Global Strategic Consulting, Inc.

The Ontario Budget: Review & Analysis

The Ontario Budget: Review & Analysis

On February 26, 2016, Posted by , In News, By ,,,, , With No Comments

Today Ontario Finance Minister Charles Sousa stood in the Legislature and proudly announced that the government is on track to eliminate the deficit by their target of 2017/18. With recent disclosure that the proposed cap-and-trade legislation will add 4.3¢ on gas and $5.00 a month on natural gas. What does this mean for businesses, especially startups, in Ontario?

The purpose of startups and social enterprise

These are not necessarily mutually exclusive. Social enterprises seek to solve a social need/issue/problem, while startups often fall into that same category; they seek to address a need. In both cases, job creation and innovation are the main drivers. While job creation is more of a by-product of innovation, both are needed for startups to be successful.

This should be the primary motivator for governments to support the startup and social enterprise community. With job creation in high demand and the increased uncertainty in both the domestic and global markets, supporting this innovative community generates jobs, improves the community through innovation, and improves the general economy of the surrounding jurisdiction by attracting investment.

The Ontario Budget

Job creation

Supporting competitiveness and job creation in key industry sectors by partnering with colleges to establish a $20 million fund to be invested over three years. This fund will better connect colleges and Ontario companies on applied research projects that result in breakthrough products and services for sale at home and abroad.

Innovation funds

Ontario is taking steps in this Budget to build upon its R&D capacity in innovative technologies by:

  • Investing $50 million at the Perimeter Institute, a world-leading research centre for theoretical physics, to provide funding through 2020–21. Its research will help foster the next generation of information technology advancements in areas such as quantum computing.
  • Investing $35 million over the next five years to establish a $50 million partnership in the Advanced Manufacturing Consortium. The Consortium will include three Ontario universities — McMaster, Waterloo and Western. This industry–academic collaboration will focus on long-term industrial innovation projects to make Ontario a leader in fields such as additive manufacturing and digital components and devices.

Support for new business

Clean Tech: Ontario will commit $55-million to develop new approaches to make investments in exchange for equity in clean tech firms. This approach is a means to share in the increased value of companies as they grow and succeed.

  • Through its recently announced Green Investment Fund, Ontario will also spur investment and innovation in clean tech solutions by committing $74-million to develop and demonstrate solutions to large emitters that face barriers in reducing GHG emissions. (See later in this chapter for details on the Green Investment Fund.)

Automotive: Through the Business Growth Initiative, Ontario will invest $15-million over four years to boost the competitiveness of the sector by:

  • Investing $5-million over two years to establish an Automotive Supplier Competitiveness Program to strengthen the technological capabilities of small and medium-sized auto parts firms; and
  • Committing $10-million over four years to the Canadian Urban Transit Research and Innovation Consortium to support R&D and commercialization of technologies such as light-weighting and autonomous software, in partnership with the federal and Quebec governments.

Business Growth Initiative: The government will be investing $400-million over 5-yerars to support highly skilled workforce.

  • The Business Growth Initiative is Ontario’s new strategy to increase the province’s global competitiveness. It builds on existing strengths and is based on creating an innovation-driven economy, catapulting more Ontario firms into global leadership, modernizing the regulatory system and continuing the reduction of red tape.

Funding for transitioning businesses (from academic to commercial)

The Strategic Partnerships Stream will explore funding industry-led partnerships and consortia focused on spurring the adoption of these technologies and the development of next-generation products and services, including:

  • The development and testing of connected vehicles — cars that drive themselves and communicate with each other and their surroundings, requiring intensive computing power;
  • Supporting the development and testing of fifth-generation (5G) wireless technologies; and
  • Increasing Ontario’s capacity for smart manufacturing through better integration of information and communications technologies

Programs directed at entrepreneurs and startups

Creating an Innovation-Driven Economy: The Province will help to accelerate Ontario’s transition to the 21st century, innovation-driven economy that thrives on the initiative, creativity, education and skills of its people. The government will make significant investments in innovation and R&D, including the commercialization and adoption of new disruptive technologies.

The Need to Scale Up: Catapulting More Ontario Firms into Global Leadership: Helping Ontario’s small and medium-sized firms get access to the capital, resources and expertise they need to grow will help turn more of Ontario’s small and medium-sized businesses into larger, globally competitive exporters.

Modernizing the Regulatory System and Lowering the Cost of Doing Business: Ontario is establishing new tools to build a smarter regulatory environment that will remove unnecessary red tape and make government rules easier to follow.

