In its first five years in office, the McGuinty government worked with Ontarians to improve the province’s schools, hospitals, roads, bridges and other key public services after years of neglect. These investments led to improved literacy and numeracy test scores, higher graduation rates, smaller class sizes, and shorter wait times for surgeries and other medical procedures. The government also eliminated the $5.5 billion deficit it inherited.
When the global recession hit, the McGuinty government chose to lessen the impact on Ontarians, through stimulus investments, boosting job training for laid-off workers and lowering income taxes for nine out of 10 Ontario taxpayers. During the global economic downturn, the government protected the gains made in education and health care.
The government also moved to make Ontario more competitive by modernizing the tax system, introducing full-day kindergarten for the youngest learners and providing support for an increasing number of students in colleges and universities.
Ontario’s economy is now growing in the wake of the global recession, but the Province is facing new economic and fiscal challenges. The economy is growing at a slower pace than projected in the 2011 Budget and the Province has a substantial deficit. As the government indicated in the 2011 Budget, balancing the budget by 2017–18 will require significantly reduced rates of growth in program spending. Now is the time to begin a new five-year plan to balance the provincial budget.
In February 2012, both the Conference Board of Canada and the Commission on the Reform of Ontario’s Public Services released projections suggesting that if no action were taken to control growth in provincial expense, Ontario’s deficit would continue to grow. The Conference Board report1 estimated that in 2017–18 Ontario’s deficit could be $16 billion. Using similar assumptions about continuing trends, the Commission estimated that the deficit could be as high as $30 billion if no action were taken to control spending.2 Regardless of the difference in projections, it is clear that Ontario is facing a serious deficit problem and that strong action must be taken to address it.
Ontario governments of all political stripes have run significant deficits and have added to the accumulated debt. In fact, since 1990, four governments formed by three parties have done so. Governments have accumulated debt because they could rely on economic growth to keep the debt-to-GDP ratio sustainable.
Given the worldwide recession and the ensuing uncertainty in the global economy, Ontario can no longer rely on economic growth alone to balance the budget. The challenges facing many European countries, where interest rates remain at unsustainable levels and are putting new pressures and stresses on both governments and people, demonstrate the consequences of not addressing deficits and debts soon enough.
The status quo is not an option. If action is not taken, the deficit will increase, which would hurt Ontario’s ability to continue focusing on its priorities: education, health care and smart, strategic investments to spur job creation. Escalating deficits would also impair the Province’s ability to set and control its future priorities, choices and actions.
By focusing on balancing the budget, the government will stabilize, and then reduce, its debt-to-GDP ratio, which has increased significantly over the past two decades. The annual cost of servicing the debt is approximately $10 billion, the third-largest expense carried by taxpayers and one of the fastest-growing expenditures. The Province spends more on interest each year than on colleges and universities. Interest rates are extremely low, which has enabled the government to manage those costs. Yet, as interest rates increase, as they are expected to, so will those payments, taking precious resources away from education and health care. For every one per cent increase in interest rates, the cost to service the debt increases by approximately $467 million in the first year of the increase. If no action is taken to balance the budget, Ontario would pay almost as much to service the debt in 2017—18 as it spends on education today.
In the 2011 Budget, the McGuinty government committed to reforming public services. It found savings across government through operational efficiencies and consolidation; streamlining programs; and further efficiencies in the health care system. In 2011—12, Ontario’s per capita program spending is projected to be $8,560, which is the lowest among the provinces and 11 per cent below the average program spending across the other nine provincial governments. The McGuinty government is well positioned to implement change, given its strong action to reform education, health care and Ontario’s tax system.
The government’s approach is different from arbitrary, across-the-board cuts, which would undermine the strength of Ontario’s economy and put job creation at risk. Experiences in Canada — including in Ontario in the late 1990s — and around the world have shown that deep, across-the-board cuts ultimately lead to increased costs. Moreover, they would undermine programs that are positioning the province for success, while leaving ineffective programs in place.
In a trend that has been developing for many years, Ontario tax revenue has been falling as a share of the economy. Tax revenues are 11.6 per cent of gross domestic product (GDP), almost 15 per cent lower today than the ratio in 1994. While some may argue for tax increases, the McGuinty government will not take that path to balance the budget.
The 2012 Budget is the next step in the McGuinty government’s plan to balance the budget. Balancing the budget is ultimately the most important thing the government can do to strengthen the economy, create jobs, and protect health care and education.
Investments in education and skills training play a critical role in preparing people for jobs that ensure future prosperity in the knowledge-based economy. Ontarians with higher levels of education and skills have better employment prospects, earn higher wages, and contribute more in taxes.
Continuing progress in education is critical to the future growth of Ontario’s economy. Since 2003, class sizes are down, graduation rates and test scores are up, and Ontario’s schools have been recognized as among the best in the world by the Organisation for Economic Co-operation and Development’s Programme for International Student Assessment (PISA) and McKinsey and Company.
In the 1990s, education budgets were cut and results in Ontario’s classrooms suffered. By contrast, this Budget takes steps to protect results achieved so far by fully implementing full-day kindergarten, maintaining class sizes in early grades at current levels, and ensuring continued progress in student achievement, while finding ways to lower costs.
Full-day kindergarten is integral to Ontario’s education system. The government remains committed to ensuring its full implementation by September 2014. By finding savings elsewhere, including through compensation restraint, this Budget ensures adequate funding to meet this commitment. Currently, approximately 50,000 children in 800 schools across Ontario are benefiting from a full day of learning. By September 2012, full-day kindergarten will be available in an additional 900 schools, reaching approximately 120,000 students, and representing nearly 50 per cent of total program enrolment. By September 2013, about 184,000 children will benefit from the program. When fully implemented, the program will reach approximately 250,000 children, giving them the best possible start as they grow to their full potential.
Smaller class sizes allow educators to focus more attention on each student to improve results. The government is now funding an additional 13,600 teaching positions compared to 2003, with over 5,000 of these for smaller primary class sizes. As a result:
The government is committed to preserving the progress made over the past eight years. Funding will be maintained to preserve caps on primary class sizes and existing average class sizes at the junior and senior levels, to ensure students in all grades benefit from more interaction with teachers.
Ontarians have made tremendous progress in education over the last few years, and the government is protecting those gains. To deliver full-day kindergarten and keep class sizes smaller, other savings must be found. This Budget identifies ways of lowering costs while maintaining progress in student achievement.
The current collective agreements with teachers and others in the education sector are set to expire in August 2012 — the Province is currently facilitating negotiations and discussions for a new deal. This is the third set of sector-wide negotiations and discussions since 2003, but the first since the deep global recession, which has left Ontario with a significant fiscal challenge.
Ontarians know how hard and how effectively teachers and support staff are working to build an education system that is the envy of the world. The government needs the help of teachers and others in the education sector to put their work on a sustainable footing for the future and is committed to working towards that goal at the bargaining table.
The government has proposed parameters for an agreement with education employees and school boards, including:
Each of these measures, or equivalent measures, is necessary if the government is to meet its commitment to balance the budget. The government is taking a similar approach to labour negotiations for all sectors.
Building on Ontarians’ progress means implementing full-day kindergarten, keeping class sizes small and ensuring students continue to benefit from the individual attention and expertise of the outstanding professionals in Ontario’s schools. By protecting full-day kindergarten, keeping class sizes at current levels and continuing to focus on students and classrooms, the government is protecting nearly 10,000 teaching positions, including 3,800 for full-day kindergarten, and 9,700 non-teaching positions.
Some of Ontario’s schools are underutilized because of declining enrolment in the province and population trends that vary by region. The way school board funding works makes it easier for some boards in urban areas to keep small and underused schools open than to deliver services more efficiently.
The government will change the school board allocations to encourage school boards to consolidate underutilized school sites, resulting in annual savings of over $70 million at maturity. This will begin in the 2013–14 school year to allow boards time to work with their communities to ensure a smooth transition, taking regional circumstances into account.
The government is committed to using resources in the manner that best supports students. One way to ensure this is by reducing school boards’ administrative expenses.
To further reduce administrative and back-office expenses, the government will pursue the amalgamation of school boards. This amalgamation will be considered in areas of the province with low population growth and declining enrolment, and will encourage economies of scale and allow the new boards to focus resources on student achievement.
The Ministry of Education, following consultation, will identify potential boards for amalgamation and work with those boards and their communities to ensure that student needs are put first in any amalgamation. The government will not consider merging public and separate school boards, in keeping with constitutional requirements.
The government is committed to ensuring that students are transported to and from schools in a safe, timely and cost-effective manner. The Ministry of Education has worked with school boards and the industry on student transportation reform initiatives to develop transportation consortia, adopt best business practices, and raise management capacity to deliver safe, effective and efficient transportation services. The ministry will continue to work with school boards and the industry to achieve savings of $34 million over three years by implementing competitive procurement processes and other operational efficiencies, while ensuring that student transportation safety is maintained and student needs are met.
Four years of high school is standard across almost all of North America. Despite the elimination of the Ontario Academic Credit (OAC) nearly a decade ago, Ontario continues to accommodate up to 20,000 students returning for a fifth year, many of whom have already received their secondary school diploma.
The government is moving to cap successful secondary credits at 34, four more than required to earn an Ontario Secondary School Diploma. This cap will motivate students to plan their courses appropriately while allowing them to seek additional or upgraded credits. It will also generate mature savings of $22 million per year, striking a balance between flexibility for students and the need for sustainability.
To allow students adequate time to plan their studies, the credit cap will take effect in September 2013. The government will work with its partners in the school system to ensure that the credit cap is implemented fairly and with minimal disruption. Schools will continue to offer programs that allow students to customize their education to their individual strengths and encourage graduation.
Ontario has made significant investments in postsecondary education and skills training to develop a well-trained and highly skilled workforce. These investments ensure that Ontario’s workforce is among the most skilled in the world and better positioned to compete globally.
Ontario is committed to maintaining and enhancing the quality of education while maximizing the value from each taxpayer dollar.
Progress includes reversing the decline in operating grants to colleges and universities experienced in the 1990s; continuing to build a high-quality postsecondary sector; and establishing an integrated employment and training program to provide Ontarians with the knowledge and skills they need for the 21st century. The government will continue to work with the postsecondary sector to enhance innovation and productivity to support efficiency targets while supporting quality education for students.
In January 2012, the government announced the new 30% Off Ontario Tuition grant. The 2012 Budget affirms the government’s commitment to continue the 30% Off Ontario Tuition grant, providing the Budget is approved by the legislature this year.
The grant provides up to $800 per term for a maximum of two terms per year for full-time undergraduate university or college degree students and up to $365 per term for a maximum of two terms for students enrolled in college diploma or certificate programs at publicly funded Ontario institutions. Moving forward, the grant is indexed to the annual increase in college and university tuition, beginning in the 2012–13 year.
The cost of the 30% Off Ontario Tuition grant is being offset by reducing funding to non-core programs. Beginning in 2012–13, the Ontario Textbook and Technology Grant and Ontario Trust for Student Support will be eliminated, while the Queen Elizabeth II Aiming for the Top Scholarship will be phased out gradually over three years so that no students currently receiving the award will lose funding. No new Queen Elizabeth II scholarships will be awarded, starting in 2012–13.
The government will further enhance its employment and training programs to better prepare Ontarians to meet the challenges of increasing globalization and rapid technological change. Programs and services will focus on delivering measurable results where need is greatest.
Currently, the government invests about $1.5 billion per year in employment and training services through dozens of programs across 11 different ministries. Programs target different client groups and use a variety of delivery networks and methods.
