Chapter I, Section A: Restoring Trust, Transparency and Accountability

Introduction

The Province faces significant financial challenges in the years ahead, not least of which is addressing the significant deficit and high levels of debt it inherited from the previous government.

For 13 out of the last 15 years, the previous government ran a deficit, spending more money than it took in through revenues which were inflated by several non-recurring or one-time factors in 2017–18 and in prior years. During the previous government’s mandate, Provincial net debt more than doubled and net debt-to-gross domestic product (GDP) grew from 27.5 per cent to 40.8 per cent. As a result, interest payments on debt are now the fourth largest line item in Ontario’s budget, after health care, education and social services — threatening to crowd out the government’s ability to adequately fund important services people use every day.

To determine the state of the Province’s finances, upon taking office, the Government for the People took immediate action to restore the public’s confidence in Ontario’s books. It established an Independent Financial Commission of Inquiry (Commission) under the Public Inquiries Act, 2009. The Commission was mandated to look into the previous government’s accounting practices and provide advice on the Province’s financial position going forward.

The government also engaged EY Canada (Ernst & Young) to undertake a detailed, independent line-by-line review of government spending over the last 15 years, to identify ways to make programs more efficient and serve citizens better. Together, the reports from the Commission and EY Canada provide a clear picture of the state of Ontario’s finances and a roadmap to making positive changes, enabling the government to work better for its citizens.

In addition, a Select Committee on Financial Transparency of the Ontario Legislature is currently reviewing the accounting practices that were identified by the Commission. The government looks forward to reviewing and acting on the Select Committee’s recommendations.

The government has already undertaken a number of actions to drive efficiencies and ensure value for taxpayer dollars spent. These actions include, introducing a freeze on discretionary spending, including travel and meal expenses; reining in Hydro One executive compensation through the Hydro One Accountability Act, 2018; updating existing government programs, for example, by providing more choice to families through changes to child care programming; and removing underutilized telephone landlines and fax lines from some government offices.

With this 2018 Ontario Economic Outlook and Fiscal Review, the Government for the People defines a new, responsible approach to the management of public finances. The government is demonstrating that its actions are achieving results in the form of savings and a reduction in the deficit inherited from the previous administration, now projected at $14.5 billion, $0.5 billion less than the $15 billion reported by the Commission 11 weeks ago. The government has accomplished this while providing almost $2.7 billion in planned tax relief to families and businesses this year.

Independent Financial Commission of Inquiry

On July 17, 2018, the government took action to restore the public’s confidence in Ontario’s books. The Independent Financial Commission of Inquiry (Commission) was created to look into the Province’s past spending and accounting practices. The Commission was chaired by former Premier of British Columbia, the Honourable Gordon Campbell, and supported by former federal Deputy Minister of Finance, Michael Horgan, and Dr. Al Rosen, founder of Rosen & Associates Limited, one of Canada’s leading investigative accounting firms.

Photo of Queens Park Legislative Building with text: Restoring trust and accountability in government

The Commission was given broad, discretionary powers and complete independence to do its work, as set out under the province’s Public Inquiries Act, 2009. The legislation is a robust tool to independently uncover and assess questionable practices or situations. The Commission’s mandate was to perform a retrospective assessment of the previous government’s accounting practices and review, assess and provide an opinion on Ontario’s actual budgetary position compared to what was reported in the 2018 Budget.

The Commission delivered its final report to the Minister of Finance and Attorney General on August 30, 2018, and the report was made public, in its entirety, on September 21, 2018.

The report’s recommendations are intended to provide certainty and enhance transparency in the spending and accounting practices used for Ontario’s public finances.

The Commission’s findings reaffirm the position of the Auditor General of Ontario (the Auditor General) that the previous government’s 2018 Budget numbers were “not a reasonable presentation of Ontario’s finances.”1 With the findings of the Commission, the Public Accounts of Ontario 2017–2018 show that Ontario ran a $3.7 billion deficit in 2017–18,compared to the balanced budget projected in the previous government’s 2017 Budget. In addition, the Auditor General provided a clean audit opinion on the Public Accounts of Ontario 2017–2018 for the first time in three years.

