(Adds budget details, economist's quote)
By Leah Schnurr
TORONTO May 1 Ontario's minority Liberal
government unveiled a budget on Thursday that projected a
larger-than-forecast deficit for fiscal year 2014-15, but it was
not clear whether the budget would get enough opposition support
to pass and stave off a summer election.
Canada's most populous province, which accounts for about
40 percent of the country's economy, will run a budget shortfall
of C$12.5 billion ($11.39 billion)in 2014-15 under the C$130.4
billion budget plan unveiled by Finance Minister Charles Sousa.
The deficit is above the government's year-ago forecast of
C$10.1 billion, and more than its 2013-14 shortfall of C$11.3
billion. The province reiterated it plans to return to a
balanced budget by 2017-18.
The budget included a proposal for a mandatory provincial
pension plan and a tax increase for high-income workers as well
as spending for transportation and public infrastructure.
With just 48 seats in the 107-seat Ontario legislature,
Premier Kathleen Wynne's Liberals need the support of at least
one opposition party to pass the budget and avert an automatic
The right-leaning Progressive Conservatives, who hold the
second-largest number of seats, denounced the budget as a
"charade" and called it a tax-and-spend budget.
New Democrat leader Andrea Horwath, whose party propped up
the Liberals and helped pass the government's budget last year,
will not comment on the new budget until Friday.
"This is a budget that's long term in scope," Sousa told
reporters. "It's not about election cycle decisions, nor should
it ever be."
"The premier has made it very clear that we will ask the
opposition to come clean as to what they want to do and to move
on with it. If the opposition wants to go to the polls, then
we'll take this to the people of Ontario."
After expanding in 2014-15, the deficit is seen shrinking to
C$8.9 billion the following year and to C$5.3 billion in
2016-17. The projection relies on average annual revenue
increases of 3.8 percent to the 2016-17 period and expense
growth of just 1.7 percent.
Ontario's deficits spiraled higher in the wake of the 2008
financial crisis, when automakers shed jobs, sending tremors
through the province's industrial base.
"Despite some good results on the spending side, on the
deficit number, Ontario is still missing the target, where in
the previous five years, they beat the target," said Sébastien
Lavoie, assistant chief economist at Laurentian Bank Securities.
"Finance Minister Sousa made the right choice to get to
fiscal sustainability through some bolder actions."
In addition to the tax changes, the province said it is also
looking at its options for selling assets, including government
The proposed pension plan would be similar to the
well-regarded Canada Pension Plan (CPP), an arm's length
government program that provides pensions to all employees in
Called the Ontario Retirement Pension Plan (ORPP), it would
see employers and employees each contribute an amount that would
not exceed 1.9 percent of an employee's earnings up to a maximum
annual earnings threshold of C$90,000.
Lower income workers would be exempt from contributions,
while those already enrolled in a comparable workplace plan
would not be required to participate. The government said
coverage would apply to about 3 million workers. Under the
proposal, the ORPP would be introduced in 2017.
The proposal was likely to heat up the political rhetoric
over the best way to ensure a financially secure retirement for
an aging population as pensions struggle with poor returns after
the financial crisis and employers try to rid themselves of the
burden of pension liabilities.
The Canadian government reiterated its position last week
that this is not the time to increase contributions to the CPP,
a proposition that has been on the agenda of Canada's provinces
for several years.
Ontario said it will make nearly C$29 billion available for
investment over the next 10 years in public transit and
transportation infrastructure. Total infrastructure spending
will be C$130 billion over the next decade.
The budget proposes to add a new tax rate of 12.16 percent
on income between C$150,000 and C$220,000. It will also lower
the threshold at which the 13.16 percent tax rate bracket kicks
in to annual income of C$220,000, down from C$514,090. The
province said the tax increases will affect just 2 percent of
Public long-term borrowing in 2014-15 should total C$35
billion, down C$1 billion from 2013-14 and C$2.6 billion below
forecasts, the government said.
(Additional reporting by Cameron French; Editing by James
Dalgleish and Peter Galloway)