2014 Ontario Budget
Chapter II: Ontario's Economic Outlook and Fiscal Plan

Highlights

  • Government-projected 2014 real GDP growth: 2.1 per cent.
  • Private-sector average projected 2014 real GDP growth: 2.2 per cent.
  • Government-projected 2015 real GDP growth: 2.5 per cent.
  • Private-sector average projected 2015 real GDP growth: 2.6 per cent.
  • Net new jobs in Ontario since recessionary low in June 2009: 459,500.
  • 2013–14 deficit is projected to be $11.3 billion, an improvement of $0.4 billion compared with the 2013 Budget forecast.
  • Ontario has the lowest program spending per capita and raises the lowest total revenue per capita among Canadian provinces, including funding from federal transfers.
  • The Province is projecting deficits of $12.5 billion in 2014–15, $8.9 billion in 2015–16, and $5.3 billion in 2016–17 — with a return to a balanced budget in 2017–18.
  • Over the medium term, the government will continue to take responsible actions to ensure every dollar spent counts, and manage program expense growth to balance the budget by 2017–18.
  • The Legislature passed the Financial Accountability Officer Act, 2013, to establish a Financial Accountability Officer who will provide independent analysis to Members of Provincial Parliament on the state of the Province’s finances.

Section A: Overview

TABLE 2.1 2014 Budget — Numbers at a Glance
Ontario's Economy: Provincial Finances:
Projected Real GDP Growth, 2014 2.1% 2014–15 Deficit Projection $12.5 billion
Avg. Private-Sector Growth, 2014 2.2% 2014–15 Revenue Plan $118.9 billion
Projected Real GDP Growth, 2015 2.5% 2014–15 Expense Plan $130.4 billion
Avg. Private-Sector Growth, 2015 2.6% 2014–15 Reserve $1.0 billion
Jobs since June 2009 459,500 Deficit-to-GDP
Ratio (2013–14)
1.6%
Increase in Real GDP
(2013 above 2003)
14.9% Accumulated Deficit-to-GDP
Ratio (2003–04)
24.6%
Increase in Real Household Disposable Income (2013 above 2003)1 28.9% Accumulated Deficit-to-GDP
Ratio (2013–14)
25.6%
1 2013 real household disposable income is an Ontario Ministry of Finance estimate.

Ontario’s economy continues to grow at a moderate pace, contributing to new jobs and business opportunities. The global economic environment, however, remains challenging. That is why the government is moving forward with a 10-year plan for the economy focused on strategic investments in people, modern infrastructure, and a dynamic and innovative business climate. These actions will put the province and its people in a position to succeed by helping to spur economic growth and create the new jobs necessary to support eliminating the deficit.

Since the recessionary low in June 2009, 459,500 net new jobs have been created in Ontario. The pace of job creation in Ontario since June 2009 has been stronger than in most developed economies, including the United States, the average for member countries in the Organisation for Economic Co-operation and Development (OECD), and the rest of Canada combined.  

The deficit for 2013–14 is now estimated to be $11.3 billion — a $0.4 billion improvement compared with the 2013 Budget forecast. This marks the fifth year in a row that the Province is reporting a projected deficit lower than forecast.

Ontario’s performance against its fiscal targets to date is the result of a responsible and balanced approach to fiscal management, and the government’s commitment to ensure value for taxpayers’ money by making every dollar count. The government has managed spending in a way that has resulted in lower-than-forecast program expense in each of the last five years. Ontario also has the lowest program spending per capita among Canadian provinces, and raises the lowest total revenue per capita, including funding from federal transfers, while still providing high-quality public services that support the well-being of Ontarians.

While Ontario remains committed to continuing to manage spending amid challenges in the broader economic environment, these conditions mean the government must continue to invest.  

Ontario is not alone in facing these challenges — most other provinces have had to extend their balanced-budget timelines, and the federal government has also seen declining revenue projections. These challenges mean the government must think long term about the choices it makes. Across-the-board cuts at this time would harm Ontario’s economic and fiscal prospects.

Despite a decline in the medium-term outlook for revenue since the 2010 Budget, the government has been taking steps to manage spending growth and remains committed to balancing the budget by 2017–18. The government is balancing the budget in a way that is both fiscally responsible and fair, holding program spending growth to an average annual rate of 1.1 per cent over the next three years while protecting critical investments and public services for all Ontarians.


