The government is on track to beat its deficit target for the fifth year in a row, which would result in the accumulated deficit being more than $24 billion lower than it otherwise would have been, while investing in key public services. Notwithstanding slower revenue growth, the government is committed to balance the budget by 2017–18 in a fair and responsible way. Ontario already has the lowest per-capita program spending among the provinces.
Achieving this, however, will require some difficult choices. While the government continues to invest in jobs and priority services, it will make responsible spending decisions to support balancing the budget. As the Commission on the Reform of Ontario’s Public Services noted, across‐the‐board cuts advocated by some would hurt public services and undermine programs that are providing high‐quality services to the public, such as health care and education. The government rejects reckless spending cuts. Instead, the Province will continue a careful review of spending to determine which programs should be enhanced or reduced, while transforming public services to increase efficiencies and improve outcomes. Ontario’s success to date has proven that strong fiscal management can achieve desired results.
The Ontario government is taking action to manage the growth of spending by ensuring government activities are carried out efficiently. Each and every dollar must go further to achieve value for taxpayers’ hard-earned money. Where a dollar can be saved in an area of lower priority, it will be redirected to help sustain high-priority areas, such as health, education and job creation. The Province is taking a fair and balanced approach to eliminating the deficit by 2017–18 by managing overall program spending growth rates while continuing to support priority programs and services people depend on.
The government is also committed to making investments in the Ontario economy to create jobs, increase opportunity and support long-term prosperity, while continuing to manage the Province’s finances responsibly.
Ontario has the lowest per-capita program spending among provinces, while still providing high-quality public services. The Province continues to make important decisions to control costs while supporting key public services to, for example, reduce health care wait times and improve student achievement. These outcomes speak to spending effectively in areas that have the greatest benefit to Ontarians, both now and in the future.
The Ontario government is determined to be the most effective and efficient in Canada, because of a sustained effort to root out waste, focus on priorities, and make every dollar count.
Because of the choices the Province is making, Ontario’s economy will be well placed to take full advantage of the expected return of stronger global economic growth. This will create the new jobs necessary to generate revenue to help support eliminating the deficit. Those same choices will put Ontario on a path to begin to pay down the debt to reduce Ontario’s net debt-to-GDP ratio to its pre-recession level of 27 per cent.
At the same time, responsible fiscal management means the government must think long term about the choices it makes, especially in challenging economic times when maintaining public services and critical investments is so important. Ontario has the lowest total government revenue per person among all Canadian provinces, including funding from federal transfers.
As announced in the 2013 Economic Outlook and Fiscal Review, the government has undertaken an expenditure review to find greater efficiencies as part of its plan to control spending while transforming public services for better value and outcomes. The review recommended strategies to manage growth in spending that are helping the government project a lower-than-forecast deficit in 2013–14.
The 2013 Budget included a $1.0 billion year-end savings target. The government is projected to exceed the year-end savings target by over 50 per cent.
Actions of the expenditure review that contributed to these savings included:
Given the success of this review, and to support the government’s commitment to balance the budget by 2017–18, the review will be an ongoing part of the Province’s balanced approach to fiscal management.
The Province is implementing an annual program review savings target. This target is set at $250 million for 2014–15 and $500 million for each of 2015–16 and 2016–17. The target will focus on maintaining or enhancing the delivery of public services while reducing costs that are not essential to delivering service.
Finding efficiencies in public services delivery is already underway in many sectors. The government will focus on enhancing these successful models by adopting best practices; driving efficiencies; eliminating duplication to reduce costs in the Ontario Public Service (OPS) and broader public sector (BPS); and adopting technology and other tools to improve customer service and accelerate sector transformation that is already showing results.
