Ontario’s budget deficit was half of the $15 billion the Progressive Conservative government initially claimed after defeating the Liberals last year.

Treasury Board President Peter Bethlenfalvy and Finance Minister Rod Phillips on Friday announced that the final deficit figure for 2018-19 was $7.4 billion.

The Tory ministers said the change — down from an interim $11.7 billion figure disclosed by former treasurer Vic Fedeli who was demoted 10 weeks after his April budget — is due to higher tax revenues and lower than anticipated spending.

“Our government’s strong fiscal management and smart policies mean we are overcoming the previous government’s record of waste and mismanagement,” said Bethlenfalvy.

But the actual deficit could be anywhere from $1.3 billion to $2.6 billion lower because the Tories are still in discussions with Auditor General Bonnie Lysyk over how to include billions of assets in government co-sponsored pension plans.

Lysyk used to account for the holdings in the Ontario Public Service Employees’ Union Pension Plan and the Ontario Teachers’ Pension Plan until a dispute with the previous Liberal government in 2015.

A panel of independent experts hired by the former administration and led by the chair of the Canadian Actuarial Standards Oversight Council concluded in 2017 that she was wrong.

The Conservatives’ independent “financial commission of inquiry,” headed by former B.C. Liberal premier Gordon Campbell, said last year the government should only adopt Lysyk’s accounting method on a “provisional basis.”

“It would seem reasonable that the government should be able to recognize a portion of an asset it jointly controls with another party,” Campbell’s report concluded.

“Given the risks and uncertainties involved, they may not feel it appropriate for the government to recognize its full 50 per cent share of the surplus. By the same token, however, it seems unlikely they would conclude the value to be zero.”

Bethlenfalvy said negotiations are continuing with Lysyk to determine how the pensions could be accounted for in the future.

That suggests if those assets are considered to be worth $2.6 billion to the annual bottom line then the government could claim a $1.3 billion benefit.

Phillips emphasized that they are “non-cash” accounting items on the books so they do not affect borrowing or program spending.

The finance minister, who took over from Fedeli after Premier Doug Ford’s massive June 20 cabinet shuffle, said the Tories still plan to balance the books within five years.

While the shortfall last year was $7.4 billion, the deficit remains on track to be $10.3 billion for 2019-20, though Phillips is expected to revise that figure in November’s fall economic statement.

After toppling Kathleen Wynne’s Liberals in June 2018, the Ford government determined the deficit had ballooned to $15 billion.

That inflated tally included $5.7 billion in new Liberal election spending announced in the March 2018 budget even though the new Tory administration was not bound by those promises and cancelled most of them.

NDP MPP Sara Singh said any savings being touted by Bethlenfalvy and Phillips are coming on the backs of Ontarians.

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“After the Kathleen Wynne government was finishing letting people down, Doug Ford barged in to make devastating cuts to services that everyday families really count on,” said Singh (Brampton Centre).

Interim Liberal leader John Fraser said “by inflating the deficit, the Ford government created the context to cut $2.3 billion to services that families depend on like public health, education, child care, mental health and addictions services, among the many.”

Green Leader Mike Schreiner said Ford “has overstated the deficit over the last year in order to pursue an ideological agenda of government cuts.”

“Municipalities, children with autism, school programs, the arts, and community groups are all feeling the sting of Ford’s cuts, even while the government delivered tax breaks to the wealthy last year,” said Schreiner.

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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