2016 Ontario Economic Outlook and Fiscal Review
Chapter II: A Balanced Path to a Balanced Budget

Section B: Transforming Government and Managing Costs

Ontarians expect the government to deliver services in a modern and efficient manner. By collaborating across ministries, the Province is taking a coordinated approach to ensuring that programs are effective, sustainable and meeting the needs of Ontarians. This approach is improving how programs are delivered and identifying how resources can be reallocated to priority areas, such as health care and education. Transforming services and managing compensation in a prudent manner is part of the government’s ongoing plan to achieve a balanced budget.

Program Review, Renewal and Transformation

Program Review, Renewal and Transformation (PRRT) is Ontario’s ongoing fiscal planning and expenditure management approach. Through cross-ministry collaboration, the government is taking focused action on major transformation and efficiency initiatives that will improve outcomes for Ontarians, ensure programs are effective and sustainable, and help free up resources to reinvest in key priorities, such as health care and education.

Program Review, Renewal and Transformation focuses on evidence-based decision-making to improve how planned outcomes are identified and achieved across government. This means redesigning policies to support greater efficiency and cooperation within government, modernizing program delivery, and changing or ending programs that no longer meet people’s needs.

Program Effectiveness and Sustainability

Improved, Better-Targeted Postsecondary Student Financial Assistance

Today, more Ontario students are graduating from postsecondary programs than ever before, but some youth hesitate to aspire to a college or university education because they worry about tuition and other costs, or graduating with debt from student loans. Beginning in September 2017, the Ontario Student Grant (OSG) will help the Ontario Student Assistance Program (OSAP) empower more students to seek an advanced education based on their abilities and potential, not their family’s income. For more details on the new OSAP program, see Chapter I, Section C: Investing in People’s Talents and Skills.

The tuition and education tax credits will be discontinued. All of the additional revenue from eliminating these tax credits will be reinvested to support the new OSG or other postsecondary, education, training and youth job programs. Grants are more effective than tax credits at targeting financial support to students with the greatest need and providing support upfront.

Tax Expenditures

As of January 1, 2017, the government is ending the Healthy Homes Renovation Tax Credit and Children’s Activity Tax Credit because they do not effectively achieve desired outcomes and overlap with support provided through other provincial programs.

Government Modernization

Digital Government

Ontario is fundamentally rethinking how it designs and delivers public services. Work is well underway on developing a Digital Government Action Plan that will unveil a vision for transforming government services online so that people can connect anytime, anywhere, on any device. The plan will build on public consultations and dialogue, and will serve as a public road map for Ontario’s digital transformation. As part of this transformation, in 2017, the Province will open a new digital outpost at Communitech in Kitchener, enabling government access to non-traditional approaches to service delivery and high-performing digital talent.

In alignment with its digital vision, the Province remains committed to delivering more tax- and benefit-related services electronically, to ensure greater access. Since the 2016 Budget, the government has made progress on developing an electronic service delivery model and introduced key initiatives, including expanding the availability of direct deposit so more individuals and businesses can receive their tax rebates, refunds and payments faster. Implementation will begin in December and continue through to summer 2017.

Modernizing Information and Information Technology

In the 2016 Budget, Ontario announced that it would improve information and information technology (IT) productivity and cost efficiency to achieve $100 million in annual savings by 2020. The government has already exceeded its 2016–17 savings target by improving the management of IT applications and infrastructure, collaborating with the broader public sector (BPS) and working with software vendors to achieve reductions in contract costs.

Initial steps have also been taken to improve IT productivity and achieve planned 2017–18 savings. These include creating a single Ontario Public Service (OPS) enterprise service management group to improve internal IT service delivery, and better managing common contracts to reduce the cost of IT software and services. The government is also continuing to reduce its reliance on fee-for-service resources, with plans underway to reduce the use of external consultants, resulting in an increase of 96 permanent OPS IT positions. This is expected to achieve $4 million in annual savings by 2018–19.

Behavioural Insights Unit

Following the 2015 announcement of the creation of a new Centre of Excellence for Evidence-Based Decision Making, Ontario continues to build its capacity to assess how programs are performing, using evidence to inform choices and lead change in critical public services. Increasingly, the government is using evidence to select, fund and operate public programs more strategically. Defining outcomes and monitoring performance are essential to transforming and modernizing government processes.

At the same time, Ontario announced the creation of the Behavioural Insights Unit (BIU) to assess programs and offer low-cost ways to improve them. Applying a behavioural lens to policies and programs will create more efficient processes, improve outcomes and deliver better services to Ontarians.

The BIU has established relationships with key partners and launched several pilot projects designed to test the impact of behavioural science insights to improve outcomes for Ontarians.