The Commission’s report estimated that the deficit inherited from the previous government for 2018–19 is $15 billion. See Chapter III: Ontario’s Fiscal Plan and Outlook for more details on the Commission’s projections.

The government is committed to restoring accountability and trust in Ontario’s public finances. To this end, it has accepted the Commission’s recommendations, including working to restore a constructive and professional relationship with the Auditor General in a manner that respects the Auditor General’s legislated independence. The Commission’s budgetary baseline for 2018–19 serves as a starting point for the government’s own forward-looking fiscal policy. The Commission’s advice will inform the development of the 2019 Budget plan, as will the results of the external line-by-line review of government spending.

The Current Fiscal Environment

The government has inherited a challenging fiscal situation from the previous government. Ontario currently has the highest subnational debt of any jurisdiction in the world. The Commission has revealed that the starting point for 2018–19 is a $15 billion deficit. This deficit trajectory would worsen without meaningful government action. The government is committed to working through these challenges and restoring fiscal sustainability to the Province’s finances.

For most of the past 15 years, unsustainable levels of spending have resulted in structural deficits and an unprecedented increase in public debt. EY Canada’s review of the Province’s spending patterns since 2002–03 revealed that total operating expenditures increased by 55 per cent or $2,226 per person in today’s dollars.

Steady deficits since 2008–09 contributed to mounting debt levels in Ontario. Ontario’s current forecast level of net debt, at $347 billion in 2018–19, is the direct result of past fiscal policy choices. The previous government pursued stimulus spending policies during the difficult economic times of the recession. However, during the recent period of economic growth, the previous government continued unsustainable spending rather than restoring fiscal balance, further contributing to the rising debt levels.

The fiscal challenge has been further amplified as a result of the previous government generating non-recurring revenues. For example, the Province sold a number of its assets, including Hydro One shares, the Liquor Control Board of Ontario (LCBO) headquarters’ site, and the Ontario Power Generation (OPG) head office and Lakeview properties. In 2017–18 alone, asset sales generated over $1.8 billion in one-time revenues. Other non-recurring revenue sources that inflated 2017–18 revenues, included:

  • Cap-and-trade carbon tax proceeds ($2.4 billion);
  • Federal Equalization payments2 ($1.4 billion); and the
  • Electricity Debt Retirement Charge ($0.6 billion).

Furthermore, for 2018–19, Ontario will receive $0.5 billion less from the federal Equalization program. Collectively, these non-recurring revenue sources have tapered off significantly in 2018–19.

Chart 1.1: The Impact of Non-Recurring Revenues as a Share of Total Revenues
Accessible description of Chart 1.1

The Province is experiencing a structural deficit resulting from deficits that have been run consecutively over the last decade by the previous government. Immediate and tangible action is required to break this cycle, eliminate the deficit, reduce the debt burden and bring sustainability to the Province’s finances.

A New Direction

The Government for the People believes that respect for the taxpayer is a top priority. The people of Ontario work hard for their money, and the government must use those hard-earned dollars wisely. To that end, the government must pursue a fiscal blueprint for the Province that puts the taxpayer at the centre of government decision-making.

This new approach to public finances will serve three important objectives: restore fiscal balance, reduce the debt burden, and strengthen accountability and transparency.

In order to meet these commitments, the government will not raise taxes or engage in measures that make life unaffordable for the people of Ontario. It will also ensure value for money and sustainable outcomes for vital public programs that serve seniors, children, families and vulnerable individuals in society.

The government will pursue efficiencies and prioritize funding for front-line services that directly serve the people of Ontario and help those who need it most. It will plan smarter, spend smarter and work smarter to achieve these goals. It will reinvent the way government operates and delivers services.

Government Action to Date

The government has already made a number of positive changes to help improve the Province’s fiscal situation as part of its Plan for the People.

