Ontario has essentially become a have-not province and the 2012 provincial budget introduced Tuesday is designed with that fiscal reality in mind. As it is, Ontario's minority Liberal government is proposing a freeze on both public sector wages and corporate tax cuts to help the province dig out from underneath its weighty $15.3 billion deficit.
It may rankle Ontario's business community, but the government says it can no longer cut the corporate tax rate to 10 per cent from 11.5 per cent by July 2013, despite a promise do so during the last provincial election. Ontario will reduce spending to save $17.7 billion over three years while increasing revenue by $4.4 billion and without hiking taxes.
By merging business support programs, the province will save an estimated $250 million. Business education taxes will also be frozen for an additional savings of $300 million.
The government is calling for a two-year wage freeze for public sector workers, which would include teachers, doctors and public servants. MPP's will also experience a two-year wage freeze if the budget is passed, totalling a five-year freeze for elected officials.
"We choose to take a fair approach to public sector salaries and pensions because compensation is our greatest single cost and we can't carry out our plan to strengthen our economy and create jobs without addressing it," Duncan said while tabling the budget.
Noteworthy for consumers, and according to the Canadian Press, Ontario will:
- Freeze welfare and delay increases to the Ontario Child Benefit
- Increase driver license fees
- Expand gambling and sell off government buildings and the Ontario Northland rail service
- Close seven tourism centres
- Delay high-occupancy vehicle lane projects designed to unclog traffic jams in densely populated cities
- Amalgamate school boards in areas of low populations and consolidate so-called 'under utilized' schools by reducing funds to keep them afloat
- Cut $34.3 million funding for student transportation
- Shave $30 million from the public drug plan by having seniors with incomes over $100,000, and couples with a combined income of $160,000, pay higher deductibles
- Reduce healthcare spending to 2.1 per cent annually
It's no secret Canada's most populous province needed to make drastic changes to get its fiscal house in order when Moody's Investors Service warned last December that it might lower Ontario's credit rating. And the Ontario Government in-turn has warned the public drastic measures would be the order of the day to eliminate its sizeable deficit. No matter which way the axe falls, Ontario's Minister of Finance Dwight Duncan had an unenviable task before him.
Beyond its credit rating, the massive budget deficit could have a direct effect on provincial bonds. Shudder to think, but is Ontario becoming the Greece of Canada? Bond market players warned harsh medicine is necessary if the province, one of the world's biggest non-sovereign borrowers, is to regain their trust.