Ministry of Finance

Public Accounts of Ontario

2008-2009

Annual Report and Consolidated Financial Statements

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To The Honourable
David C. Onley
Lieutenant Governor of Ontario

May It Please Your Honour:

The undersigned has the honour to present the Public Accounts of the Province of Ontario for the fiscal year ended March 31, 2009, in accordance with the requirements of the Ministry of Treasury and Economics Act.

Respectfully submitted,

The Honourable Dwight Duncan
Minister of Finance
Toronto, August 2009

Table of Contents

• Foreword
• Introduction
• Guide to the Public Accounts
• Annual Report
• Supporting Volumes
• Statement of Responsibility
  

FINANCIAL STATEMENT DISCUSSION AND ANALYSIS

• Highlights
• Analysis of 2008-09 Results
• Revenue
• Investing in people, services and the economy
• Impacts on borrowing and financial position
• Managing Effectively and Achieving Results
• Managing well in difficult times
• Achieving measurable results
• Actual to Interim Results in 2009 Budget

CONSOLIDATED FINANCIAL STATEMENTS

• Auditor’s Report
• Consolidated Statement of Operations
• Consolidated Statement of Financial Position
• Consolidated Statement of Change in Net Debt
• Consolidated Statement of Change in Accumulated Deficit
• Consolidated Statement of Cash Flow
• Notes to the Consolidated Financial Statements
• Schedules to the Consolidated Financial Statements
• Glossary
• Sources of Additional Information
  

FOREWORD

I am pleased to present the 2008–2009 Ontario Public Accounts. 

This past year, the global economy entered into a crisis unseen for some 80 years. No developed world economy was immune from the challenges presented by the global economic meltdown — Ontario was no exception.

The United States has lost 6.7 million jobs from the pre-recession peak and has undergone historic financial turmoil.

Businesses, in local neighbourhoods to downtown cores, banks and auto companies have closed their doors or entered into bankruptcy protection.

Other provinces and countries around the world have seen themselves move into deficit positions. This includes the federal government, the province of Alberta, Australia, Japan and the United Kingdom.

This past fiscal year, Ontario had a deficit of $6.4 billion after three consecutive balanced budgets.  Government revenues from corporate income taxes fell to the lowest level in five years. But more importantly, Ontario families and businesses were hurt. 

The government’s 2009 Budget took the single most important step to make Ontario’s economy more competitive. The Budget announced that the outdated and burdensome Retail Sales Tax would be replaced with a single, value-added tax harmonized with the federal government’s Goods and Services Tax by July 1, 2010.

This move will ensure Ontario’s businesses are more competitive when economic growth returns to the economy. The single sales tax will also allow Ontario to better attract new investment to the province, increasing employment and prosperity.  The tax rate on new investment will be cut by almost half, making Ontario one of the most competitive jurisdictions in North America and among developed nations. 

To help Ontarians through the transition period, the government is proposing $10.6 billion in tax relief over three years. This includes $4 billion in transitional cash payments that would come in three instalments in the first year under the single sales tax. The remainder would be through a personal income tax cut for the lowest tax bracket — bringing Ontario to the lowest rate of any province in Canada. 

It is estimated that Ontario businesses would save over $500 million a year in compliance costs — for businesses large and small. 

In the 2009 Budget, we also took measures to ensure that jobs are created today. The government will invest $34 billion in stimulus spending — $32.5 billion of which will go to infrastructure projects across the province over the next two years.

We also invested, along with the U.S. and Canadian governments, $4.8 billion in General Motors and Chrysler. The government support means jobs for the thousands of Ontario workers directly employed by the companies and stability for the auto industry and the communities that depend on it. If we did not make these investments, these jobs would have been lost.

As we move forward during this period of economic stabilization, tough choices will have to be made.  However, the public services Ontarians depend on will continue to be protected. 

The Ontario economy under the single sales tax will become more competitive, creating a more prosperous Ontario.

The task of leading Ontario through this recession — and beyond — to the next generation of growth falls to all of us.

The task of building a powerful Ontario economy falls to all of us.

Our government will take up that challenge confidently and with determination, just as those who came before us did.

Introduction

The Annual Report, which forms part of the Public Accounts of the Province of Ontario, outlines Ontario’s financial results and position for the fiscal year ended March 31, 2009. It is a key element of the Province’s financial accountability, providing readers with a summary of activities over the fiscal year. It compares actual financial results to the initial Budget Plan set out in March 2008, outlines the impact of unforeseen events, and explains how the government managed through the year. In providing an overview of financial and other results achieved, it helps readers to assess the effectiveness of public-sector organizations and their accountability for public resources.

The importance of effective financial management and accountability was clearly evident as governments worldwide grappled with the serious economic downturn during the year. Ontario has worked diligently to strengthen these key elements of good government in the past several years, and as a result was able to respond quickly and appropriately as the seriousness of the fiscal situation became clearer. Ontario continues to build on its strong foundation of financial management and accountability.

Producing the Public Accounts of Ontario requires the teamwork and cooperation of many staff members across the provincial government and the broader public sector. In addition, the Office of the Auditor General plays a critical role in reviewing and reporting on the Province’s financial statements. I would like to thank everyone who was involved in preparing the 2008–09 Public Accounts for their valuable assistance and efforts.

