Ministry of Education: Spending Plan Review

Ministry of Education: Spending Plan Review

Publish date: November 14, 2022 ISSN 2816-9654
This report analyzes the Ministry of Education’s spending plan as set out in the 2022 Ontario Budget and the 2022-23 Expenditure Estimates.
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About this document

Established by the Financial Accountability Officer Act, 2013, the Financial Accountability Office (FAO) provides independent analysis on the state of the Province’s finances, trends in the provincial economy and related matters important to the Legislative Assembly of Ontario.

Prepared by: Michelle Gordon (Senior Financial Analyst) and Ben Segel-Brown (Senior Financial Analyst), under the direction of Luan Ngo (Director, Financial Analysis) and Jeffrey Novak (Chief Financial Analyst).

This report has been prepared with the benefit of publicly available information and information provided by the Ministry of Education and Treasury Board Secretariat.

All dollar amounts are in Canadian, current dollars (i.e., not adjusted for inflation) unless otherwise noted.

© King’s Printer for Ontario, 2022

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Ministry of Education: Spending Plan Review, Financial Accountability Office of Ontario, 2022.
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1. Summary

Ministry of Education Spending Outlook
School Board Operations
School Board Capital Amortization Expense and Investments
Child Care
Issue 1: How does the Province plan to create 71,000 net new licensed child care spaces for children under age six?
Issue 2: How many child care providers will enrol in the $10-a-day child care program?
Issue 3: Is there enough funding available to support $10-a-day child care for all who want it?
Issue 4: Will the federal government continue to fully fund the program?
Other Program Areas
2022-23 Expenditure Estimates Review

2. Introduction

This report reviews the Ministry of Education’s spending plan in the 2022 Ontario Budget and the 2022-23 Expenditure Estimates. The report is organized as follows:

3. Ministry of Education Spending Outlook

Based on current program design and announced commitments, the FAO projects that Ministry of Education (EDU) spending will grow at an average annual rate of 4.5 per cent between 2021-22 and 2027-28, reaching $40.9 billion in 2027-28. In contrast, in the 2022 Ontario Budget, the Province projects that EDU spending will grow at an average annual rate of 3.6 per cent, reaching $38.9 billion in 2027-28. The spending gap between the FAO’s projection and the Province’s outlook increases from $0.4 billion in 2022-23 to $2.0 billion in 2027-28. Overall, the cumulative spending gap from 2022-23 to 2027-28 is $6.0 billion. To address the shortfall, the Province will need to either increase funding to the education sector or introduce new spending restraint measures.

Figure 1 Ministry of Education spending projections, FAO vs. 2022 Ontario Budget, $ billions

Note: Ministry of Education spending includes the Ontario Teachers’ Pension Plan (OTPP).

Source: 2021-22 Public Accounts of Ontario, 2022 Ontario Budget and FAO analysis of information provided by the Province.

Medium Term: In 2022-23, the FAO’s projection for EDU spending is $0.4 billion higher than the Province’s spending plan in the 2022 Ontario Budget, primarily due to the addition of the $365 million Catch Up Payments program announced after the release of the 2022 budget.[7] The spending gap between the two projections narrows to $0.2 billion in 2023-24, before returning to $0.4 billion in 2024-25. Overall, the FAO projects 5.7 per cent average annual growth between 2021-22 and 2024-25. In contrast, the Province forecasts slower growth, averaging 5.3 per cent over the medium term.

Recovery Period: The Province plans to reduce the growth rate of EDU spending to an annual average of 1.9 per cent between 2024-25 and 2027-28. Based on current program design and announced commitments, the FAO projects spending will grow at an average annual rate of 3.3 per cent over the same period. As a result, the FAO projects that education spending will be $2.0 billion higher in 2027-28 compared to the forecast in the 2022 budget.

4. Spending Outlook by Program Area

Between 2021-22 and 2027-28, the FAO projects Ministry of Education spending will grow at an average annual rate of 4.5 per cent. By program area, the FAO projects spending on school board operations will increase at an average annual rate of 2.7 per cent over the outlook, while school board capital spending will increase at an average annual rate of 3.4 per cent. The FAO projects child care spending will increase at an average annual rate of 19.9 per cent due to the signing of the Canada – Ontario Canada-wide Early Learning and Child Care Agreement, which includes the Province’s commitment to provide an average of $10-a-day child care by 2025. Spending on the Ontario Teachers’ Pension Plan (OTPP) and ministry operations is projected to grow by annual averages of 2.3 per cent and 2.4 per cent, respectively. Finally, the FAO projects spending on other education programs will increase at an average annual rate of 1.1 per cent.

