Ontario posts $2.1-billion surplus with higher-than-expected revenue

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Ontario’s provincial government says it brought in 20 per cent more revenue than anticipated thanks to a galloping economy, and ran a surplus last year of $2.1-billion, even though it warned just a month ago that it could have a deficit of $13.5-billion.

The red-ink-free final results of Ontario’s 2021-22 public accounts echo similar surprise rebounds in government revenues in other provinces. The accounts were released on Friday and detail the actual spending in the fiscal year that ended March 31, 2022. It’s the first surplus the province has posted since 2007-2008, before the global financial crisis.

The Opposition at Queen’s Park said the new numbers show the Progressive Conservative government should have spent much more on pandemic relief and could have scrapped its wage-cap legislation for nurses and other public-sector workers at a time when it faces a hospital staffing crisis.

Ontario also announced it will put more money into its plan for direct payments to parents meant to help with tutoring costs for children who have fallen behind in school during the pandemic. The government said it would add $140-million, bringing the total amount to $365-million.

The government announced the payments last month and children have been back in school for weeks, but it has still provided few details. Education Minister Stephen Lecce told reporters on Friday an application process would be up and running next month. Opposition critics have said the cash should be spent on the school system.

The surplus is a dramatic turnaround from a deficit first projected at $33.1-billion in the budget of March, 2021. That number was then updated as tax revenues and economic growth increased more quickly than anticipated. Ontario’s first pandemic budget, in 2020-21, had warned of a record $38.5-billion deficit that later shrunk.

On Friday, Finance Minister Peter Bethlenfalvy blamed the uncertainties that have beset governments around the world during the pandemic for the latest multibillion-dollar revenue lowballing. And he said the province had spent billions to fight COVID-19.

Government officials pointed to a long list of private-sector forecasters that underestimated the rapid comeback after pandemic restrictions eased, which amounted to an 11.9 per cent boost in nominal terms for Ontario’s gross domestic product, the strongest such number since the early 1980s.

Mr. Bethlenfalvy said the province had spent $6.2-billion more on health care in 2021-22 than the year before, bringing the total amount to $75.7-billion, an 8.9 per cent increase. In dollars, that’s the largest increase for health care in the province’s history, he said. Those figures include one-time funding for COVID-19 testing and vaccinations.

Asked if the government planned to introduce new measures in the fall to help Ontarians cope with high inflation, as Ottawa has done, Mr. Bethlenfalvy suggested the province would do something.

“What people can continue to expect from this government is that we’ll always act,” he said, pointing to the temporary cut in the gas tax, cancellation of licence plate fees and the low-income tax credit.

Official Opposition NDP finance critic Catherine Fife said running a surplus while refusing to rescind Bill 124, which temporarily caps all public-sector wage hikes at 1 per cent, was a “slap in the face” for nurses and other workers. She also said that in 2021-22, the province made an in-year increase of only 1-per-cent to its health care spending, even as the Omicron wave of COVID-19 took hold.

“Budgets are about choices. And this government can address the needs of Ontarians, and they’re not doing so,” Ms. Fife said.

Total spending was down from the province’s original plans by $2.5-billion, for a total $170.5-billion. Education spending was $1.4-billion lower than planned for a total of $29.9-billion, the government said, partly blaming lower enrolment.

The $2.1-billion surplus will go toward paying down Ontario’s debt. Friday’s figures pegged the province’s net debt at $380.8-billion in 2021-2022 and noted higher interest rates would increase borrowing costs.

Mr. Bethlenfalvy would not speculate on future deficits: The province’s most recent projection is for a deficit in 2022-23 of $18.8-billion. Its budget, drafted earlier this year but not passed this month, did not predict balanced books until the following year at the earliest in a best-case scenario.

The Finance Minister also promised legislation to scrap what would otherwise be an automatic pay increase for MPPs when the books are balanced. Legislation brought in by Liberal premier Dalton McGuinty more than a decade ago would have awarded legislators, who make a base salary of $116,550 a year, a raise of nearly $26,000.

Marc Desormeaux, principal economist for Canadian economics at Desjardins Group, said he was surprised at the surplus. He also said it was likely that this year’s deficit would come in much lower than predicted, barring a large decline in revenues rivalling only that experienced in the financial crisis. But he also warned that inflation could start to hit the province’s expenses soon.

“The longer inflation remains elevated, the more likely it is that wage pressures will intensify,” he said.