Highlights of the 2012 Ontario budget. The Intent According to the Government:

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1 Examples of questions to consider: Highlights of the 2012 Ontario budget How will this budget impact on us locally? How will public sector workers such as day care workers continue to work with reduced wages? How will higher service fees affect small businesses, farmers etc.? Is the public prepared to pay larger user fees rather than experience service cuts? The Intent According to the Government: Managing Growth in Expenses: For every dollar in new revenues outlined in the 2012 Budget, there are four dollars of savings and cost-containment measures. Proposed Measures: $4.9 billion in planned savings from removing overlap and duplication, implementing more efficient delivery models and focusing on core business $6 billion in government actions to restrain compensation for school boards, payments to physicians and others in the public sector $6.8 billion to contain costs across the broader public sector Freezing the general Corporate Income Tax rate and Business Education Tax rate reductions until the budget is balanced Extending the pay freeze for executives at hospitals, colleges, universities, school boards and agencies for another two years for a total of four years Extending the pay freeze for MPPs for two years for a total of five years Ensuring Ontario user fees recover more of the cost of providing programs and services. Managing Compensation Costs and Transforming Public Services: More than 50 cents of every dollar spent by the Ontario government pays for the compensation of teachers, doctors and others in the broader public sector. Compensation costs must be managed if the government is to meet its fiscal targets and protect the gains made over the past eight years in education and health care. To do this, the government is proposing: Provincial Budget Synopsis, 2012 Page 1

2 Strong action to manage current and future compensation costs Measures to make public sector pensions more affordable for taxpayers and sustainable for pension plan members. Transforming and streamlining the way the government delivers support to business by creating a Jobs and Prosperity Fund focusing on productivity and job creation. This will reduce administrative costs, while providing overall savings of $250 million in Pay freezes Some Specifics: MPPs would see their pay remain the same for another two years (for a total of five years). Executives at hospitals, universities, colleges, school boards and agencies would see their pay remain the same for another two years (for a total of four years). Corporate tax rate freeze The general corporate income tax rate would remain at 11.5 per cent until the budget is balanced. The rate had been set to drop to 10 per cent by July, Pensions Single-employer public sector pension plans would move to a cost sharing formula between employees and their organization for ongoing contributions within five years. The government hopes this move, one that would greatly impact universities many of which have their own pension plan would help narrow the solvency deficit gap. The government is also looking to pool smaller pension plans under one large structure, with one set of rules. Where the province s largest jointly sponsored pension plans face deficits, the government plans to legislate that future payouts would be reduced before considering any rise in contributions from employers or employees who are already near their reasonable limits. Departmental cuts Of the 26 government departments, 11 would see their budgets cut. Seniors Higher drug costs for higher-income seniors starting August, 2014, seniors with an income of more than $100,000 would have to pay an annual deductible of $100 plus 3 per cent of income over $100,000. The new deductible for a senior couple with a combined income of more than $160,000 would be $200 plus 3 per cent of income over $160,000. These seniors will also pay $6.11 per prescription. There would be no changes to seniors whose incomes fall below these thresholds. Healthy homes renovation tax credit Provincial Budget Synopsis, 2012 Page 2

3 The credit would apply to renovations that improve accessibility or help seniors with their mobility at home. Ontario clean energy benefit cap The benefit, which sees electricity users receive a 10 per cent rebate on their energy bill, would be capped at 3,000 kilowatts an hour per month. While most residents would unlikely exceed this, owners of very large homes and businesses would likely see a reduced rebate or none at all. Jobs and Prosperity Council A group that would advise the government on a plan to boost the province s productivity and address innovation challenges. The council would also advise on how to consolidate and refocus existing business support programs. Education Full implementation of full-day kindergarten by September, 2014 Continuation of the 30-per-cent-off tuition grant for eligible full-time post-secondary students Continuation of funding to ensure small class sizes in primary grades Slower increase to child benefit Maximum benefit level provided through the Ontario Child Benefit would be increased in two stages from $1,100 to $1,210 on July 1, 2013, and then to $1,310 on July 1, Health Care Cut the rate of spending growth to an average of 2.1% a year over the next three years and introduce wage freeze. Elementary/Secondary Education The goal is to find enough savings in salaries and benefits, which make up the majority of public education costs, to protect initiatives such as full-day kindergarten, caps on class sizes, teaching jobs. Post-Secondary Education Find efficiencies in universities and colleges while maintaining the promise of a tuition grant for more than 300,000 students. Business Support Programs Replace the existing process of direct support and indirect tax help that businesses receive from the government with a new co-ordinated approach. Resources: Provincial Budget Synopsis, 2012 Page 3

4 Some Comments: Ontario drivers, high-income seniors, homebuyers and businesses that create hazardous waste are just some of the groups being targeted with increased fees as the cash-strapped Liberal government attempts to rid the province of a $16-billion deficit by The government is staying firm on its promise to raise licence plate renewal fees in southern Ontario to $82 this year, an increase of $8. That fee will rise to $98 by 2014 and is just part of a series of fee increases on drivers' licence renewals and heavy truck licences that the government says will bring in an extra $340 million annually by 2015.The government says such fees will go towards investments in public transit, road safety, and highway maintenance and infrastructure. Kenyon Wallace, Toronto Star By any standard, this is a tough budget. It threatens a wage freeze for teachers and other public servants, rejigs the way health dollars are spent, postpones child benefit increases and tackles pension shortfalls. And yet, despite opposition bravado on Tuesday, the budget is unlikely to trigger the defeat of the minority Liberal government. Barely six months after Ontarians trudged so grudgingly to the polls (with a paltry 49 per cent turnout), voters won t stand for it and the opposition parties are too deeply in debt to withstand it Martin Regg Cohn, Queen's Park Columnist Union leaders called the pay freeze plan a "slap across the face" to public sector workers who are paying the price for a global recession triggered by big business. "There is no respect in this budget," said Sid Ryan, president of the Ontario Federation of Labour. "This is just an assault an outright assault playing pure politics with public sector workers." Andrew Lupton, CBC News You ll be hearing some screams, economics Prof. Torben Drewes said. It s harsh medicine and it s necessary medicine. At the end of this process, this provincial government will be spending fewer dollars per person than any other provincial government, he said. The consequences are not articulated in the budget. Drewes used health care as an example, noting that health care spending would increase by 2% instead of the typical 6% a year Brendan Wedley, Peterborough Examiner The Greater Peterborough Chamber of Commerce is willing to support losing the tax cuts as long as the revenue goes directly to deficit reduction, said chairman Jeff Dueck. The public sector will be asked to help with the deficit reduction through measures such as revamping the public sector pension plans, Dueck said. There s going to be pain across the board, for sure, he said. Everybody s feeling a bit of the burden here. The chamber s pleased to see the government is improving the transparency of the arbitration system that has led to rising police, fire and emergency medical services costs for municipalities, Dueck said. Brendan Wedley, Peterborough Examiner Overall, the Conference Board agrees with the assumptions set out in the budget. But we remain concerned about the government s capacity to sustain the requisite level of restraint over the next six years. Matthew Stewart Principal Economist, Conference Board of Canada. For more information about our InfoNotes contact: Dawn Berry Merriam at or dawnbm@pspc.on.ca. Provincial Budget Synopsis, 2012 Page 4

5 Provincial Budget Synopsis, 2012 Page 5