Chapter III: Ontario’s Fiscal Plan and Outlook

Introduction

The government is committed to restoring trust, transparency and accountability in Ontario’s finances. To this end, the government has accepted the recommendations of the Independent Financial Commission of Inquiry (Commission) and undertaken a number of targeted tax and efficiency measures to enhance economic growth and ensure value for every tax dollar spent. The Government for the People is demonstrating that these actions are achieving results with a lower projected deficit than the baseline provided by the Commission. Improving the Province’s fiscal health is paramount, which means returning the budget to balance on a modest, reasonable and pragmatic timetable.

Current Fiscal Outlook

On July 17, 2018, the government took action to restore the public’s confidence in Ontario’s books by establishing the Independent Financial Commission of Inquiry to look into the Province’s past spending and accounting practices.

The Commission’s report provided the government with a revised 2018–19 fiscal outlook compared to the 2018 Budget. The report states that, instead of the $6.7 billion deficit projected in the 2018 Budget, the Province’s revised baseline deficit is $15 billion.

Actions undertaken by the government to find efficiencies and reduce spending have resulted in $3.2 billion in program expense savings relative to the Commission’s outlook. Savings of $2.7 billion for taxpayers, largely due to eliminating planned tax increases and cancelling the cap-and-trade carbon tax, have been reflected in the revenue outlook. Taken together, these changes result in a projected deficit of $14.5 billion, a $0.5 billion improvement to the Commission’s baseline deficit forecast.

Table 3.1
Fiscal Summary
($ Billions)
  Actual
2017–18
Commission Revised Baseline
2018–19
Change Current Outlook
2018–19
Revenue 150.6 150.9 (2.7) 148.2
Expense — Programs 142.4 152.4 (3.2) 149.2
Expense — Interest on Debt 11.9 12.5 12.5
Total Expense 154.3 164.9 (3.2) 161.8
Surplus/(Deficit) Before Reserve (3.7) (14.0) 0.5 (13.5)
Reserve 1.0 1.0
Surplus/(Deficit) (3.7) (15.0) 0.5 (14.5)
Net Debt as a Per Cent of GDP 39.2 40.8   40.5
Accumulated Deficit as a Per Cent of GDP 25.3 N.A.   26.1

Table 3.1 footnotes:

Notes: Numbers may not add due to rounding. To ensure consistency and comparability of numbers between the current outlook, the Commission’s baseline forecast and prior year results, the Commission’s Net Debt as a Per Cent of GDP estimate has been revised from 40.5 per cent after updating GDP with the most recent numbers from Statistics Canada’s Provincial and Territorial Economic Accounts, 2017.

2018–19 In-Year Revenue Changes

In addition to the $1.5 billion in revenue changes recommended by the Commission, the revenue outlook also reflects decisions and actions undertaken by this government. As a result, revenue is now projected to be $2.7 billion lower in 2018–19 than the Commission’s forecast.

Table 3.3
2018–19 In-Year Revenue Changes1
($ Millions)
  2018–19
Not Proceeding with 2018 Budget and Prior Planned Tax Increases (308)
Cancelling Cap-and-Trade Carbon Tax (1,507)
Low-Income Individuals and Families Tax (LIFT) Credit (125)
Ontario Power Generation Inc./Hydro One Ltd. (59)
Cannabis Implementation (3)
Other Changes (689)
Total In-Year Revenue Changes (2,691)

Table 3.3 footnotes:

[1] Changes shown are in addition to those recommended by the Commission.

Note: Numbers may not add due to rounding.

A number of tax changes planned by the previous government are being cancelled, benefiting taxpayers and reducing the 2018–19 revenue forecast by $308 million, including not proceeding with:

  • Adjustments to rates, brackets, surtax and credits for Ontario Personal Income Tax;
  • Phasing out the Small Business Limit;
  • Ontario Research and Development Tax Credit enhancements;
  • Targeting the Employer Health Tax exemption; and
  • Increasing the beer basic tax rate on November 1, 2018.

