2016 Ontario Economic Outlook and Fiscal Review
Chapter II: A Balanced Path to a Balanced Budget

Section A: Ontario’s Path to a Balanced Budget

The government is dedicated to a fiscally sound approach to managing the Province’s finances. This will help grow the economy, create jobs and ensure the sustainability of programs and services that help Ontarians in their everyday lives.

The strengthening of the Ontario economy, together with the government’s approach to fiscal management, is supporting strategic investments in new child care spaces, hospitals and electricity cost relief for consumers.

Ontario is making progress on its plan to balance the budget by making investments to spur economic growth; transforming government and responsibly managing spending; and addressing the underground economy and maintaining tax fairness. The government is committed to meet the 2016–17 deficit target and to balance the budget in 2017–18 and remain balanced in 2018–19.

2016 Budget: Jobs for Today and Tomorrow

The 2016 Budget projected an interim deficit of $5.7 billion in 2015–16, a deficit of $4.3 billion in 2016–17, a return to balance in 2017–18, and continued balance in 2018–19.

Making Progress

In October, the Public Accounts of Ontario 2015–2016 reported that the 2015–16 deficit was $5.0 billion, an improvement of $3.5 billion from the $8.5 billion projection in the 2015 Budget.

This marks the seventh year in a row that Ontario has beaten its deficit target. By overachieving on its fiscal targets, the government is managing the Province’s debt and keeping interest on debt at a manageable level. This will protect Ontarians, today and in the future, from rising interest costs, which could otherwise crowd out spending on programs and services that support Ontarians in their everyday lives.

Looking forward, the government continues to project a deficit of $4.3 billion in 2016–17, a return to balance in 2017–18 and continued balance in 2018–19, consistent with the 2016 Budget. The strengthening of the Ontario economy, together with the government’s sound approach to fiscal management, is supporting strategic investments, such as electricity cost relief for Ontario consumers, support for public hospitals, and opening up additional child care spaces. Consistent with the accounting treatment adopted in the Public Accounts of Ontario 2015–2016, including the Pension Adjustment related to net pension assets, the outlook also reflects a cautious approach to forecasting pension expense each year (see Section B: Transforming Government and Managing Costs in this chapter).

Even after reflecting investments and the Pension Adjustment in the fiscal outlook, the government is still committed to balance the budget in 2017–18 and remain balanced in 2018–19. To help mitigate the potential impact of the Pension Adjustment, which was not anticipated at the time of the 2016 Budget, the government has reduced the reserve, which is included in the fiscal plan to protect the Province’s fiscal outlook from unforeseen adverse changes (see Chapter III, Section B: Fiscal Outlook for more details). Other key factors contributing to this forecast are a higher-than-expected revenue projection and lower-than-forecast interest on debt.

Ontario’s projected economic growth and ongoing commitment to transform government programs and services position it well for fiscal sustainability. The net debt-to-GDP ratio is projected to be 40.3 per cent in 2016–17 and then begin to decline from 2017–18 onwards. This gradual decline is a result of the investments the government is making to spur economic growth, which will result in GDP growing more quickly than debt, thereby helping to lower the net debt-to-GDP ratio to its pre-recession level.

Going forward, there are three central elements of Ontario’s plan to eliminate the deficit:

  • Making investments to spur economic growth;
  • Transforming government and responsibly managing spending; and
  • Ensuring revenue integrity and addressing the underground economy.

The following sections of this chapter outline measures the government is taking to achieve a balanced budget by 2017–18 and remain balanced in 2018–19, while helping Ontarians in their everyday lives.

Chart Descriptions:

Chart 2.1: Ontario’s Plan to Eliminate the Deficit

This bar chart shows Ontario’s actual deficits versus deficit targets from 2009–10 through 2015–16. In the 2009 Ontario Economic Outlook and Fiscal Review, Ontario projected a $24.7 billion deficit for 2009–10. The actual result for 2009–10 was a deficit of $19.3 billion. The 2010 Budget projected deficits of $19.7 billion for 2010–11, $17.3 billion for 2011–12, $15.9 billion for 2012–13, and $13.3 billion for 2013–14. The actual deficits were $14.0 billion in 2010–11, $13.0 billion in 2011–12, $9.2 billion in 2012–13, and $10.5 billion in 2013–14. In the 2014 Budget, Ontario projected a $12.5 billion deficit for 2014–15. The actual result for 2014–15 was a deficit of $10.3 billion. In the 2015 Budget, Ontario projected an $8.5 billion deficit for 2015–16. The actual result for 2015–16 was a deficit of $5.0 billion.

The bar chart also depicts the fiscal outlook outlined in the 2016 Ontario Economic Outlook and Fiscal Review for 2016–17 to 2018–19. The government is projecting a deficit of $4.3 billion in 2016–17 and balanced budgets in 2017–18 and 2018–19, consistent with the 2016 Budget plan.

Return to Chart 2.1

Chart 2.2: Net Debt-to-GDP and Accumulated Deficit-to-GDP

The net debt-to-GDP ratio is forecast to peak at 40.3 per cent in 2016–17. The accumulated deficit-to-GDP is projected to be 26.2 per cent as at March 31, 2017.

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