Ontario's Fiscal History - It Is NOT A Pretty Picture

June 2014

For an up-to-date version of Ontario's fiscal situation, please click on this link:

http://viableopposition.blogspot.ca/2014/06/ontarios-fiscal-problems.html

With Ontario's newly minted Premier standing on the doorstep of the Legislative Assembly of Ontario, I thought that it was time to take a look at Ontario's fiscal past to see just how prudent various governments of various political parties have been since 1986.

As a reminder, particularly for those of you who have either forgotten or never knew, here is an outline showing the terms, Premiers and political persuasions of those who have ruled Ontario as their fiefdom:

1985 - 1987  David Peterson - Liberal (minority)

1987 - 1990  David Peterson - Liberal

1990 - 1995  Bob Rae - NDP

1995 - 1999  Mike Harris - Progressive Conservative

1999 - 2003  Mike Harris - Progressive Conservative

2003 - 2007  Dalton McGuinty - Liberal

2007 - 2011  Dalton McGuinty - Liberal

2011 - present  Dalton McGuinty - Liberal (minority)

Now, let's look at some fiscal history for the province, sourced from the TD Bank as shown on this chart:

Now let's look at some graphical representations of the data starting with the surplus/deficit picture for each year:

You'll notice that out of the 27 fiscal years represented (excluding projections), that the budget has been in surplus for only eight years or 29.6 percent of the time.  As well, over the multi-decade sampling, deficits have outweighed surpluses to the point that the various governments have accrued an additional $146.894 billion in deficit spending.

Now let's look at the growth in net debt:

Since the turn of the century, the debt has grown from $132.5 billion in fiscal 2000 - 2001 to an estimated $260.4 billion in 2012 - 2013, a 96.5 percent increase.  The compound annual growth rate of the debt over that 13 year period is 5.33 percent, well above the inflation rate as shown on this chart:

Lastly, let's look at the change in the debt-to-GDP ratio:

It's really only been since fiscal 2008 - 2009 that the debt-to-GDP level has risen markedly unless we look back to the days before Mike Harris and his highly unpopular and painful austerity cutbacks in the mid-1990s.  Since 2008 - 2009, the debt-to-GDP ratio has risen from 28.9 percent to an estimated 39.5 percent in 2012 - 2013, a rise of 37 percent.  While this debt-to-GDP level seems low when we compare it to what we have seen in the Eurozone over the past year, we have to remember one thing; provincial and state governments have much lower tolerances for debt accrual than federal governments, largely because their ability to tax is limited.  Bond ratings agencies and bond markets have already expressed concerns about Ontario's debt level with Moody's already threatening a debt downgrade back in December 2011. 

Let's hope that Ontario's newly minted Premier takes the role as fiscal caretaker of Ontario's future seriously and ends the government's spend and tax philosophy before austerity is forced upon them.  Ontario's fiscal history has been far from a pretty one over the past twenty-five years and now, Ontarian's are being forced to pay for the mistakes of past governments.  With a long history of deficit spending, the odds of returning to fiscal balance are slim to nil, particularly when interest rates on the outstanding debt rise back to historical levels.  The bigger the hole that's been dug, the harder it is to get out of it.