Over the last few years, Ontario has been working towards providing a client-centred “one-stop shop” to help Ontarians acquire and retain jobs. As part of Employment Ontario’s transformation, the Province has successfully integrated employment services transferred from the federal government with its employment and skills training programs and services.
Currently, the Employment Ontario Employment Service (ES) model helps Ontarians find sustainable employment by bridging the gap between employers seeking skilled workers and individuals looking for jobs. Over 400 ES locations across the province provide access to:
There is significant opportunity for better integration of Ontario’s employment and training programs. For example, the Commission for the Review of Social Assistance in Ontario has observed that the patchwork of employment programs available to social assistance recipients results in confusion for clients, employers and service providers. By integrating these supports into a network with a single customer window where possible and improving coordination, the government can improve client outcomes and better meet the needs of clients.
The potential benefits of this realignment are significant. For individuals who need training, it will mean enhanced and simplified access to a range of services and better employment outcomes. For individuals receiving social assistance, it means access to a wider range of employment and training services. For employers, the improved and coordinated promotion of services will create a simpler system to navigate. For taxpayers, it will lead to administrative efficiencies, cost reductions and improved value for money.
Ontario’s apprenticeship system is a key part of building the well-educated and highly skilled workforce the Province needs to compete in the current and future economy.
Over the past eight years, the government has significantly expanded the apprenticeship system, nearly doubling the number of apprentices in the province to more than 120,000. However, studies have found completion rates average about 50 per cent among Ontario apprentices. The strength of the apprenticeship system needs to be measured both by the proportion of apprentices who complete their programs and obtain certification and by the growth in the number of new registrations.
The Province will help apprentices complete training by focusing on getting the right people into the right jobs to support key sectors of the economy. Measures will include:
Measures to improve completion rates will benefit apprentices through better employability and earnings, and will enhance their ability to find and keep jobs.
The Ontario College of Trades will be launching its first review of apprenticeship ratios, starting in April 2012. An objective panel will conduct the review using a process and criteria arrived at during public consultations more than a year ago. The Ontario College of Trades’ process requires that industry and employee representatives work together to determine the appropriate journeyperson–apprentice ratio.
A key element of Employment Ontario is the Second Career program that helps laid-off workers get the training they need to succeed in today’s economy. To date, almost 55,000 people have benefited from the program. Evidence collected from an evaluation of Second Career participants shows that the employment situation of most participants improved. Clients found employment in fields including computer technology and social work. The government is reaffirming its commitment to support unemployed workers through the economic recovery by maintaining funding of $251 million in 2012–13 to serve 12,000 participants.
Between 2003–04 and 2011–12, health sector funding increased at an average rate of 6.1 per cent annually, for a total increase of $17.9 billion. This reflects the government’s commitment to increase access to quality care for all Ontarians. This investment has improved health care in Ontario after years of neglect and has produced meaningful improvements for families. These include:
In 2011, there were more than 607,000 doctors, nurses, diagnostic technicians, home care service providers and other health professionals and workers employed in the health care sector — approximately nine per cent of Ontario’s total employment.
Additional actions to support a healthy Ontario include:
With the current fiscal challenge, funding for the health care system cannot continue to grow at past rates. Additionally, health cost drivers such as demographic factors, demands for service, and technological changes continue to exert pressure on the fiscal plan. The delivery of health care needs to be transformed to continue providing the high-quality health care services that Ontarians need and expect.
Earlier this year, the government released Ontario’s Action Plan for Health Care, which establishes the road map for this transformation to a sustainable and high-quality health care system. This Plan is about better value for money. It is about creating a system that delivers health care in a smarter and more efficient way that will lead to better outcomes for Ontarians.
The Plan is based on three key strategies to realize better value for money:
The community care sector includes over 800 community service agencies that help people remain independent and live with dignity in their homes and communities. Services include personal support and homemaking, meals, community transportation, acquired brain injury services, assisted-living services in supportive housing, and adult day programs.
These strategies and the additional actions announced in this Budget will help maintain excellent health care for Ontarians while slowing the overall growth in health spending in Ontario to an average of 2.1 per cent annually, over the next three years.
Transforming Ontario’s health care system is essential to managing the rate of health care spending growth to meet the government’s commitment to balance the budget. The health care system is being transformed through strategies already underway including drug reforms, Excellent Care for All legislation and primary care reform.
The government will move ahead on this critical reform agenda through key measures in this Budget to manage health care spending and build on the Action Plan.
Doctors are integral to the health care system and are at the forefront of providing quality care to patients. Since 2003, the government has worked with doctors to increase access to care and reduce wait times. Total payments to physicians increased by $5.1 billion between 2003–04 and 2011–12. Nearly one in 10 program expense dollars goes to physician compensation. The 2012 Budget reflects the government’s plan to maintain total physician compensation at current levels through the next Physician Services Agreement with the Ontario Medical Association. This is necessary for the government to meet its commitment to balance the budget.
To reduce future costs associated with preventable illnesses, initiatives are needed to help Ontarians stay healthy and productive. For example, obesity has a direct effect on the development of Type 2 diabetes, and diabetes costs Ontario $4.9 billion per year. Currently, approximately one in five youth in Ontario is overweight. In addition, tobacco continues to be the leading cause of preventable disease and premature death in Ontario, accounting for $1.9 billion in health care costs and approximately 13,000 deaths each year. The government is committed to promoting healthy living and supporting better management of chronic conditions by:
Improving access to family health care is essential for improving health care and managing overall health system costs. Total hospital operating funding is the largest area of health spending and has increased by an average of 5.1 per cent annually since 2003. This rate of growth was partly required to make up for the deep across-the-board cuts of the 1990s. Treating patients in alternative care settings instead of hospitals, where appropriate, and ensuring access to primary care providers are critical elements of the government’s plan to slow hospital expense growth. Measures include:
Ensuring patients receive the right care in the right setting is essential for high-quality patient care and for managing health care costs. For example, it costs taxpayers more to provide seniors’ care in a long-term care home than it does to support seniors who live in their own home or with a family member. Therefore, the government is:
The Kensington Eye Institute is a community-based clinic that provides Ontarians with high-quality cataract procedures, which are covered under OHIP but performed outside a hospital setting. The Institute is able to focus on providing specialized procedures and, therefore, can serve more patients with excellent outcomes at a lower cost.
Additionally, the cost of a hospital acute care bed being occupied by an Alternative Level of Care (ALC) patient is a cost the system cannot afford. Providing community care to treat these patients at home or in a long-term care home makes good health care sense, will better meet the needs of patients, and is fiscally responsible.
Measures to enhance capacity in these sectors include:
Evidence will drive decisions on funding new and existing procedures. The government is committed to funding only those services that are supported by medical evidence.
The government will accelerate the evidence-based approach to care by building on the mandate of Health Quality Ontario (HQO) to provide recommendations to direct funding to where evidence shows the greatest value, without compromising access to services deemed medically necessary. This evidence-based approach to funding reform has already provided substantial benefits, including fee changes that will save $125 million in 2011–12. These include changes to testing for vitamin D, bone mineral density and sleep studies, as well as pre-operative testing for colonoscopy, cytoscopy, carpal tunnel release and arthroscopy.
Changing the way health care services are funded is a key component of the government’s plan to transform health care. To support transformation, the government is accelerating the move to a patient-centred funding model. This approach will be phased in over a three-year time frame and will help direct resources and expertise to where they are most needed to improve the value and quality of health care.
Under this approach, hospitals, long-term care homes and Community Care Access Centres will be funded based on the types and volume of services and treatments they deliver, at a price that reflects the best practice and complexity of patients and procedures, while encouraging efficiency without compromising service and access.
The model will drive provincial health care funding towards better patient outcomes by:
Health care providers that face unique circumstances, including small and rural hospitals, will continue to be treated uniquely, given their lower patient volumes and critical local service delivery role.
The Ontario Drug Benefit (ODB) program provides assistance to seniors for the cost of their prescription drugs. The ODB is a critical element of the health care services and supports that Ontario provides to seniors.
Since 2006, the government has made reforms to the Ontario drug system to improve the value for money that Ontarians pay for prescription drugs. These changes include reducing the prices of most generic drugs to 25 per cent of the cost of the comparable brand-name products. The government’s reforms are saving seniors money on their prescriptions. By 2011–12, the savings in the Ministry of Health and Long-Term Care drug programs were about $500 million per year. An additional $100 million in savings were achieved in 2011–12.
The government is taking steps to ensure the ODB program is effective, properly administered and providing the most help to those in greatest need. The fairness of the program will be improved by asking the highest-income seniors to pay more of their own prescription drug costs, while ensuring that these costs do not impose an unreasonable burden. About five per cent of senior ODB recipients will be paying more under this change.
|Paying the Same||92|
Under the current ODB program, seniors pay the first $100 of their drug costs each year and a co-payment of $6.11 for each prescription after the $100 deductible amount. The $100 deductible is waived for lower-income seniors but they are required to pay an existing $2.00 co-payment for each prescription. All seniors are eligible for the ODB regardless of their income level. This means that someone with an annual income of $300,000 gets the same benefit as someone with an income of $30,000 per year.
To improve the fairness of the program, high-income seniors will pay a new income-tested deductible. The new deductible will increase gradually with net income. For high-income single seniors with an income over $100,000, the deductible amount will be $100 plus three per cent of income over $100,000. For high-income senior couples with a combined income of over $160,000, the new deductible for the couple will be $200 plus three per cent of their combined income over $160,000. Seniors with higher incomes will also continue to pay a co-payment of $6.11 per prescription after the deductible amount. The income thresholds will not be indexed for inflation. Table 1.2 shows examples of the deductible amounts.
|Net Income ($)||16,000||40,000||100,000||120,000||150,000||200,000|
|As % of income||0.00%||0.25%||0.10%||0.58%||1.07%||1.55%|
|Net Income ($)||24,000||60,000||160,000||200,000||250,000||300,000|
|As % of income||0.00%||0.33%||0.13%||0.70%||1.16%||1.47%|
In addition, incomes will be checked each year, to ensure that seniors are receiving the correct level of benefits. These changes will not increase drug costs for seniors with incomes below the $100,000 or $160,000 thresholds who already get drug benefits. Seniors who currently pay the $2.00 co-payment will continue to pay $2.00 per prescription.
The changes will be effective beginning August 2014 to provide seniors with time to adjust to the new system.
Approximately 1.9 million seniors live in Ontario. Under this change, about 75,000 seniors with incomes over $100,000 (single) or $160,000 (couple) will pay an average of $665 a year more towards their prescription drug costs.
Seniors will continue to get benefits under the ODB program by presenting their Ontario Health Cards at their pharmacies, where their pharmacists will be able to access the information they need to ensure that seniors are charged appropriately for their prescription drugs.
Seniors living in long-term care homes or receiving publicly funded home care will not be affected by these changes.
Over the last generation, the fundamentals that shaped the provincial economy since Confederation have changed dramatically. Protected domestic markets have been replaced by open markets and global competition. Economies that are driven by abundant natural resources are taking on roles of greater importance both here in Canada and around the world. Uncertainty now characterizes the entire global economy.
The new global economic reality presents challenges to Ontario. Increased competition from emerging economies has resulted in Ontario losing its share in its key export market — the United States. Higher oil prices have driven up the costs of doing business in Ontario. At the same time, the rise in oil prices has led to a higher Canadian dollar, which further diminishes the competitiveness of Ontario businesses in a global market.
Given these challenges, Ontario’s continued prosperity will be strongly linked to its ability to achieve higher rates of productivity growth. The government has taken strong action, such as fundamental business tax reform, major infrastructure investments and enhanced training, which are helping to improve investment and productivity in Ontario.
