What a difference a year makes, in terms of both provincial budget numbers and government policy options.

In the Oct. 22, 2008 fall economic statement, Ontario Finance Minister Dwight Duncan predicted a deficit of $500 million for a year in the face of what he called "global economic uncertainty and the slowing U.S. economy."

By the time the March 26 budget had rolled around, that figure had jumped to $3.9 billion for the 2008-09 fiscal year.

The budget deficit for the 2009-10 fiscal year was projected to be $14.1 billion. In late June, that number was pegged at $18.5 billion.

By the time Duncan delivered his fall economic update on Oct. 22, the estimated provincial deficit had jumped to $24.7 billion.

Duncan laid out three main reasons:

  • the economic contraction
  • plunging corporate tax revenues
  • recession-driven demand for government services

It projected a total revenue drop of $5.8 billion with increased expenditures of 4.8 billion, pushing the deficit up by more than $10 billion.

The government did have a number of extraordinary costs:

  • $1.3 billion for auto industry assistance to Chrysler and GM
  • skills training for displaced workers
  • $27.5 billion to be spent on infrastructure over two years as a way to stimulate the economy (Ottawa kicked in another $5 billion)

While the economy is considered to be on the mend, the deficit problem the government faces could be around for some time. In the spring budget, Duncan forecast deficits totalling about $57 billion by 2014-15, with balanced budgets beginning again in 2015-16.

The government doesn't talk about that schedule anymore.

Privatization

In the 2003 provincial election, the Liberals weren't talking about privatizing Crown corporations. Premier Dalton McGuinty rejected the idea as a way to cope with the deficit left him by the outgoing Progressive Conservative government.

But in mid-December, news came out that the government had hired two investment banks to investigate the possibility of either partially or fully privatizing some Crown corporations. Some of the names being bandied about include the LCBO, OLG and Hydro One assets.

McGuinty told reporters at Queen's Park on Dec. 16 that no final decisions had been made.

"I don't want to scare anybody ... I do think we have a shared responsibility to take a look at our assets and make sure we're getting the best bang for our buck and that's what we intend to do," he said.

The Liberals said in 2005 that the government should continue to own the LCBO.

Some estimates put the LCBO's value on the open market at $10 billion. It provides $1.4 billion in revenue every year for government coffers.

The OLG contributed another nearly $2 billion in annual revenues, but it has been plagued with problems.

"We would say to the government, 'Don't go down this road. It's a tired idea. It's an idea  that should be out-of-hand rejected," said NDP Leader Andrea Horwath.

Progressive Conservative MPP Peter Shurman added: "Our party's very concerned because we're talking about a premier who's out of control and in whose hands money just vanishes."

Tough choices

But a university professor said an asset sale might well be necessary to help the provincial government tame its deficit.

"Obviously it's not easy. The painless way would be if the economy grows," said Sandford Borins, a professor of strategic management at the University of Toronto's Rotman School of Management.

However, the economy would have to grow by at least four per cent each year to increase revenues enough -- and reduce social costs enough -- to cut seriously into the deficit, he said.

The TD bank forecasts Ontario's economy will grow 2.7 per cent in 2010 and 3.1 per cent in 2011. The last time Ontario saw five per cent growth was in 2002.

While Health Minister Deb Matthews is warning hospitals not to expect more funding this year, the government isn't threatening to cut funding either. Health funding accounts for about 43 per cent of the budget. Education accounts for another 14 per cent.

"There's not a lot of room for reducing spending on lower priorities or reducing overhead," Borins said, noting about 20 per cent of a government's expenses is simply the cost of program delivery.

The McGuinty government promised some cost-cutting in this year's budget, such as reducing the size of the civil service by five per cent over three years and finding $1 billion in savings. But that won't significantly cut into the deficit.

With the political heat the McGuinty government has taken over the harmonization of the provincial sales tax with the GST, raising taxes to help reduce the deficit isn't an option.

"They're looking to asset sales as a way to make big reductions in the deficit," Borins said.

But that isn't necessarily painless for the taxpayer either.

He noted the Progressive Conservative government of Mike Harris sold off rights to Highway 407, the province's toll road, for $3.1 billion -- and gave the concessionaire a free hand to raise tolls.

Going into the 1999 election, the windfall revenue allowed the Harris government to table a balanced budget, put more money into health care and cut a cheque for everyone in the province, he said.

But when the Conservatives left power in 2003, they left behind a $5 billion deficit. Users of Highway 407 pay whatever the operators think the market will bear.

In an interview with The Canadian Press, a Harris-era veteran cautioned against selling revenue-producing assets as a response to a short-term problem.

"There's nothing wrong with looking at your various options, but I don't think, as a general principle, you should be selling assets that produce a great deal of money just for dealing with an in-year deficit problem," said former premier Ernie Eves.

"The issue is: What are you going to do to control your spending in next year's budget?"

Bottom line? There is no easy, painless way out of the budget hole into which Ontario has fallen.

With a report from CTV Toronto's Paul Bliss and files from The Canadian Press