The government has a proven track record of strong fiscal management and has made great progress in beating its deficit targets. However, achieving a balanced budget will require a relentless focus on finding smarter, better ways to deliver the best possible value for every dollar spent, while continuing to make investments that create jobs, expand opportunities and secure prosperity for all Ontarians.
The government recognizes that across-the-board cuts would harm Ontario’s prospects for stronger economic growth and undermine programs that are providing high-quality services. That is why the government has launched Program Review, Renewal and Transformation (PRRT), a fundamentally new approach to multi-year planning and budgeting. The PRRT builds on the work of the Commission on the Reform of Ontario’s Public Services, led by Don Drummond, focusing on program objectives to assess outcomes in an effective, efficient and sustainable way.
Led by the President of the Treasury Board, and supported by a sub-committee of Treasury Board/Management Board of Cabinet, the PRRT is taking an across-government perspective and identifying both short- and longer-term opportunities to transform programs and services. At the same time, the government is making tough choices to transform or end programs that are not performing, do not link to its key priorities or no longer serve a clear public interest.
The PRRT is designed around four key principles:
The government has a strong track record of successfully transforming public services by improving outcomes and managing costs. Examples include:
For 2015–16, the government has identified through the PRRT process a number of opportunities to improve outcomes for Ontarians while managing costs.
See Chapter IV: A Fair and Sustainable Tax System for more details.
The government continues to explore opportunities to integrate services, generate savings, and make it easier and more convenient for Ontarians to access public services — when and where they need them. Some examples include:
Ontario is making more efficient use of its real estate and has committed to shrinking its office footprint by 2022 by 1.3 million square feet, which is larger than 75 NHL hockey rinks. As of March 2015, the government had reduced its office footprint by over 675,000 rental square feet. That is over 50 per cent of the Province’s target, with close to $19 million per year in estimated savings.
The government will continue to drive further administrative efficiencies and maximize revenues by selling properties and demolishing buildings that are no longer required and have ongoing costs and liabilities. Ontario will also continue working with agencies to assess the revenue potential of agency-held properties.
To ensure the sustainability of the Ontario Drug Benefit (ODB) Program and patients’ access to drugs, the Province will continue to make the ODB Program more efficient and effective. These changes will enable the government to achieve savings of over $200 million annually when fully implemented. Important changes include:
The government has established a Laboratory Services Expert Panel to conduct a review and provide recommendations relating to funding reform options to shift the focus from physician-centred, volume-driven service delivery to improving patient outcomes. This modernization is expected to drive better value for money in lab services by negotiating costs down by $50 million while ensuring high quality and public access.
Through the Assistive Devices Program, the government will continue to review approved costing of funded products, such as mobility devices, to reflect evidence-based updates to pricing. These changes will generate savings of up to $20 million per year, which will result in lower costs for clients while also ensuring the sustainability of the program.
While the PRRT process has identified a number of major initiatives to transform programs, modernize government and deliver savings towards the annual program review savings target of $500 million, it has only just begun. The PRRT is a multi-year initiative and will be considering complex, cross-government opportunities that aim to modernize public services, support fiscal objectives and improve outcomes for people.
Through its Open Government initiative, new forms of in-person and online public engagement will be introduced to seek public feedback and stakeholder input on major transformational initiatives. There will also be increased focus on progress tracking and public reporting.
A new Centre of Excellence for Evidence-Based Decision Making Support will be introduced within government to build capacity to assess how programs are performing, using evidence to inform choices and lead change in critical public services. The Centre’s work will also be supported by a new Behavioural Insights Unit (BIU) in government that designs interventions to assess programs and offer low-cost ways to redesign programs for better outcomes.
Highly successful in other countries such as the United Kingdom, BIUs help government ministries and agencies improve public services by using proven behavioural science research to encourage healthier, smarter and more cost-effective choices. In addition, the government will explore opportunities to partner with external experts and academic institutions to create a network of evidence-based policy that will assist government with difficult policy challenges.
