Buoyed by an improving economy that has reduced the projected deficit by $3.4 billion, Finance Minister Dwight Duncan will announce new social spending in the provincial budget.

“We’re in the springtime of recovery,” an uncharacteristically ebullient Duncan told reporters Wednesday against the hopeful backdrop of construction at Ryerson University.

“I am pleased to inform you that the 2010 budget will forecast a deficit of $21.3 billion for the year just ending – an improvement of $3.4 billion from the deficit forecast in last fall’s statement,” he said.

That shortfall is still a record for Ontario, but it’s better than the $24.7 billion deficit on a $113.7 billion spending plan the Liberals had predicted in the fall economic statement on Oct. 22.

It’s also good political news for Premier Dalton McGuinty, whose government faces re-election in October 2011.

The budget to be unveiled Thursday afternoon in the Legislature will outline an eight-year road map back to balance, meaning Ontario will continue to be awash in red ink until 2017-18.

“You’ll be hearing more about our realistic and responsible plan to eliminate the deficit caused by the global downturn, but I wanted to pass along today that we’ve already made some gains,” the finance minister said.

The largesse will be spent on 20,000 new spaces in universities, colleges, and apprenticeship programs and the continuation of 7,600 daycare spaces that had been threatened by an end of $63.5 million in federal funding, among other initiatives.

Duncan said the 14 per cent reduction in the size of the deficit is “largely due to better than expected economic growth as well as prudent planning of contingency and reserve funds.”

“We’re seeing upticks in employment, upticks in revenue, upticks in a variety of areas, but we still have a large challenge and that is to eliminate the deficit eventually,” he said.

“It’s pretty much across the board … we’re seeing corporate tax revenues up, we still don’t have solid numbers on personal income tax, sales tax numbers are up from the fall.”

The lack of a full-scale H1N1 pandemic helped since the government didn’t have to spend as much on the flu as it had anticipated.

But Progressive Conservative Leader Tim Hudak injected some reality into Wednesday’s festivities.

Hudak pointing out that Duncan had warned of a $14.1 billion deficit in last March’s budget and then an $18.5 billion shortfall in a revised projection in June before October’s ominous $24.7 billion announcement.

“I mean, come on. This is the fifth number that they’ve put out there for the deficit for this year. Originally it was going to be balanced,” he said, referring to 2008 forecasts before the global economic slowdown.

“Only a Dalton McGuinty Liberal would think a $21 billion deficit is some kind of an accomplishment. ”

NDP MPP Peter Tabuns (Toronto Danforth) said the changing fortunes at the provincial treasury are as much due to budget chicanery as the recovering economy.

“It is a big swing. It looks to me like … they low-balled the deficit when they brought out the numbers in the fall,” said Tabuns, adding the figure’s release on the eve of the budget was about “managing public expectations.”

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“Now, just before the budget they’re able to say, ‘gee, we’ve managed well, it’s a wonderful place, we’ve managed better than expected,’” he said.

Until last year, the largest Ontario deficit on record was $12.4 billion in the 1992 budget introduced by NDP premier Bob Rae’s finance minister, Floyd Laughren, at the height of the most recent big recession.

Sources say the anticipated deficit of $21.1 billion for 2010-11 and the $19.4 billion for 2011-12 will also be lower than previously thought.

Along with the deficit-reduction plan to be announced in the House at 4 p.m. Thursday, Duncan is expected to introduce reforms to the welfare system to stem abuse of the Special Diet Allowance.

With one in five welfare recipients—some 162,000 Ontarians—receiving the monthly extra stipend of up to $250 under the plan that helps those on assistance with medical problems the program has grown to $200 million from $6 million a year in 2003.

The Liberals argue that’s not sustainable and Auditor General Jim McCarten exposed misuse in his annual report last December.

Also in the budget will be an economic plan for struggling northern Ontario, which has been decimated by the closure of pulp and paper mills.

But unlike last year—when the 13 per cent harmonized sales tax that blends the provincial sales tax with the federal GST was unveiled – there will be no tax hikes in Thursday’s spending plan.

There will, however, be a successor to the five-year $6.2 billion “Reaching Higher” program that was launched in the 2005 budget by former finance minister Greg Sorbara to boost post-secondary schooling.

The price-tag for the 20,000 new spots in higher learning institutions will be hundreds of million of dollars, but the Liberals believe it is money well spent.

Similarly, the government will again tout its plan all-day junior and senior kindergarten for 4- and 5-year-olds that is being phased in starting this September.

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