The Ontario Finance Minister Rod Phillips delivered an action plan in lieu of the usual budget. However, given the COVID-19 pandemic and the current emergency in Ontario and around the world, Minister Phillips delivered an economic update similar to the Fall Economic Statement in order to address the COVID-19 crisis.
The Ontario government has largely had this decision forced upon them by events and circumstances. While the Minister has indicated full provincial budget will be delivered at some point this year, likely in the Fall, the most immediate needs that have to be addressed are: the health requirements of the people of Ontario and the system that provides them care; and the state of the province’s economy. To the government’s credit, they have deployed considerable financial and human resources to address both in today’s statement.
It is clear from other places in the world, who have been dealing with the coronavirus for weeks before Ontario, that the incidence level will increase, the strains on Ontario’s hospitals will intensify, intensive care units will likely be filled beyond capacity, supplies may run low, front-line health care providers will be infected as all media broadcasts have been showing for weeks.
Premier Ford himself has been front and centre in the management of this crisis and has been supportive of frontline workers and businesses. The $17 billion announced in new spending will supplement the numbers put forward by the federal government. Obviously, a direct numerical comparison is unfair. The federal government has greater fiscal capacity than provinces combined as they have the ability to do so and can leverage multiple sources inside and outside the Treasury.
The economy workers organized to deliver products and services often via complex production, consumption, exchange and distribution of goods and services, and all of those systems have been severely strained. The incentives and programs for business federally and provincially are for the benefit all: business, employees and the consuming public. The ultimate goal is to support workers and their families so they are ready to get back on the job as soon as possible and COVID-19 is under control, if not eradicated.
Previous Ontario Government announcements:
Most attention – and media headlines – will no doubt be paid to the big (and we do mean big) numbers: a deficit of $20.5-billion for 2020-2021 and $17-billion in stimulus measures (comprising $7-billion in additional resources for the health-care system and direct support for Ontarians and businesses, as well as $10-billion in support for Ontario families and businesses through tax credits and deferrals to improve cash flow and liquidity).
This mini-budget also provided firmer numbers regarding the fiscal position Ontario is in as takes on the pandemic. For example, the deficit is projected at $9.2-billion for 2019-2020. This figure is a $1.1-billion improvement relative to the forecast in the 2019 Budget (but a $200-million slide from the deficit projection in the 2019 Fall Economic Statement).
To counter the impact of COVID-19, the Province is no longer concerned with the plan to achieve a balanced budget by 2023-2024. Rather than continuing to shrink the deficit, Ontario is planning a deficit of $20.5-billion for 2020-2021.
The other key numbers:
On the stimulus measures, as noted above, there are $17-billion committed to stabilize the economy. The health sector will receive $7-billion as the frontline for the virus. Relief for Ontario families and businesses is set at $10-billion, comprised of the following measures:
Specifically, from April 1 to August 31, businesses can defer remittances and payments under the following programs:
Not surprisingly, a number of the relief measures relate to energy, some of which had already been announced previously and include:
It should be noted the mini-budget contains a $2.5-billion contingency reserve. This reserve is significantly larger than the cushion the government sets aside in normal years. This, obviously, is not a normal year.
The health sector has a fiscal plan of $67.8-billion. This is an increase of $3.3-billion over the interim 2019-20 fiscal plan.
This increase in funding includes $2.1-billion in new COVID-19 outbreak response measures. These include:
The government is also committing to a dedicated $1-billion COVID-19 contingency fund for any emerging needs to support a timely response.
Additionally, there is a $1.2-billion increase in health care resources to meet demand for services in the health and long-term care sector. These measures include:
These measures announced by the government will be helpful to the health care system and help stabilize the economy in preparation for business continuity. Whether or not the funding announced for the Ministry of Health is enough will depend largely on the Government’s collective ability to contain the spread of the virus. And those additional funds will be made available if/when they are required. Many economists and others are predicting further stimulus will be necessary in the coming weeks or months. However, the measures announced today will help to stimulate the economy in the foreseeable future over the next couple of months. Only time will tell if the combined federal and provincial measures can keep the economy going. The Minister of Finance and the Premier have emphasized today’s mini-budget is the first step in Ontario’s response.