Fall Economic Statement Updates Ontario Finances



    Ontario Moves to Protect Core Services and Manage Spending

    TORONTO, Oct. 22 /CNW/ -

    NEWS

    In the face of global economic uncertainty and the slowing U.S. economy,
the McGuinty government is continuing to encourage long-term economic growth
and do everything it can to protect key public services.
    In its 2008 Ontario Economic Outlook and Fiscal Review released today,
the government revised the province's projected economic growth outlook for
2008 to 0.1 per cent, down from the 1.1 per cent forecast in the 2008 Budget
last March. As a result, projected revenue will decline, while expenditures
will increase in certain areas.
    Due primarily to lower revenues, the government is projecting a
$500 million deficit for 2008-09. It is also taking action to further manage
expenditures in the remaining five months of the 2008-09 fiscal year by
delaying the implementation of and slowing down some new spending, while at
the same time restraining internal government expenditures.
    For five years, the McGuinty government has invested in what matters most
to Ontarians and helped to prepare the province for the uncertainties it faces
today. These investments continue through its five-point economic plan, which
responds to the needs of individuals, families and businesses by:

    
    -   Investing in skills and knowledge
    -   Investing in infrastructure
    -   Lowering business costs
    -   Strengthening the environment for innovation
    -   Forming key partnerships.
    

    QUOTES

    "Today's economic reality is forcing governments around the world to
re-examine their expenditures, adjust their assumptions and respond to an
environment where the only constant is uncertainty," said Ontario Finance
Minister Dwight Duncan (http://www.fin.gov.on.ca/english/about/min_bio.html).
"The government will bring greater focus to the management of its expenses and
it is compelled to delay the implementation of and slow down some new
spending."
    "This year's projected deficit will allow the government to maintain its
important investments in Ontario's economic future as we work through the real
challenges that confront the world today," said Duncan. "Through the McGuinty
government's five-point economic plan, we are doing everything we can to
protect key public services and build confidence in Ontario's economy."

    
    QUICK FACTS

    -   Total revenue in 2008-09 is projected to decrease by $918 million
        from the 2008 Budget forecast.

    -   Total expense in 2008-09 is projected to increase by $132 million
        from the 2008 Budget forecast, largely due to higher utilization-
        related expense in the Ontario Health Insurance Plan (OHIP) program.

    -   The government has partially drawn down the $750 million reserve for
        2008-09 included in the 2008 Budget plan. The remaining $200 million
        reserve protects against adverse changes in the province's revenue
        and expense outlooks, including those resulting from changes in
        Ontario's economic performance.

    -   More than half a million net new jobs have been created in Ontario in
        the past five years. This year alone, Ontario has created 104,100 net
        new jobs.

    -   The McGuinty government has prudently managed through deficits in the
        past - the $5.5 billion deficit it inherited in 2003 was eliminated
        within two years and was followed by three consecutive surpluses.

    LEARN MORE

    Read the 2008 Ontario Economic Outlook and Fiscal Review
    (http://www.fin.gov.on.ca/english/budget/fallstatement/2008).

    Read a summary of the 2008 Ontario Economic Outlook and Fiscal Review
    (http://www.fin.gov.on.ca/english/media/2008/bk10-fes1.html).

    Read more about how the government is managing expenditures
    (http://www.fin.gov.on.ca/english/media/2008/bk10-fes2.html).

    Find out more about the government's five-point economic plan
   
(www.fin.gov.on.ca/english/budget/fallstatement/2008/factsheet/index.html).

    Find out about Ontario's campaign for fairness
    (http://www.fairness.ca/english/default.asp).

