After a challenging year contending with the impacts of a global pandemic, Ontario must remain steadfast as case counts continue to break new records and show no signs slowing down. Like in many jurisdictions around the world, the second wave in Ontario seems to have eclipsed the first and many believe that this trend will continue over the next few months.
COVID-19 will continue to remain top of mind for the Ontario government and Premier Ford will need to address the economic impact that the mandated closures have had on businesses. At the same time, his government will enter the final year of their four-year term this summer. The pandemic has rightly shifted Premier Ford’s focus away from many of his election promises but he will need to soon return to them if he is to reinvigorate his base and position the Progressive Conservatives (PCs) for a strong reelection campaign next year.
Balance of power
Treasury Board President Peter Bethlenfalvy has been tasked with doubling as Ontario’s Finance Minister in the wake of Rod Phillips’ resignation. Phillips took a controversial trip to the Caribbean in late 2020 despite his government urging Ontario residents to only travel for essential purposes.
With the new role, Minister Bethlenfalvy easily becomes the most important figure in Premier Ford’s cabinet. Heading both the Ministry of Finance and Treasury Board Secretariat, Minister Bethlenfalvy now holds the pen on all the spending and distribution of the province’s revenue. Given the double duty, Minister Bethlenfalvy’s dance card will be twice as full so stakeholders wanting his attention will need to get in line. An additional cabinet minister will be needed on the Treasury Board committee as Minister Bethlenfalvy now represents the equivalent of two seats. All this to say, a cabinet shuffle to rebalance things may be in order once the 2021 Budget is out the door.
The Minister will also welcome a new chief of staff after his former chief, Karl Baldauf, returned to the private sector. Mark Lawson, an experienced political staffer who previously served as chief of staff to the Minister of Economic Development, Job Creation and Trade, and more recently served as the Premier’s deputy chief of staff, will take over as chief in both offices.
The Minister and Premier’s office will be well served by keeping the rest of the Finance team in place to help ensure a seamless transition, retain institutional knowledge and maintain key stakeholder relationships especially given the speed at which they need to continue operating. Minister Bethlenfalvy has already hinted at job creation being his upmost priority, but below are a few others that are likely to feature heavily in Ontario’s upcoming 2021 budget and throughout the rest of the Government’s term.
Protect, support and recover have been central themes to Ontario’s COVID-19 response and the way things are headed, Premier Ford’s attention will continue to be on the ever-evolving situation. Earlier this week, Ontario announced further changes to its public health measures, including a stay-at-home order requiring everyone to remain at home unless for essential purposes.
It can be argued that the pandemic has fast-tracked a number of significant investments throughout Ontario’s healthcare system. COVID-19 has also shed light on the need for a renewed long-term funding partnership with the federal government. Premier Ford is likely to continue calling on the federal government to increase the Canada Health Transfer while making further investments through the rest of his term. Long-term care will need prioritization and significant investment, particularly since the Premier’s independent commission is set to release their findings on Ontario’s long-term care sector in April 2021.
Besides ensuring that our healthcare system has adequate capacity to support Ontarians through the pandemic and beyond, job creation is at the top of list. As part of its fall budget, the province committed an estimated $4.8 billion to lay the foundation to protect and create jobs, both now and into the future. A similar focus is guaranteed through the remainder of this government’s term.
Another area that the government has had to act on while adjusting to the “new normal” has been its efforts to drive digital transformation and service modernization. As highlighted in Minister Bethlenfalvy’s Ontario Onwards Action Plan, leveraging digital technology could enable the Ontario government to deliver public services that are more convenient, more reliable, and more accessible. We will likely see this shift continue as a prominent pillar of the Ford Government.
In keeping with the theme of modernization, it is no surprise that the province has begun centralizing and reforming its procurement practices. Having been elected on the promise to restore trust and lower taxes, they established an agency dedicated solely to provincial procurement. We can expect to see Supply Ontario bring forward a fresh approach to government purchasing. It will certainly take some time to understand how this impacts vendors. Premier Ford also ran on a promise for his government to seek opportunities to pay less for the same services that government has been receiving from vendors. Now the Ontario PCs are likely hoping to pay less for more services which changes how vendors do business with government.
With everything on Minister Bethlenfalvy’s to-do list, it is likely that we will see more focus on the economy and fiscal stewardship and less on gaming, cannabis and alcohol that have previously taken up much of the oxygen.
Capital markets modernization
The Government now has the final report from the Capital Markets Modernization Taskforce in hand, which lays out recommendations on how to transform Ontario's capital markets to foster economic growth; reduce regulatory burden; improve governance; ensure a level playing field; and improve investor protection. There are also calls for companies to be required to report on their climate-related risks. Minister Bethlenfalvy’s deep understanding of the capital markets bodes well for an outcome that is informed and practical.
Auto and commercial insurance reform
Long before COVID-19, the Ontario government revealed sweeping plans to reduce auto insurance rates. And with rates continuing to rise through the pandemic despite cars sitting idly in driveways, the need for reform was simply reinforced. For their part, auto insurers forked over $1 billion in relief, but this was a Band-Aid, not a solution. Commercial insurers also suffered a blistering attack of Premier Ford during one of his daily press conferences. Almost overnight, the Business Insurance Action Team (BIAT) was created to seemingly find ways to insure questionable risk. Despite the very real and significant underlying market issues, this government will not be swayed by commercial explanations. This is about politics. If insurers are to influence the current trajectory on auto insurance reforms and the future of the BIAT, they will need to proactively suggest solutions that retain market-based principles while giving the government a win.
COVID-19 has negatively impacted budgets of municipalities across Ontario. They have seen their revenues greatly reduced while their expenses have increased by over $2 billion. In Toronto, the monetary impact is over $1.7 billion and after offsets achieved through mitigation strategies, the year-end shortfall is projected to be over $500 million. To alleviate financial burdens, municipalities have been forced to lay off staff, reduce programming, and in some cases, close non-essential services. While the Safe Restart Agreement has provided $2 billion in support, the remaining funds will be allocated to municipalities still facing financial hardship.
By law, municipalities in Ontario are required to pass a balanced municipal budget. This means municipalities may be forced to further reduce services and work with vendors, access their reserve funds and raise taxes.
What does this mean for your organization?
While we would all like to move on from 2020, companies and organizations will continue to face challenges in 2021 when it comes to working with government and seeking support for initiatives or investment in projects. With snowballing deficits, calls for greater spending from wide array of sectors, an election in the not-so-distant future, and the natural obstacles that virtual engagement brings, companies and organizations will need to think more strategically when they go cap in hand to the provincial coffers.
Finding alliances to support your cause, private sector partners to share the financial burden, political ambitions that align, and having the ability to show a clear and significant return on investment, will go a long way to convincing the government to open its wallet. Better yet, if you have an initiative that does not require funding but that will support economic growth, create jobs and generate provincial taxes, ensure the Ontario government knows of your efforts. With the virtual environment an increasingly noisy place, asks and arguments will need to be articulated clearly and creatively to gain traction. Now, more than ever, the victors will be those who approach the government with innovative and cost-effective solutions.
As always, our team of public affairs experts has experience during turbulent times like these and can help you amplify your message and navigate the uncertainties that 2021 is sure to bring.