Ontario values its public-sector workers. These dedicated, hardworking individuals are among the best in the world. That is why the government is committed to ensuring fairness for public-sector employees while protecting the public services that Ontarians rely on.
Managing compensation costs is critical to balancing the budget, as over half of government spending goes to salaries and benefits in the Ontario Public Service (OPS) and broader public sector (BPS). Compensation costs must be addressed within Ontario’s existing fiscal framework, which does not include additional funding for wage increases. Any modest wage increases must be offset by other measures to create a net zero agreement, and all public-sector partners must continue to work together to control current and future compensation costs.
Consistent with the government’s fiscal plan, negotiated agreements in the OPS were achieved with no new funding for compensation increases.
For example, the government reached a new four-year agreement with the Association of Management, Administrative and Professional Crown Employees of Ontario (AMAPCEO) in 2014, which produced savings of approximately $45 million in 2014–15. The agreement includes a wage freeze in the first two years and a 1.4 per cent wage increase in each of the third and fourth years. The cost of wage increases in 2016 and 2017 was offset over the four-year term through changes to benefits and entitlements, making it a net zero agreement. This agreement supports the government’s commitment to fairness to employees while protecting valued public services.
The government is also taking steps to implement its plan for the responsible management of physician service payments. Under this plan, compensation for physicians will not increase, achieving the Province’s goal of staying within its net zero compensation framework. This plan includes a modest increase in total spending for physicians’ services that will allow Ontario’s health care system to add doctors and address increasing demand due to a growing and aging population. The plan will not reduce quality of care or access to services and will help ensure that every dollar spent on health care gets the best result. Changes in physician compensation have led to $850 million in savings over the last two years, with further savings expected by the end of 2016–17.
Since the 2014 Budget, the average negotiated wage increase across Ontario’s provincial public sector continues to track below all other sectors. Since July 2012, the average annual negotiated wage increase across Ontario’s provincial public sector has been 0.6 per cent. This is lower than Ontario’s municipal public sector (1.9 per cent), the federal public sector in Ontario (1.7 per cent) and Ontario’s private sector (2.0 per cent).
Ontario’s provincial public sector includes about 787,000 unionized employees in the following sectors:
The government will continue to manage executive compensation in the BPS through the new Broader Public Sector Executive Compensation Act, 2014, which was passed by the Ontario legislature in December 2014.
The Act allows for the establishment of sector-specific compensation frameworks for senior executives in BPS organizations. These frameworks are authorized under the Act to include all aspects of compensation, such as benefits and hard caps on salaries, and will be established based on consultation, the collection of all compensation-related information and extensive research. This approach will mean Ontarians get value for their money while making sure BPS organizations can attract and retain talented individuals.
After a framework is in place for a particular employer, it will immediately apply to new hires and executives moving to new executive positions, and will also fully apply to all existing executives after the expiry of a three-year notice period.
The Act also provides significant compliance and enforcement measures. The legislation will allow for the audit of relevant records, and employers can be required to repay any amount paid above the level that is authorized under a framework. Individuals can be fined for acts of wilful non-compliance with their attestation or the audit requirements.
Ontario is continuing to take action to reduce pension costs and enhance the affordability of public-sector pension plans. The government’s successful efforts to date to constrain public-sector wage growth, along with better-than-expected investment performance, have reduced total pension expense costs over the medium term by a further $1.6 billion since the 2014 Budget.
In 2012, 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 projects a decline of $2.3 billion over the same period, resulting in a cumulative reduction of $10.3 billion compared to the Commission’s forecast. This represents a further improvement from the 2014 government forecast, which projected a decline of $1.5 billion over the same period and a cumulative reduction of $8.7 billion compared to the Commission’s forecast.
|Difference in Forecast||(0.1)||(0.8)||(1.2)||(1.9)||(2.8)||(3.5)|
|Source: Ontario Treasury Board Secretariat.|
When businesses aggressively avoid or evade paying taxes, everyone else is left to make up the shortfall. This also puts the competitiveness of legitimate businesses at risk. A fair tax system where everyone plays by the rules is critical to sustaining public services. When everyone, including businesses, pays their share of taxes, the government is able to invest in programs and services for all Ontarians.