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    BACKGROUNDER
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               2008 ONTARIO ECONOMIC OUTLOOK AND FISCAL REVIEW
    

    Since the McGuinty government delivered the 2008 Ontario Budget in March,
the global economy has changed. The slowing U.S. economy and global financial
situation are causing significant uncertainty in many jurisdictions, and
Ontario is no exception. In recent years, Ontario has also been affected by
the strong Canadian dollar and high oil prices - additional factors beyond the
government's control.
    Based on the information available to date and on the significant
lowering of private-sector forecasts, the government is projecting Ontario
real gross domestic product (GDP) growth of 0.1 per cent for 2008, compared
with 1.1 per cent at the time of the 2008 Budget. As a result, the government
expects that revenue will decline. The government is projecting a deficit of
$500 million in 2008-09. A deficit, followed by a plan for its elimination,
represents a balanced response to today's global reality.
    The government's response to the challenges arising from the global
economic situation will be guided by three principles:

    
    -   The McGuinty government's five-point economic plan will continue to
        be the foundation of its approach to today's economy. Investing in
        skills and knowledge, infrastructure, lowering business costs,
        innovation and key partnerships remains the right response in
        uncertain times.

    -   The government will continue its prudence while maintaining the
        ability to respond quickly to changing economic circumstances.

    -   The government will do everything it can to protect the gains made by
        Ontario while taking a balanced, comprehensive approach to future
        growth.
    

    As part of this approach, the government will make the necessary
adjustments to help ensure key priorities are protected. To accomplish this,
it will also take immediate action to implement fiscal restraint. The
government will delay the implementation of and slow down some new spending
while continuing to manage internal expenses. For more details, see Managing
Expenditures.

    FIVE-POINT ECONOMIC PLAN

    For five years, the McGuinty government has made strategic investments in
skills and knowledge, infrastructure, lowering business costs, innovation and
key partnerships.
    These investments have helped prepare Ontario to weather the current
economic challenges. They constitute an economic stimulus package that is
helping individuals, families and businesses today:

    
    -   The Second Career Strategy, which helps retrain laid-off workers for
        new jobs, will be enhanced this fall. The strategy is a key part of
        the $2 billion Skills to Jobs Action Plan, which further enhances
        skills and builds places to learn. In addition, the Reaching Higher
        Plan for postsecondary education and investments in skills
        training mean that 100,000 more Ontarians are being trained in
        colleges and universities today and 50,000 more are learning a trade.

    -   ReNew Ontario's five-year, $30 billion infrastructure investment is
        building new roads, schools, hospitals, bridges and transit across
        Ontario. Today, more than 100 major construction projects have been
        initiated. Our infrastructure investments will create over
        100,000 jobs this year. Through the Investing in Ontario Act, 2008,
        the government is investing an additional $1.1 billion this year in
        municipal infrastructure to improve roads and bridges, expand public
        transit and build other municipal projects throughout the province.
        This investment is expected to create 11,000 full-time jobs during
        the construction period and will make Ontario's economy more
        competitive in the long term.

    -   Strategic tax cuts since 2004 have already saved businesses more than
        $1.5 billion and will save businesses nearly $3 billion annually when
        fully implemented, while promoting new investment and creating jobs.

    -   A proposed tax incentive for new businesses that commercialize
        Canadian research would help turn home-grown ideas into hometown
        jobs. In addition, our investments are attracting new high technology
        jobs to Ontario.

    -   Ontario is partnering with key sectors of the economy, Aboriginal
        peoples, municipalities and others to foster growth. Ontario will
        continue to press the federal government for fairness.
    

