Maytree’s roundup of the Ontario government’s 2019 budget

Overview

On April 11, Finance Minister Vic Fedeli tabled the first budget of this government.

While most of the focus was on the government’s path towards eliminating the province’s $11.7 billion deficit by 2023-24, few specific details were provided on how those savings would be realized. The government’s plan, broadly, rested on less than 1 per cent average spending growth across most program areas and significant spending cuts in certain program areas.

On the whole, despite some investments in seniors’ dental and a childcare tax credit, without average spending increases that at least keep up with inflation, important public services are being chipped away at, while others are being eroded altogether.

In the absence of policy rationale for many of the announced changes, and their associated fiscal implications, this budget note outlines key social and health policy changes and provides preliminary analyses of their potential impact. However, given the seemingly unsystematic approach the government has undertaken, continued examination of how the changes interact and affect Ontarians will be required.

Housing

The province will uphold the bilateral agreement for the National Housing Strategy signed by the previous government in 2018. This ensures that the provincial government will contribute half of the $4.2 billion investment in community housing and affordable housing (with the other half coming from the federal government) over the next nine years. The province will also work with the federal government to co-design a portable housing benefit, which will require additional investment from the province. Funding for community and affordable housing from the federal government started to be available to provinces at the beginning of this month.

Further, while the government is already developing a Housing Supply Action Plan, the budget announced that it would be developing a Community Housing Renewal Strategy (CHRS). The CHRS was released on April 17, 2019, and focuses on:

• Simplifying rent‐geared‐to‐income (RGI) calculations.
• Streamlining and updating RGI waitlist and eligibility rules (including a new asset test).
• Addressing community safety concerns.
• Creating incentives for community housing providers to continue to provide housing and improve sustainability.

On supportive housing, the budget announced that “the government will undertake a comprehensive review to identify opportunities to streamline and improve coordination of the province’s supportive housing programs.” Unfortunately, there was little mention of how the province will address homelessness.

Municipalities

The budget announced a cancellation in a planned funding increase to municipalities through the Gasoline Tax. Municipalities will continue to receive two cents per litre in funding, but this will no longer increase to four cents per litre by 2021-22, as announced by the former government last year. It currently provides $364 million to 107 municipal governments.

The budget reiterated that the province is working with municipalities to help them find efficiencies in service delivery. One aspect of this is that the province is conducting a review of the municipal reporting burden to ensure that only necessary information is collected.

Municipal Affairs and Housing together will be cut from $1.48 billion in 2018-19 to $1.12 billion in 2019-20 (a 21 per cent reduction).

Social assistance

The budget announced that the government’s reform of social assistance will result in a $1 billion spending reduction over the course of the next three fiscal years. Currently, the province is spending about $10 billion to provide financial and employment support through Ontario Works and the Ontario Disability Support Program (ODSP). The budget did not set out where or how these savings would be made, but clarified that it would include “simplifying the rate structure, reducing administration, cutting unnecessary rules, and providing greater opportunities to achieve better employment”. Savings are also likely to come from a forthcoming definitional change to “disability” which would reduce the number of people eligible for ODSP, and through an effort to “consolidate complex supplements and benefits into simplified financial support.”

The only specific figure offered on social assistance in the budget was an annual saving of $720 million by 2021-22 from introducing a competitive process to selecting employment services system managers. It is unclear how this savings projection was generated, given that the province estimated that it would spend about $260 million on Ontario Works and ODSP employment programs in 2018-19. It may be that the remaining savings are realized from the Ministry of Training, Colleges, and Universities, as they are responsible for Employment Ontario—however, this is not clear in the budget.

The budget also indicated that it would be undertaking changes to Temporary Care Assistance and the Transitional Child Benefit to “streamline the system and improve equity between those who receive social assistance and other families with children.”

• Temporary Care Assistance goes to people looking after a child that is not legally their responsibility and they do not receive other compensation as a caregiver. The monthly maximum amount is $274.
• The Transitional Child Benefit goes to people who are not receiving their full Ontario or Canada Child Benefit entitlement. For example, recipients of the TCB may be newcomers to Ontario, facing administrative delays after applying for child benefits or filing taxes. It gives a monthly maximum of $230.

While it is not clear what exactly the government has planned, it is unlikely that the government will be increasing spending on these benefits or increasing equity by providing this to all families that receive social assistance.

The budget contained the first written acknowledgement that the government will be pursuing wrap-around supports to social assistance recipients. While improvements in the delivery of social assistance and other supports are importantly needed, the government has not provided further details of what this means in practice.

Postsecondary education

The budget announced that the funding formula for colleges and universities will become more performance-based.