As a result of this new approach, efforts have been made to focus spending on programs and services that are absolutely critical. While $2.1 billion of the new spending as part of the 2018 Budget was for new initiatives, other incremental funding of $3.5 billion went towards maintaining front-line services such as hospital base funding, student financial assistance and child care spaces. This combined $5.7 billion3 change in program spending and a lower revenue outlook of $1.1 billion resulted in a $6.7 billion deficit projected for 2018–19 in the 2018 Budget, which was included in the Commission’s baseline outlook.

Given the size of the deficit inherited from the previous government, the Province is already taking decisive steps to control the growth in spending. As a matter of policy, the government rejects the spending in its predecessor’s 2018 Budget unless specified otherwise. The government is taking the necessary time to carefully review status quo programs and services to find innovative ways to make them more impactful for individuals and families. It is also reviewing and cancelling new initiatives promised by the previous government that are found to deliver no value for money.

Taken together, these actions — which represent only the start of the government’s plan to restore balance — have resulted in efficiencies in 2018–19 of $3.2 billion, out of the $5.7 billion in new spending from the 2018 Budget.

At the same time, the government is eliminating tax increases of $0.3 billion planned by the previous government and scrapping the cap-and-trade carbon tax, while committing to introduce other tax reductions to strengthen Ontario’s economy. Collectively, these decisions to support businesses and families have resulted in a $2.7 billion lower revenue forecast relative to the Commission’s outlook.

The net impact of expenditure management decisions, the elimination of taxes planned or imposed by the previous government, and new measures announced in this document to make Ontario open for business, reduced the deficit to $14.5 billion.

Chart 1.2: Evolution of the 2018–19 Outlook
Accessible description of Chart 1.2

Restoring Fiscal Balance

For 13 out of the last 15 years, the previous government ran deficits. Revenues did not keep pace with the level of spending. This cycle of deficits led to more borrowing and debt for the Province which is unsustainable.

Improving the Province’s fiscal health is paramount, which means returning the budget to balance on a modest, reasonable and pragmatic timetable.

Photo of vibrant neighbourhood with text: Back on the road to fiscal health

Balancing the budget will reduce Ontario’s vulnerability to economic shocks, such as any potential downturns in the economy, or unexpected adverse changes to the revenue and expense outlook. Restoring balance will reduce Ontario’s net debt-to-gross domestic product (GDP) ratio, which will improve business confidence in Ontario and support jobs and economic growth.

Transparency and accountability are central tenets of the government’s plan to balance the budget in a responsible timeframe. Other principles that will guide the process of restoring balance include:

  • Outlining how balance will be achieved and what actions will be taken by transparently articulating the objectives and the trade-offs implied in government decisions;
  • Grounding plans in the economic outlook of the province and globally, as well as in government policy direction;
  • Maximizing the value of government assets, while avoiding the use of solutions that simply generate one-time revenues;
  • Prioritizing spending on investments that support government priorities, while maintaining an efficient and effective use of resources that generate outcomes;
  • Ensuring that today’s recurring costs are paid with today’s recurring revenues instead of being passed on to the next generation of taxpayers; and
  • Building sufficient prudence into the fiscal plan to allow for unforeseen developments, including to safeguard essential services during economic downturns.

Further details on the Province’s path to balance will be released in the 2019 Budget.

Ontario’s Debt Reduction Strategy

The government’s approach to public finances is not very different from how families across the province manage their household budgets. They take on temporary debt — a mortgage, a car loan, or a major home renovation — to enhance their quality of life, but then they pay down this debt within a reasonable timeframe.

If families choose to run a deficit of $15,000 year after year indefinitely, the negative consequences are clear. They know every dollar going to mounting credit card debt or debt servicing costs crowds out money for their children’s education or retirement savings. Rising interest costs on Ontario’s public debt are similarly crowding out sustainable investments in vital public programs.

Ontario owes more than one-third of a trillion dollars in net debt — $347 billion in 2018–19. The Province has the largest subnational debt in the world. If divided among Ontario’s population, every man, woman and child living in the province would owe $24,231. If the government made payments of $1 billion a year against the debt, it would take Ontario until year 2366 to become debt free.

