Ontario government debt

Fiscal YearNet Debt
(CDN$ billions)
2018-2019 325.0 (projected)
2017-2018308.2
2016-2017301.6
2015-2016295.4
2014-2015285.4
2013-2014268.0
2012-2013252.8
2011-2012236.2
2010-2011214.5
2009-2010193.6
2008-2009169.6
2007-2008156.6
2006-2007153.7
2005-2006152.7
2004-2005140.9
2003-2004138.8
2002-2003132.6
2001-2002132.1
2000-2001132.5
1999-2000134.4
1998-1999114.7
1997-1998112.7
1996-1997108.8
1995-1996101.9
1994-199590.7
1993-199480.6
1992-199361.8
1991-199249.4
1990-199138.4
1989-199035.4
1988-198935.5
1987-198834.0
1986-198731.5
Source:

Ontario Financing Authority (2004-2014) [1]
Viable Opposition (1985-2004)
- referencing a TD Bank report [2]
Ontario Financing Authority [3]

The Ontario government debt is the net amount of money the Government of Ontario has borrowed from the general public, institutional investors and public-sector bodies. As of March 31, 2018, the Ontario government's total debt is projected to be CDN$348.79 billion.[4] The Debt-to-GDP ratio for 2017-2018 is 37.1% and interest on the debt is CDN$11.97 billion, representing 8.0% of Ontario's revenue and its fourth-largest spending area.[5][6]

Debt breakdown

As of March 31, 2018 the breakdown of Ontario's debt is as follows:[7]

  • Canadian Dollar Public Bonds: $259.4B (74%)
  • Foreign Currency Bonds: $56.4B (16%)
  • Canadian Dollar Treasury Bills: $18.9B (5%)
  • Canadian Dollar Non-Public Debt: $11.4B (3%)
  • US Dollar Commercial Paper: $2.6B (1%)

The majority of the debt (83.1%) was issued in Canadian currency.

History

The government of Ontario's debt has risen under all governments since 1989.

During the 1990s recession, the Ontario New Democratic Party (NDP) government of Premier Bob Rae increased the total debt from $35.4 billion in 1989-1990 to $90.7 billion in 1994-1995.

The Progressive Conservative government of Premier Mike Harris increased the debt from $90.7 billion in 1994-1995 to $132.6 billion in 2002-2003, even while cutting services and downloading formerly provincially-run services onto the municipalities.[8] In the 1999-2000 budget, the Mike Harris government paid $3.1 billion towards the total deficit by selling the rights to the government-owned Highway 407/ETR in the form of 99-year lease to a private consortium.

The Liberal government of Premier Dalton McGuinty, in part due to the Great Recession, increased spending on social and energy programs and uploaded services from the municipalities, doubling the total debt from $132.6 billion in 2002-2003 to $268.0 billion in 2013-2014.[9]

The Liberal government of Premier Kathleen Wynne, in part through the sale of Hydro One shares, claimed a $600-million surplus in 2017-2018.[10][11] However the province's Auditor General has issued opinions that the government was understating the deficit by several billion dollars, because it was not following Canadian Public Sector Accounting Standards.[12][13] The government's claim of a surplus was not reflected in any way in the amount of the debt. A later review revealed that the 2017-18 deficit was actually $3.7 billion.[14]

Causes of debt

Health and education together account for more than 50% of Ontario's spending ($61.3B and $29.1B, respectively).[15]

Tax cuts and incentives to high income earners during the 1990s reduced government revenues.[16]

The Great Recession of 2008 had a considerable impact on Ontario, particularly its manufacturing sector. Ontario's budget surplus in 2007-2008 had by 2009-2010 given way to a $19 billion deficit.[17]

Scandals such as those involving eHealth, the Oakville and Mississauga power plant cancellations, and Ornge are often cited as examples of wasteful government spending contributing to debt growth.[18]

Ontario government's direct subsidies to corporations average $2.7 billion per year over the five years to 2011.[19] It has been argued that business subsidies such as to the Ontario's automotive sector does not help create widespread economic growth or new jobs and instead contributes to increased debt.[19]

Risks and consequences

In 2012, Moody's Investors Service downgraded Ontario's rating from Aa1 to Aa2, citing "growing debt burden" as a major concern.[20] In April 2018, the agency changed its outlook on this rating from "stable" to "negative," stating its expectation that "spending pressure will challenge the province's ability to sustain balanced fiscal results across multiple years."[21]

In 2012, the Provincial Solvency and Federal Obligations study found that Ontario had a 42.9% probability of defaulting on its debt obligations in the following 10-20 years (higher than any other province) and a 79.3% probability of defaulting in the following 30 years.[22]

Debt reduction

In 2012, the governing Liberal Party commissioned the Drummond Report, which outlined various measures to reduce the province's debt level.

