The Ontario Chamber of Commerce

Fiscal Balance

Restoring fiscal balance by improving the way government works

Ontario’s economic future will depend on sound fiscal strategies. Without balanced budgets, reasonable tax levels and efficient public services, Ontario will continue to lag behind other jurisdictions.

The province is facing the perfect storm of fiscal pressures with deficit elimination remaining a top priority. Health care makes up the largest share of provincial budgets — over 40% in Ontario — with no signs of slowing. Reform in this area is urgently required. Moreover, the province is disadvantaged by the federal transfers and the equalization formula, which leans on Ontario tax-payers, who are not receiving an adequate return on their disproportionate investment in the federal transfer system.

The Good News…

• Ontario and Canada have weathered the global economic downturn comparatively well
• Employment has returned to pre-recession levels
• The provincial government has recognized the need to reduce the deficit and has created the Commission on the Reform of Ontario’s Public Services (Drummond Report)
• The 2011 provincial budget identified $1.5 billion in savings and pledged to reduce the overall size of the public service
• Corporate taxes have been lowered and taxes on capital eliminated

The Challenges…

• Ontario has a $16 billion deficit (some of it structural); Ontario’s proposal to balance the budget by 2017-2018 is three years longer than most provinces
• Healthcare costs comprise over 40% of the provincial budget and are projected to increase
• Ontarians are disadvantaged by numerous federal spending programs, including equalization and funding for training
• Provincial debt is projected to reach $285 billion over the next two years-approximately $1,800 per capita

How do we restore fiscal balance?

1. Share responsibility for public service delivery: adopt creative approaches to government service provision, including partnerships with citizens, businesses and the non-profit sector
2. Find healthcare efficiencies: recover the cost savings from investments in new technology and delivery
3. Develop a long-term strategy for public sector compensation restraint
4. Improve results in the broader public sector: revisit funding formulae to ensure efficiency within the delivery of public services (hospitals, universities, school boards, municipalities, etc.)
5. Secure a better deal with the federal government: Ontario should continue to pursue principled federal transfers