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BUILDING OppoRTUNITY SECURING OUR FUTURE

ONTARIO BUDGET

2014
Charles Sousa
Minister of Finance The Honourable

BUDGET PApERS

BUILDING OppoRTUNITY SECURING OUR FUTURE

ONTARIO BUDGET

2014
Charles Sousa
Minister of Finance The Honourable

BUDGET PApERS

For general inquiries regarding the 2014 Ontario Budget: Budget Papers, please call: Toll-free English & French inquiries: 1-800-337-7222 Teletypewriter (TTY): 1-800-263-7776 For electronic copies of this document, visit our website at www.ontario.ca/budget By phone through the ServiceOntario Contact Centre Monday to Friday, 8:30 AM to 5:00 PM 416 326-5300 416 325-3408 (TTY) 1 800 668-9938 Toll-free across Canada 1 800 268-7095 TTY Toll-free across Ontario Queens Printer for Ontario, 2014 ISBN 978-1-4606-4014-2 (Print) ISBN 978-1-4606-4015-9 (HTML) ISBN 978-1-4606-4016-6 (PDF) Ce document est disponible en franais sous le titre : Budget de lOntario 2014 Documents budgtaires

TableofContents

Contents
Foreword ..............................................................................................xvii

Chapter I: Ontarios Decade A 10-Year Plan for the Economy


Section A: Investing in People
Introduction .............................................................................................3 The 10-Year Plan for Ontarios Economy ....................................................4 Highlights ................................................................................................6 Investing in Hard-Working Ontarians ...........................................................7 Ontarios New Vision for Education ..............................................................8 Continued Investments in Early Learning ................................................. 11 Fully Implementing Full-Day Kindergarten by September 2014 ................... 12 Support for Front-Line Child Care Workers ............................................... 13 Ontario Students Continue to Increase Test Scores and Graduation Rates ........................................................................... 13 Advancing Postsecondary Education ....................................................... 14 Building Ontarios Integrated Employment and Training System ..................... 18 Promoting the Skilled Trades ................................................................. 19 Ontarios Youth Jobs Strategy ................................................................ 21 Attracting Skilled Immigrants ................................................................ 24 An Action Plan for Health Care .................................................................. 26 Right Care, Right Time, Right Place ........................................................ 26 Faster Access and Stronger Links to Family Health Care ............................ 29 Supporting Healthy Lifestyles................................................................. 32 Establishing a Patient Ombudsman ......................................................... 33 Helping Seniors Stay Active and Engaged ................................................... 34 Ontarios Seniors Community Grant Program ........................................... 34

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2014OntarioBudget Section B: Building Modern Infrastructure


Highlights ..............................................................................................35 Making Strategic Investments in Roads, Bridges and Public Transit................. 42 Moving Goods to Market Faster ..............................................................42 Moving Ontario Forward ........................................................................44 Allocating the Dedicated Funds ..............................................................47 Creating More Transit Options for Commuters .......................................... 50 Modernizing Infrastructure in Communities across Ontario ............................52 Investing in Municipal Infrastructure .......................................................52 More Access to Health Care ...................................................................53 Supporting a Highly Skilled and Innovative Workforce ...............................56 Supporting Development in Northern Ontarios Ring of Fire ........................ 61 Maximizing the Value of Public Infrastructure in Ontario ................................62 Revitalizing Assets ...............................................................................62 Leveraging Private-Sector Expertise ........................................................63 Modernizing Energy Infrastructure .............................................................66 Supporting Investments in Clean Energy .................................................66 Nuclear Refurbishment: Delivering Value for Ontario Ratepayers ................. 66

Section C: Creating a Dynamic and Innovative Business Climate


Highlights ..............................................................................................67 Maintaining a Competitive Tax System .......................................................70 A New $2.5 Billion Jobs and Prosperity Fund ...............................................71 Investing in Ontarios Dynamic and Innovative Sectors .................................71 Promoting Ontarios Manufacturing Sector ...............................................73 Growing Ontarios Life Sciences Sector ....................................................77 Boosting Ontarios Information and Communications Technology Sector ....... 79 Promoting Ontarios Entertainment and Creative Cluster ............................82 Strengthening Ontarios Financial and Business Services Sector .................. 84 Modern Insurance Regulation .................................................................86 Financial Services Regulation .................................................................86 Developing Ontarios Resource Industries ................................................87 Ontario Northland Transportation Commission ..........................................90 Helping Businesses Manage Electricity Costs ............................................91

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Fostering a Culture of Innovation and Entrepreneurship ................................ 96 Investing in Venture Capital Funds ......................................................... 96 Commercializing Leading-Edge Discoveries .............................................. 97 Increasing Access to Capital .................................................................. 98 Growing Small Businesses in Ontario ...................................................... 98 Supporting Regional Investments Helps Create Jobs .................................. 100 Reducing Regulation for Business to Enhance Productivity ........................... 103 Going Global ........................................................................................ 105 Attracting Foreign Direct Investment .................................................... 105 Expanding Exports ............................................................................. 106

Section D: A Fair Society


Highlights ............................................................................................ 109 A Fair Society ....................................................................................... 111 Providing Opportunity for All Ontarians .................................................... 112 Providing Supports for Low-Income Working Individuals and Families...................................................................................... 113 Protection and Fairness for Ontario Workers .......................................... 117 Housing and Homelessness Prevention Initiatives ................................... 119 Targeted Supports for the Most Vulnerable ............................................ 122 Supporting Opportunities for Aboriginal People and Communities .............. 128 Improving Access to Justice................................................................. 133 Providing Electricity Rate Mitigation for Ontarians ................................... 134 Enhancing Consumer Protection for Ontarians ........................................... 137 Auto Insurance Cost and Rate Reduction Strategy .................................. 137 Putting Consumers First ...................................................................... 141

2014OntarioBudget Section E: Making Every Dollar Count


Highlights ............................................................................................ 145 Balanced Path to a Balanced Budget ........................................................ 147 Every Dollar Counts: Supporting the Governments Priorities ....................... 148 Annual Savings Target and Expenditure Review ......................................... 151 Compensation and Benefit Costs ............................................................. 152 Managing Executive Compensation ....................................................... 152 Continuing the Salary Freeze on Members of Provincial Parliament ............ 152 Managing Benefit Costs ....................................................................... 153 Public-Sector Compensation ................................................................ 153 Managing Public-Sector Pension Costs ................................................... 154 Electricity Sector Pension Sustainability ................................................. 156 Managing Spending Growth and Maintaining Key Services ........................... 157 Responsible Management in Health Care ............................................... 157 Transforming Public Services ............................................................... 158 Progress on Implementing Commission on the Reform of Ontarios Public Services Recommendations ............................ 160 Continuing to Improve Agency Accountability and Transparency .................. 161 Unlocking the Value of Provincial Assets ................................................... 163 Reducing the Governments Footprint.................................................... 166 Supporting Municipalities While Managing Responsibly ................................ 167 Ongoing Support to Municipalities ......................................................... 167 Ontario Municipal Partnership Fund ....................................................... 167 Strengthening Ontarios Property Tax System ........................................ 168 Power Dam Special Payment Program ................................................... 169

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Chapter II: Ontarios Economic Outlook and Fiscal Plan


Section A: Overview
Highlights ............................................................................................ 173 Transparency, Financial Management and Fiscal Accountability .................... 179 Transparency .................................................................................... 179 Financial Management ........................................................................ 180 Fiscal Accountability ........................................................................... 180

Section B: 201314 Interim Fiscal Performance


In-Year Revenue Performance................................................................. 183 Revenue Changes .............................................................................. 184 In-Year Expense Performance ................................................................. 185 Expense Changes ............................................................................... 186

Section C: Ontarios Economic Outlook


Recent Economic Developments .............................................................. 191 Ontarios Recovery ............................................................................. 192 Global Economic Developments and Outlook .......................................... 196 U.S. Economy ................................................................................... 197 Oil Prices .......................................................................................... 200 The Canadian Dollar ........................................................................... 201 Financial Markets ............................................................................... 202 Outlook for Ontarios Economic Growth .................................................... 206 Details of the Ontario Economic Outlook ................................................... 217 Private-Sector Forecasts ..................................................................... 218 Change in the Economic Outlook .......................................................... 219 Comparison to the 2013 Budget ........................................................... 220

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2014OntarioBudget Section D: Ontarios Revenue Outlook


Medium-Term Revenue Outlook .............................................................. 225 Key Changes in the Medium-Term Revenue Outlook since the 2013 Budget ........................................................................... 230 Medium-Term Revenue Outlook Has Declined since the 2010 Budget ............ 233 Risks to the Revenue Outlook ................................................................. 234

Section E: Ontarios Fiscal Plan


Medium-Term Fiscal Outlook ................................................................... 241 Medium-Term Expense Outlook ............................................................... 243 Risks to Expense Outlook .................................................................... 246 Contingent Liabilities .......................................................................... 248 Key Changes in the Medium-Term Fiscal Outlook since the 2013 Budget ........................................................................... 249 Ontarios Path to Balance ....................................................................... 253 Responsible Choices ........................................................................... 254 Actions to Eliminate the Deficit ............................................................. 254 Fiscal Prudence ..................................................................................... 258 Intergenerational Fairness ...................................................................... 259

Section F: Details of Ontarios Finances


Fiscal Tables and Charts ......................................................................... 261 Support from Gaming ............................................................................ 271

Chapter III: Federal Underfunding of Ontarians


Highlights ............................................................................................ 275 Unilateral Federal Actions Hurt Ontario ..................................................... 276 Federal Underfunding ............................................................................ 281

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Ontario Needs a Committed Federal Partner to Invest in the Provinces Economy ...................................................................... 283 Providing Better Retirement Income Security for Ontarians ...................... 284 Federal Government Needs to Invest More in Infrastructure ..................... 285 Investment in Transportation Priorities.................................................. 287 Ring of Fire ....................................................................................... 288 Immigration ...................................................................................... 290 Ontario Needs a Committed Federal Partner to Invest in Stronger Ontario Health Care .............................................................. 291

Chapter IV: Strengthening Retirement Security in Ontario


Highlights ............................................................................................ 295 Introduction ......................................................................................... 296 The Retirement Savings Gap ............................................................... 297 Factors Contributing to the Undersaving Problem .................................... 298 A Strategy to Enhance Retirement Savings ............................................... 302 Ontarians without Workplace Pension Plans ........................................... 302 Ontarians with Self-Directed Retirement Savings .................................... 312 Ontarians with Defined Benefit Plans..................................................... 312

Chapter V: A Fair and Efficient Tax System


Highlights ............................................................................................ 319 Introduction ......................................................................................... 320 Income Tax Changes for People .............................................................. 322 Personal Income Tax Rate Changes ...................................................... 322 Dividend Tax Credit Changes ............................................................... 323 Tax Changes for Business ...................................................................... 324 Small Business Deduction ................................................................... 324 Tax on Aviation Fuel ........................................................................... 325 Registration Requirements for Road-Building Machines ............................ 326 Review of Business Tax Expenditures ....................................................... 326 Business Support Programs Review ...................................................... 326 Research and Development Incentives .................................................. 327 Training Tax Incentives....................................................................... 328

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Revenue Integrity ................................................................................. 329 Underground Economy ........................................................................ 329 Corporate Tax Avoidance .................................................................... 330 Enhanced Audit Activity ...................................................................... 331 Ontarios Tobacco Strategy .................................................................. 331 Land Transfer Tax .............................................................................. 334 Federal Tax Measures ............................................................................ 335 Paralleling Federal Tax Measures .......................................................... 335 Taxation of Graduated Rate Trusts........................................................ 335 Other Measures .................................................................................... 336 Provincial Land Tax ............................................................................ 336 Hospices ........................................................................................... 336 Tax Credit for Farmers Who Donate to Community Food Programs ............ 337 Summary of Measures ........................................................................... 337 Technical Amendments .......................................................................... 338

Chapter VI: Borrowing and Debt Management


Highlights ............................................................................................ 341 Introduction ......................................................................................... 343 Term of Borrowing ............................................................................. 344 201314 Borrowing Details.................................................................. 345 Borrowing Program Results..................................................................... 347 Borrowing Program Outlook ................................................................. 348 Developing the Green Bond Market in Ontario ........................................... 350 Ensuring Preferred Market Access ............................................................ 351 Ensuring Adequate Liquidity Levels .......................................................... 353 Reducing Ontarios Stranded Debt ........................................................... 354 Provincial Debt ..................................................................................... 357 Debt-to-GDP Ratios ............................................................................... 358 Cost of Debt ......................................................................................... 360 Total Debt Composition .......................................................................... 361 Limiting Risk Exposure ........................................................................... 362 Consolidated Financial Tables .................................................................. 365

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List of Tables
Chapter I: Ontarios Decade A 10-Year Plan for the Economy
Table 1.1 Table 1.2 Table 1.3 Table 1.4 Table 1.5 Table 1.6 Table 1.7 Table 1.8 Table 1.9 Table 1.10 Dedicated Funding for Public Transit and Transportation Infrastructure (201415 to 202324)................................... 45 Examples of Major Hospitals Built, Underway or in Planning ............................................ 54 Examples of School Projects Built or Underway ...................... 57 Expansion Projects at Postsecondary Institutions Built, Underway or in Planning ............................................ 60 Industrial Electricity Incentive Program Examples of Successes ...................................................... 93 Industrial Conservation Initiative Potential Savings Examples ................................................ 95 Innovative Companies Supported by the Ontario Venture Capital Fund .............................................. 97 Difference in Projected Pension Expense versus Commission on the Reform of Ontarios Public Services Forecast ............. 156 Provincial Support to Municipalities Continues to Increase ...................................................... 168 Power Dam Special Payment Program Annual Funding .......... 169

Chapter II: Ontarios Economic Outlook and Fiscal Plan


Table 2.1 Table 2.2 Table 2.3 Table 2.4 Table 2.5 Table 2.6 Table 2.7 Table 2.8 2014 Budget Numbers at a Glance ................................. 175 201314 In-Year Fiscal Performance .................................. 181 Summary of Revenue Changes since the 2013 Budget .......... 183 Summary of Expense Changes since the 2013 Budget .......... 186 Ontario Economic Outlook ................................................ 189 Outlook for External Factors ............................................. 204 Impacts of Sustained Changes in Key External Factors on Ontarios Real GDP Growth ........................................... 205 The Ontario Economy, 2012 to 2017 .................................. 217

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2014OntarioBudget
Table 2.9 Table 2.10 Table 2.11 Table 2.12 Table 2.13 Table 2.14 Table 2.15 Table 2.16 Table 2.17 Table 2.18 Table 2.19 Table 2.20 Table 2.21 Table 2.22 Table 2.23 Table 2.24 Table 2.25 Table 2.26 Table 2.27 Table 2.28 Table 2.29 Private-Sector Forecasts for Ontario Real GDP Growth .......... 218 Changes in Ministry of Finance Key Economic Forecast Assumptions: 2013 Budget Compared to 2014 Budget .......... 221 Summary of Medium-Term Outlook.................................... 225 Personal Income Tax Revenue Outlook ............................... 226 Sales Tax Revenue Outlook............................................... 227 Corporations Tax Revenue Outlook .................................... 228 Summary of Medium-Term Revenue Changes since the 2013 Budget ..................................................... 230 Selected Economic and Revenue Risks and Sensitivities ........ 235 Ontarios 201516 Equalization Entitlement Sensitivities ....... 239 Medium-Term Fiscal Plan and Outlook ................................ 242 Summary of Medium-Term Expense Outlook ....................... 244 Selected Expense Risks and Sensitivities............................. 247 Change in Medium-Term Fiscal Outlook since the 2013 Budget ............................................................. 250 Ontarios Recovery Plan.................................................... 258 Medium-Term Fiscal Plan and Outlook ................................ 261 Revenue ........................................................................ 262 Total Expense ................................................................. 263 Other Expense ................................................................ 264 201314 Infrastructure Expenditures ................................. 265 Ten-Year Review of Selected Financial and Economic Statistics .......................................................... 266 Support for Health Care, Charities, Problem Gambling and Related Programs, Municipalities and Ontario First Nations .... 271

Chapter III: Federal Underfunding of Ontarians


Table 3.1 Table 3.2 Table 3.3 Examples of Unilateral Federal Actions Affecting Ontarians .... 277 Improving Prosperity in Ontario ......................................... 283 Examples of Federal Investment to Encourage Development of Resource Industries in Other Provinces ........................... 289

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Chapter V: A Fair and Efficient Tax System


Table 5.1 Table 5.2 Ontario Personal Income Tax: Taxable Income Thresholds and Rates ...................................................................... 322 2014 Budget Tax Measures............................................... 337

Chapter VI: Borrowing and Debt Management


Table 6.1 Table 6.2 Table 6.3 Table 6.4 Table 6.5 201314 Borrowing Program: Province and Ontario Electricity Financial Corporation ....................................................... 347 Medium-Term Borrowing Outlook: Province and Ontario Electricity Financial Corporation ......................................... 348 Net Debt and Accumulated Deficit...................................... 365 Medium-Term Outlook: Net Debt and Accumulated Deficit ..... 367 Debt Maturity Schedule .................................................... 368

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List of Charts
Chapter I: Ontarios Decade A 10-Year Plan for the Economy
Chart 1.1 Chart 1.2 Chart 1.3 Chart 1.4 Chart 1.5 Chart 1.6 Chart 1.7 Chart 1.8 Chart 1.9 Chart 1.10 Chart 1.11 Chart 1.12 Chart 1.13 Chart 1.14 Chart 1.15 Chart 1.16 Chart 1.17 Support from Early Years to Adulthood .................................10 Full-Day Kindergarten Implementation ................................12 Key Achievements ............................................................15 Apprenticeship Registration Nearly Doubled since 2003 ........... 20 Unemployment Rate by Age Category, Ontario, 200614 (Year to Date) .....................................................22 Supporting More Patients at Home .......................................26 Annual Average Provincial Infrastructure Investment Per Capita ........................................................................40 Highlights of Infrastructure Projects Completed or Underway .....................................................41 Alternative Financing and Procurement Accomplishments ........ 63 Ontario Children Below the Low Income Measure ................. 112 Supporting Working Families. ............................................ 114 Comparison of Electricity Prices for Residential Consumers ..................................................... 134 Residual Stranded Debt since April 1, 1999 ......................... 136 Auto Insurance Rates Held Below Inflation .......................... 138 Program Spending Per Capita in 201213 ........................... 149 Total Revenue Per Capita in 201213 ................................. 150 Ontario Wage Settlements ................................................ 154

Chapter II: Ontarios Economic Outlook and Fiscal Plan


Chart 2.1 Chart 2.2 Chart 2.3 Chart 2.4 Medium-Term Revenue Outlook Has Declined since the 2010 Budget ............................................................. 177 Medium-Term Expense Outlook Has Declined since the 2010 Budget ............................................................. 178 Ontario Emerging Stronger from 200809 Recession ............ 190 Ontario Real GDP since 200809 Recession ......................... 192

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Chart 2.5 Chart 2.6 Chart 2.7 Chart 2.8 Chart 2.9 Chart 2.10 Chart 2.11 Chart 2.12 Chart 2.13 Chart 2.14 Chart 2.15 Chart 2.16 Chart 2.17 Chart 2.18 Chart 2.19 Chart 2.20 Chart 2.21 Chart 2.22 Chart 2.23 Chart 2.24 Chart 2.25 Chart 2.26 Chart 2.27 Chart 2.28 Employment Gains Concentrated in Full-Time, Private-Sector, Above-Average Wage Jobs .......................... 193 Ontario Job Recovery Ahead of U.S. and OECD Average ........ 194 Ontario Job Recovery Stronger than Other Jurisdictions ........ 195 Global Economic Growth to Improve .................................. 197 Strengthening U.S. Recovery ............................................ 199 Oil Prices to Remain High ................................................. 200 Canadian Dollar to Remain Below Parity ............................. 201 Interest Rates to Rise Gradually ........................................ 203 Inflation Expected to Remain Moderate .............................. 207 Employment Expected to Rise over the Medium Term ........... 208 Ontario Housing Prices Expected to Stabilize ....................... 210 Housing in Ontario to Remain Affordable ............................ 211 Although Elevated, Canadian Household Debt Remains Affordable ......................................................... 212 Ontario Business Machinery and Equipment Investment Lags the United States ..................................................... 213 Exports to Other Provinces and Service Exports Have Grown Strongly............................................................... 214 Ontario Goods Exports Expanding to New Markets ............... 215 Private-Sector Outlook for Growth Weaker in 2014 but Stronger in 2015 to 2017............................................ 219 Government of Canada Transfers Changes since the 2013 Budget ............................................................. 231 Medium-Term Revenue Outlook Has Declined since the 2010 Budget ............................................................. 233 Ontarios Record Against Deficit Targets ............................. 253 Ontarios Plan to Eliminate the Deficit................................. 255 Composition of Revenue, 201415..................................... 268 Composition of Total Expense, 201415 ............................. 269 Composition of Program Expense, 201415 ........................ 270

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Chapter III: Federal Underfunding of Ontarians


Chart 3.1 Chart 3.2 Chart 3.3 Chart 3.4 Chart 3.5 Total Transfer Protection Payments from 201011 to 201314 ................................................ 276 Reducing Federal Health Transfers Downloads Fiscal Burden to Provinces and Territories ........................... 278 Ontarios Net Contribution to the Federation in 200910..................................................................... 279 Net Contribution to Equalization, 201415 .......................... 282 Public Infrastructure Investment Per Capita (201415 to 202324) ..................................................... 286

Chapter IV: Strengthening Retirement Security in Ontario


Chart 4.1 Chart 4.2 Chart 4.3 Chart 4.4 Retirement Income Targets and Potential Gaps .................... 297 Impact of Management Fees on Retirement Savings ............. 300 Life Expectancy at Age 65 by Sex in Ontario ........................ 301 Illustrations of Maximum Annual Benefit ............................. 308

Chapter V: A Fair and Efficient Tax System


Chart 5.1 Ontario Business R&D Spending Below the U.S. ................... 327

Chapter VI: Borrowing and Debt Management


Chart 6.1 Chart 6.2 Chart 6.3 Chart 6.4 Chart 6.5 Chart 6.6 Chart 6.7 Chart 6.8 Chart 6.9 Chart 6.10 Chart 6.11 Weighted-Average Term of Borrowing in Years .................... 344 201314 Borrowing ......................................................... 345 Domestic and International Borrowing ................................ 351 Average Unrestricted Liquid Reserve Levels ......................... 353 Residual Stranded Debt since April 1, 1999 ......................... 355 Net Debt-to-GDP ............................................................. 358 Accumulated Deficit-to-GDP .............................................. 359 Effective Interest Rate (Weighted Average) on Total Debt ..... 360 Total Debt Composition .................................................... 361 Net Interest Rate Resetting Exposure ................................. 362 Foreign Exchange Exposure .............................................. 363

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Foreword

Foreword
Building Opportunity, Securing Our Future
The2014OntarioBudgetlaysoutaplanforOntariotoday.ForastrongOntario, withmorejobs,moreopportunityandamoresecurefuture. Yourgovernmenthasaplantocreatejobsandgrowtheeconomybyinvesting inpeople,buildingmoderninfrastructure,andsupportingadynamicand innovativebusinessclimate. In2009,globalforcesbatteredtheworldeconomy.Therecessionmeantnot onlythelossofjobsaroundtheworld,butalsothefundamentalreshapingof theglobaleconomy.Manufacturingdeclinedinsomeplaces,andgrewinothers. Financialservicesflounderedinsomeplaces,andflourishedinothers.Herein Ontario,theuncertaintyleftinthewakeofallthosechangeshaspeople wonderinghowwewillkeepoureconomystrong.Ourgovernmenthasaplan. Executingthisplanwilltakedetermination,becauseitwillnotbeeasy.Itwill takevision,becauseitwillnothappenovernight.AnditwilltakeallOntarians, workingtogether,becausegovernmentcannotdoitalone. Sowhatthegovernmentcando,wewilldo.Makingtherightinvestmentsin ourfutureandstickingtoourplantobalancethebudgetby201718means, quitesimply,thattherearesomethingswewillnolongerdo.Insteadwewill choosetoinvestinthosethingsthatstrengthenourcompetitiveadvantage, createjobsandprovidevitalpublicservicesforourfamilies.Ourgovernmenthas madeourschoolsandhospitalsamongthebestintheworldandwewillcontinue tomaketheinvestmentsnecessarytostrengthenthembecausetheyareatop priority.Fromthismomenton,ourcollectiveenergy,talentandresourcesasa governmentwillcontinuetobespentcreatingopportunityandjobs buildingOntariosDecade.

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2014OntarioBudget Aspartofthisplan,ourgovernmentalsorecognizestheneedforappropriate restraint.Itwillnotgodowntheroadofrecklessacrosstheboardcutsto programsandservices.Whereexpensescanbecut,wewillcutthem.Where servicescanbeprovidedmoreefficiently,wewilldoso.Wewillnotsacrifice importantpublicservices,likeschools,hospitals,socialservicesandmeasures thatcreatejobsandhelpmiddleclassfamilies. Ontarianshavegreatresolve.Tappingintotheresolveanddeterminationof Ontarianswilldriveourgrowthandprosperity. ThisisaBudgetbythepeopleofOntarioforthepeopleofOntario.

Creating Jobs
Ontarios Decade: A 10-Year Economic Plan
Ontariohasworldclassschoolsandhospitals,isoneofthemoststableand attractiveplacesintheworldfornewbusinessinvestment,andcontinuesto beoneofthebestplacestoliveandwork. Oureconomycontinuestogrowandcreatejobsbutitischanging.Weare enteringaneweconomyanewindustrialage.Wewillseizethisopportunity. Our10yearEconomicPlanprovidesthetoolsforOntariotobecomeaglobal powerhouse. WewanttoprovideOntarianswiththeopportunitiestomoveintonewcareers andhigherpayingjobs.Alltheactionsinour10yearEconomicPlan,includinga newjobsfundtoanchorbusinessinvestmentfortheneweconomy,investingin infrastructureforamoreproductiveeconomyandfocusingonnewexport marketsaredesignedtocreatethesenew,highpayingjobsforOntariofamilies. Together,wewillprosperandbuildOntariosDecade.

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Jobs Plan
Thereisfiercecompetitionforglobalinvestment.Tohelpsecurethese newinvestments,wearecreatinganew$2.5billionJobsandProsperity Fundtocompeteontheworldstage.Thenewfundwillhelpsecurebusiness investmentsparticularlyingrowingsectors,suchasadvancedmanufacturing, agrifoodandagriproducts,andinformationandcommunications technology(ICT).

Lowering Energy Costs for Business


Wewillalsointroduceanewfivepointbusinessenergysavingsplantogive smallandmediumsizedbusinessesthetoolstheyneedtoconserveenergy, managecostsandsavemoney. Wearealsoexpandingaprogramtohelpthosegrowingbusinessesthatuse themostenergytodramaticallyreducetheirelectricitycostsonnewprojects. Thesechangesmeanthatforneworexpandingbusinesses,Ontariosenergy priceswillbemorecompetitivewiththoseofourneighbours,whichmeans Ontariocompaniescancreatenewjobsandhiremorepeople.

Investing in Transportation and Infrastructure


Ontariohasgrownfasterthantheinfrastructurenecessarytosupportit. Atthesametime,governmentsofallstripeshavefailedtomakethenecessary investmentstomakesureourhighwaysarenotclogged,thatOntarianshave enoughtransitoptions,andthatourgoodsandpeoplecangetwheretheyneed togo.Wehavedonebetterinthepastfewyears.Wehavecaughtuptothe investmentsthatneededtobemade,andnowweneedtogoevenfurther. ThetimehascomeforaplanthatwillimprovenotonlythelivesofOntarians today,butthelivesofourchildrenandgrandchildrentomorrow.Wearenotjust goingtoplanforwhatisaroundthecorner,butalsowhatisdowntheroad. Notjusttowidenthestreetenoughtomakethingsalittleeasiernow,butwewill thinkinfarreachingnewwaysthatwillmakethingsaloteasiertoday,andfor yearstocome.Itistimeweshookoffthetimidapproachofthepastandembrace aboldnewfutureforourprovince.Onethatisrational,andinformed,andfollows thebestadviceofourtransitexpertsnotonedictatedbyshorttermthinking, butonethatactuallygetsgoodsandpeoplemoving.Period.

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2014OntarioBudget

Dedicated Transportation Funds


PremierKathleenWynnehasannouncedaboldnewplanMovingOntario Forwardthatwilldedicatetwonewfundstofightcongestionandinvestin roads,bridgesandtransittotalling$29billion.Thefirstwouldhelpaddress congestionintheGreaterTorontoandHamiltonArea(GTHA).Thesecondfund wouldinvestinroads,bridgesandothercriticalinfrastructureoutsidetheGTHA. Intotal,thegovernmentwillinvestover$130billionininfrastructureaspartof OntariosDecade.

Unlocking Value from Government Assets


Thegovernmentwilllookatmaximizingandunlockingvaluefromassetsit currentlyholds,includingrealestateholdingsaswellasCrowncorporations suchasOntarioPowerGeneration,HydroOneandtheLiquorControlBoard ofOntario.Optionstounlockthefullvalueoftheseassetsincludeimproving efficiencyandenhancingtheirperformance.BysellingitssharesinGeneral Motors,thegovernmentcanthenreinvestthatmoneyinnewinfrastructure projectsthatcreatejobs.Itwillalsolookatsellingrealestateandotherland. ByunlockingvaluefromitsassetsandencouragingmoreOntarianstosave throughaproposednewOntarioRetirementPensionPlan,newpoolsofcapital wouldbeavailableforOntariobasedprojectssuchasbuildingroads,bridges andnewtransit.OurstrongAlternativeFinancingandProcurementmodel, runbyInfrastructureOntario,willallowfortheefficientdeploymentofthis capitalinjobcreatingprojects.

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Foreword

Securing Ontarians Retirement


TohelpOntarians,especiallythoseinthemiddleclass,bemoresecureintheir retirement,ourgovernmentisintroducingthefirstofitskindprovincialpension planasanenhancementtotheCanadaPensionPlan(CPP). Wemustdomoretoensurethatpeoplehaveadequatesavingsintheirretirement years.Provincialandfederalgovernmentofficialsandpensionexpertshavedone theanalysisandtellusthatCanadians,especiallythoseinthemiddleclass,need moresupportintheirretirementyears.AndmiddleclassCanadiansknowthatthe CPPisnotadequatefortheirretirement,notbecauseofexpertadviceorstudies, butbecausetheyplanfortheirretirementandwonderhowtheywillmakeupthe gapinsavings. Thefederalgovernmentrefusedtoaccepttheconsensusamongtheprovinces toworkonenhancingtheCPP.TheyarguethatitisnottherighttimeforaCPP enhancement.Peopleknowthatiswrong.Analysisdonesofar,includingby CanadasDepartmentofFinance,showsthataCPPenhancementwillhave economicbenefitsbygrowingtheeconomyandcreatingjobs,whileprovidingfor amoresecureretirementforallworkingCanadians.Theretirementsavingsgapis notamadeinOntarioproblem.Butsincethefederalgovernmentwillnotlead, OntariowillbedevelopingamadeinOntariosolutiontheOntarioRetirement PensionPlan(ORPP). TheORPPwouldmirrortheCPPascloselyaspossible.Itwouldenhancebenefits formiddleincomeearnerswhilekeepingcontributionrateslow.Itwould beintroducedin2017andwouldincreasethemaximumannualearningslevel beyondwhatiscurrentlycoveredbytheCPPandcontributionlevelswouldbe phasedinovertwoyears. Ontariowillcontinuetoengagewithotherprovincesandencouragethemtojoin ourplan.Andwewillcontinuepushingthefederalgovernmenttodotheright thing,andenhancetheCPP,whichisstillthepreferredoption. ThisisabalancedapproachtosupportmiddleincomeOntariansinsecuringa brighterretirementfuture.

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Leadership
Ontarianssharestrongvalues.Webelieveinbeingcompetitiveaswellas compassionate.Fairaswellasresponsible.Webelievenotjustinbuildinga tolerantsociety,butinsomethingbigger:webelieveinbuildingafairsociety. Sowhenwelooktogovernment,welookforleadershipthatembodiesthose values.Thosevaluesarealsothevaluesofyourgovernment. Somebelievetheycandeliverstronghealthcareandeducation,byrecklessly spendingandincreasingtaxesthatwouldundermineoureconomy.Othersthink theycancreateastrongeconomy,byrecklesslyacceleratingcutsthatwould underminehealthcareandeducation.Ontariansknowthatyouneedbalance. Onlyourgovernmentwillkeephealthcareandeducationstrongwhilebuilding astrongereconomybecauseweknowyoucannothavestrongpublicservices withoutastrongeconomy,andyoucannothaveastrongeconomywithout strongpublicservices. Agovernmentthatleadsensuresthateveryonehastheopportunitytorealize theirfullpotentialandfeelsecureabouttheirfuture.Thisisakeycomponent ofOntarios10yearEconomicPlan.Ontarioisagreatplacetoliveandwork, withastrongrecordofrespondingtotheneedsofthemiddleclassandthose mostvulnerable.Thisgovernmentbelievesinholdingtheladdersteadyand providingeveryonetheopportunitytoclimbupwithoutleavinganyonebehind.

Lowering Energy Costs


WewillhelpmiddleclassOntarianswiththeirenergycosts.Overthelast 18months,weloweredcostsinthesystem,reducingwhatpeoplewouldhave otherwisepaidbyabout$520overthenextfiveyears.Aspartofourplanto furtherhelpwiththeirelectricitycosts,weareproposingtoremovethe DebtRetirementChargefromresidentialuserselectricitybills,after December31,2015.Thiswouldsaveatypicalresidentialuseranadditional $70peryear.

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Increasing Support for the Most Vulnerable


The2014BudgetincludesaproposedenhancementoftheOntarioChildBenefit (OCB)byindexingittoinflation.BeginninginJuly2014,thegovernmentwillalso increasethemaximumannualOCBperchildto$1,310,enhancingtheincomesof halfamillionfamilies.Thegovernmentisalsoexpandinglowincomehealth benefitsanddevelopinganewprogramtoreduceelectricitybillsfor lowincomeOntarians.Ontariowillalsoincreasesocialassistancebenefitsbyan additionalonepercentin2014andexpandtheStudentNutritionProgramsothat morechildreninschoolhaveaccesstoahealthy,balancedbreakfasttostart theirday.

Federal Underfunding of Ontarians


AstheProvincecontinuestocarefullymanagecostsandtakesactiontocreate jobsandgrowtheeconomy,unilateralactionsbythefederalgovernmentputthis atrisk.Since2006,thefederalgovernmenthastakenmorethan110unilateral actionsthathavehurtpeopleandbusinessesacrossOntario.Inaddition,each andeveryyear,theshareoffederalrevenueraisedinOntarioishigherthanthe shareoffederalspendinginOntario.Thisresultsinan$11billiongapbetween whatOntarianspayversusreceivefromthefederalgovernment.In201415, Ontariowillexperienceayearoveryeardeclineof$641millioninmajortransfers. Overthelastfouryears,thefederalgovernmentpaidatotalof$2.2billionto otherprovincesthatwouldhaveotherwiseseentheirtransfersreduced.Thisyear, whenOntariowastheonlyprovincefacingadecline,thefederalgovernment endedthepracticeoftransferprotectionpayments.Ontarianscallonthefederal governmenttotreatthemthesamewaytheytreatresidentsofotherprovinces, protecttheProvincefromthe$641milliondeclineinmajortransfers,stop unilateralactionsthatimpacttheProvincespublicservicesandpartnerwith theProvincetofundimportantinfrastructureprojects.

xxiii

2014OntarioBudget

Responsible Fiscal Management


Thegovernmentisontracktobeatthedeficittargetforthefifthyearinarow, resultingintheaccumulateddeficitnowbeingmorethan$24billionlowerthan itotherwisewouldhavebeen,whilestillinvestinginkeypublicservices. Since2010,theglobaleconomyhasnotgrownasrobustlyasexpertsprojected. Thatmeansthat,nextyear,revenueswithoutthemeasurestakeninthisBudget wouldhavebeen$3.5billionlessthanprojectedjustlastyear.Thisisaresultof federalfundingcutstotheProvinceandslowglobaleconomicgrowth. Notwithstandingtheserealities,thegovernmentiscommittedtobalancethe budgetby201718.Thegovernmentwillcontinuetomaintainitstargetof reducingOntariosnetdebttoGDPratiotoitsprerecessionlevelof27percent. Thiswillrequiresomedifficultchoices. Wewillcutexpenseswherewecan.Wewillinvestwherewemust. Ourgovernmentrejectsrecklessspendingcutsadvocatedbysome.Andbelieves inexperiencebyotherswouldberiskyfortheeconomy. Ourgovernmentwillinsteadcontinuetocarefullyreviewspendingtodetermine whichprogramsshouldbeenhancedorreduced,whiletransformingpublic servicestoincreaseefficienciesandimproveoutcomes.

xxiv

Foreword

Low-Cost Government
Ontariohasthelowestpercapitaprogramspendingamongprovinces,whilestill providinghighqualitypublicservices.Itisrootingoutwaste,focusing onpriorities,andmakingsurethateverydollarspent,counts. Thegovernmenthasachievedallthiswhilehavingthelowesttotalgovernment revenueperpersonamongallCanadianprovinces. Goingforward,thegovernmentwillcontinuetoreviewexpensesthroughaspecial TreasuryBoardsubcommittee.Weareintroducinganewannualprogramreview savingstargetof$250millionfor201415and$500millionforeachofthenext twoyears.Thistargetwillfocusonmaintainingorenhancingthedeliveryofpublic serviceswhilereducingcoststhatarenotessentialtodeliveringservices. Wearealsocontrollingthecompensationofseniorexecutivesinthebroader publicsector,which,throughproposedlegislation,wouldprovidethegovernment withtheauthoritytoestablishcompensationframeworks,includingtheuseof sectorspecifichardcaps.Thegovernmenthasalsointroducedlegislationto continuethesalaryfreezeofMembersofProvincialParliament.Thisbeganin 2009andwouldcontinueuntilafterthebudgetisbalanced.Thegovernmentis continuingtomakeagenciesmoreaccountabletotheministriestofurtherensure thatcostsarecontrolledacrossgovernment. Makingeverydollarcountwillproduceamoreefficientgovernment,whichisa keycomponentofourgovernments10yearEconomicPlan.

xxv

2014Ontario oBudget

Conclus sion
Ontarioisstrongerwhenweareallwo orkingtogeth her,asoneOn ntario. Whenweea achlookoutfor f ourneighb boursanddo whatwecan ntohelp themalong. Thatisourro oleasgovern nmentaswell. Wewillcont tinuetobemindfulofhow wwespendea achdollar.W Wewillcontinu ue tobefocuse edoneliminat tingthedeficitsothatfutu uregeneratio onsarenot burdenedby ymoredebt. Theinvestmentswearemaking m today yarenecessar ry.Theyareb boosting opportunityforpeoplein nthefaceofachallenging globalecono omy. Our10yearplanwillhelp pcreateastro ongerOntario o. Itwillbuildopportunities o s.Itwillsecurethenextde ecadeOnta ariosDecade e andourfutu ure.
Originally signed by

TheHonoura ableCharlesSousa S MinisterofFinance F

xxvi

CHAPTER

Ontarios Decade: A 10-Year Plan for the Economy

ChapterI:OntariosDecadeA10YearPlanfortheEconomy

Ontarios Decade: A 10-Year Plan for the Economy


Introduction
Ontarioisoneofthebestplacesintheworldtolive,workandinvest. Itseducationsystemisworldclass,itisoneofthemostcompetitivejurisdictions intheindustrializedworldtodobusinessanddespitechallengesthatlingerinthe globaleconomy,Ontariocontinuestocreatenewjobs.Althoughrecoveryfrom theglobalrecessionisunderway,itisnotwhatitcouldbe. TheProvincerecentlyreleaseditslongtermeconomicreportthatlaidout anumberofchallengesandopportunities.Ontariohasanagingpopulation, increasedpressureontransportationinfrastructureintheGreaterTorontoand HamiltonArea(GTHA),increasingcompetitionparticularlyfromemerging economiesandlowereconomicgrowththantheprovincehasseeninthepast. ThatiswhyOntarioisintroducinganew10yeareconomicplanthatwillcontinue tohelpstimulatetheeconomy,createjobs,andincreaseprosperityandfairness forallOntarians.ThegovernmentsnewplanwillensurethatOntariohas theskilledandproductiveworkforceitneedstomeetthedemandsofthe 21stcentury.Ontarioplanstoinvestover$130billioninpublicinfrastructureover thenext10years,focusingonhospitals,schoolsandtransportationinfrastructure, andwillcontinuetocreateadynamicandinnovativebusinessclimatethatwill leveragebusinessinvestment,stimulateinnovationandcreatehighquality, wellpayingjobsfortodayandtomorrow. TheProvincescommitmentstoinvestinpeople,buildmoderninfrastructure, andsupportadynamicandinnovativebusinessclimatearepartoftheProvinces sixpointjobsplan.Investmentinpeoplemeansarelentlesscommitmentto developingthetalentsandskillsofOntarians.Italsomeansacontinued commitmenttoaYouthJobsStrategythathasalreadygivencareerrelevant placementstoover10,000youngpeople.Investmentinmoderninfrastructure supportsover110,000jobsonaverageeachyearandbuildsthebackboneof theprovinceseconomy.Adynamicandinnovativebusinessclimateisdeveloped bypartneringwithkeyindustries,supportingsmallbusiness,andbythe governmentsongoingcommitmenttoresponsiblefiscalmanagement.Theplan willhelptheOntarioeconomycontinuetogrowtobuildopportunityandsecurity forallOntarians.

2014OntarioBudget

The 10-Year Plan for Ontarios Economy


By2025: Ontarianswillknowtheyhaveasecureretirementintheirfuture. Ontarioshighlyskilledandadaptiveworkforcewillcompeteglobally andmeetthedemandsofachangingeconomy. Ontariosdynamicandinnovativelabourmarketwillenableallsegments ofsocietytoparticipatefairlyintheProvincesdiversejobmarket. Over75percentofallelementaryschoolstudentswillbesurpassing provincialliteracyandnumeracystandards. Over70percentofOntariosadultpopulationwillholdpostsecondary educationcredentials. Ontariowillexpandalternativemethodsoflearning,suchascoopandwork integratedlearningoptions,makingOntariosfuturecollegeanduniversity studentsmorecareerandjobreadythaneverbefore. Ontariosworldclasspublicinfrastructurewillenhancethequalityoflifefor Ontarians,supporteconomicgrowth,increaseproductivity,andmeet futuredemographicneeds. Ontariosbusinesseswillincreaseinvestmentsinproductivityenhancing areaslikeinformationandcommunicationstechnology,training,and researchanddevelopment(R&D)toratescomparabletothoseoftheir U.S.counterparts. TotalOntarioexportswilldouble,andexportstoChina,IndiaandBrazilwill morethantriple. OntariowillbeoneofthetopfivejurisdictionsinNorthAmericaforventure capitalinvestment. Ontariosagrifoodsectorwillbeoneofthemostinnovativeintheworld. Healthanddentalbenefitswillbeavailabletoalllowincomeworkers, reducingthewelfarewall,providingpeaceofmindforfamiliesand individuals,andallowingthemtobemoreproductive.

ChapterI:OntariosDecadeA10YearPlanfortheEconomy

Ontarios 10-Year Economic Plan Is Based on Expert Advice


The Task Force on Competitiveness, Productivity and Economic Progress, led by Roger Martin, Chair of the Institute for Competitiveness & Prosperity, was established in 2001 to provide government, firms, organizations and the people of Ontario with recommendations for increasing competitiveness and prosperity. Over the years, the Task Force has highlighted the importance of skills development, tax reform to encourage business investments, social policies to improve living standards, and supports to encourage innovation. These areas of importance align with the governments initiatives under its 10-year economic plan, as well as a number of actions the government has already taken. The government has acted on the following initiatives:
Making Ontarios tax system one of the most competitive in the Organisation for

Economic Co-operation and Development (OECD) through sales tax reform and corporate tax cuts;
Retooling the workforce through investments in education and skills development,

such as full-day kindergarten, improved worker training, and more effective apprenticeship programs; and
Taking action to support employment, transform social assistance, enhance support

for low-income families and Aboriginal communities, and protect the most vulnerable. Under the 10-year economic plan, Ontario will be:
Focusing efforts to develop opportunities in Northern Ontarios resource and mineral

sector, such as the Ring of Fire area;


Investing over $130 billion in public infrastructure over the next 10 years, focusing on

areas such as hospitals, schools, transit, roads and bridges; and


Fostering innovation and entrepreneurship through recent initiatives such as the

Northleaf Venture Catalyst Fund and the Youth Investment Accelerator Fund.

2014OntarioBudget

Highlights
Fulldaykindergartenwillbeavailabletoallfourandfiveyearoldsby September2014andwillsavefamiliesupto$6,500ayearperchildonchild carecosts. Ontariowillimplementanewvisionforeducationwiththerenewedgoalsof achievingexcellence,ensuringequity,promotingwellbeingandenhancing publicconfidenceinamodernsystemthatprepareslearnersforarapidly changing,technologydriven,globalizedworld. Ontarioiswellonitswaytomeetingitstargetofraisingpostsecondary educationattainmentto70percentby2020. Ontarioisinvestingover$750millioninadditionalfundingby201617 inmorehomeandcommunitycareservices,includingover$270millionin 201415,tostrengthenaccesstocareinthehomeandcommunity,where peoplewantit. Ontarioismakingiteasierforseniorstostaysafe,activeandengagedintheir communitiesbydoublingtheSeniorsCommunityGrantProgram.

ChapterI:OntariosDecadeA10YearPlanfortheEconomy

Section A: InvestinginPeople
Investing in Hard-Working Ontarians
Ontarioscompetitiveadvantageisincreasinglydependentonahighlyskilled, diverseandadaptiveworkforce. Ontarios10yeareconomicplanisfocusedondevelopingtheeconomyof tomorrowbyinvestinginpeopletodayandgivingOntariansthesupporttheyneed togettherightskillsandtherightjobs.ThiswillgiveallOntarianstheopportunity tohavegood,highpayingjobsandcontributetotheprosperityoftheprovince. Recentinitiativesinclude: Investing$295millionintheOntarioYouthJobsStrategy,whichgives youngpeopletheopportunitytogainafootholdinthejobmarket; InvestinginOntarioseducationsystemtogiveyouththeskillsandknowledge theyneedtocreateandfillthejobsofthefuture; Raisingtheminimumwageto$11.00perhourandproposinglegislationto indexittoinflationtohelpensurethatworkersreceiveadecentwage;and Reformingsocialassistance,whichwillreducebarrierstoentering theworkforce. Ontariosnewplanwillcontinuetobuildonasolidemploymentandtraining networkthatgiveslearners,jobseekersandemployersseamlessaccesstothe programsandservicestheyneedtoeffectivelymeetrapidlychanginglabour marketdemands.Ontariowillcontinuetobuildaninnovative,studentcentred educationsystemfromkindergartenthroughtopostsecondary,fosteringcritical thinking,problemsolving,collaborationandentrepreneurialskills.Aswell,the Provincewillcontinuetoaddmorepostsecondaryspacestoensurethat,as enrolmentgrows,Ontariosstudentswillhaveaccesstothehighestquality postsecondaryeducationclosertohome.

2014OntarioBudget

Ontarios New Vision for Education


OntarioseducationsystemisamongthebestintheEnglishspeakingworld. Overthepast10years,theProvincehasmadeseveralvitalinvestmentsinthe educationsectorthathavelaidastrongfoundationforsustainedprosperity. Classsizesaresmallerthantheywereadecadeago,ensuringthatstudentshave moretimewiththeirteachers.Newprogramsforsecondarystudents,suchasthe SpecialistHighSkillsMajoranddualcredits,arecreatingbetterlinksbetweenskills andeducationsothatstudentsarebetterpreparedtoentertheworkforceonce theygraduate.Theintroductionoffulldaykindergartenhasbeenthemost transformativechangetotheprovincesschoolsysteminageneration. Asaresultoftheseinvestmentsandthehardworkofstudents,educators, parentsandcommunities,morehighschoolstudentsaregraduatingthanever before,andmorestudentsaremeetingthehighprovincialacademicstandards thantheywereadecadeago. However,theworldischanging.Todaysgraduatesareenteringaworldthatis morecompetitive,globallyconnectedandtechnologicallyengagedthanany otherperiodinhistory.Itismoreimportantthaneverthatgraduateshavethe knowledge,skillsandcharacteristicstheyneedtobesuccessfulinthe21stcentury. Thatiswhy,inthefallof2013,thegovernmentbroughttogetherindividuals andorganizationsfromacrosstheprovincetodiscusstheskillsandknowledge Ontarianswillneedinthefuture.TheProvincereceivedinputfromparents, students,teachers,supportstaffandschoolsystemleaders,aswellasbusinesses andnonprofitorganizations.Theresultoftheirfeedbackisanewvision documentforOntarioseducationsystem,entitledAchievingExcellence. ThroughtheimplementationofAchievingExcellence,Ontariosstudentswillgain higherorderskills,suchascriticalthinkingandproblemsolving,andknowledge thatwillleadthemtobecomethemotivatedinnovators,skilledworkers, entrepreneursandleadersoftomorrow.

ChapterI:OntariosDecadeA10YearPlanfortheEconomy Ontariosrenewedgoalsforeducationare: AchievingExcellence:Childrenandstudentsofallageswillachievehigh levelsofacademicperformance,acquirevaluableskillsanddemonstrate goodcitizenship.Educatorswillbesupportedinlearningcontinuouslyand willberecognizedasamongthebestintheworld; EnsuringEquity:Allchildrenandstudentswillbeinspiredtoreachtheirfull potential,withaccesstorichlearningexperiencesthatbeginsatbirthand continuesintoadulthood; PromotingWellBeing:Allchildrenandstudentswilldevelopenhanced mentalandphysicalhealth,apositivesenseofselfandbelonging,andthe skillstomakepositivechoices;and EnhancingPublicConfidence:Ontarianswillcontinuetohaveconfidencein apubliclyfundededucationsystemthathelpsdevelopnewgenerationsof confident,capableandcaringcitizens.

Tosupportthenewvisionforeducation,theProvincewillbeinvesting $150millionoverthreeyearsintechnologyandlearningtoolssuchasnewdigital tablets,netbooks,cameras,softwareandprofessionaldevelopmentforteachers. By2025,Ontariowillhaveaneducationsystemthatseamlesslyintegratesservices fromearlyyearstoadulthood.Ontariowillbeaworldleaderinhigherorderskills, suchascriticalthinkingandproblemsolving,whichwillallowOntariotothrivein theincreasinglycompetitiveglobalmarketplace. Ontariowillbelookedatgloballyashavingahighperformingeducationsystem withengagededucators,supportivestaff,andadministrativeandother professionalswhoarecommittedtocontinuouslearning.

2014Ontario oBudget

10

ChapterI:OntariosDecadeA10YearPlanfortheEconomy

Continued Investments in Early Learning


TheProvinceiscontinuingtomodernizeandstrengthenthechildcaresystemto giveOntariosyoungestthebeststarttotheireducation.Overthepastfouryears, Ontariohasmadesignificantinvestmentstosupportthismodernizationand preservechildcarespaces,keepingfeesstableforparentsandsupportingchild careoperationsandparentsaschildrentransitiontofulldaykindergarten. Thisfundinghasalsohelpedstabilizethesectorbyhelpingtopreventchildcare centreclosuresandbyincreasingretrofitstoschoolbasedchildcarecentres. ThroughtheproposedBill143,ChildCareModernizationAct,2014,theProvince istakingstepstostrengthenoversightofOntariosunlicensedchildcaresector, whileincreasingaccesstolicensedchildcareoptionsforfamilies.Ifpassed, thenewlawwould: AllowtheProvincetoimmediatelyshutdownachildcareproviderwhen achildssafetyisatrisk; GivetheProvincetheauthoritytoissueadministrativepenaltiesofupto $100,000perinfractionbyachildcareprovider; Increasethemaximumpenaltyforillegaloffencesundertheproposedact from$2,000to$250,000; Requireallprivateschoolsthatcareformorethanfivechildrenunderage fourtobelicensed;and Ensureschoolboardsofferbeforeandafterschoolprogramsforsixto twelveyearoldswherethereissufficientdemand,eitherthemselvesor throughathirdparty.

Tofurthersupporttheongoingoperationandmodernizationofthechildcare system,Ontarioisannouncingadditionalfundingof$33.6millionoverthe nextthreeyears.Thisfundingwillhelpprotectthegainsmadeinthechildcare sectorthroughthepreviouslyannounced,fouryear$346millionchildcare modernizationinvestment,helpingtopreservespacesandkeepparentfees stable.Thefundingwillalsosupportincreasedlicensingactivityandenhance investigationandenforcementcapacity.Theincreasedactivityandcapacityare aresultofpolicyandproposedlegislativeandregulatorychangestoprotectthe wellbeingandsafetyofchildren.

11

2014OntarioBudget Thesenewinvestments,whencombinedwiththeproposedChildCare ModernizationAct,2014,willfacilitateOntariostransitiontoamodernizedchild caresystemthatbetterprotectsandfostersthelearning,development,health andwellbeingofchildren.

Fully Implementing Full-Day Kindergarten by September 2014


Sinceintroducingfulldaykindergartenin2010,theProvincehascontinuedto phaseinthisprogramsothat,bySeptember2014,allfourandfiveyearolds willhavetheopportunitytobenefit.Thisschoolyear,fulldaykindergartenis availableto184,000childrenin2,600schoolsacrossOntario.Atfull implementation,fulldaykindergartenwillbeavailabletoapproximately 265,000children,savingfamiliesupto$6,500ayearperchildonchildcare costsandgivingOntariosyoungestthebeststarttotheireducation.

CHART 1.2

Full-Day Kindergarten Implementation

Children in Full-Day Kindergarten 300,000 250,000 200,000 150,000 100,000 50,000 0 2011
Source: Ontario Ministry of Education.

2012

2013

2014

12

ChapterI:OntariosDecadeA10YearPlanfortheEconomy Theimplementationoffulldaykindergartenhasbeenthemostsignificantand transformationalchangetotheeducationalsysteminoveradecade.Benefits includeimprovedsocialskills,languageandcognitivedevelopment,aswellas communicationskillsandgeneralknowledge.Somearguefortheelimination offulldaykindergarten.However,studiesbyQueensandMcMasteruniversities showthatdoingsowouldjeopardizethesegainsandthefutureofOntarios youngestlearners.1

Support for Front-Line Child Care Workers


EarlyChildhoodEducators(ECEs)andotherchildcarestaffplayakeyroleduring thecriticalyearsofachildsdevelopment.However,thereisasignificantwage gapbetweenECEsworkinginthepubliclyfundededucationsystemandthose inthechildcaresector.Thisplacespressureonchildcareoperatorstodeliver affordable,highqualityserviceandretainpedagogicalprofessionals. Tohelpstabilizechildcareoperators,supporttheabilitytoretainECEs,and closethewagegap,theProvincewillprovideanadditional$269millionover threeyearstosupportanaverage$1perhourwageincreasein2015andafurther average$1perhourwageincreasein2016forfrontlinechildcareworkerswho workinlicensedchildcarecentres,childcarecentresmanagedbyFirstNations andlicensedprivatehomedaycareagencies.Currently,anECEinthechildcare sectorearnsanaverageof$16.34perhour.TheaverageECEinaschoolboard makesover$22perhour,whichcontinuestoincreaseasanECEmovesthrough asalarygrid.

Ontario Students Continue to Increase Test Scores and Graduation Rates


Ontariosstudentscontinuetoexcel.Respectedinternationalorganizationssuch astheOrganisationforEconomicCooperationandDevelopment(OECD), McKinseyandCompanyandtheNationalCenteronEducationandtheEconomyin theUnitedStateshaveallapplaudedOntario,itsprogramsanditsresults.

QueensUniversity,FinalReport:EvaluationoftheImplementationoftheOntarioFullDay EarlyLearningKindergartenProgram,TheSocialProgramEvaluationGroup(Fall2012);and McMasterUniversity,TheFullDayKindergartenEarlyLearningProgramFinalReport, TheOffordCentreforChildStudies(October2012).

13

2014OntarioBudget Adecadeago,only54percentofchildreninGrades3and6metprovincial standardsinliteracyandnumeracy.Thatnumberhasgrownsignificantly,and today,71percentofGrade3and6studentsareachievinghighprovincial standards,a17percentagepointincrease.2Inaddition,only68percentof studentsweregraduatingfromhighschooladecadeago.Now,83percentof studentsaregraduating,a15percentagepointincrease.Thatmeanstherearean additional138,000highschoolgraduatesinOntariobecauseoftheeducation reformsofthepast10yearsanumberthatisroughlyequivalenttothe populationofthecityofGuelph. Performancegapsbetweengroupsofstudentshavealsonarrowed,andinsome casesbeeneliminated.Forexample,elementarystudentsparticipatinginEnglish asaSecondLanguage(ESL)programsnowperformalmostaswellasthegeneral studentpopulation.Inaddition,92percentofstudentsaremeetingorexceeding internationalstandardsinreading,regardlessofsocioeconomicbackgroundor firstlanguage.

Math Action Plan


Ontariohascommittedtohaving75percentofOntarioselementary schoolstudentsmeetthehighprovincialstandardsonEducationQualityand AccountabilityOffice(EQAO)assessments.Theapproachtoachievethisgoalwill includeabalancebetweenunderstandingbasicmathconcepts,combinedwitha focusoncreativityandcriticalthinking,innovativeproblemsolvingandeffective communication.TheProvincewillcontinuetoworkwithitseducationpartners tofocusonandimproveoutcomesinmath.

Advancing Postsecondary Education


Overthepast10years,theProvincehasincreasedfundingtopostsecondary educationby80percent.Thishassupportedthegovernmentsgoalofcreatinga spacetolearnforeveryeligiblestudentregardlessoftheirfinancialcircumstances, aswellasmakingpostsecondaryeducationmoreaccessiblethroughprograms suchasthe30% Off Ontario Tuition grant.

Ontarios provincial standard is equivalent to a B grade.

14

Cha apter I: Ontar rios Decade A 10-Year P Plan for the E Economy

Ontario rem mains among g the best jurisdictions in N North America for talent, t training and skills development. d . With more Ontarians O pur rsuing postsecondary educ cation, the Provinc ce is focusing g on supportin ng programs t that provide young people e with e. the best sk kills and traini ing they need d to create an nd fill the jobs s of the future To position n Ontario as a leader in postsecondary education, th he Province re ecently implement ted a number r of initiatives s that will hel p transform t the postsecon ndary system. These include: Wor rking with Ontarios univer rsities and co lleges on Stra ategic Manda ate Agre eements to en nsure that each institution n focuses and d builds on its s stren ngths and off fers the best possible p prog grams in its ar reas of specia alization. Thes se agreement ts will: Improve the learning expe erience for st udents; ary system; Reduce duplication in the postseconda

15

2014OntarioBudget Raise the global competitiveness of Ontarios postsecondary system; and Create centres of excellence in specific subject areas.

Continuing to improve the credit transfer system so that students can take their credits with them when they move between postsecondary institutions and not have to retake courses. Investing $42 million over three years to implement Ontario Online, a new Centre of Excellence for Online Learning. Ontario Online will give students across the province one-window access to high-quality, transferable online courses and will also help reduce course duplication in the system. Ontario Online will be fully operational and begin online course offerings in 201516. Continuing to give students a range of credential options that meet the demands of the economy now and in the future. Increasing co-op, work placements and experiential learning for students, as well as supporting young entrepreneurs so they have the skills and experience needed to secure jobs or start their own businesses once they graduate.

The Province is also focused on closing achievement gaps for underrepresented groups including Aboriginal students, students with disabilities and students new to Canada. The government is providing more options for francophone students to study in French. These initiatives will improve the access and success rates for underrepresented groups. Ontario would put in place a new system that allows the collection and use of student-level information to track progress and evaluate the effectiveness of provincial funding on education outcomes. This initiative would build on the recent extension of the Ontario Education Number (a unique student identifier used in Ontarios elementary and secondary schools since 2003) to college and university students to make student records consistent from kindergarten to postsecondary education. As of the fall of 2013, postsecondary institutions have successfully extended OEN coverage for over 447,000 new students.

16

Chapter I: Ontarios Decade A 10-Year Plan for the Economy

As a result of these initiatives, by 2025, Ontario will have:


A postsecondary attainment rate above 70 per cent, and will continue to lead all

OECD countries;
A modern, forward-looking postsecondary education sector, where students have

more options for learning, both online and closer to home;


An apprenticeship system that seamlessly transitions apprentices from training into

the workforce; and


More detailed labour market information so that students know where to find jobs

in their area of specialization.

Developing the talent and skills of Ontarios people is the foundation of the Provinces plan to create jobs. In March 2014, the Province hosted a summit with educators, labour, business and the not-for-profit sector to build partnerships and better collaborate on talent and skills development. Premier Kathleen Wynne challenged each participant to implement one new initiative that will contribute to skills and talent development in the province.

17

2014OntarioBudget

Building Ontarios Integrated Employment and Training System


Ontarios skilled and adaptive workforce is one of its greatest competitive advantages. The Province continues to invest in its people to help them compete globally and to meet the demands of a rapidly changing economy. The Province invests over $1 billion annually in Employment Ontario, which provides employment, training, apprenticeship and labour market programs, and serves more than one million Ontarians. Employment Ontario offers services such as the Rapid Re-employment and Training Service (RRTS) and Second Career, which provide assistance and training-related support to unemployed workers affected by layoffs and plant closures. Since the RRTS began in January 2007, over 192,000 individuals have been offered assistance. Second Career has supported over 76,000 affected workers to help them retrain since 2008. However, services and supports for job seekers and employers are currently offered across several government ministries and through many delivery systems. To make it easier for those accessing these services, the Province is moving forward with the government-wide integration of employment and training programs. Integrating and modernizing the employment and training system will ensure that all Ontarians have access to programs and services that align with their individual needs, and that employers can make more effective use of government programs to support recruitment and workplace training. The integrated system will: Provide referrals to employment and training programs that will more accurately and fairly reflect individual needs, and identify and measure barriers to employment through leading-edge assessment practices; Through improved coordination, provide connections to other economic and social supports such as income supports for social assistance recipients and language and/or bridge training for newcomers; Provide customized workplace training programs that will give individuals relevant work experience in high-demand occupations;

18

Chapter I: Ontarios Decade A 10-Year Plan for the Economy Introduce an improved and more consistent approach to assessing the needs of clients, to better match clients to services based on individual needs and readiness to work; Better serve Ontarios most vulnerable populations, including social assistance recipients, people with disabilities, new Canadians, Aboriginal people and at-risk youth; and Offer a variety of modern services and supports, including a series of new skills training programs that are developed in partnership with local employers and tailored to industry needs. These include sector-specific skills and postsecondary training towards industry-recognized credentials as well as training with pre- and post-employment supports for unemployed individuals. To ensure that the new system reflects the diverse needs of clients and key employment and training partners, the Province will continue to engage a broad range of stakeholders at key stages of this transformation. These include Aboriginal people, client-specific advocacy groups and umbrella organizations, municipalities and employers.

Promoting the Skilled Trades


Ontarios skilled tradespersons are fundamental to the provinces continued economic growth. The new employment and training structure will include a modern apprenticeship system to help Ontarians who want careers in the skilled trades navigate the system getting the right information, receiving financial help and connecting with employers in the trades they are interested in. It will serve the needs of emerging and growing industries and ensure businesses are active participants in skills training, collaborating and working closely with training institutions. Over the past 10 years, the Province has significantly expanded the apprenticeship system: There are about 120,000 apprentices learning a trade in Ontario today twice as many as in 200203; and New annual apprenticeship registrations almost doubled from 17,000 in 200203 to more than 30,000 in 201213.

19

2014OntarioBudget

CHART 1.4

Apprenticeship Registrations Nearly Doubled since 2003

Registrations 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 200203


Source: Ontario Ministry of Training, Colleges and Universities.

201213

Targeting the Apprenticeship Training Tax Credit (ATTC)


The ATTC provides a 35 per cent targeted refundable income tax credit (45 per cent

for small businesses) to businesses that hire eligible apprentices in construction, motive power, industrial and certain service trades.
Approximately 80 per cent of Ontarios apprenticeship trades are supported by

the ATTC.
The ATTC is providing over $250 million in support in 201314. As part of the ongoing review of business support programs, ATTC support

for large businesses will be reviewed (see Chapter V: A Fair and Efficient Tax System for more details).

20

Chapter I: Ontarios Decade A 10-Year Plan for the Economy The Province is also enhancing the made-in-Ontario Alternative Financing and Procurement (AFP) model by ensuring that, beginning with the Eglinton Crosstown, future infrastructure projects include plans for providing opportunities for apprentices and supporting the completion of apprenticeships, with focused programs for at-risk youth, local communities and veterans.

The Ontario Construction Secretariat supports Infrastructure Ontarios initiative to provide good jobs for today and at the same time build the skilled workforce of tomorrow. By requiring contractors to maximize the use of registered apprentices, young workers will have more opportunities to gain the skills required to successfully complete their training and enhance the competitiveness of the Ontario economy.

Sean W. Strickland, Chief Executive Officer, Ontario Construction Secretariat, December 2013.

Ontarios Youth Jobs Strategy


Ontarios youth shouldered the brunt of job losses during the recent recession and continue to face an unacceptably high unemployment rate. Although youth unemployment at 15.4 per cent in 2014 (year to date) is lower than the recessions peak rate of 17.5 per cent in 2009, it remains considerably higher than the unemployment rate of the provinces prime working-age group aged 25 to 54 (6.5 per cent).

21

2014OntarioBudget These numbers underscore the importance of helping Ontarios youth now. Long spells of unemployment can lead to a scarring effect where youth can experience lower wages and a higher likelihood of becoming unemployed later in life. Helping youth gain the skills and experience to obtain stable employment also supports Ontarios Poverty Reduction Strategy and gives everyone the opportunity to achieve their full potential.

CHART 1.5

Unemployment Rate by Age Category, Ontario 200614 (Year to Date)

Per Cent
20 17.5 13.3 13.0 13.7 17.2 16.9

15.8

16.1

15.4

15

Youth (1524 years)

10 5.0 5.2 5.2

7.7

7.3

6.4

6.3

6.2

6.5

Prime Working Age (2554 years)

0 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD

Note: Year to Date (YTD) includes January to March. Source: Statistics Canada, Labour Force Survey.

Employment Ontario serves Ontarios youth with a range of employment and training programs. About 35 per cent of Employment Ontarios clients were under age 30 in 201213. Recognizing the persistently high youth unemployment rate, the Province announced an additional investment of $295 million over two years for Ontarios Youth Jobs Strategy in 2013. This is helping young people find jobs, start their own businesses and gain valuable skills.

22

Chapter I: Ontarios Decade A 10-Year Plan for the Economy A key element of the strategy, the Youth Employment Fund, was launched in September 2013 through the Provinces network of employment services across Ontario. To date, the fund has already helped over 10,000 young people gain work experience and find jobs. It is also well on its way to meeting its two-year target of creating 25,000 job opportunities. Ontario is also investing in three additional funds to support its Youth Jobs Strategy: the Youth Innovation Fund, the Youth Entrepreneurship Fund and the Youth Skills Connections Fund, which were launched in October 2013. As part of the Youth Entrepreneurship Fund, the Province also created the Youth Investment Accelerator Fund (Youth IAF), and is investing up to $250,000 per eligible technology-focused firm founded by entrepreneurs under age 30. This initiative will help more young people, students and researchers who choose to become entrepreneurs and support innovative companies to grow their businesses. The Province will assess long-term commitments by reviewing the effectiveness of these youth employment programs going forward. To help young people and employers get more information on accessing youth jobs programs, Ontario has launched a new website: Ontario.ca/ReadySetWork.

Helping Youth Launch High-Tech Companies


In February 2014, the government announced the first recipients of the Youth Investment Accelerator Fund (Youth IAF):
PUSH A sports-science technology startup that helps optimize training by instantly

transmitting feedback about an athletes movements.


Rubikloud A platform that processes e-commerce data and delivers insight into

business performance.
Soapbox An innovation management tool that helps maximize employee engagement

through ideas.
Greengage Mobile A platform that uses mobile engagement to help organizations

meet sustainability goals, such as decreasing their environmental footprint or improving the local community.

23

2014OntarioBudget

Attracting Skilled Immigrants


Ontario remains the number one destination for newcomers to Canada to work and raise a family. Over the last 10 years, Ontario received close to 1.2 million landed immigrants, which is nearly half of all those who came to Canada. Many choose Ontario because of its diversified economy, high quality of life, and strong public services and benefits that all people enjoy today. OntariosLongTermReportontheEconomynoted that immigration is projected to account for all of the net increases in Ontarios working-age population and is expected to be the main source of future labour force growth. That is why it is important that the federal government work with Ontario to strengthen its role in the immigrant selection process.

Programs that Help Immigrants Settle and Prepare to Enter the Labour Market
To help foster the seamless integration of skilled immigrants in Ontario, the Province continues to offer a variety of programs, including:
More than 300 bridge training programs since 2003, targeting over 100 professions and

trades that have helped about 50,000 immigrants integrate into Ontarios workforce;
Tuition-free adult language programs to help immigrants improve their English and

French; and
The Newcomer Settlement Program, which helps over 80,000 newcomers annually by

providing information on key services such as housing, language, employment and job training.

Ontarios ability to attract highly skilled immigrants has contributed to the provinces overall high educational attainment and productive workforce. More than two-thirds of working-age (25 to 64) immigrants arriving in Ontario have a postsecondary education. The Province understands the important role immigration plays in Ontarios economy and greatly values the social, cultural and economic contributions that immigration provides. This is why, in the fall of 2012, Ontario introduced its first Immigration Strategy.

24

Chapter I: Ontarios Decade A 10-Year Plan for the Economy The Immigration Strategy positions Ontario to continue attracting the best and brightest to the province. This strategy builds on Ontarios vision of a greater provincial role in immigrant selection and the creation of a seamless and comprehensive support and training system for immigrants once they arrive. Ontario will release its first Immigration Strategy Progress Report this year. The government recently introduced the Ontario Immigration Act, 2014, a key element of the Immigration Strategy. Making the most of the provinces diverse workforce is part of Ontarios Immigration Strategy and supports the governments efforts to build a prosperous economy and a fair society. If passed, the legislation would help the Province work with the federal government to maximize the social, cultural and economic benefits of immigration by: Allowing the Province to set immigration targets to attract more skilled immigrants; Enabling Ontario to work more closely with the federal government on the recruitment, selection and admission of skilled immigrants to the province; and Preventing fraud by improving compliance and enforcement measures in the immigrant selection process, such as introducing penalties for applicants who misrepresent personal information or people who take advantage of immigrants.

25

2014Ontario oBudget

An Actio on Plan for Heal lth Care e


The Province e is committe ed to a health care system that puts pat tients first, responds to their needs and a makes it easier e for pro oviders to coo ordinate care. Ontario is co ontinuing to im mplement On ntarios Actio n Plan for He ealth Care, wh hich provides the e road map fo or transformin ng health care e services to create a more sustainable and a high-quality health care system.

Right Care, Right Time, T Rig ght Place


Ontario is co ommitted to ensuring e that patients rece eive timely ac ccess to the most approp priate care in the most app propriate sett ting. This invo olves providin ng better-integrated care in the commun nity whenever r possible so patients can stay at home for as long as possi ible instead of o being admit tted unneces ssarily to a ho ospital or to a long-term care home. This also o means helpiing patients m move seamles ssly from one care provider to o another.

