Rapid Policy Update:
2019 Provincial Budget
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On April 11, the Government of Ontario released its 2019 Budget, “
Protecting What Matters Most.
” The following is a summary of key highlights from the perspective of Ontario’s business community.
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Budget 2019 outlines a fiscal recovery plan that “will prioritize investments that generate the greatest returns for the people of Ontario (…) Programs will be continually reviewed to ensure that they are efficient, effective and modern, relying on best practices from around the world.” The government is projecting a deficit of $11.7 billion in 2018-19, but lays out a plan to return to a balanced budget by 2023-2024. In running its forecasted course to a balanced budget, the Province projects economic growth to average 3 percent, in contrast to an average 1 percent forecast increase in program spending. This represents an approximately 11 percent divergence between the average annual economic growth rate and the program expense, by 2024.
The Budget also introduces the
Fiscal Sustainability, Transparency and Accountability Act, 2019
. This legislation applies the principles of sustainability, transparency, responsibility, flexibility, and equity to government administration. It legislates that government be required to provide:
- The fiscal year in which it projects it will achieve a balanced budget;
- Major revenue and expense estimates for the period of the recovery plan, including underlying forecasts and assumptions;
- Details of a reserve to protect against unexpected negative changes in revenue and expenses; and
- The projected net debt‐to‐GDP ratio for the period of the plan.
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Chamber Analysis:
The government has taken the advice we gave in our
2019 Pre-Budget Submission
and in our recent report,
Accounting for Ontario’s Debt
. We are pleased to see a robust plan for returning the Province to balanced budgets, including meaningful action to improve government’s fiscal responsibility via a ‘spend smarter’ approach rather than an austerity approach.
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Government Administration
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Over the next five years, the government plans to shift approximately 10 million in‐person service transactions to digital channels, with a projected savings of up to $33.5 million. The guiding principle will now be “digital first, but not digital only”.
In an effort to increase accountability and efficiency within public sector leadership, the government is ending automatic pay increases for executive roles, transition to a pay-for-performance model. Public sector leader accountability/pay-for-performance. This will require amendments to the
Broader Public Sector Executive Compensation Act, 2014
.
The Budget estimates that the previously announced consolidated public procurement practices and integrated supply chain models will result in an annualized savings of $1 billion.
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Chamber Analysis:
We are pleased to see that the Budget earmarks money for digitization of government services, as technology is key to improving customer service and saving money. Similarly, pay-for-performance within the public sector is a solution we have called for in the past.
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Economy and Competitiveness
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Budget 2019 details the government’s Open for Business, Open for Jobs Strategy, which links existing “open for business” policies with regulatory reform, modernization of business supports, workforce development, and incentives for new investment.
As part of its efforts to reduce the regulatory burden on business, the government intends to review payroll legislation with a view to reducing paperwork and red tape.
It also introduces a plan to modernize business support programs to focus on talent, research and commercialization, entrepreneurship and growth, and investment attraction. This includes a review of the Ontario Innovation Tax Credit and other R&D tax incentives
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Chamber Analysis:
Budget 2019 takes a holistic view of economic development. Refocusing business supports on key outcomes—as recommended in our Pre-Budget Submission—will make them more effective and sustainable.
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Budget 2019 details the Ontario Job Creation Investment Incentive, which includes a 100 percent write-off for manufacturing and processing machinery and for clean energy equipment, and an accelerated write-off for many other assets. This is equivalent to $3.8 billion in tax relief over six years. In the Accelerated Investment Incentive, a business can deduct an amount equal to three times the former first year depreciation rate in the first year that equipment is put into use (in subsequent years, the existing depreciation rate applies).
The government is also creating a special unit of tax experts to combat tax evasion and avoidance, in collaboration with federal officials.
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Chamber Analysis:
More details of the provincial government’s mirroring of the Government of Canada’s accelerated depreciation rules indicate that the OCC’s concerns about competitiveness vis-a-vis the U.S. have been heard. Similarly, it is encouraging to see that the Government of Ontario will take tax evasion seriously, in order to increase revenue without punishing law-abiding businesses and residents.
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Skills and Workforce Development
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The Budget includes a number of measures to address skills and workforce development in Ontario. These include a one-window digital portal for apprentices, promoting skilled trades as a career for younger students, and providing a financial incentive for employers to train apprentices. More specifically:
- Proposing new legislation for a governance framework that would replace the Ontario College of Trades and Apprenticeship Act, 2009;
- Financial incentives to encourage employer participation in the apprenticeship system to support a consortium like model where employers come together and train apprentices;
- A new one-window application process for apprentices;
- Promoting apprenticeship and the skilled trades to students from K-12; and
- A flexible framework to allow training and certification in a full trade or in a portable skill set.
