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Ontario budget projects $9.8B deficit, real-dollar social services cuts

The path to balance will require acute financial restraint
Ontario Finance Minister Peter Bethlenfalvy and Premier Doug Ford arrive to table the 2023 provincial budget at the legislature at Queen's Park in Toronto on March 23, 2023.

The Ford government has dropped another unsexy budget in troubled times, with a painful path back to balance.

Finance Minister Peter Bethlenfalvy signalled in advance his intent to mostly stay the course, promising Ontario more options for auto insurance, cash for housing infrastructure and, as always, no new taxes.

In his speech to the legislature on Tuesday, Bethlenfalvy acknowledged Ontarians’ “real challenges … of making rent, of paying the bills, of affording groceries,” and touted his plan to freeze taxes without any major service cuts.

“The 2024 Budget is a continuation of a plan that is working and working well,” he said, adding that “the higher deficits, compared to what we projected last year, will be time-limited, while the return on investment will be felt for decades.”

Ontario’s financial picture is less rosy than this time last year, when the government projected a modest $200-million surplus in 2024–25, growing to $4.4 billion by next year. 

Now, the province is projected to be in the black by 2026–27 — and the deficit this year is expected to jump to $9.8 billion.

If the government follows the path to balance laid out in the budget, it will require acute financial restraint, amounting to real-dollar cuts in some areas.

Programs under the $19.9-billion social services umbrella will see just a $200-million increase by 2027, amounting to a 1-per cent bump spread over two years. Health spending will grow by an average of under 3 per cent per year. And “other programs” — including everything from homelessness to transit to broadband infrastructure — will grow by 1 per cent per year.

Despite social services spending staying at $20.1 billion from 2025 to 2027, Bethlenfalvy said it’s not a “freeze.”

“No, we’re not freezing anything,” he said, adding that Community Living Ontario will see a 2-per cent increase in this budget — below this year’s projected inflation rate of 2.6 per cent. 

Many non-profit social service agencies have said for years that they can’t stretch funding anymore without cutting programs, NDP finance critic Catherine Fife noted.

“So this is a government that callously ignored the pleas from Ontarians for five-plus years, and now these agencies are on the brink of collapse,” she said.

That plan shows how “out of touch” the Ford government is, NDP Leader Marit Stiles said.

Faced with crises in health care, education, post-secondary and housing, “Doug Ford and his minister of finance have chosen to do nothing for you,” Liberal Leader Bonnie Crombie said.

“This is a do-nothing budget. It’s not even worth the paper it’s written on,” she said.

Dubbing it “Budget No,” Green Leader Mike Schreiner parodied the government’s latest partisan advertising.

“What if I told you there's a place where more than 16,000 people are unhoused every night, when the average one-bedroom apartment costs over $2,200 a month,” he said, continuing in that vein for a while. “What if I told you that place was Ontario?”

Opposition leaders said their budgets would’ve spent more on health care, education, social services and “truly affordable housing,” as Stiles put it.

Bethlenfalvy blamed his worsening forecast on Bank of Canada interest rates and the federal government’s carbon tax.

“The Bank of Canada has said this carbon tax is increasing inflation, and when factoring in both fiscal and economic impacts, the Parliamentary Budget Officer has said most Canadians will pay more in carbon taxes than they will see in rebates,” he said.

But doing nothing on climate change would also cost money, the budget officer said in a CBC interview about the political spin around the policy.

Spending will reach another all-time high this fiscal year: $214.5 billion, up from $207.3 billion last year, which itself was over $2 billion more than planned

Revenues are projected to grow by just $1.4 billion from last year, before shooting up by $11.7 billion in 2025–26, to $217.4 billion. 

Bill 124 has cost the province $6 billion, ministry staff said. Last fiscal year saw health, education, social services and justice sector costs jump “primarily” due to settlement costs from the government’s wage-limiting legislation that was struck down in court, the budget states.

On Monday, Bethlenfalvy announced another six-month extension to the government’s gas tax cut, which will cost the treasury another $620 million, finance ministry staff said in a technical briefing for reporters.

Also in the budget is a $46-million commitment for four new OPP helicopters, as well as $30 million for enhanced cannabis enforcement teams over three years.

Colleges will take a $1.4-billion revenue hit due to the lack of international students under the federal government’s new cap. That number rises to $1.7 billion next year.

Along with a $1-billion reserve that may never be spent, the controversial contingency fund is also maintained — though it took a $2.7-billion hit this year largely due to Bill 124 settlements.

The fund will go from $1.5 billion this year to $2 billion by 2026–27, “reflecting the government’s prudent and responsible fiscal planning,” the budget reads.

Inflation is projected to drop from 3.8 per cent last year (down from 2022’s high of 6.8 per cent) to 2.6 per cent this year, before reverting to the target of 2 per cent from 2025–2027.

This will be a tough year for real GDP and employment growth, which the province projects to be 0.3 per cent and 0.8 per cent, respectively — not enough for a recession, ministry staff said, but close. 

Those numbers are also expected to rebound to between 1.4 and 2.2 per cent over the next three years.

“As inflation returns to the Bank of Canada target, we expect and continue to urge that interest rates should also decline,” Bethlenfalvy said. “In fact, the people of Ontario are counting on it.”

The next election is scheduled for the spring of 2026.

A previous version of this article misattributed a quote from NDP finance critic Catherine Fife to NDP MPP Sandy Shaw.

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