Ontario’s 2024 budget has laid bare a daunting fiscal challenge, with the province’s deficit projected to balloon to $9.8 billion.
The figure not only shatters last year’s modest $200 million projected surplus but also triples the current fiscal year’s anticipated $3 billion shortfall.
In a few of the 221 pages of the budget document, Ontario’s Ministry of Finance provided two growth scenarios to cover the broad range of potential outcomes, however the budget claims that neither should be seen as the best or worse case.
Under the Faster Growth scenario, the deficit could improve to $6.1 billion by 2024-25, followed by surpluses of $2 billion and $9.7 billion in successive years. However, the Slower Growth scenario would result in a deficit of $10.3 billion in 2024-25, followed by $10.4 billion and $7.5 billion deficits in the years thereafter.
While the two scenarios cover the extremities of projections, the actual projections for Ontario are a $3 billion deficit for 2023-24, a $9.8 billion deficit in 2024-25, a $4.6 billion deficit in 2025-26, and a balanced budget in 2026-27 with a surplus of $500 million.
Despite the potential for even larger deficits, the budget is termed “Building a Better Ontario.”
Ontario’s Finance Minister Peter Behlenfalvy delivered the provincial budget in the legislature on Tuesday. While primarily optimistic about all the spending Ontario would undertake, he was weary about the global economy’s slowing and the cost of living crisis, placing some blame on the Bank of Canada and the federal government.
“The pace and frequency of the Bank of Canada rate hikes has been punishing, perhaps most of all, on homeowners whose mortgages have in some cases increased by thousands of dollars a month,” said Bethlenfalvy.
“Making matters worse, the federal government’s carbon tax is making everything more expensive, from groceries to gas. The hard-working people of Ontario can’t escape paying the high cost of the federal carbon tax,” he added.
Bethlenfalvy said he struggled to believe that the federal government planned to raise the carbon tax again on April 1.
“It’s astonishing. The people of Ontario, the people of Canada cannot afford it,” he said.
However, despite the many challenges, Bethlenfalvy said that Ontario plans to build by investing and attracting better jobs. The province plans to build highways and improve public transit while reducing costs for families and businesses.
The finance minister explained that there are choices. One would be to raise taxes, tolls, tuition, and fees, which he said Ontario will not do. Another would be for the province to tighten its belt by cutting investment in housing, roads, and public services.
“In short, to retreat and do less. We are not doing that either,” he said.
A third option, explained by the minister, would be to “throw our hands up, retreat, and expect municipalities to fill in the gaps. We are not doing that.”
Ontario will go with the fourth option: invest with time-limited higher deficits so that “the return on investment will be felt for decades and generations to come.”
However, not everyone shares Bethlenfalvy’s optimism with the increased spending.
The Coalition of Concerned Manufacturers and Businesses of Canada’s president, Catherine Swift, raised her concerns in light of the budget.
“Considering the boasting this government has done regarding the positive outlook for the Ontario economy, the need for such a big increase in the deficit, largely attributed to a slowing economy, doesn’t make sense,” she said.
The coalition said in a press release that it was disappointed to see no movement on tax reductions, with the exception of the gas tax reduction. The Ontario budget proposed extending the gas and fuel tax cuts until December 31, 2024. The government claims it has saved households in the province $320 since July 2022.
“Income taxes in Ontario remain high, with some Ontarians paying over half their income in tax. This is hardly an incentive to the entrepreneurial sector to establish and grow businesses in the province,” said Swift.
However, the coalition said that the large amount of spending can be justified given the state of infrastructure in Ontario. Spending on electricity rate subsidies is expected to increase to $7 billion a year, whereas the CCMBC said a complete restructuring of electricity system costs would be more warranted.
While the budget does not substantially increase spending, it does increase the deficit remarkably.
“I see nothing in this budget that will stop the current trend of manufacturers and other businesses leaving the province for more economically competitive jurisdictions,” concluded Swift.