When the Ford government presented their 2021 budget in March of that year, the projection was for a massive $32 billion deficit. That figure was later changed to a $13.5 billion deficit in the budget that just passed the legislature a few weeks ago.
Yet when the Public Accounts for the province, the official accounting of the full fiscal year, were unveiled on Friday, the province posted a $2.1 billion surplus. The Ford PC government has claimed this is all due to their careful fiscal prudence while the opposition NDP claims it’s due to cuts.
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The simple truth is that the government took in more revenue than expected thanks to two factors well out of their control – a stronger than expected economic recovery and inflation. It’s almost as if the Ford government’s budget had balanced itself, though Finance Minister Peter Bethlenfalvy disputed that idea when I asked him if he had proven Justin Trudeau’s theory correct.
“No, budgets don’t balance themselves. I want to be crystal clear about that,” Bethlenfalvy said.
The Ford government didn’t bring this about by spending less; they had originally projected to spend $186 billion in the 2021 budget while taking in $154 billion. In the end, they took in $185 billion and spent $183 billion.
Spending was up from the year before mostly due to increased health-care costs, but personal income tax revenue, corporate tax revenue and sales tax revenue were all up significantly, compared to the year before, and the government’s initial projections.
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The Ford government had projected to take in just $36 billion in personal income taxes, but in the end took in $46 billion. Sales tax revenue had been estimated at just $27 billion but came in at $30 billion, while corporate taxes were estimated at $14 billion and came in at $25 billion.
Opposition demands government spend surplus and then some
The NDP response was to demand the government spend more.
“Every time Doug Ford refuses to spend money on services families count on, it’s real families like ours that pay the price. Conservative choices are costing us all too much,” said NDP MPP Catherine Fife.
She’s right, but not in the way she thinks.
When the Ford PCs took office, total government spending for the last full year the Liberals were in office was $154 billion, it’s now $183 billion. That’s an increase of $29 billion — or 19% — over what the Wynne Liberals were spending, while inflation over that same time period was just 6%.
In fairness to the Ford government, much of that increase, but far from all, has been driven by the province’s response to the COVID-19 pandemic. In some areas, this is simply out of control bureaucratic spending and the NDP wants more of it, not less.
They are upset that the government is running a surplus instead of a deficit.
That surplus, small as it is, looks very good right now, but it could easily disappear. Top economists at Royal Bank, BMO, Desjardins and other leading financial institutions are all predicting a recession in early 2023.
That would take the wind out Ontario’s sails and could see that windfall of extra revenue fade away.
“We are facing challenging times,” Bethlenfalvy said when I asked him if his good fortune could soon turn bad.
He cited rising interest rates, persistent inflation and geo-political risks to our economic outlook. All of those issues are on the horizon, which is why it’s time for the Ford government to act like they are fiscally prudent instead of just talking about it.