Ontario’s credit rating downgraded over heavy debt load, budgeting – by Jane Taber (Globe and Mail – July 7, 2015)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

TORONTO — Standard & Poor’s is downgrading Ontario’s long-term credit rating, saying the province may be tackling its deficit but a multibillion-dollar 10-year plan for infrastructure spending will exacerbate its debt load

The downgrade, from double-A-negative to A-plus, comes because of a combination of “very high debt burden” and “very weak budgetary performance,” the major credit-rating agency says.

Since being re-elected last year, Ontario has been moving to cut the province’s deficit – projected to fall to $8.5-billion this year – by squeezing health care and education spending. But S&P is focusing, among other things, on the government’s intention to spend $130-billion over the next 10 years on transit and other infrastructure.

In addition to raising a red flag on the province’s long-term infrastructure plans, the rating agency chastised Queen’s Park for not being stricter on reining in its spending.

“Ontario has been slow to fully roll out the spending controls and revenues needed to eliminate its structural operating deficit, which has caused its tax-supported debt level to approximately double since fiscal 2008,” according to the analysis accompanying S&P’s decision.

Douglas Porter, chief economist at Bank of Montreal, characterized the downgrade as “a fairly significant move by Standard and Poor’s.” Mr. Porter called it “more of a report card on what has been than a look forward.”

“To some extent it reflects the fact that Ontario has had a relatively large buildup of debt since the recession hit,” he said. “In fact, by some measures, we have had the fastest buildup of debt among the provinces and that’s even as a share of the economy, that’s not just in dollar terms.”

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