Ontario Deficit Might Hit $18 Billion

There are projections that the province of Ontario will register an $18 billion deficit over the next two years as the recession hits.

Don Drummond is chief economist atTD and he is expecting Ontario to run a deficit of about $5 billion in the current fiscal year ending March 31 and another $13 billion in the next. The province's deficit has previously been placed at between $5 billion and $10 billion, taking into account its promises to bail out struggling automakers and match federal dollars for infrastructure projects meant to kick start the ailing economy. "The fact that even Alberta has slid into a deficit for the current year just gives you an idea of how quickly policy-makers across the country were overwhelmed by the sudden turn of events last fall," said Douglas Porter, deputy chief economist at the Bank of Montreal. "I do suspect that the vast majority of provinces will be looking at deficits in the coming year. I think surpluses or balanced budgets will be the exception, not the rule, which is a complete turnaround from recent years." On March 26, Canada's Finance Minister Dwight Duncan will present a $100 billion spending plan covered in red ink. The general opinion at Queen's Park has been that Duncan's recession-fighting budget would be saddled with a $5 billion to $10 billion deficit. "That's wishful thinking," Drummond said, noting that matching federal stimulus spending and bailing out General Motors Canada and Chrysler Canada combined with plunging tax revenues will hit the provincial treasury very hard. "The Ontario economy mirrors the U.S. economy. It has very little relationship to the rest of Canada and ... the (U.S.) economy is in freefall. This stuff is going to keep Ontario down." Drummond has based his forecasts on the assumption that program spending will increase 5 per cent each year in Ontario. He has shared his deficit calculations with officials in the Ministry of Finance and they did not appear surprised. "No one fell off a chair."