Commission on the Reform of Ontario's Public Services

A decision on whether to move forward with user-fee changes to generate additional revenue
is required. Two options to consider are full cost recovery and indexation.
Full Cost Recovery: Over $500 million in additional annual revenue is available if the
government moves forward with full cost recovery on all user fees. Currently, most fees are
not set at a level that results in the recovery of all costs associated with a service provided.
Moving forward with full cost recovery is consistent with the 2009 Auditor General’s Report
on User Fees that recommended the government consider full cost recovery for fees.
However, there are some fees the government may not want to increase for public policy
reasons (e.g., user’s ability to pay, to encourage certain behaviour, etc.).
Indexation: Indexing existing user fees annually by the rate of inflation of two per cent could
result in additional revenues of about $36 million in 2012–13 to $227 million by 2017–18.
Indexation would allow the government to avoid periodic steep fee increases, and better
reflects the cost of providing services. Indexation is consistent with the federal government’s
approach, which recently introduced reforms to regularly adjust fees, and with Quebec and
Nova Scotia, where most fees are indexed to the consumer price index.
Indexation is also consistent with the 2009 Auditor General’s Report on User Fees (which
recommended that the government establish a process for the regular review of fees).
Of course, a blend of the two approaches could provide the best of both worlds.
Recommendation 18-24: Instead of user fees remaining in fixed nominal terms, they should
be updated using a blend of full cost recovery and indexation and be phased in over the next
two years.
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