Ontario Budget 2009: Chapter I: Confronting the Challenge: Building Ontario's Economic Future

INTRODUCTION

The current global economic crisis is hurting Ontario families, communities and businesses. The financial credit crisis has triggered serious economic difficulties around the globe. Most of the world's major economies are expected to be in recession in 2009, and the United States, Ontario's largest trading partner, is struggling through a severe downturn. Ontario's manufacturing sector — especially the automotive and resource-based industries — has been particularly hard hit by the U.S. credit crunch and the resulting drop in demand.

The global economic outlook has deteriorated significantly in recent months. Every G7 economy has declined sharply. According to Consensus Economics, world gross domestic product (GDP) is projected to decline 1.6 per cent in 2009.

The U.S. economy — critically important to Ontario as the destination for most of its exports — is in the midst of one of its deepest downturns. U.S. housing starts and new home sales have reached all-time record lows while existing home sales and prices continue to decline. Foreclosure rates for residential mortgages continue to climb, leading to a further tightening in bank lending standards. Job losses and tighter credit conditions have led to reductions in consumer spending, particularly on durable goods such as autos.

In 2007–08, the most recent year for which data is available for all jurisdictions, Ontario's net debt-to-GDP level was below the median for the provinces and the federal government.

Ontario's prudent fiscal management has allowed it to reduce its net debt-to-GDP from a peak of 32.9 per cent in 1999–00 to 25.1 per cent in 2008–09. The Province's 2008–09 deficit relative to the size of its economy is one of the lowest of the industrialized jurisdictions affected by the global economic crisis. The Ontario government is well positioned to take action to provide jobs for today and for the future.

Ontario is not immune to the global downturn. Ontario's economy is in a recession that is expected to persist through the first half of 2009. Ontario's employment loss was less than that of neighbouring Great Lakes States and well below that of the U.S. economy as a whole. Growth in the global economy is expected to resume within the next year, partly due to the aggressive fiscal and monetary actions of national governments and central banks around the world. According to Consensus Economics, world growth is projected to rebound to 2.1 per cent in 2010 with growth in all G7 countries. The U.S. economy is expected to lead the global turnaround with growth projected to start improving in the third quarter of 2009. The Ontario economy is expected to follow the same recovery pattern as the U.S. economy with growth projected to resume during the second half of 2009 and to gain momentum in 2010 and 2011.

These conditions have created real challenges for Ontarians and underline the need for the Province to protect families and businesses now and be a leader in the economy of the future. Ontario must continue to build the foundations for sustainable future job creation and economic growth so it can continue to invest in the public services that Ontarians want and deserve.

Despite the recent economic numbers, the economy has created 325,700 net new jobs since 2003. During the last five years, the government has taken important steps to help families and businesses by building and strengthening Ontario's public services, such as universal health care, public education, infrastructure, skills training, support for the vulnerable and protecting the environment. The government has moved aggressively on its five-point economic plan, building solid foundations for an innovative economy, with a highly skilled and educated workforce.

In addition to these investments, the realities of the current global economic crisis call for immediate measures to preserve jobs and support Ontarians through these challenging times. This Budget lays out the government's strategy to preserve and create jobs today and to position Ontario to be more competitive tomorrow, so families and businesses can take advantage of the next generation of jobs and growth. This strategy includes:

• investing in infrastructure, skills training and literacy, and sector support to preserve and create jobs today;
• introducing comprehensive, competitive tax reform, growing the green economy, accelerating innovation and attracting investment to help create the jobs of tomorrow;
• investing in children and families to help Ontarians during these challenging economic times and to build for the future; and
• preserving jobs and protecting vital public services through prudent fiscal management.

Preserving and Creating Jobs Today

This Budget announces significant measures to preserve and create jobs today. While these initiatives will help Ontarians weather the current economic crisis, they will also contribute to Ontario's future competitiveness by enhancing the province's infrastructure base, investing in the skills and knowledge of Ontario's workforce, and supporting key sectors.

Smart Stimulus

The global economic downturn has led to coordinated action by governments around the world to spur an economic recovery. The American Recovery and Reinvestment Act of 2009 provides US$789 billion in fiscal stimulus to the U.S. economy. With significant job losses, central-bank interest rates near zero, and falling consumer demand, the case for stimulus is strong.

National governments have played their part in advancing stimulus plans, but other levels of government can also play a role in helping economies turn the corner to recovery. As Canada's largest province, Ontario will play its part in helping the economy recover. As such, this Budget includes significant fiscal stimulus — actions that build on the considerable investments the Province has consistently been making since before the beginning of the economic downturn.

Ontario believes that stimulus must be smart. Ontario's stimulus plan is not only significant in size; it is designed to be highly effective in restoring growth, and in saving and creating jobs. The government's actions meet the following key criteria:

• Timely — The government will build on its strong record of making significant, timely infrastructure investments, focusing on quick-start projects. It will also provide relief for families that will take effect quickly, when it is needed.
• Targeted — The government's strategic investments will ensure the maximum yield in jobs and economic activity for each taxpayer dollar spent. Two key aspects of Ontario's stimulus plan, infrastructure investments and help for low-income Ontarians, have high “multiplier effects.”
• Temporary — The government's plan consists largely of short-term strategic investments that will preserve and create jobs today, while preserving future fiscal flexibility.
• Fiscally responsible — The short-term nature of a large majority of the government's new capital investments allows for a prudent, realistic plan to return to balance by 2015–16.
• Help for the vulnerable — Through significant investments in training, the government will provide help for laid-off workers, new Canadians and other groups most affected by the downturn. By accelerating the Ontario Child Benefit and helping those on social assistance, the government will also provide timely help for low-income Ontarians.
• Strengthen Ontario's future — Ontario's stimulus plan will pay a double dividend — positioning the province for the future while restoring the economy today. Investments in transit, higher learning, social housing, the green economy and other key areas will not only create jobs today; they will ensure Ontario emerges from the current downturn stronger than ever.

Infrastructure

Infrastructure investments provide jobs in the short term and build foundations for tomorrow — moving people, goods and ideas faster and more efficiently. Investing in infrastructure has been a critical part of the government's five-point economic plan. The government's ambitious $30 billion ReNew Ontario investment plan will be completed in 2008–09, a full year ahead of schedule, and has helped to address the significant infrastructure deficit that built up over the three decades prior to 2003.

Projects such as the expanded crossing at the Queenston-Lewiston Bridge in Niagara, the new international truck route in Sault Ste. Marie, and the new high-occupancy vehicle (HOV) lanes on Highways 403 and 404 have all helped to improve Ontario's transportation network. These investments enhance Ontario's long-term competitiveness by lowering business costs and boosting productivity, while improving the quality of life of Ontarians.

At the same time, the Province has been investing in the infrastructure that supports the public health care and education systems valued so much by Ontarians. Currently, the Province has over 40 hospital projects under construction. More than 15 of these are expected to be completed in 2009–10, including Quinte Health Care in Belleville, Trillium Health Centre with locations in Mississauga and Toronto, Hamilton Health Sciences General Site, and Sudbury Regional Hospital Phase 2. Construction on nine additional hospital projects is scheduled to begin in 2009–10, and a planned investment of approximately $2 billion over the next three years will be made to advance eHealth initiatives, further modernizing the province's health care infrastructure.

In the education sector, the Good Places to Learn initiative has invested $1.3 billion to support 12,000 renewal projects at more than 2,500 schools across the province since 2005. At the postsecondary level, the government has invested $1.4 billion through the ReNew Ontario program for postsecondary campus renewal and strategic capital projects. Moreover, investments in broadband, digital media and institutions such as the Perimeter Institute have enhanced the foundation for innovation within the province, creating a climate for entrepreneurship and job creation.

Over the past two years the Province has invested in infrastructure valued at $18 billion, including a one-time allocation of $1.1 billion provided directly to municipalities through the Investing in Ontario Act. These investments supported more than 85,000 jobs in 2007–08, and have created and sustained more than 100,000 jobs in 2008–09.

Last fall, the government signed the Final Report of the Provincial-Municipal Fiscal and Service Delivery Review with its municipal partners, which will provide them with a net benefit of $1.5 billion annually by 2018. The agreement will increase annual ongoing assistance to municipalities by over 250 per cent since 2003, and allow them to make further investments in infrastructure and economic development.