As the government moves forward with its five-year plan to balance the budget, it will continue to focus on building a strong and diversified Ontario economy that will create jobs and growth.
The government will continue to invest in core economic infrastructure such as highways, transit and postsecondary education. It will consolidate and streamline employment and training programs, thereby better targeting its investments in people. It will also continue to encourage businesses to invest in innovation, improve their productivity and become globally competitive.
The plan will introduce a new strategic direction in business support programs, with a greater focus on productivity. Productivity growth comes from companies that make more efficient and innovative use of labour, capital, energy and raw materials to produce goods and services. Higher productivity growth leads to higher wages and helps businesses expand globally, resulting in the creation of new jobs and an improved standard of living for Ontarians.
The government will establish a Jobs and Prosperity Council, which will advise the government on a plan to boost Ontario’s productivity. The Council will seek to leverage the experience of business, labour, academics and non-government organizations.
The Council will recommend and lead a comprehensive research agenda on Ontario’s productivity and innovation challenges. The government will seek advice from the Council on improving research and development (R&D) tax credits to increase business R&D expenditures and simplify compliance and administration.
The Council will advise on restructuring and transforming Ontario’s existing business advisory services to boost their role in driving productivity. It will also help the government promote entrepreneurship and reach out to global markets and host an Ontario Productivity Summit.
Ontario currently provides about $2 billion in annual support to business, including targeted tax expenditures, through more than 40 different programs across at least seven ministries. These programs have encouraged business investment, jobs and economic growth. However, the current suite of programs is fragmented, resulting in a lack of coordination, increased administrative cost and complexity for business. The government will transform its existing business support programs to provide better coordination, clarify objectives, and avoid duplication and unnecessary costs.
The government will consolidate many of its programs into one Jobs and Prosperity Fund that will focus on supporting productivity growth and job creation in the business sector. It will target a reduction in administrative costs of at least 25 per cent. The Fund will support businesses and enhance productivity and innovation in the province’s many areas of economic strength. It will help businesses compete in the global marketplace, grow and create jobs.
The Jobs and Prosperity Council will provide advice to the government on consolidating and refocusing existing business support programs. Those support programs that do not fit the new productivity focus will be wound down, for overall savings of $250 million in 2014–15. To ensure an orderly transition for business, the government will meet all contractual obligations for projects that are already approved. The government will consult on the details of the new Fund.
Recognizing the distinct requirements of regional economies, the following funds will be maintained:
These funds will benefit from the productivity focus and innovative approach to program design developed for the Jobs and Prosperity Fund.
The U.S. market accounted for 77 per cent of Ontario’s international merchandise exports in 2011. This market will remain vital to Ontario but is expected to grow at a much slower pace than emerging economies such as those of Brazil, India and China. The Province has strong relationships with many of the world’s emerging economies and will build upon these important ties.
The government will also continue to diversify Ontario’s exports. It will focus its export promotion efforts on the key strengths of Ontario’s economy, including the clean energy technology sector.
To derive greater value from Ontario’s existing trade support services, the government will streamline and coordinate the trade promotion activities of all relevant ministries. This will help enhance Ontario’s access to global markets.
The Canadian government, with the participation of Ontario and other provinces, is currently negotiating a Comprehensive Economic and Trade Agreement (CETA) with the European Union (EU), one of the largest and richest markets in the world. This will help Ontario companies diversify and open new trade and investment opportunities in the EU.
Sharp declines in long-term interest rates in 2011 have increased the solvency liabilities of many pension plans while volatile global financial markets have limited investment returns.
To support jobs and growth, the government is proposing to extend temporary solvency funding relief for private-sector pension plans, consistent with the measures introduced in 2009. The government also intends to introduce regulations that would permit employers to use letters of credit to cover up to 15 per cent of pension plans’ solvency liabilities. Employers would also be offered the additional flexibility to start making special payments one year after a valuation date.
Infrastructure investments create high-quality employment and support growth. Ontario’s planned investments of more than $35 billion over the next three years will create or preserve over 100,000 jobs on average each year. During previous periods of restraint in Ontario, governments have significantly reduced key infrastructure investments. By contrast, this Budget preserves a high level of infrastructure investment.
The government will focus its infrastructure expenditures on the most critical areas, such as transportation networks, hospitals and postsecondary institutions, to maximize returns on investments. These investments will strengthen Ontario’s economy for future growth and prosperity, and support the government’s priorities in health care and education.
The Province has carefully reviewed its capital plan and found savings to help Ontario balance the budget. This will result in reduced borrowing of more than $900 million and provide fiscal savings of $120 million over three years. Over six years, this will result in reduced borrowing of more than $3.2 billion and provide fiscal savings of $890 million.
The government is also ensuring that more infrastructure commitments come in on time and on budget through expanded use of Infrastructure Ontario’s expertise, and a wider range of projects and sectors that use the Alternative Financing and Procurement (AFP) model of project delivery. This helps the government leverage private-sector investment, and improves its ability to achieve better value for money.
Since 2005, Infrastructure Ontario has completed more than 20 large complex infrastructure projects using the AFP model, with estimated value for money (VFM) savings of over half a billion dollars. This includes projects such as:
Construction is underway for the Pan/Parapan American Games Athletes’ Village, which is on track to be delivered on time and on budget for the 2015 Games. The project will advance the implementation of Waterfront Toronto’s award-winning precinct plan for the West Don Lands area. After the Games, the Village will be converted into a sustainable, mixed-use community that includes a mix of market and affordable housing, as well as a YMCA facility and a student residence for George Brown College.
Construction of the Village will support about 5,200 jobs.
The government is proposing amendments to the Ministry of Infrastructure Act, 2011 to simplify the process of property transfers within the government. As well, the government is proposing amendments to the Ontario Infrastructure and Lands Corporation Act, 2011 to clarify the range of services and advice Infrastructure Ontario can provide when directed.
Resource-based industries are a vital part of a strong northern economy. The discovery of significant mineral deposits in the Ring of Fire, an area in Ontario’s Far North, presents major opportunities. The government has a plan in place to guide resulting investments and to help diversify the northern economy.
Northern Ontario will benefit from mining the mineral deposits in the Ring of Fire area, which will help create jobs and better position the northern economy and Aboriginal communities for future growth. Proposed mine developments currently under consideration in the Ring of Fire are expected to create more than 1,500 permanent jobs once the mines are in full production. Additional jobs will be created in the mining service and supply sector.
The government is building partnerships with northern Ontarians, Aboriginal communities and industry to maximize the benefits and overcome challenges associated with developing the Ring of Fire.
In addition, the government is proposing legislation that would facilitate the implementation of a 1995 land claim settlement agreement by providing that certain lands held in trust for the Nipissing First Nation be deemed tax exempt under the Assessment Act.
Protecting social services is smart public policy that can help people find and maintain employment, contribute to improving the health of low-income individuals and families, and subsequently reduce inequality. Realizing these benefits reduces pressures on other government program expense areas.
The government is taking important steps to ensure that the supports and social services Ontarians need are sustainable over the long term. Expense in the children’s and social services sector is projected to grow by an average annual rate of 2.7 per cent per year over the medium term. This funding will support the ongoing transformation of services.
The majority of expenditure in the sector is social assistance — the safety net that many Ontarians turned to during the recent recession. Between 2008–09 and 2012–13, social assistance program expenditures will have increased by nearly $2 billion, or 33 per cent, to provide support to over 100,000 additional clients and their families. This growth is not sustainable.
The government has asked the Commission for the Review of Social Assistance in Ontario to make recommendations to transform the social assistance system to improve outcomes for clients, and ensure its long-term viability.
Moving forward, the government will:
The government will also take specific action beginning in 2012–13 to moderate growth in social assistance expense:
The Ontario Child Benefit (OCB) is a key component of the government’s Poverty Reduction Strategy. The OCB has been particularly effective in allowing parents to continue to work or pursue employment without fear of losing their children’s benefits. The OCB has also contributed to lifting 20,000 children out of poverty.
The government remains committed to reducing poverty. To continue building on these positive results in a fiscally sustainable way, the government will increase the maximum annual OCB payment from $1,100 to $1,210 in July 2013. The maximum annual payment will be increased again to $1,310 in July 2014. Together, these increases will extend benefits to an additional 90,000 children in 46,000 families. This is a slower increase to the OCB than the government hoped for or planned.
The government is continuing to transform the developmental disabilities services sector, including integrating Special Services at Home with the Passport program in the spring of 2012.
The government plans to shift to a more strategic approach to developmental services funding. It is examining the best way to give individuals and families more choice and encourage greater opportunities for individuals with developmental disabilities to participate fully in their communities while encouraging greater efficiencies in the sector.
The government continues to work with the Commission to Promote Sustainable Child Welfare and with children’s aid societies to better focus resources on improving outcomes for children and youth receiving child protection services, while containing costs through agency amalgamations, back-office consolidations and shared service delivery.
Last year, the Commission identified 21 children’s aid societies that could be consolidated. It is anticipated that, as of April 2012, there will be 47 children’s aid societies — down from 53 a year ago — as 13 children’s aid societies will have merged into six and a new Aboriginal children’s aid society, Akwesasne, was designated in the summer of 2011. These changes will be complemented by the development of a new funding model, the establishment of new approaches to accountability and outcome management, and improvements in service delivery and financial management through the implementation of the Child Protection Information Network.
Since the creation of a dedicated youth justice system and the proclamation of the Youth Criminal Justice Act in 2003, custodial sentences for youth in conflict with the law have declined significantly. Youth have been diverted to community-based alternatives for less serious offences, prompting a reduction in demand for youth justice custody. In 2003, 1,017 young people were in secure custody. By 2011, there were only 370 youth in custody.
These reforms have resulted in excess capacity in the youth justice system, which the government is addressing through the closure of the Bluewater Youth Centre in Goderich, the downsizing of the Brookside Youth Centre in Cobourg and the Cecil Facer Youth Centre in Sudbury, and a reduction in the number of transfer payment agencies contracted to provide open custody services.
The electricity sector is a critical component of the Ontario economy, accounting for over $16 billion in economic activity.
When the McGuinty government took office in 2003, it inherited an electricity system with no long-term plan. There was not enough generation to meet demand reliably. Transmission lines were aging and some assets were in poor condition. Ontario relied heavily on coal, which causes pollution. For years, health experts have been urging governments to shut down coal plants because doing so would drastically improve air quality and public health — and save money on hospital visits.
Ontario is on track to phase out coal-fired electricity by 2014. The government has already shut down 10 coal-fired units, with only six units remaining at Lambton and Nanticoke, and plans to convert the Atikokan generating station to biomass and the Thunder Bay generating station to natural gas.
Public and private investments in clean, renewable energy have increased as a result of the Green Energy and Green Economy Act, 2009. So far, the Province has created more than 20,000 clean energy jobs and is on track to create a total of 50,000 jobs. The government’s Long-Term Energy Plan will help build a clean, modern and reliable electricity system.
Provincial policy has promoted investments of $13 billion in electricity infrastructure and added over 9,000 megawatts (MW) of new capacity to the system. In addition to producing clean energy, Ontario’s Feed-in Tariff (FIT) program is building a thriving clean energy economy. The review of the FIT program was an opportunity to hear from Ontarians about how to strengthen the program and has led to changes that build on its success. The government recognizes that families are concerned about their electricity bills; that is why it is lowering prices paid for renewable energy to balance the interests of ratepayers with the continued encouragement of clean energy investment.
Although these investments have been necessary to renew and build a cleaner electricity infrastructure, they are contributing to increased costs. To help mitigate cost impacts to ratepayers from new investments, the Province is setting out a plan to improve efficiency and reduce costs in the sector.