Table 1 FAO projected Ministry of Education spending growth by program area, 2021-22 to 2027-28 Source: 2021-22 Public Accounts and FAO calculations.
Program Area 2021-22 Actual Spending
($ millions)
2027-28 Projected Spending
($ millions)
Average Annual Growth Rate (%)
2021-22 to 2027-28
School Board Operations 25,549 29,997 2.7
School Board Capital 1,567 1,915 3.4
Child Care 2,203 6,543 19.9
Ontario Teachers’ Pension Plan 1,610 1,847 2.3
Ministry Operations 317 364 2.4
Other Education Programs 262 279 1.1
Total Ministry of Education 31,507 40,945 4.5

The following sections describe each program area and identify the key assumptions, issues and uncertainties behind the FAO’s spending projection.

School Board Operations

Spending on school board operations, which comprises approximately 80 per cent of total ministry spending, represents total spending by Ontario’s 72 school boards to administer elementary and secondary education.[8] The primary funding source for school board operations is the ministry’s Grants for Student Needs program, which includes funding for teachers, school administration and other staff, classroom supplies, and specific priorities such as special education, student transportation and mental health. The FAO projects school board operations spending will grow by an average annual rate of 2.7 per cent between 2021-22 and 2027-28. The following discussion outlines the key assumptions and risks underlying the FAO’s forecast for school board operations spending.

Compensation

The largest component of school board operating spending is compensation, which comprised approximately 88 per cent of all school board operating spending in 2021-22. Growth in compensation spending is driven by enrolment levels, which impact the overall number of teachers and other employees, and wage increases, which are largely negotiated through collective bargaining agreements. Overall, total spending on compensation is projected to grow from an estimated $18.8 billion in 2022-23 to $21.0 billion in 2027-28, representing an average annual growth rate of 2.3 per cent.[9]

Enrolment Growth

The FAO projects enrolment for students in kindergarten through grade 12 will increase at an average annual rate of 0.8 per cent between the 2022-23 and 2027-28 school years. This is in line with historical growth prior to the COVID-19 pandemic. Between 2015-16 and 2019-20, enrolment increased at an average annual rate of 0.8 per cent. As a result of the COVID-19 pandemic, enrolment declined by 1.5 per cent in the 2020-21 school year and remained relatively flat at 0.2 per cent average annual growth in 2021-22 and 2022-23 (estimated).The FAO’s forecast reflects an expected recovery in the enrolment rate (i.e., enrolment as a share of the student-age population), which declined during the COVID-19 pandemic, and growth in the student-age population.

Figure 2 Historical and projected enrolment, 2015-16 to 2027-28 school years

Source: Statistics Canada, Ministry of Finance and FAO analysis of information provided by the Province.

As noted above, enrolment growth primarily drives staff levels in school boards, given regulated class sizes. The FAO estimates that the number of school board education workers will increase from approximately 289,000 in 2021-22 to 300,000 in 2027-28, for an average annual growth rate of 0.7 per cent.

Wage Growth

School board employee wages are largely set by collective bargaining agreements. The most recent round of agreements for the education sector expired on August 31, 2022. These agreements, which impacted approximately 258,000 school board workers, included 1.0 per cent base wage increases each year for three years as mandated by provincial wage restraint legislation known as Bill 124.[10]

The FAO’s spending projection for the Ministry of Education reflects information available as of October 12, 2022. As of that date, new collective agreements for school board employees had not been reached. Consequently, the FAO’s spending projection in this report assumes school board employees’ wages will increase at an average annual rate of 2.2 per cent per year, which reflects historical average wage growth in the education sector.

On November 3, 2022, the Ontario legislature passed the Keeping Students in Class Act, 2022, which imposed a collective agreement on approximately 55,000 education workers who are members of the Canadian Union of Public Employees (CUPE). However, as of the writing of this report, the Province has announced that it intends to introduce legislation that, if passed, would repeal the Keeping Students in Class Act, 2022, and that the ministry would restart collective agreement negotiations with CUPE.

