Commission on the Reform of Ontario's Public Services

Chapter 2: The Fiscal Challenge in Context
Holding program spending in check is never easy, especially not when governments face
constant pressure to increase spending. Inflation, population growth, compensation demands
and sheer need all push governments in the direction of higher spending, as do vocal interest
groups that advance any number of causes, many of them worthy. Since the current
government faces some of the same issues as the Harris government, Ontario’s experience in
the 1990s merits closer examination.
Ontario: A Closer Look
Chapter 1, The Need for Strong Fiscal Action, included our scenario for the seven years from
2010–11 through 2017–18. Now we want to compare, using broad strokes, the path we have
laid out with a comparable period in the 1990s, the last time the province grappled with a
substantial deficit. Specifically, we have chosen the six-year span from 1993–94, when the
deficit was $11.2 billion, through 1999–2000, when the government reported a surplus of
$1.0 billion. 4
We will deal first with revenues. Our Preferred Scenario projects that revenue will grow by
3.4 per cent annually from 2010–11 to 2017–18. This is a much more modest increase than
the one that occurred during the recovery period from deficit in the 1990s. Between 1993–94
and 1999–2000, revenue grew by a robust 4.7 per cent annually, even though taxes were cut
during the period after 1995. The late 1990s were a period of robust economic growth that
generated a strong flow of revenues to the provincial government. The timing of the economic
expansion was fortuitous, since federal transfer payments fell as the federal government
worked to eliminate its own deficit. However, Ontario’s revenue from its own sources
grew substantially.
4 We would have preferred to begin our 1990s comparison with 1992–93 for two reasons. First, the reported deficit peaked in that year and,
second, it would have given us a seven-year span in the 1990s to compare with the seven years to 2017–18 that we are now working
with. However, the government switched from cash accounting to accrual accounting in 1993–94, so the 1992–93 figures are no longer
comparable. The reported surplus of $0.7 billion in 1999–2000 has been adjusted to eliminate another accounting change that arose from
the restructuring of the Ontario electricity industry.
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