Over the last eight months, the global economy has seen a widespread, downward shift in projections for economic growth. As a result of pressures from outside Ontario, the Province continues to face economic challenges. This means a modest pace of economic growth, which directly impacts how the government will manage fiscal planning. This is particularly relevant when it comes to balancing the implementation of new programs and protecting public services while meeting the targets for eliminating the deficit.
The 2011 Budget outlined a plan to hold average annual growth in program expense to 1.4 per cent until the budget is balanced in 2017–18. Given the extended period of modest economic growth expected, the Commission on the Reform of Ontario’s Public Services is expected to recommend that the target for spending growth should be one per cent. The government will consider this and other advice as it prepares for the 2012 Budget.
Consistent with this, any new spending initiatives will be paid for through offsetting savings from other areas or through the reform of public service delivery. The proposed Healthy Homes Renovation Tax Credit, if passed by the legislature, would help support jobs and economic activity while helping seniors live with independence and dignity in their own home. It also costs taxpayers less for care to be provided at home than in a long-term care facility. This new measure would be funded using reductions in other programs.
Eliminating the deficit by 2017–18 and maintaining balanced budgets beyond that time as demographic trends exert increasing pressure on government programs will require fundamental reform of the delivery of public services. The Commission on the Reform of Ontario’s Public Services will make recommendations for the government’s consideration in time for the 2012 Budget.
The Province remains on track to meet the fiscal targets projected in the 2011 Budget and the First Quarter Ontario Finances. This includes a $16.0 billion deficit in 2011–12 and steadily declining deficits of $15.2 billion in 2012–13 and $13.3 billion in 2013–14.
This chapter outlines Ontario’s fiscal outlook for 2011–12 and the medium-term forecast for 2012–13 and 2013–14.
The 2011–12 deficit is currently projected to be $16.0 billion, an improvement of $0.3 billion compared with the 2011 Budget and consistent with the outlook presented in the First Quarter Ontario Finances.
The Province’s total revenue for 2011–12 is projected to be $443 million lower than the 2011 Budget forecast. Excluding the impact of the one-time loan repayment from Chrysler Canada Inc. and other first-quarter changes, the revenue forecast is $778 million lower than in the 2011 Budget, mainly reflecting the impact of slower economic growth on Ontario’s revenue.
The 2011 Budget Plan included a $700 million reserve in 2011–12 to protect against the potential impact of events that could deteriorate the Province’s fiscal performance. The reserve for 2011–12 has been reduced by $500 million to counter the impact of slower economic growth on Ontario’s fiscal performance. This amount is less than the $778 million decrease in revenue since the first quarter.
Program expense has been maintained at 2011 Budget levels. Total expense is projected to decrease primarily due to lower interest on debt expense resulting from lower interest rates than projected at the time of the Budget and the lower deficit in 2010–11.
|Interest on Debt||10,290||10,097||(193)|
The 2011–12 revenue projection at $108,275 million is $443 million lower than the 2011 Budget outlook as a result of slower economic growth. The revenue decline in 2011–12 is mitigated by the Chrysler loan repayment previously announced in the First Quarter Ontario Finances.
|Personal Income Tax||(721)|
|Ontario Health Premium||(129)|
|Land Transfer Tax||125|
|Electricity Payments-in-Lieu of Taxes||(14)|
|Government of Canada||(175)|
|Government Business Enterprises||(39)|
|Other Non-Tax Revenue|
|Chrysler Loan Repayment||468|
|Other Non-Tax Revenue||(46)|
|Total Other Non-Tax Revenue||422|
|Total Revenue Changes Since the Budget||(443)|
Key revenue changes since the 2011 Budget forecast include:
Total expense has decreased by $264.4 million primarily due to lower interest on debt expense resulting from lower interest rates than forecast at the time of the 2011 Budget and the lower deficit in 2010–11.
|Program Expense Changes|
|Proposed Healthy Homes Renovation Tax Credit||60.0|
|Savings in business support programs and tax-related expenditures||(60.0)|
|Emergency forest firefighting||175.0|
|Pan/Parapan American Games athletes' village||52.0|
|Other program expenses||9.6|
|Total Program Expense Changes||(71.6)|
|Interest on Debt||(192.9)|
|Total Expense Changes Since the Budget||(264.4)|
Key 2011–12 expense changes from the 2011 Budget forecast include:
Interest on Debt expense is $192.9 million lower than forecast in the 2011 Budget. This reduction primarily reflects the impact of lower interest rates than those projected at the time of the Budget, and the lower deficit in 2010–11.
