Ontario’s fiscal picture has improved modestly, with the province posting a $13 billion deficit for the 2025-26 fiscal year — a notable improvement on the $14.6 billion shortfall forecast in last spring’s budget. The figures, released in the annual public accounts report, reveal a government grappling with soaring programme costs in health and education, partially offset by stronger-than-expected returns from Crown corporations.
The improvement marks a significant swing from the $1.1 billion deficit recorded in 2024-25, underscoring the scale of new spending commitments undertaken by Premier Doug Ford’s administration.
Spending Surge Drives Shortfall
Finance ministry officials attribute the bulk of the deterioration to a $10 billion increase in programme expenses, concentrated almost entirely in two portfolios. Health-care expenditure climbed by $6.2 billion, pushing the total envelope to $97.5 billion for the year. Education spending followed a similar trajectory, rising $2.3 billion to reach $40.1 billion.
Both increases reflect deliberate policy choices rather than unforeseen emergencies. The government has framed the outlays as necessary investments in hospital capacity, long-term care staffing and classroom resources — commitments made during the last election campaign and subsequently accelerated.
Crown Corporations Provide a Buffer
Offsetting the spending pressure, revenue from government business enterprises exceeded projections. The Liquor Control Board of Ontario and the Ontario Lottery and Gaming Corporation both delivered stronger returns than budgeted, providing a critical cushion that prevented the deficit from widening further.
Analysts note that reliance on these entities introduces volatility. Gaming revenues in particular can fluctuate with consumer discretionary spending, while the LCBO’s contribution is sensitive to labour disruptions and supply-chain dynamics.
Opposition Questions Sustainability
Critics at Queen’s Park have questioned whether the current trajectory is sustainable without new revenue measures or service reductions. The Official Opposition argues that the deficit improvement is largely illusory, driven by one-time gains rather than structural balance. They point to the near-doubling of the shortfall year-over-year as evidence of fiscal mismanagement.
The government maintains that the deficit remains manageable relative to the size of the provincial economy and that debt-to-GDP ratios remain within targeted bands.
Why it Matters
Ontario’s improved deficit figure offers the Ford government breathing room ahead of the next budget cycle, but it masks a structural shift: permanently higher spending on health and education funded partly by volatile Crown corporation dividends. For Ontarians, the real test will come when the next economic downturn arrives — and the province must choose between deeper borrowing, tax increases, or restraint in the very services that have just been expanded.
