Ontario Finance Minister Peter Bethlenfalvy speaks during Question Period in the Ontario Legislature in Toronto on March 24.Frank Gunn/The Canadian Press
Ontario is projecting a larger-than-expected $13.8-billion deficit for the coming fiscal year while again pushing back its plan to balance the books, as the province’s sluggish economy feels the effects of U.S. tariffs.
Finance Minister Peter Bethlenfalvy delivered a budget on Thursday that he says is prudent but still includes spending increases for key priorities, including health care, and new tax breaks for small businesses.
The $13.8-billion that the province expects to be in the red in 2026-27 is $6-billion more than Ontario had projected just last fall. Ontario also expects to remain $6.1-billion in the red in 2027-28, when it had previously said it expected a surplus that year – the latest in a series of delays in its plans to balance the books. The province now says it won’t run a surplus until 2028-29.
Ontario is the latest province to issue a red-ink-soaked budget for the coming year, with British Columbia, Alberta and Quebec all warning that they planned to spend billions more than they collect and cut costs as they grapple with economic uncertainty driven by U.S. President Donald Trump’s tariffs on autos, aluminum and steel and concerns about trade talks between Ottawa and Washington.
Six key takeaways from the Ontario budget
In recent weeks, the instability has been compounded by spiking oil prices, driven by the war launched by the United States and Israel on Iran. The current run-up in crude costs, as Iran severely limits the flow of oil through the Strait of Hormuz, was not included in any of the Ontario budget’s economic projections, which were finalized in January.
Answering questions from reporters before his budget speech in the legislature, Mr. Bethlenfalvy defended his plans to boost deficit spending and put off balancing the province’s books, blaming the impact of COVID-19, population growth, and the need to maintain health, education and social services.
“Of course, I’d prefer to have a smaller deficit. I’d prefer to balance sooner,” Mr. Bethlenfalvy said. “But we have to live in the world we’re in.”
The budget contains a handful of new measures, including a 30-per-cent cut to the provincial tax rate for small businesses, to 2.2 per cent from 3.2 per cent. The budget also says Ontario will mirror federal changes to allow companies to speed up the tax deductions they can claim for spending on new equipment.
Ontario hospitals face dire financial straits, association says ahead of provincial budget
The province is also launching a previously pledged fund, now to be run with a private-sector partner, to invest in industries that the government sees as keys to future growth, including artificial intelligence and biotech.
The Protect Ontario Account Investment Fund was originally promised to offer up to $5-billion for business. The province says it has already used $1-billion to support businesses, including $100-million loaned to tariff-hit Algoma Steel. The new fund will now have up to $4-billion to invest, the government said.
Ontario is pledging an additional $1.1-billion for its hospitals, many of which have been forced to run deficits and curtail emergency-room services. The Ontario Hospital Association has warned that it needed more than double this amount just to tread water. Overall, funding for hospitals will rise 4 per cent.
An additional $1.1-billion over three years – echoing an announcement made just last year – is also being added for home care. And another $186-million will bring spending on autism, long a fraught issue for Ontario governments, close to $1-billion. Municipal and First Nations police forces along the U.S. border will get another $32.5-million for border enforcement, including drones, boats and surveillance technology.
Ontario to extend full HST rebate to new homes under $1-million
Despite tariffs and erratic threats of more levies from the U.S. President, Ontario says economic growth in the province slightly exceeded its expectations from last year’s budget, with real gross domestic product up by 1.2 per cent, instead of the 0.8 per cent the government had projected.
It believes the deficit for the current year, which ends this March 31, to end up slightly smaller than it had projected, at $12.3-billion. Ontario projects real growth for the coming year – based on a conservative read of private-sector forecasts, before the Iran war – to hit just one per cent.
The document released Thursday lays out programs that the government has already announced, including a proposal to temporarily rebate the entire 13-per-cent harmonized sales tax, with support from Ottawa, to most purchasers of new homes under $1-million. This would expand a tax break now limited to first-time buyers. Buyers of homes worth up to $1.85-million would be eligible for lesser rebates.
The budget contains no specifics or costs for some of the high-profile announcements Premier Doug Ford has made in recent weeks, such as his vow to override Toronto’s objections and take control of the city’s stake in its waterfront airport, which Mr. Ford wants to expand and allow the landing of jets. He has also vowed to build a new convention centre on artificially created waterfront land.
The budget does say that “fieldwork” would begin in the spring for the previously announced feasibility study evaluating Mr. Ford’s vision for a 60-kilometre traffic tunnel under the Toronto stretch of the 401, an idea experts say would cost north of $60-billion and do little to fix traffic congestion in the long term.
Ontario’s net debt is set to rise to $485-billion, more than $100-billion in excess of the figure when Mr. Ford’s Progressive Conservatives took power from the previous Liberals in 2018. But Mr. Bethlenfalvy points to recent credit-rating upgrades for the province, and the net-debt-to-GDP ratio, which is projected to hit 37.7 per cent next year – lower than it was under the PCs’ predecessors.
Opposition parties at Queen’s Park panned the budget, which they said was full of misplaced priorities.
Ontario NDP Leader Marit Stiles accused Mr. Ford of turning Ontario into a “have-not” province, and said the budget contained stale announcements, cuts and missed opportunities.
Interim Liberal leader John Fraser said there are no measures in the budget to help Ontarians with their daily costs. He said health care funding isn’t keeping up with inflation, and that money should be directed to lower class sizes in schools.
“Doug Ford and this government are tired and adrift,” he said. “The things that people count on every day aren’t there.”