March 1, 2016

In addition to balancing the books, which is targeted for fiscal year (FY) 2017-18, the province’s four major priorities are:
Its $134 billion FY 2015-2024 infrastructure program, investment in the residents of Ontario, stronger retirement income security and
the generation of a dynamic and robust business environment.

With a projected $2.8 billion improvement in the deficit for FY 2016 to $5.7 billion and the projected $4.3 billion shortfall for FY 2017, the province’s red ink may finally be reduced to less than 1% of provincial GDP.

Net debt, as measured by the province, is now expected to climb by $11.5 billion during FY 2016.

Climate change leadership is a major theme of the budget, with details of the proposed cap and trade program to be implemented as of January 2017.

Expected long-term public borrowing remains at $30.1 billion for FY 2016, and is projected to decline to $28.7 billion by FY 2019.  That is a reduction of 4.7% over the three year period.

Revenue growth for FY 2016 has been revised from 4.9% to 6.7%, with $1.1 billion of additional revenue from “asset optimization.”  Real GDP growth of 2.5% is assumed for 2015, with output gains averaging 2.3% over 2016 and 2017 and 2.1% over 2018 and 2019.

Growth in total revenues is expected to ease to 3.2% in FY 2017, before rising to 5.4% in FY 2018.  The government is maintaining its position that its asset optimization strategy is on track to provide $5.7 billion to the Trillium Trust towards Ontario’s long-term infrastructure program.  In addition to further reduction in the province’s equity position in Hydro One to 40%, disposal of several real estate parcels is planned.

Tax changes in the budget are expected to raise revenues by $220 million in FY 2017, rising to $665 million in FY 2019.  Total expenditure growth over FY 2017 and FY 2018 will be held to an average of 1.7% annually and then rise by 3.0% in FY 2018.

The multi-year roll-out planned for the Ontario Retirement Pension Plan has been delayed for one year as the federal government renews its discussions with the provinces and territories with respect to enhancing the Canada Pension Plan (CPP).

While Ontario’s focus on balancing the budget is indeed encouraging, there is little detail in the budget as to how that result will actually be achieved in the time frame presented.  On the expense side of the ledger, much depends on the government genuinely getting its spending under control, and allocating that spending to the sectors that, as a result, will be most likely to generate increased economic growth.  On the revenue side, government projections are dependent upon an economic environment much more robust than what we are experiencing at the present time.  While expenditure side issues are surely in the government’s control, revenue variables in many cases are not.  That said, achieving the results that the government has presented in the budget will be extremely challenging.  Only time will tell if those challenges will be met.

Howard Goodman
President, HG Partners Limited
Director, Private Client Group &
Senior Financial Advisor,
HollisWealth Advisory Services Inc.

This article was prepared solely by Howard Goodman who is a registered representative of HollisWealth Advisory Services Inc. (a member of the Mutual Fund Dealers Association of Canada and the MFDA Investor Protection Corporation).  The views and opinions, including any recommendations, expressed in this article are those of Howard Goodman alone and they are not those of HollisWealth Advisory Services Inc.

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