In an effort to achieve these and other goals that will benefit electricity customers, the government plans to move forward with a comprehensive review of the electricity sector and its various agencies.
On January 1, 2011, the government implemented the five-year, 10 per cent Ontario Clean Energy Benefit (OCEB) to help over four million residential customers and more than 400,000 farm, small business and other consumers with the transition to a cleaner system. The Commission on the Reform of Ontario’s Public Services recommends the government remove the OCEB. However, the government is continuing with relief for families, proposing a cap of 3,000 kilowatt-hours (kWh) per month to keep the benefit in place. If passed by the legislature, the expected start date would be September 1, 2012. It is estimated this would save a total of about $500 million over four years or 11.0 per cent of the total cost of the OCEB over the period. Taking a balanced approach to the OCEB is a responsible way of managing the needs of electricity consumers and the fiscal implications of providing electricity price relief.
The OCEB would continue to provide a full 10 per cent benefit to almost all residential customers, as a typical household of four people uses, on average, 800 to 1,000 kWh per month. The proposed legislation would enable exemptions to be made from the cap for eligible consumers with specified medical equipment. Most small retail businesses would also continue receiving the full 10 per cent benefit. Meanwhile, capping the benefit of the largest users would help encourage greater conservation.
Conservation programs are in place to assist farms and businesses in their transition away from the OCEB. These programs provide opportunities for farms and businesses to shift their electricity consumption patterns to take advantage of time-of-use pricing where appropriate and to reduce their overall consumption to lower the cost of their bills.
|Fridge and Freezer Pickup: Old fridges and freezers removed for free.
Heating and Cooling: Up to $650 when replacing old central heating and cooling systems.
(Commercial, Institutional and Agriculture)
|Small Business Lighting: Offers eligible small business up to $1,000 in energy-efficient upgrades.
Retrofit Program: Incentives of up to 50 per cent of project costs are available for qualifying pre-approved retrofits.
High-Performance New Construction: Design assistance and incentives for building owners and architects who exceed electricity efficiency standards.
Audit Funding: Funding to cover up to 50 per cent of the cost of an energy audit.
|Industrial||Demand Response: Compensation for reducing energy demand at specific times of power system need.
Industrial Accelerator/Process and Systems: Up to 70 per cent funding towards major energy-saving upgrade projects.
The Aboriginal Loan Guarantee Program (ALGP) continues to facilitate opportunities for Aboriginal participation in the energy sector. The ALGP has received applications for loan guarantee requests that are expected to bring over 600 MW of clean renewable power to Ontarians, while providing First Nations communities with a source of jobs and income for years to come. Two guarantees were approved in 2011 with construction on the projects now underway — the Lower Mattagami Project and the Mother Earth Renewable Energy Project.
The government has a strong record of supporting and working with Ontario municipalities and is committed to removing the burden of funding social assistance benefit programs from the property tax base. These programs are more appropriately supported by provincial revenues rather than local property taxes. In addition, this year, the Province began the upload of court security and prisoner transportation costs.
These uploads build on other provincial initiatives including funding provided through the Ontario Municipal Partnership Fund (OMPF) and the provincial gas tax program. As a result, the government’s ongoing support to municipalities has increased to $3.2 billion in 2012 — almost three times what it provided in 2003.
The government will honour its commitment to continue the uploads as agreed upon with municipalities through the Provincial-Municipal Fiscal and Service Delivery Review in 2008. As a result, by 2018, when the uploads have been completed, municipal budgets will see a total net benefit of $1.5 billion per year.
Consistent with the 2008 agreement between the Province and municipalities, the OMPF will be phased down to $500 million by 2016. In the coming months, the government will be reviewing how the OMPF works and seeking advice from its municipal partners on how to more effectively meet their needs while remaining within the program’s identified envelope.
Despite the agreed-upon phase-down of the OMPF, overall provincial support to municipalities will continue to increase, with provincial uploads more than offsetting the reduction to the program (see Table 1.4).
The government will continue to work with its municipal partners to seek opportunities to improve service delivery and achieve greater efficiency. For example, the Province is currently working with the City of Toronto to enter into an agreement for the Province to provide the administrative service for the housing allowance component of the recently announced Investment in Affordable Housing initiative — a program that will provide increased flexibility to meet local housing needs. This type of intergovernmental delivery agreement would provide a model for improved program efficiency, while recognizing the role of municipal service managers in making decisions regarding local housing programs.
Host municipalities of Ontario Lottery and Gaming Corporation (OLG) operated casinos, slot facilities and commercial casinos receive a portion of gross slot-machine revenue or fixed payments respectively. For 2012–13, these payments are estimated at $91 million and will help offset infrastructure and service costs. (See Chapter II, Section G: Details of Ontario’s Finances, for more details.)
Uncollected fines related to the POA are a growing problem, and municipalities have called on the Province to assist in collecting these fines. Ontario is committed to supporting municipalities in their efforts to recover these unpaid fines and is proposing additional collection mechanisms that would assist in this regard.
In particular, the Province is proposing a mechanism whereby the issuance or renewal of vehicle licence plates would be refused for unpaid POA fines related to the operation of vehicles. As well, the Province is proposing a mechanism whereby unpaid POA fines would be set off against tax refunds issued by the Canada Revenue Agency (CRA).
Ontario will consult with municipalities, the CRA and other stakeholders in the development and implementation of these proposals and on other potential collection mechanisms that could improve the recovery of unpaid POA fines.
The government also remains committed to working with its municipal partners to help ensure the sustainability of core municipal infrastructure. Roads, bridges, water systems and wastewater systems account for approximately 70 per cent of the replacement value of municipal public infrastructure in Ontario, and are a critical component of a strong economy. Funding for municipal infrastructure has totalled approximately $13 billion since 2003.
The financial services sector continues to grow, providing a strong foundation for Ontario’s economy going forward. Toronto is the financial capital of Canada and, with the help of the government’s Open Ontario plan, reached the goal of becoming one of the top 10 financial centres in the world based on the Global Financial Centres Index. The government is continuing to update and adapt Ontario’s financial regulations to better protect investors and support a more vibrant financial services sector, including the securities and insurance industries.
The Ontario government continues to support a strong securities regulatory framework. Over half of Canadian securities industry GDP and employment and 80 per cent of market activity take place in Ontario. Accordingly, the Ontario Securities Commission (OSC) must be well equipped to respond to the challenges that arise in the capital markets that it is mandated to oversee.
In early 2012, the OSC released a Strategic Plan with details on strengthening its operations, including compliance and enforcement. This includes establishing an Office of the Investor as part of a wider strategy to engage investors more effectively.
The OSC must remain a modern and effective securities regulator. The government plans to propose amendments to the Securities Act to:
The government also plans to propose legislative changes, for example, to Ontario’s personal property security legislation, to make it easier for businesses and financial institutions to provide or obtain a first-priority security interest in cash collateral. If enacted, these changes would support a competitive Ontario business climate, help meet Canada’s international financial reform commitments and mitigate financial system risk related to over-the-counter derivatives.
Ontario remains open to working with the federal and provincial governments to restructure Canada’s securities regulatory framework. This should include new discussions regarding the effectiveness of the Canadian Securities Administrators in meeting Ontario’s interests — safe, efficient and competitive capital markets for all Canadians.
In 2010, the government made major changes to the auto insurance system. As a result, premiums are stabilizing for drivers across Ontario. Building on the success of the 2010 reforms, the government is taking action to tackle fraudulent and abusive practices, base insurance benefits on scientific and medical principles, and ensure its regulator continues to identify and respond to new and emerging issues. The government’s ongoing work in the area of auto insurance, including fraud, should continue to reduce the pressure on premiums.
The government remains committed to combating insurance fraud and continues to support the Auto Insurance Anti-Fraud Task Force. The Task Force was announced in the 2011 Budget and delivered an interim report in December 2011. The government is working with stakeholders to address the Task Force’s early recommendations and has already:
The Task Force recommended that the government should provide the Superintendent of Financial Services with the power to impose administrative monetary penalties for contraventions of legislation and regulations. The government is proposing amendments that will provide this authority in order to enhance regulatory effectiveness.
The Task Force is continuing its important work this year. Since the interim report, it has been building relationships with the Workplace Safety and Insurance Board (WSIB) and Crime Stoppers to share best practices in fraud prevention.
The Task Force’s final report will provide recommendations on the following:
Scientific and medical knowledge on how to identify and treat a variety of injuries has improved remarkably over the last decade. The government will ensure, where possible, that insurance regulations reflect the most relevant science on identifying and treating injuries from automobile accidents. Clarity will help minimize disputes in the auto insurance system, ensure people get the treatment they need and ensure that treatments provided are based on medical evidence.
Newer scientific and evidence-based approaches can be applied to serious and minor automobile accident injuries. Recommendations on a new Minor Injury Guideline, based on the latest research on successful treatment, are being developed. The government has also received the report of the Superintendent of Financial Services on catastrophic impairment based on the work of an expert panel. The government will make the Superintendent’s report public and will move forward to propose regulatory amendments in this area.
Ontario’s insurance regulator, the Financial Services Commission of Ontario (FSCO), will continue to modernize to meet today’s challenges. The government has welcomed the recommendations of the Provincial Auditor General, which will strengthen the oversight of the auto insurance system in particular. The government will further enhance the effectiveness of FSCO regulation of the insurance sector by proposing to:
The 2011 Budget also noted the government’s intention to review and update Ontario’s Insurance Act. In this regard, the government is:
Balancing the budget requires significantly reduced growth in program expense. Achieving this goal while sustaining economic growth and protecting education and health care will require accelerating fundamental reforms to the way government does business.
Ontarians receive value for money in the way public services are delivered. In 2011–12, Ontario’s per capita program spending is projected to be $8,560. This is the lowest among the provinces and 11 per cent below the average spent across the other nine provincial governments. Still, given the fiscal challenge, reform is required to balance the budget.
“... spending is neither out of control nor wildly excessive. Ontario runs one of the lowest-cost provincial governments in Canada relative to its GDP and has done so for decades. And we must recognize that some important steps have been taken in the past few years to help manage costs, improve our prospects for future economic growth and enhance services to the public.”
Commission on the Reform of Ontario’s Public Services, Public Services for Ontarians: A Path to Sustainability and Excellence, 2012.
The 2011 Budget announced savings of nearly $1.5 billion across government from 2011–12 to 2013–14. These savings were planned in three key areas: operational efficiencies and consolidation; streamlining programs; and further efficiencies in the health care system. Ministry budgets were adjusted to reflect these strategies, and the government remains on track to achieve the nearly $1.5 billion in planned savings.
|Operational Efficiencies and Consolidation|
|Across Government||Direct operating expense savings||(271)||On track|
|Across Government||Enterprise-wide Information and Information Technology savings||(36)||On track|
|Across Government||Capital project savings||(14)||On track|
|Major Agencies||Agency efficiencies||(200)||On track|
|Infrastructure Agency Consolidation||Merging Infrastructure Ontario (IO) and the Ontario Realty Corporation (ORC)||(10)||On track|
|Community Safety and Correctional Services||Prison modernization||(16)||On track and additional savings being realized from closures|
|Children and Youth Services||Consolidation of children's aid societies||(9)||On track|
|Research and Innovation||Streamlining research talent and business support programs||(76)||On track|
|Attorney General||Service efficiencies||(20)||On track|
|Efficiencies in the Health Care System|
|Community and Social Services||Savings in the Ontario Drug Benefit program resulting from existing drug system reforms||(249)||On track for expense reductions due to lower drug prices; however, program has experienced volume pressures|
|Health and Long-Term Care||Expansion of bariatric surgeries, reducing the need to fund treatments provided out of country||(21)||On track|
|Health and Long-Term Care||Proposed changes to improve alignment of funding for out-of-country services with services delivered in Ontario||(86)||On track|
|Health and Long-Term Care||Evidence-based management of health care spending and further savings from prescription drugs||(455)||On track and achieved additional Ontario Drug Program savings in 2011–12|
|Total 2011 Budget Savings||(1,463)|
Note: Numbers may not add due to rounding.
