Chapter 3: Ontario’s Fiscal Plan and Outlook

Introduction

The 2025 Ontario Economic Outlook and Fiscal Review is projecting a deficit of $13.5 billion in 2025–26. Over the medium term, the government projects a deficit of $7.8 billion in 2026–27 followed by a surplus of $0.2 billion in 2027–28.

In the recently released Public Accounts of Ontario 2024–2025, Ontario reported a $1.1 billion deficit in 2024–25, compared to a forecasted deficit of $9.8 billion in the 2024 Budget. The government remains focused on its efforts to reduce the debt burden and bring Ontario’s finances back to balance.

The net debt-to-gross domestic product (GDP) ratio is projected to be 37.7 per cent in 2025–26. Ontario’s net debt-to-GDP ratio fell to a 13-year low in 2024–25, and Ontario’s plan keeps this ratio below target levels over the medium-term outlook.

Key Changes in 2025–26 Since the 2025 Budget

Ontario’s 2025–26 deficit is projected to be $13.5 billion — an improvement of $1.1 billion from the outlook published in the 2025 Budget.

Revenues in 2025–26 are projected to be $223.1 billion, $3.2 billion higher than forecast in the 2025 Budget. This increase is largely driven by stronger taxation revenue and broader public sector revenue.

Program expense is projected to be $218.4 billion, $2.2 billion higher than the forecast in the 2025 Budget, primarily due to a top-up of the Contingency Fund to add greater flexibility to protect key public services and quickly address unforeseen expense events that could materialize in the second half of the fiscal year.

Ontario is forecast to pay $16.2 billion in interest and other debt servicing charges in 2025–26, consistent with the forecast in the 2025 Budget.

The net debt-to-GDP ratio is now projected to be 37.7 per cent in 2025–26, 0.2 percentage points lower than the 37.9 per cent forecast in the 2025 Budget. The net debt-to-GDP ratio decreased primarily due to a lower than projected deficit.

The 2025–26 outlook also maintains a $2.0 billion reserve, unchanged from the 2025 Budget, to protect the fiscal plan against unforeseen adverse changes in Ontario’s revenue and expense forecasts for the remainder of the fiscal year. This higher-than-average historical level of reserve reflects the elevated nature of fiscal and economic risks, and the government’s commitment to be ready to respond.

Revenue Update

The 2025–26 total revenue outlook is $223.1 billion, $3.2 billion higher than projected in the 2025 Budget and the 2025–26 First Quarter Finances. The increase in the revenue forecast is mainly due to higher taxation revenue and other non-tax revenue reported by the broader public sector.

Key changes in the revenue outlook compared with the 2025 Budget and 2025–26 First Quarter Finances forecast include:

• Personal Income Tax revenue projections increased by $1,457 million, reflecting higher‑than‑expected revenues from the processing of 2024 tax returns by the Canada Revenue Agency and anticipated growth in capital gains and dividend income.
• Corporations Tax revenue projections increased by $1,020 million, mainly due to upward revisions to corporate profit growth in 2025.
• Sales Tax revenue projections increased by $23 million, mainly reflecting upward revisions to federal official Harmonized Sales Tax (HST) entitlements for 2025, partially offset by the proposed removal of the provincial portion of the HST for first-time home buyers on qualifying new homes.
• Land Transfer Tax revenue projections are lower by $576 million, mainly reflecting slower‑than‑expected housing market activity in 2025.
• Projections for All Other Taxes combined decreased by $55 million, which is mostly due to lower Employer Health Tax and Electricity Payments in Lieu of Taxes, partially offset by higher Education Property Tax and Gasoline Tax.
• Government of Canada Transfers projections increased by $52 million, mainly reflecting additional federal funding to provide evacuation support services to First Nation communities affected by floods and wildland fires.
• Net Income from Government Business Enterprises projections increased by $212 million, mainly due to higher net income forecasts for Ontario Power Generation (OPG) from projected Ontario Nuclear Funds’ realized gains.
• Other Non-Tax Revenues are projected to increase by $1,086 million, primarily due to higher revenues from the broader public sector, including fees and donations. The increase also includes higher interest and investment income.