    FISCAL OUTLOOK

    Global financial uncertainty is a key factor contributing to the change
in the province's 2008-09 fiscal outlook, as a decline in economic growth
results in a decline in revenues.
    The $500 million deficit forecast for 2008-09 represents 0.5 per cent of
the 2008-09 revenue outlook. The government has prudently managed through
deficits in the past - the $5.5 billion deficit inherited in 2003 was
eliminated within two years and was followed by three consecutive surpluses.
This was achieved while investing in key public services. The government
continues to strengthen the economy through its five-point economic plan.
    The 2008-09 revenue outlook is projected to decrease by $918 million from
the 2008 Budget forecast, largely reflecting slower economic growth
projections for 2008.
    Total expense in 2008-09 is projected to increase by $132 million from
the 2008 Budget forecast. This change is primarily due to higher
utilization-related expense in the Ontario Health Insurance Plan (OHIP)
program.
    The 2008 Budget plan included prudence in the form of a reserve of 
$750 million in 2008-09 to protect against adverse changes in the province's
revenue and expense outlooks, including those resulting from changes in
Ontario's economic performance. A portion of the reserve has been drawn down
to partially offset the effects of slower economic growth on the province's
fiscal outlook. The government continues to maintain a $200 million reserve in
recognition of the continued global uncertainty that could further impact the
province's finances.

    ECONOMIC OUTLOOK

    The province's economic growth is expected to be slow in the near term
due to heightened global uncertainty. Based on the information currently
available, the Ministry of Finance is projecting Ontario real GDP growth of
0.1 per cent for 2008, compared with 1.1 per cent at the time of the 2008
Ontario Budget. As of October 16, 2008, the average private-sector forecast
for Ontario real GDP growth is 0.7 per cent for 2009.
    Ontario has created 104,100 net new jobs so far this year. Approximately
83 per cent of those jobs have been in the private sector. Although Ontario
has lost 16,200 manufacturing jobs, there have been strong job gains in other
industries paying above-average wages, including construction (37,500);
professional, scientific and technical services (19,400); and health care and
social assistance (26,800). The increase in employment has led to solid income
gains. Labour income grew by 4.2 per cent over the first half of the year,
supported by job gains and higher wages. Since October 2003, the Ontario
economy has created more than half a million net new jobs.
    The side of the Ontario economy that is based on domestic demand has
remained strong in 2008. Household spending remains firm, with real consumer
spending up, and residential construction spending has increased. Housing
starts are up from the same period in 2007. However, while housing starts have
increased, home resales have weakened. Corporate profits are down over the
first half of this year, reflecting the negative impact of high oil prices and
the strong Canadian dollar in recent years.

    THE NEXT SIX MONTHS

    The McGuinty government will continue to inform the people of Ontario
through quarterly economic updates. There will be continued uncertainty and
anxiety in the global economy. The government will diligently monitor and
respond to events as they unfold.
    As in other times of uncertainty, Ontario will rise to the current
challenges and seize opportunities to strengthen economic growth, create new
jobs and continue to be a great place to live and invest.

    
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    BACKGROUNDER
    -------------------------------------------------------------------------

                            MANAGING EXPENDITURES
    

    The 2008 Budget forecast for Ontario economic growth in 2008 was
1.1 per cent. Due to global economic uncertainty and a significant lowering of
private sector forecasts, the government is now projecting 2008 economic
growth of 0.1 per cent.
    As a result, Ontario's revenue growth will decline, while expenditures
will increase in certain areas. Due primarily to lower revenues, the
government is projecting a $500 million deficit for 2008-09.

    A TRACK RECORD OF SOUND FISCAL MANAGEMENT

    Since taking office, the McGuinty government has eliminated the hidden
$5.5 billion deficit it inherited, produced three consecutive balanced
budgets, decreased Ontario's debt-to-GDP ratio and kept the rate of growth of
provincial spending below the rate of revenue growth. It has done so while
making strategic investments in key public services.
    The McGuinty government has demonstrated its commitment to prudent
management. To manage growth in spending while improving the delivery of
public services, the government achieved $806 million in savings between
2004-05 and 2007-08, exceeding the $750 million target. The government
achieved these savings by streamlining purchasing processes, reducing
administrative costs, reducing energy and accommodation costs, improving the
use of information technology (IT) and better harmonizing and coordinating
government operations.
    The government continues to implement efficiencies across the broader
public sector (BPS) through such initiatives as OntarioBuys, a supply-chain
management program that is expected to save up to $100 million across the
hospital and education sectors, which can then be reinvested into front-line
services.
    The government has also reduced the overall cost of government
administration from 15 per cent in 2003-04 to 12 per cent in 2007-08.
Ontario's spending on general government services was $124 per person in
2007-08, the second-lowest rate among all provincial governments.

