Commission on the Reform of Ontario's Public Services

The Status Quo Scenario
Our mandate requires us to look even further ahead than the Auditor General — to 2017–18.
We found both the Budget and the Auditor General’s report a difficult basis from which to
begin our thinking. In particular, we could neither estimate nor fully comprehend the degree
to which further restraint would be necessary because neither document offers a status
quo outlook.
When we began this work in July 2011, we first created our own Status Quo Scenario that we
believe offers a clearer perspective — certainly one based on updated and more cautious
assumptions — of the seven fiscal years from 2010–11 through 2017–18, in the absence of
new aggressive government action.
We took the same approach as the government in assessing future revenues and public debt
costs, but came up with very different revenue numbers because we expected economic
growth to be slower than the government did in the Budget and slower than private-sector
economists were projecting at that time. We were not simply engaging here in an excess of
prudence. In the short term, the outlook for the world, Canadian and Ontario economies had
already dimmed substantially in the months after the Budget was presented. And beyond
2013, the immediate purview of most forecasters, we believe Ontario’s long-term economic
growth potential will shrink as the labour force grows more slowly and productivity growth
remains moderate.
We took a very different approach from that of the Budget on spending. We built our Status
Quo spending line by projecting program expenditures in accordance with two key factors
that affect the cost of government programs. First, we used the pressures that drive spending
on programs as they are currently designed and delivered. Second, we allowed for current
cost-saving measures that are already in place and likely to produce results in the years
ahead. If a particular restraint measure has been proposed, but not yet fully developed and
implemented, we did not count it.
The results of this exercise can be summarized easily. In our Status Quo Scenario, revenue
growth will be lower and spending growth higher than assumed in the 2011 Budget. Our more
cautious set of assumptions leads not to a balanced budget in 2017–18, but to a deficit in the
order of $30.2 billion, more than double the 2010–11 deficit, and a net public debt of
$411.4 billion, equivalent to just under 51 per cent of the province’s GDP, compared with
35 per cent today.
74