With the entire world confronting the growing and far-reaching impact of COVID-19, today Ontario’s government laid out its much-anticipated economic and fiscal update.

Consistent with its responses to date, the action plan announced today injects highly-targeted funding to meet Ontario’s most critical needs. These include:

  • increasing capacity and access to critical equipment in the healthcare system;
  • providing meaningful financial support for individuals and families; and
  • helping businesses stay afloat and re-tool as they struggle to weather the storm.

The message from Ontario Minister of Finance Rod Phillips could not be more clear:

“The people of Ontario can be confident their provincial government is acting decisively to weather the challenges ahead. This update will ensure our health care system has the resources required to respond to COVID‐19, that our people are supported as they deal with a global pandemic, and that actions are taken to protect jobs and ensure long‐term economic growth.”

As anticipated, the government focused their attention solely on their response to the urgent pressures and needs that emerged during the COVID-19 crisis. Today’s update does not include the usual plethora of new programs and initiatives across government, or any of the announcements made in the Fall Economic Statement.

With full support from the opposition parties, this update tosses out previous deficit targets in order to confront this crisis:

  • The 2019-20 deficit was amended down slightly to $9.2 billion from the 2019 Budget estimate of $10.3 billion.
  • For 2020-21, based on the COVID-19 action plan, the deficit will more than double to $20.5 billion.

As part of the action plan, Ontario outlined over $2.1 billion in new funding for Ontario’s health care system, providing further costing details on previously announced commitments as well as additional measures including:

  • Investing $935 million for the hospital sector, including $594 million to accelerate progress on the government’s commitment to address capacity issues, as well as $341 million for an additional 1,000 acute care and 500 critical care beds and additional assessment centres.
  • Increasing public health funding by $160 million to support COVID-19 monitoring, surveillance, and laboratory and home testing, while also investing in virtual care and Telehealth Ontario.
  • Investing $243 million for surge capacity in the long-term care sector, as well as funding for 24/7 screening, more staffing to support infection control, and supplies and equipment to help tackle the COVID-19 outbreak.
  • Investing $75 million to supply personal protective equipment and critical medical supplies to front-line staff to tackle COVID-19.
  • Committing to a dedicated $1.0 billion COVID-19 contingency fund for emerging needs related to the COVID-19 outbreak.

The Province also announced $3.7 billion to directly and urgently support people and to protect jobs. Those initiatives include:

  • A one-time payment of $200 per child up to 12 years of age, and $250 for those with special needs for the extra costs associated with school and daycare closures.
  • Doubling the Guaranteed Annual Income System (GAINS) payment for low-income seniors for six months.
  • Lowering electricity bills for eligible residential, farm and small business consumers, by providing approximately $5.6 billion for electricity cost relief programs in 2020-21, an increase of $1.5 billion since the 2019 Budget
  • Setting electricity prices for residential, farm and small business time-of-use customers at the lowest rate, known as the off-peak price, 24-hours a day for 45 days to support ratepayers in their increased daytime electricity usage as they respond to the COVID-19 outbreak.
  • Cutting taxes by $355 million for about 57,000 employers through a proposed temporary increase to the Employer Health Tax (EHT) exemption.
  • Providing $9 million in direct support to families for their energy bills by expanding eligibility for the Low-income Energy Assistance Program (LEAP) and ensuring that their electricity and natural gas services are not disconnected for nonpayment during the COVID-19 outbreak.
  • Providing emergency child care options to support parents working on the front lines, such as health care workers, police officers, firefighters and correctional officers.
  • Expanding access to the emergency assistance program administered by Ontario Works to provide financial support to people facing economic hardship.
  • An additional $148 million for charitable and non-profit social services organizations such as food banks, homeless shelters, churches and emergency services to improve their ability to respond to COVID-19, by providing funding directly to Consolidated Municipal Service Managers and District Social Service Administration Boards who would allocate this funding based on local needs.
  • Providing six months of Ontario Student Assistance Program (OSAP) loan and interest accrual relief for students.
  • Helping to support regions lagging in employment growth with a proposed new Corporate Income Tax Credit, the Regional Opportunities Investment Tax Credit.
  • Providing additional supports of $26 million to Indigenous peoples and communities, including emergency assistance for urban Indigenous people in financial need, and costs for health care professionals and critical supplies to reach remote First Nations.