Additionally, there are daily interest charges that accumulate on the debt. In 2018–19, the government is forecasting $12.5 billion in interest payments to service that debt, or almost $900 this year alone for every man, woman and child in Ontario. Those interest payments represent one-fifth of the health care budget, almost half the education budget, and over $1 billion more than Provincial spending on postsecondary education and training. Every tax dollar that goes to debt interest payments is one less dollar going to vital public services that benefit individuals and families.

Ontario needs a meaningful strategy to address its debt problem.

The government is taking steps to address public debt. As recommended by the Commission, the government will determine and set an appropriate target and timeline to reduce the net debt-to-GDP ratio as part of the development of a comprehensive debt reduction strategy to improve Ontario’s fiscal health.

Reviewing the Fiscal Transparency and Accountability Act, 2004

Taxpayers have a right to know how the government is using their money, and if it is being used in the best possible way. The government must ensure the principles of transparency and accountability underpin the preparation of all Provincial financial reports, including the 2018 Ontario Economic Outlook and Fiscal Review and future budgets.

The Fiscal Transparency and Accountability Act, 2004 (FTAA) provides a framework for the government to carry out responsible fiscal policy development and regular reporting on Provincial finances with the objective of achieving balanced budgets. The Act sets out the government’s obligations to the public to keep it informed, and undertake prudent and responsible fiscal planning, including a requirement for the government to develop a recovery plan for achieving a balanced budget if it plans to run a deficit.

However, the limitations of the current legislation became particularly clear with the release of the previous government’s 2018 Budget. As the Commission pointed out, the recovery plan published in the 2018 Budget met the minimum requirements set out in the Act, but did not inform the people of Ontario of the policy consequences of the government’s decision not to balance the budget until much later than planned. Exceeding the government’s fiscal means by taking on additional spending while at the same time trying to balance the budget, can lead to policy decisions that either raise taxes, cut funding to vital public programs or lead to one-time asset sales. In this way, the Act falls short in delivering transparency and accountability to the people of Ontario.

As recommended by the Commission, the government will undertake a review of FTAA for the first time in 14 years. The review will look at the provisions around the governing principles, the recovery plan, public reporting and non-compliance.

The goal of the review will be to improve the law’s effectiveness in guiding government fiscal planning and reporting to put taxpayers first, and to enhance those provisions that uphold transparency and accountability to the people.

Line-by-Line Review of Government Spending

The government committed to an external line-by-line review of public spending over the last 15 years. It took immediate action in July 2018 to issue an open request for bids by outside experts to conduct this review. In addition to the review, the successful bidder had a mandate to compare Ontario government expenditures and the rate of spending growth with other provinces; find ways to save money and improve services; look at programs and sectors that may need more focused review; and incorporate input from public consultations.

Photo of documents with text: Line-by-line review

Following the open bidding process, EY Canada was selected as the successful bidder to conduct the review. The external review complements the Commission’s report by explaining how and why the new government inherited a $15 billion deficitand over one-third of a trillion dollars in public debt.

The government is committed to establishing a process of ongoing review and scrutiny of all programs and services to ensure public spending is delivering value for the people of Ontario.

External Review

In September 2018, EY Canada provided the government with the results of its review, a report entitled Managing Transformation — A Modernization Action Plan for Ontario. The firm reviewed over half a million lines of financial data, conducting a thorough review of the Province’s books.

The detailed analysis demonstrates that, over the past 15 years, the previous government allowed significant and unsustainable expenditure growth. Key findings include:

  • Ontario’s total operating expenditures increased by 55 per cent, representing $2,226 for every person living in the province;
  • Had expenditures been held to population growth, the government of Ontario would have spent $331 billion less over 15 years;
  • Growth of total operating expenditures outpaced Ontario population growth by 1.9 per cent;
  • Total operating expenditures through transfer payments have grown by $46.3 billion; and
  • Ontario’s expenditures on health care, education, social services and justice have grown faster than either British Columbia’s or Quebec’s.