The government’s decision to cancel the cap-and-trade carbon tax results in a reduction in revenues of $1,507 million in 2018–19.

The Low-income Individuals and Families Tax (LIFT) Credit announced in this document reduces the 2018–19 revenue forecast by $125 million related to the impact on revenues during the January 1, 2019 to March 31, 2019 period. See the Annex: Details of Tax Measures for more information.

The Province’s projected combined revenue from Ontario Power Generation Inc. and Hydro One Limited has been reduced based on their current updated outlook.

Revised federal timelines and changes in implementing legalized cannabis sales have resulted in a net reduction of $3 million in revenues related to cannabis. This is due to lower projected revenues from the Provincial share of the federal excise duty by $18 million. This is partially offset by avoiding $15 million in net costs primarily related to construction of retail storefronts by the Ontario Cannabis Store.

Other changes include an updated estimate of the impact of past budget tax measures, freezing driver’s licence fees and a provision built into the fiscal plan for tax measures to strengthen Ontario’s economy. This could include options for paralleling a potential federal government response to Ontario’s written request to accelerate capital cost depreciation of new depreciable assets to address the competitiveness challenges posed by U.S. tax reform.

2018–19 In-Year Expense Changes

In addition to the $6.4 billion in expense changes recommended by the Commission, the program spending outlook also reflects savings of $3.2 billion, reflecting decisions and actions undertaken by the government to put in place immediate spending controls and return the Province to a more fiscally sustainable path. As a result, spending is now projected to be $3.2 billion, or about two per cent lower, in 2018–19 than the Commission’s baseline forecast.

Table 3.4
2018–19 In-Year Expense Changes1
($ Millions)
  2018–19

Savings from Expenditure Management Restrictions and Updated Forecasts

The government is actively reviewing all spending to ensure government expenditures are delivering the best value for the people of Ontario. Savings have been found in the following areas:

  1. Restrictions on ministry discretionary spending, including government restrictions on travel, meal and hospitality spending and a hiring freeze that excludes essential front-line services.
  2. Updated forecasts for programs, including employment and training programs, electricity price mitigation and social assistance.
(1,146.7)

Savings from Ongoing Review of Programs

The government has undertaken a comprehensive review of investments from the 2018 Budget and has taken steps to reduce expenditures. Savings include: not proceeding with previously planned spending related to cap-and-trade carbon tax proceeds and budget measures such as reform of OHIP+, regional infrastructure projects and other expenditure programs that did not provide value for money.

(1,835.6)

In-Year Approvals

The government has made targeted investments for communities and families in the following areas:

  1. Investing in more than 1,100 hospital and community beds and spaces as an immediate measure to help communities reduce the strain on the health care system in advance of the flu season.
  2. Providing new tools and resources for police to protect the people of Ontario from drug, gun and gang-related violence.
  3. Protecting the Muskoka Watershed.
  4. Additional resources to fight forest fires across the province.
302.6

Other Changes, Including Changes to the Contingency Fund and Offsets for In-Year Approvals

(484.8)

Interest on Debt Change

Net In-Year Expense Changes

(3,164.6)

Table 3.4 footnotes:

[1] Changes shown are in addition to those recommended by the Commission.

Note: Numbers may not add due to rounding.

Fiscal Prudence

The Fiscal Transparency and Accountability Act, 2004 requires Ontario’s fiscal plan to incorporate prudence in the form of a reserve to protect the current outlook against unforeseen adverse changes in the Province’s revenue and expense. As recommended by the Independent Financial Commission of Inquiry, the reserve is set at $1.0 billion, consistent with its historical level.

The current outlook also maintains contingency funds to safeguard essential services. The Commission has stated in its report, that the contingency fund which was set significantly higher in 2018–19 than in the preceding eight years, is likely sufficient to cover expense risks for the remainder of the 2018–19 fiscal year.