The government’s plan also includes measures that will deliver $10 billion in support for people and businesses through tax and other deferrals to improve their cash flows over the coming months. These include:

  • Making available $6 billion by providing five months of interest and penalty relief for businesses to file and make payments for the majority of provincially administered taxes.
  • Over $1.8 billion by deferring the upcoming June 30 quarterly municipal remittance of education property tax to school boards by 90 days, which will provide municipalities the flexibility to, in turn, provide property tax deferrals to residents and businesses, while ensuring school boards continue to receive their funding.
  • Making available $1.9 billion by the Workplace Safety and Insurance Board (WSIB) allowing employers to defer payments for up to six months.

A few of the above were already outlined as part of the $300M emergency relief package ($200M of which came from the federal government) of immediate measures to help the health care sector cope with the COVID-19 emergency and $200 million in social services relief funding the government announced earlier this week.

Ontario was the second province to declare “a state of emergency” and has been releasing a steady stream of emergency orders under that declaration to restrict or close most non-essential facilities, businesses and economic activities.

The Premier, who has thus far been praised for his handling of the public health emergency, has emphasized the importance of keeping supply chains open and actively supporting the retooling of Ontario’s manufacturing capacity to produce critically-needed medical supplies and equipment.

Last week, the Ontario Legislature met to quickly pass emergency legislation. The Employment Standards Amendment Act (Infectious Disease Emergencies), 2020 provides job-protected leave for employees who are in isolation or quarantine due to COVID-19, need to be away from work due to school or daycare closures to care for children, or to care for other relatives. It was supported by all four parties in the Legislature.

Today’s economic and fiscal update is in lieu of the annual Budget, originally planned for release today. With the provincial, national and global situation uncertain and evolving rapidly, the decision to do away with the tabling of a full Budget with out-of-date, multi-year fiscal details was likely the easiest decision the government has made in weeks.

This update lets the government provide the fiscal and economic picture for the coming fiscal year, avoiding the need to provide multi-year projections that are proving impossible in the face of this global crisis. It also ensures that the provincial government has the fiscal flexibility to react further in the weeks and months ahead as the COVID-19 crisis continues to evolve.

Alongside today’s update, the government has introduced a Bill, which is expected to proceed through full debate and passage in the Legislature this evening.

Minister Phillips confirmed yesterday his intention to deliver a full Budget no later than November 15, 2020, once the full impacts of COVID-19 are better understood.

While it is impossible to predict the impending impact of COVID-19 on the province’s health care system and economy, today’s update demonstrates that the Ontario government, working alongside other levels of government, will continue to respond assertively to confront the crisis.

Fiscal Risks

While the update presents bold fiscal measures to confront the crisis, there are several inherent risks in the numbers.

The first is that even these steps may not be enough, and further costly supports could be necessary in the coming months.

Moreover, even if they are sufficient to stem the tide, the economic forecasts in the update assume that Ontario growth will remain relatively robust despite the crisis.

GDP growth is predicted to drop to zero this year and rise back to 2.0 percent in 2021. Both could well prove to be optimistic in the circumstances.

On the revenue side, the forecasts are for a very modest decline. For example, sales taxes are expected to remain steady from F19-20- to F20-21, personal income tax revenue to decline slightly from $37.6 billion to $37.3 billion, and corporate taxes similarly drop marginally from $15.4 billion to $15.2 billion.

For Ontario to go through the greatest economic disruption in modern history and see total tax revenue from all sources fall by only a half a billion dollars – $108.7 billion to $108.2 billion – will strike some analysts as an incredibly optimistic projection.

Of course, if that revenue does not all materialize, or if additional spending is needed to aid individuals and industries, the $20.5 billion deficit number will go up.