In this Budget, the Province is allocating $15.1  billion for infrastructure initiatives in 2009–10, and a further $17.4 billion in 2010–11. These figures, which include flow-through funding of $5 billion from the federal government, combine for a total of $32.5 billion over the next two years.

Table 1
Infrastructure Expenditures
($ Millions)

	2009–10 Plan	2010–11 Plan
Sector	Total Infrastructure Expenditures	Total Infrastructure Expenditures
Transportation	4,228.4	4,814.0
Transit	1,687.1	1,505.9
Highway Construction	1,718.3	2,034.2
Windsor Gateway	247.1	715.0
Other Transportation1	576.0	558.9
Health	3,177.4	3,912.3
Hospitals	2,542.8	3,438.0
Other Health	634.6	474.3
Education	1,849.1	1,928.9
School Boards	1,503.6	1,608.1
Colleges	239.9	248.1
Universities	105.6	72.7
Water/Environment	259.0	274.2
Municipal and Local Infrastructure2	418.5	431.5
Justice	355.6	819.3
Other	1,877.0	2,350.4
New Short-Term Stimulus Investments	3,430.6	3,449.8
Total	15,595.7	17,980.3
Less: Other-Partner Funding3	501.0	526.0
Total Excluding Partner Funding	15,094.7	17,454.3
Less: Flow-Throughs4	2,390.0	2,693.2
Total Provincial Expenditure	12,704.7	14,761.1

• ¹ Other transportation includes planning activities, property acquisition, and other infrastructure programs (e.g., municipal/local roads/remote airports).
• ² Municipal and local water and wastewater infrastructure investments are included in the Water/Environment sector.
• ³ Third-party contributions to capital investment in the consolidated sectors (schools, colleges and hospitals).
• ⁴ Mostly federal government transfers for capital investments.
• Note: Numbers may not add due to rounding.

These infrastructure investments are expected to support an estimated 146,000 jobs for Ontarians in 2009–10, and a further 168,000 jobs in 2010–11. This will help create jobs in all regions of the province, covering a wide range of skills and trades. Skilled workers will remain employed, maintaining a long-term supply of skilled workers in the Ontario economy.

Key new initiatives to create jobs now and in the future, while boosting Ontario's long-term competitiveness and standard of living, include the following:

• Social Housing Infrastructure: Together with the federal government, the Province plans to invest more than $700 million over the next two years to rehabilitate social housing and make it more energy efficient; more than $360 million to help create new affordable housing for low-income seniors and persons with disabilities; and $175 million over the next two years to extend the Canada–Ontario Affordable Housing Program, which is creating new homes for low-income families, senior citizens, persons living with mental illness, and victims of domestic violence.
• Capital Investments in Northern and Rural Ontario: $273 million for new infrastructure projects, including the widening of Highway 11/17 east of Thunder Bay, rehabilitation of bridges and safety improvements on provincial highways, remediation of the Mid-Canada Line radar sites, improvements to the winter road and resource access road networks and projects at the province's remote airports. The province plans to work with the federal government to make additional investments in some of these initiatives so that more projects can proceed in northern Ontario.
• New Highway Projects in Southern Ontario: $219 million over six years for new highway widening and other improvements on Highway 7/8 in the Kitchener/Waterloo region, Highway 406 in the Niagara region, Highway 6 in Guelph and Highway 403 in Brantford.
• Investing in Communities: New stimulus funding over two years for community infrastructure. By leveraging federal funding, approximately $780 million in new funds will be provided for municipal projects such as arenas, libraries and local transportation projects. This is in addition to the $1 billion investment with Ontario's federal and municipal partners already announced for small communities to fund projects such as building a sports and leisure centre in the Town of Bradford West Gwillimbury, replacing the Barber's Bay Bridge in the City of Timmins, and upgrading the Drayton Wastewater Treatment Plant in the Township of Mapleton.
• New Medical School Infrastructure: $35 million in capital investment to support the creation of an additional 100 medical school spaces.
• Funding for Social Agencies: More than $80 million for over 4,000 projects to undertake repairs and improve security, accessibility and energy efficiency at social service facilities used by low-income and vulnerable Ontarians across the province. The government invites its federal partner to provide matching funding so that an additional 4,000 projects may be undertaken.
• Strengthening Postsecondary Infrastructure: Approximately $780 million in capital funding for Ontario colleges and universities to modernize facilities and boost the Province's long-term research and skills training capacity. With leveraged federal funding, work could begin immediately to further renew the province's postsecondary infrastructure and launch exciting new projects at Ontario colleges and universities.
• Capital Investments in the Tourism Sector: $33 million for revitalization projects at Huronia Historical Parks and St. Lawrence Parks Commission sites, as well as $8 million for infrastructure improvements at Fort William Historical Park.
• Research and Innovation: $300 million in research infrastructure funding over six years, which could be used to leverage a further $300 million from the Canada Foundation for Innovation to support research and innovation in Ontario.

Through these and other investments, the Province will work to match the total federal infrastructure investment in Ontario announced in the 2009 federal budget as long as this meets the priorities of Ontarians. Through the infrastructure initiatives announced in this Budget, and the significant investments made through previous budgets, the government is laying the foundation for job creation and economic competitiveness, both now and in the future.

Job Creation and Skills Training

People remain Ontario's number one asset. The economic benefits of a highly educated and skilled workforce are clear. Over the past five years, the government has invested in the skills of Ontarians through the Reaching Higher Plan for colleges and universities, the Employment Ontario training network, and the Skills to Jobs Action Plan. The coming year will bring forward further developments including the proposed College of Trades Act and the delivery of Dr. Charles Pascal's report on early childhood education.

In this Budget, the government is enhancing support to help more unemployed and underemployed Ontarians prepare for the new economy. Additional transitional employment and training assistance of more than $750 million will be invested over two years in a number of critical areas. These include summer jobs, skills training, literacy, services for new Canadians, as well as proposed training tax credit enhancements. These program initiatives are supported by proposed enhancements to the Canada–Ontario Labour Market Agreement and Labour Market Development Agreement.

Summer Jobs

The government recognizes the employment challenges that youth face, especially during difficult economic times. Ontario is increasing spending on summer employment opportunities for youth by 57 per cent or $32 million in 2009, bringing spending this summer to nearly $90 million. This includes targeted resources for youth in high-needs neighbourhoods and expanded opportunities for student-led summer businesses. This significant expansion means that over 100,000 young people will benefit from support for summer employment opportunities this year, up from 73,000 last summer. The summer jobs program enhancements will continue in 2010.

Skills Training

This Budget announces nearly $700 million over two years in new skills training and literacy initiatives and enhancements to existing programs. These measures are designed to respond quickly to the short-term challenges posed by the global economic slowdown while preparing the province's workforce for the new economy. These include:

• $94 million over two years to expand support for new Canadians, including bridge training and mentorship opportunities, serving 15,000 more clients each year.
• $90 million over two years to expand literacy and basic skills training, including funding for community projects, distance learning and workplace literacy. These services will help up to 13,000 people per year. This is in addition to the $200 million annual investment in literacy and language training, helping 90,000 learners.
• $50 million annually for proposed enhancements to the Co-operative Education Tax Credit and to make the Apprenticeship Training Tax Credit the most generous in Canada. For details, see Chapter III: Reforming Ontario's Tax and Pension Systems.

Sector Support

The government is continuing to partner with key sectors to help Ontario businesses preserve and create jobs today and be well positioned to succeed in an increasingly competitive global economy.

This Budget announces substantial new support for Ontario's key sectors.

Manufacturing

Ontario's diverse manufacturing sector is a major contributor to the economy, directly accounting for 900,000 jobs in 2008. Manufacturing job losses have been widespread across Canada and the United States over the past year, and Ontario has not escaped the decline.

The auto sector is a major component of Ontario manufacturing and a valuable part of the economy. In 2008, it directly employed approximately 150,000 people in the province. Including related supplier and retail industries, it supported about 400,000 jobs. The auto sector's success in Ontario has been an enormous source of pride for the province.