When read alongside the Commission’s report, the line-by-line review illustrates that, while Ontario faces a challenging fiscal environment, there are opportunities to make positive changes to ensure the Province’s finances are returned to a fiscally sustainable position.

In fact, the review provided a modernization agenda to help drive efficiencies, find cost savings and enable transformation of public services. The following four recommendations came out of EY Canada’s line-by-line review:

  • Modernizing services through better use of digital and shared service models;
  • Finding more cost-efficient ways of administering government;
  • Ensuring government funding is directed to those that require it the most; and
  • Maximizing the value of government assets and putting taxpayer investment to its most productive use.

The external review of government spending was supported by two related initiatives that offered the people of Ontario an opportunity to contribute their ideas on how government could transform itself to better meet the needs of its citizens.

The Planning for Prosperity public survey and the Big Bold Ideas challenge inside the Ontario Public Service, gathered over 15,000 submissions from people across the province with ideas on ways to transform how government services are delivered. The government is carefully reviewing the areas highlighted through both consultations and the external review. It will use this information to inform strategic changes in how the Ontario Public Service operates and, along with its broader public-sector partners, delivers services to people.

Agency Review

Ontario is taking steps to ensure all Provincial agencies are relevant, efficient, effective and provide value for money for taxpayers.

The government has assembled a task force to lead a comprehensive review of Ontario’s Provincial agencies such as the Ontario Geographic Names Board and the Rabies Advisory Committee, as well as a number of other entities that work on behalf of the government to support the government’s commitment to restore accountability and trust. The review is part of the government’s broader efforts to ensure services are delivered in the most efficient and effective ways possible for the people. The work of the task force will build on the work of the Commission’s report and the line-by-line review of all government spending.

The task force will focus on:

  • Identifying immediate opportunities to enable efficiencies;
  • Ensuring agencies remain transparent and sustainable over the long term;
  • Ensuring agencies use taxpayer dollars appropriately and effectively;
  • Aligning agencies with current government priorities; and
  • Ensuring agencies have appropriate oversight structures in place.

Ongoing Review through Multi-Year Planning

Given the size of the deficit inherited from the previous administration, the government is already taking decisive steps to control growth in spending to support a return to balance. To this end, the government is committed to a multi-year framework for ongoing review of programs and services to ensure they provide real benefits to the people of Ontario. The goal is to ensure each program, ministry, and the government overall, is doing everything it can to deliver results for the people of Ontario in a responsible and sustainable way.

Building on the foundation provided by the external review, this ongoing process will include:

  • An assessment of all programs and expenditures to ensure relevance and best value for taxpayers;
  • Modernization plans for every ministry that puts the end-user, the people, at the centre of its plans, while also moving forward with some of the opportunities identified in the line-by-line review, the Planning for Prosperity public survey and the Big Bold Ideas challenge; and
  • Detailed program inventories that will show how the government spends money in an open and transparent way.

A Renewed Approach to Managing Compensation

The government values the collective bargaining process and is committed to working with public-sector employers and bargaining agents to ensure negotiated agreements support service transformation and drive productivity improvements. Moving forward, managing compensation costs represents a key element in the government’s plan to restore sustainability to the Province’s finances, and is an important step in making government more efficient and effective.

As an initial step, Provincial agencies will now be required to obtain approval of their bargaining mandates and ratification of collective agreements. This requirement will apply to agencies with collective agreements that expire on or after December 31, 2018.

This requirement will allow the government to better manage the estimated $2.6 billion that Provincial agencies spend each year on compensation, and align with broader efforts to ensure that all agencies are relevant, efficient, effective and provide value for money. Looking ahead, the government is also exploring additional opportunities to expand collective bargaining oversight to other areas of the broader public sector.

Broader Public-Sector Executive Compensation

The government has suspended all pending broader public-sector executive compensation increases while it works to complete a full regulatory review by June 7, 2019. As part of this process, the government has begun engaging with stakeholders to seek their input.

These restrictions apply to over 300 designated employers under the Broader Public Sector Executive Compensation Act, 2014, including colleges, hospitals, Provincial agencies, school boards and universities.