    FURTHER MANAGING EXPENDITURES

    The new economic reality is forcing governments around the world to
re-examine their expenditures.
    Ontario cannot spend its way out of today's difficulties. At the same
time, it cannot afford irresponsible cuts to programs and services. The
McGuinty government is committed to protecting the investments it has made in
key public services over the past five years, while taking a prudent and
balanced approach to future growth.
    In light of lower revenues for 2008-09, the government is therefore
taking action to further manage spending. It is:

    
    -   Delaying the implementation of and slowing down some new spending,
        while at the same time restraining internal government expenditures.
        Together, these restraint measures will result in $108 million in
        savings in the five months remaining in the 2008-09 fiscal year.
        These measures include:

    -------------------------------------------------------------------------
                   Restraint Initiative                    2008-09 Savings
    -------------------------------------------------------------------------
    Completing the hiring of 9,000 nurses over
    a longer period of time than anticipated in
    the 2008 Budget                                          $50 million
    -------------------------------------------------------------------------
    Deferring less-urgent education capital
    improvement projects                                     $25 million
    -------------------------------------------------------------------------
    Delaying the launch of the Ontario Social
    Venture Capital Fund                                     $20 million
    -------------------------------------------------------------------------
    Delaying the addition of 50 Family Health Teams
    by one year                                               $3 million
    -------------------------------------------------------------------------
    Internal government restraint:                           $10 million

    -   Reducing government staff travel costs
    -   Reducing print advertising for government
        jobs
    -   Freezing the existing government real
        estate footprint and leasehold improvements
    -   Reducing government use of management and
        IT consultants
    -   Freezing the purchase of government vehicles
        for the rest of 2008-09
    -   Reducing government printing, photocopying
        and fax costs
    -------------------------------------------------------------------------

    Total                                                   $108 million
    -------------------------------------------------------------------------

    -   Requiring ministries to focus on the highest-priority programs during
        their 2009-10 planning process, while ensuring lower-priority
        programs are reviewed and assessed.
    

    WORKING WITH PARTNERS IN A NEW FISCAL ENVIRONMENT

    Compensation costs and wage settlements are key cost elements that can
have a substantial impact on the finances of both BPS partners and the
province. With major contracts covering 50 per cent of BPS unionized workers
and approximately 85 per cent of Ontario Public Service employees up for
negotiation in 2008-09, the government expects its bargaining agent partners
to achieve affordable collective agreements in this new fiscal environment.
    In 2008-09, $76.6 billion-80 per cent of total government spending-will
go to transfer payment recipients. Transfer payment funding will not be
increasing in fiscal 2009-10 according to what was projected in the 2008
Budget last March. The government is confident that its transfer partners will
work together with it to rise to the challenge of the current fiscal
situation.

    A BALANCED, RESPONSIBLE APPROACH

    The McGuinty government will continue to implement its agenda, in a
responsible and prudent manner, given the challenging economic environment. A
deficit, followed by a plan for its elimination, represents a balanced
response to today's global reality. The alternative would be deep cuts to the
very programs and services that are helping individuals, families and
businesses weather the current storm.
    The 2009 Budget will update Ontario's medium-term fiscal plan and
outlook. Leading up to the Budget, the Minister of Finance will continue to
consult with many individuals, organizations and associations across the
province about what more the government can do during uncertain economic times
to prudently manage Ontario's finances and do everything it can to protect
important public services.

    
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For further information:

For further information: Alicia Johnston, Minister's Office, (416)
325-3645; Scott Blodgett, Ministry of Finance, (416) 325-0324

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