2014 Ontario Economic Outlook and Fiscal Review
Chapter III: Fiscal Outlook

Section C: Medium-Term Fiscal Outlook

Ontario's Recovery Plan

The government projects deficits of $12.5 billion in 2014–15, $8.9 billion in 2015–16 and $5.3 billion in 2016–17, unchanged from the forecast outlined in the 2014 Budget.

The medium-term revenue outlook has declined since the 2014 Budget, reflecting a lower forecast for taxation revenue.

Total expense is now projected to be lower than forecast at the time of the 2014 Budget, as a result of lower projected interest on debt expense.

A $1.2 billion annual reserve is maintained in each of 2015–16, 2016–17 and 2017–18 to protect the fiscal outlook against adverse changes in the Province's revenue and expense.

Even in the face of a decline in the revenue outlook, the government is committed to balancing the budget by 2017–18, and will do so in a way that is both fiscally responsible and fair.

TABLE 3.4 Ontario's Recovery Plan
($ Billions)
  Current Outlook Medium-Term Outlook Extended Outlook
  2014–15 2015–16 2016–17 2017–18
Revenue 118.4 124.2 129.0 134.5
Expense        
Programs 119.4 120.1 120.2 119.4
Interest on Debt 10.8 11.8 12.9 13.9
Total Expense 130.2 131.9 133.2 133.3
Reserve 0.7 1.2 1.2 1.2
Surplus/(Deficit) (12.5) (8.9) (5.3)
Note: Numbers may not add due to rounding.

The Province will continue to invest in people's skills and talents; build modern infrastructure and transportation networks; create a supportive and dynamic business climate; and strengthen retirement income security for all Ontarians. This will help grow the economy, protect revenue and create jobs. In addition, the program expense outlook over the medium term is essentially unchanged from the 2014 Budget.

Together, these government priorities and actions to make every dollar count will help support eliminating the deficit and improve the fiscal sustainability of the province.

Medium-Term Revenue Outlook

The medium-term revenue outlook reflects current revenue information and projections for the Ontario economy as outlined in Chapter II: Economic Outlook as well as the estimated impact of government policy measures. Revenue is projected to grow at an annual average rate of 4.4 per cent from 2014–15 to 2016–17.

Key information still to be received, over the remainder of the fiscal year, could have a significant impact on the medium-term outlook. This includes:

  • Final results from 2013 corporate and personal income tax return processing;
  • Entitlement estimates for the Harmonized Sales Tax (HST), which will be provided by the federal government in December 2014;
  • Ongoing monthly receipts for other taxation revenue such as Land Transfer Tax and Employer Health Tax; and
  • Ontario's 2015–16 Equalization entitlement, which the federal government will provide in December 2014.
TABLE 3.5 Summary of Medium-Term Revenue Outlook
($ Billions)
  Projected Outlook
Revenue 2014–15 2015–16 2016–17
2014 Budget 118.9 124.5 129.4
2014 Ontario Economic Outlook and Fiscal Review 118.4 124.2 129.0
Change since the 2014 Budget (0.5) (0.3) (0.3)
Note: Numbers may not add due to rounding.

The change in the medium-term revenue outlook reflects lower Taxation Revenue than projected in the 2014 Budget. The decline in taxation revenue is largely due to the impact of a lower level of revenue in 2013–14, reflecting weaker 2013 results from processing tax returns during 2014. The impact of the lower 2013–14 revenue carries forward over the medium term. A downward revision to Ontario's estimated 2014 HST entitlement, provided by the federal government, also contributes to the lower overall revenue outlook.

The forecast for Government of Canada transfers is unchanged from the 2014 Budget outlook, except for an $8.3 million federal funding increase in 2014–15 for the Targeted Initiative for Older Workers program (see Section B of this chapter). Overall transfers are projected to grow at an average annual rate of 4.7 per cent over the medium term. The increase over the forecast period largely reflects projected increases in the major Government of Canada transfers.

The outlook for Income from Government Business Enterprises is unchanged from the 2014 Budget outlook. Overall revenue from government enterprises is projected to increase at an annual average rate of 4.3 per cent over the outlook.

The forecast for Other Non-Tax Revenue is unchanged from the 2014 Budget outlook and is based on information provided by government ministries and provincial agencies. Other Non-Tax Revenue is projected to decrease by an average annual rate of 4.2 per cent, largely reflecting lower, fiscally neutral power supply contract recoveries, the removal of the Debt Retirement Charge cost from residential users' electricity bills, and lower miscellaneous revenue.

Medium-Term Revenue Outlook Has Declined since the 2010 Budget

Since the 2010 Budget, the medium-term outlook for revenue has declined, reflecting, in part, slower economic growth in a challenging global environment.

Before the impact of 2014 Budget measures, the revenue outlook in the 2014 Ontario Economic Outlook and Fiscal Review is $7.8 billion below the 2010 Budget projection in 2014–15 and $9.1 billion below by 2016–17.

Medium-Term Expense Outlook

Total expense is projected to grow to $133.2 billion by 2016–17 — below the forecast included in the 2014 Budget — due to lower interest on debt expense.

Ontario's medium-term forecast for interest on debt expense is currently forecast to be below the 2014 Budget estimate, primarily as a result of lower-than-forecast interest rates. These savings mitigate the impact of the decline in the medium-term outlook for revenue.

The program expense outlook over the medium term is essentially unchanged from the 2014 Budget.

The government is committed to transforming and modernizing public services to improve outcomes for Ontarians and meet the Province's fiscal commitments. Through Program Review, Renewal and Transformation, a fundamentally new approach to multi-year planning and budgeting, programs will be reviewed through the lenses of relevance, effectiveness, efficiency and sustainability. Program renewal and transformation opportunities will be identified to improve services and outcomes based on measurable results, to ensure that sustained funding goes to initiatives that work.

Fiscal Prudence

As required by the Fiscal Transparency and Accountability Act, 2004, Ontario's fiscal plan incorporates prudence in the form of a reserve to protect the fiscal outlook against adverse changes in the Province's revenue and expense. Consistent with its purpose, the reserve is being reduced by $0.3 billion in 2014–15, to $0.7 billion, to help mitigate the impact of the decline in Ontario's revenue outlook. The government is maintaining the $1.2 billion reserve that was set out in the 2014 Budget in each of 2015–16, 2016–17 and 2017–18.

The fiscal plan also includes contingency funds (both operating and capital) to help mitigate expense risks — particularly in cases where health and safety may be compromised or services to the most vulnerable are jeopardized — that may otherwise negatively impact Ontario's fiscal performance.

Chart 3.1: Medium Term Revenue Outlook Has Declined since the 2010 Budget

This chart is a line graph comparing the medium-term revenue outlooks from the 2010 Budget and the 2014 Ontario Economic Outlook and Fiscal Review.  For a more meaningful comparison, the latter excludes the impact of 2014 Budget revenue initiatives.  

The line shows that the revenue outlook has declined significantly since the 2010 Budget. Before the impact of 2014 Budget measures, the revenue outlook in the 2014 Ontario Economic Outlook and Fiscal Review is $7.8 billion below the 2010 Budget projection in 2014-15 and $9.1 billion below by 2016-17.

Return to Chart 3.1