The medium-term revenue forecast reflects the Ministry of Finance’s economic outlook and the estimated impact of government policy measures.
|Government of Canada||23.0||21.6||21.6||22.8|
|Income from Government Business Enterprises||4.6||4.5||4,8||5.2|
|Other Non-Tax Revenue||7,9||7.6||7.2||7.2|
The medium-term Taxation Revenue outlook reflects current revenue information and projections for the Province’s economic growth as outlined in Chapter II: Ontario’s Economic Outlook.
The forecast for Government of Canada transfers is based on existing federal–provincial funding arrangements. The decline from 2010–11 to 2011–12 is largely due to the decline in federal transitional assistance related to the introduction of the Harmonized Sales Tax and lower stimulus funding for infrastructure and labour market programs.
The outlook for Income from Government Business Enterprises (GBEs) is based on projections from the GBEs. Revenue is projected to decline slightly in 2011–12, largely due to the Ontario Lottery and Gaming Corporation’s strong performance in 2010–11, and Ontario First Nations’ receipt, beginning in 2011, of 1.7 per cent of gross gaming revenues under the Gaming Revenue Sharing and Financial Agreement, projected at $117 million in 2011–12. Over the forecast period, revenue is projected to grow at an average annual rate of 4.4 per cent. The forecast for GBEs includes $200 million in efficiencies by 2013–14 that the government has instructed its agencies to deliver.
The forecast for Other Non-Tax Revenue is based on projections provided by government ministries and provincial agencies. The decrease in 2011–12 reflects the government’s previously announced decision to upload the municipal share of Ontario Disability Support Program costs and the full-year impact of the replacement of certain alcohol charges, including Beer and Wine Fees, with taxes beginning on July 1, 2010. The further decline in 2012–13 reflects one-time factors that boosted Non-Tax Revenues in each of 2010–11 and 2011–12. These included, in 2010–11, the sale of a portion of the Province’s General Motors shares and the Province’s share of civil agreements with certain tobacco manufacturers and, in 2011–12, receipts from the repayment of an Ontario loan by Chrysler, as discussed in the First Quarter Ontario Finances.
|Source of Change||2011–12||2012–13||2013–14|
|Total Revenue Changes||(0.4)||(0.8)||(0.9)|
The lower medium-term revenue outlook is largely due to lower taxation revenue and a downward revision to Ontario’s Equalization entitlement for 2011–12 as a result of a federal government calculation error.
The outlook for Taxation Revenue is lower due to slower economic growth and a lower estimated 2010 tax base indicated by tax returns processed since the 2011 Budget. There is an additional one-time impact in 2011–12 reflecting variances from the 2010–11 Public Accounts.
Equalization Payments are lower over the medium term due to a downward revision to Ontario’s entitlement for 2011–12 as a result of a federal government calculation error. This revision impacted the forecast going forward.
The $0.4 billion increase in Other Revenue in 2011–12 largely reflects Chrysler’s repayment of its Ontario loan discussed above. The forecast for Other Revenue also reflects fiscally neutral revenue changes referenced in Section B of this chapter.
Total expense is projected to grow to $128.7 billion by 2013–14 — below the forecast included in the 2011 Budget — primarily due to lower interest on debt expense.
Program expense over the medium term is consistent with the 2011 Budget Plan. This includes the impact of the proposed Healthy Homes Renovation Tax Credit announced in this Ontario Economic Outlook and Fiscal Review to help support jobs and economic activity, which has been accommodated without increasing overall program spending.
The government is committed to balancing the implementation of new programs and protecting public services while meeting the targets for eliminating the deficit.
Despite forecasts of slower economic growth, the Province is on track to meet the fiscal targets laid out in the 2011 Budget. Ontario’s fiscal outlook continues to project steadily declining deficits of $16.0 billion in 2011–12, $15.2 billion in 2012–13 and $13.3 billion in 2013–14.
Provincial revenue is now projected to grow at a slower rate than forecast, primarily due to lower economic growth projections for Ontario.
Total expense is now forecast to be lower than projected at the time of the 2011 Budget, primarily due to lower interest on debt expense.
A $1.0 billion reserve has been maintained for 2012–13 and 2013–14, recognizing ongoing global economic uncertainty and the significant volatility that could cause variances to both the Province’s revenue and expense outlooks.
To continue the progress Ontarians have made in building strong public health care and education, the Province must now sharpen its focus on managing growth in spending. Ontario has had success in meeting this challenge in the very recent past by lowering growth in program spending from about seven per cent to approximately four per cent last year.
The government remains committed to the fiscal targets laid out in the 2011 Budget. At that time the government presented a plan to hold average annual growth in program expense to 1.4 per cent until the budget is balanced in 2017–18. The Province will have to find better, more efficient ways to invest in key priority areas. Given the current economic uncertainty, the Commission on the Reform of Ontario’s Public Services is expected to recommend that the target for spending growth should be one per cent. The government will consider this and other advice as it prepares for the 2012 Budget.
