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More cuts to Ontario deficit coming in January

Dwight Duncan
The Ontario government's recent Fall Economic Statement retroactively confirmed that the 2011-12 deficit was $2 billion less than set out in the 2012 provincial budget. It also lopped $400 million off the 2012-13 deficit.

Our economic elites thought this was no big deal -- there was a "lack of significant progress" the TD Bank said. (See TD's report here and the chart "Fiscal profile largely the same for the Ontario government" )

But just those cuts in the deficits are equivalent to $1 billion more than the $1.4 billion the government hopes to save through the first year of its  "provincial compensation framework" announced in July.

The   $2.4 billion reduction in the Fall Economic Outlook is just the latest in a long series of reductions since the 2010 Budget -- $13.5 billion in total.

Deficit (in billions of dollars)
2010 Budget
2012 Fall Economic Statement
Reduction in Deficit

Despite this (and despite that it was apparent the major part of the government's planned compensation savings were already achievable) Premier McGuinty and Finance Minister Dwight Duncan launched their fateful legislative attack on collective bargaining in the broader public sector.

More Deficit Cuts?
Earlier this week, outgoing Finance Minister Duncan (while pleading for the new Liberal leaders to stick with his policies) suggested that he will announce new deficit numbers in January.  This will likely continue Duncan's tradition: we will be told the deficit is smaller than previously announced.  (Despite growth and little new spending, Duncan's Ministry somehow estimated that the deficit will be $1.4 B higher this year than last year in the recent Fall Economic Statement.)

This will also allow Duncan to grab credit for a reduced deficit before he goes, likely shortly after the January 26 leadership contest vote.

But don't expect the Duncan (or the banks) to suggest that any adjustment in the deficit should mean any adjustment in policy on free collective bargaining.


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