Commission on the Reform of Ontario's Public Services

138
• In the fiscal approach described in the <strong>Commission</strong>’s mandate, program spending
becomes a residual. The anchor is the target of a balanced budget by 2017–18. As tax
rates are not to be changed, revenues will simply reflect the interaction of economic
performance and the existing tax structure; in effect, they are a given. Similarly, interest
on the public debt is a given, reflecting the interaction of projected interest rates and the
amount of provincial borrowing. This leaves total program spending as the residual; that
is, what is left after interest payments are subtracted from revenues.
• Within the total residual for program spending, the government’s focus should first be
applied to the big-ticket items — health, education and labour costs. Health and
education alone account for more than 60 per cent of total spending (including their
labour component). Including labour costs from the rest of spending, these three broad
areas account for more than 80 per cent of total program spending. Health and
education warrant special attention because they have been among the
fastest-growing components of spending and rank at the top of public interest. Health,
understandably, is always the top priority that people choose in public opinion surveys.
Education is key to the standard of living of individuals and to Ontario society as a
whole. Once the government determines the extent to which health and education can
be restrained, then the rest of program spending becomes the residual from the
residual; that is, what program spending is left over after health and education
allocations have been set. Ministry spending will have to be informed by a view of future
labour costs. It is not satisfactory to simply assume this away by asserting that
ministries must absorb any increases in labour costs. They will be asked to make cuts
for many other reasons. Their overall ability to absorb the restraint will not be
independent of the course of labour costs.
• Fiscal restraint exercises too often feature wage freezes and the elimination of
managers’ bonuses. But in the context of Ontario’s fiscal challenges, focus must remain
on the larger picture, which is the government’s need to get the right people into the
right positions at a cost that is both compatible with its fiscal circumstances and
appropriately aligned with private-sector compensation. The government will have to
attract and retain bright, competent people qualified to carry out the difficult tasks
ahead. It will require considerable flexibility in labour arrangements. Such broader
considerations may well be more important than any short-term cost savings.