Ontario's auto assembly plants rank among the most productive in North America, benefiting from the province's highly skilled workforce. Ontario's large, diverse auto parts industry includes major global companies and plays an increasingly important role in auto sector innovation. The Province will continue to work with the federal government and Ontario's auto sector to support the sector's move to become more sustainable and globally competitive.

The government's partnerships with manufacturers — such as the Next Generation of Jobs Fund and the Advanced Manufacturing Investment Strategy (AMIS) — are helping companies enhance their competitiveness, preserving jobs today and creating the jobs of tomorrow. To date, AMIS has made loan commitments of almost $100 million to support innovative projects. These loan commitments will generate $890 million in new investments and support the creation or retention of about 4,000 jobs in 15 communities over a five-year period.

Ontario will provide an additional $110 million of tax relief for manufacturers in 2011–12 by paralleling the federal extension of the temporary accelerated 50 per cent straight line Capital Cost Allowance (CCA) rate for manufacturing and processing machinery and equipment investments made in 2010 and 2011.

In addition to the targeted tax relief in this Budget, the government proposes significant tax reform that would include moving to a single sales tax system and cutting the Corporate Income Tax rate for manufacturers to 10 per cent from 12 per cent on July 1, 2010.

The tax savings provided by the elimination of Capital Tax for manufacturers and the proposed new business tax relief in this Budget would provide more than $1.3 billion per year, when fully implemented, in additional tax relief for Ontario's manufacturing sector.

The Northern Economy

The government and the people of northern Ontario are working together in these challenging times to craft a growth plan for the region that will help it compete in the evolving global economy. Research done to support this plan shows that the region is establishing a presence in new sectors, such as the bioeconomy, as well as enhancing its research and commercialization capacities. At the same time, established sectors, such as mining and forest products, remain important cornerstones of the northern economy. Reaching new markets and generating new ideas, products and processes are essential. Innovation will help these sectors be competitive and sustainable in the future.

Transportation infrastructure is also critical to the success of business in Ontario's northern communities. The government is investing a record $648 million in 2009–10 in provincial highway projects in the north. Key northern transportation investments through the Northern Highways Program include the ongoing widening to four lanes of Highway 69 to Sudbury and Highway 11 to North Bay. The Province will also proceed with a new project to widen Highway 11/17 east of Thunder Bay. To support the forest products and mining sectors, the Province is planning to work with the federal government to make new investments to improve resource access roads.

Ontario's most isolated northern communities face unique challenges. The Province plans to invest additional resources in its remote airports, its winter-road network and the remediation of the Mid-Canada Line radar sites. The Province invites its federal partner to join in these investments.

The forest products sector is being challenged by increasing global competition, a slumping
U.S. housing market and the volatility of the Canadian dollar. These challenges underline the need for the sector to capitalize on new opportunities and improve competitiveness.

This Budget announces immediate steps to further help the forest products sector, including:

• providing about $58 million to extend by one year the Northern Pulp and Paper Mill Electricity Transition Program, which will provide electricity price rebates of 1.8 cents per kilowatt-hour to qualifying mills; and
• extending, for one year, reductions to the white birch and poplar stumpage rates.

The government will also review Ontario's forest tenure and pricing systems, exploring options to improve their design. Working with industry, environmental groups, Aboriginal communities and the broader public, the government will help create the best environment possible for Ontario's forest product businesses to succeed, while balancing this with sustainable practices.

Mining is a significant driver of economic growth in northern Ontario, which is home to Ontario's 27 metal mines, five of the province's 14 major industrial mining operations, most of Ontario's gemstone operations, and an estimated 400 mining service and supply companies.

Metal prices have dropped significantly from recent highs, and the current global economic crisis continues to create challenges for the sector. The government is taking measures to help the mining sector. This spring, the government will introduce changes to the Mining Act that promote balanced development to benefit all Ontarians, while supporting a vibrant Ontario minerals industry. The proposed legislative changes would also establish a framework that would make significant strides in Aboriginal consultation. The government is providing $40 million over three years for initiatives to support Mining Act modernization.

The government will provide $2 million annually for the next four years for mining and forest product equipment and services companies and sector associations to expand their export capacity and increase sales to international markets.

Agriculture

With crop and livestock sales totalling close to $9 billion, Ontario farmers make an important economic contribution to the province. To help Ontario farmers, this Budget announces:

• $8 million annually, starting in 2009–10, to promote Ontario food products to the broader public sector;
• $1.5 million for the Ministry of Agriculture, Food and Rural Affairs to plan the development of new agri-food research centres focused on livestock and crop production, renewable energy, nutrition and health. The centres will contribute to market-driven research, development and adaptation for the commercialization of value-added agricultural products, with active participation by all partners, including government, communities, academic institutions and industry; and
• food producers will be better able to sell, and consumers will be better able to identify, Ontario foods with clearer Ontario Food definitions. Developed with the industry and tested through consumer research, each definition includes a high threshold for Ontario content.

Small Business

A strong small business sector is important to Ontario's economic success. It provides important entrepreneurial dynamism to the economy of the province. This Budget proposes targeted tax measures, in addition to a comprehensive tax reform package, that would provide more than $1 billion over three years, beginning in 2010–11, to support Ontario's small businesses. The proposed targeted tax measures include:

• providing enhanced refundable tax credit rates for small businesses that hire apprentices and
  co-op students;
• extending the refundable Ontario Innovation Tax Credit to more small and medium-sized businesses; and
• providing a temporary accelerated depreciation for buying eligible computers and software.

Creating Jobs Tomorrow

In this Budget, the McGuinty government is proposing to do more to help those being hurt, right now, by the global recession.

As outlined earlier in this chapter, the government is investing $32.5 billion in infrastructure spending over the next two years, creating an estimated 300,000 jobs. It is also investing more than $750 million in job creation and skills and literacy training. It is investing $130 million in new support for agriculture, mining and forest products.

As critical as short-term stimulative measures are, they are not enough. Managing the challenges posed by this economic crisis is not enough. Ontario must lead. Ontario must take bold action now to build a stronger and more powerful economy for the future.

When the economy recovers from this global recession — and it will — Ontario must be poised to take advantage of the next generation of growth, in order to create jobs and protect and enhance the public services that matter most to Ontarians.

To build Ontario's economy for the future, the McGuinty government is proposing a comprehensive tax reform package.

Starting in July 2010, subject to the approval of the legislature, Ontario would move to a single sales tax that is based on value-added taxation. More than 130 countries in the world have already adopted such a tax, which is overwhelmingly recognized around the world as being superior to a Retail Sales Tax (RST) in increasing investment and productivity.

To help Ontarians through the adjustment period and to provide ongoing tax relief, the government proposes to provide $10.6  billion over three years in tax relief for people.

Over the same period, the government is proposing to provide $4.5 billion in tax cuts for businesses, including reducing the tax rate for small business and eliminating the small business surtax.

The tax measures proposed in this Budget would make Ontario one of the most attractive jurisdictions in the industrialized world for new investment. Attracting new investment to the province will lead to future job creation.

This comprehensive tax reform package is the single most significant action the government can take at this time to strengthen the Ontario economy for the long term. It would provide a lifeline to thousands of businesses today and would position the economy for rapid growth as Ontario emerges strongly from the economic downturn.

To boost Ontario's competitiveness further, this Budget also makes investments to grow a greener economy, accelerate innovation and attract investment.

The government's tax reform package — along with new investments in a green economy, innovation and to attract investment — would position the economy for long-term competitiveness, leading to economic growth and jobs, and preserving and enhancing the public services that matter most to Ontario families.

Ontario's Tax System

Building Ontario's Economic Future

Five years ago, the McGuinty government was elected on its commitment to strengthen the public services Ontario people and families need to reach their full potential — publicly funded education, universal health care, modern infrastructure, support for vulnerable citizens and a greener Ontario.

These investments strengthen the programs and services that matter most to Ontarians and also strengthen the economy. Ontario's well-educated workforce, universal health care system and modern infrastructure are key to its economic success and competitiveness.

A strong, competitive economy that invests in people and businesses is more productive, creating more wealth and jobs, and ultimately improving the quality of life for all citizens.

