ONN reaction to Fall Economic Statement 2018
On November 15, the Ontario Minister of Finance presented the Fall Economic Statement and tabled its implementation bill, Bill 57 (Restoring Trust, Transparency and Accountability Act, 2018). The headline announcements included a tax cut for workers earning $30,000 or less, eliminating rent control for newly built or converted rental homes, eliminating the per-vote subsidy to political parties and increasing political donation limits, halting the planned French-language university, and eliminating the legislative watchdog positions for the environment, for children, and for French-language services.
The new Ontario Government set the stage for austerity cuts earlier this year by commissioning a spending review (the tax system was considered out of scope for this exercise). Transfer payments to the broader public sector, to community-based nonprofits, and to others were highlighted as an area for spending restraint. Already a low-tax jurisdiction in the North American context and the lowest-spending province in Canada on a per-capita basis, the Government of Ontario intends to further drive down spending in the interests of reducing taxes while simultaneously paying down the debt.
How does the Statement affect provincially funded nonprofits?
The Statement contains numerous references to themes from the recent spending review: the growth of provincial spending on health, social services and education relative to population growth and relative to two other provinces (BC and Quebec); the opportunity to streamline and modernize spending through digitization and shared service models; and an interest in reducing spending by shifting from universal access towards funding that is directed to “those who need it most.”
The large number of new investments promised in the previous government’s 2018 Budget are under review or eliminated. According to the Fall Statement: “The government has undertaken a comprehensive review of investments from the 2018 Budget and has taken steps to reduce expenditures. Savings include: not proceeding with previously planned spending related to Cap-and-Trade Carbon Tax proceeds and budget measures such as reform of OHIP+, regional infrastructure projects and other expenditure programs that did not provide value for money,” (p. 122). As previously announced, the government plans to end the requirement for publicly funded child care to be operated on a nonprofit basis. The previous government’s plan to provide free early learning and child care for children ages two-and-a-half and up has been cancelled.
While details for the longer-term spending plan will have to wait for the 2019 Budget, nonprofits can get a sense of the overall direction by comparing the planned 2018-2019 expenditures in the 2018 Budget(p. 223) with those in the 2018 Fall Statement(p. 126). For instance, the combined budget of Community & Social Services, Citizenship & Immigration, and Children and Youth in the spring Budget was $18.03 billion, while the new budget for the combined Ministry of Children, Community and Social Services is now $17.01 billion –a reduction of 5.7 percent. Ministries as diverse as Indigenous Affairs; Economic Development; Municipal Affairs and Housing; and Tourism, Culture and Sport are all seeing year-over-year budget decreases.
In terms of health services, there is no reference to community health. As promised, however, the government will match the federal investment of $1.9 billion in mental health over 10 years. There are also short-term investments in hospital beds but no sense of how health and community services will keep up with a growing and aging population, especially given the history of funding agreements in this sector that have not taken into account the cost of inflation.
The government will continue its review of spending and we anticipate further cuts in the 2019 Ontario Budget, although a recent speechby the president of the Treasury Board, Minister Peter Bethlenfalvy, indicate that cuts will be targeted as opposed to a cross-the-board reduction.
The previous government’s 2017 Budget had committed to increasing the tax rate on high-income earners, providing an estimated $275 million in additional revenue. The 2017 Budget had also increased the tax credit rate on charitable donations exceeding $200. These changes have been cancelled.
As noted above, workers earning $30,000 or less will receive a tax credit of up to $850, expected to apply to 1.1 million people. (The measure does not fully replace the value of the minimum wage increase that would have been implemented January 1 if not for Bill 47, currently at the committee stage, which repeals the previous government’s employment standards changes).
The government is phasing in by 2021 a corporate tax reduction for small businesses estimated at $160 million. Eligibility for the Employer Health Tax exemption is being increased from the first $450,000 of payroll to $490,000, providing employers with a further $40 million in tax reductions.
The limits on donations to political parties are being raised while per-vote subsidies are being phased out by 2022. The rule banning MPPs and Cabinet ministers from attending fundraisers is being eliminated.
The development charge rebate program, designed to encourage more rental housing, has been eliminated. There is no mention of support for increased affordable housing supply other than the elimination of rent control on newly built or newly converted rental homes and other market-based incentives. An action plan is expected on housing supply in spring.
The Fall Statement confirms previous announcements signalling the government’s approach to climate change. The government has committed to reducing red tape by 25 percent for small businesses by 2022. Through the burden reduction initiative, ONN is exploring avenues for streamlining and modernizing provincial funding agreements, creating an enabling environment for nonprofit social enterprise, and other regulatory frameworks for nonprofits.
We’ll take a look at the 100-page implementation bill and let the sector know if there is relevant additional information affecting the sector as a whole (the omnibus bill affects a wide array of legislation). For instance, changes to the Broader Public Sector Accountability Act, the Pay Transparency Act, the Accessibility for Ontarians with Disabilities Act, and the Lobbyist Registration Act could all affect nonprofits.
Then stay tuned for ONN’s pre-budget submission in early January as we make the case for an enabling regulatory and policy environment to help Ontario’s nonprofits meet their missions and support thriving communities.