Strong action is required to balance the budget. The Conference Board of Canada and the Commission on the Reform of Ontario’s Public Services both released projections in February 2012 suggesting that if no action is taken to control growth in expense, a fiscal gap will emerge that would put the Province on a path towards growing deficits and debt.
This analysis illustrates what could happen if spending continues to increase due to factors such as inflation, population growth, demographic changes and higher demand for services, and no action is taken to meet the resulting fiscal challenge.
Using a similar “what-if” analysis, it is estimated that a fiscal gap of $13.9 billion would arise in 2014–15 against the government’s deficit target that year if the action outlined in this Budget is not taken.
The government is taking action to protect the services Ontarians depend on. By managing growth in expense, the government will meet a significant part of the challenge. By proposing new revenue measures, the government is demonstrating its balanced approach to meeting its deficit targets.
Without these revenue and expense measures, the provincial deficit would approach $25 billion in 2014–15, largely due to program expense growing at an average annual rate of almost four per cent.
|Total Revenue before Measures||111.9||114.7||118.4|
|Programs before Measures||117.8||122.3||128.4|
|Interest on Debt||10.7||11.5||13.1|
|Total Expense before Measures||128.5||133.8||141.5|
|Surplus/(Deficit) before Measures||(17.6)||(20.3)||(24.6)|
|Less: Expense Measures||(2.0)||(5.3)||(10.4)|
|Add: Revenue Measures||0.3||1.4||2.7|
|Less: Lower Interest on Debt Expense as a Result of Measures||(0.1)||(0.3)||(0.8)|
Note: Numbers may not add due to rounding.
Over the next three years, there are four dollars of expense measures being taken for each dollar of revenue measures. This means that program spending will be reduced by a cumulative $17.7 billion compared to what it would have otherwise been — ensuring that average annual growth in program spending is held to 1.0 per cent between 2011–12 and 2014–15.
|Expense Management Measures||(1.0)||(1.7)||(2.2)||(4.9)|
|Total Expense Measures||(2.0)||(5.3)||(10.4)||(17.7)|
|Freeze the Corporate Income Tax Rate at 11.5 Per Cent, If Passed||0.1||0.5||0.8||1.5|
|Freeze Business Education Tax Reductions||0.1||0.2||0.3||0.6|
|Modernize the Ontario Lottery and Gaming Corporation||(0.1)||0.2||0.5||0.6|
|Optimize Liquor Control Board of Ontario Revenue Potential||–||–||0.1||0.1|
|Enhance Revenue Integrity and Other Measures||0.1||0.3||0.5||1.0|
|Fee Changes to Move Closer to Full Cost Recovery||0.1||0.2||0.4||0.6|
|Total Revenue Measures||0.3||1.4||2.7||4.4|
|Total Direct Impact of Fiscal Actions||2.3||6.7||13.1||22.1|
|Interest on Debt Expense Avoided||0.1||0.3||0.8||1.1|
|Ratio of Expense Measures to Revenue Measures||4:1|
1Includes compensation restraint for school boards, payments to physicians and public servants.
Note: Numbers may not add due to rounding.
Table 1.8 provides a summary of the $4.9 billion in savings planned over the next three years. These savings are planned through removing overlap and duplication, more efficient delivery models and focusing on core business. The remaining $12.8 billion consists of $6.0 billion in government actions to restrain compensation — for school board employees, payments to physicians and public servants — and $6.8 billion to contain costs across the broader public sector.
|Removing Overlap and Duplication||(0.1)||(0.1)||(0.4)||(0.5)|
|More Efficient Delivery Models||(0.1)||(0.3)||(0.5)||(0.9)|
|Focusing on Core Business||(0.8)||(1.3)||(1.4)||(3.5)|
Note: Numbers may not add due to rounding.
By taking action to manage expense, the government has succeeded in meeting a significant part of the challenge. Additionally, the government is taking a balanced approach through reasonable revenue measures to maintain existing investments in jobs and growth, such as full-day kindergarten, smaller class sizes and the 30% Off Ontario Tuition grant for postsecondary education. Taken together, these restraint measures would ensure the government remains on track to balance the budget.
The McGuinty government’s approach to managing spending is not just about saving money. It is also about reforming programs and services to ensure they continue to deliver results on a sustainable basis. A relentless, systematic commitment to making government more efficient and more effective is the best way to combine strong fiscal management with a commitment to education and health care.
This approach does not involve across-the-board program cuts, which would reverse the significant gains in education and health care achieved over the past several years and undermine the foundations of the Province’s long-term economic prosperity.
“Avoid across-the-board cuts. Such a blunt tool treats equally a valuable, efficiently run program and one that is outdated and sloppily managed. This is dumb. Spending should be aligned with government priorities so that high-priority initiatives are adequately funded while lower-priority programs are either cut substantially or eliminated outright. Across-the-board cuts represent an abdication of the government’s responsibility to make real, and often difficult, decisions.”
Commission on the Reform of Ontario’s Public Services, Public Services for Ontarians: A Path to Sustainability and Excellence, 2012.
As part of the plan to manage spending and balance the budget, the government has committed to funding any new spending or unforeseen expenditures from savings in other areas.
Today, the most important thing the Ontario government can do to strengthen the economy is to balance the budget. The government’s five-year plan to balance the budget by 2017–18 requires spending growth of less than one per cent per year on average between now and then, while ensuring long-term sustainability of core public services such as health, education, postsecondary education and social services.
The government is committed to securing the key results achieved over the past eight years: moving forward with full-day kindergarten; keeping smaller class sizes in the early grades; internationally recognized progress in the province’s schools; better access to physicians and lower health care wait times; and ensuring all qualified students have access to affordable college and university education.
To achieve the fiscal plan and protect the health and education services families most rely on, the government’s plan requires strong management of current and future compensation costs, including wages, benefits and pensions. Compensation costs account for the majority of Ontario-funded program spending, either paid directly through the Ontario Public Service (OPS) or as part of the government’s transfer payments to schools, hospitals and other public-sector partners. While the length of individual collective agreements may vary, restraining public-sector compensation costs for the full five years of the plan is critical to balancing the budget.
The need to manage public-sector compensation costs not only reflects the government’s plan; it is also inherent from the fiscal frameworks and policy approaches of all political parties represented in the Ontario legislature. All parties agree on the need to balance the budget by 2017–18. All parties, through their election platforms, assumed rates of program spending growth similar to those included in the 2011 Budget and in the government’s current fiscal plan. None of the parties identified additional money in their platforms to fund increases in compensation for public-sector employees.
This government respects the collective bargaining process. Responsible employers and bargaining agents can, through tough and realistic bargaining, reflecting Ontario’s economic circumstances, increase productivity, maintain services and ensure fiscal sustainability. This view is consistent with the protections afforded to collective bargaining under the Supreme Court of Canada’s interpretation of the Charter of Rights and Freedoms.
Much has been achieved over the past two years. During this time, employers and bargaining agents have worked to reach settlements with moderated wage increases. Ontario public-sector settlements are now below the average of those in the private sector, municipal sector and the federal public sector.
Through the depths of the recession, the government respected collective agreements, a reflection of its regard for the collective bargaining process. And now, as Ontario emerges from the recession and new collective agreements are being negotiated, the government intends to continue to respect the collective bargaining process.
The fiscal plan provides no funding for incremental compensation increases for new collective agreements. The government will take further steps to manage public-sector compensation. It accepts the findings of the Commission on the Reform of Ontario’s Public Services that short-term approaches undermine long-term sustainability. Previous governments relied largely on across-the-board and short-term frameworks, which led to inevitable compensation pressures and failed to protect services or secure consistent savings. This Budget adopts a more realistic and effective approach.
As the Commission also pointed out, total compensation includes multiple components. Wages, benefits, pensions, premium pay, overtime and grid movement provisions are all important elements of compensation that must be considered as part of a balanced approach to ensuring that labour agreements are linked to public-sector service sustainability and improved productivity so that fiscal goals are met, the deficit is reduced and then eliminated, and key services such as health care and education are preserved.
A balanced approach also requires an appreciation of the links between labour relations, compensation, productivity and services; a commitment to dialogue; respect for Charter rights; and the resolve to ensure that long-term sustainability of public services is put ahead of short-term goals. The compensation plan in this Budget takes a balanced approach and is consistent with the direction of the Commission’s recommendations.
In 2012, the agreements with the government’s largest and most directly funded employee groups will expire. Those agreements, with teachers and others in the education sector, and Ontario Public Service employees, are worth over $20 billion.
The government has begun facilitating negotiations and discussions with school boards and unions. In those discussions, the government has proposed parameters that, if accepted, would allow full-day kindergarten to continue to roll out as scheduled, keep class sizes at current levels and continue the focus on students and classrooms. This will help protect nearly 10,000 teaching positions, including 3,800 for full-day kindergarten, and 9,700 non-teaching positions while sustaining and improving educational achievements.
Another area that accounts for a substantial portion of funding for services for Ontarians consists of payments to doctors under Ontario’s health insurance plans. These payments represent $11 billion or 23 per cent of health care costs. The government has begun discussions with doctors in connection with the fee schedule for insured services and other issues and is aiming, through the discussions, to make health care better for patients while keeping total physician compensation at current levels.
Later this year, the government will be setting mandates to negotiate with OPS employees, represented by the Ontario Public Service Employees Union (OPSEU) and the Association of Management, Administrative and Professional Crown Employees of Ontario (AMAPCEO). The government intends to negotiate agreements that live within this Budget’s fiscal plan while enhancing productivity and facilitating public-sector transformation.
The Ontario government is approaching negotiations asking a very simple question: what must be achieved to deliver on the fiscal plan? The government intends to work through the collective bargaining process to reach agreements with its partners that will maintain the progress in core public services — particularly in health care and education — that Ontarians now depend on.
Physicians play a critical role in providing health care and in Ontario they are well compensated. Average payments to physicians through OHIP have increased by over 50 per cent since 2003. Physicians have also benefited from tax changes that provide them with a competitive corporate tax rate and support their families through income-splitting. The government will build on this base of support to manage health care costs through the OHIP schedule of benefits to ensure that the fiscal plan for health care is achieved.
Since 2003, the government has supported significant improvements in student achievement. Test scores and graduation rates have increased while relationships with key stakeholders in the sector, including teachers and other employees, have been stable and peaceful. Since 2002–03, over 10,000 new teachers — a 12 per cent increase — have been added to the system and per-student funding has increased by 55 per cent. The government will build on this base of support to manage education sector costs through the Grants for Student Needs to ensure that the fiscal plan for the sector is achieved and the implementation of important initiatives — such as full-day learning for four- and five-year-olds — can continue as planned.
The government will continue to respect existing collective agreements in the broader public sector (BPS). As agreements expire, the government expects all BPS partners to bargain responsibly, as the government is doing with school boards, trustee associations and education sector unions, reflecting the fiscal circumstances of the Province and significant income and employment gains over the past eight years.