Details of Ontario’s Finances

Table 3.5
Revenue
($ Millions)
  2015–16 2016–17 Actual
2017–18
Current Outlook
2018–19
Taxation Revenue — Personal Income Tax 31,141 30,671 32,900 34,946
Taxation Revenue — Sales Tax1 23,455 24,750 25,925 26,727
Taxation Revenue — Corporations Tax 11,428 14,872 15,612 13,766
Taxation Revenue — Education Property Tax2 5,839 5,868 5,883 6,076
Taxation Revenue — Employer Health Tax 5,649 5,908 6,205 6,494
Taxation Revenue — Ontario Health Premium 3,453 3,575 3,672 3,870
Taxation Revenue — Gasoline Tax 2,459 2,626 2,701 2,699
Taxation Revenue — Land Transfer Tax 2,118 2,728 3,174 2,710
Taxation Revenue — Tobacco Tax 1,226 1,230 1,244 1,250
Taxation Revenue — Fuel Tax 751 742 760 784
Taxation Revenue — Beer, Wine and Spirits Taxes 582 589 601 630
Taxation Revenue — Ontario Portion of the Federal Cannabis Excise Duty 17
Taxation Revenue — Electricity Payments in Lieu of Taxes 3,247 334 494 369
Taxation Revenue — Other Taxes 470 453 552 563
Taxation Revenue — Total 91,818 94,346 99,723 100,901
Government of Canada — Canada Health Transfer 13,089 13,910 14,359 14,934
Government of Canada — Canada Social Transfer 4,984 5,146 5,314 5,486
Government of Canada — Equalization 2,363 2,304 1,424 963
Government of Canada — Infrastructure Programs 146 732 1,065 1,703
Government of Canada — Labour Market Programs 927 965 969 998
Government of Canada — Social Housing Agreement 455 441 419 386
Government of Canada — Other Federal Payments 893 761 996 1,235
Government of Canada — Direct Transfers to Broader Public-Sector Organizations 284 285 314 301
Government of Canada — Total 23,141 24,544 24,860 26,006
Income from Government Business Enterprises — Ontario Lottery and Gaming Corporation 2,234 2,358 2,487 2,245
Income from Government Business Enterprises — Liquor Control Board of Ontario 1,956 2,349 2,207 2,234
Income from Government Business Enterprises — Ontario Cannabis Store (6) (25)
Income from Government Business Enterprises — Ontario Power Generation Inc./Hydro One Ltd.3 719 860 1,464 794
Income from Government Business Enterprises — Total 4,909 5,567 6,152 5,248
Other Non-Tax Revenue — Reimbursements 991 988 1,000 995
Other Non-Tax Revenue — Vehicle and Driver Registration Fees 1,565 1,727 1,912 2,001
Other Non-Tax Revenue — Electricity Debt Retirement Charge 859 621 593
Other Non-Tax Revenue — Power Supply Contract Recoveries 875 838 185 183
Other Non-Tax Revenue — Sales and Rentals 2,102 1,999 2,426 1,409
Other Non-Tax Revenue — Carbon Allowance Proceeds 2,401 472
Other Non-Tax Revenue — Other Fees and Licences 964 974 1,029 1,006
Other Non-Tax Revenue — Net Reduction of Power Purchase Contracts 172 129 74 41
Other Non-Tax Revenue — Royalties 274 272 290 295
Other Non-Tax Revenue — Fees, Donations and Other Revenues from Hospitals, School Boards and Colleges 7,493 7,957 8,309 8,552
Other Non-Tax Revenue — Miscellaneous Other Non-Tax Revenue 985 772 1,640 1,122
Other Non-Tax Revenue — Total 16,280 16,277 19,859 16,076
Total Revenue 136,148 140,734 150,594 148,231

Table 3.5 footnotes:

[1] Sales Tax revenue is net of the Ontario Sales Tax Credit and the energy component of the Ontario Energy and Property Tax Credit.