26

Chapter I: Ontarios Decade A 10-Year Plan for the Economy Ontario is investing in more health care services in the home and in the community so that more community options are available to patients when and where they need them. In the 2013Budget, the Province committed to increasing investments in home and community care services by an average of five per cent per year to support initiatives such as the achievement of the five-day home care service targets. These investments include $15 million per year in new funding to support meeting the five-day wait time target for patients with complex needs to receive nursing services. Half of Ontarios Local Health Integration Networks (LHINs) have consistently met the five-day service target for community-referred patients. Ontario continues to deliver on this commitment by increasing investments in these services by over $750 million by 201617, including over $270 million in 201415. These investments will improve the health systems capacity and ability to care for individuals after hospital discharge, and, where possible, avoid costly hospitalization or long waits in the emergency room. This will help free up hospital and long-term care beds for those who need them. As part of the strategy to build capacity at the community level, Ontario is investing in front-line care. Many personal support workers (PSWs) are at the front line of health care delivery in the home and community, providing services to the most vulnerable. But they are also some of the lowest-paid workers in the broader public sector and are earning significantly less than PSWs in hospitals and long-term care homes. This makes it difficult to attract and retain high-quality PSWs, with the sector currently seeing a 60 per cent turnover rate. To support the high-quality care that PSWs provide, the Province is proposing to give PSWs in the publicly funded home and community care sector a $1.50 per hour wage increase in 201415, an additional $1.50 per hour increase in 201516, and a further $1.00 per hour increase in 201617. This increase would bring up the base wage to $16.50 per hour by 2017. By strengthening recruitment and retention of PSWs in this sector, Ontario is building capacity to help transform the health care system by delivering high-quality care to patients in the most appropriate setting.

27

2014OntarioBudget

Self-Directed Care
The Province is determined to help as many Ontarians as possible live at home for as long as they can. An important part of this is giving people the tools to customize their own care. As part of the governments community investment, Ontario will commit to supporting demonstration projects that empower people or their designates to choose the care that best suits their needs, instead of the system choosing it for them. This responds to a report entitled LivingLonger,LivingWell by Dr. Samir Sinha, Director of Geriatrics at Mount Sinai Hospital and the University Health Network Hospitals, and is an important next step in Ontarios Seniors Strategy.

Direct to Community Supports


The community supports services sector from meal programs to homemaking provides essential supports that Ontarians need to age at home. The Province will enable community support agencies to assess and provide services directly to clients with less complex needs. This will provide faster, more appropriate and flexible care at home.

Community Paramedicine
Ontarios paramedics are essential to ensuring that patients get the right care, at the right time and in the right place. The Province will invest $6 million to help paramedics across Ontario expand their efforts to proactively care for frequent users of emergency services and connect them to appropriate community supports.

Palliative/End-of-Life Care
The government is committed to improving the quality of end-of-life care for Ontarians by promoting advanced care planning and palliative services supports. This means supporting community-based providers, formal and informal caregivers, and patients to promote dignified palliative care.

28

Chapter I: Ontarios Decade A 10-Year Plan for the Economy

Long-Term Care Homes


Ontario continues to modernize long-term care (LTC) homes to ensure continued safety for residents. To further Ontarios commitment to provide safe, sustainable homes for seniors, the government amended the Fire and Building Codes in 2013 to require all LTC homes to upgrade their sprinkler systems. The government is proposing further investment in the LTC sector to enhance the current Long-Term Care Home Renewal Strategy by: Providing funding to encourage LTC home operators to accelerate the redevelopment of about 30,000 long-term care home beds; and Introducing amendments to the LongTermCareHomesAct,2007, which, if passed, would extend the maximum term of LTC home licences from 25 to 30 years.

In addition, the government is proposing an amendment to the AssessmentAct, which, if passed, would provide consistent and equitable property tax treatment by exempting all charitable and non-profit LTC homes from property taxation, allowing homes to devote more of their resources to front-line care services. All together, these enhancements will contribute to the stability and capacity of Ontarios LTC home sector.

Faster Access and Stronger Links to Family Health Care


Family health care serves as a hub for the entire health care system and improves the way health care is delivered. When patients have faster access to family health care, they stay healthier, get connected to the right care and are less likely to require treatment in hospitals. This is especially true with seniors and those with complex care needs, who need help navigating the system.

29

2014OntarioBudget To improve access to care, Ontario is expanding Community Health Links, which bring together health care providers to better and more quickly coordinate care for high-needs patients such as seniors and people with complex conditions. Health Links are a new, made-in-Ontario innovation that will help patients transition within the health system, ensuring patients receive more responsive care that addresses their specific needs with the support of a team of providers. To date, 54 Health Links have been created, with plans to create more than 90 in total. Other steps Ontario is taking to improve access to care include: Making progress towards providing a family doctor for every senior who wants one. As of February 2014, 91 per cent of high-needs seniors who registered with Health Care Connect have been referred to a family health care provider; and Expanding the scope of practice for a number of health care providers, such as allowing pharmacists to give flu shots and authorizing registered nurses and registered practical nurses to dispense drugs in certain circumstances.

Expanded Mental Health and Addictions Strategy


It is estimated that 20 per cent of Ontarians will experience a mental health problem at some point in their lives, with 2.5 per cent of Ontarians having a serious mental illness. Addressing these problems has been complicated by mental health and addictions services that were delivered in a fragmented system. Various programs have been delivered by different ministries, across many service sectors. Individuals and families experience difficulty accessing timely and well-coordinated services. In 2011, Ontario launched Open Minds, Healthy Minds, a 10-year comprehensive strategy to deliver mental health and addictions services to Ontarians in an integrated, coordinated and effective way. The first three years of the Strategy focused on children and youth, with funding growing to $93 million at full implementation. An estimated 35,000 more children and youth are already benefiting from these supports and services.

30

Chapter I: Ontarios Decade A 10-Year Plan for the Economy Ontario is now building on this Strategy, expanding it to include improved transition between youth and adult services, people with addictions and adults, through additional investments of over $65 million in 201415, growing to about $83 million annually by 201617. The expanded Strategy will help to ensure Ontarians and their families have better access to quality services and supports for their mental well-being. It will also achieve better value for these investments by linking funding directly to the quality care that is needed. The Strategy envisions that all Ontarians deserve to enjoy good mental health and well-being throughout their lifetime and those with mental health illnesses or addictions can recover or participate in welcoming and supportive environments. The Strategy will: Promote mental health and well-being for all Ontarians investing in evidence-based prevention initiatives in the workplace, schools and communities; Ensure early identification and intervention equipping service providers and clients to respond to symptoms and intervene early and appropriately; Expand housing and employment supports providing stability and supports to empower people to manage in the community; Expand an integrated health and social service coordination model for people coping with mental illness and addictions; and Provide funding based on need and quality delivering a new funding model that links population need, quality improvements and sector integration to service delivery.

Providing Support for Family-Building in Ontario Funding for Infertility Services


The government will provide additional support for people in this province who want to become parents by expanding coverage of infertility services for one cycle of in vitro fertilization per patient per lifetime for all causes of eligible infertility. Enhancing coverage makes infertility services more affordable and increases access to more than 4,000 additional patients annually. The government is also committed to developing a stronger quality and regulatory framework for those providing infertility services to ensure patients receive safe, high-quality care.

31

2014OntarioBudget

Supporting Healthy Lifestyles


People are more likely to reach their full potential when they lead healthy and active lives. That is why Ontario is committed to promoting healthy lifestyles and preventing the diseases that have the greatest cost to Ontarians. Initiatives that the government has put in place to promote keeping Ontarians healthy include: Proposing to strengthen the SmokeFreeOntarioAct by doubling penalties for selling cigarettes to minors; banning flavoured tobacco targeted at children; and broadening restrictions on smoking in public areas, including bar and restaurant patios; and increasing the tobacco tax rate (see Chapter V: AFairandEfficientTaxSystem); Expanding eligibility for Healthy Smiles Ontario to provide access to dental services for an additional 70,000 low-income children and youth aged 17 and under. In August 2015, existing publicly funded dental programs will also be integrated into the Healthy Smiles Ontario Program to provide seamless enrolment, making it easier for eligible children and youth to receive timely dental care; Acting to protect young people against skin cancer with the SkinCancer PreventionAct(TanningBeds),2013, that restricts those under age 18 from using tanning beds and prohibits the marketing of tanning services to youth; Expanding Newborn Screening Ontario, Canadas most comprehensive infant screening program that checks all newborns in Ontario for 29 inherited and/or treatable diseases at no cost to families; Acting on Healthy Kids Panel recommendations such as: Introducing new legislation requiring large chain restaurants to post calories on menus; Expanding the Student Nutrition Program by delivering more nutritious meals and snacks to children and youth in elementary and secondary schools across Ontario; and Expanding Ontarios After-School Program to give an additional 650 children and youth the opportunity to get involved in programs that promote sports, active living and healthy lifestyles.

32

Chapter I: Ontarios Decade A 10-Year Plan for the Economy

Establishing a Patient Ombudsman


Patients sometimes need a third party to turn to when they have exhausted all local complaint resolution processes. That is why the Province is proposing to establish a Patient Ombudsman. This would help resolve complaints and concerns and would also drive system-wide quality improvements. The Patient Ombudsman would have the power to initiate and conduct investigations, mediate and make recommendations, and report on patient complaints to the Ontario Ministry of Health and Long-Term Care.

33

2014OntarioBudget

Helping Seniors Stay Active and Engaged


As discussed in OntariosLongTermReportontheEconomy, the number of seniors in Ontario is increasing and is expected to double over the next two decades. Helping this growing population stay engaged and connected to their communities is an important part of the recently announced Action Plan for Seniors. The plan is focused on addressing the growing needs of the province's aging population and providing seniors with better access to health care, quality resources, and improved safety and security. The Province has already delivered on many commitments laid out in the Action Plan: Working with local municipalities to support age-friendly communities that are socially and physically accessible and inclusive. An Age-Friendly Community Planning Guide has been developed to help municipalities support independent and active living so seniors can stay connected to their communities; Providing seniors with more opportunities to stay active, healthy and involved in their communities through Elderly Persons Centres (EPCs). There are approximately 270 EPCs that serve 250,000 older adults across the province and are vital community hubs that provide health, social and recreational programs to promote wellness for seniors; Investing over $8 million in preventing elder abuse, including fraud; and Creating the Retirement Homes Regulatory Authority to follow up on complaints regarding abuse, neglect, or improper care or treatment in retirement homes.

Ontarios Seniors Community Grant Program


Ontario is making it easier for seniors to stay safe, active and engaged in their communities by doubling the size of the new Seniors Community Grant Program to $1 million per year. The program helps seniors continue their learning in areas like technology and financial literacy, and develop a stronger sense of social inclusion. This initiative is another step towards making Ontario the best place in which to age actively and in good health, to live longer and to live well.

34

ChapterI:OntariosDecadeA10YearPlanfortheEconomy

Highlights
Planningtoinvestover$130billioninpublicinfrastructureoverthenext 10years,including: Dedicatingfundingtomakenearly$29billionavailableoverthenext 10yearsfortransportationinfrastructure. Investingatotalof$2.5billionin201415forhighwayrehabilitation andexpansionprojectsacrosstheprovince. Supportingmunicipalroadsandbridgesthroughanewpermanent $100millionfund. Makingcriticalrepairsinhospitalstohelpbetterprovidehighqualityhealth caretopatientsbyprovidingadditionalfundingofalmost$700millionover thenext10years. Providingmorethan$11billionoverthenext10yearsforelementary andsecondaryeducationinfrastructure. Fundingcriticalmaintenancerepairsinthepostsecondarysectorbyproviding additionalfundingofapproximately$500millionoverthenext10years. Committingupto$1billiontowardsinfrastructuredevelopmentfortheRing ofFirecontingentonmatchinginvestmentbythefederalgovernment. DeliveringmoreinfrastructureprojectsthroughtheAlternativeFinancingand Procurementmodel.

35

2014OntarioBudget

36

ChapterI:OntariosDecadeA10YearPlanfortheEconomy

Section B: BuildingModernInfrastructure
Ontarioscontinuedinvestmentsininfrastructurehavehelpedtomakethe provinceoneofthebestplacesintheworldtolive,workandinvest.Since2003, Ontariohasinvestednearly$100billioninhospitals,schoolsandtransportation infrastructure,whichhasmadeOntarioasafer,morecompetitiveandmore productiveprovince,andresultedinalargeanddiverseprovincial infrastructuresystem. Since2003,theProvincesinfrastructureinvestmentshavesupportedanaverage of100,000jobseachyear,inconstructionandrelatedindustries.Thesestrategic investments,focusedinareasconsistentwiththeProvinceslongterm infrastructureplan,BuildingTogether,haveresultedin: 100majorhospitalprojectsbuiltorunderway,including23newhospitals; Nearly650newschoolsopened,plannedorunderconstruction; Morethan27,000schoolrenewalprojectscompletedorunderway, includingreplacingleakyroofs,draftywindowsandoldboilersinschools acrosstheprovince; Over7,900kilometresofneworrepairedprovincialhighwaysmorethan twicethedrivingdistancebetweenTorontoandCalgary,includingover 4,000kilometresinNorthernOntario; Morethan950neworrepairedbridgesonprovincialhighways,which represents34percentofallprovincialbridgesandstructures; Anoverallincreaseof63percentintheGOTransitfleetsize,including morethan200newGOTransitcommuterrailcarsand47newdoubledeck GObuses;and Fivenewconsolidatedcourthouses,providingeasieraccesstocourts.

37

2014OntarioBudget Evenwithalltheseinvestments,theProvincerecognizesthatchallengeslieahead. AssuggestedinOntariosLongTermReportontheEconomy,theProvinces projectedpopulationgrowthwillresultinsignificantdemandforalltypesof infrastructure,includingtransportation,healthcareandeducation.Thatiswhy theProvincehasintroducedanew10yeareconomicplantoinvestover $130billioninpublicinfrastructure.Worldclassinfrastructuredriveseconomic growthandprosperityandenhancesOntariansqualityoflifeby: Directlysupportingjobstodayinconstructionandindirectlythrough relatedindustries; Creatingjobsinthefuturebyattractingprivatesectorinvestment; Reducingbusinesscostsbymakingthemovementofgoodsmoreefficient; Allowingfirmstoaccessmoretalentedemployees; Helpingmanagecongestionandcommutetimesbyprovidingmore transportationchoices; Providingamodernandefficienthealthcaresystemthatmeetstheneeds ofanagingpopulation; Buildingschools,collegesanduniversitiestosupportaneducated workforce;and MakingOntarioscommunitiesbetterforfamiliesandindividuals.

38

ChapterI:OntariosDecadeA10YearPlanfortheEconomy

Public Infrastructure Investments Benefit Ontarios Economy


A growing body of research demonstrates the significant economic benefits of public infrastructure.
A 2013 Conference Board of Canada report cited Ontarios current and planned real

infrastructure investments from 2006 to 2014, and estimated that:


each $1 invested in public infrastructure in Ontario raises gross domestic product

by $1.14 in the near term; and


public infrastructure spending adds over $1,000 to the average annual income of

Ontarians in 2014 and lowers the unemployment rate by about one percentage point compared to what it would have been in the absence of these investments.
A 2009 Statistics Canada report estimated that on average roughly 50 per cent of

Canadas multifactor productivity growth, representing about 10 per cent of labour productivity growth overall, in the private sector between 1962 and 2006 was the result of growth in public infrastructure.
Between 1995 and 2006, U.S. business sector productivity growth outpaced that of

Canada and Ontario by about 20 per cent in total. This occurred while the stock of U.S. infrastructure rose by almost 25 per cent compared to a 3.5 per cent decline in Canada.

Underinvestinginpublicinfrastructureintimesofstrongeconomicgrowthhas madeinvestinginmorechallengingtimesmoredifficult. InvestingininfrastructurethroughOntariosnew10yeareconomicplanwill continuetohelpstimulatetheeconomy,createjobs,andincreaseprosperity andfairnessforOntarians.Ontariosplannedinfrastructureinvestments wouldsupportover110,000jobsonaverageeachyearinconstructionand relatedindustries. Ontarioscommitmenttosupportlongterminfrastructureplanninganda strongereconomywillgoevenfurther.TheProvincehasintroducedBill141, theInfrastructureforJobsandProsperityAct,2014,which,ifpassed,would setoutprinciplesandcriteriatohelpimproveinfrastructureplanningand prioritization,promotehighqualityinfrastructuredesign,andenhancethe involvementofapprenticesincertainprovincialinfrastructureprojects.

39

2014OntarioBudget Bymakinglongterminvestmentsininfrastructure,Ontariowillmaintainitsstatus asoneofthebestplacesintheworldtolive,workandinvest.TheProvincewill continuetoensurethatOntarianshavethebestqualityoflifepossibleandthat businessescanbeasproductiveaspossibletosucceedintheglobaleconomy.

CHART 1.7

Annual Average Provincial Infrastructure Investment Per Capita

Dollars Per Capita


900 800 700 600 500 400 300 200 100 0 199495 to 200304 200405 to 202324
Note: Annual average investment amounts are net of third-party contributions and are presented on a nominal basis. Starting in 200203, infrastructure investments include the cost of tangible capital assets acquired by the Province and consolidated government organizations. Starting in 200506, the provincial reporting entity was expanded to include colleges, school boards and hospitals. Sources: Statistics Canada, Ontario Ministry of Infrastructure and Ontario Ministry of Finance.

$830

$250

40

ChapterI:OntariosDecadeA10YearPlanfortheEconomy
CHART 1.8 Northern Ontario

Highlights of Infrastructure Projects Completed or Underway

Southern Ontario

Notes: For additional information on infrastructure projects in Ontario, visit http://www.ontario.ca/buildingtoday. Source: Ontario Ministry of Infrastructure.

41

2014OntarioBudget

Making Strategic Investments in Roads, Bridges and Public Transit


Moving Goods to Market Faster
Investmentintheprovinceshighways,bridgesandothertransportation infrastructurehelpsmanagecongestionandtraveltimesonkeycorridorsandat internationalgateways,andstrengthensaccesstoimportantexportmarketsinthe UnitedStatesandabroad. Overthelastdecade,theProvincesrecordinvestmentsintheprovincialhighway networkhaveshownsignificantresults,including: NorthernHighwaysInvestments Over4,000kilometresofneworrepairedprovincialhighways. Approximately50kilometresofnewfourlanedhighwaybetweenSudbury andParrySoundalongHighway69todate. ConstructionofthenewNipigonRiverBridge,whichwillbethefirstcable staybridgeontheprovincialhighwaysystem.

SouthernHighwaysInvestments Almost3,800kilometresofneworrepairedprovincialhighways. Majorexpansionprojectsincluding78kilometresofnewhighoccupancy vehicle(HOV)laneprojects. TheRightHonourableHerbGrayParkway,whichwillbethemostsignificant singlehighwayinvestmentmadeinOntariohistorywhenitopens in201415.

Thegovernmentiscommittedtopreservingthesegains,makingfurther improvementsandcontinuingtobuildforthefuture.In201415,investments totalling$2.5billionareplannedforhighwayrehabilitationandexpansion projectsacrosstheprovince,anincreaseofapproximately$400millionabove 201314levels.

42

ChapterI:OntariosDecadeA10YearPlanfortheEconomy Keyprojectsscheduledtostartconstructionthisyearinclude: Highway407EastPhase2,fromHarmonyRoadinOshawatoHighway 35/115inClarington,includingtheEastDurhamLink; HOVlaneprojectsonsectionsofHighway410,throughMississaugaand Brampton,andonHighway427,throughMississaugaandVaughan; WideningHighway401nearCobourg; Wideninganadditional11kilometresofHighway69betweenParrySound andSudbury,aspartoftheongoingexpansionofHighway69;and RealignmentofHighway66throughthecommunityofVirginiatown, eastofKirklandLake.

Inaddition,thefollowingprojectsareplannedtosupportgrowthandimprove trafficflow: ExpandingtwosectionsofHighway11/17tofourlanes,eastofThunderBay towestofNipigon,beginningin201516; ProceedingwithanewfourlanealignmentonHighway7between KitchenerandGuelph.Propertyacquisitionisunderwayandadvance constructionworkwillbegininthefallof2015;and AddingnewHOVlanesonHighway401throughHaltonandPeelRegions, beginningin201920.

Extending Highway 427 from Highway 7 to Major Mackenzie Drive in York Region
This project is currently planned to start construction in 201617. The Ministry of Transportation has completed the preliminary design and received environmental assessment clearance for the project, and is moving forward as quickly as possible with obtaining the required property and making arrangements for utility relocations.

43

2014OntarioBudget

Moving Ontario Forward


New Dedicated Funds for Investment in Transportation Infrastructure
PremierKathleenWynneannouncedaboldnewplantomakenearly$29billion availableforinvestmentoverthenext10yearsinpublictransit,transportation infrastructure,andotherpriorityinfrastructureprojectsacrosstheprovince. Intotal,theProvinceplanstoinvestover$130billionininfrastructureoverthe next10years.

Ontarios new plan for dedicated funds for public transit, transportation infrastructure, and other priority infrastructure projects is based on the following principles:
The two new dedicated funds should be supported by dedicated sources of revenue; New dedicated revenue sources should not increase taxes on low- to middle-income

individuals;
Allocating dedicated funds proceeds between the Greater Toronto and Hamilton Area

(GTHA) and the rest of the province should be done in a way that is fair, accountable and transparent;
Dedicated funds proceeds should be substantially applied to specific transportation and

other critical infrastructure projects; and


The two new dedicated funds should be transparent and managed with strong

accountability mechanisms.

Thegovernmentwillnotincreasethetaxongasoline,theHarmonizedSales Tax(HST),educationpropertytaxes,orpersonalincometaxesonlowto middleincomeindividuals. Twonewdedicatedfundswouldbecreatedtosupportinfrastructureprojects thatareessentialtoOntariosimmediateandlongtermeconomicgrowthand jobcreation: TheProvincewoulddedicateanewfundtohelpaddresscongestionin theGTHA;and Newdedicatedfundingwouldalsobesetasidetoinvestinroads,bridges, publictransitandothercriticalinfrastructureoutsidetheGTHA.

44

ChapterI:OntariosDecadeA10YearPlanfortheEconomy Astheproceedsforthesenewdedicatedfundswouldberaisedprovincewide, itisproposedthattheybeallocatedtotheGTHAandtherestoftheprovince usingcensusdatafromStatisticsCanada.Byallocatingtheproceedstothetwo fundsbypopulation,theProvincewouldensurethattheallocationisfair, accountableandtransparent.

TABLE1.1 ($Billions)

DedicatedFundingforPublicTransitandTransportation Infrastructure(201415to202324)

201415
Available for Investment in the GTHA Available for Investment Outside the GTHA Total 1.7 1.6 3.3

201516
1.7 1.6 3.3

201617
1.6 1.4 3.0

10 Years
15.0 13.9 28.9

Note: Totals include available net new borrowing for public transit, transportation infrastructure and other priority projects.

Committingtodedicatedfundingforpublictransitandtransportation infrastructuredeliversonakeyrecommendationmadebyMetrolinxinits InvestmentStrategy,releasedinMay2013,andbytheTransitInvestment StrategyAdvisoryPanelinitsfinalreport,releasedinDecember2013. Dedicatedfundingwouldsupportinfrastructureinvestmentsthatwouldimprove thequalityoflifeofOntariansbyaddressingcongestion,helpingcommutersget hometotheirfamiliessooner,connectingpeoplewithexistingandfuturejobs, andmeetingtheneedsoffuturegenerations. Dedicatedfundsforpublictransitandtransportationinfrastructurewouldbe supportedby: Dedicatingproceedsfrom7.5centsoftheexistingprovincialgasolinetax topublictransitandtransportationinfrastructurepriorities,startingin 201415.Thiswouldbeoverandabovetheexistinggastaxfunding providedtomunicipalities,withnoincreasetothetaxratefromits currentlevel.

45

2014OntarioBudget Dedicatingproceedsfromthefollowingproposedtargetedrevenue measurestopublictransit,transportationinfrastructureandother priorityprojects: Restrictinglargecorporationsfromclaimingthesmallbusiness deduction; Restrictingthefueltaxexemptionforroadbuildingmachines;and Phasinginanincreaseoffourcentsperlitretothetaxrateonaviation fueloverfouryears.

SeeChapterV:AFairandEfficientTaxSystemformoreinformation. RepurposingrevenuesfromtheexistingHSTchargedonthecurrent provincialtaxesongasolineandroaddieselacrosstheprovincetowards publictransit,transportationinfrastructureandotherkeyinfrastructure priorities.

Thededicatedfundswouldalsobesupplementedby: Leveragingprovincialborrowing,whenneeded,andincludingproceeds fromgreenbondstohelpfinancetransitandotherenvironmentallyfriendly infrastructureprojectsacrosstheprovince. Allocatingnetrevenuegainsfromcertainassetsalesthroughtheproposed TrilliumTrust,aspecialfundtobededicatedtoOntarioskeyinfrastructure. Workingwiththefederalgovernmenttosecurefederalfundingthrough theBuildingCanadaPlanforkeytransportationrelatedprojectsthroughout theprovince. Dedicatingnetrevenuegainsfromhighoccupancytolllaneswhenthey becomeavailable.

Thesetwodedicatedfundswouldprovidenewandstablefundingtosupport priorityprojectsastheyareconstructed.Oncethefundsareestablished,the Provincewouldtracknewspendingonprojects,ensuringtransparencyand accountabilityforallOntarians.Anonlineportalwouldreportpubliclyonproject fundingandimplementationprogress.

46

ChapterI:OntariosDecadeA10YearPlanfortheEconomy

Allocating the Dedicated Funds


TheGTHAisoneofthefastestgrowingmetropolitanareasinNorthAmerica. ThepopulationoftheGTHAhasgreatlyincreasedsincethemid1970s,risingfrom 3.6millionin1976toover7.0millionin2013.Thisregionhasseensignificantly fastergrowththantherestoftheprovinceoverthisperiod,suchthattoday 52percentofOntariansliveintheGTHA,upfrom43percentin1976. Thesedemographictrendscontinuetoputpressureonthetransportation infrastructuresystemintheGTHA,causinglongercommutingtimesforfamilies andindividuals,increasedcongestionontheroadsandalessproductiveprovince. ThatiswhytheProvinceiscommittedtotakingactiontoproviderelief. ProceedsfromthededicatedfundfortheGTHAwouldbeinvestedexclusivelyin publictransitprioritiesthataddresscongestionandimprovemobilitythroughout theregion.Proceedswouldbeusedtobuildpriorityprojectsincludedin Metrolinxsregionaltransportationplan,TheBigMove,andforotherpotential projectsthatsupporteconomicdevelopmentandimprovemobility,suchasthe EastBayfrontLightRailTransit(LRT)projectonTorontoswaterfront.Thiswould buildonthefirstwaveofprojects,suchastheEglintonCrosstownLRTlineand UnionPearsonExpress,andtheBloorDanforthsubwayextensioninScarborough. Thegovernmentrecognizescontinuedexpansiontowardstwoway,allday GOTransitrailserviceasapriority.GOTransitimprovementsonallcorridors wouldincludeadditionaltrack,gradeseparations,improvedsignalling,station improvementsandadditionalfleet,whichareallbuildingblockstowardstwoway, alldayservice.Inaddition,analysisisunderwayonaproposaltoelectrifythe GOrailsystemtodeliverserviceatintervalsasfrequentas15minutes.

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2014OntarioBudget

The Big Move identifies additional GO service as critical to developing the regional rapid
transit network, and all-day, two-way express rail service as part of the solution. The Province has asked Metrolinx to begin work immediately to examine opportunities to move GO service towards a regional express rail, providing fast and frequent electrified service on all corridors at intervals as frequent as 15 minutes. This would represent a game-changer in how people move about the region, and enhance ridership and efficiency on GO Transit and other projects that connect to the network as well.

TheProvincewillworkwithMetrolinxandmunicipalitiesonhowbesttoprioritize transitinvestmentsthroughtheuseofrigorousbusinesscaseanalyses.These analyseswillhelpprioritizeNextWaveprojectsthatcouldbeaccommodated withintheProvincesdedicatedfundfortheGTHAandprovidethebestvalue forOntarians.

Priority Projects within the Greater Toronto and Hamilton Area (GTHA)
Beyond the existing GO network, priority projects within the GTHA would be drawn from the Next Wave of Metrolinx projects included in The Big Move:
GO Rail Service Expansion (more two-way, all-day and rush-hour service); GO Lakeshore Express Rail Service (including electrification); Electrification of the GO Kitchener line and Union Pearson Express; Brampton Queen Street Rapid Transit; Dundas Street Bus Rapid Transit; Durham-Scarborough Bus Rapid Transit; Hamilton Rapid Transit; Hurontario-Main LRT linking Mississauga and Brampton; Relief Line; and Yonge North Subway Expansion to York Region.

48

ChapterI:OntariosDecadeA10YearPlanfortheEconomy OutsidetheGTHA,thenewdedicatedfundwouldbeusedtosupportimportant infrastructureprojects.Projectsthatenhanceeconomicgrowthandaddress criticallocal,regionalandprovincialneedswouldbeidentifiedthroughan evidencebasedprocessinpartnershipwithOntarioregionsandcommunities.

Priority Projects Outside the Greater Toronto and Hamilton Area (GTHA)
The new dedicated fund would be used to support initiatives outside the GTHA, such as:
Local and regional transit, roads, bridges and other critical infrastructure; Infrastructure development in the Ring of Fire; Funding for bus and rail infrastructure for the Ontario Northland Transportation

Commission;
Strategic highway improvements; and Other projects to be identified through Building Canada Plan negotiations with the

federal government.

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2014OntarioBudget

Creating More Transit Options for Commuters


Since2003,Ontariohasinvestedmorethan$19.3billiontosupportpublic transitacrosstheprovince,includingapproximately$9.1billioninGOTransit. ThroughMetrolinx,theProvinceisleadingthedevelopmentofanintegrated andcoordinatedtransportationsystemacrosstheGTHA.

Projects Underway
ThefirstwaveofprojectsinMetrolinxsRegionalTransportationPlan,TheBig Move,currentlyfundedandunderwayincludes: ModernrapidtransitinToronto,beginningwiththeEglintonCrosstown LRTproject.TunnellingforthisprojectbeganinJune2013; RevitalizationofUnionStation,includingimprovedplatformaccess,anew trainshedroof,andanewconcourse.ThenewYorkStreetconcourseis expectedtoopenbytheendof2014,andthetrainshedroofisexpected tobecompletedin2016; DedicatedrapidtransitbuslanesinbothYorkRegionandMississauga. PortionsoftherapidtransitlanesopenedinYorkRegioninAugust2013, andwillopeninMississaugathisyear; UnionPearsonExpress,adedicatedraillink,betweenTorontoPearson InternationalAirportandUnionStation,whichisexpectedtobeginservice in2015,intimeforthePan/ParapanAmericanGames.Constructiononthe newTerminal1stationbeganinMarch2013andisnearingcompletion;and PreliminarydesignandengineeringworkontheSheppardEastLRTand FinchWestLRT.

Actions Underway to Expand GO Transit


The government recently announced its commitment to double current service frequency between Kitchener and Toronto, from four to eight train trips per day in 2016. To support this, Metrolinx recently reached an agreement in principle to purchase the 53-kilometre rail corridor between Georgetown and Kitchener. This purchase would add significantly to the section of the Kitchener corridor that Metrolinx already owns and would provide additional flexibility and control to help improve service and reliability for GO commuters on the corridor. This is part of the governments commitment to deliver full-day, two-way GO train service.

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy

Municipal Transit Projects


TheProvincealsocontinuestosupportkeymunicipaltransitprojects,including: Waterloos36kilometrerapidtransitcorridor,withaprovincialinvestment ofupto$300million,connectingthethreemajorurbancentresof Cambridge,KitchenerandWaterloo.Constructionoftheadaptedbusrapid transit(aBRT)componentisexpectedtobecompletedbyearly2015; ExtensionoftheYongeUniversitySpadinasubwaylinetoYorkUniversity andintoVaughan,withaprovincialinvestmentof$870million. TunnellingforthisprojectwascompletedinNovember2013; ConstructionofOttawas12.5kilometreLRTproject,theConfederation Line,withaprovincialinvestmentofupto$600million.Workhasbegun onthe2.5kilometredowntowntunnel; RenewalofTorontosstreetcarfleet,withaprovincialinvestmentof upto$416million.Thenewstreetcarsbeganonstreettestingin March2013;and ExtensionofTorontosBloorDanforthsubwaylinethroughScarborough, withaprovincialcommitmentofupto$1.48billion.Workonthe environmentalassessmentisexpectedtobeginsoon.

Sharing Provincial Gas Tax Revenues with Municipalities


Ontario provides significant ongoing funding for municipal transit systems across the province by sharing two cents per litre of provincial gas tax revenues. Since 2004, the Province has committed more than $2.7 billion in gas tax funding. This program is now a guaranteed source of funding for eligible municipalities to improve and expand their transit services.

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2014OntarioBudget

Modernizing Infrastructure in Communities across Ontario


Investing in Municipal Infrastructure
RecognizingthatmanycriticalservicesacrossOntariorelyonwellplanned, wellbuiltandwellmaintainedlocalinfrastructure,theProvincelaunchedits MunicipalInfrastructureStrategyin2012tohelpaddresslocalinfrastructure challengesoverthelongterm.

Recent Municipal Infrastructure Investments


The Province has made nearly $200 million available under the Municipal Infrastructure Strategy to help municipalities prepare asset management plans and address critical road, bridge, water and wastewater projects, including:
Northern Bruce Peninsula: Paving and widening Cemetery Road to improve safety; Sault Ste. Marie: Widening Second Line East to address increased traffic and

pedestrian safety;
Sault Ste. Marie and Prince Township: Rehabilitation of single-lane bridges; Wasaga Beach: Widening Schoonertown Bridge to four lanes and adding full sidewalks

on both sides, improving safety for vehicles, cyclists and pedestrians;


Adjala-Tosorontio: Replacing Bridge #9 with a two-lane bridge to improve safety and

accommodate increased traffic;


North Kawartha Township: Reconstruction of Jeff Road and Clydesdale Road; and Northumberland County: Rehabilitation of the CPR Overhead Bridge.

TheProvinceiscontinuingitssupportforstrongcommunitiesundertheMunicipal InfrastructureStrategythroughthenewpermanentmunicipalroadsandbridges fundof$100millionperyear,whichwillbelaunchedthisspring.Thenew permanentfundformunicipalroadsandbridgeswillcontinuesupportforthe mostcriticalprojectsincommunitieswithchallengingfiscalcircumstances.Itwill alsocontinuetoprovidesupportformunicipalassetmanagementplanning.The newpermanentfundof$100millionformunicipalroadsandbridgeswillinclude applicationandformulabasedfundingforeligiblemunicipalities,withan objectiveoftransitioningtofullformulabasedfundingovertime.

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy

Infrastructure Ontario Loan Program


The Province also supports municipal infrastructure through Infrastructure Ontarios Loan Program, which has provided over 650 loans to support approximately 1,700 municipal projects with a total value of $8.6 billion.

More Access to Health Care


TheProvinceistakingstepstoensurethatthehealthcaresectorcontinuesto offerqualityservicewhileprotectingsustainabilityofthesystemforfuture generations.Overthepast10years,morethan$21billionhasbeeninvestedin healthinfrastructure,including100majorhospitalprojectsbuiltorunderway. Ontarioplanstoinvestover$11.4billionincapitalgrantsinmajorhospital expansionorredevelopmentprojectsoverthenext10years.Thiswouldsupport morethan40projectsthatareunderconstructionorinvariousstagesofplanning andincludetheconstructionorexpansionofsurgicalandcancertreatment services.By2025,Ontariowillbenefitfromthesemodernhospitalfacilitiesthat offerqualityservices.

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2014OntarioBudget

TABLE1.2
Cornwall Community Hospital

ExamplesofMajorHospitalsBuilt,UnderwayorinPlanning
Ontario is consolidating acute and rehabilitation hospital services from two separate locations onto one site for the Cornwall Community Hospital. Construction is currently underway on renovations and a new hospital wing. Ontario is moving forward with the new Mackenzie Vaughan Hospital, with construction scheduled to start in the fall of 2015. This project will include a state-of-the-art emergency department and technologically advanced diagnostic imaging. Ontario is making progress on Mount Sinai Hospitals Womens and Infants Project in Toronto, which will add six new floors and renovate existing space to meet patient needs. The project involves the construction of a new labour and delivery unit, new neonatal intensive care unit, as well as support service areas and expanded ambulatory care space. Ontarios investment to expand the dialysis facility at Renfrew Victoria Hospital will reduce the need for patients to commute to Ottawa to meet their dialysis needs. The project will expand patient treatment and support areas, including an increased number of hemodialysis treatment stations. Ontarios investment in the Royal Victoria Regional Health Centres Expansion Project doubled the size of the existing facility and added the Simcoe Muskoka Regional Cancer Centre. The new cancer centre is providing comprehensive care to cancer patients throughout Simcoe County and the District of Muskoka. The project included space for two future patient care units, which will help the hospital continue to meet the health care needs of a growing and aging community. Ontario recently completed construction of a state-of-the-art facility for Woodstock General Hospital, with expanded programs and improved delivery of quality health care. At three storeys high and 350,000 square feet, the new hospital is more than double the size of the previous facility and allows health care professionals to offer a full range of clinical services and programs, from critical care to outpatient acute mental health services.

Mackenzie Vaughan Hospital

Mount Sinai Hospitals Womens and Infants Project

Renfrew Regional Dialysis Program

Royal Victoria Regional Health Centre

Woodstock General Hospital

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy TheProvincesplanforbuildingasustainablepublichealthcaresystemis deliveringtherightcare,attherighttime,intherightplace.Tosupportthis transformation,thegovernmentisprovidingadditionalfundingof$300million over10yearstohelpshiftcarefromhospitalstocommunitysettingsandensure adequateinfrastructurecapacityinthehealthcaresector. ThisincludesthecreationofadedicatedCommunityInfrastructureRenewalFund thatwouldhelpcommunityorganizationssuchasPublicHealthUnits,Family HealthTeamsandNursePractitionerLedClinics.Thisdedicatedfundwillgive communitypartnersthecapitalsupportneededtoprovideOntarianswithmore healthcareoptions. TheProvincewillalsoincreaseinfrastructurefundingforCommunityHealth Centres,communitybasedmentalhealthandaddictionprograms,andAboriginal HealthAccessCentres.

Building Capacity in the Community: Birth Centres


While many women and families choose to deliver their children in a hospital environment, others opt for care at home or in another supportive setting. To enhance choice for families, Ontario has supported the establishment of two new birth centres the Ottawa Birth and Wellness Centre and the Toronto Birth Centre which opened in 2014. Each of the new birthing centres will be able to accommodate up to 450 births a year. By offering women a home-like and family-centred setting in the community, where they can have a midwife-attended birth, Ontario is providing pregnant mothers and their families with more choice for healthy deliveries closer to home. Midwife-led birth centres are a proven, safe and cost-effective alternative to hospital deliveries.

Overthenext10years,theProvinceisprovidingadditionalfundingofalmost $700milliontoaddressdeferredmaintenanceinhospitals.Thisinvestmentwould doublefundingavailabletohospitalsforrepairs.Maintaininghospitalfacilitiesis necessarytoensureanefficienthealthcaresystem.

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2014OntarioBudget

Supporting a Highly Skilled and Innovative Workforce


Astrongeducationsystemandthecapacityforleadingedgeresearchare foundationsofasuccessfuleconomyandacentralpartofOntarios 10yeareconomicplan. Since2003,Ontariohasinvested$12billionineducationinfrastructureand another$4billioninpostsecondaryinfrastructure.Theseinvestmentshave resultedinnearly650newschoolsbeingopened,plannedorunderconstruction; 27,000schoolrenewalprojects(includingreplacingleakyroofs,draftywindows andoldboilers);and23majorexpansionprojectsatcollegesanduniversities. FulltimeenrolmentinOntariospostsecondarysystemhasgrownbyover 160,000since2003morethaninanydecadeintheprovinceshistory. Toensureastrongeducationsystemnowandintothefuture,theProvinceis continuingtomakeimportantinvestmentsineducationandpostsecondary infrastructure. Overthenext10years,theProvinceplanstoprovidemorethan$11billion incapitalgrantstoschoolboardstocontinuebuildingbetterplacestolearnand supportconsolidationsofelementaryandsecondaryschools.Capitalinvestments willhelpbuildnewschoolstoaddressgrowthpressuresinareassuchasMilton, Brampton,BarrhavenandAncaster.Theseinfrastructureinvestmentswillalign withdemographictrendsandhelpmeettheneedsofchangingcommunities.

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy

TABLE1.3

ExamplesofSchoolProjectsBuiltorUnderway
Ontario built a new elementary and secondary school in Pickering that added a total of 676 pupil places for more students to better serve French-language rights-holders, and introduced full-day kindergarten to the community. Ontario built a new elementary school in Scarborough that added 334 new elementary pupil places for more students and allowed the retirement of an inadequate facility. Ontario built a new elementary school in Scarborough that added a total of 201 pupil places for more students to better serve Frenchlanguage rights-holders and introduced full-day kindergarten to the community. Ontario is building a new elementary school in Mississauga that will add 615 new elementary pupil places for more students to accommodate local growth and introduce full-day kindergarten to the community. Ontario is building a new elementary school in Brampton that will add 800 new elementary pupil places for more students to accommodate local growth and introduce full-day kindergarten to the community. Ontario is building a new school in Halton that will add 1,194 new secondary pupil places for more students to accommodate local growth. Ontario has built a new secondary school in London that accommodates 1,008 pupil places.

CS Viamonde P/SP Ronald-Marion Pickering (JK12) CS Viamonde P Laure-Rise Scarborough CSDC Centre-Sud C Saint-Michel Scarborough Peel DSB Dundas Fairview

Peel DSB Fletchers Meadow Halton DSB Dr. Frank J Hayden Secondary School London Catholic DSB Saint Andre Bessette Catholic Secondary School Rainbow DSB MacLeod PS CC du Centre-Est C Sainte-Kateri Barrhaven Ottawa Carleton DSB South March Elementary

Ontario has built a new elementary school in Sudbury that opened in March 2014. The new school accommodates 600 elementary pupil places. Ontario built a new elementary school in Barrhaven that added a total of 388 pupil places for more students to accommodate growth, and introduced full-day kindergarten to the community. Ontario is making a new addition to South March PS in Kanata that will add 285 new elementary pupil places for more students, address overcrowding and introduce full-day kindergarten to the community.

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2014OntarioBudget

Renewing Elementary and Secondary Education Infrastructure


Overthenext10years,theProvincewillprovideover$4.2billiontohelpaddress schoolrepairneeds.Fundingwilltargetcriticalneedsinthesectorandimprove schoolconditions,supportasafeandhealthylearningenvironmentforstudents andmodernizeclassrooms,aswellashelpschoolboardsreduceoperatingcosts associatedwithaginginfrastructure.

Better Matching of Schools to Community Needs


Toachievelongtermsustainabilityinschoolboardfunding,theProvincehas beenworkingcloselywitheducationpartnersontheSchoolBoardEfficiencies andModernizationStrategy.Schoolboardsarealreadylookingatwaystodrive operatingefficienciesinthesystemandachievesavings. Acrosstheprovince,over600schoolsareoperatingatbelow50percentcapacity. Tobetterutilizeexistingschoolinfrastructureandreduceexcesscapacityinthe system,Ontariohasannounced$750millionoverfouryearsinnewcapitalfunding tosupportschoolconsolidations.Thisfundingwouldsupportconsolidations throughretrofits,additionstoexistingschools,ortheconstructionofnewfacilities. TheProvincewillgiveprioritytoprojectswherethereiscollaborationbetweentwo ormoreschoolboardsonnewcapitalprojects.Theseinvestmentsareexpectedto helpschoolboardstransitiontoamoremodernandefficientoperatinglandscape. Bybecomingmoreefficientandreducingsurplusspaceinthesystem,schoolboards canfocuslimitedresourcesintheclassroom. Despiteoveralldecliningenrolmentintheelementaryandsecondarysector, somecommunitiesareexperiencingrapidgrowth.Morethan1,000schoolsare operatingovercapacity. By2025,schoolswillbettermatchenrolmentandgrowthtrends,withfewer schoolsthataredrasticallyundercapacityandmorecollaborationbetween boardsforjointuseofspace.Theimportanceofschoolstosmall,moreisolated communitieswillcontinuetoberecognizedthroughthisprocess.

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy

Increasing Access to Postsecondary Institutions


Ontariowillcontinuetoexpanditspostsecondaryeducationinfrastructure inareaswherestudentdemandisstrongandwheretherearegapsinaccess. ThiswillsupporttheProvincesgrowingknowledgebasedeconomy. Toensurethatmorestudentshaveaccesstohighqualitylearning, closertohome,theProvinceisworkingtobuildneworexpandedcampuses incommunitiesacrossOntario.InMarch2014,theProvincelaunchedacallfor proposalsasthefirststepinaformal,transparentandcompetitiveprocessto evaluatedecisionsaboutfutureexpansions.Oncecompleted,newcampuses, ormajorexpansionsatexistingcampuses,willprovidenewopportunitiesfor studentstoaccesshighqualitypostsecondaryeducationincurrentlyunderserved communities.TheselocationswillcreateadditionalspacestohelpOntarioachieve itsgoalofa70percentattainmentrate. Overthenext10years,theProvinceisalsoprovidingadditionalfundingofalmost $500milliontoaddresscriticalmaintenancerepairsinthepostsecondarysector. Theseinvestmentswillfundcriticalrepairsandupgradestoexistingbuildings. Maintainingcollegeanduniversityfacilitiesisessentialtopromotingsafeand effectivelearningenvironmentsforpostsecondarystudents.

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2014OntarioBudget

TABLE1.4

ExpansionProjectsatPostsecondaryInstitutions Built,UnderwayorinPlanning
Ontario helped to support the expansion and renovation of the MacOdrum Library at Carleton University, which opened in December 2013. The library expansion will help promote Ontario as a leader in research and innovation, giving researchers across the country the opportunity to access, collect and share information. Ontario is supporting the relocation of Centennial Colleges aerospace training programs to Downsview Park, providing opportunities for future expansion in the aerospace industry, including by Bombardier, and helping to create the next generation of manufacturing in the province. Ontario supported the construction of Lakehead Universitys new Faculty of Law, Northern Ontarios first law school, which welcomed its inaugural class in September 2013. The Faculty of Law focuses on issues such as access to justice in northern and rural communities as well as Aboriginal and natural resource law. Ontario is investing in Laurentian Universitys new School of Architecture. The new bilingual school will help northern architecture students study closer to their families and the communities where they grew up. The first phase of the new School of Architecture was completed in 2013. Ontario is supporting a permanent Industry Innovation Centre at Niagara College. The state-of-the-art facility will allow Ontario-based manufacturers to access business services, equipment, research and expertise provided by the faculty and students at Niagara College. This new Centre, which opened in the fall of 2013, will play an important role in helping to provide Northern Ontario with well-trained health professionals. The new Health and Wellness Centre will feature modern labs and health facilities and will be used to deliver specialized health programs to a growing number of students. Ontario is helping Seneca College build new classrooms, state-of-the-art learning labs and study spaces for students at their King Campus. More classrooms and labs will allow new courses to be offered at the King Campus to better serve the growing needs of York Region families.

Carleton Universitys MacOdrum Library Extension in Ottawa

Centennial Colleges Aerospace Campus at Downsview

Lakehead University's New Faculty of Law in Thunder Bay

Laurentian Universitys New School of Architecture in Sudbury Niagara Colleges Industry Innovation Centre

Sault Colleges Student Health and Wellness Centre

Seneca Colleges King Campus Expansion

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy

Supporting Development in Northern Ontarios Ring of Fire


Ontariosnorthwesternregionisexpectedtoexperiencesignificantgrowthin mineralexplorationandminingdevelopmentoverthecomingdecades.The regionsRingofFirearearichwithchromite,nickel,goldandotherdeposits willcreateenormousbusinessandgrowthopportunitiesfortheprovincesmining andsupportingindustries. TheProvincecontinuestotakeconcretestepstowardsthedevelopmentofthe RingofFireinasmart,sustainableandcollaborativeway. TheProvinceandnineMatawamemberFirstNationcommunitiesrecentlysigned aregionalframeworkagreementafirststepinahistoric,communitybased negotiationprocessthatensuresOntarioandimpactedFirstNationscanwork togethertoadvanceRingofFireopportunities. Ontarioisestablishingamultistakeholderdevelopmentcorporationtoaccelerate infrastructuredevelopmentandprovideabusinessstructurefordecisionmaking. Thedevelopmentcorporationwillberesponsibleforconstructing,financing, operatingandmaintaininginfrastructurethatwillopenaccesstotheRingofFire. Afacilitatorisworkingwithprivateandpublicpartners,includingkeymining companies,FirstNationsandthefederalgovernment,creatingguidingprinciples forthedevelopmentcorporation,andwillseekconsensusonthecorporations nextsteps. TheProvinceiswillingtocommitupto$1billiontowardsinfrastructure development,contingentonmatchinginvestmentbythefederalgovernment. Thiswouldensurethatthenecessaryinfrastructureinvestments,estimatedto beover$2billion,wouldproceed. SignificantoutputwillbeproducedfromOntariosRingofFire,whichwould haveagreateconomicimpactontheentirecountry,creatingthousandsofdirect andindirectjobsandprovidingmoreopportunitiesforAboriginalcommunities. AsthefederalgovernmenthassupportedtheoilsandsinAlbertaandoffshore oilinNewfoundlandandLabrador,itmustnotpassoverdevelopmentofthe RingofFireaneconomicopportunityofnationalimportance. SeeChapterIII:FederalUnderfundingofOntariansformoreinformation.

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2014OntarioBudget

Maximizing the Value of Public Infrastructure in Ontario


Revitalizing Assets
TheProvinceisrevitalizingassetstosupportOntarioseconomicgrowthand socialwellbeing,includinghealthyandvibrantcommunities.

Lakeview Redevelopment
TheProvinceandtheCityofMississaugaarefocusedonrealizingthepotential oftheLakeviewlandsinsoutheasternMississauga.Asafirststep,amemorandum ofunderstandingwassignedin2011betweentheCity,theProvinceandOntario PowerGenerationthatcommittedtoworkingtogetheronasharedvisionfor thefutureoftheLakeviewlands.Movingforward,thesepartnerswillcontinue toworkwithlocalresidentstoplananddesigntheirfuturecommunitywith abalancedmixofcommercial,residentialandrecreationaldevelopment. TheCityexpectsthemasterplanfortheareatobefinishedbythesummerof 2014.ActingtodaytobuildLakeviewsfuturewillhelprealizethefullpotential ofanimportantassetforOntario.

Ottawa River Action Plan


Ontariowillcontinuetoimprovelocalinfrastructuretoenrichcommunitiesand regionswhilesupportingjobs.Forexample,theOttawaRiverActionPlanisacore infrastructureprojectthatwouldpromotehealthylifestylesandenvironmental sustainability,andcreatejobsfortheCityofOttawaandregion.

Ontario Place Revitalization


TheProvinceiscommittedtotransformingOntarioPlaceintoayearround, multiusewaterfrontdestinationthatattractsOntariansandvisitorsalike. Asafirststep,theProvinceannouncedthedevelopmentoftheUrbanParkand Waterfronttrail.Workontheparkandtrailisunderwayandisexpectedtobe completeandopentothepublicin2015.

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy

Leveraging Private-Sector Expertise


Ontarioisrecognizedasagloballeaderinpublicprivatepartnerships. TheProvinceusesAlternativeFinancingandProcurement(AFP),amadein Ontario,publicprivatepartnershipmodel,toconsistentlydelivervaluable publicinfrastructureontimeandonbudget. TheProvincecontinuestosupportbetterpublicservicesbymodernizingpublic infrastructureandrealestateassets.Infrastructureandrealestateprojectsare resultingineconomicbenefitsforOntario,growthopportunitiesforOntario companies,andemploymentopportunitiesforOntarians. ThroughInfrastructureOntario(IO),theProvinceisdeliveringover 80AFPprojectsvaluedatabout$35billionincapitalcosts.Projectsunder constructionorcompletedhaveanestimated$3billioninvalueformoney savings. Arecentreviewof30completedprojectsfoundthat29werecompleted atorbelowbudget,and28werecompletedon,aheadof,orwithinthree monthsofschedule.

CHART 1.9

Alternative Financing and Procurement Accomplishments

To date, the AFP model has been applied most extensively to social infrastructure projects.

HEALTH CARE
Including projects that support:

JUSTICE
Including projects such as:

8 8 5 3

Complex continuing care/ rehabilitation services

18 5 2 1

Ontario Provincial Police facilities including new detachments, regional command centres and forensic units Courthouses including over 90 courtrooms

Emergency services

Cancer treatment services

Correctional facilities

Mental health services

Youth justice detention facility

Source: Ontario Ministry of Infrastructure.

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2014OntarioBudget

Examples of Award-Winning Alternative Financing and Procurement (AFP) Projects


The AFP model is delivering value for Ontarians by maintaining project budgets and schedules while delivering award-winning designs. Examples include: Bridgepoint Hospital
Bridgepoint Hospital and Infrastructure Ontario partnered with Plenary Health to design,

build, finance and maintain the new facility for 30 years after completion. It contains a complex of different buildings including the old Don Jail, which is used for offices. The centre won Canadian Architect magazines Award of Excellence in 2008. Durham Region Courthouse
The first provincial consolidated courthouse project delivered by IO was awarded a

Royal Architectural Institute of Canada Award of Excellence in 2011. 2015 Pan/Parapan American Athletes Village
The Athletes Village is the largest infrastructure project associated with the 2015

Pan/Parapan American Games. The village is expected to house 10,000 athletes, coaches and team officials for the duration of the Games. After the Games, the village will become a mixed-use neighbourhood with affordable housing, new condominiums, a YMCA and a residence for George Brown College students. This project won

Canadian Architect magazines Award of Excellence in 2012.


The Games and Games-related investments will create more than 26,000 new jobs.

Movingforward,theProvincewillusetheAFPmodeltoexpandtheMilton DistrictHospitalandaddressthecareneedsofoneofOntariosfastestgrowing communities.Theexpansionprojectwillfocusonincreasingthemostindemand servicesandfacilitiesatthehospital,includingemergency,surgical,criticalcare, maternalnewborn,diagnosticimagingandsupportservices,aswellas medical/surgicalinpatientunits.

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy Inaddition,theProvinceisproceedingwithanewcourthouseintheTorontoarea usingtheAFPmodel.Thenewfacilitywilladdresscapacitypressuresinaging facilitiesandconsolidateOntarioCourtofJusticeoperationsfromfivedifferent locationsintoonecentralizedsite,realizingsavingsofmorethan$700millionover 30yearsbymovingoutofthirdpartyleasedspaces.Thenewcourthousewill enablemoreeffective,innovativeandresponsivedeliveryofjusticeservicesand increaseaccesstosocialjusticeprogramsinthecity.

Its not every day that clear solutions are found to fund infrastructure projects. Public-private partnerships provide a win-win solution for solving our infrastructure deficit and provide immediate and sustainable economic growth.
Joseph Mancinelli, Labourers International Union of North America, Vice President and Regional Manager for Central & Eastern Canada, November 7, 2013.

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2014OntarioBudget

Modernizing Energy Infrastructure


Supporting Investments in Clean Energy
By2003,yearsofunderinvestmentingenerationandtransmissionhadleft Ontariowithanagingenergyinfrastructure,asupplyshortageandasystemthat reliedonexpensiveimports.Theprovincereliedondirtycoalfiredpower,a privatizationschemeinthesectorhadfailedand,worstofall,Ontarioresidents andbusinessescouldneverbesureifthelightswouldcomeonwhentheyflipped theswitch.Furthermore,betweenApril1,1999,andMarch31,2004,theOntario ElectricityFinancialCorporationsunfundedliability(orstrandeddebtofthe electricitysector) increased by about $1 billion. Over the last decade, the government has turned the system around. More than $21 billion has been invested in cleaner generation and over $11 billion has been invested in transmission and distribution infrastructure by Hydro One alone. Ontarios elimination of coal-fired electricity generation is the single largest greenhouse-gas reduction measure implemented in North America to date, and Ontario is now a North American leader in renewable energy and a world leader in energy technology, innovation and smart grid solutions. Even with all these investments in infrastructure and clean energy, the stranded debt is estimated to have been reduced cumulatively by about $10.5 billion between March 31, 2004, and March 31, 2014, based on interim results which would be the tenth consecutive year of stranded debt reduction.

Nuclear Refurbishment: Delivering Value for Ontario Ratepayers


Ontarios updated Long-Term Energy Plan (LTEP) has tasked the provinces two nuclear operators Bruce Power and Ontario Power Generation (OPG) to find savings for ratepayers through economies of scale in both refurbishment and operations. Ontario also remains committed to ensuring the provinces nuclear facilities remain publicly owned, while finding greater operational efficiencies and synergies between both organizations.

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy

Highlights
Establishinganew10year,$2.5billionJobsandProsperityFundthatwill improveOntariosabilitytoattractsignificantbusinessinvestments, strengthenOntariosstrategicsectorsandsupporttheprovincesfuture economicgrowth. Committing$40millionannuallytoafoodprocessingstreamunderthenew JobsandProsperityFund. Maintainingacompetitivebusinesstaxsystem,anintegralpartofthe Provincesnew10yeareconomicplantostrengthenOntariosabilitytogrow andprosper. ExpandingtheIndustrialConservationInitiativeandintroducinganewstream oftheIndustrialElectricityIncentiveprogramtohelplargebusinesseswith theirelectricitycosts. Ensuring,throughOntariosfivepointbusinessenergysavingsplan,that smallbusinesseshavethetoolstheyneedtounderstandtheirbill,conserve energy,managecostsandsavemoney. Eliminatingandreducingredtapetohelpbusinessessavemillionsofhoursin timeand$100millionincostsby201617. ExpandingthereachofOntariosexportstofastgrowingemergingmarkets, tohelpmanysmallandmediumsizedbusinessesgrowandcreatejobs. ContinuingtosupportworldleadingresearchthroughtheOntarioResearch Fundwith$250millionoverthenextthreeyearsforleadingedgeresearch infrastructure. Providingfinancingtoearlystagelifesciencesfirmsatacriticalstageoftheir development,throughaproposedLifeSciencesSeedVentureCapitalFund.

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2014OntarioBudget Investing$25millionoverfiveyearsintheInstituteforQuantumComputing tosupportresearchandcommercializationinthisdynamicarea. Providing$5millionover10yearstoestablishtheTrilliumAdvanced ManufacturingNetworktotransformresearchresultsformanufacturersinto concreteactions.

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Section C: CreatingaDynamicand InnovativeBusinessClimate


Ontariohasbuiltastrongreputationasahubforglobalbusiness.Theprovince rankedthirdinNorthAmericaforforeigndirectinvestment(FDI),after NewYorkandCalifornia,andhasbeenrankedasCanadasmostcompetitive provinceandoneofthebestplacesforinvestmentandbusinessdevelopment. Ontariocontinuestofocusoncreatingadynamicandinnovativebusiness climatewhileimprovingproductivity. AsdiscussedinOntariosLongTermReportontheEconomy,productivityisa keydriverofaneconomysprosperityandlivingstandards.Akeychallengefor Ontario,andcountriesaroundtheworld,willberaisingproductivitygrowthin thefuture. ThatiswhyOntariosboldnewplanisfocusedonleveragingbusinessinvestment, fosteringacultureofinnovationandentrepreneurship,andcreatinghighquality jobs.Recentinitiativesinclude: Improvingthecompetitivenessofthetaxsystemtoincreasebusiness investment; Supportingcommunitiesinallregionsoftheprovincetohelpthem growandcreatejobs; InvestinginOntariosdynamicandinnovativesectors; Providingprogramstohelpbusinessesmanageelectricitycosts; Fosteringacultureofinnovationandentrepreneurship; Supportingsmallbusinessesandentrepreneurship; Modernizingregulationtoenhancebusinessproductivity;and GoingglobalexpandingOntariostradestrategytoincreaseexports inemergingmarketstobecomealeaderinproductivity.

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2014OntarioBudget Ontariosnew10yearplanfortheeconomyanditsinvestmentstodaywill ensuretheProvinceremainsoneofthemostattractiveplacestodobusiness. Thegovernmentwillcontinuetocompeteforsectorinvestmentsthatcreate wellpayingjobshereathomeandleadthewayinFDIandprivatesector productivity.Byfosteringacultureofinnovationandentrepreneurshipwhile buildingpartnershipsabroad,Ontariobusinesseswillthriveintheinternational marketforyearstocome.Thegovernmenthasalongtermplanthatwillmake Ontariooneofthemostcompetitiveplacesintheworld.

Maintaining a Competitive Tax System


Ontariostaxsystemishighlycompetitiveinternationally.Since2009,themarginal effectivetaxrateonnewbusinessinvestmentinOntariohasbeencutinhalf, makingOntariosignificantlymoreattractiveforbusinessinvestment.Increased investmentimprovesproductivityandthecompetitivenessofOntariobusinesses inexportmarkets,leadingtomorewellpayingjobs.

Recent Measures Ontario Has Taken to Support a More Competitive Tax System
Sales tax and corporate tax cuts totalling more than $9 billion per year: The Harmonized Sales Tax (HST) will remove $4.7 billion per year in embedded sales

taxes paid by businesses when fully implemented;


Corporate Income Tax cuts deliver $2.3 billion of tax relief per year; and Elimination of the Capital Tax provides $2.1 billion of tax relief per year. Implementation of significant cuts to high Business Education Tax rates has resulted in

savings of over $200 million per year for Ontario businesses.


The 50 per cent accelerated depreciation rate for manufacturing and processing

machinery and equipment was extended to 2015, providing a benefit of $265 million over three years.
Harmonization with the federal Corporate Income Tax and Goods and Services Tax has

reduced business compliance costs by more than $635 million per year.

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A New $2.5 Billion Jobs and Prosperity Fund


Inadditiontomaintaininganinternationallycompetitivetaxsystem,theProvince iscreatinganew10year,$2.5billionJobsandProsperityFundthatwillimprove Ontariosabilitytoattractsignificantbusinessinvestmentsandsupportthe provincesfutureeconomicgrowth. Thenewfundwillsecurebusinessinvestmentsthatfocusonjobcreating innovation,productivityandgoingglobal,asrecommendedbytheJobsand ProsperityCouncil,andwillinvestinOntarioskeysectors. FirmslooktoinvestinOntariobecauseofitswellestablishedadvantages, whichincludecompetitivetaxes,ahighlyskilledlabourforce,andworldclass infrastructure.Evenwiththesebusinessfriendlyconditions,however,the provincemustcompetegloballywithotherjurisdictionstoattractstrategic investments.Thesecompetingjurisdictionsincreasinglyofferawidearrayof incentivestoattractbusinesses,suchasgrants,taxbreaks,energysubsidiesand capitalinvestments.Withthenewfund,theProvincewillhavetheflexibilityto offerstrategicincentiveswherenecessarytosecurekeyanchorinvestmentsin Ontariosinterest,helpsupportgrowth,andcreatewellpaidjobsathome.

Investing in Ontarios Dynamic and Innovative Sectors


AdiverseeconomywithmanymatureandemergingindustriesisoneofOntarios greatstrengths.TheProvincewillcapitalizeonitscompetitiveadvantagesby supportingitskeysectors.

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Were approached, and visited, every day by governors, presidents, and country leaders who would like Cisco to bring the kind of knowledge-based jobs that we are bringing to Ontario. We look at these investments, and opportunities to partner, through a filter do we see a supportive government, rich capabilities in the university system, a competitive tax rate, a predictable business climate, a stable employment base. We get all of that in Ontario, which is exactly why we chose Ontario over all the other places.

Rob Lloyd, President, Development and Sales, Cisco.

Promoting Ontarios Manufacturing Sector


Ontarios Auto Sector
OntariocontinuestobealeadingNorthAmericanautomanufacturingjurisdiction. In2013,theprovincesalmost2.4millionunitsofproductionaccountedfor approximately15percentofalllightvehicles(i.e.,carsandlighttrucks)produced onthiscontinent. TheautosectorcontributessignificantlytoOntarioseconomy,andplayedakey roleintherecoveryfromtherecentrecession.Ontariosmotorvehicleassembly andpartssectoraccountedforabout2.5percentofOntarionominalgross domesticproduct(GDP)in2012.Theautosectorisalsoamajoremployer, accountingforalmost97,000directjobsin2013. Theautomanufacturingsupplychainsareanintegralpartoftheautoindustryand helpsupporthundredsofthousandsofjobsincommunitiesacrosstheprovince. Thesesupplychainsincludeinnovativepartsfirms,asophisticatedtooling industry,aswellassteel,chemicalsandplasticsmanufacturingfirms. Ontariosestablishedsupplybasecontributestoitssuccessandattractiveness asanautomanufacturingjurisdiction.

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2014OntarioBudget

Ontario Is a Strong Partner to Competitive Companies


Toyota Motor Manufacturing Canada: Supporting 7,300 jobs through investment in the

Cambridge plant, helping secure assembly of advanced vehicles like the Lexus RX 450h hybrid sport utility vehicle, and investment in the Woodstock plant to expand capacity.
Ford Motor Company: Supporting 2,800 jobs through investment in the upgrading of

the Oakville assembly plant to introduce global processes and increase R&D activity.

Advanced Manufacturing in Ontario


OntarioisCanadasmanufacturingheartland,accountingfor45percent ofnationalmanufacturingemploymentand46percentofoutput. Themanufacturingsectorfacedsignificantchallengesoverthepastdecade, includinganovervaluedCanadiandollar,weakdemandfromU.S.customers, andincreasingcompetitionfromemergingmarkets. Ontariosproductiveandskilledworkersandentrepreneursareespeciallywell placedtotakeadvantageoftheopportunitiesthatnewtechnologieswilloffer. Oneofthehallmarksofajurisdictionspotentialtosucceedwillbeitsabilityto identifyandembracetechnologicalchangesandcreateopportunitiestogrow. InordertohelpensurethatOntariobecomesagloballeaderinadvanced manufacturing,theProvincewillprovide$5millionover10yearstoestablish theTrilliumAdvancedManufacturingNetworktosupportthegrowthofthe manufacturingsector.TheNetworkwillbelocatedatWesternUniversitysIvey BusinessSchoolinLondon. TheTrilliumAdvancedManufacturingNetworkwillbuildacoalitionofbusiness, labourandgovernmentleaders,anddeliverresultstoimprovethesuccessofthe sector.Itwillcollectcuttingedgeresearchfromaroundtheworldandsharebest practicesthroughoutthesector. Ontarioissupportingpartnershipsbetweenpostsecondaryinstitutionsand industrytohelpensurehandsonlearningandtrainingareavailabletostudents, andresultinreal,concretebenefitsforindustry.

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CentennialCollege
ThePotential
Theglobalaerospace sectorispoisedfor substantialgrowthover thenext20years. TheProvincewantsto helpensureOntarios aerospacesectorisready tocompete.

ThePlanfor TomorrowsEconomy
Ontarioissupporting CentennialCollegeasit partnerswiththeprivate sectortotrainthenext generationofaerospace workers.

TheResult
Apartnershipbetween BombardierandCentennial willhelpbuildcapacityin Ontariosaerospacesector, providingtheentiresupply chainwithbothnewand experiencedgraduatesand skillsupdatingprograms.

NiagaraCollege
TheChallenge
Manysmallandmedium sizedmanufacturersin Ontariodonothavethe inhousecapacityto performresearchand developmentorsolve operationalproblems.

ThePlanfor TomorrowsEconomy
Ontarioisinvestingin apermanent,stateof theartIndustryInnovation CentreintheNiagara regionthatwillallow Ontariobased manufacturerstoaccess businessservices,suchas 3Dprintingprovidedbythe facultyandstudents atNiagaraCollege.

TheResult
Theseserviceswillhelp Ontariomanufacturers increasetheirproductivity, reshoreproduct development,reduce productioncosts,and minimizeproductiontime, helpingtocreatethe nextgenerationof manufacturingin theprovince.

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2014OntarioBudget

Supporting Ontarios Food and Beverage Processing Sector


Ontariosagrifoodsectoristhriving.Itcontributesapproximately$34billionto theprovinceseconomyandsupportsmorethan740,000jobsacrossOntario. Theprovinceisalsohometo3,000foodandbeverageprocessingbusinesses. Thefoodprocessingsector,supportedbyOntariosdiverseandproductive agriculturesector,isacrucialpartofOntariosadvancedmanufacturingsector andoneofOntariostoptwomanufacturingemployers. ThePremierhaschallengedthebroaderagrifoodsectortodoubleitsannual growthrateandcreate120,000newjobsby2020.Tocomplementexisting programming,Ontariowillhelpthesectormeetthisgoalbycommitting $40millionannuallytoanagrifoodandagriproductsprocessinginvestment categoryundertheJobsandProsperityFund.Thisdedicatedfoodprocessing streamwillhelpsupportOntariosfarmers,attractnewinvestments,createnew jobs,enhancesectorproductivityandcompetitiveness,andexpandtheindustrys marketreachbothathomeandabroad. Overthenext10yearstherewillbeanincreasedglobaldemandforfood products.Withtheseinvestments,Ontariowillbewellpositionedtotake advantageofthedemand.

Ontario is helping St. Albert Cheese Co-operative, which was established in 1894, build a new state-of-the-art cheese manufacturing operation that will support 110 local jobs and strengthen the economy. Their former factory was lost to a fire in 2013. A provincial investment of $1 million will help the co-operative purchase equipment and establish a computerized production line for their new facility. The new operation will process 50 million litres of local milk a year, create 10 new jobs and support the more than 100 jobs that were displaced as a result of the fire. At 76,000 square feet, the building will be 30 per cent larger and will feature a manufacturing plant, an observation deck for visitors, a retail store and a restaurant. Production on the new line will start in the summer of 2014.

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy

Ontario is supporting leading baked-goods producer Fiera Foods $34 million investment to increase production and enable the company to expand into new domestic and international markets. The Provinces $1.5 million investment will help retain 1,000 existing jobs and create 52 new jobs. Fiera Foods was started more than 25 years ago. My partner, Alex Garber, COO, and I established a culture at Fiera that focuses on innovation, quality and excellence, which set us on a path to achieve the success weve experienced to date. The Ontario governments support enhances our ability to continue to grow and reach new markets both here at home and around the world.

Boris Serebryany, CEO and President, Fiera Foods Company.

Growing Ontarios Life Sciences Sector


Since2003,theProvincehasinvestedalmost$49millioninthelifesciences industries.Ontarioisnowoneofthepremiercentresforlifesciencesin NorthAmericaandisrecognizedinternationallyforitsleadershipindeveloping worldclassresearch.Itishometomanyinnovativelifesciencescompaniesand toprankedbiomedicalresearchers.Ontariossupportprogramshelpaccelerate thedevelopmentofinnovativetherapeutics,diagnostics,medicaldevices,health informationtechnologyplatforms,researchtools,andenablingtechnologies. ThenextphaseofadvancingandleveraginginnovationinOntarioinvolves achievinggreatersuccessincommercialization,whichdriveshealthtechnology sectorgrowthandeconomiccompetitivenessthatsupportjobcreationin theprovince. InNovember2013,thegovernmentannouncedthecreationoftheOntario HealthInnovationCouncil(OHIC),bringingtogetherexpertsfromthehealthcare, homecare,medicaldevice,nonprofit,mentalhealth,research,academicand businesssectorstoidentifyopportunitiestobringnewhealthcareproducts tomarket.

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2014OntarioBudget Thegovernmentiscommittedtoworkwithallpartnersinthissectortoaccelerate theadoptionofnewhealthtechnologiesandinnovationsthatdemonstratevalue throughthedevelopmentofinitiativesincluding: Implementingaframeworkforstrategic,valuebasedprocurement; ClearlyarticulatingOntariohealthsystemprioritiestobuyersandsellers ofhealthtechnologies; Definingrequirementsforassessingthevalueofpotentialinnovations; Creatingstructuredpathwaysfortheadoptionofproveninnovations;and Exploringtransformativesolutionsofferedbyhealthtechnologyinnovations (e.g.,mobilehealth,remotemonitoring).

