Chapter 3: Ontario’s Fiscal Plan and Outlook

Introduction

Ontario is navigating a challenging economic environment shaped by unwarranted U.S. trade and tariff pressures and global supply chain disruptions stemming from geopolitical conflicts, while demand for essential public services continues to grow. In response to these challenges, the government is taking action to protect Ontario’s economy, support workers and businesses, and strengthen interprovincial trade. By balancing immediate economic support with responsible fiscal stewardship, the province is supporting key services while maintaining the flexibility to respond to changing conditions. Reflecting the impact of these external factors, Ontario’s fiscal outlook has deteriorated since the 2026 Budget, with Ontario’s extended outlook projecting a path to a balanced budget in 2029–30. For more details, please see Table 3.1.

The 2026 Ontario Economic Outlook and Fiscal Review is projecting a deficit of $16.9 billion in 2026–27. Over the medium term, the government projects deficits of $12.7 billion in 2027–28 and $6.7 billion in 2028–29, followed by a return to a surplus of $0.2 billion in 2029–30, in the extended outlook.

In the recently released Public Accounts of Ontario 2025–2026, Ontario reported a $13.0 billion deficit in 2025–26, compared to a forecasted deficit of $14.6 billion in the 2025 Budget. The government remains committed to eliminating the province’s structural deficit while continuing to make progress towards long‑term economic and fiscal sustainability and achieving a balanced budget.

The net debt-to-GDP ratio is forecast to be 37.4 per cent in 2026–27, 0.3 percentage points lower than the forecast in the 2026 Budget and remains below Ontario’s target of 40.0 per cent.

Key Changes in 2026–27 Since the 2026 Budget

Ontario’s 2026–27 deficit is projected to be $16.9 billion — a deterioration of $3.1 billion from the outlook published in the 2026 Budget. This reflects updated economic and revenue information and higher prudence to mitigate near-term risks.

Revenues in 2026–27 are projected to be $232.6 billion, $2.0 billion higher than the forecast in the 2026 Budget. This increase is largely driven by higher-than-expected federal transfers, net income from Government Business Enterprises and taxation revenue.

Program expense is projected to be $229.9 billion, $4.3 billion higher than the forecast in the 2026 Budget, primarily due to a top-up of the Contingency Fund to provide greater fiscal flexibility and help manage risks associated with compensation pressures and ongoing economic uncertainty.

Ontario is forecast to pay $17.4 billion in Interest and Other Debt Servicing Charges in 2026–27, an increase of $0.1 billion from the forecast in the 2026 Budget. The net debt-to-GDP ratio is forecast to be 37.4 per cent in 2026–27, 0.3 percentage points lower than the 37.7 per cent forecast in the 2026 Budget.

The 2026–27 outlook also includes a $2.2 billion reserve, $0.7 billion higher than projected in the 2026 Budget. This increase reflects ongoing extraordinary circumstances arising from economic and geopolitical uncertainty, including significant trade-related risks to Ontario’s economy. The reserve has also been increased to accommodate the estimated impact of the proposed federal Productivity Mega Deduction.

Revenue Update

The 2026–27 total revenue outlook is $232.6 billion, $2.0 billion higher than projected in the 2026 Budget and $1.8 billion higher than projected in the 2026–27 First Quarter Finances. The increase in the revenue forecast since the 2026–27 First Quarter Finances is mainly due to higher‑than‑expected federal transfers, net income from Government Business Enterprises and taxation revenue.

Key changes in the revenue outlook compared with the 2026–27 First Quarter Finances forecast include:

• Corporations Tax revenue projections increased by $1,543 million, mainly due to upward revisions in corporate profit growth in 2026 and stronger-than-expected revenue from the processing of 2025 and prior year tax returns by the Canada Revenue Agency (CRA). This is partially offset by the impact of tax measures in Bill C-15, enacted by the federal government on March 26, 2026, which includes several accelerated capital cost allowance measures;
• Sales Tax revenue projections increased by $878 million, mainly due to a reprofiling of Ontario’s enhancement of the Harmonized Sales Tax (HST) rebates of the 8 per cent provincial portion of HST on new homes announced in the 2026 Budget. This is part of Ontario’s enhanced relief on up to the full 13 per cent HST on eligible new homes;
• Land Transfer Tax revenue projections are lower by $497 million, mainly reflecting slower‑than‑expected housing market activity in 2026;
• Personal Income Tax revenue projections decreased by $1,703 million, mainly due to lower‑than-expected revenues from the processing of 2025 tax returns by the CRA;
• Projections for All Other Taxes combined increased by $213 million, mainly due to higher estimates for the Ontario Health Premium; Employer Health Tax; and Beer, Wine and Spirits Taxes;
• Government of Canada Transfers projections increased by $776 million, mainly due to one-time funding from the federal government to support measures to increase Ontario’s housing supply;
• Net income from Government Business Enterprises projections increased by $610 million, mainly due to higher net income forecasts for Ontario Power Generation (OPG) based on projected Ontario Nuclear Funds’ realized gains, partially offset by lower projected net income from the Ontario Lottery and Gaming Corporation (OLG); and
• Other Non‐Tax Revenues projections combined are higher by $19 million, mainly due to higher interest and investment income.

Expense Update

Since the release of the 2026 Budget and 2026–27 First Quarter Finances, changes to program expense have been largely driven by a top-up to the Contingency Fund, as well as targeted investments in areas such as housing affordability and the emergency firefighting response. The 2026–27 total expense outlook is projected to be $247.3 billion, $4.4 billion higher than in the 2026 Budget.

Key investments since the 2026–27 First Quarter Finances include the following initiatives, which have been offset by revenues and existing contingencies:

• $293 million to support the Ontario New Home Affordability Payment, which provides top-up relief equivalent to up to 100 per cent of the 5 per cent federal portion of HST, to deliver the full 13 per cent HST relief on eligible new homes when combined with Ontario’s HST rebates;
• $100 million in increased funding to meet expenditure requirements for wildfire management and suppression activities for the 2026 fire season, which saw a 176 per cent increase in hectares burned compared to the 10-year average;
• $21 million to update and expand the McMichael Canadian Art Collection (McMichael) facility and grounds in Kleinburg;
• $2 million to support the capacity and sustainability of the province’s crisis, information, and referral lines, as part of Ontario-STANDS, the action plan to prevent and address gender-based violence;
• $1 million for the Nancy Island Revitalization Project as part of Ontario’s investment in Destination Wasaga, intended to preserve local heritage, create jobs, boost tourism and support economic growth across the region; and
• $31 million in other changes.

In addition, the Contingency Fund has been topped up by an additional $3.8 billion to protect key public services, address compensation-related pressures, and provide flexibility to respond to unforeseen risks arising from the escalating U.S. trade tensions and its potential impacts on economic growth, investment and employment.

Interest and Other Debt Servicing Charges is forecast to be $17.4 billion, an increase of $0.1 billion from the forecast in the 2026–27 First Quarter Finances and the 2026 Budget.

Prudence in 2026–27

Since the 2026 Budget, the economic environment has become more uncertain due to the escalation of the U.S. trade tensions and its potential impacts on economic growth, investment and employment. In response to these heightened risks, the province has made available an additional $3.8 billion in contingency funds in 2026–27 to protect Ontario’s economy and maintain the flexibility to protect key public services, respond to emerging risks and address compensation pressures. In 2026–27, after the $3.8 billion top-up in the 2026 Ontario Economic Outlook and Fiscal Review, the Contingency Fund has a balance of $4.9 billion.

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 revenues and expenses, including those resulting from changes in Ontario’s economic performance.

The 2026 Budget included a reserve of $1.5 billion in 2026–27, which has been increased to $2.2 billion as part of the current fiscal outlook. This increase reflects ongoing extraordinary circumstances, including significant trade-related risks to Ontario’s economic outlook, as well as the estimated impact of the proposed federal Productivity Mega Deduction.

Medium-Term Fiscal Plan

The government is projecting deficits of $16.9 billion in 2026–27, $12.7 billion in 2027–28, and $6.7 billion in 2028–29. This reflects a deterioration compared to the 2026 Budget outlook, mainly due to increased prudence and lower-than-expected growth in taxation revenues.

Revisions to the Medium-Term Outlook

Medium-term projections in the 2026 Ontario Economic Outlook and Fiscal Review have been revised compared to the projections in the 2026 Budget.

Key changes in the medium-term outlook include the following:

• Total revenue is projected to be $3.9 billion lower in 2027–28 and $4.9 billion lower in 2028–29 than in the 2026 Budget, primarily due to lower-than-expected taxation revenues;
• Program expense is projected to increase by $0.7 billion in 2027–28 and $0.3 billion in 2028–29, mainly reflecting the Ontario New Home Affordability Payment (ONHAP) and additional prudence to respond to economic risks and support potential measures to protect Ontario from the impacts of unwarranted U.S. tariffs and trade tensions;
• Interest and Other Debt Servicing Charges is forecast to increase by $0.4 billion in 2027–28 and $0.7 billion in 2028–29; and
• The reserve has been increased by $1.6 billion in 2027–28 and $1.3 billion in 2028–29. This increase reflects ongoing extraordinary circumstances arising from economic and geopolitical uncertainty, including significant risks to Ontario’s economy related to trade, as well as the impact of proposed federal tax measures.

The government is projecting deficits of $12.7 billion in 2027–28, and $6.7 billion in 2028–29, representing a deterioration of $6.6 billion, and $7.2 billion, respectively, compared to the forecasts presented in the 2026 Budget.

Medium-Term Revenue Outlook

Over the medium term, revenue is forecast to increase from $232.6 billion in 2026–27 to $247.9 billion in 2028–29.

The taxation revenue outlook reflects the impact of finalized 2025–26 results and the updated economic growth outlook since the 2026 Budget. See Chapter 2: Economic Performance and Outlook for more details.

The forecast for Personal Income Tax revenues is driven by the economic outlook including compensation of employees. Personal Income Tax revenue is projected to grow at an average annual rate of 7.0 per cent between 2025–26 and 2028–29.

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 4.3 per cent between 2025–26 and 2028–29.

The forecast for Corporations Tax revenue is mainly driven by projections of corporate profitability. Corporations Tax revenue is projected to grow at an average annual rate of 5.3 per cent between 2025–26 and 2028–29.

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 5.0 per cent between 2025–26 and 2028–29.

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 0.6 per cent between 2025–26 and 2028–29.

Revenues from All Other Taxes are projected to increase at an average annual rate of 2.2 per cent between 2025–26 and 2028–29. 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 0.9 per cent between 2025–26 and 2028–29.

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 income from GBEs is projected to decrease at an average annual rate of 3.2 per cent between 2025–26 and 2028–29.

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 1.2 per cent from 2025–26 to 2028–29.

Medium-Term Expense Outlook

The government continues to protect Ontario’s economy and invest in key public services while maintaining fiscal responsibility. The province’s plan keeps program spending growth below that of revenue growth over the medium-term outlook, with contingency measures in place to address unexpected challenges as they arise.

Over the medium-term outlook, base program expense is projected to increase every year, growing at an average annual rate of 1.4 per cent from 2025–26 to 2028–29.

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

• Addressing the growing demands of the health care sector by investing in utilization-driven programs like the Ontario Health Insurance Plan, hospitals and other health care services to support Ontario’s aging population;
• Strengthening student achievement through a back-to-basics approach, focused on building strong foundational skills in reading, writing and math, ensuring every student has the opportunity to succeed;
• Continuing to support access to child care for families while strengthening early learning services and child care programs;
• Increasing investments to support the Postsecondary Education sector’s long-term success and sustainability, as well as to support research and innovation to help drive economic growth;
• Applying the annual indexation of the Ontario Disability Support Program core allowances and the maximum monthly amount for the Assistance for Children with Severe Disabilities Program;
• Continuing to support enhanced border security, the expansion and construction of new correctional institutions, public safety modernization initiatives and essential service delivery, including First Nations policing, the Ontario Provincial Police, courts, correctional services, animal welfare services, coroner and forensic pathology services; and
• Building municipal housing-enabling infrastructure projects through the Municipal Housing Infrastructure Program.

The Contingency Fund has been increased to maintain fiscal flexibility, reflecting a prudent planning approach amid increasing uncertainty over the medium term.

The total expense outlook includes Interest and Other Debt Servicing Charges expense, which is forecast to increase from $17.4 billion in 2026–27 to $20.4 billion in 2028–29.

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 ongoing economic uncertainty continuing to affect the province, the government is maintaining a responsible and flexible fiscal plan to respond to these impacts as needed. Ontario incorporates prudence in the form of a reserve to protect the fiscal outlook against unforeseen adverse changes in revenue and expense, including those resulting from changes in Ontario’s economic performance.

The reserve has been increased over the medium-term outlook relative to the 2026 Budget. This increase reflects ongoing extraordinary circumstances arising from economic and geopolitical uncertainty, including significant trade-related risks to Ontario’s economy, and measures to accommodate the estimated impact of the proposed federal Productivity Mega Deduction.

In addition, the Contingency Fund is maintained to help mitigate expense risks that may otherwise adversely affect Ontario’s fiscal performance (for example, in cases where health and safety may be compromised), in response to economic risks and to support potential measures to protect Ontario from the impacts of unwarranted U.S. tariffs and trade tensions.

Transparency and Risks

The government continues to be 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 that related information should be readily available to the public without charge.

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 2026 onwards, the planning assumptions are set 0.1 percentage points 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 a broader range of possible outcomes, 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 government’s flexible fiscal planning processes, including plans to mitigate and manage fiscal pressures and maintain adequate contingencies as part of medium-term fiscal projections 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 the Contingency Fund is included in the fiscal plan to help mitigate the expense risks, these risks are not included in the province’s fiscal plan until there is certainty about the likelihood and costs of these future events. 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 2025–26 fiscal year have been disclosed as part of the Public Accounts of Ontario 2025–2026, released on September 24, 2026.

Details of Ontario’s Finances

Chart Descriptions

Chart 3.1: Current Fiscal Outlook Compared to the 2026 Budget

The bar chart illustrates the fiscal outlooks presented in the 2026 Budget compared to the current outlook in the 2026 Ontario Economic Outlook and Fiscal Review. The 2026 Budget projected deficits of $13.8 billion in 2026–27 and $6.1 billion in 2027–28, followed by a surplus of $0.6 billion in 2028–29. With the release of the 2026 Ontario Economic Outlook and Fiscal Review, the deficit projections have been revised to $16.9 billion in 2026–27, $12.7 billion in 2027–28 and $6.7 billion in 2028–29 followed by a surplus of $0.2 billion in 2029–30 in the extended outlook.

Source: Ontario Ministry of Finance.

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Chart 3.2: Composition of Total Revenue, 2026–27

The pie chart shows the composition of Ontario’s total revenue in 2026–27, which is projected to be $232.6 billion. The largest taxation revenue source is Personal Income Tax revenue at $63.4 billion, accounting for 27.3 per cent of total revenue. This is followed by Sales Tax at $40.7 billion, or 17.5 per cent of total revenue; and Corporations Tax at $30.2 billion, or 13.0 per cent of total revenue. Other components of taxation revenue include Education Property Tax at $6.0 billion, or 2.6 per cent of total revenue; Employer Health Tax at $8.6 billion, or 3.7 per cent; Gasoline Tax and Fuel Tax at $2.3 billion, or 1.0 per cent; the Ontario Health Premium at $5.6 billion, or 2.4 per cent; and Other Taxes at $6.0 billion, or 2.6 per cent of total revenue.

Total taxation revenue accounts for $162.8 billion, or 70.0 per cent of total revenue.

The other major non-taxation sources of revenue are Federal Transfers at $40.7 billion, or
17.5 per cent of total revenue; Income from Government Business Enterprises at $7.1 billion, or 3.0 per cent of total revenue; and various Other Non-Tax Revenue at $21.9 billion, or 9.4 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 Total Expense, 2026–27

The pie chart shows the share of Ontario’s total expense and dollar amounts by sector in 2026–27.

Total expense in 2026–27 is projected to be $247.3 billion.

The largest expense is the Health Sector at $100.7 billion, accounting for 40.7 per cent of total expense.

The remaining sectors of total expense include the Education Sector^* at $40.2 billion or 16.3 per cent; the Postsecondary Education Sector at $13.9 billion or 5.6 per cent; the Children, Community and Social Services Sector at $21.4 billion or 8.7 per cent; the Justice Sector at $7.2 billion or 2.9 per cent; and Other Programs at $46.5 billion or 18.8 per cent. Interest and Other Debt Servicing Charges, included as part of total expense, is $17.4 billion or 7.0 per cent.

^* Excludes Teachers’ Pension Plan. Teachers’ Pension Plan expense 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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