Christine Van Geyn is the Ontario director of the Canadian Taxpayers Federation.
This week, Ontario Finance Minister Charles Sousa will stand in the provincial legislature and deliver the fall fiscal update.
The fall fiscal update is the government's opportunity to update any of the assumptions it made in April's budget, including Mr. Sousa's promise to balance the budget by 2017-18. And updating is certainly in order.
April's was a "hold your breath" budget. If absolutely all of the government's optimistic projections worked out, and if the government used $3.4-billion in reserves over the next three years, it would be able to squeeze through a balanced budget.
Describing those assumptions as "optimistic" is generous. The budget might better be described as fiscal fantasy.
For example, the government assumed revenue growth of 4.3 per cent over the next three years. Fantastic indeed, given that the revenue growth rate over the most recent three years has been 2.6 per cent. Private sector forecasts of real gross domestic product growth, a key driver of government revenue, are all projecting lower-than-anticipated growth. This is a result of lower commodity prices, swings in the Canadian dollar exchange rate and continued sluggish employment growth that has not recovered since the recession or kept pace with population growth.
Yet Mr. Sousa seems to think the public will believe his claim that revenue will grow significantly faster in the next three years than it has the past three years.
How fast has your income been growing in Ontario over the past three years?
Reality demands an adjustment to this head-in-the clouds assumption. If the revenue projections aren't lowered in the fall fiscal update, there is no reason to believe any commitment to balancing the budget.
Another fiscal fantasy in the 2015 budget is the minister's promise to control program spending. Mr. Sousa projected program spending would grow at an average rate of just 0.3 per cent a year over the next three years. This is a snail's pace of growth compared with the explosive 4.1-per-cent annual average spending growth this government has undertaken over the past eight years – a pace the governing party's voting base has come to expect and demand.
A check of the budget projections for education spending alone is laughable. Between 2017 and 2018, the minister predicts no increase in the education budget. This target will be impossible to maintain if the government continues its practice of secret million-dollar payouts to teachers' unions.
Is it realistic to believe that Mr. Sousa will replace his spending firehose with an eyedropper? This is an ambitious goal to say the least, and spending restraint is not an area where this government has a strong track record. In the fall fiscal update, the program spending projection needs to be realistic.
So what should the revised fiscal assumptions be?
The Ontario Financial Accountability Office recommends a project spending projection of 1.4 per cent to reflect the pace of spending growth in the past four years, or 3 per cent to reflect the pace of inflation and population growth. The FAO predicted in a Nov. 4 report that anticipated reduced revenue, combined with projected higher program spending, will lead to a 2017-18 deficit of between $3.5-billion and $7.4-billion.
The FAO also recommends reducing revenue growth predictions from nigh-impossible 4.3-per-cent growth to a more realistic realm of somewhere between 3.6 per cent and 4.1 per cent. While this is more realistic, it remains far more ambitious than the 2.6-per-cent growth the province has seen in revenue for the past three years.
So if Mr. Sousa stands up to deliver his updates on the government's key budget assumptions and doubles down on his promise to balance the budget, the taxpaying public needs to consider the numbers he's using. Will this be a true fiscal update, or is he living in a fiscal fantasyland?