2018 Ontario Budget Briefing Note

Looking for a place to happen: A bold plan, but will it be implemented?

OPTIMUS | SBR’s Public Sector, Health Care and Not-For-Profit group regularly monitors policy developments at the federal, provincial and municipal level to inform its work and support clients in government, the broader public sector, and certain parts of the private and not-for-profit sectors. This Briefing Note highlights key elements of interest to our clients from yesterday’s Ontario Budget announcement.

 

A Pre-Election Budget

With a provincial election set to occur on or before June 7th, Ontario’s government presented its 2018 Budget, A Plan for Care and Opportunity, in the Legislature on March 28 (excerpts in bulleted form below preserve or paraphrase Ontario Budget wording to ensure accuracy and clarity).

A Change in Fiscal Direction

Where past budgets had been concentrated on tracking towards a balanced budget, the Budget stresses the need to improve economic growth and ensure that the “benefits of growth are more widely shared”. This means large spending commitments and a move away from modest surpluses into deficits of over $6 billion from 2018-19 through 2020-21 (the “Medium-Term Plan”), followed by a “Recovery Plan” to once again get the Province back to a balanced budget seven years from now in 2024-25. While much has already been made of the headline numbers, the Budget provides additional detail on where and how the money will be spent.

How Much?

For fiscal year 2018-19, the government is planning to spend $158.5 billion, which includes:

  • $61.2 billion or 38.7% of the total in the health sector;
  • $29.1 billion or 18.3% in the education sector;
  • $11.1 billion or 7.4% in the postsecondary and training sector; and
  • $12.5 billion in Interest on the debt.

When the interest is removed to focus on program spending, the familiar patterns for health care and education persist: the health sector represents 42% of all program spending while the education, postsecondary and training sectors together constitute the next 28%; together, they represent 70% of all program spending. Below we highlight developments of interest in the Health Care, Children & Youth Services, Income Security, and Cannabis sectors.

 

Highlights by Sector

Health Care

New spending in the health sector more or less covers the entire continuum of care. The story here is the incremental – and in some cases much more than incremental – growth in each subsector.

Hospitals

  • $822 million in 2018-19 (a 4.6% increase) for hospitals, including $305 million “to support hospitals with service demands related to population growth and aging”, plus:
    • $187 million for more hospital beds including new medical and surgical beds, mental health beds and beds for long-term ventilated patients”; and
    • $54 million to increase access to specialized services such as bariatric surgeries, organ transplantations, neurosurgical services and critical care”, as well as $5 million for new adult critical care beds; and
  • $19 billion over 10 years in 40 major hospital projects, including SickKids’ Project Horizon and major redevelopment projects at Scarborough and Rouge Hospital and Lakeridge Health.

Primary Care

  • $102 million over three years to support the expansion of interprofessional primary care teams; and
  • $330 million over three years to support the recruitment and retention of health care professionals for primary care teams, including those working in Aboriginal Health Access Centres, community health centres, Nurse Practitioner-Led Clinics and family health teams.

Mental Health and Addictions

  • $2.1 billion over the next four years for a more integrated mental health and addictions system, including up to 100 acute care beds;
  • increased access to publicly funded psychotherapy (such as Cognitive Behavioural Therapy, or CBT), including related training to primary care teams and community mental health and addictions agencies;
  • a needs-based funding allocation for community-based child and youth mental health services; and
  • more culturally appropriate and preventive mental health services for First Nation, Inuit and Métis children and youth.

Opioid Crisis

  • $222 million for the implementation of the province’s Strategy to Prevent Opioid Addiction and Overdose;
  • $7 million for seven supervised injection sites; and
  • the approval of four Overdose Prevention Sites beyond the first one opened in London in February 2018.

Drug and Dental Benefits

  • OHIP+, which provides drug coverage at no cost to eligible children and youth under 25, will be expanded to include seniors receiving prescriptions through the Ontario Drug Benefit; and
  • Ontario will introduce a new Ontario Drug and Dental Program in summer 2019 for people without extended health plans.

