It is not often that a Cabinet minister gives an address that outlines the sorry state of the government's finances, particularly when that minister's party has been in power for eight years.

But Ontario Liberals have been doing a lot of that lately. Premier Dalton McGuinty told a Toronto audience last week that the province's $16billion deficit is "not going to go away on its own."

On Monday, Health Minister Deb Matthews echoed his concerns in a speech of her own, explaining the "two big challenges" of a steep fiscal deficit and shifting demographics toward a population with more elderly people. "The fact is, we have a $16-billion budget shortfall." It demands action, she said.

And yet, a report released on Thursday by the Conference Board of Canada suggests that the ministers have been understating the problems with Ontario's fiscal picture. More accurately, they might have said: "Boy howdy, we are screwed."

Deficits until 2031 and beyond? Or a massive hike in the provincial share of the HST - to 15% from 8% - to ensure balanced budgets five years from now? These scenarios would not just be a pick-your-poison situation for the McGuinty Liberals. It would be more like pick-your-preferred-cause-ofcrushing-electoral-defeat.

But these are the scenarios that the Conference Board forecasts, absent significant reforms to the way Ontario manages its spending, particularly in the area of health care, which eats up more than 40% of its budget.

And they are why, despite the report's doomsaying topline conclusions, it could actually be good news for a government that needs to convince the public of the need for major health reforms.

One could argue that the report suggests the reforms Ms. Matthews announced on Monday don't go far enough.

The Conference Board arrived at its stark conclusions by projecting growth in revenues and spending through 2031.

Significantly, it argues that growth in real economic output will be less than 2% per year due to a host of factors, including the aging population and a slowing manufacturing sector hit by the strong Canadian dollar and a shaky U.S. economy. It's a more pessimistic view than that taken by Ontario's Finance Ministry, which in its budget last year forecast annual growth of 2.7% by 2013.

The Conference Board report says the slower growth means Ontario won't be able to reach a balanced budget until 2021-22, even if it sticks to its aggressive spending-reduction goals. It argues that a balanced budget by the planned date of 2017-18 would be achievable if the government managed to limit program spending growth to 0.7% annually. Considering that program spending has grown at more than 6% a year under Premier McGuinty, we can conclude that 0.7% growth will happen right after the Liberals grant a unicorn to every household.

But if the report's revenue projections set off warning bells, its healthcare spending forecasts should blare air-raid sirens. The Conference Board says that, even if growth in health and education spending is limited to only that caused by inflation, demographic changes and population increases (totalling 4.5%), Ontario won't achieve a balanced budget by 2031. That would be retirement age for those in their mid-40s.

If health-care spending grows at 5.6% annually - which would still be a reduction below the current rate of 7% - then total Ontario health spending would be $134-billion by 2031, up from $47-billion today. The Conference Board advises that the province could still balance the budget by 2017-18, provided it almost doubles the provincial sales tax to 15%. That actually seems less likely than the unicorn scenario.

Of course, the McGuinty government has no interest in running deficits for eternity or doubling the sales tax, which is why the Premier and his Health Minister have been giving speeches about the need for change. His Finance Minister, Dwight Duncan, is scheduled to give just such a speech two weeks from now, as everyone awaits the recommendations of the Drummond Commission on reforming the public service. After winning re-election based on promises of stability and prudence, the Liberals are now quite eager to call for change.

But if the Conference Board is correct in its forecasts - and, to be fair, it might not be - then its numbers suggest that the plan outlined by Ms. Matthews on Monday could easily fall short of what's needed. Ontario plans to limit growth in health spending to 3% annually by moving toward "patient-centred" funding and by moving more services out of the expensive acute-care hospital system and into specialized clinics and facilities. The Liberal plan is so short on details, though, that it will take years to realize the efficiencies it hopes to find. Even Ms. Matthews acknowledged that many of the proposals were starting points for a conversation with the health industry. Meanwhile, health spending will tick along at a growth rate of nowhere near that 3% level, and probably closer to 7%, requiring further reductions to be that much steeper.

It's clear that the McGuinty government wants to spend some time softening the public up to the idea of major spending changes. But this new report is more evidence that the numbers are bleak. At some point they will have to stop talking about reforms, and start making them.

sstinson@nationalpost.com