Read the article below and answer the following questions

ONTARIO GOVERNMENT PLANS TO BALANCE BUDGET IN FIVE YEARS, WITH DEFICIT NOW AT $11.7-BILLION

The globe and mail APRIL 11, 2019

Ontario's Progressive Conservative government is charting a gradual path to balance in its first budget, keeping a lid on spending increases and promising to take the province into the black only after the next provincial election.

While health care, education and transportation will see modest increases in annual funding, most government ministries will face cuts to their budgets, including the ministries of Environment and Social Services. Sixteen of 22 government departments will see their spending fall this year.

Program expenses will rise over three years by an average of 0.8 per cent, compared with the 3.3 per cent in growth the former Liberal government planned. The size of the deficit was the subject of a dispute between the auditor-general and the previous Liberal government. The Liberals' previous budget pegged the deficit at $6.7-billion; however, the Tories later said it was $15-billion after putting the Liberals' hydro plan and other assets on the books.

In a budget that includes a tax incentive for business investment, a new daycare tax credit and an array of measures that loosen the rules around alcohol, the Progressive Conservative government is taking a measured approach to eliminating a deficit the Tories now peg at $11.7-billion. Under this budget, it will fall to $10.3-billion by next year and hit $3.5-billion in 2022-23. The document projects a small surplus by 2023-24.

Mr. Ford has promised in the past that he would balance the books, but the PC Party platform released during the election campaign did not spell out a timeline. The province's plan unveiled Thursday will balance the books in five years. "We have developed a reasonable path to balance," Finance Minister Vic Fedeli said, describing the plan as "the Goldilocks approach. It can't happen too quickly; it can't take too long. It has to be just right."

While the business community said it had hoped for a promised corporate tax cut, the opposition New Democrats criticized the government for what it saw as deep and painful cuts.

Rocco Rossi, head of the Ontario Chamber of Commerce, said he was disappointed that the government did not follow through on its campaign pledge to reduce corporate taxes by 1 per cent, to match recent tax cuts in the United States. But he said the Chamber of Commerce had lobbied harder for the tax measure for business that was included in the budget: the allowing of faster write-offs for investments in machinery and equipment to encourage job creation. "Look, we'd love to have both, to be clear," Mr. Rossi said. "The government has to make its own balance, and they chose the highest priority."

Although overall spending will increase, it will rise at less than the rate of inflation, which will actually mean a reduction in critical services such as health and education, NDP Leader Andrea Horwath said. She warns that the budget will hurt the province's most vulnerable people, pointing to long-term spending cuts for social services and Indigenous Affairs. "We went into this budget expecting deep cuts," Ms. Horwath said. "What we didn't expect was the level of irresponsibility and outright cruelty that we're seeing in this budget."

The budget revealed significant funding changes for universities and colleges, which are already working to absorb the province's 10-per-cent cut to tuition. The government is now planning to tie more than half of the institutions' funding to performance outcomes, although it has not stated what those metrics would be.

Currently, only around 1 per cent of funding for universities and colleges is tied to outcomes such as graduation and employment. When the agreements between the sector and the government are negotiated next year, 25 per cent of funding will be tied to outcomes, going up to 60 per cent by 2024-25.

The budget also contains a list of measures with little impact on the province's books, including a new, blue licence-plate design with the slogan "A Place to Grow" and the liberalization of liquor laws to allow tailgating in stadium parking lots, drinking in bars and restaurants at 9 a.m. and, if municipalities choose, drinking in parks. Bars will be allowed to advertise "happy hour" discounted drinks, and the government is "evaluating ways to lower beer costs" at Royal Canadian Legion halls. It also plans to legalize online gambling and allow casinos to advertise free drinks.

While Mr. Fedeli repeatedly pointed to increases in health and education, his political opponents seized on the cuts. The Ministry of Children's and Social Services, which includes income assistance and the autism program, will see $1-billion in cuts by 2021-22, a decrease of 2.1-per-cent a year, for example. The government says it will achieve the targets through "operational efficiencies and costs savings," closing unused youth jails and streamlining administration. Other agencies facing major reductions include Legal Aid Ontario, which will see its budget - which is supposed to be $456-million this year - slashed by 30 per cent, with $164-million less to spend a year by 2021-22.