The government has already taken several steps to improve Ontario's competitiveness by lowering business costs. Since 2004, the Province has made strategic tax cuts that have already saved Ontario businesses $3.2 billion and, when fully implemented, will provide tax relief of nearly $3 billion annually. These strategic tax cuts include eliminating Capital Tax for manufacturers retroactive to 2007 and fully eliminating Capital Tax on July 1, 2010.

But more must be done. The current global economic crisis has heightened the responsibility of government to do all it can to strengthen Ontario's economy for the long term.

Returning to growth is not enough. The economic growth levels that Ontario experienced prior to the world economic crisis will not be enough to enhance valued public services and to continue to reduce poverty levels.

The government of Ontario does not control monetary policy. It does not control international markets. It cannot affect the global economic downturn. However, the government does control the province's tax structure.

The government is therefore taking bold action to reform Ontario's tax system.

Reforming Ontario's tax system is the single most effective step the government can take to help create jobs and position the economy for future growth.

Reforming Ontario's tax system is the essential next step in the McGuinty government's plan to build Ontario's future economy, which would improve the quality of life for all Ontarians.

The Need for Change

In today's global economy, Ontario has no choice but to compete to attract the investment needed to grow, leading to job creation and maintaining a high and rising standard of living.

Ontario's current tax system imposes too high a burden on investment and income — key drivers of prosperity, growth and job creation.

Lower Corporate Income Tax (CIT) rates would boost new investment.

As well, numerous studies and groups have said that a crucial measure the government can take today to promote long-term economic growth is to reform the tax system by replacing the RST with a single value-added tax. Value-added taxation is overwhelmingly accepted around the world as a more efficient form of taxation than a retail sales tax. Among the 30 developed countries that belong to the Organisation for Economic Co-operation and Development (OECD), only the United States does not have a value-added tax.

The province needs business and sales tax systems that maximize its international competitiveness. Bold action is needed now to move the province to the next level of global competitiveness, so that Ontario can take advantage of the opportunities of the future.

The government is taking action.

Comprehensive Tax Reform Package

To ensure that the province is poised to take advantage of the next generation of jobs and economic growth, the government is proposing to fundamentally reform Ontario's tax system.

There has never been a more appropriate time for this kind of reform. This balanced, effective approach would position Ontario's economy for long-term competitiveness. It would lead to economic growth and job creation, which in turn would preserve and enhance the public services that matter most to Ontario families.

The proposed personal, corporate and sales tax changes would enhance Ontario's competitiveness by lessening the tax burden on investment and income. Replacing two sales taxes with one would save businesses more than $500 million a year in compliance costs. Businesses would also have a greater incentive to reinvest profits, promoting expansion and growth, permitting them to reduce prices, invest in productivity improvements and create jobs.

Reforming Ontario's Sales Tax

Working in partnership with the federal government, Ontario proposes to move to a federally administered single sales tax.

Pending legislative approval and Ontario and Canada signing a tax coordination agreement, the single sales tax would take effect July 1, 2010 with a combined rate of 13 per cent, with the provincial portion at a rate of eight per cent and the federal portion at a rate of five per cent.

Implementation of the single sales tax would bring Ontario into line with what is viewed as the most efficient form of sales taxation around the world.

The single sales tax would reduce the cost of Ontario's exports, making the province more competitive and boosting a sector of the economy that has been particularly hard hit by the economic downturn.

With the added efficiency of a single sales tax, Ontario would be well positioned as the global
economy recovers.

The single sales tax would be largely consistent with the federal Goods and Services Tax (GST). The single sales tax would not be charged on a range of items, such as basic groceries, prescription drugs, and medical devices. Like the GST, the single sales tax would be levied on most other goods and services.

The government is proposing a number of made-in-Ontario components to meet the province's unique requirements:

• Children's clothing and footwear, children's car seats and car booster seats, books, diapers and feminine hygiene products would be exempt from the provincial portion of the single sales tax.
• Purchasers of new homes worth up to $500,000 would receive a housing rebate on the provincial portion of the single sales tax. The proposed provincial rebate rate would be more than twice as generous as the GST housing rebate rate and is estimated to return $1.1 billion per year to homebuyers. The effect of the housing rebate would be to ensure that, on average, new homes under $400,000 would not be subject to an additional tax burden.
• To help small businesses make the transition to a single sales tax, the government would provide up to $400 million in one-time transition support in the form of a sales tax credit.
• Municipalities, hospitals, universities, colleges, school boards, charities and qualifying non-profit organizations would receive rebates to ensure the net effect of the provincial portion of the single sales tax would be fiscally neutral for each of these sectors.
• Under the single sales tax, the provincial portion of the tax rate on transient accommodation, such as hotel rooms, would rise from five per cent to eight per cent. Approximately $40 million of annual net revenue associated with this difference in rates would be allocated to support destination marketing in Ontario tourism regions, once these are established.

For people:

To help Ontarians through the period of adjustment to the single sales tax, and to provide ongoing tax relief, the McGuinty government is proposing $10.6 billion in tax relief for people over three years, including:

• $4 billion in cash payments to 6.5 million Ontario families and individuals — totalling up to $1,000 for families and up to $300 for single people — in 2010 and 2011 to ease the transition to a new single sales tax;
• a new permanent $260 refundable sales tax credit for low- to middle-income adults and children;
• an enhanced refundable property tax credit to continue providing relief to low- and middle-income homeowners and tenants; and
• $1.1 billion in ongoing, broadly based Personal Income Tax (PIT) cuts, by reducing the first bracket tax rate from 6.05 per cent to 5.05 per cent, the lowest rate of any province in Canada.

Ontario's proposed PIT rate reduction, enriched sales tax credit and enhanced property tax credit would increase the progressivity of Ontario's tax system by providing a greater share of the tax relief to low- to middle-income individuals and families.

For businesses:

The McGuinty government is proposing tax cuts for business that would result in $4.5 billion in tax relief for businesses over three years. When the proposed tax reform measures are fully phased in, the marginal effective tax rate on new investment in Ontario would fall by more than half, from 32.8 per cent in 2009 to 16.2 per cent in 2018. This would increase investment and productivity, leading to new job creation.

• The proposed business tax measures include:
  • cutting the Manufacturing and Processing CIT rate from 12 per cent to 10 per cent, effective July 1, 2010;
  • cutting the general CIT rate from 14 per cent to 12 per cent by July 1, 2010 and to 10 per cent in 2013;
  • cutting the CIT rate for small business from 5.5 per cent to 4.5 per cent, effective July 1, 2010;
  • eliminating the CIT small business deduction surtax, effective July 1, 2010, making Ontario the only Canadian jurisdiction that does not claw back its small business deduction; and
  • exempting more small and medium-sized businesses from the Corporate Minimum Tax and cutting the rate for large businesses from 4 per cent to 2.7 per cent effective July 1, 2010.

The Budget also proposes targeted tax relief of more than $940 million over four years to help seniors and families, key sectors in the economy, innovation and training.

Overall, the tax measures proposed in this Budget, net of federal transitional assistance of $4.3 billion, would reduce Ontario revenue by $2.3  billion over four years. See Chapter III: Reforming Ontario's Tax and Pension Systems for further details of the proposed tax measures.

Growing the Green Economy

The global trend towards fighting climate change and ensuring environmental sustainability presents enormous economic opportunities. The potential for growth in sectors such as clean energy, green transportation and energy efficiency is significant. Jurisdictions that embrace the shift to a low-carbon, sustainable economy — aligning environmental goals with economic ones — will see more robust growth, more jobs and higher wages. Investments will gravitate to those jurisdictions that demonstrate vision, creativity and leadership.

Since 2003, the government has pursued policies that position Ontario for success in the green economy, including making its electricity supply cleaner, making breakthrough investments in public transit and preserving natural resources such as the Greenbelt and the northern boreal forest. The current global economic downturn is no reason to slow these efforts. Indeed, the economic challenges facing Ontario families underline the need for the government to work even harder to ensure that Ontario is a leader in the transition towards a greener economy, attracting more green jobs sooner.

Central to the government's thinking on energy has been the remediation of greenhouse gases (GHG). The government's commitment to the replacement of coal-fired electricity generation and support of renewable electricity and conservation programs would reduce GHG emissions from the electricity sector and contribute to addressing climate change challenges. To date, coal use in Ontario is down by almost 40 per cent. By 2014, Ontario's electricity needs will be met without coal. Ontario's coal replacement is the single largest GHG reduction initiative in Canada.