Debt reduction was proposed by all three major provincial parties in their 2014 election platforms. The Progressive Conservative Party proposed to eliminate the deficit and reduce debt through eliminating 100,000 public sector jobs, a public sector wage freeze and benefit reduction, and service cuts to all programs except healthcare.[23] The New Democratic Party proposed to balance the budget by eliminating corporate tax "giveaways" and through the Fairness Tax on Ontario's highest income earners.[24] The Liberal Party proposed to balance the budget by 2017-2018 by establishing a committee of ministers to find $2.25B in savings over 3 years and reduce the number of government agencies by 30%.[25]

Non-governmental organizations in other Provinces such as the Fraser Institute and the Canadian Taxpayers Federation have advocated for aggressive debt reduction through spending cuts. Organizations such as the Canadian Centre for Policy Alternatives have advocated for strong stimulus programs such as infrastructure spending to aid economic recovery and growth during the Great Recession. They also advocate eliminating corporate subsidies, tax loopholes and cuts.

See also

References

  1. ↑ "Borrowing & Debt History". www.ofina.on.ca. Ontario Financing Authority. 4 November 2013. Retrieved 4 January 2014.
  2. ↑ "Ontario's Fiscal History - It Is NOT A Pretty Picture". www.viableopposition.blogspot.ca. Viable Opposition. 27 March 2012. Retrieved 11 January 2014.
  3. ↑ "Borrowing & Debt History". www.ofina.on.ca. Ontario Financing Authority. 2 September 2016. Retrieved 2 September 2016.
  4. ↑ "2018 Ontario Budget Schedule of Debt" (PDF). www.ofina.on.ca. Ontario Financing Authority. Retrieved 20 April 2018.
  5. ↑ "Province's Debt History". www.fin.gov.on.ca. Ontario Ministry of Finance. Retrieved 20 April 2018.
  6. ↑ "Ontario debt projected to rise to $325B, Wynne Liberals to run deficits until 2024". Global News. 28 March 2018. Retrieved 20 April 2018.
  7. ↑ "Province's Consolidated Debt Portfolio". Ontario Financing Authority. Retrieved 20 April 2018.
  8. ↑ "What the tax cut means for Ontario's debt and deficit" (PDF). www.ofl.ca. Ontario Alternative Budget Working Group. 1998. Retrieved 11 January 2014.
  9. ↑ "Public Debt A Debt Burdened Ontario: Risks and Solutions". www.researchforum.ca. Canadian Forum for Policy Research. 2013. Retrieved 4 January 2014.
  10. ↑ Castaldo, Joe (28 March 2018). "Ontario budget 2018: In an election year, Wynne bets on deficits". Maclean's. Retrieved 20 April 2018.
  11. ↑ Yauch, Brady (7 March 2018). "A rare win for Kathleen Wynne: How selling Hydro One really helped Ontario taxpayers". Financial Post. Retrieved 20 April 2018.
  12. ↑ "2017 Annual Report". www.auditor.on.ca. Office of the Auditor General of Ontario. 6 December 2017. Retrieved 4 August 2014.
  13. ↑ "Review of the 2018 Pre-Election Report on Ontario's Finances" (PDF). www.auditor.on.ca. Office of the Auditor General of Ontario. 25 April 2018. Retrieved 4 August 2014.
  14. ↑ "Ontario will have $15B deficit, not the $6.7B the Liberals projected: finance minister". Canadian Press. 21 September 2018. Retrieved 21 September 2018.
  15. ↑ Thomas, David (28 March 2018). "The 2018 Ontario Budget in charts and numbers". Maclean's. Retrieved 20 April 2018.
  16. ↑ "What the tax cut means for Ontario's debt and deficit" (PDF). www.ofl.ca. Ontario Alternative Budget Working Group. 1998. Retrieved 11 January 2014.
  17. ↑ "A Balanced Approach to Balancing Books Ontario's Challenges: A consultation on debt and deficit" (PDF). www.ontariondp.com. Ontario NDP. 2012. Retrieved 4 January 2014.
  18. ↑ "Public Debt A Debt Burdened Ontario: Risks and Solutions". www.researchforum.ca. Canadian Forum for Policy Research. 2013. Retrieved 4 January 2014.
  19. 1 2 "Avoiding a Crisis: Fixing Ontario's deficit" (PDF). www.fraserinstitute.org. Fraser Institute. 2012. Archived from the original (PDF) on 5 November 2013. Retrieved 11 January 2014.
  20. ↑ "Moody's downgrades Ontario's credit rating". www.thestar.com. Toronto Star. 26 April 2012. Retrieved 8 January 2014.
  21. ↑ "Rating Action: Moody's changes outlook to negative on Ontario's Aa2 ratings". 17 April 2018. Retrieved 20 April 2018.
  22. ↑ "Provincial Solvency and Federal Obligations" (PDF). www.macdonaldlaurier.ca. A Macdonald-Laurier Institute Publication. October 2012. Retrieved 8 January 2014.
  23. ↑ "Paths to Prosperity - An Agenda for Growth". www.ontariopc.uberflip.com. Ontario PC. 2013. Retrieved 4 January 2014.
  24. ↑ "A Balanced Approach to Balancing Books Ontario's Challenges: A consultation on debt and deficit" (PDF). www.ontariondp.com. Ontario NDP. 2012. Retrieved 4 January 2014.
  25. ↑ "Ontario Liberal 2014 Platform: "Kathleen Wynne's Plan for Ontario" Quick Reference Guide" (PDF). StrategyCorp. Retrieved 20 April 2018.
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