Tosupportincreasedacquisitionofinnovativehealthproducts,thegovernment hasdevelopedanInnovationProcurementFramework,providing$20million overthenextfouryears.Thefundingwillidentifybarrierstoinnovationand provideguidanceonearlymarketengagementandinnovationprocurement modelstofurtheracceleratelifesciencesandhealthcaretechnology. TheOHICwillbecontinuingitsworktoencourageproveninnovationsthat willcontributetoamoreproductiveandsustainablehealthcaresystem, andbetterhealthoutcomesforOntariopatients. Duetothetimeneededforproductdevelopmentandregulatoryapprovals, theProvinceissupportingearlystagelifesciencesfirmsthroughanewLife SciencesSeedVentureCapitalFund.Theproposedfund,ofupto$30million, wouldbeapartnershipinvolvingtheProvince,theprivatesectorandhospital foundations.ItwouldinvestinOntariobasedlifesciencescompaniesthatneed financingatthecriticalearlystagesoftheirdevelopment,helpingtobolster OntariospositionasalifesciencesleaderinNorthAmerica.

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy

Boosting Ontarios Information and Communications Technology Sector


Ontariosinformationandcommunicationstechnology(ICT)sectorranksasthe secondlargestinNorthAmericaafterCaliforniabasedonthenumberof companies.Itisalsoacriticalsourceofbothproductsandservicesasfirms throughouttheeconomyincreaseinvestmentintechnologyandraiseproductivity andinnovation. OntariosICTsectorisledbythreeclustersToronto,OttawaandKitchener WaterloowithagrowingclusterinLondon.Theyformacorridorthataccounted forover80percentofthesectorsemploymentin2013andhasstrong concentrationsofresearchanddevelopment(R&D)activityandventure capitalinvestment. Overthenext10years,thegovernmentwillcontinuetosupportthesectors continuedgrowth,includingpartneringwithhighvalueaddedproducers.

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2014OntarioBudget

CiscoSystems,Inc.
Today
Ciscosellsinternetbased routingandnetworking productsandservices. OntarioishometoCiscos Canadiansubsidiary, conductingR&D,sales andmarketing.

ThePlanfor TomorrowsEconomy
$4billioninvestmentto makeOntariooneofits globalR&Dcentres, includingdeveloping technologyusedinmobile computingandvideo technology.

TheResult
Creatingupto5,000jobs overthenextdecade, mainlyinOttawaand Toronto.

Communitech
Today
Communitechisthe WaterlooRegionshub forthecommercialization ofinnovativetechnologies.

ThePlanfor TomorrowsEconomy
TheCommunitechHub createdasignificant publicprivatepartnership, engaginghundredsof companies,thelocal community,andthe federalgovernment. In2013,theProvince announcedarenewed commitmentof$15million overthreeyears.

TheResult
Leveragedmorethan $25millionfromthe federalgovernmentand over$125millionfrom theprivatesector, andwillcreate approximately 7,000newjobs.

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy

Communitech is proud to be a partner in the Ontario Innovation Agenda. This additional support will help us to expand programming at the Communitech Hub to meet the significant demand for startup assistance and support Ontario firms as they scale. Were thrilled with the support from the Province its a testament to the strength of the Waterloo Region technology cluster.

Iain Klugman, CEO, Communitech.

AnExpandingInformationand CommunicationsTechnologySector
IBM
IBMisexpandingitshigh performancecomputing infrastructure,partnering withgovernmentsand universitiestoformthe IBMCanadaResearchand DevelopmentCentrein Toronto.Itiscreating145 newR&Djobsandan additional100jobsrelated tothedesignandbuilding ofanewdatacentrein Barrie.

Ericsson
ASwedishbased multinationalcorporation recentlyopenedanew researchanddevelopment labinOttawawith provincialsupport,creating andretaining140jobs.

ChristieDigital
AKitchenerbaseddigital projectionanddisplay systemscompanyrecently investedcloseto$140 milliontofurther modernizeitsplantand developnewtechnologies, withsupportfromthe Ontariogovernment, creatingandretaining 100jobs.

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2014OntarioBudget

Promoting Ontarios Entertainment and Creative Cluster


TheentertainmentandcreativeclusterisanimportantcomponentofOntarios economy.Knowledgeintensiveandcreativeindustriessupportahigherquality oflifeandgoodjobs,makingOntarioanattractiveplacetolive,workandvisit. Ontariocompaniesengagedinfilmandtelevisionproduction,interactivedigital media,music,andbookandmagazinepublishingcontributetoavibrant entertainmentandcreativecluster. OntarioisoneofthetopfilmandtelevisionproductioncentresinNorthAmerica, andOntariosmusicindustryisnumberoneinCanada.Thegovernment successfullylaunchedthethreeyear,$45millionOntarioMusicFundin2013. Thiswillallowthesectortodriveinnovation,whileseizingopportunitiesinboth thedomesticandinternationalmarkets,driveemployment,createandenhancea musicecosystemforOntarioartists,andincreasetourismintheprovince.Oneof thehighlightsofthisyearssupportfortheindustrywastheinvestmenttobring theJUNOAwardsbacktoOntarioin2015. Ontarioscreativeindustriesareapillarofthisprovincesneweconomyandone ofitsbestjobcreatorsespeciallyforyoungpeople.Thegovernmentwill continuetoworkinpartnershipwiththeentertainmentandcreativeindustries toshowcaseOntariostalentandexpertise.

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy

Culture,TourismandEvents

Ontarios unique local festivals and events celebrate the provinces diversity, heritage and culture, and make it a more attractive place to visit. Supporting festivals and events across the province is part of Ontarios efforts to build a strong economy and vibrant communities, drawing tourists and creating over 22,000 jobs in Ontario every year. 2015 Pan/Parapan American Games Ontario Music Fund In the summer of 2015, Ontario will host the Pan/Parapan American Games, the largest sporting event in Ontario history. It will be an opportunity to showcase Ontario to an international audience that will include more than 250,000 visitors. The three-year, $45 million Ontario Music Fund announced in the 2013 Budget allows the sector to drive innovation and employment, while seizing opportunities in both the domestic and international markets. The government is investing to bring the JUNO Awards back to Ontario in 2015, a year when the global spotlight will shine on the province as it hosts the Pan/Parapan American Games. The Toronto International Film Festival has become North Americas largest film festival, and one of the top three in the world. The Provinces support of the signature fall festival helps focus the global spotlight on Ontario, promote cinema, stimulate growth in related industries, and attract thousands of tourists to the province. In June 2013, the government announced the development of the Urban Park and Waterfront Trail on the Ontario Place site, including linking the park to the existing waterfront trail system. Work on the park and trail is underway and is expected to be complete and open to the public in 2015. The provinces Celebrate Ontario program helps over 200 festivals and events, such as the Taste of Toronto, the Stratford Festival and the Ottawa Bluesfest, enhance their programs, activities and services every year. Starting in 201415, the government will provide $2 million per year to support international amateur sports events. The Tourism Development Fund encourages strategic new investments in the tourism industry by building the capacity and sustainability of tourism businesses, associations and regions. The government will provide $1 million per year to help the tourism industry develop innovative tourism products and attract private-sector investment to Ontario. Recognizing the key role that public libraries play in delivering and supporting important community programs, the government will provide an additional $10 million over the next three years to help achieve IT improvements across the public library sector, improve service delivery, and encourage more research and innovation. In 2015, Ontario will commemorate Samuel de Champlains passage through the province and celebrate the 400th anniversary of French presence in Ontario. This celebration will bring together people from around the world to focus on the important cultural, social and economic contributions that Franco-Ontarians have made to the province.

JUNO Awards

Toronto International Film Festival

Ontario Place

Celebrate Ontario

Tourism Development Fund

Ontario Libraries Capacity Fund

400th Anniversary of French Presence

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2014OntarioBudget

Strengthening Ontarios Financial and Business Services Sector


Promoting the Financial Services Cluster
Financialandbusinessserviceswillcontinuetobeoneofthemostdynamic sectorsoftheOntarioeconomyandamajorgrowthandprosperitydriverover thenext10years. FinancialservicessectoremploymentinOntariogrewstronglyin2013by overthreepercent.Overthepast10years,itgrewmorethantwiceasfast asoverallemploymentinOntario. Employmentinbusinessservices,includingprofessionalservicessuchas architecture,engineeringandadministrativeservices,grewbyover fourpercentin2013,andalsogrewmorethantwiceasfastastheoverall economyoverthepast10years.

Toronto is the financial capital of Canada and a global financial centre home to many leading banks, securities dealers, insurers and pension funds. As a global financial centre, Toronto ranks as one of the best in the world number nine on The Banker magazines ranking and fourteenth on the U.K.-based Global Financial Centres Index.

TheOntariofinancialservicessectorwillalsocontinuetobeoneofthemost stable,efficientandwellregulatedintheworld.Canadasmajorbankshave beenrankedasthesoundestintheworldoverthelastsixyears,andOntariowill maintainitsstrongglobalreputationforwellrunfinancialmarketsandeffective riskmanagement. Thegovernmentiscontinuingtoworkwiththefinancialservicessector, theTorontoFinancialServicesAllianceandotherordersofgovernmentto implementafinancialservicessectorgrowthandcompetitivenessstrategy.

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Establishing a Cooperative Capital Markets Regulator


AstrongcooperativesecuritiesregulatoryframeworkwouldenhanceCanadas reputationandcompetitivenessinglobalcapitalmarkets,whichinturnwould underpinstrongereconomicgrowthandmorereadyaccesstocapital. InSeptember2013,theOntario,BritishColumbiaandfederalgovernmentssigned anagreementinprincipletoestablishaCooperativeCapitalMarketsRegulatory System(CCMR)featuringacommonregulatorthatwouldadministerasingleset ofsecuritiesregulations. OntarioisworkingactivelywithBritishColumbiaandthefederalgovernmentto meettheagreedtimelinesforthisinitiative,underwhichtheCCMRwould becomeoperationalbyJuly1,2015. TheCCMRwouldalsoofferrealbenefitstoinvestorsandtocompaniesraising capital,aswellastotheinvestmentindustryandothermarketparticipants bybetterprotectinginvestors,strengtheningcapitalmarketsenforcement, andpromotingsafe,securecapitalmarketsthatattractinvestment. Ontario,BritishColumbiaandthefederalgovernmentcontinuetoinviteother provincesandterritoriestoparticipateintheCCMR.

Fostering Safe and Competitive Capital Markets


Asthefinancialsystembecomesmorecomplexandmoreinterconnected, soundsecuritiesregulationandstrongenforcementarebecomingincreasingly importanttoenhancecompetitiveness.TheOntarioSecuritiesCommission(OSC) isdevotingincreasedattentionandresourcestostrengtheningenforcementand investorprotection.Forexample,in2013,theOSCconcludedproceedingsagainst atotalof170individualsandcompanies,upfrom100individualsandcompanies in2012. Thegovernmentplanstoproposechangestoupdatesecuritieslawsandrelated legislation.Proposedlegislativeamendmentswouldinclude: ChangestotheSecuritiesActthatwould: Updatedisclosurerequirementsforexchangetradedfunds; Suspendrunningofrelevantsecondarymarketcivilliabilitylimitation periodwhileinvestorsseekleavetoproceedwiththeirclaim; 85

2014OntarioBudget Expandscopeofinsidertradingandselfdealingprovisionsinrelationto investmentfunds;and Broadendefinitionofmarket participant.

Changes to the SecuritiesAct and the CommodityFuturesAct that would: Increase scope of OSC compliance and continuous disclosure reviews; Facilitate extension of freeze orders; and Broaden OSCs ability to preserve assets in an enforcement context.

These changes would help modernize and strengthen Ontarios securities regulatory framework, enhance the competitiveness of Ontarios capital markets and facilitate increased investment.

Modern Insurance Regulation


Recipients of long-term disability payments have seen their payments reduced or eliminated when their corporate employer faced fiscal challenges and the fund was not insured. The Province proposes to protect such future recipients by amending the InsuranceAct to require that long-term disability benefits are insured.

Financial Services Regulation


The Province is actively engaged in its long-term commitment to continuously update and adapt Ontarios financial services regulation to maintain a strong regulatory framework that protects consumers. This is achieved through periodic (e.g., five-year) reviews of legislation and regulations. As well, proactive regulatory improvements are initiated often to address technological advances and practices, national and international trends, and an evolving marketplace.

Credit Unions
Credit unions and caisses populaires play an important role in Ontarios economy. They have over 1.5 million members and, at the end of 2013, had provided $33.4 billion in loans to households and businesses throughout the province. A modern regulatory framework that enables the credit union system to flourish and protect members is essential.

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Chapter I: Ontarios Decade A 10-Year Plan for the Economy A review of the CreditUnionsandCaissesPopulairesAct,1994, will be launched in the fall. This will provide an opportunity to update the legislation and regulations so credit unions can continue to meet the needs of their members and the economy into the future. Online Promotion of Insurance In recent years, credit unions and other deposit-taking institutions have been providing an increasing array of online services to their customers. Many services that used to be exclusively accessed in a credit unions bricks and mortar branches are now being accessed by consumers online. It is important to ensure that Ontarios policies regarding the online insurance activities of credit unions keep consumers best interests in mind. To this end, in late 2013, the Province initiated an examination of insuranceproduct promotion on credit union websites. In addition to seeking the views of the insurance and credit union sectors, recent federal government action affecting federally incorporated financial institutions was also considered. As a result, the Province is proposing to prohibit credit unions from online promotion of insurance products such as home and auto insurance, which they are not permitted to promote in their branches.

Developing Ontarios Resource Industries


A Diverse and Dynamic Mining Sector in Ontarios North
Ontario remains Canadas leading jurisdiction for the exploration and production of minerals and a major player around the world. The province also holds a strong position as the global centre for mining finance, with the Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV) having more than half of the worlds listed mining companies, with a market capitalization of almost $250 billion in 2013.

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2014OntarioBudget The northwestern region of the province is expected to experience significant growth in mineral exploration and mining development over the coming decades. The regions Ring of Fire area, rich with chromite, nickel, gold and other deposits, will create enormous business and growth opportunities for the local mining and supporting industries. More than 20 companies and individuals hold active mining claims in the Ring of Fire area and 265 companies are exploring 400 projects in Ontario, laying the foundation for significant future mining development and job creation. Emerging market nations will continue to support demand for Ontarios minerals, in turn driving continuing exploration and development in northern Ontario. By 2025, significant output will be produced from Ontarios Ring of Fire area, making the province one of the major world producers of chromite and strengthening Ontarios position as a world leader in nickel production. As part of Ontarios ongoing modernization of the MiningAct, the Province is modernizing Ontarios claims staking system going from paper-based to online. Ensuring a fast, efficient system is in place is good for business, affected landowners and Aboriginal communities.

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Chapter I: Ontarios Decade A 10-Year Plan for the Economy

Ontario, First Nations and Industry Working Together to Realize the Potential of the Ring of Fire Area
In March 2014, a historic framework agreement was signed by the Province of Ontario and the Chiefs of the nine Matawa-member First Nations to engage in a community-based regional negotiation process. The agreement commits First Nations and Ontario to work together to advance Ring of Fire opportunities, including regional long-term environmental monitoring and enhanced participation in the environmental assessment process, resource revenue sharing, economic supports, and regional and community infrastructure. In February 2014, Deloitte LLP was brought on to help establish a development corporation that would be responsible for infrastructure in the Ring of Fire region. Deloitte LLP will act as a third-party resource for key partners, including First Nations, industry, and the provincial and federal governments.

Providing Growth Opportunities for Local Mining Industries


To support the growth of the mining industry in the Sudbury area, the Province is committing up to $26.7 million for the first phase of an expansion of Maley Drive, subject to matching federal and municipal contributions. The expansion will create a limited-access east-west route bypassing central Sudbury, taking heavy trucks carrying ore and slurry off city streets.

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2014OntarioBudget

Ontario Northland Transportation Commission


The government is moving forward with a balanced approach to transforming the Ontario Northland Transportation Commission (ONTC) to ensure sustainable employment, continued economic growth, and a strong transportation and telecommunication network in Northern Ontario. As recently announced, the Province has reached an agreement with Bell Aliant for the sale of Ontera, Northern Ontarios vital, efficient and reliable telecommunications network, that will ensure continued service quality, sustained jobs, significant capital investment in Northern Ontario and the best value to taxpayers. Through an advisory committee, the government has listened to the voices of northern municipalities, Aboriginal communities and industry stakeholders, and is committed to keep the remaining ONTC business lines (motor coach, Polar Bear Express, rail freight and refurbishment services) in public hands as these vital transportation services and infrastructure support economic growth in northern Ontario. A sustainable organization will require operational improvements including through cost containment, restructuring and collective bargaining. The government is also prepared to support this renewed direction with new investments to ensure the sustainability of ONTC assets, for example: Improving service and accessibility of motor coach services; and Refurbishing passenger rail coaches for use on the Polar Bear Express, which will sustain jobs and create business for the refurbishment division while ensuring vital service between Cochrane and Moosonee can be delivered more effectively and efficiently.

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Chapter I: Ontarios Decade A 10-Year Plan for the Economy

Helping Businesses Manage Electricity Costs


Rate Mitigation for Business
Many programs and incentives are available to support industrial consumers: The Province extended the Northern Industrial Electricity Rate (NIER) Program with $360 million over three years (201314 to 201516) to provide a rebate of two cents per kilowatt-hour to qualifying large northern industrials; The Province implemented the Industrial Conservation Initiative in 2011 that encourages large companies to conserve during peak hours, saving money for the entire electricity system; Companies have the opportunity to participate in Demand Response programs administered by the Ontario Power Authority (OPA); and Industrial companies could be eligible for a significant reduction in electricity rates through the Industrial Electricity Incentive program if they start or expand operations and create jobs.

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Five-Point Business Energy Savings Plan


The government knows that local entrepreneurs are focused on growing their business. Ontarios five-point business energy savings plan is designed with the busy small business owner in mind. 1. Working with energy agencies, local distribution companies and the Retail Council of Canada, the government will promote the use of Roving Energy Managers. Roving Energy Managers will be available to small businesses to provide support and assistance every step of the way on an energy-savings project from applying for incentives to installing energy-efficiency measures. 2. The saveONenergy for Business Conservation program will be better tailored to small businesses to ensure they can benefit from the programs that help them manage and reduce their energy bills. 3. The saveONenergy for Business Conservation program is also being expanded to provide increased incentives to businesses. Participation will be made easier and faster for small businesses by simplifying and automating application processes. 4. To help small businesses cover the upfront capital costs of conservation projects, the Province will work to make on-bill financing available for the sector, beginning in 2015, and allow repayment through the utility bill. 5. To ensure conservation incentives continue to be available for small businesses, Ontario will commit to another six years of conservation programs through the new Conservation and Demand Management Framework.

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Chapter I: Ontarios Decade A 10-Year Plan for the Economy

Giant Tiger operates over 200 stores across Canada and employs over 7,000 employees. Through a project funded by the Ontario Power Authority (OPA) and Hydro Ottawa, an Embedded Energy Manager (EEM) was hired within Giant Tiger to find energy reduction opportunities, resulting to date in average annual electricity savings of about $7,500 per store, or about six per cent of its bill, across about 40 stores in Ontario.

Industrial Electricity Incentive


In 2012, the OPA began accepting applications for the Industrial Electricity Incentive (IEI) program under two application streams. The IEI assists with the management of electricity demand by encouraging increased industrial production through sharply discounted electricity rates for local job creators. In this way, Ontario is using the current surplus baseload generating capacity to support domestic job creation and economic growth. Table 1.5 shows a selection of the successful IEI applicants.

TABLE1.5

IndustrialElectricityIncentiveProgram ExamplesofSuccesses
Sector Pulp and Paper Steel Pulp and Paper Pulp and Paper Estimated New Jobs 140 45 80 78

Applicant Name Pembroke MDF ASW Steel Atlantic Packaging Products Resolute Forest Products

As part of Ontarios efforts to support a dynamic business climate, drive local economic growth and support job creation, the government will direct the OPA to run a new IEI stream to accept applications for discounted electricity rates. The new stream will make available up to four terawatt hours of electricity per year. Program guidelines and eligibility criteria will be expanded to encourage participation from more diverse economic sectors, and contracts will be available for a longer term, with an end date of December 31, 2024.

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2014OntarioBudget This stream will build on the previous successful intakes, and the OPA will aim to complete the procurement process in time to award contracts by December 31, 2014.

Industrial Conservation Initiative


Ontario is committed to providing competitive industrial electricity rates while also promoting the conservation of energy, including electricity. To support these priorities, in 2011 the Province implemented the Industrial Conservation Initiative (ICI). The ICI charges the largest consumers in the province, termed Class A consumers, a global adjustment rate based on their contribution to peak demand.

Vision Extrusions, an extrusions manufacturing company in York region employing 325 workers, could expect to save approximately $560,000, or 17 per cent, on its annual electricity costs under proposed changes to the Industrial Conservation Initiative, assuming the company reduces its electricity consumption by 15 per cent during times of highest system demand.

Consumers with an average monthly peak demand greater than five megawatts (MW) are defined as Class A consumers, and those with an average monthly peak demand of less than five MW are defined as Class B consumers. In the updated Long-Term Energy Plan (LTEP), a large industrial consumer with a five megawatt demand and a 75 per cent capacity factor is projected to pay about $3 million less in the next five years, and about $11 million less to 2030, compared to the 2010 LTEP forecast. The Ministry of Energy will expand the definition of Class A consumers, lowering the threshold from five MW to three MW, thereby increasing the number of Ontario businesses eligible to participate in the ICI. This will save participants on average 15 to 20 per cent on their energy bill.

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Chapter I: Ontarios Decade A 10-Year Plan for the Economy

TABLE1.6

IndustrialConservationInitiative PotentialSavingsExamples
Average Monthly Peak Demand 4.1 MW 3.2 MW Annual Estimated Savings ~ $400,000 ~ $900,000 Reduction to Total Bill 12% 23%

Sector Manufacturing Data Processing

Notes: Values are illustrative. Actual savings will depend on multiple factors, including actual contribution to peak demand and levels of electricity consumption. Annual estimated savings rounded to the nearest $100,000.

The ICI program expansion supports both increased business competitiveness as well as the governments conservation goals by: Enhancing the efficiency and competitiveness of a larger number of industrial firms; Helping reduce emissions by promoting energy conservation during peak demand periods; Improving the reliability of the electricity system, especially during critical peak demand periods; and Reducing the need for and costs associated with the building of new electricity power plants in the future to cope with periods of high demand.

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Fostering a Culture of Innovation and Entrepreneurship


Innovation and entrepreneurship are important drivers of economic growth. Ontario is committed to supporting a business environment where small businesses, entrepreneurs and investors can strive to create the technologies and well-paid jobs of the future.

Investing in Venture Capital Funds


Access to capital is a driver of growth and innovation for entrepreneurial firms. Young firms, however, often have difficulty finding the capital they need to grow and expand. That is why the Province, with the federal government and private-sector partners, recently launched the Northleaf Venture Catalyst Fund (NVCF). The NVCF had its first closing in January 2014 at over $217 million, and could grow to $300 million with additional private-sector commitments. To support early-stage financing, the fund will invest in high-potential firms as well as other venture capital funds. To date, the NVCF has already invested in two Ontario-based, venture capital funds. The announcement of the NVCF builds on the continued success of the Ontario Venture Capital Fund (OVCF).

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Chapter I: Ontarios Decade A 10-Year Plan for the Economy

TABLE1.7

InnovativeCompaniesSupportedbytheOntarioVenture CapitalFund
Shopify (Ottawa) Achievers (Toronto)
Provides a cloudbased platform to engage and recognize employees and their performance.

BlueCat Networks (Toronto)


Provides reliable and secure internet protocol (IP) address management solutions to help organizations manage their networks and devices. 1,500 clients worldwide.

newterra (Brockville)
A leader in the design and manufacture of modular water treatment systems.

Business

A leading ecommerce platform used by retailers to sell goods and services online.

Achievements

Recent market valuation of $1 billion.

Named sixthfastest growing software company in Canada in 2013.

Three-year growth rate of more than 30 per cent.

Ontarios support for venture capital is having a positive effect. In 2013, Ontario-based companies received $675 million in venture capital investments, the fourth consecutive annual increase. Through the Provinces ongoing commitment to improving access to capital, Ontario is well positioned to be in the top five North American jurisdictions for venture capital investment by 2025.

Commercializing Leading-Edge Discoveries


Ontarios universities, colleges and research hospitals play an important role in the development of a well-educated labour force, while also making leading-edge discoveries. Bringing these discoveries to market through Ontarios network of innovation and commercialization centres supports entrepreneurial activity within the province, and is a key driver of long-term economic growth. The Province will continue to support the activities of world-leading researchers through the Ontario Research Fund, including $250 million over the next three years to invest in leading-edge research infrastructure. This funding will help postsecondary institutions leverage investments from the federal government, private sector and other sources. These investments help sustain Ontarios long-term prosperity by supporting research that will create the technologies and well-paid jobs of the future. 97

2014OntarioBudget The field of quantum computing seeks to apply the principles of quantum mechanics to develop a new generation of computers. This technology could result in radically improved computing speeds, and potentially impact such areas as medicine and resource discovery. The Institute for Quantum Computing, at the University of Waterloo, continues to make significant discoveries in this field, positioning Ontario at the forefront of this exciting technology. Building on its previous support, the government will commit $25 million over the next five years to continue supporting the Institutes research and commercialization activities. The government recognizes the strategic importance of the Perimeter Institute as a global leader in theoretical physics, advanced training and postgraduate research. The Province will continue to support its research, training and outreach activities.

Increasing Access to Capital


All businesses, particularly startups and small and medium-sized enterprises (SMEs), need broad access to pools of capital to foster job creation and economic growth. In March 2014, the Ontario Securities Commission published for comment four proposed prospectus exemptions that would make it easier for businesses to raise capital and, in particular, would enable crowdfunding.

Growing Small Businesses in Ontario


Small and medium-sized enterprises are the leading source of business entrepreneurship and account for more than 60 per cent of private-sector employment. In a dynamic economy, successful small and medium-sized businesses will grow and prosper as they innovate and expand into global markets. To help foster a healthy and growing small and medium-sized business sector, the Ontario government is taking the following actions: Employer Health Tax Exemption raising the exemption from $400,000 to $450,000 of annual Ontario payroll means that 60,000 small employers will now pay less Employer Health Tax. This change saves these employers up to $975 per year; Five-Point Business Energy Savings Plan ensuring small businesses have the tools they need to understand their bill, conserve energy, manage costs and save money;

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Chapter I: Ontarios Decade A 10-Year Plan for the Economy Reducing Red Tape reducing burdens on businesses through renewal of the Open for Business initiative. Each year, ministries will identify, measure and report on at least one additional burden that can be reduced; Venture Capital creating a new venture capital fund in collaboration with the federal government and private-sector partners that will help innovative startups and other emerging companies get the financing they need to build competitive businesses and create tomorrows jobs; Expanding SME Exports providing opportunities for Ontarios small businesses to diversify exports beyond the United States to fast-growing markets, through the Going Global Trade Strategy; and Corporate Income Tax (CIT) maintaining a low CIT rate for small business at 4.5 per cent, a full seven percentage points below the general CIT rate. Small and medium-sized enterprises also continue to benefit from enhanced tax credit rates for employee training and a 10 per cent refundable R&D tax credit.

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Supporting Regional Investments Helps Create Jobs


The governments priority is to create jobs, growth and opportunity in every part of the province. Each region of the province has unique advantages to specific industries and economic activities that form a strong base to build resilient local economies. The Eastern and Southwestern Ontario Development Funds support regionally based projects that create jobs in Ontarios communities. The Northern Ontario Heritage Fund Corporation (NOHFC) supports northern municipalities, businesses and economic development organizations. Since its launch in 2008, the Eastern Ontario Development Fund has committed over $70 million to 126 projects, leveraging business investment of over $670 million and helping to create and retain 15,400 jobs. Since October 2003, the NOHFC has approved over $897 million, leveraging over $3.2 billion towards 5,933 projects in Northern Ontario. About 22,900 jobs have been created or retained. Since its launch in October 2012, the Southwestern Ontario Development Fund has committed support of over $40 million for 32 projects, leveraging business investment of over $400 million and helping create and retain 9,800 jobs.

Through the Communities in Transition program, the government helps communities and industries facing sudden economic challenges such as closures, job losses and industry-wide restructuring. The government also offers assistance for drafting new economic strategies to build strong communities. Since 2006, the Ontario government has committed over $17 million in Communities in Transition funding to assist 67 communities and industry groups. Although major closures are a normal part of the economic cycle, the government will engage early to help prevent closures, where possible. In the event of a closure, the government will help to mitigate the impact on workers and communities. Working with business and labour, Ontario will strengthen worker protection when major closures do occur, building on the success of the Communities in Transition program and Rapid Response Teams. 100

Chapter I: Ontarios Decade A 10-Year Plan for the Economy

Anchoring Economic Sectors, Creating Opportunity


Eastern Ontario Development Fund:
Located in Iroquois, Ross Video Limited, a manufacturer of switchers, control systems

and robotic cameras for use in broadcast and live event production, received a $513,600 grant. The project will leverage $5.1 million in private investment, create 25 jobs and retain 160 jobs.
Flying Colours Corp., located in Peterborough and specializing in aircraft completions,

received a $1.2 million grant to expand its avionics facility. This project is leveraging $12 million in private investment and the company is committing to create 60 new jobs and retain 169 jobs. Northern Ontario Heritage Fund Corporation:
Rotacan received a $1 million grant and loan for its rotary, blast-hole, drill-bit

manufacturing operation in North Bay. The project leveraged $1 million in private investment and created 16 new jobs.
Geraldton Community Forest Inc. received a $1.75 million grant towards the

construction of a Regional Skills Centre at the Greenstone Regional Airport. The training centre will provide training for employment opportunities in the forestry and mining sectors for Aboriginal people. The project leveraged $2.85 million in other investment and will create and retain 27 jobs. Southwestern Ontario Development Fund:
NASG Canada Inc., a Woodstock-based supplier of stampings and welded assemblies to

the automotive industry, received a $1.5 million grant to expand its facility, and create 50 jobs and retain 210 jobs. The project leveraged $12 million in private investment.
Natra Chocolate America Inc., a manufacturer of chocolate bars, spreads and other

specialty products, received a loan of $2.8 million to help invest $19 million in its new London facility, creating 56 new jobs in the community.

The Rural Economic Development (RED) Program helps rural communities plan and build a foundation for economic growth, and strengthens rural businesses through support for projects related to business development and diversification, regional marketing, and attraction and retention of skilled labour. Since 2003, RED has invested $167 million in 468 economic development projects, generating over $1.2 billion in new economic activity while creating and retaining over 35,000 jobs.

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Creating Opportunity in Rural Ontario


Recent Investments by the Rural Economic Development Program:
Located in Collingwood, Goodall Rubber Company of Canada (a hose and fitting supplier) is expanding its operations to position itself as the North American leader in the ammonia market, directly supporting Ontarios agri-food and processing sector. The project is creating 20 new jobs and leveraging $1.3 million in private investment. The municipality of Port Hope received support to develop a strategic plan to strengthen relationships between local residents and the business community, and help local business develop business plans and marketing strategies.

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Chapter I: Ontarios Decade A 10-Year Plan for the Economy

Reducing Regulation for Business to Enhance Productivity


Ontario is building a regulatory environment that encourages business growth. As part of the recent Open for Business renewal initiative, Ontario is finding ways to further reduce regulatory burdens, adopt smarter regulatory practices and facilitate ongoing business-to-government connections. The government has introduced legislation that, if passed, would create a better business climate by reducing burdens for business. Each year, ministries will identify, measure and report on at least one initiative that can help further reduce the regulatory burden on businesses. Through this initiative, the government will help stakeholders save millions of hours in time and $100 million in costs by 201617. The government is committed to reducing the regulatory burden while protecting public safety. A smart and targeted effort at red tape reduction will ensure a better business climate without putting public safety at risk. This work follows the governments achievement of eliminating 80,000 regulatory burdens or 17 per cent of red tape since 2008.

The provinces commitment to introduce red tape accountability legislation is in line with CFIBs recommendations to government. By legislating annual reporting from all ministries and by regularly measuring the cost of regulations on businesses, Ontario is expecting to join the best in class in regulatory reform.

Canadian Federation of Independent Business, March 12, 2014.

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The following are examples of burden reduction projects that have helped reduce cost for businesses and stakeholders.

Workplace Safety and Insurance Board (WSIB) Form 7 Reduction


A form must be filed with the WSIB every time a worker is injured on the job,

even if the injury does not result in the employee losing time from work (known as WSIB Form 7).
By working with the small business sector, WSIB was able to reduce the length of

Form 7 by 60 per cent. WSIB also launched electronic and tele-claim services to make filing a claim more convenient.
These changes save an average of eight minutes per claim, which multiplied out to the

thousands of Form 7 submissions every year, translates into more than 10,000 hours and half a million dollars in cost savings annually.

Biogas Approval Streamlining


Many agricultural businesses have considered the installation of biogas digesters as a

way to generate renewable energy from farm waste (manure). However, in the past, the approval process was prohibitively long and expensive, stunting the development of these facilities.
The Ministry of Agriculture and Food, working with the Ministry of the Environment,

has worked to streamline approvals for on-farm anaerobic digesters, making it substantially easier and less costly for lower-risk facilities to be established.
Under the new framework, the approval times have gone from around two years to

an average of three months. Other fees and unnecessary requirements have also been reduced, resulting in estimated average savings of almost $89,000 per operator, or $1.77 million for all stakeholders in one year.

Small-Scale Solar Facilities Approval Streamlining


Under Ontarios Renewable Energy Approvals program, small-scale solar facilities

were facing costs and time commitments disproportionate to the size and risk of their projects.
To address this, the Ministry of the Environment worked with stakeholders to streamline

the approvals process for low-risk, small-scale solar facilities that have minimal environmental impact when complying with standard regulatory requirements.
These changes reduced the preparation time for approvals from an average of

17 months to less than 30 days, with final approvals being granted online in less than 10 minutes.
This move from a one-size-fits-all process to one based on risk will deliver more than

$1.9 million in savings to ground-mounted solar facilities operators in a one-year period (based on registrations to date).

Open for Business, Fewer Burdens, Greater Growth, (January 2014).

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Going Global
Attracting Foreign Direct Investment
Ontario has experienced considerable success in attracting FDI, and has proven to be a leading destination within North America for investment. fDi Intelligence, a leading industry resource for research and analysis on FDI trends globally, published in its 2012 report on FDI trends in Ontario and North America that Ontario was a destination for global foreign direct investment. It: Received the third highest number of investment projects in the United States and Canada; and Ranked number one for FDI projects per capita among major North American states/provinces.

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Attracting Global Investment, Creating Jobs at Home


In recent months, Ontarios trade offices around the world have facilitated a number of investments, including:
India-based Mahindra Satyam, which offers consulting and information technology

(IT) services spanning various sectors, and its sister company Tech Mahindra are setting up a development centre and research and development facility in Toronto, planning to hire up to 130 IT engineers and financial experts, and investing approximately $10 million over the next five years.
U.S.-based XPO Logistics provides third-party logistics services using a network of

relationships with ground, sea and air carriers in the United States, Mexico and Canada. XPO Logistics opened a carrier procurement office in Ontario that will focus on the procurement of full truckload-focused companies that can move their clients goods throughout Canada. The project secured 200 jobs and is resulting in an approximate investment of $24 million.
Gizeh, a food packaging company from Germany, made a $4 million investment in the

food processing/advanced manufacturing sector in Ontario. This investment will create 20 to 25 new jobs and, within three years, the company expects an additional investment of $25 million and 60 to 70 new jobs.
Newgen Software Technologies Limited from India has entered into a strategic

partnership with HP Canada to offer solutions particularly with respect to the financial services market. Newgen Software is a leader in business process management, enterprise content management and customer communication management. The company has also procured its first project from a municipal government in Ontario and a bank. The investment is $3 million and 10 jobs.

Expanding Exports
Demand for Ontarios high value-added goods and services is expanding around the world. Emerging markets such as China and India will continue to grow quickly, while advanced regions such as the United States and Europe will continue to provide steady demand for Ontarios resources, high-technology exports, and professional and technical services. One of the greatest sources of opportunity for Ontarios small businesses lies in expanding and diversifying exports overseas, beyond the U.S. market. Over the past decade, many of Ontarios small and medium-sized businesses have started to build on their export success to the United States by pursuing new export markets abroad. 106

Chapter I: Ontarios Decade A 10-Year Plan for the Economy The Province continues to move forward with its Going Global Trade Strategy, which will expand the reach of Ontarios exports, including to fast-growing emerging markets that are quickly increasing their share of the global economy. It will help Ontario companies especially SMEs increase their success in exporting to global markets and creating jobs. The Ontario government continues to: Promote Ontario companies quality goods and services, by opening Ontarios eleventh International Marketing Centre (IMC) in So Paulo earlier this year to help companies explore export opportunities and connect with international buyers and investors in Brazil. Further expand representation to include South Korea, Chongqing in China, and Israel, adding to the existing IMCs in New York, San Francisco, Mexico City, London, Paris, Munich, Beijing, Shanghai, Tokyo and New Delhi (including a satellite office in Mumbai). Expand the number of trade missions to increase the number of companies exporting and increase employment by connecting more businesses to more foreign buyers, while increasing Ontarios global reputation as a source of innovative goods and services. Help exporters find new markets. Last year alone, Ontario led over 70 outbound trade missions in priority sectors and emerging markets. These outbound missions are helping almost 500 SMEs to export and have identified almost $450 million in potential exports. They are part of a plan to help triple exports to emerging economies and diversify exports over the next 10 years. Expand the opportunities for foreign buyers to connect with potential Ontario exporters. Ontario has hosted over 80 foreign buyers and international delegations. A Global Export Forum focused on opportunities in the Asia Pacific region was held in Ontario last fall. Another Global Export Forum, focused on Latin America, will be held in May 2014. Connect Infrastructure Ontario with Ontarios international trade offices to create export opportunities for Ontario firms that have participated in Alternative Financing and Procurement (AFP) projects. Infrastructure Ontario is showcasing the made-in-Ontario AFP model through its involvement with the National Governors Association in the United States.

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2014OntarioBudget It is projected that, over the next 10 years, Canada will negotiate a diverse collection of comprehensive trade agreements with most of its major trading partners, including India and Japan. Ontario will continue to support trade agreements that benefit its economy while supporting strategic sectors. Concluding new trade agreements will also help Ontario businesses become more productive and involved in global competition, supporting the international transfer of new ideas, innovation and competitive techniques.

Successful Missions
Ontarios in-market trade representation in Mexico, Chile and Brazil has helped Ontario

companies secure 25 contracts (April to October 2013). Ontario software, ICT, mining, tooling, construction and clean energy firms are among those that have achieved this new business.
Electrovaya, a clean technology company, has received a purchase order for

approximately $1.0 million US from an original equipment manufacturer in the United Arab Emirates. The order is for a high-value application for strategic portable power systems and is the first order from the Middle East. Electrovaya exhibited in the Ontario pavilion at the World Future Energy Summit.

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Highlights
Raisingtheminimumwageto$11.00,andtyingittoinflationtoprovide fairnesstolowincomeworkersandpredictabilitytobusinesses. Investinginaffordablehousingandhomelessnesspreventioninitiatives. IncreasingandproposingtoindextheOntarioChildBenefit. Establishinganewhealthbenefitprogramforlowincomechildren. Continuingtoreformthesocialassistancesystemthrougharateincrease andbystreamliningemploymentbenefits. ExpandingtheStudentNutritionProgramtoservemorechildrenin lowincomeneighbourhoodsandonFirstNationreserves. Enhancingsupportsforadultswithdevelopmentaldisabilities. Creatingamoreaccessiblejusticesystemwherelowincomefamiliesand vulnerablegroupshaveaccesstothelegalsupportstheyneed. SupportinggreateropportunitiesforAboriginalpeoplethroughavariety ofnewinitiatives. Takingfurtheractiontoreduceautoinsurancerates. Improvingconsumerprotectionthroughamodernizedregulatorysystem. ProposingtoremovetheDebtRetirementChargecostfromresidentialusers electricitybillsafterDecember31,2015,tosaveatypicalresidential ratepayerabout$70peryear.

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Section D: AFairSociety
A Fair Society
Ontariohasastrongreputationforpromotinggreaterfairnessbyinvestingin people,ensuringequalaccesstokeypublicservicessuchashealthcareand education,andsupportingtheneedsoflowincomechildren,familiesandthe mostvulnerable.Byprovidingmoreprotection,securityandequalopportunity forOntarians,thegovernmentprovidesindividualswithagreatersenseofdignity andindependence. Overthepastdecade,Ontariohasseensubstantialincreasesintheminimum wage,theintroductionandexpansionoftheOntarioChildBenefit,andnew investmentsinsocialassistanceafteryearsofneglect. Ontarioisintroducinganew10yeareconomicplantocreatetheconditionsto helpliftpeopleoutofpoverty.Throughthetaxandtransfersystem, thegovernmentisabletoprovidevaluableservicesandbenefitstoallOntarians, includingeducation,healthcareandchildrensbenefits.Thiscreatesnew opportunitiesforeventhemostvulnerable,whileincreasingtheprovinceslong termeconomicprospects.Ontarioisworkingwithallsectorpartnersinthefight againstpoverty.ThegovernmentbelievesthatallOntarians,regardlessoftheir economicstatusorbackground,shouldhaveanequalopportunitytoreachtheir fullpotentialandcontributetotheprosperityoftheprovince.

We should strive for an economy that draws on all peoples capabilities and creates economic success for everybody. Equality is not simply a measure of outcomes; it is also a measure of opportunities to contribute.

Institute for Competitiveness and Prosperity, 2007.

Toensureprotectionsareinplace,theProvinceistakingfurtherstepstofight fraudandreduceautoinsuranceratesbydevelopingadedicatedinvestigationand prosecutionofficeonseriousfraud.Inaddition,Ontarioisdevelopinglongterm solutionstoaddresstheneedsofcondominiumownersandismovingtoestablish provincewidestandardsforhomeinspectors.

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Providing Opportunity for All Ontarians


Eveninchallengingeconomictimesandwhileworkingtoeliminatethedeficit, Ontariocontinuestomakegainsinthefightagainstpoverty.Thegovernments firstPovertyReductionStrategy,announcedin2008,helpedlift47,000children outofpoverty.

CHART 1.10

Ontario Children Below the Low Income Measure*


Poverty with No Government Transfers and No Poverty Reduction Strategy Poverty with Government Transfers and No Poverty Reduction Strategy Actual Poverty with Government Transfers and Poverty Reduction Strategy
24.9 26.1 22.2 16.7 14.6 13.8

Per Cent
30 25 20 15 10 5 0
22.5

15.2 15.2

15.4

15.9 13.6

2008

2009

2010

2011

*The Low Income Measure is half of median household Income adjusted for size. In this chart, it is fixed to a base year of 2008 and adjusted for inflation for subsequent years. Note: 2010 and 2011 include the Ontario Sales Tax Transition Benefit. Source: Ontario Ministry of Finance Based on Statistics Canadas Survey of Labour and Income Dynamics.

TheProvincerecognizesthat,inthelongterm,reducedpovertyandbetter accesstojobsforthemostvulnerablewillhelpbuildafairersocietyandamore prosperouseconomy.Thatiswhythegovernmentistakingactionbyinvestingin arenewedpovertyreductionstrategy.Givingthoseatthelowendoftheincome scaleaboostmeansmoremoneyspentincommunities,morejobscreated, andgreatergainstotheeconomyasawhole.

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But for every dollar that poverty takes from these low-income households, the province as a whole loses an additional 50 cents. It shows up in extra costs to our health care system, the costs of crime, the cost of social assistance, the loss of tax revenue that accompanies low earnings, and the intergenerational costs that flow from the likelihood that a significant number of children from poor families will also be poor when they grow up.

Ontario Association of Food Banks, The Cost of Poverty, (2008).

Providing Supports for Low-Income Working Individuals and Families


TherecessionwashardonmanylowincomeworkingOntarians.However, improvementsinchildrensbenefits,otherchangestoprovincialandfederaltax andbenefitprograms,andahigherminimumwagehaveallcontributedtogreater incomesforlowincomefamilies.AsshowninChart1.11,bytheendof2014, asingleparentwithtwochildrenwhoearnsminimumwagewouldexperience a75percentincreaseinincomecomparedto2003.

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CHART 1.11 Annual Income ($)
35,000 30,000 25,000 20,000 15,000
$13,358 $19,468
Ontario Child Benefit and Other Ontario Tax-Based Benefits and Credits $396 in 2003 Change Since 2003 +$13,181 (+68%)

Supporting Working Families


Total Annualized Income for a Single Parent with Two Children (Ages 9 and 10)

$32,649 $3,678 $6,630


Change Since 2003 +$14,632 (+75%)

$34,100 $3,774 $8,093


Ontario Child Benefit and Other Ontario Tax-Based Benefits and Credits Additional Gross Employment Income from Minimum Wage Increases

$13,358

$13,358

Gross Employment Income at 2003 Minimum Wage Federal Child Benefits & Other Federal Tax-Based Benefits and Credits

10,000 5,000
$5,715

$8,984

$8,876

0
Notes: 1) Other Ontario Tax-Based Benefits and Credits consist of Ontario Property and Sales Tax Credits in 2003, and Ontario Energy and Property Tax Credit and Ontario Sales Tax Credit after 2009. Federal Child Benefits and Other Federal Tax-Based Benefits and Credits consist of Canada Child Tax Benefit, National Child Benefit Supplement, Universal Child Care Benefit, Goods and Services Tax Credit and Working Income Tax Benefit. 2) Incomes, rents and benefits are annualized as at the end of the calendar year shown. 3) Gross Employment Income calculated for parent earning $6.85/hour in 2003, $10.25/hour in 2013 and $11.00/hour in 2014, and working for 37.5 hours per week for 52 weeks. 4) Ontario Child Benefit monthly payments began in 2008; maximum per child rate increased from $1,100 in July 2012 to $1,210 in July 2013 and to $1,310 in July 2014. 5) In 2014, the family in this example would receive $2,504 in Ontario Child Benefit, and $1,270 in Other Ontario Tax-Based Benefits and Credits. Source: Ontario Ministry of Finance.

2003

2013

2014

Thegovernmentwillmaintaintheseinvestmentsandbuildonthemtohelpkeep thesefamiliesontrackforabrighterfuture.

Expanding the Ontario Child Benefit


Ontarioprovidestargetedsupportforlowtomoderateincomefamiliesthrough theOntarioChildBenefit(OCB).Thisbenefit,alongwithotherprovincialand federaltaxandbenefitprograms,enhancestheincomesoflowtomoderate incomefamiliesandhelpsprovideamorestableincomebaseforthosewhomay experienceuncertainearnings.Sincethesebenefitsareavailableoutsidesocial assistance,theyalsohelpreducefinancialbarriersforindividualsandfamiliesto becomefinanciallyindependent. TheOCBhasmadeasignificantpositiveimpactonpeopleslives: Ithashelpedlift47,000childrenoutofpoverty. In201314,Ontarioprovidednearly$1billionthroughtheOCBtooverone millionchildrenacrosstheprovince,helpingtosupportabout35percent ofallchildrenunderage18.

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy InJuly2014,thegovernmentwillincreasethemaximumannualOCBperchildto $1,310,enhancingtheincomesofhalfamillionfamilies. InvestmentsintheOCBthatimprovetheincomesoflowtomoderateincome familiesalsohelptheeconomyasawhole,sincethesefamiliesusetheadditional supporttopurchaseneededgoodsandservicesintheircommunities. TomaintainthegainsmadebytheOCB,thegovernmentproposestobegin indexingtheOCBmaximumbenefit,andtheincomethresholdatwhichthe OCBstartstobereduced,toannualincreasesintheOntarioConsumerPriceIndex (CPI).ThiswouldtakeeffectinJuly2015,andwouldsafeguardthepurchasing poweroftheOCBfromerosionduetoinflation.

Expanding Low-Income Health Benefits


Childrenshealthisanimportantsocialandeconomicinvestment.However, onlyabout20percentoflowincomeworkershaveaccesstoemployerhealth benefitsforthemselvesandtheirfamilies. AspartofthefirstPovertyReductionStrategy,thegovernmentlaunchedthe HealthySmilesOntarioprogramin2010,whichprovidesdentalservicesto childreninlowincomeworkingfamilies.BeginninginApril2014,program eligibilityisbeingexpandedtogive70,000morechildrenaccesstodentalservices. Thegovernmentwillfurtherintegrateexistingpubliclyfundeddentalprogramsfor childrenintotheHealthySmilesOntarioprogramtoprovideseamlessenrolment andstreamlinedadministration. Thegovernmentisalsoproposingtofurtherexpandaccesstohealthbenefitsfor childreninlowincomefamilies.Oncefullyimplemented,childreninlowincome familieswouldbeeligibletoreceiveadditionalhealthbenefitsincluding prescriptiondrugs,assistivedevices,visioncareandmentalhealthservices. Byexpandingeligibilitytoapproximately500,000children,thesebenefitsand serviceswouldfurtherimprovehealthoutcomesforlowincomechildrenand helptheirfamiliesremaininemployment. Movingforward,thegovernmentwillconsultwithstakeholderstoexploreoptions toextendhealthbenefitstoalllowincomeOntarians.

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Expanding the Student Nutrition Program


ThegovernmentseeksthebestforOntarioschildrenandyouth.Itwantsthem tobehealthyandhappy,succeedinschool,andgetthesupportstheyneedto growintostronghealthyadults. TheProvinceisexpandingtheexistingStudentNutritionProgram.Thisisin additiontothecurrentannualinvestmentofover$20million,resultinginatotal annualinvestmentof$32millionby201617.Thenewinvestmentwouldfund 340newbreakfastprogramsforanadditional56,000childreninhigherneeds elementaryandsecondaryschools,includingonreserveFirstNationschools. TheProvincewillcontinuetofundaportionofthecostofprovidingfood,with thebalancefundedthroughcommunityfundraisingeffortsandnongovernment partners,includinglocalbusinesses,largecorporationsandnationalcharities.

The Impact of Ontarios Existing Student Nutrition Program


Ontarios Student Nutrition Program has had a positive impact on student learning: Research conducted by the Toronto District School Board in 2008 and 2009 in schools with a student nutrition program demonstrated that children who regularly ate breakfast scored 9 to 16 per cent higher on Education Quality and Accountability Office (EQAO) tests in reading, science and math than before the program was introduced. The same study showed that Grade 7 and 8 students who ate breakfast at school on most days achieved or exceeded provincial reading standards by a rate 10 per cent higher than those who did not have breakfast. According to the Board, 78 per cent of Grade 10 students who regularly ate breakfast were on track for high school graduation (having accumulated 15 or more high school credits), compared to 61 per cent of students who ate morning meals only a few days a week or not at all.

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Reducing Energy Costs for Low-Income Families


Thegovernmentiscommittedtoreducingelectricitycostpressuresonindividuals andfamilies,recognizingthatOntariosmostvulnerablespendaproportionately higherpercentageofdisposableincomeonenergyandelectricity. TheProvinceprovidestaxcreditstohelplowtomoderateincomefamiliesand individualswiththeirenergycosts: OntarioEnergyandPropertyTaxCreditfor2014,upto$973intaxrelief fornonseniors,orupto$1,108intaxreliefforseniors,tohelpwiththe salestaxonenergy,includingelectricity,andwithpropertytax;and NorthernOntarioEnergyCreditfor2014,upto$141forsinglepeople inthenorth,orupto$216forfamiliesinthenorth,tohelpwiththehigher energycoststheyface.

TheProvinceisalsorequiringtheOntarioEnergyBoardtoreportbackon electricitysystemoptionsforasustainable,longtermelectricitysupportprogram specificallydesignedforlowincomeOntariofamilies. ThegovernmentisalsoproposingtoremovetheDebtRetirementCharge(DRC) costfromresidentialelectricityuserselectricitybillsafterDecember31,2015.

Protection and Fairness for Ontario Workers


Legislating a Fair Minimum Wage
Thegovernmentsapproachtotheminimumwageprovidesfairnesstolow incomeworkersandpredictabilityforbusinesses.Theminimumwagewasfrozen from1995to2003.Beginningin2003,thegovernmentincreaseditforseven successiveyearsfrom$6.85to$10.25perhourin2010.Thisrepresentedan increaseof50percent,exceedingthe34percentchangeininflationoverthe 1995to2010period.Thegovernmentthenmaintainedtheminimumwageat thatratefrom2010to2013,inpartbecauseofweaknessinthelabourmarket stemmingfromtheglobalrecession,andtogivebusinessestimetoadjustto theincreasesuptothatperiodtomaintaincompetitiveness.

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2014OntarioBudget In2013,thegovernmentappointedtheMinimumWageAdvisoryPanelwith representationfrombusinesses,workersandyouthtoprovideadviceonhow todeterminefutureincreasestotheminimumwage.Aftercarefulconsideration, thegovernmentannouncedthattheminimumwagewillincreaseto$11.00 onJune1,2014.Respondingtotheadviceofthepanel,thegovernmenthas introducedlegislationtotietheminimumwagetotheOntarioCPIrateof inflation,beginninginOctober2015.Thiswouldbringconsistencyand transparencytosettingtheminimumwage,whichhelpsbusinessesand workersplanforthefuture. ThesignificantincreasesinOntariosminimumwagesince2003havemadeareal differencetotheeconomicwellbeingoflowincomeworkersandtheirfamilies. Asingleparentwithayoungchildworking37.5hoursaweekattheupcoming $11.00perhourminimumwageandaccessingallavailabletaxandbenefit programswillhaveanestimatedaftertaxincomenearlythreepercentabove theLowIncomeMeasure(LIM)threshold.In2003,attheminimumwageof $6.85perhour,thisparentwas15percentbelowtheLIM.

People at the bottom of the income spectrum spend all the money they have, and more. Increase their pay, they spend more money, raise demand, boost the economy.

Armine Yalnizyan, Senior Economist, Canadian Centre for Policy Alternatives. Boosting Minimum Wage Would Also Boost Economy, from the Bottom Up, The Globe and Mail, (February 27, 2013).

The Need for a Federal Partner


OntariocallsonthefederalgovernmenttoenhancetheWorkingIncomeTax Benefit(WITB)toaddresstheneedsoflowincomeworkers. TheWITBisafederalrefundabletaxcreditthatenhancestheearnedincomesof eligiblelowincomeworkingindividualsandfamilies.Byhelpingtomakeworkpay, anenhancedWITBwouldmoreeffectivelyencouragelowincomeCanadiansto entertheworkforceandmakeiteasierforlowwageworkingfamiliestoremain inthelabourmarket.

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The House of Commons Standing Committee on Finance recently recommended:


That the federal government formally review the Working Income Tax Benefit to determine how it could be expanded or modified to further benefit Canadians and further incent workforce attachment, subject to the governments stated intention to balance the budget in the medium term.

Income Inequality in Canada: An Overview, Report of the Standing Committee on Finance, December 2013.

Housing and Homelessness Prevention Initiatives


Preventing and Reducing Homelessness
Individualsandfamilieslivinginpovertyoftenfacechallengesfindingand/or retainingsuitableandaffordablehousing.WhenOntariansarenotsecurely housed,itimpactsallfacetsoftheirlives.Everyoneneedsasafe,secureand affordableplacetocallhome. Asannouncedinthe2012Budget,theCommunityHomelessnessPrevention Initiative(CHPI)wasestablishedonJanuary1,2013.Itcombinedfundingfromfive separatehomelessnessrelatedprogramsintoasingleprogramdeliveredlocallyto allowmunicipalitiestobetteraddresslocalhousingpriorities. TheCHPIsupportsthegovernmentsLongTermAffordableHousingStrategy, akeycomponentofthegovernmentsbroaderPovertyReductionStrategy. ThevisionforCHPIistoprovideamoreflexible,locallycoordinatedandintegrated servicedeliverysystemthatispeopleoriented,outcomefocused,andreflectsa housingfirstapproachtopreventingandreducinghomelessnessincommunities acrossOntario. Ahousingfirstapproachtohomelessnessisbasedontheideathatapersonsfirst andmostbasicneedasidefromfoodandcleanwaterisstablehousing,and thatassistingpeoplewhoarehomelessoratriskofhomelessnesstoobtainand maintainstableandaffordablehousingfirstwillhelpthemaccesssupportservices suchascrisispreventionandinterventionsupports,medicalcare,andeducation andemploymentsupports.

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2014OntarioBudget ConsistentwiththesuccessofhousingfirstapproachesinOntarioandelsewhere, thegovernmentisenhancingannualfundingfortheCHPIby$42millionstarting in201415,toatotalof$294million.

Expanding the Investment in Affordable Housing Program


Ontariansneedanddeservehelpaccessingadequate,suitableandaffordable housing.AstudybytheWellesleyInstituteshowsalackofsafe,affordable housingleadstoincreasedillnessandpressuresonthehealthcaresystem.1 Lackofaffordablehousingincreaseshomelessnessanddestabilizesvulnerable workers,whichalsothreatenstheprovincescompetitivenessinthe globaleconomy. Thatiswhy,since2003,Ontariohascommittednearly$3billiontoavarietyof affordablehousingprograms,supportingthecreationofover17,000affordable rentalhousingunits,makingmorethan263,000repairsandimprovementsto socialandaffordablehousingunits,andprovidingrentalanddownpayment assistancetoover81,000householdsinneed. AkeycomponentoftheLongTermAffordableHousingStrategyisthejointly fundedfederalprovincialInvestmentinAffordableHousing(IAH)program. ThroughtheIAHprogram,lowincomehouseholdscanaccessnewaffordable rentalhousing,receivedownpaymentassistancetoownanaffordablehome, andrepairandmodifytheirhometoimprovetheirlivingconditionsandfoster independentliving.Beingabletoliveindependentlyisespeciallyimportantfor seniorsandpeoplewithdisabilities,aswellasforvictimsoffamilyviolence. Ontarioisfinalizinganagreementwiththefederalgovernmenttoextendthe IAHprogramforafurtherfiveyears.TheOntariogovernmentwouldcontribute $80.1millionannuallyforfiveyearstothisprogram.

WellesleyInstitute,TheBlueprinttoEndHomelessnessInTorontoATwoPartAction Plan,(2011),www.wellesleyinstitute.com/wpcontent/uploads/2011/11/ TheBlueprintfinal.pdf.

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy ThecurrentIAHprogramprovidesfundingfortheconstructionandrenovationof affordablehousingunits,aswellashomeownershipassistance,rentsupplements, shelterallowances,andtherenovationandrepairofaccommodationstofoster independentliving.Theprogramalsoprovidesdedicatedfundingassistancefor thehousingneedsofoffreserveAboriginalcommunitiesaswellasremote communitiesinNorthernOntario.

Establishing a New Local Poverty Reduction Fund


Tohelpfosterpartnershipswithlocalcommunities,thegovernmentisinvesting $50millionoverfiveyearstocreateanewpovertyreductionfundtargetedat supportinglocalsolutionstopoverty.Thisfundwouldaddresspovertybybuilding onlocalstrengthsandaddressinglocalneeds.Thefundingwouldsupport innovationsthroughpartnershipsatthelocallevel.

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2014OntarioBudget

Targeted Supports for the Most Vulnerable


Enhancingsocialservicesissmartpublicpolicythatcanhelppeoplefind andmaintainemployment,andcontributetoimprovingthehealthoflowincome individualsandfamilies.Thesesocialgainsthenreducepressuresonother governmentprogramexpenseareas. Thegovernmentwillcontinuetobuildonitsachievementssupportingvulnerable childrenandfamiliesthroughsubstantialinvestmentsinsocialassistance, andservicesandsupportsforpeoplewithdevelopmentaldisabilities.

Social Assistance Reform


Thegovernmentiscontinuingtoimplementreformstosocialassistance, guidedbytheadviceoftheCommissionfortheReviewofSocialAssistancein Ontario,ledbyFrancesLankinandMunirA.Sheikh. Increasing Social Assistance Benefits In1995,socialassistanceratesforOntarioWorksrecipientswerecutby 22percentandthenfrozenforeightyears.Ratesforpeoplewithdisabilitieswere alsofrozenforeightyears. Endingthisfreezein2004,thegovernmentincreasedsocialassistancerates bymorethan15percentby2012.Inthe2013Budget,rateswereincreasedby anadditionalonepercentforadultOntarioWorksrecipientsandpeoplewith disabilitiesreceivingOntarioDisabilitySupportProgram(ODSP)benefits.Single OntarioWorksadultswithoutchildrenreceivedafurthertopup,foratotal increaseof$20permonth,inrecognitionofthefactthattheserecipientshave thelowestlevelofsupportamongsocialassistancerecipients. Buildingontherateincreasesannouncedinthe2013Budget,thegovernment willincreasesocialassistanceratesin2014byanadditionalonepercentforadult OntarioWorksrecipientsandpeoplewithdisabilitiesreceivingODSPbenefits. Asin2013,thegovernmentwillprovideafurthertopupforsingleadultswithout childrenreceivingOntarioWorks.Withboththeonepercentincreaseandthe topup,OntarioWorkssingleswithoutchildrenwillreceiveatotalincreaseof $30permonth.

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy Inaddition,thecomfortallowanceforlowincomeresidentsoflongtermcare homeswillalsoincreasebyonepercent.Lowincomeresidentsusethecomfort allowancefordiscretionarypersonalexpenses. ThesesocialassistancerateincreaseswilltakeeffectinSeptember2014for ODSPandinOctober2014forOntarioWorks.Municipalitieswillnotberequired tocostsharetheOntarioWorksrateincreaseuntilJanuary2015. Greatersupportforlowincomefamilieswouldalsohelptheeconomyasawhole, sincethesefamiliesusetheadditionalsupporttopurchaseneededgoodsand servicesintheircommunities. Streamlining Employment Benefits ConsistentwiththeCommissionsrecommendation,theProvinceismoving forwardwithaplantostreamlinesocialassistanceemploymentbenefits. Thegovernmentisreplacingsevenseparateemploymentbenefitswitha consolidatedbenefitstructurewithineachofODSPandOntarioWorks. Thiswillreducethecomplexityofthesocialassistancesystemandimprove programefficiency.Itwillalsomakeiteasierforclientstoknowwhathelpis availableandgivecaseworkersmoreflexibilitytobettermeettheunique needsofindividualclients. Aspartofthischange,theWorkRelatedBenefit(WRB)inODSPwillbe consolidatedintothenewemploymentbenefit,whichwillbeavailableto ODSPrecipientswithdisabilitiesbasedontheiremploymentrelatedneeds andexpenses.Toassistwiththeadjustmenttoanewbenefitstructure, thegovernmentwillprovideasixmonthtransitionbenefitforWRBrecipients withadisability.

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2014OntarioBudget

Progress on Implementing Recommendations of the Lankin-Sheikh Commission for the Review of Social Assistance in Ontario
With the initial steps taken in the 2013 Budget and the proposed changes for 2014, the government continues to transform the social assistance system by increasing benefits for recipients with the lowest level of support, harmonizing program rules and reducing barriers to employment. Progress on transforming the social assistance benefit structure in the first two years includes:
Increasing the support for single Ontario Works recipients without children by

$50 per month an important step in meeting the Commissions recommendation of a $100 rate increase for Ontario Works single adults without children, who experience the lowest level of support in social assistance;
Introducing an earnings exemption of $200 monthly to reduce employment barriers

for all social assistance recipients; and


Taking steps to align Ontario Disability Support Program and Ontario Works rules by

harmonizing the treatment of employment income for full-time students and selfemployed individuals, and by increasing asset limits for singles receiving Ontario Works from $606 to $2,500, and from $1,043 to $5,000 for couples. Moving forward, the government will continue to reform social assistance guided by the Commissions advice.

Supporting Employment for People with Disabilities


Thereare1.65millionpeopleinOntariowhohaveaphysical,mental,sensory orlearningdisability,63percentofwhomareaged15to64thecohortmost likelytobeparticipatinginthelabourforce.Thegovernmentisworkingtoprovide necessarysupportsthataddressthebarriersandchallengespeoplewithdisabilities faceinsecuringemployment.Employmentforpeoplewithdisabilitieswillultimately leadtoimprovedsocialinclusionandindependence.

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy Ontariowillcontinuetocollaboratewithbusinessesandcommunityemployersto correctmythsandmisconceptionsaboutpeoplewithdisabilities,address stereotypingandfosterpartnershipstoestablishinclusiveworkplaces.Thiswillbe coupledwithtalentdevelopmentinitiativesthatfocusoneducationalattainment, skillstrainingandearlyexperienceswiththelabourmarketforpeoplewith disabilities,particularlythroughexperientiallearning.

Supports and Programs that Promote Hiring People with Disabilities

Engaging Employers: The Partnership Council on Employment Opportunities for People with Disabilities, composed of corporate leaders and accessibility changemakers, was announced in the 2013 Budget.

Valuing Ability Campaign: This targeted outreach and marketing initiative will increase awareness of the Accessibility for Ontarians with Disabilities Act, 2005, and its standards among small and medium-sized enterprises, improve compliance, and highlight tools and resources available to recruit and retain people with disabilities.

Supporting Compliance: The Accessibility Directorate of Ontario will continue to work with businesses by providing the tools and assistance they need to meet Ontarios accessibility standards.

Supporting Adults with Developmental Disabilities


Thegovernmentremainscommittedtoimprovingsupportsforadultswith developmentaldisabilitiesandtheirfamiliesinordertohelptheseadultslive asindependentlyaspossibleandfullyintegrateintosociety.Inkeepingwiththis commitment,andcombinedwithfundingannouncedinthe2013Budget, thegovernmentisinvestinganadditional$810millioninthecommunityand developmentalservicessectoroverthenextthreeyears,beginningin201415. Akeyelementisanewinvestmentof$485millionoverthenextthreeyears inanactionplantobuildstrongerservicesandsupportsforindividualswhile encouragingnewapproaches,collaborationandpartnershipstoadvancethe governmentstransformationofthedevelopmentalservicessystem. Thisinvestmentbuildsonthe$42.5millionannualfunding,announcedin the2013Budget,whichwastargetedtohelpfamiliesandadultsathighrisk, reducewaitlistpressuresandbettersupportthosewithcomplexneeds.

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2014OntarioBudget Thisnewinvestmentwould: Expanddirectfundingprogramstohelpindividualswithdevelopmental disabilitiesparticipateintheircommunities: ForthePassportprogramtoeliminatewaitlistsoverfouryears;and FortheSpecialServicesatHomeprogramtoeliminatewaitlistsover twoyears.

Expandindividualizedplanningtohelpindividualswithdevelopmental disabilitiestransitiontoadulthood,findemploymentandachievegreater independence; Provideresidentialservicestoadultswithurgentneeds,includingsupport totransitionyoungadultscurrentlyreceivingyouthresidentialservicesto moreappropriateadultservicesandsupports;and Expandcosteffectiveresidentialservicesandpromoteinnovative communitylivingsolutionsthatsupportgreaterinclusionofpeoplewith developmentaldisabilitiesintocommunities.

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy

Supporting Workers Who Serve Ontarios Most Vulnerable


Peoplewithdevelopmentaldisabilitiesrelyonhundredsofagenciesacross Ontarioforawidearrayofsafe,highqualityservices.Ontarioisinvesting $200millionoverthreeyearsforitsfrontlineworkersintheseagenciesto ensurefamilieshavetheservicestheyrequireintheircommunities. Specifically,thisinvestmentwillsupportthecontinuedprofessionalizationofthe communityanddevelopmentalservicessectorandsupportsalariesandwagesfor frontlineworkers,includingthoseinlowerwagebands.Itwillsupportoverall transformationofthesectorbyprovidingagencieswiththeflexibilityneededto modernizehowtheyoffertherightmixofservicestovulnerableOntarians.

Addressing Waitlists for Childrens Treatment and Rehabilitation Services


Thegovernmentiscommittedtohelpingchildrenandyouthwithspecialneeds achievetheirfullpotential.Tosupportthisgoal,thegovernmentisprovidingan additional$5millionannualinvestmentinChildrensTreatmentCentres(CTCs) thatwouldreducewaittimesforcorerehabilitationservicesforchildrenand youthwithspecialneeds. ChildrensTreatmentCentresproviderehabilitationservicesinphysiotherapy, occupationaltherapyandspeechandlanguagetherapytochildrenandyouth upto19yearsofagewithphysicaland/ordevelopmentaldisabilities,chronic illnessesand/orcommunicationdisorders. Thenewinvestmentwillbuildonthe2013BudgetinvestmentinCTCs,further expandingaccesstorehabilitationservices.

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2014OntarioBudget

Supporting Opportunities for Aboriginal People and Communities


TheProvinceiscollaboratingwithAboriginalcommunitiesandmaking investmentstocreateabetterqualityoflifeforAboriginalpeopleinOntario. Improvedsocialconditionsandeconomicopportunitiesareessentialtoensuring thatAboriginalcommunitiescanthrive.Inrecentyears,theProvinceandits Aboriginalpartnershaveworkedtogetherto: Createover540jobsandtrain4,300AboriginalpeoplethroughtheNew RelationshipFund; Provide$32.2milliontoAboriginalcommunitiesthrough118majorand minorcapitalgrantsandrelatedfeasibilitystudiesthroughtheAboriginal CommunityCapitalGrantsProgram; OfferlocalflexibilitywithassetrulesforOntarioWorkstorecognize theuniqueneedsofAboriginalcommunities; EstablishaFirstNationJuriesReviewCommittee,whichisworkingto enhanceFirstNationrepresentationonjuries; DevelopanewTreatyStrategy,includinganeducationandpublic awarenesscampaignthatwillraiseawarenessoftreatyandAboriginal rights; Continueinvestmentsinprojectsthathelptoclosetheachievementgap betweenAboriginalandnonAboriginalstudents;and ContinuetointegrateAboriginalhistories,cultures,perspectivesand traditions,includingthehistoryofresidentialschools,intothecurriculum.

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy

The Remote Communities Allowance


Peoplelivinginremotenortherncommunities,particularlyFirstNations,can facedisproportionatelyhighcostsforbasicnecessitieslikegroceries.Thisyear, inadditiontoasocialassistancerateincrease,thegovernmentisproposing toreplacetheexistingNorthernAllowanceprovidedthroughOntarioWorks andODSPwithaRemoteCommunitiesAllowance.TheRemoteCommunities Allowancewouldrepresenta$50permonthincreaseoverthecurrentNorthern Allowanceforthefirstperson,anda$25permonthincreaseforeachadditional familymember.Thisisanincreaseofmorethan30percentforasingleindividual.

We heard clearly from First Nations that social assistance rates do not reflect the realities of northern and remote communities, such as the high cost of food and transportation.

Final Report, Commission for the Review of Social Assistance in Ontario, 2012.

Joint Working Group on Violence against Aboriginal Women


TheOntariogovernmentrecognizesthattheratesofviolenceagainstAboriginal womenaremuchhigherthanforotherwomeninOntario.Researchhasshown thateightoutoftenAboriginalwomenhaveexperiencedviolenceintheir relationships.Toaddressthisimportantissue,Ontarioisinvesting$2millionover twoyearstosupporttheJointWorkingGrouponViolenceagainstAboriginal Women.ThefundingwillallowtheJointWorkingGrouptorespondtotheneeds ofAboriginalwomenandgirlswhohaveexperiencedorareatriskforviolence, andtodevelopcommunitybasedinitiativesthatwillhelpinformthedevelopment ofalongtermpreventionstrategy.

Aboriginal Children and Youth Strategy


OntarioisworkingwithFirstNations,Mtis and Inuit people to transform the way services are designed and delivered, and to begin to address the disproportionate challenges faced by Aboriginal children and youth both on- and off-reserve. The strategy, which aims to increase the availability of culturally appropriate services and enhance community control over service delivery and design, is set to roll out in 2015.

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2014OntarioBudget

Student Nutrition in Aboriginal Communities


In March 2013, the Healthy Kids Panel recommended establishing a universal student nutrition program in First Nation communities. As part of the proposed three-year, $32 million expansion of the Student Nutrition Program, First Nation communities will receive funding commencing in 201516. Communities will have the opportunity to lead the development and delivery of Student Nutrition Program models that address the unique strengths and needs of their communities. The First Nation expansion includes funding for food and equipment on a per-school basis; part-time, on-site program coordinators in each school; and coordinators to support administrative requirements and logistics.

Urban Aboriginal Action Plan


A large share of Ontarios Aboriginal population lives in urban centres. Given the ongoing challenges facing this population, the government is introducing an Urban Aboriginal Action Plan. The government will support urban Aboriginal communities by providing $2.5 million in funding over three years to develop strategies that reflect local interests and lead to improved socioeconomic outcomes. The Province will also coordinate an engagement strategy in consultation with Aboriginal people, municipalities and the federal government to better align programming directed towards urban Aboriginal people.

