Ontario back in deficit while pledging billions in affordability initiatives

Just months after the Ontario government touted a $2.1-billion surplus for 2021-22, the province is yet again in the red.

Ontario is projecting a $12.9 billion deficit for 2022-23, according to the fall economic statement released Monday. This shortfall is nearly $7 billion less than what was projected in the 2022 budget and includes a number of affordability pledges meant to save drivers, small business owners, and seniors money.

The province’s fall economic statement—titled “Ontario’s Plan to Build: A Progress Update”—promises to “put more money into the pockets of the people” while continuing Premier Doug Ford’s pledge to build infrastructure and create more jobs.

The latest financial documents show the government has made about $186.8 billion in revenue, primarily from taxes and federal transfers.

The government attributes the increase in revenue to “higher than expected 2021 taxation revenues” and “higher-than-projected nominal GDP and inflation in 2022.”

They expect to spend about $198.8 billion in 2022-2023, with about $185.2 billion earmarked for programs.

A large portion of the fall economic statement is dedicated to infrastructure, with the province’s capital plan being labelled by the Ford government as “one of the most ambitious in the province’s history.”

Included is an investment of about $159.3 billion over the next 10 years for infrastructure, including about $20 billion in 2022-23.

The government did not provide a specific breakdown by project, but said that about $25.1 billion over 10 years will go into highways, $61.5 billion will be for public transit and more than $40 billion for hospital infrastructure.

There is no new funding for health-care in the fall economic statement. Instead, Finance Minister Peter Bethlenfalvy said the 2022 budget included “significant funds” to address labour shortages and surgical backlogs.

The province has also included a number of new or newly-discussed affordability initiatives in their financial update, which they say will be funded from “existing contingencies.”

The fall economic statement promises more than $675 million in income tax relief to businesses over the next three years by temporarily allowing some to expense up to $1.5 million per year in certain capital investments.

They will also widen eligibility for a reduced corporate income tax rate, allowing an estimated 5,500 businesses to save about $185 million.

CHANGES TO ODSP EARNING EXEMPTIONS

Meanwhile, the government says it will increase the maximum amount a recipient of the Ontario Disability Support Program (ODSP) can earn before it impacts their payments.

As it stands, once an ODSP recipient earns more than $200 a month, they will see a reduction in their benefits. For each additional dollar earned, their payments will be reduced by 50 cents.

In its fall economic statement, the government is increasing that monthly maximum to $1,000, adding that each dollar earned above that amount would reduce benefits by 25 cents.

This is in addition to a five per cent increase in monthly payments to ODSP recipients, bringing the payments to about $1,227 a month. As of 2023, the rate increases will be tied to inflation.

Advocates and opposition parties have called for the doubling of ODSP rates.

The province is also doubling Guaranteed Annual Income System (GAINS) payments for all recipients for 12 months starting in January 2023.

This would increase the maximum payments to $166 per month for single seniors and $332 per month for couples.

KEEPING COSTS DOWN

Many of the affordability programs mentioned in the fall economic statement have already been announced by the provincial government.

The first is the extension of the gas tax cut, which Premier Doug Ford announced late Sunday morning.

The Ontario government slashed prices at the pumps by 5.7 cents per litre in the summer but the legislation was set to expire on Dec. 31. It has since been extended until Dec. 31, 2023.

The premier said this temporary tax cut could save households about $195 on average.

The original six-month tax cut cost about $645 million. For another year, it could cost an estimated $1.3 billion if the same funding model is used.

The province is also spending about $365 million on direct payments to parents in an effort to help students “catch up” amid the pandemic.

Ontario has said this will equal about $200 or $250 per child.

CONTINGENCY FUNDS BELOW FAO PROJECTIONS

The Financial Accountability Office (FAO) released a report in late October showing the government’s current spending plan contained about $40 billion in funding shortfalls over six years. It also found the government had about $44 billion in unallocated contingency funds.

At the time, Financial Accountability Officer Peter Weltman alleged the government was not being transparent about how it is going to spend the money.

However, in the fall economic statement the government said there was only about $3.5 billion in the contingency fund for 2022-2023.

Bethlenfalvy noted the FAO forecasts are based on a “point in time” whereas the province’s projects are based on the private sector. Bethlenfalvy also objected to the FAO’s description that Ontario is in “a time of fiscal stability.”

The province is forecasting a significant reduction in the deficit over the next three years, with an expected $700 million deficit for 2024-2025. When asked by reporters, Bethlenfalvy would not confirm whether the government hopes to balance the budget ahead of the 2026 election.

“Of course I’m an optimist, and I’m confident in people of Ontario, I’m confident in our resourcefulness to deal with the challenges as we face to the pandemic,” he said. “But we’re not immune. We’re not an island here. We’re connected to the global economy.”

OTHER HIGHLIGHTS

  • Ontario will introduce legislation on Monday to create a voluntary clean energy credit registry. Little information has been provided on the registry, but officials say this will help corporations meet their environmental or sustainability goals.
  • Ontario is expanding eligibility for the film and television tax credits to include productions distributed exclusively online. Regulation amendments will be posted in the coming months.
  • $40 million in additional funding for the Skills Development Fund

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