Ontario: Budget 2024 - Spending Pressures Delay Plans to Balance by One More Year

The province of Ontario’s fiscal year 2024–25 (FY2025) forecasts a return to budget surplus in FY2027—one year later than anticipated in the 2023 Fall Economic Statement (FES).

Higher spending projections—largely attributable to public sector wage increases following the repeal of Bill 124—were responsible for much of the deterioration in the bottom line. The federal government’s announcement that it will cap international student permit applications for two years also played a role. The extension of gas and fuel tax cuts headlined new policy.

Borrowing requirements are now expected to total $38.2B in FY2025, $37.7B in FY2026, and $32.8B in FY2027. The projections for the first two years represent a combined rise of just $1.6B versus FES forecasts, as pre-borrowing activity and more short-term financing are expected to partially offset the effects of larger deficits.

Risks to the plan include weaker-than-anticipated headcount gains following Ottawa’s move to reduce the temporary resident population and further tax base adjustments. Fortunately, Budget 2024 also (characteristically) includes multiple layers of prudence.

Budget 2024 shows a deterioration in Ontario’s financial position, but that deterioration likely would have been worse absent prudent choices in prior plans. Nonetheless, the road ahead will be challenging as the province seeks to balance expenditure control and debt sustainability with the needs of a fast-growing and rapidly aging population.