First Nations Treaty Strategy


Negotiated agreements with First Nation communities honour legal obligations and resolve longstanding land disputes in a way that benefits First Nations and Ontario as a whole. To promote constructive engagement with First Nation communities, the Province is moving forward with a new Treaty Strategy, including funding of $7.9 million over three years. The strategy will include a treaty education and public awareness campaign to raise awareness of treaty and Aboriginal rights, and help facilitate meaningful relationships with Aboriginal communities by creating a common language and approach to treaty implementation. Successful implementation will raise public awareness and promote improved socioeconomic outcomes for First Nations.

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Chapter I: Ontarios Decade A 10-Year Plan for the Economy

Aboriginal Economic Development Fund


The Province recognizes that improved economic opportunities are essential to ensuring that Aboriginal people can work and thrive. That is why it will move forward with an Aboriginal Economic Development Fund, which will include an investment of $25 million over three years. The Fund will support Aboriginal communities in the development of long-term economic strategies. It will also provide grants for Aboriginal businesses and fund province-wide, regional skills-training programs.

Preparing Remote First Nation Communities for Electricity Transmission


To help ensure remote First Nation communities can more fully benefit from new transmission projects in their area, Ontario will provide $3 million in funding over three years through the Remote Electrification Readiness Program. This will help them prepare for the advantages that connections to the grid will bring. The program will include job-specific training, relevant health programs, business innovation mentoring, and economic development supports. The program will support the goals of Ontarios new Long-Term Energy Plan, which identified connecting remote northwestern First Nation communities to the electricity grid as a priority for the Province. Electricity service in remote First Nation communities in northwestern Ontario is currently supplied by local diesel generators. According to the Ontario Power Authority, diesel generation typically costs three to ten times more than the average cost of the provincial supply mix. Connecting remote northwestern First Nation communities to the Ontario electricity grid is a priority and would support stronger, healthier northern remote communities by reducing barriers to growth, increasing economic development opportunities, improving social and living conditions for residents, providing cleaner air and reduced greenhouse gas emissions, reducing future environmental remediation liabilities associated with diesel fuel spills, and ensuring more reliable electricity supply. The federal government must work with the Province to establish a funding agreement for cost-sharing of investments to connect remote First Nation communities. 131

2014OntarioBudget

Aboriginal Loan Guarantee Program


The Aboriginal Loan Guarantee Program (ALGP) was launched in 2009 to facilitate Aboriginal participation in renewable energy infrastructure projects. To date, the program has leveraged significant investments, with $130 million in approved loan guarantees supporting the investments of eight communities, representing over 10,000 First Nation people, in four projects that have invested over $2.8 billion in the province. These include the recently approved loan guarantee that will support a portion of Alderville First Nations equity investment in the Alderville Solar Project, the provinces first ground-mounted solar farm wholly owned by a First Nation community. To build on this success, the total amount of loan guarantees that will be made available under the ALGP was recently increased by $250 million to $650 million. This will give the Province flexibility to support qualifying applications currently under review, as well as future applications to the program. Eligible investments under the ALGP include key investments in transmission, wind, solar and hydroelectric projects that will be located across the province. These projects will provide Ontarians with sources of clean, reliable electricity for many years to come. The ALGP is aligned with other provincial programs supporting Aboriginal participation in the electricity sector, including the Ontario Power Authoritys Feed-in Tariff Program and Aboriginal Renewable Energy Fund.

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Chapter I: Ontarios Decade A 10-Year Plan for the Economy

Improving Access to Justice


All Ontarians, regardless of income level or ability, should have access to an effective and fair justice system. Ontario is committed to ensuring low-income families and vulnerable groups have access to the legal supports they need.

Increased Legal Aid Eligibility


The government is introducing a strategy to expand access to legal aid by raising the income eligibility threshold to qualify for legal aid assistance. The income eligibility threshold has not increased since the 1990s. As a result, more and more low-income Ontarians are unable to afford legal representation in the court system. When fully implemented, raising the income eligibility threshold would allow an additional one million low-income Ontarians to be eligible for legal aid services, more than doubling the number of eligible Ontarians. As part of this initiative, approximately 75,000 additional certificates would be issued by Legal Aid Ontario each year. These certificates allow low-income Ontarians to be represented by a lawyer.

Easier Access to Child Support for Ontario Families


Currently, establishing and updating child support payments through the court system is time consuming and costly for parents. The government is proposing to create a new, easy-to-use online service option for those parents who would like a simpler and faster approach to set up or change child support amounts without having to go to court. This service would speed up the process while also freeing up valuable court time that could be used to deal with the most pressing cases. The new service, the first of its kind in Canada, would start in 2015. This new online service would leverage the Ministry of Finances centralized automated information verification service to give parents faster and more efficient child support payment determinations. An administrative fee would be charged to offset the cost of the new online service. Amendments will be proposed to the FamilyLawAct,FamilyResponsibility andSupportArrearsEnforcementAct,1996, and MinistryofRevenueAct to implement the new program.

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2014OntarioBudget

Providing Electricity Rate Mitigation for Ontarians


In December 2013, the Province released an updated Long-Term Energy Plan (LTEP), AchievingBalance, to ensure Ontario has the right strategies and targets in place for a clean, modern and reliable energy future. It included strong actions to mitigate future rate increases. While the updated LTEP projects typical residential bills will increase on average by 2.8 per cent per year over the next 20 years, residential customers can expect to pay about $520 less over the next five years and $3,800 less to 2030 than originally forecast in the 2010 LTEP. Recent comparative data, compiled by Hydro-Quebec, show average electricity prices for Ontario cities to be in the middle of the range, across major North American cities.

CHART 1.12

Comparison of Electricity Prices for Residential Consumers

25 20
Cents/kWh

15 10 5

Montreal, QC

Vancouver, BC

Nashville, TN

Moncton, NB

Portland, OR

Toronto,ON ON Toronto,

Seattle, WA

Ottawa,ON ON Ottawa,

Miami, FL

Edmonton, AB

Charlottetown, PE

New York, NY

St. Johns, NL

Winnipeg, MB

Calgary, AB

Houston, TX

Boston, MA

Chicago, IL

Regina, SK

Halifax, NS

Detroit, MI

Note: Prices as of April 1, 2013. Source: Hydro-Quebec 2013 Comparison of Electricity Prices in Major North American Cities. www.hydroquebec.com/publications/en/comparison_prices/

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San Francisco, CA

Chapter I: Ontarios Decade A 10-Year Plan for the Economy The Province has taken other steps to mitigate the impact of electricity costs on Ontario families and seniors, including: EnergyConsumerProtectionAct,2010 tough new rules to protect consumers from unfair practices in the retail energy sector; and Moved off-peak rates to start at 7 p.m. instead of 9 p.m.: 10 more hours per week at the lowest-cost, off-peak electricity rates.

Removing the Debt Retirement Charge from Residential Bills


The government is proposing to remove the Debt Retirement Charge (DRC) cost from residential users electricity bills. Removing the DRC cost for residential electricity users would save a typical residential user about $70 per year. The DRC is provided for under the ElectricityAct,1998, and has been charged since May 1, 2002, to help service and pay down the debt and other liabilities of the old Ontario Hydro, which are managed by the Ontario Electricity Financial Corporation (OEFC), until the residual stranded debt is retired. The residual stranded debt has been reduced by an estimated $8 billion since 2004, from an estimated peak of $11.9 billion as at March 31, 2004, to $3.9 billion as at March 31, 2013, as published in the 2013OntarioEconomicOutlookand FiscalReview. In the absence of this initiative, current projections estimate that the residual stranded debt would be retired and the DRC would end in 201718. The estimated timing for residual stranded debt retirement along with the end of the DRC is subject to uncertainty in forecasting future dedicated revenues from the electricity sector. Revenues would depend on the financial performance of OPG, Hydro One and municipal electrical utilities, as well as other factors such as electricity consumption. The governments proposal to eliminate the DRC for residential electricity users after December 31, 2015, would mean ending the DRC almost two years earlier for these users than currently estimated. The charge would remain on all other electricity users bills until the residual stranded debt is retired this is currently estimated to occur by the end of 2018, in line with the previous estimated range.

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2014OntarioBudget The Minister of Finance will continue to report annually on the residual stranded debt and the estimated date range for retirement of residual stranded debt and the end of the DRC for all non-residential electricity users. The Auditor General audits OEFCs annual financial statements and has provided an unqualified opinion every year since the initial 19992000 financial statements. This includes OEFCs interest expense, which is currently about $1.5 billion per year and has totalled about $29.2 billion between April 1, 1999, and March 31, 2014. The Auditor Generals 2012 and 2013 Annual Reports also noted that the Auditor was pleased to see an increased level of transparency with respect to public reporting on the residual stranded debt.

CHART 1.13 $ Billions


25 20 15 10 5 0
7.8 5.9

Residual Stranded Debt since April 1, 1999


Initial Stranded Debt OEFC Unfunded Liability* Residual Stranded Debt

11.9 9.9 6.3 7.7 7.5 8.5 7.6 6.7

5.6

5.4

5.8

4.5

3.9

* OEFCs unfunded liability as at April 1, 1999, was $19.4 billion, which is the initial stranded debt of $20.9 billion adjusted for $1.5 billion of additional OEFC assets as of that date, including primarily an accounting asset for deferred debt charges. Note: Unfunded Liability amounts are from OEFC Annual Reports from 19992000 to 2012, and the Annual Financial Statements for 2013. Residual Stranded Debt value for April 1, 1999, as announced on April 1, 1999. Values for the period from March 31, 2000, to March 31, 2010, as estimated by the Ministry of Finance in the 2012 Budget and for March 31, 2011, to March 31, 2013, as determined by the Minister of Finance in accordance with a regulation made under the Electricity Act, 1998.

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Enhancing Consumer Protection for Ontarians


Ontario continues to move forward with its ambitious consumer-protection agenda. The Province has taken action to address a wide variety of pressing marketplace concerns that affect consumers in their everyday lives. Promoting consumer protection helps people make informed choices, spend wisely and protect their hard-earned money. Consumer confidence, in turn, promotes a stronger economy.

Auto Insurance Cost and Rate Reduction Strategy


Ontario is committed to making auto insurance more affordable for the provinces over nine million drivers. In the 2013Budget, the Province introduced a Cost and Rate Reduction Strategy to build on previous reforms that successfully stabilized auto insurance rates in Ontario. In 2010, the government implemented a series of auto insurance reforms aimed at stabilizing premiums. The recently released Automobile Insurance Transparency and Accountability Report highlighted that, without these reforms, insurance rates would have needed to increase significantly. The Strategy is targeting a 15 per cent average rate reduction by August 2015, with an average eight per cent reduction target by August 2014.

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CHART 1.14

Auto Insurance Rates Held Below Inflation

Per Cent Change


50 40 30 20 10 0 7.6 10.2 6.6 18.3 17.6 44.9
Consumer Price Index Auto Insurance Premiums Auto Insurance Rate Approvals

19901994 1990 - 1994

19952003 1995 - 2003

20042013 2004 - 2013

Note: Data from 2004 to 2013 reflect rate change approvals. General Insurance Statistical Agency data regarding premiums in 2013 will not be available until summer 2014. Sources: General Insurance Statistical Agency and Financial Services Commission of Ontario.

Ontario continues to take action to achieve the average rate reduction target of 15 per cent within two years. The most recent rate approval of April 15, 2014, indicates a total rate reduction of more than 5.6 per cent since the Strategy was launched in August 2013. While progress has been achieved to date, further actions will be required to meet the average rate reduction targets. Ontario is working hard to reduce rates for consumers but industry also has a responsibility to contribute to these efforts. It is critical that industry play its part and take concrete steps to lower costs, control overhead, and manage claims effectively and fairly. The government will continue to review industrys efforts as the Cost and Rate Reduction Strategy progresses.

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Transforming the Dispute Resolution System and Fighting Fraud to Reduce Rates
In March 2014, the government introduced Bill 171, the Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014, a key element of the Cost and Rate Reduction Strategy. The Bill proposes a number of initiatives to tackle major sources of costs and uncertainty in the system that prevent rates from coming down. The Bill includes legislative amendments for the transformation of the dispute resolution system, and further action to crack down on fraud and abuse, as well as other cost-saving measures. Fighting fraud is an important part of the Cost and Rate Reduction Strategy. To date, the government has taken action to address half of the recommendations made by the Auto Insurance Anti-Fraud Task Force in late 2012. The government is building on the steps it has taken by developing a dedicated investigation and prosecution office on serious fraud, with an initial focus on auto insurance fraud. The development of this fraud office would be based on the Task Forces principle that fraudsters should be vigorously pursued and prosecuted where evidence warrants.

Addressing Towing, Vehicle Storage and Collision Repair Practices


Drivers involved in traffic collisions or in need of roadside assistance should have the confidence that the tow truck driver helping them is reputable and safe, and will provide honest and fair dealings. The Province committed to take action to address vehicle storage and collision repair practices, and to hold consultations on provincial oversight of the towing industry. Ontario is proposing legislation to regulate the towing industry. The government has taken action to address storage-fee issues by introducing legislative amendments as part of Bill 171 that would provide regulation-making authority for the determination of vehicle storage periods and fair value regarding daily fees. As part of the next phase of this initiative, the Province will continue consulting to address issues of fraud and abuse relating to collision repair practices.

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Increasing Automobile Insurance Transparency and Accountability


The government has retained an independent third party to provide annual Automobile Insurance Transparency and Accountability Expert Reports to assess its efforts to reduce auto insurance costs and rates. An interim report was delivered to the Minister of Finance in April 2014, and annual reports will be delivered in August of each year of the Strategy. The reports will also assess the industrys efforts to lower costs and pass on savings to drivers. The interim report highlights that further action is needed to support the governments Cost and Rate Reduction Strategy. The report also concludes it is important that insurers continue working to achieve efficiencies and reduce costs in the auto insurance system through initiatives such as better claim management, more sophisticated pricing methods (such as usage-based insurance) and improved fraud-prevention practices.

Rewarding Safe Drivers: Usage-Based Insurance


Ontario is working with the insurance industry on new ways to reward safe drivers as part of its Cost and Rate Reduction Strategy. In particular, the government is encouraging insurance companies to offer consumers usage-based insurance, which uses technology to identify and offer discounts for safe driving habits. The Financial Services Commission of Ontario (FSCO) has already communicated key consumer protection requirements to the insurance industry, and many companies have implemented or are planning to implement usage-based insurance. The Province will continue to encourage insurance companies to invest in this new technology as well as work with the FSCO to encourage uptake of this product. This innovative technology can help promote safe driving and make auto insurance more affordable for Ontarians. Some insurance companies have already introduced usage-based insurance that can provide discounts for drivers, depending on how often they drive. For example, consumers who drive less because they use public transit can reduce their auto insurance rates by choosing this specific product. In the future, the government will consider using telematic technology for a variety of purposes, including improving the effectiveness and accessibility of vehicle emissions testing. 140

Chapter I: Ontarios Decade A 10-Year Plan for the Economy

Putting Consumers First


Ontario is putting consumers first by strengthening rights and providing more protection. To help inform consumers of their rights and to let them know where to go if they have a complaint or dispute, the government recently established Consumer Protection Ontario. This new awareness program is part of the governments plan to protect consumers and ensure a fair marketplace.

Modernizing the Condominium Act


The government is taking steps to update and improve the CondominiumAct, 1998, to address the needs of the condominium community and support the long-term sustainability of condominium living. To respond to the evolving sector, Ontario launched a public consultation to identify a comprehensive set of issues and develop long-term solutions relating to matters such as: Consumer protection for buyers; Condominium finances and reserve fund management; Condominium board governance; Expertise/accreditation of condominium managers; and Dispute resolution, for example, between condominium boards and owners.

As a next step, the Province will introduce legislation in the spring of 2014 that, if passed, would establish mandatory qualifications for condominium managers and create a modern dispute resolution system. These new measures would allow condominium owners to use an alternative to the court system, saving money and resolving disputes more quickly, and would increase protection for condominium owners, tenants and buyers by improving condominium management standards.

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Establishing Province-wide Standards for Home Inspectors


Buying a home is the largest purchase most people make. Having a home inspection before finalizing the transaction can help people make informed decisions and avoid unexpected problems and expenses. A group of experts, including home inspectors, consumer advocates, educators and representatives from the real estate, law and insurance sectors, recently submitted its recommendations to the government on licensing, standards and qualifications for home inspectors. The Province will review and consider these recommendations as it explores province-wide standards for home inspectors with the aim to: Increase transparency in the profession; Ensure a minimum standard of training; Improve consistency in home inspections; and Enhance consumer protection.

Strengthening Building Safety


Currently, the BuildingCodeAct,1992, does not require the involvement of professional engineers and architects in the design of certain types of buildings. As a result, there is a risk that non-qualified people may attempt to design large and complex buildings, putting public safety at risk. To further promote public safety, the government proposes to introduce amendments to the BuildingCodeAct,1992, which, if passed, would clarify that only qualified designers and design professionals can design certain types of buildings in Ontario. As well, the Province proposes to address the problem of illegal residential building. Illegal residential building takes place when a builder builds a home in his or her own name, registers it as private construction, and sells it on completion as a private home without having registered it for a new home warranty with Ontarios Tarion Warranty Corporation. There is a concern for public safety because a house built illegally is at risk of substandard construction. In response, the government proposes to explore options to address this, which may include legislative and regulatory changes.

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French Language Services Commissioner


On January 1, 2014, the FrenchLanguageServicesAmendmentAct took effect, making the French Language Services Commissioner an independent officer of the provincial Legislature. The Commissioner is responsible for handling complaints and conducting investigations to ensure compliance with the French LanguageServicesAct, which guarantees an individuals right to receive services in French from ministries and agencies in 25 designated areas. This change is an important step forward in recognizing and safeguarding the rights of Ontarios francophone citizens.

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Highlights
Thegovernmentisontracktobeatitsdeficittargetforthefifthyearinarow, whichwouldresultintheaccumulateddeficitbeingmorethan$24billion lowerthanitotherwisewouldhavebeen. TheProvinceistakingafairandbalancedapproachtoeliminatingthe deficitby201718bymanagingoverallprogramspendinggrowthrateswhile continuingtosupportpriorityprogramsandservicespeopledependon. Ontariohasthelowestpercapitaprogramspendingamongprovincesand thelowesttotalgovernmentrevenueperpersonamongallCanadian provinces,includingfundingfromfederaltransfers. Thegovernmenthasundertakenanexpenditurereviewtofindgreater efficienciesandisprojectedtoexceedits201314yearendsavingstarget byover50percent. Thegovernmentcontinuestotakestrongbutfairactiontomanage publicsectorcompensationandbenefitscosts. Thegovernmentiscontinuingtomoveaheadwithrecommendationsofthe CommissionontheReformofOntariosPublicServices.Over80percentof therecommendationsarenowbeingactedon. Thegovernmentismovingforwardtounlockvaluefromitsinterestinshares inGeneralMotorsandcertainProvincialrealestateassetstoreinvestin publicinfrastructure,andhasestablishedthePremiersAdvisoryCouncilon GovernmentAssetstoassessoptionsforotherProvincialassets,withpriority giventomaximizingtheannualrevenuefortheProvince.

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Section E:

MakingEveryDollarCount

Balanced Path to a Balanced Budget


Thegovernmentisontracktobeatitsdeficittargetforthefifthyearinarow, whichwouldresultintheaccumulateddeficitbeingmorethan$24billion lowerthanitotherwisewouldhavebeen,whileinvestinginkeypublicservices. Notwithstandingslowerrevenuegrowth,thegovernmentiscommittedtobalance thebudgetby201718inafairandresponsibleway.Ontarioalreadyhasthe lowestpercapitaprogramspendingamongtheprovinces. Achievingthis,however,willrequiresomedifficultchoices.Whilethegovernment continuestoinvestinjobsandpriorityservices,itwillmakeresponsiblespending decisionstosupportbalancingthebudget.AstheCommissionontheReformof OntariosPublicServicesnoted,acrosstheboardcutsadvocatedbysomewould hurtpublicservicesandundermineprogramsthatareprovidinghighquality servicestothepublic,suchashealthcareandeducation.Thegovernmentrejects recklessspendingcuts.Instead,theProvincewillcontinueacarefulreviewof spendingtodeterminewhichprogramsshouldbeenhancedorreduced,while transformingpublicservicestoincreaseefficienciesandimproveoutcomes. Ontariossuccesstodatehasproventhatstrongfiscalmanagementcanachieve desiredresults.

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Every Dollar Counts: Supporting the Governments Priorities


TheOntariogovernmentistakingactiontomanagethegrowthofspending byensuringgovernmentactivitiesarecarriedoutefficiently.Eachandeverydollar mustgofurthertoachievevaluefortaxpayershardearnedmoney.Wherea dollarcanbesavedinanareaoflowerpriority,itwillberedirectedtohelpsustain highpriorityareas,suchashealth,educationandjobcreation.TheProvinceis takingafairandbalancedapproachtoeliminatingthedeficitby201718by managingoverallprogramspendinggrowthrateswhilecontinuingtosupport priorityprogramsandservicespeopledependon. ThegovernmentisalsocommittedtomakinginvestmentsintheOntarioeconomy tocreatejobs,increaseopportunityandsupportlongtermprosperity,while continuingtomanagetheProvincesfinancesresponsibly. Ontariohasthelowestpercapitaprogramspendingamongprovinces,whilestill providinghighqualitypublicservices.TheProvincecontinuestomakeimportant decisionstocontrolcostswhilesupportingkeypublicservicesto,forexample, reducehealthcarewaittimesandimprovestudentachievement.Theseoutcomes speaktospendingeffectivelyinareasthathavethegreatestbenefittoOntarians, bothnowandinthefuture. TheOntariogovernmentisdeterminedtobethemosteffectiveandefficientin Canada,becauseofasustainedefforttorootoutwaste,focusonpriorities,and makeeverydollarcount.

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy BecauseofthechoicestheProvinceismaking,Ontarioseconomywillbewell placedtotakefulladvantageoftheexpectedreturnofstrongerglobaleconomic growth.Thiswillcreatethenewjobsnecessarytogeneraterevenuetohelp supporteliminatingthedeficit.ThosesamechoiceswillputOntarioonapathto begintopaydownthedebttoreduceOntariosnetdebttoGDPratiotoitspre recessionlevelof27percent.

CHART 1.15

Program Spending Per Capita in 201213

$ Per Capita
16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 ON BC QC NS NB AB PE MB NL SK

Note: Due to differences in accounting standards, figures may not be directly comparable. Sources: 201213 Provincial Public Accounts and Statistics Canada.

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2014OntarioBudget Atthesametime,responsiblefiscalmanagementmeansthegovernmentmust thinklongtermaboutthechoicesitmakes,especiallyinchallengingeconomic timeswhenmaintainingpublicservicesandcriticalinvestmentsissoimportant. OntariohasthelowesttotalgovernmentrevenueperpersonamongallCanadian provinces,includingfundingfromfederaltransfers.

CHART 1.16

Total Revenue Per Capita in 201213

$ Per Capita
16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 ON BC AB NB NS PE MB QC SK NL
Own-Source Revenue Federal Transfers

Note: Due to differences in accounting standards, figures may not be directly comparable. Sources: 201213 Provincial Public Accounts and Statistics Canada.

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy

Annual Savings Target and Expenditure Review


Asannouncedinthe2013EconomicOutlookandFiscalReview,thegovernment hasundertakenanexpenditurereviewtofindgreaterefficienciesaspartofits plantocontrolspendingwhiletransformingpublicservicesforbettervalueand outcomes.Thereviewrecommendedstrategiestomanagegrowthin spendingthatarehelpingthegovernmentprojectalowerthanforecastdeficit in201314. The2013Budgetincludeda$1.0billionyearendsavingstarget.Thegovernment isprojectedtoexceedtheyearendsavingstargetbyover50percent. Actionsoftheexpenditurereviewthatcontributedtothesesavingsincluded: Savingmorethan$200millionthroughchangestobenefitsforemployees retiringonorafterJanuary1,2017,thatwillbringpublicservicepost retirementbenefitentitlementsinlinewithpracticesintheprivatesector andotherjurisdictions;and Freezingnonessentialspendingforthelastquarterofthe201314year.

Giventhesuccessofthisreview,andtosupportthegovernmentscommitmentto balancethebudgetby201718,thereviewwillbeanongoingpartofthe Provincesbalancedapproachtofiscalmanagement. TheProvinceisimplementinganannualprogramreviewsavingstarget.Thistarget issetat$250millionfor201415and$500millionforeachof201516and 201617.Thetargetwillfocusonmaintainingorenhancingthedeliveryofpublic serviceswhilereducingcoststhatarenotessentialtodeliveringservice. Findingefficienciesinpublicservicesdeliveryisalreadyunderwayinmanysectors. Thegovernmentwillfocusonenhancingthesesuccessfulmodelsbyadoptingbest practices;drivingefficiencies;eliminatingduplicationtoreducecostsinthe OntarioPublicService(OPS)andbroaderpublicsector(BPS);andadopting technologyandothertoolstoimprovecustomerserviceandacceleratesector transformationthatisalreadyshowingresults.

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Compensation and Benefit Costs


Managing Executive Compensation
TodirectlycontrolthecompensationofseniorexecutivesintheBPS, thegovernmenthasintroducedBill179,thePublicSectorandMPPAccountability andTransparencyAct,2014.Ifpassed,thelegislationwouldprovidethe governmentwiththeauthoritytoestablishcompensationframeworks,including theuseofsectorspecifichardcaps.Proposedlegislationwouldalsoauthorizethe governmenttoobtainallcompensationrelatedinformation,includingcontracts. Complianceandenforcementmeasureswouldinclude: Requiringorganizationstosubmitattestationsconfirmingcompliance withthecompensationframeworks; Requiringorganizationstorepayanyamountthatisabovethe compensationframeworksasadebttotheCrown;and Providingthegovernmentwiththeabilitytoconductauditstoverify compliancewiththecompensationframeworks.

Continuing the Salary Freeze on Members of Provincial Parliament


Thegovernmentrecognizesthateverybodyneedstodotheirpartintoughtimes, and,asaresult,hasproposedtoextendthepayfreezeforMembersofProvincial Parliament(MPPs)throughBill177,theMPPSalaryFreezeAct,2014,untilthe budgetisbalanced.SalariesforMPPshavebeenfrozensince2009.Ifthisactis passed,thepayfreezecouldlastuntilthebudgetisbalancedin201718and confirmedinthePublicAccountsforthatyear.ThepayfreezeforfederalMPs endedin201314,havinglastedforthreeyears.

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy

Managing Benefit Costs


Thegovernmentistakingadditionalactionstomanagecompensationcosts, whichwillgeneratesavingsofover$1.4billionby201718,bybringing publicserviceretirementbenefitsinlinewithpracticesintheprivatesector andotherjurisdictionsforemployeesretiringonorafterJanuary1,2017. EmployeesoftheOPSandotherpublicsectoremployerswhoarepartofthe OPSpensionplanswillbetransitionedtoanewcostsharingmodelforretiree benefitsthatisinlinewiththoseofotherprivateandpublicsectororganizations.

Public-Sector Compensation
Thegovernmentcontinuestotakestrongbutfairactiontomanagepublicsector compensationcosts.Withoverhalfofgovernmentspendinggoingtosalariesand benefitsintheOPSandBPS,managingpublicsectorcompensationcostsisan importantpartoftheProvincesplantocontrolspendingandprotect frontlinegovernmentservices.Compensationcostsmustbeaddressedwithin Ontariosexistingfiscalframework.Allpublicsectorpartnersneedtocontinue toworktogethertocontrolcurrentandfuturecompensationcosts. Thegovernmentcontinuestorespectthecollectivebargainingprocess.Collective bargainingenhancestheabilityofresponsibleemployersandbargainingagentsto increaseproductivity,deliverservicesandensurefiscalsustainability.Anymodest wageincreasesthatarenegotiatedmustbeabsorbedbyemployerswithin availablefundingandwithinOntariosexistingfiscalplanthroughefficiencyand productivitygainsorothertradeoffssothatservicelevelscontinuetomeet publicneeds.

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2014OntarioBudget Ontariopublicsectorsettlementscontinuetobebelowtheaverageofthosein theprivatesector,municipalsectorandfederalpublicsector.

CHART 1.17

Ontario Wage Settlements

Per Cent
2.5 2.0 1.5 1.0 0.5 0.0
Ontario Public Sector Ontario Private Sector Ontario Municipalities

Average Annual Base Wage Increases

FederalPublic PublicSector Sector Federal (inOntario) Ontario) (in

Note: Data are for agreements with over 150 employees, ratified between July 17, 2012, and March 26, 2014. Sources: Ontario Ministry of Government Services and Ontario Ministry of Labour.

Managing Public-Sector Pension Costs


Pensionplansinallsectors,includingthepublicsector,havefacedfunding pressuresarisingfromgeneraleconomicanddemographicfactors. Thegovernmentisadirectsponsor,cosponsororproviderofindirectfunding forsponsorsofmostpublicsectorplans.Consequently,thesefundingpressures canhaveanegativeimpactonthegovernmentsfinances. Tohelpmanagethesefundingpressures,thegovernmenthas: Reachedcontributionagreementswiththefourpensionplansconsolidated intheProvincesfinancialstatements;and Initiatedtemporarysolvencyfundingreliefmeasures.

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy ThecontributionagreementsapplytotheCollegesofAppliedArtsand TechnologyPensionPlan,HealthcareofOntarioPensionPlan,OntarioPublic ServiceEmployeesUnionPensionPlan,andOntarioTeachersPensionPlan. Theyprovidedafreezeinemployercontributionsuntil2017andavoidedthe potentialofupto$1.5billioninadditionalemployercontributions. Thesolvencyfundingreliefmeasuresaredirectedtosingleemployerplansin thepublicsectorthathaveafundingshortfallandarerequiredtomakespecial payments.Employersreceivetimelimitedrelieffrommakingspecialpayments. Thisreliefresultedina$700millioncumulativereductioninrequiredpayments bytheendof2013.Totalsolvencyfundingreliefisexpectedtoreachanestimated $1.3billionbytheendof2015. Inexchangeforthisrelief,planscommittomakingchangesintheircontribution orbenefitstructure.Asaresult,thesolvencyfundingreliefmeasureshaveledto permanentimprovementstotheplanssustainabilityandaffordability.Todate, atleast17planshavesuccessfullynegotiatedchangeswithmembersresultingin highermembercontributionratesand/orreducedbenefitsforfutureservice. TheCommissionontheReformofOntariosPublicServicesforecastthatpension expensewouldincreaseby$1.1billionovertheperiodfrom201213to201718. Thecurrentgovernmentforecastofpensionexpensesuggestsadeclineof $1.5billionoverthesameperiod,resultinginacumulativereductionof$8.7billion comparedtotheCommissionsforecast.Thisalsoreflectsanimprovementinthe pensionexpenseforecastascomparedtothe2013Budget(seesectionentitled PathtoBalance,inChapterII,SectionE:OntariosFiscalPlanformoreinformation).

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TABLE1.8
($Billions)

DifferenceinProjectedPensionExpenseversusCommission ontheReformofOntariosPublicServicesForecast

201213
Commission Forecast Current Forecast Difference in Forecast 3.1 3.0* (0.1)

201314
3.7 3.0 (0.8)

201415
3.6 2.5 (1.1)

201516
3.7 2.0 (1.7)

201617
4.0 1.7 (2.3)

201718
4.2 1.5 (2.7)

*Actual expense for 201213. Note: Numbers may not add due to rounding. Source: Ontario Ministry of Finance.

Electricity Sector Pension Sustainability


InJanuary2014,thegovernmentappointedJimLeech,formerCEOoftheOntario TeachersPensionPlan,asSpecialAdvisor,ElectricitySectorPensionSustainability, withamandatetoproviderecommendationsoninitiativestoimprovethe sustainabilityandaffordabilityoftheplans.Electricitysectorpensionplansare relativelygeneroustoemployeesandcostlytoemployers;thesecostsare ultimatelyreflectedinpriceschargedtoratepayers. Mr.Leechhascompletedhisreportanddeliveredittothegovernment.Inthe nearfuture,theMinisterofEnergywillannouncefurtherdetailsrespectingthe reportandthegovernmentsresponse.

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy

Managing Spending Growth and Maintaining Key Services


ThegovernmentisundertakinginitiativesacrosstheOPSandisworkingwithits partnersintheBPStodriveefficiencies,transformservicedelivery,managethe growthofspendingandmaintainservicesonwhichOntariofamiliesrely.

Responsible Management in Health Care


Ontariohasfoundefficienciesinhealthcareandprescriptiondrugcosts: Implementingdrugreforms,includingreducingthepricethegovernment paysforgenericdrugs.Thesechangesareachievingsavingsofabout $500millionperyear; Savinganadditional$100millionannuallysince201112byactionssuch asmanagingthecostofbrandnamedrugsuntilthecorrespondinggeneric drugsbecomeavailable; Implementingchangestoimprovealignmentoffundingforoutofcountry healthcareserviceswithfundingforservicesdeliveredinOntario,forabout $86millioninsavings; Creating54HealthLinkstodatewithplanstocreatemorethan90intotal. Thisnewmodelofcareencouragesgreatercollaborationamonghealthcare providersandcouldreduceunnecessaryhospitalvisitsandreadmissionsfor patientswithcomplexneeds; Increasinginvestmentsinhomeandcommunitycareservicestoprovide highqualitycareinmorecosteffectivesettingsthanhospitalsorlongterm carehomes,whenappropriate; Expandingthescopeofpracticeforpharmaciststogiveflushots,prescribe smokingcessationmedicationsandshowpatientshowtouseasthma inhalersorinjectinsulin,whichwillhelpreducepotentialfuturehealthcare costsbypreventingmoreseriousandcostlyillnesses; IntegratingexistingpubliclyfundeddentalprogramsintotheHealthySmiles Ontarioprogramtoprovideseamlessenrolmentforeligiblechildreninlow incomefamilies,makingiteasierforthemtoreceivetimelydentalcare; Updatingphysicianservicefeestoreflectadvancesintechnologybasedon thelatestmedicalevidence;and 157

2014OntarioBudget Saving$18millionannuallystartingin201415bylimitingthe reimbursementofdiabetesteststrips.

Health System Funding Reform


Changing the way health care services are funded is a key component of the governments plan to transform health care. Ontario is entering the third year of a major reform of how it funds the health care sector: moving from a provider-centred global funding approach to a more person-centred, activity-based approach for hospitals, long-term care homes and Community Care Access Centres. Under the reform, hospital budgets will be aligned so that 30 per cent of their funding is based on the types and volume of services and treatments they deliver, at a price that reflects evidence-based best practices after factoring in the complexity of patients and procedures. Hospitals have an incentive to pay attention to how services are provided, at what cost, and to find efficiencies and improve quality, in order to be able to deliver procedures at the best-practice price. Ontario continues to move from a global funding model for hospitals by increasing the overall share of their budgets based on patient- and activity-based funding from 46 per cent in 201213 to 53 per cent in 201415. Funding reform is particularly important in the hospital sector to help manage costs as the government is continuing to hold hospitals overall base operating funding to zero per cent growth in 201415. This is critical to managing overall health care expenditures as funding to hospitals is the largest area of health spending.

Transforming Public Services


Ontariowillcontinuetoimplementand,insomecases,accelerate transformationalinitiativesthathavegeneratedincreasedefficiencyand effectiveness.Thegovernmentwillmaintainmomentumasitmovesforward totransformpublicservicesbychangingthewayprogramsandservicesare delivered,toensureresultsandbettervalueformoney.

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy

Centralized Collections
Anumberofministrieshaveadopteddifferentapproachestothecollectionof nontaxprovincialdebt.Someministrieshaveestablishedinhousecollection units,whileothershavereliedextensivelyonprivatecollectionagencies. LeveragingthecollectionexpertiseoftheMinistryofFinance,whichisresponsible forthecollectionoftaxdebt,acentralizedcollectionmodelhasbeendeveloped thatisfocusedonactivemanagementofoutstandingaccounts,increasing cash/revenuerecoveriesandreducingrelianceonprivatecollectionagencies. During201314,theMinistryofFinancesignedagreementswithseveral ministriestocollectoutstandingnontaxdebtofmorethan$1billionontheir behalf.Withthetransferoftheoutstandingnontaxcollectionportfolio,the MinistryofFinancenowcollectsmorethan85percentofallnontaxdebtand, by2015,itisexpectedtocollectabout98percentofallnontaxdebt. Onceappropriateregulatoryauthoritiesareinplace,thestrategicapplication ofabroaderrangeofcollectiontoolsshouldgenerateadditionalproceedsof $25millionannuallyby201516.

Transforming the Delivery of Benefit Programs to Ontarians


Aspartofthebroadertransformationofthedeliveryofpublicservices, thegovernmentiscommittedtoimprovingthewaybenefitprogramsare deliveredtoOntarians.Currently,morethan40taxandbenefitprograms providingmorethan$25billioninsupportforpeoplearedeliveredby 10differentministries. Workingwithprogramandservicedeliverypartners,Ontariohasbegun transformingthedeliveryofbenefitprograms.Forexample,eligibilityprocesses continuetobestreamlined,withmoreprogramsusingtheautomatedincome verificationservicebetweentheMinistryofFinanceandCanadaRevenueAgency. ProgresshasalsobeenmadewithrespecttoprovidingOntarianswithcentralized accesstobenefitprograminformation.Basedonadvicefromexternalexperts, aconsentbasedidentificationapproachthatusesacommonidentifiertocentrally linkdataacrossmultipleprogramswasrecommendedforOntario. Considerableprogresshasbeenmadeinthedevelopmentofthepilotprojectsfor theMyBenefitsAccount,withthegoalofimplementinginlate201516.

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2014OntarioBudget

Better Services for Taxpayers


Thegovernmentwillreviewallofitstaxandbenefitadministrationprograms andservices,withaviewtomovingtoafullelectronicservicemodelwithinthe nextfiveyears.Currently,someoftheprogramsandservicesareprovided electronicallybutnotfullyutilizedbyclients.Thegovernmentwillexplore opportunitiesforenhancedeserviceforapplications,registrations,tax remittance,collectionsandotherservices. Additionally,theProvincewillworkcloselywiththefederalgovernmenttoexpand theadoptionoftheBusinessNumberasacommonidentifierforallbusinessesin Ontario,therebysimplifyingtheirdealingswithalllevelsofgovernment.

Progress on Implementing Commission on the Reform of Ontarios Public Services Recommendations


ThegovernmentiscontinuingtomoveaheadwiththeCommissiononthe ReformofOntariosPublicServicesrecommendationsover80percentof recommendationsarenowbeingactedon,upfrom60percentinthe 2013Budget. Theseactionsareenablingsustainabletransformationandsupportingsuccessful expendituremanagement.Thegovernmentiscontinuingtoimplementthe Commissionsrecommendationsaspartofitscommitmenttodeliverthemost effectiveandefficientpublicservices. AcrosssectionofactionstakeninresponsetotheCommissionsrecommendations canbefoundonlineatwww.fin.gov.on.ca/en/reformcommission/progress

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy

Continuing to Improve Agency Accountability and Transparency


Thegovernmentcontinuestostrengthenitsoversightofclassifiedagenciesand reduceriskintheagenciessector.Thegovernmentiscommittedtoensuringthat onlythoseagenciesthatplayanimportantroleinthesocialandeconomicfabric oftheprovincecontinuetooperate. In201011,thegovernmentreducedthenumberofclassifiedagenciesinOntario from259to246(adropoffivepercent).SinceMarch2011,hardworkandcareful managementhaveseenanadditionalreductioninthenumberofclassified agenciesbyapproximately20percent. ByMarch2015,thegovernmentiscommittedtoreducingthenumberofclassified agenciesbyapproximately30percentbelowthe2011baseline(246classified agencies).Forexample,thegovernmentisproposingtomergetheOntario MortgageCorporationwiththeOntarioMortgageandHousingCorporation, eliminatingsomeoverlappingfunctions.Themergerwouldresultinmoreefficient administrationofvarioushousingandloanprograms. Thegovernmentisalsoproposinglegislativeamendmentstoconsolidatetwo electricityagenciesOntarioPowerAuthority(OPA)andtheIndependent ElectricitySystemOperator(IESO)inordertorealizeefficienciesand containcosts. Beginningthisyear,thegovernmentwillberequiringthatthemandatesofall classifiedagenciesbereviewedonaregularbasis.Byundertakingfocused mandatereviews,thegovernmentwillensurethatthetaxdollarsofhardworking Ontarianswillonlybeusedtosupportthoseclassifiedagenciesthatarecarrying outactivitiesand/ordeliveringservicesthatarealignedwiththeneedsand expectationsofcitizensandtheirgovernment.Ininstanceswhereagenciesare notalignedormeetingexpectations,thegovernmentwillusethemandatereview resultstohelpdeterminewhetherparticularagenciesshouldbedownsized, consolidatedordivested.

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2014OntarioBudget Toincreaseclassifiedagencytransparency,thegovernmenthasintroduced legislationthat,ifpassed,wouldprovidetheIntegrityCommissionerwiththe abilitytoreviewexpenseclaimsofappointeesandseniorexecutivesona selectivebasis.ThescopeoftheCommissionersreviewwouldbeexpanded toall197classifiedagencies. Inaddition,tofurtherdrivetransparency,inMarchofthisyear,thegovernment madeacommitmentthatallclassifiedagencieswouldberequiredtopubliclypost businessplansandothergovernancedocuments,andtheexpenseinformationfor appointeesandseniorexecutivesinthoseagencies. Thegovernmentwillensureclassifiedagenciescontinuetobewellgovernedand mindfulofthebestinterestsofthepeopleofOntario.Overthecomingmonths, allappointeestoclassifiedagencieswillberequiredtoreceivegovernance trainingrelatedtotheirresponsibilitiesoverseeingOntariosclassifiedagencies. Thegovernmentwillcontinuetoinstilariskmanagementcultureacrossthe classifiedagenciessectorbyrequiringthatministriesundertakeongoingrisk assessmentevaluationsoftheiragencies.Thecurrentriskframeworkwillbe refinedandenhancedtoensurethatclassifiedagencieshavecomprehensive andtransparentriskmitigationplans. Finally,toimproveaccountabilityatthemostseniorlevelsinclassifiedagencies, theChairs/CEOsofallagencieswillberequiredtoannuallyattestthattheir organizationsareinfullcompliancewithallgovernmentdirectives.Thiswill helpensurethatagenciesstayontrackandremainalignedwiththeneedsand expectationsofOntariansandtheirgovernment.

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy

Unlocking the Value of Provincial Assets


TheProvincehasawiderangeofvaluableassets,includinganextensivereal estateportfolioandoperatingenterprises.MaintainingProvincialownership formanyoftheseassetsremainsaprioritytodeliverkeyservicestothepublic. Someassets,however,maynolongerserveapublicpolicypurposeandareof particularinterestto,forexample,Ontarioslargepensionplansasgoodlong terminvestments. Unlockingthevalueoftheseassetsthroughoperationalimprovementsorasset salesgivesthegovernmentaninnovativerevenuesourcetoreinvestbackintothe economy.Netrevenuegainsfromthedivestmentofcertainassetswillbeinvested inprovincialassetssuchasroads,bridgesandtransit.Theserevenueswillbeused toinvestinpublicinfrastructuretoexpandOntarioseconomy,improveOntarios competitiveness,boostproductivityandcreatejobs. AnumberoftheProvincesassetsarenolongercriticaltodeliveringoncore governmentprogramsorpriorities.TheseincludetheProvincesinterestin GeneralMotorsshares,acquiredatthetimeoftheautoindustryrestructuring, andanumberofprimelocatedrealestateassets.Thegovernmentwillnotsell publicassetsforthepurposeofmeetingoperatingbudgetshortfalls.Instead, netrevenuegainsfromtheseandcertainotherassetsalesareplannedtoflow totheproposedTrilliumTrust,whichwouldhelptofundthebuildingofanew generationofpublicinfrastructuretoimprovetheProvinceslongterm competitivenessforthewellbeingofallOntarians.

163

2014OntarioBudget Asannouncedinthe2013OntarioEconomicOutlookandFiscalReview, thegovernmenthasbeenexploringopportunitiestounlockeconomicvalue fromLiquorControlBoardofOntarios(LCBO)headquartersandOntarioPower Generations(OPG)headoffice.Thegovernmentwillnowmoveforwardon divestingthoseassets.Otherrealestateassetsarebeingrevitalized,including theformerLakeviewgeneratingstationpropertyinsoutheasternMississauga, whichisexpectedtoseeabalancedmixofcommercial,residentialand recreationaldevelopmentoverthenextdecade;andtheSeatonLandsin Pickering,whereoneofthelargestnewurbancommunitiesinCanadawillbe developedoverthenext20years.Thegovernmentwillexploreopportunitiesto divesttheseassets.Itisalsoconsideringdivestingsomeofitsnoncoredowntown Torontoassets,primarilyofficespace,locatedonprimecommercialland.Selling theseandsimilarnoncoreassetsfreesupresourcestoinvestinnewpublic infrastructure,buildingastrongerfoundationforincreasedeconomicgrowth. TheProvincesvaluableassetsincludelargeandcomplexGovernmentBusiness Enterprises(GBEs)suchastheLCBO,HydroOneandOPG.Toidentify opportunitiestooptimizethefullvalueandperformanceofthesecoreassets, thegovernmentwilllaunchanindepthreviewprocess. ThePremiersAdvisoryCouncilonGovernmentAssetswillexaminehowtoget themostoutofkeygovernmentassetstogeneratebetterreturnsandrevenues forOntarians.TheCouncilwillreportdirectlytothePremierofOntarioandbe supportedbyexistingresourceswithinthegovernment.TheCouncilhas beengivenamandatetomaximizethevalueoftheseGBEstotheProvince, includingsuchmeasuresasefficientgovernance,growthstrategies, corporatereorganization,mergers,acquisitionsandpublicprivatepartnerships. TheCouncilwillgivepreferencetocontinuedgovernmentownershipofall corestrategicassets. Thegovernmentiscommittedtostrengtheningtheaccountability,financial management,andtransparencyofitsbusinessenterprises.TheCouncilwillreport tothePremierontheLCBO,HydroOneandOPG,bytheendof2014inorderto feedintothe2015Budgetprocess.

164

ChapterI:OntariosDecadeA10YearPlanfortheEconomy Theconceptofassetrecyclingiscommonaroundtheworld,andwillhelpthe governmentusescarceresourcestotheirbestpossibleeffectbuildingpublic infrastructurethatwillimproveprivatesectorproductivityandOntarians qualityoflife. Inallitsactivities,thecouncilwillbeguidedbythreeprinciples: Thepublicinterestremainsparamountandprotected; DecisionsalignwithmaximizingvaluetoOntarians;and Thedecisionprocessremainstransparent,professionaland independentlyvalidated.

Finaldecisionswouldbemadebythegovernment.

Asset Recycling Globally


In 2014, the Australian government announced a plan to sell $130 billion (Australian

dollars) in government assets and use the proceeds to invest in new infrastructure projects, potentially including a new International Airport in Sydney, that would create jobs and grow the economy.
In 2010, the United Kingdom sold the high-speed train that connects London to the

Chunnel for 2.1 billion. The Ontario Municipal Employees Retirement System (OMERS) and Ontario Teachers Pension Plan (OTPP) were the successful bidders on the 30-year concession to operate the rail line. The U.K. government has since made significant investments in transportation infrastructure including the Crossrail a new subway line in London that is the largest project currently underway in Europe.
In 2013, the United Kingdom conducted an initial public offering of the British Royal

Mail, raising almost 2 billion for the British government.

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2014OntarioBudget

Reducing the Governments Footprint


TheProvinceistransformingthewayitmanagesitsrealestateholdings. Tofacilitatecostsavings,reduceitsenvironmentalfootprintandprovidemore sustainableworkplaces,itiscommittedtoshrinkingitsofficefootprintinthe CityofTorontobyaboutonemillionsquarefeetequivalenttomorethan 11CanadianFootballLeaguefields. Ontariosrealestatestrategyincludesadoptinganewofficespacestandardofup to180rentablesquarefeetperemployee,consolidatingintofewerlocationsand makingmoreefficientuseofexistinggovernmentofficespace.Forexample,the retrofitof222JarvisStreetinTorontohasreducedthegovernmentsfootprintby over135,000squarefeet. SinceApril1,2012,theofficefootprintinTorontohasbeenreducedby approximately242,000rentablesquarefeet,withcloseto$9.6millionperyear inestimatedsavings.Thisisatrendintheprivatesectorandgovernmentsaround theworld.TheProvincewilltakeadditionalstepstoprioritizescarcerealtydollars todelivergovernmentpriorities.

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ChapterI:OntariosDecadeA10YearPlanfortheEconomy

Supporting Municipalities While Managing Responsibly


Ongoing Support to Municipalities
TheProvincehasastrongrecordofsupportingandworkingwithmunicipalities. In2014,theProvincewillprovidemunicipalitieswithongoingsupportof approximately$3.5billionanincreaseofmorethan200percentover2003. ThesignificantlevelofsupportthattheProvincehasprovidedtothemunicipal sectorwashighlightedbytheCommissionontheReformofOntariosPublic Services,whichnotedthattherateofincreaseinsupporttothemunicipalsector hasbeensignificantlyhigherwhencomparedtoothersectors,includinghealth careandeducation. DespitecontinuedglobaleconomicuncertaintyanditsimpactonOntarios recovery,aswellastheCommissionsrecommendationtodelaythe implementationoftheprovincialuploads,thegovernmentcontinuestoupload socialassistancebenefitprogramsaswellascourtsecurityandprisoner transportationcostsoffthepropertytaxbase,recognizingtheimportanceof thiscommitmenttomunicipalities. Asaresultoftheuploads,municipalitiesareseeingover$1.5billioninsavingsin 2014alone,whichistheequivalentofnearly10percentofpropertytaxrevenue intheprovince.Thesesavingswillcontinuetogrowuntilfullimplementationof theprovincialuploadsby2018.

Ontario Municipal Partnership Fund


TheOntarioMunicipalPartnershipFund(OMPF)istheProvincesmain unconditionaltransferpaymenttomunicipalitiesthatprimarilysupportsruraland northerncommunitiesinrecognitionoftheiruniquechallenges. In2012,thegovernmentannouncedthereviewandphasedownoftheOMPFto $500millionby2016.Thephasedownwasalsopartofthe2008upload agreementwithmunicipalities.

167

2014OntarioBudget Thegovernmentwillcontinuetoprovideunconditionalsupporttomunicipalities throughtheOMPFandproceedwiththephasedownto$500million.However, tomanageprogramspending,andinlightofthesignificantlevelofsupport providedtomunicipalities,thephasedownschedulefortheOMPFwillbe adjustedfor2015.Undertherevisedschedule,municipalitieswillreceive $515millionthroughtheprogramin2015. Ontariowillcontinuetoworkcloselywithmunicipalitiestomanagethephase downoftheprogram,andensurethatdetailsofthe2015allocationsareavailable assoonaspossibletosupportmunicipalbudgetplanning. EvenwiththephasedownoftheOMPF,thegovernmentscommitmenttothe provincialuploadsmeansthatoverallsupporttomunicipalitieswillcontinue toincrease,withtheprovincialuploadsmorethanoffsettingthereductionto theprogram.

TABLE1.9
($Millions)

ProvincialSupporttoMunicipalitiesContinuestoIncrease
2013
1,368 575 1,943

Provincial Uploads OMPF Combined Support

2014
1,560 550 2,110

2015
1,630 515 2,145

2016
1,770 500 2,270

Strengthening Ontarios Property Tax System


Ontariospropertyassessmentandtaxsystemplaysafundamentalrolein supportinglocalmunicipalservicesandtheProvinceselementaryandsecondary schoolsystem.The2013BudgetannouncedthattheProvincewouldworkwith theMunicipalPropertyAssessmentCorporation(MPAC),municipalitiesand businesstaxpayerstoreviewoptionstoensureOntariospropertytaxsystemis fair,accurateandpredictable.

168

ChapterI:OntariosDecadeA10YearPlanfortheEconomy ThefinalreportontheSpecialPurposeBusinessPropertyAssessmentReviewwas releasedinDecember2013andisavailableontheministryswebsite.Thereport includesrecommendationsrelatedtoimprovingtheassessmentofspecificspecial purposebusinessproperties,aswellas26overarchingrecommendationsfor strengtheningtheoverallpropertyassessmentsystem.TheMinistersofFinance andMunicipalAffairsandHousinghaveacceptedthereport.TheProvinceisnow focusedonimplementingtherecommendedimprovementstoOntariosproperty assessmentsysteminconsultationwithmunicipalitiesandotherstakeholders.

Power Dam Special Payment Program


TheProvinceprovidesaspecialannualpaymenttomunicipalitieshosting hydroelectricgeneratingstations(powerdams).Throughthisprogram,the Provincehasbeenprovidingmunicipalitieswithfundingthatreflectstheamount ofpropertytaxrevenuethateachmunicipalityreceivedfromthesestationsprior to2001,whenthestationsbecameexemptfrompropertytaxation. In2013,theProvinceadvisedmunicipalitiesthatthisprogramwouldbereviewed aspartofabroaderexaminationtoensuregovernmentprogramsmeettheir policyobjectives,whiletakingintoaccountthegovernmentsongoingeffortto makeresponsiblespendingchoices.Pendingtheoutcomeofthereview,the Provincecommittedtomaintainastableleveloffundingtomunicipalitiesunder thisprogramforthe2013and2014taxationyears. AsaresultoftheProvincesreview,andinthecontextofthegovernments commitmenttocontinuetomanagespending,theprogramwillbephasingdown to$14.3millionby2017.

TABLE1.10 PowerDamSpecialPaymentProgramAnnualFunding
($Millions)

Annual Payments to Municipalities

2014
18.7

2015
18.1

2016
16.8

2017
14.3

TheProvincewillworkwithmunicipalitiesonwaystoimplementthephasedown inamannerthatisfairandmanageable.

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CHAPTER

II

Ontarios Economic Outlook and Fiscal Plan

ChapterII:OntariosEconomicOutlookandFiscalPlan

Highlights
Governmentprojected2014realGDPgrowth:2.1percent. Privatesectoraverageprojected2014realGDPgrowth:2.2percent. Governmentprojected2015realGDPgrowth:2.5percent. Privatesectoraverageprojected2015realGDPgrowth:2.6percent. NetnewjobsinOntariosincerecessionarylowinJune2009:459,500. 201314deficitisprojectedtobe$11.3billion,animprovementof $0.4billioncomparedwiththe2013Budgetforecast. Ontariohasthelowestprogramspendingpercapitaandraisesthelowest totalrevenuepercapitaamongCanadianprovinces,includingfundingfrom federaltransfers. TheProvinceisprojectingdeficitsof$12.5billionin201415,$8.9billionin 201516,and$5.3billionin201617withareturntoabalancedbudget in201718. Overthemediumterm,thegovernmentwillcontinuetotakeresponsible actionstoensureeverydollarspentcounts,andmanageprogramexpense growthtobalancethebudgetby201718. TheLegislaturepassedtheFinancialAccountabilityOfficerAct,2013, toestablishaFinancialAccountabilityOfficerwhowillprovideindependent analysistoMembersofProvincialParliamentonthestateofthe Provincesfinances.

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2014OntarioBudget

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ChapterII:OntariosEconomicOutlookandFiscalPlan

Section A: Overview
TABLE2.1 2014BudgetNumbersataGlance
Provincial Finances:
2.1% 2.2% 2.5% 2.6% 459,500 14.9% 28.9% 201415 Deficit Projection 201415 Revenue Plan 201415 Expense Plan 201415 Reserve Deficit-to-GDP Ratio (201314) Accumulated Deficit-to-GDP Ratio (200304) Accumulated Deficit-to-GDP Ratio (201314) $12.5 billion $118.9 billion $130.4 billion $1.0 billion 1.6% 24.6% 25.6%

Ontarios Economy:
Projected Real GDP Growth, 2014 Avg. Private-Sector Growth, 2014 Projected Real GDP Growth, 2015 Avg. Private-Sector Growth, 2015 Jobs since June 2009 Increase in Real GDP (2013 above 2003) Increase in Real Household Disposable Income (2013 above 2003)1
1

2013 real household disposable income is an Ontario Ministry of Finance estimate.

Ontarioseconomycontinuestogrowatamoderatepace,contributingtonew jobsandbusinessopportunities.Theglobaleconomicenvironment,however, remainschallenging.Thatiswhythegovernmentismovingforwardwitha10year planfortheeconomyfocusedonstrategicinvestmentsinpeople,modern infrastructure,andadynamicandinnovativebusinessclimate.Theseactionswill puttheprovinceanditspeopleinapositiontosucceedbyhelpingtospur economicgrowthandcreatethenewjobsnecessarytosupporteliminating thedeficit. SincetherecessionarylowinJune2009,459,500netnewjobshavebeencreated inOntario.ThepaceofjobcreationinOntariosinceJune2009hasbeenstronger thaninmostdevelopedeconomies,includingtheUnitedStates,theaveragefor membercountriesintheOrganisationforEconomicCooperationand Development(OECD),andtherestofCanadacombined. Thedeficitfor201314isnowestimatedtobe$11.3billiona$0.4billion improvementcomparedwiththe2013Budgetforecast.Thismarksthefifthyear inarowthattheProvinceisreportingaprojecteddeficitlowerthanforecast.

175

2014OntarioBudget Ontariosperformanceagainstitsfiscaltargetstodateistheresultofa responsibleandbalancedapproachtofiscalmanagement,andthegovernments commitmenttoensurevaluefortaxpayersmoneybymakingeverydollarcount. Thegovernmenthasmanagedspendinginawaythathasresultedinlowerthan forecastprogramexpenseineachofthelastfiveyears.Ontarioalsohasthe lowestprogramspendingpercapitaamongCanadianprovinces,andraisesthe lowesttotalrevenuepercapita,includingfundingfromfederaltransfers,while stillprovidinghighqualitypublicservicesthatsupportthewellbeingofOntarians. WhileOntarioremainscommittedtocontinuingtomanagespendingamid challengesinthebroadereconomicenvironment,theseconditionsmeanthe governmentmustcontinuetoinvest. Ontarioisnotaloneinfacingthesechallengesmostotherprovinceshavehad toextendtheirbalancedbudgettimelines,andthefederalgovernmenthasalso seendecliningrevenueprojections.Thesechallengesmeanthegovernmentmust thinklongtermaboutthechoicesitmakes.Acrosstheboardcutsatthistime wouldharmOntarioseconomicandfiscalprospects.

176

ChapterII:OntariosEconomicOutlookandFiscalPlan Despiteadeclineinthemediumtermoutlookforrevenuesincethe2010Budget, thegovernmenthasbeentakingstepstomanagespendinggrowthandremains committedtobalancingthebudgetby201718.Thegovernmentisbalancingthe budgetinawaythatisbothfiscallyresponsibleandfair,holdingprogram spendinggrowthtoanaverageannualrateof1.1percentoverthenextthree yearswhileprotectingcriticalinvestmentsandpublicservicesforallOntarians.

CHART 2.1

Medium-Term Revenue Outlook Has Declined since the 2010 Budget

$ Billions
140 135 130 125 120 115 110 105 100 201011 201112 201213 201314 201415 201516 201617
Note: 2010 Budget amounts have been restated for the reclassification of government agencies and organizations as described in the 2011 Ontario Economic Outlook and Fiscal Review and a fiscally neutral reclassification of a number of tax measures that are transfers or grants as described in the 2012 Ontario Budget. Source: Ontario Ministry of Finance.

2010 Budget Revenue Outlook

2014 Budget Revenue Outlook


(not including measures)

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2014OntarioBudget
CHART 2.2

Medium-Term Expense Outlook Has Declined since the 2010 Budget

$ Billions
145 140 135 130 125 120 115 110 105 201011 201112 201213 201314 201415 201516 201617
Note: 2010 Budget amounts have been restated for the reclassification of government agencies and organizations as described in the 2011 Ontario Economic Outlook and Fiscal Review and a fiscally neutral reclassification of a number of tax measures that are transfers or grants as described in the 2012 Ontario Budget. Source: Ontario Ministry of Finance.

2010 Budget Expense Outlook

2014 Budget Expense Outlook

Inthe2013OntarioEconomicOutlookandFiscalReview,thegovernmentmade itspriorityclearthatitwillcontinuetoprotectinvestmentsinjobs,growthand familiesaheadofshorttermtargets.Asaresult,itisnowprojectingadeficitof $12.5billionin201415,$8.9billionin201516,and$5.3billionin201617, andareturntoabalancedbudgetin201718. Overthemediumterm,thegovernmentwilltakedeliberateactionstocontinue tomeetorbeatthesedeficittargets.Theseincluderesponsiblemanagementof programspending,maintainingtheintegrityofprovincialrevenue,and introducingtaxfairnessforpeopleandbusinesses.

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ChapterII:OntariosEconomicOutlookandFiscalPlan

Transparency, Financial Management and Fiscal Accountability


Ontariocontinuestoactonopportunitiestofurtherstrengthentransparency, financialmanagementandfiscalaccountability,insupportofachievingthe Provincesfiscalplananddeliveringgovernmentprogramsandservices. Similartopreviousyears,OntariohasonceagainreceivedanArankingfrom theC.D.HoweInstituteforitsclarityinpresentationandexplanationoffinancial results.1TheProvinceensurescomparableandconsistentfinancialinformation isusedtosupportfinancialplanningandtrackingreflectedinitsBudgets, ExpenditureEstimates,quarterlyfinancialstatementsandannualresultsreported inthePublicAccounts.Thisisaccomplishedthroughconsistentapplicationof accountingpoliciesandreportingstructuresthataideffectivedecisionmaking andensuretransparencyandaccessibilityofthefinancialresultsforthepublic.

Transparency
Environmental Liabilities
TheProvincecurrentlyreportsfinancialliabilitiesthatarebasedonits environmentalobligationsresultingfromfederallegislation.Thegovernment planstoenhanceitsreportingonenvironmentalliabilitiesinaccordancewith thePublicSectorAccountingBoards(PSAB)newstandardonaccountingfor contaminatedland,whichiseffectivefor201415.Underthenewstandard, theProvincesownlegislationmustalsobeconsideredwhenidentifyingliabilities tobereported.Thenewstandardwillbereflectedinthegovernmentsstatement offinancialpositionreportedinthePublicAccountsofOntario20142015. Thegovernmentisconsideringrelatedlegislativechangesrequiredtosupport applicationofthenewstandard.

Recent Developments in Public Sector Accounting Standards


ThegovernmentcontinuestoevaluatetheimpactofPSABsprospective standardsforfinancialinstrumentsandforeigncurrency,whichwillbeeffective asofApril1,2016.Nochangesarerequiredforthe201415fiscalyear. TheProvincewillworkwithPSABtoaddresspotentialimplementationissues.
1

WilliamB.P.RobsonandColinBusby,Credibilityonthe(Bottom)Line:TheFiscal AccountabilityofCanadasSeniorGovernments,2013,C.D.HoweInstitute,(2014).

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2014OntarioBudget

Financial Management
ThegovernmentwillproposeanInterimAppropriationfor201415Act,2014. IfapprovedbytheLegislature,thiswouldprovidetheinterimlegalspending authorityforanticipated201415spending,pendingfinalizationofthe201415 Supplyprocess.Thisproposedlegislationisrequiredforthegovernmentto continueoperationsuntiltheLegislativeAssemblyhasapprovedtheExpenditure EstimatesandaSupplyActisproposedandpassed.

Fiscal Accountability
Designated Revenue Reporting
Accountablefinancialmanagementrequirestransparentreportingonthe Provincesdeliveryofitsfinancialcommitments.Forexample,theproposed TrilliumTrustwoulddedicatenetrevenuegainsfromcertainassetsalesto financekeyinfrastructureprojectsaspartofthegovernments10yearplan fortheeconomy,whichincludesinvestmentsinpublictransit,transportation infrastructureandotherpriorityinfrastructure.Toensureaccountabilityforthe useofdedicatedfunds,thegovernmentisexploringproposednewreporting mechanismsandassociatedlegislativechangestosupportthesecommitments.

Financial Accountability Officer


Inordertoenhancefiscalaccountabilityandtransparency,inSeptember2013, theLegislaturepassedtheFinancialAccountabilityOfficerAct,2013,toestablish aFinancialAccountabilityOfficerasanindependentofficeroftheLegislature. Ontarioisthefirstprovincetointroducethisoversightmeasure.TheFinancial AccountabilityOfficerwillbeabletoprovideindependentanalysistoallMembers ofProvincialParliamentaboutthestateoftheProvincesfinances,includingthe OntarioBudget,aswellaslookattrendsintheprovincialandnationaleconomies. TheestablishmentofaFinancialAccountabilityOfficerbuildsonprevious governmentactionstoenhancetransparencyandaccountability,suchasthe FiscalTransparencyandAccountabilityAct,2004.

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ChapterII:OntariosEconomicOutlookandFiscalPlan

Section B: 201314InterimFiscal Performance


Ontariosdeficitfor201314isnowprojectedtobe$11.3billion.Despitelower thanprojectedrevenue,thegovernmentcontinuestobeatitsfiscaltargetsasa resultofitsapproachtomanaginggrowthinspending.Thismarksthefifthyearin arowthatOntarioisreportingbothlowerthanprojectedprogramexpenseanda deficitlowerthanforecast.

TABLE2.2
($Millions)

201314InYearFiscalPerformance
Budget Plan In-Year Change
(1,521) (235) 272 292 (1,192)

Interim
80,454 22,240 4,751 8,208 115,653

Revenue Taxation Revenue Government of Canada Income from Government Business Enterprises Other Non-Tax Revenue Total Revenue Expense Programs Interest on Debt Total Expense Reserve Surplus/(Deficit)
Note: Numbers may not add due to rounding.

81,975 22,475 4,479 7,916 116,845

116,983 10,605 127,588 1,000 (11,743)

116,396 10,556 126,952 (11,300)

(587) (49) (636) (1,000) 443

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2014OntarioBudget Totalrevenuein201314isprojectedtobe$1,192millionbelowthe 2013BudgetPlan,primarilyduetolowertaxationrevenue. Ontariosprogramexpenseisprojectedtobe$587millionlowerthan outlinedinthe2013Budget,thefifthyearinarowthatspendingis projectedtobelowerthanforecast.Managinggrowthinspendingisthe primarycontributortotheProvincebeingontracktobeatitsdeficittarget thisyear,despiteexperiencinglowerthanforecastrevenue. Totalexpensein201314isprojectedtobe$636millionlowerthan forecastinthe2013Budget.Thisincludestheimpactofaslightlylower interestondebtexpenseprojection,primarilyreflectingOntarios lowerthanforecastcostofborrowingrelativetoCanadain the2013Budgetandcosteffectivedebtmanagement.

The2013Budgetincludeda$1.0billionreservefor201314inrecognitionofthe potentialimpactofcontinuedglobaleconomicuncertaintyontheProvincesfiscal outlook.Consistentwiththis,thereserveisbeingusedtopartiallymitigatethe impactofthe$1.2billiondeclineintherevenueoutlookontheProvinces fiscalperformance. Giventhepreliminarynatureoftheseestimates,theinterimforecastissubject tochangeasactualProvincialrevenueandexpensearefinalizedinthePublic AccountsofOntario20132014thissummer.

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ChapterII:OntariosEconomicOutlookandFiscalPlan

In-Year Revenue Performance


Totalrevenuein201314isestimatedtobe$115,653million.Thisis$1,192million belowtheamountprojectedinthe2013Budget.Thedecreaseislargelydueto lowertaxationrevenues.

TABLE2.3
($Millions)

SummaryofRevenueChangessincethe2013Budget
Interim 201314

Taxation Revenue Sales Tax Land Transfer Tax Corporations Tax All Other Taxes Government of Canada Canada Health Transfer and Canada Social Transfer Other Income from Government Business Enterprises Ontario Power Generation Inc./Hydro One Inc. Other Government Business Enterprises Other Non-Tax Revenue Gain on Sale of GM Shares All Other Non-Tax Revenue Total Revenue Changes since 2013 Budget
Note: Numbers may not add due to rounding.

(1,475) 222 100 (368) (1,521) (175) (60) (235) 256 16 272 249 43 292 (1,192)

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2014OntarioBudget

Revenue Changes
Highlightsofkey201314revenuechangesfromthe2013Budgetforecastare asfollows: SalesTaxrevenuesareestimatedtobe$1,475millionlower,largely reflectinglowerestimatesofOntariosHarmonizedSalesTaxentitlements for2012and2013.Aboutonehalfofthedecreaseisaonetimeadjustment duetoanoverestimationofSalesTaxrevenuesinthePublicAccountsof Ontario20122013. LandTransferTaxrevenuesareestimatedtobe$222millionhigher, reflectingcontinuedstrengthintheOntariohousingmarket. CorporationsTaxrevenuesareestimatedtoincreaseby$100millionasa highertaxbaseandonetimeamountsmorethanoffsettheimpactoflower growthinnetoperatingsurplusofcorporations. AllOtherTaxrevenuescombinedareestimatedtodecreaseby $368million,mostlyduetolowerthanexpectedMiningTaxandEducation PropertyTaxrevenues.MiningTaxrevenueis$122millionbelowthe 2013Budgetforecastbecauseoflargeprioryearrefundsandweakerthan expectedcommodityprices.EducationPropertyTaxis$163millionlower mostlybecauseofinyeartaxreductionsduetoanumberoffactors includingslowerthanprojectedassessmentgrowthfromnewlyconstructed orrenovatedpropertiesandpropertyassessmentappeals. GovernmentofCanadatransfersundertheCanadaHealthTransferand CanadaSocialTransferprogramsare$175millionlower,mainlydueto downwardrevisionsbyStatisticsCanadatohistoricpopulationestimates thatloweredOntariosshareofCanadawidepopulation.Ashistoric populationestimateswererevised,the201314changealsoincludes onetimeadjustmentsforprioryears. AllOtherGovernmentofCanadatransfersare$60millionbelowthe 2013Budgetforecast,mainlyduetolowertransferstoconsolidated governmentagenciesandrevisedtimelinesforcapitalprojects. Thesereductionsarelargelyoffsetbycorrespondinglowerspending. ThecombinednetincomesofOntarioPowerGenerationInc.(OPG) andHydroOneInc.(HydroOne)areestimatedtobe$256millionhigher, largelyduetoloweroperatingcostsandhighergenerationrevenuesat OPGandhighertransmissionanddistributionrevenuesatHydroOne.

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ChapterII:OntariosEconomicOutlookandFiscalPlan For201314,netincomefromtheOntarioLotteryandGaming CorporationandtheLiquorControlBoardofOntarioisprojectedtobe largelyinlinewiththe2013Budgetprojection. OtherNonTaxRevenueisprojectedtobe$292millionhigher, largelyreflecting: A$249milliongainonthesaleoftheProvincesinterestin 10millionsharesofGeneralMotorsCompany,announcedon September10,2013;and Higherrecoveriesfrompowersupplycontracts,whicharefullyoffset bypowersupplycontractcosts,andhighersalesandrentalsrevenues fromconsolidatedgovernmentagencies.

In-Year Expense Performance


Totalexpensein201314iscurrentlyprojectedtobe$635.7millionlowerthan the2013Budgetforecast.Therevisedprojectionisprimarilytheresultofthe governmentsongoingeffortstomakeresponsiblespendingchoicesandlower thanprojectedinterestondebtexpense. Programexpensein201314isprojectedtobe$586.7millionlowercompared withthe2013Budgetforecastduetomanaginggrowthinspendingandactions relatedtorecommendationsbythegovernmentsexpenditurereview.Asaresult ofthegovernmentscommitmenttostrongfiscalmanagement,provincial programspendinghasbeenlowerthanforecasteveryyearsincethe2009Ontario EconomicOutlookandFiscalReview. Growthinprogramspendingbetween201213and201314isprojectedtobe 3.7percent.Thisprogramspendinggrowthispartlytheresultofinvestmentsfor aprosperousandfairOntariothatbeganwiththe2013Budget,includingfunding fortheYouthJobsStrategyandfortransformingsocialassistance.Itisalsopartly theresultofonetimesavingsof$1.3billionin201213withintheeducation sectorfromtheeliminationofbankedsickdaysforteachers.Programspending waslowerin201213thaninthepreviousyearthefirsttimethishashappened inOntarioinmorethanadecade.

