Commission on the Reform of Ontario's Public Services

Chapter 4: Making Transformation Work: Process and Structures
3. Without tax increases, it will be difficult for Ontario to return to a balanced budget earlier
than 2017–18. Therefore, this date should remain the target. However, a number of steps
should be taken to increase the probability of securing this 2017–18 target:
• Use private-sector forecasts to inform the budget planning process but reduce those
forecasts if it appears the private sector is not appropriately reflecting the risks to the
Ontario economy. Any adjustment to the private-sector growth forecasts should be
based on sophisticated internal economic and risk analyses. Where there is a range
of possible outcomes, do not choose the mid-point of the range, but something on
the prudent side of the middle of the risk distribution.
• Ensure an adequate contingency reserve against forecast errors. To protect against
errors in revenue or expenditure growth rates, the level of the reserve should grow over
time as the budget projection is pushed further out into the future.
• Develop a plan to identify and reduce specific risks to the fiscal plan (the contingency
reserve is designed more to address risks that cannot be identified before the fact).
Examples of specific risks would be certain federal government actions and some
pension liabilities.
• Given the tight constraints that will be imposed on ministry operating budgets, a
centrally held operating reserve should continue to be maintained and accessed only
through a process involving Cabinet and Treasury Board. It should be used in cases
where health and safety might be compromised or services to the most vulnerable are
jeopardized. This operating reserve could also be applied to areas where there is a
convincing argument that an initial investment is required to achieve substantial savings
(and/or quality improvement) over time.
• Between now and 2017–18, it is inevitable that new programs will be introduced.
Consistent with the government’s current policy for program offsets, these will need to
be funded through deeper cuts to some existing programs (or their outright elimination).
This implies that the initial spending targets for ministries will have to be set low enough
to create a policy reserve so that additional cuts do not have to be applied as new
programs are considered.
• At the end of each fiscal year, any reserves not required should be put towards deficit
reduction. A transparent accounting process must be established to demonstrate this.
How the reserves were handled should be explained in a public document issued —
and well publicized — within 60 days of the public accounts figures becoming available
each year.
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