To directly control the compensation of senior executives in the BPS, the government has introduced Bill 179, the Public Sector and MPP Accountability and Transparency Act, 2014. If passed, the legislation would provide the government with the authority to establish compensation frameworks, including the use of sector-specific hard caps. Proposed legislation would also authorize the government to obtain all compensation-related information, including contracts. Compliance and enforcement measures would include:
The government recognizes that everybody needs to do their part in tough times, and, as a result, has proposed to extend the pay freeze for Members of Provincial Parliament (MPPs) through Bill 177, the MPP Salary Freeze Act, 2014, until the budget is balanced. Salaries for MPPs have been frozen since 2009. If this act is passed, the pay freeze could last until the budget is balanced in 2017–18 and confirmed in the Public Accounts for that year. The pay freeze for federal MPs ended in 2013–14, having lasted for three years.
The government is taking additional actions to manage compensation costs, which will generate savings of over $1.4 billion by 2017–18, by bringing public service retirement benefits in line with practices in the private sector and other jurisdictions for employees retiring on or after January 1, 2017.
Employees of the OPS and other public-sector employers who are part of the OPS pension plans will be transitioned to a new cost-sharing model for retiree benefits that is in line with those of other private- and public-sector organizations.
The government continues to take strong but fair action to manage public-sector compensation costs. With over half of government spending going to salaries and benefits in the OPS and BPS, managing public-sector compensation costs is an important part of the Province’s plan to control spending and protect front-line government services. Compensation costs must be addressed within Ontario’s existing fiscal framework. All public-sector partners need to continue to work together to control current and future compensation costs.
The government continues to respect the collective bargaining process. Collective bargaining enhances the ability of responsible employers and bargaining agents to increase productivity, deliver services and ensure fiscal sustainability. Any modest wage increases that are negotiated must be absorbed by employers within available funding and within Ontario’s existing fiscal plan through efficiency and productivity gains or other tradeoffs so that service levels continue to meet public needs.
Ontario public‐sector settlements continue to be below the average of those in the private sector, municipal sector and federal public sector.
Pension plans in all sectors, including the public sector, have faced funding pressures arising from general economic and demographic factors. The government is a direct sponsor, co-sponsor or provider of indirect funding for sponsors of most public-sector plans. Consequently, these funding pressures can have a negative impact on the government’s finances.
To help manage these funding pressures, the government has:
The contribution agreements apply to the Colleges of Applied Arts and Technology Pension Plan, Healthcare of Ontario Pension Plan, Ontario Public Service Employees Union Pension Plan, and Ontario Teachers’ Pension Plan. They provided a freeze in employer contributions until 2017 and avoided the potential of up to $1.5 billion in additional employer contributions.
The solvency funding relief measures are directed to single-employer plans in the public sector that have a funding shortfall and are required to make special payments. Employers receive time-limited relief from making special payments. This relief resulted in a $700 million cumulative reduction in required payments by the end of 2013. Total solvency funding relief is expected to reach an estimated $1.3 billion by the end of 2015.
In exchange for this relief, plans commit to making changes in their contribution or benefit structure. As a result, the solvency funding relief measures have led to permanent improvements to the plans’ sustainability and affordability. To date, at least 17 plans have successfully negotiated changes with members resulting in higher member contribution rates and/or reduced benefits for future service.
The Commission on the Reform of Ontario’s Public Services forecast that pension expense would increase by $1.1 billion over the period from 2012–13 to 2017–18. The current government forecast of pension expense suggests a decline of $1.5 billion over the same period, resulting in a cumulative reduction of $8.7 billion compared to the Commission’s forecast. This also reflects an improvement in the pension expense forecast as compared to the 2013 Budget (see section entitled Path to Balance, in Chapter II, Section E: Ontario’s Fiscal Plan for more information).
|Difference in Forecast||(0.1)||(0.8)||(1.1)||(1.7)||(2.3)||(2.7)|
|*Actual expense for 2012–13.|
|Note: Numbers may not add due to rounding.|
|Source: Ontario Ministry of Finance.|
In January 2014, the government appointed Jim Leech, former CEO of the Ontario Teachers’ Pension Plan, as Special Advisor, Electricity Sector Pension Sustainability, with a mandate to provide recommendations on initiatives to improve the sustainability and affordability of the plans. Electricity sector pension plans are relatively generous to employees and costly to employers; these costs are ultimately reflected in prices charged to ratepayers.
