In tabling the 2020 Ontario Budget yesterday, the provincial government reminded us that the path to fiscal stability will be long and arduous as a result of the ongoing coronavirus pandemic—and that new COVID-19 lockdowns could still inflict major economic damage. In doing so, Doug Ford’s Progressive Conservatives scrapped plans to balance the budget in 2023-24, instead setting a course for record spending of $187 billion and a whopping deficit of $38.5 billion for the current fiscal year.
None of this comes as a surprise, of course. Both federal and provincial balance sheets were devastated when the coronavirus pandemic struck in March; they’ve been impacted further by additional stimulus and relief spending intended to keep individual Canadians, businesses, and the economy as a whole, afloat. The 2020 Ontario budget ensures that support will continue flowing in the months ahead with measures designed to support businesses of all sizes across the province, along with billions in additional spending on long-term care and to support the health sector.
Budget highlights for businesses and individual Ontarians include:
- $300 million in relief for eligible businesses affected by modified Stage 2 lockdown restrictions
- $680 million over four years to improve broadband infrastructure in underserved areas across the province
- A $1.3 billion commitment to lower electricity bills for medium- and large-sized industrial and commercial employers by approximately 14 and 16 per cent, respectively
- Lowering the Business Education Tax rates on business properties in the province to 0.88 per cent
- Making permanent the Employer Health Tax exemption of up to $1 million
- Giving municipalities the ability to cut property taxes for small businesses
- Investments of $180.5 million over three years for job creation and training for tourism and hospitality workers, as well as workers in those sectors most affected by the coronavirus pandemic
- $500 million over four years to streamline the delivery of government services
- A $50 million fund to help businesses retool operations to manufacture essential medical supplies and equipment
- $57 million to help businesses create an online presence through the Digital Main Street program
- An extension of the reporting period to claim an Ontario Research and Development Tax Credit
- A new Seniors’ Home Safety Tax Credit for the 2021 tax year that would provide a 25 per cent credit on eligible renovations of up to $10,000
- $7.5-billion in new funding for long-term care centres and hospitals over three years
- $1.75 billion to build 30,000 new long-term care beds across the province
- A one-time $25 million COVID-19 relief fund for art institutions in the province
- $200 per child up to 12 years old and $250 for children and youth with special needs up to age 21, to aid with COVID-19-related additional expenses such as technology for remote learning
As the 2020 Ontario budget notes, “Ontario’s real GDP is projected to decline by 6.5 per cent in 2020 and rise by 4.9 per cent in 2021. Ontario’s economic growth is expected to continue after 2021, with real GDP projected to rise 3.5 per cent in 2022 before moderating to 2.0 per cent growth in 2023.”
These are merely projections and, at this point, hopeful scenarios. Because the only real guarantee at this point is greater fiscal uncertainty. As the budget explains, “… the state of the economy has contributed to the largest range in private-sector forecasts in recent history of 2.4 percentage points between the lowest and highest real GDP growth forecast for 2020.” Deficits will be astronomical for years to come and could take more than a decade to balance out if the pandemic carries on for longer than anticipated. A vaccine could be a game-changer, but is likely still months away.
The government signalled that it is both aware of the financial pain being felt by broad swaths of the business community, as well as the potential need for greater economic stimulus. Its investment in multi-billion-dollar contingency funds are intended to provide fiscal flexibility in the event that the province’s economy needs to be quickly propped up in the months ahead.
The first provincial budget of the COVID-19 era underscored the unprecedented economic challenges that we’ve faced up to now, and the many that still lie ahead. What is clear is that it will take significant mettle to weather all of them and restore some form of fiscal balance when this crisis eventually subsides.
Armando Iannuzzi, Co-Managing Partner