Ontario’s new budget: how to get rid of a $10-billion deficit?

Keep working, Ontario: you've got a lot to pay for
Keep working, Ontario: you’ve got a lot to pay for

Ontario: balancing the books with SWEATED ratepayers

How can Ontario rid itself of a $10.9-billion deficit, as the Liberals promise by 2017/18?  Both Finance Minister Charles Sousa and Premier Wynne are adamant it will happen, but many of us ordinary folks, as well as economists, debt rating agencies, etc., are having difficulty seeing how that will be accomplished without either a big tax increase or an across-the-board slashing of ministerial budgets.

The Finance Minister announced the budget will be released April 23, 2015.  What should we expect?

Having agonized over the question for some time, I believe the formula Minister Sousa has devised  will not sit well with Ontario’s ratepayers and others who dare to consume energy.

The norm for Ontario government programs is: label them with an acronym. Well, maybe ratepayers/taxpayers need an acronym to describe the upcoming budget balancing plans. I suggest SWEATED1. (Sousa Wynne Eliminating All Traces [of the] Enormous Deficit).

To eliminate a $10.9-billion deficit requires politicians to make difficult decisions that might prove detrimental in future elections, but if they are presented as positive change the party’s fortunes may not be harmed.

Here is how we might anticipate what “Revenue Tools” they think may do the job:

Reducing the Ontario Deficit:

Effective January 1, 2016 the OCEB (Ontario Clean Energy Benefit) will be eliminated, saving $1.2 billion for the Treasury.  The $1.2 billion “benefit” removed will mean ratepayers pick up those costs. The Province will also garner their (8%) portion of the HST, putting another $100 million towards deficit reduction. Result: the deficit falls to $9.6 billion.

Also effective January 1, 2016, the OESP (Ontario Electricity Support Program) starts and  ratepayers will be charged with funding it.  The estimate is $200 million to cover subsidies for “low-income” ratepayers. Ratepayers will also pick up the HST portion of $16 million. The Ministry of Community and Social Services will cut their budget by $200 million. Result: the deficit is reduced to $9.384 billion.

Effective immediately (announced by the Ministry of Northern Development and Mines) the Northern Industrial Electricity Rate Program became permanent “with continued investment of up to $120 million per year.”  Ratepayers will continue to supply those “continued investments” for  eternity!  This doesn’t affect the deficit reduction but will mean NO rate relief!

Effective July 1, 2014 OPG started to receive regulated rates for unregulated hydro and also paid for IESO induced spillage increasing the annual cost of OPG-supplied hydro by about $250 million,  OPG also got approval for a rate increase to cover some of their pension shortfall adding $300 million to power costs.  Electricity generated by OPG will cost $600 million more and add $50 million to the province’s HST revenues. Higher profits for OPG means the province could generate $300 million in dividends. Result:  the deficit is reduced to $9.034 billion.

Now, OPG are not the only ones to get rate increases as all LDC increased their collective billings by $541 million (2009 to 2013), meaning the province collects their 8% HST portion and the increased  profits allows the LDC to pay higher dividends to their municipal owners.  This will allow the province to reduce payments to municipalities by $100 million and, together with the HST portion of about $50 million, will further reduce the deficit to $8.884 billion.

Now with Hydro One’s announced partial sale we should look to what the province might generate. A sale of 60% to Provincial Pension Funds: e.g., OMERS, OPB, Teachers, etc., for the $9 billion Ed Clark suggests it would generate, will be allocated thus: $5 billion to pay off what the province owes OEFC for their Hydro One debt and interest  and a one-time reduction in the deficit.  The  balance of $4 billion would be put in the Trillium Trust “infrastructure pot.”.  That $9 billion would produce a budget surplus of around $100 million, once the full 60% of Hydro One is sold.

Now to put the budget well over the top, the recent announcement for a “cap and trade” tax on vehicle fluids (gasoline & diesel) of, say, 3 cents/litre would generate about $700 million annually (based on 2013 Statscan Ontario consumption numbers for Ontario).  Let’s assume it will raise $300 million annually from other “carbon emitters.” Result: the budget surplus will jump to $1.1 billion.

What this all suggests is Ontario could claim the province is in surplus by $1.1 billion, (the cost to move two gas plants), which they will have done principally on the backs of  energy consumers, just as they have in the past!

©Parker Gallant,                                                                                                                                      April 19, 2015

  1. Oxford defines “sweated labour” as “hard work done under poor conditions for very low wages”.

The views expressed are those of the author and do not represent Wind Concerns Ontario policy.

Comments

Andy Oudman
Reply

Parker:

Applauding all you do. Keep me in the loop. We should talk soon,
Andy Oudman, Host of Newstalk 1290 CJBK London.

Bob Lyman
Reply

The taxpayers and the electricity ratepayers would both take sizeable hits under this scenario. The taxpayer hit would come, inter alia, from the loss of an asset – the value of Hydro One shares, while the revenues from those shares is spent to pay down the past debts of the electricity system and to cross-subsidize the taxpayers of the GTAA who should, by rights, be the ones who pay for all the expensive urban transit infrastructure that Wynne and her cronies want to build there. Parker, your article illustrates well how the Ontario Treasury and Energy Ministries are cooperating in a clever shell game to transfer revenues and debts around to achieve the appearance of fiscal prudence, all the while maintaining a spending addiction. The beauty of this strategy politically is that the game being played is so complex the public will not be able to follow the pea.

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