The BIU will continue to work with its pilot partners, including the Poverty Reduction Strategy Office, Employment and Social Development Canada, Cancer Care Ontario and Ontario Ministry of Finance, to design and implement policies and programs that are more effective, efficient and human-centric.

Transfer Payment Administration Modernization

The Province is simplifying how transfer payments are managed to support a more modern, efficient and effective government. These changes will simplify processes for both transfer payment recipients and government staff, allowing them to spend less time on administration. As a first step, this fall, the Province is implementing a “one-window” common registration system that will help transfer payment recipients easily submit and update information online.

Managing Compensation

The 2016 Budget reaffirmed the government’s commitment to balancing the budget by 2017–18 and confirmed that compensation costs remain a key element of achieving this goal.

The public service plays an important part in supporting the delivery of the government’s commitments and key priorities. As such, it is necessary to recognize its role through a consistent and coordinated approach to compensation that fosters a positive relationship between the Province and its public-sector partners. To this end, the government will continue to provide effective and affordable public services, while recognizing the need for fair compensation. A strong labour relations framework will provide stability, improve the quality of public services that Ontarians rely on and support the government’s transformational agenda.

The government is committed to working with public-sector bargaining agents to negotiate fair collective agreements that consider recent macroeconomic and labour market trends. Moving forward, the Province expects current modest public-sector wage trends to continue, with outcomes that are consistent with the fiscal plan.

Since July 2012, public-sector negotiated agreements have included average annual negotiated wage increases that are lower than those in the private sector. Specifically, the Ontario provincial public-sector negotiated wage increases in which the government has been directly involved have been significantly lower than in all other sectors.

TABLE 2.1
Average Annual Negotiated Wage Increase in Ontario
Sectors Per Cent Increase
(July 2012 to September 2016)
Provincial Public Sector 0.6
Municipal Public Sector 1.7
Federal Public Sector 1.7
Private Sector 1.9
Sources: Ontario Treasury Board Secretariat and Ontario Ministry of Labour.

The 2016 Budget highlighted the collective agreements that had been reached with the Ontario Public Service Employees Union (OPSEU), which applied to all OPS members. Since then, the Province has also reached an agreement with the Professional Engineers Government of Ontario. The Province also recently received an interest arbitration award for the Ontario Provincial Police Association, which provides outcomes below police-sector norms.

Since the 2016 Budget, a number of government agencies, including the Municipal Property Assessment Corporation and Workplace Safety and Insurance Board, have also negotiated agreements consistent with the Province’s fiscal framework.

Going forward, emphasis will be placed on a collective bargaining process that supports transformational and modernization priorities and recognizes employees’ needs. Managing compensation in a fiscally prudent manner, together with promoting service transformation, will help the government make progress on its commitment to a balanced budget by 2017–18, and continue to deliver high-quality public services that are efficient, effective and sustainable.

Accountability and Transparency

The government continues to demonstrate its strong commitment to fully transparent financial reporting, which is a key element to delivering on accountability for the use of public funds.

Pensions Accounting

In preparing the Public Accounts of Ontario 2015–2016, the Province’s professional accounting staff and the Auditor General’s Office engaged in discussions about the appropriate interpretation of public-sector accounting standards in relation to pension accounting for jointly sponsored pension plans. The Province’s interpretation of the standards had been applied consistently since they were first implemented 15 years ago.

The government adopted the Auditor General’s accounting interpretation for the treatment of net pension assets for 2015–16 through a time-limited regulatory amendment (the “Pension Adjustment”).

The impact of the change resulted in an additional $10.7 billion being added to the net debt and accumulated deficit and an increase of $1.5 billion to the annual deficit for 2015–16.

Consistent with the accounting treatment adopted in the Public Accounts of Ontario 2015–2016, the medium-term fiscal outlook provided in this document also reflects a cautious approach to forecasting the projected Pension Adjustment in each year. This cautious approach to forecasting the Pension Adjustment results in an estimated potential impact of $2.2 billion in 2016–17, $2.8 billion in 2017–18 and $3.7 billion in 2018–19.

The government has established a Pension Asset Expert Advisory Panel to assess the interpretation of public-sector accounting standards as related to Ontario’s pension plans. The panel will also provide advice on how to value pension assets reported on the Province’s books, taking into account future decisions that might be made by the plans’ sponsors. Specifically, the panel will help to inform the amount of net pension assets that should be reflected on the Province’s financial statements if there is concurrence that the asset should be recognized. A net pension asset arises when the government’s total contributions to a plan, including interest earned, are greater than the pension expense recognized since the start of the plan.

The Panel’s recommendations will help inform the development of the 2017 Budget and the Province’s future accounting treatment for net pension assets.