Think-tank predicts Ont. won't balance budget for decade
Ontario Premier Dalton McGuinty addresses The Canadian Club of Toronto regarding his government's economic plan for 2012 in Toronto on Tuesday, Jan. 24, 2012. (Nathan Denette / THE CANADIAN PRESS)
The Canadian Press
Published Thursday, February 2, 2012 11:28PM EST
KITCHENER, Ont. - Premier Dalton McGuinty agrees with a Conference Board of Canada report warning Ontario won't be able to balance its budget on schedule without significant cost reductions, but says the needed changes are being made.
The Ottawa-based think-tank said Thursday its analysis suggests Ontario must rein in health-care cost increases if it wants to balance the books by 2022, because potential sustainable economic growth for Ontario is dropping to 1.9 per cent a year.
"The projected sluggish growth in Ontario's long-term potential output plays a crucial role in our analysis of the revenues available for government public services, notably health care," Glen Hodgson, the board's chief economist, said in a statement.
"If Ontario residents expect their publicly funded health care system to continue to grow at or near recent levels, they will most likely have to pay for it through higher taxes," he said.
"If the public is unwilling to accept and support higher taxes, other transformative changes will likely be required to how publicly funded health care is delivered in Ontario."
Ontario has already begun to make the changes needed to reduce costs and has no intention of raising taxes to balance the books, McGuinty responded at an event in Kitchener, Ont.
"It makes it clear that if we don't make changes, if we don't do things in a different way, we're not going to be able to balance our budget in 2017-18, and I couldn't agree more with that," he said.
"That's why, starting with our last budget, we began to make some decisions that put us on track to balance, including inviting (economist Don) Drummond and his commission to offer his best advice with respect to changes we need to make."
Drummond will release a report this month with hundreds of recommendations on how to hold the overall increase in government spending to just one per cent a year. Eliminating or reducing some services will be among the suggestions.
The government hopes to limit the growth in health care, which eats up about 42 per cent of program spending, to three per cent a year. Drummond has suggested that could mean cuts of up to 30 per cent in other ministries.
The Ontario government has said it plans to eliminate its $16-billion fiscal deficit by 2017-18, based on program spending growth of 1.7 per cent per year over the next seven years.
Moody's put the province on a credit watch in December amid fears Ontario won't be able to stick to its deficit reduction schedule, but McGuinty said the Liberals are still on track.
"We will lay out our plan to eliminate the deficit in our budget, but I can tell you right now we will balance our budget by 2017," he said.
"We will protect health care and education, and will not raise taxes. Instead we will find ways through reform to deliver government services more efficiently."
But the conference board said even with planned spending cuts, meeting fiscal targets will be delayed due to slower projected revenue growth.
"The government pledged to curb annual growth in public health-care spending from its seven per cent pace of the past decade to just three per cent per year beginning in 2012-13. Even if these spending plans are met, slower projected revenue growth will delay the date of a balanced budget," it said.
Ontario spent $47.1 billion on health care in the past year.
The report cites aging demographics and slower labour force growth as drags on potential growth, as well as a "challenging" economic environment in the United States.
McGuinty has said he wants doctors, nurses, teachers and public sector workers in Ontario to refrain from demands for salary increases while the province deals with the deficit, but balked at an Opposition demand that he legislate a pay freeze for public sector workers.
The provincial Progressive Conservatives doubted the Liberals would be able to balance the books by 2017.
"There's been $2.4 billion in new spending since the government came to power Oct. 6 and no plans to reduce the size and cost of government," said Kitchener Tory Michael Harris.
"We've put forward some ideas such as a public sector wage freeze, a thorough review of all agencies boards and commissions."