Since 2013–14, the Province has taken concrete measures to help ensure tax fairness and a level playing field for business. These include:
The government is taking focused action in the residential roofing sector to help ensure compliance with health and safety obligations and to inform consumers and workers about the risks and liabilities associated with participation in the underground economy.
By targeting firms that neglect these important regulatory obligations and working to reduce the illegitimate operations, the government is making it more difficult for businesses to operate underground and protecting Ontarians from unsafe working conditions and potential liabilities. In 2015–16, additional action will focus on the auto-body repair sector.
In total, these efforts have generated an estimated $600 million for Ontario to date, as well as enhanced fairness and safety for Ontario’s consumers and workers.
Going forward, the Province will build on these successful initiatives with new approaches to address the underground economy.
In March 2015, the government held a successful underground economy roundtable with representatives from industry, academia and other governments. The roundtable enhanced the collective understanding of the impact of the underground economy on the business community, outlined the experiences of other jurisdictions and identified further initiatives Ontario could consider implementing to effectively combat the underground economy.
The underground economy generally refers to transactions that are undertaken with a deliberate effort to evade taxes and other legal obligations.
According to Statistics Canada, the country’s underground economy is estimated to be 2.3 per cent of annual gross domestic product (GDP), and is estimated to largely occur in the construction, retail and hospitality sectors1 where cash payments are common. Applied to Ontario, this means approximately $15 billion in annual economic activity.
Ontario is determined to address this illicit activity. The government is proposing further measures in 2015–16 to help level the playing field for business.
Electronic sales suppression is a practice that allows some businesses to use sophisticated software, commonly referred to as zappers, to break the rules by concealing sales records, including the taxes that customers have paid. This prevents tax revenue from being used for essential public services.
When businesses use sophisticated technology or software to electronically hide or suppress sales, it creates an unfair advantage by allowing them to underreport business income, pay less tax to government and retain the taxes paid by consumers.
To better address the challenge of electronic sales suppression, the Province is proposing to make the use, manufacture or distribution of electronic sales suppression technologies illegal under the Taxation Act, 2007. This action would align with recommendations made by the Commission on the Reform of Ontario’s Public Services in 2012 and the Organisation for Economic Co-operation and Development in 2013.
As a further measure, Ontario will actively examine options to stop sales suppression at point-of-sale terminals. The government will begin consulting with the business community and other related entities in the coming months on technology-based approaches that could ensure all businesses abide by the same tax obligations without being unnecessarily burdensome.
Targeting illegitimate business practices is best achieved by identifying areas at high risk of underground economy activity. To do this, Ontario must be in a position to facilitate better information sharing within the government, as well as with other governments and government entities, including municipalities. Examples of potentially useful information include business registration data provided to government and business compliance information generated by government (i.e., violations, fines or penalties). Accordingly, in the coming year, the Province will pursue legislative options to improve its ability to share information.
In examining these options, the government is committed to respecting the privacy of citizens and consulting with all interested parties to ensure that any proposed legislation would appropriately protect privacy.
When the government awards a contract to a business, that business must be compliant with its tax obligations before a contract is finalized. The Province remains committed to expanding tax verification to the broader public sector and Crown corporations, and will continue to make progress towards this goal in 2015–16. As part of that progress, Ontario will undertake pilot projects, beginning with subcontractors in targeted areas in the coming year.
