Ontario did better at cutting its deficit in the just completed fiscal year but won't meet its deficit targets this year because of a big revenue shortfall caused by a slowing economy.

"Sometimes the economy throws you a curve ball,"Finance Minister Charles Sousa told the Canadian Club Thursday. He said slow growth will cut provincial revenues by about $3.5 billion this year relative to last year's projections, and much less than the long-term forecasts made in 2010.

"So, we do what’s necessary... we step up to the plate."

Sousa said Ontario ran a deficit of $11.3 billion in the just completed fiscal year, about $400 million lower than projected in last year's budget. But deficits will be harder to contain in the following two years though he's still committed to balancing the books by 2017-2018.

Sousa wouldn't explain to reporters after his speech how he will eliminate the deficit in 2017 while spending billions of new dollars in transit and infrastructure, as well as rolling out an expansion of the Canada Pension Plan.

"We adjust as necessary. We've made a determined decision that we can't sacrifice the wellbeing of Ontarians by not investing in those things that are going to make us competitive," Sousa said. "We have a number of intiatives coming out in the budget that will highlight how we will, in fact, balance the books."

Progressive Conservative Finance Critic Vic Fedeli said today's new deficit numbers showed the Liberals have no plan to balance the budget.

"That means we'll see further job losses, and will threaten the things we care about like health care and education," Fedeli said. "Leave it to the Liberals to celebrate the fact they're spending $11.3 billion more than they're taking in."

Fedeli also said today's numbers included drawing down a $1 billion reserve by roughly $600 million, the first time they've had to do that since the financial crisis of 2008-2009.

Sousa ruled out increases in the HST, gas tax, or personal income taxes to balance the budget—means Premier Kathleen Wynne had already ruled out for funding transit and infrastructure spending.

Sousa did acknowledge that balancing the budget would fall on the Ontario Public Service to some degree.

"We're looking at a number of transformations of the sector, and working with all parts of the broader publics sector as well," Sousa said. "They all have a desire to safeguard their pensions, and given that we want to make certain it's sustainable."

Sousa is expected to table his 2014-2015 budget May 1, a plan that could contain up to $5.7 billion in new spending on everything from transit and job creation to schools and social and health-care spending.

The provincial Tories have urged the government to impose a two-year wage freeze on 1.3 million workers in the broad public sector as a way to save $2 billion a year and avoid raising taxes in a province facing a "jobs crisis."

Sousa told the business group the government will press ahead to balance the books by 2017-2018 and is moving forward with 80 per cent of the recommendations former Bay Street economist Don Drummondmade in his landmark 2012 report on public finances.

"We’re surpassing expectations of savings in the system more than ever imagined," Sousa said. "And we are avoiding more than $24 billion in additional borrowing. More importantly, we’ve done this without having to pick a fight with the public sector."

The government has already cut more than $1 billion in future expenses by reforming the health benefits plan for public sector workers starting in 2017. And it's likely to offer only small wage gains in future contract talks with teachers, nurses, doctors and other public workers.

Premier Wynne and Sousa have both said the Liberals don't want to raise taxes on the middle class or the HST or gasoline taxes to pay for transit expansion planned in the budget.

Sousa says he can’t meet short-term deficit target

Read this for free.