The 2007 Ontario budget reviewed

In classic centrist style, there's a little something here for everyone.

If the centrist budget announced by Stephen Harper's Conservative Party can be accused of infringing upon the patented approach of the federal Liberal Party, then the anti-poverty budget just announced by the Liberal Party in Ontario can be accused by the provincial NDP of identity theft. For having lost three by-elections in a row to the NDP and now facing an October election, Dalton McGuinty's Liberals appear in their budget document to be trying to co-opt parts of the NDP platform.

Yet the budget contains no tax increases, projects a budget surplus for this and future fiscal years (after inheriting a deficit of $5.5 billion in 2003), and promises tax reductions for individuals and business ? the kind of measures that will appease groups on the other end of the political spectrum. Give thanks for this apparent fiscal rectitude and capacity to cater to a broad cross-section to the strong economy and consequent windfall in tax revenues, which amounted to $3.4 billion in 2006-2007.

The centrepiece of the Liberals' “anti-poverty agenda” is the new Ontario Child Benefit (OCB), which provides assistance to low-income families with children. Families earning less than $20,000 will get the maximum of $250 per child in 2007. Those earning more than $20,000 will have the OCB reduced by a formula that lowers the benefit to zero at an income level of $33,750 for families with one child, and $46,000 for families with two children. The OSB will be raised every year until the annual maximum per child reaches $1,100 in 2010.

Other features in the fight against poverty include:

increases in the minimum wage by $0.75 per hour annually until it reaches $10.25 per hour in 2010

2% increase in payments to disabled and welfare recipients

$51 million over three years to Legal Aid Ontario to increase low-income access to legal services and compensation of legal aid lawyers

an extra $25 million channeled to child care programs in 2007-2008 and $50 million annually afterward

$127 million for municipalities to build affordable housing, $80 million for off-reserve aboriginal housing, and $185 million for housing allowances starting in 2008 (up to $100 per month to help low-income families pay rent)

raise by 2.5% on July 1, 2007 (and on January 1 in each of 2008 and 2009) benefits provided by the Workplace Safety and Insurance Board to injured workers with partial pensions

more than $200 million in additional operating funding over four years to services for people with developmental disabilities and their families

thresholds used in the Ontario Property and Sales Tax Credits will be raised to ensure planned increases to Old Age Security and Guaranteed Income Supplement payments don't result in lower credits

Low-income and disadvantaged persons are by no means the only budget beneficiaries. Seniors are another group. Pensioners will be able to split certain types of pension income and apply for new life income funds that permit i) up to 25% of funds in a locked-in retirement savings plan to be unlocked and ii) the opportunity to withdraw additional retirement income from locked-in accounts.

Homeowners will get some respite, too. Property tax assessments are to move to a four-year cycle in 2009, and increases in tax assessments will be phased in over four years. Also in the works is a phasing out over seven years (from 2007) of the taxes transferred from property owners in York, Peel, and Halton Regions to the City of Toronto for social assistance and housing costs (to be uploaded to provincial government).

Business gets a few breaks as well, although like many other initiatives in the budget, lengthy phase-in periods are noteworthy. The Business Education Tax will be reduced by $540 million over the next seven years, with a 5% cut this year. Complete elimination of the capital tax is to be moved ahead by two years to 2010.

An immediate $125 million is to be applied to environmental initiatives such as rebates for home energy audits, planting of one million trees (to remove carbon dioxide from air), and research into alternative fuels and clean-car technology such as the Ontario BioAuto Council's project to build auto parts from agricultural and forestry feedstocks. The government is expected to announce this spring another $200 million over three years for additional climate change measures.

The 2007 Ontario Budget continues to make significant investments in health care, education, infrastructure, and the judicial system. A few highlights are:

in 2007-2008, funding for public school boards will be $781 million higher, and 1,200 new elementary school teachers will be hired

an additional $135 million for reducing wait times (including pediatric surgeries), $143 million to improve access to emergency care, and 8,000 nurses to be hired by the end of 2007-2008

an immediate $70 million for the Rural Infrastructure Investment Initiative and over $350 million in investments for public transit

30 new justices of the peace (to speed up courts), an additional $8 million over three years for the Human Rights Legal Support Centre, and $49 million over three years for victims of crime

Opposition parties will attempt to portray the budget as full of post-dated cheques paying out over lengthy periods after the next election. McGuinty has broken promises before, his political foes will say, so can he be trusted to follow through? But for fiscal conservatives, the protracted phase-in periods will be welcomed as an attempt to accommodate populist sentiment while adhering to a fiscally responsible path.

Another matter for concern, at least to some economists, may be the escalation in the Ontario government's debt during a strong upswing in the economic cycle. Indeed, despite enjoying a $20 billion rise in government revenues since assuming office in 2003, the Liberals have presided over an increase in net debt from $138.8 billion to $143.0 billion. Even the budget surplus of $310 million in 2006-2007 has not halted the upward trajectory because of continued borrowing to fund capital spending projects.