Ford Tries Going Back to Basics in New Budget

After three years of pandemic spending, Finance Minister Peter Bethlenfalvy signalled a return to basics in the Ford government’s 2023 Budget, Building a Strong Ontario. An end to time-limited COVID-19 programs and limited new spending in priority areas (like training, housing, and healthcare), puts the province on a path to a balanced budget by the next fiscal year.

However, this plan will continue to be tested by the rising cost of living, a worsening housing crisis, a struggling healthcare system, and a potential recession. If Ontario’s economy slows and the Ford government does not realize the revenue growth it’s projecting, the government’s ability to address affordability challenges, train workers in high-demand fields, and make progress on its “plan to build” could be in jeopardy.

Balanced Budget Projected Next Year

For now, Bethlenfalvy is projecting confidence. Budget 2023 projects a $1.3 billion deficit this year, followed by a modest $200 million surplus next year; it demonstrates progress on priority infrastructure projects like GO transit expansion and subway development; and it introduces targeted spending measures aimed at getting more Ontarians into high-demand fields like nursing and the skilled trades.

The province was also sure to tout the more than $16 billion in investments by global automakers and suppliers over recent years, demonstrating international interest in the Ontario market.

With a path to balance, familiar key themes, and a nod to the challenges the province is facing with respect to housing, transportation, and healthcare, Budget 2023 attempts to position Ford as a pillar of stability in a constantly changing political and economic landscape.

What This Budget Means

This budget presents a more positive outlook than a typical post-election budget where governments try and make the tough decisions and hope voters’ memories wane by election day. Short-term criticisms will likely fall flat from Opposition Parties as this budget looks to be a deft political document, but with warning signs on the horizon. While the budget paints a financial picture that could be a prelude to a 2026 election complete with robust promises of tax cuts or spending promises, the global economic picture is full of risk.

The budget commitments on mental health, homelessness, and reductions in ambulatory wait times may help improve some of the province’s most visible and important social challenges, but the earnest efforts to build more housing and make life affordable may do little to reverse the financial pressures pushing more Ontarians to move to other provinces.

As the province faces intense criticism over decisions like Bill 23, the removal of land from the Greenbelt, and increased private sector involvement in the healthcare system, Budget 2023 looks to remind Ontarians that the Ford government has a plan to tackle today’s biggest challenges, and make progress, over the course of this mandate.

It’s also a more focused budget, with nearly all of the new spending coming in these core areas rather than the more scattershot approach we’ve seen in past budgets. This demonstrates both the commitment to restraint but also the clear decision to focus on a few key core areas.

Uncertainty Among the Largest Challenges

There continues to be many unknowns on the horizon as the government executes this plan. As Ford continues to build, cost escalations on marquee projects like the Ontario Line will limit the government’s ability to “get shovels in the ground” on all of its planned projects before the next election.

And although the government is making investments in training, like enhancements to the Skills Development Fund and a $3.3 million increase to dual credit programs, the government recognizes that nearly 300,000 jobs in Ontario remain unfilled – meaning labour shortages, and their associated costs, will persist.

COVID Funding Redirected to Targeted Healthcare Spending

After three years of unprecedented spending through the pandemic, the province is winding down much of its time-limited COVID-19 spending. In its place, the government is focused on allocating resources in targeted ways to support the healthcare system.

A $9.6 million investment in the Runnymede Healthcare Centre reflects the government’s focus on building capacity in the healthcare system, while attempting to reduce the pressures faced by hospitals, doctors, and nurses by investing an addition $72 million to make additional surgeries and procedures available in community settings.

These initiatives and others like them aim to increase the capacity of the healthcare system, but the reliance on private (or “community”) organizations will continue to create political and labour challenges as both the Opposition and healthcare workers unions voice their concern.

Municipalities Advocate for Change

Absent from Budget 2023 is a plan to support municipalities still struggling with the financial challenges brought on by the pandemic. Further to this, municipalities continue to advocate for changes to Bill 23 that will incentivize housing development, without sacrificing the fiscal sustainability of Ontario’s towns and cities.