[2] Education Property Tax revenue is net of the property tax credit component of the Ontario Energy and Property Tax Credit and the Ontario Senior Homeowners’ Property Tax Grant.

[3] Includes income from Brampton Distribution Holdco Inc. for 2015–16 to 2016–17 from its interest in Hydro One Brampton Networks Inc. On February 28, 2017, the Province sold its entire interest in Hydro One Brampton Networks Inc. and it is no longer included as a Government Business Enterprise.

Note: Numbers may not add due to rounding.

Table 3.6
Total Expense1
($ Millions)
Ministry Expense 2015–16 2016–17 Actual
2017–18
Current Outlook
2018–19
Agriculture, Food and Rural Affairs (Total) 929 1,031 1,006 1,177.2
Attorney General (Total) 1,859 1,937 2,041 1,970.7
Board of Internal Economy (Total) 205 219 303 352.3
Children, Community and Social Services (Total) 15,313 15,789 16,416 17,008.3
Community Safety and Correctional Services (Total) 2,687 2,683 2,792 2,906.8
Economic Development, Job Creation and Trade (Total) 966 1,118 1,098 1,025.9
Education (Base) 25,967 26,580 27,300 29,012.0
Education — Teachers’ Pension Plan2 1,590 987 1,659 1,725.0
Education (Total) 27,557 27,567 28,958 30,737.0
Energy, Northern Development and Mines (Total) 1,933 1,734 4,225 4,829.7
Environment, Conservation and Parks (Total) 601 639 894 975.0
Executive Offices (Total) 37 46 48 46.7
Finance (Base) 1,048 862 875 945.7
Finance — Ontario Municipal Partnership Fund 513 505 506 510.0
Finance — Power Supply Contract Costs 875 838 185 182.8
Finance (Total) 2,436 2,205 1,567 1,638.5
Government and Consumer Services (Total) 767 715 793 652.9
Health and Long-Term Care (Total) 55,267 56,293 59,260 61,678.2
Indigenous Affairs (Total) 79 128 1,210 95.3
Infrastructure (Base) 93 90 71 112.9
Infrastructure — Federal–Provincial Infrastructure Programs 8 248 603.3
Infrastructure (Total) 93 97 320 716.2
Labour (Total) 304 308 317 319.3
Municipal Affairs and Housing (Total) 1,088 1,544 1,375 1,211.6
Natural Resources and Forestry (Base) 624 635 678 655.1
Natural Resources and Forestry — Emergency Forest Firefighting 95 107 117 169.8
Natural Resources and Forestry (Total) 719 742 795 824.9
Office of Francophone Affairs (Total) 8 5 6 6.1
Seniors and Accessibility (Total) 37 37 48 65.0
Tourism, Culture and Sport (Total) 2,289 1,561 1,590 1,450.2
Training, Colleges and Universities (Total) 9,927 10,154 11,150 11,374.2
Transportation (Base) 3,284 3,636 4,113 4,373.2
Transportation — Federal-Provincial Infrastructure Programs 404 887.5
Transportation (Total) 3,284 3,636 4,517 5,260.8
Treasury Board Secretariat (Base) 180 190 190 292.9
Treasury Board Secretariat — Employee and Pensioner Benefits3 1,338 1,082 1,442 1,335.0
Treasury Board Secretariat — Operating Contingency Fund 1,006.6
Treasury Board Secretariat — Capital Contingency Fund 275.0
Treasury Board Secretariat (Total) 1,518 1,272 1,632 2,909.5
Interest on Debt4 11,589 11,709 11,903 12,542.8
Year-End Savings
Total Expense 141,494 143,169 154,266 161,775.0

Table 3.6 footnotes:

[1] Numbers reflect current ministry structures that were announced on June 29, 2018.

