Commission on the Reform of Ontario's Public Services

Chapter 1: The Need for Strong Fiscal Action
The 3.8 per cent annual cut to “everything else” would be almost impossible to manage.
The prospect of squeezing more each year would force ministries to simply chop an activity
altogether or impose the 24 per cent cut all at once and then sort out the future with a budget
fixed at the new lower level. In some cases, such cuts would border on the technically
infeasible or require decisions that could be counterproductive. For example, a substantial
portion of the “everything else” category consists of the cost of amortizing existing capital
(mainly infrastructure projects), the government’s contributions to existing pension
arrangements with public-sector employees and the cost of electricity contracts. These items,
which in 2017–18 will account for over 31 per cent of the “everything else” spending, cannot
be cut. This implies that the cut to everything other than those fixed items would be in the
order of 6.4 per cent annually, for a cumulative decline of more than 37 per cent over
seven years.
Also included here are cost-sharing programs with the federal government, so if the province
cut $100 million from programs in which the federal–provincial cost split is 60–40, then
Ottawa’s contribution would fall by $150 million and total spending in the province would be cut
by $250 million. Accordingly, the burden of restraint will fall even more heavily on other
programs.
This is a simple illustration of the kind of choices Ontarians must face in the months ahead.
Another choice involves labour compensation. Since the total bill for wages, salaries and
benefits accounts for about half of all program spending, it is difficult to believe that program
spending can be held to annual growth of 0.8 per cent if labour costs rise by much more
than that.
Having developed a number of scenarios for program spending, we have opted to recommend
one that seeks even greater savings from health care to leave room for additional growth in
spending on other programs. As we will spell out in detail in Chapter 5, Health, we believe
there is ample scope in the health care system for efficiencies that will allow health care
providers to deliver the services Ontarians need without getting annual increases of the kind
seen in recent years.
105