Today Ontario Finance Minister Charles Sousa tabled the Wynne Government’s first budget. The budget, while still fulfilling aspects of Premier Wynne’s mandate, was intended to meet NDP demands in an effort to avoid a provincial election. Taking a different approach than the McGuinty administration, Wynne courted Andrea Horwath’s New Democratic Party pre-budget with a series of announcements targeted at the party’s interests including: reforms to auto insurance, a new youth employment program, commitment to review public sector executive compensation and increased supports to the home-care sector.

At the same time, the budget contained an economic plan aimed at disarming the Progressive Conservative’s platform with the intent of weakening the PC’s perceived strengths into a potential general election.

In a budget with few surprises, the real questions and the inter-party dialogue will now begin. Is there enough in the budget to convince Horwath to support the minority Liberal government? Or will she cave to internal pressure from her party and vote down the budget along with Tim Hudak and the Progressive Conservative Party forcing a spring election?

This budget shows the strongly increased policy alignment between the new Liberal government and the NDP, with most of the government’s major items announced over the previous weeks.  The budget also firmly places the onus on the NDP to make the next move and decide the government’s fate.

“The Budget [also] speaks to the priorities of all parties in this House, because despite our differences, we are united in our wish to help this province.  Working together – and only working together – can we achieve those priorities.” —   Finance Minister Charles Sousa in budget speech

2013 Budget Pillars

  1. An economic plan for growth and prosperity
  2. Creating a fair society
  3. Continued deficit reduction

Numbers at a Glance

Budget Highlights by Sector

Transportation and Infrastructure

The Premier has taken considerable time preparing the Greater Toronto Hamilton Area (GTHA) for the imposition of new revenue tools to fund transit expansion and address the issues of gridlock in the GTHA. As of late these issues have been a hotly debated issue among government, stakeholders, media and the public.  As a result, both transit funding and gridlock reduction were a focus of the budget.

In terms of transit funding, the government outlined that it looks forward to the release of Metrolinx’s report on transit revenue tools which is expected this spring and will inform the provincial government’s recommendations.  The government reiterated its commitment that any revenue generated by the new funding tools is directly tied to the transit project being funded.  In an effort to support municipalities that fund transit development, the government announced that it will make permanent the funding arrangement which provides municipalities two per cent of gas tax revenues.

To address gridlock, the government announced that it will bring forward a plan to turn select high-occupancy vehicle (HOV) lanes into high-occupancy toll (HOV-HOT) lanes. The new HOV-HOT lanes would allow carpooling drivers to drive for free, while charging a toll for single drivers.

The government announced its plan to create a new $100-million fund for 2013-14 to help small, rural and northern municipalities build roads, bridges and other critical infrastructure.  This announcement underscored Premier Wynne’s commitment to focus on rural and northern Ontario, which is part of how it hopes to build Liberal support in those areas. As part of its long-term infrastructure plan, the government plans to invest $13.5 billion on infrastructure in 2013-14.  An area of investmenthighlighted was highway improvements, including proceeding with planned extensions and the addition of HOV lanes on a number of the 400 series highways.

A Fair and Just Society

The Ontario budget focused heavily on creating what the government is calling “a fair and just society” with many of the government’s social policy initiatives placed under this heading. While this includes the healthcare system, here were very few new announcements and few mentions of health in the budget speech, other than already announced commitments to home care and seniors.

The Province will produce another Poverty Reduction Strategy under the leadership of a new Cabinet Committee. Building on the 2008 strategy that focused on lifting children out of poverty, this new strategy will be released in 2013. The province will also begin implementing the Social Assistance Review done by Francis Lankin and Dr. Munir Sheik, released in 2012. The focus will be on removing barriers for people wishing to enter the workforce, including changes to allow both Ontario Works and ODSP recipients to keep more of their employment earnings. Commitments in both these areas were made by Premier Wynne during her campaign for Leader of the Ontario Liberal Party.

Health continues to be focused around the Action Plan for Health, the government’s blueprint for health care in the province released in February 2012. With Minister Matthews at the helm, the Ministry will continue to focus on: increasing access to primary care; receiving care in the community rather than in an acute care setting; focusing on preventative health care; and getting more value out of the healthcare system.

The sector will continue with its slower than average growth rate of 2.3% for 2013-14. Hospital base operating funding will continue to be frozen in 2013-14. In the hospital sector, the government will be looking to redirect $3.5 million to front line care through managing executive costs.