[2], [3] Numbers reflect the pension expense that was calculated based on recommendations of the Independent Financial Commission of Inquiry, as described in Note 19 to the Consolidated Financial Statements in Public Accounts of Ontario 2017–2018.

[4] Interest on debt is net of interest capitalized during construction of tangible capital assets of $165 million in 2015–16, $159 million in 2016–17, $157 million in 2017–18, and $456 million in 2018–19.

Note: Numbers may not add due to rounding.

Chart 3.1: Composition of Revenue, 2018–19
Accessible description of Chart 3.1
Chart 3.2: Composition of Total Expense, 2018–19
Accessible description of Chart 3.2
Table 3.7
2018–19 Infrastructure Expenditures
($ Millions)
Sector Total
Infrastructure Expenditures
2017–18 Actual1
2018–19 Current Outlook
Investment in Capital Assets2
2018–19 Current Outlook
Transfers and Other Infrastructure Expenditures3
2018–19 Current Outlook
Total Infrastructure Expenditures4
Transportation — Transit 4,657 4,725 1,364 6,088
Transportation — Provincial Highways 2,534 2,697 275 2,972
Transportation — Other Transportation, Property and Planning 237 217 75 292
Health — Hospitals 2,403 2,559 66 2,625
Health — Other Health 239 84 190 273
Education 2,188 2,476 511 2,987
Postsecondary — Colleges and Other 639 757 9 765
Postsecondary — Universities 572 250 250
Social 595 14 361 374
Justice 284 292 261 553
Other Sectors5 1,009 816 1,063 1,879
Total Infrastructure Expenditures 15,358 14,637 4,422 19,059

Table 3.7 footnotes:

[1] Includes Provincial investment in capital assets of $12.2 billion.

[2] Includes $456 million in interest capitalized during construction.

[3] Includes transfers to municipalities, universities and non-consolidated agencies.

[4] Includes third-party investments in hospitals, colleges and schools; and provisional federal contributions to Provincial infrastructure investments.

[5] Includes government administration, natural resources, and culture and tourism sectors.

Note: Numbers may not add due to rounding.

Table 3.8
Ten-Year Review of Selected Financial and Economic Statistics1, 2
($ Millions)
  2009–10 2010–11 2011–12 2012–13 2013–14 2014–15 2015–16 2016–17 Actual
2017–18
Current Outlook
2018–19
Revenue 102,553 113,594 116,401 120,319 122,955 126,152 136,148 140,734 150,594 148,231
Expense — Programs 112,696 120,843 121,222 120,103 123,330 126,199 129,905 131,460 142,363 149,232
Expense — Interest on Debt3 9,119 10,005 10,587 10,878 11,155 11,221 11,589 11,709 11,903 12,543
Total Expense 121,815 130,848 131,809 130,981 134,485 137,420 141,494 143,169 154,266 161,775
Reserve 1,000
Surplus/(Deficit) (19,262) (17,254) (15,408) (10,662) (11,530) (11,268) (5,346) (2,435) (3,672) (14,544)
Net Debt 193,589 217,754 241,912 259,947 276,169 294,557 306,357 314,077 323,834 347,055
Accumulated Deficit 130,957 147,816 164,092 174,256 184,835 196,665 203,014 205,939 209,023 223,567
Gross Domestic Product (GDP) at Market Prices 597,876 630,983 659,740 680,086 695,352 726,053 759,440 792,932 825,805 857,557
Primary Household Income 412,847 424,251 444,076 459,111 472,921 489,436 511,577 519,413 544,062 567,914
Population — July (000s)4 12,998 13,136 13,261 13,391 13,511 13,618 13,707 13,875 14,071 14,323
Net Debt per Capita (Dollars) 14,893 16,577 18,242 19,413 20,441 21,631 22,350 22,636 23,014 24,231
Household Income per Capita (Dollars) 31,762 32,297 33,486 34,286 35,003 35,942 37,322 37,434 38,664 39,651
Interest on Debt as a Per Cent of Revenue 8.9% 8.8% 9.1% 9.0% 9.1% 8.9% 8.5% 8.3% 7.9% 8.5%
Net Debt as a Per Cent of GDP 32.4% 34.5% 36.7% 38.2% 39.7% 40.6% 40.3% 39.6% 39.2% 40.5%
Accumulated Deficit as a Per Cent of GDP 21.9% 23.4% 24.9% 25.6% 26.6% 27.1% 26.7% 26.0% 25.3% 26.1%