The budget includes a $90-million dental-care program for low-income seniors. And it commits $11.2-billion in provincial money toward an estimated $28.5-billion investment in four rapid transit projects announced for the Greater Toronto Area this week.

THAT UNEXPECTED TASTE IN ONTARIO'S BUDGET? IT'S AUSTERITY-LITE

APRIL 11, 2019 The globe and mail

The government of Ontario, even before Doug Ford was elected Premier, already had the lowest per-capita spending of any Canadian province. Tenth out of 10. Back of the pack. Dead last. Ontario, pre-Doug Ford, also had the lowest per-capita revenues of any province.

Those facts constrain whoever is in power at Queen's Park, regardless of political stripe. They also explain why Premier Ford's Progressive Conservative government, whose first budget was expected to rain down fire, brimstone and deep cuts, instead delivered something milder on Thursday.

What the Ford government was facing - thanks to recent changes in accounting rules that pumped up the deficit, last year's Liberal profligacy and its own tax cuts, including scrapping nearly $2-billion a year in cap-and-trade revenue - was a budget shortfall in the year just ended of $11.7-billion. Finance Minister Vic Fedeli's response? Call it restrained restraint. Rather than deep austerity, it's austerity-lite.

The most important budget metric, the debt-to-GDP ratio, will be allowed rise. It won't start moving in the right direction for at least three years. And instead of a quick road to budget balance, Mr. Fedeli's plan is to get there gradually, over five years.

This is a budget the previous Liberal administration could have delivered - and in many ways it's what the Liberals did deliver. The Wynne government whittled down spending in key departments, even while claiming to be spending a lot more, ultimately balancing the budget in 2017. (Well, they sort of balanced it - depending on which accounting standards are used. It's complicated.)

Then in 2018, the Liberals blew the doors off in a bid to spend their way to re-election. And here we are. Mr. Fedeli calls his budget's slow road to deficit reduction "thoughtful and measured." After years of PC claims that Ontario's budget shortfalls were a simple matter of out-of-control spending, a problem easily solved, Thursday was surprising, and sobering.

Mr. Fedeli was at pains to stress not how much he was cutting, but how much he was still spending. He pitched deficit reduction as necessary for "protecting what matters most" - government funding for education and health care. Spending on the biggest department, health, which claims roughly 40 cents on every government dollar, is budgeted to rise by just 1.6 per cent a year over the next three years. That's less than the rate of inflation, and only about half the rate of inflation plus population growth.

That is an effective cut to annual health spending, for three years in a row. That won't be easy to pull off, given how much of that spending is salaries. Barring clever management, it's a cut that will be felt by Ontarians. Remember that figure about Ontario being Canada's lowest-spending province? It's also the lowest per-capita spender on health care.

The government also plans to increase education spending by just 1.2 per cent a year over the next three years - while cutting post-secondary spending by 1 per cent a year and lowering spending on children and social services by 2.1 per cent a year. The PCs have drawn a line between sectors where they want to restrain their restraint, and other areas where they're going to cut deeper.

The day before the budget, in an attempt to burnish its credentials as not just a cutter but also a spender, the Ford government announced what it's pitching as "the largest capital contribution to new subway builds and extensions in Ontario history," with $11.2-billion to fund transit construction.

It's not clear how much of this is new money; what is clear is that the province is ripping up long-standing plans and replacing them with something half-baked. But big capital projects often feel free to governments, because capital spending is accounted for separately from operating costs - giving the PCs room for big announcements that boost debt but don't have an immediate impact on the deficit.

The bottom line is that, although the Ford government is going slow on cuts, its plan to get to balance involves gradually ratcheting down the relative level of spending in what is already Confederation's lowest-spending province. It won't be easy. And as the next election comes into view, the temptation to spend a lot more - or lure voters with big tax cuts - will only grow. We have seen this movie before.