185

2014OntarioBudget Interestondebtexpenseisforecastedtobe$49.0millionlowerthanprojectedin the2013Budget,primarilyreflectingOntarioslowerthanforecastcostof borrowingrelativetoCanadainthe2013Budgetandcosteffectivedebt management.

Expense Changes
Asinpreviousyears,the2013Budgetincludeda$1.0billionyearendsavings target.Thetablebelowshowsthattheactionstakenbythegovernmenthave producedresults.Thegovernmentisontracktoexceedtheyearendsavings targetby$586.7million,ormorethan50percent.Aspartofthis,16outof 25ministriesareprojectedtospendbelowtheirtotalexpenseallocation.

TABLE2.4
($Millions)

SummaryofExpenseChangessincethe2013Budget
201314

Year-End Savings Target included in 2013 Budget Increase/(Decrease) since 2013 Budget1 Health Sector Education Sector2 Postsecondary and Training Sector Childrens and Social Services Sector Justice Sector Other Programs Total Increase/(Decrease) since 2013 Budget Net Program Expense Increase/(Decrease) after Applying Savings to Meet $1.0 Billion Year-End Savings Target Interest on Debt Total Expense Changes since 2013 Budget
Expense change by sector, restated for fiscally neutral transfers of programs between sectors. Excludes Teachers Pension Plan. Teachers Pension Plan expense is included in Other Programs. Note: Numbers may not add due to rounding.
1 2

1,000.0

(72.3) (400.0) (128.2) (165.6) 106.1 (926.7) (1,586.7)

(586.7) (49.0) (635.7)

186

ChapterII:OntariosEconomicOutlookandFiscalPlan Actionsrecommendedbythegovernmentsexpenditurereviewthatwas announcedinthe2013OntarioEconomicOutlookandFiscalReviewlastfall contributedtomanagingdowngrowthinprogramspendingin201314. Theseincludedimmediatestepstofreezenonessentialspendingforthelast quarterofthe201314fiscalyear. Keyexpensechangessincethe2013Budget,includingthoseresultingfrom governmentactionsthatcontributedtolowerthanforecastspending, includethefollowing: Healthsectorexpenseisprojectedtodecreaseby$72.3million, primarilyduetosavingsintheOntarioDrugProgramasaresultof negotiatingreducedpricingforsixgenericdrugs;savingsinthepublic healthimmunizationprogramduetoenhancedinventorymanagement ofvaccines;lowerspendinginvariousprograms,suchasclinicaleducation; andlowerthanprojectedamortizationexpenseforhospitalsduetominor constructiondelaysformajorhospitalprojects. Educationsectorexpenseisprojectedtodecreaseby$400.0million, primarilyduetolowerthanexpectedschoolboardexpenseandsavings inministryadministration.Schoolboardexpensesavingsaremainlydue tolowerthanprojectedgrowthintotalstudentenrolment,construction delaysonschoolprojects,andmeasurestakenbyschoolboardsto balancebudgetswhileprotectingthegainsinstudentachievement. Ministryefficienciesarebeingrealizedthroughlowercostsassociated withinformationandinformationtechnology,andmanagingstaff vacancies,withoutaffectingtheministrysabilitytodeliverprograms andfulfilcommitments. Postsecondaryandtrainingsectorexpenseisprojectedtodecreaseby $128.2million,mainlyduetolowerthanforecastspendingonemployment andtrainingprogramsasaresultofimprovingjobopportunities,andlower thanexpectedspendingonstudentfinancialassistanceduetolower programdemand.

187

2014OntarioBudget Childrensandsocialservicessectorexpenseisprojectedtodecrease by$165.6million,dueinparttooverallimprovementsintheeconomy, resultinginlowerthanexpectedtakeupofOntarioWorksandlowincome benefits,suchastheOntarioChildBenefit.Inaddition,lowerexpense requirementsintheOntarioDrugBenefitprogramforsocialassistance recipientsresultedfromthegovernmentseffortstonegotiatereduced pricingfordrugs. Justicesectorexpenseisexpectedtoincreaseby$106.1million,primarily asaresultofsettlementagreementstoprovidecompensationtothe formerresidentsoftheHuronia,RideauandSouthwesternRegional Centres,compensationfundingforvictimsofaninternationalinvestment fraudcasefullyoffsetfromrevenuerecoveredthroughOntarioscivil forfeiturelawandthedecisiontokeeptheSarniaJailfacilityopen followinganevaluationofoperationalneeds. Otherprogramsexpenseisprojectedtodecreaseby$926.7million, asaresultofadditionalrestraintmeasurestoalignpublicserviceretiree benefitswiththoseintheprivatesectorandotherjurisdictions;pension savingsduetomanagingcompensationcoststhroughthelastroundof collectiveagreements,alowerthanprojectedincreaseinactivemembers, andcontinuedimprovementininvestmentreturnsandmarketperformance since2010.Thedecreasealsoreflectsanumberofconstraintmeasures implementedacrossministriestomanagespendingresponsiblywhile protectingcorepublicservices.

Interestondebtexpenseisprojectedtobe$49.0millionlowerthanforecastinthe 2013Budget,primarilyreflectingOntarioslowerthanforecastcostofborrowing relativetoCanadainthe2013Budgetandcosteffectivedebtmanagement. The201314interimexpenseprojectionmaintainsatotalbalanceinthe contingencyfundsof$250.0millioninrecognitionofexpensechangesthatcould materializeasthePublicAccountsofOntario20132014arefinalized,including upto$190.0millionforplannedfinancialassistancetomunicipalitiesand conservationauthoritiesimpactedbytheDecember2013icestorm.

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ChapterII:OntariosEconomicOutlookandFiscalPlan

Section C: OntariosEconomicOutlook
Theriskstoglobaleconomicgrowth,includingfinancialmarketvulnerabilities, havepersistedthroughtherecoveryandhavetranslatedintoweakerthan expectedgrowth.Ontarioisnotimmunetotheseglobaldevelopmentsand needstocontinuetobuildagloballycompetitive,resilientanddiverseeconomy. Ontarioseconomycontinuestogrowatamoderatepaceinachallengingglobal economicenvironment.StrongerU.S.growthandthedeclineinthevalueofthe CanadiandollarwillhelpboostOntarioexportsandencouragestrongerbusiness investment.Householdspending,whichaccountsforcloseto60percentofthe economy,isalsoexpectedtostrengthen. TheMinistryofFinanceisforecastinggrowthinrealgrossdomesticproduct(GDP) todoublefrom1.3percentin2013to2.6percentby2017.1

TABLE2.5
(PerCent)

OntarioEconomicOutlook
2011 2012
1.3 3.0 0.8 1.4

2013
1.3 2.7 1.4 1.0

2014p
2.1 3.5 1.1 1.5

2015p
2.5 4.4 1.5 1.9

2016p
2.5 4.4 1.6 2.0

2017p
2.6 4.6 1.4 2.0

Real GDP Growth Nominal GDP Growth Employment Growth CPI Inflation

2.2 4.0 1.8 3.1

p = Ontario Ministry of Finance planning projection. Sources: Statistics Canada and Ontario Ministry of Finance.

WhileprudentmanagementandforecastingmeanthatthisBudgetreflects theprivatesectorconsensusforgrowth,thegovernmentbelievestheinvestments beingmadeinskillsandknowledge,ininfrastructureandinbusinesswillpayreal economicdividendsinbothshortandlongterm,leadingtohighergrowth.

BasedoninformationavailabletoApril8,2014.

189

2014OntarioBudget Sincetheglobalrecessionin200809,Ontariohasemergedstronger.Major indicators,includingrealGDP,employment,exports,householdincomeand consumption,havepostedstronggainssincetherecession.

CHART 2.3

Ontario Emerging Stronger from 200809 Recession


Per Cent Change from Recessionary Low
+10.3%

Ontario Indicator Real GDP

Pre-Recession Peak $602.0 Billion


(2008 Q2)

Recessionary Low $573.3 Billion


(2009 Q2)

Ontario Policies Supporting Recovery


Competitive Taxes Infrastructure Investments Business and Regional Support Skills Training Youth Jobs Strategy Poverty Reduction Strategy

Current Level $632.6 Billion


(2013 Q4)

Exports

$337.1 Billion
(2008 Q3)

$274.9 Billion
(2009 Q2)

$353.8 Billion
(2013 Q4)

+28.7%

Employment

6,708,600
(September 2008)

6,442,800
(June 2009)

6,902,300
(March 2014)

+7.1%

Household Income Household Consumption

$414.3 Billion
(2008 Q2)

$410.3 Billion
(2009 Q2)

$476.2 Billion
(2013 Q4)

+16.1%

$342.3 Billion
(2008 Q3)

$335.6 Billion
(2009 Q2)

$394.8 Billion
(2013 Q4)

+17.6%

Sources: Statistics Canada and Ontario Ministry of Finance.

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ChapterII:OntariosEconomicOutlookandFiscalPlan

Recent Economic Developments


Althoughmoderate,thesustainedgrowthofOntarioseconomyhassupported continuedgainsinemployment.In2013,Ontarioemploymentincreasedbya solid95,700newjobs(+1.4percent),improvingonagainof52,400jobsin2012. Lastyear,64.7percentofjobsgainedwerefulltimepositionsand68.2percent wereintheprivatesector. ThesteadyjobgrowthresultedinOntariosunemploymentratedecliningto 7.5percentin2013,wellbelowtherecessionaryhighof9.4percentinJune2009. OntariosrealGDPincreased1.3percentin2013,matchingthegainin2012. Solidgainsinconsumerspendingandnettradesupportedeconomicgrowth lastyear. TheviewamongprivatesectoreconomistsisthatOntarioiswellpositionedfor continuedeconomicgrowthovertheforecastperiod.

191

2014OntarioBudget

Ontarios Recovery
Allmajoreconomiesaroundtheworldfacedsetbacksduringthe200809 recession.InOntario,realGDPdeclinedby4.8percentfromthesecondquarter of2008tothesecondquarterof2009.Employmentdroppedby265,800netjobs fromSeptember2008totherecessionarylowinJune2009. TheProvincecontinuestotakemeasurestostrengthentheeconomyandsupport jobsbystrategicallyinvestingingloballycompetitivesectors.Ontarioseconomic recoveryhasbeensupportedbyhouseholdspendingandresidentialconstruction, aswellasgovernmentinvestmentininfrastructureandbusinessinvestmentin plantandequipment.Majorindicators,includingrealGDPandemployment,are nowwellaboveprerecessionlevels.Asofthefourthquarterof2013,Ontarios realGDPhadincreasedby10.3percentfromtherecessionarylowandwas 5.1percentaboveitsprerecessionpeak.

CHART 2.4

Ontario Real GDP since 200809 Recession

$ Billions, 2007
650
Pre-recession level: $602.0B in 2008Q2 $632.6B in 2013Q4

600

550

Recession low: $573.3B in 2009Q2

500
2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3
Sources: Statistics Canada and Ontario Ministry of Finance.

192

ChapterII:OntariosEconomicOutlookandFiscalPlan SincetherecessionarylowinJune2009,459,500netnewjobshavebeencreated. Astrongrecoveryof463,400fulltimejobsaccountedforalltheemployment gainssincetheendoftherecession.Themajorityofthenetnewjobswereinthe privatesectorandinindustriespayingaboveaveragewages.AsofMarch2014, Ontariohad193,700morejobscomparedtotheprerecessionpeakin September2008.Ontariosunemploymentratehasdeclinedfromarecessionary highof9.4percentinJune2009to7.3percentinMarch2014.

CHART 2.5

Employment Gains Concentrated in Full-Time, Private-Sector, Above-Average Wage Jobs

Employment Gains since June 2009 (Thousands)


500 400 300 200 100 0 (100)
(4) 75 55 460 463 330 319 140

Notes: Numbers may not add due to rounding. Above-average wage industries are defined as those with earnings above the average hourly earnings of all industries. Sources: Statistics Canada and Ontario Ministry of Finance.

193

2014OntarioBudget Sincetheglobalrecession,thepaceofjobcreationinOntariohasbeenstronger thaninmostdevelopedeconomies,includingtheUnitedStatesandmostOECD2 countries,includingSweden,Germany,theUnitedKingdom,FranceandJapan. Inaddition,thepaceofjobcreationinOntariosinceJune2009isaheadofall theGreatLakesStatesandtherestofCanada.

CHART 2.6

Ontario Job Recovery Ahead of U.S. and OECD Average

Employment (Per Cent Change from Peak)


4 2 0 (2) (4) (6) (8) 2008 2009 2010 2011 2012 2013 2014
OECD U.S. Ontario

Note: Based on quarterly data. Pre-recession peak was 2008Q3 for Ontario, 2008Q2 for the OECD average and 2008Q1 for the U.S. Sources: Organisation for Economic Co-operation and Development, U.S. Bureau of Labor Statistics and Statistics Canada.

OrganisationforEconomicCooperationandDevelopment.

194

ChapterII:OntariosEconomicOutlookandFiscalPlan
CHART 2.7

Ontario Job Recovery Stronger than Other Jurisdictions

Employment Growth since June 2009 (Per Cent)


8 7 6 5 4 3 2 1 0
7.1 5.3 3.5 5.3 6.0

4.7 3.9 1.7 2.3

1.0

1.3

1.4

* The OECD average is based on quarterly data and represents growth since the second quarter of 2009. Note: Total U.S. employment is taken from the Current Employment Statistics Survey, while state employment is from Local Area Unemployment Statistics. Sources: Organisation for Economic Co-operation and Development, U.S. Bureau of Labor Statistics and Statistics Canada.

195

2014OntarioBudget

Global Economic Developments and Outlook


Theglobaleconomygrewby3.0percentin2013,followingagainof3.2percent in2012.IntheUnitedStates,economicgrowthgainedmomentumthrough2013, supportedbystrongerexportsandhouseholdspending.InEurope,modestgrowth resumedinthesecondquarterof2013,followingayearandahalflongrecession. Growthinemerginganddevelopingeconomieseasedin2013asforeigncapital outflowsandfinancialmarketvolatilityledtosharpcurrencydevaluationsfor severalcountries. Globaleconomicgrowthissettoimprovein2014,ledbystrongergrowthin advancedeconomies.Inparticular,strongereconomicactivityintheUnitedStates isexpectedtobeasubstantialdriverofglobalgrowth.Europeisalsoexpected tosustainamodestrecovery,althoughgrowthremainsunevenacrosseuroarea countries.InJapan,aggressivemonetarystimulusandincreasedgovernment infrastructurespendingareprojectedtooffsettheimpactoftaxincreases. EconomicgrowthinChinaisexpectedtoremainrelativelyrobust,asthe countrytransitionsfromarelianceonexportsandinvestmenttoamorebalanced economy,withrisingdomesticconsumption.Otheremergingmarketsare expectedtostrengthen,astheybenefitfromstrongergrowthinglobaldemand. However,economicchallenges,capitaloutflowsandpoliticalinstabilityinsome emergingeconomiescouldleadtomoremoderategrowthandgreatervolatility.

196

ChapterII:OntariosEconomicOutlookandFiscalPlan
CHART 2.8 Real GDP Growth (Per Cent Change)
8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0
3.9 3.2 3.0 3.6 3.9 2.2 1.4 1.3 2.3
Global Economy Advanced Economies Emerging and Developing Economies

Global Economic Growth to Improve

6.3 5.0 4.7 4.9 5.3

1.7

p = International Monetary Fund projection. Note: Advanced economies include Ontario and Canada. Source: International Monetary Fund (April 2014).

U.S. Economy
TheUnitedStatesisOntarioslargesttradingpartner,areflectionofgeography andbusinessties.Morethan160millionconsumerscanbereachedwithina daysdriveofsouthernOntario.TheU.S.marketisparticularlyimportantfor manyOntarioindustries,accountingfor80percentofexportsofmotorvehicles, furniture,plasticsandsteel. TheU.S.economyacceleratedinthesecondhalfof2013,withrealGDPgrowth averaging3.4percent(annualized)comparedtoaveragegrowthof1.8percent overthefirsttwoquarters.Employmentgainsaveraged194,000jobspermonth in2013,whiletheunemploymentratefellfrom7.9percentinJanuary2013to 6.7percentbyyearend.

197

2014OntarioBudget TheU.S.FederalReservehasjudgedunderlyingeconomicconditionstobestrong enoughtobeginreducingmonetarystimulus.Atthesametime,U.S.fiscalpolicy isexpectedtobelessofadragoneconomicgrowthin2014.Moreimportantly, thepoliticaluncertaintysurroundingtheU.S.federalgovernmentsbudgetand debtceilinghasabated,providingmuchneededsupporttoconsumerand businessconfidence. TheU.S.tradedeficitnarrowedsharplyin2013,largelyduetoreductionsin energyimports.StrongernetexportsshouldprovideafurtherlifttoU.S.growth in2014,aidedbyimprovingglobaleconomicprospects. U.S.householdnetwealthhasmorethanrecoveredfromlossesexperienced duringtherecession,supportedbystrongequitymarketgainsandrisinghouse prices.Improvedhouseholdwealth,combinedwithgrowingemploymentand risingwages,willlifthouseholdincomesandsupportstrongerconsumerspending.

198

ChapterII:OntariosEconomicOutlookandFiscalPlan U.S.economicgrowthisprojectedtostrengthenfrom1.9percentin2013 to2.7percentin2014and3.0percentin2015.U.S.motorvehiclesalesare expectedtoreach16.0millionunitsin2014,up3.3percentfrom2013, and16.4millionunitsin2015,up2.5percentfrom2014.

CHART 2.9 Real GDP Growth (Per Cent Change)


4.0 3.0 2.0 1.0 0.0 (1.0) (2.0) (3.0) (4.0) 2009
(2.8)

Strengthening U.S. Recovery

2.5 1.8

2.8 1.9

2.7

3.0

2.9

2.8

2010

2011

2012

2013

2014p

2015p

2016p

2017p

p = projection. Sources: U.S. Bureau of Economic Analysis and Blue Chip Economic Indicators (March and April 2014).

199

2014OntarioBudget

Oil Prices
Oilpricesfluctuatedthrough2013,reflectingsupplyinterruptionsand geopoliticaltensions.ThepriceofWestTexasIntermediate(WTI)crudeoil averaged$98USperbarrelin2013,upfrom$94USin2012. Crudeoilproductionisexpectedtoincreasefurtherin2014,supportedby increasedpipelineandrailwayflowswithinNorthAmerica.However,despite higherproduction,strengtheningglobaleconomicgrowth,ongoingpolitical turbulenceandhighrecoverycostsareexpectedtokeepoilpricesatrelatively highlevelsovertheforecastperiod.Oilpricesareforecasttoaverage $97USperbarrelin2014,withprivatesectorforecastsrangingfrom$95US to$104USperbarrel.

CHART 2.10

Oil Prices to Remain High

West Texas Intermediate (WTI) Crude Oil ($ US Per Barrel)


120 100 80 60 40 20 0 2000 2002 2004 2006 2008 2010 2012 2014p 2016p
p = Ontario Ministry of Finance planning projection. Sources: U.S. Energy Information Administration and Ontario Ministry of Finance.

200

ChapterII:OntariosEconomicOutlookandFiscalPlan

The Canadian Dollar


Recently,theCanadiandollarhastradedataround90centsUS,itslowestlevel inoverfouryears.ThedeclineintheCanadiandollarreflectsanumberoffactors, includingimprovedgrowthprospectsintheUnitedStatesandareducedsafe haveneffectthatboostedtheCanadiandollarfollowingtheglobalfinancialcrisis. ThelowerdollarwillhelpimproveOntariobusinesscompetitivenessand encouragestrongerexportgrowth.However,thedollarremainswellabove theaverageexchangerateof79centsUSoverthe2000to2009period. Additionally,thelowervalueoftheCanadiandollarwillraisepricesforimported goods,affectingbothbusinessesandconsumers. TherearedivergentviewsaboutthefuturedirectionoftheCanadaU.S.exchange rate.Someprivatesectorforecastersexpectfurtherdepreciationinthecoming quarters,whileothersexpectthedollartostrengthen.Forecastsrangefrom 88centsUSto92centsUSfor2014.Thedollarisforecasttostrengthenmodestly overtheoutlook,risingfrom90centsUSin2014to93centsUSin2017.

CHART 2.11

Canadian Dollar to Remain Below Parity

Cents US
110 100 90 80 70 60 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014p 2016p
p = Ontario Ministry of Finance planning projection. Sources: Bank of Canada, Ontario Ministry of Finance Survey of Forecasters (April 2014) and Ontario Ministry of Finance.

Low and High Private-Sector Projections

201

2014OntarioBudget

Financial Markets
TheBankofCanada,likeothercentralbanksaroundtheworld,hascontinued tomaintainaccommodativepoliciestosupporteconomicgrowth.TheBank hasmaintainedthetargetfortheovernightrateatthelowlevelof1.0percent sinceSeptember2010.InrecentstatementstheBankofCanadahasexpressed concernaboutthesoftnessinconsumerpriceinflationandtheweaknessin Canadasbusinessinvestmentandtradebalance.Asaresult,economistsbelieve thattheBankwilldelayanyincreasetopolicyinterestrates.Privatesector forecastersexpectthethreemonthCanadianTreasurybillyieldtoaverage 1.0percentthisyear,littlechangedfrom2013,andthenriseto1.3percentin 2015andreach3.3percentin2017. LongterminterestratesbegantoriseinMay2013asglobalfinancialmarkets anticipatedthegradualeasingoftheFederalReservesmonetarystimulus. ThegradualreductionortaperingoftheFederalReservespurchasesofU.S. treasurybondsandmortgagebackedsecuritiesbeganinJanuaryandisexpected tocontinuethrough2014.However,longtermbondyieldshavedeclinedsince December,asconcernoveremergingmarketeconomiesincreaseddemandfor safeassets.Inthecurrentenvironment,longterminterestratesarelikelyto remainvolatile.Theyieldon10yearGovernmentofCanadabondsisexpectedto risegraduallyfromanaverageof2.3percentin2013to2.8percentin2014and 3.5percentin2015,andtoreach4.3percentby2017.

202

ChapterII:OntariosEconomicOutlookandFiscalPlan
CHART 2.12

Interest Rates to Rise Gradually

Per Cent
14 12 10 8 6 4 2 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014p 2016p
p = Ontario Ministry of Finance planning projection. Sources: Bank of Canada and Ontario Ministry of Finance.

3-month Government of Canada Treasury Bill 10-year Government of Canada Bond

203

2014OntarioBudget Forecastsforkeyexternalfactorsaresummarizedinthetablebelow. TheseareusedasthebasisfortheMinistryofFinancesforecastforOntarios economicgrowth.

TABLE2.6

OutlookforExternalFactors
2011 2012
3.2 2.8 94 100.1 0.9 1.9

2013
3.0e 1.9 98 97.1 1.0 2.3

2014p
3.6 2.7 97 90.0 1.0 2.8

2015p
3.9 3.0 96 91.0 1.3 3.5

2016p
4.0 2.9 96 92.0 2.4 3.9

2017p
3.9 2.8 98 93.0 3.3 4.3

World Real GDP Growth (Per Cent) U.S. Real GDP Growth (Per Cent) West Texas Intermediate Crude Oil ($US/bbl.) Canadian Dollar (Cents US) Three-Month Treasury Bill Rate1 (Per Cent) 10-Year Government Bond Rate1 (Per Cent)

3.9 1.8 95 101.1 0.9 2.8

e = estimate. p = Ontario Ministry of Finance planning projection based on external sources. 1 Government of Canada interest rates. Sources: IMF World Economic Outlook (April 2014), U.S. Bureau of Economic Analysis, Blue Chip Economic Indicators (March and April 2014), U.S. Energy Information Administration, Bank of Canada, Ontario Ministry of Finance Survey of Forecasts (April 2014) and Ontario Ministry of Finance.

204

ChapterII:OntariosEconomicOutlookandFiscalPlan Table2.7providescurrentestimatesoftheimpactofsustainedchangesinkey externalfactorsonthegrowthofOntariosrealGDP,assumingotherexternal factorsareunchanged.Therelativelywiderangefortheimpactsreflects uncertaintyregardinghowtheeconomywouldbeexpectedtorespondto thesechangesinexternalconditions.

TABLE2.7

ImpactsofSustainedChangesinKeyExternalFactors onOntariosRealGDPGrowth
First Year Second Year
+0.2 to +0.9 0.1 to 0.3 +0.4 to +0.8 0.2 to 0.6

(PercentagePointChange)
Canadian Dollar Depreciates by Five Cents US Crude Oil Prices Increase by $10 US per Barrel U.S. Real GDP Growth Increases by One Percentage Point Canadian Interest Rates Increase by One Percentage Point
Source: Ontario Ministry of Finance.

+0.1 to +0.8 0.1 to 0.3 +0.3 to +0.7 0.1 to 0.5

205

2014OntarioBudget

Outlook for Ontarios Economic Growth


TheMinistryofFinanceisforecastingsteady,continuedgrowthinOntarios economy,withrealGDPincreasingby2.1percentin2014,2.5percentin2015 and2016,and2.6percentin2017.ThiscomparestoaforecastforrealGDP growthatthetimeofthe2013Budgetof2.3percentin2014and2.4percent inboth2015and2016. Whileaforecastforsustainedmoderategrowthisareasonablebasisforplanning, thereisalwaysthepotentialforstrongergrowthaswellasariskthatthe economycouldunderperform.Onthedownside,renewedglobalfinancialmarket volatilitycouldposearisktotheworldeconomy.Ontheupside,theU.S.economy couldbestrongerthanexpected,boostingOntariosexportsandgrowth.Akey domesticriskfortheOntarioandCanadianeconomiesisthepotentialfora significanthousingmarketadjustment. ThechoicesandinvestmentsmadeinthisBudgetwillpositionOntariototakefull advantageofitsstrengthsastheglobaleconomyreturnstonormalgrowthinthe shortterm,andastheeconomyundergoesfundamentalshiftsoverthemedium andlongterm.AttractingglobalcompaniesandinvestinginOntarianshealthand educationwillallpositiontheProvincetotakeadvantageoftheseshiftsinthe economy. Economicgrowthpriortothe200809globalrecessionwasdominatedbystrong gainsinhouseholdandgovernmentspending.Nettradewasasignificantdrag ongrowth,largelyasaresultoftheappreciationintheCanadiandollarover thisperiod.Overthe2013to2017period,growthisexpectedtoberelatively balanced,withgainsinhouseholdspending,businessinvestmentandnettrade allsupportingoverallGDPgrowth.

206

ChapterII:OntariosEconomicOutlookandFiscalPlan Overthelasttwoyears,inflationhasbeentrendinglowerinmanyadvanced economies.InOntario,theConsumerPriceIndex(CPI)increasedby1.0percent in2013,thelowestpaceofinflationinfouryears.ThemodestpaceofOntario consumerpriceinflationreflectedrelativelymoderatefoodpriceincreasesas wellasintensecompetitionintheretailsector.Strongereconomicgrowthand thelowerCanadiandollarwhichwillincreasepricesforimportedgoods areexpectedtoresultinamoderateincreaseinconsumerpriceinflation. Consumerpriceinflationisexpectedtobe1.5percentin2014,1.9percent in2015,and2.0percentin2016and2017.

CHART 2.13

Inflation Expected to Remain Moderate

Consumer Price Index (Per Cent Change)


4.0
3.1

3.0
2.5 1.9 1.4 1.5 1.0 2.0 2.0

2.0

1.0

0.0 2010 2011 2012 2013 2014p 2015p 2016p 2017p


p = Ontario Ministry of Finance planning projection. Sources: Statistics Canada and Ontario Ministry of Finance.

207

2014OntarioBudget Ontarioslabourmarketwillremainresilient,withsteadyemploymentgains expectedtocontinueovertheforecastperiod.Employmentisforecasttogrow by1.1percentor73,000netnewjobsin2014,andincreasebyanaverageof 1.5percentperyearoverthe2015to2017period.By2017,Ontariowillhave createdoveronemillionnetnewjobscomparedto2003.Thesteadygainsin employmentwilllowerOntariosunemploymentratefrom7.5percentin 2013to6.2percentin2017.

CHART 2.14 Employment (Millions)


7.4 7.2 7.0 6.8 6.6 6.4 6.2 6.0 2009

Employment Expected to Rise over the Medium Term

7.3 7.2 7.1 6.9 6.7 6.6 6.5 6.8 7.0

2010

2011

2012

2013

2014p

2015p

2016p

2017p

p = Ontario Ministry of Finance planning projection. Sources: Statistics Canada and Ontario Ministry of Finance.

Householdincomeisforecasttoincreaseby3.3percentin2014andstrengthen toanaveragegainof4.6percentannuallyoverthe2015to2017period.Real householdspendingisexpectedtoincreaseby2.1percentin2014andbyan averageof2.5percentperyearoverthe2015to2017period,inlinewiththe growthinrealincome.

208

ChapterII:OntariosEconomicOutlookandFiscalPlan Therewere61,100housingstartsinOntarioin2013,downfrom76,700startsin 2012.Existinghomesalesedgedup0.5percentin2013,whiletheaverageprice ofanOntarioresalehomeincreasedby4.7percent. HomebuildingisanimportantindustryinOntario,accountingforabout 120,000jobsin2013.DemandfornewhomesinOntariowillcontinuetobe supportedbysteadygrowthinthepopulation.Housingstartsareexpectedto average63,500unitsperyearbetween2014and2017.Ontariohomeresalesare expectedtogrowbyanaverageof0.8percentperyearbetween2014and2017. Amorebalancedmarketforresalehomesisexpectedtocontributetorelatively stablehomepricesoverthenextseveralyears.

209

2014OntarioBudget ThereareconcernsthatcurrenthousingpricesinOntarioandCanadaareelevated relativetobothhouseholdincomesandrents.Intheearly1990s,averagehouse pricesfellbyalmost15percent,followinganeartriplinginpricesinthelate 1980s.Thecorrectioninhousingpricesintheearly1990swasassociatedwith bothhighmortgageratesofover13percentin1990andariseinthe unemploymentrate(fromalowof5.0percentin1988to9.5percentin1991).

CHART 2.15

Ontario Housing Prices Expected to Stabilize

Average House Price ($ Thousands)


450 400 350 300 250 200 150 100 50 0 1980 1985 1990 1995 2000 2005 2010 2015p

p = Ontario Ministry of Finance planning projection. Sources: Canadian Real Estate Association and Ontario Ministry of Finance.

Inthecurrentoutlook,interestratesareexpectedtoremainrelativelylow, whiletheunemploymentrateisexpectedtocontinueimprovingsteadily.Aswell, despitemoderatelyhigherinterestrates,mortgagecarryingcostsasashareof householdincomeareexpectedtoremainbelow30percent,significantlylower thantherecordhighofnearly38percentreachedintheearly1990s.Asaresult, Ontariohousingpricesareexpectedtoremainrelativelystableoverthe outlookperiod.

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ChapterII:OntariosEconomicOutlookandFiscalPlan
CHART 2.16

Housing in Ontario to Remain Affordable

Mortgage Carrying Cost as a Share of Disposable Income per Household (Per Cent)
45 40 35 30 25 20 15

p = Ontario Ministry of Finance planning projection. Note: Carrying cost is based on the average five-year mortgage rate, a 25-year amortization and a 25 per cent down payment. Sources: Statistics Canada, Bank of Canada, Canadian Real Estate Association and Ontario Ministry of Finance.

211

2014OntarioBudget Canadashouseholddebttoincomeratiowas164.0percentinthefourthquarter of2013.Althoughtherateofincreasehasmoderated,thelevelofhousehold debtinCanadaremainselevated.Debtservicecostsasapercentofhousehold disposableincomeisameasureoftheaffordabilityofinterestpaymentsondebt. Thisratiodeclinedfromahighof9.2percentinthefourthquarterof2007to 7.1percentinthefourthquarterof2013itslowestlevelonrecordanda reflectionoflowinterestrates.Althoughinterestratesareexpectedtorise modestly,debtservicecostsareexpectedtoremainaffordableasincomes continuetorise.

CHART 2.17

Although Elevated, Canadian Household Debt Remains Affordable


Debt Service Cost as a Per Cent of Household Disposable Income 9.5 9.0

Household Debt as a Per Cent of Household Disposable Income 170

150

Household Debt

8.5 8.0 7.5

130 Debt Service Cost

110

7.0 6.5

90
2000Q1 2002Q1 2004Q1 2006Q1 2008Q1 2010Q1 2012Q1

6.0

Source: Statistics Canada.

212

ChapterII:OntariosEconomicOutlookandFiscalPlan BusinessinvestmentcontributestoOntarioseconomicgrowth,jobsandprosperity. OntariosTaxPlanforJobsandGrowthincludingtheHarmonizedSalesTax hasimprovedthecompetitivelandscapeoftheprovinceandprovidedincentives forbusinessinvestment.However,businessinvestmentinOntariohastendedto lagthepaceofinvestmentintheUnitedStates.Jobcreationandeconomicgrowth couldbeevenstrongerifcompaniestookadvantageofthecompetitivebusiness climateandincreasedinvestment.Businessesareexpectedtoboostinvestment inmachineryandequipment(M&E)by3.5percentthisyearandbyanaverage of5.7percentannuallyoverthe2015to2017period.However,Ontariospace ofM&EinvestmentgrowthisexpectedtocontinuetolagtheUnitedStatesover the2014to2017period.

CHART 2.18

Ontario Business Machinery and Equipment Investment Lags the United States
($ US Billions, 2009)
U.S. (Right Axis)

($ Billions, 2007)
40 38 36 34 32 30 28 26 24 22 20 2007 2008 2009 2010 2011 2012

1,300 1,200 1,100 1,000 900 800 700 600 500 400

Ontario (Left Axis)

2013 2014p 2015p 2016p 2017p

p = projection. Sources: Statistics Canada, U.S. Bureau of Economic Analysis, IHS Global Insight (March 2014) and Ontario Ministry of Finance.

213

2014OntarioBudget ThecompositionanddestinationofOntariosexportshaveevolvedand diversified,inpartaresultofthegovernmentstradepolicyinitiatives. ThisevolutioninOntariosexportshasincludedstronggainsinbothexports tootherprovincesaswellasexportsofhighvalueaddedservices.Thisbenefits Ontarioexporters,whichcangrowandprosperinotherkeymarkets,while becominglessreliantonanysingletradingpartner. From2003to2013,OntariostotalexportstootherCanadianprovinces increasedbyover36percent,whileexportstoothercountriesincreasedby about3percent.Overthesameperiod,exportsofservicesincludingfinancial, professionalandinformationandculturalservicesincreasedbyabout 49percent,themajorityofwhichweredestinedforotherprovinces. Exportsofgoodswereessentiallyunchangedoverthisperiod.

CHART 2.19 Ontario Exports ($ Billions)

Exports to Other Provinces and Service Exports Have Grown Strongly

Exports to Other Provinces +$33.6B or +36% since 2003

Service Exports +$39.6B or +49% since 2003

400
$310B

$350B $310B Interprovincial $125.9B Services $81.5B

$350B Services $121.1B

300

Interprovincial $92.3B

200
International $217.8B International $224.1B Goods $228.6B Goods $228.9B

100

2003

2013

2003

2013

Sources: Statistics Canada and Ontario Ministry of Finance.

214

ChapterII:OntariosEconomicOutlookandFiscalPlan Thediversificationofexportsthatisunderwayisbeginningfromabasethatis dominatedbygoodsexportstotheUnitedStates.Ontarioexportstoitslargest tradingpartner,theUnitedStates,havedeclinedby16percentoverthelast 10years.Asaresult,theshareofOntariosgoodsexportsdestinedforthe UnitedStateshasfallenfrom91.5percentin2003to78.4percentin2013. Overthesameperiod,theshareofOntarioexportstotheEuropeanUnion andothercountries,includingfastgrowingemergingeconomies,hasmore thandoubled.

CHART 2.20

Ontario Goods Exports Expanding to New Markets


Share of Exports to Other Countries (Per Cent) 2003 78.4 9.5 2013 12.1

Share of Exports to U.S. (Per Cent)

100 80 60 40

91.5

15 12 9 6 3 0

3.8

4.7

20 0 United States
Source: Statistics Canada.

European Union

Rest of the World

215

2014OntarioBudget TheshiftinOntariosexportsisexpectedtocontinue,supportedbyagrowing worldeconomyandnewtradeagreements.Forexample,theproposedtrade agreementwiththeEuropeanUnionwillmakeOntariocompaniesmore competitiveinEuropeanmarketsaneconomywith500millionconsumers andGDPofcloseto$17trillion.AresurgentU.S.economyand,inparticular, areboundinU.S.consumerdemand,includingmotorvehiclesales,willalso supportstrongergrowthinOntariosexports.Exportstofastgrowingemerging marketeconomies,suchasChinaandIndia,arealsoexpectedtoaccelerate. Importantly,anincreasingshareofOntarioexportsareintegratedintoglobal supplychains,whichwillhelpsupportexportgrowthovertheforecastperiod. Ontariosexportdiversificationwillallowcompaniestoreachnewmarkets, boostingeconomicgrowthandjobcreation.Overall,Ontariosrealexports areprojectedtoincreasebyanaverageof3.5percentannuallybetween2014 and2017,outpacinga2.5percentincreaseinimports.

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Details of the Ontario Economic Outlook


ThefollowingtableprovidesdetailsoftheMinistryofFinanceseconomicoutlook for2014to2017.

TABLE2.8

TheOntarioEconomy,2012to2017
Actual 2012 2013
1.3 1.8 (2.2) (8.0) (3.8) 1.1 (0.6) 2.7 1.8 61.1 0.5 2.9 2.6 (1.3) 1.0 1.4 96 7.5 1.9 98 97.1 1.0 2.3

(PerCentChange) Projection 2014


2.1 2.1 0.0 2.0 3.5 3.2 2.0 3.5 4.1 58.0 1.0 3.3 3.5 4.4 1.5 1.1 73 7.3 2.7 97 90.0 1.0 2.8

2015
2.5 2.2 0.9 5.6 6.0 4.1 2.7 4.4 4.0 60.0 (0.5) 4.4 4.6 4.2 1.9 1.5 107 6.9 3.0 96 91.0 1.3 3.5

2016
2.5 2.6 1.2 3.0 5.8 3.4 2.7 4.4 4.4 67.0 0.5 4.7 4.6 5.0 2.0 1.6 110 6.5 2.9 96 92.0 2.4 3.9

2017
2.6 2.7 2.0 3.4 5.4 3.3 2.5 4.6 4.4 69.0 2.1 4.7 4.7 4.7 2.0 1.4 102 6.2 2.8 98 93.0 3.3 4.3

Real Gross Domestic Product Household Consumption Residential Construction Non-residential Construction Machinery and Equipment Exports Imports Nominal Gross Domestic Product Other Economic Indicators Retail Sales Housing Starts (000s) Home Resales Primary Household Income Compensation of Employees Net Operating Surplus Corporations Consumer Price Index Employment Job Creation (000s) Unemployment Rate (Per Cent) Key External Variables U.S. Real Gross Domestic Product WTI Crude Oil ($ US per Barrel) Canadian Dollar (Cents US) 3-month Treasury Bill Rate1 10-year Government Bond
1

1.3 1.4 4.7 (1.6) 2.0 1.7 2.0 3.0 1.6 76.7 (2.1) 3.4 3.2 (1.0) 1.4 0.8 52 7.8 2.8 94 100.1 0.9 1.9

Rate1

Government of Canada interest rates (per cent). Sources: Statistics Canada, Canada Mortgage and Housing Corporation, Canadian Real Estate Association, Bank of Canada, U.S. Bureau of Economic Analysis, Blue Chip Economic Indicators (March and April 2014), U.S. Energy Information Administration and Ontario Ministry of Finance.

217

2014OntarioBudget

Private-Sector Forecasts
TheMinistryofFinanceconsultswithprivatesectoreconomistsandtrackstheir forecaststoinformthegovernmentsplanningassumptions.Intheprocessof preparingthe2014OntarioBudget,theMinisterofFinancemetwithprivate sectoreconomiststodiscusstheirviewsontheeconomy.Additionally,members oftheOntarioEconomicForecastCouncil,establishedundertheFiscal TransparencyandAccountabilityAct,2004,reviewedtheMinistryofFinances economicassumptionsinFebruary2014.Allcouncilmembersfoundthe assumptionstobereasonable. PrivatesectoreconomistsareprojectingcontinuedgrowthforOntariooverthe forecasthorizon.Onaverage,privatesectoreconomistsarecallingforgrowthof 2.2percentin2014,2.6percentinboth2015and2016,and2.7percentin2017. Forprudentfiscalplanning,theMinistryofFinancesrealGDPgrowthprojections areslightlybelowtheaverageprivatesectorforecast.

TABLE2.9
(PerCent)

PrivateSectorForecastsforOntarioRealGDPGrowth
2014 2015
2.5 2.4 2.7 2.3 2.4 2.6 2.7 2.5 2.5 2.9 2.2 2.7 3.0 2.6 2.5

2016
2.7 2.5 2.2 2.5 2.5 2.7 2.9 2.6 2.5

2017
3.0 2.9 2.4 2.5 2.6 2.9 2.7 2.6

BMO Capital Markets (March) Central 1 Credit Union (March) Centre for Spatial Economics (January) CIBC World Markets (April) Conference Board of Canada (February) Desjardins Group (March/January) IHS Global Insight (January) Laurentian Bank Securities (January) National Bank (January) RBC Financial Group (March) Scotiabank Group (March) TD Bank Financial Group (April) University of Toronto (January) Private-Sector Survey Average Ontarios Planning Assumption

2.3 1.9 2.2 2.0 2.1 2.1 2.3 2.3 2.1 2.5 1.9 2.2 2.2 2.2 2.1

Sources: Ontario Ministry of Finance Survey of Forecasts (April 2014) and Ontario Ministry of Finance.

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ChapterII:OntariosEconomicOutlookandFiscalPlan

Change in the Economic Outlook


OntariorealGDPgrowthin2013wassofterthanexpectedatthetimeofthe 2013Budget,reflectingweakerbusinessinvestmentandexportsthanforecast. ThiswasaresultofanumberoffactorsincludingunevenU.S.growth, higherthanprojectedoilpricesandincreasesinlongterminterestrates. Onaverage,economistshavereviseddowntheirexpectationsforOntariogrowth in2014.ThecurrentprivatesectoraverageoutlookforOntariorealGDPgrowth is2.2percentin2014,downfrom2.4percentprojectedatthetimeofthe 2013Budget.However,privatesectorforecastsfor2015to2017havebeen revisedhighercomparedtoforecastsatthetimeofthe2013Budget.

CHART 2.21

Private-Sector Outlook for Growth Weaker in 2014 but Stronger in 2015 to 2017

Projections for Ontario Real GDP Growth (Per Cent)


3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2013p 2014p 2015p 2016p 2017p
p = private-sector survey average projection. Source: Ontario Ministry of Finance Survey of Forecasts (April 2013 and April 2014).

2013 Budget 2.4 2.5 2.2 2.6

Current 2.5 2.6 2.3 2.7

1.6 1.3

219

2014OntarioBudget

Comparison to the 2013 Budget


Keychangessincethe2013Budgetinclude: LowerrealGDPgrowthin2013and2014,followedbystrongergrowth in2015and2016; MoremoderateCPIinflationfrom2013through2015; Strongerthanexpectedemploymentgrowthin2013,followedbyslightly weakergrowthin2014;and LowernominalGDPgrowthin2013and2014,followedbystrongergrowth in2015and2016.

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ChapterII:OntariosEconomicOutlookandFiscalPlan

TABLE2.10 ChangesinMinistryofFinance KeyEconomicForecastAssumptions: 2013BudgetComparedto2014Budget


(PerCentChange)
2013
2013 Budget Actual

2014p
2013 Budget 2014 Budget

2015p
2013 Budget 2014 Budget

2016p
2013 Budget 2014 Budget

Real Gross Domestic Product Nominal Gross Domestic Product Retail Sales Housing Starts (000s) Primary Household Income Compensation of Employees Net Operating Surplus Corporations Employment Job Creation (000s) Consumer Price Index Key External Variables U.S. Real Gross Domestic Product WTI Crude Oil ($ US per Barrel) Canadian Dollar (Cents US) 3-month Treasury Bill Rate1 (Per Cent) 10-year Government Bond Rate1 (Per Cent)

1.5 3.0 2.5 61.0 2.8 2.8 3.3 1.2 83 1.5

1.3 2.7 1.8 61.1 2.9 2.6 (1.3) 1.4 96 1.0

2.3 4.1 3.8 60.0 3.9 3.7 5.0 1.4 98 2.0

2.1 3.5 4.1 58.0 3.3 3.5 4.4 1.1 73 1.5

2.4 4.2 3.8 65.0 4.2 4.3 4.0 1.5 107 2.0

2.5 4.4 4.0 60.0 4.4 4.6 4.2 1.5 107 1.9

2.4 4.2 3.8 68.0 4.5 4.3 4.0 1.5 107 2.0

2.5 4.4 4.4 67.0 4.7 4.6 5.0 1.6 110 2.0

2.1 94 98.0 1.0 2.0

1.9 98 97.1 1.0 2.3

2.7 98 99.5 1.2 2.6

2.7 97 90.0 1.0 2.8

3.1 99 100.0 1.9 3.2

3.0 96 91.0 1.3 3.5

2.9 100 99.5 3.1 3.9

2.9 96 92.0 2.4 3.9

p = Ontario Ministry of Finance planning projection. 1 Government of Canada interest rates. Sources: Statistics Canada, Canada Mortgage and Housing Corporation, Bank of Canada, U.S. Energy Information Administration, U.S. Bureau of Economic Analysis, Blue Chip Economic Indicators (March and April 2014) and Ontario Ministry of Finance.

221

2014OntarioBudget

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ChapterII:OntariosEconomicOutlookandFiscalPlan

Section D: OntariosRevenueOutlook
TheProvincesrevenuestendtogrowroughlyinlinewiththeOntarioeconomy (thatis,nominalgrossdomesticproduct[GDP]),sinceitiseconomicactivitythat generatesthemajorityofrevenues.Forexample,taxesarecollectedonthe incomesandspendingofOntariansandontheprofitsgeneratedbyOntario corporations. However,thereareimportantqualificationstothisgeneralrule. Growthinseveraltaxrevenuesources,suchasvolumebasedfuelandgasoline taxes,ismorecloselyalignedtotherealeconomy(thatis,realGDP)thanthe nominaleconomy.Inotherwords,theserevenueresourcesarelessinfluenced bychangesinprices.Similarly,somenontaxrevenues,suchasvehicleanddriver registrationfees,tendtomorecloselytracktherealeconomyanddemographic factorssuchasgrowthinthedrivingagepopulation. Growthinotherrevenuesources,suchasCorporationsTaxandMiningTax,can differsignificantlyfromgrowthinnominalGDPinanygivenyear,duetothe inherentvolatilityofbusinessprofitsaswellastheuseoftaxprovisions,suchas losscarrying. TheOntariorevenueforecastalsooftenincludessignificantonetimeadjustments, usuallyduetolagsbetweentheperiodinwhichrevenuesareearnedandwhen theactualamountsarefinallyknown. Forexample,theMinistryofFinancewillusethelatestavailableinformationon PersonalIncomeTax(PIT)revenueearnedbytheProvinceforthe2013taxyear asthebasisforthe201314PITrevenueestimatetobepublishedlaterthisyear inthePublicAccountsofOntario20132014.ActualPITrevenueearnedfor 2013and2014,however,willnotbeknownuntiltheendof2014and2015, respectively,afterthemajorityofPITreturnshavebeenassessedbytheCanada RevenueAgency.

223

2014OntarioBudget Moreover,additionaltaxinformationcontinuestoarriveforyearsfollowingthe actualtaxyearduetolatetaxfilingsandreassessments.Theresultisthateven aftertheOntarioPublicAccounts20132014arereleased,new,updatedtax assessmentinformationwillleadtorevisionsoftheestimatefor201314PIT revenues.UnderPublicSectorAccountingBoardstandards,revenueestimates alreadypublishedintheOntarioPublicAccountsarenotrestatedforupdated information.Instead,theserevisionsarereportedasprioryearadjustments inthecurrentyearsPublicAccounts. Forthe2014Budget,theMinistryofFinanceretainedDonDrummond,oneof Canadastopeconomists,toreviewtherevenueforecastandprovideanopinion onitsreasonableness.Hisreviewemployedthreemethodologies.First,an independentmacroprojectionwasdevelopedandcomparedtotheMinistrys forecast.Thismacroprojectionwasbasedonthehistoricalrelationshipbetween growthintheOntarioeconomyandprovincialrevenues.Second,the methodologiesandforecastsofeachrevenuesourcewereexaminedindividually. Finally,changessincerecentbudgetswereexaminedtounderstandthenatureof pastvariancesandwhethertheremaystillbebiasesinthecurrentforecast. Fromallthreeperspectivesaddressedinthereview,Drummondconcluded thattheOntarioMinistryofFinancerevenueforecastisasoundbasisfor budgetplanning.

224

ChapterII:OntariosEconomicOutlookandFiscalPlan

Medium-Term Revenue Outlook


TheProvincesrevenuesareprojectedtoincreaseovertheforecastperiod, largelyreflectingthecurrentoutlookforOntarioeconomicgrowth.

TABLE2.11 SummaryofMediumTermOutlook
($Billions) Interim 201314
27.5 20.4 11.4 3.2 5.5 12.5 80.5 22.2 4.8 8.2 115.7

Revenue
Personal Income Tax Sales Tax Corporations Tax Ontario Health Premium Education Property Tax All Other Taxes Total Taxation Revenue Government of Canada Income from Government Business Enterprises Other Non-Tax Revenue Total Revenue
Note: Numbers may not add due to rounding.

Plan 201415
29.2 21.9 10.3 3.3 5.7 13.0 83.4 21.9 5.0 8.6 118.9

Outlook 201516
30.9 23.0 11.4 3.5 5.7 13.7 88.1 22.7 5.0 8.6 124.5

201617
32.6 23.9 12.0 3.7 5.8 14.1 92.0 24.0 5.5 7.9 129.4

Revenuesareprojectedtoincreaseatanaverageannualrateof3.8percentover the201314to201617period.TherevenueforecastisbasedontheMinistryof Financeseconomicoutlook(detailedinSectionC:OntariosEconomicOutlookin thischapter).

225

2014OntarioBudget

TABLE2.12 PersonalIncomeTaxRevenueOutlook
($Billions) Revenue
Total Projected Revenue Measures Included in Total1 Adjustments for Prior Years Base Revenue2 Base Revenue Growth (Per Cent) Compensation of Employees3 (Per Cent Change)
1

Interim 201314
27.5 0.3 27.2

Plan 201415
29.2 0.5 28.7 5.4 3.5

Outlook 201516
30.9 0.5 30.4 5.7 4.6

201617
32.6 0.6 32.0 5.6 4.6

Represents the incremental revenue impact of all tax measures, announced previously or proposed in this Budget, relative to their impact on revenue in 201314. 2 Total Projected Revenue less the impact of tax measures or other one-time factors such as prior-year adjustments. Base Revenue reflects the impact of underlying macroeconomic factors. 3 Formerly referred to as Wages and Salaries. Note: Numbers may not add due to rounding.

TheprimaryeconomicdriveroftheforecastforPersonalIncomeTaxrevenueis theoutlookforgrowthincompensationofemployees.Totalprojectedrevenue includesimpactsofmeasuresandadjustmentsforprioryears.Measuresinclude impactsofchangestothetaxationofhighincomeearnersproposedinthis Budget(seeChapterV:AFairandEfficientTaxSystem).AdjustmentsforPrior Yearsof$0.3billionin201314reflecttheunderestimationofPITrevenuesinthe OntarioPublicAccounts20122013.Afteraccountingfortheimpactsofmeasures andprioryearadjustments,thePITrevenuebaseisprojectedtogrowatan averageannualrateof5.5percentovertheforecastperiod.Thiscomparesto averageannualgrowthof4.2percentincompensationofemployeesoverthis period.PersonalIncomeTaxrevenuetendstogrowatafasterratethanincomes duetotheprogressivestructureofthePITsystem.

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ChapterII:OntariosEconomicOutlookandFiscalPlan

TABLE2.13 SalesTaxRevenueOutlook
($Billions) Revenue
Total Projected Sales Tax Revenue1 Measures Included in Total2 Adjustments for Prior Years Base Revenue3 Base Revenue Growth (Per Cent) Nominal Consumption Growth (Per Cent)
1

Interim 201314
20.4 (0.6) 21.0

Plan 201415
21.9 0.2 21.8 3.7 3.6

Outlook 201516
23.0 0.2 22.8 4.5 4.1

201617
23.9 0.1 23.8 4.6 4.5

Beginning July 1, 2010, most of the Retail Sales Tax was replaced with a value-added tax and combined with the federal Goods and Services Tax to create a federally administered Harmonized Sales Tax. Sales Tax Revenue is reported net of both the Ontario Sales Tax Credit and the energy component of the Ontario Energy and Property Tax Credit. 2 Represents the incremental revenue impact of all tax measures, announced previously or proposed in this Budget, relative to their impact on revenue in 201314. 3 Total Projected Revenue less the impact of tax measures or other one-time factors such as prior-year adjustments. Base revenue reflects the impact of underlying macroeconomic factors. Note: Numbers may not add due to rounding.

SalesTaxrevenueisprojectedtorisebasedprimarilyongrowthinconsumer spendingafteradjustmentsformeasuresandprioryearamounts.Measures includethoseannouncedinthisandpreviousBudgets,andprimarilyreflect theimpactoftransitionmeasures,suchasrestrictedinputtaxcredits,aswellas measurestoaddresstheundergroundeconomy.Thereisaonetimeadjustment forprioryearsof$0.6billionin201314,mainlyreflectingoverestimationof SalesTaxrevenueintheOntarioPublicAccounts20122013.Afteraccountingfor theimpactsofmeasuresandadjustments,theSalesTaxrevenuebaseisprojected togrowatanaverageannualrateof4.3percentovertheforecastperiod,roughly consistentwiththeaverageannualgrowthinnominalconsumptionof4.0percent overthisperiod.

227

2014OntarioBudget

TABLE2.14 CorporationsTaxRevenueOutlook
($Billions) Revenue
Total Projected Revenue Measures Included in Total1 Other Base Adjustments2 Revenue3

Interim 201314
11.4 0.8 10.6

Plan 201415
10.3 0.2 (0.8) 10.9 3.3 4.4

Outlook 201516
11.4 0.2 11.3 3.3 4.2

201617
12.0 0.2 11.8 4.4 5.0

Base Revenue Growth (Per Cent) Net Operating Surplus Corporations Growth (Per Cent)
1

Represents the incremental revenue impact of all tax measures, announced previously or proposed in this Budget, relative to their impact on revenue in 201314. 2 Other Adjustments include net timing of payments adjustments due to the difference between projected Corporations Tax (CT) revenue entitlements and projected federal CT remittances. 3 Total Projected Revenue less the impact of tax measures or other one-time factors such as prior-year adjustments. Base Revenue reflects the impact of underlying macroeconomic factors. Note: Numbers may not add due to rounding.

TheforecastforCorporationsTax(CT)revenueisbasedlargelyonprojected annualgrowthinthenetoperatingsurplusofcorporations.Totalprojected revenueincludestheimpactofmeasuresandprioryearandotheradjustments. MeasuresincludethoseannouncedinthisandpreviousBudgetssuchasproposed changestotheOntarioSmallBusinessDeductionandmeasurestoenhanceCT compliance.Afteraccountingfortaxmeasuresandotheradjustments,theCT revenuebaseisprojectedtogrowatanaverageannualrateof3.7percentover themediumterm,comparedtoaverageannualgrowthinnetoperatingsurplusof corporationsof4.6percent.CorporationsTaxrevenuetendstogrowmoreslowly thancorporateprofitsduetotaxprovisions,includingthecarryforwardoflosses forupto20years. TheOntarioHealthPremiumrevenueisbasedontheoutlookforemployment andhouseholdincomegrowth.OntarioHealthPremiumrevenueisprojected toincreaseatanaverageannualrateof4.8percentovertheforecastperiod. EducationPropertyTaxrevenueisprojectedtoincreaseatanaverageannual rateof1.5percentovertheforecastperiod,largelyduetogrowthintheproperty assessmentbaseasaresultofnewconstruction.Theforecastalsoreflectsthe ongoingimpactsofmeasuresannouncedinthe2012Budgettofreezethe BusinessEducationTaxreductionplan. 228

ChapterII:OntariosEconomicOutlookandFiscalPlan RevenuesfromAllOtherTaxesareprojectedtoincreaseatanaverage annualrateof4.1percentovertheforecastperiod.Thisincludesrevenues fromvolumebasedtaxessuchasGasolineTax,FuelTax,TobaccoTax,andBeer andWineTax,aswellasothertaxessuchasElectricityPaymentsInLieuof TaxesandMiningTax. TheforecastforGovernmentofCanadatransfers,includingCanadaHealth Transfers,CanadaSocialTransfersandEqualization,isbasedonexisting federalprovincialfundingarrangements.GovernmentofCanadatransfersare projectedtoincreaseatanaverageannualrateof2.6percentoverthe forecastperiod. TheforecastforIncomefromGovernmentBusinessEnterprisesisbased oninformationprovidedbytheindividualenterprises.Overallrevenuefrom governmententerprisesisprojectedtoincreaseby$0.7billionbetween 201314and201617,oratanaverageannualrateof4.8percent. TheforecastforOtherNonTaxRevenueisbasedoninformationprovidedby governmentministriesandprovincialagencies.Between201314and201617, othernontaxrevenuesareprojectedtodecreaseby$0.3billion,largelyreflecting theonetimegainin201314onthesaleoftheProvincesinterestin10million sharesofGeneralMotorsCompany,andlowerelectricitysectorrelatedrevenues, overtheforecastperiod,includingfiscallyneutralpowersupplycontract recoveries.

229

2014OntarioBudget

Key Changes in the Medium-Term Revenue Outlook since the 2013 Budget
Revenuesarelowerthanprojectedinthe2013Budgetduetoslowereconomic growth,alowertaxbaseandlowerGovernmentofCanadatransfers.

TABLE2.15 SummaryofMediumTermRevenueChangessincethe 2013Budget


($Billions) 201314
Slower Economic Growth Lower Tax Revenue Base One-Time Impacts Government of Canada transfers Income from Government Business Enterprises Other Non-Tax Revenue Subtotal Revenue Changes 2014 Budget Measures Total Revenue Changes
Note: Numbers may not add due to rounding.

201415
(0.7) (0.6) (1.0) (1.3) 0.1 (0.1) (3.5) 1.9 (1.6)

201516
(0.3) (0.5) (1.3) (0.5) 0.2 (2.4) 1.9 (0.5)

(0.6) (0.6) (0.5) (0.2) 0.3 0.3 (1.3) 0.2 (1.2)

Slowereconomicgrowthin2013and2014loweredthetaxationrevenueoutlook. Theoutlookfornominalgrossdomesticproduct(GDP)growthis0.3percentage pointslowerin2013and0.6percentagepointslowerin2014comparedtothe 2013Budgetoutlook. Taxassessmentandtaxreceiptsdatareceivedduring2013loweredthetax revenuebaseuponwhichgrowthisprojected.Inparticular,PITandSalesTax baseswerebothlowerthanprojectedinthe2013Budget. Onetimeimpactsinclude: Lower201314SalesTaxrevenuesduetorevisedHarmonizedSalesTax entitlementestimatesforprioryears;and Arepaymenttothefederalgovernmentin201415duetoaprojected overpaymentofCorporateIncomeTaxtotheProvincebytheCanada RevenueAgencyforthe2013taxyear.

230

ChapterII:OntariosEconomicOutlookandFiscalPlan
CHART 2.22

Government of Canada Transfers Changes since the 2013 Budget

$ Billions
24.5 24.0 23.5 23.0 22.5 22.0 21.5 21.0 20.5 201314
Source: Ontario Ministry of Finance.

Population data revisions Gentilly-2 closure Other


2013 Budget

2014 Budget

201415

201516

GovernmentofCanadatransfersareloweroverthemediumtermduetoa numberoffactors. DownwardrevisionsbyStatisticsCanadatohistoricalpopulationestimates loweredOntariosprojectedentitlementsundereachoftheCanadaHealth Transfer,CanadaSocialTransferandEqualizationprograms. TheclosureofHydroQuebecsGentilly2nuclearpowerplanttemporarily lowersQuebecsfiscalcapacity,asmeasuredundertheEqualization program,whichinturnlowersOntariosEqualizationentitlementovera threeyearperiod. Otherchangesincludeupdatedfiscalcapacityandeconomicdata, particularlyfor201213,whichincreasedOntariosrelativefiscalcapacity comparedtothe2013Budgetprojection,therebyloweringOntarios Equalizationentitlementoutlook.

231

2014OntarioBudget ThechangeintheIncomefromGovernmentBusinessEnterprisesoutlookreflects higherrevenuesfrommostgovernmentbusinessenterprises.Theslightincrease in201415islargelyduetohighercombinednetincomefromOntarioPower GenerationInc.andHydroOneInc.,whichcarriesforwardto201516.Thedecline in201516largelyreflectslowernetincomefromtheOntarioLotteryandGaming Corporation(OLG). TheOLGscumulativenetincomebetween201314and201516isprojectedto be$0.8billionlowerthanpreviouslyprojectedinthe2013Budget.Thisislargely duetoOLGmodernizationprocurementdelays,theintegrationofhorseracing andgaming,andmunicipaldecisionsregardinggamingsites. ThechangeintheOtherNonTaxRevenueoutlookin201314largelyreflects theonetimegainonthesaleoftheProvincesinterestin10millionsharesof GeneralMotorsCompany,announcedonSeptember10,2013.Thevariancein 201415and201516reflectssmallchangesinavarietyofOtherNonTax Revenuesources. InadditiontothetaxmeasuresoutlinedinChapterV:AFairandEfficientTax System,the2014Budgetmeasuresincludenetrevenuegainsofasset optimization(discussedinChapterI,SectionE:MakingEveryDollarCount) totalling$0.9billionin201415and$1.0billionin201516,andtherevenue implicationsoftheproposedremovaloftheelectricityDebtRetirementCharge costfromresidentialusersbills(discussedinChapterI,SectionD:Fosteringa FairSociety).

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ChapterII:OntariosEconomicOutlookandFiscalPlan

Medium-Term Revenue Outlook Has Declined since the 2010 Budget


CHART 2.23

Medium-Term Revenue Outlook Has Declined since the 2010 Budget

$ Billions
140 135 130 125 120 115 110 105 100 201011 201112 201213 201314 201415 201516 201617
Note: 2010 Budget amounts have been restated for the reclassification of government agencies and organizations as described in the 2011 Ontario Economic Outlook and Fiscal Review and a fiscally neutral reclassification of a number of tax measures that are transfers or grants as described in the 2012 Ontario Budget. Source: Ontario Ministry of Finance.

2010 Budget Revenue Outlook

2014 Budget Revenue Outlook


(not including measures)

Sincethe2010Budget,themediumtermoutlookforrevenueshasdeclined, reflecting,inpart,slowereconomicgrowthinachallengingglobalenvironment. Beforetheimpactofnewrevenuemeasures,therevenueoutlookinthe 2014Budgetis$2.9billionbelowthe2010Budgetprojectionin201314 and$8.8billionbelowby201617.

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2014OntarioBudget

Risks to the Revenue Outlook


Ontariosrevenueoutlookisbasedonreasonableassumptionsaboutthepace ofgrowthinOntarioseconomy.Therearebothpositiveandnegativerisksto theeconomicprojectionsunderlyingtherevenueforecast.Someoftheserisks arediscussedinSectionC:OntariosEconomicOutlookinthischapter. Thissectionhighlightssomeofthekeysensitivitiesandriskstothefiscalplanthat couldarisefromunexpectedchangesineconomicconditions.Theseestimates areonlyguidelinesandactualresultswillvarydependingonthecompositionand interactionofthevariousfactors.Therisksarethosethatcouldhavethemost materialimpactonthelargestrevenuesources.Abroaderrangeofadditional risksarenotincludedbecausetheyareeitherlessmaterialordifficulttoquantify. Forexample,theoutlookforGovernmentofCanadatransfersissubjectto changesineconomicvariablesthataffectfederalfundingaswellaschanges bythefederalgovernmenttothefundingarrangementsthemselves.

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ChapterII:OntariosEconomicOutlookandFiscalPlan

TABLE2.16 SelectedEconomicandRevenueRisksandSensitivities
Item/Key Components
Total Revenues Nominal GDP 3.5 per cent growth in 2014 $845 million revenue change for each percentage point change in nominal GDP growth. Can vary significantly, depending on composition and source of changes in GDP growth.

201415 Assumption

201415 Sensitivities

Total Taxation Revenues Revenue Base1 Nominal GDP 3.7 per cent growth in 201415 3.5 per cent growth in 2014 $565 million revenue change for each percentage point change in nominal GDP growth. Can vary significantly, depending on composition and source of changes in GDP growth.

Personal Income Tax (PIT) Revenues Revenue Base Compensation of Employees 5.4 per cent growth in 201415 3.5 per cent growth in 2014 $326 million revenue change for each percentage point change in compensation of employees growth. $253 million revenue change for each percentage point change in 2013 PIT assessments.2 $14 million revenue change for each percentage point change in 2012 and prior PIT assessments.2

2013 Tax-Year Assessments2 2012 Tax-Year and Prior Assessments

$25.3 billion

$1.4 billion

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2014OntarioBudget

TABLE2.16 SelectedEconomicandRevenueRisksandSensitivities (contd)


Item/Key Components
Sales Tax Revenues Revenue Base Nominal Household Consumption 3.7 per cent growth in 201415 3.6 per cent growth in 2014 $185 million revenue change for each percentage point change in nominal household consumption growth. $225 million revenue change for each percentage point change in 2012 gross revenue pool. $237 million revenue change for each percentage point change in 2013 gross revenue pool. $244 million revenue change for each percentage point change in 2014 gross revenue pool.

201415 Assumption

201415 Sensitivities

2012 Gross Revenue Pool3

$22.5 billion

2013 Gross Revenue Pool3

$23.7 billion

2014 Gross Revenue Pool3

$24.4 billion

Corporations Tax Revenues Revenue Base Net Operating Surplus Corporations 3.3 per cent growth in 201415 4.4 per cent growth in 2014 $90 million change in revenue for each percentage point change in net operating surplus corporations growth. $84 million change in revenue for each percentage point change in 2013 Tax Assessments. $118 million change in revenue for each percentage point change in the federal estimate of 2014 Canada Corporate Taxable Income. $31 million change in revenue for each percentage point change in 2015 Canada Corporate Taxable Income.

2013 Tax Assessments2

$8.4 billion

2014 Canada Corporate Taxable Income

$269.2 billion

2015 Canada Corporate Taxable Income

$285.3 billion

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ChapterII:OntariosEconomicOutlookandFiscalPlan

TABLE2.16 SelectedEconomicandRevenueRisksandSensitivities (contd)


Item/Key Components
Employer Health Tax Revenues Revenue Base Compensation of Employees 3.5 per cent growth in 201415 3.5 per cent growth in 2014 $53 million revenue change for each percentage point change in compensation of employees growth.

201415 Assumption

201415 Sensitivities

Ontario Health Premium (OHP) Revenues Revenue Base Primary Household Income 4.2 per cent growth in 201415 3.3 per cent growth in 2014 $30 million revenue change for each percentage point change in primary household income growth. $30 million revenue change for each percentage point change in 2013 OHP assessments.

2013 Tax-Year Assessments

$3.0 billion

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2014OntarioBudget

TABLE2.16 SelectedEconomicandRevenueRisksandSensitivities (contd)


Item/Key Components
Gasoline Tax Revenues Revenue Base Gasoline Pump Prices 0.2 per cent growth in 201415 129 cents per litre in 2014 $3 million revenue decrease (increase) for each cent per litre increase (decrease) in gasoline pump prices.

201415 Assumption

201415 Sensitivities

Fuel Tax Revenues Revenue Base Real GDP 1.0 per cent growth in 201415 2.1 per cent growth in 2014 $11 million revenue change for each percentage point change in real GDP growth.

Land Transfer Tax Revenues Revenue Base Housing Resales Flat growth in 201415 1.0 per cent increase in 2014 $17 million revenue change for each percentage point change in both the number and prices of housing resales.

Resale Prices Canada Health Transfer Ontario Population Share

1.5 per cent increase in 2014 38.5 per cent in 201415 $32 million revenue change for each tenth of a percentage point change in Ontarios population share. $13 million revenue change for each tenth of a percentage point change in Ontarios population share.

Canada Social Transfer Ontario Population Share 38.5 per cent in 201415

Revenue Base is revenue excluding the impact of measures, adjustments for past Public Accounts estimate variances and other one-time factors. Ontario 2013 Personal Income Tax and Corporations Tax are estimates because 2013 tax returns are yet to be assessed by the Canada Revenue Agency. The Gross Revenue Pool is a federal Department of Finance estimate and excludes the impact of Ontario measures.

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ChapterII:OntariosEconomicOutlookandFiscalPlan

TABLE2.17 Ontarios201516EqualizationEntitlementSensitivities
Item/Key Components
Three-year WeightedAverage Population

201516 Assumption
1.0 per cent growth over 201415

201516 Sensitivities
1.0 per cent relative increase (decrease) in the three-year weighted-average population for Ontario will result in $0.5 billion higher (lower) Equalization entitlement for Ontario. 1.0 per cent relative increase (decrease) in Ontarios average per capita fiscal capacity will result in $0.5 billion lower (higher) Equalization entitlement for Ontario.

Three-year WeightedAverage Per Capita Fiscal Capacity

2.5 per cent growth over 201415

239

2014OntarioBudget

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ChapterII:OntariosEconomicOutlookandFiscalPlan

Section E:

OntariosFiscalPlan

Medium-Term Fiscal Outlook


Ontariohasaproventrackrecordofstrongfiscalmanagement.Thismarksthe fifthyearinarowthattheProvinceisontracktobeatitsdeficittargets. Thedeficitfor201314isprojectedtobe$11.3billiona$0.4billion improvementcomparedwiththe2013Budgetforecast.For201314,the governmentisprojectingtobeatitsdeficittargetdespitelowerthanprojected taxationrevenueandtransfersfromthefederalgovernment,andunforeseen expensepressuresrelatedtotheDecember2013icestorm. Recognizingthatnowisthetimetobemakingstrategicinvestmentsinpeople, moderninfrastructure,andadynamicandinnovativebusinessclimate, thegovernmentismovingforwardwitha10yearplanfortheeconomythat willputtheprovinceanditspeopleinapositiontosucceedbyhelpingtospur economicgrowthandcreatethenewjobsnecessarytosupporteliminating thedeficit. Alongsideanongoingcommitmenttomakeresponsiblespendingchoicesand makeeverydollarcount,thegovernmentisprojectingdeficitsof$12.5billionin 201415,$8.9billionin201516and$5.3billionin201617.Thegovernment remainscommittedtobalancethebudgetby201718,despiteadeclineinthe mediumtermoutlookforrevenuecomparedtothe2010Budget. Thegovernmentsdeficittargetsincludeareserve,whichisinplacetohelp protectthefiscalplanfromtheimpactofongoingglobaleconomicuncertainty. Ifthereserveisnotneededbyyearend,itwillbeappliedtoreducethedeficit.

241

2014OntarioBudget

TABLE2.18 MediumTermFiscalPlanandOutlook
($Billions)


Total Revenue Expense Programs Interest on Debt1 Total Expense Surplus/(Deficit) Before Reserve Reserve Surplus/(Deficit)
1

Interim 201314
115.7

Plan 201415
118.9

Outlook 201516
124.5

201617
129.4

116.4 10.6 127.0 (11.3) (11.3)

119.4 11.0 130.4 (11.5) 1.0 (12.5)

120.1 12.0 132.1 (7.7) 1.2 (8.9)

120.2 13.3 133.5 (4.1) 1.2 (5.3)

Interest on debt expense is net of interest capitalized during construction of tangible capital assets of $0.2 billion in 201314, $0.3 billion in 201415, $0.3 billion in 201516 and $0.4 billion in 201617.

