With the Wynne government delivering its 2015 – 2016 budget, the second in its short history, the time seemed right to update an older posting that I had written on Ontario's rather dodgy-looking fiscal picture.
Let's start with a look at which individuals and political parties have ruled in Ontario since 1985:
1985 – 1987 David Peterson – Liberal (minority)
1987 – 1990 David Peterson – Liberal
1990 – 1995 Bob Rae – NDP
1995 – 1999 Mike Harris – Progressive Conservative
1999 – 2002 Mike Harris – Progressive Conservative
2002 – 2003 Ernie Eves – Progressive Conservative
2003 – 2007 Dalton McGuinty – Liberal
2007 – 2011 Dalton McGuinty – Liberal
2011 – 2013 Dalton McGuinty – Liberal (minority)
2013 to present Kathleen Wynne – Liberal
The fiscal data for this posting was sourced from the TD Bankwhich provides a history of both fiscal balance and debt levels for all provinces and the federal government.
Let's start with a table showing Ontario's debt, surplus and deficit and debt-to-GDP history since 1986:
Here is a bar graph showing Ontario's surplus and deficit history since 1986:
It's quite apparent that Ontario governments have a severe spending problem. Of the last 30 fiscal years, Ontario's budget has been in surplus only eight times or 26.7 percent of the time and in deficit twenty-two times or 73.3 percent of the time. The surplus has ranged from a minimum of $90 million in fiscal 1989 – 1990 to a maximum of $2.269 billion in fiscal 2006 – 2007. The total surplus over the eight years is only $6.319 billion for an average of $789.9 million in each of the eight years. In contrast, the deficit has ranged from a low of $1.479 billion in fiscal 1988 – 1989 to a high of $19.262 billion in fiscal 2009 – 2010. The total deficit over the twenty-two years is $175.2 billion for an average of $7.96 billion in each of the 22 years. It is interesting to see that the average deficit over the 30 year period is higher than the total surplus over the eight years that the Ontario government spent less than it brought in as revenue.
Now, let's look at a graph that shows the growth in Ontario's debt since 1986:
Over the past three decades, Ontario's net debt has grown by $235.7 billion or 748.3 percent. In fiscal 2013 – 2014, Ontario's provincial debt was $267.2 billion, putting it in first place among all provinces with Quebec in second place at $181.3 billion. According to Statistics Canada, Ontario's population in 2014 was 13,678,700; this puts Ontario's per capita debt at $19,535. By way of comparison, Quebec's population in 2014 was 8,214,700; this puts Quebec's per capita debt at $22,070.
Lastly, let's look at what has happened to Ontario's debt-to-GDP ratio since 1986:
You'll notice that since fiscal 2008 – 2009, Ontario's debt-to-GDP ratio has climbed quite rapidly, similar to what happened in the early 1990s although, at that time, the debt-to-GDP was at a much lower level. The debt-to-GDP level has risen by 10.3 percentage points since 2008, a trend that is quite worrisome. While the debt level as a percentage of the economy isn't as high as in many national jurisdictions around the world, Ontario also has more limited ability to tax its residents to make up for the shortfall.
While it was quite understandable that Ontario's spending would exceed its revenue during and immediately after the Great Recession, it is quite concerning that a succession of provincial governments seem unable to achieve anything close to fiscal balance. Historical precedents indicate that the global economy is quite likely to experience a contraction over the next two or three years, a situation that will make it increasingly unlikely that Ontario (and other overly indebted provincial jurisdictions for that matter) will achieve a balanced budget, no matter what they may try to tell taxpayers.
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