In future negotiations, the priority must be to protect the gains made in Ontario’s public services. Public-sector employers and bargaining agents should seek compensation agreements that allow the government to live within its fiscal plan while preserving results in Ontario’s schools, health care system and broader public services. As such, the government expects its partners to consider not only current and future compensation, but also those aspects of collective agreements that enhance productivity and facilitate public-sector transformation.
The government fully expects employers and bargaining agents to reach responsible settlements that are respectful of fiscal realities and also maintain vital public services. Where agreements cannot be reached that are consistent with the government’s plan to eliminate the deficit and protect priority public services, or in the face of significant disruption, the government is prepared to propose necessary administrative and legislative measures.
Beyond current and upcoming bargaining, there is a need over the long term to streamline public-sector collective bargaining in Ontario. Currently, there are nearly 4,000 collective agreements in the BPS. To increase effectiveness and value for money, the government will move towards greater centralization of bargaining over time, reducing transaction costs for all parties to negotiations. It will conduct a review of collective bargaining best practices to determine the most appropriate path forward.
The government also recognizes the need for more transparency in collective bargaining outcomes. This includes the need to ensure that bargaining will be supported by better, publicly available data related to all elements of compensation, including wages, benefits and pensions.
The need for greater transparency and accountability also applies to interest arbitration. To make arbitration more transparent, accountable and efficient, the government is proposing legislation that would:
The government will also begin a dialogue with those employers with significant numbers of employees and a material impact on the Province’s fiscal plan, and who have automatic access to arbitration, about additional tools they may need to live within their funding envelopes while protecting services. The government will consider proposals that respect the collective bargaining process and will hear submissions from employers, bargaining agents and other stakeholders on additional tools necessary to live within their funding allocations. In particular, the government is interested in submissions based on practices in other Canadian provinces.
Public-sector defined benefit pension plans are an important source of retirement security for many Ontarians. The government believes in a strong pension system. It has a strong track record of pension reform, has passed the most significant reforms to Ontario pension law in over two decades, and has led the national charge for a stronger retirement system, including a modest enhancement to the Canada Pension Plan (CPP).
Sustainability and affordability are key pillars of any pension system. Canada’s retirement income system is recognized as one of the best in the world in part because of responsible choices made to make the Canada Pension Plan sustainable. Unlike U.S. and some European public pensions, the CPP is now projected to be sustainable for the next 75 years. Ontario’s pension funds are recognized as some of the best managed in the world — again in part due to responsible decisions to ensure good governance and professional investment management.
“Over the past ten years [the Ontario Teachers’ Pension Plan] has had the highest total returns of the biggest 330 public and private pension funds in the world.”
The Economist, “Maple Revolutionaries: Canada’s Public Pension Funds Are Changing the Deal-Making Landscape,” March 2012.
As the Commission on the Reform of Ontario’s Public Services made clear, pension costs are one of the fastest-growing line items in the budget. These rising costs, made worse by the impact of the global recession and low interest rate environment on plan assets, make it more difficult to balance the budget and maintain the results achieved in health care and education. The Commission forecast that, if no changes are made, the cost of pensions would nearly double between this fiscal year and 2017–18.
At the same time, many plans are currently experiencing sustainability challenges, due not only to market forces but also to demographic changes. With employee contributions in some plans scheduled to increase to more than 13 per cent of salary, many employees have also expressed a desire to limit future contribution increases. Strong action today will limit taxpayer exposure to pension expense, protect priority public services such as health care and education, and put pensions on a sustainable track for the future.
In this Budget, the government is taking action to make public-sector pensions more affordable for taxpayers and sustainable for pension plan members.
Most of the largest Ontario public-sector pension plans are jointly sponsored. These plans are unique in that they are jointly governed by employees and employers and both have agreed to share the risks of funding shortfalls. These large pension plans account for almost 80 per cent of the Province’s direct pension expense.
The government recognizes the demographic and financial market challenges facing these plans and will consult on measures that would help make them sustainable and affordable for members as well as all Ontarians. To meet this goal, the government proposes to focus on ensuring that measures used to improve plan funding do not add to employer and taxpayer expense, beyond what has already been agreed to. The government also wishes to ensure that all jointly sponsored plans move to 50–50 funding between employers and employees.
Following consultations, the government will introduce appropriate legislation to help achieve these objectives. The government will consult with its partners to develop a legislative framework involving the following parameters:
Many Ontario public-sector employees, particularly in the university and electricity sectors, are members of single-employer pension plans. Under these plans, the employer is solely responsible for funding shortfalls. Employers typically contribute more than plan members — in some cases, two or three times more. When these plans are in deficit, as many of them are today, the difference between employee and employer pension costs grows even wider.
As with jointly sponsored pension plans, the government believes that single-employer public-sector plan members should share the ongoing cost of their pension benefits equally with the employer. These increasing employer pension costs are absorbing funding that is critically needed for public services. The government will consider a variety of tools to enhance the sustainability of single-employer public-sector pension plans, while freeing up funds for public services. The government
A strong pension system also means maximizing the effectiveness of asset management. Ontario’s large pension plans are internationally recognized for their cost-effective, professional approach to investment. The Ontario Teachers’ Pension Plan was an early adopter of the model wherein a fund invests directly and manages its portfolio internally. Over the past decade, the plan has had the highest total returns of the 330 largest public- and private-sector pension funds in the world.
Many studies show the benefits of scale in pension plan management. Although most public-sector pensions in Ontario are held in larger funds, a large number of pension plans lack the scale that experts say is required to optimize investment returns. For example, the 20 publicly funded universities in Ontario have more than 25 pension plans.
A recent study from the International Centre for Pension Management suggested that large plans outperform smaller plans by between 43 and 50 basis points per year.
The government intends to introduce framework legislation in the fall of 2012 that would pool investment management functions of smaller public-sector pension plans in Ontario. Under this framework, management of assets could be transferred to a new entity or to an existing large public-sector fund. The government will appoint an adviser to develop the framework, working with affected stakeholders and building on Ontario’s internationally recognized model for pension plan management.
The government is continuing to take action to manage compensation costs by proposing to extend the pay freeze for executives at Ontario’s hospitals, colleges, universities, school boards and agencies for another two years. This would mean their pay will have been frozen for four years.
The extended freeze would apply to the presidents and vice presidents of hospitals, provosts and deans of universities and colleges, directors and superintendents of school boards and also to the leadership teams of Ontario’s hydro companies. Regulations would also be proposed to capture certain other organizations and agencies such as Ornge, LHINs, LCBO and OLG. The extended freeze would also apply to office holders of these organizations who are full-time members of their governing boards.
Base salaries would be frozen. Performance pay for eligible executives would be restricted to successful implementation of measures to reduce costs while protecting front-line service, achievement of articulated government priorities or achievement of performance improvement targets set out in an annual quality improvement plan developed under the Excellent Care for All Act, 2010.
For the first time, those making hiring decisions in Ontario’s hospitals, universities, colleges and school boards would be required to use benchmarks from other Canadian public-sector institutions to set compensation. They would also be required to report publicly on these benchmarks.
These measures, if passed, will increase transparency and ensure that those at the top lead by example.
It is also proposed that MPPs’ pay would be frozen for another two years, bringing the total length of their pay freeze to five years.
These efforts to manage compensation build on the initiative to reduce executive office costs by 10 per cent at hospitals and universities/colleges and certain other public-sector organizations, as announced in the 2011 Budget.
As part of the government’s plan to manage responsibly and eliminate the deficit incurred as a result of the recession, the 2009 Budget announced measures to make the Ontario Public Service (OPS) more efficient by reducing its size by five per cent or approximately 3,400 full-time equivalent (FTE) staff over three years through attrition and other measures. The government will achieve 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 will achieve nearly 1,000 reductions in full-time equivalent staff over the next two years towards this commitment.
Once fully implemented, these measures will reduce the OPS by 4,900 full-time equivalent staff in total and will save almost $500 million a year.
As the government moves forward on plans approved as part of this Budget, it will continue to explore opportunities to provide more value for each dollar, including looking at what services could be delivered more efficiently and effectively by another entity, such as another level of government, a not-for-profit or a private-sector organization. This would help reduce staff on the government’s payroll and allow the government to focus on its core priorities.
Some transformational initiatives that could lead to reduced staffing or a transfer of jobs outside the public sector include:
Ontario delivers government services with the lowest number of provincial public servants at 7.4 per 1,000 of population, and will strive to improve on this as the government moves forward on transformation over the longer term.
In the mid-1990s, both the federal and provincial governments responded to an economic downturn by constraining expenditures, which in turn reduced the number of public-sector employees.
Since 2003, reinvestments in public services in Ontario have resulted in modest growth to public service staff levels; however, the current size of the OPS is 14 per cent below 1995 levels. During the same period, the size of the federal public service has increased by nine per cent.
The government continues to eliminate overlap and duplication wherever possible by transforming and modernizing processes to deliver services and programs in the most efficient and effective manner. These reforms leverage expertise across programs and functions in government and will allow all partners to focus on core businesses, while reducing costs and improving services. This will free up funds to reinvest in front-line services and reduce the deficit.
In addition to the actions highlighted below, this Budget contains initiatives to remove overlap and duplication in direct business support programs, employment and training programs, income-related benefits, trade promotion activities, collective bargaining, pension investment management, and federal–provincial relations.
The government is directing the Ministry of Finance to develop a legislative framework that would provide the ministry with authority to consolidate and collect all provincial debts owed to the Crown and review the use of tax collection tools on non-tax debt. Centralizing collections can result in significant efficiencies and is expected to generate additional revenues of $25 million annually by 2014–15. The Ministry of Finance’s cost for collecting one dollar of tax revenue is four cents, whereas the non-tax revenue portfolio that is contracted out to private collection agencies costs up to 16 cents for every dollar collected.
The Ministry of Finance will continue to work with other ministries across the OPS to leverage its imaging and data capture technologies and expertise to reduce program costs and enable faster delivery of services to the public. For example, as a result of the successful partnership with the Family Responsibility Office, the time it takes to update case information has been reduced from about 30 days to within 48 hours. Over time, digital imaging and data capturing technologies will reduce the size of the government’s office-space footprint by converting millions of paper files to protected electronic records.
The government is introducing legislative authority in the Budget Bill that would permit the Ministry of Finance to perform compliance audits with respect to government-funded programs on behalf of other ministries and broader public-sector entities. This consolidation of the government’s regulatory audit functions would generate savings for the Province and eliminate the need for multiple ministries to inspect and audit the same companies throughout the year. This initiative is expected to generate additional revenues of $50 million annually by 2014–15.
The government will also further streamline investigative audit functions, including forensic and accounting services, through a mix of consolidation and service level agreements. This transformation will result in enhanced coordination and service delivery, greater efficiencies, and opportunities to strengthen fraud prevention training, tools and awareness.
The 2011 Budget announced the closure of underutilized prisons in Owen Sound, Walkerton and Sarnia, and the partial closure of Toronto West Detention Centre.
In this Budget, the government is moving ahead with fully closing the Toronto West Detention Centre, as well as the closure of the Brantford and Chatham jails. This plan will help modernize Ontario’s correctional facilities and achieve greater efficiencies. Full closure of the Toronto West Detention Centre will achieve additional savings of $23 million in 2013–14 and $28 million in 2014–15.
The government will continue pursuing savings and efficiencies across the broader public sector by leveraging or further capitalizing on existing collective purchasing capacity and working with health care institutions, school boards and postsecondary institutions to develop participation targets for collaborative procurement. Increased coordination of strategic sourcing, contract management and product/process standardization will contribute to potential cost savings of six to eight per cent as referenced in the report of the Commission on the Reform of Ontario’s Public Services.
