Ontario budget to be ‘prudent,’ feature gas tax cut extension, infrastructure funds

Ontario’s finance minister is set to present his budget Tuesday amid pressures to ease the rising cost of living, spur new home construction and plan for larger public sector salaries, all while eyeing an expected weaker economy on the horizon.

Premier Doug Ford has said the fiscal plan will be “balanced, per se,” not necessarily referring to the bottom line but rather describing a document that takes slower growth into account while pouring money into infrastructure and attracting manufacturing.

Finance Minister Peter Bethlenfalvy signalled that the cautious approach he has taken with his three previous budgets will continue.

“We’ll build on our plan to keep costs down and grow Ontario’s economy, rebuild it, and grow it and support our workers,” Bethlenfalvy said Monday at a news conference.

“This update will continue with our government’s very prudent and responsible plan — and very targeted — to manage the province’s finances. It’s going to help us stay the course while creating stronger communities, not just for today, but for tomorrow as well.”

Last year’s budget had the province eyeing a surplus for this upcoming fiscal year, but Bethlenfalvy’s fall economic update pegged the 2024-25 deficit at $5.3 billion and projected a balanced budget the following year. He has not indicated if his path to balance will remain the same. 

Ford and Bethlenfalvy announced one affordability measure the day before the budget, trumpeting an extension of their 5.7-cent-per-litre cut to the provincial gas tax to the end of the year.

They have also already announced $1.6 billion more to help municipalities build key infrastructure to help support new home construction, such as roads and water lines.

But this moment cries out for more spending both to address an affordability crisis and to help see more homes built, opposition parties said Monday. 

Ford, however, has made it clear over the past week that any new housing policy will not include automatically allowing fourplexes across the province.

“(In) an existing home, you can have a nanny suite, but what we aren’t going to do is force people to put up with your neighbour selling their house, and all of a sudden a four-storey building goes up,” he said Monday. 

Ford railed last week about buildings of up to eight storeys when asked about fourplexes.

The four-unit homes — which are not necessarily four storeys — have become the hot button housing issue du jour for the premier, and the Liberals’ parliamentary leader suggested that is only because Liberal Leader Bonnie Crombie has come out in favour of them.

“The premier lost his mind when she said that, it’s evident,” John Fraser said. “Just the hyperbole of, ‘Oh my God, six, eight storeys, the sky is going to fall, people are going to lose their minds.’ There’s only one person who’s losing their mind right now and that’s Doug Ford.”

Green Party Leader Mike Schreiner said what he wants to see in Tuesday’s budget is “housing, housing, housing” because it underpins so much of the affordability crisis.

“I don’t even think (Ford) understands what a fourplex is,” Schreiner said. “It’s the cheapest and fastest way to build affordable homes for people in the communities they love.”

Municipal Affairs and Housing Minister Paul Calandra, meanwhile, criticized the federal government for withholding more than $350 million in funding for affordable housing as Ottawa has said the province isn’t building those homes quickly enough.

“It is unfair to the people of Ontario,” Calandra said, taking issue with how the federal government is counting the province’s progress toward its targets. 

NDP Leader Marit Stiles said in addition to housing, she wants to see the budget prioritize public health care and public education.

In those areas, the government is seeing compensation costs rise significantly after it lost a court battle over a law that restrained wage increases for broader public sector workers. 

The government is already on the hook for more than $6 billion in retroactive payouts and Desjardins principal economist Marc Desormeaux has estimated that the higher wage rates could mean an additional $5 billion per year for the near future.

However, Bethlenfalvy has already used some of his last budget’s large contingency fund to absorb those extra costs, and Desormeaux expects that to continue.

“They’re very aware of the risks and they’ve been wise in how they structure their finances to try and absorb that,” he said in an interview.

Desjardins and others are forecasting an economic slowdown, but Ontario should be able to weather the storm, Desormeaux said.

“We don’t think that a record deficit is likely,” he said. “We don’t think that a record debt-to-GDP ratio is likely. That reflects both the prudence that’s built into these plans and some of the efforts to consolidate public finances that occurred before the pandemic.”

In health care, several hospitals have reported running deficits, and Ontario Hospital Association president and CEO Anthony Dale said the government has been providing some funding for hospitals in the greatest need.

Dale wouldn’t say if there was a specific percentage increase in base funding the OHA was seeking in this budget, instead saying there is a need to protect the capacity built up during the pandemic and to plan for the future of an aging population. 

“It’s just wrong to become fixated on a specific budget and a specific number at any given time,” he said. 

“There has to be a separate, open conversation about how to drive innovation and change within the hospital sector.”

Along with the gas tax cut, help for drivers appears set to feature centrally in the budget, with the CBC reporting that auto insurance reforms are also on the way. 

The Progressive Conservative government previously promised auto insurance changes in its 2019 budget to lower auto insurance costs, reform the medical assessments process and make the market more competitive. The auditor general wrote in a late 2022 report that little progress had been made, partly due to the COVID-19 pandemic.

Average auto insurance premiums in the province increased by 14 per cent between 2017 and 2021, to $1,642, the auditor reported.

This report by The Canadian Press was first published March 25, 2024.

Allison Jones, The Canadian Press