We welcome your comments on the Public Accounts. Please share your thoughts by e-mail at annualreport@ontario.ca, or by writing to the Office of the Provincial Controller, Re: Annual Report, Ontario Ministry of Finance, Second Floor, Frost Building South, 7 Queen’s Park Crescent, Toronto, ON M7A 1Y7.

Guide to the Public Accounts

The Public Accounts of the Province of Ontario comprise this Annual Report and three supporting volumes.

Annual Report

The Annual Report includes a Financial Statement Discussion and Analysis that explains the Province’s financial and other results, as well as the Consolidated Financial Statements.

The Consolidated Financial Statements are made up of several documents and schedules:

• The Auditor General’s Report expresses the opinion of the Auditor General as to whether the statements fairly report the activities of the government in accordance with Canadian generally accepted accounting principles.
• The Consolidated Statement of Operations reports the annual surplus or deficit from operations in the period. It shows government revenue, the cost of providing services and other expenses, and the difference between them. It also provides a comparison against the Budget Plan.
• The Consolidated Statement of Financial Position shows the assets of the Province, which are classified as financial or non-financial, against its obligations. The Province’s obligations less its financial resources is called its net debt. The Province’s accumulated deficit is its net debt less the value of its tangible capital assets and the net assets of hospitals, school boards and colleges.
• The Consolidated Statement of Change in Net Debt shows the combined impact on net debt of the Province’s annual deficit, investments in capital assets and changes in the fair market value of Ontario Nuclear Funds Agreement (ONFA) investments during the year.
• The Consolidated Statement of Change in Accumulated Deficit shows the impact of the annual deficit and changes in elements of the fair market value of ONFA funds on the Province’s accumulated deficit.
• The Consolidated Statement of Cash Flow shows the sources and uses of cash over the period. The government’s operations either use or provide cash over the fiscal year, as do other activities such as capital investments and financing activities. Sources of cash include increases in debt and decreases in financial investments, while uses of cash include investments in infrastructure and other assets. The Consolidated Statement of Cash Flow shows the impact of all these activities on the Province’s holdings of cash and cash equivalents over the year.
• Notes and schedules provide further information on the items in the various statements and form an integral part of the Consolidated Financial Statements. The notes also include a summary of the significant accounting policies that reflect the basis on which the Province’s financial statements are prepared.

Supporting Volumes

• Volume 1 contains ministry statements and detailed schedules of debt and other items. The ministry statements, which are presented on the accrual basis of accounting, compare the amounts that were appropriated by the Legislative Assembly with actual expenses incurred. The expenses of government organizations including provincial corporations, boards, commissions, hospitals, school boards and colleges, are not appropriated. However, the impact of these organizations on the government's finances is reflected in the Consolidated Financial Statements.

• Volume 2 contains the financial statements of significant provincial corporations, boards and commissions that are part of the government’s reporting entity, and other miscellaneous financial statements.

• Volume 3 contains detailed schedules of ministry payments.

Statement of Responsibility

The Consolidated Financial Statements and Financial Statement Discussion and Analysis are prepared by the Government of Ontario in compliance with legislation and in accordance with generally accepted accounting principles for governments in Canada.

The government accepts responsibility for the objectivity and integrity of these Consolidated Financial Statements and the Financial Statement Discussion and Analysis.

The government is also responsible for maintaining systems of financial management and internal control to provide reasonable assurance that transactions recorded in the Consolidated Financial Statements are within statutory authority, assets are properly safeguarded and reliable financial information is available for preparation of these Consolidated Financial Statements.

The Consolidated Financial Statements have been audited by the Auditor General of Ontario and his report appears on page 27 of this document.

Peter Wallace  Deputy Minister July 31, 2009	Bruce L. Bennett, CA Assistant Deputy Minister and Provincial Controller July 31, 2009

Financial Statement Discussion
 and Analysis

Highlights

Ontario faced turbulent conditions as a result of global economic challenges over the 2008–09 fiscal year. These challenges have continued into 2009–10.

The United States, the province’s largest trading partner, is experiencing a downturn whose severity became increasingly evident as 2008 progressed. The impacts included a worldwide credit crunch and a sharp reduction in U.S. domestic demand. Major elements of the Ontario economy that depend heavily on exports to the U.S., particularly the automotive and resource sectors, were hard hit as a result. The downturn — estimated as the largest global contraction since the Second World War — contributed to a contraction of 0.5 per cent in Ontario’s real gross domestic product in 2008 and a sharp decrease in the Province’s Corporate Tax revenues.

