Ontario budget projects $38.5 billion deficit; path to balance coming in March
Ontario Finance Minister Rod Phillips tabled a budget forecasting a $38.5 billion deficit Thursday, with no path to balance until the next budget is tabled in March because of the uncertainty around COVID-19.
The deficit is the same projection given in the government’s last economic update, and includes various scenarios for future deficits based on varying levels of economic growth.
As expected in the biggest forecasted deficit in provincial history, the government is putting its focus on supporting the health care sector through the crisis, attempting to create positive conditions for economic growth and more economic support measures.
“This is a great news budget,” Premier Doug Ford said considering the circumstances the virus has put on Ontario. “We will continue to be there for the people of Ontario.”
The budget reveals $4 billion in new spending in 2021-2022 and $2 billion in 2022-2023 to fight the pandemic in upcoming years and estimates the virus cost the government over $8 billion this fiscal year. Overall spending in this budget at $187 billion is also a record-breaker along with the deficit.
COVID-19, HEALTH CARE AND SENIORS
Total COVID-19 related spending is expected to be $45 billion over the next three years.
But one thing that stands out the most is that there’s no cost associated with the promise of four hours of direct care for long-term care residents, which will be a massive investment.
“We are totally committed,” Ford said, but added the cost will depend heavily on consultations with not only industry stakeholders and labour groups, but also working with the federal government on elements such as immigration to support the service.
“It’s something that has to be done planfully,” Phillips said. “The financing will be there to support it, that’s going to take a lot of hard work and a lot of partnership."
The government is also budgeting $380 million for a new seniors tax credit, where 25% of renovation costs for things like wheelchair ramps and bars are available to keep seniors in their homes longer.
When asked why non-COVID-19 spending is remaining relatively flat, Phillips said health care spending will still go up three per cent next year and a major focus remains increased federal funding.
About $7 billion of this year’s spending is coming from Ottawa by way of measures like the Safe Restart Agreement and pandemic pay.
For businesses, the government will lower High Business Education tax rates from 1.25% to 0.88% for a vast majority of businesses, while offering a $5,000 reduction in small business tax relief. It’ll also be offering a number of deferrals to make payments on taxes, as well as WSIB premiums.
The government is pledging to significantly bring down electricity costs, at an expense of $1.3 billion a year through subsidies, forecasting it’ll bring down prices by 14 to 16% for medium and large-sized businesses.
When asked why taxpayers should pay the brunt of the measures instead of tax relief directly to workers, Ford said it’s about creating a better overall economic environment.
“How can you be competitive with the electricity costs in Ontario?” he said. “We’re going to create more revenues for the coffers of the province, when businesses are thriving and paying more taxes, people are getting hired and paying more taxes.
Phillips said the government will also make it permanent for restaurants to deliver alcohol with their orders, and the government is also planning on giving authority to the AGCO to set up online gambling.,
FAMILIES, STAYCATIONS AND CONTINGENCY
Parents can also expect another round of support payments before Christmas, at either $200 or $250 per child, totalling a $380 million dollar investment.
There’s also a focus in the near future on local tourism, rebating residents 20 per cent of tourism expenses as long as they travel in Ontario in 2021, in an effort to support the sector once restrictions ease off.
“We will make 2021 the year of the Ontario staycation,” Phillips said.
The government is also budgeting $5.3 billion in contingency funding this year along, along with fiscal reserves of $2.5 billion this year and $2.0 billion the next two years. The premier and finance minister were questioned about the concerns of promised spending not getting out to municipalities and the health care sector.
“Those dollars will get spent and deployed,” Phillips said. “We’ll make sure they have the resources they need.”
This is also a unique budget in that it’s not only not providing a path to balance until the next one, but is also suggesting various scenarios based on economic growth.
For example, while the upcoming deficit is $38.5 billion, the government suggested other possibilities should growth be lower or higher than expected:
-$33.1 billion in 2021-2022 (in case of faster growth-27.7, slower growth 35.6)
-$28.2 billion 2022-2023 (in case of faster growth 21.3, slower growth 33.4)