* 2012-13 deficit seen at C$11.9 bln vs C$14.4 bln in fall
* Finance minister: Deficit could fall further to C$11.4 bln
* No change to 2017-18 target to balance budget
By Claire Sibonney
TORONTO, Jan 22 Ontario's minority Liberal
government said on Tuesday the province's budget deficit has
fallen more quickly than projected, helped by higher corporate
tax revenues and one-time savings from the elimination of banked
sick days for teachers.
The Canadian province's 2012-13 deficit is now expected to
be C$11.9 billion ($11.98 billion), down from C$14.4 billion
seen in the fall economic update.
The government credited a one-off C$1.1 billion jump in
corporate tax revenues related to tax assessments. It also
booked savings of C$1.1 billion by eliminating bankable sick-day
payouts to the province's teachers.
The Liberals have been locked in battle with unions
representing most of the province's teachers over controversial
legislation that ended the practice of banking unused sick days
for payouts at retirement. It also cut sick days, limited
teachers' right to strike and imposed a two-year wage freeze.
"We have taken the difficult decisions that we had to take,"
Finance Minister Dwight Duncan told a business audience in
Toronto, where he announced he will step down as finance
minister following the election of a new Liberal leader this
"Beating fiscal targets is a direct result of managing
spending prudently and steady but modest growth in the economy,"
Duncan predicted that the deficit could come in even lower
than the revised target.
The 2012-13 deficit could fall to C$11.4 billion "barring
any catastrophe" by using C$500 million of a C$1 billion reserve
built into budget, he said.
Even so, the government said its plan to balance the budget
by 2017-18 is unchanged.
"The much-publicized battles over public-sector compensation
haven't necessarily reduced the spending profile, but rather
have allowed the province to hit the targets set out in the
FY12/13 budget," Robert Kavcic, senior economist at BMO Capital
Markets, said in a research note.
"Hitting these targets was an area of concern for some at
the time of the budget, and the province deserves some credit on
Duncan said overall in 2012 Ontario public sector wage
increases are averaging under 1 percent.
For 2012-13, program expenses are expected to rise by only
1.8 percent, well below recent trends, though Duncan warned that
in order to get back to balance, the province needs to bring it
closer to 1 percent.
The finance minister also revealed Ontario's economy grew by
0.1 percent in the July to September period. He cautioned that
private sector forecasters expect Ontario's economy to grow by
just 1.8 percent in 2013, down from the 2.3 percent seen in
DEBT-TO-GDP, BORROWING SEEN EASING
Ontario's net debt-to-GDP is expected to be 37.8 percent at
the end of 2012-13, below the 39.1 percent the government
projected in the fall. It is expected to peak at 39.9 percent in
This year's borrowing program remains unchanged. But the
province's borrowing requirements for 2013-14 fell by C$2.7
billion to a projected C$36.4 billion.
For the fiscal year ending on March 31, Ontario has
completed C$30.1 billion, or 87 percent, of the C$34.5 billion
requirement. More than 70 percent has been raised in Canadian
dollars, while the rest has been issued in U.S. currency.
Gadi Mayman, head of the province's financing authority,
said the absence of borrowing in other foreign currencies "has
been unique for us. I don't recall a year where we've gone this
far into the year without borrowing in anything other than
Canadian or U.S. dollars."
Mayman said Ontario has also been able to extend the term of
its debt, particularly in the 30-year area.
"Ontario is still seen as a safe-haven for investors. Our
debt is still selling out, and again my worry in the short term
is interest rates," Duncan told reporters following a speech in
which he cautioned that the threat of rising interest rates is a
"ticking time bomb."