Canada: A Closer Look: Fasken Experts Offer Their Views On Key Components Of The 2019 Ontario Budget

Government Relations and Strategy Bulletin
Last Updated: May 9 2019
Article by Matthew Welch and Lindsay Aagaard

With both investment and belt-tightening initiatives, 2019 Ontario Budget includes much more than new, blue licence plates.  Here, Fasken lawyers offer their analysis of some of the many new measures and approaches that may affect your business.

In 2019–20, the Ontario Government has budgeted to spend $163.4 billion, and projects to eliminate the deficit by 2023–24. Though overall program spending for 2019–20 is not significantly higher (or lower) than the previous year, the 2019 Ontario Budget shows dramatically reshuffled spending to reflect the current Government's priorities, while at the same time foreshadowing the Government's plans for the remainder of its mandate.

The treatment of cannabis in the budget is one example. The Ontario Government renewed its commitment to switch to an open allocation of licences, beyond the current cap of 25 retail store authorizations. The Government signaled that the process currently being developed will see the Alcohol and Gaming Commission of Ontario pre-qualify operators, based on a number of pre-qualification criteria, who may then participate in future allocations.  However, the Government also noted it may not issue further retail store authorizations until the federal Government has provided enough "reliable supply".

Another example is the $1.1 billion allocated to the contingency fund in Treasury Board Secretariat's 2019–20 budget line.  This reserve, under the control of the Treasury Board Cabinet Committee, can serve a dual purpose. First, it signals the Government's intention to continue using the powers of Treasury Board to make be the first line of defence on in-year spending.  Second, it provides flexibility for this Government in the sense that it can keep costs "down" while, at the same time, planning for possible projected increases - beyond those identified by the Government as relating to legal settlements or loan and funding guarantees.

Important Changes to Rules Governing Labour Relations Transitions in the Health Sector

The 2019 Ontario Budget includes changes to the Public Sector Labour Relations Transition Act, 1997 ("PSLRTA").  These changes are cast primarily as measures designed to assist the Ministry of Health and Long Term Care to provide efficient delivery of health services, but are also referenced as being part of the broader action the Government intends to take, along with upcoming consultations with public sector employers and bargaining agents on compensation, to "strengthen its oversight of Provincial agency collective bargaining."   

Notably, the amendments contained in the Budget Bill would replace current section 8 of PSLRTA and narrow the scenarios in which PSLRTA applies to integrations of health service providers.  The Budget Bill also makes consequential amendments to the provisions in Bill 74, the People's Health Care Act, 2019 that relate to the application of PSLRTA to certain integrations permissible under that Act.   Bill 74 received Royal Assent on April 18, 2019. 

"The changes to PSLRTA in Bill 100 are significant," notes Marc Rodrigue, associate in the Labour, Employment & Human Rights practice group.  "These amendments will change how that Act applies to integrations in the health system going forward, and all health service providers will want to take note."   

OBCA Companies, Take Note:  Record-Keeping Change to the Ontario Business Corporations Act

Recently, amendments have been made or proposed by several governments in Canada to statutes governing business corporations. In the 2019 Ontario Budget, the Government has elected to use a light touch, proposing only one change to the Ontario Business Corporations Act (OBCA) which will require that the register of directors also include directors' email addresses, if provided. This change will apply to all OBCA corporations and will take effect immediately once the budget bill is granted royal assent.

"All OBCA companies and their legal advisors should be aware of this small but important change to how records are kept," said Dana Gregoire, an associate in Fasken's Corporate/Commercial and Government Relations groups. "Time will tell whether the Ontario Government will introduce additional measures that have recently been proposed in other jurisdictions, such as the obligation to maintain a 'transparency register' of individuals with significant control, which will take effect for privatefederal companies on June 13, 2019, and has also been proposed in British Columbia and Manitoba." The Ontario approach can be further contrasted with that of the federal government, which has proposed significant reforms to corporate governance in an earlier bill and in its most recent budget bill.

