Ontario’s Economic and Fiscal Outlook in Brief
Restoring accountability, trust and public confidence in Ontario’s finances is one of the promises the government has made to the people of Ontario. The 2019 Ontario Budget — the first budget of Ontario’s Government for the People — delivers on this commitment.
The government inherited a significant fiscal challenge from the previous government and is committed to restoring fiscal health in Ontario and to getting the Province back on a fiscally sustainable path to protect health care, education and other key services that individuals and families in Ontario rely upon every day. To that end, and with this Budget, the government has committed to balancing the budget by 2023–24 in a responsible manner — restoring accountability, sustainability and trust.
Continuing the practice established in the 2018 Ontario Economic Outlook and Fiscal Review, and consistent with the provisions of the proposed Fiscal Sustainability, Transparency and Accountability Act, 2019, this first section provides, with clarity and transparency, the financial state of the Province. It is important that the people of Ontario are well informed and have access to the information needed to fully understand the difficult, but necessary choices that lie ahead in restoring fiscal balance and sustainability.
Ontario’s Economic Outlook
Ontario’s economy has underperformed since 2003. The province’s real GDP growth trailed the national average in 12 of the previous 16 years.
As a result, the Province now faces a number of challenges that could impact its future prosperity and heighten its vulnerability to slowing global economic growth.
Recently there have been positive signs in the Ontario economy. Ontario’s real GDP grew by an estimated 2.2 per cent in 2018. Since June 2018, 132,000 net new jobs have been created in Ontario, with 112,400 in the private sector. In the past six months alone, employment in the province has increased at the strongest pace since January 2003. In addition, Ontario’s unemployment rate declined to an average of 5.6 per cent in 2018, its lowest annual rate since the late 1980s.
Looking ahead, the Ontario economy is expected to continue to grow steadily over the 2019 to 2024 period. However, the pace of economic growth is forecast to moderate from recent years due to a less supportive external environment.
| Item | 2016 | 2017 | 2018 | 2019p | 2020p | 2021p | 2022p | 2023p | 2024p |
|---|---|---|---|---|---|---|---|---|---|
| Real GDP Growth | 2.3 | 2.8 | 2.2 | 1.4 | 1.6 | 1.5 | 1.9 | 1.9 | 1.8 |
| Nominal GDP Growth | 4.4 | 4.1 | 3.4 | 3.4 | 3.4 | 3.2 | 3.6 | 3.9 | 3.9 |
| Employment Growth | 1.1 | 1.8 | 1.6 | 1.3 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 |
| CPI Inflation | 1.8 | 1.7 | 2.4 | 1.9 | 2.0 | 1.7 | 1.9 | 2.0 | 2.0 |
Table footnotes:
p = Ontario Ministry of Finance planning projection based on information up to March 8, 2019.
Sources: Statistics Canada and Ontario Ministry of Finance.
Plan to Balance the Budget: Ontario’s Recovery Plan
The government is delivering on its commitment to balance the budget.
The government’s plan will prioritize investments that generate the greatest returns for the people of Ontario and protect what matters most to Ontario individuals, families and businesses. Programs will be continually reviewed to ensure that they are efficient, effective and modern, relying on best practices from around the world.
The government is ensuring value for money and prioritizing spending that is projected to generate savings and cost avoidance of about eight cents for every dollar spent, on average, over the path to balance. This is enabling the government to provide, through measures announced to date and in the 2019 Ontario Budget, a projected $26 billion in much needed relief to Ontario individuals, families and businesses over six years, while continuing to eliminate the deficit.
“Affordability and excellence are not incompatible; they can be reconciled by greater efficiency, which serves both the fiscal imperative and Ontarians’ desire for better run programs.”