In the 2013 Ontario Economic Outlook and Fiscal Review, the government made its priority clear — that it will continue to protect investments in jobs, growth and families ahead of short-term targets. As a result, it is now projecting a deficit of $12.5 billion in 2014–15, $8.9 billion in 2015–16, and $5.3 billion in 2016–17, and a return to a balanced budget in 2017–18.

Over the medium term, the government will take deliberate actions to continue to meet or beat these deficit targets. These include responsible management of program spending, maintaining the integrity of provincial revenue, and introducing tax fairness for people and businesses.

Transparency, Financial Management and Fiscal Accountability

Ontario continues to act on opportunities to further strengthen transparency, financial management and fiscal accountability, in support of achieving the Province’s fiscal plan and delivering government programs and services.

Similar to previous years, Ontario has once again received an “A” ranking from the C.D. Howe Institute for its clarity in presentation and explanation of financial results.1 The Province ensures comparable and consistent financial information is used to support financial planning and tracking reflected in its Budgets, Expenditure Estimates, quarterly financial statements and annual results reported in the Public Accounts. This is accomplished through consistent application of accounting policies and reporting structures that aid effective decision-making and ensure transparency and accessibility of the financial results for the public.

Transparency

Environmental Liabilities

The Province currently reports financial liabilities that are based on its environmental obligations resulting from federal legislation. The government plans to enhance its reporting on environmental liabilities in accordance with the Public Sector Accounting Board’s (PSAB) new standard on accounting for contaminated land, which is effective for 2014–15. Under the new standard, the Province’s own legislation must also be considered when identifying liabilities to be reported. The new standard will be reflected in the government’s statement of financial position reported in the Public Accounts of Ontario 2014–2015. The government is considering related legislative changes required to support application of the new standard.

Recent Developments in Public Sector Accounting Standards

The government continues to evaluate the impact of PSAB’s prospective standards for financial instruments and foreign currency, which will be effective as of April 1, 2016. No changes are required for the 2014–15 fiscal year. The Province will work with PSAB to address potential implementation issues.

Financial Management

The government will propose an Interim Appropriation for 2014–15 Act, 2014. If approved by the Legislature, this would provide the interim legal spending authority for anticipated 2014–15 spending, pending finalization of the 2014–15 Supply process. This proposed legislation is required for the government to continue operations until the Legislative Assembly has approved the Expenditure Estimates and a Supply Act is proposed and passed.

Fiscal Accountability

Designated Revenue Reporting

Accountable financial management requires transparent reporting on the Province’s delivery of its financial commitments. For example, the proposed Trillium Trust would dedicate net revenue gains from certain asset sales to finance key infrastructure projects as part of the government’s 10-year plan for the economy, which includes investments in public transit, transportation infrastructure and other priority infrastructure. To ensure accountability for the use of dedicated funds, the government is exploring proposed new reporting mechanisms and associated legislative changes to support these commitments.

Financial Accountability Officer

In order to enhance fiscal accountability and transparency, in September 2013, the Legislature passed the Financial Accountability Officer Act, 2013, to establish a Financial Accountability Officer as an independent officer of the Legislature. Ontario is the first province to introduce this oversight measure. The Financial Accountability Officer will be able to provide independent analysis to all Members of Provincial Parliament about the state of the Province’s finances, including the Ontario Budget, as well as look at trends in the provincial and national economies.

The establishment of a Financial Accountability Officer builds on previous government actions to enhance transparency and accountability, such as the Fiscal Transparency and Accountability Act, 2004.

1 William B.P. Robson and Colin Busby, “Credibility on the (Bottom) Line: The Fiscal Accountability of Canada’s Senior Governments, 2013,” C.D. Howe Institute, (2014).

Chart Descriptions

Chart 2.1: Medium-Term Revenue Outlook Has Declined since the 2010 Budget

This chart shows the decline in the medium-term outlook for Ontario government revenues since the 2010 Budget projection.

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

Before the impact of new revenue measures, the revenue outlook in the 2014 Budget is $2.9 billion below the 2010 Budget projection in 2013–14 and $8.8 billion below by 2016–17.

Return to Chart 2.1

Chart 2.2: Medium-Term Expense Outlook Has Declined since the 2010 Budget

This chart shows the decline in the medium-term outlook for Ontario expense since the 2010 Budget.

In the 2010 Budget, expense was projected to increase from approximately $127 billion in 2010–11 to approximately $140 billion in 2016–17. In the 2014 Budget, expense is projected to increase from $121 billion in 2010–11 to approximately $134 billion in 2016–17. In each year between 2010–11 and 2016–17, the 2014 Budget expense projection is below the 2010 Budget expense projection.

Return to Chart 2.2