Ford government to table 2023 Ontario budget amid 'uncertain economic times'

The Ford government is set to release its 2023 budget on Thursday, one that Ontario’s finance minister says will prepare the province for the “uncertain economic times” ahead.

“Families and businesses and workers are feeling the financial pressures the current economy is putting on them each and every day,” Finance Minister Peter Bethlenfalvy said this week.

“While Ontario’s economy has remained resilient, the economic road ahead continues to be uncertain,” added Bethlenfalvy, who has stressed the need for “restraint” after the big spending, high-deficit budgets of the COVID-19 pandemic.

That restraint, though, does not mean cutting program spending, according to Bethlenfalvy.

“I don’t think you can cut your way to prosperity,” he told reporters. “You have to have a plan and a vision.”

Bethlenfalvy has hinted the “vision” will be a plan to attract jobs and build — keeping on a favourite theme of Premier Doug Ford’s infrastructure-focused government.

The latest outlook comes as Ontario wrestles with above-target consumer price inflation, high interest rates, a generational labour crunch and possible recession. Growth has slowed and is expected to remain modest in the coming years.

The government, however, has also seen unexpectedly high tax revenues and shrinking deficits. It is sitting on billions of dollars in contingency funds that opposition parties argue should be pumped into the severely strained health-care sector.

The New Democrats have accused Bethlenfalvy of repeatedly exaggerating deficit projections to warrant under-spending on health care, education and social programs. In a third-quarter finances report released last month, the government’s deficit outlook from just months earlier nearly halved, going from about $13 billion to $6.5 billion.

The province also finished the 2021-2022 fiscal year with a surprise $2.1 billion surplus, despite forecasting a $33 billion deficit in the 2021 budget.

Unique conditions create opportunities, challenges

Ontario’s current economic circumstances are “unique pretty much in my entire lifetime as an economist,” said Brian Lewis, former chief economist at the Ontario Public Service and now a senior fellow at the Munk School of Global Affairs.

Further revenue growth offers potential for the province to quicken its path back to balance, he said. Or it could invest more in new programs and offer some form of tax relief. But those possibilities also risk adding inflationary pressure to the economy, he added.

An increase in the revenue outlook means the government could do more to address the staffing crisis in the health-care sector, according to Lewis. One option is to repeal Bill 124, which capped public sector wage increases at one per cent annually.

The Ontario government is currently waging a court battle to keep Bill 124 in place, despite warnings from health-care profressionals that it is driving away nurses from the sector.

An Ontario Court of Appeals judge ruled late last year that Bill 124 was unconstitutional, but the government has appealed the decision.

Given increases in the cost of living, it will be hard to attract professionals to public health care if they’re forced to accept wage increases so far below the rate of inflation, he said.

“The world has changed fundamentally since Bill 124 was put into place — from the government’s perspective,” Lewis said.

“I think there is an opportunity here for the government to completely reset the channel on this particular front, given to them by all of the things that have happened over the last few years, and I hope they take it.”

Early-mandate budget

Today’s fiscal outlook will also be the first real post-election budget since the Progressive Conservatives secured a second majority. While the 2022 budget was ultimately passed after the June 2 vote, nearly all of its lofty spending promises were rolled out before the election — and the PCs made only minor revisions to that budget before it passed.

Governments sometimes make fiscal decisions that could prove politically unpopular early in their mandates to soften any electoral consequences of those choices.

“The last budget was a pre-election budget, and we know that pre-election budgets always have a lot of goodies for a lot of folks in them,” said Karl Baldauf, a vice president at the public affairs firm McMillan Vantage. Baldauf was previously chief of staff to Bethlenfalvy during the latter’s tenure as Treasury Board president.

“Sometimes, after an election, those goodies are rolled back. They are not necessarily delivered in the way that had been announced,” he said.

Baldauf said he expects today’s budget to try to send a message that the government has a solid economic plan, and that plan is working.

He also pointed to ongoing negotiations with major public sector unions that are set to ramp up in coming months. Those unions are likely to push hard for wage and benefit packages that are reflective of the currently inflationary environment, Baldauf said, meaning government spending on that front could increase dramatically.