Tax incentives

Innovators

Access to capital: The Province recently approved several new prospectus exemptions proposed by the Ontario Securities Commission that are designed to facilitate capital formation and job creation. These include a new crowdfunding exemption regime that allows businesses, particularly those in the early stages of development, to raise up to $1.5 million annually by distributing securities on a prospectus-exempt basis through a registered Internet funding portal.

Government as early adopters of innovation: This pilot project would complement Ontario’s adoption last year of all six recommendations from the Ontario Health Innovation Council, including the establishment of a $20 million Health Technology Innovation Evaluation Fund to support made-in-Ontario technologies, improve patient care and spur economic growth.

Strategic Investments Office: To build upon the government’s strategic partnerships with the private sector, the Province will create a Strategic Investments Office to serve as a one-window point of entry to provide improved investment attraction services for major investment projects, licensing and permit coordination, facilitation of workforce training and site-selection supports. The new office will allow the government to provide a more coordinated response to the various needs of businesses. The Province will also launch an online portal to help firms easily find and navigate the programs and initiatives it provides across government.


Ontario Research Development Tax Credit and Innovation Tax Credit: The government has reduced these two programs tax credits by 1%. While not a huge percentage, it may have further reaching impacts as many, especially in biotech and agritech sectors rely heavily on these incentives to develop new and innovative products and techniques.

Budget breakdown by ministry

Attorney General

  • The government commits to lower auto insurance – details are not presented in the budget documents
  • A new dispute system to resolve auto insurance claims will be in place, dispute resolution applications will be accepted as of April 1, 2016

Aboriginal Affairs

  • Increase in Ministry budget from $74.8-million (2015/16) to $77-million (2016/17)
  • Commitment to working to reassess on-reserve sales of tobacco and gasoline
  • $100-million over 3-years goes to addressing violence against indigenous women
  • Ontario is investing an additional $1.3-million annually in Ontario’s Aboriginal Health Access Centres (AHACs)

Agriculture, Food and Rural Affairs

  • Overall spending is down to $915.9-million, reduction of $28-million from previous year
  • Farmers that wish to expand and produce value-added activities will be taxed at industrial rates for the portion of the farm these activities are produced
  • There will be off sets for cap-and-trade in agriculture – further details are forthcoming

Children and Youth Services

  • The government will be investing $333-million in autism treatment in Ontario over five years
    • How autism services are delivered will be consolidated and rebuilt
  • The government will have younger children assessed faster and receive support sooner
  • Older children with autism will receive more individualized services
  • Over 10-years, the Province plans to provide more than $11-billion in capital grants to school boards
  • $8-million to retrofit Alexander Henry High School in Sault Ste. Marie
  • $9-million to consolidate two schools into a new Greensville Public School in Hamilton
  • $13-million to construct a new École Secondaire Gaétan-Gervais in Oakville
  • $12-million to build a new JK–8 school in Windfields Farm in Oshawa
  • $15-million to rebuild Davisville Junior Public School in Toronto
  • $21-million to replace two schools in Cambridge and Ayr
  • $2-million to create over 70 new child care spaces at Centennial Hylands Elementary School in Shelburne
  • $52-million to build two new schools and four retrofits/additions in Ottawa

Immigration and International Trade

  • Refugees –  additional funding of $2-million in 2016–17
  • The government increased its investment to $12.5-million

Community Safety and Correctional Services

  • No funding announced to support recent PTSD legislation (Bill 163)
  • The government will continue to fund court costs through downloads to municipalities
  • The 2016 budget will have a slight increase to $2.649-billion

Community and Social Services

  • Debit cards will be introduced in 2016 to ODSP (Ontario Disability Support Program) and OW (Ontario Works) recipients.
  • The Special Needs strategy will receive $17.8-billion over the next three years to hire
    • 68 additional service planning coordinators will be hired
    • Up to seven more Regional Service Resolution Agencies to support children with multiple and/or complex special needs
  • ODSP will increase by 1.5% in September 2016
  • OW single recipients will receive an additional $25 top up
  • Municipalities will start cost sharing the top up increase in January 2017
  • The government will reduce claw backs from single parents receiving child support and social assistance
  • A new strategy for Developmental Disabilities will be established with improved and new services that will also engage employers
    • No cost has been announced for the new strategy

