Ontario deficit will shrink more than predicted by province, watchdog says

A new report from Ontario's fiscal watchdog predicts smaller budget deficits over the next few years compared to those in the government's last economic update due to an improved revenue forecast.

The Financial Accountability Office's report issued Tuesday on the province's economic outlook said Ontario's deficit is expected to decline to $2.8 billion by the end of the 2023-24 fiscal year, down from $16 billion this fiscal year.

That's compared to the government's predicted budget deficit of $11.4 billion.

Financial Accountability Officer Peter Weltman said the difference "is largely due to a significant change in the revenue forecast."

"That's really where the bulk of this comes from," Weltman said at a virtual news conference. The report also notes that a "lower projection for interest on debt expense" by the watchdog's office contributed to the $8.6 billion difference.

The watchdog report projects that revenues will be $7.6 billion higher by 2023-24 than figures in the government's plan.

The report makes total spending projections similar to the government's for the fiscal year ending in 2024. But it highlights shortfalls for programs in health, education, justice, post-secondary education and social services in government's plan, which it says could be offset using "significant unallocated funds."

Weltman said a lot of the unallocated funds are "COVID-earmarked money" that didn't have a specified allocation as of Jan. 20. The numbers are not included in the watchdog's projections until the government specifies its plans for the money, and Weltman said "the government can do really what it wants to do" with the funds.

"[Government]can create new programs, it can enhance existing programs, it can fund those programs shortfalls or it could just hold on to it and reduce the deficit," he said.

The Financial Accountability Office's report comes ahead of the government's election-year budget that's expected to come before the end of next month.