CHARLOTTETOWN — Premier Robert Ghiz says a new report from the Conference Board of Canada, commissioned by the country's premiers, shows it isn't possible for them to balance their budgets in the long-term without more money from Ottawa.

But the Conference Board's numbers show the vast majority of the current deficit problem from coast to coast is one province's doing: Ontario.

Of the $16.1 billion in combined provincial and territorial deficits in the 2013-14 year, the Conference Board finds Ontario is responsible for $11.3 billion, or 70 per cent of the total. Ontario's deficit of 1.6 per cent of GDP is nearly twice as large as Quebec's, and larger than any other province except New Brunswick's.

The Ontario deficit for this year is even bigger – at $12.5 billion – but the ruling Liberals insist they will balance the books within three years. Their budget last month promised to hold the line on government spending, sell government assets, raise taxes by $1.1 billion and rely on economic growth to help wipe out the red ink.

Premier Kathleen Wynne defended her government's record on deficit-fighting, denying that the "fiscal imbalance" was largely of Liberal making.

Premier Kathleen Wynne in Charlottetown, PEI August 28, 2014 (John Michael McGrath/QP Briefing)

Premier Kathleen Wynne in Charlottetown on Aug. 28, 2014 (John Michael McGrath/QP Briefing)

"We've just had a long discussion about that in Ontario. We've put forward a plan that balances our budget, eliminating our deficit by 2017-18," Wynne said. "At the same time, we recognize there are immediate needs in order to grow our economy and create the jobs we know are necessary."

Ghiz said the provinces collectively will face demographic challenges over the long term that only more funding from Ottawa can fix.

"We know every year we bring this up, and the federal government says there is no fiscal imbalance," Ghiz said. "The Conference Board has come back with a concrete report that changing demographics and ageing population will trigger weaker economic growth over the long term."

"The combination of lower revenues and rising social costs will make it difficult for provinces and territories to balance their budgets, while at the same time we're going to see the federal government moving to surplus situations," Ghiz said.

From Ottawa's point of view, the Harper government's changes to transfer payments – especially in health care – have forced provinces to reform a system that was unsustainable. That has led to new policies to cut drug costs and end useless tests to reforming how services are delivered.

The Conference Board of Canada report contains few surprises: the combination of an aging population, low rates of immigration and a low birthrate among Canadian-born residents are all combining to lower economic growth and raise the health-care costs that make up the single largest budget item in Ontario.

The Conference Board estimates that Canada's real potential economic output – the sustainable level of economic growth the country can expect absent recessions or inflation – will grow by only two per cent over the next 20 years. Assuming no major policy changes, the Conference Board sees persistent budget surpluses for the federal government thanks to lower debt payments and changes made to Old Age Security (OAS).

Under the status quo, the Conference Board sees health-care spending rising to 55 per cent of GDP for provincial governments. Even with aggressive measures to control costs, the report sees health-care costs rising as a percentage of GDP.

Late in the afternoon Thursday, Ghiz and Yukon Premier Darrell Pasloski applauded the work of the Health Care Innovation Working Group (which Pasloski will co-chair with Wynne in the coming year), which has worked to lower the price of generic and brand-name drugs, one of the strategies the provinces are using to contain health-care costs.

"As a result of that work," Pasloski said, "we've increased the savings from $150 million to a total of $250 million annually."

COF: Ghiz touts Conference Board report, says Ottawa needs to address fiscal imbalance

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