Posted by Bruce Little on 5/19/2004, 9:48 pm, in reply to "Stop Christian-bashing" By BRUCE LITTLE Yesterday's budget from Finance Minister Greg Sorbara was full of fiscal surprises. The biggest was the speed at which the fat deficit has already dwindled, and the reason for it. In the fiscal year that ended in March, spending exceeded revenue by $6.2-billion. This year's projection is a scant $2.2-billion, and most of the $4-billion swing is the result of a simple accounting measure. The government had been on the hook for some electricity subsidies stretching out to 2048. Having shifted those costs to consumers in the form of higher prices over the next 44 years, the government's long-term liability of $3.9-billion disappeared. Under public sector accounting rules, that lump had to be counted as revenue this year. Another surprise was a projection that the budget will be balanced in three years, a span that looked far too short when the deficit looked much larger. But Mr. Sorbara said the deficit will be gone by the 2007-08 fiscal year. That could turn out to be 2006-07, when the government says the deficit will still be $1.5-billion, but its spending plan includes a $1.5-billion reserve that, if not needed for unexpected contingencies, won't be spent. The new taxes were no surprise at all -- a new health care premium (an income surtax, really) worth about $2.5-billion a year, higher alcohol and tobacco taxes and more costly drivers' licences. Mr. Sorbara's rookie outing was daring only in that it included revenue and spending projections for the next four years, rather than two, the previous norm. Aside from committing himself publicly to some very firm long-term targets, however, the minister has plotted a very cautious course. Spending on programs this year is budgeted to rise 7 per cent from last year (when the cost of SARS inflated spending by almost $850-million). But the government has pledged to rein in spending after that, after it has made what it regards as some needed investments in infrastructure and the health care system. "They are addressing a lot of issues that need addressing," said Bank of Nova Scotia economist Mary Webb. "Unfortunately, that has a cost." By 2007-08, however, the government says revenue and spending as a share of gross domestic product will be about the same as they were in 2002-03, the last full year under the Conservative government of former premier Ernie Eves. This is not, it seems, a government out to occupy a bigger chunk of the provincial economy. The worst of the deficits is already behind us, the budget said. In 2003-04, the transition year that began with the Tories and ended with the Liberals under Premier Dalton McGuinty, the government figures it collected $68.3-billion in revenue and spent $74.5-billion, for a deficit of $6.2-billion. This year, Mr. Sorbara expects to take in $78.4-billion in revenue and spend $79.6-billion. That suggests a deficit of only $1.2-billion, but the government has also revived the practice of adding a reserve fund to its plans, so the $1-billion addition produces a projected deficit of $2.2-billion. At first glance, the expected revenue increase this year -- almost 15 per cent -- looks too large to be credible, especially since it follows a 2003-04 fiscal year in which revenue actually contracted slightly. However, officials said the past two years' numbers contain some quirks that make their projections look much better. The government had overestimated its revenue in 2002-03 by about $800-million; this was convenient for the former Conservative government, which was able to claim a small surplus that year. The error was discovered after data from final tax returns became available in late 2003. To get the numbers back in line, the Finance Ministry lopped $800-million off revenue for 2003-04; conveniently for the new Liberal government, this inflated the size of the deficit for that year. It means that underlying revenue for last year is higher than it looks. This year, revenue will benefit not only from an economy that is stronger than in 2003 -- the year of SARS and the blackout -- but also from the introduction of a new Ontario Health Premium (worth $1.6-billion) and an increase in corporate income taxes (worth another $500-million). The budget's assumptions about the economy are suitably modest, something that many governments are now doing. Private sector forecasters are predicting real economic growth in the province of 2.7 per cent this year and 3.5 per cent in 2005, but the government is assuming growth of 2.3 and 3.2 per cent for those years, respectively. Mr. Sorbara's budget puts an end to the fiscal drama that has been something of an obsession in Ontario politics for the past 14 months. It began at an auto parts training facility with a "budget" that promised balance in 2003-04, but which was roundly denounced as fraudulent by most non-government analysts, who put the real deficit at about $2-billion. After the Liberals won the tober election, they brought in former auditor Erik Peters, who took a look at the books and said the deficit would be at least $5.6-billion and could go higher. An economic statement in December by Mr. Sorbara stuck to that figure. Mr. Sorbara has launched another that will last until the next election in 2007 or 2008. He has set fiscal targets for the life of the government's mandate; now he has to meet them. Budget at a glance 2004 Budget Forecast ...............................Budget..........Sorbara......Budget...... $-million...... Actual.... Forecast:.... Outlook.... Estimate.........................2004 Budget Forecast ...............2002-03....March, 2003.Dec. 2003....May 2004......2004-05.2005-06....2006-07...2007-08 Total Revenue.......68,609.......71,566..........69,532..........68,250...........78,360.......79,900.......82,500......86,000 Total Spending......68,492.......70,566............75,153.........74,472...........79,599........80,500......82,500.......84,500 Programs.....58,798.......61,858.............65,128........64,720..........69,270........69,700.......71,400......73,100 Interest.........9,694......8,708..............10,025.........9,725..........10,320........10,800........11,100......11,500 Financial Cushion.....--...1,000...............--..............--..............1,000.........1,500.........1,500........1,500 Budgetary Balance*...117..N/A............-5,621........-6,222..........-2,239..........-2,100........-1,500...........0 Net Debt...........132,647......N/A............138,970........139,405.........142,412.....145,400......147,900.....148,700 Accumulated .......Debt...118,705.......N/A............124,326........124,927........127,166......129,200......130,700....130,700 -*A minus sign indicates a deficit; a plus sign indicates a surplus. Net debt is the difference between liabilities and financial assets. Accumulated deficit is the net debt adjusted for tangible capital assets. SOURCE: ONTARIO MINISTRY OF FINANCE
Ontario's incredible shrinking deficit
Sorbara budget full of fiscal surprises
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It looks so easy. Ontario's big deficit -- in the prebudget talk, it was certainly $6-billion, perhaps $8-billion -- is already down to just over $2-billion. With a bit of economic luck, it could be gone in only two years.
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