Like other forward-looking jurisdictions, Ontario was quick to respond as the impact of problems in the U.S. and other major economies became clearer. The key elements of its strategy are:

• Investing in infrastructure, training and sector support — Ontario’s government invested in infrastructure valued at $19 billion over the past two years and has committed an additional $32.5 billion over the next two. These investments created more than 100,000 jobs last year and are giving Ontario the high-quality public assets it needs for global competitiveness. Focused and strategic training and retraining programs are giving people the right skills to help Ontario achieve sustained economic growth.
• Continuing to transform Ontario’s tax system to promote long-term prosperity and maintain competitive rates — A comprehensive package of tax measures proposes to give Ontario’s families $10.6 billion in tax relief over three years and its businesses $4.5 billion over the same period. This includes moving to a single, value-added tax structure on July 1, 2010. A value-added sales tax is more efficient than a retail sales tax and would enhance the ability of Ontario businesses to compete and grow. With the comprehensive package, Ontario businesses would benefit from both lower taxes and simpler structures that reduce the compliance burden.
• Growing the green economy, accelerating innovation and attracting investment to help create the jobs of tomorrow — Ontario is acting on major commitments to renewable energy and conservation, boosting the green economy. Key investments in innovative people and facilities are helping Ontario attract investments and move new ideas to the marketplace faster to create leading-edge jobs.
• Investing in Ontario’s children and families — The government recognizes that people in Ontario need reliable public services now more than ever. Its strong commitment to those services since 2003 is paying dividends through better places to learn, stronger reading and writing skills, modernized hospitals, lower wait times for medical procedures and innovative ways of providing health care.
• Managing its finances responsibly and ensuring accountability — The current economic downturn heightens the importance of the fiscal management and accountability for public resources that have been key priorities of this government. The plan is to return to a balanced budget no later than 2015–16. To do so, Ontario’s government will rely on the same financial management skills it used to help eliminate, a year earlier than planned, the $5.5 billion deficit it inherited in 2003. At the same time, it is ensuring greater accountability among public-sector organizations across Ontario.

The global financial market crisis and economic downturn caused a steep decline in revenue, resulting in a deficit of $6.4 billion. The major source of revenue weakness was Corporations Tax, which was down almost 50 per cent from the previous year and $5.6 billion less than forecast in the 2008 Budget. Expenses remained relatively close to the Budget Plan.

Higher-than-budgeted spending in some programs, driven largely by economic conditions, was offset by lower spending in other areas and other savings found during the year. As a result, Ontario recorded its lowest year-over-year growth in expense in eight years.

2008–09 Actual Results against Budget Plan			Table 1
($ Billions)
	2008–09 Budget	2008–09 Actual	Change
Revenue	96.9	90.5	(6.4)
Expense
Programs	87.3	88.3	1.0
Interest on debt	8.9	8.6	(0.3)
Total Expense	96.2	96.9	0.7
Reserve	0.8	–	(0.8)
Annual Surplus (Deficit)	0.0	(6.4)	(6.4)
Note: Budget numbers and related variances may not add due to rounding.

Through its actions, the government has strengthened Ontario’s ability to deliver the public services on which people rely, and has improved accountability for the public funds entrusted to it and to organizations to which it provides funding. It is helping people across the province cope with tough economic times. Looking ahead, these investments are also ensuring a stronger and more competitive economy in Ontario in the years to come.

Analysis of 2008-09 Results

Actual 2008–09 financial results were weaker than those forecast in the Budget of March 25, 2008.

2008–09 Operating Results against Budget Plan			Table 2
($ Billions)
	2008–09 Budget	2008–09 Actual	Change
Revenue
Taxation	69.0	62.4	(6.6)
Government of Canada	16.5	16.6	0.1
Income from government business enterprises	4.1	4.0	(0.1)
Other non-tax revenue	7.4	7.5	0.1
Total Revenue	96.9	90.5	(6.4)
Expense
Health	40.4	40.7	0.3
Education, postsecondary and training	19.4	19.3	(0.1)
Children's and social services	11.8	12.1	0.3
Other programs	15.6	16.2	0.6
Total Program Expense	87.3	88.3	1.0
Interest on debt	8.9	8.6	(0.3)
Total Expense	96.2	96.9	0.7
Reserve	0.8	–	(0.8)
Surplus (Deficit)	0.0	(6.4)	(6.4)
Note: Budget numbers and related variances may not add due to rounding.

Revenue

At $90.5 billion, total revenue for 2008–09 was $6.4 billion lower than forecast in the 2008 Budget.

Ontario’s economy contracted by 0.5 per cent in 2008, as measured by the change in real gross domestic product (GDP). This performance, which was weaker than projected, resulted in lower taxation revenues, which are driven largely by economic activity.

Almost all the revenue decline was attributable to Corporations Tax, the most volatile major revenue source. At $6.7 billion, it was significantly below the forecast level of $12.3 billion and fell by almost half from the $13.0 billion reported for the previous year. Its share of total revenues fell to 7 per cent from the previous year’s 13 per cent. The decrease in this source of revenue reflects poorer-than-expected corporate results in most sectors of the economy.

Personal Income Tax revenue was $24.7 billion, slightly below the Budget forecast of $25.2 billion, also reflecting the poorer-than-expected economic performance. Taken together, all other tax sources totalled $30.9 billion, $0.5 billion below the Budget outlook.

Other major revenue sources for the Province include transfer payments from the federal government, income from government business enterprises and a range of other non-tax items. The net impact of changes in actual results for these items from the Budget Plan was an increase of $132 million, resulting mainly from higher-than-budgeted transfers from the federal government.

Investing in people, services and the economy

The Province made key investments in 2008–09 to help families and communities, stimulate the economy, and provide strategic support for major industries, while limiting the growth of expenses through effective financial management and greater efficiencies.

