Ontario’s government reported a modest surplus of $298 million for the fiscal year 2005-06, which has been verified by the Auditor General, Finance Minister Greg Sorbara announced on Thursday.

The improvement to the province’s fiscal position from the projection in the 2005 budget is largely due to higher than expected tax revenue and lower than expected net expenses of hospitals, school boards and colleges, it said. Revenue in 2005-06 was $286 million higher and expenses were $1.4 billion lower than the interim numbers included in the 2006 provincial budget.

The financial results of these broader public sector organizations are being consolidated for the first time in the province’s accounts in accordance with revised accounting standards for governments issued by the Public Sector Accounting Board of the Canadian Institute of Chartered Accountants.

“Our plan was to eliminate the fiscal deficit by 2008-09, or a year earlier if the reserve was not needed. We have balanced the budget in 2005-06 while making historic, long-term investments in health, education and the economy,” Sorbara said. “However, we must remain prudent and disciplined in the face of continuing fiscal challenges. While we have achieved a modest surplus for the past year, we have not yet eliminated the structural deficit we inherited.”

“While we have won a significant battle in the war on the deficit, it would be premature to declare victory,” he added. “We continue to face significant spending pressures and serious external challenges to our economy, including higher interest rates, the high dollar and increasing oil prices. There is still a significant risk to our economic outlook and we cannot discount the possibility that these factors may have a negative impact on our fiscal plan, which is why we must continue to be vigilant.”

“We have made great progress, we are close to our goal but there is much more to be done,” Sorbara said. “We remain committed to strong financial management and we will continue our prudent, disciplined approach so that we can win the war on the deficit while continuing to make priority investments in health, education and the economy.”