Overview

Ontario’s 2018 Budget, released today, propels the Ontario Liberals and Premier Kathleen Wynne into the Spring election campaign with a larger than usual collection of new and expanded social programs—with large price tags to match. Titled “A Plan for Care and Opportunity,” the Budget acknowledges the strong state of the province’s economy, with robust job growth and low unemployment, but also identifies two key challenges for Ontario: achieving higher economic growth and ensuring the benefits of that growth are widely shared.
The Budget reports that for 2017-18, the province achieved a $600 million surplus—reaching the government’s announced goal of balancing the books. But with this Budget’s influx of new program spending, 2018-19 will see a deficit of $6.7 billion, with similar deficits projected for the two years after that and decreasing deficits until a return to balance in 2024-25.  If last year’s Budget could be interpreted as the launch of the Premier’s re-election campaign, today’s Budget should be read as the Ontario Liberal Party’s platform. With initiatives like free childcare for all the province’s preschool-age children and the removal of deductibles and co-pays on prescription drugs for seniors, the Wynne Liberals believe they have found winning campaign issues with key voter demographics whose support they will need to form government once again.
Ontario PC leader Doug Ford—who in all recent opinion polls currently maintains a lead large enough to deliver a strong majority government—focused his response on voters’ frustration with the governing Liberals, their mistrust of the Premier and their desire for change. With the Budget plunging the province back into deficit after achieving balance last year for the first time since the 2008-09 recession, Ford once again pledged to find efficiencies by reviewing every government program and committing to a balanced budget. He memorably compared the recent announcements of new government spending to Oprah giving her audience free cars.
Watch for Ford and the PCs to criticize an additional revenue measure the Liberals are positioning as “simplifying” provincial income tax by eliminating a surtax and streamlining tax brackets. The simplification will mean tax filers making more than $95,000 could pay an average of nearly $200 more in provincial income tax per y5ear, while 8.6 million tax filers will see no change, and 680,000 tax filers could have their taxes drop by $130. The PCs have already begun attacking this measure, along with other changes to business taxes that will see some employers pay more, as $2 billion in new taxes that will impact 1.8 million Ontarians and tens of thousands of small businesses.
For her part, Andrea Horwath and the NDP attacked the Budget as too little, too late. In her reaction, Horwath scoffed at the timing of the new program announcements, noting that the Liberals have had 15 years to implement these programs and reiterating her pledge to implement a universal pharmacare program (limited to the most-prescribed drugs) and her recently announced public dental care program.
The 2018 Budget comes at a key moment for Wynne’s Liberals. With an election campaign just over a month away—and an opposition leader in Doug Ford who is a known quantity, good or bad, to many Ontario voters—Wynne is counting on the province’s voters to start paying attention to provincial politics in a real and sustained way and to evaluate what the parties are offering in the way of policy. However, it may not be enough to overcome Doug Ford and the PCs’ significant lead. The Liberals are hoping their large investments in social programs will appeal to potential NDP voters, allowing the left-wing and centre-left voters to coalesce around Wynne’s re-election, not unlike what happened in the 2014 election that delivered Wynne an unexpected majority government.

Economic & Fiscal Outlook

The budget affirms that the government achieved its goal of balance for 2017-18 – in fact, it is now forecasting a modest surplus of $600 million, beating fiscal targets for the ninth year in a row. The surplus will be applied to debt reduction.
The economy is running strong, with unemployment at a 17-year low of 5.5 per cent and Ontario exceeding all G7 countries in economic growth since 2014. Real GDP growth rose by 2.7 per cent annually on average over the 2014-17 period and is expected to average 1.9 per cent a year between 2018-21, fueled by exports and business investment. For the first time since 2009-10, Ontario is a net contributor to Equalization, and is projected to soon stop receiving Equalization payments.
The 2018 budget promises $20.3 billion in new investments over three years, resulting in a deficit of $6.7 billion for the coming year. Program spending growth will average 3.3 per cent annually over the medium-term, with interest on debt projected to grow from $12.5 billion in 2018-19 to $13.8 billion in 2020-21; average annual revenue growth of 3.7 per cent is also predicted, with more than 1 million jobs created between 2009 and 2021 (811,000 created to date). The province projects, however, that the net debt-to-GDP ratio will remain below its 2014-15 peak and resume a downward trend by 2022-23.
The budget predicts similar deficits of $6.6 billion in 2019-20 and $6.5 billion the following year, after which deficits will be annually reduced until a return to balance in 2024-25 and projected surplus the year after that.

