The Ontario government’s long awaited and much discussed report of the Commission on the Reform of Ontario’s Public Services (aka, the Drummond report) was finally publicly released this afternoon.
As was rumoured, the report says Ontario would need to increase program spending by no more than 0.8% per year for the government to reach balance by 2017/18. Drummond has adopted a pessimistic forecast of GDP growth, but unfortunately this could become self-fulfilling if the Ontario government does proceed with his proposed cuts.
It would be much better to introduce fair and progressive revenue increases to balance the budget while maintaining reasonable program spending growth–but unfortunately the mandate Drummond was given forebade him from proposing tax increases and Premier McGuinty has also ruled them out.
The consequence of this that Ontario could be in for program spending cuts in McGuinty’s third term that are considerably worse than the spending cuts enacted under Mike Harris’s first term in office.
Constraining overall program spending growth to an average of 0.8% per year would result in a -2.5% cut in real per person terms every year for McGuinty’s third term (assuming 2.2% inflation and 1.2% annual population growth, as is assumed on page 115 of the Drummond report and in Table 1). That’s more than twice as deep as the annual average -1.2% cut in real program spending per person under Mike Harris during his first term in office from 1995 to 1999.
If overall program spending is kept to nominal growth of 0.8% per year until the next election, provincial program spending in real dollars per person will be cut by -9.8% in McGuinty’s third term compared to -4.7% in the four years of Harris’ first term.
By 2017/18, Ontario’s program spending per person would be 16.2% lower in real dollars than it was in 2010/11.
(Chart and figures updated Feb 21 according to inflation and population growth assumptions in report, as discussed in comments section.)