Ontario rolling out spending-packed budget to power up economy

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Tens of kilometres of new transit lines. A provincial pension plan. A large fund to dole out grants to business.

Any one of these would be hefty enough to anchor a budget on its own. But Ontario Premier Kathleen Wynne and Finance Minister Charles Sousa want to do them all at once, packing these measures into an ambitious $130.4-billion spending blueprint to be tabled Monday.

The budget comes at a crucial time. The nation's most populous province faces a difficult economy, still sluggish five years after the recession. On Friday, Statistics Canada revealed Ontario shed 34,000 jobs last month. Manufacturing has been hit particularly hard, with employment in the sector at its lowest point since 1976.

The Liberals are banking on the new spending to rev up the economy. But these programs will put a strain on already stretched finances, which two weeks ago caused bond rater Moody's to change its outlook on the province's credit rating to "negative."

This budget gave Ms. Wynne her majority government – its rejection in May by the opposition parties triggered an election that returned the Grits by a comfortable margin. Now, she must deliver on the sweeping promises it contains.

The pension centrepiece

The Ontario Retirement Pension Plan will cover anyone who does not already have a pension through their employer. It is designed to roughly double the benefits of the Canada Pension Plan for retirees, requiring contributions from both workers and companies. Critics of the policy, including the small business lobby, argue it is too much for employers to afford. Ms. Wynne and Mr. Sousa counter that people simply aren't saving enough on their own and need an additional way to set money aside.

The ORPP is designed so it could be rolled into the CPP in future if Ottawa drops its opposition to expanding the federal pension plan.

Infrastructure

Ms. Wynne's priority when she became Premier a year and a half ago was to smash gridlock in the Greater Toronto and Hamilton Area. This budget makes a bid to do that – with $15-billion for new commuter trains, subways and light-rail lines over the next decade – and goes a step further, adding $14-billion for infrastructure outside the GTHA. Those dollars can be used for transit, roads and bridges.

Big bucks for business

The government is setting aside $2.5-billion for a 10-year "Jobs and Prosperity Fund" to dole out money to corporations. The cash is meant to encourage firms to come to the province, or help existing ones expand operations. The province already frequently makes one-off deals with companies – Cisco and OpenText being prominent examples in the past year – but the dedicated fund is meant to draw more of them by putting out the word that Queen's Park is looking to hand out cash.

New revenue

The new spending will be partly offset by higher taxes. The budget creates a new income tax bracket for people making between $150,000 and $220,000 a year, and puts anyone earning over $220,000 into the top bracket. The new measures, which also include jacked-up levies on tobacco and airplane fuel, are expected to deliver the government $840-million more annually.

The $12.5-billion problem

The spending plan adds more than a billion dollars to the deficit, bringing it to $12.5-billion. It also promises to balance the books in three years, requiring a sharp drop in spending next year. To achieve this, the government is vowing not to provide extra money for new labour deals and to cut program spending. The details on this still have to be worked out.