ONTARIO BUDGET PRESENTS PLAN FOR BALANCED BUDGET, BUT NOT WITHOUT RISK

STEPHEN LECLAIR THE GLOBE AND MAIL APRIL 11, 2019

Budget 2019 addresses several commitments made by the Ontario government. It presents a plan for a balanced budget, but it is not without risk.

Over the five years to the forecasted balanced budget, expenditures increase at less than half the rate of increase of revenue. Will the balanced budget fiscal plan be achieved through the forecast control of expenditures and growth of revenues? Forecasts do not come with certainty and the budget is no different. Elements of the fiscal plan create significant challenges for the government; elements of the fiscal plan address some risks.

The government estimates an $11.7-billion deficit this fiscal year, down almost $3-billion since last fall's fiscal update. The budget sees the deficit declining to $10.3-billion by next year and $3.5-billion in 2022-23; a small surplus is expected by 2023-24.

Modest expenditure growth for programs will create calls from the public for an increase in spending. The government has stated that controlled spending will be achieved through efficiencies in, and reallocation of, expenditures. Improving efficiency and reallocation of spending are positive steps. These moves also create a challenge with the control of spending. Often, spending controls in the early years of a government's mandate are reversed in the latter years as pressure mounts from both those who deliver the services and those who use the services. Not everyone will be happy with efficiencies found and allocations made.

The budget contains significant capital investments, such as in health-care facilities and transit. These investments can provide benefits to both people and businesses. Potential benefits include, among others, improved access to health care, reduced transit times and lower costs for businesses. The challenge for government is capital investments create increases in financing needs and potential operational expense.

The time is right for financing. Canadian and international institutions have recently reduced interest rate growth forecasts as a result of global economic uncertainties. Investing in the near term and using funding from Ottawa and municipal partners is a positive approach. However, there is the risk that interest rates may increase in the medium term, thus increasing the cost of government financing.

The strong revenue growth rate is driven by increases in personal income tax and sales tax revenues. This is surprising given that recent private sector forecasts for nominal gross domestic product have been diminished and the fiscal plan includes different tax benefits.

With respect to economic forecasts, the budget uses projections consistent with recent private sector estimates. Also, business investment tax incentives will support the continued growth of the economy. The incentives provide Ontario businesses relief so that taxes are more in line with the recent changes in the United States. Enabling businesses to quickly write off manufacturing investment will stimulate investment in Ontario. This is much needed as the province's manufacturing sector has for several years operated close to full capacity.

The increase in personal income tax revenue is reasonable despite the tax incentives in the budget. The increases are consistent with the historical ratios of personal income tax revenues to nominal GDP.

Budget 2019 is a good start. It provides a balanced budget, which is a step toward a needed reduction in net debt. The budget is based on a reasonable economic forecast and emphasizes several of the priorities of the government. However, the lack of information on plans for achieving expenditure efficiencies creates uncertainty about the spending controls. It is a plan with risk.

Questions:

Provincial Budget 2019: CIA4U - Fiscal Policy Assignment

Ontario Government Plans To Balance Budget In Five Years, With Deficit Now At $11.7-Billion

1. Cite three specific examples of expansionary fiscal policy from the article.

2. Cite three examples of contractionary fiscal policy from the article.

3. Read the following quote from the article: "Rocco Rossi, head of the Ontario Chamber of Commerce, said he was disappointed that the government did not follow through on its campaign pledge to reduce corporate taxes by 1 per cent, to match recent tax cuts in the United States."

State the type of fiscal policy that the quote (above) exemplifies. Defend your answer by citing material from your notes.

That Unexpected Taste In Ontario's Budget? It's Austerity-Lite

4. State three reasons why the Progressive Conservative government in Ontario decided not to make deeper cuts in its budget.

5. State two examples from this article that may contribute to a structural deficit.

6. What term describes the Progressive Conservative's government's need to defend potential deficit spending when it contests a provincial election scheduled in June, 2022? Cite a quote from this article to support your answer.

Ontario Budget Presents Plan For Balanced Budget, But Not Without Risk

7. Explain why the Impact Lag and the next provincial election scheduled for June, 2022 is a problem for the Ontario Progressive Conservative government in its forecast of a balanced budget within five years.

8. State three reasons why the article writer approves of this budget.