Economic Development, Employment and Infrastructure

  • 2016 projections for job creation have dropped drastically:
    • In 2015 the government was predicting 93,000 jobs created in 2016, they are now projection 78,000 – 15,000 fewer jobs projected
  • Employment rates have also seen a decline since 2015’s budget:
    • Last year the government predicted a 1.3% change in employment
    • In the 2016 budget the government is projecting a 1.1% change.
  • $400-million over the next 5-years for investment in supporting a highly skilled workforce
  • $50-million to Perimeter Institute – research centre for theoretical physics –to fund through 2020-2021
  • $35-million over the next 5-years to establish a $50-million partnership in the Advanced Manufacturing Consortium
  • Partnering with colleges to establish $20-million fund in over 3-years
  • $55-million in clean tech
  • $74-million in Green Investment Fund
  • $15-million over 4-years in the following two programs:
    • $5-million over two years to establish an Automotive Supplier Competitiveness Program
    • $10-million over 4 years to the Canadian Urban Transit Research and Innovation Consortium
  • $3-million over 4-years in Bio-Industrial Innovation Canada
  • Super Corridor – $15-million in the U of T towards the Centre for Engineering Innovation and Entrepreneurship
  • Global Export Strategy – $30-million over next 3-years
  • Up to $1-million annually over five years to partner with Prosper Canada provide a range of financial empowerment tools and services to more communities across Ontario
  • Up to $650,000 in matching funding to the OCC to support Funny Money
  • Ontario Community Infrastructure Fund (OCIF):
    • $15 billion for outside the GTA and GHTA
    • OCIF giving cities $100 million per year
      • Expanding $300 million per year by 2018-2019
      • Small Communities Fund – provincial government investing $272-million
        • In southwestern Ontario, the Municipality of Chatham-Kent will receive $2-million
        • In northeastern Ontario, the City of Temiskaming Shores will receive about $1.5-million
        • Township of Havelock-Belmont-Methuen will receive about $1.7-million
        • Town of Cobourg will receive $675,000
      • The Connecting Links program will provide $20-million in 2016–17
      • Funding for this program will increase to $30-million per year by 2018–19
      • Ring of Fire – Ontario has also committed up to $1-billion

Education

  • 3-year annual investment of $5-million in the education sector from 2016–17 to 2018–19 to teach the history and legacy of residential schools
  • $97-million over the next three years to support key initiatives that will help more First Nation, Métis and Inuit learners
  • Youth Job Connection – more than $160-million over two years

Energy

  • Natural gas will be taxed under the Cap and Trade scheme, meaning costs of $475 per year for each household heated by natural gas
  • Residential energy rates will decrease however with a $24 a year savings through Cap and Trade money
    • $2/month
  • Darlington Nuclear Generating Station – $12.8-billion and all four units are scheduled for completion by 2026

Finance

  • Revenues projected to increase to $130.6-billion (from 126.5-billion in 2015-16), an increase of $4.1-billion
  • Expenses projected to increase to $133.9-billion (from $132.1-billion in 2015-16), an increase of $1.8-billion
  • The deficit is projected to decrease to $4.3-billion in 2016-17 (compared to $5.7-billion 2015-16), a decrease of $1.4-billion
  • Debt is projected to increase to $308.3-billion (from $296.1-billion in 2015-16), an increase of $12.2-billion
  • The net debt to GDP ratio is projected to remain at 39.6%
  • Immediate Deficit Reduction
    • Removed $850-million from the contingency fund
    • Applied a $2.6-billion one-time departure tax from the sale of Hydro One
    • Increased revenue of roughly $1.1-billion from Hydro One sales, previously announced in the Fall Economic Statement
  • Tools for Future Budget Balance (2016-17)
    • A $1.8-billion transfer from the Federal Government
    • $1.9-billion extra in personal income tax revenue
    • $500-million in sales tax increases
    • $700-million in corporate income tax revenue
    • Additional cap-and-trade revenue of $500-million
  • Taxation Changes
    • The budget has again increased taxes on alcohol and tobacco
      • Wine prices will increase by 4%; there will be a minimum price applied to alcoholic ciders.
    • Government removing both the Children’s Activity Tax Credit and the Home Renovation Tax Credit

Ontario Retirement Pension Plan

  • The main objective [of the Government] is to look at ways to meet the goals of the ORPP in an enhanced CPP framework, while preserving the ability to implement the ORPP, should that not be possible
    • This indicates that the Government would wind up the ORPP if the CPP is enhanced

Poverty Reduction Strategy

  • $10-million will be available for 2016, the second year of the program.
    • $8.5-million has been announced in 2015 for the PRSO.
    • Applications to be accepted in the Spring 2016.

