Canada's largest province is trying to climb out of deficit by shrinking the size of government and asking for a wide-ranging examination of how it delivers public sector services ranging from birth certificates to health care.
Economists pointed to Ontario's move as one of the country's most aggressive attempts to balance the books and restore economic stability at a time when several regions are struggling to put their fiscal houses in order.
Ontario accounts for just under 40 per cent of the Canada's GDP, so its ability to shed its deficit is crucial to the country's overall fortunes.
Many provinces are cutting the size of their civil services - Ontario announced another 1,500 job cuts over two years on Tuesday. But what sets it apart from other regions is its plans to launch a review after next October's election of all government programs and services examining every aspect of how it spends taxpayers' money.
Provinces have succeeded in "picking off the low-hanging fruit," but Ontario's review is far more comprehensive, said Mary Webb, senior economist at Bank of Nova Scotia.
"This is really positive," she said, adding that downsizing government is as important as eliminating the deficit.
The McGuinty government has appointed an economist and trusted adviser to do the heavy lifting and examine all aspects of the province's spending, including health care and education. The goal is to cut the growth rate in program spending and get more bang from the buck.
The province's manufacturing heartland was hit hard in the recent recession, and unlike Western Canada, it does not have resource riches to help fuel a rebound.
As a result, Ontario cannot count on economic growth to erase its deficit, which now stands at $16.7-billion. But much like the former federal government, Ontario is also trying to strike a balance between preparing for an upcoming election campaign and shedding its deficit.
The government delivered a budget on Tuesday that attempted to do just that. It is making a symbolic gesture to target the generous pay packets of hospital, university and other public sector chief executive officers by cutting funding for their offices by 10 per cent. The announcement comes on the eve of the release of the annual "sunshine list," which publishes the salaries of all public sector workers who earn more than $100,000 a year.
But the government is putting off the tough decisions on overhauling the delivery of public sector programs and services until after the provincial election next October.
In his fifth and final budget before the election, Finance Minister Dwight Duncan unveiled a partisan document that contains no blueprint for digging the province out of deficit.
He has appointed former Toronto-Dominion Bank economist Don Drummond to examine government spending. Mr. Drummond will deliver his recommendations in time for next year's budget. The goal is to come up with reforms - which could include privatizing some services - to help the province balance its books faster.
Canada's biggest province will spend another six years in the red, longer than the federal government and many other provinces. Its deficit accounts for 2.7 per cent of the province's gross domestic product, putting it roughly on par with New Brunswick.
Mr. Duncan has ruled out raising taxes to help boost revenues. He has asked Mr. Drummond to identify services that could be delivered more efficiently by another entity.
This more-value-for-money approach could include privatizing some programs such as ServiceOntario, which issues birth and marriage certificates and drivers' licenses either online or in person.
Mr. Drummond said in an interview that everything is on the table, including health care and education. While the government has ruled out privatizing health care or education, Mr. Drummond said that doesn't mean he won't look at having the private sector deliver some services.
"Health care is 46 per cent [of the province's spending] and education is 23, so you've got almost three-quarters of spending right there in two programs," Mr. Drummond said, so he "absolutely" has to consider them as part of his mandate.
However, Mr. Duncan stressed that Mr. Drummond has "outright rejected the slash-and-burn approach."
The Finance Minister wants to balance the province's books sooner than his target of fiscal 2017-18 while protecting health care and education. But the challenge is enormous.
Program spending in 2010-11 was $2.6-billion less than what Mr. Duncan projected in last year's budget. But $917-million of that reduction came from fewer laid-off workers signing on for retraining programs and less spending by embattled eHealth Ontario on digital health records.
Mr. Duncan is projecting that program spending will grow 1.7 per cent a year - well below historic rates of 6 per cent - and reach $113.8-billion in 2011-12. To get there, his latest budget contains new spending for only a handful of areas, including mental health and addiction, breast cancer screening and new spaces in universities and colleges.
The budget itself contains no pre-election goodies. But Mr. Duncan delivered a highly partisan budget speech in the Legislature aimed at drawing sharp distinctions between the governing Liberals and the Progressive Conservatives.
PC Leader Tim Hudak, who is leading in the public opinion polls, has not unveiled his campaign platform. Nevertheless, Mr. Duncan asserted that Mr. Hudak plans to cut the harmonized sales tax rate, which he said would result in massive job cuts for doctors, nurses and teachers.
"We chose to preserve and safeguard our quality of life," Mr. Duncan said. "Others would have cut people loose."
The McGuinty government has avoided confrontation with the public sector during its 7.5 years in office. Restraint measures in last year's budget that included a voluntary wage freeze for public sector workers who bargain collectively all but failed, with most rejecting it.
The previous Tory government, by contrast, slashed public sector jobs in the mid-1990s as part of its Common Sense Revolution.
Mr. Hudak said these are the kind of scare tactics governments resort to when they get desperate.
"I'm going to take puppies away from kids," he said sarcastically. "I'm going to cancel Christmas and the sun won't shine."
With a report from Richard Blackwell
Postsecondary education: create more than 60,000 additional college and university spaces by 2015-16 at a cost of $64-million in 2011-12 and $309-million in 2013-14 for operating grants.
Breast cancer screening: an additional $15-million over the next three years to provide about 90,000 more screening exams for women under 50 at high risk.
Mental health: Funding that reaches $93-million a year in 2013-14 for a mental health and addictions strategy, starting with children and youth.
$236.3-billion Ontario's total debt as of March 31, 2011, accounting for 35.4 per cent of gross domestic product.
$113.3-billion Total 2010-11 program spending.
$16.7-billion Projected deficit for 2010-11
$3.4-billion Amount the Ontario Lottery and Gaming Corp. and the Liquor Control Board of Ontario contributed to the province in 2010-11.
1,500 Public service jobs to be cut between April, 2012, and March, 2014, on top of 3,400 full-time cuts announced in the 2009 budget.