Note: Numbers may not add due to rounding.

Totalrevenueisprojectedtogrowfrom$115.7billionto$129.4billionover the201314to201617period,resultinginanaverageannualgrowthrateof 3.8percent.Themediumtermrevenueoutlookisbelowthe2013Budget outlook,largelyduetolowerfederaltransfersresultinginpartfromthefederal governmentsdecisiontoallowOntariosmajortransferstodeclinein201415 andslowerthanforecasteconomicgrowthin2013and2014.Formore informationonthedeclineinfederaltransfers,seeChapterIII:Federal UnderfundingofOntarians. Overthesameperiod,totalexpenseisprojectedtoincreasefrom$127.0billion to$133.5billion,oranaverageannualgrowthrateof1.7percent.Thisincrease reflectsstrategicinvestmentsaspartofOntarios10yearplanfortheeconomy andthegovernmentscommitmenttofosteramoresecurefutureandfair societyforallOntarians.Italsoreflectsaresponsibleapproachtomanaging programspendinggrowth. Inrecognitionofongoingrisksintheglobaleconomy,thefiscalplanincludes additionalprudenceintheformofcontingencyfundstotalling$0.5billionin 201415,andareserveof$1.0billionin201415,and$1.2billioninboth 201516and201617.

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ChapterII:OntariosEconomicOutlookandFiscalPlan

Medium-Term Expense Outlook


TheProvincestotalexpenseoutlookisprojectedtogrowatanaverageannual rateof1.7percentbetween201314and201617. Whilethegovernmentismakingstrategicinvestmentsnowtospureconomic growthforfutureprosperity,itisalsocommittedtomanagingprogramexpense growthoverthemediumtermtosupportabalancedapproachtoeliminating thedeficit. Thegovernmenthasundertakenanexpenditurereviewtofindgreaterefficiencies aspartofitsplantocontrolspendingwhiletransformingpublicservicesforbetter valueandoutcomes.Thisexpenditurereviewsuccessfullyidentifiedsavings opportunitiesandactivitiestomanagedownspendingin201314infact,the governmentisprojectedtoexceedtheyearendsavingstargetbymorethan 50percent.Buildingonthissuccess,thegovernmentwillintroduceanannual programreviewsavingstargetthatwillfocusonmaintainingorenhancingthe deliveryofpublicserviceswhilereducingcoststhatarenotessentialtodelivering services.Asaresult,programexpensegrowthwillbeheldtoanaverageof 1.1percentperyearbetween201314and201617,inlinewiththe1.4percent averageannualgrowthinprogramspendingbetween201011and201314. Formoredetailsontheannualsavingstarget,seeChapterI,SectionE:Making EveryDollarCount.

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2014OntarioBudget

TABLE2.19 SummaryofMediumTermExpenseOutlook
($Billions) Average Annual Growth Interim 201314
Programs Health Sector Education Sector1 Postsecondary and Training Sector Childrens and Social Services Sector Justice Sector Other Programs Total Programs Interest on Debt Total Expense
1

Plan 201415
50.1 24.8 7.8 15.0 4.3 17.4 119.4 11.0 130.4

Outlook 201516
51.0 25.3 7.8 15.5 4.4 16.1 120.1 12.0 132.1

201314 to 201617
2.2% 2.3% 1.0% 3.5% 0.8% 6.0% 1.1% 7.9% 1.7%

201617
52.1 25.6 7.8 15.6 4.3 14.9 120.2 13.3 133.5

48.8 23.8 7.6 14.1 4.2 17.9 116.4 10.6 127.0

Excludes Teachers Pension Plan. Teachers Pension Plan expense is included in Other Programs. Note: Numbers may not add due to rounding.

Highlightsoftheprogramexpenseoutlookoverthemediumtermincludethe following: Totalhealthsectorexpenseisprojectedtoincreaseby$3.3billionbetween 201314and201617,mainlyduetoinvestmentstosupportcontinued implementationofOntariosActionPlanforHealthCare,including investmentstostrengthencommunityservicesandhomecareaswellas increasedcommunityinfrastructureinvestments.

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ChapterII:OntariosEconomicOutlookandFiscalPlan Totaleducationsectorexpenseisprojectedtoincreaseby$1.7billion between201314and201617,mainlyduetoincreasedfundingtoschool boardstosupportfullimplementationoffulldaykindergarten,growthin studentenrolment,increasedcapitalexpensesassociatedwithcompleted schoolprojects,andotherschoolboardsectorexpensestoimplement Ontariosrenewedvisionforeducation.Theincreasealsoreflectshigher fundingforthechildcaresectortosupportchildcaremodernization, helpstabilizechildcareoperatorsandprovideincreasedsupportfor frontlinechildcareworkers. Totalpostsecondaryandtrainingsectorexpenseisprojectedtoincrease by$0.2billionbetween201314and201617,mainlyduetocontinued fundingtosupportenrolmentgrowthinpostsecondaryinstitutions,growth instudentfinancialassistanceprograms,andsupportforcapitalprojectsat collegesanduniversitiesannouncedaspartofBuildingTogether,Ontarios longterminfrastructureplan.Growthin201415alsotakesintoaccount thesecondyearofOntariosYouthJobsStrategy. Totalchildrensandsocialservicessectorexpenseisprojectedtoincrease by$1.5billionbetween201314and201617.Thisincreaseprimarily reflectsthegovernmentssupportforvulnerableOntariansthrough investmentsinsocialassistanceanddevelopmentalservices.These increasedinvestmentswillalsocontributetoeconomicgrowth,asthe supportsprovidedareusedtopurchasebasichouseholdgoodsandservices thatareusuallypurchasedlocally. Totaljusticesectorexpenseisprojectedtoincreaseby$0.1billionbetween 201314and201617,primarilyduetothecontinuinguploadofcourt securitycostsfrommunicipalitiesandtheProvincesstrategytoexpand accesstolegalaidservicesforlowincomeOntarians.Thedecreasein justicesectorexpensefrom201516to201617reflectstheconclusion ofProvincialsupportforsecurityservicesforthe2015Pan/Parapan AmericanGames.

245

2014OntarioBudget Otherprogramsexpenseisprojectedtodecreaseby$3.0billionbetween 201314and201617,largelyfromcontinuedrestraintmeasuresto managegrowthinspendingwhileprotectingcorepublicservices,lower thanforecastpensionexpenses,includingintheTeachersPensionPlan, lowerplannedexpensesduetothelegislatedsunsettingoftheOntario CleanEnergyBenefit,andtheconclusionofProvincialsupportforthe planninganddeliveryofthe2015Pan/ParapanAmericanGames.

Thetotalexpenseoutlookincludesinterestondebtexpense,whichisprojected toincreaseby$2.7billionfrom201314to201617.Thisincreaseismainlydueto theforecastincreaseininterestratesandadditionalborrowingrequiredtofund deficitsandinvestmentincapitalassets.

Risks to Expense Outlook


GivencontinuedglobaleconomicuncertaintyanditsimpactonOntariosrecovery andthefederalgovernmentstendencytoactunilaterally,potentialrisksmay emergethatcouldimpacttheProvincesmediumtermexpenseprojections. Thegovernmenthasproventobeastrongfiscalmanager,havingbeatenitsfiscal targetssincethedepthsoftheglobalrecession.Itwillmanagerisksprudentlyto ensureitcancontinuetoinvestinpeople,moderninfrastructure,andadynamic andinnovativebusinessclimate,whilealsotakingaresponsibleapproachto managingtheProvincesfinancesandbalancingthebudgetby201718. Thefollowingtableprovidesasummaryofkeyexpenserisksandsensitivities thatcouldresultfromunexpectedchangesineconomicconditionsandprogram demands.Achangeinthesefactorscouldimpacttotalexpense,causingvariances intheoverallfiscalforecast.Thesesensitivitiesareillustrativeandcanvary, dependingonthenatureandcompositionofpotentialrisks.

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TABLE2.20 SelectedExpenseRisksandSensitivities
Program/Sector
Health Sector Hospitals Sector Expense

201415 Assumption
Annual growth of 2.6 per cent. Annual growth of 0.7 per cent.

201415 Sensitivity
One per cent change in health spending: $500 million. One per cent change in hospitals sector expense: $219 million. One per cent change in program expenditure of drug programs: $36 million. One per cent change in number of beds: approximately $39 million. One per cent change in hours of homemaking and support services: approximately $7.5 million. One per cent change in nursing and professional visits: approximately $5.3 million. One per cent enrolment change: approximately $150 million. One per cent enrolment change: $32 million. One per cent enrolment change: $13 million. One per cent caseload change: $24 million. One per cent caseload change: $44 million. One per cent change in inmate days: $5.9 million. The 201415 impact of a 100 basis-point change in borrowing rates is forecast to be approximately $400 million.

Drug Programs

Annual growth of 3.1 per cent.

Long-Term Care Homes

78,000 long-term care home beds. Average Provincial annual operating cost per bed in a longterm care home is $50,032. Approximately 24 million hours of homemaking and support services. Approximately 7 million nursing and professional visits.

Home Care

Elementary and Secondary Schools University Students College Students Ontario Works Ontario Disability Support Program Correctional System

1,970,000 average daily pupil enrolment. 378,000 full-time undergraduate and graduate students. 196,000 full-time students. 254,678 average annual caseload. 327,799 average annual caseload. 3.2 million adult inmate days per year. Average cost of $184 per inmate per day. Average cost of 10-year borrowing in 201415 is forecast to be approximately 4.1 per cent.

Interest on Debt

247

2014OntarioBudget

Contingent Liabilities
Inadditiontothekeydemandsensitivitiesandeconomicriskstothefiscal plan,therearerisksstemmingfromthegovernmentscontingentliabilities. WhetherthesecontingencieswillresultinactualliabilitiesfortheProvinceis beyondthedirectcontrolofthegovernment.Lossescouldresultfromlegal settlements,defaultsonprojects,andloanandfundingguarantees.Provisionsfor lossesthatarelikelytooccurandcanbereasonablyestimatedareexpensedand reportedasliabilitiesintheProvincesfinancialstatements.Anysignificant contingentliabilitiesweredisclosedaspartofthe20122013AnnualReport andConsolidatedFinancialStatements,releasedinSeptember2013.

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ChapterII:OntariosEconomicOutlookandFiscalPlan

Key Changes in the Medium-Term Fiscal Outlook since the 2013 Budget
Despitealowerrevenueoutlookcomparedtothe2013Budgetforecast, thegovernmentisprojectedtobeatits201314fiscaltargetasaresultofa responsibleandbalancedapproachtofiscalmanagementandacommitment toensurevaluefortaxpayersmoneybymakingeverydollarcount. Continuedchallengesinthebroadereconomicenvironmentareholdingback economicgrowthinOntarioandtheoutlookforProvincialrevenue.Ontariois notaloneinfacingthesechallengesseveralprovinceshavehadtoextendtheir balancedbudgettimelines,andthefederalgovernmenthasalsoseendeclining revenueprojections.However,Ontariocontinuestomoveforwardwithplansto meetitsoriginalbalancedbudgettargetdateof201718.

249

2014OntarioBudget

TABLE2.21 ChangeinMediumTermFiscalOutlooksincethe 2013Budget


($Billions) 201314
Surplus/(Deficit) from 2013 Budget Revenue Changes Underlying Revenue Forecast Revenue Measures Total Revenue Changes Expense Changes Net Program Expense Changes Interest on Debt Total Expense Changes Change in Reserve Fiscal Improvement/(Deterioration) 2014 Budget Surplus/(Deficit)
Note: Numbers may not add due to rounding.

201415
(10.1)

201516
(7.2)

(11.7)

(1.3) 0.2 (1.2)

(3.5) 1.9 (1.6)

(2.4) 1.9 (0.5)

(0.6) (0.0) (0.6) (1.0) 0.4 (11.3)

1.1 (0.1) 0.9 (0.2) (2.4) (12.5)

1.3 (0.2) 1.2 (1.6) (8.9)

AsoutlinedinSectionD:OntariosRevenueOutlookofthischapter,theunderlying revenueforecastislowerthaninthe2013Budgetduetoslowereconomic growth,alowertaxbaseandlowerfederaltransfers.Therevenuemeasures proposedbythegovernmentonlypartiallymitigatethisdeclinerelativetothe 2013Budgetforecast.

250

ChapterII:OntariosEconomicOutlookandFiscalPlan Totalexpenseandprogramexpenseareprojectedtobelowerin201314 comparedwiththe2013BudgetPlan,reflectingthegovernmentseffortsto managespendinginafairandresponsibleway.Totalexpenseandprogram expenseareprojectedtobehigherin201415and201516comparedwiththe mediumtermforecastinthe2013Budget.Thisreflectstheinvestmentsinpeople, moderninfrastructure,andadynamicandinnovativebusinessclimateaspartof thegovernments10yearplanfortheeconomy,aswellasinvestmentsaimedat promotingafairsociety.Theseinvestmentsmadenowwillspureconomic growthandcreatethenewjobsnecessarytosupporteliminatingthedeficit. AcrosstheboardcutsatthistimewouldharmOntarioseconomicandfiscal prospectsintheshortandlongterm.Cutstotransferstoindividualsorincome supportprogramswouldresultinadampeningofconsumerspending,akey driverofeconomicgrowth.Cuttingbackoninfrastructureinvestmentswould resultinaneconomythatcannotgrowtoitsfullpotentialinthelongterm. Publicinvestments,especiallyintransportationinfrastructure,providea foundationforeconomicgrowthandincreasedproductivity. Ontarioismanagingprogramexpensegrowthwhilemaintainingitsinvestments incoreservices.In201415,thegovernmentisinvesting$1.1billionmorein programsthanoutlinedinthe2013Budgetdespitea$3.5billionweakeningin theunderlyingrevenueforecastbeforemeasures. Theoutlookforprogramspendingalsoincludesanannualprogramreview savingstarget,whichreflectsthegovernmentscommitmenttocontinueto reviewprogramsthatwillfocusonmaintainingorenhancingthedeliveryof publicserviceswhilereducingcoststhatarenotessentialtodeliveringservice. Thistargetissetat$250millionin201415and$500millionineachof201516 and201617. For201415and201516,interestondebtexpenseisprojectedtobelowerthan forecastinthe2013Budget,primarilyreflectinglowerforecastsforOntarios interestrates.

251

2014OntarioBudget Thereservefor201314hasbeenusedtopartiallymitigatetheimpactofthe $1.2billiondeclineintheProvincesrevenueoutlook.Thereservein201415has beenadjustedasthereismoreinsightintothe201415economicoutlookthan therewasayearago. Inthe2013OntarioEconomicOutlookandFiscalReview,thegovernmentmade itspriorityclearitwillcontinuetoprotectinvestmentsinjobs,growthand familiesaheadofshorttermtargets.Asaresult,itisnowprojectingadeficitof $12.5billionin201415,$8.9billionin201516and$5.3billionin201617.

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ChapterII:OntariosEconomicOutlookandFiscalPlan

Ontarios Path to Balance


Ontariosperformanceagainstitsfiscaltargetstodateistheresultofa responsibleandbalancedapproachtofiscalmanagementandacommitment toensurevaluefortaxpayersmoneybymakingeverydollarcount.Program expensein201314iscurrentlyprojectedtobe$0.6billionlowerthanoutlinedin the2013Budget.Asaresult,theProvinceisontracktohavelowerthanforecast programexpenseineachofthelastfiveyears. Thegovernmentisalsoprojectedtobeatitsdeficittargetforthefifthyearina row,resultingintheaccumulateddeficitnowbeingmorethan$24billionlower thanitotherwisewouldhavebeen.

CHART 2.24
Fiscal Balance ($ Billions)
200910

Ontarios Record Against Deficit Targets

Actual

Interim

201011

201112

201213

201314

5.0 0.0 (5.0)


(9.2)

(10.0)
(14.0)

(13.0) (15.9) Performance1

(11.3) (13.3)

(15.0)
(19.3)

(20.0) (25.0)
1 2

(17.3) (19.7)

(24.7)

Fiscal Forecast2

Represents current forecast for 201314. For 200910 to 201213, actual results are presented. Forecast for 201011 to 201314 based on the 2010 Budget. Projection for 200910 from the 2009 Ontario Economic Outlook and Fiscal Review.

253

2014OntarioBudget

Responsible Choices
Whilethegovernmentremainscommittedtocontinuemanagingspendingina fairandresponsibleway,itcannotignoretheongoingchallengesinthebroader environment,whichareholdingbackeconomicgrowthinOntarioandtheoutlook forProvincialrevenues. Thesechallengesmeanthegovernmentneedstothinklongtermaboutthe choicesitmakes.Ontarioalreadyhasthelowestpercapitaprogramspending amongCanadianprovinces.AstheCommissionontheReformofOntariosPublic Servicesnoted,acrosstheboardcutswouldhurtpublicservicesandundermine programsthatareprovidinghighqualityservicestoOntarians.Suchacrossthe boardcutsatthistimewouldalsoharmOntariosprospectsforstronger economicgrowth. Nowisthetimetobemakingsmartinvestmentsinpeople,moderninfrastructure, andadynamicandinnovativebusinessclimateinvestmentsthatwillhelpto spureconomicgrowthandcreatethenewjobsnecessarytosupporteliminating thedeficit.

Actions to Eliminate the Deficit


Togetherwiththestrategicinvestmentsthegovernmentismakingtosupport Ontarios10yeareconomicplan,itwillalsobetakingdeliberateactionstoensure itcancontinuetomanagespendingandenhancetaxfairnessforpeopleand business.Thesecombinedmeasureswillhelpmeetorbeatthefiscaltargets outlinedinthisBudget,andeliminatethedeficitby201718.

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ChapterII:OntariosEconomicOutlookandFiscalPlan
CHART 2.25
Fiscal Balance ($ Billions) 5.0 1.2 0.0 (4.1) (5.0) (10.0) (15.0) (20.0) (25.0)
2014 Budget Outlook 2014 Budget Outlook before reserve

Ontarios Plan to Eliminate the Deficit


Extended Outlook

Plan

Medium-Term Outlook

201415

201516

201617

201718

0.0

(7.7) (11.5) (12.5) (8.9)

(5.3)

Thesedeliberateactionswilltogetherhelpensurethatthepriorityprograms andservicesthatpeoplerelyonaremaintainedandenhancedwhilethedeficit iseliminated: Responsiblemanagementofprogramspending; MaintainingtheintegrityofProvincialrevenues; Enhancingtaxfairnessmeasuresforpeopleandbusinesses;and UnlockingthevalueofProvincialassets.

Examplesofkeyactionstosupporttheresponsiblemanagementofspending willinclude: Holdingtheaverageannualgrowthinprogramspendingto1.1percent overthemediumtermconsistentwiththe1.4percentaverageannual growthinprogramspendingsince201011.

255

2014OntarioBudget ContinuingtomoveaheadwiththeCommissionontheReformof OntariosPublicServicesrecommendationsover80percentofthe recommendationsarenowbeingactedon,enablingsustainable transformationandsupportingsuccessfulexpendituremanagement. Managingthegrowthrateofhealthcarespending,currentlymorethan 40percentofProvincialprogramspending,toanannualaverageof 2.2percentoverthemediumterm.ThroughimplementationofOntarios ActionPlanforHealthCare,thegrowthrateofspendinghasbeenreduced toaprojected2.5percentin201314from5.8percentin200910. Buildingonthesuccessofthegovernments201314expenditurereview byintroducinganannualprogramreviewsavingstargetof$250millionin 201415and$500millionin201516and201617,withaparticularfocus onmaintainingorenhancingthedeliveryofpublicserviceswhilereducing coststhatarenotessentialtodeliveringservice. EndingtheOntarioCleanEnergyBenefitonDecember31,2015,and replacingitwithaplannedratebaseprogram,withtheOntarioEnergy Boardtoreportbackonprogramoptionsthatwouldbetargetedto Ontariosmostvulnerable,whospendahigherproportionoftheir disposableincomeonenergyandelectricity. ManagingpublicsectorandexecutivecompensationfromwithinOntarios existingfiscalframeworksothatanymodestwageincreasesthatare negotiatedwillneedtobeabsorbedwithinfundingenvelopes,andwithin Ontariosoverallfiscalplan,throughefficiencyandproductivitygains,or othertradeoffsthatcontinuetodelivertheservicelevelstomeetpublic needs.Thisactionreducesfundingpressuresonthegovernmentasover halfoftheProvincestotalprogramspendingisforcompensation.Byway ofexample,aonepercentincreaseincompensationcostswouldamount toapproximately$600millionwithoutproductivityorotheroffsets. Modernizingandmanagingpublicsectorbenefitcostsbybringingpublic serviceretirementbenefitsinlinewithpracticesintheprivatesectorand otherjurisdictions,whichwillsaveover$1.4billionby201718. Continuingtotakeactiontoreducepensioncostsandenhancethe affordabilityofpublicsectorpensionplans.Thegovernmentssuccessful effortstodatetoconstrainpublicsectorwagegrowth,alongwith betterthanexpectedinvestmentperformance,havereducedtotalpension expensecostsoverthemediumtermby$1.1billionsincethe2013Budget.

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ChapterII:OntariosEconomicOutlookandFiscalPlan KeyactionstoprotecttheintegrityofProvincialrevenueswillinclude: Supportingafairandefficienttaxadministrationsystemthatensures everyonepaystheirfairshareoftaxesthroughenhancedtax compliancemeasures. Increasingthetobaccotaxratetogeneratemorethan$100millionayear innewrevenues.

Keyactionsincludeensuringthatthosewiththegreatestabilitytopaycontribute morethroughtheirtaxes.TheProvinceisproposingtoincreasePersonalIncome Taxontaxableincomeabove$150,000,whichwouldraise$0.7billionby201617. KeyactionstounlockthevalueofProvincialassetsinclude: Exploringoptionstounlockthefullvalueofawiderangeofvaluable Provincialassets,includingthoseoflargeandcomplexGovernment BusinessEnterprises(GBEs)specifically,theLCBO,HydroOneand OntarioPowerGeneration. EstablishingthePremiersAdvisoryCouncilonGovernmentAssetsto examinekeygovernmentassetsandgeneratebetterreturns.

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TABLE2.22 OntariosRecoveryPlan
($Billions) Extended Outlook 201718
134.8


Revenue Expense Programs Interest on Debt Total Expense Surplus/(Deficit) Before Reserve Reserve Surplus/(Deficit)

Interim 201314
115.7

Plan 201415
118.9

Medium-Term Outlook 201516


124.5

201617
129.4

116.4 10.6 127.0 (11.3) (11.3)

119.4 11.0 130.4 (11.5) 1.0 (12.5)

120.1 12.0 132.1 (7.7) 1.2 (8.9)

120.2 13.3 133.5 (4.1) 1.2 (5.3)

119.4 14.2 133.6 1.2 1.2

Note: Numbers may not add due to rounding.

Fiscal Prudence
Thegovernmentcontinuestomaintainabalancedapproachtomanagingthe fiscalplanandmakingresponsiblechoicesaboutstrategicinvestmentstosupport theeconomicprosperityoftheprovince.Thegovernmenthasalsoincluded prudenceaspartofthefiscalplantohelpensureitmeetsfuturefiscaltargetsas itmovestowardsabalancedbudgetin201718. AsrequiredbytheFiscalTransparencyandAccountabilityAct,2004(FTAA), thefiscalplanincorporatesprudenceintheformofareservetoprotectthefiscal outlookagainstadversechangesintheProvincesrevenueandexpense,including thoseresultingfromchangesinOntarioseconomicperformance.Thereservehas beensetat$1.0billionin201415,and$1.2billionineachof201516,201617 and201718. Thefiscalplanalsoincludescontingencyfunds(bothoperatingandcapital)tohelp mitigateexpenserisksthatmayotherwisehaveanegativeimpactonresults.Inan efforttocontrolthegrowthinprogramexpense,thecontingencyfundswillonly beusedtofundministryexpensepressuresincaseswherehealthandsafety mightbecompromisedorservicestothemostvulnerablearejeopardized.

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ChapterII:OntariosEconomicOutlookandFiscalPlan Inkeepingwithsoundfiscalpractices,theProvincesrevenueoutlookisbased onprudenteconomicassumptions.TheOntarioEconomicForecastCouncil, establishedunderFTAA,reviewedtheMinistryofFinanceseconomicassumptions inFebruary2014.Allcouncilmembersfoundtheassumptionsreasonable.

Intergenerational Fairness
ThepeopleofOntarioexpecttheirgovernmenttobeabletocontinueto providehighqualitypublicservicesandopportunitiesnowandforgenerationsto come.Therefore,thereisanobligationtoensurethatthecostofthesesupports doesnotleadtounsustainabledebtlevelsandhighinterestcostsfor futuregenerations. Thegovernmentistakingafairandbalancedapproachtoeliminatingthedeficit by201718,andmaintainsatargetofreducingOntariosnetdebttoGDPratio toitsprerecessionlevelof27percent.Thiswillhelpkeepinterestondebtata manageablelevelandprotectfuturegenerationsfromrisinginterestcosts, whichcouldotherwisecrowdoutspendingongovernmentpriorities.Takinga balancedapproachtoeliminatingthedeficitandreducingnetdebttoGDP willhelpstrengthentheeconomysoitcancreatejobs.Itisgoodfiscalpolicyand itisfairtofuturegenerations.

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Section F:

DetailsofOntariosFinances

Fiscal Tables and Charts


ThissectionprovidesinformationontheProvinceshistoricalfinancial performance,keyfiscalindicators,anddetailsofOntariosfiscalplanandoutlook.

TABLE2.23 MediumTermFiscalPlanandOutlook
($Billions) Interim 201314
Revenue Expense Programs Interest on Debt1 Total Expense Surplus/(Deficit) Before Reserve Reserve Surplus/(Deficit) Net Debt Accumulated Deficit
1

Plan 201415
118.9 119.4 11.0 130.4 (11.5) 1.0 (12.5) 289.3 189.8

Outlook 201516
124.5 120.1 12.0 132.1 (7.7) 1.2 (8.9) 305.3 198.6

201617
129.4 120.2 13.3 133.5 (4.1) 1.2 (5.3) 317.2 204.0

115.7 116.4 10.6 127.0 (11.3) (11.3) 269.2 177.3

Interest on debt expense is net of interest capitalized during construction of tangible capital assets of $0.2 billion in 201314, $0.3 billion in 201415, $0.3 billion in 201516 and $0.4 billion in 201617. Note: Numbers may not add due to rounding.

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2014OntarioBudget

TABLE2.24 Revenue
($Millions)
201112
Taxation Revenue Personal Income Tax Sales Tax1 Corporations Tax Education Property Tax2 Employer Health Tax Ontario Health Premium Gasoline Tax Land Transfer Tax Tobacco Tax Fuel Tax Beer and Wine Tax Electricity Payments-In-Lieu of Taxes Other Taxes Government of Canada Canada Health Transfer Canada Social Transfer Equalization Infrastructure Programs Labour Market Programs Social Housing Wait Times Reduction Fund Other Federal Payments Government Business Enterprises Ontario Lottery and Gaming Corporation Liquor Control Board of Ontario Ontario Power Generation Inc./Hydro One Inc. Other Non-Tax Revenue Reimbursements Vehicle and Driver Registration Fees Electricity Debt Retirement Charge Power Supply Contract Recoveries Sales and Rentals Other Fees and Licences Net Reduction of Power Purchase Contract Liability Royalties Miscellaneous Other Non-Tax Revenue3 Total Revenue
1

Actual 201213
25,574 20,957 12,093 5,511 5,137 3,067 2,390 1,484 1,142 710 560 324 469 79,418 11,315 4,591 3,261 116 897 483 97 901 21,661 1,816 1,721 932 4,469 932 1,125 939 1,323 1,188 760 263 226 1,065 7,821 113,369

Interim 201314
27,512 20,381 11,369 5,531 5,343 3,178 2,365 1,604 1,111 726 556 397 381 80,454 11,930 4,689 3,169 128 909 468 96 851 22,240 2,038 1,745 968 4,751 966 1,273 941 1,348 1,123 776 243 247 1,291 8,208 115,653

Plan 201415
29,172 21,937 10,254 5,661 5,551 3,321 2,395 1,604 1,300 734 572 329 536 83,365 12,350 4,841 1,988 296 902 458 1,047 21,882 2,053 1,779 1,194 5,026 996 1,442 940 959 2,058 795 217 274 917 8,598 118,871

24,548 20,159 9,944 5,765 5,092 2,916 2,380 1,432 1,150 710 561 367 574 75,598 10,705 4,469 2,200 362 904 489 97 2,079 21,305 1,882 1,659 872 4,413 831 1,075 952 1,372 1,193 776 317 200 1,741 8,457 109,773

Beginning July 1, 2010, most of the Retail Sales Tax was replaced with a value-added tax and combined with the federal Goods and Services Tax to create a federally administered Harmonized Sales Tax (HST). Sales Tax revenue is net of the Ontario Sales Tax Credit and the energy component of the Ontario Energy and Property Tax Credit. 2 Education Property Tax revenue is net of the property tax credit component of the Ontario Energy and Property Tax Credit and the Ontario Senior Homeowners Property Tax Grant. 3 Miscellaneous Other Non-Tax Revenue in 201112 is higher than other years due to one-time revenues including Chryslers repayment of an Ontario loan and higher-than-usual recoveries of prior-year expenditures from government ministries. Note: Numbers may not add due to rounding.

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TABLE2.25 TotalExpense
($Millions)
Ministry Expense Aboriginal Affairs1 Agriculture and Food / Rural Affairs1 Attorney General Board of Internal Economy2 Children and Youth Services Citizenship and Immigration Community and Social Services Community Safety and Correctional Services1 Consumer Services Economic Development, Trade and Employment / Research and Innovation1 Education1 Energy1 Environment1 Executive Offices Finance1 Francophone Affairs, Office of3 Government Services1 Health and Long-Term Care Infrastructure1 Labour Municipal Affairs and Housing1 Natural Resources1 Northern Development and Mines Tourism, Culture and Sport1 Training, Colleges and Universities1 Transportation Interest on Debt4 Other Expense1 Program Review Savings Target5 Year-End Savings6 Total Expense
1

201112 67 1,038 1,705 271 3,855 130 9,347 2,170 19 973 23,041 498 524 31 933 5 1,104 46,491 331 184 823 719 726 1,170 7,113 2,339 10,082 7,054 122,742

Actual 201213 65 1,016 1,683 197 3,912 130 9,720 2,280 20 963 23,141 341 485 30 849 5 1,143 47,571 66 281 825 694 718 1,424 7,346 2,478 10,341 4,863 122,589

Interim 201314 63.4 854.3 1,829.5 204.3 4,023.0 116.7 10,062.6 2,347.3 22.5 871.5 23,845.7 319.9 480.6 30.8 947.2 4.8 878.9 48,766.7 282.2 304.8 837.3 715.0 757.6 1,333.5 7,604.7 2,774.3 10,556.0 6,117.1 126,952.3

Plan 201415 70.7 1,137.4 1,774.2 204.8 4,222.0 120.7 10,791.0 2,433.9 25.2 1,011.9 24,839.9 332.8 490.2 32.8 1,015.4 4.1 1,028.8 50,054.8 279.6 311.2 879.6 713.2 754.3 1,235.7 7,838.8 3,024.9 11,010.0 6,088.2 (250.0) (1,100.0) 130,376.0

Details on other ministry expense can be found in Table 2.26, Other Expense. 2 The 201112 amount includes expenses for the 2011 general election. 3 Reduction beginning in 201314 reflects that, effective January 1, 2014, the office of the French Language Services Commissioner is part of the Board of Internal Economy. 4 Interest on debt is net of interest capitalized during construction of tangible capital assets of $234 million in 201112, $232 million in 201213, $225 million in 201314 and $336 million in 201415. 5 For details on the program review savings target, see Chapter l, Section E: Making Every Dollar Count. 6 As in past years, the Year-End Savings provision reflects anticipated underspending that has historically arisen at year-end due to factors such as program efficiencies, and changes in project startups and implementation plans. Note: Numbers may not add due to rounding.

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2014OntarioBudget

TABLE2.26 OtherExpense
($Millions)
Ministry Expense
Aboriginal Affairs One-Time Investments including Settlements Agriculture and Food / Rural Affairs Time-Limited Investments in Infrastructure Time-Limited Assistance Community Safety and Correctional Services Time-Limited Support for 2015 Pan/Parapan American Games Security Economic Development, Trade and Employment / Research and Innovation Time-Limited Investments for Youth Education Teachers Pension Plan1 One-Time Savings Labour Savings Energy Ontario Clean Energy Benefit Environment Time-Limited Investments Finance Harmonized Sales Tax Transitional Support Ontario Municipal Partnership Fund Operating Contingency Fund Power Supply Contract Costs Transition Fund Government Services Pension and Other Employee Future Benefits Infrastructure Federal-Provincial Infrastructure Programs Capital Contingency Fund Municipal Affairs and Housing Time-Limited Investments in Municipal Social and Affordable Housing Time-Limited Investments Natural Resources Emergency Forest Firefighting Tourism, Culture and Sport Time-Limited InvestmentsSport Program One-Time Investments Time-Limited Investments to Support 2015 Pan/Parapan American Games Training, Colleges and Universities Time-Limited Investments

201112
28 247

Actual 201213
19

Interim 201314
12.0 136.3 16.5

Plan 201415
47.1 6.5

6.0

44.9

523 1,033 1,440 598 1,375 1,300

895 (1,296) 994 78 592 1,323 1,519

50.0 873.0 1,020.0 568.9 250.0 1,348.4 1,283.0

50.0 507.0 1,100.0 541.5 415.0 959.1 80.0 1,170.0 241.7 100.0

59 9 209 37 3 59 133

158 42 180 358

155.2 18.9 93.7 285.2

155.2 70.1 600.1

Total Other Expense


1

7,054

4,863

6,117.1

6,088.2

Numbers reflect Public Sector Accounting Board pension expense. Ontarios matching contributions to the plan grow from $1,344 million in 201112 to $1,532 million in 201415. Note: Numbers may not add due to rounding.

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TABLE2.27 201314InfrastructureExpenditures
($Millions)
Total Infrastructure Expenditures 201314 Interim 201415 Plan Investment in Capital Assets1 Transfers and Other Infrastructure Expenditures2 Total Infrastructure Expenditures

Sector

Transportation Transit Provincial Highways Other Health Hospitals Other Health Education Postsecondary Colleges Universities Water/Environment Municipal and Local Infrastructure Justice Other Subtotal Less: Other Partner Funding4 Total Excluding Partner Funding Less: Other Capital Total Provincial
1

2,726 2,052 698 3,157 480 1,884 391 155 135 693 319 391 13,083 1,893 11,190 376 10,814

2,630 2,472 750 3,341 206 1,724 368 57 8 129 481 12,167 1,666 10,500 284 10,216

519 95 287 203 58 168 96 643 125 132 2,326 2,326 262 2,064

3,150 2,472 845 3,629 409 1,781 368 168 153 651 254 613 14,493 1,666 12,826 546 12,280

Transportation3

Contributions5

Expenditure6

Investment in Capital Assets includes interest capitalized during construction of tangible capital assets of $336 million. 2 Mainly consists of transfers for capital purposes to municipalities and universities, and expenditures for capital repairs. 3 Other transportation includes highway planning activities, property acquisition, highway service centres and other infrastructure programs (e.g., winter roads, remote airports). 4 Third-party contributions to capital investment in consolidated schools, colleges, hospitals and provincial agencies. 5 Mostly federal government transfers for capital investments. 6 Total Provincial Infrastructure Expenditure includes Investment in Capital Assets of $9 billion for 201314. Note: Numbers may not add due to rounding.

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2014OntarioBudget

TABLE2.28 TenYearReviewofSelectedFinancialand EconomicStatistics1


($Millions) 200506
Revenue Expense Programs Interest on Debt3 Total Expense Surplus/(Deficit) Before Reserve Reserve Surplus/(Deficit) Net Debt4 Accumulated Deficit Gross Domestic Product (GDP) at Market Prices Primary Household Income Population July (000s) Net Debt per Capita (dollars) Household Income per Capita (dollars) Interest on Debt as a per cent of Revenue Net Debt as a per cent of GDP Accumulated Deficit as a per cent of GDP
1

200607
97,120 86,020 8,831 94,851 2,269 2,269 153,742 106,776 574,292 382,688 12,662 12,142 30,224 9.1 26.8 18.6

200708
104,115 94,601 8,914 103,515 600 600 156,616 105,617 597,803 401,978 12,764 12,270 31,493 8.6 26.2 17.7

90,738 81,421 9,019 90,440 298 298 152,702 109,155 552,769 363,479 12,528 12,189 29,013 9.9 27.6 19.7

Revenue and expense have been restated to reflect a fiscally neutral accounting change for the revised presentation of education property taxes, as described in the 2010 Ontario Budget; a fiscally neutral accounting change related to the reclassification of government agencies and organizations as described in the 2011 Ontario Economic Outlook and Fiscal Review; and a fiscally neutral reclassification of a number of tax measures that are transfers or grants, as described in the 2012 Ontario Budget. 2 Starting in 200910, investments in minor tangible capital assets owned by the Province were capitalized and amortized to expense. All capital assets owned by consolidated organizations are being accounted for in a similar manner. 3 Interest on debt is net of interest capitalized during construction of tangible capital assets of $234 million in 201112, $232 million in 201213, $225 million in 201314 and $336 million in 201415. 4 Starting in 200910, Net Debt includes the net debt of hospitals, school boards and colleges, consistent with Public Sector Accounting Board standards. For comparative purposes, Net Debt has been restated from 200506 to 200809 to conform with this revised presentation. Net Debt has also been restated in 200506 to reflect the value of hydro corridor lands transferred to the Province from Hydro One Inc. Sources: Statistics Canada and Ontario Ministry of Finance.

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200809
97,532 95,375 8,566 103,941 (6,409) (6,409) 169,585 113,238 604,282 413,032 12,883 13,164 32,061 8.8 28.1 18.7

2009102
96,313 106,856 8,719 115,575 (19,262) (19,262) 193,589 130,957 595,433 413,152 12,998 14,894 31,787 9.1 32.5 22.0

201011
107,175 111,706 9,480 121,186 (14,011) (14,011) 214,511 144,573 629,500 425,140 13,135 16,331 32,367 8.8 34.1 23.0

201112
109,773 112,660 10,082 122,742 (12,969) (12,969) 235,582 158,410 654,715 443,501 13,264 17,762 33,438 9.2 36.0 24.2

Actual 201213
113,369 112,248 10,341 122,589 (9,220) (9,220) 252,088 167,132 674,485 458,683 13,412 18,796 34,199 9.1 37.4 24.8

Interim 201314
115,653 116,396 10,556 126,952 (11,300) (11,300) 269,155 177,260 692,418 472,122 13,538 19,881 34,874 9.1 38.9 25.6

Plan 201415
118,871 119,366 11,010 130,376 (11,505) 1,000 (12,505) 289,251 189,765 716,933 487,720 13,762 21,019 35,441 9.3 40.3 26.5

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2014OntarioBudget
CHART 2.26

Composition of Revenue, 201415


Other Non-Tax Revenue 7.2% $8.6B Income from Government Business Enterprises 4.2% $5.0B

Ontario Health Premium 2.8% $3.3B Gasoline and Fuel Taxes 2.6% $3.1B Other Taxes 3.7% $4.3B Employer Health Tax 4.7% $5.6B

Federal Transfers 18.4% $21.9B

Corporations Tax 8.6% $10.3B Personal Income Tax 24.5% $29.2B Sales Tax 18.5% $21.9B

Education Property Tax 4.8% $5.7B

Note: Numbers may not add due to rounding.

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CHART 2.27

Composition of Total Expense, 201415


Childrens and Social Services Sector Justice Sector 11.5% $15.0B 3.3% $4.3B Other Programs 13.3% $17.3B

Postsecondary and Training Sector 6.0% $7.8B

Education Sector1 19.1% $24.8B Interest on Debt 8.4% $11.0B

Health Sector 38.4% $50.1B

1 Excludes

Teachers Pension Plan. Teachers Pension Plan expense is included in Other Programs. Note: Numbers may not add due to rounding.

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2014OntarioBudget
CHART 2.28

Composition of Program Expense1, 201415


Postsecondary and Training Sector 6.6% $7.8B Childrens and Social Services Sector 12.6% $15.0B Justice Sector 3.6% $4.3B

Education Sector2 20.8% $24.8B

Other Programs 14.5% $17.3B

Health Sector 42.0% $50.1B

Program expense equals total expense minus interest on debt. 2 Excludes Teachers Pension Plan. Teachers Pension Plan expense is included in Other Programs. Note: Numbers may not add due to rounding.

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ChapterII:OntariosEconomicOutlookandFiscalPlan

Support from Gaming


ProceedsfromgamingactivitiesinOntariocontinuetosupportProvincial priorities.TheOntarioLotteryandGamingCorporationAct,1999,requiresthat netProvincialrevenuegeneratedfromlotteries,OntarioLotteryandGaming Corporation(OLG)operatedcasinosandslotsandcommercialcasinossupport servicessuchastheoperationofhospitals,municipalities,amateursports, OntarioFirstNations,problemgamblingprevention,treatmentandresearch, andfundingforcharitableandnotforprofitorganizations.

TABLE2.29 SupportforHealthCare,Charities,ProblemGamblingand RelatedPrograms,MunicipalitiesandOntarioFirstNations


($Millions) Interim 201314
Revenue for Provincial Purposes Operation of Hospitals Ontario Trillium Foundation Problem Gambling Prevention, Treatment and Research Ontario Amateur Sports General Government Priorities, including Horseracing Support Subtotal Net Profit to Province from OLG Support for Municipalities and Ontario First Nations1 Municipalities Ontario First Nations Total Support from Gaming
1

Plan 201415
1,771 115 39 10 118 2,053 115 123 2,291

1,754 115 39 10 119 2,038 116 120 2,274

Operating expenses of the Ontario Lottery and Gaming Corporation (OLG) include payments to host municipalities and Ontario First Nations under the Gaming Revenue Sharing and Financial Agreement. Note: Numbers may not add due to rounding.

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2014OntarioBudget

272

CHAPTER

III

Federal Underfunding of Ontarians

ChapterIII:FederalUnderfundingofOntarians

Highlights
TheProvinceprovidesefficientpublicservicesresultingincompetitivetaxesfor Ontarians.Infact,Ontarioalreadyhasthelowestprogramspendingpercapita amongprovinceswhile,atthesametime,itraisesthelowesttotalrevenueper capitaincludingfederaltransfers.However,astheProvincecontinuestocarefully managecosts,takeactiontoincreaseprosperityandimplementitsfairand responsibleplantoreturntobalance,unilateralactionsbythefederalgovernment areputtingthisatrisk. Since2006,thefederalgovernmenthastakenmorethan110unilateralactions thathavehurtpeopleandbusinessesacrossOntarioandunderminedthe Provincesfiscalplan.Eachandeveryyear,theshareoffederalrevenueraisedin OntarioishigherthantheshareoffederalspendinginOntario.Thisresultsinan $11billiongapaccordingtomostrecentlyavailablefigures.In201415,Ontarians willbecontributing$4.5billionmoretoEqualizationthantheProvinceisreceiving inpayments.WhilethismoneycouldbeusedinOntariotofundmorehospitals, nursesorpublictransit,itisredistributedtootherregionsofCanadatosubsidize programsandservicesthatOntariansthemselvesmaynotenjoy. Asthefederalgovernmentplanstobalanceitsbudgetbeginningin201516, itisinapositiontomakeinvestmentsthatwillhelpgrowOntarioseconomy andprotectservices.Ontariocallsonthefederalgovernmentto: TreatOntariansthesamewayittreatsresidentsofallotherprovinces; ProtecttheProvincefromthe$641milliondecreaseinpaymentsfrommajor transfersin201415,asithasdonewithotherprovincesinthepast; StopunilateralactionsthatimpacttheProvincespublicservicesandfiscal planandinsteadworkwithOntarioonimportantissuesthataffectOntarians; Significantlyincreasefundingforinfrastructure,giventhatOntarioplansto investnearlyfivetimesmorepercapitaininfrastructurethanthefederal governmentplanstoinvestoverthenext10years;and MatchtheProvinces$1billioncommitmenttoadvanceregional infrastructuredevelopmentintheRingofFirearea.

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2014OntarioBudget

Unilateral Federal Actions Hurt Ontario


In201415,Ontariowillexperienceayearoveryeardeclineof$641millionin entitlementsformajortransfers.Overthelastfouryears,thefederalgovernment paidatotalof$2.2billioninTotalTransferProtectionpaymentstoseven provincesthatwouldotherwisehaveseentheirmajortransfersreduced.This year,whenOntariowouldhavequalifiedforapaymentforthefirsttime, thefederalgovernmentdecidedtoendthepracticeoftransferprotection payments.Asaresult,Ontarioistheonlyprovincesince201011tofaceadecline initsoverallmajortransfers.

CHART 3.1

Total Transfer Protection Payments from 201011 to 201314

$ Millions
800 700 600 500 400 300 200 100 0 QC MB NS NB NL SK PE ON
Source: Ontario Ministry of Finance.

201011

201112

201213

201314

In 201415, Ontario would have qualified for $641 million in Total Transfer Protection payments

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ChapterIII:FederalUnderfundingofOntarians

Because of the unprincipled nature of Canadian federal fiscal arrangements and funding agreements, Ontarians and Ontario businesses are often short-changed. The federal government needs to reform Equalization and create a national standard for EI access, and fix the funding gaps in infrastructure, training, housing, and regional economic development funds.
Ontario Chamber of Commerce, Emerging Stronger, 2013.

ThefederalgovernmentismakingunfairchoicesthatundermineOntarios economicgrowth.Bytakingunilateralactions,itisbalancingitsbudgetonthe backsofOntariansandotherCanadians.

TABLE3.1

ExamplesofUnilateralFederalActionsAffectingOntarians
Description Federal government decided to shut down consideration of a modest enhancement to the Canada Pension Plan, and increased the Old Age Security age of eligibility from 65 to 67. Federal government did not renew $205.4 million to Ontario for wait-time reductions. Federal government did not renew $117 million to Ontario for immunizations. Federal government did not renew $156 million to support the hiring of 329 front-line police officers in Ontario. Federal government eliminated ELCC Agreement and cut $1.3 billion over three years in support for Ontario.

Program Retirement Income Security

Patient Wait Times Guarantee Trust Human Papillomavirus Vaccine Trust Police Officers Recruitment Fund Early Learning and Child Care (ELCC) Agreement

Source: Government of Ontario, Federal Actions Negatively Impacting Ontarians, 2014.

TheProvincehastakenmeasurestoprotectOntariansfromsomeofthese actionsincluding: Steppinginwith$63.5millionannuallytoaddressthegapleftbythe eliminationoftheEarlyLearningandChildCareAgreement; Investing$20millionannuallytofillgapsinhealthcarecoveragefor refugeesleftbythescalingdownoftheInterimFederalHealthProgram; and Providing$4millionayeartofundthe40FirstNationspoliceofficers previouslysupportedbythefederalgovernmentunderthePoliceOfficers RecruitmentFund.

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2014OntarioBudget However,theProvincecannotstepineverytimethefederalgovernment abandonsitsresponsibilities. AsdiscussedinOntariosLongTermReportontheEconomy,in2011,thefederal governmentunilaterallychangedthegrowthrateoftheCanadaHealthTransfer, beginningin201718,whichwillremoveanestimated$21billioninsupportfor healthcarenationally $8billionofthatinOntario by202324.Thiswillhave arealeffectonthequalityofhealthcareprovidedtoOntarians.Asconfirmedby thefederalParliamentaryBudgetOfficer,thistransferringoffiscalburdencreates afiscallysustainablefederalgovernment,butfiscallyunsustainableprovincesand territories.Unlessactionistaken,thefiscalpositionofprovincesandterritories willdeteriorateinthelongterm.

CHART 3.2
Net Debt as a Per Cent of GDP (200) (100) 0 100 200 300 400
1991 2001

Reducing Federal Health Transfers Downloads Fiscal Burden to Provinces and Territories

New growth rate of CHT takes effect beginning in 201718

Improving Fiscal Position

Federal Government

Deteriorating Fiscal Position

Provincial/ Territorial/ Local/ Aboriginal 2081

2011

2021

2031

2041

2051

2061

2071

Note: Negative figures indicate net assets. Source: Ontario Ministry of Finance calculations based on data from the Parliamentary Budget Officer.

The federal fiscal structure has been transformed from unsustainable in 2011 to sustainable with substantial fiscal room largely through spending restraint and reform of the Canada Health Transfer (CHT) escalator. However, the federal fiscal room created by the change in the CHT escalator has transferred the fiscal burden to provinces and territories. Parliamentary Budget Officer, 2013

278

ChapterIII:FederalUnderfundingofOntarians Lastyear,sevenoftenprovincespushedbacktheirexpectedbalancedbudget yearfromtargetsoutlinedinpreviousbudgets.Atthesametime,the2014federal budgetannouncedthatthefederaldebttoGDPratioisexpectedtofallto 25.5percentby201819,puttingthefederalgovernmentwellonitswayto achievingitstargetof25percentby2021. Notonlydoimbalancesexistbetweenthefederalgovernmentandprovinces, butinequitablefederalprogramsandpoliciesalsocauseimbalancesbetween OntariansandCanadiansinotherprovinces.AccordingtotheMowatCentre, thepeopleofOntariocontributed$11billionmoretothefederalgovernment thantheyreceivedinreturnin200910(theyearwiththelatestavailabledata). Thisrepresentsabout$850perOntarian.

CHART 3.3 $ Billions


100 98 96 94 92 90 88 86 84 82 80

Ontarios Net Contribution to the Federation in 200910

The Gap 97.3


$11 Billion or 1.9 per cent of GDP

86.2

Federal Revenue Collected from Ontarians

Federal Spending in Ontario

Notes: Federal revenue collected from Ontarians and federal spending in Ontario are adjusted to assume a balanced federal budget. Federal spending in Ontario includes Ontarians share of federal public debt interest charges. Sources: Ontario Ministry of Finance calculations based on data from the Mowat Centre.

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2014OntarioBudget

Ontarians transfer approximately $11B on net to the rest of Canada. This transfer is equivalent to 1.9% of the provinces GDP. This can be referred to as the gap between what Ontarians contribute to the federal government and what is returned to the province in the form of transfers and spending.

Noah Zon, Filling the Gap: Measuring Ontarios Balance with the Federation, Mowat Centre, (2013).

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ChapterIII:FederalUnderfundingofOntarians

Federal Underfunding
Thecurrentsystemoffederalprovincialfiscalarrangementsisworkingagainst, notfor,thepeopleofOntario.Agoodexampleofanarrangementthatworks againstOntarioandneedstobemodernizedistheEqualizationprogram.While OntarioiscommittedtotheprinciplesoftheEqualizationprogram,theProvince doesnotsupportasystemoftransfersthatputsOntariospublicservicesatrisk andprovidesinequitablelevelsofsupporttodifferentpartsofCanada.

How the Equalization Program Works


The principle of Equalization is enshrined in the Constitution to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation, Section 36(2), Constitution Act. The programs formula estimates how much potential revenue a province could raise based on its economic base, and provides payments to provinces with below-average potential revenue.

In2009,whenOntariofirstenteredEqualization,thefederalgovernment unilaterallyimposedaceilingtolimitannualgrowthontotalEqualization paymentstotherateofgrowthofnationalgrossdomesticproduct(GDP). ThecumulativeimpactoftheGDPceilingonEqualizationonOntariospayments isapproximately$6.7billionbetween200910and201415.In201415alone, theGDPceilingreducedOntariospaymentbynearly$670millionoverthree timesmorethanin201314. OntariosEqualizationpaymentwillbe$1.2billionlowerin201415thanthe previousyear,partlyduetofactorsthathavenorelationtoOntarioseconomic performance.Forinstance,$300millionofthereductioninOntariosentitlement in201415isduetotheclosureofQuebecsGentilly2nuclearpowerplant anactionthathasnobearingontherelativestrengthofOntarioorQuebecs economicbase.But,duetotheEqualizationformula,theclosureofGentilly2will increaseQuebecspaymentbetween201415and201617.Underthefederally imposedGDPceiling,oneprovincesincreasingEqualizationentitlementsarepaid forbyreductionsinpaymentstoothers.Inthiscase,largerpaymentstoQuebec reducepaymentstoOntario.

281

2014OntarioBudget WhileOntariospaymentislowerin201415,theprogramisgrowingbyover $560millionnationally.Ontariansarepayingmoreintotheprogramcomparedto previousyearsandarereceivingless.Thedifferencebetweenwhatthepeopleof OntariowillpayintotheEqualizationprogramthroughfederaltaxesandwhatthe Provincewillreceivefromtheprogramis$4.5billionin201415,andhasreached $43billionoverthelast10years.

CHART 3.4

Net Contribution to Equalization, 201415

$ Billions
6 4.5 4 2.7 2 0 (2) (4) (6) ON AB BC SK NL PE NS MB NB
Source: Ontario Ministry of Finance.

2.1 0.5 0.3 (0.3)

(1.2)

(1.3)

(1.4)

(5.9) QC

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ChapterIII:FederalUnderfundingofOntarians

Ontario Needs a Committed Federal Partner to Invest in the Provinces Economy


Buildingaprosperousprovincerequirespartnershipamongallordersof government.ThisisdemonstratedeachtimetheProvinceworkswithother governmentstocreatejobsandmakebusinessesmorecompetitive,suchas movingtowardsacooperativecapitalmarketsregulatorwiththefederal governmentandBritishColumbia.Bybeingafairandcollaborativepartner andmakingstrategicinvestments,thefederalgovernmentcouldsupport theProvincesplantobuildgreaterprosperityforthepeopleofOntario.

TABLE3.2

ImprovingProsperityinOntario
Benefit to Ontarians
Would ensure that todays workers are able to enjoy their retirement years. Would better meet the needs of communities and provide economic returns to Canada. Improvement in commuting times, economic competitiveness, and regional productivity. Ontario Chamber of Commerce estimates that Ring of Fire development would sustain 5,500 jobs.

Potential Areas for Enhanced Collaboration


Retirement Income Security for Ontarians Greater Investments in Public Infrastructure Investment in Regional Transportation Priorities Development of Ring of Fire

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2014OntarioBudget

Providing Better Retirement Income Security for Ontarians


CanadaspubliclyadministeredCanadaPensionPlan(CPP)isfundamentaltothe retirementincomesecurityofallCanadians,butforseveralreasons,itsbenefits aretoolowtomeettheneedsofmanyworkers. Severalstudieshaveshownthat,unlessactionistaken,asignificantportionof todaysworkerswillfaceadeclineintheirlivingstandardinretirement,andthat thisproblemwilllikelyworsenovertime.1RecentanalysisbytheOntarioMinistry ofFinancedrawssimilarconclusions. Ontariohaslongplayedaleadershiproleinretirementincomesecurityandhas beenadvocatingforanenhancementtotheCPPsince2010. InDecember2013,thefederalgovernmentunilaterallyshutdowndiscussionson optionsforanenhancementtotheCPPagainsttheagreementofprovincesand territoriestocontinueworkonthisissue.Thishasnotonlycurtailedworkona potentialenhancement,buthasalsocrowdedoutdiscussionsonotherpossible reformstomodernizetheCPP. ACPPenhancementisstillthepreferredoptionand,ifthefederalgovernmentis preparedtocometothetable,Ontarioisstillawillingpartner.However,inthe absenceofactionbythefederalgovernment,theProvinceismovingforwardwith analternativetoprovideOntarianswiththeretirementincomesecurity theydeserve. SeeChapterIV:StrengtheningRetirementSecurityinOntarioformoredetails.

RecentstudiesthathaveexaminedtheadequacyofretirementsavingsinCanadainclude: KeithHorner,RetirementSavingbyCanadianHouseholds,(2009);McKinsey&Company, AreCanadiansReadyforRetirement? (2012); Kevin D. Moore, William Robson and Alexandre Laurin, C.D. Howe Institute, Canadas Looming Retirement Challenge, (2010); Michael C. Wolfson, Projecting the Adequacy of Canadians Retirement Incomes, (2011); and CIBC, Canadians Retirement Future: Mind the Gap, (2013).

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Chapter III: Federal Underfunding of Ontarians

Federal Government Needs to Invest More in Infrastructure


As part of the Council of the Federation, Premier Kathleen Wynne is leading a working group that includes provincial and territorial ministers responsible for economic development and infrastructure to study the critical role infrastructure investments play in creating good jobs and attracting investments in such areas as manufacturing, transportation, and research and development. Given the fundamental role infrastructure plays in Canadas economic growth and the Provinces ongoing commitment to infrastructure funding, it is essential that the federal government be a strong partner and invest more in public infrastructure. The federal government has committed to provide $70 billion nationally for infrastructure over the next 10 years, including $47 billion through the new Building Canada Plan. This $70 billion investment is equal to roughly $2,000 per capita over 10 years given that Canada has a population of about 35 million. By comparison, Ontario plans to invest over $130 billion in the province over the next 10 years. This investment is equal to almost $10,000 per capita over the next 10 years, given that Ontario has about 13.5 million people. The Province plans to invest nearly five times more per capita than the federal government over the next decade.

285

2014OntarioBudget Inadequate federal investment means fewer improvements to transit systems, roads, bridges, and water and wastewater systems. To support jobs and economic growth, federal funding for infrastructure should be closer to the level being invested by Ontario.

CHART 3.5

Public Infrastructure Investment Per Capita (201415 to 202324)

Dollars Per Capita


12,000 10,000 8,000 6,000 4,000 2,000 0 Federal (Canada)
*Planned provincial spending only. Source: Ontario Ministry of Infrastructure.

Provincial* (Ontario)

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Chapter III: Federal Underfunding of Ontarians

Investment in Transportation Priorities


The Commission on the Reform of Ontarios Public Services recommended a national transit strategy with the federal government, other provinces and municipalities. A federal commitment to dedicated funding for transit would help support the development of such a strategy. The Province recognizes that an effective transportation network is supported by many components working together: transit systems and roads that carry commuters and link communities, major highways that allow movement across regions, and heavy rail that moves goods across industries. The Province has recognized the need for dedicated and stable funding as part of a balanced investment strategy in transportation infrastructure, including public transit, but the federal government needs to recognize that a national strategy is badly needed. Canada is the only G7 country without a federal policy of long-term, predictable investment dedicated to transit, and the continuing absence of the federal government on ongoing investments in transit networks has an effect on commute times, movement of goods, economic competitiveness and productivity.

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2014OntarioBudget

Ring of Fire
OntarioisCanadasleadingjurisdictionfortheexplorationandproductionof mineralsandamajorplayeraroundtheworld.TheProvincesRingofFirearea, locatedabout535kilometresnortheastofThunderBay,holdssignificantdeposits ofminerals.Recentestimatessuggestthatthevalueofmineralresourcesinthe RingofFireareacouldbeupto$60billionforknownchromite(akeymaterialin theproductionofstainlesssteel)andnickeldeposits.

Key Facts
Ontario is Canadas leading destination for mineral exploration investment.

Upto

$60B
Almost

in known chromite and nickel deposits in the Ring of Fire area. of the metals mined in Ontario are processed here. Capital investment in mining is expected to increase to $3.8 billion in Ontario in 2012.

60% $3.8B

Source: Ministry of Northern Development and Mines.

The Plan
Arrived at a regional framework agreement with the Matawa-member First Nations. Establish a development corporation to accelerate infrastructure development and collaborate with key partners. The Province is willing to commit up to $1 billion towards infrastructure development, contingent on matching investment by the federal government.
Ontario: Federal Government:

The Potential Results


Within the first 10 years of its development, the Ring of Fire will produce considerable benefits:

$9.4B $6.2B 5,500 $2B

In GDP generated in Ontario For Ontarios Mining industry Jobs sustained annually in Ontario In additional revenues divided among federal, provincial and municipal governments

$1B

$1B?

Source: Ontario Chamber of Commerce, Beneath the Surface: Uncovering the Economic Potential of Ontarios Ring of Fire, (2014).

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Chapter III: Federal Underfunding of Ontarians By 2025, significant output will be produced from the Ring of Fire, making the province one of the major world producers of chromite and strengthening Ontarios position as a world leader in nickel production. This would have a positive economic impact not only for Northern Ontario, but also for Canada as a whole.

There is a strong business case for governments to invest in this economic opportunity. We think the federal government has an obligation to be actively involved in this development, as it has for other transformative projects including the oil sands, the St. Lawrence Seaway, and Churchill Falls.

Ontario Chamber of Commerce, Beneath the Surface: Uncovering the Economic Potential of Ontarios Ring of Fire, (2014).

Ontario is playing a leadership role in the development of the Ring of Fire, and calls on the federal government to advance regional infrastructure development in the Ring of Fire, just as it has supported industry development in other provinces and territories.

TABLE3.3
Newfoundland and Labrador and Nova Scotia

ExamplesofFederalInvestmenttoEncourageDevelopment ofResourceIndustriesinOtherProvinces
To encourage the commercial development of offshore oil and gas, the federal government signed the 2005 Atlantic Accords with Newfoundland and Labrador and Nova Scotia. Newfoundland and Labrador received $2 billion from the federal government through the Accord. Nova Scotia received $1.1 billion between 200405 and 201415. In 2013, the federal government finalized a loan guarantee with Newfoundland and Labrador to develop the Muskrat Falls Hydroelectric Project. According to Newfoundland and Labrador, the loan guarantee is projected to result in savings of $1 billion in interest costs. The Commission on the Reform of Ontarios Public Services reported that federal support for the oil and gas sectors is worth $1.4 billion annually in addition to $2 billion for carbon capture and storage.

Newfoundland and Labrador

Alberta and Saskatchewan

The Province is willing to commit up to $1 billion towards infrastructure development, contingent on matching investment by the federal government. This would ensure that the necessary infrastructure investments, estimated to be over $2 billion, would proceed.

289

2014OntarioBudget

Immigration
Ontario remains the top destination for immigrants to Canada. Over the last 10 years, Ontario has received close to 1.2 million landed immigrants 46 per cent of all those who came to Canada. However, in recent years, economic immigration to other provinces has increased at Ontarios expense. This is due to growth in regional economic selection programs implemented by the federal government (e.g., Provincial Nominee Programs and Quebec Skilled Workers) that place Ontario at a disadvantage. In 2012, Ontario was limited to less than four per cent of landed economic immigrants through its Provincial Nominee Program, compared to an average of 54 per cent for other provinces (excluding Quebec). The lack of federal support for a more flexible selection process inhibits Ontarios ability to select the right combination of newcomers and undermines immigrants ability to contribute to the economy. This is why, in the fall of 2012, Ontario released its first Immigration Strategy, responding to the provinces demographic and economic realities. The Immigration Strategy called on the federal government to increase its Provincial Nominee Program levels to 5,000 by 2014. The federal government took a step in the right direction by increasing Ontarios Provincial Nominee Levels from 1,300 in 2013 to 2,500 in 2014. However, it still falls short of the 5,000 nominations Ontario has been seeking. A more flexible immigration selection system would allow Ontario to meet changing labour market needs and help the province grow. Ontario calls on the federal government to increase the nomination target and to bring Ontarios share of economic immigration up to 70 per cent, from the current share of only 50 per cent.

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Chapter III: Federal Underfunding of Ontarians

Ontario Needs a Committed Federal Partner to Invest in Stronger Ontario Health Care
The unilateral federal decision to limit the growth of the Canada Health Transfer (CHT) will have a significant impact on Ontarios delivery of quality health care. Instead of maintaining the CHT annual growth rate at six per cent, the transfer is now expected to increase at the rate of nominal economic growth nationally, approximately 4.3 per cent, starting in 201718. By 202324, this federal action will remove an estimated $8 billion from health care in Ontario and $21 billion nationally. The cumulative impact would be equivalent to reducing federal funding of health care by about $550 for every Ontarian by 2023. The federal funding that is being reduced could instead be used to help support Ontarios ongoing efforts to decrease wait times for surgical and diagnostic services, hire more doctors and nurses who provide Ontarians with access to primary care, and improve investments in the provinces home care initiatives that help older Ontarians live healthier, more independent lives.

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2014OntarioBudget

292

CHAPTER

IV

Strengthening Retirement Security in Ontario

ChapterIV:StrengtheningRetirementSecurityinOntario

Highlights
MovingforwardwithamandatorypensionplantheproposedOntario RetirementPensionPlanthefirstofitskindinCanadathatbuildsonthe strengthsoftheCanadaPensionPlan; Introducingalegislativeframeworkforpooledregisteredpensionplansthat isbroadlyconsistentwiththemodelintroducedbythefederalgovernment andadoptedbyvariousprovinces; Enhancinginvestmentopportunitiesforbroaderpublicsectorpensionplans throughpooledassetmanagement;and Enablingtheconversionofemployersponsored,singleemployerpension planstojointlysponsoredpensionplans.

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2014OntarioBudget

Introduction
Thegovernmentiscommittedtoastrongandsecureretirementincomesystemto helpensurethatOntariansarebetterabletoenjoytheirretirementyears. CanadaspubliclyadministeredCanadaPensionPlan(CPP)isfundamentaltothe retirementincomesecurityofallCanadians,butitsbenefitsalonearetoolowtomeet theneedsofmiddleincomeearners.AsnotedinOntariosLongTermReportonthe Economy(2014),twothirdsofworkersdonotparticipateinworkplacepensionplans. Severalstudieshaveshownthat,unlessactionistaken,asignificantportionof todaysworkerswillfaceadeclineintheirlivingstandardinretirement,andthat thisproblemwilllikelyworsenovertime. The

Undersaving Problem

Do Ontarians Have Enough Savings to Retire?


Year over year, more Canadians who are expecting to retire are concerned about not having enough money to support their retirement: 72% in 2013, 68% in 2012 and 67% in 2011.

Scotiabank Annual Investment Poll, 2014.


defined benefit and defined contribution pension members are Canadas lucky employees. More than 60 per cent of Canadian workers do not even belong to a workplace pension. Most will rely on a combination of personal savings, the Canada Pension Plan, and federal OAS and GIS supplements. For many retirees, personal savings wont be much help. In recent years, Canadian consumers have only set aside a threadbare 5.5 per cent of their income, a sharp drop from a 20 per cent savings rate in the 1980s.

Jim Leech & Jacquie McNish, The Third Rail, (McClelland & Stewart, 2013), p. 25.
For middle-income Canadians, as you project ahead, the Canada Pension Plan is not going to be able to do that which it must The role of government is not only to deal with today.

The Right Honourable Paul Martin


A growing gap will leave close to six million Canadians facing a more than 20% drop in living standards as they leave the workforce, even accounting for the savings on some expenditures that retirement brings. If left unchecked, current trends in pensions, government programs and savings rates will, particularly for todays younger cohorts, be insufficient to allow todays working Canadians to realize the retirement lifestyle that their elders have achieved.

CIBC World Markets Inc., Canadians Retirement Future: Mind the Gap, 2013.

296

ChapterIV:StrengtheningRetirementSecurityinOntario The21stcenturyworkforceneedsamodernretirementincomesystem, butOntarioandCanadahavea20thcenturysysteminplace.ThatiswhyOntario istakingaleadershiproleinaddressingthispressingissue.

The Retirement Savings Gap


Retirementexpertsoftenrecommendthatworkersaimtoreplaceupto 70percentoftheirincomeinretirementtomaintainasimilarlivingstandard. Canadasretirementbenefitprograms,namelyOldAgeSecurity(OAS)andthe CPP,donotprovidesufficientincomereplacementforthosewithmiddleincomes, asshowninChart4.1. Inaddition,asignificantportionoftodaysworkersarenotsavingenoughto maintaintheirstandardoflivingwhentheyretire.Individualswithmiddlepre retirementincomesfaceapotentialretirementincomegapduetothelimited benefitsprovidedbytheCPPandOAS.Theseworkersmustrelyonothersources ofretirementincome,suchasregisteredretirementsavingsplans(RRSPs),tofill thisgap.

CHART 4.1

Retirement Income Targets and Potential Gaps

Annual Retirement Income (Before Tax)


$70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0
Potential Gap
CPP OAS CPP OAS CPP OAS
Retirement Income Replacement Target
(Based on 70 per cent of Pre-Retirement Income)

Potential Gap Potential Gap

Series Series Series Series Series Series Series Series Series Series Series Series Series Series Series Series Series Series Series Series Series 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Annual Pre-Retirement Income (Before Tax)


At $70,000 $49,000 $29,829

At $45,000 Retirement Income Target Potential Gap $31,500 $14,109

At $90,000 $63,000 $43,829

Notes: CPP amounts assume the individual contributes for 40 years, begins collecting CPP at age 65 and had steady career before-tax earnings of $45,000, $70,000 and $90,000, expressed in 2014 dollars. OAS benefit amounts are based on estimates for 2014 and assume the individual has been a resident of Canada for 40 years after the age of 18, and begins collecting benefits at age 65. The target income levels are based on 70 per cent of pre-retirement income. Figures do not take into account the impact of income tax. Source: Ontario Ministry of Finance.

297

2014OntarioBudget Inadequatesavingnotonlyputsfutureretireesincomesatrisk,butwillalsohave negativelongtermimpactsontheeconomiesofOntarioandCanada. Increasingsavingstodaywouldmeanhigherincomesandincreasedspending byretireesthatwouldhelpgeneratefutureeconomicgrowthandemployment. ThiswouldhelptheOntarioeconomybettercopewithpopulationagingand couldhelpreduceintergenerationaltransfersfromfutureworkerstoretirees. AsnotedintherecentlypublishedpaperbytheformerGovernoroftheBankof Canada,DavidDodge,higherretirementsavingswouldalsomakemorecapital availableintheeconomyforinvestment.1Increasedinvestmentwouldresultin higherproductivity,leadingtostrongereconomicgrowthandjobcreation.

Factors Contributing to the Undersaving Problem


Theretirementsavingsproblemisrootedinseveralfactorsincludinglow workplacepensioncoverage,lowpersonalsavingsandlongerlifespans.Amore detaileddiscussionofthesefactorsandtheretirementsavingsproblemcanbe foundinOntariosLongTermReportontheEconomy(2014).

Most People Do Not Have a Workplace Pension Plan


Whereavailable,workplacepensionplansactasaveryeffectivesourceof retirementincomebeyondthatwhichisprovidedbypublicprograms.Households withoutworkplacepensioncoveragearemorelikelytoexperienceastandardof livingdeclineinretirementthanthosewithworkplacepensions.2 However,manyemployersdonotoffertheseplans.In2012,only34percentof Ontariosworkingpopulationbelongedtoaworkplacepensionplan. Buildingadequatesavingsthroughapensionplanisparticularlydifficultforthose whochangeemployersoftenoverthecourseoftheircareers.Youngerworkers, whoareexpectedtohavemultipleemployers,willbemorelikelytoencounter thispatchworkofcoverage.

DavidA.DodgeandRichardDion,MacroeconomicAspectsofRetirementSavings, (April2014). 2 MinistryofFinanceanalysisshowsthathouseholdswithoutworkplacepensioncoverageare about32percentmorelikelytoexperienceastandardoflivingdeclineinretirementthan householdswithpensioncoverage.

298

ChapterIV:StrengtheningRetirementSecurityinOntario

Voluntary Savings Are Inadequate


SincetwothirdsofOntariosworkersdonotparticipateinaworkplacepension plan,theymustrelytoagreaterdegreeonpersonalsavings. However,in2012,therewasabout$730billioninunusedRRSProominCanada, including$280billioninOntarioalone.Amongthosewithincomesbetween $25,000and$75,000whodocontributetoRRSPs,averagecontributionshave declinedinrecentyears.ArecentsurveybyScotiabank3indicatedthatonlyabout threeintenCanadiansplannedtomakeanRRSPcontributionin2014,downfrom 39percentinpreviousyears. Forthoseindividualswhodomanagetosave,traditionalinvestmentvehicleslike mutualfundsoftencarryhighmanagementfeesthatcansignificantlyerode savingsgrowth,regardlessoftherealrateofreturnontheinvestments.Over time,relativelysmallincreasesinfeescanhaveanimpactonanindividuals retirementsavings.Relativetoindividualretailcustomers,thefeesor managementexpenseratios(MERs)associatedwithcertaininvestmentsaremuch lowerforpensionplans.Assuch,membersofpensionplans,evensmallplans, canbenefit. Chart4.2illustrateshowmanagementfeesaffectretirementsavingsovertime forthecaseofanindividualmakingannualcontributionsof$6,000toanRRSP. Comparedtothepotentialsavingsportfoliovalueintheabsenceoffees, managementfeesof2.4percentoverthe40yearperiodcouldreducethe potentialportfoliovaluebymorethan44percent.However,iffeeswerelow (onepercent),thetotalretirementsavingswouldbeabout40percenthigher thanthetotalretirementsavingsinaportfoliowitha2.4percentfee.

