Post-pandemic red ink is the most startling thing about the Doug Ford government's new budget

·5 min read
Finance Minister Peter Bethlenfalvy arrives in the Ontario Legislature with Premier Doug Ford to deliver the budget.  (Frank Gunn/The Canadian Press - image credit)
Finance Minister Peter Bethlenfalvy arrives in the Ontario Legislature with Premier Doug Ford to deliver the budget. (Frank Gunn/The Canadian Press - image credit)

The record deficit incurred by Premier Doug Ford's government in 2020 and the huge one projected for 2021 are clearly to be expected, given all the effects of COVID-19.

What's going to have fiscal conservatives shuddering in their spreadsheets about the new Ontario budget: the many years of red ink, forecast until a time when the pandemic ought to be far in the rearview mirror.

COVID-19 is undoubtedly an economic earthquake for governments, forcing a ramp up of one-time spending while also hitting revenues.

The Ford government allocated $20 billion in one-time COVID-related spending for 2020, which, coupled with a significant drop in revenue, helped saddle Ontario with an $38.5 billion deficit this year.

While the government intends to reduce pandemic-specific spending in the coming year by more than $13 billion, and it projects some bounce back in revenues, the deficit is only getting reduced by a little over $5 billion.

Statistics in the Ford government's new budget show that more than 14 per cent of people younger than age 25 lost their jobs in Ontario over the past year, a far higher figure than among older workers. However, the government's new tax credit for job training is only valid for workers age 26 to 65.
Statistics in the Ford government's new budget show that more than 14 per cent of people younger than age 25 lost their jobs in Ontario over the past year, a far higher figure than among older workers. However, the government's new tax credit for job training is only valid for workers age 26 to 65. ()

And then, even when life returns to something like normal, the shortfalls just keep on coming.

"Our return to fiscal sustainability will take many, many years." said Finance Minister Peter Bethlenfalvy in his budget speech.

"Many, many" means at least six, probably eight, according to long-term fiscal projections in the budget document. Even in the most optimistic scenario of faster than expected economic growth, Ontario is not on track for a balanced budget until 2027. That's more than two elections away.

It's a head-shaking scenario for a premier who campaigned on a promise to cut the size and cost of government, and a finance minister whose mission in his first cabinet post was to root out what he claimed was billions of dollars in waste frittered away annually by the province.

The many years of deficits come even without any massive injection of stimulus spending to supercharge Ontario's economic recovery.

The Ford government projects Ontario will not see a balanced budget until 2029-30, but says the deficit could be eliminated by 2027-28 if economic growth is faster than expected.
The Ford government projects Ontario will not see a balanced budget until 2029-30, but says the deficit could be eliminated by 2027-28 if economic growth is faster than expected. (Ontario Ministry of Finance)

While the government is giving another round of grants of up to $20,000 to small businesses whose revenues were hurt by pandemic restrictions, there's little solace for the hundreds of thousands of Ontario workers who lost their jobs.

People who want to get new job skills are offered a new refundable tax credit, worth 50 per cent of the cost of retraining, up to $2,000.

The program is however only valid for workers age 26 to 65. That's an interesting limitation, given the chart in the budget that shows how younger Ontarians were hit so much more dramatically by job losses during the pandemic than their elders.

The number of people employed in the 25 to 54 age group dropped by 2.4 per cent since February of 2020. Among people younger than 25, employment dropped by 14.3 per cent

Despite that lack of a spur, Ford and Bethlenfalvy say they will rely on economic growth — rather than tax increases or spending cuts — to get rid of the deficits.

Finance Minister Peter Bethlenfalvy gets a standing ovation from a few masked cabinet colleagues after delivering the 2021 budget.
Finance Minister Peter Bethlenfalvy gets a standing ovation from a few masked cabinet colleagues after delivering the 2021 budget. (Canadian Press)

"Economic growth is the key to our fiscal recovery," said Bethlenfalvy in Thursday's speech. "That growth will create jobs, provide revenues to support critical public services and ensure a sustainable fiscal position."

Lest they be accused of taking a "budget will balance itself" kind of approach, the Progressive Conservatives are promising to lay out later this year a plan "to strengthen the conditions for long-term economic growth."

That will be a revealing document. It could lay the groundwork for the PCs to bring in some of the tax cuts they promised in the 2018 campaign.

Which brings us back to the many years of deficits to come post-pandemic.

The government is not planning any COVID-specific spending past 2022, when it has an allocation of $2.8 billion.

The projections for overall spending on government programs — when you factor in population growth and inflation — are pretty much a flat-line for the rest of the decade.

And yet even with that projected level of spending restraint, it's just deficits and more deficits to come.

Is it possible that it means the province simply isn't bringing in enough revenue to pay for the government programs that Ontarians want?

The Ford government makes the case for greater tapping of one particular source of revenue: the federal government. The call from the premiers for Ottawa to cover a greater share of health funding is echoed in the Ontario budget.

No surprise there.

Still, it would be unfair not to acknowledge that there has been a clear shift in tone from Doug Ford's PCs.

It was not that long ago when even official news releases were calling it Ontario's "Government For the People," branding the province with a party slogan, on the taxpayers' dime. In the 2019 speech accompanying the only pre-pandemic budget delivered by this government, the words racism, race or racialized did not cross the lips of then-minister of finance, Vic Fedeli.

The 2021 version of the budget speech, Bethlenfalvy said Ontario needs to "do better for Indigenous and racialized people. Systemic racism is a reality — including here in Ontario. It is a reality we must change."

It's not the kind of statement one would have expected from this government before last year. Yet another example of how 2020 changed just about everything, including creating a scenario where a Doug Ford government projects deficits for years and years to come