Province moves around contingency monies amid $2.6B spending surge in Q3

By Allison Smith February 11, 2021

New Finance Minister Peter Bethlenfalvy dropped his first fiscal report since taking up the high-profile portfolio.

Yesterday’s third-quarter financial update revealed the province has allocated its full $13.3-billion Covid contingency fund set out in the fall budget — money the opposition has repeatedly accused the PCs of sitting on.

While not all of the cash has flowed, the finance minister maintained it’s on the way out the door and said critics claiming the latter are “simply incorrect.”

“It’s gone. We can’t spend it again,” Bethlenfalvy said. “We’re using up the contingencies.”

To that end, the PCs are digging into the fiscal reserves to top up the contingency fund with another $2.1 billion for the remainder of 2020-21, with an eye to mitigating expense risks amid the ongoing pandemic. Bethlenfalvy called these money moves an “extraordinary step.”

Alongside the new $2.1 billion, an additional $2.4 billion still sits in reserves and other contingency funds. The finance ministry said this $4.5 billion could be used to pay down the province’s $38.5-billion deficit if it remains untapped by the end of the fiscal year.

Spending hits new high, but social assistance drops by $400M
Program spending is up by $2.6 billion since the November budget and overall expenditures hit a record high of $189.7 billion.

A $612-million increase in revenues will help cover the spending hike, as will drawing down other contingency funds that were given a booster shot in the fall, including the Covid health fund and the “Support for People and Jobs” fund.

The finance minister cited the $1.4-billion small business grant program as an example of an unexpected expenditure these contingencies are covering. It offers cash to firms forced to shut their doors during the lockdown that began December 26.

About $860 million in new spending will flow to hospitals for items such as PPE and testing supplies; essential firms on the supply chain will also get $609 million to procure PPE; and long-term care homes will see $398 million to improve virus containment efforts, among other things.

Meanwhile, program outlays are down on two key items: infrastructure and social assistance. Thanks to implementation delays, $269 million less will be spent on building various government projects and a “lower-than-expected social assistance expenditure” will save the province $427 million.

“Do more” was the message from the official Opposition, who took issue with the lack of transparency over the social service cuts. “People need a social safety net now more than ever before,” NDP Finance critic Catherine Fife said. “[Minister] Bethlenfalvy refused to describe the impact of this underspending today — and that’s got people seriously worried.”

Despite Bethlenfalvy’s insistence on the government’s “fiscal flexibility” and the fact that “lives are on the line,” he would not commit to pouring funds into paid sick leave. Instead, he stressed the need to spread awareness about Ottawa’s program.

Liberal Leader Steven Del Duca said there is “simply no excuse” for the PCs not to fund paid sick days while they continue “to hoard billions of budgeted Covid response funds.”

For his part, Green Leader Mike Schreiner questioned why the province is holding onto $4.5 billion in contingency cash instead of spending it on LTC and business relief. “The rainy day is here and it’s pouring,” he said in a statement.

By the numbers
Compared to Budget 2020, the province raised an additional $1.5 billion in corporate income tax and $1.1 billion in sales tax in Q3, thanks to a recovery in household spending.

However, personal income taxes drew in $1 billion less than expected and fewer drivers on the road meant $200 million less in gasoline tax entering the province’s coffers. Non-tax revenues garnered from hospitals, school boards and post-secondary institutions were $1.2 billion lower than anticipated.

The GDP grew by 9.4 per cent in Q3 after sustaining two quarters of decline, but it remains 5.7 per cent below 2019 levels.

Revenues were better than forecasted at the LCBO, OPG and OLG; the Ontario Cannabis Store saw a small dip.

Notably, the Ministry of Colleges and Universities spent $379 million less than expected on financial assistance for students, representing a 30 per cent decrease.