Rosy economic growth projections, expanded cap-and-trade revenues and new federal infrastructure funds are fuelling a budget plan that will see billions in new spending over the next few years — but keeps the province on schedule to eliminate its deficit in 2017-18.
It includes a complete overhaul of tuition assistance that scraps the complicated system of tax credits and replaces it with a simple grant program that, among other things, will make tuition entirely free for students from families making less than $50,000.
But it also hits consumers with increased costs on gasoline and heating bills thanks to cap-and-trade, on wine and cigarettes thanks to tax increases, and on their paycheques thanks to the Ontario Retirement Pension Plan contributions that will start in 2018.
Most of the new spending is on greenhouse gas reduction measures and infrastructure projects, while the health and education budgets continue to see minuscule increases. The province still plans to find program savings of between $1.3 billion and $2.5 billion over the next three years.
Overall, the deficit fell to $5.7 billion over the past year due to a $2.2-billion increase in revenue (half of which came from tax benefits from the Hydro One IPO), and the province has slashed its deficit target for next year to $4.3 billion, down from $4.8 billion in the fall.
The year after, the government predicts a balanced budget that will see Ontario’s GDP-to-debt ratio hit 39.6 per cent, then start falling for the first time in 10 years.
The budget sets out optimistic growth targets that forecast GDP to rise by 2.2 per cent annually on average for the next three years, exports to rise by 3 per cent annually in that time, and unemployment to fall to 6.1 per cent.
“Rising exports, reflecting solid U.S. demand and a lower Canadian dollar, will provide an increasingly compelling case for increased investment, especially now that Ontario’s businesses are operating closer to full capacity,” the budget says.
“Growth in incomes, buoyed by continued job growth and rising wages along with low interest rates, is projected to support consumer spending in Ontario.”
Finance Minister Charles Sousa used his budget speech to the legislature to declare the goal of wiping out the deficit is finally nearing fruition.
“Ontario’s plan has been long in the making,” he said. “Now, we are in the home stretch.”
Here are a few key things to know about the budget:
Spending
Compared to the 2015 budget, the Liberal government is booking $1.6 billion more in spending in 2016-17 and $4.2 billion more in 2017-18.
The majority of that spending comes thanks to the cap-and-trade system that will raise $478 million next year and $1.9 billion in revenue in 2017-18 — about $500 million more than previously estimated. The revenue will go into a dedicated account that can be used for environmentally friendly measures as set out in legislation and regulations.
The province estimates the cap-and-trade system will cost households an extra $5 in heating and $8 in gasoline prices each month — but that's only when the program starts up. The costs will increase over time as the cap comes down.
Ontario also expects to get $2 billion over the next two years in new funding from the federal government. The money reflects “prudent assumptions related to the current federal government’s commitments for additional funding for infrastructure, home care, and jobs and training,” the budget says.
Other revenue boosts have come from a hot housing market, strong performances from government-owned businesses such as the LCBO, and from a series of new tax measures the government is rolling out — including hikes on wine and cigarettes.
Read more here: <a href="http://www.qpbriefing.com/2016/02/25/budget-2016-new-revenue-measures-include-tax-hikes-on-wine-and-cigarettes/">New revenue measures include tax hikes on wine and cigarettes</a>
Savings
The new spending is not, however, relieving the crunch on ministry program budgets. The $50.8-billion health budget is only set to grow by 1.8 per cent next year, and the $24.8-billion education budget is growing by just 1.2 per cent.
The government is pursuing billions in further savings with its Program Review, Renewal and Transformation initiative, a line-by-line spending review led by Treasury Board President Deb Matthews.
One of the PRRT targets revealed in this year’s budget is the province’s public drug programs, which the government intends to prop up by increasing seniors’ deductibles and housing all the plans under a single banner.
Read more here: <a href="http://www.qpbriefing.com/2016/02/25/budget-2016-ontario-to-set-up-single-drug-plan-but-hike-costs-for-seniors/">Ontario to set up single drug plan, but hike costs for seniors</a>
Tuition overhaul
The surprise announcement from the budget is a total overhaul of how tuition funding assistance is handed out, with the tangled system of tax credits and other student assistance programs being replaced with a simple grant targeted for low-income families.
The government says the grant will effectively make tuition free for students from families with incomes of $50,000 or less, and for more than half of students from families with incomes of $83,000 or less.
The exact cost of the new program is unknown, and will depend on take-up, but the province says it will be more than covered by the savings from eliminating the tax credits.
Read more here: <a href="http://www.qpbriefing.com/2016/02/25/budget-2016-post-secondary-education-will-be-free-for-low-income-students/">Post-secondary education will be free for low-income students</a>
Jobs
The government projects 300,000 more jobs will be created in Ontario by 2019, and that the province’s overall economic performance will outpace the national average for at least the next two years.
“Ontario’s economy has fully recovered from the 2008–09 global recession,” the budget says.
“Over 600,000 net new jobs have been added since the recessionary low in 2009, with the majority in the private sector and in industries that pay above-average wages.”
But even with those sunny numbers, the government is committing $400 million over the next five years to its new Business Growth Initiative. The program is aimed at growing small businesses and cutting red tape.
Read more here: <a href="http://www.qpbriefing.com/2016/02/25/budget-2016-government-prepares-for-400-million-splurge-on-business-schemes/">Government prepares for $400-million splurge on business schemes</a>

Cap-and-trade and tuition funding overhaul headline 2016’s optimistic budget

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