On March 29, 2011 the Ontario Minister of Finance Hon. Dwight Duncan introduced the government’s 2011 budget. As the Minister states in his budget speech, “… this budget builds on our government’s plan to return Ontario’s finances to balance while protecting the gains we have made together”. This captures the overall theme of the 2011 pre-election budget–reducing and government expenditures, paying down operating deficits and restructuring program service delivery, while enhancing elementary and post-secondary education and health care.
The mayor initiatives outlined in this years budget include:
- Securing $200 million of savings by 2013-2014 through public service program reforms and efficiencies. This includes the establishment of Commission on the Reform of Ontario’s Public Services to be chaired by Don Drumond;
- Reducing the size of the Ontario public service by 1,500 between April 2012 and April 2014;
- Reducing funding for executives at all government agencies including hospitals, universities, hydro companies by 10% over two years;
- Providing additional funding for colleges and universities to accommodate 60,000 new students – $64 million in 2011 and increasing to $309 million by 2015-2016;
- Enhancing the funding for breast cancer screening programs by $15 million over three years to service an additional 90,000 patients at risk;
The following summary highlights key features of the budget on those issues of greatest interest to Borden Ladner Gervais LLP’s (BLG) clients.
FISCAL SITUATION AND ECONOMIC OUTLOOK
The current budget deficit is forecast is $16.7 billion – $3 billion lower than forecast in the 2010 budget. This is attributable to lower program costs than was forecast last year. Over the next two years the government is on track to improve on its deficit projections by $1.7 billion for a cumulative improvement of $4.7 billion over three years.
Beyond 2012-2013, the government states that it is on track to reach its fiscal targets and eliminate the deficit by 2017-2018.
The 2011 real GDP growth is expected to reach 2.4% according to government projections. Private sector projections estimate growth to reach 2.6%. In 2012, real GDP growth is estimated to by 2.7% to 2.8%. Employment growth is estimated to be on average 1.7% over the next three years.
The government states that this means that between 2010 and 2014 roughly 480,000 net new jobs will be created.
On the revenue side, Ontario continues to recover following the global recession in 2008. Tax revenues are projected to growth by 5.6% in 2011 and increase at an annual average rate of 3.3% through 2013-2014. This growth is due to economic growth and not tax increases.
Government expenditures are projected to be $122.9 billion in 2011, a decrease of $3 billion from the 2010 budget forecast.
The budget plans to make an additional investment of $35 billion over the next three years. This includes $12.8 billion in 2011-2012. The budget does not give any details but suggests that this infrastructure money will be allocated to key sectors such as post secondary education, health care, transportation, energy and municipal. However, the government is cancelling the construction of the Toronto West Court House which will result in saving of approximately $181 million over the next three years.
SECURITIES LEGISLATIVE REFORM
In addition to the recent amendments to the Ontario Securities Act that came into force on January 1, 2011 – which require all mutual funds to produce and make available plain language “funds facts” disclosure documents – the province propose securities act changes to support the next phase of this disclosure project. In addition, the government is proposing other changes to the securities act to enable the Ontario Securities Commission to conduct hearings in a more timely manner. This initiative will align with the proposed framework for securities regulation contained in the draft Canadian Securities Act.
The one new initiative in this area is the establishment of the “Trillium Benefit Program”. This program combines payments of refundable tax credits and delivers them monthly to low and moderate income Ontarians starting in July 2012. The tax credits rolled into the Trillium Benefit are the Ontario Sales Tax Credit, the Ontario Energy and Property Tax Credit and the Northern Ontario Tax Credit.
In addition to the $15 million for enhanced breast cancer screening examinations, the government is proposing the following measures:
- 3% annual funding increase in the community service sector for long term care facilities;
- Creating a “Mental Health and Addictions Strategy” with a cost over three years of $93 million and
- Enhancing the working capital for hospitals by providing over the next three years $600-$800 million to assist those hospitals with cash flow difficulties;
- Increasing hospital base funding by 1.5%;
- Investing $100 million annually to enhance pharmacy services to Ontarians that receive drug coverage through the Ontario Drug Benefit Program, primarily senior citizens and social assistance recipients. This investment starts on April 1 2011 and will fund and support pharmacies offering services such as medication assessments, training on home diagnostic devices and prescription consultations.