QUEEN’S PARK—With the economic turbulence anticipated by the introduction of US tariffs on Canadian goods and services, the Ford government has proposed a budget that would propel the provincial deficit to new heights, to the tune of $14.6 billion, instead of the $1.5 billion deficit that had been projected in the mid-year fiscal update last fall.
Those deficits are also expected to last longer, as the government’s timeline for reaching a balanced budget sheet falling back by a year to 2027-28.
The result is that in fiscal years 2025-26 and 2026-27 combined, deficits are expected to be higher by $18.3 billion compared to the last budget. The jump will be anticipated to be from $4.1 billion in 2024 to $18.3 billion in this budget. Note those deficit [projections include $2 billion in “contingencies” for each of the next three fiscal years.
The budget news, at least in theory, is not all doom and gloom. Ontario projects a net debt-to-GDP of 37.9 percent in 2025-26, just a marginal increase from the 36.3 percent recorded in 2024-25 and low compared to most of the past 10 years.
Weaker revenues and higher costs both contributing to the deficit projections. Program spending is expected to increase by 1.8 percent, while revenues are expected to fall by 0.8 percent.
The government is projecting that expenses will grow by an average of only 0.4 percent in fiscal years 2026-27 and 2027-28, while revenues are expected to increase by an average of four percent over that time period due to a faster economic recovery. The budget takes a conservative approach to GDP projections, projecting increases of 0.8 percent in 2025, one percent in 2026 and 1.9 percent in 2027.
If the stars align, fiscal year 2027-28 could produce a notable surplus, while the low scenario considered by the government would see no real economic growth over two years and associated notable deficits.
The budget kept most new spending announcements limited to helping businesses navigate potential tariffs and their repercussions through various tax credits. An approach that opposition parties assert would do nothing to alleviate the current shortfalls in health care, housing and education.
The budget is definitely “business oriented” in proposing that businesses be able to defer payment of select provincially administered taxes for six months this year. That would provide $9 billion of extra cashflow to companies to enable them to weather potential economic turmoil.
In addition, the province is creating the Protecting Ontario Account—a $5 billion initiative aimed at supporting businesses facing tariff-related disruptions.
The government also plans to expand the Ontario Made Manufacturing Investment Tax Credit by increasing the tax credit rate for Canadian-controlled private corporations, adding an additional $1.3 billion in support over the next three years.
There are also smaller programs, including a $20 million fund for new worker training centres, $40 million for the new trade-impacted communities program and increasing the LCBO discount rate from 10 to 15 percent.
There is some new spending that is not directly related to trade disruptions, such as $3 billion to triple the maximum amount of loan guarantees through the Indigenous Opportunities Financing Program.
The government is pursuing opportunities to fast-track construction of highways and hospitals. Key projects in the provincial government’s transport infrastructure plans include the construction of Highway 413, the Bradford Bypass and the Ontario Line. Although a new Manitoulin swing bridge is not among those transport items being “fast-tracked,” it does remain in the budget—albeit without any timelines or distinct funding allocations.
The budget also includes an additional $400 million to be allocated to Municipal Infrastructure Programs, bringing total investment in that sector to nearly $2.3 billion over four years. Despite opposition party assertions of inaction, those programs form part of the province’s strategy to boost housing construction.
This provincial budget attempts to project a fiscal discipline in the face of uncertainty. In fairness, the changes in deficit projections can mostly be attributed to the lower revenues that will result from a weaker economic outlook for the province thanks to the US trade war implications, as well as investments aimed at mitigating the impact of those tariffs. In short, the budget anticipates higher deficits in the short-term but getting back to balance in the mid-term.
The issues being faced by the Ford government are real. Ontario lost 30,000 jobs in the manufacturing sector in April and there is little end in sight in that respect. Damage control is clearly the order of the day. Shoring up business confidence is key to keeping things from spiraling out of control.
As might be anticipated, infrastructure spending is key to mitigating the impact of trade challenges and the better portion of that spending is aimed at improving transit systems and highways, as well as healthcare. The government has made it clear that it intends to get “shovels in the ground” faster—leading to concerns among environmental groups about what that means when it comes to maintaining environmental protections.
