Commission on the Reform of Ontario's Public Services

Comparison of the Scenarios
Across all programs, the Status Quo spending scenario — adjusted for cases where the
government has already implemented firm plans to restrain spending — points to spending in
2017–18 that is $17.4 billion higher than the sums contained in the 2011 Budget scenario for a
balanced budget in that year. (This includes our $900 million increase in the contingency
reserve, explained earlier.) Tack on interest payments that are $3.4 billion higher than found in
the Budget (a consequence of higher deficits on the way to 2017–18) and the result is total
expenditures that are about $20.8 billion higher than the Budget projection. Since we assume
that total revenue in 2017–18 will fall $9.4 billion short of the Budget’s assumption, the result in
our scenario is a $30.2 billion gap compared with the Budget Scenario.
All scenarios are projections based on assumptions, of course, but we believe the dynamics of
revenue and spending growth point almost inescapably to this Status Quo outcome if no action
is taken — a provincial government with a debt of $411.4 billion, equivalent to 50.7 per cent of
annual GDP, not the more benign $322.5 billion (39.7 per cent of GDP) implied in the
2011 Budget.
To prevent that outcome, the government can raise taxes or cut the rate of growth of
spending, or both. We need to find $30.2 billion to close the 2017–18 gap between revenue
and spending. Since our mandate precludes us from recommending new or increased taxes,
we are forced to examine government spending as the primary source of a solution. However,
we have already suggested that a set of revenue measures that do not constitute tax
increases — these involve contraband tobacco, the underground economy, collections issues,
tax expenditures and Crown agencies — could raise almost $2 billion and we recommend that
the government proceed with these measures. Steadily reducing the deficit to zero by
2017–18 would save $4.3 billion in interest costs in that year. This means we need to shave
about $23.9 billion off our projection for program spending seven years from now to fully close
the gap and balance the budget.
The arithmetic is simple: in 2017–18, we expect revenues of $132.7 billion from the existing
tax structure and federal transfers. The revenue collection measures mentioned above would
bring total revenue in 2017–18 to about $134.7 billion, so a balanced budget requires total
spending of the same amount. Interest on the debt would cost $15.3 billion; though we, too,
like the 2011 Budget, are setting a course to eliminate the deficit in seven years, this interest
cost is lower than the budget figure primarily because forecasters now anticipate lower interest
rates than they did at budget time. This leaves a residual — after we have set aside a
$1.9 billion contingency reserve for unforeseen events — of only $117.5 billion to be spent on
programs in 2017–18, up somewhat from the $111.2 billion spent on programs in 2010–11,
but below the $124.9 billion foreseen in the 2011 Budget for that year.
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