Commission on the Reform of Ontario's Public Services

� Long-term health costs outstripping federal funding: The CHT and the Wait Times
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Reduction Fund are set to expire in 2014. The federal government plans to increase the
CHT by its current six per cent per year until 2017, but then tie the growth rate to Canada’s
nominal GDP, with a three per cent floor. While we recommend capping the growth of
Ontario health spending below that level to balance the budget by 2017–18, the long-run
cost of health care will almost certainly grow faster than nominal GDP. Moving to a
GDP-based growth rate would cost Ontario about $239 million in 2017–18, but could
reach nearly $421 million if GDP growth is below three per cent. These gaps will grow.
Constraining CHT transfers in this fashion will reduce even further the federal
government’s minority share of health care funding.
Aside from the major transfers (CHT, Canada Social Transfer [CST] and Equalization),
the federal government has made no commitment to renewing other expiring transfers.
Ontario needs a reliable and predictable federal partner.
Some federal programs that directly serve Ontarians or fiscal arrangements that support
provincial services should be modernized and reformed. The province should advocate
strongly to change federal programs that do not work effectively in Ontario’s interests.
(Full recommendations on these points can be found in the individual chapters.)
Equalization: A ceiling on Equalization limits the size of the program to the nominal growth
rate of national GDP despite rising disparities among the provinces. The program fails to fully
capture and share the wealth generated by high commodity prices in other parts of Canada.
Nor does the program account for Ontario’s higher cost pressures, which affect the cost of
public services. Equalization should fully capture resource revenues and accommodate
differing price levels among provinces.
Canada Social Transfer: The federal government generates revenues from Ontario on a
nearly equal per capita basis; the CST then returns money to the province on an equal per
capita basis. This unnecessary step is inefficient and reduces accountability and transparency.
The CST should be transferred to the provinces in the form of tax points; in other words,
the federal government should reduce its taxes so provinces could increase theirs by an
equivalent, revenue-neutral amount.
Employment Insurance: Employment Insurance does not meet the needs of the modern
labour market. In 2010, Ontarians contributed about 40 per cent of EI premiums, yet received
only 32 per cent of benefits. And despite having an unemployment rate above the national
average, only 32 per cent of unemployed Ontarians get EI, which also restricts their eligibility
for training. The changes recommended by the Mowat Centre for Policy Innovation would
improve outcomes for Ontario workers and employers.