TORONTO (Reuters) - The government of Ontario stressed funding for skills training and infrastructure in its 2008-09 budget on Tuesday as it struggles to deal with the loss of tens of thousands of manufacturing jobs.
The fiscal plan for Canada’s most populous and industrialized province projected balanced budgets in each of the coming three years, but expectations were ratcheted down from a year ago, when the government boasted of a new era of “sustainable surpluses.”
For the fiscal year starting April 1, Ontario said it sees a balanced budget with a reserve of C$750 million ($737 million). If that reserve is not needed to cover surprises, it could result in a surplus.
“We have laid out a plan over the next three years which does not contemplate deficit,” Ontario Finance Minister Dwight Duncan told reporters.
He acknowledged several difficulties facing Ontario, including the slowing U.S. economy, high oil prices and the strong Canadian dollar, but said those had been taken into account in the fiscal plan’s “prudent” assumptions.
“We have the plan to respond to whatever transpires in the coming year, we have the flexibility within the plan to make adjustments to any contingency that could happen,” Duncan said.
Against a backdrop of slowing economic growth, the budget proposes no new taxes, and little in the way of tax cuts.
Instead, it focuses on a C$1.5 billion three-year training plan to improve skills so that more Ontario residents can find jobs or make the transition to new careers. It also earmarks C$1 billion in new funding for municipal infrastructure, which is included in the current fiscal year.
The budget also introduces a 10-year income tax exemption for new corporations that commercialize intellectual property developed by Canadian universities, colleges or research institutes.
Overall, the budget projects modest increases in revenue and expenses.
It sees C$96.9 billion in total revenue for 2008-09, up 0.4 percent from its latest estimate for the 2007-08 year. On the spending side, it allocates C$96.2 billion to various programs, including health and education, plus interest payments on the provincial debt. That would mark a 0.2 percent increase from 2007-08 spending levels.
The 2008-09 plan should leave a C$750 million cushion, or reserve, that can be used to cover higher than expected expenses or lower than expected revenues in the upcoming year.
With the United States looking like it’s headed for a recession, or possibly already in one, Ontario has reined in its economic growth expectations. The budget assumes real economic growth of just 1.1 percent in 2008, half the 2.1 percent growth rate that is estimated for 2007.
It also assumes an average oil price of $85 per barrel in 2008, and the Canadian dollar at par with the U.S. dollar.
For the 2007-08 fiscal year that ends March 31, the Liberal government projects a C$600 million surplus. Final figures for the year will be released this summer.
John Tory, leader of Ontario’s opposition Conservative Party, said the budget should have included more tax cuts.
“There is nothing in this budget that will get the economy going again, and save the jobs that are disappearing from this province at an alarming rate,” Tory said.
Howard Hampton, leader of the New Democratic Party, criticized the budget as “underwhelming,” saying that it failed to help the province’s beleaguered manufacturing sector, or its poorest citizens.
Editing by Peter Galloway