Operating spending

Despite pressures on spending triggered by tougher economic times, Ontario’s government kept total operating spending to $96.9 billion, an increase of 0.37 per cent from the previous year and 0.73 per cent from the Budget Plan.

Recognizing the deteriorating economic situation, the Minister of Finance announced in the Ontario Economic Outlook and Fiscal Review, mid-way through the fiscal year, that the government would slow down or delay the startup or expansion of programs and restrain its internal spending. Together, these measures helped the government reduce spending by $111 million over the rest of the fiscal year.

Most ministries spent less than or close to their planned allocation for the year. Increases in spending were linked in large part to economic conditions. The expense for children’s and social services increased by $256 million from the Budget Plan, mainly because spending on social assistance and other supports was higher in the downturn than budgeted.

Interest on debt was $325 million less than forecast in the 2008 Budget Plan, reflecting lower interest rates than expected and cost-effective management of the borrowing program, offset to some extent by additional borrowing needs created by the deficit.

Infrastructure stimulus and sector support

As the economic crisis deepened in 2008, forward-looking governments around the world acted quickly to provide immediate stimulus through spending on public works, transit and transportation systems, and other valuable infrastructure. This form of stimulus provides significant benefits in both the short and long term.

As well as creating jobs in the short term, these investments improve the Province’s economic competitiveness on an ongoing basis. The availability and quality of public infrastructure has a major impact on where businesses choose to locate.

Ontario’s government has shown a strong commitment to the value of infrastructure not just in the current downturn, but as a fundamental element of supporting the economy. These investments have helped to address the major infrastructure deficit that had built up over the three decades before 2003:

• The $30 billion ReNew Ontario investment plan was completed in 2008–09, a full year ahead of schedule. Over a four-year period, this ambitious program helped to close the significant infrastructure deficit that had built up over the three decades before 2003. It brought major improvements to Ontario’s highways, border crossings and transit systems, enhancing the flow of goods, people and ideas, as well as updating and expanding educational and hospital facilities.
• Over the past two years alone, the Province invested in infrastructure valued at $19 billion. These investments supported more than 85,000 jobs in 2007–08, and created and sustained more than 100,000 jobs in 2008–09. In the 2009 Budget, the Province announced a further $32.5 billion for infrastructure investments over two years, supporting an estimated 300,000 jobs.
• In 2008–09, work moved forward on key commitments such as the Windsor Gateway project that is enhancing one of Ontario’s most critical economic linkages, the widening of Highway 11 to North Bay to four lanes, and Metrolinx projects to improve public transit in the Greater Toronto and Hamilton Area.
• In the Public Accounts for 2007–08, the government provided a one-time allocation of $1.1 billion directly to municipalities through the Investing in Ontario Act.

Through Good Places to Learn and other initiatives, the government invested approximately $1.7 billion in the education, postsecondary and training sectors in 2008–09. Since 2005, some 13,000 renewal projects at more than 2,600 schools across the province have been supported by government funding of $1.45 billion in total. At the postsecondary level, the government has invested $1.4 billion through ReNew Ontario for postsecondary campus renewal and strategic capital projects. Parallel investments in broadband, digital media and research institutions have paved the way for greater innovation in the province.

The following table provides total investments supported by the provincial government. Capital expenditures are presented in line with the Province’s accounting policy of recognizing investment in capital assets on an accrual basis.

Infrastructure Expenditures, 2008–09			Table 3
($ Billions)
	Investment in Capital Assets1	Transfers and Other2	Totals, 2008–09 Actual
Transportation and transit3	2.6	0.4	3.0
Health	2.4	0.1	2.5
Education, postsecondary and training	1.6	0.1	1.7
Municipal and other4	0.9	0.9	1.8
	7.5	1.5	9.0
Less: Third-party contributions5	0.5	–	0.5
Total	7.06	1.5	8.5
1 The Province's capital investment in its own infrastructure and that of hospitals, colleges and school boards. 2 The totals consist of transfers for capital purposes to municipalities and universities and expenditures for capital repairs. Transfers for capital-related purposes and other infrastructure expenditures are recorded as expenses in the Province's Consolidated Statement of Operations. 3 Includes investments in provincial and municipal transportation infrastructure, such as highways, roads, bridges and transit. 4 Includes water, wastewater and other environmental infrastructure; other municipal and local infrastructure; justice sector infrastructure; and other assets. Also includes a one-time adjustment of $0.3 billion for consolidation of Ontario Northland Transportation Commission. 5 Third parties include charitable foundations and other contributors supporting hospitals and colleges. 6 The Province's direct investment of $3.6 billion in its own capital assets, as outlined in the Consolidated Statement of Cash Flow, plus capital investments of hospitals, school boards and colleges of $3.9 billion, less the $0.5 billion contribution they received from third parties. Note: Numbers may not add due to rounding.

In partnership with the governments of Canada and the United States, Ontario is also directly supporting one of the key pillars of its economy, the automotive sector. With several large automakers and more than 400 part manufacturers in Ontario, the sector in 2008 directly accounted for 3.7 per cent of Ontario’s GDP and employed tens of thousands of people. Because of a high degree of sector integration within North America, the governments of Canada, Ontario and the United States are working together to ensure the long-term viability of the auto sector, which has been particularly hard hit by the economic downturn. As part of this initiative, Ontario agreed in 2009–10 to make investments supporting two automobile manufacturers.

