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Ontario Finance Minister Charles Sousa delivers the provincial budget at Queens Park in Toronto on April 23, 2015.MARK BLINCH/Reuters

Ontario has shaved $1-billion off this year's deficit, bringing the shortfall down to $7.5-billion from the $8.5-billion projected in the spring budget.

That relief, however, is only temporary: It mostly comes from an accounting measure related to the privatization of Hydro One and does not get the province closer to its promise to balance the books in two years.

Finance Minister Charles Sousa's fall economic statement on Thursday also unveiled a new $325-million Green Investment Fund to dole out cash for programs to fight climate change, such as giving buildings energy retrofits and more charging stations for electric cars. Once the province's cap-and-trade system comes into effect in 2017, money raised will be put into the fund. In its first projection on how much the carbon pricing plan will net, the statement says the province will get $1.3-billion in its first full year in operation.

"We are investing in our economy and in our people," Mr. Sousa told the legislature. "And all the while taking deliberate steps to exceed our targets by reducing the deficit and balancing the budget."

Mr. Sousa said the deficit for next year, 2016-17, will be $4.5-billion, followed by a balanced budget in 2017-18.

The $1-billion reduction of this year's deficit, Mr. Sousa said, is due primarily to the initial public offering of 15 per cent of Hydro One earlier this month, which brought in $1.1-billion more than projected. The government is also paying $140-million less than expected in debt financing charges, and took in $155-million more than forecast in tax revenue, primarily from personal income tax and land transfer tax.

The proceeds from the Hydro One sale are slated to be set aside in the Trillium Trust, a reserve fund for building new transit lines. The money counts against the deficit only temporarily, before it is moved to the trust.

"Every dollar that's generated from the net gain [from the sale of Hydro One] is dedicated to the Trillium Trust," Mr. Sousa told reporters. "We're not relying on [the sale of] these assets to bring our books to balance or reduce our deficit."

Progressive Conservative finance critic Vic Fedeli said it was ridiculous for the Liberals to crow about slashing the deficit by $1-billion if the money from the Hydro One sale will be moved to the trust.

"You're either going to put it against the deficit, as they did here, or you're going to put it in [the Trillium Trust]," he said. "They're attempting to spend the same dollars two times."

Almost every aspect of the privatization of Hydro One has proven controversial, including its financial projections. The government insists that putting money from the sale into new transit will stimulate the economy and produce higher government revenue. But the province's budget watchdog last month estimated that, over the long term, privatization will actually rob the government of up to $500-million per year in dividend payments.

The economic statement relies on a mix of higher revenue and tougher austerity to achieve budget balance in two years. The government projects revenue will grow to $135.3-billion by 2017-18 from $125.6-billion this year. The Liberals have held program-spending growth to an average of 1.4 per cent over the past four years, a lean total that has sometimes been lower than inflation. They plan to push that down to just 0.9-per-cent growth.

But critics charged the plan offers few specifics on how such numbers will be achieved and leans heavily on revenue growth assumptions. One line in the economic statement said the government would "consider other tools" if revenue failed to live up to expectations; Mr. Sousa would not specify what the other tools are.

NDP finance critic Catherine Fife said the government is leaving the door open to further privatizations.

"They say if revenues slow down, they're going to look at other tools. We definitely know what that means: more asset sales," she said. "It's setting Ontario up for more sell-offs and more cuts."