Article content continued

The long-term rating was lowered from AA- to A+, but Ontario’s short-term A-1+ rating was affirmed and its outlook remains stable. That means there will be few short-term costs to the provincial treasury but in the long-run the downgrade could drive up Ontario’s borrowing rate when interest payments already eat up the third largest chunk of its $132-billion budget.

This is the second time S&P has downgraded Ontario since it started running deficits after the recession. Though the agency notes Ontario is set to balance its books by 2018 — as promised by Finance Minister Charles Sousa — it worries about how much capital spending the Liberal government has committed.

Continue reading…

[/np_storybar]

Similarly, when Standard & Poor’s downgraded Ontario’s long-term credit rating on Monday, Sousa managed once again to find the tiny ray of sunshine in the gathering gloom. “Part of the basis for S&P’s stable rating is that Ontario has a stable, majority government,” he beamed. “The report,” he added, “further notes that Ontario has ‘had some success in bending its cost curve over the past several years.”

The provincial debt is on track to reach $298 billion this year, almost half the size of the federal debt in an economy barely a third as large; servicing it costs $11 billion a year, the third-largest expense in the budget, even at today’s record-low interest rates; and the province’s productivity, according to a recent study by the Centre for the Study of Living Standards, is growing at the second-slowest rate in the country: just 0.5% a year between 2000 and 2012.