Ontario is on track to eliminate an $11.7-billion deficit by 2017-18, but has decided to continue spending rather than worry about meeting its target if economic growth weakens even more, Finance Minister Charles Sousa said on Thursday.
The Liberal government will protect investments in jobs and growth ahead of meeting "short-term targets" to balance the books, Sousa announced in the annual fall economic statement.
"Stronger economic growth and new jobs are the surest, fairest path to higher revenues and a balanced budget," Sousa said.
The minister also said the slow and uncertain recovery from the global recession has led to $5-billion less in projected provincial revenues since 2010.
Earlier Thursday, Premier Kathleen Wynne previewed Sousa's statement in a speech to a Toronto conference on public-private partnerships, insisting that the Liberals were not backing off their goal to eliminate the deficit within four years.
"It's not that we are saying we're abandoning that and we're going to now just spend and invest," she said. "We're the leanest government in the country. We need to continue to make sure that we control spending in a rational way, but I am determined that we are not going to cut and slash the services that people need."
The government announced it intends to invest heavily in infrastructure projects, which Wynne called a centre of the Liberals' economic growth plan, with 11 major projects getting the green light, including the extension of Highway 427 in York Region and major improvements at GO Transit.
The Premier also said the province needs to keep a lid on public sector salaries, warning there's still little cash for pay hikes for teachers, nurses and civil servants.
"We're going to need to work with our partners in the public sector to make sure that they understand that there isn't a lot of money for increases," she said. "A large percentage of the provincial budget is salaries for employees, so we have to continue to constrain those costs."
Sousa also announced the government would lower the $35 Drive Clean fee for vehicle emissions tests – although it hasn't yet decided by how much – and has plans to make it easier for large pension funds to invest in public infrastructure projects. Tax changes to benefit low- and moderate-income investors will also be introduced.
Ontario will change the way dividend tax credits are calculated to save about one million shareholders an average of $145 a year. Investors who don't pay Ontario's income surtax, which kicks in at $70,000 income, will benefit from the change.
Sousa again called on the federal government to increase benefits under the Canada Pension Plan and warned Ontario will set up its own plan if Ottawa fails to act.
"So far the federal government is resisting calls to make those enhancements," he said. "We all pay a heavy price for that inaction. "If an agreement cannot be reached, we will move forward with a 'made in Ontario' solution."
The minister also signalled other potential tax changes for businesses that could be in next spring's provincial budget. "Measures under consideration to promote capital investment include restructuring research and development tax credits to encourage new spending and new incentives for investments in training and new equipment."