The Current Context Ontario Fiscal Policy Rhetoric Vs. Reality

Ontario under pressure to cut public services With the election over, pressure to cut public programs has become quite intense. Another option -- increasing revenue from corporations and the wealthy is not mentioned. However, data clearly indicates that Ontario does not have an overspending problem compared to the other provinces. Instead, it indicates Ontario has very low revenue.

Ontario has the lowest public spending of all the provinces on a per capita basis (Source: 2014 Ontario Budget). If anything, this suggests we have an under-spending problem.

The Ontario government has also now reported in the 2014 Budget that Ontario has the lowest revenue per capita of any province. This is particularly notable as other provinces are quite a bit poorer than Ontario and therefore have a much more limited ability to pay for public spending. Also notable in this chart is the weak role federal government transfer payments play in Ontario finances.

Low Ontario revenue is not a one-year flash in the pan. Statistics Canada data for 2009 (the last year before Stats Can terminated the series) indicates that Ontario had the lowest per capita revenue at that time as well.

The Stats Can data further indicates that Ontario has the lowest revenue as a percentage of the economy (GDP) of all the provinces. ("Own source" revenues are those only from measures imposed by the Ontario government - -they exclude transfers to the Ontario government from the federal government).

Own source revenue for Ontario was 14.4% of GDP, while in the rest of Canada it was 17.9%, i.e. an astonishing 3.5 percentage points of GDP lower in Ontario. If Ontario had taken the same own source revenue as the rest of Canada, the treasury would have an extra $19.5 billion in The deficit would be toast and our big problem would be to figure out how to spend the extra cash.

The federal role The Ontario government says the unilateral federal decision to limit the growth of the Canada Health Transfer will cost Ontario $8.2 billion -- $550 for every individual in Ontario. The Ontario Fall Economic Outlook indicates that 59% of the Ontario health care funding increase this year comes from the annual increase in funding from the federal government via the Canada Health Transfer (CHT). The federal transfer increase accounts for $752 million out of a total provincial health care increase of $1.272 billion. (Another $181 million comes from the increase in the Employer Health Tax revenue, with not much coming from other Ontario based revenue sources, like income or corporate tax.) The share of new funding paid for by new federal CHT funding is up from 56% in and 25% in Federal CHT funding now provides 24.7% of Ontario provincial government health care funding. Unfortunately, the federal government has unilaterally announced plans to reduce its increases for health care funding. Given the role those increases are playing for health care in Ontario, this is significant. this year was under the planned federal CHT funding model, Ontario would be out $340 million. As the federal cuts compound every year, the losses will increase every year.

The provincial role Ontario’s Spending Trends Health care is shrinking, not growing, as a proportion of Ontario’s spending. Ontario is 8th of 10 provinces in health spending. Ontario is 8th of 10 provinces in all government spending. Ontario spends less as a percentage of its GDP than almost all other provinces and is significantly below the average. Hospitals and home care are shrinking, not growing as a proportion of health spending. Ontario has engaged in the most prolonged and deepest tax cuts of any province in Canada. These cuts have not resulted in business investment.

Tax cuts, not health care are “eating” the provincial budget