Commission on the Reform of
Ontario’s Public Services, 2012
Over the course of the path to balance, total revenue is projected to grow at an average annual rate of 3.0 per cent. Comparatively, program expense over the same period is expected to grow at an average annual rate of 1.0 per cent.
| Item | Actuals 2017–18 |
Interim1 2018–19 |
Medium-Term Outlook 2019–20 |
Medium-Term Outlook 2020–21 |
Medium-Term Outlook 2021–22 |
Recovery Plan 2022–23 |
Recovery Plan 2023–24 |
|---|---|---|---|---|---|---|---|
| Revenue — Personal Income Tax | 32.9 | 35.0 | 36.6 | 38.2 | 39.0 | 40.1 | 42.1 |
| Revenue — Sales Tax | 25.9 | 27.9 | 28.1 | 28.9 | 29.9 | 31.0 | 32.2 |
| Revenue — Corporations Tax | 15.6 | 15.2 | 15.2 | 15.7 | 16.3 | 16.9 | 17.9 |
| Revenue — Ontario Health Premium | 3.7 | 3.8 | 4.0 | 4.2 | 4.4 | 4.6 | 4.8 |
| Revenue — Education Property Tax | 5.9 | 6.0 | 6.1 | 6.2 | 6.2 | 6.2 | 6.2 |
| Revenue — All Other Taxes | 15.7 | 15.6 | 16.2 | 16.7 | 16.2 | 16.4 | 17.0 |
| Total Taxation Revenue | 99.7 | 103.6 | 106.1 | 109.8 | 111.9 | 115.2 | 120.2 |
| Government of Canada | 24.9 | 25.0 | 25.5 | 26.6 | 27.2 | 28.2 | 29.0 |
| Income from Government Business Enterprises | 6.2 | 4.9 | 5.8 | 6.2 | 6.9 | 7.0 | 7.2 |
| Other Non-Tax Revenue | 19.9 | 17.4 | 16.8 | 17.2 | 17.6 | 18.1 | 18.6 |
| Total Revenue | 150.6 | 150.8 | 154.2 | 159.8 | 163.7 | 168.5 | 175.1 |
| Programs — Health Sector | 59.3 | 62.2 | 63.5 | 64.6 | 65.3 | 66.2 | 67.9 |
| Programs — Education Sector2 | 27.3 | 29.1 | 29.8 | 29.8 | 30.1 | 30.1 | 30.2 |
| Programs — Postsecondary Education and Training Sector | 11.2 | 12.1 | 11.4 | 11.5 | 11.7 | 12.1 | 12.5 |
| Programs — Children’s and Social Services Sector | 16.4 | 17.0 | 16.7 | 16.5 | 16.0 | 15.7 | 15.6 |
| Programs — Justice Sector | 4.8 | 5.0 | 4.9 | 4.8 | 4.7 | 4.7 | 4.7 |
| Programs — Other Programs | 23.3 | 24.6 | 23.8 | 24.7 | 26.0 | 27.0 | 26.7 |
| Total Programs | 142.4 | 150.0 | 150.1 | 151.9 | 153.8 | 155.8 | 157.6 |
| Interest on Debt | 11.9 | 12.5 | 13.3 | 13.7 | 14.4 | 14.9 | 15.5 |
| Total Expense | 154.3 | 162.5 | 163.4 | 165.6 | 168.2 | 170.7 | 173.2 |
| Surplus/(Deficit) Before Reserve | (3.7) | (11.7) | (9.3) | (5.8) | (4.6) | (2.2) | 1.9 |
| Reserve | – | – | 1.0 | 1.0 | 1.0 | 1.3 | 1.6 |
| Surplus/(Deficit) | (3.7) | (11.7) | (10.3) | (6.8) | (5.6) | (3.5) | 0.3 |
| Net Debt as a Per Cent of GDP | 39.2 | 40.2 | 40.7 | 40.7 | 40.6 | 39.8 | 38.6 |
Table footnotes:
[1] Interim represents the 2019 Ontario Budget projection for the 2018–19 fiscal year.
[2] Excludes Teachers’ Pension Plan. Teachers’ Pension Plan expense is included in Other Programs.