Table 3.8 footnotes:

[1] Amounts reflect a change in pension expense that was calculated based on recommendations of the Independent Financial Commission of Inquiry, as described in Note 19 to the Consolidated Financial Statement, in Public Accounts of Ontario 2017–2018. Amounts for net debt and accumulated deficit also reflect this change.

[2] Revenues and expenses have been restated to reflect the following fiscally neutral changes: i) revised presentation of education property taxes to be included in the taxation revenues; ii) reclassification of certain Government Business Enterprises to other government organizations; iii) reclassification of a number of tax measures that provide a financial benefit through the tax system to be reported as expenses; and iv) change in presentation of third-party revenue for hospitals, school boards and colleges to be reported as revenue.

[3] Interest on debt is net of interest capitalized during construction of tangible capital assets of $165 million in 2015–16, $159 million in 2016–17, $157 million in 2017–18, and $456 million in 2018–19.

[4] Population figures are for July 1 of the fiscal year indicated (i.e., for 2009­–10, the population on July 1, 2009 is shown).

Note: Numbers may not add due to rounding.

Sources: Statistics Canada, Ontario Ministry of Finance and Treasury Board Secretariat.

Chart Descriptions

Chart 3.1: Composition of Revenue, 2018–19

This pie chart shows the composition of Ontario’s revenue in 2018–19, which totals $148.2 billion. The largest taxation revenue source is Personal Income Tax revenue at $34.9 billion, accounting for 23.6 per cent of total revenue. This is followed by Sales Tax at $26.7 billion, or 18.0 per cent of total revenue; and Corporations Tax at $13.8 billion, or 9.3 per cent of total revenue. Other components of taxation revenue include Education Property Tax at $6.1 billion, or 4.1 per cent of total revenue; Employer Health Tax at $6.5 billion, or 4.4 per cent; Gasoline and Fuel Taxes at $3.5 billion, or 2.3 per cent; the Ontario Health Premium at $3.9 billion, or 2.6 per cent; and Other Taxes at $5.5 billion, or 3.7 per cent of total revenue.

Total taxation revenue accounts for $100.9 billion, or 68.1 per cent of total revenue.

The other major non-taxation sources of revenue are Federal Transfers of $26.0 billion, or 17.5 per cent of total revenue; Income from Government Business Enterprises at $5.2 billion, or 3.5 per cent of total revenue; and various Other Non-Tax Revenue at $16.1 billion, or 10.8 per cent of total revenue.

Return to Chart 3.1

Chart 3.2: Composition of Total Expense, 2018–19

This pie chart shows the share of Ontario’s total expense and dollar amounts by sector in 2018–19.

Total expense in 2018–19 is $161.8 billion.

The largest expense is the Health Sector at $61.7 billion, accounting for 38.1 per cent of total expense.

The remaining sectors of total expense include the Education Sector at $29.0 billion or 17.9 per cent; the Postsecondary and Training Sector at $11.4 billion or 7.0 per cent; the Children’s and Social Services Sector at $17.0 billion or 10.5 per cent; the Justice Sector at $4.9 billion or 3.0 per cent; and Other Programs at $25.3 billion or 15.6 per cent. Interest on Debt, included as part of Total Expense, is $12.5 billion or 7.8 per cent.

Note that the Education Sector excludes the Teachers’ Pension Plan. Teachers’ Pension Plan expense is included in Other Programs.

Return to Chart 3.2

Footnotes

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