The government is on track to balance the budget by 2017–18 in a fair and responsible way. This will mean new strategic investments to spur growth, create jobs, strengthen services and help families. The world’s recovery from the global recession remains uncertain, and many families are still feeling unsure about their job security and their financial future.
Should global economic conditions falter, causing revenue growth to fall further, the government’s priority will be to continue to protect investments in jobs, growth and families ahead of short-term targets. Stronger growth and new jobs are the surest and fairest path to balancing the budget. These investments will be critical to helping foster the growth necessary to both support Ontario’s families and generate revenues necessary to support eliminating the deficit.
For four years in a row, the government has overachieved on the deficit targets it established after the 2009 global recession based on disciplined actions to reduce spending. In September, the 2012–2013 Public Accounts of Ontario reported that the deficit for 2012–13 was $9.2 billion — $0.6 billion lower than projected at the time of the 2013 Budget. The 2013 Ontario Economic Outlook and Fiscal Review projects that the deficit for 2013–14 will be $11.7 billion, on track with the 2013 Budget forecast and more than $1.0 billion ahead of the deficit projection for 2013–14 outlined in the 2012 Budget.
Ontario continues to face global economic uncertainty, which is holding back economic growth and therefore the outlook for Provincial revenues. In response, the government will drive further savings through an expenditure review; continue to move forward with 60 per cent of the recommendations of the Commission on the Reform of Ontario’s Public Services; and consider other tools, as necessary, to ensure the deficit is eliminated by 2017–18. (See Chapter VI: Taxation for more details.)
In 2011–12, year-over-year growth in program spending was held to less than one per cent. The 2012–2013 Public Accounts of Ontario reported that total spending and program spending in 2012–13 fell from the previous year for the first time in more than a decade.
As indicated by the Commission on the Reform of Ontario’s Public Services, chaired by Don Drummond in 2012, slowing the rate of growth in program spending through fiscal discipline is essential for eliminating the deficit by 2017–18.
Ontario currently has the lowest program spending per capita among Canadian provinces and ranks the lowest among provinces in terms of public-sector employees per capita. In 2012, the latest year for which data are available, Ontario had 6.5 public-sector employees per 1,000 people, compared to a national average of 9.7 employees per 1,000 people.
The 2013 Budget put in place targeted actions that will continue to control the rate of growth in program spending in a way that is fair and balanced, while also ensuring that key public services continue to be funded. Key actions include:
The Province continues to move forward with 60 per cent of the recommendations of the Commission on the Reform of Ontario’s Public Services. The Commission provided valuable advice to the government on how to deliver the most effective and efficient public services possible and achieve a sustainable fiscal balance. Recent actions to implement recommendations include:
Building on previous initiatives to be more efficient and accountable, the government is going to drive further savings through an expenditure review.
The review will consider additional proposals recommended by the Commission while also pursuing opportunities to accelerate the implementation of others.
With over half of all government spending going to salaries and benefits, managing public-sector compensation costs is an important part of the plan to eliminate the deficit and protect the front-line government services that Ontario families rely on. As stated in the 2013 Budget, compensation costs must be addressed within Ontario’s existing fiscal framework.
The government continues to respect the collective bargaining process. Collective bargaining enhances the ability of responsible employers and bargaining agents to increase productivity, maintain services and ensure fiscal sustainability. Any modest wage increases that are negotiated must be absorbed by employers within available funding and within Ontario’s existing fiscal plan through efficiency and productivity gains or other tradeoffs so that service levels continue to meet public needs. All public-sector partners need to continue to work together to control current and future compensation costs.
Collective bargaining has achieved results. Ontario public-sector settlements are below the average of those in the private sector, municipal sector and federal public sector.
The government has frozen salaries for designated executives at hospitals, universities, colleges, school boards and provincially owned electricity companies.
All aspects of compensation plans are frozen, and base salaries cannot be increased. In addition, the overall performance pay envelopes at designated employers are frozen. These restraint measures will be in place until the deficit is eliminated. Members of Provincial Parliament (MPPs) will also continue to see their wages frozen — bringing the total length of the current freeze to five years.
The government is modernizing compensation structures for senior executives in the broader public sector. This is being informed by sector-specific compensation studies with the objective of establishing modern compensation structures, including the consideration of appropriate cross-sector benchmarks, salary grids and hard caps, to hold executives accountable for results and achievement of government and board priorities.
Current compensation practices for public appointees are also being reviewed, including special advisers and appointees to classified agencies and short-term bodies as per the Government Appointees Directive.
Since launching its Action Plan for Health Care, the government has made significant progress in transforming health care services into a more sustainable, high-quality system to manage the growth in health care spending. While ensuring Ontarians get better value for their health dollars, Ontario’s strategy is making health care options available closer to home, enhancing supports for seniors and promoting healthy lifestyles.