Note: Numbers may not add due to rounding.
Source: Ontario Ministry of Finance.
Revenue Details
A detailed revenue outlook is presented as required by the proposed FSTAA. The government’s policy commitments have been reflected in the forecast.
Key inputs included in the revenue forecast are:
- A prudent economic growth outlook;
- Existing federal–provincial agreements and funding formulas; and
- The business plans of government ministries, business enterprises and service organizations.
Details of the revenue outlook are outlined later in this document. See Chapter 3: Ontario’s Fiscal Plan and Outlook and Annex: Details of Tax Measures for more details.
Program Expense Details
In order to achieve a balanced budget while protecting what matters most, the government has been working hard to transform programs, not only to find efficiencies and savings, but to make services more modern and accessible for the people of Ontario.
Several programs have been streamlined to centralize administrative functions, including:
- Combining six existing Provincial health agencies and the Local Health Integration Networks into one new agency, Ontario Health, to streamline health care oversight, reduce health care bureaucracy and reduce siloed regional administration, leading to annualized savings of more than $350 million at maturity;
- Creating an integrated supply chain model to consolidate procurement practices across sectors, resulting in reduced government expenditures and reduced red tape for vendors, while ensuring a seamless movement of products throughout the province. This initiative is expected to result in annualized savings of $1 billion; and
- All ministries have identified four per cent in administrative efficiencies resulting in cumulative savings of $1.7 billion by 2023–24.
Several programs have been redesigned to focus spending on what matters most to the people of Ontario, including:
- Reforming the social assistance system by simplifying the rate structure, reducing administration, cutting unnecessary rules, and providing greater opportunities to achieve better employment outcomes for social assistance recipients, resulting in estimated annual savings of over $1 billion at maturity;
- Focusing drug benefits under OHIP+ to those who need them the most — children and youth under the age of 25 who are not covered by private insurance plans, generating annualized savings of at least $250 million;
- Reforming the Ontario Student Assistance Program (OSAP) so that future generations of Ontario students can access financial support for postsecondary education and providing a 10 per cent reduction in tuition for domestic students. The government is restoring OSAP to a needs-based program. The changes to OSAP will lead to estimated annual savings of at least $325 million; and
- Making important strides towards building a modern and more efficient workforce while ensuring that front-line services and workers are protected. As an example, the size of the Ontario Public Service has already been reduced by 3.5 per cent through attrition alone. Additional measures such as voluntary exit initiatives will bring about further reductions and efficiencies in the future.
By containing costs and prioritizing spending, the government is providing, through measures announced to date and in this Budget, a projected $26 billion in much needed relief to Ontario individuals, families and businesses over six years, while continuing to eliminate the deficit.For example, the government is proposing a new refundable tax credit for child care costs that would provide up to $6,000 per child under the age of seven, up to $3,750 per child between the ages of seven and 16, and up to $8,250 per child with a severe disability. The government is also providing a more transparent and responsible government-funded electricity rate relief program to families, farms and small businesses. At the same time, the government is reducing electricity system costs, including by terminating more than 750 unnecessary renewable contracts and reducing the cost of conservation programs, focusing on the most cost-effective and efficient programs.
“We believe Ontarians can make — and implement — the kind of thoughtful decisions needed to resolve the province’s fiscal dilemma while protecting, to the greatest degree possible, the public programs on which Ontarians rely, many of which are a source of justifiable pride.”
Commission on the Reform of
Ontario’s Public Services, 2012
The government’s approach to restraining spending growth and finding savings is responsible and pragmatic; program expense will grow at an average annual rate of one per cent between 2018–19 and 2023–24, which is more fiscally responsible than spending growth under the previous administration, which peaked at a year-over-year growth rate of 8.3 per cent between 2016–17 and 2017–18. In addition, when compared to other savings exercises conducted by previous governments, it is evident that this government’s approach is responsible and measured.
