September 23, 2022 | 11:59
Ontario FY21/22 Public Accounts
The Province of Ontario posted a $2.1 billion surplus (0.2% of GDP) in the FY21/22 public accounts, much better than the $13.5 billion deficit last expected in the 2022 budget (April 2022). This is a massive revision that resets the fiscal backdrop in Ontario for the current year and beyond, and is the first surplus for the province in 14 years.
Total revenues came in at $185 billion, up $11.5 billion from the latest estimate. Strong upward revisions to tax revenues almost across the board drove the increase. Meantime, total spending came in $4.1 billion lower than last expected, or $3.1 billion below the initial budget plan. That's a modest incremental improvement set against a surging top line.
The better-than-expect result also left net debt in a better position coming into this year, at $380 billion or 39.2% of GDP. That's a solid 1.5 point improvement for FY21/22, though still leaves Ontario near the back of the pack (ahead of Newfoundland & Labrador) as the final numbers come in.
There’s no current-year borrowing update here, but given the nature of the upward revision (higher tax revenues), we should see a meaningful portion of the upside surprise flow into the current fiscal year and directly cut the deficit (keeping in mind that Ontario had a pretty big spending program for FY22/23). From Ontario's latest borrowing update, taking $10 billion off the operating deficit; holding expectations for capital spending steady; and accounting for the $10.3 billion of pre-borrowing done last year, FY22/23 requirements could look closer to $30 billion down from the $40 billion last estimated for FY22/23. Actual borrowing plans will vary depending on how much of last year's improvement flows through, and how spending evolves.
Looking further ahead, keep in mind that the picture is likely to worsen for FY23/24 and beyond, when we get a medium-term fiscal update (later in the fall). Our real GDP outlook is deteriorating quickly, and will be well below the budget assumption of +3.1% for 2023 (although nominal growth looks to have more staying power). So, as we wrote recently, this all fits into the theme that we are going to see more near-term fiscal upside for the provinces, but it could prove fleeting and give way to downward revisions for next fiscal year and beyond.