The Top Line

Two days after the Federal Government released its budget, Premier Wynne’s Liberal Government followed. The Ontario budget follows the government’s “activist centre” mantra, with large investments in public infrastructure, as well as new government initiatives designed to support and stimulate private sector job creation in existing and certain new industries the government envisions as part of the new economy.  The budget avoids any major public sector cut while re-affirming the Premier’s commitment to balance the budget by 2017-18.

Presented by Finance Minister Charles Sousa, the highlight of the budget is a plan to spend more than $130 billion over 10 years on infrastructure projects, of which $11.9 billion is to be delivered in 2015-16.

To pay for this plan, and the other initiatives proposed, the government will divest some provincial assets, drive new revenue from its previously announced new model for beer retailing, undertake an offering of shares in Hydro One and use current funds held in the Trillium Trust from previous asset sales.

Budget Highlights

Economic Highlights

The budget projects government revenues to grow at an average annual rate of 4.3 per cent over the next forecast period. This means total revenue is projected to grow from $124.4 billion in 2015-16 to $134.4 billion in 2017-18.

The government is still proposing to balance the budget by 2017-18. It projects a deficit of $10.9 billion in 2014-15 – a $1.6 billion improvement compared to the forecast in the 2014 Budget.  Budget 2015 forecasts deficits of $8.5 billion in 2015-16 and $4.8 billion in 2016-17.

Key new revenues identified in Budget 2015 include:

• $4 billion from an initial public offering of approximately 15 per cent of common shares in Hydro One, with additional share sales in subsequent years.
• $100 million from changes to the beer distribution model, phased in over four years.
• $1.35 billion currently in the Trillium Trust, representing the proceeds of the sale of the province’s shares in General Motors and other divested assets.

Measures Affecting Business

Infrastructure Funding – The government is touting the largest infrastructure funding program in the history of Ontario. Over $130 billion over 10 years in public infrastructure, such as roads, bridges and transit, including $31.5 billion in dedicated funds through the Moving Ontario Forward Plan. The investments are expected to support over 110,000 jobs per year in construction and related industries.

Cap-and-Trade System – The government will move forward with a cap-and-trade system and its carbon pricing system. Proceeds from this program will be directed toward key priorities that will help lower greenhouse gases. There will be an overall emission limit (the cap) on those facilities included in the program, and methods of rewarding companies under this threshold.

Jobs and Prosperity Fund – The government is enhancing the fund by a total of $200 million beginning in 2015-16, this is on top of the original $2.5 billion over 10 years that was announced in January 2015.

Supporting Health Innovation – The government will establish a $20 million Health Technology Innovation Fund and appoint a Chief Innovation Strategist, also there will be an increase in regional trade and investment with Quebec.

Industrial Conservation Initiative – Originally created in 2014, this initiative is aimed at incenting large and medium-sized electricity users to consume electricity in non-peak periods.  Budget 2015 will lower the threshold for qualifying industrial sectors from five megawatts to three.

Ontario Youth Jobs Strategy – The government will be renewing this plan with an additional $250 million investment over the next two years. The total investment in youth employment programming will be more than $565 million over the next two years. This will serve up to 150,000 clients and focus on skills development, including apprenticeship training, labour market connections, entrepreneurship and innovation.

Other Initiatives 

Auto Insurance – There will be additional initiatives to reduce the cost of auto insurance for consumers, including, lowering the maximum interest rate charged on monthly auto insurance premium payments; prohibiting premium increases for minor at-fault accidents according to particular criteria and requiring that insurers offer a discount for use of winter tires.

Electricity Support Program – A monthly benefit of $20 to $50 directly on the electricity bills of the most vulnerable citizens. The size of the benefit would be assessed based on income level and household size.

Beer Retailing Reform – Changes to the retail of beer in the Province. Up to 450 grocery store locations will be authorized to sell beer across Ontario.

Retirement Security – The government remains committed to moving forward with the creation of the Ontario Retirement Pension Plan and are moving forward with creating the administrative body necessary. A voluntary pooled registered pension plan has been introduced.

Opposition Reaction

Both Opposition Parties were swift to declare that they will not support the Liberal’s budget. In recent weeks as the government previewed its plan to sell shares of Hydro One both parties expressed their discontent for this plan.

Immediately following the budget PC Finance Critic Vic Fedeli said that Ontarians should expect more cuts to come in health care and education, and also that everyone should prepare for higher hydro rates. NDP Leader, Andrea Horwath, restated that this is a “bad budget” and everyone will continue to be paying for this government’s mismanagement and bad decisions.

What Comes Next

The Liberals hold a majority in the Legislature and have the ability to enact all budget-related items quickly.  While both Opposition Parties will be extremely vocal against measures included in the budget, such as the sale of shares of Hydro One, they have no ability to do more than delay the budget bill.[