Mr. Leech has completed his report and delivered it to the government. In the near future, the Minister of Energy will announce further details respecting the report and the government’s response.
The government is undertaking initiatives across the OPS and is working with its partners in the BPS to drive efficiencies, transform service delivery, manage the growth of spending and maintain services on which Ontario families rely.
Ontario has found efficiencies in health care and prescription drug costs:
Health System Funding Reform
Changing the way health care services are funded is a key component of the government’s plan to transform health care. Ontario is entering the third year of a major reform of how it funds the health care sector: moving from a provider-centred global funding approach to a more person-centred, activity-based approach for hospitals, long-term care homes and Community Care Access Centres.
Under the reform, hospital budgets will be aligned so that 30 per cent of their funding is based on the types and volume of services and treatments they deliver, at a price that reflects evidence-based best practices after factoring in the complexity of patients and procedures. Hospitals have an incentive to pay attention to how services are provided, at what cost, and to find efficiencies and improve quality, in order to be able to deliver procedures at the best-practice price.
Ontario continues to move from a global funding model for hospitals by increasing the overall share of their budgets based on patient- and activity-based funding — from 46 per cent in 2012–13 to 53 per cent in 2014–15.
Funding reform is particularly important in the hospital sector to help manage costs as the government is continuing to hold hospitals’ overall base operating funding to zero per cent growth in 2014–15. This is critical to managing overall health care expenditures as funding to hospitals is the largest area of health spending.
Ontario will continue to implement and, in some cases, accelerate transformational initiatives that have generated increased efficiency and effectiveness. The government will maintain momentum as it moves forward to transform public services by changing the way programs and services are delivered, to ensure results and better value for money.
A number of ministries have adopted different approaches to the collection of non-tax provincial debt. Some ministries have established in-house collection units, while others have relied extensively on private collection agencies. Leveraging the collection expertise of the Ministry of Finance, which is responsible for the collection of tax debt, a centralized collection model has been developed that is focused on active management of outstanding accounts, increasing cash/revenue recoveries and reducing reliance on private collection agencies.
During 2013–14, the Ministry of Finance signed agreements with several ministries to collect outstanding non-tax debt of more than $1 billion on their behalf. With the transfer of the outstanding non-tax collection portfolio, the Ministry of Finance now collects more than 85 per cent of all non-tax debt and, by 2015, it is expected to collect about 98 per cent of all non-tax debt.
Once appropriate regulatory authorities are in place, the strategic application of a broader range of collection tools should generate additional proceeds of $25 million annually by 2015–16.
As part of the broader transformation of the delivery of public services, the government is committed to improving the way benefit programs are delivered to Ontarians. Currently, more than 40 tax and benefit programs providing more than $25 billion in support for people are delivered by 10 different ministries.
Working with program and service delivery partners, Ontario has begun transforming the delivery of benefit programs. For example, eligibility processes continue to be streamlined, with more programs using the automated income verification service between the Ministry of Finance and Canada Revenue Agency. Progress has also been made with respect to providing Ontarians with centralized access to benefit program information. Based on advice from external experts, a consent-based identification approach that uses a common identifier to centrally link data across multiple programs was recommended for Ontario.
Considerable progress has been made in the development of the pilot projects for the My Benefits Account, with the goal of implementing in late 2015–16.
The government will review all of its tax and benefit administration programs and services, with a view to moving to a full electronic service model within the next five years. Currently, some of the programs and services are provided electronically but not fully utilized by clients. The government will explore opportunities for enhanced e-service for applications, registrations, tax remittance, collections and other services.
