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Don Drummond is photographed during a press conference February 15 2012 after delivering a report on budget savings for the provincial government.

The Globe and Mail

Get ready for a new reality, Ontario.

A sweeping report on the financial health of Canada's largest province calls for a major rethink of an economy long regarded as the engine of the country's growth.

The highly anticipated report delivered Wednesday by economist Don Drummond warns that Ontario is in the midst of a sea change driven by the decline of its manufacturing sector and shifting demographics.

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The prescription is a massive cost-cutting plan, a laundry list of austerity measures delivered in a 532-page report, "a brick," in Mr. Drummond's estimation. Its 362 recommendations range from broad reforms such as a culture shift in health care to focus on health promotion from the existing "after-the-problem treatment" model to nitty-gritty details, such as a call for commuters to pay for parking at GO Transit stations.

In total, the work of the four-person panel amounts to a wake-up call to the province and the politicians who govern it – one it concedes could take some time to sink in.

"Our message will strike many as profoundly gloomy. It is one that Ontarians have not heard," the report cautions at the onset.

The days of relying on economic growth to solve the province's fiscal problems are over, Mr. Drummond warns. "We don't think the previous growth rates, unfortunately, will come back," he told reporters.

If left unchecked, Ontario's deficit will swell to $30.2-billion by 2018, or more than double last year's figure. In order to correct that course, the report says annual spending growth must be held at 0.8 per cent over seven years – a target that, given population growth and inflation, actually will require a 16.2 per cent cut in program spending over that period for every man, woman and child in the province.

As well as its list of prescriptive measures, the report raises two key themes, the need to make policy decisions based on evidence and the need to integrate public services – everything from social assistance to provincial real estate holdings.

This is not the first time a Canadian government has embarked on such a belt-tightening endeavor, Mr. Drummond said. But this time around the province has indicated raising taxes is off the table and the report recommends that no cuts be made to social assistance rates, as they were under the Mike Harris government.

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With those caveats, Mr. Drummond said his report would send the province into largely uncharted waters. "I think it would be fair to say it would be unprecedented in the post-war period in Canada," he said.

The report's major recommendations include:

Health care

The bulk of the report – like the provincial budget – is devoted to health-care reforms. Health-care spending accounts for more than 40 per cent of the provincial budget.

> capping annual increase to health-care spending at 2.5 per cent.

> shifting treatment from hospitals to clinics and homecare

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> shifting services to "lower cost caregivers" where possible and making more use of nurse practitioners

> favours revamped Local Health Integration Networks, tightly integrated with Community Care Access Centres and with clear accountability structures.

> linking CEO and executive compensation to health outcome targets


> Funding should grow at 1 and 1.5 per cent respectively for primary and postsecondary education, far below the current 3 to 5 per cent

> Full-day kindergarten should be scrapped, but as the government has already refused this advice, its implementation should at least be delayed three years, and staffing trimmed

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> Class size caps should be relaxed, to 23 students in primary classes, and an average of 22 to 26 in later years

> Salary increases must be modest, and pensions may need to be jointly managed

> Seventy per cent of 13,800 non-teaching jobs created since 2003 should be scrapped, as should 25 per cent of funds for textbooks and classroom supplies

> Universities should sign individual mandate agreements, tying funding to goals, outcomes and graduation rates, and be forced to differentiate more

> The province needs federal help closing the wide gap in on-reserve education funding, and should join First Nations in forming new entities with powers similar to a school boards


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> The report does not recommend wage freezes, calling them ineffective

> More centralized bargaining in the public sector

> More flexibility for the public sector workforce including changes to bumping provisions.


> Most of the report focuses on restraint, it estimates $2-billion in new revenue can be found in areas such as contraband tobacco, the underground economy, collections issues, tax expenditures and additional income from Crown agencies.

> It also calls for an "honest discussion" about revenue solutions such as road tolls, congestion charges, regional gas taxes, parking surcharge and a review of user fees.

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With files from Tavia Grant and James Bradshaw

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