First Nation Partnerships
The government is committed to continuing a dialogue with First Nation communities and leaders on tobacco. This includes discussions on self-regulation of tobacco on-reserve and revenue-sharing. Such discussions are currently underway with the Chippewas of the Thames First Nation and the Mohawk Council of Akwesasne, and the government welcomes similar discussions with other First Nation communities. To date, these pilot projects have provided an excellent opportunity to establish collaborative relationships and a forum for conducting joint research and analysis to explore models for self-regulation of tobacco on-reserve and revenue-sharing.
The government has launched a review of the First Nations Cigarette Allocation System that will be led by independent co-facilitators Kathleen Lickers and Peter Griffin. Over the coming months, the co-facilitators will listen to the perspectives of First Nation communities and stakeholders on improving and modernizing the allocation system.
Further, the Province will seek First Nations’ advice on modernizing the Ontario Gas Card Program, focusing on improved customer service and better program integrity.
Contraband tobacco is a significant component of Ontario’s underground economy. The presence of contraband tobacco in Ontario is a persistent and complex challenge that undermines provincial health objectives under the Smoke-Free Ontario Strategy, results in less tobacco tax revenue for critical public services and compromises public safety through links with organized crime.
Ontario’s tobacco strategy consists of a balanced approach of partnerships and compliance activities to address the issue of contraband tobacco. In the 2014 Budget, the government amended the Tobacco Tax Act to increase fines for offences related to marked tobacco products, allow for the impounding of vehicles used to transport contraband tobacco and strengthen other enforcement measures.
Effective January 1, 2015, the government also took steps to impede the flow of raw leaf tobacco to contraband manufacturers through the introduction of regulations that provide for effective oversight. The government is working cooperatively with growers and others that deal with raw leaf tobacco in Ontario to ensure they are registered. The government will continue to closely monitor implementation of this important initiative and identify possible additional legislative measures to strengthen the raw leaf tobacco oversight regime.
Building on existing measures, the government is proposing a number of additional actions, including:
The Province is also proposing to improve the government’s ability to partner with, and provide grants to, external organizations in support of compliance activities related to the Tobacco Tax Act and other statutes.
Corporate tax avoidance is reducing or eliminating tax liability through planning techniques. Tax avoidance becomes an issue when planning techniques are used aggressively in a way that is inconsistent with, and undermines the intent of, tax legislation. Tax evasion, on the other hand, occurs where there is a deliberate and illegal effort to evade taxes, and is often found in the underground economy.
All corporations should pay their fair share of taxes. That is why Ontario, in conjunction with the federal government, has taken substantive actions to help better address aggressive corporate tax avoidance.
For example, Ontario amended the Taxation Act, 2007, to require reporting of information that could disclose aggressive tax avoidance transactions. With these disclosures, Ontario will be better positioned to effectively assess and address egregious tax practices.
Ontario will continue to focus on finding ways to ensure that tax fairness and revenue integrity are achieved for the benefit of all Ontarians. This focus must be applied globally, as well as within Canada’s borders.
Ontario continues to act on opportunities to further strengthen government transparency, financial management and fiscal accountability, to help achieve its fiscal plan and deliver government programs and services.
Effective agency management contributes to the efficient use of public funds. In 2014–15, the government introduced new measures to further strengthen its oversight of Provincial agencies and increase transparency and accountability across agencies and the broader public sector.
As of April 1, 2015, Provincial agencies are required to post their governance documents, including business plans, online. In addition, agency Chairs and CEOs are required to attest to their organization’s full compliance with applicable government legislation, regulations and directives.
By undertaking Mandate Reviews for all Provincial agencies, the government is working to align the activities of its agencies in shaping public administration while effectively serving the needs of Ontarians. The government is committed to reducing the number of Provincial agencies by approximately 30 per cent below the 2011 baseline (246 Provincial agencies). Since 2011, the government has taken a thoughtful approach and has eliminated 67 agencies, with additional reductions possible as the government undertakes and considers the outcomes of regular Mandate Reviews.
