Commission on the Reform of Ontario's Public Services

Chapter 1: The Need for Strong Fiscal Action
The Auditor General, as stipulated by the Fiscal Transparency and Accountability Act,
subjected the Budget forecast to the act’s stated principle that the government base its fiscal
policy on “cautious and prudent assumptions.” He concluded that while the government’s
estimates of revenues and interest on the public debt met that test, “many of the assumptions
underlying its estimates for program expenses (that is, expenses excluding interest on the
public debt and reserves) were optimistic and aggressive rather than cautious.”
Spending has been skewed in recent years by the government’s one-time support for the auto
sector and record infrastructure stimulus expenditures after the global financial crisis that
began in 2007. But after excluding those large one-time outlays from his comparisons, the
Auditor General concluded that the government’s forecast assumed that there would be a very
sharp drop in the growth rate of spending on programs — from an average of 6.9 per cent in
the past eight years to 1.8 per cent in the three years from 2010–11 to 2013–14. He singled
out the cost of compensation (salaries, wages and benefits comprise half of all program
spending) and health care costs (which amounted to 40 per cent of spending in 2010–11,
with considerable overlap with the compensation costs) as areas where spending pressures
are the major contributors to what he called “a heightened risk that actual expenses will be
higher than estimated.”
In effect, he found — not surprisingly — that the Budget featured a spending track lower than
the one that would unfold under current program designs and savings plans. The Auditor
General surmised — and we have confirmed — that there were no fully developed plans
at the time of the Budget to secure all of the depicted restraint. If there are now plans under
development within government to secure all of the fiscal restraint, they have not been
provided to the <strong>Commission</strong>. When the Auditor General’s report was released, the minister
acknowledged that his plan was aggressive, but maintained that the government was
committed to balancing the budget by 2017–18. “There are enormously difficult choices
ahead,” Minister Duncan said. “This will give Ontarians greater insight and clarity as to the
challenges coming at us.” Implicitly, then, the minister was promising to develop and
implement over time the details of what would be an aggressive restraint plan. Indeed,
the government acknowledged in its Pre-Election Report that “certain assumptions are
based on anticipated actions, strategies and programs of the government that are consistent
with the fiscal plan.” This, of course, is the main reason why the government created
this <strong>Commission</strong> — to provide advice on what a restraint plan might look like.
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