Government revenues are rising and the provincial deficit is melting away, but Ontario’s Finance Minister is sticking to his multi-year plan for significant cuts to public services.
That‘s the key takeaway from this year’s Economic Outlook and Fiscal Review, released by Minister Rod Phillips today.
Today’s update provided further evidence that Ontario’s finances are not in crisis, despite the Ford government’s vigorous attempts to characterize them that way.
The update estimates that the 2019-20 deficit will be $9 billion. That’s $1.3 billion below the $10.3 budget forecast.
Revenues are expected to hit $155.8 billion this year. That’s up $1.6 billion from the Budget forecast of $154.2 billion.
Program spending growth for this year is forecast at 1.4 per cent. This is barely budging from the 0 per cent growth in the 2019 Budget. Planned increases for the next two fiscal years are 2.1 per cent and 1.2 per cent respectively.
The planned growth in program spending means that public services will continue to be reduced. Because of inflation and population growth, Ontario needs program spending to increase by 3.5 per cent just to maintain current service levels. The impacts of this shortfall have become evident across the provincial public sector, from health care to education to social services. In our hospitals, despite government commitments to “end hallway medicine,” wait times in emergency rooms have reached new record levels. In our schools, the government’s plan for fewer teachers, bigger classes, and reduced course offerings have cast a pall of uncertainty over the entire system.
Tax cuts still making themselves felt
Phillips could have boosted funding to maintain current service levels if the government had not already dramatically cut its own revenues. In its first year in office, the government introduced measures to reduce revenues by between $3.4 to $3.9 billion a year between 2019-20 and 2021-22. These include:
- eliminating the cap and trade program;
- paralleling the federal corporate income tax measures that will provide for immediate write-off and accelerated depreciation for capital investments;
- reversing the 2018 Ontario Budget tax change that paralleled progressive federal corporate income taxes on the treatment of passive investment income;
- the Low-income Individuals and Families Tax Credit (LIFT), which was brought in after the minimum wage increase was cancelled; and
- the Ontario Childcare Access and Relief from Expenses tax credit (CARE).
Sheila Block is a senior economist with the Canadian Centre for Policy Alternatives’ Ontario office. You can find her on twitter at @SheilaBlockTO.