The provincial government says in an effort to balance the budget next year as promised, it’ll have to dip into its reserve fund.
In its fall economic update on Monday, the Liberal government says an accounting dispute with the auditor general over how pension assets should appear on the books is to blame as it added $2.2-billion to the deficit this fiscal year.
The reserve fund for 2017-18 will be reduced from $1.1-billion to $700-million, and in 2018-19, $400 million is being used.
“We build prudence into our budget year over year and in this case the reserve is meant to offset any unforeseen circumstances and we had that” in the pension adjustment, Finance Minister Charles Sousa (pictured right) said.
“We had to accommodate for it and as a result we used the reserve, as is common practice to do in any business, in any government, and it’s done often.”
By dipping into its reserves, the Liberals are expected to be able to balance the books in time for the June 2018 election. Sousa insists balance could be sustained beyond that but Progressive Conservative finance critic Vic Fedeli says a balance achieved through using reserve funds isn’t a “true” balance.
“When you tap into one-time reserves and one-time sale of assets, you’re only artificially balancing the budget,” he said. “They’ve got…a structural deficit in Ontario.”
NDP finance critic Catherine Fife echoed Fedeli’s sentiments.
“The desperation that we see from this government to plug the holes from a financial perspective is astounding and so short-sighted,” she said.
Since the spring budget, the government has also added about $3-billion in new expenses – thanks to the pension adjustment, a new 8% electricity rebate, and new health spending – but finance documents show those expenses are mostly paid for by more than $2-billion extra in higher than expected tax revenues and lower than expected interest on debt.
Sousa stresses tax revenues are up because of growth and not tax hikes.