Ontario's COVID-19 budget comes with record spending and deficit, breaks for business

·6 min read

The Ontario government rolled out its latest budget on Thursday, a plan that includes a record deficit as the province battles a resurgence of COVID-19 and tries to lay the groundwork for an economic recovery.

The fiscal outlook details about $187 billion in total spending this year with a deficit of $38.5 billion. It offers no path to balance as many typical provincial budgets do, though the government says that will come in next year's budget.

In tabling the spending plan in the legislature, Finance Minister Rod Phillips said the budget aims to "provide as much certainty as possible in an uncertain time."

"There is still great uncertainty in the global economy, and this means the same thing for the Ontario budget as it does for the family and business budgets," Phillips said.

"This means there is a greater degree of risk underlying our projections than normal."

This year's budget comes amid the backdrop of an ongoing second wave of COVID-19, with Ontario's seven-day average of new daily cases climbing to more than 980 this morning. The plan includes $45 billion in COVID-19 related spending over the next three years, though about two-thirds of that has already been spent.

The Progressive Conservative government says it has earmarked $7.5 billion in new health-care sector spending over the next three years. It will also spend $2.5 billion more on hospitals this year than last, including $572 million aimed specifically at offsetting COVID-19 expenses.

Focus on business

In his speech, Phillips emphasized what he called "strong, sustained" economic growth in spite of the pandemic. Part of achieving that, Phillips said, is getting rid of "structural barriers" to job creation.

One such proposal includes subsidizing some commercial and industrial hydro bills to the tune of $1.3-billion starting next year by absorbing costs passed on to users from renewable energy deals signed by the previous Liberal government. The ministry of finance estimates it would save an average industrial user 14 per cent and commercial user about 16 per cent on their hydro bills.

"This cost on business is costing us jobs," Phillips told reporters at an afternoon news conference.

The costs of the program are expected to decline annually until 2040, when they will all expire.

Meanwhile, the government says about 94 per cent of businesses in Ontario will see a reduction in their property taxes, by standardizing the Business Education Tax. What businesses currently pay depends on where they are located.

Further, the government says it will provide a permanent exemption from paying the Employer Health Tax. The move would benefit about 30,000 small businesses with payrolls lower than $1 million annually, and come at a cost of some $360 million to the province.

These cuts come on top of $300-million that was previously announced for businesses in regions that were forced to roll back to a modified Stage 2 last month.

Details lacking on major long-term care promise

Notably absent from the 239-page budget is the cost of one of the government's most ambitious promises for the long-term care system, which has been ravaged by COVID-19 outbreaks this year and has seen the deaths of more than 2,000 residents.

The government previously announced it would work toward achieving four hours of direct care for every long-term care resident in Ontario by 2025. Labour unions and health-care advocates have long called for such a standard.

Asked about the omission, Premier Doug Ford insisted the province is "totally committed" to the new standard but said it needs to consult with stakeholders before providing more details.

Phillips said the government needs more time because it only received interim recommendations from its commission on long-term care two weeks ago.

"The funding is there and will be made available," he said.

A government study released in July also highlighted the need for increased staffing in long-term care homes.

NDP Leader Andrea Horwath was vocal in her criticism of the budget's promises for long-term care.

"There's no action in the budget to urgently address this crisis and it's shameful," Horwath told reporters, adding that the lack of details about the cost, in a budget document, makes her suspicious about the government's intent.

"It tells me once again Mr. Ford is being not quite truthful with the people of Ontario," she said.

Bill VanGorder, chief policy officer for the Canadian Association of Retired Persons (CARP), agrees.

"What we saw was a strong focus on long-lead economics to the exclusion of real people at immediate risk," he said in a statement.

"We've put forth a strong agenda of shorter-term actions that would meaningfully improve the lives of seniors in Ontario and it's disappointing to see so few of them reflected in this budget."

Money for families, seniors

The budget includes another $200 for each child under 12 years old, or $250 for children with special needs under 21 years old, to assist with education expenses. The same payment was issued in the spring.

There is also a proposed home renovation tax credit for seniors, or families that have a grandparent in the home, intended to help elderly Ontarians stay in their own homes longer.

The refundable credit would cover 25 per cent of up to $10,000 in expenses for renovations that make a home more accessible for seniors.

The program is expected to cost about $30 million.

3 possible scenarios

The budget outlines three possible scenarios for the province's economic recovery over the next two years — an official projection based on medium growth and two alternatives, one based on a slower growth outlook and another with more rapid growth.

Under the medium growth scenario, the government predicts the deficit will go down to $33.1 billion in 2021-2022, then to $28.2 billion the following year.

A path of slower economic growth would see a deficit of $35.6 billion in 2021-2022 and $33.4 billion the next year, and one with faster growth would see deficits of $27.7 billion and $21.3 billion respectively.

The government put off delivering a full fiscal plan earlier this year, citing the economic uncertainty caused by the global health crisis.

'There's a lot to like here'

Andria Barrett, president of Canadian Black Chamber of Commerce, said her initial reaction to the budget was that "there's a lot to like here."

"Obviously we're in difficult times, but I think the minister of finance made a lot of good decisions with this budget," she told CBC Toronto.

Among those good decisions, she says, are support for mental health and seniors, as well as deferral for Workplace Safety & Insurance Board (WSIB) payments.

Additionally, she commended the province's decision to invest $60 million in the Black Youth Action Plan — something Barrett calls "so important" to the Canadian Black Chamber of Commerce.

"We believe in economic empowerment through entrepreneurship for the Black community," she said.

Barrett isn't the only one with a positive response.

Toronto Mayor John Tory said the provincial government made the "tough but correct decision to incur debt to help fund its ongoing response to the pandemic."

"Throughout the pandemic, I have stressed the need for all governments to do everything they can to help people and help businesses get through these tough times," he said in a statement.

"I believe this budget takes some significant initial steps to help stabilize the economy and help businesses, especially small businesses."

You can read the Ontario government's full 2020 budget below: