Ok hold on that's not at all what happened. Firstly while a Line 2 extension to Scarborough was considered it was quickly shot down after the bill for the 1 stop extension to Kennedy came in. That extension alone cost nearly as much as the extensions to Warden and Islington 12 years prior and at the time Metro was still responsible for the bulk of construction costs. This dramatic cost increase shouldn't have been a surprise considering the Spadina Extension to Wilson came in at around $200 Million and blew way over budget. While the Province could pitch in they had no obligation too and there wasn't a set funding model like the 1/3 split we have today. It should be no surprise then that by the time the 80's came around Metro and the TTC wanted out of the subway game and looked at LRT as an alternative since without provincial support Metro alone couldn't afford to build any more subways. Secondly what the SRT replaced was the originally an LRT (or "High-Speed Streetcar" as it was called) using coupled together ALRV's running from Kennedy to Milner & Sheppard (with a possible branch line to Markham & Progress). This would have been replicated out in Etobicoke with the Etobicoke RT with a line running from Kipling to Pearson with a possible branch to York University utilizing the hydro corridors in the area. The SRT change was imposed on us by the Province as they needed a guinea pig for their ICTS trains and after Hamilton told them to pound sand they came here and "reminded" Metro and the TTC that they were paying for 2/3 of the TTC operating budget. That said the province did fully pay for the conversion and the eventual rebuild of the Kennedy platforms so it cost the TTC and Metro nothing upfront.
Finally ALRT had nothing to do with any of this as that was a seperate provincial project. The ALRT trains were not LIM based but were conventional using standard traction motors powered by an overhead catenary and would have been completly automated. The only similarity here was that the ALRT trains used the same model of vehicle as the SRT trains, only the ALRT trains were of similar dimension to the TTC's subway trains (75' long, 6 doors per car, 2 car married sets coupled into a 6 car train, 2x2 transverse seating, capacity of about 200 people (156 seated) per 2 car set (1,200 passengers across a 6 car consist), automated using SelTrac CBTC, and finally powered by conventional 600v DC motors (4 per car) drawing power from a 25kv AC powered catenary). Basically ALRT was Toronto's REM before the REM. What killed was the combination of Bill Davis retiring, Frank Miller immediately abandoning the idea for whatever ungodly reason, and finally David Peterson deciding it would be to just expand the pre-existing GO network then build something new. I'll admit the SRT was pointed to since it wasn't living up to expectations but this comparison ignored the fundamental difference between the trains. The SRT trains were a brand new technology that had never been done before at that scale using LIM which was a bespoke system at the time; while the ALRT trains were just conventional EMU's that drove themselves. Peterson did also say that he didn't wan the bi-level coaches tossed aside as they were only like 10 years old at the time even though this ignores the fact that the ALRT Northern Line was the first to be built and wouldn't have displaced any bi-levels since it was a brand new line. Secondly the Southern Line which was to be a full conversion of the Lake Shore lines wouldn't have been built for another 20-30 years so by the time it was done the bi-levels would have been ready for retirement anyways. Basically the Liberals didn't want to pay for it which is also why they killed Network 2011; although they conveniently had enough money to funnel into the Highway 407 project.
Also if you are wondering I believe the 8 stop extensions to Warden and Islington cost about $76 Million while the 1 stop extension to Kennedy cost about $74 Million. If you include the 1 stop extension to Kipling (about $36 Million) then these two stops alone cost Metro around $100 Million. So you can see how subway construction in Toronto was unsustainable without provincial help.