2012 Ontario Budget Analysis

Transcription

1 2012 Ontario Budget Analysis March 27, 2012

2 Table of Contents Executive Summary Ontario Budget Details... 3 Budget Overview... 3 Budget Deficits and Provincial Debt... 3 Knowledge and Skills... 3 Transforming Health Care... 3 Jobs and Prosperity Fund... 4 The Budget and REALTORS... 4 Balancing the Budget... 4 Public Sector Compensation... 4 Increasing Revenue... 5 Capital Project Spending... 5 The Budget and Real Estate... 6 Ontario s Economic Outlook... 6 Realty Transformation Strategy... 6 Capping the Ontario Clean Energy Benefit for Large Users... 6 OREA 2012 Ontario Budget Analysis 1

3 Executive Summary The number one priority of the 2012 Ontario Budget is eliminating the deficit. To this end, the Budget proposes a number of measures that will reduce overall program spending by $17.7 billion and raise an additional $4.4 billion in revenue over the next three years. Highlights of the 2012 Ontario Budget include: Budget Overview The Budget reaffirms the government s commitment to full-day kindergarten. The Budget commits to reducing health care spending by 2.1 per cent annually over the next three years. The Budget creates a Jobs and Prosperity Fund. The news fund will save the province over $250 million by refocusing investments in areas that encourage greater productivity. The Budget and REALTORS In its 2012 pre-budget submission, OREA recommended that the Government of Ontario take action to eliminate the province s deficit by The Budget acts on this recommendation with a plan to balance the budget by The Budget proposes to freeze Corporate Income Tax (CIT) rates at 11.5 per cent. The province was scheduled to reduce the CIT to 10 per cent by The small business CIT will remain unchanged at 4.5 per cent. The Budget and Real Estate The Budget proposes to temporarily freeze scheduled reductions in Business Education Taxes (BET). The freeze will begin BET reductions already implemented will not be reversed. The government will also ensure all eligible new construction continues to benefit from full implementation of the BET reductions. The Budget introduces a Realty Transformation Strategy (RTS). The strategy will reduce the Ontario Public Service s footprint by about one million square feet of office space in Toronto. In addition, the government will divest itself of ownership in buildings by up to $500 million. The 2012 Budget proposes to cap the Ontario Clean Energy Benefit (OECB) at a usage rate of 3,000 kilowatt-hours (kwh) per month. The OECB was introduced in It is designed to help consumers transition to the new energy system by providing 10 per cent off of energy bills. If passed, the expected start date of the cap will be September 1, OREA 2012 Ontario Budget Analysis 2

4 2012 Ontario Budget Details Budget Overview Budget Deficits and Provincial Debt The Province is projecting a $15.3 billion deficit in The deficit is expected to decrease to $15.2 billion in and $13.3 billion by The government plans to balance the budget by Medium Term Outlook Extended Outlook Fiscal Plan ($ billions) Revenue Expense Programs Interest the Debt Total Expense Reserve Surplus/(Deficit) (19.7) (15.3) (15.2) (13.3) (10.7) (7.8) (4.2) 0.0 Total Debt Knowledge and Skills The Ontario Government remains committed to implementing full-day kindergarten by September Once implemented, the program is expected to reach 250,000 children. The 2012 Budget affirms the government s commitment to continue the 30 per cent off Ontario tuition grant, indexed to the annual increase in tuition. Lastly, the government will continue funding the Second Career program by investing $251 million in to serve 12,000 applicants. Transforming Health Care The Budget proposes transforming health care to reduce the rate of growth of spending to an average of 2.1 per cent annually over the next five years. Specifically, the province will move to a more patient-centred funding model. Under this approach, hospitals, long-term care homes and community centres will receive funding based on the type/volume of services and treatments provided. In addition, the Budget commits to reducing child obesity by 20 per cent over five years, increasing penalties for those who sell tobacco to children and expanding screening programs for cervical, breast and colorectal cancer. OREA 2012 Ontario Budget Analysis 3

