Ontario’s deficit will rise this year to $19.9 billion, with the Ford government enacting new measures for seniors, low-income workers and auto commuters in a budget that holds out hope the province can return to balance in time for the next provincial election in 2026.
The deficit for the fiscal year that ended last month is down from an estimated $21.5 billion in the 2021 Fall Economic Statement and $33.1 billion in 2021 budget to $13.5 billion.
The 2022 budget says the deficit will fall to $10.8 billion in 2023-24, $6.1 billion in 2024-25, $5 billion in 2025-26 and only $700 million in 2026-2027 once a $1.5 billion reserve is removed.
Premier Doug Ford’s election-year budget includes a pledge for tax relief for low-income workers, a cut to the gas tax, and reveals what his much-touted end to vehicle licence plate sticker fees will cost.
The Ford government is betting big on infrastructure, with $10 billion in additional money for hospital construction and redevelopment over the next 10 years.
The funds will build new hospitals in Brampton and Mississauga, and redevelop other hospitals in Etobicoke and Scarborough, along with a raft of other projects across the province.
There’s also nearly $4 billion more for highway construction in the province over the next decade, though provincial bureaucrats would not say how much of that will be committed to the new Highway 413 or the Bradford Bypass, projects expected to cost billions on their own and have not yet been put out to tender.
Finance Minister Peter Bethlenfalvy defended the size of the nearly $200 billion spending plan, which sees the province stay in deficit until the next election or later, saying it addresses affordability issues brought on by once-in-a-generation high levels of inflation.
“What you’ve seen is us bringing costs down on many fronts – lower income tax for those making $50,000 or less is part of our plan – we’ve given the license plate stickers – and the previous liberal government, they just increased fees every year – with the license plate stickers, that’s like an immediate tax cut.”
Addressing the budget hawks, he said the new plan still eliminates the deficit two years earlier than was projected in his last budget.
“Our debt to GDP (ratio) is down eight per cent and our commitment to balance the budget is going to happen two years faster than we said last year,” he said.
But asked four separate times whether he would actually pass the budget presented Thursday if the PCs win the June 2 election, Bethlenfalvy was less clear.
“What I will commit to the people of Ontario that this is our plan. This is the budget that we’re tabling and we’ll get the people of Ontario to vote on that budget. And I have full confidence in the people of Ontario that they will pass this budget.”
NDP Leader Andrea Horwath said she felt there was no guarantee that the PCs would pass the budget in its current form should they win the election.
“I am absolutely concenrned about a bait and switch. There must be a hidden budget somewhere – because the finance minister refused to commit to the document he put in front of you today, he was very uncomfortable.”
She said the budget was full of “gimmicks” and failed to recognize the seriousness of housing unaffordability and rising inflation.
NEW MEASURES FOR SENIORS
Entirely new is a tax credit aimed at frail seniors who still live at home and receive home care from a nurse or attendant.
The new Seniors Care at Home Tax Credit will offer tax filers age 70 or up a credit of 25 per cent of medical costs up to $6,000, for a maximum credit of $1,500. Seniors earning $65,000 a year or more are not eligible.
It’s expected to cost $110 million in 2022 and help up to 200,000 seniors.
LICENCE PLATE REFUNDS
Ford’s largest promise, by cost, is the government’s ongoing effort to end vehicle licence sticker renewal fees and send rebates of $60-120 per year per vehicle to all Ontario car owners.
But the budget document says the rebate will cost taxpayers $1.8 billion, $800 million more than was suggested by government sources when the pledge was first made public.
INCOME TAX FOR LOW-INCOME EARNERS
The budget also details plans to expand eligibility of the Ford government’s Low-Income Individuals and Families Tax Credit (LIFT).
The new LIFT credit will include tax filers earning up to $50,000 individually or up to $82,500 for a household, and provide up to $875 in tax relief.
The expanded threshold means 700,000 additional Ontario tax filers will qualify for the credit.
It will cost taxpayers $400 million each year.
NDP finance critic Catherine Fife said the credit amounts to just a few “dollars” per tax filer each year.
“There hasn’t been a huge takeup. It’s not easily navigated and this is small, we’re talking about actually is really just dollars in people’s pockets, one or two dollars. There’s no substantive recognition, that people are hurting.”
PRICES AT THE PUMPS
Also coming in July is an 11 cent per litre cut to provincial taxes on gasoline, expiring at the end of 2022.
The 2022 budget projects this tax cut will cost the province $645 million in lost revenue this year.
Other document details include an additional $3.5 million for emergency preparedness measures, and $96 million over three years to equip and train Ontario police services to respond to future protests and blockades at land border crossings.
Generally, the deficit is shrinking not due to cost cutting, but rising revenues.
Bureaucrats said the 2022 budget contains nearly $20 billion more in revenue compared to last year, owing largely to the full reopening of all sectors of the economy after closures during the COVID-19 pandemic.
Many sectors outside health care are running below projected expense targets.
Education is $1.3 billion under budget in 2021-22, largely due to lower than expected enrolment. Social services and children ran $632 million under budget due to lower need for the Ontario Child Benefit and fewer social assistance applications than expected.
The impact of rising interest rates has begun – with borrowing costs increasing $21 million over last year – a rounding error in a nearly $200 billion budget, but significant nonetheless.
Interest rate hikes cost the province $7 million per basis point, per year, meaning a .50 per cent hike costs the province $350 million in added interest costs.
Under a faster than projected growth scenario, the province could be in the black by 2024-25, with a $2.4 billion surplus.
Net debt is set to rise to $395 billion this year, up from $324 billion five years ago.
Ontario is still budgeting $1.1 billion for COVID-19 testing in 2022-23.
This is equivalent to approximately 64,000 PCR tests per day using existing cost figures of roughly $47 per test, a rate of testing the province has not hit in more than three months and would struggle to achieve under current eligibility rules.
Real estate continues to contribute strongly to government coffers, with land transfer tax revenue up $212 million to nearly $5.7 billion in 2022.
Also, the tightening of the Non-Resident Speculation Tax, which now covers all of Ontario and includes groups such as foreign students and foreign workers that previously had an exemption, will earn the government $175 million this year and $235 million by 2024-2025.