While balancing the budget requires difficult decisions and trade-offs, it is also an opportunity to rethink how government works and how the entire broader public sector delivers programs and services that the people of Ontario rely on every single day. This is why the government will continue to review programs on an ongoing basis to ensure that they are efficient, sustainable and delivering outcomes for the people of Ontario. The people of Ontario need to feel confident that the government is a careful steward of their tax dollars.
Details of the expense outlook are outlined later in this document. See Chapter 3: Ontario’s Fiscal Plan and Outlook and Annex: Details of Tax Measures for more details.
Other Recovery Plan Assumptions
The reserve is set at $1.0 billion over the medium term increasing to $1.3 billion in 2022–23 and $1.6 billion in 2023–24, which, by the final year of the recovery plan, is more than double the level set in the 2018 Budget.
Net debt-to-GDP is not expected to exceed the peak of 40.8 per cent identified by the Commission in 2018–19 and is projected to decline to 38.6 per cent by the end of the recovery plan.
Ontario’s Debt Challenge
The Province’s net debt has grown to more than one-third of a trillion dollars. In 2019–20, the government is forecasting $13.3 billion in interest payments to service that debt. This is why the government is taking action to reduce the debt burden and restore the fiscal health of the province within a reasonable and practical timeframe.
Through the implementation of the debt burden reduction strategy, the government is clearly setting out its intent to have Ontario’s net debt-to-GDP ratio reach more sustainable levels and be lower than the Commission’s forecast of 40.8 per cent for 2018–19. By the end of the recovery plan, net debt-to-GDP is forecast to fall to 38.6 per cent.
The Province completed $39.6 billion in long-term borrowing in 2018–19. That is a larger amount than any of the annual borrowing programs over the next five years, including in 2019–20, at which time the borrowing program is forecast to be $3.6 billion lower at $36.0 billion. As the deficit is reduced, a growing portion of borrowing will be used to refinance maturing debt, rather than financing new debt. By the end of the recovery plan in 2023–24, the borrowing program is forecast to be $36.6 billion, which is less than the Province’s debt maturities that year.
The table below provides information on Ontario’s debt burden and borrowing program. See Chapter 4: Borrowing and Debt Management for more details.
| Item | 2018 FES1 |
In-Year Change |
Interim2 2018–19 |
Medium-Term Outlook 2019–20 |
Medium-Term Outlook 2020–21 |
Medium-Term Outlook 2021–22 |
Recovery Plan 2022–23 |
Recovery Plan 2023–24 |
|---|---|---|---|---|---|---|---|---|
| Deficit/(Surplus) | 14.5 | (2.8) | 11.7 | 10.3 | 6.8 | 5.6 | 3.5 | (0.3) |
| Investment in Capital Assets | 12.8 | (0.9) | 11.9 | 11.6 | 11.1 | 10.5 | 9.0 | 9.3 |
| Non-Cash Adjustments | (7.4) | 1.1 | (6.3) | (7.7) | (7.7) | (7.7) | (8.0) | (8.1) |
| Loans to Infrastructure Ontario | 0.4 | (0.2) | 0.1 | 0.2 | 0.1 | 0.2 | (0.2) | (0.1) |
| Other Net Loans/Investments | 0.0 | (0.8) | (0.8) | 0.7 | 0.0 | (0.3) | (0.2) | (0.1) |
| Debt Maturities/Redemptions | 21.9 | 0.0 | 21.9 | 27.5 | 26.4 | 24.1 | 31.2 | 37.0 |
| Total Funding Requirement | 42.1 | (3.5) | 38.6 | 42.5 | 36.8 | 32.5 | 35.3 | 37.6 |
| Canadian Pension Plan Borrowing | 0.0 | 0.0 | 0.0 | – | – | – | – | – |
| Decrease/(Increase) in Short-Term Borrowing | – | – | – | (1.2) | (1.0) | (1.0) | (1.0) | (1.0) |
| Increase/(Decrease) in Cash and Cash Equivalents | 3.5 | 9.8 | 13.3 | (5.3) | (3.0) | – | – | – |
| Pre-borrowing in 2017–18 | (12.4) | – | (12.4) | – | – | – | – | – |
| Total Long-Term Public Borrowing | 33.2 | 6.3 | 39.6 | 36.0 | 32.8 | 31.5 | 34.3 | 36.6 |
| Maturities as a Percentage of Long-Term Public Borrowing | 66% | 55% | 76% | 81% | 77% | 91% | 101% |
Table footnotes:
[1] 2018 Ontario Economic Outlook and Fiscal Review (FES).
