It was the budget that cared – but will Ontario voters get a case of the warm and fuzzies, or will they see it as a desperate run on the bank in a bid for re-election? Today, Minister of Finance Charles Sousa delivered his sixth Ontario Budget, A Plan for Care and Opportunity. It signaled that this government wants to do more for Ontarians, but at the cost of deficits for the next six years, starting with $6.7 billion in 2018-19.
Premier Kathleen Wynne and her cabinet blitzed the media and stakeholders over the past week to announce some of the signature investments of this budget, including:
- Expanding OHIP+ to include seniors (age 65+) by eliminating co-pays and deductibles, at a cost of $575 million, and starting in August 2019;
- Promising a whopping $2.1 billion towards mental health over four years – leapfrogging the former People’s Guarantee of $1.9 billion over 10 years;
- Free daycare for children from age 2 ½ until they enter kindergarten starting in 2020, saving parents an estimated $17,000 per child at a price tag of $2.2 billion over three years;
- A 4.6 per cent increase, or about $822 million, in hospital funding;
- Investing up to $2.4 billion to support a new Patient Care Centre at SickKids;
- An increase of $300 million over three years in funding for special education in schools.
The Liberals saved their biggest for last, announcing in the Budget two new programs that will, respectively, put money directly into seniors’ pockets, and continue their mission to fundamentally transform the healthcare system by significantly expanding pharmacare and – much to Andrea Horwath’s dismay – dental care.
The government also made a big play for seniors’ votes with the Seniors’ Healthy Home Program, which will provide seniors aged 75 and over with up to $750 per year to help offset the costs of maintaining their home. This will come at a cost of $1 billion over three years.
This Budget took another step towards universal pharmacare by providing a new Ontario Drug and Dental Program for Ontarians who do not have employer-based plans. The Program will reimburse up to 80 per cent of eligible drug and dental costs to a maximum of $400 per single, $600 per couple, and $50 per child in the family. The price tag is $800 million over the first two years of the program, starting in the summer of 2019.
Other big-ticket items include:
- $11 billion for high-speed rail from Toronto to Windsor, and an additional $40 billion in infrastructure spending to 2028;
- $1.8 billion over three years for people with developmental disabilities, including direct funding to individuals and funding increases to community-based agencies;
- Expanding home care, community care, and long-term care:
- $650 million in home and community care to increase nursing and therapy visits, including 2.8 million more hours of care and respite, and improved contract rates for Personal Support Workers, Registered Practical Nurses, Registered Nurses and Therapists
- An additional $300 million over the next three years for long-term care to increase average hours of care per resident and hire a Registered Nurse for every long-term care home
- $23 million to increase the number of Personal Support Workers by 5,500, with a focus on underserved rural, remote and Northern communities;
- $16 billion over 10 years for construction and renovation of schools.
All this largesse means a one-year growth in provincial spending of almost 12 per cent, an almost unprecedented year-over-year increase in the modern, low inflation era.
The bad news for the Liberals is that the fiscal recovery plan forecasts it will take seven years to get back to a balanced budget. The projected deficit of $6.7 billion this year won’t be erased until 2024-25, with the next three years hovering at deficits between $6.5-6.7 billion, and recovery slated to begin in 2021-22.
During that time, the current provincial debt of $335 billion will likely grow by at least another $40 billion (though no long-term projection is given in the Budget).
Ontario’s economy grew at a strong rate of 2.7 per cent in 2017, above the 2017 Budget projection of 2.2 per cent, but the government’s own 2018 Budget is projecting lower growth of about 2.1 per cent in 2018, and an overall average of 1.9 per cent over the next four years.
Global economic factors including high interest rates, oil prices, and the relative strength of the Canadian dollar all play into the assumption of lower growth, as do risks such as protectionist trade measures, high household debt and the housing market.
The budget marks a clear about-face by the Liberals. After finally returning the Ontario budget to balance after nine years of recovering from the global recession, the government is now choosing to spend into deficit again. But unlike the recession and years of recovery that followed, this spending isn’t for jobs stimulus.
The Liberals are gambling that Ontario voters will be less concerned about a balanced budget than increased government investment in areas they care about – after all, they voted for a Trudeau government that included annual deficits of $10 billion in its platform. Their hope is that voters will choose to reward the Liberals for popular policies such as OHIP+ and free tuition, despite the Premier’s low popularity.
Clearly, this a budget that aims to unite the centre-left—the Premier framed the election of Doug Ford as providing voters with a “stark choice” between care or cuts—though it’s less clear that the Liberals can continue to eat the NDP’s lunch, or that these big investments will be able to overcome voter fatigue from 15 years of Liberal government. There’s still plenty of time for voters on the left end of the spectrum to coalesce around an alternative as they did in the last election, but it’s up in the air whether this budget will reinforce the perception of the Liberals as the only real alternative to the PCs, or whether those who oppose the Tories will finally be willing to give Andrea Horwath a chance.
If you’re a voter looking for fiscal discipline, PC leader Doug Ford is promising to find “efficiencies” totaling 4 per cent of the budget, or about $6 billion – but with the People’s Guarantee now in the recycling bin, the new PC platform and final costing is yet to come. Today’s budget seems intended to make that open question as painful for Ford and the PCs as possible – giving the Liberals ample opportunities to serve up popular new investments as likely cuts under a PC-led government.
The PCs have not definitively said they will run a balanced budget – and they may not be able to if they indeed cut the carbon tax that underpinned the financial assumptions of the People’s Guarantee. However, Ford and his team may simply decide to say nothing about whether they’d run a deficit or not, and hope that voters are committed to change and will choose them in spite of the spending spree announced by the Liberals.
How voters will react remains to be seen. With 70 days until the ballots are cast, we’re about to find out.