Charles Sousa may be getting tired of delivering bad news. Ontario's Finance Minister has some bright spots he can point to in the province's economic numbers — lower unemployment, hopes of higher exports as US economic activity picks up — but today it was his job to tell the provincial legislature the government's revenues are lower than expected, again. $509 million lower than projected in the spring 2014 budget, to be precise. And those projections from earlier this year had already anticipated revenues coming in $3.5 billion lower than the last one.
Progressive Conservative Finance Critic (and a contender for his party's leadership) Vic Fedeli said the Liberal plan to fight the deficit amounted to a "fairy tale" this afternoon.
"The Liberals brag about the economic outlook improving, but Ontario's fiscal outlook is actually worse," Fedeli said. He pointed to Ontario's smaller economic growth as well, estimated at 1.9 per cent for the following year instead of previous estimates of 2.1 per cent.
It all puts the Liberals in a bind. They've all but etched in stone their promise to balance the budget by the 2017-18 fiscal year, and worry about the province's credit rating being further downgraded if they blow through that deadline. So that leaves the government chasing a few different strategies to keep that promise, some of which Sousa hinted at today.
More taxes: The Liberals have already gone to this well in 2014, with a budget that increased taxes on aviation fuel, cigarettes, and personal incomes over $150,000. While they may have to bite the bullet and raise taxes in the future, for now they're focusing on better enforcement of the taxes they already have. Sousa previewed the government's coming initiatives to crack down on corporate tax evasion and contraband cigarettes. As a starting point, companies that get government contracts will need to have paid their taxes. This is not a typo. The Ontario government will also work with First Nations reserves to fight cigarette smuggling.
Asset sales: Last week former TD Bank chief Ed Clark presented his initial report to the government on what to do with Ontario's Crown agencies, from the LCBO to Ontario Power Generation and Hydro One. Clark acknowledged a month ago that his report was written to be palatable to the Liberals and not as aggressive as it could have been, saying it "improves what we have and actually gets things done, rather than adds to the list of reports never implemented." Clark's report calls for some tinkering to the province's liquor retailers, and increases in costs for the Beer Store, but stayed well clear of any notion of privatizing the LCBO. Clark also suggested Hydro One break off the local utilities it has acquired in the last few years, and sell part of that business to private capital.
One note about asset sales: while the government swears up and down that the proceeds of selling assets, like the LCBO headquarters in Toronto, will go towards public infrastructure, Fedeli's efforts earlier this year to etch this in law in the 2014 budget was shot down by the Liberals in committee. Both the Tories and the NDP accused the government today of leaving themselves a loophole to balance the budget with asset sales — something the Liberals accused the Harris-era Tories of when they sold the 407 ETR highway.
Cost cutting: The downside of being one of Premier Kathleen Wynne's closest allies is that Deb Matthews has one of the toughest jobs in cabinet right now. As President of the Treasury Board, it's Matthews' job to squeeze various budgets across the government, either (as set out in her mandate letter) by finding more efficient ways to deliver public services, or by controlling compensation in the public service. Program spending, which grew at 1.2 per cent since 2010, is projected to grow by just 0.8 per cent until 2018.
Rather than pin their deficit-fighting plans on any one tactic, the Liberals are clearly hoping that doing a lot of little things will put the province's books back in black. On days like today, with worse than expected budget numbers, they may be wondering if they've made the right bet.
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