The government has achieved its five per cent agency reduction target and is proposing to:
In the 2011 Budget, the government committed to revisiting and scrutinizing existing assumptions and traditional public service delivery models.
It will continue to look for more effective and efficient delivery mechanisms, including new partnerships with the private sector, not-for-profit sector or other levels of government.
The government will act based on evidence of what delivery model provides the best and most cost-effective results.
The 2011 Budget announced the government would explore alternative service delivery models, including leveraging private-sector investments and expanding ServiceOntario’s one-stop delivery network to other lines of business.
ServiceOntario provides Ontarians with fast, easy access to government information and services, including registrations, certifications and licensing. This innovative government organization already has an exceptional track record — customer satisfaction increased from 75 per cent in 2008 to 93 per cent in 2011. Birth and marriage certificates are delivered on time in 99.8 per cent of cases, and money-back guarantees are offered when they are not. Despite this high performance, there is still room for improvement.
Over the past year, the government met with municipalities and the federal government to discuss options to expand service delivery. With the help of outside experts, the government also explored the benefits of private-sector involvement. This exercise uncovered significant opportunities to employ private capital and expertise to reduce costs and improve operations.
For example, when a client goes to a ServiceOntario office it costs the government five times as much as the same transaction performed online. Greater efficiencies can be gained by driving customers to a lower-cost, online channel. However, unlocking these benefits entails a substantial, upfront investment. Optimizing ServiceOntario’s core business, including the development and build-out of online services, is projected to cost approximately $100 million. In the current fiscal context, this kind of investment is not feasible. Instead, the government will use private-sector capital to keep taxpayer dollars devoted to the highest-priority public services, such as schools and health care.
The 2012 Budget announces proposed legislation that would enable the government to pursue a number of potential public–private partnership models for ServiceOntario to advance these strategic objectives, while continuing to set customer service standards and ensure protection of privacy and personal data. The proposed legislation would also amend a number of statutes to enable both public–private partnerships and the ongoing transformation of services, including the continued adoption of online services.
Over the coming months, subject to the passage of proposed legislation, the government will finalize its preferred approach and move forward with a competitive process to secure a public–private partnership for the development of ServiceOntario.
The government will draw upon lessons learned and successes from previous public–private partnerships to guide its decisions in developing an approach for ServiceOntario. Two examples include the previous government’s lease of the Highway 407 Express Toll Route (ETR), and the current government’s extension of Teranet’s licences to provide electronic land registration and writs services. The electronic land registration model, as shown in Table 1.9, demonstrates how a public–private partnership can be designed in a manner that can protect appropriate public interests, while maximizing value.
|Term||99 years||50 years|
|Control over fee increases||The Province has no approval rights with respect to toll increases.||The Province must initiate or consent to fee increases for statutory services.|
|Certain fees, beginning in 2015, will be adjusted annually by 50 per cent of the Consumer Price Index.|
|Ongoing provincial revenues||No ongoing revenues are received by the Province.||The Province will receive royalty payments from Teranet after March 31, 2017.|
|Provincial participation rights||No provincial participation rights.||The Province could receive additional one-time payments or additional royalty payments if Teranet earns extraordinary profits.|
The cost of services to people is increasing at an unsustainable rate and the government must pursue innovative ways to transform and improve service delivery while reducing costs. In practice, alternative financing and outcomes-based procurement have been successful in jurisdictions around the world in lowering costs to government while sustaining or improving outcomes for families and individuals who depend on these services.
The Province will explore opportunities to develop new partnerships that encourage improved outcomes at a lower cost by transforming traditional approaches to the delivery of services to people. Over the next 12 to 18 months, the Province will draw on experiences in other places to find pilot projects where new service delivery models can be initiated. Infrastructure Ontario’s internationally recognized expertise in external contracting and project management will help the government undertake pilot projects in a way that will maximize competition and make the most of marketplace capital and ingenuity. Infrastructure Ontario will work with line ministries and with external groups, such as MaRS. Partnerships would be structured according to the needs of the market and service providers.
This work builds on the Province’s commitments to social innovation and will require social entrepreneurs, innovators, investors and philanthropists to work with government and local providers to deliver services to people.
TVO is funded primarily by the Ministry of Education and has been providing quality educational programming to Ontarians for more than 40 years. TVO is pursuing opportunities to generate new revenue streams. The government will work with the agency to help it achieve these goals, while protecting the integrity of children’s educational programs. TVO will generate new revenue to reduce its dependence on government grants, while remaining publicly owned. This will allow it to continue as a publicly owned broadcaster providing innovative educational media while focusing taxpayer dollars on providing greater access to education.
The government’s main business is to provide services to the public. Being a landlord should not be a core function of government; the private sector can manage office space better and at lower cost. For that reason, the government is transforming the way it manages its real estate holdings.
Currently, ministries do not always pay market rent for their office space. Through the Realty Transformation Strategy, the rent charged to ministries will increase to help drive efficient use of government office space. By encouraging ministries to use space more efficiently, the strategy will reduce the Ontario Public Service’s footprint when fully implemented by about one million square feet in Toronto — comparable to 43 storeys in an office tower — or from the current average of more than 250 square feet per employee to less than 200 square feet per employee. In addition, the government will look for opportunities to divest itself of ownership of buildings where it makes sense. Divesting ownership of buildings could generate more than $500 million. This would free up resources to focus on what matters to Ontario families — health care, education and jobs — without jeopardizing the government’s commitment to the communities in which it operates.
Since 2003, the government has modernized the delivery of public services. Building on its record of efficiency and accountability, the government is proposing to move forward with more efficient delivery models for public services and expand the use of DAAs across government.
Delegated Administrative Authorities are self-financing, not-for-profit corporations that operate at arm’s length from government. They set their own fees and are entirely funded through the fees collected from industry. The government retains overall accountability for DAAs and maintains oversight through various accountability mechanisms (including administrative agreements and regular performance reporting).
Advantages of the DAA model could include improved efficiencies, associated reduced costs to taxpayers, improved regulatory outcomes and continued government oversight. For example, between 1996 and 2010, inspection services formerly offered by government that were moved to a DAA model saw:
Further, since 2006 DAAs have delivered other positive outcomes:
The Ministry of Consumer Services provides oversight for eight DAAs, including the Ontario Motor Vehicle Industry Council, Real Estate Council of Ontario and Travel Industry Council of Ontario.
The DAA is an effective service delivery model that provides regulatory oversight while improving regulatory efficiencies. It is consistent with best practices for accountability and governance, and builds on the government’s commitment to provide the best services for all Ontarians. The government will explore new DAA opportunities where it can be shown that they would strengthen consumer protection and public safety, while maintaining effective oversight and reduce regulatory red tape and costs.
The government is proposing to amend the Funeral, Burial and Cremation Services Act, 2002 and Funeral Directors and Establishments Act to allow one of the Ministry of Consumer Services’ current administrative authorities to set its own fees, consistent with other DAAs.
To enable the Ministry of Natural Resources to transform the stewardship and conservation of Ontario’s natural resources in the most fiscally responsible way, the ministry is proposing to:
To support jobs in Ontario’s forest industry, the government is proposing amendments to the Crown Forest Sustainability Act that would provide some flexibility in forest management planning and permit the charging of fees to reflect a shift towards more cost-recovery and user-pay models. These amendments would bring the Crown Forest Sustainability Act in line with other major natural resource management statutes.
The Province is proposing amendments to the Endangered Species Act that maintain its commitment to protecting species at risk while streamlining approvals and permitting.
To support the economic growth and future sustainability of Ontario’s valued natural resources, the government is proposing amendments to the Fish and Wildlife Conservation Act that would allow a reduction in the number of various authorizations and licences that are currently required. Instead, the proposed amendments would allow the ministry to set standards, which individuals or organizations would need to meet.
To provide modern, streamlined services for consumers and businesses, the government is proposing amendments to the Lakes and Rivers Improvement Act that would enable the Minister of Natural Resources to coordinate water-management planning with construction approval for dams and other structures on a lake or river.
The government is proposing amendments to the Kawartha Highlands Signature Site Park Act to provide the minister with the flexibility needed to conclude the work of the Kawartha Highlands Signature Site Park Management Advisory Board.
For an integrated approach to the protection of green space in Ontario’s Golden Horseshoe, the government is proposing to amend the Niagara Escarpment Planning and Development Act. This would enable joint review and public consultation on the Greenbelt Plan, the Oak Ridges Moraine Conservation Plan and the Niagara Escarpment Plan.
To support jobs in the forest industry in northern Ontario, the government is proposing to amend the Ontario Forest Tenure Modernization Act to give the minister the authority to make loans to Ontario local forest management corporations, with the approval of the Minister of Finance.
To be more efficient and effective, the government is proposing to amend the Provincial Parks and Conservation Reserves Act to provide more flexibility in areas such as park management planning.
The government is proposing to amend the Public Lands Act to make it possible for the Minister of Natural Resources to delegate selected functions to persons outside government, for example, to allow the ministry to enter into agreements with municipalities to manage Crown land within municipal boundaries.
The government will begin to modernize court services by providing some services online (e.g., court forms, the filing of court documentation and paying court fees). This transformational initiative will improve access to justice for Ontarians by moving to provide 24-hour online services (versus limited daytime hours for traditional services), and ensuring funding is being used where it is needed most.
The government is hiring 100 civilian staff for data-entry functions that are currently carried out by the Ontario Provincial Police (OPP). This initiative will achieve efficiencies within the OPP and enable the equivalent of up to 250 OPP officers to better use their time for front-line policing services.
The government intends to move forward with the establishment of an Unclaimed Intangible Property Program to reunite owners with their unclaimed property and, until it is claimed, allow the money to be used for the benefit of Ontarians. Unclaimed intangible property generally includes but is not limited to insurance policies, returned stocks and bonds, bank deposits, unpaid wages, and pension benefits.
Focusing on core business means scaling back non-priority programs, eliminating programs that the government should not be delivering, or identifying programs that the private sector could deliver more efficiently.
Some of the choices are difficult. But a dollar saved through refocusing from non-core priorities is a dollar that can go towards health care, education and job creation measures, or eliminating the Province’s deficit.
Key areas that the government recognizes as non-core, scaleable or that could be delivered more efficiently by the private sector include the following.
The Province created and currently runs the Ontario Northland Transportation Commission (ONTC), which provides transportation services to northern Ontario. The ONTC’s business lines include the Polar Bear Express passenger rail service between Cochrane and Moosonee, the Northlander passenger rail service and bus service from Toronto to Cochrane, telecommunication services delivered by Ontera, and rail freight and refurbishment operations.
The ONTC has historically operated at a deficit, spending more money on operations and capital repairs than it makes in revenue. For example, ridership on the Northlander passenger rail is not commercially viable. The cost to the ONTC per passenger has been approximately $400 beyond the ticket price paid by passengers. Taxpayers can no longer maintain this subsidy, and the total funding provided to the ONTC has increased from $28 million in 2003–04 to $103 million in 2011–12 due to mounting operating and capital pressures.
As a result, the government will:
Once implemented, this will result in annual savings and avoid costs of approximately $250 million over three years.
The government is committed to maintaining vital public services the ONTC delivers, particularly for isolated communities where no alternatives exist.
Through the 2011 Budget, the government introduced Risk Management Programs that provide income stability to Ontario’s agri-food producers. These programs are demand driven, with expenditures that can fluctuate from year to year depending on commodity prices.
The Province and Ontario farmers developed these innovative approaches to provide support for managing costs. However, the federal government has refused to participate in these programs to support Ontario farmers.