Funding for the health care system cannot continue to grow at past rates. The Province is committed to managing the growth in health care funding to an annual average of two per cent over the medium term as it continues to improve integration, offer new service delivery, implement new funding models and offer more services for complex care patients in the community setting.
While the challenge ahead is significant, substantial progress has already been made, including:
In the 2013 Budget, the Province announced the introduction of an efficiencies and modernization savings strategy that aims to achieve long-term sustainability in school board funding.
The Ministry of Education is currently engaging education stakeholders and working with school boards on this strategy.
The Ministry has conducted operational reviews of all 72 school boards across the province over several years, beginning in 2007. The goal of the operational reviews was to enhance management capacity within school boards, by encouraging good stewardship of public resources and by leveraging and sharing best practices.
The government recognizes the important work of the Ontario Public Service (OPS) in delivering vital services to citizens and propelling the province forward.
The 2009 Budget announced measures to make the OPS more efficient by reducing its size by five per cent or approximately 3,400 full-time equivalent staff over three years through attrition and other measures. The Province achieved the five per cent reduction by March 31, 2012.
In the 2011 Budget, the government expanded on this target by committing to a further reduction of 1,500 full-time equivalent staff by March 31, 2014. It is well on its way to meeting that commitment.
The government has strengthened the Agency Establishment and Accountability Directive (AEAD) by introducing a risk-based approach to the oversight of classified agencies. The government has also acted on the recommendations of the Report of the Special Advisor on Agencies to further enhance the governance of classified agencies.
The enhanced AEAD requires ministries to undertake annual risk assessment evaluations for classified agencies. In addition, ministries will undertake mandate reviews for specific operational agencies to assess their effectiveness. Over the next several years, ministries will undertake mandate reviews of all classified agencies with a view to support the achievement of government priorities. The government is also strengthening board governance training for appointees to further enhance accountability.
To demonstrate the government’s commitment, it will begin to benchmark government enterprises such as the LCBO, Ontario Lottery and Gaming Corporation, Ontario Power Generation, Hydro One and other agencies. The responsible ministries will report annually on the performance of these enterprises.
The government recognizes the need for fiscal transparency and accountability, to ensure that the legislature and Ontarians have the financial information necessary to understand the state of the Province’s finances. The legislation to establish the Financial Accountability Officer received Royal Assent in September, making Ontario the first province in Canada to establish such an officer. The Financial Accountability Officer Act, 2013, outlines that the mandate of the Officer will be to:
An expenditure review will find greater efficiencies in support of the government’s plan to control spending. This will help inform the government on the path to balance, while transforming public services to increase efficiencies and improve outcomes.
The government will also look to employ other tools, as necessary, to ensure the deficit is eliminated by 2017–18, while avoiding across-the-board cuts that could jeopardize vital public services or reckless tax increases that would hurt job creation.
Chart 1.6: Ontario’s 2013 Budget Plan to Eliminate the Deficit
Bar chart shows Ontario’s 2013 Budget Plan to eliminate the deficit. In the 2009 Ontario Economic Outlook and Fiscal Review, Ontario projected a $24.7 billion deficit for 2009–10. The actual result for 2009–10 was a deficit of $19.3 billion. The 2010 Budget projected deficits of $19.7 billion for 2010–11, $17.3 billion for 2011–12, $15.9 billion for 2012–13 and $13.3 billion for 2013–14. The actual result for 2010–11 was a deficit of $14.0 billion. The actual result for 2011–12 was a deficit of $13.0 billion. The actual result for 2012–13 was a deficit of $9.2 billion.
For the medium-term and extended outlook, the 2013 Budget projected a deficit of $11.7 billion for 2013–14, a deficit of $10.1 billion for 2014–15, a deficit of $7.2 billion for 2015–16, a deficit of $3.5 billion for 2016–17 and a surplus of $0.5 billion for 2017–18.
Chart 1.7: Year-Over-Year Program Expense Changes
Bar chart shows that the annual growth rate in program expense was 12.0 per cent in 2009–10, 4.5 per cent in 2010–11, 0.9 per cent in 2011–12 and –0.4 per cent in 2012–13.
Chart 1.8: Ontario Wage Settlements
Average wage settlements for the Ontario public sector were 0.3 per cent — lower than the settlements for the private sector, which were 2.0 per cent, the municipal sector, which were 2.0 per cent, and the federal public sector in Ontario, which were 1.7 per cent.
Chart 1.9: Ontario Public Service Staffing Levels
Bar chart shows that the number of Full Time Equivalent Staff (FTEs) was 68,645 in October 2008, the 2009 Budget Target for March 2012 (which was achieved), was 65,245, and the 2011 Budget Target to be achieved by March 2014 is 63,745. The chart notes that the 2009 Budget Target was a reduction of 3,400 FTEs and that 2011 Budget Target was a further reduction of 1,500 FTEs.