Additionally, the Province will work closely with the federal government to expand the adoption of the Business Number as a common identifier for all businesses in Ontario, thereby simplifying their dealings with all levels of government.
The government is continuing to move ahead with the Commission on the Reform of Ontario’s Public Services’ recommendations — over 80 per cent of recommendations are now being acted on, up from 60 per cent in the 2013 Budget.
These actions are enabling sustainable transformation and supporting successful expenditure management. The government is continuing to implement the Commission’s recommendations as part of its commitment to deliver the most effective and efficient public services.
A cross-section of actions taken in response to the Commission’s recommendations can be found online at www.fin.gov.on.ca/en/reformcommission/progress
The government continues to strengthen its oversight of classified agencies and reduce risk in the agencies sector. The government is committed to ensuring that only those agencies that play an important role in the social and economic fabric of the province continue to operate.
In 2010–11, the government reduced the number of classified agencies in Ontario from 259 to 246 (a drop of five per cent). Since March 2011, hard work and careful management have seen an additional reduction in the number of classified agencies by approximately 20 per cent.
By March 2015, the government is committed to reducing the number of classified agencies by approximately 30 per cent below the 2011 baseline (246 classified agencies). For example, the government is proposing to merge the Ontario Mortgage Corporation with the Ontario Mortgage and Housing Corporation, eliminating some overlapping functions. The merger would result in more efficient administration of various housing and loan programs.
The government is also proposing legislative amendments to consolidate two electricity agencies — Ontario Power Authority (OPA) and the Independent Electricity System Operator (IESO) — in order to realize efficiencies and contain costs.
Beginning this year, the government will be requiring that the mandates of all classified agencies be reviewed on a regular basis. By undertaking focused mandate reviews, the government will ensure that the tax dollars of hardworking Ontarians will only be used to support those classified agencies that are carrying out activities and/or delivering services that are aligned with the needs and expectations of citizens and their government. In instances where agencies are not aligned or meeting expectations, the government will use the mandate review results to help determine whether particular agencies should be downsized, consolidated or divested.
To increase classified agency transparency, the government has introduced legislation that, if passed, would provide the Integrity Commissioner with the ability to review expense claims of appointees and senior executives on a selective basis. The scope of the Commissioner’s review would be expanded to all 197 classified agencies.
In addition, to further drive transparency, in March of this year, the government made a commitment that all classified agencies would be required to publicly post business plans and other governance documents, and the expense information for appointees and senior executives in those agencies.
The government will ensure classified agencies continue to be well governed and mindful of the best interests of the people of Ontario. Over the coming months, all appointees to classified agencies will be required to receive governance training related to their responsibilities overseeing Ontario’s classified agencies.
The government will continue to instil a risk management culture across the classified agencies sector by requiring that ministries undertake ongoing risk assessment evaluations of their agencies. The current risk framework will be refined and enhanced to ensure that classified agencies have comprehensive and transparent risk mitigation plans.
Finally, to improve accountability at the most senior levels in classified agencies, the Chairs/CEOs of all agencies will be required to annually attest that their organizations are in full compliance with all government directives. This will help ensure that agencies stay on track and remain aligned with the needs and expectations of Ontarians and their government.
The Province has a wide range of valuable assets, including an extensive real estate portfolio and operating enterprises. Maintaining Provincial ownership for many of these assets remains a priority to deliver key services to the public. Some assets, however, may no longer serve a public policy purpose and are of particular interest to, for example, Ontario’s large pension plans as good long-term investments.
Unlocking the value of these assets through operational improvements or asset sales gives the government an innovative revenue source to reinvest back into the economy. Net revenue gains from the divestment of certain assets will be invested in provincial assets such as roads, bridges and transit. These revenues will be used to invest in public infrastructure to expand Ontario’s economy, improve Ontario’s competitiveness, boost productivity and create jobs.
