Yesterday afternoon, Ontario Finance Minister Charles Sousa tabled the 2013 Provincial Budget, his first since taking over as Ontario’s treasurer.  Ever since Kathleen Wynne became Premier after winning the Liberal leadership in January, speculation has been rampant that an opposition-forced election could occur at any time.  Because of this, and since the Opposition PC Party has long made it known that they will not support the government, much of the speculation surrounding this year’s budget centered on a list of demands presented by NDP leader Andrea Horwath to the Premier. The list included: a 15% reduction in auto insurance premiums; a 5 day wait time guarantee for home health care; closing corporate tax loopholes; a new youth jobs program; and more support for people on welfare.  Horwath made no guarantees, only stating that her party might support the budget, but only if her party’s requests were met.

In the days leading up to the budget, the government began to leak several elements that were clearly linked to meeting the NDP’s requirements.  Given the leaked details, most pundits speculated that the government would deliver on virtually all of Horwath’s asks; the budget – as you will see in the highlights below, did not disappoint in this regard.  The overall theme of this budget could be seen as appeasement; balancing Liberal interests with the NDP’s list of demands, while attempting to avoid an election at all costs.

Budget Balance


(Source Global News, May 5^th 2013)
 

Net Debt

Debt-to-GDP


In his budget speech, Minister Sousa noted that: “We’re talking and taking the right approach – eliminating the deficit while protecting services people rely on […] Building a strong economy that creates jobs does not have to come at the expense of those more vulnerable who need help.”  The details in this budget certainly take Minister Sousa’s proclamation to heart; making an attempt at balancing deficit reduction strategy with social responsibility. 

As one can see from the budget highlights below, this latest offering is really the best that the NDP could hope for, and represents the Liberals best chance at avoiding a spring election.

Budget Highlights Include: 

• $127.6 billion in total spending this year, forecasted to grow by 1.8% a year for next three years
• Deficit will rise from $9.8 Billion in 2012-2013 to $11.7 billion in 2013-14
• The budget is forecasted to be balanced by 2017-18
• Debt forecasted to rise to $272.8 billion
• 1.5% forecasted growth in GDP in 2013, 2.3% in 2014, 2.4% in 2015-16
• Average 15% reduction in auto insurance rates
• The government will invest $295 million over two years into youth employment initiatives
• $260 million dollar boost to home health care services
• New $200 a month earnings exemption for welfare recipients
• More than $35 billion allocated to infrastructure spending over the next three years. Including $100 million for small and rural municipalities to repair roads and bridges
• New high-occupancy toll (HOT) lanes on sections of some 400 series highways in the GTA
• Increase in the employer health tax exemption to $450,000 of payroll from $400,000 to help small business
• Elimination of health tax exemption for businesses with payroll over $5 million
• Income testing beginning in August 2014 to force higher income seniors to pay a larger share of prescription drug costs
• $42 million a year to help adults with developmental disabilities and their families
• $5 million in additional funding for native education
• The government will adopt a further 10% of the recommendations from the Drummond Report
• $45 million over three years for a new Ontario Music Fund
• $8 million in 2013-14 to support Massey Hall’s revitalization
• $9 million over 3 years to the Canadian Film Centre
• Commit to working with industry and First Nations to explore and develop the Ring of Fire
• Government will strike a panel to provide advice on how to adjust minimum wage
• $4 million to support First Nations Police Officers
• Local Food Strategy will support innovative local food projects with funding of $30 million over three years
• Budget will continue to move forward with the Comprehensive Mental Health and Addictions Strategy – with funding growing to $93 million per year by 2013-14.

 
Opposition Commentary

PC Party

According to a PC Party release, the solutions to Ontario’s problems aren’t hard to figure out, they’re just not easy to implement.  In the minds of the Progressive Conservatives the Budget:

• Increases spending
• Increase debt
• Entrenches the damaging anti-jobs policies of the McGuinty-Wynne government 

PC Leader Tim Hudak was quoted as saying: “Too many people in Ontario are having trouble finding work and losing hope in our great province.  Yet today, the Liberal Government chose to continue down a path that will only dig the hole deeper for Ontarians”.


NDP

According to an NDP release, the Liberals have addressed some of the key issues facing Ontarians, but a lack of timelines and firm commitments make it far from clear that the added investment will deliver promised results for families.  According to the NDP the budget:

• Announced new spending measures, but didn’t include enough cost-savings
• Did not include the NDP’s proposal to cap hospital CEO salaries, or to implement a prudent healthcare purchasing policy, which would have helped fund the NDP’s demands
• Suffers from a lack of accountability and clear cut timeline

NDP leader Andrea Horwath was quoted as saying: “We will be consulting with Ontarians, because families need to have their say on this Budget, and how to make it work for them.  We want to bring accountability to this budget and ensure that public dollars won’t be wasted [..]”.
 
Realities, Challenges, and Opportunities

In this year’s budget offering, it is hard to ignore the obvious deal that the Liberals are offering the NDP, in a bid to retain power. 

While NDP leader Andrea Horwath has thus far remained non-committal in terms of whether or not her party will support the budget, it will be difficult for them to oppose something that offers virtually all that they asked for.  Should the NDP vote in favour of the budget, the 15% reduction in auto-insurance premiums in particular would constitute one of the biggest policy wins for her party since they last formed government under Bob Rae. 

Readers may remember that in return for NDP support on last year’s budget, the Liberals made a deal around taxing those making $500K+ per year.  Despite its inclusion in the budget, Horwath remained non-committal for several weeks and faced mounting criticism for drawing the process out.  Because of last year’s debacle, most pundits agree that Horwath will have to decide to either support or not support the budget in the next week to 10 days. 

Rumblings out of the NDP caucus for the past several weeks have suggested a split exists, with many in favour of taking the Liberals to an election now.  While the prospects of an election remain uncertain until the day of the budget vote, the inclusion of all of the NDP’s demands makes it likely that the government will survive the budget vote and live on, at least until the fall.

Whether an election is triggered by the budget vote, or sometime in the fall, it is important for all interested parties to keep informed and stay tuned.  Ontario’s government remains unstable, and the polls still indicate that any election will be a three horse race.  While the timing of an election remains uncertain, the summer months will be a critical time for all interested parties.