Expense Update

Since the release of the 2025 Budget and 2025–26 First Quarter Finances, changes to program expense have been primarily funded through the Contingency Fund and largely relate to initiatives to support health, emergency services, and economic and cultural activities. The 2025–26 total expense outlook is projected to be $234.6 billion, $2.1 billion higher than both the 2025 Budget and the 2025–26 First Quarter Finances projections.

Key investments since the 2025–26 First Quarter Finances include:

• $369.5 million to address rising home care service volumes and to support the expansion and sustainability of the Hospital to Home (H2H) program;
• $99.3 million to support evacuation services for First Nation communities affected by spring flooding and wildland fires;
• $90.0 million to meet requirements for wildfire management and suppression activities for the 2025 fire season, which saw a 300 per cent increase in hectares burned compared to 2024;
• $30.0 million to support the forestry sector’s competitiveness in the face of U.S. softwood lumber duties and the threat of tariffs;
• $10.0 million to increase funding for the Fire Protection Grant to help municipal fire departments expand cancer prevention initiatives, improve responses to lithium-ion battery‑related incidents, and support upgrades such as enhanced broadband and internet connectivity;
• $2.2 million to support the completion of The Corleck, a new cultural venue located on Toronto’s waterfront that is being developed by the Canada Ireland Foundation;
• $1.0 million to commemorate the 50^th Anniversary of the Franco–Ontarian Flag by supporting events that recognize the unique contribution of Francophones to Ontario and promote their cultural and economic growth; and
• $5.8 million in other changes, primarily due to investments in infrastructure supports to restore research capacity and environmental sustainability to Agricultural Research and Innovation Ontario, to expand the Charles H. Best Diabetes Centre in Whitby, and to support the Gairdner Awards by the Gairdner Foundation.

Additionally, the Contingency Fund has been increased by an additional $2.0 billion to support greater flexibility in the fiscal plan to help protect against unforeseen changes and mitigate expense risks and for compensation settlements.

Interest and other debt servicing charges is projected to be $16.2 billion, consistent with the forecast in the 2025–26 First Quarter Finances and the 2025 Budget.

Prudence in 2025–26

The Ontario government continues to maintain a responsible and flexible fiscal plan to respond to uncertainty and risks. The Fiscal Sustainability, Transparency and Accountability Act, 2019 requires Ontario’s fiscal plan to incorporate prudence in the form of a reserve to protect the fiscal outlook against unforeseen adverse changes in the province’s revenue and expense, including those resulting from changes in Ontario’s economic performance.

The 2025 Budget included a reserve of $2.0 billion in 2025–26, which has been maintained as part of the current fiscal outlook. This elevated reserve level demonstrates the government’s commitment to addressing uncertainty and prudent risk management. In addition, the Contingency Fund is maintained to help mitigate any expense risks. For 2025–26, after a $2.0 billion top-up in the 2025 Ontario Economic Outlook and Fiscal Review, the Contingency Fund has a projected balance of $4.5 billion.

Medium-Term Fiscal Plan

The government is projecting a deficit of $13.5 billion in 2025–26, an improvement from the $14.6 billion deficit published in the 2025 Budget. The fiscal outlook for 2026–27 and 2027–28 remains consistent with the path outlined in the 2025 Budget.  

Medium-Term Revenue Outlook

Over the medium term, revenue is forecast to increase from $226.2 billion in 2024–25 to $240.0 billion in 2027–28.

The taxation revenue outlook reflects the impact of finalized 2024–25 results and updated economic outlook since the 2025 Budget.

The primary driver of the forecast for Personal Income Tax (PIT) revenue is the outlook for growth in compensation of employees. Personal Income Tax revenue is projected to grow at an average annual rate of 6.1 per cent between 2024–25 and 2027–28.