Through these actions, the Ontario government is demonstrating its support to auto workers and their communities. The outcome should be not just a healthy automotive sector, but one that is more innovative and better able to provide high-quality jobs for people in Ontario.

Impacts on borrowing and financial position

The accumulated deficit is the difference between the Province’s total liabilities and total assets. In 2008–09, the accumulated deficit rose from $105.6 billion to $113.2 billion, an increase of $7.6 billion. This increase was the result of the Province’s operating deficit of $6.4 billion and $1.2 billion from decreases in the market value of the Ontario Nuclear Funds Agreement investments during the year.

The debt of the Province increased by $14.7 billion during the fiscal year. As the following table shows, the main reasons for the increase were the deficit from operations and the Province’s capital investments, totalling $7.0 billion, as well as an increase in cash and short-term investments held by the Province at the end of the fiscal year:

Application of New Borrowings by the Province, 2008–09		Table 4
($ Billions)
Applied to operating transactions:1		6.7
Applied to capital investments:
Investments in directly owned provincial capital assets2	3.6
Investments in capital assets of hospitals, school boards and colleges3	3.4
		7.0
Provided to hospitals, school boards and colleges from their operating and financing transactions4		(2.7)
Increase in the Province's cash and temporary investments		3.7
Increase in the Province's debt		14.7
1 The Province's operating deficit of $6.4 billion plus $0.3 billion for net changes in assets and liabilities that also used cash for operating purposes. See the Consolidated Statement of Cash Flow. 2 Includes a one-time adjustment of $0.3 billion for consolidation of Ontario Northland Transportation Commission. 3 Represents $3.9 billion investment in the capital assets of these organizations less third-party contributions of $0.5 billion. 4 Consists of changes in the net assets and liabilities of these organizations that provided cash for operating and capital financing purposes. See Schedule 10 to the Consolidated Financial Statements.

MANAGING EFFECTIVELY AND ACHIEVING RESULTS

Managing well in difficult times

Risk and uncertainty in the global economy are today at levels seen rarely, if ever, since the end of the Second World War. In this environment, the Province’s steady focus on managing effectively is helping people and businesses through difficult times and positioning Ontario for renewed growth as recovery develops. It is enhancing the efficiency of its own operations and those of organizations in the broader public sector, while continuing to ensure greater accountability for the use of public resources. At the same time, Ontario’s government is building on its existing five-point plan for a more innovative and flexible economy, creating and supporting existing jobs today and preparing a highly educated workforce for tomorrow’s needs. The sections that follow explain in more detail how the government’s efforts are achieving real and measurable results for Ontario.

Maintaining focus

Ontario’s government remains focused on steady improvements to quality of life and economic growth in the province, underpinned by sound financial management.

The government inherited a $5.5 billion deficit in 2003. It committed to return Ontario’s fiscal plan to a sustainable path while giving people and businesses in Ontario the services and infrastructure they needed.

It has not just kept its commitment, but has built on it. Through responsible financial management, the Province eliminated the deficit by 2005–06, ahead of the schedule it had set, and then went on to record three consecutive surpluses. It achieved this critical rebalancing of the fiscal situation while making significant strides to restore public services and modernize infrastructure.

Ontario has been providing for several years the supports that many governments have only recently recognized as critical to economic growth. Ontario’s government will continue to make the investments needed to support people and stimulate the economy, and has laid out a plan to return Ontario to budgetary balance no later than 2015–16.

Maintaining a reasonable debt-to-GDP ratio is another important goal. The ratio of accumulated deficit to Ontario GDP is a measure of Ontario’s fiscal and economic health, showing the impact both of changes in economic activity and in the government’s fiscal position. After moving downward over several years, this ratio increased in 2008–09 from 18.1 per cent to 19.3 per cent, owing to the contraction of the Ontario economy during the year and an increase in the accumulated deficit, as Chart 3 shows. The government’s plan to return to budgetary balance will help prevent the ratio from returning to the historically high levels of a decade ago.

Another measure of fiscal position is the ratio of interest expense to government revenue. It shows how much of the government’s revenues must be allocated each year to servicing its debt. Chart 4 shows Ontario’s interest expense as a share of total revenue over the past 10 years. In 2008–09, the ratio rose slightly, from 9.2 to 9.5 per cent. While interest expense was lower than in the previous year, provincial revenue fell by a proportionately greater amount. This meant that debt expense increased as a share of revenue.

More efficient government

As 2008–09 unfolded, the government recognized that economic conditions called for ways of achieving savings in its own operations. It announced a rigorous program of internal restraint that included such measures as reducing travel and consulting costs, freezing the purchase of government vehicles, freezing the existing government real estate holdings and leasehold improvements, and expanding green workplace practices to reduce printing, photocopying and fax costs. It announced that the size of the Ontario Public Service (OPS) would be held at 68,645 full-time equivalent staff, and constrained salary increases for senior staff. It has since committed to reducing the size of the OPS by 5 per cent over three years through attrition and other measures.

As a result of these and other factors, Ontario’s spending per resident on “general government services,” including administration costs, was the second lowest among provincial governments in 2008–09, according to Statistics Canada data. At $134 per resident, Ontario’s spending in this area per resident was 28 per cent below the $185 average of other provincial governments.