A number of the Province’s assets are no longer critical to delivering on core government programs or priorities. These include the Province’s interest in General Motors’ shares, acquired at the time of the auto industry restructuring, and a number of prime-located real estate assets. The government will not sell public assets for the purpose of meeting operating budget shortfalls. Instead, net revenue gains from these and certain other asset sales are planned to flow to the proposed Trillium Trust, which would help to fund the building of a new generation of public infrastructure to improve the Province’s long-term competitiveness for the well-being of all Ontarians.
As announced in the 2013 Ontario Economic Outlook and Fiscal Review, the government has been exploring opportunities to unlock economic value from Liquor Control Board of Ontario’s (LCBO) headquarters and Ontario Power Generation’s (OPG) head office. The government will now move forward on divesting those assets. Other real estate assets are being revitalized, including the former Lakeview generating station property in southeastern Mississauga, which is expected to see a balanced mix of commercial, residential and recreational development over the next decade; and the Seaton Lands in Pickering, where one of the largest new urban communities in Canada will be developed over the next 20 years. The government will explore opportunities to divest these assets. It is also considering divesting some of its non-core downtown Toronto assets, primarily office space, located on prime commercial land. Selling these and similar non-core assets frees up resources to invest in new public infrastructure, building a stronger foundation for increased economic growth.
The Province’s valuable assets include large and complex Government Business Enterprises (GBEs) — such as the LCBO, Hydro One and OPG. To identify opportunities to optimize the full value and performance of these core assets, the government will launch an in-depth review process.
The Premier’s Advisory Council on Government Assets will examine how to get the most out of key government assets to generate better returns and revenues for Ontarians. The Council will report directly to the Premier of Ontario and be supported by existing resources within the government. The Council has been given a mandate to maximize the value of these GBEs to the Province, including such measures as efficient governance, growth strategies, corporate reorganization, mergers, acquisitions and public-private partnerships. The Council will give preference to continued government ownership of all core strategic assets.
The government is committed to strengthening the accountability, financial management, and transparency of its business enterprises. The Council will report to the Premier on the LCBO, Hydro One and OPG, by the end of 2014 in order to feed into the 2015 Budget process.
The concept of asset recycling is common around the world, and will help the government use scarce resources to their best possible effect — building public infrastructure that will improve private-sector productivity and Ontarians’ quality of life.
In all its activities, the council will be guided by three principles:
Final decisions would be made by the government.
Asset Recycling Globally
The Province is transforming the way it manages its real estate holdings. To facilitate cost savings, reduce its environmental footprint and provide more sustainable workplaces, it is committed to shrinking its office footprint in the City of Toronto by about one million square feet — equivalent to more than 11 Canadian Football League fields.
Ontario’s real estate strategy includes adopting a new office space standard of up to 180 rentable square feet per employee, consolidating into fewer locations and making more efficient use of existing government office space. For example, the retrofit of 222 Jarvis Street in Toronto has reduced the government’s footprint by over 135,000 square feet.
Since April 1, 2012, the office footprint in Toronto has been reduced by approximately 242,000 rentable square feet, with close to $9.6 million per year in estimated savings. This is a trend in the private sector and governments around the world. The Province will take additional steps to prioritize scarce realty dollars to deliver government priorities.
The Province has a strong record of supporting and working with municipalities. In 2014, the Province will provide municipalities with ongoing support of approximately $3.5 billion — an increase of more than 200 per cent over 2003. The significant level of support that the Province has provided to the municipal sector was highlighted by the Commission on the Reform of Ontario’s Public Services, which noted that the rate of increase in support to the municipal sector has been significantly higher when compared to other sectors, including health care and education.
Despite continued global economic uncertainty and its impact on Ontario’s recovery, as well as the Commission’s recommendation to delay the implementation of the provincial uploads, the government continues to upload social assistance benefit programs as well as court security and prisoner transportation costs off the property tax base, recognizing the importance of this commitment to municipalities.
