Commission on the Reform of Ontario's Public Services

New Brunswick, which went through two episodes of restraint under Liberal Premier Frank
McKenna, has a mixed record. The first began after the province recorded a deficit in 1986–87
amounting to 3.5 per cent of GDP, which raised the debt-to-GDP ratio to 24.7 per cent.
By 1989–90, the deficit had shrunk to $24 million from $368 million three years earlier.
Revenue increases accounted for most of this progress; the growth of program spending
slowed, but never fell. However, the return to an almost balanced budget was short-lived.
By 1991–92, the recession had pushed the deficit back up to 2.6 per cent of GDP while the
debt ratio, which had fallen to 23 per cent during the restraint years, was back up to
26.4 per cent. This time, a combination of expenditure curbs –– which held the growth of
spending to an average of only 0.7 per cent annually –– and revenue-raising measures
brought the budget to surplus in four years. This was not a major, or even prolonged, attack on
government spending, which actually fell in only one of those years and remained below its
pre-restraint peak for two.
Ontario’s experience in the 1990s is, of course, more familiar to Ontarians. A negligible surplus
in 1989–90, when the debt was only 12.7 per cent of GDP, had marked the last hurrah of the
1980s economic boom. It was followed by a deep recession and five years of deficits from
1990–91 through 1994–95 that raised the debt to 29.2 per cent of GDP. In the 1995 election,
the Progressive Conservatives under Mike Harris won power after running on a platform called
the “Common Sense Revolution” (CSR). The platform set out four key objectives: tax
reduction, balancing the budget, reducing the size of government, and greater emphasis on
individual economic responsibility. The new government substantially implemented its
platform. With the exception of health care, spending was reined in; the two most dramatic
moves were a 22 per cent cut in social assistance rates and a downloading of program
responsibilities to municipal governments, with a partial fiscal offset from other changes in
Ontario-municipal relations and the induced reductions in social assistance expenditures.
Personal taxes were cut by almost 30 per cent over a period of several years, while a new
health tax on high income earners was levied to help pay for rising health care costs.
Corporate taxes were cut as well.
Strong economic and revenue growth after 1995 helped the province balance its budget by
1999–2000, by which time spending had begun to rise again. Although the Harris government
retains its reputation as one that made deep and lasting spending cuts, the reality is rather
different. From its 1995–96 peak, program spending fell by only 4.1 per cent and stayed below
the peak for only three years. By comparison with Alberta and Saskatchewan, Ontario’s
restraint was both milder and much shorter. Even Quebec cut program spending by more than
Ontario during this period –– 4.6 per cent in the two years from 1994–95 to 1996–97.
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