The Province will also be launching a micro-credentials pilot in an effort to develop the in-demand skills employers are seeking. The government’s plan for improving employment services includes an enhanced labour market information website featuring job profiles and a connection to the federal government job bank.
The Budget also introduces changes to Ontario’s Immigration Nominee Program to better reflect changing labour market needs across the province. Specifically, the government will amend the program by creating a technology-focused stream to attract skilled employees, expand the occupations eligible for the Employment Job Offer to reflect in-demand skills, and expand the Entrepreneur Stream.
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Chamber Analysis:
We applaud the government’s new financial incentive program to support employers to come together and train employers.
The OCC is also pleased to see the government take action to leverage the skills and global connections of international talent in Ontario, which is critical to ensuring the province’s global competitiveness and future prosperity. However, the government’s plan for enhanced labour market information falls short of the labour market data required to better connect job seekers with employers. The proposal to improve the government’s already existing job bank website is redundant with private sector platforms.
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Infrastructure and Transportation
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Budget 2019 reveals that planned investments for 2019–20 total $14.7 billion and announces an infrastructure investment of approximately $144 billion over the next decade.
To help expand broadband and cellular infrastructure across Ontario, the Province is investing an additional $250 million over the next five years, on top of a previously committed $65 million.
The government will develop a Transit Oriented Development Strategy, leveraging third‐party investment for transit expansion (e.g. allowing developers to build above transit stations in exchange for building new infrastructure). They also intend to bring forward a transportation plan for Southwestern Ontario by the Fall and review the transportation system in the North with the goal of improving both passenger and goods movement.
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Chamber Analysis:
The OCC is pleased to see a commitment to investing in broadband and cellular infrastructure, essential to the competitiveness of businesses across the province, and looks forward to seeing more details in the Broadband and Cellular Strategy that will be released later this year.
We are also pleased to see the Ontario Government taking a regional focus in its transportation plan, with projects earmarked for both rural and urban parts of the Province, and a market-driven transit-oriented development strategy in partnership with the private sector that has the potential to increase housing supply and community development.
We encourage the Province to prioritize investments that present the greatest potential return on investment, including two-way all-day GO Train service in the Toronto-Waterloo Corridor and High-Frequency Rail.
We will continue to advocate for increased infrastructure investment across the province and press the government to meet its spending commitment of $144 billion over 10 years.
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Budget 2019 sets aside $384 million for the hospital sector and $267 million for home and community care. They project savings of $250 million per year by eliminating OHIP+ coverage for those children and youth who are already covered by private insurance.
The government also intends to implement a digital first strategy to increase the use of virtual care and improve access to personal health information. Procurement and supply chain will be centralized through Ontario Health. The government will enable certain regulated health professionals such as pharmacists, nurse practitioners, dental specialists, and optometrists to expand their scope of practice.
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Chamber Analysis:
While investments are needed in our public health care system, reforms—such as increasing the use of digital health tools and modernizing procurement and supply chain—will generate the greatest returns.
We are pleased to see that the government will empower more health care professionals, increasing access to care for Ontarians.
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The Province will develop a process to allow the Alcohol and Gaming Commission of Ontario (AGCO) to pre‐qualify operators that seek to enter the legal cannabis market and participate in the future allocations of retail store authorizations. Pre‐qualification criteria may include: the payment of a fee or obtaining a standby letter of credit; financial information, including information about corporate structure and affiliates; criminal and other background checks; and information confirming lease or ownership interests in potential retail store locations. Once the federal government has enough reliable supply, it will issue further retail store authorizations, including in municipalities with a population of less than 50,000 and in Indigenous communities.
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Chamber Analysis:
The OCC is pleased to see that the government is taking steps towards the second phase of private retail in Ontario, as well as moving towards a merit-based system in which prospective retail operators with the requisite capital and infrastructure are given the chance to apply for a retail store authorization. We are also pleased to see that, unlike the initial phase, municipalities with less than 50,000 residents will be able to apply for a retail store authorization, presenting an opportunity for regional economic development for small and rural municipalities. We encourage the Province to continue to work with Health Canada, identifying the causes of the supply shortage as well as the solutions to re-open the application process as expeditiously as possible.
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Provincial-Federal Relations
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The Government of Ontario is seeking reform of the federal transfer system to better meet this province’s needs. They will advocate to the federal government for the following changes:
- Ontario must be treated fairly and transfers should have clear goals;
- Transfers must meet the fiscal needs of the Province; and
- Transfers must not apply more constraints or costs on Ontario.
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