The budget that Ontario Finance Minister Charles Sousa delivered on Thursday, April 27, 2017, is all about an event happening on Thursday, June 7, 2018: The next provincial election. The province's Liberal government currently stands a distant second or third in the polls; those same opinion surveys have saddled Premier Kathleen Wynne with the moniker of "Canada's least popular premier." Her personal approval rating is so low that for months, there's been widespread talk about a panicked party pushing her into retirement.
But don't count out the Liberals or Ms. Wynne just yet. Not by a long shot. Election after election since 2003, they've figured out how to win back voters, with more than a little help from Ontario's Progressive Conservatives, who are past masters at figuring out how to lose them. Team Wynne still has a lot of tricks up its sleeve – and more ammunition than ever in its fiscal arsenal.
Nine years after Great Recession hit, Ontario's budget is back in balance. After winning the election in 2014, the Liberals promised to eliminate the deficit before voters next went to the polls. Their two-stage plan has largely worked as expected.
How did they do it? Step one, spending restraint. Yes, really. For the last three years, Liberal rhetoric has been designed to convince voters that they've been as busy giving away money as the Tooth Fairy. In fact, they've spent the last three years wrestling down expenses in health and education, the two largest government departments.
Spending increases there have been held well below inflation plus population growth – not an easy trick when teachers unions are your allies, or given that Ontario already spends less per person on health than any province except Quebec. The Liberals brought in austerity-lite, while trying to deny it. And for the budget to balance, they had to.
Step two, revenue growth: Over the last few years, the economy has grown faster than expected, and tax revenues, including a land transfer tax powered by a hot housing market, and a big scoop from the new tax-like cap-and-trade system, greatly outpaced growth in expenditures. Revenues growing faster than spending equals, right on the electoral schedule, a balanced budget.
If the budget remains balanced in the years to come – that's what the Liberals are promising, though some economists and the province's Fiscal Accountability Office have raised questions about the details – the relative size of the province's debt, known at the debt-to-GDP ratio, will slowly but steadily fall. That would be a real and substantial accomplishment.
It's also valuable political currency. That's why PC leader Patrick Brown, the man whose election this is to lose, responded to Thursday's budget by insisting that taxes and spending are still out of control, and Liberal accounting shenanigans are covering up the fact that the government is deep in deficit. New Democratic Party leader Andrea Horwath, in contrast, handed out a press release headlined: "Wynne's Budget Doesn't Undo The Damage She's Done."
It was Why Haven't You Cut More vs. Why Have You Cut So Much. The Liberals are aiming to walk to victory, right up the middle.
But the Wynne government's plan to win again in 2018 is mostly not about competing with the Tories for votes. Beyond eliminating the deficit, the budget doesn't use Tory language. Instead, it's about winning re-election by eating the NDP's lunch.
For three years, the Liberals have been implementing austerity-lite, while insisting that they are actually Santa Claus. Now that Ontario's in balance, they're talking more than ever like Saint Nick, but they've finally got more gifts to hand out, to key constituencies: young voters, seniors, lower income Ontarians, the education sector, anyone who cares about health care, and anyone steaming over their hydro bill.
The Liberals are shifting from austerity-lite to NDP-lite.
For example, the NDP has been calling for a province-wide pharmacare plan – free prescription drugs for everyone. The Liberal budget cribs from the NDP by going part way there, offering free drugs for anyone under the age of 24. The Liberals have long been pushing for a national pharmacare program, and the province already covers drugs for seniors and those on welfare, more than a quarter of the population. But the sudden arrival of free drugs for children and youth still feels like a last minute addition to the fiscal plan. Finance Minister Charles Sousa told reporters it will cost $465-million a year, but that figure is nowhere to be found in the budget itself.
Seniors? The federal Liberals eliminated the boutique tax credit for riding public transit; their provincial cousins have brought it back – for anyone over the age of 65.
Young voters? The province's program for assisting college and university students, OSAP, will become both simpler and more generous. This was announced last year, but it doesn't start to kick in until this fall and next year. The Liberals say the vast majority of students from families earning less than $90,000 will now receive grants that meet or exceed the cost of tuition.
Health? The province really has been squeezing health spending since the last election, with annual increases of barely more than 2 per cent over the last two years – well below inflation plus population growth. This coming year, however, health spending is budgeted to rise by 3 per cent, and then by nearly 5 per cent the year after.
And whereas governments used to focus on streamlining health care by closing hospitals, the Liberals are trumpeting all the new facilities they are building or planning.
More daycare spaces? Yes – though fewer than the NDP is demanding.
Housing? As announced earlier this month, the Liberals are using the housing price bubble as an excuse to expand rent control – an economically self-defeating policy, and one having absolutely nothing to do with the housing bubble, but which will please more than a few renters nonetheless.
Hydro? One of the most expensive new commitments, announced before the budget, is the government's plan to use your taxes to lower your hydro bill. Price: $1.4 billion a year. Governments can do all sorts of dumb things when they're feeling flush.
And for all that, this budget often tries to act like it's spending more than it is; the government's health care increases, which are modest but real, get creatively double- and triple-counted. Health spending is budgeted to grow from $52.2-billion in 2016 to $58.1 billion in 2019, and that is repeatedly referred to as "increasing by $11.5-billion over three years."
And the long-term infrastructure plan, most of which is scheduled to happen years from now, and which exists almost entirely outside the annual operating budget, never stops growing, at least rhetorically. Two years ago it was a ten year, $130-billion infrastructure program. Last year, it had become a 12-year, $160-billion program. Now it's described as a 13-year, $190-billion infrastructure plan.
The bottom line is that the current state of Ontario's finances offers big opportunities for the Liberals, and serious challenges for the PCs and the NDP.
The NDP, whose voters are the Liberal target, of course say they hate this budget. But with its balanced bottom line and big new commitments to social spending, it feels like a fiscal plan another NDP party – the 2015 federal NDP, led by Thomas Mulcair – would have loved.