Ontario’s deficit has shrunk to $6.6-billion, down from $9.8-billion, according to the provincial government’s fall economic statement, which includes projections that suggest a balanced budget could be within reach as soon as next year amid talk of an early election call.
The fiscal update released on Wednesday also includes a plan announced earlier this week to hand out $200 cheques to Ontario residents. That move that would cost the province about $3.2-billion – accounting for half the projected deficit for 2024-2025.
Opposition politicians called the cheques a pre-election “bribe” and said the money would be better spent on Ontario’s struggling health care and education systems. The handouts were also criticized by the Toronto Region Board of Trade, which said it would have preferred the money go toward investments that improved productivity.
Finance Minister Peter Bethlenfalvy said the government could afford the handouts, meant to help Ontarians with the rise in the cost of living, partly because stronger-than-predicted economic growth over the past year has meant an unanticipated boost in the amount of tax collected.
According to Wednesday’s figures, Ontario is on pace to bring in about $7-billion more in taxes and revenue than it had expected in its March budget. That includes $3-billion from the federal government’s changes to the capital gains tax, a windfall Mr. Bethlenfalvy said should be refunded to taxpayers.
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Other governments in the past have handed out similar cheques but typically after balancing their budgets, something Ontario’s Progressive Conservatives don’t formally plan to do until two years from now, in 2026-2027.
However, the economic statement pegs Ontario’s projected deficit for next year, 2025-2026, at just $1.5-billion, a figure that includes a $1.5-billion reserve fund, meaning expenses and revenues are effectively balanced already. And if the government’s tax take again comes in higher than its usually conservative estimates, a deficit next year is unlikely.
That means the next budget, typically delivered in March, could be balanced in time for the government to call a snap spring vote. (The next election is not scheduled until June, 2026.) Both NDP Leader Marit Stiles and Liberal Leader Bonnie Crombie called the budget projections a “shell game” meant to set the stage for an early vote.
“It’s like all of a sudden, magically they’ll balance the budget,” Ms. Stiles told reporters. “But what is really concerning right now is where are they not spending those dollars right now where people really need them.”
Mr. Bethlenfalvy insisted he was only being prudent with his forecasts, but he would not rule out an earlier-than-projected balanced budget.
“I’m an optimist. I’m always hoping that I can beat the numbers,” he told reporters. “I’m putting forward the most credible plan based on the information that we have.”
Using the government’s own average borrowing rate forecast of 4 per cent, the $3.2-billion plan to hand out cheques would result in annual interest payments of $128-million. The handouts also add to the government’s net debt, which is set to increase this year to a record $429-billion – more than $100-billion higher than it was in 2018.
However, the province’s net-debt-to-GDP ratio is projected to be lower this year, at 37.8 per cent, than predicted in March and lower than it has been in more than a decade, although it is set to increase slightly next year. The government also points to Morningstar DBRS’s decision in June to upgrade Ontario’s credit rating to AA, a decision that cited the government’s “prudent fiscal management.”
The fiscal update also includes new numbers related to the government’s move this year to allow beer, wine and some other alcoholic beverages in corner stores, big box stores and more supermarkets. The plan requires the government to hand the Beer Store retailer, which is controlled by multinational brewers, $225-million to cancel its quasi-monopoly contract 16 months early.
The numbers show profits at the province’s Liquor Control Board of Ontario (LCBO) sinking by more than $500-million in the next two years, partly caused by this summer’s strike, but recovering in 2026-2027. The LCBO retains its exclusive right to sell hard liquor, but it also becomes the monopoly wholesaler for the new outlets.
That’s why the fiscal update’s projections for market share show the LCBO’s jumping to 77.1 per cent from 51.2 per cent by 2026-2027, as these sales will include those at thousands of corners stores and supermarkets. Meanwhile, the government expects the Beer Store to shrink from 41.1 per cent of the alcohol market, measured by volume, to just 15 per cent.
Total LCBO revenue is projected to rise to $8.5-billion and its profits, much of which are remitted to the province, are to hit $2.65-billion in 2026-2027, up $96-million from previous projections.
Housing starts in the province are also down compared to the predictions in this year’s budget, making Premier Doug Ford’s goal of getting 1.5 million homes built by 2031 even harder to hit. The government says home builders across the province “continue to face a challenging economic environment,” including elevated interest rates, “that impact the pace of new home construction.” But it also insists it is still on track to meet its goal.
The fall economic statement also includes an additional $100-million for the government’s Invest Ontario Fund, which will now spend $700-million on grants to companies in targeted sectors to get them to open up shop or expand in the province. The document also pledges an additional $100-million for a $600-million fund that distributes cash to mostly smaller, rural municipalities.
A group of mayors of Ontario’s biggest cities said the fall update did not address the crisis of drug use, homelessness and mental illness on their streets. Camille Quenneville, chief executive officer of the Canadian Mental Health Association, said the document failed to help the health and social services sectors, which “continue to be strained by the lack of adequate base funding.”