Ontario deficit has shrunk by $3.3 billion, but return to balance still two years away

Ontario Premier Doug Ford, bottom right, shakes hands with Finance Minister Peter Bethlenfalvy, left, after he provided an economic update, which serves as a mini budget, at Queen's Park, in Toronto, Wednesday, Oct. 30, 2024. THE CANADIAN PRESS/Nathan Denette

Ontario’s deficit for 2024-25 has shrunk by $3.3 billion since the Ford government released the provincial budget earlier this year, and the province says it expects that deficit to flip to a larger-than-expected surplus within the next two years.

“Inflation and our growing economy have brought in unexpected tax revenues,” Finance Minister Peter Bethlenfalvy said in the government’s fall economic statement, titled “Building Ontario For You.”

The deficit for 2024-25 now stands at $6.6 billion, down from the $9.8 billion included in the 2024 budget. The province is now projecting a revised deficit of $1.5 billion for 2025-26 and a small surplus of $900 million in 2026-27.

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That extra revenue comes from boosted sales tax revenue due to inflation, as well as changes to capital gains tax rules by the federal government.

Bethlenfalvy said that’s why the government can afford to give each taxpayer a one-time cheque of $200, expected to be mailed out early in 2025.

Those cheques, which the province says are intended to help Ontarians with the high cost of living, will cost $3 billion. The government says it’s not yet clear how much it will cost to administer the program.

Overall, the province is spending slightly more than projected in the budget, with a total spend of $218.3 billion, up from $214.5 billion.

In terms of growth, the province’s real GDP is expected to shrink to 0.9 per cent this year, from 1.4 per cent in 2023. The province is predicting that it will strengthen to 1.7 per cent in 2025 and 2.3 per cent by 2026.

Employment growth is also lower this year at 1.4 per cent, down from 2.4 per cent last year. That number is expected to stay at or below 1.5 per cent in 2025 through 2027.

Ontario's updated budget projections are shown.

Other cost of living measures

The update includes a number of other measures intended to reduce the cost of living.

As announced earlier this week, the province is also extending the temporary gas and fuel tax cuts to June 30, 2025. They say that with the latest extension, the move will have saved the average household $380 since it was implemented in July 2022.

Bethlenfalvy said the “One Fare” integration of transit fares across municipalities is saving daily transit users $1,600 a year. The province says that over 90 per cent of transit riders in the Greater Golden Horseshoe region have access to the program.

For Ontarians seeking fertility treatment, the province will be investing an extra $150 million over two years to expand the Ontario Fertility Program. The government says this will triple the number of individuals who are able to receive government-funded IVF.

The province will introduce a new tax credit in 2025 that would cover up to 25 per cent of eligible treatment expenses for Ontario residents.

LCBO and gaming revenue lower

The government expects the LCBO’s net income to be down from previous forecasts for the next two years due to the impact of this year’s strike, the retail expansion of alcohol sales to corner stores, and lower sales projections.

For 2024-25, the LCBO’s net income is expected to be $2.17 billion, about $286 million less than the budget forecast. For 2025-26, it’s expected to be $2.23 billion, about 254 million less than previously expected.

The government expects that income to pick up in 2026-27 as the LCBO transitions to its expanded role as a wholesaler. The increased net income for that year is now projected at $2.65 billion, roughly $96 million more than previously expected.

Implementing the new alcohol marketplace is costing the government $87 million for 2024-25.

By 2027, the LCBO is expected to have 77.1 per cent of Ontario’s alcohol market share, compared to 51.2 per cent this year. That will mostly come from eating up some of The Beer Store’s current 41.1 per cent share, which is expected to shrink to 15 per cent by 2027.

The province has previously disclosed that it will pay The Beer Store up to $225 million to end the deal before it was set to expire.

The government says it is doing a review of taxes, fees and markups on alcohol to create a more competitive market.

No details on Crosstown or Hwy. 401 tunnel

The province says “significant progress” has been made on the much-delayed Eglinton Crosstown LRT project, but there is no opening date in the update.

As previously disclosed by Metrolinx, the government says that “nearly all occupancy permits have been received by The City of Toronto” and the project continues in the testing and commissioning phase.

There were also few details in the update on an idea previously announced to build a tunnel under Highway 401.