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Here from Ottawa economist Robert Lyman, a review of Ontario’s debt situation: it isn’t pretty.


Several pundits have commented on the reasons for the major victory by the Liberal Party in the Ontario provincial elections held on June 12. Many have judged that voters were simply unwilling to believe the Progressive Conservative message that fiscal responsibility required reductions in spending, including where necessary reductions in the number of public service positions and programs. Voters said that the debt was not a problem that they wanted to worry about.

Even after the event, it is may be a good idea to examine exactly what the facts are with respect to the financial situation of the provincial government and what this may mean to the people who live in Ontario in future.

  • According to the Ontario Financing Authority, the consolidated provincial debt as of June 14, 2014 is $295.8 billion.
  • The debt has grown significantly over the past generation. In 1990, Ontario’s debt was $38.4 billion. It grew to $115 billion by 1998, and has almost doubled again since then.
  • Ontario has only been able to sustain this increase in debt because of interest rates that are at all-time historic lows. Even so, in 2013-2014, annual debt service costs to the provincial treasury were about $10.6 billion, the fourth largest expenditure item after health, education and social services.
  • The 2014 budget that was defeated projected that debt service costs would rise to $12 billion by 2015-16 and $13.3 billion by 2016-17. This is by far the fastest growing item in the provincial budget, growing twice as fast as the health budget.
  • The Liberals are committed to increasing program spending for at least the next four years. This year the $3 billion increase in program spending will increase the annual deficit to $12.5 billion from $11.3 billion last year. The deficit will be much higher if the Liberals’ projection of a 4 % annual economic growth rate turns out to be too optimistic.
  • There are very few reasons to believe the optimistic growth forecasts. Ontario’s productivity growth lags behind that of the United States, as does business investment. The province’s cost competitiveness has eroded, due to higher taxes and fees and much higher energy costs.
  • In the short term, the debt service cost could be increased further if the various investors’ services downgrade the province’s credit rating. Ontario has $250 billion worth of bonds rated by Moody’s Investor Services. The province’s ability to pay back those bonds, known as the debt-to-revenue ratio, is 237.7 %, the worst rating among all Canadian provinces.

Read the full paper here: ONTARIO’S DEBT

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