2013 Ontario Economic Outlook and Fiscal Review

Chapter I: Creating Jobs and Growing the Economy

Section B: Managing Responsibly

Ontario’s Path to Balance

The government is on track to balance the budget by 2017–18 in a fair and responsible way. This will mean new strategic investments to spur growth, create jobs, strengthen services and help families. The world’s recovery from the global recession remains uncertain, and many families are still feeling unsure about their job security and their financial future.

Should global economic conditions falter, causing revenue growth to fall further, the government’s priority will be to continue to protect investments in jobs, growth and families ahead of short-term targets. Stronger growth and new jobs are the surest and fairest path to balancing the budget. These investments will be critical to helping foster the growth necessary to both support Ontario’s families and generate revenues necessary to support eliminating the deficit.

For four years in a row, the government has overachieved on the deficit targets it established after the 2009 global recession based on disciplined actions to reduce spending. In September, the 2012–2013 Public Accounts of Ontario reported that the deficit for 2012–13 was $9.2 billion — $0.6 billion lower than projected at the time of the 2013 Budget. The 2013 Ontario Economic Outlook and Fiscal Review projects that the deficit for 2013–14 will be $11.7 billion, on track with the 2013 Budget forecast and more than $1.0 billion ahead of the deficit projection for 2013–14 outlined in the 2012 Budget.

Ontario continues to face global economic uncertainty, which is holding back economic growth and therefore the outlook for Provincial revenues. In response, the government will drive further savings through an expenditure review; continue to move forward with 60 per cent of the recommendations of the Commission on the Reform of Ontario’s Public Services; and consider other tools, as necessary, to ensure the deficit is eliminated by 2017–18. (See Chapter VI: Taxation for more details.)

An Efficient and Accountable Government

In 2011–12, year-over-year growth in program spending was held to less than one per cent. The 2012–2013 Public Accounts of Ontario reported that total spending and program spending in 2012–13 fell from the previous year for the first time in more than a decade.

As indicated by the Commission on the Reform of Ontario’s Public Services, chaired by Don Drummond in 2012, slowing the rate of growth in program spending through fiscal discipline is essential for eliminating the deficit by 2017–18.

Ontario currently has the lowest program spending per capita among Canadian provinces and ranks the lowest among provinces in terms of public-sector employees per capita. In 2012, the latest year for which data are available, Ontario had 6.5 public-sector employees per 1,000 people, compared to a national average of 9.7 employees per 1,000 people.

The 2013 Budget put in place targeted actions that will continue to control the rate of growth in program spending in a way that is fair and balanced, while also ensuring that key public services continue to be funded. Key actions include:

• Respecting the collective bargaining process. Collective bargaining enhances the ability of responsible employers and bargaining agents to increase productivity, maintain 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. All public-sector partners need to continue to work together to control current and future compensation costs;
• Slowing the growth rate of health care spending — currently 42 per cent of Provincial program spending — to an annual average of two per cent over the medium term. The government will continue to move forward with its Action Plan for Health Care to transform the health care system and provide better value for money;
• Driving benefit transformation initiatives aimed at improving access and effectiveness for Ontarians and achieving long-term administrative cost savings and program efficiencies; and
• Reviewing executive compensation for the broader public sector.

Moving Forward on Recommendations of the Commission on the Reform of Ontario’s Public Services

The Province continues to move forward with 60 per cent of the recommendations of the Commission on the Reform of Ontario’s Public Services. The Commission provided valuable advice to the government on how to deliver the most effective and efficient public services possible and achieve a sustainable fiscal balance. Recent actions to implement recommendations include:

• Ministry of Health and Long-Term Care:
  • Continuing the 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 51 per cent in 2013–14.
  • Maximizing opportunities to use highly trained and skilled nurse practitioners, with the aim of efficiency while maintaining excellent care, by continuing to increase investments in home care and community services. These investments will support Ontario’s 26 Nurse Practitioner-Led Clinics. Nurse Practitioner-Led Clinics are a made-in-Ontario initiative to make it easier and faster for families to access primary care in their local community. At full capacity, these clinics are expected to serve more than 40,000 patients across the province.
  • Expanding access to publicly funded, clinic-based physiotherapy that will provide more than 200,000 seniors and patients with improved access to high-quality physiotherapy, exercise and falls prevention classes.
  • Expanding the scope of practice for pharmacists to include administering the flu shot, prescribing medication to help people quit smoking, and demonstrating how to use an asthma inhaler or inject insulin.
• Ministry of Health and Long-Term Care, Ministry of Children and Youth Services:
  • Continuing to implement a series of recommendations by the Healthy Kids Panel to help start all kids on the path to healthier lives and healthy communities. The Province has been moving forward on the Panel’s recommendations since the 2013 Budget by:
    • providing enhanced breastfeeding support to new mothers who require support;
    • committing to introduce legislation after consulting with the food industry and health care sector to help parents and their children make healthier choices by putting calories on menus at large chain restaurants;
    • expanding the Student Nutrition Program by delivering more nutritious meals and snacks to children and youth in elementary schools, secondary schools and community agencies across Ontario; and
    • expanding Ontario’s After School Program to provide an additional 650 children and youth with the opportunity to get involved in programs that promote sport, active living and healthy lifestyles.
• Ministry of Training, Colleges and Universities:
  • Addressing the oversupply of teachers in Ontario as part of the changes to the teacher education program announced in June. The enhanced program will extend learning time from two semesters to four and increase classroom placements from a minimum of 40 days to a minimum of 80 days, starting in September 2015. In addition to expanding the length of teacher’s college, admissions will be reduced by 50 per cent.
  • Establishing multi-year mandate agreements with universities and colleges that provide more differentiation and minimize duplication. The Ministry of Training, Colleges and Universities recently released a draft Differentiation Policy Framework.
• Ministry of Finance:
  • Phasing down the Ontario Municipal Partnership Fund (OMPF) to $500 million by 2016. The overall support to municipalities continues to increase, with provincial uploads more than offsetting the reduction to the program.
  • Establishing a Business Support Programs Review Panel to review and evaluate Ontario’s business support programs including tax credits.
• ServiceOntario:
  • Directing clients to more convenient and less expensive channels. This development allows Ontarians to access more government services online, thereby improving access while making greater use of ServiceOntario’s capabilities. Ontario has become the first province in Canada to offer online driver’s licence renewal.
• Ministry of Community and Social Services:
  • Undertaking the initial steps to implement recommendations proposed by the Commission for the Review of Social Assistance in Ontario to remove barriers and increase opportunities to participate in the workforce. In September 2013, Ontario implemented a number of reform measures, including increasing liquid asset levels and thereby allowing single Ontario Works clients to retain up to $2,500 in assets, like cash and bank accounts, without affecting their eligibility for the program.
• Ministry of Children and Youth Services:
  • Continuing to transform the child welfare sector with the introduction in April 2013 of a new funding model and a new approach to accountability that will ultimately include measurement and reporting on outcomes for children and youth.
  • Providing 800 more children and youth in rural, remote and underserved communities with access to mental health consultations through videoconferencing starting this fall.

Building on previous initiatives to be more efficient and accountable, the government is going to drive further savings through an expenditure review.

The review will consider additional proposals recommended by the Commission while also pursuing opportunities to accelerate the implementation of others.

Public-Sector Compensation

With over half of all government spending going to salaries and benefits, managing public-sector compensation costs is an important part of the plan to eliminate the deficit and protect the front-line government services that Ontario families rely on. As stated in the 2013 Budget, compensation costs must be addressed within Ontario’s existing fiscal framework.

The government continues to respect the collective bargaining process. Collective bargaining enhances the ability of responsible employers and bargaining agents to increase productivity, maintain 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. All public-sector partners need to continue to work together to control current and future compensation costs.

Collective bargaining has achieved results. Ontario public-sector settlements are below the average of those in the private sector, municipal sector and federal public sector.

Executive and Members of Provincial Parliament Compensation

The government has frozen salaries for designated executives at hospitals, universities, colleges, school boards and provincially owned electricity companies.

All aspects of compensation plans are frozen, and base salaries cannot be increased. In addition, the overall performance pay envelopes at designated employers are frozen. These restraint measures will be in place until the deficit is eliminated. Members of Provincial Parliament (MPPs) will also continue to see their wages frozen — bringing the total length of the current freeze to five years.

The government is modernizing compensation structures for senior executives in the broader public sector. This is being informed by sector-specific compensation studies with the objective of establishing modern compensation structures, including the consideration of appropriate cross-sector benchmarks, salary grids and hard caps, to hold executives accountable for results and achievement of government and board priorities.

Current compensation practices for public appointees are also being reviewed, including special advisers and appointees to classified agencies and short-term bodies as per the Government Appointees Directive.

Health Care System Changes

Since launching its Action Plan for Health Care, the government has made significant progress in transforming health care services into a more sustainable, high-quality system to manage the growth in health care spending. While ensuring Ontarians get better value for their health dollars, Ontario’s strategy is making health care options available closer to home, enhancing supports for seniors and promoting healthy lifestyles.

Funding for the health care system cannot continue to grow at past rates. The Province is committed to managing the growth in health care funding to an annual average of two per cent over the medium term as it continues to improve integration, offer new service delivery, implement new funding models and offer more services for complex care patients in the community setting.