As carbon pricing becomes a reality, those jurisdictions that move away from carbon-based energy will enjoy a significant economic advantage.

The government recognizes that Ontario's power grid is where economic and social interests meet. Ontario's power sector is not only an enabler of efficient, reliable energy, it has the potential to be a key engine of economic development and prosperity.

On February 23, 2009, the government introduced Bill 150, the Green Energy and Green Economy Act, 2009, to power the transition to a cleaner, greener economy and support the creation of an estimated 50,000 jobs in the first three years.

The government will make Ontario a champion of a green economy, with a sweeping group of initiatives that build on the province's strong record of protecting its natural resources. They include:

• $250 million over five years for a new Emerging Technologies Fund that will include investments in green technology companies;
• approximately $390 million to match Ontario's share of the federal Green Infrastructure Fund to develop initiatives that assist in the implementation of the proposed Green Energy and Green Economy Act, 2009, including expediting the growth, transmission and distribution of clean, green renewable energy across Ontario;
• $50 million over five years to enable the research, capital and demonstration projects necessary for the development of a smart grid in Ontario;
• accelerating the government's significant investments in public transportation and mass transit;
• reducing energy costs and developing marketable expertise through a significant retrofitting program that focuses on government buildings, schools, social housing, homes and commercial buildings;
• using Ontario's buying power by dedicating $30 million annually to support Ontario's emerging innovative green technology companies by providing initial purchases of their products and by showcasing and demonstrating the effectiveness of those products to potential customers here and around the world;
• $5 million for the Sustainable Prosperity Research and Policy Network at the University of Ottawa, which will help develop a new generation of market-based environmental policy approaches that promote green economic development;
• $5 million over two years to develop a Green Jobs Skills Strategy that responds to labour demand in the emerging green energy sector, including electricity;
• building on Ontario's world-leading commitment to phase out the use of coal-fired electricity generation, the government will continue to work closely with the province of Quebec on cap and trade and will continue to make progress as a member of the Western Climate Initiative towards the development of a cap and trade system for North America in 2012; and
• proposed amendments to the Assessment Act and regulations under that Act to provide that the assessment of properties would not be affected due to energy-efficiency enhancements.

The public sector — both the government and the broader public sector — will show leadership by conserving energy and using it more efficiently. This strategy will help lower GHG emissions. It will be informed by the work of David Ramsay, Parliamentary Assistant to the Premier, who has been asked to identify the carbon footprint of the Ontario Public Service and recommend means and strategies to reduce emissions based on expert advice and experience from other jurisdictions.

Ontario is also building a cleaner and greener electricity system. The government's plan for energy includes replacing coal-fired generation, reducing electricity demand by 6,300 megawatts (MW), and dramatically increasing renewable energy capacity. The replacement of coal-fired generation will be completed by 2014. In September 2008, the Minister of Energy and Infrastructure directed the Ontario Power Authority (OPA) to review its targets to maximize the potential for conservation and renewable energy.

Since October 2003, approximately 4,700 MW of new power generation have come online, including almost 1,000 MW of new renewables. Another 6,300 MW of electricity supply projects are currently underway, including about 1,200 MW of renewables. These projects underway represent approximately $12 billion in investments and are estimated to create about 100,000 jobs over the construction period.

In addition, the OPA also has 5,200 MW of renewable, cogeneration and gas-fired generation underway or procurement processes in progress or in the planning phase.

The government is moving forward with a competitive process to select a nuclear reactor vendor for two new units at Ontario Power Generation's (OPG) Darlington site. In 2008, OPG began planning the refurbishment assessment for Darlington. It is also proceeding with its Pickering B refurbishment feasibility assessment.

Accelerating Innovation

Now more than ever, Ontario's ability to compete for jobs and investment depends on creating economic value through innovation. This Budget announces additional tax relief and over $785 million in initiatives that support key partnerships and stimulate Ontario's creative cluster.

Supporting Research and Technology

Effective partnerships are catalysts that generate new ideas and bring new products and services to market. Ontario-grown scientific solutions need to be developed and utilized. This Budget proposes more than $110 million in additional tax relief in 2009–10, and $715 million in investments to support key partnerships in innovation and encourage business to develop new products and services. These investments are on top of the approximately $3 billion already committed by the Ministry of Research and Innovation over eight years to 2011–12. They include:

• $300 million in capital funds over six years for research infrastructure, which will be available to leverage funding from the federal Canada Foundation for Innovation;
• $100 million in additional operating funds over four years for research performed in the biomedical field, focusing on genomics and gene-related research. This funding, as well as the funding for research infrastructure, will be delivered through the Ontario Research Fund;
• $5 million to support the Ontario Genomics Institute, an important partner in fostering genomics research in Ontario, including the administration of Genome Canada research projects awarded in Ontario;
• $250 million over five years for a new Emerging Technologies Fund that will focus on clean technologies, health and life sciences, and information and communication technologies, including digital media;
• $50 million over four years to enhance the successful Innovation Demonstration Fund. Through the Fund, the government will continue to partner with innovative companies to develop emerging technologies, with a preference toward bio-based, environmental and alternative energy technologies;
• $10 million over three years to the Colleges Ontario Network for Industry Innovation to assist small and medium-sized enterprises with hands-on applied research, technology transfer and commercialization;
• $110 million of tax relief in 2009–10 from paralleling the proposed federal temporary 100 per cent accelerated CCA rate for eligible computers and software acquired after January 27, 2009 and before February 2011; and
• $2 million a year in proposed tax relief to extend the 10 per cent refundable Ontario Innovation Tax Credit to more small and medium-sized corporations that perform Scientific Research and Experimental Development (SR&ED) in Ontario.

The Entertainment and Creative Cluster

With employment of 276,000 in 2008, Ontario has the third-largest entertainment and creative sector in North America, after California and New York, and is the leading province in film and television production, book and magazine publishing, and sound recording. Ontario is a solid international competitor in the rapidly growing interactive digital media sector.

The government's ongoing support is helping to strengthen the competitiveness of Ontario's entertainment and creative industries, an important component of the new knowledge economy.

This Budget is proposing about $100 million annually in additional tax relief and investments of about $30 million to support the entertainment and creative cluster. These measures include proposals to:

• enhance tax support for the creation of interactive digital media products in Ontario;
• enhance the refundable book publishing tax credit;
• make the enhanced tax credit rates under the refundable film and television tax credits permanent, to create predictability and stability for the industry;
• provide $20 million to the Ontario Media Development Corporation (OMDC), an agency of the Ministry of Culture, which supports a number of Ontario's creative industries as they compete domestically and globally; and
• invest $10 million in a pilot program, administered through OMDC, that would refund a portion of the costs associated with intellectual property development to Ontario-based companies in the screen-based industries.

See Chapter III: Reforming Ontario's Tax and Pension Systems for further details of the proposed tax measures.

Tourism

The February 2009 Tourism Competitiveness Study, Discovering Ontario: A Report on the Future of Tourism, noted the significant economic contribution tourism makes to the province, with receipts totalling $22 billion annually. The study also noted that, as vital as Ontario tourism is today to creating jobs and growth, its long-term economic potential is greater still.

Approximately $40 million of the annual net revenue from the provincial portion of the single sales tax would be allocated to support destination marketing in Ontario tourism regions, once these are established.

This Budget also announces an additional $41 million, over three years, to enhance Ontario attractions including:

• $33 million for revitalization projects associated with Huronia Historical Parks and the St. Lawrence Parks Commission; and
• $8 million for infrastructure improvements at Fort William Historical Park.

Attracting Investment

Ontario's ability to attract new business investment is critical for job creation and economic prosperity. In 2008, the government created the Ministry of International Trade and Investment, which works internationally to promote trade and attract investment to Ontario, developing new opportunities for Ontario workers. In this Budget, the government is announcing additional measures to enhance Ontario's business climate.

The comprehensive tax package proposed by the government would reform Ontario's tax system so that, when fully implemented, Ontario's marginal effective tax rate on new capital investment would be cut in half — from 32.8 per cent to 16.2 per cent.

This would make Ontario one of the most attractive jurisdictions in the industrialized world for new investments.