Two weeks prior to the budget, Minister Matthews announced an infusion of $185 million into the province’s home-care sector. A further commitment was made in the budget that all patients receiving nursing services, including hospital and community referrals, will be targeted to receive service within five days of a Community Care Access Centre (CCAC) assessment. For complex care clients, referred by either community clinics or hospitals, in need of personal support services, the target will be first service within five days of CCAC assessment.

Unlike Alberta, and ending much speculation, Ontario did not make a commitment to lower all generic drug prices to 18% of their brand equivalent. The province will continue to support the work done by the Council of the Federation on generic drug pricing. Higher income seniors will have to pay a greater share of prescription drugs effective August 2014, which is a continuation of the income testing for the Ontario Drug Benefit for seniors.

As in the throne speech, there were commitments made to improving opportunities to aboriginal communities including housing supports and the creating of an Aboriginal Children and Youth Strategy.

Employment and Wages

A key piece of the budget is the government’s new $295-million youth employment strategy aimed at creating 30,000 new jobs for youth.  The NDP included a youth employment program as one of their pre-conditions for supporting the budget. The allocation of funds to the program actually exceeds the NDP ask. However, youth employment was an issue advocated for by now Minister of Economic Development, Trade and Employment Eric Hoskins. In addition to appeasing the NDP, this plan also neutralizes the PCs who have been criticizing the government for 30,000 jobs lost in the private sector.

The government announced it would be introducing an advisory panel to provide advice on how to adjust Ontario’s minimum wages as well as an advisory panel to review compensation practices for public sector executives.  Both commitments are intended to appeal to the NDP, with a hard cap on public sector salaries being something the NDP has repeatedly demanded.

Energy

The government made little mention of its plan for renewable energy except to say that it is continuing to look at ways to provide municipalities with a voice. The budget did highlight that the government is pursuing transformation initiatives for OPG and Hydro One, which will include strategic sourcing of products and services. The government also reiterated its commitment to smart-meter technology.

Financial Reform

The government has not given up the fight for the enhancement of the Canada Pension Plan, but has opened the door to allowing other pension frameworks which should assist Ontarians in ensuring that they have adequate retirement income.

The government acknowledged that it will introduce legislation allowing for the establishment of Pooled Retirement Pension Plans (PRPPs). These will allow third party companies to administer the plan on behalf employers. However, before introducing the legislation, the government will consult with industry stakeholders on how PRPP can be implemented.

The government is also examining the creation of target benefit plans that would allow pension benefits to retirees and active members to be adjusted to ensure ongoing sustainability of the plan.

The government also continues to look at its own public sector plans and how they can be reformed to ensure greater efficiency and continuity.

The government indicated that they remain committed to a national securities regulator and highlighted their framework for the new regulator including recognition of areas of regional expertise across the country, such as Calgary for oil and gas. They also indicated willingness to look at a voting structure which recognizes the role of jurisdictions with major capital markets.

In another concession to the NDP, the government announced it would introduce legislation to reform the auto insurance sector including setting a target to reduce premiums by 15 per cent on average. This commitment was a direct response to a demand from the NDP to reduce premiums.

Conclusion

Progressive Conservative Party Leader Tim Hudak has been very clear that his party will not be supporting this budget. Similar to last year, the strategy is to oppose the government outright while pushing for a provincial general election claiming the governing Liberals have lost the confidence of the Legislature. Tim Hudak is attempting to capitalize on all the concessions the Liberals have made to the NDP and they will present themselves as the only other option to the Liberals.

The balance of power is now with Andrea Horwath and the NDP. Ms. Horwath is receiving increasing pressure from her party to go to the polls since Kathleen Wynne’s popularity is likely to grow the longer she governs, particularly in Toronto. This pressure must be weighed against her approval ratings which are the lowest they have been since the 2011 provincial election as well as the knowledge that the province does not want to see another provincial election so soon.

In addition, the controversy over the gas plant cancellations could further sway the NDP to want to head to the polls. The NDP have been firm in calling into question the government’s accountability on the issue and criticizing the government for the burden that is left on taxpayers.  New – and unfavourable – information from the Ontario Power Authority this week on the costs of the Oakville plant’s cancellation could factor into the NDP’s decision on whether or not to support the government on the budget, which is confidence vote, even though the budget has met NDP demands.

Premier Wynne, though preparing for a campaign, has very publicly messaged that she would like to make the minority government work and keep governing. With the Progressive Conservative Party clearly not supporting the budget, the NDP are acutely aware that they will be they will be the party answerable for a triggering a spring election.

Debate on the budget will commence next week, with a confidence vote coming as early as a week today, but more likely in the following weeks.  Andrea Horwath will have until that time to decide whether or not Ontario will be faced with an election.