While the challenge ahead is significant, substantial progress has already been made, including:

• Ongoing implementation of a transparent, patient-centred funding model for hospitals to encourage efficient delivery of services;
• Continuing to direct funding to where evidence shows the greatest value and quality improvement;
• Strengthening the coordination of care for high-needs patients — Ontario has to date created 37 Health Links, a new model that encourages greater collaboration among health care providers and could reduce unnecessary hospital visits and readmissions for patients with complex needs;
• Funding two new midwife-led birth centres and shifting routine procedures traditionally conducted in hospitals to specialized, not-for-profit community clinics, starting with vision care. These clinics can serve more patients more quickly and at a lower cost, while achieving excellent patient outcomes;
• Continuing to implement key recommendations from Dr. Samir Sinha’s report, “Living Longer, Living Well,” by increasing investment in home and community care services to better meet patients’ needs and moving care out of the much more costly hospital setting. The government is building on this commitment by increasing overall funding for home and community care services by an average of over five per cent annually over the next three years;
• Negotiating and implementing a new Physician Services Agreement with the Ontario Medical Association. The agreement, which runs to March 2014, represents a cumulative net savings over two years of approximately $295 million in physician services savings and $100 million in broader health system savings to help manage health spending. It also allows for reinvestments into better care for Ontarians, including support for e-consults among patients, doctors and specialists;
• Investing in 30,000 more house calls by primary care providers; and
• Funding three million more personal support worker hours over the next three years to assist seniors with daily activities and staying healthy at home. This investment will improve the quality of life for 90,000 more seniors.

School Board Efficiencies and Modernization

In the 2013 Budget, the Province announced the introduction of an efficiencies and modernization savings strategy that aims to achieve long-term sustainability in school board funding.

The Ministry of Education is currently engaging education stakeholders and working with school boards on this strategy.

The Ministry has conducted operational reviews of all 72 school boards across the province over several years, beginning in 2007. The goal of the operational reviews was to enhance management capacity within school boards, by encouraging good stewardship of public resources and by leveraging and sharing best practices.

Managing the Size of the Ontario Public Service

The government recognizes the important work of the Ontario Public Service (OPS) in delivering vital services to citizens and propelling the province forward.

The 2009 Budget announced measures to make the OPS more efficient by reducing its size by five per cent or approximately 3,400 full-time equivalent staff over three years through attrition and other measures. The Province achieved the five per cent reduction by March 31, 2012.

In the 2011 Budget, the government expanded on this target by committing to a further reduction of 1,500 full-time equivalent staff by March 31, 2014. It is well on its way to meeting that commitment.

Improving Accountability

Agency Accountability

The government has strengthened the Agency Establishment and Accountability Directive (AEAD) by introducing a risk-based approach to the oversight of classified agencies. The government has also acted on the recommendations of the Report of the Special Advisor on Agencies to further enhance the governance of classified agencies.

The enhanced AEAD requires ministries to undertake annual risk assessment evaluations for classified agencies. In addition, ministries will undertake mandate reviews for specific operational agencies to assess their effectiveness. Over the next several years, ministries will undertake mandate reviews of all classified agencies with a view to support the achievement of government priorities. The government is also strengthening board governance training for appointees to further enhance accountability.

To demonstrate the government’s commitment, it will begin to benchmark government enterprises such as the LCBO, Ontario Lottery and Gaming Corporation, Ontario Power Generation, Hydro One and other agencies. The responsible ministries will report annually on the performance of these enterprises.

Financial Accountability Officer

The government recognizes the need for fiscal transparency and accountability, to ensure that the legislature and Ontarians have the financial information necessary to understand the state of the Province’s finances. The legislation to establish the Financial Accountability Officer received Royal Assent in September, making Ontario the first province in Canada to establish such an officer. The Financial Accountability Officer Act, 2013, outlines that the mandate of the Officer will be to:

• Provide independent analysis to all MPPs about the state of the Province’s finances, including the Ontario Budget, as well as look at trends in the provincial and national economies; and
• At the request of a legislative committee or an MPP, provide other types of research, including reviewing and estimating the financial costs or benefits to the Province of any proposal that falls under the jurisdiction of the legislature, such as any public bill or proposal brought forward by members.

Balanced Choices

An expenditure review will find greater efficiencies in support of the government’s plan to control spending. This will help inform the government on the path to balance, while transforming public services to increase efficiencies and improve outcomes.

The government will also look to employ other tools, as necessary, to ensure the deficit is eliminated by 2017–18, while avoiding across-the-board cuts that could jeopardize vital public services or reckless tax increases that would hurt job creation.