2015 Ontario Budget
Chapter II: Ontario’s Economic Outlook and Fiscal Plan

Section C: 2014–15 Interim Fiscal Performance

The 2014 Budget outlined a plan for 2014–15 that included investing in key priorities while managing responsibly and unlocking the value of the Province’s assets. The 2015 Budget confirms that the government is making real progress.

Ontario’s deficit for 2014–15 is now projected to be $10.9 billion — a $1.6 billion improvement compared to the 2014 Budget forecast. The government’s strong performance against its deficit target is the result of sound fiscal management and a relentless focus on finding smarter and better ways to deliver services.

Table 2.2 2014–15 In-Year Fiscal Performance
($ Millions)
  Budget Plan Interim In-Year Change
Revenue      
Taxation Revenue 83,365 82,654 (711)
Government of Canada 21,882 21,713 (169)
Income from Government Business Enterprises 5,026 5,311 285
Other Non-Tax Revenue 8,598 8,839 241
Total Revenue 118,871 118,517 (354)
Expense      
Programs 119,366 118,775 (591)
Interest on Debt 11,010 10,675 (335)
Total Expense 130,376 129,450 (926)
Reserve 1,000 (1,000)
Surplus/(Deficit) (12,505) (10,933) 1,572
Note: Numbers may not add due to rounding.

Total revenue is projected to be $354 million below the 2014 Budget Plan due to lower Taxation Revenue and Government of Canada transfers. This is partially offset by higher net Income from Government Business Enterprises (GBEs) and higher Other Non-Tax Revenue.

Program expense: all expenses except interest on debt.

Ontario’s program expense is projected to be $591 million lower than outlined in the 2014 Budget, the sixth year in a row that spending is expected to be lower than forecast. This success is due to an ongoing focus on managing growth in spending and working to achieve the best possible value for every dollar spent. In fact, over the past four years, the Province has managed to hold average annual growth in program spending to 1.5 per cent, below CPI inflation, without cutting services that people rely on.

Total expense in 2014–15 is projected to be $926 million lower than forecast in the 2014 Budget. This includes the impact of a lower interest on debt expense projection, resulting primarily from lower-than-forecast interest rates and a one-time gain from the sale of asset-backed commercial paper that was written down in prior fiscal years.

The fiscal plan outlined in the 2014 Budget included a $1.0 billion reserve to protect the fiscal outlook against adverse changes in the Province’s revenue and expense forecasts. This prudence helped mitigate the impact of the projected revenue decline on the Province’s fiscal performance.

Given the preliminary nature of these estimates, the interim forecast is subject to change as actual Provincial revenue and expense are finalized in the Public Accounts of Ontario 2014–2015 this coming summer.

In-Year Revenue Performance

Total revenue in 2014–15 is estimated to be $118,517 million. This is $354 million, or 0.3 per cent, below the amount projected in the 2014 Budget. The decrease is largely due to weaker Taxation Revenue in 2014–15, including adjustments with respect to prior tax years, and lower-than-expected Government of Canada transfers. These lower revenue sources are partially offset by higher Income from GBEs and higher Other Non-Tax Revenue.

TABLE 2.3 Summary of Revenue Changes since the 2014 Budget
($ Millions)
    Interim 2014–15
Taxation Revenue    
Sales Tax (197)  
Land Transfer Tax 154  
Personal Income Tax (144)  
Employer Health Tax (121)  
Corporations Tax (106)  
All Other Taxes (297)  
    (711)
Government of Canada (169)  
    (169)
Income from Government Business Enterprises    
Ontario Power Generation Inc./Hydro One Inc. 371  
Ontario Lottery and Gaming Corporation (118)  
Liquor Control Board of Ontario 32  
    285
Other Non-Tax Revenue 241  
    241
Total Revenue Changes since the 2014 Budget   (354)
Note: Numbers may not add due to rounding.

Revenue Changes

Highlights of key 2014–15 revenue changes from the 2014 Budget forecast are as follows:

  • Sales Tax revenues are estimated to be $197 million lower, largely reflecting one-time adjustments to estimates of Ontario’s Harmonized Sales Tax entitlements for 2012 and 2013.
  • Land Transfer Tax revenues are estimated to be $154 million higher due to continued strength in the Ontario housing market.
  • Personal Income Tax revenues are estimated to be $144 million lower, largely because of lower-than-expected tax assessments for 2013 and lower growth in wages and salaries.1
  • Employer Health Tax revenues are estimated to be $121 million lower, reflecting lower growth in wages and salaries.
  • Corporations Tax revenues are estimated to be $106 million lower, mainly due to one-time reductions in tax assessments in respect of years prior to 2013, partially offset by the impact of stronger growth in net operating surplus of corporations in 2014.
  • All Other Tax revenues combined are estimated to be $297 million lower, mainly due to lower payments in lieu of taxes from electricity-sector companies and lower Tobacco Tax revenue.
  • Government of Canada transfers are estimated to be $169 million lower, mainly due to lower infrastructure transfers as a result of revised timelines in the Building Canada Fund and lower transfers to consolidated Ontario government agencies. These reductions are largely offset by corresponding lower spending.
  • The combined net incomes of Ontario Power Generation Inc. (OPG) and Hydro One Inc. (Hydro One) are estimated to be $371 million higher than the 2014 Budget forecast, mainly reflecting lower operating costs, better financial market performance of OPG’s nuclear funds, and higher Hydro One transmission revenue.
  • Net income from the Liquor Control Board of Ontario is projected to be slightly higher, reflecting stronger sales, while net income from the Ontario Lottery and Gaming Corporation is projected to be lower, reflecting lower-than-anticipated sales, primarily in the lottery business.
  • Other Non-Tax Revenue is projected to be $241 million higher, mainly reflecting $200 million higher-than-projected revenue on the sale of the Province’s shares of General Motors Company, as well as higher recoveries of prior-year expenditures by government ministries.