To strengthen efficiency across Ontario’s public sector, the 2009 Budget announced that the government would build on the success of the OntarioBuys initiative, which has focused on getting hospitals, school boards, colleges and universities to work together to reduce the costs of purchasing goods and services. It plans to propose legislation expanding the OntarioBuys program to mandate more partners in the broader public sector to collaborate when buying common goods and services. This coordinated and integrated approach to procurement would result in an estimated $200 million in annual savings within the first three years of operation.

Making it easier to do business in Ontario

The Open for Business initiative is making government faster and friendlier for families and businesses. This initiative aims to modernize regulations while protecting the public interest. The government will also reduce the amount of regulation by 25 per cent in the next two years.

The 2009 Budget proposed moving to a single, value-added tax structure in Ontario that would be in place on July 1, 2010. Four Canadian provinces and more than 130 countries around the world have adopted a value-added tax structure because of its greater efficiency. British Columbia has also recently announced its plan to move to a single sales tax over the same period. With adoption by British Columbia and Ontario, six Canadian provinces would use a value-added tax structure.

The current retail sales tax applies to many purchases that businesses make in providing goods and services for sale. This cost becomes embedded in the final price and is passed on to consumers. In a value-added structure, most businesses are reimbursed for the tax they pay on most of their inputs. Studies show that most of the cost savings are passed on to consumers through lower prices, and exports also become more price-competitive. In Ontario, alignment with the framework for the federal goods and services tax would also give businesses the benefit of a more streamlined approach to reporting. It is estimated this would result in savings of more than $500 million a year in compliance costs. Ontario has already transferred corporate tax administration to the federal government for tax years ending after 2008. This is making compliance simpler and less costly, providing Ontario businesses with additional savings of up to $100 million a year.

Enhanced accountability

Ontario’s government has also focused on ensuring that the resources entrusted to it and other entities in the public sector are used in ways that provide value for money. Never is this need more critical than in times of economic hardship, so that people have the assurance that public funds are being used properly and achieving the right results. Ontario’s government continues to refine and strengthen the frameworks and practices that underpin its commitment to greater accountability.

Transfer payments — which fund a wide range of not-for-profit organizations delivering health and social programs on behalf of the government — are the major component of the Province’s spending. Through an enhanced directive on transfer payments, the government now requires greater accountability for both the spending of transfers and the results they achieve. The directive sets out clearly the relationship between the Province and any organization receiving transfer payments. An agreement must document expectations, terms and conditions of funding that support good governance, value for money and transparency. To achieve optimum results, a risk-based approach is used that ensures the government constantly assesses and manages effectively the risks to achieving the government’s goals. Provisions allow the Province to take corrective action to ensure funds are either used as spelled out in agreements or returned.

The government is in the process of revising its Agency Establishment and Accountability Directive, which sets out the responsibilities of agencies it creates and its role in overseeing them. The changes will improve both the accountability of government agencies and oversight of them, and also help to ensure that they follow consistent business standards and practices.

Ontario’s government is ensuring that its partners in the broader public sector also strive to ensure the best possible use of public dollars:

• When making investments in municipal infrastructure through the Investing in Ontario Act last year, the Province set out several measures to ensure accountability for the $1.1 billion in funding. Municipalities must report back on the planned and actual use of the funds. The Province also maintains the right to carry out audits to ensure funds were used for the purposes intended, and to recover any funds not used as intended.
• The 2009 Budget announced $32.5 billion in infrastructure investments over the next two years. A significant part of this funding reflects federal-provincial infrastructure programs to provide short-term economic stimulus. The focus is on distributing funding in a timely manner to achieve stimulus goals while maintaining accountability and ensuring transparent decision-making. In line with that goal, the government is planning to launch a website to report publicly on the progress of these stimulus investments.

Achieving measurable results

Ontario’s government has set the bar high for its public services. To help achieve its ambitious goals for people in Ontario, it has committed to a planning and reporting process that revolves around setting goals and reporting on progress towards them. These goals range from better student skills to shorter wait times for medical procedures, from safer roads to better-planned communities, and from increasing Ontario’s use of green energy to attracting more innovators and investors. By focusing on key goals, the government is continuing to build better lives and brighter futures for people in Ontario despite the economic downturn.

Strong people, strong economy

Helping students succeed — Through several initiatives, Ontario’s government is ensuring that more students succeed, which is a priority of creating a well-educated workforce and helping every citizen achieve greater lifelong success. Strategies to reduce class sizes in the crucial primary school years, boost students’ reading, writing and mathematical skills, and ensure more young people graduate from secondary school are succeeding:

• The government achieved its class-size target in 2008–09, with more than 90 per cent of kindergarten to Grade 3 classrooms at 20 or fewer students and no classes with more than 23 students. That means more than 540,000 primary students are in classes of 20 or fewer, compared to only 166,000 students five years before. Class sizes at each school for the past five years are available through an online tracker at www.edu.gov.on.ca/eng/cst/.
• In 2002–03, only 54 per cent of Grade 3 and 6 students were achieving the provincial standard (equivalent to a B grade) in reading, writing and math assessments. Students who struggle with these skills often become discouraged and later drop out of school. In 2007–08, the most recent year for which results are available, 65 per cent of Grade 3 and 6 students met the provincial standard in reading, writing and math. This represents an 11 percentage-point increase since 2002–03 and significant progress towards the goal of 75 per cent. The results for each school are available on the website of the Education Quality and Accountability Office, which carries out the tests, at www.eqao.com. Ontario’s students rank strongly against those in other jurisdictions. The province's nine- and ten-year-old students rank among the top in the world in reading, according to the 2006 Progress in International Reading Literacy Study. In addition, the 2007 Pan-Canadian Assessment Program report showed that Ontario’s 13-year-old English-language students scored significantly higher in reading than their peers in other provinces and territories.
• In 2003–04, only 68 per cent of students were completing their high school diploma. Studies show that those students who do not graduate face a future with an increased risk of unemployment and financial and social problems. In response, the government set a graduation target of 85 per cent. In 2007–08, Ontario’s graduation rate increased to 77 per cent. This represents an increase of nine percentage points — or 13,500 more students — compared to 2003–04. Ontario’s strategy also received a positive evaluation from the Canadian Council on Learning in 2008. Its report concluded that, over the past four years, more students were getting the attention and learning options they needed to be successful in school. The report suggests that other jurisdictions could benefit from reviewing Ontario’s high school strategy.

Meeting the economy’s need for skilled workers — A key commitment of the government’s five-point plan is to strengthen the knowledge and skills of Ontario’s labour force so that the province will remain competitive in the global knowledge-based economy. In line with that, it has:

• Launched the Second Career program, which is on track to give 20,000 laid-off workers the help they need to move into new industries through skills training courses, needs-based income supports and career planning services. At the end of the 2008–09 fiscal year, more than 8,000 laid-off workers were involved ― above target for the program’s first year.
• Offered help to more than 82,000 people under the Rapid Re-employment and Training Service, which provides an immediate and appropriate response to large-scale layoffs.
• Helped to achieve an increase of 100,000 in the number of students at colleges and universities in Ontario, up by 25 per cent from 2002–03, with increases in operating grants to colleges and universities of $1.7 billion or almost 63 per cent since 2002–03.
• Improved and enhanced training and apprenticeship supports and facilities to attract interested individuals and build the profile of the skilled trades in Ontario. There are 120,000 apprentices learning a trade today, nearly 60,000 more than in 2002–03.

Ensuring access to clean, affordable energy — Ontario’s government is broadening its commitment to ensuring that people and businesses have access to reliable, clean, affordable energy. In February 2009, it introduced the landmark Green Energy Act to spark investment in wind, solar, water, biomass and biogas energy projects and create up to 50,000 jobs in Ontario in its first three years. The government has already achieved significant progress in making Ontario a leader in clean energy and conservation:

• Ontario has already surpassed, by roughly 300 megawatts, its goal of 2,700 megawatts of signed contracts for new renewable energy by 2010.
• In 2007–08, Ontario achieved its then-current target for energy conservation and is now working towards a new goal of reducing peak demand by a further 1,350 megawatts by 2010 and a total of 6,300 megawatts by 2025.
• Since October 2003, more than 7,100 megawatts of new and refurbished capacity have come online to help replace coal-fired capacity in Ontario’s energy mix and increase renewable energy capacity. Between 2003 and 2008, coal generation fell by close to 40 per cent.
• Progress continues on installing “smart meters” in all homes and small businesses across the province by the end of 2010 to support a time-of-use electricity pricing system, with more than two million meters installed to date.

Providing better access to health care — As a result of increased funding and restructuring efforts, people in Ontario are today waiting much less time for key services, enjoying better access to health care professionals, and benefiting from a more effective system with greater local accountability.

