Commission on the Reform of Ontario's Public Services

Executive Summary
Liability from Pension Funds in the BPS: Ontario’s public-sector pension plans — to which
the province provides direct and indirect funding — include some of the largest in the country.
More transparency and strategic planning would help manage this risk. The government
should develop plans to contain fiscal risks. Five plans are consolidated in the province’s
financial statements. The province is wholly or partly responsible for any shortfalls in three of
those: the Public Service Pension Plan (PSPP); OPSEU Pension Plan (OPSEUPP); and
Ontario Teachers’ Pension Plan (TPP). The employers bear this joint responsibility for the
Healthcare of Ontario Pension Plan (HOOPP) and Colleges of Applied Arts and Technology
(CAAT) Pension Plan. The <strong>Commission</strong> encountered considerable confusion on the question
of who bears the ultimate financial responsibility for funding deficits. The government should
clarify who ultimately holds financial liability.
The three pension plans sponsored or co-sponsored by the province now have funding
shortfalls; HOOPP was fully funded as of its latest valuation, while CAAT had a small surplus.
Many of these have increased employer and employee contribution rates and some have
reduced or eliminated the guarantee of inflation protection. A sensitivity analysis of the health
of these plans would be useful since views differ on how their liabilities should be valued.
The government has few levers to make significant short-term adjustments to its pension
costs, but long-term savings are possible.
When faced with future shortfalls, pension plan sponsors should reduce prospective benefits
to limit the need for further contribution rate increases. For its part, the government should
make benefit cost containment part of its compensation negotiating strategy for the BPS.
The government should seek opportunities to save money and obtain better investment
returns by consolidating administrative functions and pooling the investments of pension plans
across the BPS. Transparency is also important. The cost of the public-sector pension plans
should be made much clearer in the Public Accounts and the Budget.
The Taxpayer Protection Act fetters the government’s capacity to make decisions regarding
revenues due to its restrictions on increasing tax rates or introducing a new tax. Ultimately, the
government is accountable to taxpayers if it decides to modify tax rates or introduce a new tax.
Modifying or eliminating this act will allow spending and taxes to be used as required to
address the threats of fiscal sustainability.
Environmental Risks: To better protect the province from the costs of environmental
cleanup, the legislation should be changed to put more focus on the principle of “polluter
pays.” Other options include a program like Superfund in the United States, which has the
authority to clean up hazardous waste sites.
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