Don Drummond on the Ontario budget

We must look at the broader economic and fiscal context to drive efficiencies that will help our public services cope with slower funding increases

Ontario Budget 2012-13 at a glance.
Ontario Budget 2012-13 at a glance.
Credit: 
Graphic by Justin Chin

Students, faculty and staff had much at stake with the release of the Ontario budget on March 27. Immediate interest likely centred on the plan to increase funding for post-secondary education by 1.9 per cent per annum over the next few years, to continue the 30 per cent tuition credit and to maintain the five per cent cap on annual tuition increases.

While the 1.9-per-cent increase will barely cover the projected rise in post-secondary enrolment, it’s nevertheless more than double the limit on total government spending across all areas, reflecting the priority the Ontario government places on education.

But the economic and fiscal context behind the budget should be of even greater interest than the particular actions. I chaired the Commission on the Reform of Ontario Public Services which estimated that without strong fiscal action, the province’s deficit would balloon from $15.3 billion this year to over $30 billion by 2017-18.

Even more troubling, the ratio of net public debt to the province’s Gross Domestic Product — a key indicator of the extent to which fiscal shortcomings are being shifted to the future — would rise from 37.2 per cent to over 50 per cent over the same period. While still far lower than the ratios of over 100 per cent in many European countries in crisis, such a debt load would inevitably leave the government little choice but to apply wrenching action that would undermine the most valued public services.

So while the medicine being applied now seems bitter, it’s a far superior approach to doing nothing until collision with a fiscal wall. By taking action now the government has an opportunity to absorb a good part of the fiscal restraint through increasing the efficiency of public services.

Health care is a prime example: it constitutes over 40 per cent of the province’s spending and its budget has been rising at more than 7 per cent a year over the past decade. Yet aside from the U.S., the phenomenal spending buys rather mediocre results compared to other developed countries. Parts of the system remain in silos when they should be integrated, and patients fall between the cracks. Information technology isn’t used effectively. People languish in the wrong facilities at high cost and satisfaction is often poor. We can and must do much better with slower funding increases.

The same focus on efficiency needs to be applied to universities and colleges to ensure students receive a good education within a more limited fiscal framework.

Efficiency shouldn’t be defined just by the resources used, but the outcomes those resources produce. As with many other areas the Commission studied, more attention needs to be paid to the definition of outcomes in higher education.

It’s not simply a matter of graduating more students. It’s what and how they learn that counts. It is troubling that many post-secondary education institutions need annual funding increases of four to six per cent simply to continue doing the same thing. When funding increases fall short of this, the response is often larger class sizes, which can result in a deterioration of the learning experience.

The challenge before Ontario’s universities and colleges now is to prevent deterioration, and hopefully ensure an improvement, in outcomes within the resource constraints.

At the broadest level the Commission on the Reform of Ontario Public Services called for a different way of running governments — one that is respectful of the taxpayers’ money in times of economic health, rather than only when a fiscal crisis looms.

This shift requires clear definitions of objectives. Programs must be designed to deliver their objectives as efficiently as possible. Data must be collected and analyzed to ensure this efficiency. And where programs are falling short of the efficiency mark, they must be reformed or scrapped.

The Commission found tremendous waste in the overlap of different levels of government. Numerous departments offer uncoordinated programs in areas such as employment, training, immigration settlement, environment protection and business support.

In business support, for example, we identified about $4 billion of spending and targeted tax relief, spread across at least nine ministries, without clear objectives or stringent tests of success. In most cases the only question asked is whether they create jobs. But what kind of jobs are created and at what cost to taxpayers?

Last Thursday’s federal budget and other recent provincial budgets also played into this theme of efficiency. Immigration is an area where the federal government has recently paid more attention to defining objectives. Programs are beginning to be assessed and shaped according to which immigrants succeed economically and socially. In other areas, such as with funding for the Canadian Broadcasting Corporation (CBC), we saw a major cut in funding without a discussion of what the public broadcaster’s role should be.

A signature move in the 2012-13 federal budget was increasing the age of entitlement for Old Age Security (OAS) and the Guaranteed Annual Income (GAI) from 65 to 67. Inevitably, the link to the aging baby boomer population and longer life expectancy was made.

Longevity, however, is just one of many factors playing out for retirement incomes: with more education, young people start work later. They often have trouble finding good jobs initially and, in particular, are increasingly less likely to receive employee benefits such as a work-sponsored pension. They have children later and must then finance their children’s post-secondary education.

In the parlance of economists, the life-cycle pattern of savings has been fundamentally altered. Yet public policy responses have been mostly ad hoc.

Understandably, the immediate attention at universities to federal and provincial budgets is on the actions specific to the sector. However, the broader economic and fiscal context suggest there’s much more than just post-secondary education at stake for young people.

In March 2011, Don Drummond was appointed by Premier Dalton McGuinty to examine the reform of Ontario’s public services. The Drummond Report was released on Feb. 15, 2012 containing 362 recommendations that the Commission stated would allow the Ontario government eliminate its budget deficit by 2017-18.

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