This Budget is providing $1.2 million in ongoing operating funding beginning in 2009–10 to the Toronto Region Research Alliance (TRRA), a non-profit organization actively working to strengthen Toronto's ability to attract and grow innovative, research-intensive companies.

Announced on March 6, 2009, the Open For Business strategy is an ongoing plan to make government faster and friendlier for families and businesses while still protecting the public good. As part of the strategy, the government has introduced three initiatives:

• Open For Business will reduce the amount of regulatory burden in Ontario by 25 per cent in the next two years, while continuing to protect public safety.
• A new 1-800 phone number for business inquiries will replace the 12 existing ones.
• Ontario businesses will be able to use their federal Business Number in dealing with provincial ministries of Revenue and Labour, with other ministries and agencies to be included later.

Open For Business complements other improvements in Ontario program and service delivery in a number of important areas, including:

• streamlining to six months the environmental assessment (EA) process for transit projects;
• proposed streamlining of approvals for renewable energy projects; and
• working with the federal government to streamline environmental assessments, leading to an integrated efficient review for infrastructure projects.

The Ontario government continues to look at ways to simplify and modernize its processes and services, in order to keep pace with the needs and expectations of businesses across Ontario.

To this end, the Ministry of Revenue will be engaging Ontario's businesses in a renewed and determined effort to modernize its service commitments and standards for Ontario's tax clients. Clear, timely, accurate and transparent services and processes will help foster confidence and reduce administrative burdens on business.

The ministry is also continuing its work with business on the Taxes Administration Act initiative, announced in the 2008 Budget, with a view to easing the compliance burden, consolidating tax administration rules and using consistent, simplified legislative language.

The single sales tax proposed in this Budget would reduce tax compliance costs for Ontario businesses by over $500 million a year. This is in addition to the estimated compliance savings of up to $100 million a year from the transfer of Ontario corporate tax administration to the Canada Revenue Agency in 2008.

The government will also propose amendments to the Bailiffs Act and Collection Agencies Act to streamline and modernize bonding requirements for registrants and appointees by permitting the Minister of Small Business and Consumer Services to specify security requirements by regulation.

Advancing Ontario as a World-Class Financial Jurisdiction

Global financial markets have faced significant challenges over the past year, driven in part by the fallout from subprime mortgage lending in the United States. Although Ontario has not escaped the global financial crisis, integrity and strong regulation and oversight at both the provincial and federal levels have left the province's financial markets well positioned compared to other jurisdictions.

On January 12, 2009, the federal Expert Panel on Securities Regulation presented its final report, which outlined a plan to establish a common securities regulator. Ontario has long advocated for a common regulator, and is pleased to see the Panel's recommendations endorse the government's position. The government believes that the regulator should be headquartered in Toronto.

The government will work in the coming year with federal, provincial and territorial governments to make this initiative a reality. A common regulator would provide investors with greater protection, through more effective regulation and enforcement, while lowering the cost of raising capital for businesses. This initiative would build upon and further the government's efforts to strengthen investor protection and enforcement, including the recent introduction of amendments to the Securities Act to facilitate the enforcement of orders across jurisdictions within Canada. The government also plans to propose reforms to registration requirements and registration and prospectus exemptions, as a further step toward a common regulator and enhanced investor protection.

The recent turmoil in financial markets shows that it is critical to have tools available that allow for a prudent, proactive response where immediate action is required to protect the public interest. To that end, the government will propose amendments to the Securities Act and the Commodity Futures Act that would give the government and the Ontario Securities Commission additional authority to respond to extraordinary circumstances involving a major market disturbance. This amendment would correspond with the legislative approach taken in the United States and the United Kingdom, as well as with recommendations contained in the recent report from the federal Expert Panel.

Canada has the soundest banking sector — the majority of which is based in Toronto — in the world. Toronto is ranked as the eleventh most competitive financial centre in the world on the Global Financial Centres Index. Toronto also has a highly educated workforce and a diverse population, and is a city in which people from around the world want to live and invest.

This Budget announces that the government, in partnership with the Toronto Financial Services Alliance (TFSA), private-sector partners and the City of Toronto, will help fund a strategic positioning paper to provide the building blocks necessary to move Toronto even further forward as a global financial centre. As part of this effort, the government will partner with the City of Toronto to provide the TFSA with the necessary resources to promote Toronto as a financial centre.

These steps, along with other initiatives announced in the 2009 Budget, will help to position Toronto, and Ontario as a whole, among world-leading destinations for businesses in the financial services sector, providing economic growth and high-paying jobs for Ontarians now and in the future.

Strengthening Ontario's Pension System

A strong and modern pension system enhances Ontario's competitiveness through its ability to attract high-skilled labour. It improves quality of life for workers, retirees and their families. It bolsters capital markets — with pension funds constituting the second-largest source of investment capital in Canada after the chartered banks.

The current economic downturn has affected pension plans and retirement savings, underscoring the need for pension reform.

The government is addressing the short-term economic challenges pension plans are facing, while moving forward with long-term reforms to strengthen the pension system for Ontarians and increase Ontario's competitiveness.

Addressing Current Economic Challenges

In December 2008, the government announced it would introduce amendments to the Pension Benefits Act in the spring of 2009 to provide pension plans with solvency funding relief — eight measures designed to protect jobs and families during rapidly changing economic conditions. If passed, legislative amendments would allow regulatory changes to be made retroactive to September 30, 2008. The proposed measures would:

• allow plan sponsors to spread their solvency payments over a longer period, freeing resources for operations, including other payroll expenses; and
• ensure that workers and retirees have clear information about the financial health of their pension plans, while helping to protect benefit security.

This Budget includes additional details about the government's solvency relief plan, which are outlined in Chapter III: Reforming Ontario's Tax and Pension Systems.

Moving Forward with Long-Term Reform

Despite major economic and demographic shifts, there have been no significant reforms to Ontario's pension system for over 20 years.

To address the need for reform, the government created the Expert Commission on Pensions, which was chaired by noted academic Harry Arthurs. The Commission conducted extensive consultations — receiving 127 submissions from interested Ontarians and stakeholder groups — and commissioned 17 research studies.

The Commission's report, A Fine Balance: Safe Pensions, Affordable Plans, Fair Rules, was an important step in developing the government's pension reform agenda. It was released in November 2008, at which time the government announced increased resources for the Financial Services Commission of Ontario and launched a short feedback period on the Expert Commission's report. This feedback period ended on February 27, 2009, and the government is now reviewing the many comments it received.

The Province is committed to moving forward with pension reform, and plans to introduce legislation in the fall of 2009. The government's reforms will be guided by the following principles:

• transparency — ensuring mechanisms are in place for stakeholder feedback and posting proposed regulatory changes;
• balance — considering both benefit security and plan affordability;
• cooperation — collaborating productively with federal and provincial partners, including harmonizing rules with other jurisdictions where possible;
• clarity — striving for clear, user-friendly rules;
• coverage — striving to expand pension coverage for Ontarians;
• competitiveness — ensuring any changes position Ontario for long-term economic success; and
• flexibility — responding to current economic challenges.

To assist with the reform process, the government will establish a Pension Reform Advisory Council to provide practical feedback on specific pension reform proposals.

This Budget proposes further steps to reform pensions — steps that are consistent with the principles outlined in the Expert Commission's report. These changes, if passed, would:

• simplify and clarify pension rules faced by members, pensioners and spouses in the difficult process of marriage breakdown; and
• permit plans to offer phased retirement to allow members at retirement age to continue working while receiving a pension and continuing to accrue pension benefits.

The government will continue to work with the Federal–Provincial–Territorial Working Group on Pensions. One of Ontario's priorities is to review the tax and investment rules relating to pension plans, ensuring these rules better reflect today's changing economy. Ontario will also work to finalize a proposed multilateral agreement to establish clear rules for the administration and regulation of multi‑jurisdictional pension plans.

In addition to reforming the Pension Benefits Act, the government is committed to exploring broader public policy issues relating to the adequacy of retirement incomes and the extent of pension coverage. The government regards these issues, whose profile has been raised due to the economic downturn, as central to the pensions debate. Through the Federal–Provincial–Territorial Working Group on Pensions, Ontario will collaborate with the federal government and its provincial partners to review possible strategies to explore these issues.