The funding formula for the province’s 45 publicly assisted colleges and universities is set out in Strategic Mandate Agreements (SMAs) with the provincial government. Presently, less than 2 per cent of this funding is performance-based. When the existing SMAs expire in March 2020, 25 per cent of funding will be performance-based, rising to 60 per cent in 2024-25.

Critics have highlighted that this poses a risk to postsecondary institutions in remote and northern communities, as well as smaller campuses.

Government spending in Postsecondary Education and Training is projected to decrease from $12.1 billion in 2018-19 to $11.7 billion in 2021-22; an average annual decrease of 1 per cent. While some of this decrease is likely to come through the SMA changes described above, previously announced changes to OSAP and tuition fees are also included here.

Children

The Ontario Child Benefit (OCB), which is very well targeted to families on the lowest incomes, will remain indexed and will increase in line with the cost of living. On July 1, the OCB will increase from a maximum benefit of $1,403 to $1,434 per child per year.

The budget included details of a new tax credit for childcare – the Childcare Access and Relief from Expenses (CARE) tax credit, with an estimated annual cost of $390 million. The details are:

• Families receive up to 75 per cent of their eligible child care expenses incurred as of 2019.
• It would provide up to $6,000 per child under the age of seven, up to $3,750 per child between the ages of seven and sixteen, and up to $8,250 per child with a severe disability.
• The share of expenses covered is based on family income – the maximum of 75 per cent begins to reduce at a family income of $20,000 and reaches 0 per cent at a family income of $150,000.
• It would provide about 300,000 families with an average of $1,250 annually.

The CARE tax credit will work in tandem with the existing Childcare Expense Tax Deduction which allows parents to deduct childcare expenses from their income to reduce tax liability. People with low enough incomes to pay no income tax do not benefit from the existing childcare deduction and the new childcare tax credit fills this gap. However, critics in favour of universal free childcare have raised concerns that the eligible expenses cap is much lower than the actual cost of childcare forcing lower-income parents to seek cheaper, low quality childcare.

Health

The Budget confirmed the government’s plans to introduce a dental program for low‐income Ontario seniors at an annual cost of $90 million when fully implemented. By late summer 2019, single seniors age 65 and older with incomes of $19,300 or less (or senior couples with combined incomes of less than $32,300) and without existing dental benefits, will be able to receive dental services in public health units, community health centres, and Aboriginal Health Access Centres.

Expenditure on drug programs (through the Ontario Drug Benefit) is forecast to fall by 2.6 per cent annually by 2021-22. Given that ODB was expected to grow by 3 per cent every year, even without the introduction of OHIP+, from 2015-16 to 2019-20, further information on the government’s estimate are required. The budget indicates that the government is continuing to redesign Ontario Drug Benefit Program to:

• Provide timely access to new clinically proven medicines while continuing efforts to lower drug costs;
• Modernize and strengthen oversight of payments to pharmacies; and
• Reduce the administrative burden for clinicians and red tape for the industry wherever possible.

The government is also reducing the number of public health units from 35 to 10 over the next two years, with a projected saving of $200 million. Given the important work that public health units undertake in preventing chronic and infectious diseases, and delivering some front-line services (e.g., the new low-income seniors dental program could be delivered the public health units), it is unclear if the move will improve population health outcomes.

Indigenous Affairs

The Ministry of Indigenous Affairs’ expenditures will go from $146 million in 2018-19 to $74.4 million in 2019-20. A large portion of this is the absence of one-off investments, such as in claims settlements, which amounted to $65 million in 2018-19. However, even base funding has fallen by $6.6 million (from $81 million to $74.4 million).

There were no details of how these savings would be realized. The budget, however, only referred to two investments it was making in Indigenous communities:

• A new Northern Ontario Internship Program administered by the Province’s Northern Ontario Heritage Fund Corporation will include a funding stream for Indigenous Internships.
• An additional $3.7 million in 2019–20 will be used to fund a revised First Nations, Métis and Inuit studies curriculum for Grades 9‐12 and the Indigenous Graduation Coach Program in targeted district school boards across the province.

Access to justice

The budget announced the government’s plans to modernize youth justice services which will lead to annual savings of $48 million by 2021–22. This will include “the closure of underutilized youth justice facilities and reduction of beds in both the open and secure custody detention system.”

The budget announced that the delivery of legal aid will be streamlined to generate savings of over $164 million annually, starting in 2021–22. Media have also reported that in the near term Legal Aid Ontario will receive $133 million less this fiscal year than the $456 million it had anticipated. Some of this seems to be the result of eliminating funding for refugee and immigration law services.

Poverty

Poverty was not mentioned, even once, in the budget.

Protecting what matters

The government has named its 2019 budget “Protecting What Matters Most.” If we are to assume that the government will continue to invest in the programs and services that matter, the following helps to illustrate the government’s priorities: