Ontario Budget 2026: Deficit Doubles to $13.8B, Tax Breaks & New Spending

Ontario Deficit Balloons to $13.8 Billion as Ford Government Tables 2026 Budget

Ontario’s projected deficit for the coming fiscal year has grown significantly, reaching $13.8 billion for 2026-2027, according to the budget delivered Thursday by Finance Minister Peter Bethlenfalvy. This represents a substantial increase from the $7.8 billion deficit projected in last year’s budget. The Ford government attributes the widening gap to “ongoing economic and geopolitical uncertainty,” mirroring a trend seen across Canada as provinces grapple with challenges like U.S. Tariffs and a volatile global economy.

The 2026 budget, titled “A Plan to Protect Ontario,” outlines fresh spending in areas like home care and post-secondary education, alongside billions in tax breaks for new homebuyers and minor businesses. However, the revised fiscal outlook signals a delay in the province’s path to a balanced budget, now projected for 2028-29 with a modest $600 million surplus.

Economic Headwinds and Provincial Responses

The increase in the deficit comes as Ontario, like other provinces, navigates a complex economic landscape. Provincial officials point to global economic tensions and supply chain disruptions as key factors impacting the province’s financial projections. This situation echoes similar budgetary adjustments in British Columbia, Alberta, and Quebec, all of which are running deficits. British Columbia recently experienced a credit rating downgrade following the tabling of a budget with a $13.3-billion deficit, while Alberta’s 2026-2027 budget projects a $9.4-billion deficit, and Quebec’s stands at $8.6 billion.

Despite these challenges, the government maintains a cautiously optimistic outlook, anticipating real GDP growth of one per cent in 2026, increasing to 1.7 per cent in 2027 and 1.8 per cent in 2028. However, government revenue is down by approximately $100 million, largely due to lower revenue from the Liquor Control Board of Ontario (LCBO).

Key Spending Measures and Tax Relief

The budget includes significant investments in key sectors. Healthcare will receive $101.2 billion, while education is allocated $40.8 billion, and post-secondary education will receive $14 billion.

A key element of the budget is the temporary removal of the Harmonized Sales Tax (HST) on new homes for all buyers intending to live in or rent them out as residences. This measure, expected to cost the province $1.4 billion, aims to address housing affordability concerns. Homebuyers could save up to $130,000 on homes valued at $1.5 million or less.

Small businesses will likewise benefit from a corporate income tax cut, dropping from 3.2 per cent to 2.2 per cent starting July 1. The government estimates this will save over 375,000 small businesses a combined $1.1 billion over three years.

A $4 Billion Investment Fund with a Private Partner

The budget introduces a $4 billion “Protect Ontario Account Investment Fund” designed to invest in emerging industries and technologies. Notably, the fund will be managed by a private investment manager, a departure from the province’s usual practice. Officials say this approach will leverage “private sector expertise” to drive investment in strategic areas like defense, data centres, and technology companies. The government says it will closely monitor investments to ensure alignment with provincial priorities.

An additional $107 million over three years will be allocated to support critical technologies, including artificial intelligence, life sciences, and advanced manufacturing, starting in 2027-28.

Shifting Municipal Funding and Education Changes

The budget proposes a significant shift in how education funding is distributed. Starting in 2028, property tax revenue currently collected by municipalities for education will be remitted directly to the Ministry of Education. The government argues this will streamline funding and ensure resources are directed towards student learning.

The budget also allocates $41 million annually to provide elementary school teachers with spending cards of up to $750 for classroom supplies.

Funding for the Ontario Autism Program will increase to nearly $1 billion annually, allowing more children to access clinical services and expand capacity across the province. $1.1 billion over three years will be invested in home and community care services, extending access to thousands more patients.

Opposition Criticism and Concerns

The budget has drawn criticism from opposition parties, who argue it fails to address the pressing issue of affordability for Ontarians. NDP Leader Marit Stiles stated the budget “fails the test to meet Ontario’s priorities,” while Interim Liberal Leader John Fraser emphasized the lack of measures to alleviate the rising cost of living.

The opposition parties contend that the budget lacks concrete solutions for issues like high housing costs, rising energy bills, and the financial burden of post-secondary education.

The province is also promising to ban the resale of live event tickets for more than face value, and to consult on strengthening consumer protections for rewards points programs. Fieldwork on a feasibility study for Premier Doug Ford’s proposed Highway 401 tunnel is expected to begin this spring, and the province will explore standardizing rideshare regulations across Ontario.