Finance Minister Vic Fedeli is promising to serve “a dose of reality” about red ink on Ontario’s books in a breakfast speech Friday, warning “some of it may not make you feel well.”

His remarks to the Economic Club of Canada come almost three months after Premier Doug Ford’s Progressive Conservatives took power following nearly 15 years of Liberal government.

Fedeli will touch on the accounting spat between the previous Kathleen Wynne administration and Auditor General Bonnie Lysyk over how pension assets are booked and how costs of the Liberals’ $40-billion “fair hydro plan” — which the Conservatives have kept in place — are treated.

“Those are the main issues,” the treasurer told reporters Thursday.

Opposition parties said Fedeli will use the occasion to lay the groundwork for steep cuts to government programs and services given Ford’s election promise to cut $6 billion in spending.

Ford signalled earlier this week that Ontarians will be “floored” by the revelations in an independent audit into the books led by former B.C. premier Gordon Campbell.

Campbell worked with respected forensic accountant Al Rosen and Michael Horgan, a former deputy finance minister for the federal government, to examine the state of Ontario’s finances.

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Lysyk disagreed with bureaucrats and Wynne’s Liberals over whether $11 billion in government co-sponsored pension plans can be counted toward the bottom line.

Although she and her predecessors booked the holdings in the Ontario Public Service Employees’ Union Pension Plan and the Ontario Teachers’ Pension Plan as an asset starting in 2002 — when Tory Ernie Eves was premier — she changed her mind two years ago.

A panel of independent experts led by the chair the Canadian Actuarial Standards Oversight Council concluded last year the fiscal watchdog was wrong.

Still, Lysyk’s U-turn is worth $5 billion on the annual bottom line, so the deficit for this year would be $11.7 billion instead of the Liberals’ projected $6.7 billion from the March 28 budget.

Fedeli is expected table a revised spending plan in the fall economic statement, likely in November.

NDP Leader Andrea Horwath warned the accounting change will be “an excuse or a piece of evidence that they’ll hold up to say that more cuts have to occur.”

“Nothing is safe in Ontario. This government is intent on dragging our province from bad to worse,” said Horwath.

“Whether it’s the cuts that they’ve already made to mental health funding (or) … the cuts that they’ve made to school repairs, they’re already cutting,” she said.

Interim Liberal Leader John Fraser said the Tories are squandering a strong economy that they “inherited” from the previous Grit government.

“Tomorrow will all be about a context for cuts — that’s their agenda,” he said, noted that in the lead-up to the June 7 campaign the Tories used the Liberals’ accounting projections not Lysyk’s.

Green Leader Mike Schreiner, whose party did use the auditor general’s accounting in its campaign documents, said the Tories are looking for “an excuse for running larger deficits than anyone would anticipate for them.”

Schreiner said the new government is “doubling down” on the Liberal hydro plan, which subsidizes ratepayers’ electricity bills at great expense to the treasury.

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Lysyk has criticized the accounting in the scheme that uses borrowed money to reduce rates by 25 per cent.

But Energy Minister Greg Rickford is building upon the Liberal plan to further cut rates by an additional 12 per cent.

In her pre-election report last spring, the auditor general calculated the deficit forecast for next year is $12.2 billion — not the $6.6 billion former Liberal finance minister Charles Sousa predicted — and for 2020-21 it’s $12.5 billion, not $6.5 billion.

Robert Benzie is the Star's Queen's Park bureau chief and a reporter covering Ontario politics. Follow him on Twitter: @robertbenzie

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