Ontario’s deficit balloons to $38.5B thanks to Covid
This year’s budget deficit is forecast to jump by $18 billion to a record-setting $38.5 billion because of the pandemic, nearly double what the PCs predicted back in March.
Finance Minister Rod Phillips delivered the bleak outlook in the first quarterly financial update Wednesday, but it still isn’t as dire as the $41-billion shortfall projected by the Financial Accountability Office earlier this year.
The plunge is owed mainly to a drop in revenues due to COVID-19 — the government projects a $10.8-billion drop in tax revenues, which is partially offset by higher federal transfers, but will still punch a $5.7-billion hole in provincial coffers.
Another $898 million decrease is expected in non-tax revenue, due to lagging Metrolinx sales and lower service fees collected.
Meanwhile, another $13.1 billion in spending has been added to the books for things like the pandemic pay bump, matching federal restart funds for municipalities and transit, as well as another $9.6 billion added across the province’s three contingency funds.
While the March mini-budget was based on an assumption of zero per cent GDP growth in 2020, the PCs are now predicting a 6.7 per cent decline followed by 5.7 per cent growth next year.
Interest on debt is expected to be $12.5 billion, a $741-million decrease from March thanks to lower-than-expected interest rates, despite a $17 billion increase in the funding requirement.
The $17-billion Covid response “action plan” is now pegged at $30 billion (though the Financial Accountability Office has already poked holes in it, noting it includes pre-pandemic electricity subsidies and that the value of tax deferrals would be about $1 billion less than projected because business revenues have declined).
The government is also extending the interest and penalty-free period for businesses to pay provincial taxes by one month, to October 1.
Opposition blasts Tories over LTC funding
NDP Finance critic Sandy Shaw said Premier Doug Ford clearly didn’t spend enough to form the “iron ring” of protection that he promised to put around seniors, more than 1,800 of whom have lost their lives to the coronavirus. Shaw pointed out the long-term care budget increased by only $218 million in the quarterly report, while there was no increase for education.
However, some of the new funding may not yet be reflected in the Q1 report — such as the $309 million for schools and $234 million for child care. (The government has allocated $243 million for LTC amid Covid.)
Ford concedes plans to balance budget by 2023 thrown off course
Premier Ford admitted the pandemic has blown up plans to wipe out Ontario’s red ink by 2023-24 — but said it was worth it to support struggling families and businesses.
“Hopefully, we’re going to try to stay on track [to balance the budget], but yes, it is, I am going to be very frank,” Ford said. “[It was] a whole different situation six months ago, compared to now, but we’re going to continue being very fiscally conservative, responsible.”
“When this first started, I said, ‘You know, I’m not going to spare a penny,’ and I proved it,” the premier went on to say.
Ford again wouldn’t rule out the possibility of future program cuts or tax hikes to make up the budget shortfall, but noted that “I just don’t believe in raising taxes.” Instead, he prefers to focus on generating revenue.
“I just can’t predict the future,” Ford said. “Once we get the economy going again and get revenues back up … That’s what we’re going to do … We can stir the economy and get things back on their feet.”
Finance Minister Rod Phillips acknowledged it isn’t sustainable for governments to make it rain perpetually. “Governments can’t and shouldn’t spend at these levels forever, but right now we are in the middle of both a health crisis and an economic crisis,” Phillips said.
A full-scale budget with longer-term projections is due out by November 15.