Home, Community and Long-Term Care

In the home, community and long-term subsectors, the province is proposing to spend in several different areas, including:

  • $1 billion over three years that would provide households led by seniors 75 and older with up to $750 per year to assist with maintaining their homes, which could include things like snow shovelling, lawn cutting or house cleaning;
  • $300 million over three years, starting with $50 million in 2018-19, to provide for registered nurses in every long-term care home; and
  • $126 million to increase the number of PSWs in underserved communities and provide them with additional training.

Children and Youth Services

There are significant announcements here:

  • $2.2 billion over three years to introduce free preschool for children from age two-and-a-half through to kindergarten eligibility, which the government claims could save an average Ontario family over $17,000 during that period, or more if they live in Toronto;
  • additional operating funding of over $160 million over three years, beginning in January 2019;
  • $62 million in 2018-19 in the Ontario Autism Program to expand current system capacity; and
  • $30 million over two years to create an Early Years and Child Care Innovation Fund, which will support the development of new child care solutions.

Income Security Reform

Following from the Income Security Working Group’s Income Security: A Roadmap for Change report, the Budget commits the government to making social assistance programs simpler, less punitive, and less burdensome to comply with. In addition, Ontario Works and Ontario Disability Support Program rates are set to increase three percent per year, starting in fall 2018, while certain other benefits and allowances will increase by two percent per year.

Cannabis Legalization

The Budget includes estimates of two types of cannabis-related revenue, assuming the federal government will carry out its legalization plans:

  • the province’s portion of the federal excise duty, expected to grow from $35 million in 2018-19 to $115 million in 2020-21; and
  • earnings from the Ontario Cannabis Retail Corporation (OCRC), starting with an estimated net loss of $40 million in 2018-19 and growing to a net income of $100 million in 2020-21,

or, overall, revenue approaching a quarter billion dollars in 2020-21. The Budget also describes capacity building measures for law enforcement, justice, public health, to accompany the legalization of cannabis.

 

The Path Back to a Balanced Budget?

In years past, some citizens and more commonly bond rating agencies have voiced concerns about the sustainability of Ontario’s debt load, particularly as interest rates are widely expected to rise in the coming years. Steadily declining deficits have helped alleviate some of these concerns, while increasing infrastructure commitments have tended to exacerbate them.

Previous budget projections of the relevant measure, the Net Debt-to-GDP ratio, tended to show it coming down from its 2014-15 peak of 39% as budgets balanced or went into surplus for the foreseeable future. Now it shows a second peak approaching 39% in 2021-22, and then a descent from when the aforementioned Recovery Plan is expected to take hold. Given that this Recovery Plan would largely be executed after the next government’s mandate, this may not put bondholders at ease, while citizens will shortly have their say on whether and how much they share these concerns through the election.

 

Discussion: Policy & Implementation

There is of course much more in this Budget, as well as future budgets to come. In the meantime, our clients in the public, health care and not-for-profit sectors must continue to execute on their mandates and carry out business plans based on 2018-19 budgets that have for the most part already been set. Given the potential for a change in government, many in these sectors may find:

  • 2018-19 operations need to proceed as planned, recognizing that a mid-year course correction may be required; and
  • should the government change, there will be little runway left towards the end of the fiscal year to act on any course correction required.

If, however, this Budget does get implemented, organizations in the health, children and youth, and social sectors can expect to have significantly more policy and financial latitude to advance their goals than they have today. By necessity there will be strings attached for arms of government and organizations receiving these funds, but on the whole this Budget opens up policy and capacity on many new fronts.

 

OPTIMUS | SBR’s Public Sector Practice

Our Public Sector, Health Care and Not-For-Profit Practice has extensive expertise in policy, governance, strategy, stakeholder consultation and facilitation, organizational effectiveness, and a range of implementation services from planning and project management to process improvement. For more information, please contact:

Terri Lohnes, Vice President and Practice Lead
Terri.Lohnes@optimusssbr.com
416.649.6017

David Lynch, Principal
David.Lynch@optimussbr.com
416.649.6064