Budget Highlights

Health Care
Health care is central to the 2018 budget and dominated pre-budget announcements. Overall, the government is promising an increase in health spending of $5 billion over three years in priority areas, including hospitals, seniors, pharmacare and mental health.
Hospitals
In the wake of significant media and opposition attention on hospital overcrowding, the government is promising an additional $822 million in funding to improve wait times and increase the number of services and procedures available – an increase of 4.6 per cent year over year. The government has also committed to $19 billion in 10 years for about 40 major hospital projects, including SickKids in Toronto ($2.4 billion) and The Ottawa Hospital ($1.8 billion).
Seniors
The government is committing more than $1 billion over three years, beginning 2019-20, to a Seniors Healthy Home Program, providing up to $750 for every eligible household led by a senior 75 years or older to offset the costs of maintaining a home. The government is also investing an additional $650 million over the same period for home and community care, including $180 million for more care hours and $23 million to hire 5,500 new PSWs. The government is also investing an additional $126 million to increase the number of PSWs in underserved communities.
In addition to building 30,000 new long-term care beds over the next ten years – announced in November 2017’s Action Plan for Seniors – the government will invest $300 million over three years for increased care hours and hiring more nurses and PSWs in long-term care.
Pharmacare
The budget trumpeted the successful launch of last year’s banner commitment to provide drug coverage for young people with the so-called OHIP+ program. Going forward this will be expanded to include seniors 65 years and older—effectively eliminating annual deductibles and co-payments. The government has committed to introducing an Ontario Drug and Dental Program for individuals without extended health plans. This program, launching in summer 2019, will reimburse up to 80 per cent of eligible prescription drug and dental expenses up to an annual maximum of $400 for singles, $600 for couples and $50 for each child in a family.
Mental Health
The budget commits to an increase of $2.1 billion in funding over the next four years for mental health and addiction services. This investment includes access to treatment for 46,000 more youth by 2021-22; 400 new mental health workers, bringing access to every secondary school in the province; 15 wellness hubs to help youth transition from children’s services to adult services; access to publicly-funded psychotherapy for 350,000 Ontarians; and 2,475 new supportive housing units. This investment is supported by the province’s agreement on health transfers with the federal government.
Other promises include:

  • $102 million over three years to create 19 new or expanded inter-professional primary care teams recruiting nearly 100 new health professionals
  • $330 million over three years for health human resources recruitment and retention
  • $15 million more in 2018-19 for palliative care
  • $222 million for the Opioid Strategy

Education

One of Budget 2018’s highest-profile commitments is the introduction of universal pre-school for all children from two-and-a-half years old until eligible for kindergarten. Launching in 2020, this program will save the average family over $17,000 per child, at a cost of about $2.2 billion to the taxpayer. Over the next six years government will invest $534 million to build 10,000 more preschool places in schools and 4,000 in other public spaces. In addition, the province is providing an additional $160 million over three years to reduce costs and eliminate fee subsidy waitlists for infant and toddler care, as well as $30 million over two years for an Early Years and Child Care Innovation Fund. Included in this announcement is the creation of a wage grid to bring child care workers income in line with Early Childhood Educators working in Full-Day Kindergarten classrooms.
Ontario is investing $16 billion over ten years in capital grants for new and improved schools, with $784 million this year to build 39 new schools and renovate 40 existing facilities. $3 billion has been committed for post-secondary institutions, with $500 million in new funding starting 2020-21 to renew university and college campuses.
Government is also investing $250 million in new funding over three years to eliminate waitlists and improve special education services, and $120 million over the same period to hire 450 new guidance counsellors to help students in Grades 7 and 8 prepare to transition to high school.
The Budget invests in skills training with $170 million over three years in a new Ontario Apprenticeship Strategy to support transitions into apprenticeship from high school, and a $63 million Ontario Training Bank to bring employers, employees and training institutions together to develop skills programs. The government also allocated $411 million out of its new Good Jobs and Growth Plan investment for skills and training, supporting industry and postsecondary partnerships to develop programming and hands-on learning for students.

