Commission on the Reform of Ontario's Public Services

Chapter 2: The Fiscal Challenge in Context
Remarkably, the implications of this spending goal went almost entirely unremarked by the
public in the months since the Budget was released. The target of $124.9 billion in programs
represented an increase of 10.2 per cent from what the Budget estimated was the
$113.3 billion spent in 2010–11, an increase of 1.4 per cent per year. 5 But if you adjust for
population growth of 1.2 per cent annually and for inflation of 2.2 per cent annually, the
government’s Budget Scenario points to a steady decline in real program spending per capita
that would average 1.9 per cent per year. It is startling to compare this with the 1993–94 to
1999–2000 period. During that time, real per capita program spending fell at an annual rate of
2.0 per cent. Ontarians may not have noticed it, but the 2011 Budget was projecting seven
years in which program spending on a real per capita basis would fall at almost the same rate
as it did in the 1990s.
Unfortunately, the <strong>Commission</strong> believes that these measures will not be enough, as noted in
Chapter 1, The Need for Strong Fiscal Action. Given our greater caution in projecting revenue
growth, our scenario suggested that program spending –– again on a real per capita basis ––
will have to fall by 2.5 per cent annually.
If the cuts of the 1990s appear smaller than the figures that loom in the memories of many
Ontarians, bear in mind that in 1999–2000, the final year of the period we are using, total
program spending increased by 3.0 per cent. The government of the day was heading for a
balanced budget and loosened the purse strings that year, mainly to deal with the pressures
that had accumulated during the previous six years of restraint. This was especially evident in
health spending, which increased by 11.4 per cent that year. It is also worth recalling that a
22 per cent reduction in social assistance rates was a key element of the Harris years; since
these rates have for the most part not increased since then, that avenue is not open now so
restraint in other areas will have to be much tougher.
There is a lesson here from exercises in restraint. Governments can hold the lid on spending
for a while by taking extraordinary measures to contain compensation costs, postponing
capital projects and scrimping on infrastructure maintenance. Unless more fundamental
reforms to spending programs are implemented, however, old pressures reassert themselves
and governments with newly balanced budgets have a harder time resisting them. The Ontario
experience of the 1990s is particularly instructive in this regard because reforms were applied
in several areas including hospitals, schools and municipal relations, and still the fiscal
pressures grew.
5 Program spending eventually came in at $111.2 billion as a result of larger-than-expected year-end savings.
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