It's hard to know if the Province of Ontario scheduled its much-delayed 2020 budget for this week in the hope that the bad news would be overshadowed by the US Presidential election. You wouldn't entirely blame them if they did, because the budget tabled on Thursday contains a whole lot of red ink, and no path back to balance.
The projected budget deficit for this fiscal year (which is, of course, already half over) is C$ 38.5 billion, almost four times larger than the pre-pandemic forecast. Total spending is projected at a record $185 billion, but the forecast deficit is also the result of a sharp fall in major revenue streams as a result of the pandemic*. The Government promises to set out a path for a return to balance in next year's budget but in the meantime offers three scenarios. In the base case, which assumes moderate but steady economic growth, the deficit falls to $ 33 billion in fiscal 2021/22 and $ 28 billion in the year after that. Slower growth would see a deficit of almost $ 36 billion in 2021/22, while a more optimistic economic scenario would cut that figure to under $ 28 billion.
There are a lot of new measures in the budget, some specifically relating to the pandemic, others designed to help the economy to recover once the situation starts to improve. Total COVID-related spending is estimated at $ 45 billion over three years, although as much as two-thirds of this has already been spent. There will be $ 7.5 billion in new health care spending over the three year budget horizon, but this does not include any costs for the Government's recently-announced plan for improvements to the long-term care home sector.
In terms of plans to boost the economic recovery, the budget offers relief for businesses' electricity bills and property taxes. Smaller businesses will be relieved of the burden of paying a portion of their employees' health care costs. Interestingly, the Province will also make permanent a measure it introduced earlier in the year to allow restaurants to sell alcohol for consumption off the premises, for example with take-home meals -- one more remnant of "Ontario the Good" cast into the garbage can of history.
Truth to tell, the Doug Ford government is at the mercy of events here, as it has been basically since the pandemic started. Depending on how things evolve, the actual outcomes, especially beyond this year, may be very much different from what was tabled yesterday. One striking thing about the deficit projections is worth noting: although the Provincial deficit has ballooned to unprecedented levels, the projected 300 percent increase in the shortfall for this year is way smaller than more than tenfold increase projected at the Federal level. It's Ottawa that has been carrying most of the weight here, and will continue to do so. No wonder Doug Ford is making nice with Justin Trudeau.
* The major exceptions to this: revenue from liquor and cannabis sales, both of which are sharply higher.
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