While the province is committing an additional $202 million each year to the Homelessness Prevention Program and Indigenous Supportive Housing Program, an additional $425 million over three years to support mental health and addictions services, and $13.4 million this year to fight gun-and gang-related crime, expect municipalities to continue to call on the government for further support – particularly as Toronto’s mayoral by-election gets underway. The province did not provide a downpayment on its pledge to make up the expected revenue losses from the legislated cuts to development charge fees. It seems those funds will wait until planned municipal audits are complete later this year.

The Opposition Response

The policies in Budget 2023 are wide ranging. With investments in homelessness, mental health and addictions, and additional pathways for people to receive training and find jobs, there are few policy areas the Ford government has ignored.

That said, NDP Leader Marit Stiles says Budget 2023 “failed to meet the moment.” Stiles paints Ford as making choices “that benefit insiders,” without meaningfully addressing the need for affordable housing, the financial sustainability of municipalities, and hospital wait times. Although Budget 2023 contains policies geared towards addressing each of these challenges, these problems are large enough that Ontarians will likely continue to see these problems well into the future despite Ford’s best efforts. Stiles will likely continue with an effective message track that accuses the government of not doing enough to address today’s challenges.

Similarly, the Ontario Liberals said that Budget 2023 “offers no relief” as Ontarians struggle with the high cost of living. Interim Party Leader John Fraser suggested that Ford could still balance the budget “without neglecting the health and well-being of everyday Ontarians.” However, Bethlenfalvy likely anticipated such a criticism. He noted that the Ford government “did not wait until today” to address affordability issues and introduced measures like the gas tax reduction and removal of licence plate sticker fees last year. Ford’s affordability message resonated with voters during the last election, so it’s unlikely Fraser’s criticism of Budget 2023 will stick without comparable policy solutions.

What the Key Economic Indicators Tell Us

Budget 2023 paints an even grimmer picture of Ontario’s economy for 2023 and 2024 than what was forecasted in the Fall Economic Statement. Amid significant economic headwinds, Ontario will see real GDP grow by only 0.2 per cent this year. Unless the economy runs flat the entire year, this growth number indicates that Ontario could very well see negative growth for a couple of quarters in 2023, which could amount to a technical recession.

Budget 2023 expects slow economic growth to have significant impact on employment. While the unemployment rate for Ontario remained low in February (5.1 per cent according to Statistics Canada), the government expects job losses to increase and job creation to slow down in the coming months. Budget 2023 projects the unemployment rate to reach 6.4 per cent for 2023 and remain above the six per cent mark in 2024 and 2025.

The impact of economic dynamics such as higher interest rates and labour shortages are particularly felt in the housing sector. Despite the introduction of extensive measures to “build more homes faster” since the last election, Budget 2023 forecasts housing starts will be lower in the next three years compared to the numbers presented in Budget 2022. Between 2023 and 2025, housing starts will average nearly 80,800 on a yearly basis according to Budget 2023. In order to achieve its objective to build 1.5 million homes in the next ten years, the government needs housing starts to average 150,000 per year, a far cry from today’s updated figures.

Budget Items – At a Glance

Building Ontario

• Building Ontario’s economy through measures such as a new Ontario Made Manufacturing Investment Tax Credit to incentivize manufacturers to innovate and invest in the province.
• Leveraging Ontario’s clean energy sector through initiatives like a grant to McMaster University for the McMaster Nuclear Reactor to increase research.
• Continuing to build highways, transit, and infrastructure like the Northlander passenger rail service, GO Transit expansion such as the Lakeshore East expansion, and building subways and connected Transit-Oriented Communities.

Working for You

• “Working for Workers” by introducing a capital stream to the Skills Development Fund, providing additional funding though the Ontario Immigrant Nominee Program, and providing an additional $3.3 million over three years to expand the Dual Credit Program.
• Addressing affordability challenges by expanding the Guaranteed Annual Income Supplement (GAINS) to support 100,000 additional seniors and investing an additional $202 million each year in the Homelessness Prevention Program and Indigenous Supportive Housing Program.
• Offering better services by further expanding the ability of pharmacists to prescribe medications and investing $170 million over three years to support children leaving the child welfare system.

The full 2023 Budget, Building a Strong Ontario can be found here.