Investments in Health Gain Top billing

One of the top-line messages in the 2019 Ontario Budget is the investment being made in the health care system, which includes support for the significant system transformation started by Bill 74, The People's Health Care Act, 2019.  Some of the investments highlighted in the Budget document include:

  • $384 million in the hospital sector;
  • $276 million in home and community care, with a focus on items such as community supports, personal support services and other professional services at home;
  • $17 billion in capital grants over the next 10 years to support hospital capacity and modernization;
  • 15,000 new long term care beds and an upgrade for an additional 15,000 long term care beds; and
  • $174 million in 2019–20 for community mental health and addictions services. 

The Government signaled that it will be introducing a dental program for low-income seniors, and that it will be allowing expanded scopes of practice for certain health care professionals.  The Government also issued a clear call to the federal government to deliver more federal funding for healthcare to the provinces to ensure health system sustainability.

"The system transformation currently underway in Ontario is ambitious and rapid," notes Lynne Golding, the leader of Fasken's Health group.  "The investment seen in this budget will support that transformation, and is welcome news."

More to Come in the Alcohol Sector

Though the 2019 Ontario Budget does not include immediate changes to the provincial beer retail model, the Government did formally reaffirmed its commitment to pursing alcohol reform  through expanded consumer choice, convenience, and business opportunities - and signaled that plans for this are underway.   The 2019 Ontario Budget included several other measures that could change the alcohol sales and consumption practices in the province, including the introduction of tailgating permits, extended hours of alcohol service and municipal powers to permit alcohol consumption in public areas.    For wineries, cideries, breweries and distilleries, the Government will be removing the restrictions on serving sizes for "by the glass" licences.

The Government also noted that it supports the further reduction of interprovincial trade barriers, including to facilitate greater trade in alcohol between the provinces and territories.

"The signal that serious change is still to come in the alcohol sector in Ontario is important," noted Dan Brock, Chair of the Government Relations group at Fasken.  "This Government has shown that it moves quickly and decisively on its commitments, so it is prudent for all in the industry to remain engaged and attentive."

Investments in Ontario's Automotive Sector Could Help Manufacturers

The Budget announces various initiatives at least partially aimed at bolstering Ontario's automotive sector. A series of spends will be gathered within the Government's "Driving Prosperity" plan, initially announced earlier this year, though these largely riff off measures in other areas, such as environmental policy, labour market regulation and education and worker re-training.

How the Government's flagship initiatives could assist the automotive sector is explained by way of a fictitious auto parts manufacturing firm, held out as an example of competiveness, with measures contributing to its prosperity including:

  • the removal of the tax burden resulting from Ontario's cap-and-trade scheme;
  • savings resulting from cancelling previously scheduled increases in the minimum wage; and
  • reduced premiums for the workplace safety insurance.

More concretely,  Ontario's 2019 budget provides accelerated tax write-off measures for capital investments, aligned with the similar federal program announced with the federal 2018 Fall Economic Statement. Labelled the Ontario Job Creation Investment incentive, this incentive could be a boon for Ontario's auto-parts manufacturing and auto-manufacturing industries.

"Various initiatives included in the budget are at least partially aimed at stimulating investment in Ontario's automotive industry", says Steven Rosenhek, head of Fasken's Automotive Group. "Small and medium-sized parts manufacturers in particular, as well as other businesses that feed the manufacturing supply chain, should ensure that they plan their spending over the next year accordingly."

Non-Budgetary Measures Compete for the Spotlight

Two significant aspects of the budget  that are not budgetary measures at all also telegraph how the Government intends to operate over its mandate.  

One is a promise of improved public accounting. Budget 2019 refers to the Government's proposed Fiscal Sustainability, Transparency and Accountability Act, 2019 and its promise of quarterly reports on Government finances (known as Ontario Economic Accounts).  It also includes a requirement that the Premier and Minister of Finance pay a penalty (of 10 percent of their salaries) for each missed reporting deadline.  

The other is the repeal of the Proceedings Against the Crown Act and its replacement with a new act called the Crown Liability and Proceedings Act, 2019.   The change is described as clarifying the scope of the Crown's civil liability, and, significantly, it clarifies areas where the Crown is not liable for torts committed by certain entities, among other measures. Since the budget bill's introduction, this new proposed act has received considerable attention and concern, and will be watched closely by many in the legal community as the bill moves through the legislative process.

Fasken at your Service

To evaluate the impact of the 2019 Ontario Budget on yourself or your business, please contact any of the contributors to this bulletin.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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