Ontario Liberals understating deficit by billions: auditor

The Kathleen Wynne government is low-balling its budget deficits by billions of dollars, according to a report released Wednesday by the province’s auditor general, just six weeks ahead of the provincial election.

The Liberal government’s projected deficit of $6.7 billion for 2018-19 should actually be $11.7 billion, says Auditor General Bonnie Lysyk in her pre-election report on government finances.

Lysyk said the government failed to account properly for the financial impact of its Fair Hydro Plan on provincial coffers and improperly treated the revenues and expenses related to two provincial pension plans.

For the same reasons, the auditor says the Liberals are underestimating the deficits in future years:

“The consequences of these major differences between the governments projections and the likely actual deficits are significant,” Lysyk said. “They create the perception that the government has more money available to it than it actually does.”

Premier Kathleen Wynne, whose Liberals have been trailing in recent polls ahead of the spring election, downplayed the discrepancy, calling it a long-standing “accounting dispute” between her government and the auditor general.

“Those are old discussions and they are ongoing,” Wynne said.

Provincial law requires the auditor to review the government’s financial projections ahead of each scheduled election to determine whether the figures are reasonable. The law was brought in under former premier Dalton McGuinty after the previous PC government left the province with a hidden deficit.

Finance Minister Charles Sousa acknowledged that the government and the auditor general’s office have been at odds over the issue for years, but said the government is not changing its position on the issue.

“This is an ongoing disagreement between professional accountants. That hasn’t changed,” he said. “But what I am confirming today, what the auditor general has confirmed, is that the plan that we put forward is prudent, it’s cautious, it’s appropriate.”​

Progressive Conservative parliamentary leader Vic Fedeli said the dispute comes down to a “matter of trust” and Ontario voters shouldn’t trust a government that is trying to make the books look better ahead of the spring election.

“We the MPPs have been deliberately misled and so have the people of Ontario,” he said. “They have purposely deceived the people.”

NDP finance critic John Vanthof said the auditor general has pointed out what should be basic accounting principles used by the government.

“When the government makes a decision … to spend money it should show up clearly and transparently on the books,” he said.

Under its Fair Hydro Plan, the government will borrow money over the long-term to cut rates immediately. Lysyk said the government has not included the cost of compensating power generators or interest on the money borrowed for the plan.

“The plan gives ratepayers a discount on their hydro bills but someone else still has to compensate power generators for their reduced revenues resulting from the discount,” she said. “That someone is the government. And it must borrow to pay this compensation.”

Lysyk also raised the issues with the accounting of the Ontario Public Service Employees Union Pension Plan and the Ontario Teachers’ Pension Plan, which are jointly sponsored with the government.

In 2016, the auditor general told the government it did not have a legally enforceable right to unilaterally access the assets, so they should not appear on the balance sheets.

She repeated that message Wednesday, adding that if the government could produce a letter proving the co-sponsors agreed it could access the funds she would change her assessment.

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