Infrastructure

In its 2018 budget, the Ontario government reaffirmed its commitment to a 14-year infrastructure investment of $230 billion (which began in 2014-15) for hospitals, schools, transit, bridges and roads and rural broadband. This includes $79 billion in public transit and $25 billion in highways. The budget also indicates that the province is developing a new 2051 Greater Golden Horseshoe Transportation Plan to identify and support key transit and transportation priorities as the region grows in the years to come.
The government committed to an additional $500 million over three years to expand broadband in rural and northern communities.

Business Supports & Labour

The Ontario government is introducing a Good Jobs and Growth Plan as part of its 2018 budget, with $935 million in new investments over three years. The province has also committed to renewing its Jobs and Prosperity Fund with an increase of $900 million over the next 10 years.
Ontario has committed to a three-year Women’s Economic Empowerment Strategy to increase pay and workforce transparency – the Premier recently announced legislation that would implement this if passed – as well as providing supports to female entrepreneurs, promote women’s corporate leadership and develop a return-to-work program for women.
The government will move forward with a better-targeted Employer Health Tax exemption for small business. This will result in about 20,000 employers paying $2,400 more per year on average.
Other significant commitments in the 2018 budget include:

  • An increase to social assistance rates of three per cent per year for the next three years
  • Enhancing the Ontario Charitable Donations Tax Credit
  • $1.8 billion over three years to expand services for people living with developmental disabilities, including funding to support the transition from youth to adult services
  • $547 million over five years for repairs and retrofits to support energy efficiency of social housing buildings
  • $242 million over three years to support survivors and their children as part of the recently-announced Gender-Based Violence Strategy
  • Discounts for Presto card holders ($3 for all GO Transit trips within Toronto and any trips under 10km) and a commitment to reduce transit fares that cross municipal systems
  • $64 million over three years to enhance existing cybersecurity practices
  • $28 million over three years to create a provincial Digital Public Library to provide free access to e-books, music and audiobooks, research database and other materials
  • Two new Social Impact Bond pilot projects for homelessness to assist more than a thousand at-risk youth over an eight-year period

What’s Next?

Now that the Budget has been tabled, two separate debates must take place in the House. First, there is the debate on the Budget motion—here MPPs from all three parties will debate, and ultimately vote on, whether the Legislature supports the government plan in principle. This debate must be completed within 12 sessional days of the Budget’s tabling.
Second, parallel to this, the Finance Minister will introduce proposed legislation which must pass in order for the government to implement the budget. This Budget Bill goes through the same process as any other proposed legislation, including committee consideration, giving stakeholders an opportunity to provide input. It usually comes to a final vote a few weeks after the Budget is introduced.
Finally, after debate on the Budget motion has concluded, and within 12 days of the Budget’s introduction, the government tables the Estimates. This is the line-by-line spending projection for the government where you will find details of promises made in the Budget, as well as any other spending in the government’s plan.

What Does This Mean For You?

During this pre-election and election period, stakeholders with a role to play in helping the government implement its new programs will find a receptive political audience for statements of support. All three parties are fully engaged in their election campaigns, and engagement with sitting MPPs as well as candidates will be a particularly effective way to get the ear of decision-makers. Emphasizing the local impact of your advocacy goals—and highlighting local voices to help deliver your advocacy message—will be an effective means of engagement with all three parties.
While political decision-makers are squarely focused on their campaigns, government and ministry officials’ work does not stop. During the campaign itself, they will remain focused on program implementation as well as preparing for a June transition—whether that transition is to support a new PC or NDP government, or a re-shuffled Liberal government.
With the Wynne Liberal government currently behind in the polls, engagement with the opposition parties is more important than ever. As a firm, Hill+Knowlton Strategies has developed strong relationships with decision-makers in the PC, NDP, and Liberal parties and can help provide insights and executional support for your advocacy with these decision-makers. Our consultants look forward to working with you to navigate this unique political and government decision-making environment.

For more information:

Omar Khan
Vice President, Public Affairs
Omar.Khan@hkstrategies.ca
+1 416 413 4769
Matt Boudreau
Account Director, Public Affairs
Matt.Boudreau@hkstrategies.ca
+1 416 413 4581