This suspension is an interim measure as the government works toward developing a long-term approach to broader public-sector executive compensation, one that supports the government’s fiscal priorities, and recognizes the value of leaders within the broader public sector in driving efficiencies, transformation and better outcomes for the people of Ontario.

Ensuring Fairness for Ontario Taxpayers

Transfers from the federal government are an important source of Provincial revenues and directly impact the Province’s ability to move towards long-term fiscal sustainability. In its Fiscal Sustainability Report 2018, the federal Parliamentary Budget Officer shows that by constraining transfers to the provinces, the federal government has achieved fiscal sustainability for itself over the long term at the expense of resulting fiscal challenges for the provinces and territories, including Ontario.

Meanwhile, provincial and territorial governments are finding themselves cash-strapped due to ever-increasing health care costs as the population ages. At the same time, federal health transfers are declining significantly over time as a share of Provincial spending. The line-by-line review echoed these findings, pointing out that federal transfers to Ontario are not adequate to help meet the growing costs of health care and other services provided to Ontario families.

Additionally, both the line-by-line review and the report of the Parliamentary Budget Officer found that some federal transfers are not allocated based on clear and consistent principles. The line-by-line review highlighted research that shows Ontario taxpayers contribute $12.9 billion more to the federal government through tax revenue than the Province or its taxpayers receive in federal spending.

The federal government has also imposed increasingly prescriptive rules in many federal–provincial agreements that create fiscal challenges for Ontario and limit its flexibility to pursue provincial priorities. A review of overall federal transfers is needed to ensure that transfers are not adding a fiscal and administrative burden to the Province, and that Ontario businesses, individuals and families receive a fair and adequate share of the funding.

A lack of federal leadership and action in certain areas of federal and shared responsibility such as irregular migration and Indigenous programming is also imposing costs on Ontario. The government will continue to stand up for its citizens and hold the federal government accountable for these decisions. Ontario calls on the federal government to provide adequate funding in areas of federal responsibility.

Ontario’s Fight against the Carbon Tax

The 2018 provincial election was a decisive referendum on carbon taxation in Ontario. The result of that election is clear — Ontario families and businesses cannot afford a cap-and-trade carbon tax, as such a plan results in large increases in the cost of living and places a new job-killing tax burden on Ontario businesses.

The government has already acted decisively to protect families from carbon taxation in Ontario. On October 31, the Ontario Legislature passed the Cap and Trade Cancellation Act, 2018, which officially liberates Ontario families and businesses from the previous government’s cap-and-trade carbon tax scheme.

The government, as a foundational matter of policy, intends to use every tool within its jurisdiction to protect the people of Ontario from being selectively punished by a discriminatory federal carbon tax.

The government contends that the federal carbon tax is as unconstitutional as it is unethical and unfair. To that end, the government has filed a reference case to challenge the federal carbon tax at the Ontario Court of Appeal.

Ontario and Saskatchewan have released a joint statement on combining forces to fight the carbon tax. Ontario will be participating in Saskatchewan’s constitutional challenge of the federal carbon tax and welcomes Saskatchewan’s intention to participate in the Ontario challenge as well. The government also welcomes other provinces, including Manitoba, who are also opposed to the federal carbon tax.

Carbon Tax Transparency

In 2019, the federal government intends to impose a job-killing carbon tax on the people of Ontario, while attempting to hide the true cost of its carbon tax plans. The federal carbon tax will increase gasoline, diesel, natural gas, propane and heating oil bills for the people of Ontario. The next stage of Ontario’s fight against the carbon tax will involve ensuring the federal government is no longer able to deceive the public about the new costs that its proposed carbon tax will place on Ontario families and businesses.

The Ontario government intends to pursue new transparency measures to ensure the public is appropriately informed about the true cost of the federal carbon tax. The government is actively exploring measures to ensure that the true cost of the carbon tax is broken out and listed on items such as natural gas bills, directly on gas pumps and on gas receipts for consumers.

