2012 Ontario Budget: Foreword


The McGuinty government is taking strong action for a stronger Ontario.

Right now, the single most important step the Ontario government can take to grow the economy is to balance the budget.

By maintaining a low rate of growth in spending and building on a record of overachieving the deficit targets laid out in the 2010 and 2011 Budgets, the McGuinty government will balance the budget by 2017–18. A balanced budget will make the economy stronger and better able to create jobs while keeping schools and hospitals strong.

Keeping Schools and Hospitals Strong

Between 2003 and 2008, Ontarians worked together to improve key public services, especially education and health care, and rebuilt the province's infrastructure, which previous governments had allowed to deteriorate. These efforts were supported by stable economic growth. During this period, the Province eliminated the hidden deficit left by the previous government and balanced three consecutive budgets between 2005 and 2007.

In September 2008, the global economy entered into a sharp, sudden recession that created new challenges for Ontarians. The achievements Ontarians had accomplished together to improve key public services helped protect families from some of the effects of the global recession. In addition, the government, like other governments in Canada and around the world, injected substantial stimulus into the economy. The McGuinty government helped create jobs in the clean energy economy and preserve jobs in auto and other key manufacturing sectors, while protecting the gains made in education and health care.

The global economy is recovering, and Ontario's economy is growing stronger. Just as Ontario took action to help families through the recession, the Province must now take strong action to grow the economy and continue to support needed job creation. The McGuinty government's five-year plan will result in a balanced budget by 2017–18. By choosing strong action today, Ontario will avoid a future of even larger deficits and painful choices imposed by forces outside its control. The Province spends more money on interest each year than on colleges and universities. As interest rates increase, so will those payments, taking precious resources away from education and health care.

The McGuinty government is maintaining its strong commitment to education and health care. Ontario's edge in the global economy is its highly skilled and educated workforce. According to McKinsey and Company, Ontario's schools are now the best in the English-speaking world. The actions outlined in the 2012 Budget are necessary to balance the budget and protect the gains Ontarians have made. The McGuinty government's plan to build the best-educated workforce includes:

  • fully implementing full-day kindergarten by 2014 to give the youngest learners the best start;
  • keeping a cap on class sizes in the early grades;
  • maintaining the 30% Off Ontario Tuition grant for families; and
  • integrating employment and training programs to make them more responsive to today's job market.

Reforms to health care are enhancing community-based care and will help keep growth in spending to an average of 2.1 per cent annually over the next three years. The government will also income-test seniors who receive prescription medicine through the Ontario Drug Benefit so that only the five per cent of seniors with the highest incomes pay more for their prescription medicine.

Protecting Results and Public Services

Compensation costs account for the majority of program spending. The McGuinty government respects and supports the collective bargaining process and remains committed to good-faith negotiation and consultation.

The government is facilitating negotiations and discussions with school boards and unions. Through this process, and through direct negotiations with other public servants, the government must achieve agreements that support the shared objectives of a balanced budget and protect the important gains in education and health care. For teachers, the proposed labour framework includes a two-year wage freeze, no incremental increases on the salary grid for two years, and an end to a sick-leave plan that allows some to get a partial payment for up to 200 unused sick days upon retirement. The government will pursue a very similar mandate with its other public-sector partners. It has begun discussions with doctors in connection with the fee schedule for insured services and other issues. The goal is to make health care even more centred on patients and to ensure that we get even better value for money for health care dollars, while maintaining total physician compensation at current levels.

Where collective agreements cannot be negotiated that are consistent with the fiscal plan, the shared objective of protecting education and health care, and the plan to balance the budget, the government will consider all options to meet its fiscal goals, including intervention through legislation or other means.

Ontario needs interest arbitration that is transparent, accountable and efficient. The McGuinty government will propose legislation that would require written submissions by both parties in arbitration and would require written rationales by the arbitrator when requested by either party. The government will also seek input from employers with automatic access to arbitration about which additional tools may be required to deliver public services within their funding envelopes.

Public-sector pensions are one of the fastest-growing expenses in Ontario's budget. The government is taking action to make public-sector pensions more affordable for taxpayers and sustainable for pension plan members by proposing to limit additional contributions while asking employees to share pension costs equally with their employers. The McGuinty government is asking public-sector workers to put their pensions on a sustainable footing by reducing future benefits before asking for additional contributions from taxpayers. These changes are required to put the plans on a sustainable path for future retirees — and they would only affect future benefits, not existing retirees or pension credits already earned.

Balancing the Budget

The 2012 Budget includes strong action to balance the budget and to maintain gains made in education and health care. For every dollar in new revenues, the plan includes four dollars of expense measures.

Over three years, the plan, if passed, would include:

  • $17.7 billion of savings and actions to contain cost increases; and $4.4 billion of revenue-raising measures.

The plan includes many elements that, if passed, would help balance the budget:

  • extending the pay freeze for MPPs by a further two years — for a total of five years;
  • delaying and cancelling infrastructure projects to reduce borrowing by over $3 billion;
  • capping the Ontario Clean Energy Benefit at 3,000 kWh per month, which allows virtually all families to continue receiving the 10 per cent discount on electricity and creates over $500 million in savings; and
  • freezing planned tax reductions to Corporate Income Tax and Business Education Tax.

Transforming the Delivery of Public Services

The McGuinty government is focusing more than ever on the services that are most important to Ontario families — and that means education and health care receive moderate increases in funding, while lesser priorities get less funding. These thoughtful choices will ensure that Ontario families are receiving the best possible service and the highest value for tax dollars.

The 2012 Budget presents a strong plan to move forward and transform public services — to change the way they are delivered to give Ontario families better value for money and better results. The plan rejects tax increases. It does not include across-the-board cuts to public services, which hurt families and do not yield long-term success. Some examples announced in this Budget include:

  • streamlining business support programs to create the Jobs and Prosperity Fund. This move will produce administrative savings of at least 25 per cent and overall savings of $250 million in 2014–15;
  • using office space more efficiently to reduce the government's real estate footprint by about one million square feet;
  • divesting or closing down some parts of the Ontario Northland Transportation Commission, avoiding costs of approximately $250 million over three years; and
  • pursuing a public–private partnership for ServiceOntario to improve service while lowering costs.

Beating Fiscal Targets

Ontario's economy is growing stronger. In 2011, over 121,000 net new jobs were created in Ontario — virtually all of them full-time. The economy is projected to grow at 1.7 per cent in 2012, 2.2 per cent in 2013 and 2.4 per cent in 2014.

Ontario's deficit reduction plan is ahead of schedule. For the third year in a row, deficit forecasts have been beaten. The government's five-year plan keeps Ontario on track to balance the budget by 2017–18.

The deficit for 2011–12 is now projected to be $15.3 billion, which is a $1 billion improvement from the deficit forecast in the 2011 Budget. This forecast is based on year-over-year program expense growth of 2.5 per cent. For 2012–13, the deficit is projected to be $15.2 billion, consistent with the plan to balance the budget laid out in the 2011 Budget.

The 2012 Budget is the next step in the McGuinty government's plan to balance the budget. It presents strong action for Ontario. It is fair, reasonable and balanced. Deficit elimination is not an end in itself — it is a means to an end: ensuring that Ontario families continue to receive the best value through the best education and health care in the world and a strong economy that creates jobs.