Government and Consumer Services

  • No further details in 2016 budget

Health and Long-term Care

  • This 2016 budget provides hospitals a 1% base funding increase ($345-million). This is the first base funding increase in five years; however, this budget also reduces gaming revenue for the operation of hospitals by $107-million
  • This means that hospital funding has actually only increased by $238-million
  • Effective August 1, 2016, the Ontario Drug Benefit Program will be adjusted by increasing income eligibility thresholds for the low-income seniors’ benefit from $16,018 to $19,300 for single seniors, and from $24,175 to $32,300 for couples
  • Effective August 1, 2016, seniors with above the low-income threshold updated thresholds will see increased annual deductible under the ODB from $100 to $170, and the co-payment per prescription will increase from $6.11 to $7.11
  • The province will introduce a redesigned public drug program by 2019 which will coordinate with individuals’ private insurance
  • A vision paper for the new “Patients First Drug Program” will be released in 2016
  • The Ministry budget increased $999.8-million
    • The provincial contribution to the health care budget increase was $225.8-million, with the federal transfer accounting for 77% of the health budget increase
  • The government budgets annual health sector growth to 2018-19 at 1.8%

Long-term Care and Wellness

  • $12-billion over 10-years in capital grants to hospitals
  • New annual funding of $50-million to assist hospitals in maintaining their facilities
  • $3.3-million to support the reconstruction of the Blyth performing arts facility
  • Additional $85-million over three years in Community Health Centres, Nurse Practitioner-Led Clinics, Family Health Teams, Aboriginal Health Access Centres and nursing stations
  • In 2016–17, the government will provide about $1-million to fund support services for those affected by pregnancy and infant loss
  • Over the next 3-years, government investing an additional $130-million in cancer care services
  • Ontario is also providing $1.5-million to the Dave Smith Youth Treatment Centre in Ottawa
  • Ontario is also providing $2-million to 10 Indigenous organizations
  • Increase funding by $250-million to expand capacity to deliver high-quality home and community care
  • Over next 3-years, additional $75-million in community-based residential hospice and palliative care, for a total investment of about $155-million

 

Intergovernmental Affairs

  • No further details in 2016 budget

Labour

  • No further details in 2016 budget

Municipal Affairs and Housing

  • The Provincial Land Tax (PLT) is not being reformed; a second stage review will take place before 2017 PLT rates will be announced
  • No reforms to MPAC, the government will continue to consult with stakeholders
  • Power Dam Special Payment Program extended to 2017
  • New Affordable Housing for Ontario
    • $178-million over three years for housing subsidies and benefits that include the construction of up to 1500 new supportive housing units.
    • The Community Homelessness Prevention Initiative (CHPI) will receive $45-million over three years.
    • $2.4-million for a new pilot program, a Portable Housing Benefit to offer more options for persons fleeing domestic violence.
      • The will benefit approximately 500 households.
  • Ontario is also dedicating an additional $92-million to social housing energy retrofit initiatives

Natural Resources and Forestry

  • Budget 2016 increases funding for MNRF by $40-million form the 2015/16 Interim numbers
  • Modernizing the delivery of programs, along with the Ministry of Northern Development and mines, leading to a potential savings of $19 million
  • Treasury Board Officials indicated that the $40 million in increased funding will be allocated for capital infrastructure projects including the rehabilitation of Park facilities, the managing of resource roads and contaminated site clean-up
  • Regarding references to the Forestry Sector, Budget 2016 contained only three indirect mentions in the sections on Red Tape Reduction, Cap and Trade and Green Bonds
  • Budget 2016 MNRF Funding Levels – $750.6 Million
  • Interim 2015-16 Funding Levels – $710.6 Million

Northern Development and Mines

  • Spending UP from $740.8-million (2015/16) to $790.7-million (2016/17)
  • $1-billion Ring of Fire Infrastructure money is re-announced. Money is part of Long-Term Infrastructure Plan
  • Increase in spending attributed to funding for “studies and consultations/ infrastructure planning for Ring of Fire – detailed numbers will come out in annual Estimates
  • Northern Regional Projects (Spending in other Ministries)
  • Atikokan Hospital
  • 4-laning Hwy 11/17
  • Provincial Land Tax reform process updated with commitment to change tax rates by 2017

Research and Innovation

  • The Business Growth Initiative is the government’s “new strategy” to increase the province’s global competitiveness.
  • The strategy will commit $400-million over the next five years
  • $50-million invested into Perimeter Institute – research centre for theoretical physics –to fund through 2020-2021
  • $35-million over the next 5 years to establish a $50-million partnership in the Advanced Manufacturing Consortium
  • Partnering with colleges to establish $20-million fund in over 3-years
  • Through the Business Growth Initiative, investing $15-million over 4-years in the following two programs:
    • $5-million over two years to establish an Automotive Supplier Competitiveness Program
    • $10-million over 4-years to the Canadian Urban Transit Research and Innovation Consortium
  • Total expense went down by $18.4-million in this plan