Scotiabanknewsrelease,AreYouOnTracktoAchieveYourRetirementGoals? (February6,2014).

299

2014OntarioBudget
CHART 4.2

Impact of Management Fees on Retirement Savings


No Fees vs. 1% and 2.4% MERs

Value of Individual Savings ($)


900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 0 5 10 15 20 25 30 35 40
No Fees 1% MER 2.4% MER

$784,630 $605,689 $434,872

Years
Notes: The chart simulates stock and bond rates of return over a 40-year horizon based on estimates reported in Richard Guay and Laurence Allaire Jean, Long-Term Returns: A Reality Check for Pension Funds and Retirement Savings, C.D. Howe Institute, Commentary 395 (2013). The illustrated investment portfolio is composed of 50 per cent Canadian equities and 50 per cent Canadian bonds, with management expense ratios (MERs) of 0, 1, and 2.4 per cent. The 2.4 per cent MER is derived from the weighted average MER for mutual funds with $25 million or more in assets in 2013. Annual rates of return change with the number of years invested. The compounded annual growth rate without fees reaches about 4.9 per cent after 40 years but only 3.8 per cent with a 1 per cent MER and 2.5 per cent with a 2.4 per cent MER. The investment is assumed to be held in an RRSP. Sources: C.D Howe Institute and Ontario Ministry of Finance.

300

ChapterIV:StrengtheningRetirementSecurityinOntario

People Are Living Longer


Increasinglifespansareasignofhigherlivingstandardsandbetterhealth outcomes.However,thishasputpressureonpersonalsavingsandworkplace pensionplansabilitytoensurelifelongincomeoveraretirementperiodthatcan lastseveraldecades. AsshowninChart4.3,Ontariomenatage65cancurrentlyexpecttoliveanother 19years.Itisprojectedthat,by2035,Ontariomenaged65willhave,onaverage, 23moreyearstolive.ForOntariowomenaged65,lifeexpectancyiscurrently 22moreyearsandisprojectedtoriseto25yearsby2035.Whiletheseprojections areaverages,asignificantportionoffutureretireeswilllivewellbeyond theaverage.
CHART 4.3

Life Expectancy at Age 65 by Sex in Ontario


1979 to 2035

Life Expectancy at Age 65 (Years)

24

History

Projection

20

Females

Males

16

12

1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 2030 2033

Sources: Statistics Canada, 19792008, and Ontario Ministry of Finance.

Increasinglifeexpectancymakesitespeciallydifficultforthosewithoutpension planstoensuretheirpersonalsavingsareenoughtocarrythemthroughtheir retirementyears.Thosewithoutsufficientincomefrompensionsorpersonal savingswillbeforcedtorelytoagreaterdegreeongovernmentprogramsand services,andonfinancialsupportfromfamilymembers. 301

2014OntarioBudget

A Strategy to Enhance Retirement Savings


Modernizingtheretirementincomesystemwillrequirearangeoftoolsand closecollaborationwithallplayers,includingindividuals,employers,labour, thefinancialservicesindustry,andallordersofgovernment. TheProvinceiscommittedtotakingaleadershiproleinmodernizingthe retirementincomesystemtohelpensurethattodaysworkersareableto enjoytheirretirementyears. Aspartofacommitmenttostrengthentheretirementincomesystem, thegovernmentannouncedaboldnewstrategyinthe2013OntarioEconomic OutlookandFiscalReview.Thethreeprongedstrategyfocuseson: Ontarianswithoutworkplacepensionplans; Ontarianswithselfdirectedretirementsavings;and Ontarianswithdefinedbenefitplans.

TheProvincewillcontinuewiththisstrategy,withparticularemphasison innovationandmodernization,tohelpensurethatanyimprovementsto theretirementincomesystemmeettheneedsofa21stcenturyworkforce.

Ontarians without Workplace Pension Plans


Canada Pension Plan Provides a Sound Base But Benefits Are Inadequate
TheCanadaPensionPlanisanefficientandeffectivemandatorypublicpension program,withcontributionssharedequallybyemployersandemployees. ItprovidesCanadianswithasecurepensionthatispredictable,indexedto inflationandpaidforlife.BecausetheCPPisfullyportablewithinCanada,itallows workerswhochangejobsfrequently(e.g.,youngerworkers)tohaveongoing pensioncoverage,anditcoversvirtuallyalltypesofemployment.

302

ChapterIV:StrengtheningRetirementSecurityinOntario However,thebasicstructureoftheCPPhasnotchangedsincetheplanwas createdin1966.TheCPPsreplacementrateisonly25percentofpensionable earningsandworkerscannotcontributeonamountsaboveamaximumearnings threshold.4Theselimitsmeanthatthecurrentmaximumbenefitisonlyabout $12,500peryear,andtheaverageannualbenefitpaidisfarbelowthat,atabout $6,400inCanadaand$6,800inOntario.Theseamountsarenothighenoughto allowworkers,particularlymiddleincomeearners,tomaintaintheirstandardof livinginretirement. EnhancingtheCPPiscriticaltoensuringOntariansandCanadians,particularly middleincomeearners,havegreaterfinancialsecurityinretirement.Ontarios preferredapproachtostrengtheningtheretirementincomesystemisthroughan enhancementtotheCPP. Ontariohaslongplayedaleadershiproleinretirementincomesecurityandhas beenadvocatingforanenhancementtotheCPPsince2010.In2013,aschairof theCounciloftheFederation,Ontarioelevatedthepressingneedforpension reformtoanationaldialogue.Throughthisrole,Ontarioleddiscussionsamong provincialandterritorialfinanceministersonwaystoimproveCanadas retirementincomesystem,includinganenhancementtotheCPP.Duringthese discussions,provincesandterritoriesagreedtocontinueworkonapossibleCPP enhancement;forexample,byengagingfurtherwithbusinessandemployer communities. Despitetheconsensusamongprovincesandterritoriestocontinuethis collaborativeeffort,inDecember2013,thefederalgovernmentunilaterally shutdownCPPenhancementdiscussions. Thisactionbythefederalgovernmentnotonlycurtailedworkonapotential enhancement,buthasalsocrowdedoutdiscussionsonotherpossiblereformsto modernizetheCPP.

Theyearsmaximumpensionableearnings(YMPE)is$52,500in2014.TheYMPEisindexed toannualincreasesintheaveragewage.

303

2014OntarioBudget First-of-Its-Kind Provincial Pension Plan: The Ontario Retirement Pension Plan TheProvinceisnotpreparedtowaitforthefederalgovernmenttostepupto addresstheretirementincomechallengecurrentlyfacedbytodaysworking Canadians.Unlessactionistakennow,thereisariskthattheretirementsavings problemwillworsenovertime.Theretirementincomesystemwillbecome increasinglyoutoftouchwiththechangingworkforce,placingyounger generationsatasignificantdisadvantagerelativetotheirparents. Giventhefederalgovernmentsdecisiontoshutdowndiscussionsonan enhancementtotheCPP,Ontarioisproposingtomoveforwardwithanew mandatoryprovincialpensionplantheOntarioRetirementPensionPlan (ORPP)thatwouldbecosteffective,responsibleanddesignedtomeetthe needsofa21stcenturyworkforce. TheORPPwouldbethefirstofitskindinCanadaandwouldexpandpension coverageinitiallytomorethanthreemillionworkingOntarianswhocurrentlyrely ontheCPP,OASandtheirownsavingsforretirementincome.Itwouldbuildon thekeyfeaturesoftheCPP,andcouldlaterbeintegratedwiththeCPPshould negotiationsonanenhancementbesuccessfulinthefuture.

304

ChapterIV:StrengtheningRetirementSecurityinOntario Key Design Features of the Ontario Retirement Pension Plan Bytargetingthosemostatriskofundersaving,particularlymiddleincome earners,theORPPwouldhelpOntarioworkingfamiliesbuildamoresecure retirementfuture. TheORPPwouldincludethefollowingdesignfeatures: Provideapredictablestreamofincomeinretirementbypoolinglongevity andinvestmentrisk,andindexingbenefitstoinflation,similartotheCPPs retirementbenefit. Requireequalcontributionstobesharedbetweenemployersand employees,notexceeding1.9percenteach(3.8percentcombined)on earningsuptoamaximumannualearningsthresholdof$90,000.TheORPP maximumearningsthresholdwouldincreaseeachyear,consistentwith increasestotheCPPmaximumearningsthreshold. Aimtoprovideareplacementrateof15percentofanindividualsearnings, uptoamaximumannualearningsthresholdof$90,000.

WhencombinedwiththeretirementbenefitprovidedthroughtheCPP: Anindividualwithsteadycareerearningsover40yearsof$52,500 themaximumannualearningscoveredbyCPPwouldreplaceabout 40percentofpreretirementincomeandwouldreceiveanannuallifetime benefitofapproximately$19,935.Thisrepresentsa60percentincrease overthemaximumCPPbenefit. Anindividualwithsteadycareerearningsover40yearsof$90,000 themaximumannualearningsthresholdundertheORPPwouldreplace about30percentofpreretirementincomeandwouldreceiveanannual lifetimebenefitofabout$25,275.Thisisroughlydoubletheretirement benefittheindividualwouldreceiveundertheCPPalone.

For illustrative examples in this chapter, earnings levels are stated in 2014 dollars. Steady career earnings means that the individual earned the equivalent of the stated earnings in each of the 40 years, taking into account annual increases in the average wage.

305

2014OntarioBudget TheORPPwouldbepubliclyadministeredatarmslengthfromgovernment, haveastronggovernancemodelandberesponsibleformanaginginvestments associatedwithannualcontributionsofapproximately$3.5billion.Benefitswould beearnedascontributionsaremadetoensurethatthesystemisfair, andyoungergenerationsarenotburdenedwithadditionalcosts. SincetheORPPisintendedtoassistindividualsmostatriskofundersaving, particularlymiddleincomeearnerswithoutworkplacepensions,thosealready participatinginacomparableworkplacepensionplanwouldnotberequiredto enrolintheORPP. Toreducetheburdenonlowerincomeworkers,earningsbelowacertain thresholdwouldbeexemptfromcontributions,similartotheCPP.Currently, theCPPhasanannualbasicexemptionof$3,500.Thegovernmentwillconsulton whethertheORPPslowerincomethresholdwouldmirrorthatoftheCPP. Thegovernmentrecognizestheuniquestatusofselfemployedindividualsin thelabourmarketasbothemployeeandemployer.Thegovernmentwillconsult todeterminehowbesttoassistselfemployedindividualsinachievingasecure retirementfuture. RecognizingthatretirementincomesecurityiscriticallyimportanttoOntario familiesandforthefutureprosperityoftheprovince,thegovernmentwillbe movingforwardwithimplementationoftheORPPasapriority.TheORPPwould beintroducedin2017tocoincidewiththeexpectedreductionsinEmployment Insurancepremiums. EnrolmentofemployersandemployeesintotheORPPwouldoccurinstages, beginningwiththelargestemployers.Contributionrateswouldbephasedinover twoyears.

306

ChapterIV:StrengtheningRetirementSecurityinOntario Illustrative Examples of the Ontario Retirement Pension Plan TheORPPnumericalexamplesarebasedonanalysisofrecentCPPenhancement proposals.5TheseexamplesmayhelpshowhowtheORPPmightaddressthe undersavingproblem.SincethedesignandstructureoftheORPPmayvaryfrom theCPP,actuarialanalysiswouldberequiredtofinalizeelementsoftheORPP.6 Barbara,BonnieandBerniceareabouttoenterthelabourforceandplantowork for40yearsandretireat65.Forillustrativepurposes,atage65,Barbara,Bonnie andBernicewillhavehadsteadycareerearningsof$45,000,$70,000and$90,000 respectively,in2014dollars.Chart4.4illustratestheannualORPPretirement benefit,thebenefitlevelwhencombinedwithCPPbenefits,andtheannualCPP andORPPcontributions.7 Withacontributionrateof1.9percent,Barbara(earning$45,000)would contributeabout$788annuallytotheORPP,matchedbyheremployeroverher workingcareer.Inretirement,Barbarawouldreceive: AmaximumORPPbenefitof$6,410annuallyforlife;and CombinedORPPandCPPbenefitsofabout$17,090annuallyforlife, replacingabout40percentofherpreretirementincome.

Withacontributionrateof1.9percent,Bonnie(earning$70,000)would contributeabout$1,263annuallytotheORPP,matchedbyheremployeroverher workingcareer.Inretirement,Bonniewouldreceive: AmaximumORPPbenefitof$9,970annuallyforlife;and CombinedORPPandCPPbenefitsofabout$22,430annuallyforlife, replacingabout34percentofherpreretirementincome.

CPPenhancementestimatesarebasedonthe25thCPPActuarialReportasatDecember31, 2009. 6 DifferencesbetweenCPPassumptionsandthoseoftheORPPcouldaffecttheestimated contributionratesandbenefitlevelsoftheORPPdiscussedabove.Inadditiontopotential differencesinplandesign,otherfactorsthatcouldvarybetweentheCPPandtheORPP includethedemographicprofileofmembers(suchaslongevity),anddifferencesinlabour forcegrowth,realwagegrowth,inflation,therealrateofreturnandadministrativecosts. 7 TheestimatedvaluesoftheCPPandORPPbenefitsshownintheillustrativeexamplesdonot exactlyequalthenotedreplacementratemultipliedbythenotedearningslevel.SeeChart 4.4notes.

307

2014OntarioBudget Withacontributionrateof1.9percent,Bernice(earning$90,000)would contributeabout$1,643annuallytotheORPP,matchedbyheremployeroverher workingcareer.Inretirement,Bernicewouldreceive: AmaximumORPPbenefitof$12,815annuallyforlife;and CombinedORPPandCPPbenefitsofabout$25,275annuallyforlife, replacingabout30percentofherpreretirementincome.

CHART 4.4

Illustrations of Maximum Annual Benefit


Aggregate Replacement Rate ORPP and CPP ~ 30%

Maximum Annual Benefit (Before Tax)


$30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 $45,000 Barbara
Aggregate Replacement Rate ORPP and CPP ~ 40% Aggregate Replacement Rate ORPP and CPP ~ 34%

$22,430
$9,970
Max. annual combined contributions = $2,525

$25,275
$12,815
Max. annual combined contributions = $3,285

$17,090
$6,410
Max. annual combined contributions = $1,575

ORPP
Replacement rate = 15% Maximum earnings threshold = $90,000 Combined contribution rate = 3.8%

$10,680
Max. annual combined contributions = $4,110

$12,460
Max. annual combined contributions = $4,850

$12,460
Max. annual combined contributions = $4,850

CPP
Replacement rate = 25% Maximum earnings threshold = $52,500 Combined contribution rate = 9.9%

$90,000 Bernice Annual Earnings (Before Tax)

$70,000 Bonnie

Notes: CPP and ORPP amounts assume 40 years of contributions on steady career earnings (before tax). All figures are expressed in 2014 dollars. The estimated value of the CPP and ORPP benefits shown above do not exactly equal the noted replacement rate multiplied by the noted earnings level. In the above chart, the identified income levels reflect the individuals career earnings. However, the value of benefits is based on the workers career earnings adjusted for the average of the ORPPs maximum earnings threshold in the year of retirement and four previous years. This approach is consistent with the CPP. All figures are rounded.

308

ChapterIV:StrengtheningRetirementSecurityinOntario Implementation and Next Steps Todate,thegovernmenthasbenefitedtremendouslyfromtheadviceofformer PrimeMinisterPaulMartin,drawingonhisextensiveexperienceinretirement incomesecurityandCPPreform.InJanuaryofthisyear,thegovernment establishedaTechnicalAdvisoryGrouponRetirementSecurity,bringingtogether arangeofpensionexpertiseandperspectives. Asnotedearlier,aprovincialpensionplanofthisscalewouldbethefirstofits kindinCanada.ThegovernmentwillcontinuetoengagetheTechnicalAdvisory Groupon,amongotherissues,theappropriatelowerincomethresholdandhow besttoassisttheselfemployed.Furtherwork,includingactuarialanalysis,isalso requiredtofinalizetheORPPdesigndetails. OntarioishometosomeofCanadaslargestandmosthighlyregardedpension funds.Considerationwillbegiventohowtoleveragetheexpertiseofthese publicsectorpensionplanswithrespecttotheirstronggovernanceandproven investmenttrackrecord.Inaddition,thegovernmentwillconsiderhowto leveragetheprovincesstrongfinancialservicessectorandOntarios proposednewassetpoolingentityintheadministrationoftheplanand investmentmanagement. OntariowillworkwithotherprovincestoexaminewhethertheORPPcould beexpandedtoenhancetheretirementincomesecurityofthoseliving outsideOntario. ToensuretheORPPwouldeffectivelybalanceprovidingbenefitsecurityin retirementwithminimizingtheimpactonbusiness,thegovernmentwillconsult withOntarioemployersandlabour.Thegovernmentalsoplanstoworkwiththe federalgovernment,wherenecessary,tofacilitateaseamlessimplementation oftheORPPforOntarians. Furthertechnicaldetailswillbereleasedlaterthisyearpriortointroducing legislation.

309

2014OntarioBudget Impact on the Undersaving Challenge TheORPPwouldbeamajorstepinaddressingtheundersavingchallengeand modernizingtheretirementincomesystem. TheORPPwouldexpandpensioncoverageinOntarioatatimewhenworkplace pensioncoverageisonthedecline.Itwouldbuildonadvantageousfeaturesof theCPPsuchasbenefitpredictability,pooledlongevityandinvestmentrisk,and lowcostadministration.TheORPPwouldassistOntariosmodernworkforce inpreparingforretirementwhilesupportingastrongandprosperousOntario.

Pooled Registered Pension Plans


WhiletheORPPisacriticalelementinenhancingtheretirementincomesecurity ofOntarians,theundersavingchallengeisacomplexissuerequiringamulti facetedapproachandarangeoftools.Voluntarysavingsvehicleswillcontinue toplayanimportantroleinOntariosretirementincomesystem. Pooledregisteredpensionplans(PRPPs)areanewformoftaxassistedindividual retirementsavingsplan.Theyareintendedtomakeiteasiertosaveforretirement byofferingemployeesandtheselfemployedanadditionallowcostsavings vehicle(achievedthroughasimpledesignandeconomiesofscale).Theyare professionallymanaged,portablefromoneworkplacetoanother,andhavemore favourabletaxtreatmentthangroupRRSPs. Inthefallof2013andthewinterof2014,thegovernmentconsultedwith interestedpartiestodeterminehowPRPPscouldbestbeimplementedtoensure thattheymeettheneedsofOntarioscurrentworkforce.

310

ChapterIV:StrengtheningRetirementSecurityinOntario Key Design Features Afterreviewingfeedbackfromavarietyofstakeholders,includingmembersof thepublic;labourandemployerrepresentatives;retireeorganizations;pension experts;andvariouspublicandprivatesectorentities,thegovernmenthas decidedtomoveforwardwithalegislativeframeworkforPRPPsthatisbroadly consistentwiththemodelintroducedbythefederalgovernmentandadoptedby variousprovinces.Inparticular,anOntarioPRPPframeworkwouldincludethe followingkeydesignfeatures: VoluntaryparticipationandcontributionsbyemployersEmployers wouldchoosewhethertooffertheiremployeesaPRPPandwhetherto contributetotheiremployeesPRPP; AutomaticenrolmentofemployeesWhereanemployerelectstooffer aPRPP,enrolmentofemployeeswouldbeautomaticunlessanemployee choosestooptoutwithinaspecifiedperiod;and LowcostAdministratorswouldberequiredtoprovidePRPPsatalow costtoplanmembers.

Implementation ThegovernmentintendstointroducePRPPlegislationinthefallof2014. Ontariocontinuestosupportnationaleffortstoimprovetheretirementincome systemandrecognizesthevalueinworkingwithotherjurisdictionstodevelop innovativesolutionsthatadvancethisimportantgoalforallCanadians.AnOntario PRPPframeworkthatisharmonizedwiththoseofotherjurisdictionswouldassist increatingacoordinatedapproachtoadministrationandregulationacrossthe country.Notonlywouldthishelptocreateeconomiesofscaleandminimizecosts, butitwouldalsofostergreaterportability,supportingamodern,mobile workforce.

Target Benefit Pension Plans


Targetbenefitpensionplansofferemployersaninnovativenewoptionby combiningfeaturesofdefinedbenefit(DB)pensionplansanddefinedcontribution pensionplans.Targetbenefitpensionplanstargetaspecificpensionfundedby fixedcontributions.UnlikeDBpensions,thetargetbenefitpensionmaybe reducedtoaddressfundingshortfalls.

311

2014OntarioBudget TheProvinceintendstoconsultonaregulatoryframeworkformultiemployer targetbenefitpensionplanswithaviewtointroducingaframeworkthatsetsout eligibilityconditions,fundingrulesandgovernancerequirements.Feedbackfrom theseconsultationswillhelpinsubsequentlydevelopingaframeworkforsingle employertargetbenefitpensionplans.

Ontarians with Self-Directed Retirement Savings


Review Regulation of Financial Planning
The2013OntarioEconomicOutlookandFiscalReviewacknowledgedthatmany individualsrelyonfinancialadvisers,includingfinancialplanners,whenmaking savingsandinvestmentdecisions.Theextentofthisreliancemayposeaconcern sincefinancialplanninginOntarioisnotcurrentlysubjecttogeneralregulatory oversight.Inlightofthispotentialregulatorygap,thegovernmentcommittedto investigatethemeritsof,andpossibleoptionsfor,proceedingwithmoretailored regulation,andconsultedwithindustrystakeholdersinJanuary2014.However, noconsensusemergedontheappropriateregulatoryframework. TheMinisterwillappointanexpertcommitteetoconsidermorethoroughly possiblepolicyalternativesformoretailoredregulationandtodevelop recommendations.

Ontarians with Defined Benefit Plans


Thegovernmentwillcontinueworktoenhancethesecurityofbenefitsfor membersofDBpensionplanswhileensuringtheseplansremainaffordable forplansponsors.

Reform of Funding Rules


Pensionplansarerecoveringfromfundingchallengesexperiencedfollowing the200809recession.Sincethen,thefundinglevelofplansinOntariohas improvedconsiderably. ToensurethatDBplansareprudentlyfundedandsustainableforthelongterm, importantstepsneedtobetakentorefinefundingrules.

312

ChapterIV:StrengtheningRetirementSecurityinOntario Thegovernmentplanstoenactregulationsthatdefinethefundinglevelatwhich acontributionholidaycanbetakenandtheduration.Inaddition,proposednew regulationswouldsetparametersforacceleratedfundingofbenefit improvementsinunderfundedpensionplans.Thesenewruleswouldensureplans canmanagefuturefundingpressuresandcontinuetopayforthebenefitsthey offerinthelongerterm. Thegovernmentwillalsocarefullyconsider,inconsultationwithaffected stakeholders,theimplementationofotherfundingruleschangestosupportthe longtermsustainabilityofDBpensionplansinOntario. Aswell,thegovernmentintendstoaddresstheregulationsthattemporarily exemptspecifiedOntariomultiemployerpensionplansandjointlysponsored pensionplans(JSPPs)notsubjecttosolvencyfundingrequirementsfromthe solvencyconcernstest.Thistestcurrentlyrequiresplanswithsolvencyfunded ratiosoflessthan85percenttofileplanvaluationswiththeregulatorannually, ratherthantriennially. Thegovernmentintendstoextendtheexemptionthatwouldotherwiseexpireon December31,2014,toDecember31,2017,toallowsufficienttimefor consultationonanappropriatetestforallnonsolvencyfundedplans.This wouldincludetargetbenefitpensionplans,forwhichaframeworkiscurrently underdevelopment. Thegovernmentisalsocurrentlyseekingfeedbackfromstakeholdersbefore puttinginplacenewregulationstofurtherenhancetransparencyand accountabilitywithrespecttoplanfundingandinvestmentstrategiestoplan membersaswellasformerandretiredmembers.

Enhancing Investment Opportunities through Asset Pooling


Thegovernmentwillbemovingforwardwithaframeworktoenablepooling ofassetsofpensionplansinthebroaderpublicsectoraswellasendowment andotherfundsofpublicentitiesinordertoimprovetheirinvestmentresults. Largerpoolsofcapitalenableaccesstoabroaderrangeofinvestments, whichiskeytoimprovingriskadjustedreturns. TheProvincewilltargettheintroductionoflegislationinthespringof2015to enabletheestablishmentofanewassetpoolingentity,whichwouldoperate atarmslengthfromgovernment. 313

2014OntarioBudget TheWorkplaceSafetyandInsuranceBoardandtheOntarioPensionBoardhave stronginvestmenttrackrecordsandarewillingandwellplacedtobeinitial participantsinthenewpoolingentity. Participationofotherpensionplansandqualifiedorganizationsinthepooling entitywouldbeonavoluntarybasis.

Converting to JSPP Models


AJSPPisaDBpensionplaninwhichtheemployer(s)andplanmembersshare responsibilityfortheplansgovernanceandfunding.Employersandmembers jointlydeterminecontributionlevels,theallocationofsurplusandhowdeficits arefunded. The2013Budgetannouncedthegovernmentsintenttofacilitatethetransferof assetsfromemployersponsored,singleemployerpensionplans(SEPPs)toJSPPs andtoallowemployersponsoredSEPPstobeconvertedtoJSPPs.Throughthis Budget,thegovernmentisfulfillingthiscommitmentbyintroducinglegislative amendmentstothePensionBenefitsActthatwouldcreateregulatoryauthorityto prescriberequirementsforplanconversion. ToensurethatthenewJSPPprotectstheexistingpensionentitlementsfor convertingmembers,andistransparentandvoluntary,theamendmentswould requirethat: Thesamepensionbeprovidedtoretireesandtheequivalentvaluebe providedtocurrentemployeesuponconversion; Noticebeprovidedtoallplanbeneficiariesandtradeunions; Consentofplanbeneficiariesbeobtainedpriortotheplanconversion;and TheapprovaloftheSuperintendentofFinancialServicesbegranted.

Insomecircumstances,plansponsorsmayprefertotransfertheirpension responsibilitiestoanexistingJSPP.Thegovernmentintendstomakeregulations toensurethattheassetstransferredaresufficienttofundthetransferred liabilities,whilenotundulysubsidizingorenrichingexistingJSPPbeneficiaries. Thegovernmentrecognizesthattheavailabilityofanexemptionfrom solvencyfundingrulesfornewJSPPsisanimportantfactorforstakeholders exploringconversions. 314

ChapterIV:StrengtheningRetirementSecurityinOntario EmployersandplanmembersjoininganexistingJSPPthatisalreadyexemptfrom solvencyfundingrequirementswouldreceivethesametreatment. ThegovernmentwillconsiderexemptingnewJSPPsthatinvolvemultiple employersfromsolvencyfundingrequirements,subjecttocertaincriteria, tobedevelopedinconsultationwithstakeholders.Fornewsingleemployer JSPPs,considerationwillbegiventowhethersufficientprotectionsareinplace formembersandwhethertheplanscanbeexpectedtobesustainableinthe futurebeforeprovidingasimilarsolvencyexemption.

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2014OntarioBudget

316

CHAPTER V
A Fair and Efcient Tax System

ChapterV:AFairandEfficientTaxSystem

Highlights
AproposedPersonalIncomeTaxincreaseontaxableincomesabove $150,000,affectingthetoptwopercentofOntariotaxfilers. Legislativeamendmentsthatwouldimprovethefairnessofdividend taxcredits. Tosupportpublictransit,transportationinfrastructureandotherpriority projects: Aproposedchangetobettertargetthesmallbusinessdeduction;and Aproposedincreasetothetaxrateonaviationfuel. Anincreasetothetobaccotaxratefrom12.350centsto13.975cents percigaretteandpergramofothertobaccoproducts. Enhancedcompliancemeasurestopreservetheintegrityofthetax administrationsystem. Ataxcreditforfarmerswhodonatetocommunityfoodprogramsto encouragethedonationofagriculturalproductstothoseinneed. Continuedreviewoftaxexpenditures,includingresearchanddevelopment taxcredits,theApprenticeshipTrainingTaxCreditandtheCooperative EducationTaxCredit,toachievebetteroutcomesandimprovecost effectiveness.

319

2014OntarioBudget

Introduction
Ontariohastakenmanystepsinthelastfiveyearstofosteramorecompetitive businessclimate,positioningtheprovinceasoneofthemostattractivelocations intheindustrializedworldfornewbusinessinvestment.Thegovernmenthas reducedCorporateIncomeTax(CIT)ratesforlargeandsmallbusinesses, eliminatedtheCapitalTaxandintroducedtheHarmonizedSalesTax(HST), removingembeddedsalestaxesandprovidingsavingstobusinessesthatcan beusedtohelpthemgrowandcreatejobs.Thesemeasuresprovidesavingsto businessesofmorethan$9billionperyear. Thegovernmenthasalsomadechangestohelplowtomoderateincomepeople withtheirexpenses.Forexample,thegovernmentenhancedpropertyandsales taxcreditsandcombinedpaymentofthecreditsintotheOntarioTrilliumBenefit. OntariohasaprogressivePersonalIncomeTax(PIT)structurewherehighertax ratesapplyastaxableincomesincrease.In2012,thegovernmentincreasedPIT onthetop0.2percentoftaxfilers.Tocontinuefundingprogramsinafairand balancedway,theProvinceproposesthatthosewiththegreatestabilitytopay contributemorethroughtheirtaxes.ThePITchangesproposedinthisBudget wouldonlyaffectthetoptwopercentofOntariotaxfilersthosewithtaxable incomesover$150,000. Thegovernmentisproposingtocreatetwodedicatedfundstosupportpublic transitandtransportationinfrastructureprojects.Proposedrevenuesourcesfor thesefundsincluderestrictinglargecorporationsfromclaimingthesmallbusiness deductionandphasinginameasuredincreasetothetaxrateonaviationfuel. TheProvincewouldalsodedicatetheproceedsfrom7.5centsperlitreofthe existingprovincialgasolinetaxtothesefunds,withoutincreasingthecurrentrate of14.7centsperlitre,andrepurposerevenuesfromtheexistingHSTchargedon thecurrentprovincialtaxesongasolineandroaddiesel.Thiswouldbeinaddition tothesignificantongoingfundingOntariocurrentlyprovidestomunicipaltransit systemsacrosstheprovincebysharingtwocentsperlitreofprovincialgastax revenues.AdditionaldetailsonthesenewinvestmentscanbefoundinChapterI, SectionB:BuildingModernInfrastructure.

320

ChapterV:AFairandEfficientTaxSystem ATechnicalPanelhasbeenestablishedtoreviewOntariosbusinesssupport programsandprovideaframeworkforongoingevaluation.ThePanelsfinal reportisexpectedthisspring.TheProvincewillcontinuetoreviewexistingtax creditstoensurethattheyareeffectiveandefficient. Aspartofitscommitmenttohavingafairandefficienttaxadministration system,thegovernmentwilltakeadditionalmeasurestoaddressthe undergroundeconomy,corporatetaxavoidanceandcontrabandtobacco. Similarly,thegovernmentwillcontinuetoexploreopportunitiesforimproving servicestotaxpayers,suchasimplementingenhancedelectronicservices. ThegovernmentwillalsoreviewitstaxcollectionarrangementswiththeCanada RevenueAgencyonaregularbasistoensurethatqualityservicesareprovided toOntariansandthatoptimalrevenuesarerealizedthroughtaxadministration andcomplianceactivities.

321

2014OntarioBudget

Income Tax Changes for People


Personal Income Tax Rate Changes
Thegovernmentproposesto: Lowerthetaxableincomethresholdforthe13.16percenttaxratefrom $514,090to$220,000;and Addanewtaxrateof12.16percentontaxableincomebetween$150,000 and$220,000.

ThesechangeswouldapplytotaxationyearsendingafterDecember31,2013. ThefollowingtableillustrateshowtheproposedchangeswouldaffectthePIT taxableincomethresholdsandrates.

Table5.1

OntarioPersonalIncomeTax:TaxableIncome ThresholdsandRates
Proposed, 2014 and Subsequent Years Taxable Income Range ($) Above 220,000 150,000220,000 Tax Rate (Per Cent) 13.16 12.16 Share of tax filers

Current, 2014 Taxable Income Range ($) Above 514,090 Tax Rate (Per Cent) 13.16

2 per cent affected

80,242514,090

11.16

40,12080,242 Up to 40,120

9.15 5.05

Up to 150,000

No Change

98 per cent not affected

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ChapterV:AFairandEfficientTaxSystem Thenewincomethresholdswouldnotbeadjustedforinflationeachyear, unlikethecurrenttaxableincomethresholds. ThesemeasureswouldonlyapplytothetoptwopercentofOntariotaxfilers thosewithtaxableincomesabove$150,000andwouldnotapplyto98percent oftaxfilers.About220,000peoplewouldpaymoreOntarioPITin2014ontheir taxableincomeabove$150,000.Ofthese: About115,000peoplewithtaxableincomebetween$150,000and $220,000wouldpay$425moreOntarioPIT,onaverage,orabout 0.2percentoftheaveragetaxableincomeofthisgroup;and Theremaining105,000people,withtaxableincomeabove$220,000, wouldpayabout$5,500moreOntarioPIT,onaverage,orabout onepercentoftheaveragetaxableincomeofthisgroup.

Peoplewithtaxableincomesbelow$150,000wouldseenochangeintheir OntarioPITpayableasaresultofthesechanges. Ontariowouldcontinuetoprovideacharitabledonationstaxcreditrateof 5.05percentonthefirst$200ofdonationseachyear,and11.16percenton donationsoverthatamount.

Dividend Tax Credit Changes


The2013federalbudgetannouncedchangestothetaxtreatmentofdividends paidfromcorporateincometaxedatthefederalsmallbusinessrate(noneligible dividends),whichwouldautomaticallyreducetheOntariodividendtaxcredit ratefornoneligibledividends.WhencombinedwithOntariossurtax,thefederal changeswouldhaveinequitableimpactsontaxpayerswithdifferentincomes. Forpeoplewithhigherincomes,Ontariossurtaxincreasesthebenefitofdividend taxcreditsforbothnoneligibledividendsanddividendspaidoutofcorporate incometaxedathigherrates(eligibledividends). Tomitigatetheimpactofthefederalchangesandimprovethefairnessofthe taxationofdividends,theProvinceproposedmeasuresinthe2013Ontario EconomicOutlookandFiscalReviewthatwouldchangethedividendtaxcredit ratesandthesurtaxcalculation,startingin2014.

323

2014OntarioBudget Theproposedchangestothecalculationofthesurtaxwithrespecttodividend taxcreditswouldresultinthesecreditshavingthesamevalueforalltaxpayers, regardlessoftheirincomes.Thetaxcreditratesfornoneligibleandeligible dividendswouldbesetat4.5percentand10percent,respectively. Thegovernmentwillintroducelegislationtoimplementthesemeasures.

Tax Changes for Business


Small Business Deduction
TheOntariosmallbusinessdeduction(SBD)isintendedtoprovidetaxrelief tosmallbusinessesintheprovincesavingstheycanusetoinvestinthe growthoftheirbusinessesandhiremorepeople.OntariosgeneralCITrateis 11.5percent.TheSBDreducesthegeneralCITrateto4.5percentonthefirst $500,000ofOntarioactivebusinessincomeofCanadiancontrolledprivate corporations(CCPCs).Currently,aCCPCreceivesabenefitofupto $35,000peryearonthefirst$500,000ofactivebusinessincome. Currently,allCCPCsinOntariocantakeadvantageofthisrateregardlessofhow largetheyare.OntarioistheonlyprovincethatallowslargeCCPCstoclaimthis deduction.ThegovernmentproposestotakeactiontoensureonlysmallCCPCs canqualifyforthededuction,whichwouldbringOntarioinlinewitheveryother provinceandthefederalgovernment.Thiswasarecommendationofthe CommissionontheReformofOntariosPublicServices. OntarioisproposingtoparallelthefederalSBDphaseout,effectivefortaxation yearsendingafterBudgetday,andproratedfortaxationyearsthat straddletheBudgetday.TheSBDwouldbephasedoutforlargeCCPCs (andassociatedgroupsofCCPCs)withmorethan$10millionintaxablecapital employedinCanadainthepreviousyearandwouldbefullyeliminatedforlarge CCPCs(andassociatedgroupsofCCPCs)withtaxablecapitalemployedinCanada inthepreviousyearinexcessof$15million.

324

ChapterV:AFairandEfficientTaxSystem Theproposedmeasurewouldnotaffectsmallbusinesses.Itwouldapplyonlyto largeCCPCs,whichrepresent1.5percentofCCPCscurrentlyclaimingtheSBD. Therevenuegeneratedbythischangewouldbededicatedtopublictransit, transportationinfrastructureandotherpriorityprojectsacrosstheprovince. SeeChapterI,SectionB:BuildingModernInfrastructureformoreinformation.

Tax on Aviation Fuel


Aviationfuelhasbeentaxedatarateof2.7centsperlitresince1992.Thisrateis significantlylowerthantherateforgasoline(14.7centsperlitre)andtheregular ratefordiesel(14.3centsperlitre). ThisBudgetproposestoincreasethetaxrateonaviationfuelbyonecentperlitre eachyearforfouryears,beginningin2014.AnamendmenttotheGasolineTax Actwouldberequiredtoimplementtheproposedincreases.Theonecentper litrerateincreasefor2014wouldbeeffectivethedayaftertheamendment receivesRoyalAssent.Subsequentrateincreasesofonecentperlitrein2015, 2016and2017wouldbeeffectiveApril1ofeachrespective year.Uponfullimplementation,thetaxratewouldbe6.7centsperlitre. TheMinistryofFinancewouldworkwiththeMinistryofTransportationtoprovide relieftovulnerablecommunities,especiallythoseinremoteandnorthernareas. Therevenuegeneratedbythischangewouldbededicatedtopublictransit, transportationinfrastructureandotherpriorityprojectsacrosstheprovince. SeeChapterI,SectionB:BuildingModernInfrastructureformoreinformation. ThegovernmentwillalsoproposeamendmentstotheGasolineTaxActthatwould providetheMinisterofFinancewiththeauthoritytorequirethecompletionofan inventoryreport,andmakeregulationsinrespectoftheinventoryrequirement andtransitionalmatters.

325

2014OntarioBudget

Registration Requirements for Road-Building Machines


TheProvincewillproposeamendmentstotheHighwayTrafficAct(HTA)to modernize,by2016,thetreatmentofunregisteredroadbuildingmachinesthat usepublicroadsandhighways.Examplesofthesevehiclesincludemobilecranes, concretepumpersandhydrovacs.Thismeasureaimsto: Ensurethatownersoroperatorsofthesevehiclescontributetheirfair shareoftax; Maintaintheintegrityofrelatedregulatoryandlegislativerequirements suchastheapplicationoffueltaxandregistrationfees;and Helpleveltheplayingfieldbetweenroadbuildingmachinesandother commercialvehiclesthatusepublicroadsandhighways.

UndertheFuelTaxAct,taxexemptdieselfuelmaybeusedinunlicensed commercialvehicles,suchasroadbuildingmachines.AmendmentstotheHTA wouldincludeimposingregistrationandlicensingrequirementsonroadbuilding machinesthatusepublicroadsandhighways.Assuch,additionalfueltaxrevenue wouldresultfromlicensedroadbuildingmachinesthatwouldnotbepermittedto usetaxexemptfuel. TheMinistryofFinancewillworkwiththeMinistryofTransportationonreviewing theregistrationandlicensingrequirementsofthesevehicles. Therevenuegeneratedbythischangewouldbededicatedtopublictransit, transportationinfrastructureandotherpriorityprojectsacrosstheprovince. SeeChapterI,SectionB:BuildingModernInfrastructureformoreinformation.

Review of Business Tax Expenditures


Business Support Programs Review
Asannouncedinthe2013OntarioBudget,aTechnicalPanelisreviewingOntarios businesssupportprograms,includingtaxcredits,grantsandotherdirectsupport programs.ThePanelsfinalreportisexpectedthisspringandwillincludea frameworkforongoingevaluation.

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ChapterV:AFairandEfficientTaxSystem

Research and Development Incentives


Researchanddevelopment(R&D)supportslabourproductivitygrowthandis animportantfactorinincreasingeconomiccompetitiveness.Despitegenerous provincialtaxcreditsthatprovidedsupportforR&DinOntarioinexcessof $430millionin201314,businessspendingonR&Dasapercentageofgross domesticproduct(GDP)haslaggedthatoftheUnitedStatesoverthepastdecade.

CHART 5.1

Ontario Business R&D Spending Below the U.S.

Per Cent of GDP


2.2 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Ontario Canada U.S.

Sources: U.S. Bureau of Economic Analysis, National Science Foundation and Statistics Canada.

Asnotedinthe2013OntarioEconomicOutlookandFiscalReview,the governmentisreviewingoptionstorestructuretaxsupportforR&D,including anincentiveforincrementalR&D,withthegoalofincreasingR&Dinvestmentin Ontario.Anincrementaltaxincentivewouldrewardincreasedexpenditureson R&D,tyinggovernmentsupportdirectlytoincreasedR&Dinvestments.TheU.S. federalgovernment,mostU.S.statesandothercountries,suchasJapan, providetaxcreditsbasedonincrementalR&Dinvestment.

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2014OntarioBudget Forexample,thegovernmentwillexplorethefollowingapproach: CompaniesthatincreaseR&Dinvestmentwouldqualifyforanenhanced taxcreditonincrementalinvestmentinadditiontotheirexistingcredits; CompaniesthatmaintainconsistentR&Dinvestmentwouldreceivethe existingleveloftaxsupport;and CompaniesthatsignificantlydecreaseR&Dinvestmentwouldhaveexisting provincialtaxcreditratesreduced.

Dependingonthedesign,thenetimpactonprovincialrevenuescouldbenegative intheshorttermthatis,theamountofenhancedR&Dsupportforbusinesses investingmorewouldbegreaterthanthesavingsgeneratedbyalessgeneroustax creditforthosethatinvestless.Thisinvestmentcouldresultinlongtermbenefits totheeconomyatlargebyencouragingR&Dandinnovation,andboosting productivityatthefirmlevelandthroughoutthebroadereconomy.The governmentwillconsultwithbusinessesandresearchorganizationsonthis approach.

Training Tax Incentives


Tosupportemployerbasedtraining,Ontarioprovidesrefundabletaxcredits tobusinessesonthesalariesandwagespaidtoOntarioapprenticesandcoop students.Together,theApprenticeshipTrainingTaxCredit(ATTC)and CooperativeEducationTaxCredit(CETC)providedsupporttoemployersofabout $295millionin201314.Theaverageannualgrowthrateofthesetaxcreditshas been22percentsince200506thefirstfullyeartheATTCwasavailable. Sincethesetaxcreditsarerefundable,businessescanreceivetaxsupporteven ifnoincometaxispayableinayear.Thisdiffersfromfederaltaxsupportto businessforapprenticeshiptraining,whichisintheformofanonrefundabletax creditandislimitedtotheamountofincometaxliabilityinayear.The governmentwillreviewtrainingtaxcreditsforlargebusinesseswiththeintention oflimitingthesetaxcreditstotheamountabusinesspaysinincometax.Making thesetaxcreditsnonrefundablewouldrecognizethatlargerbusinesseshave accesstoothersourcesoffinancing;smallerbusinesseswouldbeabletocontinue toclaimrefundablecredits.Thegovernmentisalsocontinuingtoreviewtraining taxcreditstomakethemmoreeffective.

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ChapterV:AFairandEfficientTaxSystem

Revenue Integrity
Intodaysglobalenvironment,acompetitivetaxsystemisfundamentalto economicgrowthandprosperity.Equallyimportantistheneedtohaveafair andefficienttaxadministrationsystemthatensureseveryonepaystheirfair shareoftaxes.Iftheintegrityofthetaxadministrationsystemiscompromised, ithasseveralconsequences,including,mostdirectly,thelossoftaxrevenues andthelossofconfidenceintheoveralltaxsystem.TheOntariogovernmentis determinedtotackleareaswherethereareschemesandpracticesthatavoid thepaymentofrequiredprovincialtaxes.

Underground Economy
ArecentstudybyStatisticsCanadarevealedthattheundergroundeconomy remainsasignificantissue.Itisestimatedthattheundergroundeconomy accountsforapproximately2.3percentofgrossdomesticproduct(GDP), whichtranslatesintoapproximately$15billionfortheOntarioeconomy. Whilethemostdirectimpactoftheundergroundeconomyisthelossof significantrevenuetogovernments,therearealsoimplicationsforbusiness competitiveness,vulnerableworkersareexposedtounsafeworkingconditions, andconsumersmaybeputatriskwheretherearecashtransactions. TheministriesofFinance,LabourandConsumerServicesarecollaboratingto developanactionplanfocusedonaddressingillegalactivitiesinhighrisksectors. Theapproachwillfocusonincreasingpublicawareness,coordinatingenforcement activitiesandworkingwithindustrypartnerstoencouragebusinessestooperate inaccordancewiththeProvinceslaws. ThegovernmentisalsoworkingwiththeCanadaRevenueAgency(CRA)on enhancingcomplianceactivitiestoaddresstheundergroundeconomy.Aspartof amultiyearagreementnegotiatedin2013,theCRAhasbeenabletogenerate morethan$60millioninadditionaltaxrevenuesforOntarioin201314. Inaddition,throughtheTenderContractTaxComplianceinitiativelaunchedin February2014,businessesthatareengagedinprocurementactivitywiththe Ontariogovernmentmustdemonstrate(viacertificationoftaxcompliance)that theyarecompliantwiththeirprovincialtaxobligationspriortobeingawarded governmentcontracts.

329

2014OntarioBudget Whilethegovernmentisencouragedbysomeoftherecentinitiativestotackle theundergroundeconomyundertakenbythefederalgovernment,includingthose announcedinthe2014federalbudget,theabsenceofanationalstrategypresents amajorgapinaddressingthisproblem.Onceagain,Ontarioiscallingonthe federalgovernmenttoreleaseitsproposednationalstrategytoraisepublic awarenessofthisissueandtocoordinateeffortswithallprovinces.

Corporate Tax Avoidance


Recentmediaattentionhasraisedconcernsaboutagrowingnumberof individualsandcorporationsengagedinschemestoavoidpayingtaxes.Someof thestorieshavefocusedonlargecorporationspayinglittleornocorporatetaxin theirjurisdictions. Itisimportanttounderstandthedistinctionbetweentaxevasionandtax avoidance.Taxevasionreferstotheuseofillegalmeanstoreduceoravoidtax liability.Taxavoidanceistheuseofplanningtechniquestoreduceoreliminatetax liability.Wheretaxavoidancebecomesanissueiswhenplanningtechniquesare employedinanaggressivemannerthatareinconsistentwithandundermine theintentoftaxlegislation.Likemanycountries,Canadahasadoptedageneral antiavoidancerule(GAAR)tocontrolaggressivetaxavoidance.TheOrganisation forEconomicCooperationandDevelopment(OECD)hasbeendirectedbyG20 countriestodevelopproposalstoimprovetaxtransparency,combattaxevasion, andreducebaseerosionandprofitshifting,giventheglobalimplications. Reducingcorporatetaxavoidanceandclosingtaxloopholesisapriorityforthe Ontariogovernment.Thegovernmentsupportstheprinciplethateveryone shouldpaytheirfairshareoftaxes,includingcorporations. Tothisend,thegovernmentissupportiveofthevariousinitiativesundertakenby thefederalgovernment,includingthoseinthe2014federalbudget,toaddress aggressiveinternationaltaxplanning.Thegovernmentwillintroducelegislative amendmentstotheTaxationAct,2007,thatwouldrequirecorporationsin OntariotodiscloseaggressivetaxavoidancetransactionstothefederalMinister ofNationalRevenue,whoadministersOntarioscorporatetaxes.Thisapproach parallelsthosetakenbythefederalandQuebecgovernmentsonreportable transactionrules.

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ChapterV:AFairandEfficientTaxSystem Subjecttofederalimplementation,Ontariowouldalsoautomaticallyparallelthe followingfederalinitiativestoaddressaggressiveinternationaltaxplanning: Captiveinsuranceanamendmenttoanantiavoidanceruleintendedto preventCanadiantaxpayers,e.g.,financialinstitutions,fromshiftingincome fromtheinsuranceofCanadianrisksoffshore. Offshoreregulatedbanksanamendmentrelatedtothecalculation ofincomeforregulatedforeignfinancialinstitutionsownedbyCanadian taxpayers.

ThroughthemultiyearenhancedcomplianceagreementsignedwiththeCRAlast yeartoaddressaggressiveinternationaltaxplanning,Ontarioreceivedincreased revenuesofmorethan$150millionin201314. Ontarioremainsconcernedaboutthelackofactionbythefederalgovernment ontheissueofinterprovincialincomeshiftingthatallowscorporationstoshift profitsandlossesacrossprovincialboundaries,oftenresultinginsignificantloss ofcorporatetaxrevenuesforprovinces,butnotforthefederalgovernment. InMarch2013,FinanceMinisterCharlesSousawrotetothefederalgovernment urgingthemtoaddresstheissueofinterprovincialprofitandlossshiftingbut, todate,thatrequesthasnotbeenaddressed.

Enhanced Audit Activity


WiththefederalgovernmentcollectingPIT,CITandtheprovincialportionofthe HSTonbehalfoftheProvince,othertaxessuchasEmployerHealthTax,Tobacco Tax,GasolineandFuelTaxareadministeredbytheMinistryofFinance.Building onitsexistingcomplianceprograms,theministrywilldirectadditionalresources toitsFlexibleandIntegratedRiskSystem(FAIRS)programtoidentifyhighrisk auditcasesacrossseveraltaxstatutesandexpectstogenerateanadditional $10millionintaxrevenueannually.Cumulatively,thenewcomplianceactivities introducedoverthepastthreeyearsnowcontributeanadditional$75million annuallyintaxrevenues.

Ontarios Tobacco Strategy


StatisticsrelatedtothehealtheffectsoftobaccoinOntarioarealarming morethan13,000smokingrelateddeathsannuallyandhealthcarecostsofmore than$2.2billionannually.Thegovernmentwillcontinuetotakeactiontoimprove thehealthoutcomesofOntarians. 331

2014OntarioBudget

Smoke-Free Ontario Strategy


OntariosSmokeFreeStrategy,whichisaimedatprotectingOntarians,iscentral tothegovernmentsoveralltobaccostrategy.Thegoalremainsunchanged: tohavethelowestsmokingratesinCanadaandtoreducethesupplyoflowcost, illegaltobaccoavailabletoyoungpeople.

Tobacco Tax Increase


Tobaccotaxisanimportantcomponentofthecampaigntoreducesmoking. Severalstudies1indicatethattobaccotaxesareeffectiveatreducing tobaccoconsumption. Ontariostobaccotaxrateoncigaretteswaslastadjustedin2006,andtodayitis thelowestprovincialrateinCanada.Consistentwiththeactionsrecentlytakenby severalprovincialgovernmentsandthefederalgovernment,Ontarioisincreasing thetobaccotaxratefrom12.350centsto13.975centspercigarette(i.e.,from $24.70to$27.95percartonof200cigarettes)andpergramoftobaccoproducts otherthancigarettesandcigars,effective12:01a.m.thedayafterBudgetday. Thisincreaseaccountsforinflationsince2006andwillhelprestorethe effectivenessoftheOntariotobaccotax.Thetaxrateforcigarsremains unchangedat56.6percentofthetaxableprice. Wholesalersoftobaccoproductsthatarenotcollectorsoftobaccotaxare requiredtotakeaninventoryofalltobaccoproducts(exceptcigars)theyholdat theendofBudgetdayandremittheadditionaltaxontheinventorytothe MinistryofFinance.

Thesestudiesinclude:CigaretteTaxesandSmokingParticipation:EvidencefromRecentTax IncreasesinCanada,ConcordiaUniversity(2011);TheImpactofthe2009FederalTobacco ExciseTaxIncreaseonYouth Tobacco Use, University of Illinois at Chicago (2012); Differential Effects of Cigarette Price Changes on Adult Smoking Behaviours, Washington University School of Medicine (2012); and Global Effects of Smoking, of Quitting, and of Taxing Tobacco, Centre for Global Health Research, sponsored by St. Michaels Hospital and the University of Toronto (2014).

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Chapter V: A Fair and Efficient Tax System

First Nations Partnership


Tobacco has considerable ceremonial value as well as economic development importance to First Nation communities in Ontario. The government recognizes and respects this. It is within this context that the government has endeavoured to build a new partnership with First Nation communities. Progress continues to be made on the two pilot projects with the Chippewas of the Thames First Nation and the Mohawk Council of Akwesasne, with the goal of reaching agreements on community-based tobacco regulation on-reserve and a revenue-sharing agreement. Through information sharing and extensive dialogue, government officials and First Nation leaders are reviewing regulatory regimes from other jurisdictions. Ontario and its partners are looking for a sustainable, made-in-Ontario solution. In the 2013OntarioEconomicOutlookandFiscalReview, the government committed to conduct a formal review of the current system of allocating unmarked cigarettes, commonly referred to as the First Nations Cigarette Allocation System. In the coming months, the government plans to appoint a facilitator to engage with First Nation communities and leaders, and other organizations to listen and seek their advice on the current allocation system, including possible ways to modernize it.

Contraband Tobacco Enforcement


Several recent studies have suggested that the supply of contraband tobacco in Ontario is increasing and is undermining the Provinces health objectives. The government is concerned about this trend and is taking appropriate action to address it. The Ministry of Finances enforcement activities have resulted in the successful seizure of more than 235 million illegal cigarettes, 3.2 million untaxed cigars and 95 million grams of untaxed fine-cut or other tobacco products over the past six years. Furthermore, over the same period, approximately $35 million in penalties has been assessed under the TobaccoTaxAct.

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2014OntarioBudget To protect youth from cheap illegal products, improve community health and safety, and ensure appropriate taxes are paid, the government will be strengthening tobacco enforcement. Accordingly, the government will be proceeding with the implementation of the raw leaf oversight system effective January 1, 2015. This is consistent with the governments intent from Bill 186, SupportingSmokeFreeOntariobyReducingContrabandTobaccoAct,2011. The government also plans to introduce amendments to the TobaccoTaxAct that will increase fines for offences related to marked tobacco products, impound vehicles used to transport illegal tobacco and strengthen other enforcement measures.

Land Transfer Tax


Land Transfer Tax applies to all transfers of land in Ontario, both registered and unregistered, with few exceptions. The Ministry of Finance is reviewing aggressive tax avoidance structures and issuing assessments as appropriate. In particular, the Ministry is concerned that some structures attempt to use Ontario Regulation 70/91, made under the LandTransferTaxAct,in a manner inconsistent with its intent. The regulation provides a de minimis partnership exemption that is intended to apply to small changes in partnerships that own land. The exemption is not to be used as a vehicle to acquire land without payment of tax. The Province also proposes to introduce a general anti-avoidance rule into the LandTransferTaxAct, applicable to transactions that are completed after Budget day and transactions that are part of a series of transactions that is completed after Budget day. Other legislative options to further ensure the integrity of the land transfer tax system are also under consideration.

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Chapter V: A Fair and Efficient Tax System

Federal Tax Measures


Paralleling Federal Tax Measures
The 2014 federal budget proposed several personal and corporate income tax measures, including proposals related to: medical expenses; tax changes for farmers and fishers; amateur athlete trusts; estate donations; non-resident trusts; pension transfer limits; new limitations on shifting income to a minor child; donations of ecologically sensitive land and certified cultural property; clean energy generation equipment; and tax on insurance swaps and offshore regulated foreign financial institutions.

Under the terms of the CanadaOntario Tax Collection Agreement, Ontario will adopt these measures and their effective dates once federal legislative and regulatory changes have been approved. Similarly, the 2014 federal budget proposed an exemption from HST for certain health-related services and medical devices, that, once federal legislative changes are made, will apply in Ontario.

Taxation of Graduated Rate Trusts


In its 2014 budget, the federal government proposed to change the taxation of certain trusts and estates that pay income tax at graduated rates. This measure, which is proposed to take effect as of the 2016 taxation year, is under review.

335

2014OntarioBudget

Other Measures
Provincial Land Tax
The government is moving forward with its plan to reform the Provincial Land Tax (PLT). Provincial Land Tax is a property tax that applies in unincorporated areas outside municipal boundaries in Northern Ontario. The Province has not adjusted PLT revenues in several decades and, as a result, PLT rates in unincorporated areas are now significantly lower than municipal property tax rates in neighbouring municipalities. The 2013OntarioEconomicOutlookandFiscalReviewannounced that the Province would be reviewing the PLT to address the inequities that northern municipalities have identified between taxpayers within their boundaries and those outside. While the review is underway, PLT rates for 2014 have been frozen at 2013 levels. The Province will ensure PLT reform addresses the concerns of northern municipalities in a fair and balanced manner. In addition to consulting northern municipalities, the Province will seek input from residents and other stakeholders in the unincorporated areas. The consultations will be completed in 2014 and solutions will be brought forward to address tax fairness in Northern Ontario for the 2015 tax year.

Hospices
Ontario recognizes that end-of-life or palliative care encompasses a spectrum of activities beyond administering medicine. It is therefore making regulatory amendments to clarify the scope of the property tax exemption announced in the 2011OntarioBudget for non-profit hospices providing end-of-life care. The amendments would ensure that facilities providing supportive services for the care of terminally ill patients continue to receive fair treatment from the property tax system.

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Chapter V: A Fair and Efficient Tax System

Tax Credit for Farmers Who Donate to Community Food Programs


The LocalFoodAct,2013, which received Royal Assent on November 6, 2013, introduced a new non-refundable income tax credit for farmers who donate food to community food programs, including food banks. The credit is worth 25 per cent of the value of the agricultural goods donated and can be claimed for donations made beginning January 1, 2014. The government will bring forward regulations to implement the credit.

Summary of Measures
TABLE5.2 ($Millions) 2014BudgetTaxMeasures

201415
Income Tax Changes for People Personal Income Tax Rate Changes Tax Changes for Business Small Business Deduction Tax on Aviation Fuel Registration Requirements for Road-Building Machines1 Revenue Integrity Tobacco Tax Increase2 Federal Tax Measures Paralleling Federal Tax Measures Total
1

201516 685 50 45 135 120 1,035

201617 745 50 65 25 130 120 1,135

635 40 25 140 60 900

Amount shown is the additional fuel tax revenue that would result from changing registration and licensing requirements for road-building machines (made through amendments to the Highway Traffic Act). Impacts reflect an estimated decrease in smoking prevalence over time.

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2014OntarioBudget

Technical Amendments
To improve administrative effectiveness and enforcement, and maintain the integrity and equity of Ontarios tax and revenue collection system, as well as enhance legislative clarity and regulatory flexibility to preserve policy intent, amendments will be proposed to various statutes, including: AlcoholandGamingRegulation andPublicProtectionAct,1996 AssessmentAct BroaderPublicSector AccountabilityAct,2010 BuildingCodeAct,1992 ChildrensLawReformAct CommodityFuturesAct CompulsoryAutomobile InsuranceAct ElectricityAct,1998 EnvironmentalBillofRights,1993 FamilyLawAct FamilyResponsibilityandSupport ArrearsEnforcementAct,1996 FinancialAdministrationAct HousingDevelopmentAct IncomeTaxAct InsuranceAct LandTransferTaxAct LegislationAct,2006 LiquorControlAct LobbyistsRegistrationAct,1998 LongTermCareHomesAct,2007 MinistryofEnergyAct,2011 MinistryofMunicipalAffairsand HousingAct MinistryofRevenueAct OntarioEnergyBoardAct,1998 OntarioMortgageandHousing CorporationAct PensionBenefitsAct PrepaidHospitalandMedical ServicesAct SecuritiesAct TaxationAct,2007 TaxpayerProtectionAct,1999 TobaccoTaxAct

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CHAPTER VI
Borrowing and Debt Management

ChapterVI:BorrowingandDebtManagement

Highlights
Totallongtermpublicborrowingfor201415isforecasttobe$35.0billion, $1.0billionlowerthantheamountborrowedin201314and$2.6billion lowerthanforecastfor201415inthe2013Budget. Thetotalfundingrequirementfor201415is$1.6billionhigherthanforecast inthe2013Budgetprimarilybecauseofahigherprojecteddeficit.Thishigher projecteddeficitislargelyduetolowerfederaltransfersandslowerthan forecasteconomicgrowth,andstrategicinvestmentsintheeconomy. Cumulatively,sincethe2012Budget,longtermpublicborrowingis forecasttobelowerby$4.5billionforthethreeyearperiodfrom201213 to201415.Thislowerforecastisreflectedina$6.2billionreductionin projectednetdebtoverthesamethreeyearperiod. TheweightedaveragetermtomaturityoflongtermProvincialdebtissued was13.6yearsfor201314.Overthepastfouryears,theProvincehas extendedthistermsignificantly. Netdebtisprojectedtobe$269.2billionasofMarch31,2014,lowerthan the$272.8billionforecastinthe2013Budget,andthe$279.8billionforecast inthe2012Budget. ThenetdebttoGDPratioisprojectedtobe38.9percentattheendof fiscal201314,comparedtothe39.3percentforecastinthe2013Budget andthe40.8percentforecastinthe2012Budget.Thisratioisexpectedto peakat40.8percentin201516,slightlyhigherthanthe40.4percent forecastinthe2013Budget,butlowerthanthe41.3percentforecastinthe 2012Budget. ThegovernmentcontinuestomaintainatargetofreducingOntariosnet debttoGDPratiotoitsprerecessionlevelof27percent.

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2014OntarioBudget Interestondebt(IOD)expenseisprojectedtobe$10,556millionfor 201314,whichis$49millionlowerthanforecastinthe2013Budget. For201415,IODisprojectedtobe$11,010million,whichis$138million lowerthanforecastinthe2013Budget. For201415,theimpactofaonepercentagepointchangeininterestrates onIODisapproximately$400millionfortheProvince. TheProvinceplanstoissuegreenbonds,whichwillbeanimportanttoolto helpOntariofinancetransitandotherenvironmentallyfriendlyprojects acrosstheprovince,andwillbenefitfromOntariosabilitytoraisefundsat lowinterestrates. Ontariocontinuestohavepreferredaccesstointernationalanddomestic financialmarkets.TheProvincewillremainflexibleinitsborrowingapproach bymonitoringallmajormarketsandseekingthemostcosteffectivemeans, overthelongterm,tofinanceOntariosborrowingprogram. TheProvincemaintainshighlevelsofunrestrictedliquidreserves,which averaged$24.9billionfor201314toensureOntariowillalwayshave sufficientliquiditytomeetitsfinancialobligations. Thestrandeddebtoftheelectricitysectorisestimatedtobereducedfrom $11.3billionasofMarch31,2013,to$10.1billionasofMarch31,2014. Thisisthetenthconsecutiveyearofstrandeddebtreduction,followingthe periodbetween1999and2004whenitincreased. ThegovernmentisproposingtoremovetheDebtRetirementCharge(DRC) costfromresidentialelectricityuserselectricitybills,afterDecember31, 2015.TheDRCwouldremainonallotherelectricityusersbillsuntilthe residualstrandeddebtisretiredcurrentlyestimatedtooccurbythe endof2018.

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ChapterVI:BorrowingandDebtManagement

Introduction
Ontariosuccessfullycompleteditsannualborrowingprogramin201314, despitetheongoingchallengesthatlingerintheglobalfinancialmarkets. TheProvinceborrowed$36.0billionin201314,capitalizingonthecontinuing lowinterestrateenvironmentandstrongdemandforOntariobonds. TheProvincestotalfundingrequirementin201415hasbeenincreasedby $1.6billioncomparedtothe2013Budgetforecastprimarilybecauseofahigher projecteddeficitandborrowingonbehalfofInfrastructureOntario(IO).This higherprojecteddeficitislargelyduetolowerfederaltransfersresulting,inpart, fromthefederalgovernmentsdecisiontoallowOntariosmajortransfersto declinein2014andslowerthanforecasteconomicgrowthin2013and2014,as wellasstrategicinvestmentsmadeaspartofthe10yearplanfortheeconomy toputtheProvinceanditspeopleinapositiontosucceed.However,longterm publicborrowingin201415willbe$2.6billionlowerthanthe2013Budget forecast,primarilyasaresultofpreborrowingin201314andanincreasein shorttermborrowingtofundIOsshorttermfundingrequirements. Cumulatively,sincethe2012Budget,longtermpublicborrowingisforecastto belowerby$4.5billionforthethreeyearperiodfrom201213to201415.This lowerforecastisreflectedina$6.2billionreductioninprojectednetdebtoverthe samethreeyearperiod. StrongglobalinvestordemandforCanadiandollarassets,theliquidityofOntario benchmarkbondsandcontinuingconfidenceintheProvinceallowedOntarioto borrow82percentintheCanadiandollarmarketin201314,whichwaswell abovethetargetofatleast70percentsetoutinthe2013Budget.TheProvince completed72percentofitsborrowingintheCanadiandollarmarketin201213 and81percentin201112. TheProvincesdomesticandinternationalborrowingtargetswillremainthesame in201415asOntarioonceagainplanstoborrowatleast70percentinthe Canadiandollarmarket.Thisisinlinewiththehistoricalaverage,andcontinuesto representadeclineintherelianceonforeignmarketsseenduringthefinancial crisis.In200910,atthepeakofthecrisis,only49percentoftheProvinces issuancewasintheCanadiandollarmarket.

343

2014OntarioBudget

Term of Borrowing
CHART 6.1

Weighted-Average Term of Borrowings in Years

Years
16 14 12 10 8 6 4 2 0 200809 200910 201011 201112 201213 201314 8.6 8.1 12.8 13.0 13.6 12.4

Source: Ontario Financing Authority.

Giventhelowinterestratesexperiencedinrecentyears,Ontariohasbeen proactiveinextendingthetermofitsborrowingprogram.Theweightedaverage termtomaturityoflongtermProvincialdebtissuedhasbeenextended significantlyoverthepastfouryears. OntariowasoneofthefirstCanadiangovernmentstoissueultralongdebt(bond issueswithmaturitiesgreaterthan30years)totakeadvantageoftheselowrates, andhasbeenverysupportiveofthedevelopmentofthismarket.Since1998, Ontariohasissuedover$3.8billionofultralongdebt,including$475millionof 50yeardebtoverthepasttwoyears. Extendingthetermtomaturity,inpartthroughtheuseofultralongbonds, allowstheProvincetolockinlowinterestratesforalongerperiod,whichreduces refinancingrisksandhelpsoffsettheimpactofexpectedhigherinterestrateson theProvincesinterestondebt(IOD)costs.

344

ChapterVI:BorrowingandDebtManagement WhileOntariowillcontinuetouseultralongbondsandaccessthismarketwhen costeffectiveopportunitiesbecomeavailable,itwillbeusedjudiciouslyasa complementtoOntarios30yearborrowingprogram.Issuingultralongbondscan impact30yearborrowingbypotentiallyreducingfurtherissuanceopportunities anddecreasingoveralldemandforOntarios30yeardebt.

201314 Borrowing Details


CHART 6.2

201314 Borrowing
Domestic Bond Auction, $1.1B 3%

$36.0 Billion Issued

Domestic Floating Rate Notes, $2.3B 6%

Ontario Savings Bonds, $0.4B 1% Domestic Medium-Term Note, $0.02B 0% U.S. Dollar Global Bonds, $6.6B 18%

Syndicated Bonds, $25.5B 71%


Note: Numbers may not add due to rounding. Source: Ontario Financing Authority.

Canadiandollarborrowingwascompletedprimarilythrough32syndicatedissues, butalsoincludedfloatingratenotes,abondauction,OntarioSavingsBondsanda mediumtermnote. TheU.S.dollarmarketremainedanimportantsourceoffundingforOntario. About$6.6billion,or18percent,ofborrowingwascompletedthroughglobal bondsinU.S.dollars.

345

2014OntarioBudget Forthesecondconsecutiveyear,Ontariodidnotborrowincurrenciesotherthan CanadianorU.S.dollars.Aspartofits30percentinternationalissuancetargetfor 201415,theProvincewilllooktoborrowinothercurrenciesincludingeuros, Japaneseyen,Swissfrancs,AustraliandollarsandU.K.poundssterlingifcost effectiveopportunitiesbecomeavailable.Thepurposeofborrowingincurrencies otherthanCanadiandollarsistocontinuetodiversifytheProvincesinvestor base.ThishelpsreduceOntariosoverallborrowingcostsandensuresthatthe Provincewillcontinuetohaveaccesstocapitalifmarketconditionsbecome morechallenging.

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ChapterVI:BorrowingandDebtManagement

Borrowing Program Results


TABLE6.1
($Billions)

201314BorrowingProgram: ProvinceandOntarioElectricityFinancialCorporation
2013 Budget
11.7 11.1 (3.9) 0.6 0.9 23.7 0.3 44.5 (1.5) (5.8) (3.7) 33.4

Deficit Investment in Capital Assets Non-Cash Adjustments Loans to Infrastructure Ontario Other Net Loans/Investments Debt Maturities Debt Redemptions Total Funding Requirement Decrease/(Increase) in Short-Term Borrowing Increase/(Decrease) in Cash, Cash Equivalents and Temporary Investments Maturity of Debt Buybacks Preborrowing for 201415 Total Long-Term Public Borrowing
Note: Numbers may not add due to rounding.

Interim
11.3 9.0 (3.6) 0.6 0.6 23.6 0.2 41.7 (1.5) (3.0) (3.7) 2.6 36.0

In-Year Change
(0.4) (2.1) 0.3 (0.3) (0.1) (0.1) (2.8) 2.8 2.6 2.6

TheProvincesdeficitfor201314isnowprojectedtobe$11.3billion a$0.4billionimprovementcomparedwiththe2013Budgetforecast.Thetotal fundingrequirementfor201314isnowforecasttobe$2.8billionlowerthanthe 2013Budgetforecast,primarilyasaresultofthelowerdeficitandinvestmentsin capitalassets.However,giventhefavourablemarketconditions,theProvincehas borrowedtheoriginallyforecasted$33.4billionlongtermpublicborrowing requirement,aswellaspreborrowinganadditional$2.6billion.Asnotedearlier, thiswillreducetheamountoflongtermborrowingrequiredforfiscal201415.

347

2014OntarioBudget IODexpenseisprojectedtobe$10,556millionfor201314,whichis$49million lowerthanforecastinthe2013Budget,primarilyreflectingOntarioslowerthan forecastcostofborrowingrelativetoCanadaandcosteffectivedebt management.For201415,IODisprojectedtobe$11,010million,whichis $138millionlowerthanforecastinthe2013Budget,primarilyreflectingalower forecastforOntariosinterestrates.

Borrowing Program Outlook


TABLE6.2
($Billions)

MediumTermBorrowingOutlook: ProvinceandOntarioElectricityFinancialCorporation
201415
12.5 10.2 (4.5) 1.8 (0.5) 21.7 0.3 41.5 (2.4) (1.4) (2.6) 35.0

Deficit Investment in Capital Assets Non-Cash Adjustments Loans to Infrastructure Ontario Other Net Loans/Investments Debt Maturities Debt Redemptions Total Funding Requirement Canada Pension Plan Borrowing Decrease/(Increase) in Short-Term Borrowing Increase/(Decrease) in Cash, Cash Equivalents and Temporary Investments Preborrowing from 201314 Total Long-Term Public Borrowing
Note: Numbers may not add due to rounding.

