Program spending down by $4.8B as Covid-fighting booster funds shrink

By Allison Smith March 24, 2021

Ontario’s deficit isn’t going anywhere. The budgetary hole is now projected at $32.1 billion for the next fiscal year, down $5.4 billion from the year prior.

Program spending will be reduced by slightly less, $4.8 billion. The PCs will allocate $173 billion towards running the province, down from last year’s record-setting $177.8-billion allotment, while raking in $154 billion in revenues.

Another $13 billion will be set aside to pay interest on the provincial debt, which is projected to hit $439 billion in the upcoming fiscal year — a $40-billion spike — and grow beyond half-a-trillion-dollars by 2023-24.

While spending is down from last year, the finance minister highlighted that it remains $11 billion more than 2019-20, the last pre-pandemic fiscal year. “It’s clear we are sparing no expense to defeat COVID-19,” Bethlenfalvy said in the document’s introduction.

Program spending will continue to drop over the next three years as emergency Covid allocations and contingency funds dry up (a $6.7-billion one-time boost is on the books for 2021-22, down from $20.1 billion this year). During the second half of the decade, it will start climbing again by about 2.1 per cent yearly, slightly more than the average annual inflation rate.

Moving forward, the fiscal hole is expected to keep shrinking by about $6 billion annually over the next three years, a slightly speedier rate than outlined in last fall’s budget.

Deficit won’t be cleared until the end of the decade
The budget outlines a long-term path to balance, forecasting that Ontario will get out of its fiscal hole by 2029-30 (before the pandemic hit, the PC’s plan was to get the province in the black by 2023).

“I would do it all over again when faced with a crisis of this proportion,” Minister Bethlenfalvy told reporters when asked about being a Tory lawmaker laying out years of red ink.

The long-term forecast also comes with a caveat: “Significant uncertainty still remains about future economic growth, which may impact these projections further,” the fiscal document states.

Ontario’s GDP was negative 5.7 per cent in 2020. Following that wallop, the province expects about four per cent growth this year and 4.3 per cent in 2022, before it peters off to about two per cent in future years.

There are still 305,300 fewer jobs in the province than there were before Covid hit. Finance officials acknowledged recovery has been “partial” and “uneven.”

Meanwhile, the provincial debt-to-GDP ratio is projected to soar to 50.5 per cent within three years. Not exceeding that 50.5 per cent ratio is part of the PC’s new “debt burden reduction strategy,” which also adds two new metrics to the province’s financial tables: net debt-to-revenue, which is projected at 285 per cent, and interest on debt as a percentage of revenue, which is 8.5 per cent. Both those figures are projected to grow along with the debt load.

Money for health, long-term care and battling the pandemic
The budget divvies up priority spending into two major categories: health and the economy.

The first, “Protecting People’s Health,” sets aside $16.3 billion over the next four years to battle Covid and address other health-care woes unearthed by the pandemic.

The province has allocated $1 billion for its vaccination effort, of which about $135 million has already been spent, per Ministry of Finance officials.

Another $2.3 billion will be spent on Covid testing and contact tracing, and hospitals will get $1.8 billion in extra funds to treat Covid patients and address the surgical backlog.

Several new capital health-care projects were announced, including hospital expansions at Peel Memorial Hospital in Brampton and the London Health Sciences Centre, a new hospital tower in Etobicoke, a rebuild in Mississauga, and planning for new facilities in Windsor and Moosonee.

In order to cover the cost of providing four hours of daily care for long-term care residents by the end of fiscal 2024-25, the PCs set aside $4.9 billion over that period, which will be used to hire up to 27,000 more LTC staff, including PSWs and nurses.

When it comes to improving working conditions in LTC so homes can retain their staff, the province says it is working with the sector to increase full-time employment and leverage “innovative approaches to work and technology.”

Alongside previously announced short-term LTC pay bumps, the PCs are also spending $2 million to attract PSWs and nurses to retirement homes by granting retention bonuses ranging from $5,000 to $10,000.

The $933 million in previously announced funding for new long-term care beds was also highlighted.

Cash for businesses, job creation and child care
The PC’s second priority is “Protecting our Economy,” which will get an even larger share of the pot over the next two years: $23.3 billion.

That includes a new $260-million job training tax credit, which will provide up to $2,000 to workers who want to boost their skills through post-secondary education or occupational training.

The province’s small business grant program is getting a second round of funding, which will flow automatically to businesses that received the first round. In total, the province expects to dole out $3.4 billion to companies via grants of up to $20,000.

There is also $400 million in new funds to support tourism and hospitality over the next three years, as well as a fresh $2.8 billion to improve broadband access, which the government said is the largest single investment in the network in Canadian history.

The Regional Opportunities Investment Tax Credit, which provides a corporate tax break to firms that purchase property in rural areas for their business activities, is rising from 10 per cent to 20 per cent.

The budget dedicates a full page to recognizing the so-called “she-session” and pledges to help alleviate the “unfair” burden the pandemic has placed on women. The plan is $117.3 million in targeted employment and training programs, which will also be open to people of colour, Indigenous people, youth and those with disabilities, as well as previously announced child care spaces.

In his budget speech, Minister Bethlenfalvy gave a shout-out to the “strong, capable, brilliant” women who showed leadership during the pandemic, including PC cabinet ministers, associate chief medical officer of health Dr. Barbara Yaffe and official Opposition Leader Andrea Horwath.

The pandemic child benefit is getting a third round at double the rate of the first two. Parents will receive $400 per child and $500 per child with special needs, costing the coffers another $980 million.

Additionally, the PCs are ponying up $75 million to increase the CARE tax credit, which helps about 300,000 families cover child care costs, by 20 per cent to $1,500 per year.

In his budget speech, Bethlenfalvy said the PC’s goal is to “create the conditions,” but it will be Ontarians and employers to “create the actual growth.”

He concluded with the story of his parents fleeing Hungary during the Second World War as refugees: “And today their son has the privilege to serve as the minister of finance. That is the Ontario story. That is the Ontario dream.”