Since, as of the writing of this report, new collective agreements for school board workers have not been reached, the FAO has estimated the potential impact of two additional bargaining outcomes to its spending projection. As noted above, the FAO’s spending projection in this report assumes that school board employee wages will increase at an average annual rate of 2.2 per cent per year, which reflects historical average wage growth in the education sector. Alternatively, if school board workers receive average wage increases of 3.2 per cent per year over three years, followed by a return to historical wage growth, the FAO estimates that it would increase school board compensation spending by $113 million in 2022-23, growing to $620 million in 2027-28. Under this scenario, the FAO’s projection for school board compensation spending would increase by $2.7 billion over six years. In the second scenario, if school board workers receive an average wage increase of 4.2 per cent per year over three years, followed by a return to historical average wage growth of 2.2 per cent, then the FAO’s projection for school board compensation spending would increase by $226 million in 2022-23, growing to $1.3 billion in 2027-28. Under this scenario, which nearly matches expected inflation over this period,[11] the FAO’s projection for school board compensation spending would increase by $5.5 billion over six years.

Table 2 Potential impact to the FAO’s projection for school board compensation spending under different wage increase assumptions, 2022-23 to 2027-28, $ millions Source: FAO calculations.
2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 Total
2.2% annual wage growth (FAO base case) - - - - - - -
3.2% annual wage growth over three years, then 2.2% 113 303 500 587 603 620 2,726
4.2% annual wage growth over three years, then 2.2% 226 607 1,008 1,186 1,219 1,254 5,501
Additional Risk to the Compensation Spending Projection: the Court Challenge to Bill 124

In response to Bill 124, which capped public sector base salary increases to one per cent per year for a period of three years, a coalition of over 40 Ontario unions launched a lawsuit to challenge the legislation. In the lawsuit, the unions argue that Bill 124 infringed on their rights to associate and collectively bargain as guaranteed under the Canadian Charter of Rights and Freedoms. The unions have asked the court to declare Bill 124 null and void, and that the Province repay workers for lost earnings. As of the writing of this report, a decision is expected in 2023.

To illustrate the potential increase in Ministry of Education spending if the lawsuit is successful, the FAO developed a scenario where school board employees are compensated for wage restraint that applied under Bill 124, estimated as the difference between historical average wage growth and the amount received under collective agreements subject to Bill 124. Overall, the FAO estimates that the cost to the ministry could be $1.5 billion in 2022-23, assuming retroactive payments, and, over the entire projection period, total incremental spending could reach $4.4 billion.

Figure 3Potential impact of a successful Bill 124 court challenge to the FAO’s projection for school board compensation spending, 2021-22 to 2027-28

Note: If the Bill 124 court challenge is successful, assumes that unionized school board employees are compensated for Bill 124 wage growth restrictions that have applied since 2019, estimated as the difference between historical average wage growth and the amount received under collective agreements subject to Bill 124 wage restraint.

Source: FAO estimates.

Non-Compensation Spending

For non-compensation school board operating spending, such as classroom supplies and school facilities services, the FAO assumes 4.4 per cent and 3.5 per cent growth in 2022-23 and 2023-24, respectively, before a return to historical spending growth of 1.5 per cent. Higher non-compensation spending growth in 2022-23 and 2023-24 reflects the expected impact of inflationary pressures on education supplies and services.[12]

School Board Capital

School board capital spending reflects the amortization expense for school board infrastructure assets. Investments in school board infrastructure are amortized and expensed over the useful life of the asset. These assets include approximately 5,000 school buildings, totalling about 290 million square feet, as well as machinery and equipment (such as laboratory equipment and facility maintenance machinery). The FAO projects school board capital spending will increase at an average annual rate of 3.4 per cent, based on the amortization profile of school boards’ infrastructure assets and the Province’s 10-year infrastructure plan for schools in the 2022 Ontario Budget.

Investments in School Board Capital Assets

The Province provides funding to invest in school board infrastructure through the School Board Capital Grants program and, on a time-limited basis, the Investing in Canada Infrastructure Program. School boards use these funds to either rehabilitate existing assets (to keep assets in a state of good repair) or build new assets (i.e., expansion projects). In the 2022 Ontario Budget, the Province plans to invest $21.2 billion in education sector infrastructure over the 10-year period from 2022-23 to 2031-32, which is unchanged from the planned 10-year investment from the 2021 Ontario Budget.

