Following on the heels of Ontario Finance Minister Vic Fedeli updating Ontarians on the state of the province’s finances, predicting a $15 billion deficit for 2018-19, Treasury Board President Peter Bethlenfalvy has revealed the findings of the government’s promised “line-by-line audit”, conducted by an independent auditing firm. Bethlenfalvy noted the information found in the audit will be used in making strategic changes to service delivery planning across the board.
The audit, Managing Transformation: A Modernization Action Plan for Ontario, reviewed government expenditures from 2002/03 – 2017/18 – and their report highlighted spending across five key sectors:
- health and long-term care;
- children, community and social services;
- justice; and,
- post-secondary and training.
It is not clear if government will be releasing further analysis of spending in other sectors in the short-term.
Report shows Government Spending Skyrocketed over Past Several Years
As anticipated, the report concludes that government expenditures have increased significantly (by 55%) since 2003-04 – far outpacing population growth. Over the period, the provincial debt more than doubled from $158B to $338B.
Annual interest on debt charges grew $2.4B to $12.4B per year in 2017/2018 – and is Ontario’s 4th largest expenditure.
Importantly, the report notes that although real operating expenditures in the Ontario Public Service (OPS) have remained flat at 0 per cent, operating expenditures through Transfer Payments (TP) including to the Broader Public Sector (BPS) have grown by $46.3B – “for every one dollar spent in the OPS, nine dollars are spent through the 35,000 separate TP arrangements that the Ontario Government manages.” Expect an efficiency and accountability lens to be applied to all TP arrangements.
The report sought to use the findings of the line-by-line assessment as the basis for developing a new modernized strategy “focused on efficiency, productivity and results, influencing specific discussion of the enabling conditions that need to be in place to sustain performance.”
A Framework for a Modernized Ontario Government
The report recommends an improved framework for public expenditure management for a “modernized Ontario government” that commits to:
- evidence-based decision-making;
- a modern relationship with labour;
- a citizen-centred and digital-first mindset;
- modern risk-based regulatory management;
- funding models that incent improved outcomes such as productivity and performance;
- intergovernmental coordination; and,
- a clear understanding of government acting as a steward of taxpayer investment.
Report highlights fed-prov fiscal gap
Supported by the Mowat Centre, the structural gap in what Ontarians contribute to federal coffers and what Ontarians receive in federal spending (direct transfers) continues to grow. The report highlights that Ontario’s transfers are not growing at the rate of other transfers nor are they done so based “on clear and consistent principles.” The report suggests that this disadvantages Ontarians and introduces the need for further review. Politically it sets-up a fight around fairness as the federal government heads into an election.
Treasury Board President Bethlenfalvy Commits to Working with Stakeholders in Managing Spending
Reiterating the government’s “moral imperative” to return the province to balanced budgeting, Bethlenfalvy committed to reviewing the areas highlighted by the line-by-line. The release of the line-by-line audit continues to reinforce the message to stakeholders that “everyone will have to make sacrifices, without exception.” Together the line-by-line audit, the 2017-18 Public Accounts, and the Report of Inquiry will be used as a blueprint for the government’s priorities moving forward, and will form the basis of the Fall Economic Statement expected in November.
Furthermore, Minister Bethlenfalvy stressed in his media availability that this is “not a blueprint for cuts” to public services. However, stakeholders may be asked to work with government to find efficiencies, and any financial asks must include a strong rationale that clearly aligns with the government’s priorities. Government will be looking to ensure spending priorities can deliver a return on investment.
Policies and programs will be assessed based on whether they will help grow the economy, create jobs, or otherwise benefit people in their everyday lives. The themes of “doing more for less” and “Ontario is open for business” remain as a constant with this government.
The government’s next steps will require tough choices as it makes progress on its campaign commitment to find $6 billion in efficiencies, while also delivering on its campaign promises, some that require significant government spending.
One-time Savings Through Asset Sales Possible
As part of what the government will do to get the ball rolling, selling all (or a portion) of business enterprises the government owns, as well as looking at alternative service delivery models, will be considered to generate one-time cash payouts. This will certainly be a topic that receives more attention as work proceeds.