Ontario Premier Doug Ford isn’t planning to balance the province’s books within his mandate — his first budget outlines a mix of tax cuts and spending restraint that would delay a return to the black until 2023-24.

Ford has used dire language to characterize the province’s fiscal situation since he entered provincial politics 16 months ago and Finance Minister Vic Fedeli continued that message in his budget speech Thursday, describing a “fiscal and moral imperative” to reduce the debt burden in order to protect the integrity of public services for future generations.

However, their budget ticks up the province’s debt-to-GDP ratio this year to 40.7 per cent and keeps it at that level throughout their mandate. The budget deficit is projected to be $10.3 billion this year, down from $11.7 billion in 2018-19.

“Not only were the cupboards bare,” said Fedeli in his budget speech, describing the books left by the Liberal government, “but the fiscal house was on the verge of collapsing under the weight of the massive debt and deficit.”

In a surprise move, Ford and Fedeli promised to tie their own personal finances to the province’s books, announcing plans to introduce legislation that would dock their personal salaries by 10 per cent if they fail to make financial and economic reports public by legislated deadlines.

“We are quite literally putting our money where our mouths are,” said Fedeli.

Political stunts aside, the budget lays out a plan to reach balance over five years by restraining program spending growth to 1 per cent a year, while allowing revenues to rise by 3 per cent, until balance is reached.

The official opposition immediately decried the spending cuts and fiscal restraint described in the budget, with NDP Leader Andrea Horwath describing the impact of the spending projections as “outright cruelty.”

Taxes

The budget document includes an outlook of the province’s path back to balance that’s more detailed than was offered under the previous Liberal government, outlining projected revenue and program expense changes by sector year-by-year until 2023-24.

The outlook indicates that the Ford government plans to begin implementing two of its major election promises — a personal income tax cut for the middle class and a gas tax cut — in the 2021-22 budget year, just ahead of the expected 2022 election. Government officials confirmed those election promises are baked into the fiscal projections, even though they have not been explicitly announced.

The personal income tax promise was to reduce the rate of the second provincial income tax bracket — on income from about $43,000 to $86,000 — to 7.32 per cent from 9.15 per cent.

The gas-tax promise was to reduce the price of gas by 10 cents a litre and the Tories have claimed credit for getting 4.3 cents towards that goal by repealing the province’s cap-and-trade regime. Fedeli previously told QP Briefing he has no plans to include the impact of the federal carbon tax — which has been implemented by the upper order government because of the repeal of cap-and-trade — in that calculation.

Unless the province is successful in challenging the federal carbon backstop in court, it adds a 4.4 cents-a-litre tax now and is scheduled to rise. Balancing out the hit to provincial coffers, the government announced in the budget it will not follow through with its predecessor’s promise to double the municipal share of gas tax revenue from two cents per litre to four cents by 2021-22.

The Tories had promised to reduce the corporate tax rate by one percentage point, but after taking office (confirmed to QP Briefing) they don’t intend to follow through with it, pursuing accelerated capital cost writeoffs instead, mirroring a federal change made to keep Canada competitive with the U.S. The plan was officially announced in the fall economic statement, but renamed in this budget the “Ontario Job Creation Investment Incentive.”

Spending

The outlook also offers some indication of how the government intends to enforce spending restraint in different program areas.

The government intends to hold spending increases to its biggest expense area — the $60-billion health sector — to 1.6 per cent annually through the current mandate. That comes in far below the pressures on the health-care system associated with cost inflation, population growth and aging that have been identified by the province’s Financial Accountability Office (FAO). It’s also in line with two recent periods of spending restraint — in the 1990s under former premier Mike Harris and following the 2008 recession when the former Liberal governments froze hospital spending and warred with the province’s doctors over compensation.

The spending restraint comes as the government works to implement its health-care transformation plan, which includes centralizing health-care agencies including Cancer Care Ontario and Health Quality Ontario into the super agency Ontario Health, centralizing health-care procurement, and drastically reorganizing the delivery and co-ordination of care into new regional groups of health-care providers called Ontario Health Teams, while eliminating Local Health Integration Networks.

The province plans to hold the line on its education budget of roughly $30 billion, limiting increases to 1.2 per cent a year through the end of the mandate and then freezing spending until the budget is balanced. That comes as the province is already warring with teachers, promising class-size increases and signalling its intention to take a tough line in collective bargaining over the coming months.

At the same time, the government plans to drive down spending on children’s and social services every year until the budget is balanced, cutting a billion from the budget over four years. It’s promising reforms to social assistance — yet to be unveiled — that will “with the goal of achieving better outcomes for clients, reducing costs and administrative burden, and ensuring Social Assistance programs are more accountable to the people of Ontario.”

Horwath described those plans for cuts as targeting the most vulnerable.

“We knew there were going to be deep cuts in this budget — Conservatives don’t believe it’s their job to help you and your family,” she said. “What we didn’t expect was this level of irresponsibility and outright cruelty we’re seeing in this budget.”

She pointed, in particular, to the $1 billion cut to social services and said the moderate spending increases in health care and education will come in under the rate of inflation, resulting in service cuts.

The accountability legislation

Overall, Fedeli framed the government’s path back to balance as more than just a set of projections, but a promise — one that comes with an “ironclad guarantee” to “change the culture of government.”

Part of that promise is the new accountability legislation the government is promising — the Fiscal Sustainability, Transparency, and Accountability Act — which would require the government to include more information about how it intends to return to balance when a deficit is projected, including projected net debt-to-GDP ratio for the period of the plan and estimates of the major components of revenue and expense over the period. The 2019 budget complies with both.

However, the promise that the premier and finance minister will take a pay cut if they fail to make public financial and economic reports public by legislated deadlines comes after the government has failed on that account so far.

It failed to table its estimates this year by the deadline required for the figures to receive legislative scrutiny. When it did so, it tabled estimates that stemmed from the Liberal government’s 2018 budget — much of which the current government had changed — preventing scrutiny of the changes it made in the 2018-19 budget year, according to the FAO.

The budget shed some light on what has changed since then.

Total expenses increased by $744 million, even though the government saved $919 million by delaying planned spending on infrastructure projects that were to be cost shared with the federal government.

The increases were not broken out individually, but include higher-than-anticipated spending on the Ontario Student Assistance Program due to program changes implemented by the previous government which the government has since repealed, and higher-than-forecast social assistance costs, which the government intends to tackle with a revamp of the system.

Budget 2019: Ford government won’t balance the books before the next election

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