Over the last few years, the Province has worked with the federal government to promote economic growth and job creation to meet the challenge of a global recession, including providing financial support to the auto industry. The Province has also urged the federal government to address unfair treatment of Ontarians in the Canadian federation. Progress has been made on both these fronts, including recent federal legislation to increase the number of Ontario’s representatives in the federal House of Commons by 15 to 121. But more work remains to be done.
Historically, Ontario has been Canada’s economic engine, supporting investments in other provinces and the delivery of vital public services across the country. While Ontario’s economy has in many respects recovered from the global recession, continuing global economic uncertainty requires ongoing and enhanced investment in the foundation for sustained economic growth and job creation.
A key component of sustained economic growth and job creation is a strong workforce. Although the Province continues to invest in the tools that Ontarians need to prosper in the new economy, the federal Employment Insurance program is still failing to meet the needs of Ontario’s unemployed workers and the modern labour market.
The federal government supports industries like the oil industry. Ontario looks to the federal government to invest in the province’s future as a leader in green energy.
Ontario welcomes the federal government’s commitment to a six per cent annual increase in the Canada Health Transfer for the duration of the next health accord. The Province has called on the federal government to begin discussions with provincial and territorial governments on a new Ten-Year Health Accord, which would also include additional funding for seniors’ care and home care. These discussions must start as soon as possible in order to complete a new accord by the end of 2012.
In 2011–12, the Ontario government expects to receive $2.2 billion in Equalization payments, while Ontarians will contribute about $5.8 billion to the program. The $3.6 billion difference between what Ontarians pay into the Equalization program and the Province receives back from the program enables other provinces to reduce taxes, build roads and deliver public services to the people who live there.
Ontario is the only province that receives Equalization payments and that also sees its taxpayers pay more into the program than their government receives. Although the Province will receive 15 per cent of Equalization payments this year, Ontario taxpayers will contribute almost 40 per cent of the program’s cost. That is unfair. Equalization to other provinces costs each Ontarian about $270 this year.
Canada’s transfer system should help — not hinder — the Ontario government’s ability to invest in the provincial economy. Reform of the federal transfer system must include more than the Canada Health Transfer. Increases in the Canada Health Transfer must not come at the expense of other important transfers such as the Canada Social Transfer and those that support services and programs like labour-market training, reducing health care wait times and infrastructure.
Federal initiatives should not undermine the ability of provincial governments to fund and deliver services that their taxpayers require, like health care and education, by forcing scarce resources to be diverted elsewhere. Accordingly, Ontario recently joined the Quebec government in asking the federal government to provide additional funding to address any provincial costs that may result from proposed changes to the criminal justice system. Ontario is also calling on the federal government to ensure that proposed measures such as income splitting and Tax-Free Savings Accounts do not adversely affect the Province’s capacity to fund core public services.
Ontarians demand that their federal and provincial governments work together. They also rightly demand that, as taxpayers, they be treated fairly.
The Ontario government looks forward to working with the federal government and other provincial and territorial governments to realize a comprehensive, equitable and efficient system of federal transfers that supports the sustainable delivery of quality services like health care across the country.
This section provides information on the Province’s current fiscal outlook, historical financial performance and key fiscal indicators.
|Interest on Debt2||9.5||10.1||10.6||11.7|
|Personal Income Tax||25,738||23,393||23,624||24,779|
|Education Property Tax2||5,696||5,626||5,913||5,727|
|Employer Health Tax||4,617||4,545||4,733||4,991|
|Ontario Health Premium||2,776||2,763||2,934||2,945|