Tourism, Culture and Sport

  • Extending funding for the Ontario Microbrewery Strategy – $1.4-million over 2-years

Training, Colleges and Universities

  • The government will create a single major upfront grant — the Ontario Student Grant (OSG), starting in the 2017–18 school year
    • This will be done by redirecting 100 per cent of the funding from the 30% Off Ontario Tuition grant, Ontario Student Opportunity Grant, Ontario Access Grants and other grants offered by OSAP

Transportation

  • The Connecting Links program extended to $20-million in 2016–17 for vital road and bridge improvements in our small, rural and northern communities
    • These communities will still be receiving 5-million less than almost a decade ago
  • $13.5-billion to implement GO Regional Express Rail (RER)
  • Hurontario – $1.4-billion to cover the capital construction costs of this light rail transit (LRT) line in Peel Region
  • Hamilton – The Province will cover the capital costs of building the LRT, up to $1-billion.
  • Northern Highways Program, the Province is investing $550-million
  • $20-million to purchase a new ferry for the Eastern Region by 2018

Environment and Climate Change

  • The Environment Ministry’s budget will increase by 5% to $531.4, up from $502.6.
  • Cap-and-trade:
    • The government plans to start cap-and-trade on Jan. 1, 2017, and intends to raise $478-million in 2016/17.
    • By 2017/18, the government will increase cap-and-trade revenue to $1.9-billion – this number marks an increase from $1.3-billion that was announced in the Fall Economic Statement
    • The government notes cap-and-trade will increase the cost of gasoline by 4.3 cents a litre and natural gas costs by $60 a year
    • The government will provide $2 a month to reduce residential hydro bills (or $24 a year) through a cap-and-trade rebate
    • Revenue generated from cap-and-trade will pay for the $325 million in commitments the government has made under the Green Investment Fund (GIF)
      • Additional cap-and-trade revenue will fund programs and projects that the will be in the upcoming Climate Action Plan
    • Drive Clean:
      • The government will eliminate the $30 Drive Clean fee, but they will keep the program
    • In addition to the $100-million Green Investment Fund (of the $325-million down payment), government is investing:
      • $26-million to support energy-efficient initiatives for SMEs
      • $74-million for new tech for large industrial emitters
      • $92-million in social housing energy
      • $5-million to support climate change adaptation in First Nation Communities
      • $8-million for micro-grids in remote First Nation communities
      • On top of the GIF, province will provide new $17-million endowment to the Toronto Atmospheric Fund

Anti-Racism Initiative

  • No further details in 2016 budget

Francophone Affairs

  • No further details in 2016 budget

Seniors Affairs

  • No further details in 2016 budget

Women’s Issues

  • No further details in 2016 budget

Budget Analysis

This is a budget that was designed to increase investment in Ontario, and increase a small business’s and startup’s ability to succeed in Ontario. While from a SME, which startups are a part of, perspective this is a great budget that offers, increased investment, new programs, new government initiatives, and the first real indication by any government of a willingness to innovate and foster that community; this budget from a resident-living-in-Ontario perspective illustrates expensive times ahead.

It is an easy ‘out’ for the government to announce significant investment, however if the cost of living and these funds are locked away or already earmarked, then only the few will actually benefit from these new investments. It still remains unclear where and/or how the government intends on rolling out the Strategic Initiatives Office and if this will actually generate real investment and uptake of the startup market.

The opposition Parties have already come out strong that this budget is all promises that will only lead to the same results from previous years. It may be difficult to be optimistic in the economic environment, but all indications thus far point to the Ontario government looking at new ways of creating jobs, new measures to support Ontario businesses, and increasing existing funding programs.

While the budget bill, Bill 173 – Jobs for Today and Tomorrow Act (Budget Measures), 2016, contains 34 schedules, often opposition parties and even the government will make amendments during the committee phase of the process. If the Ontario government, opposition Parties included, really wanted to set a new bar, make it as easy as humanly possible for startups and SMEs to conduct business and create jobs in Ontario. These are the people that the government should look to as the ‘traditional’ sector jobs are drying up and moving to greener pastures.

Minister Sousa proudly during his budget speech that Ontario is and will continue to be the benchmark for innovative markets and businesses. This certainly is a grandiose statement however, if the budget is rolled out how it is written, which is seldom the case, then Ontario is poised to become the pinnacle of startup environments.

 

Leave a Reply