As a result of the uploads, municipalities are seeing over $1.5 billion in savings in 2014 alone, which is the equivalent of nearly 10 per cent of property tax revenue in the province. These savings will continue to grow until full implementation of the provincial uploads by 2018.
The Ontario Municipal Partnership Fund (OMPF) is the Province’s main unconditional transfer payment to municipalities that primarily supports rural and northern communities in recognition of their unique challenges.
In 2012, the government announced the review and phase-down of the OMPF to $500 million by 2016. The phase-down was also part of the 2008 upload agreement with municipalities.
The government will continue to provide unconditional support to municipalities through the OMPF and proceed with the phase-down to $500 million. However, to manage program spending, and in light of the significant level of support provided to municipalities, the phase-down schedule for the OMPF will be adjusted for 2015. Under the revised schedule, municipalities will receive $515 million through the program in 2015.
Ontario will continue to work closely with municipalities to manage the phase-down of the program, and ensure that details of the 2015 allocations are available as soon as possible to support municipal budget planning.
Even with the phase-down of the OMPF, the government’s commitment to the provincial uploads means that overall support to municipalities will continue to increase, with the provincial uploads more than offsetting the reduction to the program.
Ontario’s property assessment and tax system plays a fundamental role in supporting local municipal services and the Province’s elementary and secondary school system. The 2013 Budget announced that the Province would work with the Municipal Property Assessment Corporation (MPAC), municipalities and business taxpayers to review options to ensure Ontario’s property tax system is fair, accurate and predictable.
The final report on the Special Purpose Business Property Assessment Review was released in December 2013 and is available on the ministry’s website. The report includes recommendations related to improving the assessment of specific special purpose business properties, as well as 26 overarching recommendations for strengthening the overall property assessment system. The Ministers of Finance and Municipal Affairs and Housing have accepted the report. The Province is now focused on implementing the recommended improvements to Ontario’s property assessment system in consultation with municipalities and other stakeholders.
The Province provides a special annual payment to municipalities hosting hydro-electric generating stations (power dams). Through this program, the Province has been providing municipalities with funding that reflects the amount of property tax revenue that each municipality received from these stations prior to 2001, when the stations became exempt from property taxation.
In 2013, the Province advised municipalities that this program would be reviewed as part of a broader examination to ensure government programs meet their policy objectives, while taking into account the government’s ongoing effort to make responsible spending choices. Pending the outcome of the review, the Province committed to maintain a stable level of funding to municipalities under this program for the 2013 and 2014 taxation years.
As a result of the Province’s review, and in the context of the government’s commitment to continue to manage spending, the program will be phasing down to $14.3 million by 2017.
|Annual Payments to Municipalities||18.7||18.1||16.8||14.3|
The Province will work with municipalities on ways to implement the phase-down in a manner that is fair and manageable.
This chart compares per-capita program spending in Ontario to the other nine provinces for 2012–13. In 2012–13, Ontario’s per-capita program spending was $8,369. This is the lowest per-capita program spending among the provinces. This is followed by British Columbia, Quebec, Nova Scotia, New Brunswick, Alberta, Prince Edward Island, Manitoba, Newfound and Labrador, and Saskatchewan.
This chart compares Ontario’s total revenue per-capita to the other nine provinces for 2012–13. In 2012–13, Ontario’s total revenue per-capita that included its own source and federal transfers was $8,453. This is the lowest total per-capita revenue among the provinces. This is followed by British Columbia, Alberta, New Brunswick, Nova Scotia, Prince Edward Island, Manitoba, Quebec, Saskatchewan, and Newfoundland and Labrador.
This chart shows the average annual base wage increases from wage settlements ratified between July 17, 2012 and March 26, 2014. The average annual wage settlements for the Ontario public sector were 0.4 per cent — lower than the settlements for the private sector, which were 2.0 per cent, the municipal sector, which were 2.0 per cent, and the federal public sector in Ontario, which were 1.7 per cent.