[2] Interim represents the 2019 Ontario Budget projection for the 2018–19 fiscal year.
Note: Numbers may not add due to rounding.
Source: Ontario Financing Authority.
Ontario’s Capital Plan Outlook
The government is committed to investing in the province’s infrastructure, including strategic investments in transit and highways, schools and hospitals. Planned investments for 2019–20 total $14.7 billion and reflect the government’s commitment to invest about $144 billion over the next 10 years.
In the fall, the government committed to reviewing planned infrastructure investments to prioritize projects that have a real impact on people’s daily lives while delivering the best value for taxpayers. Under the previous government, the Province overstated its infrastructure investment commitments year after year. For the five years between 2013–14 and 2017–18, actual infrastructure investments were on average 17 per cent below the amounts planned.
Beginning in 2019–20, the government’s plan reflects more sustainable levels of infrastructure investment. It also reflects a more realistic forecast of construction timelines for major projects planned or underway, in keeping with actual expenditure patterns.
| Sector | Medium-Term Outlook 2019–20 |
Medium-Term Outlook 2020–21 |
Medium-Term Outlook 2021–22 |
Recovery Plan 2022–23 |
Recovery Plan 2023–24 |
10-Year Total |
|---|---|---|---|---|---|---|
| Transportation — Transit | 5,527 | 5,499 | 5,295 | 5,702 | 7,224 | 66,723 |
| Transportation — Provincial Highways | 2,754 | 2,723 | 2,538 | 2,527 | 2,347 | 22,085 |
| Transportation — Other Transportation, Property and Planning | 284 | 213 | 167 | 180 | 194 | 1,722 |
| Health — Hospitals | 2,357 | 2,214 | 2,724 | 2,387 | 2,310 | 26,989 |
| Health — Other Health | 255 | 239 | 269 | 321 | 309 | 3,313 |
| Education | 2,435 | 2,205 | 2,081 | 1,862 | 1,806 | 19,479 |
| Postsecondary Education and Training — Colleges and Other | 299 | 327 | 278 | 262 | 140 | 2,115 |
| Postsecondary Education and Training — Universities | 52 | 71 | 64 | 119 | 106 | 1,077 |
| Social | 299 | 176 | 240 | 272 | 281 | 2,505 |
| Justice | 762 | 813 | 719 | 581 | 510 | 4,829 |
| Other Sectors2 | 1,599 | 1,963 | 2,066 | 1,727 | 1,588 | 12,803 |
| Total Infrastructure Expenditures | 16,623 | 16,444 | 16,441 | 15,939 | 16,814 | 163,641 |
| Less: Other Partner Funding3 | 1,891 | 2,050 | 2,033 | 1,929 | 1,748 | 19,433 |
| Total4 | 14,732 | 14,394 | 14,407 | 14,010 | 15,066 | 144,208 |
Table footnotes:
[1] Includes interest capitalized during construction; third-party investments in hospitals, colleges and schools; federal and municipal contributions to provincially owned infrastructure investments; and transfers to municipalities, universities and non-consolidated agencies.
[2] Includes government administration, natural resources and culture and tourism sectors.
[3] Other Partner Funding refers to third-party investments in hospitals, colleges and schools.
[4] Includes federal/municipal contributions to provincial infrastructure investments.
Note: Numbers may not add due to rounding.