Transparency in Government Accounting

For the first time in three years, the Auditor General issued a clean audit opinion on the Public Accounts of Ontario 2017–2018. The financial results were informed by the report issued by the Independent Financial Commission of Inquiry (Commission) which had a mandate to assess and provide advice on past accounting practices.

In preparing the Public Accounts of Ontario 2017–2018, the government accepted the Commission’s recommendation on the accounting for the net pension assets of the Province’s jointly sponsored pension plans, and on the global adjustment refinancing, and is committed to working closely with the Auditor General on these issues. The annual fiscal results in this document have been restated to reflect the impacts of any required valuation allowance against previously reported net pension assets. For this reason, the historical results may vary from those previously published.

Openness and transparency in the government’s financial reporting is of the utmost importance in communicating the value delivered to the people of Ontario from every tax dollar. The government is committed to working with the Office of the Auditor General to restore accountability and trust in the Province’s finances.

Ontario Strengthening Relationship with Municipalities

The Province is committed to working with municipalities to benefit communities and their residents.

Municipalities are often the level of government that is closest to the day-to-day lives of Ontario families. The decisions municipalities make on service delivery and infrastructure have real impact on people’s daily lives.

The Province is committed to working constructively with local governments to work harder, smarter and more efficiently to make life better for everyone.

Since coming into office, the government has:

  • Reinforced its partnership with municipalities by signing a joint Memorandum of Understanding (MOU) with the Association of Municipalities of Ontario (AMO);
  • Committed to provide $40 million over two years to help municipalities with the implementation costs of recreational cannabis legalization, while permitting municipalities to opt-out of retail stores;
  • Further committed that, if Ontario’s portion of the federal excise duty on recreational cannabis over the first two years of legalization exceeds $100 million, the Province will provide 50 per cent of the surplus to those municipalities that have not opted-out as of January 22, 2019; and
  • Made reforms to deliver better local government.

The Province also intends to introduce legislation to amend the Municipal Act, 2001 and the City of Toronto Act, 2006 to further clarify municipalities’ authority to further restrict rules around the consumption of cannabis, similar to the rules already in place for tobacco.

Local governments benefit from a range of provincial transfer payments. As recommended in Managing Transformation — A Modernization Action Plan for Ontario, the government is committed to driving greater efficiencies and value for money. This commitment will also be required from all partners, including municipalities.

Improving Legislative Accountability

The government is acting to improve both political and legislative accountability in Ontario.

To reduce unnecessary cost while preserving critical functions, the government is proposing amendments to statutes governing the Officers of the Legislative Assembly. This will include reducing the number of Legislative Officers from nine to six, effective no later than May 1, 2019.

In addition, amendments will be proposed to standardize statutory provisions relating to the Legislative Officers, including the Clerk of the Assembly. Amendments will also be put forward to set a threshold percentage for the number of seats required to achieve “recognized party” status. A “recognized party” will include any party that obtains at least 10 per cent of the seats in the Legislative Assembly. The proposed legislation will also deem legislative security service members to be peace officers for the purposes of the protection of the legislative precinct.

Election Finances Act Amendments

The government believes that taxpayers should not be forced to pay more and work harder to make life easier for politicians. Currently, eligible political parties receive a subsidy for each vote received in the previous provincial general election. The government believes that tax dollars are best left in the hands of taxpayers, not political parties. For that reason, the government is introducing legislation that would reduce the allowances to registered political parties and constituency associations in 2021. The government will eliminate allowances in 2022. The proposed legislation would more closely align Ontario with federal rules on contribution limits and fundraising events. The proposed changes will result in savings of $5.6 million in 2021–22, growing to almost $15 million annually beginning in 2022–23.

Fixing the Hydro Mess

Restoring Public Confidence in Hydro One

In July 2018, the government accepted a proposed agreement from Hydro One that included the retirement of Hydro One’s former chief executive officer (whose total compensation was over $6 million in 2017) and the resignation of the board of directors.

In August 2018, a new, highly qualified board was appointed and the Hydro One Accountability Act, 2018 was proclaimed. The Act requires the board to establish a new executive compensation framework within six months, and Hydro One is required to annually publish a record of executive compensation amounts and any proposed changes to its compensation policies. An amendment was also made to the Ontario Energy Board Act, 1998 to ensure that compensation paid to Hydro One executives is not funded from electricity rates.