Further details of these proposed legislative and other pension reform initiatives are outlined in Chapter III: Reforming Ontario's Tax and Pension Systems.

Towards an Independent and Sustainable Pension Benefits Guarantee Fund

The Pension Benefits Guarantee Fund (PBGF) was established in 1980. Although the PBGF is supported by assessments on plan sponsors, its assessments and benefits have not been reviewed for many years.

Ontario's Expert Commission on Pensions recently recommended that the PBGF be examined to determine appropriate fees and guarantees and to ensure it is governed on self-financing principles. The Commission also recommended that “the PBGF should be administered, preferably at arm's length from the pension regulator, by an agency.”

The government is taking the prudent step of reviewing the stability and financial status of the PBGF through an independent actuarial study — the first since the PBGF's inception. Once the study is complete, the government will consider establishing an independent PBGF agency. The government intends that the PBGF would operate on sound principles with coverage levels and assessments that are sustainable for the long term.

As part of the process of creating an independent, sustainable PBGF, the government will introduce amendments to the Pension Benefits Act to clarify that the PBGF is a self-sustaining fund, independent of the government. The amendments would give the government the flexibility to make grants to the PBGF, while also confirming that the government is not required to make either grants or loans. The amendments would also confirm the existing regulatory requirement that the PBGF's liability to guarantee pensions is limited to the assets of the PBGF.

Investing in Children and Families

The current global economic crisis should not prevent society from helping its most vulnerable members. In fact, there is now an even more compelling need for immediate measures to support vulnerable Ontarians and families affected by the current economic downturn. Reducing poverty gives people opportunities to achieve their potential, narrows Ontario's prosperity gap and strengthens the economy.

This Budget continues to support the most vulnerable Ontarians by proposing to accelerate the phase-in of the Ontario Child Benefit (OCB), increase social assistance rates and raise the minimum wage as scheduled. It also proposes to invest in building stronger and safer communities by:

• supporting local community initiatives;
• giving youth more access to jobs and training;
• building new affordable housing and renovating existing housing for low-income families;
• providing temporary financial assistance to help low-income tenants avoid losing their homes; and
• retrofitting social housing to help conserve energy.

These proposed initiatives would advance the government's Poverty Reduction Strategy and help families who have been hit hard by these difficult economic times.

Accelerating Ontario Child Benefit Payments

To move forward on its Poverty Reduction Strategy, the government is proposing to accelerate the phase-in of the OCB by two years, providing low- and moderate-income families with up to $1,100 annually per child starting in July 2009 — an 83 per cent increase in the maximum benefit compared to 2008. Currently, the OCB is scheduled to reach a maximum level of $1,100 annually per child in July 2011. Other OCB program parameters and eligibility requirements would not change.

Table 2
Accelerating the Ontario Child Benefit Payment
(Maximum Annual $ Per Child Per Benefit Year¹)

	2008–09	2009–10	2010–11	2011–12
Currently Scheduled OCB Levels	600	805	900	1,100
Proposed Accelerated OCB Levels	600	1,100	1,100	1,100
Increase due to Proposed OCB Acceleration	–	295	200	–

• ¹ The OCB benefit year is from July 1 to June 30.
• Source: Ontario Ministry of Finance.

The proposed acceleration would provide over $400 million more in children's benefits over the next three years. As outlined in previous Budgets, adjustments would be made to the Ontario Child Care Supplement for Working Families (OCCS) and social assistance benefits for children to further consolidate them with the OCB.

Once the proposed OCB acceleration is implemented, families with children would receive up to $500 more per child in OCB payments than in 2008.

In December 2008, the Poverty Reduction Strategy committed to a maximum OCB level of $1,310 annually per child within five years. The government remains committed to this goal.

The government would also continue to provide funding equivalent to the proposed OCB level for children and youth in the care of children's aid societies. This support would also increase to $1,100 annually per child starting in July 2009. The government will introduce legislation to support the administration of these OCB-equivalent payments.

Community Hubs

As a component of the Poverty Reduction Strategy, the government will invest $3 million in 2009–10 to help establish community hubs in selected low-income neighbourhoods. The community hubs will bring together a range of community partners to identify and provide social, community and educational supports.

Supporting Ontarians Receiving Social Assistance

In this Budget, the government is proposing to increase the adult basic allowance and maximum shelter allowance by two per cent in November for Ontario Disability Support Program recipients and in December for Ontario Works recipients. The initiative would complement the government's Poverty Reduction Strategy by improving the incomes of social assistance recipients. This would include families receiving Temporary Care Assistance and Assistance for Children with Severe Disabilities, as well as those living in long-term care homes who receive the comfort allowance.

A single-parent family receiving social assistance with two children aged five and seven would have an annualized income of $22,730 — $1,110 higher than in 2008. This would represent an increase of $5,670, or 33 per cent, from the family's 2003 annualized income of $17,060 (see Chart 9).

Taking into account the increase proposed in this Budget, social assistance rates would rise by 11 per cent since the government first took office in 2003. Municipalities would not be required to contribute to the proposed rate increase until January 2010.

Support for Housing

The government is proposing new housing infrastructure initiatives that will support its Poverty Reduction Strategy. Together with the federal government, the Province plans to invest:

• more than $700 million over the next two years for social housing rehabilitation and energy retrofits;
• more than $360 million to help create new affordable housing for low-income seniors and persons with disabilities; and
• $175 million over the next two years to extend the Canada–Ontario Affordable Housing Program, which is creating new homes for low-income families, senior citizens, persons living with mental illness, and victims of domestic violence.

As part of its Poverty Reduction Strategy, the government is also proposing to provide more than $5 million annually beginning in 2009–10 to ensure stable funding for municipal rent banks across Ontario. To help low-income tenants keep their homes, the government has invested nearly $24 million since 2004 to support rent banks. Provincial rent bank funding has prevented more than 15,500 evictions to date.

Raising the Minimum Wage

In the 2007 Budget, the government announced that the minimum wage would rise to $10.25 per hour by 2010. On March 31, 2009, the minimum wage will increase by 75 cents per hour as planned.

Since taking office in 2003, the government has increased the minimum wage each year to help Ontario's low-income workers. These increases follow a nine-year period during which Ontario's minimum wage was frozen.

Support for Seniors

Doubling Senior Homeowners' Property Tax Grant in 2010

As announced in the 2008 Ontario Budget, the Ontario Senior Homeowners' Property Tax Grant is providing up to $250 to help low- to middle-income senior homeowners pay their 2009 property taxes. Starting in 2010, the maximum grant amount will be increased to $500. Over the next five years, the grant will provide about $1 billion in property tax relief to over 600,000 seniors.

Enhancing Ontario Property and Sales Tax Credits for Senior Couples

Since 2003, the government has made several improvements to Ontario Property and Sales Tax Credits to ensure they better reflect circumstances facing low-income seniors. This Budget proposes to further enhance these credits to ensure that senior couples receiving the guaranteed minimum level of income from governments receive the full benefit from these credits.

Starting in 2010, the Ontario Property and Sales Tax Credits would be replaced with a new Ontario Sales Tax Credit and a new Ontario Property Tax Credit.

Increasing Access to Locked-In Accounts

The Budget also proposes reforms for locked-in accounts to give seniors and other Ontarians more flexibility in accessing the funds in these accounts:

• increasing the amount of unlocking permitted from Ontario Life Income Funds (LIFs) from 25 to 50 per cent; and
• providing a two-year waiver of fees for financial-hardship unlocking applications.

For further details on support for seniors, see Chapter III: Reforming Ontario's Tax and Pension Systems.

Bringing fairness to Ontario

Since 2003, the government has led a campaign to achieve fairness for Ontario. The federal government has responded to some of Ontario's concerns and both levels of government are taking action to help Ontarians meet the current economic challenges. In these times of economic uncertainty, Ontarians expect governments at all levels to work together.

Ontario has fought to ensure that federal funding for health care, postsecondary education and social services, provided through the Canada Health Transfer (CHT) and Canada Social Transfer (CST), treats all Canadians equally. In 2007–08, the federal government began transferring the CST on an equal per capita basis.