201516
8.9 10.3 (4.9) 1.4 1.1 20.6 0.3 37.6 37.6

201617
5.3 10.2 (5.1) 0.8 0.2 21.3 0.3 33.0 (0.1) 32.9

TheProvincestotallongtermpublicborrowingin201415isforecasttobe $35.0billion,$1.0billionlowerthantheamountborrowedin201314,and $2.6billionlessthanforecastfor201415inthe2013Budget.Plannedlongterm publicborrowingin201516isprojectedtobe$0.6billionhigherthanthe forecastinthe2013Budget,primarilybecauseofthelargerdeficit.Longterm publicborrowingisthenforecasttodeclineby$4.7billionthefollowingyearto $32.9billionin201617.

348

ChapterVI:BorrowingandDebtManagement InfrastructureOntarioborrowsfromthemarketstoprovideloansfor infrastructuredevelopmenttothebroaderpublicsector,includingmunicipalities. From201415onwards,IOsborrowingwillbeundertakendirectlybythe ProvincethroughtheOntarioFinancingAuthority.Thiscentralizationwillallow borrowingtobeconductedinamorecosteffectivemanner,resultinginoverall interestsavings.WhiletheProvincesfundingrequirementwillincreaseinorder tofundIOsloans,netdebtwillnotbeaffectedasIOsborrowinginthepublic marketswillbereducedbyanidenticalamount. Tomeetitsfundingrequirements,Ontariowillcontinuetobeflexible,monitoring Canadiandollarandinternationalmarkets,issuingbondsindifferenttermsand currencies,andrespondingtoinvestorpreferences. ThegovernmentwillseekapprovalfromtheLegislatureforborrowingauthorityto meettheProvincesrequirement.

349

2014OntarioBudget

Developing the Green Bond Market in Ontario


Inthe2013OntarioEconomicOutlookandFiscalReview,theMinisterofFinance announcedthatOntariointendedtobethefirstprovinceinCanadatoissuegreen bonds.ThesebondswillbeanimportanttooltohelpOntariofinancetransitand otherenvironmentallyfriendlyprojectsacrosstheprovince,andwilltake advantageofOntariosabilitytoraisefundsatlowinterestrates. Overthepastsixmonths,Ontariohashelddiscussionswithinvestors, underwriters,internationalissuersofgreenbondsandthirdpartyenvironmental expertstoensurethatOntariosgreenbondswillappealtoasmanyinvestors aspossible.Workinginclosecollaborationwithvariousstakeholdersand governmentagencies,Ontarioisdevelopingarobustgreenbondframework thatwillalignwithOntariosenvironmentalpoliciesandclimateobjectives. Theworldmarketforgreenbondsisrapidlyevolving,andOntarioseesvalue inadheringtorecommendedgreenbondprinciplesthatsupporttransparency, disclosureandintegrityinthedevelopmentofthegreenbondmarket. Furthermore,tohelpfosterinvestorconfidenceinthisdevelopingmarket,Ontario willretainthirdpartyenvironmentalexpertstoprovideindependentverifications ofitsgreenbondframework.Thismayincludeobtainingsecondopinionsonthe greenbondframeworkorapplyingforgreenbondcertificationoncerecognized standardsforenvironmentalprojectsareputinplace. Ontarioexpectstobeinapositiontoissueitsfirstgreenbondinearlyfiscal 201415andisplanningtolaunchthisissuedomesticallytohelpestablisha Canadiandollargreenbondmarket.ThisissuancewillsolidifyOntariospresence inthegreenbondmarketandbringvisibilitytotheprovincebyencouraging investmentsinsustainableprojects. TheProvinceintendstoissuethesebondswiththesameyieldasOntariobonds ofcomparabletermandsize.WhenthemarketforgreenbondsinCanadahas hadtimetodevelopsufficiently,Ontariowillexamineopportunitiestosellgreen bondsdirectlytoretailinvestorsiftheycanbeundertakeninacosteffective manner.

350

ChapterVI:BorrowingandDebtManagement

Ensuring Preferred Market Access


Ontariocontinuestohavepreferredaccesstothebondandmoneymarkets,both domesticallyandinternationally.TheProvinceusesavarietyoftoolstoensure thatitwillcontinuetohaveunhinderedaccesstocapitalasneeded,whetherthis isinstablemarketslikein201314,orindifficultconditions,suchasin200910. In201314,theProvincewasabletotakeadvantageofarobustdomestic markettocomplete82percentofitslongtermborrowingrequirementthrough syndicatedbonds,floatingratenotes,abondauction,OntarioSavingsBondsand amediumtermnote.TheProvincealsoplanstoissuegreenbondsintheCanadian marketin201415.Thisabilitytoissuedebttargetedatavarietyofbuyersallows theProvincetoborrowcosteffectivelyandhaveaccesstomarketsevenduring difficultconditions. TheProvincehasalsobeenverysuccessfulinreopeningexistingsyndicatedbond issuesandisabletoaccommodateinvestorsdemandingsignificantamountsof Ontariodebtthroughitslargeorderprocedure.ThisallowstheProvincetoraise cashcosteffectivelyoverashortperiodoftime.
CHART 6.3

Domestic and International Borrowing

$ Billions
45 40 35 30 25 20 15 10 5 0 200506 200607 200708 200809 200910 201011 201112 201213 201314
19.8 14.2 23.8 4.0 18.7 4.5 18.0 2.6 19.0 21.4 23.5 43.8

Canadian dollar Foreign currencies


28.7 9.7 22.4

39.9 34.9 16.4 6.5 36.6 10.2 36.0 6.6

28.4

26.4

29.4

15.4

Note: Numbers may not add due to rounding. Source: Ontario Financing Authority.

351

2014OntarioBudget Whileaccessremainedparticularlystrongduring201314inthedomesticmarket, wheretheProvincehastraditionallydonemostofitsborrowing,theU.S.dollar marketcontinuedtoprovideanexcellentplatformtocompletetheremaining 18percentofthe201314borrowingrequirement.TheProvinceregularly accessestheU.S.dollarmarket,havingborrowed$23.0billioninU.S.dollarsover thepastthreeyears.OntariosmostrecentU.S.dollarissuancewasahighly successful,fiveyearbenchmarkbondfor$2.0billioninJanuary2014,which attractedover90investorsandhadstronginterestfromofficialinstitutionsinthe AmericasandEurope.OntariosU.S.dollarbondstendtobelargebenchmark issuesthatareactivelytradedandhighlyliquid. WhileOntariohasnotborrowedincurrenciesotherthanCanadianandU.S. dollarsforthepasttwoyears,theProvincecontinuestoremainvigilantfor costeffectiveborrowingopportunitiesinothercurrencies.Ontarioalsoworks tostrengthenitsdiverseinvestorbasethroughitsinvestorrelationsinitiatives. Itmaintainsstrongworkingrelationshipswithglobalinvestmentdealers,issuers andotherindustryexperts.Inaddition,theProvinceprovidesuptodateinvestor informationproductsandregularupdatesonthestatusofOntariosborrowing programthroughtheOntarioFinancingAuthorityswebsite. Thisvigilance,combinedwithattentiontointernationalmarketsandinvestors, hasbeenrewardedduringtimesofchallengingmarketconditions,suchasin 200910atthepeakofthefinancialcrisis,whenborrowinginthedomestic marketwasdifficult.Ontariocompleted51percentofits$43.8billion,200910 borrowingrequirementininternationalmarketsthroughglobalissuesinU.S. dollars,euros,SwissfrancsandHongKongdollars.Overall,theProvincemaintains adiverseinternationalinvestorbase,havingissuedbondsinmorethan10different currenciesoverthepastdecadeandattractinginvestorsfromallovertheglobe. TheProvincewillremainflexibleinitsborrowingapproachbymonitoringall majormarkets,andseekingthemostcosteffectivemeans,overthelongterm, tofinanceOntariosborrowingprogram.Thiswillincludecontinuingtoreachout toinvestorsandinvestmentbanks,domesticallyandglobally,toensurethat Ontariobondissueswillremainhighlyattractive,liquidandsoughtafter,asthey havebeensinceOntariofirstbeganaccessingpublicmarketsalmost25yearsago.

352

ChapterVI:BorrowingandDebtManagement

Ensuring Adequate Liquidity Levels


Ontarioactivelymanagesitsabilitytomeetitsfinancialobligationsthroughthe maintenanceofaliquidreserveportfolioandtheuseofshorttermborrowing. TheProvincehasconsistentlymaintainedhighlevelsofunrestrictedliquid reservessincethefinancialcrisis,averaging$24.9billionfor201314, $23.3billionfor201213and$20.2billionfor201112. TheProvincesshorttermborrowingprogramintheCanadianandU.S.dollar moneymarketsisrelativelysmall,accountingforonly8.4percentofOntarios debt.Theunusedshorttermborrowingcapacitythatthisleaves,combinedwith thehighlevelsofunrestrictedliquidreserves,ensuresthattheProvincewill alwayshaveadequateliquiditytomeetitsfinancialobligations.

CHART 6.4

Average Unrestricted Liquid Reserve Levels

$ Billions
30 25 20 15 10 5 0 200809 200910 201011 201112 201213 201314
8.3 14.4 19.4 20.2 23.3 24.9

Source: Ontario Financing Authority.

353

2014OntarioBudget

Reducing Ontarios Stranded Debt


TheOntarioElectricityFinancialCorporation(OEFC)inherited$38.1billionin totaldebtandotherliabilitiesfromtheformerOntarioHydrowhentheOntario electricitysectorwasrestructuredonApril1,1999.Aportionofthe$38.1billion wassupportedbythevalueoftheassetsofOntarioHydrosuccessorcompanies, leaving$20.9billionofstrandeddebtnotsupportedbythoseassets. Interim201314resultsfortheOEFCshowanestimatedexcessofrevenueover expenseof$1.2billion,reducingtheCorporationsunfundedliability(orstranded debtoftheelectricitysector)from$11.3billionasofMarch31,2013,to $10.1billionasofMarch31,2014. Projected201415OEFCresultsareanexcessofrevenueoverexpenseof $1.3billion,whichwouldreducetheunfundedliabilityto$8.8billionasof March31,2015.

This is the tenth consecutive year of stranded debt reduction, following the period between 1999 and 2004, when OEFCs unfunded liability increased by about $1 billion and while there was underinvestment in electricity supply and transmission infrastructure.

354

ChapterVI:BorrowingandDebtManagement

CHART 6.5 $ Billions


25 20 15 10 5 0
7.8 5.9

Residual Stranded Debt since April 1, 1999


Initial Stranded Debt OEFC Unfunded Liability* Residual Stranded Debt

11.9 9.9 6.3 7.7 7.5 8.5 7.6 6.7

5.6

5.4

5.8

4.5

3.9

* OEFCs unfunded liability as at April 1, 1999, was $19.4 billion, which is the initial stranded debt of $20.9 billion adjusted for $1.5 billion of additional OEFC assets as of that date, including primarily an accounting asset for deferred debt charges. Notes: Unfunded Liability amounts are from OEFC Annual Reports from 19992000 to 2012, and the Annual Financial Statements for 2013. Residual Stranded Debt value for April 1, 1999, as announced on April 1, 1999. Values for the period from March 31, 2000, to March 31, 2010, as estimated by the Ministry of Finance in the 2012 Budget and for March 31, 2011, to March 31, 2013, as determined by the Minister of Finance in accordance with a regulation made under the Electricity Act, 1998.

Since2004,thegovernmentselectricitysectorreformsintheElectricity RestructuringAct,2004,andothers,haveputthestrandeddebtrecoveryplan backontrack,whileatthesametimeresultinginsignificantinvestmentsinthe electricitysector. Aspublishedinthe2013OntarioEconomicOutlookandFiscalReview,the MinisterofFinancedeterminedtheresidualstrandeddebttobe$3.9billion asofMarch31,2013.UnderOntarioRegulation89/12,thedeterminationof residualstrandeddebtasofMarch31,2014,willbemadebytheMinisterof FinanceaftertheOEFCsubmitstotheMinisteritsannualreport,includingthe auditedfinancialstatements,andbynolaterthanMarch31,2015. TheAuditorGeneralauditsOEFCsannualfinancialstatementsandhasprovided anunqualifiedopinioneveryyearsincetheinitial19992000financialstatements. ThisincludesOEFCsinterestexpense,whichiscurrentlyabout$1.5billion peryearandhastotalledabout$29.2billionbetweenApril1,1999,and March31,2014.

355

2014OntarioBudget AsconfirmedintheAuditorGenerals2011AnnualReport,theDRCisused exclusivelybyOEFCtomeetitsmandate,asprovidedforundertheElectricityAct, 1998,whichincludesservicingandretiringitsdebtandotherliabilities. TheAuditorGenerals2012and2013AnnualReportsalsonotedthattheAuditor waspleasedtoseeanincreasedleveloftransparencywithrespecttopublic reportingontheresidualstrandeddebt. AspartofOntariosplantolowerpressureonelectricityratesforresidential customers,thegovernmentisproposingtoremovetheDRCcostfromresidential electricityuserselectricitybills,afterDecember31,2015,oncetheOntarioClean EnergyBenefit(OCEB)ends. Thechargewouldremainonallotherelectricityusersbillsuntiltheresidual strandeddebtisretiredcurrentlyestimatedtooccurbytheendof2018, inlinewiththepreviousestimatedrangeinthe2013OntarioEconomicOutlook andFiscalReview. Theestimatedtimingforresidualstrandeddebtretirementissubjectto uncertaintyinforecastingfutureOEFCresultsanddedicatedrevenuestoOEFC, whichdependonthefinancialperformanceofOntarioPowerGeneration,Hydro Oneandmunicipalelectricalutilities,aswellasotherfactorssuchasinterestrates andelectricityconsumption.

356

ChapterVI:BorrowingandDebtManagement

Provincial Debt
Totaldebt,whichrepresentsallborrowingwithoutoffsettingfinancialassets, isprojectedtobe$295.8billionasofMarch31,2014,comparedto$281.1billion asofMarch31,2013,andaforecastof$290.9billioninthe2013Budget. Totaldebtishigherthanthe2013Budgetforecastasaresultofthe$2.6billion inpreborrowingfor201415completedduringthe201314fiscalyear,aswell asdebtissuedatadiscountandforeignexchangedebtrevaluations. Ontariosnetdebtisthedifferencebetweentotalliabilitiesandtotalfinancial assets.Ontariosnetdebtisprojectedtobe$269.2billionasofMarch31,2014 (March31,2013,$252.1billion).ThisprojectionforMarch31,2014,is$3.6billion belowtheforecastof$272.8billioninthe2013Budget,andlowerthanthe forecastof$279.8billioninthe2012Budget.Thisincludesthebroaderpublic sectorsnetdebtof$14.2billion(March31,2013,$13.9billion).

357

2014OntarioBudget

Debt-to-GDP Ratios
TheProvincesnetdebttoGDPratioisprojectedtobe38.9percentattheend offiscal201314,comparedtothe39.3percentforecastinthe2013Budget, andthe40.8percentforecastinthe2012Budget.Thisratioisexpectedtopeak at40.8percentin201516,slightlyhigherthanthe40.4percentforecastinthe 2013Budget,butlowerthanthe41.3percentforecastinthe2012Budget. ThegovernmentcontinuestomaintainatargetofreducingOntariosnet debttoGDPratiotoitsprerecessionlevelof27percent.

CHART 6.6

Net Debt-to-GDP

Per Cent
45 40 35 30 25 20 15 10 5 0
21.2 17.1 13.4 26.9 32.2 31.5 30.7 30.3 29.7 29.5 28.6 28.4 32.5 27.1 27.5 26.6 27.7 26.8 26.2 28.1 34.1 36.0 37.4 40.8 40.6 39.7 38.9 40.3

Actual

Outlook

Note: Net Debt has been restated to include Broader Public Sector Net Debt, starting in 200506. Source: Ontario Ministry of Finance.

358

ChapterVI:BorrowingandDebtManagement
CHART 6.7

Accumulated Deficit-to-GDP

Per Cent
35 30 25 20 15 10 5 0
17.1 13.4 21.2 26.9 28.6 30.3 31.5 30.7 32.2 29.7 29.5 28.4 24.3 24.6 23.7 19.8 18.6 18.7 23.0 25.6 24.2 24.8 26.5 26.5 26.1 25.0

22.0 17.7

Actual

Outlook

Source: Ontario Ministry of Finance.

359

2014OntarioBudget

Cost of Debt
Theeffectiveinterestrate(onaweightedaveragebasis)ontotaldebtis estimatedtobe3.9percentasofMarch31,2014(March31,2013,4.1percent, andMarch31,2012,4.4percent).Thisratehascontinuedtodropinspiteofthe Provinceextendingthetermofitsdebtissuedtoreducerefinancingrisks. Forcomparison,onMarch31,1991,theeffectiveinterestrateontotaldebt was10.9percent. For201415,theimpactofaonepercentagepointchangeininterestrateson IODisapproximately$400millionfortheProvince.

CHART 6.8

Effective Interest Rate (Weighted Average) on Total Debt

Per Cent
12 10 8 6 4 2 0
10.9 10.7

10.1

9.5

9.8

9.4

9.0

9.0

8.6

8.4

8.2

7.6

7.2

6.7

6.4

6.1

6.0

5.8

5.2

4.6

4.5

4.4

4.1

3.9

Sources: Ontario Public Accounts (19912013) and Ontario Financing Authority.

360

ChapterVI:BorrowingandDebtManagement

Total Debt Composition


Totaldebtconsistsofbondsissuedinthepubliccapitalmarkets,nonpublicdebt, treasurybillsandU.S.commercialpaper. Publicdebt,asofMarch31,2014,totals$282.9billion,primarilyconsistingof bondsissuedinthedomesticandinternationalpublicmarketsin10currencies. Ontarioalsohas$12.9billionoutstandinginnonpublicdebtissuedin Canadiandollars.Nonpublicdebtconsistsofdebtinstrumentsissuedmainlyto publicsectorpensionfundsinOntarioandtheCanadaPensionPlanInvestment Board.Thisdebtisnotmarketableandcannotbetraded.

CHART 6.9

Total Debt Composition

$295.8 Billion Outstanding


Domestic Bonds Syndicated bonds Medium-term notes Floating rate notes Ontario Savings Bonds Bond auctions Real return bonds

Non-Public Debt, $12.9B, 4%

Treasury Bills and U.S. Commercial Paper, $21.2B, 7%


International Bonds Canadian dollars U.S. dollars Euros Japanese yen New Zealand dollars Norwegian kroner Swiss francs Australian dollars South African rand Hong Kong dollars

Domestic Bonds, $198.9B, 67%

International Bonds, $62.8B, 21%

Note: Numbers may not add due to rounding. Source: Ontario Financing Authority.

361

2014OntarioBudget

Limiting Risk Exposure


TheProvincecontinuestotakeaveryprudentapproachtomanagingtherisks associatedwithitsborrowingprogram.Liquidreservesaveraged$24.9billionin 201314,ensuringthattheProvincewillalwayshaveadequateliquiditytomeet itsfinancialobligations.Ontariohasalsobeenproactiveinextendingthetermof itsborrowingtoreducerefinancingriskandexposuretochangesininterestrates. Theaveragetermofborrowingin201314was13.6years. Ontariolimitsitselftoamaximumnetinterestrateresettingexposureof 35percentofdebtissuedforProvincialpurposesandamaximumforeign exchangeexposureoffivepercentofdebtissuedforProvincialpurposes.Asof March31,2014,theinterimvaluesfornetinterestrateresettingexposureand foreignexchangeexposurewere11.0percentand0.4percentrespectively. Allexposuresremainedwellbelowpolicylimitsin201314.
CHART 6.10

Net Interest Rate Resetting Exposure

As a Percentage of Debt Issued for Provincial Purposes (Interest Rate Exposure Limit Set at 35 Per Cent)
35 30 25 20 15 10 5 0
March 31, 2010 March 31, 2011 March 31, 2012 March 31, 2013 March 31, 2014 (Interim)

11.4 8.3 8.3

8.9

11.0

Note: Excludes OEFC debt. Source: Ontario Financing Authority.

362

ChapterVI:BorrowingandDebtManagement
CHART 6.11

Foreign Exchange Exposure

As a Percentage of Debt Issued for Provincial Purposes (Foreign Exchange Exposure Limit Set at 5 Per Cent)
5 4 3 2 1 0
0.1
March 31, 2010 March 31, 2011 March 31, 2012 March 31, 2013

1.0

1.0

0.8 0.4
March 31, 2014 (Interim)

Note: Excludes OEFC debt. Source: Ontario Financing Authority.

TheProvinceusesderivatives,whichareatypeoffinancialcontract,tomanage riskexposureandminimizeinterestcosts.Theuseofderivativesallowsthe Provincetooffsetexistingobligationsandconvertthemintoobligationswith moredesirablecharacteristics.Specifically,theProvinceusesinterestrateswaps andcurrencyswapstoreducetherisksassociatedwithissuingbondsindifferent currenciesandhedgeinterestcosts. ThishedgingprocessmaybecomemorecomplexduetotheDoddFrankActand BaselIIIregulations.Hedgingmayalsobecomemoreexpensiveifproposalssuch asfinancialtransactiontaxesormarktomarketderivativestaxesarelegislated andimplementedinEuropeortheUnitedStates. Initiativesthatassistregulatorsinensuringthefuturestabilityofcapitalmarkets arewelcome.However,itmustberecognizedthattheseinitiativesmayincrease thecostofhedgingthroughsubstantiallyhighertransactioncostsandcapital chargesontheProvincescounterparties.

363

2014OntarioBudget TheProvincesconsolidatedderivativeportfoliofor201314(asofMarch19,2014) hadanotionalvalueof$198.8billion(2013,$199.0billion),whichconsistedof $117.6billion(2013,$117.0billion)ininterestrateswaps,$54.6billion(2013, $61.9billion)incrosscurrencyswaps,$25.9billion(2013,$19.3billion)inforward foreignexchangecontracts,and$0.7billion(2013,$0.8billion)inswaptions. Notionalamountsrepresentthevolumeofoutstandingderivativecontractsand arenotindicativeofcreditrisk,marketriskoractualcashflows.

364

ChapterVI:BorrowingandDebtManagement

Consolidated Financial Tables


TABLE6.3
($Millions)

NetDebtandAccumulatedDeficit
200910 201011 201112 201213 Interim 201314 Plan 201415

Debt1 Publicly Held Debt Bonds2 Treasury Bills U.S. Commercial Paper2 Infrastructure Ontario (IO)3 Other Non-Public Debt Canada Pension Plan Investment Fund Ontario Immigrant Investor Corporation 55 School Board Trust Public Service Pension Fund Canada Mortgage and Housing Corporation Ontario Public Service Employees Union Pension Fund (OPSEU) Ontario Teachers Pension Fund
175,899 13,914 3,087 1,920 296 195,116 201,074 13,925 3,242 1,989 353 220,583 223,468 11,925 4,701 1,854 347 242,295 245,544 13,024 6,611 1,909 360 267,448 259,721 12,787 8,388 1,625 346 282,867 273,439 15,227 8,388 950 336 298,340

10,233

10,233

10,233

10,233

10,233

10,233

929 797 1,713

1,063 779 1,403

1,185 759 1,048

1,108 739 656

1,111 726 225

842 704

755

696

635

569

501

430

814 1,765 17,006

667 1,205 16,046 236,629

498 625 14,983 257,278

312

107


12,209 310,549

13,617 281,065

12,903 295,770

Total Debt

212,122

365

2014OntarioBudget

TABLE6.3
($Millions)

NetDebtandAccumulatedDeficit(contd)
200910 201011
236,629 (22,416)

201112
257,278 (21,180)

201213
281,065 (29,037)

Interim 201314
295,770 (23,518)

Plan 201415
310,549 (20,250)

Total Debt Cash and Temporary Investments Total Debt Net of Cash and Temporary Investments Other Net (Assets)/Liabilities4 Broader Public Sector (BPS) Net Debt Net Debt Non-Financial Assets5 Accumulated Deficit
1 2

212,122 (17,102)

195,020 (15,598) 14,167 193,589 (62,632) 130,957

214,213 (13,261) 13,559 214,511 (69,938) 144,573

236,098 (14,862) 14,346 235,582 (77,172) 158,410

252,028 (13,839) 13,899 252,088 (84,956) 167,132

272,252 (17,311) 14,214 269,155 (91,895) 177,260

290,299 (15,390) 14,342 289,251 (99,486) 189,765

Includes debt issued by the Province and Government Organizations, including OEFC. All balances are expressed in Canadian dollars. The balances above reflect the effect of related derivative contracts. 3 Infrastructure Ontario's (IO) interim 201314 debt is composed of Infrastructure Renewal Bonds ($950 million) and shortterm commercial paper ($675 million). IO's debt is not guaranteed by the Province. 4 Other Net (Assets)/Liabilities include accounts receivable, loans receivable, investments in government business enterprises, other assets, accounts payable, accrued liabilities, deferred revenue and capital contributions, pensions and other employee future benefits, and other liabilities. 5 Non-financial assets include the tangible capital assets of the Province and broader public sector. Source: Ontario Ministry of Finance.

366

ChapterVI:BorrowingandDebtManagement

TABLE6.4
($Billions)

MediumTermOutlook:NetDebtandAccumulatedDeficit
201516 201617 337.8 (20.2) 317.5 (13.5) 13.2 317.2 (113.2) 204.0

Total Debt Cash and Temporary Investments Total Debt Net of Cash and Temporary Investments Other Net (Assets)/Liabilities Broader Public Sector (BPS) Net Debt Net Debt Non-Financial Assets Accumulated Deficit
Note: Numbers may not add due to rounding.

326.6 (20.2) 306.3 (14.9) 13.9 305.3 (106.7) 198.6

367

2014OntarioBudget

TABLE6.5
($Millions)

DebtMaturitySchedule
Currency
Canadian Dollar U.S. Dollar
17,429 10,126 9,763 4,879 5,142 47,339 6,517

Japanese Yen
54 1,001

Euro
385

Other Currencies1
758 1,807 507

Interim 201314 Total


43,570 21,356 21,472 17,512 15,948 119,858 73,984 20,550 9,500 22,760 49,118 295,770

201213 Total
45,362 21,615 21,091 18,830 16,224 123,122 63,806 18,796 14,227 21,913 39,201 281,065

Fiscal Year Payable Year 1 Year 2 Year 3 Year 4 Year 5 15 years 610 years 1115 years 1620 years 2125 years 2650 years2 Total3 Debt Issued for Provincial Purposes OEFC Debt Total
1

25,329 8,422 11,202 12,248 10,140 67,341 59,153 20,550 9,500 22,760 49,118 228,422


76 1,131 400

590 3,662 1,541

385 6,373


53,856


1,531


6,758


5,203

204,123 24,299 228,422

52,934 922 53,856

1,531

6,579 179 6,758

4,460 743 5,203

269,627 26,143 295,770

253,729 27,336 281,065

1,531

2 3

Other currencies include Australian dollar, New Zealand dollar, Norwegian kroner, Swiss franc, Hong Kong dollar and South African rand. The longest term to maturity is to June 2, 2062. The foreign currency denominated debt for Interim 201314 is $67.3 billion (201213, $68.2 billion). Of that, $65.9 billion or 97.9 per cent (201213, $66.3 billion or 97.1 per cent) was fully hedged to Canadian dollars.

368

ChartDescriptions

Chart Descriptions
Chart 1.1: Support From Early Years to Adulthood ThechartshowstheOntariogovernmentsupportsforOntariansfromearlyyears toadulthood. UnderAge6 Earlylearningandliteracyprograms Parentingandfamilyliteracycentres Qualitychildcare,includingchildcaresubsidies Fulldaykindergarten ChildrensActivityTaxCredit(under16) HealthyChildDevelopmentPrograms HealthySmilesOntario OntarioChildBenefit(under18) 18publiclyfundedvaccinesstartingat2monthsofage Age6to13(ElementaryEducation) Programsthatfostercreativityandcriticalthinking 90percentofprimaryclasseswith20orfewerstudents Increasinglevelsofliteracyandnumeracyachievement StudentNutritionProgramprovideshealthbreakfasts,snacksandlunches Age13to18(SecondaryEducation) Initiativestoincreasegraduationrates OntariosStudentSuccessStrategy Learningoptionsincludingexpandedcooperativeeducation,SpecialistHigh SkillsMajors,dualcreditsandelearningprograms Age18to24(PostsecondaryEducation) Accessgrants,30%OffOntarioTuitiongrant,anewtuitionfeeframeworkand CooperativeEducationTaxCredit OntarioSummerJobsStrategy OntarioOnline Age15to29 YouthJobsStrategy(employment,entrepreneurshipandinnovation) EmploymentOntarioServices Apprenticeshipsupports ReturntoChart1.1

369

2014OntarioBudget Chart 1.2: Full-Day Kindergarten Implementation Barchartshowsthenumberofchildrenenrolledinfulldaykindergartenbetween theyears2011and2014.Inthe2011schoolyear,about50,000childrenwere enrolledinfulldaykindergarten.Astheprogramisimplementedacrossthe province,thenumberofchildrenroseto122,000in2012and184,000in2013. Enrolmentisprojectedtoriseto265,000inSeptember2014,whentheprogram isfullyimplemented. ReturntoChart1.2 Chart 1.3: Key Achievements ThechartliststhekeyachievementsinOntariospostsecondaryeducation. 41percentincreaseormorethan160,000studentsenrolledin postsecondaryeducationsince200203. 59percentincreaseinenrolmentingraduateprogramsbetween200203 and201213. Over370,000studentsreceivedfinancialassistancein201213,withover $1billioningrantsandloanstostudents,includingthe30%OffOntario Tuitiongrant. 77percentundergraduatestudentsfromuniversityaregraduating,upfrom 74percentin200203. 65percentofcollegestudentsaregraduating,upfrom57percentin 200203. 66percentofadultsaged2564haveuniversity,collegeorcollegebased apprenticeshipcertificationin2013. 87percentofuniversitygraduatesand83percentofcollegegraduates wereemployedwithinsixmonthsofgraduationin201011.

ReturntoChart1.3 Chart 1.4: Apprenticeship Registration Nearly Doubled since 2003 BarchartshowsthenumberofnewannualapprenticeshipregistrationsinOntario almostdoubled,from17,000in200203tomorethan30,000in201203. ReturntoChart1.4

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ChartDescriptions Chart 1.5: Unemployment Rate by Age Category, Ontario, 200614 (Year to Date) Linechartshowsunemploymentratesforyouth(aged15to24years)andprime workingagepopulation(2554years)betweentheyears2006and2014yearto date(YTD).Unemploymentratesarehigherforyouthsthanfortheprime workingagepopulationgroupeveryyear,withyouthsaveraging15.4percent in2014YTD,higherthantheprimeworkingagegroupof6.5percent. ReturntoChart1.5 Chart 1.6: Supporting More Patients at Home Thechartshowsthatmorepatientsaregoinghomefromthehospitalwith support,andfewerpeoplearegoingtolongtermcarehomesandinstead receivingcareathome. Since200910,18percentmorepatientsaregoinghomefromhospital withsupport,from8,223in200910to9,674patientsin201213. 37percentfewerpeoplearegoingtolongtermcarehomes,from9,080 patientsgoingtolongtermcarein200910to5,680in201213.

ReturntoChart1.6 Chart 1.7: Annual Average Provincial Infrastructure Investment Per Capita Thisbarchartcomparestheaverageprovincialinfrastructureinvestmentper capitabetweentwotimeperiods:199495to200304and200405to202324. Theaverageprovincialinfrastructureinvestmentgrewfromapproximately $250percapitatoanestimated$830percapitafromthefirsttimeperiodto thesecond. ReturntoChart1.7 Chart 1.8: Highlights of Infrastructure Projects Completed or Underway Thesetwomapshighlightthelocationsofinfrastructureprojectscompletedor underwayacrosstheprovinceofOntario.Thefirstmapillustratesinfrastructure projectsinNorthernOntario,andthesecondmapreferencesprojectsin SouthernOntario. ReturntoChart1.8

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2014OntarioBudget Chart 1.9: Alternative Financing and Procurement Accomplishments ThischartillustratestheProvincesaccomplishmentsusingtheAlternative FinancingandProcurement(AFP)modelinthehealthcareandjusticesectors. Inthehealthcaresector,Ontariohasredevelopedorbuilthospitalprojects, includingeightcomplexcontinuingcare/rehabilitationservices,eightemergency services,fivecancertreatmentservicesandthreementalhealthservices.The Provincehasalsocompletedjusticeprojects,including18OntarioProvincialPolice facilities,comprisingofnewdetachments,regionalcommandcentresandforensic units,fivecourthouses(withover90courtrooms),twocorrectionalfacilitiesand oneyouthjusticedetentionfacility. ReturntoChart1.9 Strengthening Ontarios Sectors Aerospace 2ndlargestaerospacesectorinCanada. Partneringwithindustryandacademiatohelpbuildaleadingaerospacecluster aroundDownsviewParkinToronto. AgriFood 6thlargestinfoodandbeverageprocessinginNorthAmerica. Supportingfarmersthroughfundingforbusinessriskmanagementandinnovation programswhilepartneringwithmanufacturers,likeDr.OetkerinLondon,toadd valuetoOntariogrownfood. Auto AtopsubnationalNAFTAjurisdictioninvehicleassembly. Workingwithmajorautocompaniestosupportassemblyfacilitiesthatwillanchor theautomotiveclusterinOntario,includingsupportforFordMotorCompanyin Oakville. Chemistry SarniaLambtonisCanadaslargestchemistrycluster. Supportingtheproductionofinnovativeandnewproductsincludingbasicorganic andinorganicchemicals,syntheticresinsandfertilizers.

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ChartDescriptions CleanTech Ontarioscleantechsectorhas10,100jobsand200firms. Workingwithindustryonresearchanddevelopmentandmanufacturingofbio basedtechnologies,processesandproducts.Also,OntariosWaterSectorStrategy willhelptostrengthenthewatersectorandhelpinnovativefirmscompetein globalmarketsandprovidesolutionstoglobalwaterchallenges. FinancialServices Torontois2ndlargestbyemploymentinNorthAmerica. Workingwithindustryandotherlevelsofgovernmenttoimplementafinancial servicessectorgrowthandcompetitivenessstrategy.Ontario,BritishColumbia andthefederalgovernmenthavesignedanagreementinprincipletoestablisha CooperativeCapitalMarketsRegulatorySystem(CCMR).Ontarioisworkingwith BritishColumbiaandthefederalgovernmenttomeetthemilestonessetoutinthe agreement. Forestry In2013,forestproductsexportswerevaluedat$3.6B. Supportingthetransformationoftheforestsectortowardsproductionofhigher valueaddedproductstopreserveandcreatejobsthroughexistingfunding programsandreformstothetenureandpricingsystemforCrownforest resources. InformationandCommunicationsTechnology 2ndinICTinNorthAmerica. PartneringwithCiscoCanadatolaunchthelargestjobcreatinginvestmentinthe historyoftheprovincestechnologysectorandworkingwithCommunitechto supportentrepreneurialactivityinKitchenerWaterloo. LifeSciences 2ndinlifesciencesinNorthAmerica. Fosteringhealthcareadvancementsandtheircommercializationbyestablishing theOntarioHealthInnovationCouncilwithprivateandpublicpartnersaswellas fundingresearchingenomicsandpersonalizedmedicineinpartnershipwiththe OntarioGenomicsInstitute.

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2014OntarioBudget Mining Top10worldproducerofnickelandplatinummetals. Providingincentivesandspecialdeductionsthroughtheminingtaxsystemto encourageinvestment. EntertainmentandCreativeCluster LargestinCanadaand3rdlargestinNorthAmerica. GrowingOntariosmusicproductionanddistributionthroughthenewOntario MusicFundandprovidingsupporttothefilmindustrytoensurethatOntario remainsatoplocationforfilmproduction. ReturntoStrengtheningOntariosSectorschart Chart 1.10: Ontario Children Below the Low Income Measure Thisbarchartshowsthatthegovernment'sPovertyReductionStrategyishelping tolowerchildpoverty.For2011,thepovertyrateforchildrenwas22.2percent beforetaxesandtransfers.Afteraccountingfortheimpactoftaxesandtransfers, thepovertyratefor2011declinedto15.9percent.Theimpactofthepoverty reductionstrategywastofurtherlowerthechildpovertyrateto13.6percent. ReturntoChart1.10 Chart 1.11: Supporting Working Families. Thischartshowstotalannualizedincomeforasingleparentwithtwochildren (ages9and10)in2003,2013and2014.Thechartshowstheincreaseinincome between2003and2014duetoincreasesin:theOntarioChildBenefitandother OntarioTaxBasedBenefitsandCredits,FederalChildBenefitsandotherFederal TaxBasedBenefitsandCredits,andtheminimumwagerate. ReturntoChart1.11 Chart 1.12: Comparison of Electricity Prices for Residential Consumers Thisbarchartcomparesaverageelectricitypricesforresidentialconsumersas ofApril1,2013,in22selectedCanadianandU.S.cities.Electricitypricesrange from6.87centsperkilowatthour(kWh)inMontrealto22.94centsperkWhin SanFrancisco.InOntario,OttawaandTorontoaverageelectricityratesare 12.39centsperkWhand12.48centsperkWh,respectively. ReturntoChart1.12

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ChartDescriptions Chart 1.13: Residual Stranded Debt Since April 1, 1999 AsatMarch31,2013,asdeterminedbytheMinisterofFinance,theresidual strandeddebtwas$3.9billion,adecreaseofabout$0.6billioncomparedto residualstrandeddebtof$4.5billionasatMarch31,2012,andadecreaseof about$8billionfromtheestimatedpeakasatMarch31,2004. ReturntoChart1.13 Chart 1.14: Auto Insurance Rates Held Below Inflation ThisbarchartshowsthatinOntariofrom2004to2013,autoinsurancerates increasedmoreslowlythantherateofinflation.From1990to1994,theconsumer priceindexincreasedby7.6percent,whileautoinsurancepremiumsincreased by10.2percent.From1995to2003,theconsumerpriceindexincreasedby 18.3percent,whileautoinsurancepremiumsincreasedby44.9percent. From2004to2013,theconsumerpriceindexincreasedby17.6percent, whileautoinsuranceratesincreasedby6.6percent. ReturntoChart1.14 Chart 1.15: Program Spending Per Capita in 201213 ThischartcomparespercapitaprogramspendinginOntariototheothernine provincesfor201213.In201213,Ontariospercapitaprogramspendingwas $8,369.Thisisthelowestpercapitaprogramspendingamongtheprovinces.This isfollowedbyBritishColumbia,Quebec,NovaScotia,NewBrunswick,Alberta, PrinceEdwardIsland,Manitoba,NewfoundandLabrador,andSaskatchewan. ReturntoChart1.15 Chart 1.16: Total Revenue Per Capita in 201213 ThischartcomparesOntariostotalrevenuepercapitatotheothernineprovinces for201213.In201213,Ontariostotalrevenuepercapitathatincludeditsown sourceandfederaltransferswas$8,453.Thisisthelowesttotalpercapita revenueamongtheprovinces.ThisisfollowedbyBritishColumbia,Alberta,New Brunswick,NovaScotia,PrinceEdwardIsland,Manitoba,Quebec,Saskatchewan, andNewfoundlandandLabrador. ReturntoChart1.16

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2014OntarioBudget Chart 1.17: Ontario Wage Settlements Thischartshowstheaverageannualbasewageincreasesfromwagesettlements ratifiedbetweenJuly17,2012andMarch26,2014.Theaverageannualwage settlementsfortheOntariopublicsectorwere0.4percentlowerthanthe settlementsfortheprivatesector,whichwere2.0percent,themunicipalsector, whichwere2.0percent,andthefederalpublicsectorinOntario,whichwere 1.7percent. ReturntoChart1.17 Chart 2.1: Medium-Term Revenue Outlook Has Declined since the 2010 Budget ThischartshowsthedeclineinthemediumtermoutlookforOntariogovernment revenuessincethe2010Budgetprojection. Sincethe2010Budget,themediumtermoutlookforrevenueshasdeclined, reflecting,inpart,slowereconomicgrowthinachallengingglobalenvironment. Beforetheimpactofnewrevenuemeasures,therevenueoutlookinthe 2014Budgetis$2.9billionbelowthe2010Budgetprojectionin201314 and$8.8billionbelowby201617. ReturntoChart2.1 Chart 2.2: Medium-Term Expense Outlook Has Declined since the 2010 Budget ThischartshowsthedeclineinthemediumtermoutlookforOntarioexpense sincethe2010Budget. Inthe2010Budget,expensewasprojectedtoincreasefromapproximately $127billionin201011toapproximately$140billionin201617.Inthe 2014Budget,expenseisprojectedtoincreasefrom$121billionin201011 toapproximately$134billionin201617.Ineachyearbetween201011and 201617,the2014Budgetexpenseprojectionisbelowthe2010Budgetexpense projection. ReturntoChart2.2

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ChartDescriptions Chart 2.3: Ontario Emerging Stronger from 200809 Recession ChartshowsOntariorealGDPreacheditsprerecessionpeakat$602.0billionin 2008Q2andfelltotherecessionarylowof$573.3billionin2009Q2.Thecurrent levelofrealGDPis$632.6billionin2013Q4,10.3percenthigherthanthe recessionarylow. Ontarioexportsreacheditsprerecessionpeakat$337.1billionin2008Q3 andfelltotherecessionarylowof$274.9billionin2009Q2.Thecurrentlevel ofOntarioexportsis$353.8billionin2013Q4,28.7percenthigherthanthe recessionarylow. Ontarioemploymentreacheditsprerecessionpeakat6,708,600inSeptember 2008andfelltotherecessionarylowof6,442,800inJune2009.Thecurrent employmentlevelis6,902,300inMarch2014,7.1percenthigherthanthe recessionarylow. HouseholdincomeinOntarioreacheditsprerecessionpeakat$414.3billionin 2008Q2andfelltotherecessionarylowof$410.3billionin2009Q2.Thecurrent levelofhouseholdincomeis$476.2billionin2013Q4,16.1percenthigherthan therecessionarylow. HouseholdconsumptioninOntarioreacheditsprerecessionpeakat$342.3billion in2008Q3andfelltotherecessionarylowof$335.6billionin2009Q2.Thecurrent levelofhouseholdconsumptionis$394.8billionin2013Q4,17.6percenthigher thantherecessionarylow. Ontariopoliciessupportingtherecoveryincludecompetitivetaxes,infrastructure investments,businessandregionalsupport,skillstraining,YouthJobsStrategyand PovertyReductionStrategy. ReturntoChart2.3

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2014OntarioBudget Chart 2.4: Ontario Real GDP since 200809 Recession LinechartshowsthelevelofOntariorealGDPbetweenthefirstquarterof2008 andthefourthquarterof2013.OntariorealGDPreacheditsprerecessionpeakof $602.0billioninthesecondquarterof2008anddeclinedtoitsrecessionarylowof $573.3billioninthesecondquarterof2009.Asofthefourthquarterof2013,real GDPhadrisento$632.6billion. ReturntoChart2.4 Chart 2.5: Employment Gains Concentrated in Full-Time, Private-Sector, Above-Average Wage Jobs BarchartshowsOntarioemploymentgainssinceJune2009.Totalemployment increasedby460,000sinceJune2009.Fulltimeemploymentincreasedby 463,000,whileparttimeemploymentdeclinedby4,000.Privatesector employmentincreasedby330,000,whilepublicsectoremploymentincreasedby 75,000andselfemploymentroseby55,000.Employmentinaboveaveragewage industriesincreasedby319,000,whileemploymentinbelowaverageindustries increasedby140,000. ReturntoChart2.5 Chart 2.6: Ontario Job Recovery Ahead of U.S. and OECD Average Linechartcomparesthepercentagechangeinemploymentrelativetoits prerecessionpeakinOntario,theaverageforthemembercountriesofthe OrganisationforEconomicCooperationandDevelopment(OECD)andtheUnited Statesbetweenthefirstquarterof2008andthefirstquarterof2014(forOntario andtheU.S.)andthethirdquarterof2013fortheOECD. Asofthefirstquarterof2014,employmentinOntariohasrecoveredtowell aboveitsprerecessionpeakwhiletheUnitedStatesisbelowitsprerecession peak.Asofthethirdquarterof2013,theOECDisslightlyhigherthanitspre recessionpeak. ReturntoChart2.6

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ChartDescriptions Chart 2.7: Ontario Job Recovery Stronger than Other Jurisdictions BarchartshowsthepercentchangeinOntariosemploymentsinceJune2009 comparedtoGreatLakeStates,theOECDaverage,theU.S.averageandtherest ofCanada.Ontariosemploymenthasincreasedby7.1percentsinceJune2009. Illinoiswasup1.0percent,NewYorkwasup1.3percent,Ohiowasup 1.4percent,Wisconsinwasup1.7percent,Pennsylvaniawasup2.3percent, Michiganwasup3.9percent,Indianawasup4.7percent,Minnesotawasup 5.3percent,theOECDaveragewasup3.5percent,theU.S.averagewasup 5.3percentandtherestofCanadawasup6.0percent. ReturntoChart2.7 Chart 2.8: Global Economic Growth to Improve BarchartshowsrealGDPgrowthfortheglobaleconomy,advancedeconomies, andemerginganddevelopingeconomiesfrom2011to2015. RealGDPgrowthfortheglobaleconomywas3.9percentin2011,3.2percentin 2012and3.0percentin2013.AccordingtotheInternationalMonetaryFund (IMF),growthisprojectedtobe3.6percentin2014and3.9percentin2015. RealGDPgrowthforadvancedeconomieswas1.7percentin2011,1.4percent in2012and1.3percentin2013.AccordingtotheIMF,growthisprojectedtobe 2.2percentin2014and2.3percentin2015. RealGDPgrowthforemerginganddevelopingeconomieswas6.3percentin 2011,5.0percentin2012and4.7percentin2013.AccordingtotheIMF,growth isprojectedtobe4.9percentin2014and5.3percentin2015. ReturntoChart2.8

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2014OntarioBudget Chart 2.9: Strengthening U.S. Recovery BarchartshowsU.S.realGDPgrowthfrom2009to2017.U.S.realGDPdeclined 2.8percentin2009andgrewby2.5percentin2010,1.8percentin2011, 2.8percentin2012and1.9percentin2013.AccordingtoBlueChipEconomic IndicatorsfromMarchandApril2014,U.S.realGDPisprojectedtogrowby 2.7percentin2014,3.0percentin2015,2.9percentin2016and2.8percent in2017. ReturntoChart2.9 Chart 2.10: Oil Prices to Remain High LinechartshowsthepriceofWTIcrudeoilfrom2000to2017.ThepriceofWest TexasIntermediate(WTI)crudeoilrosefrom$30USperbarrelin2000to$100US perbarrelin2008,declinedto$62USperbarrelin2009andincreasedto$98US perbarrelin2013.TheOntarioMinistryofFinanceprojectsoilpriceswilldecline to$97USperbarrelin2014,average$96USperbarrelin2015and2016,and thenincreaseto$98USperbarrelin2017. ReturntoChart2.10 Chart 2.11: Canadian Dollar to Remain Below Parity LinechartshowingtheCanadianexchangeratefrom1990to2017andthelow andhighprivatesectorprojectionsfor2014to2017.TheCanadiandollarfellfrom 87centsUSin1991toalowof64centsUSin2002.Ittrendedupoverthe2003to 2011period,reaching101centsUSin2011.In2013,thedollarwas97centsUS. TheMinistryofFinanceprojectstheCanadiandollarwillrisefrom90centsUSin 2014to93centsUSin2017.Privatesectorprojectionsrangefromahighof 98centsUStoalowof89centsUSin2017. ReturntoChart2.11

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ChartDescriptions Chart 2.12: Interest Rates to Rise Gradually LinechartshowingthethreemonthGovernmentofCanadaTreasurybillrate andthe10yearGovernmentofCanadabondyieldfrom1990to2017.Thethree monthTreasurybillratehasdeclinedfromcloseto13percentin1990to1.0per centin2013.Itisexpectedtorisegraduallyto3.3percentin2017.The10year GovernmentofCanadabondyieldhasdeclinedfromover10percentin1990to alowof1.9percentin2012.The10yearbondyieldmovedupto2.3percentin 2013andisexpectedtorisegraduallyto4.3percentin2017. ReturntoChart2.12 Chart 2.13: Inflation Expected to Remain Moderate BarchartshowspercentagechangeintheOntarioConsumerPriceIndex(CPI) from2010to2017.OntarioCPIincreasedby2.5percentin2010,3.1percent in2011,1.4percentin2012and1.0percentin2013.TheOntarioMinistryof FinanceprojectsCPIinflationtobe1.5percentin2014,1.9percentin2015 and2.0percentin2016and2017. ReturntoChart2.13 Chart 2.14: Employment Expected to Rise over the Medium Term BarchartshowstheannuallevelofOntarioemploymentfrom2009to2017. Ontarioemploymentrosefrom6.5millionin2009to6.9millionin2013.The OntarioMinistryofFinanceprojectsemploymentwillincreaseto7.3million in2017. ReturntoChart2.14 Chart 2.15: Ontario Housing Prices Expected to Stabilize Linechartshowingaveragehousepricesfrom1980to2017.Averagehouse priceshavetrendedsteadilyupwardfrom$155,200in1995to$402,500in2013. In2014,theaverageresalepriceisexpectedtoincreaseto$408,600andremain closetothislevelovertherestoftheforecastperiod. ReturntoChart2.15

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2014OntarioBudget Chart 2.16: Housing in Ontario to Remain Affordable Linechartshowsthemortgagecarryingcostasashareofdisposableincome perhouseholdinOntariofrom1981to2017.Thelineincreasedtoahighofover 37percentin1990andthendeclinedtoalowof19percentin1998.Ithassince trendedhigher,reachingalmost27percentin2013.TheOntarioMinistryof Financeprojectsthesharetoremaincloseto27percentoverthe2014to 2017period. ReturntoChart2.16 Chart 2.17: Although Elevated, Canadian Household Debt Remains Affordable Linechartshowshouseholddebtanddebtservicecostsasapercentageof householddisposableincomeinCanadafromthefirstquarterof2000tothe fourthquarterof2013. Thelineforhouseholddebtasapercentageofhouseholddisposableincome increasedsteadilyfrom108percentinthefirstquarterof2000to164percentin thefourthquarterof2013.Thelineforthedebtservicecostsasapercentageof householddisposableincomedeclinedfrom8.5percentinthefirstquarterof 2000to7.5percentinthesecondquarterof2002,stayedatthisleveluntilthe endof2005,increasedto9.2percentinthefourthquarterof2007anddeclined to7.1percentinthefourthquarterof2013. ReturntoChart2.17 Chart 2.18: Ontario Business Machinery and Equipment Investment Lags the United States Thelinechartshowsbusinessmachineryandequipmentinvestmentin $2007billionsforOntarioand$2009billionsfortheUnitedStatesfrom2007to 2017.RealmachineryandequipmentinvestmentinbothOntarioandtheU.S. declinedduringthe200809recession.Sincetherecession,machineryand equipmentinvestmenthasbeenrisinginbothjurisdictions.However,machinery andequipmentinvestmenthasbeenrisingfasterintheU.S.thaninOntariosince 2009.Overtheforecastperiod,Ontariospaceofmachineryandequipment investmentgrowthisexpectedtocontinuetolagtheU.S. ReturntoChart2.18 382

ChartDescriptions Chart 2.19: Exports to Other Provinces and Service Exports Have Grown Strongly ThefirsttwobarsshowthatOntariostotalexportstootherprovincesincreased to$125.9billionin2013from$92.3billionin2003,anincreaseof$33.6billionor 36percent.Overthesameperiod,exportstoothercountriesincreasedfrom $217.8billionin2003to$224.1billionin2013. ThelasttwobarsshowthatOntariosexportsofservicesincreasedto $121.1billionin2013from$81.5billionin2003,up$39.6billionor49percent. Exportsofgoodsincreasedto$228.9billionin2013from$228.6billionin2003. ReturntoChart2.19 Chart 2.20: Ontario Goods Exports Expanding to New Markets ThebarchartshowsthattheshareofOntariosgoodsexportstotheUnitedStates declinedfrom91.5percentin2003to78.4percentin2013,whiletheshareof OntariosgoodsexportstotheEuropeanUnionincreasedfrom3.8percentin 2003to9.5percentin2013.TheshareofOntariosgoodsexportstotherestof theworldincreasedto12.1percentin2013from4.7percentin2003. ReturntoChart2.20 Chart 2.21: Private-Sector Outlook for Growth Weaker in 2014 but Stronger in 2015 to 2017 ThebarchartshowstheaverageprivatesectorprojectionforOntariosrealGDP growthatthetimeofthe2013Budgetand2014Budget. TheaverageprivatesectorforecastforOntariorealGDPgrowthfor2013was 1.6percentinthe2013Budgetand1.3percentcurrently. TheaverageprivatesectorforecastforOntariorealGDPgrowthfor2014was 2.4percentinthe2013Budgetand2.2percentcurrently. TheaverageprivatesectorforecastforOntariorealGDPgrowthfor2015and 2016was2.5percentinthe2013Budgetand2.6percentcurrently. TheaverageprivatesectorforecastforOntariorealGDPgrowthfor2017was 2.3percentinthe2013Budgetand2.7percentcurrently. ReturntoChart2.21 383

2014OntarioBudget Chart 2.22: Government of Canada Transfers Changes since the 2013 Budget Thischartshowsthethreebroadfactorsaccountingforthedeclineinthe mediumtermoutlookofGovernmentofCanadaTransferssincethe2013Budget. DownwardrevisionsbyStatisticsCanadatohistoricalpopulationestimates loweredOntariosprojectedentitlementsundereachoftheCanadaHealth Transfer,CanadaSocialTransferandEqualizationprograms. TheclosureofHydroQuebecsGentilly2nuclearpowerplanttemporarilylowers Quebecsfiscalcapacity,asmeasuredundertheEqualizationprogram,whichin turnlowersOntariosEqualizationentitlementoverathreeyearperiod. OtherChangesincludeupdatedfiscalcapacityandeconomicdata,particularly for201213,whichincreasedOntariosrelativefiscalcapacitycomparedto the2013Budgetprojection,therebyloweringOntariosEqualization entitlementoutlook. ReturntoChart2.22 Chart 2.23: Medium-Term Revenue Outlook Has Declined since the 2010 Budget ThischartshowsthedeclineinthemediumtermoutlookforOntarioGovernment revenuessincethe2010Budgetprojection. Sincethe2010Budget,themediumtermoutlookforrevenueshasdeclined, reflectinginpartslowereconomicgrowthinachallengingglobalenvironment. Beforetheimpactofnewrevenuemeasures,therevenueoutlookinthe 2014Budgetis$2.9billionbelowthe2010Budgetprojectionin201314and$8.8 billionbelowby201617. ReturntoChart2.23

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ChartDescriptions Chart 2.24: Ontarios Record Against Deficit Targets ThischartshowsOntariosactualdeficitsversusdeficittargetsfrom200910 through201314. Inthe2009OntarioEconomicOutlookandFiscalReview,Ontarioprojecteda $24.7billiondeficitfor200910.Theactualresultfor200910wasadeficitof $19.3billion.The2010Budgetprojecteddeficitsof$19.7billionfor201011, $17.3billionfor201112,$15.9billionfor201213and$13.3billionfor201314. Theactualresultfor201011wasadeficitof$14.0billion.Theactualresultfor 201112wasadeficitof$13.0billion.Theactualresultfor201213wasadeficit of$9.2billion.Theinterimprojectionfor201314isadeficitof$11.3billion. ReturntoChart2.24 Chart 2.25: Ontarios Plan to Eliminate the Deficit ThischartshowsOntarios2014BudgetPlantoeliminatethedeficit,including aprojecteddeclineinOntariosdeficitsfrom201415through201718.Forthe mediumtermandextendedoutlook,thecurrentfiscalprojectionsareadeficit of$12.5billionfor201415,adeficitof$8.9billionfor201516,adeficitof $5.3billionfor201617andareturntobalancefor201718. Thegovernmentsdeficittargetsincludeareserveof$1.0billionin201415, and$1.2billionineachof201516,201617and201718.Thechartalsoshows thatforthemediumtermandextendedoutlook,thecurrentfiscalprojections beforethereserveareadeficitof$11.5billionfor201415,adeficitof$7.7billion for201516,adeficitof$4.1billionfor201617andasurplusof$1.2billionin 201718. ReturntoChart2.25

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2014OntarioBudget Chart 2.26: Composition of Revenue, 201415 Thischartshowstheshareoftotalrevenuein201415anddollaramountsby majorrevenuecategory.ThelargestrevenuesourceisPersonalIncomeTax revenueat$29.2billion,accountingfor24.5percentoftotalrevenue.Thisis followedbySalesTaxat$21.9billion,or18.5percentoftotalrevenue,and CorporationsTaxat$10.3billion,or8.6percentoftotalrevenue.Totaltax revenueaccountsfor$83.4billion,or70.1percentoftotalrevenue.Theother majornontaxationsourcesofrevenueareFederalTransfersof$21.9billion, or18.4percentoftotalrevenue.IncomefromGovernmentBusinessEnterprises at$5.0billionor4.2percentoftotalrevenueandvariousOtherNonTax Revenuesat$8.6billionor7.2percentoftotalrevenue. ReturntoChart2.26 Chart 2.27: Composition of Total Expense, 201415 Thischartshowstheshareoftotalexpensein201415anddollaramounts bysector. ThelargestexpenseistheHealthSectorat$50.1billion,accountingfor 38.4percentoftotalexpense. TheremainingsectorsoftotalexpenseincludetheEducationSectorat $24.8billionor19.1percent;thePostsecondaryandTrainingSectorat$7.8billion or6.0percent;theChildrensandSocialServicesSectorat$15.0billionor 11.5percent;theJusticeSectorat$4.3billionor3.3percent;andOther Programsat$17.4billionor13.3percent.InterestonDebt,includedaspartof TotalExpense,is$11.0billionor8.4percent. NotethattheEducationSectorexcludesTeachersPensionPlan.Teachers PensionPlanexpenseisincludedinOtherPrograms. ReturntoChart2.27

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ChartDescriptions Chart 2.28: Composition of Program Expense, 201415 Thischartshowstheshareofprogramexpensein201415anddollaramounts bysector.Programexpenseequalstotalexpenseminusinterestondebtexpense. ThelargestexpenseistheHealthSectorat$50.1billion,accountingfor 41.9percentoftotalprogramexpense. TheremainingsectorsofprogramexpenseincludetheEducationSectorat $24.8billionor20.8percent;thePostsecondaryandTrainingSectorat$7.8billion or6.6percent;theChildrensandSocialServicesSectorat$15.0billionor 12.6percent;theJusticeSectorat$4.3billionor3.6percent;andOther Programsat$17.4billionor14.5percent. NotethattheEducationSectorexcludesTeachersPensionPlan. TeachersPensionPlanexpenseisincludedinOtherPrograms. ReturntoChart2.28 Chart 3.1: Total Transfer Protection Payments from 201011 to 201314 ThischartshowstheamountofTotalTransferProtectionPaymentspaidto provincesfrom201011to201314.Duringthistime,Quebecreceived $731million,followedbyManitobawith$660millionandNovaScotiawith $421million.TheseprovincesarefollowedbyNewBrunswick,Newfoundland andLabrador,SaskatchewanandPrinceEdwardIsland.However,thefederal governmentdecidedtoendthepracticeoftransferprotectionpaymentsin 201415,whenOntariowouldhavequalifiedforapaymentof$641million. ReturntoChart3.1

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2014OntarioBudget Chart 3.2: Reducing Federal Health Transfers Downloads Fiscal Burden to Provinces and Territories Thischartshowsthat,basedontheratioofnetdebttoGDP,thefinancialposition ofthefederalgovernmentisprojectedtoimproveovertime,whereasthe financialpositionsofprovincial,localandAboriginalgovernmentsareprojectedto deteriorateoverthesameperiod.From1991to2014,thefederalgovernmentis expectedtohaveanetdebttoGDPratiohigherthanprovinces.Thisrelationship isprojectedtoreverse,startingin2015,andwidenovertime.From2015to2087, thedifferencebetweennetdebttoGDPratiosbetweenthefederalandprovincial governmentsincreases,reflectingaprogressivelystrongerfiscalpositionforthe federalgovernmentandadeterioratingfiscalpositionforprovincesand territories. ReturntoChart3.2 Chart 3.3: Ontarios Net Contribution to the Federation in 200910 Thischartshowsthatin200910,Ontarianscontributed$97.3billiontothe federalgovernmentwhilereceiving$86.2billioninfederaltransfersandservices. ThegapbetweenOntarioscontributiontothefederalgovernmentandbenefit fromfederaltransfersandservicesis$11billionor1.9percentofGDP. ReturntoChart3.3 Chart 3.4: Net Contribution to Equalization, 201415 Thischartshowsthatin201415,Ontarioisthelargestnetcontributortothe Equalizationprogram.OntarioisfollowedbyAlberta,BritishColumbia, Saskatchewan,andNewfoundlandandLabrador.Allotherprovincesreceivemore inEqualizationpaymentsthantheirtaxpayerscontributethroughfederaltaxes. ReturntoChart3.4 Chart 3.5: Public Infrastructure Investment Per Capita (201415 to 202324) Thisbarchartillustratespercapitainvestmentinpublicinfrastructurebyorderof governmentoverthenextdecade.Thefederalinvestmentisroughly$2,000per capitaover10years.Bycomparison,Ontarioplanstoinvest$10,000percapita overthesameperiod. ReturntoChart3.5

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ChartDescriptions Ring of Fire KeyFacts OntarioisCanadasleadingdestinationformineralexplorationinvestment. Upto$60BinknownchromiteandnickeldepositsintheRingofFirearea. Almost60%ofthemetalsminedinOntarioareprocessedhere. $3.8BCapitalinvestmentinminingisexpectedtoincreaseto$3.8billionin Ontarioin2012.

Source:MinistryofNorthernDevelopmentandMines. ThePlan ArrivedataregionalframeworkagreementwiththeMatawamemberFirst Nations. Establishadevelopmentcorporationtoaccelerateinfrastructure developmentandcollaboratewithkeypartners. TheProvinceiswillingtocommitupto$1billiontowardsinfrastructure development,contingentonmatchinginvestmentbythefederal government.

Ontario:$1B FederalGovernment:$1B ThePotentialResults Withinthefirst10yearsofitsdevelopment,theRingofFirewillproduce considerablebenefits: $9.4B $6.2B 5,500 $2B InGDPgeneratedinOntario ForOntariosMiningindustry JobssustainedannuallyinOntario Inadditionalrevenuesdividedamongfederal,provincialand municipalgovernments

Source:OntarioChamberofCommerce,BeneaththeSurface:Uncoveringthe EconomicPotentialofOntariosRingofFire,(2014). ReturntoRingofFirechart 389

2014OntarioBudget Chart 4.1: Retirement Income Targets and Potential Gaps ThisbarchartshowshowtheCPPandOAScontributetoretirementincomefor individualswithpreretirementearningsof$45,000,$70,000and$90,000.The chartshowsthateachindividualfacesapotentialgapinachievinga70percent incomereplacementtargetduetothelimitedbenefitsprovidedbythese programs.Anindividualwithannualpreretirementincomeof$45,000would needanadditional$14,109annuallyoverandabovebenefitsprovidedbytheCPP andOAStomeeta70percentincomereplacementtargetof$31,500.An individualwithpreretirementincomeof$70,000wouldneedanadditional $29,829tomeetanincomereplacementtargetof$49,000.Anindividualwithpre retirementincomeof$90,000wouldrequireanadditional$43,829tomeetan incomereplacementtargetof$63,000. Allamountsarebeforetaxandexpressedin2014dollars.Preretirementearnings areconstantovera40yearcareer,takingintoaccountannualincreasesinthe averagewage.Individualsareassumedtoretireatage65. ReturntoChart4.1 Chart 4.2: Impact of Management Fees on Retirement Savings Thislinegraphshowshowmanagementfeesaffectretirementsavingsovertime forthecaseofanindividualmakingannualcontributionsof$6,000toanRRSP. Thegraphshowsthevalueofasavingsportfoliounderthreescenarios:a 2.4percentmanagementfee,aonepercentmanagementfee,andnofees. Givena2.4percentmanagementfee,thevalueofthosesavingsaftera40year periodwouldbe$434,872.Withalowonepercentfee,thevalueofthosesame savingswouldbe$605,689after40years.Underanofeescenario,thevalueof thosesamesavingsoverthesameperiodwouldbe$784,630.Thegraphshows thatcomparedtothepotentialsavingsportfoliovalueintheabsenceoffees, managementfeesof2.4percentcouldreducethepotentialportfoliovalueby morethan44percent. ReturntoChart4.2

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ChartDescriptions Chart 4.3: Life Expectancy at Age 65 by Sex in Ontario Thislinegraphshowsthatlifeexpectancyatage65hasincreasedsteadilysince thelate1970s.In1979,Ontariomalescouldexpecttoliveanother14years, comparedtoanother19yearsforfemales.By2011,theseexpectationshad increasedto19yearsformalesand22yearsforfemales.Thegraphsprojections showthatthistrendwillcontinue.By2035,lifeexpectancyatage65isprojected tobe23yearsformalesand25yearsforfemales. ReturntoChart4.3 Chart 4.4: Illustrations of Maximum Annual Benefit ThischartillustratestheproposedannualORPPretirementbenefitlevel,the benefitleveloftheproposedORPPwhencombinedwithCPPbenefitsandthe annualCPPandproposedORPPcontributionsforthreedifferentindividuals Barbara,BonnieandBernicewhohavedifferentsteadycareerearnings. Barbaraspreretirementearningsare$45,000annually.Barbaraandher employertogetherwouldcontribute$1,575annuallytotheORPPand$4,110 annuallytotheCPPoverherworkingcareer.Inretirement,Barbarawouldreceive anORPPbenefitof$6,410annuallyforlife.CombinedwithherCPPbenefits,she wouldreceiveabout$17,090annuallyforlife,replacingabout40percentofher preretirementincome. Bonniespreretirementearningsare$70,000annually.Bonnieandheremployer togetherwouldcontribute$2,525annuallytotheORPPand$4,850annuallyto theCPPoverherworkingcareer.Inretirement,BonniewouldreceiveanORPP benefitof$9,970annuallyforlife.CombinedwithherCPPbenefits,shewould receiveabout$22,430annuallyforlife,replacingabout34percentofherpre retirementincome. Bernicespreretirementearningsare$90,000annually.Berniceandheremployer togetherwouldcontribute$3,285annuallytotheORPPand$4,850annuallyto theCPPoverherworkingcareer.Inretirement,BernicewouldreceiveanORPP benefitof$12,815annuallyforlife.CombinedwithherCPPbenefits,shewould receiveabout$25,275annuallyforlife,replacingabout30percentofherpre retirementincome.

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2014OntarioBudget Allamountsarebeforetaxandexpressedin2014dollars.Preretirementearnings areconstantovera40yearcareer,takingintoaccountannualincreasesinthe averagewage.IndividualsareassumedtohavecontributedtotheCPPandORPP throughouttheircareerandtoretireatage65. ReturntoChart4.4 Table 5.1: Ontario Personal Income Tax: Taxable Income Thresholds and Rates Thechartontheleftdisplaysthecurrentstatutorytaxratesof5.05percentfor thetaxableincomesbelow$40,120,9.15percentontaxableincomebetween $40,120and$80,242,11.16percentontaxableincomesbetween$80,242and $514,090,and13.16percentontaxableincomesabove$514,090. Thechartontherightdisplaysthemeasuresthatthegovernmentproposesto implementfor2014andbeyond.Thelowerpartofthechartshowsthatthere wouldbenochangetostatutorytaxratesontaxableincomesof$150,000and below.Aboveisaboxthatshowstheproposedstatutorytaxrateof12.16per centthatwouldapplyontaxableincomesbetween$150,000and$220,000. Ontheverytopofthechart,anotherboxshowsthatthecurrenttoptaxrateof 13.16percentwouldapplytotaxableincomesabove$220,000. Notationstothefarrightofthechartindicatethattheproposedchangeswould affectthetoptwopercentoftaxfilers,andthat98percentoftaxfilerswould notbeaffected. ReturntoTable5.1 Chart 5.1: Ontario Business R&D Spending Below the U.S. BusinessR&DasapercentageofGDPinOntariohascontinuouslylaggedbehind theU.S.Between2001and2011,OntariosbusinessR&DasapercentageofGDP declinedfrom1.7percentto1.2percent,whiletheU.S.remainedat1.9percent. ReturntoChart5.1 Chart 6.1: Weighted-Average Term of Borrowing in Years AsatMarch31,2014,theweightedaveragetermofborrowingswas13.6years. TheaveragetermtomaturityofnewlongtermProvincialborrowinghasbeen extendedsignificantlyfrom8.6yearsin200809. ReturntoChart6.1 392

ChartDescriptions Chart 6.2: 201314 Borrowing TheProvinces201314borrowingprogramtotalled$36.0billion,andconsisted of$25.5billionofsyndicatedbonds,$2.3billionofdomesticfloatingratenotes, $0.02billiondomesticmediumtermnotes,$0.4billionofOntarioSavingsBonds, a$1.1billiondomesticbondauction,and$6.6billionofU.S.dollarglobalbonds. ReturntoChart6.2 Chart 6.3: Domestic and International Borrowing TheProvinces201314borrowingprogramtotalled$36.0billion.$29.4billion,or 82percent,wasborrowedinthedomesticmarketand$6.6billion,or18percent, wasborrowedintheinternationalmarket. ReturntoChart6.3 Chart 6.4: Average Unrestricted Liquid Reserve Levels AsatMarch31,2014,theaverageunrestrictedliquidreservewas$24.9billion. Theaverageunrestrictedliquidreservelevelhasbeensteadilyincreasingfrom $8.3billionin200809. ReturntoChart6.4 Chart 6.5: Residual Stranded Debt since April 1, 1999 AsatMarch31,2013,asdeterminedbytheMinisterofFinance,theresidual strandeddebtwas$3.9billion,adecreaseofabout$0.6billioncomparedto residualstrandeddebtof$4.5billionasatMarch31,2012,andadecreaseofan estimated$8billionfromtheestimatedpeakof$11.9billionasatMarch31,2004. ReturntoChart6.5 Chart 6.6: Net Debt-to-GDP NetdebttoGDPratioisprojectedtobe38.9percentasatMarch31,2014. ThenetdebttoGDPisprojectedtopeakat40.8percentin201516. ReturntoChart6.6

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2014OntarioBudget Chart 6.7: Accumulated Deficit-to-GDP TheaccumulateddeficittoGDPratioisprojectedtobe25.6percentasat March31,2014.TheaccumulateddeficittoGDPisprojectedtopeakat 26.5percentin201415and201516. ReturntoChart6.7 Chart 6.8: Effective Interest Rate (Weighted Average) on Total Debt AsatMarch31,2014,theinterimeffectiveinterestrate(calculatedasaweighted average)is3.9percentontheProvincestotaldebt.Thiscompareswith4.1per centin201213and4.4percentin201112.Theeffectiveinterestratehasbeen steadilydecreasingfrom10.9percentin199091. ReturntoChart6.8 Chart 6.9: Total Debt Composition AsatMarch31,2014,theProvincestotaldebtwas$295.8billion,andconsistedof $198.9billionofdomesticbonds,$12.9billionofnonpublicdebt,$21.2billionof treasurybillsandU.S.commercialpaper,and$62.8billionofinternationalbonds. ReturntoChart6.9 Chart 6.10: Net Interest Rate Resetting Exposure TheProvincesinterimnetinterestrateresettingexposure,calculatedasa percentageofthedebtissuedforProvincialpurposeswas11.0percentonMarch 31,2014.Thiscomparesto8.9percentasatMarch31,2013,and8.3percentas atMarch31,2012.Theinterestrateexposurelimitissetat35percent. ReturntoChart6.10 Chart 6.11: Foreign Exchange Exposure TheProvincesinterimforeignexchangeexposure,calculatedasapercentageof thedebtissuedforProvincialpurposes,was0.4percentasatMarch31,2014. Thiscomparesto0.8percentasatMarch31,2013,and1.0percentasat March31,2012.Theforeignexchangeexposurelimitissetat5percent. ReturntoChart6.11

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