These changes will help improve transparency and accountability at Hydro One, and address executive and board compensation.

Rate Mitigation Mechanism Replacing Global Adjustment Refinancing

The government believes that electricity bills for Ontario households are still too high. The government is continuing to implement additional price mitigation measures to lower electricity bills further. This will be in addition to existing government funded electricity support programs, such as the Ontario Rebate for Electricity Consumers.

The government also agrees with the recommendations of the Commission on the accounting treatment used for global adjustment (GA) refinancing, which is a major component of the Ontario Fair Hydro Plan Act, 2017. To reflect this and enhance transparency, the Public Accounts of Ontario 2017–2018 included the cost of GA refinancing as an expenditure that contributed about $1.8 billion to the deficit in 2017–18, consistent with the recommendations of the Commission and the Auditor General.

In September 2018, the government also made a decision to propose future changes to the Ontario Fair Hydro Plan Act, 2017 to cancel the GA refinancing component as designed, including reducing the amount of the current electricity price reduction to be borne by future ratepayers, and making any recovery from future ratepayers optional. The government intends to introduce proposed legislation to address GA refinancing. The government also intends to provide government funding that maintains electricity rates in 2018 at the level provided for under GA refinancing, but in a more transparent manner.

The Province will finance this interim mechanism, which will be cheaper, recognizing that the Province is able to borrow at a lower interest rate than the Fair Hydro Trust can.

Chart Descriptions

Chart 1.1: The Impact of Non-Recurring Revenues as a Share of Total Revenues

The stacked bar chart presents the value of Ontario’s continuing revenues and non-recurring revenues (such as one-time asset sales, cap-and-trade carbon tax, Equalization and electricity debt retirement charge) for the five fiscal years from 2014–15 to 2018–19.

Total revenues were $126.2 billion in 2014–15, $136.1 billion in 2015–16, $140.7 billion in 2016–17, $150.6 billion in 2017–18 and $148.2 billion in 2018–19. Continuing revenues were $122.1 billion in 2014–15, $129.7 billion in 2015–16, $136.8 billion in 2016–17, $144.4 billion in 2017–18 and $146.8 billion in 2018–19. Non-recurring revenues totaled $4.0 billion (3.2 per cent of total revenue) in 2014–15, $6.4 billion (4.7 per cent of total revenue) in 2015–16, $4.0 billion (2.8 per cent of total revenue) in 2016–17, $6.2 billion (4.1 per cent of total revenue) in 2017–18 and $1.4 billion (1.0 per cent of total revenue) in 2018–19.

Return to Chart 1.1

Chart 1.2: Evolution of the 2018–19 Outlook

This chart shows the evolution of the 2018–19 surplus/(deficit) projection, as shown in the 2017 Budget, 2018 Budget, the Independent Financial Commission of Inquiry report and the 2018 Ontario Economic Outlook and Fiscal Review.

The 2017 Budget projected a balanced budget for the 2018–19 fiscal year.

The 2018 Budget projected a $6.7 billion deficit in 2018–19, which consists of status quo program growth of $3.5 billion, new investments of $2.1 billion (collectively these amount to approximately $5.7 billion in spending) and a revenue decline of $1.1 billion.

The Commission’s recommendations are layered on top of the $6.7 billion deficit to arrive at the Commission 2018–19 baseline deficit of $15.0 billion.

Savings of $3.2 billion in 2018–19 have been achieved, out of the $5.7 billion in new spending from the 2018 Budget — the remainder is priority spending that is maintained in 2018–19. Tax cuts to support businesses and families have resulted in a lower revenue forecast by $2.7 billion, relative to the Commission outlook. The net impact of the expenditure management decisions and the tax cuts, reduce the deficit to $14.5 billion for the 2018–19 current outlook.

Return to Chart 1.2

Footnotes

Updated: November 15, 2018
Published: November 15, 2018