In the 2011 Budget, the government announced that the cost of Risk Management Programs would be shared between the Ontario government and farmers. Without the support of the federal government, the Province’s demand-driven farm income support programs cannot be sustained in the long term. As the programs were designed based on insurance principles and intended to share risk, the government will continue to encourage the federal government to partner with the Province and farmers in these important programs.
Given the Province’s fiscal challenges, the Ontario government will work with farmers to redesign these programs to focus on supporting productivity while capping the overall program at a sustainable level to manage taxpayers’ exposure and leverage federal dollars. The 2011 Budget committed about $100 million of taxpayer support net of producer premiums. The commitment remains to support the program up to a maximum of $100 million.
Ontario is not proposing the outright sale of any of its major revenue-generating assets. Instead, the government is taking action to optimize the value of existing assets to help balance the budget. Going forward, the Province remains open to new models that enhance efficiency and optimize the business models of government assets where those models could be demonstrated to deliver value for money and protect the public interest.
The Ministry of Finance will continue to work with line ministries and Infrastructure Ontario to systematically review the Province’s asset base to ensure it delivers the best value for Ontarians.
The 2011 Budget required major agencies to deliver efficiencies of $200 million by 2013–14 above previous net income forecasts. The LCBO is implementing a number of measures to deliver $100 million per year in additional net revenue towards this commitment, beginning in 2013–14.
In addition, the LCBO will develop and implement new measures to deliver another $100 million per year in net revenue to the Province from 2014–15 onward. These measures will enhance profitability in a socially responsible manner.
To realize further revenue for the Province and optimize public assets, a one-time initiative to sell LCBO’s head office property is underway. The sale of this property is projected to realize a net profit of $200 million after relocation and transactional costs.
Based on OLG’s strategic business review, the government has directed it to modernize its operations. In doing so, OLG will maximize its return to government by increasing its revenues, becoming more efficient, and broadening the role of the private sector in its operations and capital requirements. Proposals include:
Modernizing the OLG will generate more than $600 million in additional revenue between 2012–13 and 2014–15, and more than $1 billion per year by 2017–18.
Since 1998, $3.7 billion has been provided to the horseracing industry in Ontario, including $345 million in 2011–12. As part of OLG’s modernization process, the government reviewed this support for the horseracing industry, as outlined in the previous government’s 1998 letter of intent. In doing so, the government determined that the industry needs to move towards greater self-sufficiency without government support. This will allow the industry to respond competitively to market demands for its racing product.
The government remains committed to supporting horseracing through its reduction to the Province’s pari-mutuel tax. This leaves wagering revenues with the industry for programming support.
In recent years, the government has worked with its electricity generation and transmission companies, namely Ontario Power Generation (OPG) and Hydro One, to reduce costs and improve productivity. As shown in the examples that follow, these two organizations are aggressively driving greater efficiencies in their operations.
Although these measures are significant, the Province recognizes that further action is needed to benefit Ontarians. Therefore, the government will initiate an independent benchmarking review of OPG and Hydro One. It will engage independent advisers to examine the operations of Hydro One and OPG to determine efficiencies and benchmark the companies against comparable North American entities. Based on the results of the benchmarking exercise, the government, working with OPG and Hydro One, will take appropriate action to secure further efficiencies and cost savings.
Transforming the way government delivers services to people means constantly measuring and assessing program outcomes. If programs are not achieving the desired results and ensuring the best use of taxpayer dollars, they need to be transformed. Measuring productivity and transforming public services will contribute to more effective and efficient delivery of government programs and services. To successfully transform the way government works, actions will need to be taken not just within ministries, but across government. These actions will also have to be embedded as part of the annual planning cycle for reviewing government programs.
This Budget announces a number of transformational initiatives that focus on sustainability of key priority areas and core business, such as the reform of business supports and the delivery of benefit programs. To ensure success of these transformational initiatives, proper and timely implementation is essential. To signal the commitment to transformation and provide leadership from the top, a Premier’s Table on Results and Reform will be created. Results tables have helped drive improvements in education and health care in the past and the same outcomes-oriented approach will be brought to transformation.
To support and guide implementation of initiatives in key programs and services, the government will create multi-disciplinary teams to drive productivity and reform in the public sector. Using an evidence-based approach, these teams will be responsible for supporting the implementation of more efficient and effective forms of delivery, consolidation of programs and services, and optimization of government assets.
Team members will be drawn from existing resources and will include central agency and ministry staff who are experts in their fields, working in conjunction with external experts who have a track record of driving transformational change in complex organizations. This approach will bring an outside perspective to challenge internally held views, while also building skills and capacity within the public sector.
The teams will report to the Premier’s Table on Results and Reform, Treasury Board/Management Board of Cabinet, and the full Cabinet, depending on the issue involved. Examples of projects where they will play a role include the new Jobs and Prosperity Fund and the drive for more efficient delivery of income-based benefits.
These teams will work on projects year-round to reflect the need for constant focus on reform and effective implementation. Their findings and recommendations will inform the annual budgeting cycle. This approach draws on the recommendations on internal processes and structures outlined by the Commission on the Reform of Ontario’s Public Services.
Ontario Internal Audit Division will support transformation and strong fiscal management by providing expertise in risk assessment, control evaluation, and performance measurement during the implementation of cross-cutting transformational initiatives in core business areas. Internal Audit will also play a key role in assessing the progress of these initiatives to help ensure they achieve their intended outcomes of enhanced service delivery and greater efficiencies.
This work will be supported by regular reporting to Treasury Board/Management Board of Cabinet through established governance mechanisms that will reinforce organizational independence and help raise awareness earlier of key issues and risks.
To support these efforts, the government will explore providing Ontario Internal Audit Division with enhanced authority to audit the broader public sector.
Together these reforms will further enhance the government’s ability to help ensure that results are achieved and controls are in place and working, while helping to support the Province through transformation.
In order to protect health care and education, the government is proposing to increase revenues in this Budget by $4.4 billion over the next three years. These measures would not increase taxes. They would freeze business tax rates, increase user fees and take steps to ensure the integrity of the tax system so that those who owe taxes pay them.
The Tax Plan for Jobs and Growth has reduced Corporate Income Tax (CIT) rates for large and small businesses and has, along with other tax changes, positioned Ontario as one of the most attractive jurisdictions in the industrialized world for business investment. Ontario’s general statutory CIT rate has fallen from 14 per cent in 2009 to 11.5 per cent, as of July 1, 2011, and is scheduled to drop to 10 per cent by July 1, 2013.
This Budget proposes to freeze the general CIT rate at 11.5 per cent, providing fiscal savings of almost $1.5 billion over the next three years. When Ontario returns to a balanced budget in 2017–18, CIT rate reductions would resume and the general CIT rate would continue to fall. (See Chapter IV, Section A: Tax, for more details.)
The government has also taken steps to address the property tax burden on Ontario businesses. Since 2007, high BET rates have been cut, resulting in savings of over $200 million per year to businesses. Under the plan, BET reductions were scheduled to continue until 2014.
To help protect priority investments and balance the budget, this Budget proposes to temporarily freeze the BET reduction plan, beginning in 2013. This measure will avoid revenue decreases, providing fiscal savings growing to over $300 million annually by 2014–15. The government is committed to resuming the BET rate reductions once Ontario returns to a balanced budget in 2017–18. (See Chapter IV, Section A: Tax, for more details.)
Both the Auditor General and the Commission on the Reform of Ontario’s Public Services have recommended that where the Province charges a user fee for a service, that fee should recover the full cost of providing the service. This approach is necessary to ensure that the cost of maintaining Ontario’s public services is borne by the people who use and benefit from them, rather than taxpayers generally. Traditionally, user fees have not increased with inflation, meaning that in some cases these fees have not increased in decades. Action taken in this Budget will increase fees in a fair, reasonable and balanced way in order to recover some of those costs.
The Ministry of Transportation will spend more than $2.5 billion in 2012–13 to fulfil its mandate to provide a transportation network in Ontario that permits the free and safe movement of people and goods. These expenditures support investments in public transit, road user safety, and highway operations, maintenance and infrastructure.
To help support these investments, the government charges a variety of transportation-related fees, and as part of this Budget some of those charges will increase as announced by the Minister of Transportation on March 13, 2012.
The government is also proposing legislation to provide authority to toll the new Highway 407 East (between the easterly end of Highway 407 and Highway 35/115), which is needed before the first phase of the extension’s anticipated opening in 2015.
The Auditor General and the Commission on the Reform of Ontario’s Public Services also recommended that greater emphasis be placed on prevention and the polluter-pay principle. This recommendation applies to Ontario’s contaminated sites. The Province also recognizes that those responsible for creating pollution and waste should generally bear the costs of environmental programs and services.
Increasing demand and environmental concerns place added pressure on the Province to ensure the sustainable use of water (e.g., to conserve and sustain water resources for present and future generations). By applying a user-pay model, the Water Taking Charges program passes some of the costs of water quantity management programs onto commercial and industrial water users. This also gives businesses an incentive to better conserve water and ensure more efficient and sustainable processes, and creates opportunities for economic development and clean-technology jobs in Ontario.
The first phase of the program was successfully implemented in April 2007, and set a charge of $3.71 per million litres for high-consumption water users such as manufacturers of bottled water, ready-mix concrete and fertilizers. This phase affected approximately 100 facilities in Ontario.
As part of its five-year review of the program, including consultations, the government will review the current charge framework to assess the adequacy of the charge rate and ensure that the program recovers costs as fully as possible.
Implementing Phase 2 of the program will expand the user-pay base and apply the charge to most of the remaining industrial and commercial water users in Ontario. Some of the affected sectors include construction, petroleum, mining, food production and recreational facilities. The charge rate to be paid by Phase 2 facilities will be determined as part of the program review.
It is estimated this initiative will generate $3.5 million in 2013–14, and $6.0 million in 2014–15 and ongoing.
To move towards full-cost recovery, the government will revise the fee structure for Environmental Compliance Approvals (ECA) and the related Environmental Activity and Sector Registry (EASR). If a business’s activities impact the natural environment (such as by releasing pollutants into the air, onto land or into water), that business needs an approval from the Ministry of the Environment to operate legally in Ontario.
The fee structure for this approvals system has not been revised since 1998. In the past, a business had to apply for multiple approvals for individual processes and pieces of equipment. Today, a business can register on the EASR and/or apply for a single ECA that addresses all of the business’s emissions, discharges and waste.
The government will consult on an updated ECA and EASR fee structure to ensure that it appropriately reflects a new modernized approvals system and to ensure that the program is fully cost-recovered. Additionally, the ministry will establish service standards and provide electronic service delivery that will ensure timely and efficient approvals for businesses.
It is estimated this initiative will generate $3.8 million in 2013–14 and ongoing.
Another environmental fee that will be revised is the Hazardous Waste Fee, which has not been updated since 2002. The government tracks the generation, movement and disposal of hazardous and liquid industrial waste to help ensure a safer and cleaner environment for Ontario. Fees are based in part on manifests (i.e., the record of waste being shipped) and on tonnage of waste generated.
Raising tonnage fees will improve program cost recovery and provide greater incentives to reduce or recycle waste. In addition, the increase in fees will be borne by the larger generators of hazardous waste. The fee for paper manifests will be increased, which will help encourage greater use of the lower-cost electronic manifesting system.
It is estimated this initiative will generate $2.5 million in 2014–15 and ongoing.
1Kip Beckman, Glen Hodgson and Matthew Stewart, “Ontario’s Economic and Fiscal Prospects: Challenging Times Ahead,” Conference Board of Canada, 2012.
2Commission on the Reform of Ontario’s Public Services, Public Services for Ontarians: A Path to Sustainability and Excellence, 2012.