The Sales Tax revenue projection is based primarily on the outlook for household consumption spending. Sales Tax revenue is projected to grow at an average annual rate of 3.2 per cent between 2024–25 and 2027–28.

The forecast for Corporations Tax revenue is mainly driven by projections of corporate net operating surplus. Corporations Tax revenue is projected to grow at an average annual rate of 3.5 per cent between 2024–25 and 2027–28.

The Ontario Health Premium revenue forecast is based primarily on the outlook for growth in the compensation of employees. Ontario Health Premium revenue is projected to increase at an average annual rate of 3.3 per cent between 2024–25 and 2027–28.

Education Property Tax revenue is based primarily on the outlook for growth in the property assessment base resulting from new construction activities. Revenues are projected to increase at an average annual rate of 0.5 per cent between 2024–25 and 2027–28. 

Revenues from All Other Taxes are projected to increase at an average annual rate of 2.2 per cent between 2024–25 and 2027–28. This includes revenues from all other taxes including the Employer Health Tax; Land Transfer Tax (LTT); Beer, Wine and Spirits Taxes; and volume-based taxes such as the Gasoline Tax, the Fuel Tax and the Tobacco Tax.

The forecast for Government of Canada Transfers is based on existing federal–provincial funding agreements and formulas. Federal transfers are projected to increase at an average annual rate of 2.7 per cent from 2024–25 to 2027–28.

The outlook for Income from Government Business Enterprises (GBEs) is based on Ontario Ministry of Finance estimates for Hydro One Ltd. (Hydro One) and projections provided by Ontario Power Generation (OPG), the Ontario Cannabis Store (OCS), the Liquor Control Board of Ontario (LCBO), the Ontario Lottery and Gaming Corporation (OLG) and iGaming Ontario (iGO). Net incomes of GBEs are projected to increase at an average annual rate of 0.3 per cent from 2024–25 to 2027–28.

The forecast for Other Non-Tax Revenue is based on projections provided by government ministries and provincial agencies. The outlook for Other Non-Tax Revenue is projected to decrease at an average annual rate of 1.0 per cent from 2025–26 to 2027–28. Other non-tax revenue in 2024–25 was elevated significantly due to the inclusion of non-recurring revenue including the court‑approved settlement between tobacco companies and their creditors.

Medium-Term Expense Outlook

The total expense outlook is projected to grow from $227.3 billion in 2024–25 to $237.8 billion in 2027–28. Ontario’s program expense outlook is expected to grow from $212.1 billion in 2024–25 to $220.1 billion in 2027–28. Over the medium term, this reflects the government’s commitment to key public services such as health care, education and infrastructure. As part of the government’s strategy for responsible fiscal management, the government has ensured that program expense growth does not outpace revenues. In addition, contingencies have been incorporated into the program expense outlook to ensure stability and the ability to respond to unforeseen events.

The government continues its plan to take a fiscally responsible and balanced approach by sustaining investments in key public services and targeted supports while maintaining fiscal flexibility to respond to uncertainty and emerging risks.

Sustained investments in key public services over the medium term include:

• Addressing the growing demands of the health care sector by investing in hospitals and other health care services to support Ontario’s aging and expanding population;
• Supporting student achievement through programs that build foundational skills in reading, writing and math, to better prepare students for the in-demand jobs and opportunities of the future;
• Providing child care supports to help ensure access for more families and enhance the quality of early learning and child care program delivery;
• Supporting postsecondary institutions and improving labour market alignment to produce job‑ready graduates for employers in priority sectors, such as health, human resources, education and skilled trades, as well as to support research and innovation to help drive economic growth;
• Making annual inflation adjustments to core allowances for the Ontario Disability Support Program and the maximum monthly amount for the Assistance for Children with Severe Disabilities Program;
• Providing supports to the Ontario Provincial Police, such as in enhanced border security and improved technology, investments to expand and build new correctional institutions, as well as compensation costs for frontline public-safety personnel;
• Funding to support employment and training, including the Skills Development Fund Training and Capital Streams; and
• Building municipal housing-enabling infrastructure projects through the Municipal Housing Infrastructure Program.