|Land Transfer Tax||1,013||1,015||1,247||1,374|
|Beer and Wine Tax (replacing Fees)3||–||–||397||538|
|Electricity Payments-In-Lieu of Taxes||830||516||321||518|
|Government of Canada|
|Canada Health Transfer||8,942||9,791||10,184||10,713|
|Canada Social Transfer||4,079||4,204||4,330||4,460|
|Labour Market Programs||797||1,253||1,201||891|
|Wait Times Reduction Fund||235||97||97||97|
|Other Federal Payments||1,867||1,440||4,052||2,200|
|Government Business Enterprises|
|Ontario Lottery and Gaming Corporation||1,921||1,924||1,956||1,738|
|Liquor Control Board of Ontario||1,410||1,440||1,562||1,641|
|Ontario Power Generation Inc./Hydro One Inc.||713||854||1,048||1,092|
|Other Government Enterprises||(2)||(23)||–||–|
|Other Non-Tax Revenue|
|Vehicle and Driver Registration Fees||1,034||1,057||1,080||1,084|
|Electricity Debt Retirement Charge||970||907||944||931|
|Power Supply Contract Recoveries||953||1,409||1,288||1,351|
|Sales and Rentals||733||647||1,015||1,021|
|Other Fees and Licences||683||717||715||788|
|Beer and Wine Fees (replaced by Tax)3||459||451||181||–|
|Net Reduction of Power Purchase Contract Liability||373||348||339||317|
|Miscellaneous Other Non-Tax Revenue||655||854||1,161||1,127|
|Agriculture, Food and Rural Affairs1||877||1,265||888||1,244.3|
|Board of Internal Economy||188||187||194||293.9|
|Children and Youth Services||3,223||3,588||3,835||3,947.5|
|Citizenship and Immigration||89||101||106||114.5|
|Community and Social Services||7,992||8,621||9,148||9,770.0|
|Community Safety and Correctional Services||2,121||2,201||2,610||2,755.5|
|Economic Development and Trade||245||223||267||343.1|
|Francophone Affairs, Office of||5||5||5||5.5|
|Health and Long-Term Care||40,352||42,725||44,085||47,128.5|
|Health Promotion and Sport1||382||385||385||398.4|
|Municipal Affairs and Housing1||725||664||672||608.8|
|Northern Development, Mines and Forestry||645||653||823||846.2|
|Research and Innovation1||295||333||349||369.5|
|Tourism and Culture1||566||668||793||900.5|
|Training, Colleges and Universities1||6,081||6,479||6,501||6,998.3|
|Interest on Debt3||8,566||8,719||9,480||10,096.9|
|Agriculture, Food and Rural Affairs|
|Time-Limited Investments in Infrastructure||–||618||1,496||293.4|
|Teachers’ Pension Plan1||50||255||522||526.0|
|Ontario Clean Energy Benefit||–||–||300||1,135.0|
|One-Time Automotive Sector Support2||75||3,022||–||–|
|Ontario Municipal Partnership Fund||905||781||684||623.7|
|Operating Contingency Fund||–||–||–||359.5|
|Pension Benefit Guarantee Fund||–||500||–||–|
|Power Supply Contract Costs||953||1,409||1,288||1,351.0|
|Pension and Other Employee Future Benefits||971||949||1,182||1,341.0|
|Health Promotion and Sport|
|Time-Limited Investments in Infrastructure||–||48||288||44.2|
|Time-Limited Investments to Support Pan/Parapan Am Games||–||–||15||28.3|
|Capital Contingency Fund||–||–||–||32.3|
|Municipal Affairs and Housing|
|Time-Limited Investments in Municipal Social and Affordable Housing Stock||–||585||668||58.7|
|Research and Innovation|
|Harmonized Sales Tax Transitional Support||–||–||3,039||1,440.6|
|Tourism and Culture|
|Training, Colleges and Universities|
|One-Time Transit and Infrastructure Investments||–||190||–||–|
|Total Other Expense||3,035||8,985||10,350||7,383.2|
|Sector||2011–12 Current Outlook|
|Investment in Capital Assets1||Transfers and Other Infrastructure Expenditures2||Total Infrastructure Expenditures|
|Municipal and Local Infrastructure||514||134||183||316|
|Short-Term Stimulus Investments||3,598||42||451||493|
|Less: Other Partner Funding4||597||674||–||674|
|Total Excluding Partner Funding||14,612||11,019||1,754||12,773|
|Total Provincial Expenditure6||14,272||10,923||1,177||12,100|
|2002–032||2003–04||2004–05||2005–063||2006–07||2007–08||2008–09||2009–102||Actual 2010–11||Current Outlook 2011–12|
|Interest on Debt4||9,694||9,604||9,368||9,019||8,831||8,914||8,566||8,719||9,480||10,097|
|Gross Domestic Product (GDP) at Market Prices||477,763||493,081||516,106||537,383||560,576||583,946||587,055||581,635||612,494||636,996|
|Population — July (000s)||12,091||12,242||12,391||12,528||12,665||12,793||12,934||13,073||13,228||13,373|
|Net Debt per Capita (dollars)||10,971||11,339||11,373||12,189||12,139||12,242||13,112||14,808||16,216||17,825|
|Personal Income per Capita (dollars)||30,553||31,133||32,362||33,482||34,957||36,430||37,051||36,722||37,802||38,626|
|Interest on Debt as a per cent of Revenue||13.0||12.9||11.2||10.0||9.1||8.6||8.8||9.1||8.9||9.3|
|Net Debt as a per cent of GDP||27.8||28.2||27.3||28.4||27.4||26.8||28.9||33.3||35||37.4|
|Accumulated Deficit as a per cent of GDP||24.8||25.2||24.4||20.3||19.0||18.1||19.3||22.5||23.6||25.2|