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Ontario budget deficit projected to jump to $38.5 billion in 2020-2021

TORONTO — The COVID-19 pandemic continues to take a heavy toll on Ontario, the province's finance minister said Wednesday as he announced the government has nearly doubled its deficit projection in just three months.

TORONTO — The COVID-19 pandemic continues to take a heavy toll on Ontario, the province's finance minister said Wednesday as he announced the government has nearly doubled its deficit projection in just three months.

Rod Phillips said the pandemic has created an "unprecedented health crisis" and the province had to spend billions to support the health-care sector and help businesses and residents weather the storm.

In March, the Progressive Conservative government said the deficit would reach $20.5 billion by the end of 2020-2021, but Phillips said Wednesday that due to billions more in spending required by the ongoing pandemic, the number is set to reach $38.5 billion.

"We remain in uncertain times and the risk of a second wave is real despite our collective efforts to avert it," he said. "The economic impacts of COVID-19 globally, and in Ontario, are still unfolding."

In its spring fiscal update, the province announced a $17-billion spending package designed to provide aid during the pandemic. The government said Wednesday that its COVID-19 relief spending will now total $30 billion by the close of the fiscal year.

Overall, the government expects to spend an additional $13 billion on programs this year, while collecting $5.7 billion less in taxes and other revenues because of the pandemic.

Among the new measures announced in Wednesday's update, the province now plans to add $4.3 billion more to a health-care spending contingency fund in advance of a potential second wave of coronavirus cases this fall.

The "Safe Restart Agreement" the provinces recently reached with the federal government will cost Ontario $2.4 billion, while another $2.2 billion will be added to a standard contingency fund.

The cost to Ontario for the promised pandemic pay for front-line workers is estimated at $1.1 billion.

All tax deferrals the province had put in place earlier this year will be extended until to Oct. 1, which it estimates will cost $1.3 billion.

Prior to the pandemic, Ontario had been projecting a $9-billion deficit for 2020-2021 and Premier Doug Ford had pledged to balance the province's books by 2023-2024 — into a hypothetical second mandate for the Tories.

Phillips stressed that the government had been on track to achieve that goal, but COVID-19 required immediate action.

"While the current level of government spending and deficits are not sustainable over the long term, they are necessary today," he said. 

The premier also defended the spending and acknowledged that balancing the budget by 2023 was no longer possible.

"I'm going to be very frank," Ford said Wednesday. "It was a whole different situation six months ago compared to now. But we're going to continue to be very fiscally conservative (and) responsible."

Ford has said repeatedly since the start of the pandemic that the province would not hold back spending if it felt it could save lives. Now, he said, it's about ensuring people clearly understand how the money is being spent.

"I kept my promise to the people of Ontario," he said. "When this first started, I said ... 'I'm not going to spare a penny,' and I've proved it."

The premier's spending plan received a vote of confidence from the Canadian Union of Public Employees, which said in a statement that the higher deficit "should not be cause for concern."

"We need more investment and support to help Ontario continue to manage and to rebound out of this crisis," the union's Ontario president, Fred Hahn, said. "Because spending saves lives. What the pandemic has taught us is that we need more collective resources, not less."

NDP finance critic Sandy Shaw noted that the fiscal update shows the government has spent just $218 million on long-term care since April.

"More than 1,845 seniors and front-line health care workers tragically died in long-term care homes," Shaw said in a statement. "It's abundantly, heart-breakingly clear that $218 million was nowhere near enough to fund the iron ring around nursing homes that was needed."

Earlier this year, the province postponed its annual budget, which is normally introduced in March. The government said it will instead introduce its full spending package on or before Nov. 14.

This report by The Canadian Press was first published Aug. 12, 2020.

Shawn Jeffords, The Canadian Press

Note to readers: This is a corrected story. An earlier version had an incorrect figure for the deficit projection.