In-Year Expense Performance

Total expense in 2014–15 is currently projected to be $926 million lower than the 2014 Budget forecast. The revised projection is primarily the result of the government’s ongoing efforts to make responsible choices and lower-than-projected interest on debt expense.

For 2014–15, 14 out of 24 ministries are projected to spend below their total expense allocation.

The 2014 Budget included a $1.1 billion year-end savings target in addition to a $250 million program review savings target. The government has once again overachieved on its savings targets by taking action to produce results. The government is on track to exceed the year-end savings target by more than 50 per cent.

TABLE 2.4 Summary of Expense Changes since the 2014 Budget
($ Millions)
  Interim 2014–15
Savings Targets Included in the 2014 Budget  
Year-End Savings Target 1,100
Program Review Savings Target 250
Total Savings Targets Included in the 2014 Budget 1,350
Increase/(Decrease) since the 2014 Budget1  
Health Sector 93
Education Sector2 (248)
Postsecondary and Training Sector (85)
Children's and Social Services Sector (243)
Justice Sector 38
Other Programs (1,496)
Total Increase/(Decrease) since the 2014 Budget (1,941)
Net Program Expense Increase/(Decrease) after Applying Savings to Meet Total Savings Targets Included in the 2014 Budget (591)
Interest on Debt (335)
Total Expense Changes since the 2014 Budget (926)
1 Expense change by sector, restated for fiscally neutral transfers of programs between sectors.
2 Excludes Teachers' Pension Plan. Teachers' Pension Plan expense is included in Other Programs.
Note: Numbers may not add due to rounding.

Expense Changes

Key expense changes since the 2014 Budget include the following:

  • Health sector expense is projected to increase by $93 million, due to additional demand for physician services, new cancer medications, and increased utilization in drug programs.
  • Education sector expense is projected to decrease by $248 million, primarily due to lower-than-expected school board expense and savings in ministry administration. School board expense savings are mainly due to lower-than-projected student enrolment and lower-than-expected spending on school operating costs.
  • Postsecondary and training sector expense is projected to decrease by $85 million, mainly due to lower-than-forecast enrolment in postsecondary institutions and lower-than-projected spending on employment and training programs due to improving job opportunities, offset by higher expense on tax credits to employers to support training.
  • Children’s and social services sector expense is projected to decrease by $243 million, due in part to lower-than-expected take-up of low-income benefits such as Ontario Works and the Ontario Child Benefit, reflecting improvements in the economy.
  • Justice sector expense is expected to increase by $38 million, primarily due to capital repair and rehabilitation upgrades to facilities across the province to address health and safety issues, additional programming and training requirements at correctional facilities, and settlements under the Proceedings Against the Crown Act.
  • Other programs expense is projected to decrease by $1,496 million, due to implementation delays related to the Building Canada Fund; lower demand in agricultural Business Risk Management Programs; continued restraint in collective bargaining that has resulted in savings in benefits and entitlements; and a variety of administrative savings across government such as reduced spending on information technology and lower fees paid to the Canada Revenue Agency for the administration of the Ontario Trillium Benefit.

Interest on debt expense is projected to be $335 million lower than forecast in the 2014 Budget, mainly resulting from lower‐than‐forecast interest rates and a one‐time gain from the sale of asset‐backed commercial paper that was written down in prior fiscal years.

Achieving the 2014–15 Savings Target

The government has consistently demonstrated that it can meet its savings targets. For 2014–15, a $250 million program review savings target was met through a number of initiatives that identified efficiencies, lowered costs or reduced administrative overhead without impacting front-line services.

Achieving the 2014–15 Program Review Savings Target

The government met its $250 million program review savings target through initiatives such as:

  • Negotiating lower prices for goods and services, achieving savings of approximately $40 million through lower contract costs for vaccines and telehealth services, as well as approximately $7 million in savings from contracts related to government cellular phone plans and 1-800 lines;
  • Achieving approximately $15 million in annual savings in information technology, through internal efficiencies such as data centre, desktop and service management operations;
  • Modernizing the delivery of natural resources management programs, achieving savings of $15 million in 2014–15 as a result of streamlining program delivery, automating business processes and realigning programs to focus on core priorities;
  • Restraining compensation growth in line with the government’s “net zero” policy, including an agreement with the Association of Management, Administrative and Professional Crown Employees of Ontario (AMAPCEO), saving approximately $45 million in 2014–15 through changes to benefits and entitlements, while providing modest salary increases (see Chapter II, Section B: Ontario’s Plan to Eliminate the Deficit for more details); and
  • Achieving approximately $150 million in savings through operational and administrative efficiencies across government, including through a reduction in the government’s office footprint and prudent management of discretionary costs, such as supplies and travel.

1 Wages and salaries account for about 85 per cent of employee compensation reported in Statistics Canada’s Provincial Economic Accounts. The remainder is accounted for by employers’ social contributions.