TORONTO — Ontario sharply lowered its projected deficit for next year in a move the opposition suggests is all about setting the stage for a balanced budget just ahead of a possible spring election.
Earlier this year, the government had forecast a $4.6-billion deficit for 2025-26, but in its fall economic update presented Wednesday, that is now set at $1.5 billion.
The fiscal document shows revenues and expenses for that year are actually balanced, and the entirety of the projected $1.5-billion deficit is a $1.5-billion reserve. The province maintains its projection of a small surplus by 2026-27.
But Finance Minister Peter Bethlenfalvy said the province is not committing to balance the books this spring.
“Do I hope we beat our numbers? Absolutely, but hope is not a strategy, this is our plan,” he said.
Opposition leaders said the plans to explore building a tunnel under Highway 401, sending people $200 cheques, and preparing a possibly balanced budget next year are all evidence that Ford has an election on the brain.
“Almost everything you see in this fall economic statement – including the too cute situation of having a $1.5-billion deficit and a $1.5-billion contingency fund – just shows you the premier is putting his own political self-interest ahead of the people of this province that the government has abandoned,” said Green Party Leader Mike Schreiner.
Liberal Leader Bonnie Crombie suggested having a $1.5 billion reserve as the whole deficit for next year is a shell game.
“We know very well they’re going to announce a balanced budget,” she said. “Of course, they’ll transfer the money over and pretend that there is no deficit and they’ve balanced the books, but nothing is further from the truth.”
NDP Leader Marit Stiles said what’s really concerning is “where are they not spending those dollars right now where people really need them?”
The province attributes the more positive outlook since the spring budget to population growth, more jobs, reduced inflation, lower interest rates and a boost from changes to capital gains taxes from the federal government.
It is projecting to take in $7 billion more in taxes compared to what was expected in the spring budget.
The capital gains tax changes proposed by the federal government have yet to become law, but Ontario has them baked into its projections to a tune of $3.3 billion.
Bethlenfalvy has said he expects that legislation to go through, though the minority federal Liberal government is in a precarious position and could fall at any time.
Premier Doug Ford previously said he was not in favour of the federal government’s changes to capital gains taxes, but it has helped the province’s bottom line.
It’s all good news for Ontarians, Bethlenfalvy said Wednesday.
“This lower deficit came thanks to a number of different factors, including higher revenues, lower borrowing and, of course, lower interest on debt,” he said. “In fact, our interest on debt relative to revenues is currently at its lowest level since the 1980s.”
Ford and Bethlenfalvy had already announced two main affordability items from the fiscal update, which serves as a mini-budget — a continuation of a cut to the gas tax, and a $3-billion plan to send $200 cheques to every Ontario taxpayer.
“I’m under no illusions that this will relieve all of the affordability pressures facing Ontario families, but it will help,” Bethlenfalvy said.
“I could wait maybe a couple of years to be able to provide some relief, but I think the relief has to happen now.”
Opposition critics have suggested the cheques that are set to be mailed early next year are timed to arrive ahead of a possible spring election.
Ford has repeatedly refused to rule out an early election ahead of the next fixed date of June 2026, although he has said an election will not come this year. Opposition parties are preparing for the possibility of an election next spring.
Ford and Bethlenfalvy have said the province can afford to mail out $3 billion in cheques because of higher-than-expected revenues due to the impact of inflation on provincial sales tax money coming into government coffers.
Program spending is up by $5 billion from the time of the budget, mostly due to the $3 billion being spent on the cheques and a top-up to the contingency fund. Ontario’s total spending is now over $218 billion.
Bethlenfalvy did not mention housing during his speech in the legislature on Wednesday.
In the fall statement, Ontario lowered its projections for how many new homes will get built, casting doubt on whether it can reach its goal of building 1.5 million homes by 2031.
The province has not met its annual target yet, although it came close last year after it started counting new long-term care beds. Ontario has 81,300 housing starts so far this year, compared to a 125,000 goal.
In his speech, Bethlenfalvy referenced Ford’s plan to tunnel an expressway underneath Highway 401. The fiscal statement does not set aside any money for that project, which is currently undergoing a feasibility study.
On the revenue side, the government is expecting an eventual increase in the dividend the Liquor Control Board of Ontario pays to the province, as a result of its expanded wholesale role in the alcohol marketplace that now includes convenience stores.
But in the short term, that increase is partly offset by costs of $99 million this year and $80 million next year in getting the expansion going, the fall economic statement shows.
It also shows that a two-week strike at the LCBO this summer led to a $102-million revenue hit. Alcohol consumption is down, which affected the liquor store’s projections.
“Consumption patterns have changed,” Bethlenfalvy said.
As part of the fall fiscal update, the province also recently announced it would cover the costs of tuition for more than 1,000 medical school students who commit to practising family medicine in Ontario.
It is also spending $150 million to expand the province’s in-vitro fertilization program.
The province will also give $100 million more over two years to municipalities as part of a general fund.
The province’s total debt rose to $429 billion, up more than $100 billion since Ford came to power in 2018.
This report by The Canadian Press was first published Oct. 30, 2024.
