Today the Ontario Government released the second budget of its third mandate, titled A Plan to Protect Ontario, Budget 2026. This year’s budget is a clear indicator that Ontario is not immune to the same fiscal pressures facing our provincial counterparts across the country. Instability caused by U.S. trade policy, a weaker global economic outlook and decreasing interest rates have caused the provincial deficit to rise higher than previously projected.
The Ford Government insists that it will continue on its plan to balance the budget by 2028/29, but reinforced that it will do so by continuing to make investments in the province without increasing or introducing any new taxes, a key hallmark of the Ford government’s time in office.
“Ontario is navigating economic challenges with a pragmatic and prudent fiscal plan,” said Minister Bethlenfalvy. “To help the province navigate these times and come out stronger, we are investing in strategic priorities such as energy, critical minerals, key infrastructure and critical technologies that will make our economy stronger, while cutting red tape and creating the conditions for businesses to grow, supporting workers and strengthening Ontario’s economy.”
Budget 2026, like many of its predecessors, is broken down into two major themes that guide the investments being made by the Ford Government, Protecting Workers and Businesses and Protecting Ontario. Through the lens of these two themes came two of the Government’s most significant new measures released in today’s budget. In an effort to ensure Ontario’s small businesses continue to stay competitive and resilient, the Government is proposing to cut the small business corporate income tax (CIT) rate from 3.2 per cent to 2.2 per cent. The Government also unveiled that it is investing in itself, by establishing the Protect Ontario Account Investment Fund, in which the province will invest up to $4 billion to attract investment from pension funds and other private capital to advance Ontario’s long-term economic and strategic priorities.
These themes were highlighted in the lead-up to today’s budget, with the government having previously announced several of the key planks to their plan over the past few weeks. Minister Bethlenfalvy and Premier Ford earlier this week had announced the province’s plan to remove HST off of all newly built homes, as well as the province’s plan to take over Toronto’s Billy Bishop Airport.
Ontario's Fiscal Situation
Budget 2026 has made it clear that just like the provinces that have already introduced their fiscal plans for this year, Ontario is also feeling the economic downturn. While the province remains in a deficit, the government remains confident that its deficit to GDP ratio is among the strongest in confederation. Ontario also remains one of the few jurisdictions in Canada that still maintains that they have a path to a balanced budget, even if this year’s fiscal plan has once again delayed reaching that goal.
This year's budget saw Ontario’s deficit come in higher than was anticipated out of both last year’s fiscal plan and this past fall's fiscal update, with the province expecting a deficit for 2026/27 of $13.8 billion, up from the forecasted $7.8 billion deficit in Budget 2025.
Program expense outlook is projected to be $222.4 billion, $6.1 billion higher than the 2025 Budget, primarily due to investments in health, postsecondary education, social services and justice. It is projected that Ontario’s debt will now surpass $500 billion.
Protecting Workers and Businesses
Despite global economic uncertainty and the ongoing trade dispute with our neighbours south of the border, Budget 2026 demonstrated a clear intent for the province to continue to invest in Ontario companies and workers. There was a clear focus throughout the budget and Minister Bethlenfalvy’s speech that the province will continue to focus on competitiveness, growth and fiscal responsibility.
Beyond the mentioned Protect Ontario Account Investment Fund and the proposed small business corporate tax cut, Budget 2026 highlighted the government’s work to date to protect businesses impacted by tariffs, by establishing the Protect Ontario Financing Program to provide targeted working capital support. The $40 million Trade-Impacted Communities Program also supports local projects that promote economic resiliency, increase export and investment opportunities, as well as bolster Ontario’s strategic priority sectors and their supply chains. Budget 2026 also committed to extending Ontario’s Critical Technologies Initiative by investing an additional $107 million over the next three years to continue its successful work to date in helping scale Ontario businesses and helping them innovate.
Protecting Ontario
Budget 2026 placed a significant focus on protecting Ontario by building highways, transit and community infrastructure, providing relief and support to keep life affordable, strengthening public safety and expanding investments in critical areas such as health care, education, and other vital services. The province continues to make significant investments in many of their core services such as increasing funding for the Ontario Autism Program to nearly $1 billion annually, which will enable more children and youth to access core clinical services while further strengthening sector capacity across the province.
Today’s budget also continued to make record investments in health care spending, such as the four-year investment in the Primary Care Action Plan to $3.4 billion from 2025 to 2029. Initiatives through the Primary Care Action Plan will close the gap for the remaining people of Ontario who want to connect to primary care, with the goal of connecting every person in Ontario to primary care. The province also announced that it is continuing to expand funding for Home and Community Care with a new investment of $1.1 billion, on top of the previously announced funding in last year’s Fall Economic Statement.
The budget also included the previously announced investment in Ontario’s classrooms, by investing $66 million per school year to create the Classroom Supplies Fund for elementary school homeroom teachers to receive a Classroom Supplies Card that provides access to $750 annually to reduce out-of-pocket expenses.
Upstream's Analysis
It is clear that Ontario’s 2026 Budget strives to find a balance between being cautious and optimistic, seizing opportunities to continue to invest in Ontario despite external pressures outside of its control.
This was by no means a flashy budget, with far fewer headline announcements and initiatives than previous budgets tabled by Minister Bethlenfalvy. The province has made a clear decision to protect core service spending, focusing on continued growth in investments in education and healthcare. Instead of significantly increasing the deficit, or increasing taxes, the province has tried to strike a balance between necessary investments and fiscal prudence. The Minister was quick to point out that relative to other provinces, Ontario maintains one of the lowest debt to GDP ratios. He was also adamant that Ontario remains one of the few provinces in the country with a plan to actually balance its books.
What was missing from this year’s budget was one of the hallmark programs of the Ford Government, Ontario’s Skills Development Fund. Despite being a central plank over the last six years of the Government’s fiscal plans, the budget made no mention of funding for the controversial SDF. Despite no mention of the program, the Government hasn’t signalled that they plan to discontinue a program the Premier has regularly described as “the best investment we’ve ever done.”
If you would like to discuss how Ontario’s 2026 budget may impact your public affairs goals please reach out to info@upstreamgroup.ca to book a consultation.