New targeted investments over the medium term include:

• Investing in home care services and to expand and sustain the Hospital to Home program, enhancing access to community-based health care;
• Providing support for the expansion of the Charles H. Best Diabetes Centre in Whitby, to address rising demand for Type 1 diabetes care, primarily in the Durham Region; and
• Investing in Halton Healthcare Services to address regional capacity needs.

To maintain fiscal flexibility and reflect a cautious approach to planning as uncertainty increases over time, the level of the Contingency Fund has been increased. 

The total expense outlook includes interest and other debt servicing charges expense, which is projected to increase from $16.2 billion in 2025–26 to $17.7 billion in 2027–28.

Prudence Built into the Medium-Term Outlook

In keeping with sound fiscal practices, Ontario’s revenue outlook is based on prudent economic planning projections, as discussed in Chapter 2: Economic Performance and Outlook.

With the ongoing challenges the province faces due to economic uncertainty, the government maintains a responsible and flexible fiscal plan to respond to these impacts as necessary. Ontario incorporates prudence in the form of a reserve to protect the fiscal outlook against unforeseen adverse changes in the province’s revenue and expense, including those resulting from changes in Ontario’s economic performance.

The reserve has been set at $2.0 billion in 2026–27 and 2027–28, unchanged from the levels in the 2025 Budget. This elevated reserve level demonstrates the government’s commitment to addressing uncertainty and prudent risk management. In addition, the Contingency Fund is maintained to help mitigate expense risks — for example, in cases where health and safety may be compromised, and which may otherwise adversely affect Ontario’s fiscal performance.

Transparency and Risks

The government is committed to being open and transparent about the state of Ontario’s finances. This principle is reflected in the Fiscal Sustainability, Transparency and Accountability Act, 2019, which stipulates that Ontario’s fiscal policy should be clearly articulated and information about it should be readily available to the public without charge.

While mid-year updates to the government’s finances are informed by the latest information available, key information still to be received over the remainder of the fiscal year may present further upside and downside risks, which could materially affect the fiscal outlook. Revenue could be affected by new information from the Canada Revenue Agency on tax return processing for 2024 and previous taxation years, changes in the economic outlook and the evolution of private‑sector economic forecasts, which the province uses to develop its own revenue projections, while expenses could be impacted by changes in utilization of large demand-driven programs.

To ensure a reasonable and prudent economic forecast, the government’s key economic planning projections are set below the average of private‐sector forecasts in each year. For 2025 onwards, the planning assumptions are set 0.1 percentage point below the private‐sector average.

While the planning assumptions for economic growth are reasonable and prudent, the Ontario Ministry of Finance has also developed Faster Growth and Slower Growth scenarios to provide greater transparency around Ontario’s economic and fiscal outlook amid heightened economic uncertainty.

As a matter of transparent fiscal management, financial pressures are monitored throughout the fiscal year by the Ontario Treasury Board Secretariat, with the goal of ensuring that robust and prudent methodologies are used to develop forecasts. Other important risk management tools include closely tracking the pace of implementation of initiatives and proactively identifying emerging program and policy risks. Comprehensive analysis of known pressures informs the fiscal planning processes, including the development of plans to mitigate and manage fiscal pressures, as well as maintaining adequate contingencies as part of the medium-term fiscal projections in respect of the government’s flexible fiscal plan to respond to uncertainty and risks.