Compared to 2008–09, Ontario will increase health sector spending by over $1.8 billion, supported by a $841 million increase to Ontario's CHT payment. This CHT increase includes $489 million in 2009–10 to give Ontario per capita funding equal to the other provinces that receive Equalization. This increase in the CHT provides support to Ontario hospitals and increased funding to the Ontario Health Insurance Plan (OHIP) program.

In 2009–10, Ontario will also receive a $347 million Equalization payment — an amount equivalent to the disappearing federal funding that supports public transit and reductions in medical wait times.

While the Province has a plan to strengthen Ontario's economy and create new jobs, it can do much more, much faster, in partnership with the federal government.

The Need for a Federal Partner to Support Ontario's Workers

Despite recent improvements to the program, Ontario's concerns about Employment Insurance (EI) remain. Almost 70 per cent of unemployed Ontarians do not receive EI total regular benefits, primarily because the program is not designed to meet the changing needs of Ontario's labour force. In 2008, total regular benefits per unemployed person were $5,490 in Ontario, versus an average of $9,560 in the other provinces — a difference of $4,070, or 43 per cent less.

Ontario workers and employers contribute more to the federal EI program than do those in any other province in Canada. Ontarians have contributed disproportionately to the EI program for years and are now asking to make use of that investment. Further, Ontario's share of total EI funding for employment and training services is expected to be about 30 per cent next year, up from 27 per cent in 2008–09. However, this improvement will lapse after two years and remains much lower than Ontario's 42 per cent share of Canada's unemployed workers.

Ontario calls on the federal government to ensure Ontarians have equitable access to the EI program, especially during these difficult economic times. The federal government should also review and change the current EI funding formula for training programs to reflect current labour market conditions.

The Need for a Federal Partner in Early Learning and Child Care

In 2006, the federal government unilaterally terminated the Early Learning and Child Care agreement. With the last federal payment made in 2006–07, Ontario has been able to support almost 8,500 child care spaces across the province, through to 2009–10.

However, beginning in 2010–11, a commitment of ongoing support from the federal government is essential if Ontario is to maintain these child care spaces. Ontario calls on the federal government to reconsider its decision to terminate the agreement. The federal government must initiate new funding measures to support child care.

Competitive Government

Despite the fiscal challenges arising from the economic downturn, the government will not compromise vital public services. In fact, its prudent management is preserving jobs and protecting services.

The government has already made significant headway in modernizing government and managing expenditure growth. Through more streamlined processes, lower administrative costs, better use of technology, and ongoing cost-avoidance and cost-reduction initiatives, the government identified reportable savings of $806 million in its 2007 Budget. Ongoing efficiency initiatives reduced the overall cost of Ontario government administration from 15 per cent of all government spending in 2003–04 to 12 per cent in 2007–08, the second-best efficiency rate in Canada.

Efficiencies are also found in the government's day-to-day interactions with the public. Through the recent pre-budget consultations, new and innovative ways of interacting and consulting with the public were piloted by the Minister of Finance. Contact North is a network of distance education and training access centres bridging 90 communities across northern Ontario. The pilot enabled the Minister to consult with more than one community at the same time. Due to its success, Contact North technology will be more broadly used in future government consultations, thereby reducing travel costs and engaging more Ontarians across the province.

In the 2008 Ontario Economic Outlook and Fiscal Review, the government implemented new expenditure management measures and saved an estimated $111 million in the last five months of fiscal 2008–09, exceeding its original target by almost $3 million. This was bolstered by measures such as reducing travel and consulting costs; freezing the purchase of government vehicles; freezing the existing government real estate footprint and leasehold improvements; and increasing green workplace practices to reduce printing, photocopying and fax costs. Total Provincial expense in 2008–09 has been held to growth of only 0.8 per cent compared to 2007–08, and only 1.2 per cent higher than the 2008 Budget forecast — reflecting the government's commitment to contain spending while protecting key public services during this time of economic uncertainty.

In addition to the efficiency measures introduced in the fall of 2008, this Budget takes another step forward in managing the Province's finances by introducing a $1 billion efficiency target in 2011–12.

The government has already achieved significant savings. Building on this success, innovative efficiency practices and managing overall expenditures will help the government balance the budget by 2015–16. Excluding non-core spending, such as immediate measures to protect and create jobs, core program expense growth will be held to 3.6 per cent on average annually between 2008–09 and 2011–12, lower than the projected 3.8 per cent average annual growth rate for revenue over the same period. Similarly, program expense will be held to 2.3 per cent annual average growth between 2011–12 and 2015–16, lower than the 4.6 per cent growth projected for revenue over the same period.

In December 2008, the government further demonstrated its commitment to prudent use of taxpayer dollars by announcing measures that restrain spending on public salaries. Deputy ministers and senior managers earning $150,000 or more annually will have their base-salary and salary-range increases limited to 1.5 per cent in 2009–10. This Budget proposes changes to the Legislative Assembly Act that, once enacted, would freeze the annual salary of Members of the Provincial Parliament at their current level for that year.

Last fall, the size of the Ontario Public Service (OPS) was frozen at 68,645 full-time equivalent staff. This Budget takes a further step at making the OPS more efficient by reducing its size by five per cent over three years through attrition and other measures. The government recognizes the important work of its public service to deliver vital services to citizens and in showing leadership during times of economic hardship.

The government is also proposing amendments to the Government Advertising Act, 2004 to clarify certain sections. Under the amendments, members of the Executive Council would not be allowed to appear in television, radio, print, cinema and transit advertisements, paid for by the government of Ontario or printed material paid to be distributed to households in Ontario by the government of Ontario.

The government will also propose amendments to the Ontario Provincial Police Collective Bargaining Act, 2006 and Police Services Act to implement agreements reached with the government's bargaining agents, modernizing the labour relations framework for the OPS.

Investing in eHealth

In September 2008, the government launched a new agency, eHealth Ontario, to lead implementation of a coordinated eHealth strategy and the creation of an electronic health record for Ontarians by 2015. Electronic health care records will enable better sharing of health information that will improve patient care and create a more effective and cost-efficient health care system.

Ontario's eHealth strategy will initially focus on achieving three priorities:

• building a diabetes registry to help people with diabetes and their health care providers to control and manage diabetes more effectively in order to reduce associated complications and costs;
• implementing online management of prescription medications to minimize preventable adverse drug reactions; and
• developing an eReferral and Resource Matching system in Ontario's hospitals in order to better manage wait times in their emergency departments and to expedite patient referrals to appropriate care settings.

These initiatives will lead towards the improvement of quality of care received by Ontarians, improve outcomes and help manage health care costs.

OntarioBuys

In the 2004 Budget, the government launched OntarioBuys, an important initiative to reduce the overall costs of broader public sector (BPS) procurement and redirect savings to front-line services.

OntarioBuys is an innovative program designed to find savings from the $10 billion that the BPS spends each year purchasing goods and services. With the health sector accounting for more than 40 per cent of that spending, OntarioBuys initiatives have so far predominantly focused on hospitals' efforts to automate supply chain processes, reduce duplication, and standardize product sourcing, purchasing and payment.

These institutions saved money, improved productivity and freed up much-needed funds to support front-line service. To date, OntarioBuys has helped BPS entities redirect $45 million in savings towards front-line services and is tracking to $100 million in annual savings by 2011–12.

As a major step forward in fiscal accountability, the government of Ontario will propose legislation to expand the OntarioBuys program. This legislation would build on the success of collaborative purchasing by bringing together more BPS partners to leverage the benefits of innovative supply chain leading practices, reduce supply costs and redirect savings towards vital public services. All major BPS entities funded by Ontario's taxpayers would be included under the proposed legislation, which would require the majority of BPS entities to collaborate when buying common goods and services. Through the strengthened mandate of OntarioBuys, it is anticipated that this coordinated and integrated approach to procurement would result in $200 million in annual savings within the first three years of operation. This approach makes sense at a time when operational dollars for BPS partners are so precious.

The BPS holds significant purchasing power, and this legislation would use that purchasing power to benefit Ontarians. By mandating certain procurement activities, such as buying goods and services collaboratively, the government of Ontario would not only drive down costs while maintaining — and even improving — the quality of front-line services, it could also facilitate initiatives that are important to Ontarians, such as the purchase of green products and services.