5 Finally, the 2012 Budget proposes that seniors with incomes over $100,000 pay greater share of their prescription drug costs under the Ontario Drug Benefit program. Jobs and Prosperity Fund The Budget proposes to consolidate over 40 programs designed to support businesses into one Jobs and Prosperity Fund. The fund will focus on supporting productivity growth and job creation in the business sector. Programs that do not focus on increased productivity will be canceled to save $250 million. Consolidating the existing programs will also save the government $25 million in administration costs. The Budget proposes to maintain the following regional funds: Southwestern Ontario Development Fund; Eastern Ontario Development Fund; and Northern Ontario Heritage Fund Corporation. The Budget and REALTORS The 2012 Ontario budget acts on one of the four recommendations made in OREA s 2012 prebudget submission. Balancing the Budget In OREA s 2012 pre-budget submission the association recommended that the Government of Ontario take action to balance the budget by Balanced budgets are essential for helping to mitigate increases in interest rates. Even marginal increases in interest rates can impact the affordability of housing and other forms of real property. The 2012 Ontario Budget outlines a plan to eliminate the provincial deficit and balance the budget by Specifically, the Budget includes $17.7 billion in savings and actions to contain cost increases and $4.4 billion in revenue raising measures over the next three years. The government s plan to balance the Budget focuses on three areas: public sector compensation, increasing revenue and capital project spending. Public Sector Compensation Current collective agreements with various public sector unions will expire in The Province is currently facilitating negotiations and discussions for new deals with public sector unions. In order to achieve its budget balancing targets, the province intends to take a number of steps to manage current and future public compensation costs. OREA 2012 Ontario Budget Analysis 4

6 Specifically, the 2012 Ontario Budget proposes: Making collective bargaining arbitration more transparent and accountable Mandating a two year wage freeze for education sector employees Moving jointly sponsored and single-employer public pension plans to a funding model between employers and employees Freezing executive level salaries for two years; and Freezing MPP salaries for another two years. Increasing Revenue To increase revenues, the 2012 Budget proposes freezing the Corporate Income Tax (CIT) rate at 11.5 percent. Under the Tax Plan for Jobs and Growth Act, 2009 the Province was committed to reducing the CIT to 10 percent by Freezing the CIT at 11.5 percent will save the government $1.5 billion over the next three years. The small business CIT will not change. The Budget also proposes to temporarily freeze the province s Business Education Tax (BET) reduction plan. Beginning in 2013, this measure will provide fiscal savings growing to over $300 million annually by The BET rate reductions already implemented will not be reversed. The government will also ensure all eligible new construction continues to benefit from full implementation of the BET reductions. Once the budget is returned to balance in , the Province will return to its schedule of BET reductions. Capital Project Spending The Province has reviewed its capital plan and found savings of over $890 million and reduced borrowing of more than $3.2 billion over the next six years. Specific measures include: Cancelling four previously announced major hospital projects and rescoping two other projects Delaying further investment in high occupancy vehicle (HOV) lanes until fiscal capacity allows; and Reducing unallocated capital funding for schools. OREA 2012 Ontario Budget Analysis 5

7 The Budget and Real Estate Ontario s Economic Outlook The Ministry of Finance is projecting real GDP growth of 1.7 per cent, with strong business investment, moderate consumer spending and improved exports supporting this growth. GDP is expected to grow 2.2 per cent in Employment is forecast to increase by 0.9 percent in 2012, or 59,000 net new jobs. Over the period, employment growth is expected to average 1.5 per cent annually. Modest employment and income gains will support limited increases in household spending. Real consumer spending is projected to grow by 1.8 per cent in Residential investment is expected to decline by 1.1 per cent as housing starts and resales are expected to ease. The Ministry of Finance predicts that the resale housing market will moderate in 2012 and then increase modestly through House price gains are also expected to be more subdued, increasing by an average of 1.5 per cent per year between 2012 and Realty Transformation Strategy In the 2012 Budget, the government will transform the way it manages its real estate holdings. Currently, ministries do not always pay for their office space. Through the Realty Transformation Strategy (RTS) the rent charged to ministries will increase to help drive efficient use of government office space. The strategy will reduce the Ontario Public Service s footprint by about one million square feet in Toronto. In addition, the government will divest itself of ownership in buildings by more than $500 million. Capping the Ontario Clean Energy Benefit for Large Users On January 1, 2011 the government implemented the five-year 10 per cent Ontario Clean Energy Benefit (OCEB) to help electricity consumers transition to a clean energy system. The 2012 Budget proposes to cap the OECB at a usage rate of 3,000 kilowatt-hours (kwh) per month. If passed, the expected start date of the cap would be September 1, It is estimated that capping the OECB will save the province $500 million over four years. The OECB will continue to provide a full 10 per cent benefit to all resident customers, as a typical household of four people use on average, 800 to 1,000 kwh per month. OREA 2012 Ontario Budget Analysis 6

8 For more information contact: Jim Flood Matthew Thornton Director of Government Relations Manager of Government Relations (416) (416) Yuliya Khraplyva Government Relations Associate (416) ext. 383 OREA 2012 Ontario Budget Analysis 7