The government passed the Public Sector and MPP Accountability and Transparency Act, 2014, in December 2014. The Act includes a number of initiatives that will provide increased accountability and more oversight over broader public-sector entities. This will help ensure tax dollars are spent wisely as the Province delivers on its commitment to eliminate the deficit by 2017–18.
In addition, the government will dissolve three inactive adjudicative tribunals: the Chiropody, Dentistry and Optometry Review Committees. These committees have been inactive since 2003, as practitioner payment disputes are resolved through an OHIP review process.
The government continues to move ahead with more transparent, consistent reporting, to be prepared to address requirements as and when they are determined, under both federal and provincial environmental regulation. In line with new public-sector accounting standards, the consolidated financial impact of remediation for environmentally contaminated sites for which the government and its consolidated entities are responsible will be reflected in financial reporting, beginning with the Public Accounts of Ontario 2014–2015. The Province will propose legislative amendments to support reporting of these financial obligations.
The government continues to work with the Public Sector Accounting Board (PSAB) regarding implementation of new standards on financial instruments and foreign currency translation, which are effective April 1, 2016, for senior governments. The PSAB recently requested feedback from stakeholders on clarification of the scope of application, and new guidance on transitional provisions. The government will work with PSAB to ensure its reporting requirements are properly addressed for implementing these new standards.
The Highway 407 East project will help relieve congestion and support the efficient movement of people and goods through the eastern Greater Toronto Area and beyond. The government will propose legislative amendments to support integrated management of toll revenues by its tolling services provider. Customers travelling on both Highway 407 East and the 407 Express Toll Route (ETR) will experience a seamless and integrated experience as only one transponder will be required and the consumer will receive only one bill. To protect drivers from unreasonable rates, initial toll fees on Highway 407 East will be lower than those charged by the existing 407 ETR.
The government is developing enhanced strategic financial management and business analysis tools and processes that will support transformational improvements in ministries’ operations and lead to improved interactions with business partners and the public.
The government will introduce an Interim Appropriation Act for 2015–16. If approved by the legislature, this would provide legal spending authority for anticipated 2015–16 spending, pending completion of the supply process. This would enable the government to continue operations until the Legislative Assembly has approved the Expenditure Estimates and a Supply Act is enacted.
The government plans to propose amendments to the Financial Administration Act to support implementation of the enhanced role for the Treasury Board Secretariat in strengthening oversight and fiscal management, as well as other technical amendments to enhance legislative clarity.
Passage of the Financial Accountability Officer Act, 2013, in the fall of 2013, established a Financial Accountability Officer (FAO) as an independent officer of the legislature. The FAO has a mandate to provide independent analysis to the legislature about the state of the Province’s finances, including the Ontario Budget, as well as to examine trends in the provincial and national economies.
In February 2015, the legislature announced the appointment of Stephen LeClair as Ontario’s first FAO. Ontario is the first province in Canada to introduce this oversight office.
The establishment of the FAO’s office moves forward the government’s commitment to enhance accountability and transparency of the Province’s finances.
The government will propose amendments to the Government Advertising Act, 2004, that would modernize and broaden the scope of the Act to ensure greater transparency about how the government communicates through advertisements and improve the process by which government advertisements are reviewed.
The proposed amendments would:
The proposed amendments support the government’s commitment to openness, transparency and accountability in the way government conducts business, including public advertising.
Informed by the report of the Chief Electoral Officer, the Province will also move to strengthen rules around election-related, third-party advertising to protect the public interest.
This line chart depicts average annual base wage increases collectively bargained in Ontario during the Province’s compensation restraint period from April 2010 to March 2015 and compares outcomes between the Ontario provincial public sector, Ontario municipal public sector, Ontario private sector and federal public sector in Ontario. In particular, modest wage increases that have been negotiated since July 2014 in the Ontario provincial public sector have been absorbed by employers within available funding and within Ontario’s existing fiscal plan.