In his first budget as Ontario’s Finance Minister, the Hon. Rod Phillips introduced today the 2020-21 budget and three-year fiscal blueprint, entitled Ontario’s Action Plan: Protect, Support, Recover.
With the March 2020 budget postponed at the onset of the pandemic emergency, this will be the Ford Government’s second official budget since being elected in June 2018. To put this into pre-pandemic context: the Toronto Raptors had not even won their first world championship the last time Ontario delivered a provincial budget.
The Ontario Government’s $187 billion budget projects a record $38.5 billion deficit, consistent with first quarter projections from August. The focus of today’s budget was the next phase of the government’s response to COVID-19 – a $45 billion plan over three years based on three pillars: Protect, Support and Recover.
The government is spending $15.2 billion over three years, including $7.5 billion in new funding, to protect individuals, families and workers across the province from COVID-19. New investments include:
- As announced earlier this week, increases in the average daily direct care of long-term care residents from a nurse or personal support worker (PSW), to four hours a day, over the next four years.
- $4 billion in 2021-22 and a further $2 billion in 2022-23 in dedicated support to help protect Ontarians in the fight against COVID-19.
- Investing in the opening of the Cortellucci Vaughan Hospital site.
In acknowledging the personal and economic pain, hardships, and economic uncertainties that COVID-19 has brought to families, employees and employers, the government is reinforcing its commitment to provide support with an investment of $13.5 billion over three years, with $2.4 billion in new funding for individuals, families, seniors and businesses including:
- $380 million to parents through another round of the Support for Learners Initiative.
- A new Seniors’ Home Safety Tax Credit for the 2021 taxation year — a 25 per cent credit on eligible renovations of up to $10,000 to improve safety and accessibility.
- An additional $60 million over three years starting in 2020-21 for the Black Youth Action Plan.
- $100 million over two years for the Community Building Fund.
- One-time emergency funding of $25 million for Ontario’s arts institutions to help cover operating losses from COVID-19.
- Additional $1.8 billion in the Support for People and Jobs Fund over the next two years, 2021-22 and 2022-23, to remain responsive to emerging needs and continue providing supports for the people of Ontario.
The Plan aligns closely with Premier Ford’s stated determination to build a foundation for the future around a certain and strong economic recovery, while protecting the health of Ontarians.
The government is investing $4.8 billion over three years to support economic growth. New funding includes:
- As announced this week, close to $1 billion to improve broadband access and cellular service.
- Reducing hydro rates for large industrial and commercial businesses. Starting on January 1, 2021, an estimated 85 per cent of wind, solar and bioenergy contract costs will be shifted from ratepayers to the provincial tax base. This will save medium-size and larger industrial and commercial employers about 14 and 16 per cent respectively, on average, (at an additional public expense of $1.3 billion over three years).
- Lowering high Business Education Tax (BET) rates for over 200,000 employers, or 94 per cent of all business properties in Ontario, saving these businesses $450 million in 2021 alone.
- Proposing through legislation to provide municipalities with the ability to cut property tax for small businesses and a provincial commitment to consider matching these reductions. This would provide small businesses as much as $385 million in total municipal and provincial property tax relief by 2022-23, depending on municipal adoption.
- Proposing through legislation to make permanent the Employer Health Tax (EHT) exemption increase from $490,000 to $1 million.
- Committing to provide Ontario residents with support of up to 20 per cent for eligible Ontario tourism expenses to encourage them to safely discover Ontario in 2021, the year of the Ontario staycation.
- Connecting workers in the tourism and hospitality sector and others most affected by the pandemic to training and jobs with an investment of $180.5 million over three years to acquire in-demand skills.
- $500 million over four years to the Ontario Onwards Acceleration Fund, which aims to pilot new technologies to help people and businesses connect with and access government services.
Comparing today’s budget numbers with the forecast from Ontario’s independent Financial Accountability Office (FAO) just two weeks ago illustrates the magnitude of spending the Ford government has undertaken to fight the pandemic, and the longer-term challenges it will present.
The FAO had projected a deficit of $37.2 billion for this fiscal year and $20.4 billion in 2021-22. It noted that beyond that period, structural changes of $14 billion annually – in the form of sizeable new taxes or spending cuts – would be needed to get back on track to a balanced budget.
Today’s budget takes the expected deficit up to $38.5 billion for 2020-21 and $33.1 billion for 2021-22, with no roadmap back to balance. Few will criticize that, given the need for large-scale spending to continue the battle against this unprecedented health and economic threat. Still, it illustrates the size of the problem that will confront the government and Ontarians in the future.
The Minister of Finance notes that while real GDP fell by an exceptional 6.5 per cent in 2020, it is anticipated to rebound to 4.9 percent growth in 2021 and 3.5 per cent the following year.
The detailed economic forecasts reveal that even three years out from the pandemic the unemployment rate, at 6.2 per cent, is expected to remain above where it was prior to the outbreak of the pandemic in Ontario earlier this year. Gross Domestic Product (GDP) will be $28 billion below where it would have been absent COVID.
As a result, the debt-to-GDP ratio is expected to hit over 49.6 per cent, the highest level since World War II.
There is no escaping the fact that the pandemic will have dramatic impacts not just immediately but for years to come.
(Given the unique circumstances, this budget includes three possible economic scenarios that could impact the trajectory of Ontario’s recovery from COVID-19, though all projections cited in government releases and here are based on the middle-case.)
Official Opposition Leader Andrea Horwath of the New Democratic Party reacted to the release of the budget, calling it a “missed opportunity” for a green recovery. Claiming that the province is waiving a white flag and surrendering to COVID-19, Horwath says that this budget is “telling people you’re on your own.
Ontario Liberal Leader Steven Del Duca called this budget a “betrayal of students, frontline education workers, seniors and those who are being disproportionately impacted by the pandemic.”
Ontario Green Party Leader Mike Schreiner said the budget should have included funding for measures like electric vehicles and lowering the cost of storing green energy.
What Comes Next
The Minister of Finance introduced Bill 229, Protect, Support and Recover from COVID-19 Act (Budget Measures), 2020. Bill 229 can be found here. These measures still need to be debated and passed by the Legislature.
With the next provincial budget expected to be delivered at its traditional time in the spring of next year, Ontario may shortly head back into another round of budget consultations, with the potential for difficult decisions ahead.
The Ford government acknowledges that current spending levels are not sustainable or desirable over time, but remain necessary in the face of a global pandemic.
As there is uncertainty in the global economy, there is uncertainty and risk for Ontarians. To allow capacity to confront emerging challenges, Budget 2020 sets $4 billion aside for next year and $2 billion the following year in a dedicated pandemic contingency fund.
Counsel will keep you updated on important news and matters coming out of Queen’s Park and share further updates as the Ontario Government continues to address the ongoing fallout of the COVID-19 pandemic.