Key changes resulting from the government’s review include:
- Prioritizing hospital projects that address ending hallway health care;
- Pausing capital funding for high-speed rail and actively exploring ways to enhance train speeds and service levels on existing railway corridors in Southwestern Ontario;
- Cancelling the construction of a freight rail by-pass that will no longer be pursued because of increased services along the GO Transit Kitchener rail corridor that are planned or already in effect as part of the GO Rail Expansion program;
- Reprioritizing transit projects in the City of Toronto, with the introduction of four new priority projects;
- Realigning funding for new school construction and child care to reflect changes to investment priorities in the sector; and
- Reducing funding for undergraduate and graduate capital expansion projects.
The government’s commitment to lower the net debt-to-GDP ratio to below the inherited 40.8 per cent by 2022–23 is supported by the outcomes of the review of planned infrastructure investments. Having a more responsible capital plan than that of the previous government had will lower the Province’s projected borrowing requirements by $10 billion over the next five years, thereby reducing new debt and interest costs.
Chart Descriptions
Chart: Ontario’s Path to Balance Compared to Other Governments
The line graph presents the values of the program spending growth index for; the projection for the 2019 Ontario Budget outlook from 2019–20 to 2023–24, the previous Ontario government from 2013–14 to 2017–18; the government of Canada from 2010–11 to 2014–15; and the previous Ontario government from 1995–96 to 1999–00.
- The program expense growth index for the 2019 Ontario Budget Outlook 2019–20 to 2023–24 is 100 in Year 1, 101.2 in Year 2, 102.5 in Year 3, 103.8 in Year 4 and 105.0 in Year 5.
- The program expense growth index for the previous Ontario government from 2013–14 to 2017–18 is 100 in Year 1, 102.3 in Year 2, 105.3 in Year 3, 106.6 in Year 4 and 115.4 in Year 5.
- The program expense growth index for the Government of Canada from 2010–11 to 2014–15 is 100 in Year 1, 100.4 in Year 2, 102.1 in Year 3, 103.2 in Year 4 and 104.7 in Year 5.
- The program expense growth index for the previous Ontario government from 1995–96 to 1999–00 is 100 in Year 1, 96.8 in Year 2, 97.2 in Year 3, 96.2 in Year 4 and 101.8 in Year 5.
Chart: Net Debt-to-GDP
Ontario’s net debt-to-GDP ratio is forecast to be 40.2 per cent in 2018–19.
| Year | Net Debt-to-GDP (%) |
|---|---|
| 1990–91 | 13.4 |
| 1991–92 | 17.1 |
| 1992–93 | 21.1 |
| 1993–94 | 26.7 |
| 1994–95 | 28.4 |
| 1995–96 | 30.2 |
| 1996–97 | 31.3 |
| 1997–98 | 30.6 |
| 1998–99 | 29.5 |
| 1999–00 | 32.1 |
| 2000–01 | 29.3 |
| 2001–02 | 28.3 |
| 2002–03 | 26.8 |
| 2003–04 | 27.5 |
| 2004–05 | 26.8 |
| 2005–06 | 27.9 |
| 2006–07 | 27.1 |
| 2007–08 | 26.6 |
| 2008–09 | 27.9 |
| 2009–10 | 32.4 |
| 2010–11 | 34.5 |
| 2011–12 | 36.7 |
| 2012–13 | 38.2 |
| 2013–14 | 39.7 |
| 2014–15 | 40.6 |
| 2015–16 | 40.3 |
| 2016–17 | 39.6 |
| 2017–18 | 39.2 |
| 2018–19 | 40.2 |
| 2019–20 | 40.7 |
| 2020–21 | 40.7 |
| 2021–22 | 40.6 |
| 2022–23 | 39.8 |
| 2023–24 | 38.6 |
Footnotes
- [1] EY Canada, “Managing Transformation. A Modernization Action Plan for Ontario,” https://files.ontario.ca/ey_report_2018_en.pdf