• Wait times are down for targeted health procedures, in many cases by a significant amount. Targeted procedures for lower wait times include cataract surgeries, angiography, angioplasty, knee and hip replacements, CT and MRI scans, and cancer surgeries. Improvements to these procedures have been tracked since August 2005. More recently, wait times for pediatric surgeries and general surgeries have been targeted and successfully reduced as well. Detailed information on wait times by region and medical procedure is regularly updated at www.ontariowaittimes.com.
• The government is also addressing the complex issue of reducing emergency-room wait times by investing in programs to prevent and better manage chronic diseases; creating nurse-led outreach teams to provide residents in long-term care homes with care and interventions to avoid emergency visits; freeing up hospital beds by opening more long-term care beds; and improving capacity and performance in emergency rooms.
• The government is further supporting wellness and disease prevention by creating the Ontario Agency for Health Protection and Promotion, which gives specialized and technical advice and on-the-ground support to front-line health care workers, public health units and government in the areas of infectious disease, infection control and prevention, health promotion, and other elements of public health.
• It has implemented a Smoke-Free Ontario Strategy to prevent young people from starting to smoke and to help smokers to quit. It has also banned the display of tobacco products and smoking in cars in which children are riding.
• Roughly two million Ontarians have chosen to receive their primary health care through the Province’s Family Health Teams, including about 280,000 who did not previously have a family doctor. Family Health Teams enable family doctors, nurses, nurse practitioners and other health professionals to work in partnership, improving access and enhancing the effectiveness of primary health care. Ontario also developed Health Care Connect, an innovative, made-in-Ontario program that helps people without a family health care provider to find one in their community.
• The government is increasing the number of doctors, nurses and nurse practitioners available to help patients. It increased first-year medical school enrolment by 23 per cent from 2003–04 to 2008–09, and in September 2008 funded 852 entry-level undergraduate medical positions across the province’s six medical schools. This includes the Northern Ontario School of Medicine, the first new medical school in Canada in more than 30 years, which had 224 students in September 2008. In May 2009, 100 additional spaces were allocated to medical schools. Combined with the increase of 160 spaces since 2003–04, this will create 260 first-year spaces overall, representing a 38 per cent increase.
• Overall, the government has increased the number of family medicine residency positions by 75 per cent between 2004–05 and 2007–08, leading to 330 more family doctors ready to enter practice as of June 2008.
• To support nurse practitioners, the government funded 163 education seats in 2008–09, a 60 per cent increase from three years earlier. Nurse practitioners are registered nurses with advanced knowledge and decision-making skills in health assessment, diagnosis, therapeutics, health care management, and community development and planning. The increased supply of nurse practitioners will help improve access to primary health care for people in Ontario.
• Through the Nursing Graduate Guarantee Program, more than 5,500 new nursing graduates have been matched to a guaranteed job opportunity to work full time for up to 7.5 months since the program’s inception in 2007. There are about 10,000 more nurses employed in Ontario since 2003. The government has created over 2,300 nursing positions since the fall of 2007.
• With the introduction of Local Health Integration Networks (LHINs), the Ministry of Health and Long-Term Care has assumed a stewardship role focusing on the strategic and overall direction for the province’s health care system. Local Health Integration Networks were established in 2006 and are responsible for hospitals, long-term care homes, community care access centres, community support service agencies, mental health and addictions agencies, and community health centres in their local areas.
• All hospitals are now required to collect and report patient safety measures in a clear, standard manner, with data on a total of eight indicators now provided through a website for patients, health care providers and the public.

Moving people and products efficiently and safely — The transportation sector is an important cornerstone of Ontario’s economic prosperity and high quality of life. Ontario’s export-driven economy relies on this system to move goods and people efficiently and competitively, particularly within the current climate of just-in-time delivery, as well as safely.

• Ontario is getting more people onto public transit by working with its partners to make it a convenient and accessible option. Municipal transit systems serving Ontario’s 15 largest urban centres carried 703 million passengers in 2007. Ridership is expected to increase to 740 million trips in 2009 and 809 million trips by 2012. GO Transit carried 51.6 million passengers in 2007–08. Ridership is expected to increase from 52.8 million in 2009–10 to 57.7 million by 2012–13.
• Projects such as the expanded crossing at the Queenston-Lewiston Bridge in Niagara, the new international truck route in Sault Ste. Marie, and the new high-occupancy vehicle (HOV) lanes on Highways 403 and 404 all helped to improve Ontario’s transportation network and links to its largest trading partner.
• Another top priority is promoting road safety. Ontario was the safest jurisdiction in North America as measured by motor-vehicle collision fatalities, according to the most recent publicly available data. It reported 0.87 fatalities per 10,000 licensed drivers, the lowest rate it has ever achieved.

ACTUAL TO INTERIM RESULTS IN 2009 BUDGET

The Province provided interim estimates of results for 2008–09 in the 2009 Budget, tabled in March of this year. The final deficit of $6.4 billion reported for the year represents an increase of $2.5 billion from the interim estimate of a $3.9 billion deficit, consisting of a reduction of $2.9 billion in estimated revenues, offset somewhat by expenses that were $0.4 billion less than anticipated.

The 2009 Budget interim estimate for revenues was $3.5 billion below the 2008 Budget Plan. The final results for 2008–09 are a further $2.9 billion below the interim estimate due to larger-than-expected revenue impacts of the global financial crisis and economic downturn beginning in the fourth quarter of calendar 2008. In particular, Corporations Tax revenues are $1.9 billion lower than the interim estimate due to extraordinarily higher refunds than expected. Personal Income Tax revenues were also $0.8 billion lower, based on new information from 2008 tax-return processing indicating lower levels of employment and capital gains income than previously estimated. All sources of revenue apart from taxation increased by $0.1 billion from interim.

Final expense was $96.9 billion, $0.4 billion less than expected in the interim results. This reflects more complete information that became available after the interim information was presented in the 2009 Budget.

Comparison of 2008–09 Interim and Actual Results			Table 5
($ Billions)
	2008–09 Interim	2008–09 Actual	Change
Revenue
Taxation	65.4	62.4	(3.0)
Government of Canada	16.6	16.6	–
Income from government business enterprises	3.9	4.0	0.1
Other	7.5	7.5	–
Total Revenue	93.4	90.5	(2.9)
Expense
Programs	88.5	88.3	(0.1)
Interest on debt	8.9	8.6	(0.3)
Total Expense	97.3	96.9	(0.4)
Annual Surplus (Deficit)	(3.9)	(6.4)	(2.5)
Notes: Interim numbers and related variances may not add due to rounding. A reserve of $750 million included in the fiscal plan in the 2008 Budget was used to reduce the size of the deficit.