Imagine Ontario Premier Doug Ford driving down a highway. The road is about to end in a fork. Now Ford must decide whether to head north or south.
If Ford goes north, he can get Ontario’s finances in order and finally end a years-long provincial deficit streak. But if Ford goes south, he can announce billions of dollars’ worth of new spending and allow the province to continue to barrel toward a fiscal cliff.
According to Ontario’s Financial Accountability Office (FAO), an independent watchdog that keeps track of government spending, Ford can balance the books as soon as next year with just a little bit of restraint.
But to achieve that outcome, Ford needs to pick the right path.
How did Ontario reach this historic fork in the road?
It all started sixteen years ago.
When former finance minister Greg Sorbara presented Ontario’s last balanced budget, Ontario’s debt stood at $143 billion. After sixteen years of reckless fiscal management, Ontario’s debt now stands at $440 billion.
Ontario is now the most indebted sub-national government in the world.
That’s right, worse than New York state and worse than California.
In the sixteen years since Ontario’s politicians last balanced the books, successive governments have tried to convince Ontarians that deficits are a good thing.
While campaigning for re-election in 2018, former premier Kathleen Wynne told Ontarians billions of dollars of more deficit spending were needed, because “if we don’t make those investments … we’ll actually pay a price down the line.”
Ontario is paying the price, albeit a different one than Wynne alluded to. Thanks to years of overindulgent spending, Ontario taxpayers are being forced to spend over $13 billion a year simply to pay interest on the province’s debt load.
That’s money going to Bay Street that ought to be left on Main Street.
When the Ford government came into office, the province’s finances were in shambles.
“The party is over with taxpayers’ money,” said Ford while running for office.
But Ford actually increased spending by $5 billion, despite claiming that Wynne’s out-of-control spending was running the province into the ground.
In retrospect, it seems only the Liberal party with taxpayers’ money had ended. The party balloons and streamers had changed from red to blue, but the spending raged on.
Once the pandemic hit, Ontario’s already reckless spending went into overdrive. In just two years, the Ford government hiked permanent government spending by $17 billion.
But against all odds, the FAO says the Ford government can balance the books next year if it holds the line on spending.
This opportunity is not due to the Ford’s government’s fiscal prudence.
Ontario is on the cusp of running a surplus next year because government revenue has grown by $12 billion since last year and is set to grow by another $8 billion by next year. Much of that will come from increased federal transfers.
With a $20-billion cash infusion, the Ford government has no excuse not to balance the books by next April.
According to the FAO, Ontario will run a surplus of $1.2 billion in 2023-24 if the Ford government exercises just a little bit of fiscal restraint.
As Ford decides which direction to turn – north toward fiscal sustainability or south toward fiscal ruin – the right pathway for the government is obvious.
Ford needs to turn north. He should present a clear plan to balance the books by next year. If he does so, Ontario’s sixteen-year deficit road trip from Hell can finally be over and the government can turn its attention to much-needed tax relief.