Comparing the Debt Burdens of California and Ontario
Highlights of the Fraser Institute report
|The new benchmark in bad planning|
On March 8, 2014, the Vancouver-based Fraser Institute published a research study comparing the debt burdens of the state of California and the province of Ontario. Within the United States, many people consider California to represent a prime example of irresponsible government spending coupled with poor cash management. However, the Fraser Institute report uses a number of measures to compare Ontario’s situation to that of California. In almost all cases, Ontario is much worse.
Here are the highlights of the report:
· California’s current debt in the form of government-issued bonds is US $144.8 billion, while Ontario carries CDN $267.5 billion, almost double the amount of California.
· This figure actually understates the disparity between the two regions, as California has a much larger economy. The gross debt in the form of bonds is 7.6% of California’s economy, while it is a “whopping” 40.9% of Ontario’s economy, more than five times as large as California.
· Per capita, each Ontarian’s share of provincial government debt is CDN $20,166 (i.e. $80,664 for a family of four), compared to US$ 3,844 in state government debt for each resident of California.
· Servicing this debt through interest payments is more costly in Ontario. 9.2% of budget revenues in Ontario are devoted to interest payments, compared to 2.8% in California.
· Ontario’s expenditures as a share of the economy grew from 15.5% in 2001-2002 to 19% in 2011-2012.
· Over this period, total government spending in Ontario has been steadily increasing from one year to the next. Thus, unlike California, Ontario has not managed to stabilize the growth of the debt in terms of GDP.
· Ontario’s net debt for 2012-2013 is the second highest as a percentage of GDP of any Canadian province, trailing only Quebec. However, Quebec’s annual budget deficit was only half as large – 0.7 % compared to Ontario’s 1.4 %.
· Ontario’s budget analysts project that from 2012-2013 to 2015-2016 net interest payments will represent the fastest growing expense for the provincial government, growing at 5.5 % annually – more than twice the projected rate of health care expenditures.
Ottawa, March 18, 2014
Blog Editor note: Ontario Energy Minister Bob Chiarelli admitted Ontario is spending $1B a year on power generation from wind energy; he also admits we don’t need it.