WRAPUP 1-Hydro IPO trims Ontario deficit, Quebec eyes balanced budget

By Leah Schnurr and Kevin Dougherty
OTTAWA/QUEBEC CITY, Nov 26 (Reuters) - Canada's two most
populous provinces gave better than expected budget updates on
Thursday, as Ontario got help from the initial public offering
of utility Hydro One Ltd H.TO and Quebec clamped down on
spending.
Ontario expects to run a smaller-than-anticipated deficit of
C$7.52 billion ($5.66 billion) in the 2015-16 fiscal year, its
Liberal government said, down from the C$8.5 billion deficit it
estimated in its April budget.
Total revenues are now seen at C$1.2 billion more than
previously anticipated, but the biggest change came from
revenues related to the initial public offering of power
distributor Hydro One.
Non-tax revenue for the current fiscal year, which includes
higher projected net revenue from the Hydro One sale, is seen
C$1.1 billion higher than forecast.
"Ontario's bottom line is running ahead of expectations
again this year - excellent," Robert Kavcic, senior economist at
BMO Capital Markets, wrote in a note. "But, the improvement
comes on the back of one-time asset sales, not underlying
revenue or (more importantly) spending performance."
Ontario, which accounts for about 40 percent of Canada's
economy, also forecast a smaller-than-expected deficit for next
year and reaffirmed its promise to balance the budget in
2017-18.
Meanwhile, Quebec reaffirmed that it is "on track" to return
to a balanced budget this year, with Finance Minister Carlos
Leitão crediting tight spending controls for the turnaround.
Leitão, former chief economist at Laurentian Bank, said
spending controls have also reduced the deficit for the previous
2014-15 fiscal year by C$1.25 billion, with the final shortfall
last year at C$1.1 billion.
Leitão said government revenues are slightly lower this
year, but the decline has been offset by lower debt-service
costs.
Spending growth is being held down to 2.7 percent for
2015-16, while revenues are seen rising by 4.1 percent.
Quebec is facing pressure to loosen its purse strings from
labor unions representing about 500,000 public-sector workers.
While he offered no additional money for employees, Leitão said
he would add C$20 million to the education budget this year and
an additional C$80 million a year starting in 2016-2017.
Quebec is also committed to investing C$88.4 billion in
infrastructure projects under a 10-year 2016-2026 capital
investment program.
"The high level of public investment planned for the coming
years will provide powerful stimulus for economic activity and
job creation in every region of Quebec," the finance minister
said.
($1 = 1.3284 Canadian dollars)