Ontario’s government spending watchdog warns there is “significant risk” the Liberals will not eliminate a $4.3 billion deficit next year, but Finance Minister Charles Sousa insists the books will be balanced as promised.

In his fall economic statement Nov. 14, Sousa announced he would dip into the reserve fund to ensure a balanced budget in 2017-18, in part because of an accounting change in the way pension liabilities are calculated.

“We’re balancing next year and we’re balancing the year after that,” Sousa said Monday. “We’re much more aggressive in our assumptions, and while the FAO is estimating that impact (from the accounting change) will be $1.5 billion a year, we said it would be $2.2 billion and $3.7 billion.”

The Financial Accountability Office issued a report Monday insisting the Liberals were relying on “optimistic assumptions for revenue growth and program spending restraint.” The FAO said the government’s revenue projection is $2.8 billion higher than its estimate for 2016-17, and $5.2 billion higher by 2018-19.

“The government has a variety of tools that it could use to temporarily improve the budget balance in 2017-18,” concludes the FAO report. “Beyond 2017-18, maintaining a balanced budget will likely require additional measures to raise revenues or reduce expenses.”

But Sousa insisted the government could reach balance next year without new or increased taxes or cutting government programs.

“We’re very confident that we’re balancing next year and the year after that because of the disciplined nature of the program spending restraints we put in place and without sacrificing the things that matter,” he said.

“We’re investing over $1 billion more into health care, we’re putting more into education and we’re providing for social programs to ensure that everyone is able to participate in the increased prosperity of the province.”

The FAO questioned how the government will pay for new promises it made in September’s throne speech to discount the 8% provincial portion of the HST from hydro bills and to create 100,000 new child care spaces.

The FAO assumed program spending would increase $1.8 billion annually to fund the hydro rebate and to create the child care spaces, but Sousa’s fall economic statement reported program expenses only $400 million higher in 2018-19 compared to the 2016 budget,

“That suggests that these new initiatives may be partially funded though reallocations from existing programs or the contingency funds,” concluded the FAO’s report.

“Government officials indicated that since the policy details for the child care expansion are still being developed, the final cost of the program has not been fully incorporated into the fiscal plan.”

The Progressive Conservatives said the FAO’s report shows the Liberals’ fall economic statement did not reflect reality.

“Contrary to minister Sousa’s numbers, the FAO has projected a budget deficit of $2.6 billion in 2017-18 and a ‘significant risk’ of a structural deficit going forward,” said PC finance critic Vic Fedeli.

“The FAO has confirmed minister Sousa’s plan to balance the budget in the election year of 2017-18 is a complete fantasy and will only be artificial.”

Sousa reported in the fall economic statement ago that Ontario’s net debt-to-GDP ratio would peak at 40.3% in 2016-17 and then edge down to 39.3% by 2018-19. But the FAO projected the debt-to-GDP ratio would hit 41%, primarily because of “continued deficits beyond 2017-18.”