In addition to the key demand sensitivities and economic risks to the fiscal plan, there are risks stemming from the government’s contingent liabilities. Whether future events will result in actual liabilities for the province is beyond the direct control of the government. For example, losses could result from legal settlements or a call on loan or funding guarantees. While a Contingency Fund is included in the fiscal plan to help mitigate the expense risks, until there exists certainty around the likelihood and costs of these future events, these risks are not included in the province’s fiscal plan. Provisions for losses that are likely to occur and can be reasonably estimated are expensed and reported as liabilities in Ontario’s financial statements. Any significant contingent liabilities related to the 2024–25 fiscal year have been disclosed as part of the Public Accounts of Ontario 2024–2025, released in September.

Summary of Significant Accounting Policies

Effective April 1, 2026, Ontario will adopt the Public Sector Accounting Board’s new Conceptual Framework for Financial Reporting in the Public Sector and Section PS 1202 Financial Statement Presentation. This change reflects a shift in presentation and is fiscally and economically neutral. The 2026 Budget will be the first to incorporate these new standards.

Details of Ontario’s Finances

Chart Descriptions

Chart 3.1: Current Fiscal Outlook Compared to the 2025 Budget

The bar chart illustrates the fiscal outlook presented in the 2025 Budget compared to the current outlook in the 2025 Ontario Economic Outlook and Fiscal Review. The 2025 Budget projected deficits of $14.6 billion in 2025–26 and $7.8 billion in 2026–27, and a surplus of $0.2 billion in 2027–28. With the release of the 2025 Ontario Economic Outlook and Fiscal Review, the deficit projection has been revised to $13.5 billion in 2025–26 and remains at a deficit of $7.8 billion in 2026–27 and a surplus of $0.2 billion in 2027–28.

Source: Ontario Ministry of Finance.

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Chart 3.2: Composition of Revenue, 2025–26

The pie chart shows the composition of Ontario’s revenue in 2025–26, which is projected to be $223.1 billion. The largest taxation revenue source is Personal Income Tax revenue at $59.3 billion, accounting for 26.6 per cent of total revenue. This is followed by Sales Tax at $40.1 billion, or 18.0 per cent of total revenue; and Corporations Tax at $27.0 billion, or 12.1 per cent of total revenue. Other components of taxation revenue include Education Property Tax at $5.9 billion, or 2.6 per cent of total revenue; Employer Health Tax at $9.4 billion, or 4.2 per cent; Gasoline and Fuel Taxes at $2.2 billion, or 1.0 per cent; the Ontario Health Premium at $5.4 billion, or 2.4 per cent; and Other Taxes at $6.3 billion, or 2.8 per cent of total revenue. Total taxation revenue accounts for $155.6 billion, or 69.7 per cent of total revenue.

The other major non-taxation sources of revenue are Federal Transfers at $38.9 billion, or 17.4 per cent of total revenue; Income from Government Business Enterprises at $6.5 billion, or 2.9 per cent of total revenue; and various Other Non-Tax Revenue at $22.1 billion, or 9.9 per cent of total revenue.

Note: Numbers may not add due to rounding.

Source: Ontario Ministry of Finance.

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Chart 3.3: Composition of Expense, 2025–26

The pie chart shows the share of Ontario’s total expense and dollar amounts by sector in 2025–26.

Total expense in 2025–26 is projected to be $234.6 billion.

The largest expense is the Health Sector at $91.5 billion, accounting for 39.0 per cent of total expense.

The remaining sectors of total expense include the Education Sector at $41.0 billion or 17.5 per cent; the Postsecondary Education Sector at $13.0 billion or 5.5 per cent; the Children, Community and Social Services Sector at $20.4 billion or 8.7 per cent; the Justice Sector at $6.8 billion or 2.9 per cent; and Other Programs at $45.9 billion or 19.5 per cent. Interest and Other Debt Servicing Charges, included as part of total expense, is $16.2 billion or 6.9 per cent. Note: The Education Sector excludes the Teachers’ Pension Plan expense, which is included in Other Programs.

Note: Numbers may not add due to rounding.

Sources: Ontario Treasury Board Secretariat and Ontario Ministry of Finance.

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