The Ontario government promised Wednesday it would balance the budget by fiscal 2008-09, possibly a year earlier should a $1.5-billion reserve not be needed.

Ontario Finance Minister Greg Sorbara tabled his government’s 2005 budget that includes a $6.2-billion plan for post-secondary education, sharp cuts to the province’s deficit and no new tax increases.

But the budget was prepared before Premier Dalton McGuinty got a commitment on May 7 from Ottawa for an additional $5.75 billion in transfers over the next five years. Assuming the money is forthcoming after the expected upcoming federal election, this could accelerate the deficit slaying process, but only if the funds are used to finance or replace already budgeted expenditures.

The budget projects a deficit for 2004-05 at $3 billion, down from last year’s $6.1 billion, but higher than the $2.2-billion projection made before the government’s $3.9-billion deficit reduction measure was rejected by the provincial auditor.

The budget sets aside a reserve each year to cover unexpected expenditures or revenue shortfalls. For fiscal 2006 the reserve is $1 billion, but is $1.5 billion for each year thereafter.

McGuinty is talking with the other federal parties and is expected to get a similar commitment from the Conservative Party, which will need to win seats in Ontario to form a government, and from the NDP, which will also be counting on support in the province.

The $5.75 billion is targeted to particular areas – support for immigrants, training for the unemployed, support for post-secondary education students and institutions and climate change projects. Of these, the one that overlaps with the Ontario budget is education, called the highest priority by Sorbara.

The budget talks about a $6.2-billion cumulative increase in spending over six years. That’s much bigger than it sounds. By 2009-10, spending on student financial assistance, operating grants to colleges and universities and training, apprenticeship and other initiatives is only $1.6 billion higher than in 2003-04.

Sorbara said that growth in government spending will slow, but in fact expenditures (excluding one-time non-recurring items) are increasing just as much this year as last, at 6.3%. That’s a rapid pace for a government in deficit. The reason it can get away with it is strong revenue gains, 12.8% last year and 5.9% this year.

Much smaller spending increases are forecast for the following three years — 2.8%, 3% and 2.6% — but that’s some time down the road.

Besides education, the budget focuses on health and education. It’s upping the health budget by $1.8 billion this year and will spend $30 billion on infrastructure over the next five years. The $30 billion infrastructure figure is startling, especially given that total government spending increases a much smaller $10.6 billion over the next four years.

The $30 billion includes spending that was already planned. In addition, the number refers to the total cost of projects, some of which may not have to be paid within five years. Furthermore, government capital spending appears in budgets in terms of amortization over its useable life, which can be 20 or more years. This year, for example, Ontario will spend $3.7 on capital projects but amortization of capital projects will be only $2.7 billion. Although not assumed in the budget, the government says it is looking at the possibility of asset sales, the proceeds of which it would use to fund infrastructure needs.

The budget affirmed that the government expects to introduce a new mortgage brokers act in 2005. Draft legislation of the Mortgage Brokerages, Mortgage Lenders and Mortgage Administrators Act has been released and interested parties have been invited to comment on it.

There were no tax increases or decreases, which means the capital tax will continue to be reduced. As announced in the 2004 budget, it is scheduled for elimination in 2012.