If the $21.2 billion planned investment in education sector infrastructure is achieved, it would be a $1.5 billion (eight per cent) increase from the $19.7 billion education sector infrastructure investment over the previous 10 years from 2012-13 to 2021-22. However, on a real basis, the Province’s 10-year education infrastructure plan in the 2022 budget represents a decline in spending on infrastructure assets compared to the previous 10-year period. After adjusting for inflation, the Province spent $21.4 billion over the previous 10 years (in 2021 dollars), and plans to spend $18.3 billion (in 2021 dollars) over the next 10 years. Therefore, in real terms, the 10-year education sector infrastructure spending plan in the 2022 budget represents a $3.0 billion (14 per cent) spending decline compared to the previous 10-year period.

Figure 4 Actual and planned investments in education sector infrastructure assets in nominal and real (2021) dollars, 2012-13 to 2031-32, $ millions

Source: FAO analysis of information provided by the Province.

Child Care

Overview

The child care program area consists primarily of transfer payments to Consolidated Municipal Service Managers and District Social Services Administration Boards to support licensed child care, and child and family programs in the province. The program area also includes funding for the Childcare Access and Relief from Expenses (CARE) tax credit and spending on other programs, including First Nations child care and EarlyON Child and Family Centres.

On March 28, 2022, the Province announced an agreement with the federal government to “lower fees for families and deliver an average of $10 a day child care by September 2025.”[13] As the Province begins to implement the new $10-a-day child care program, provincial spending on the child care program area will increase significantly, from $2.2 billion in 2021-22 to a projected $6.5 billion in 2027-28, representing an average annual growth rate of 19.9 per cent.

The Child Care Agreement

Under the Canada – Ontario Canada-wide Early Learning and Child Care Agreement (the Agreement),[14] the federal government will provide the Province with $10.2 billion over five years to support child care in Ontario, while the Province will add $268 million. Overall, the Agreement calls for a total investment in child care of $10.5 billion over five years, of which 97 per cent of the funds will be provided by the federal government.

Table 3 Planned federal and provincial child care contributions under the Canada – Ontario Canada-wide Early Learning and Child Care Agreement, 2021-22 to 2025-26, $ millions Source: FAO analysis of information provided by the Ministry of Education.
2021-22 2022-23 2023-24 2024-25 2025-26 2021-22 to 2025-26
Federal Contributions - 1,458 2,286 2,848 3,640 10,232
Provincial Contributions - 33 55 77 102 268
Total Contributions - 1,491 2,341 2,925 3,742 10,500

The Agreement has two main objectives. The first is to reduce the cost of licensed child care for children under age six to an average cost of $10 per day by September 2025. The ministry plans to achieve this target through four steps: an average 25 per cent reduction in child care fees retroactive to April 1, 2022; a further 50 per cent reduction in child care fees, on average, by the end of December 2022; further fee reductions in September 2024; and a final reduction to an average of $10-a-day child care by September 2025.[15] Overall, under the $10-a-day child care program, the average cost of licensed child care for children under age six in Ontario will drop from an estimated $46 per day as of January 2022[16] to an average $10 per day by September 2025, a decline of 78.3 per cent.

Figure 5 Estimated average daily cost of licensed child care in Ontario for children under age six under the $10-a-day child care program, 2022 to 2026, $

Note: “Average” daily rate includes all licensed child care (homes and centres). Daily rate by category is for licensed child care centres only.

Source: FAO analysis of the Canada – Ontario Canada-wide Early Learning and Child Care Agreement.

The second objective of the Agreement is to add 71,000 net new licensed child care spaces for children under age six by the end of 2026. This commitment includes the creation of 27,000 new spaces by the end of 2023. If achieved, Ontario would have 375,111 licensed child care spaces for children under age six by the end of 2026.

Under the Agreement, the Province has also committed to increase wages for Registered Early Childhood Educators (RECEs). Starting in 2022, RECEs at enrolled child care providers must be paid at least $18 per hour (the wage floor). Going forward, the wage floor will increase by $1 per hour in each of 2023, 2024 and 2025. In addition, all RECEs will receive annual $1 per hour wage increases in each of those years up to a maximum of $25 per hour. There are also wage adjustments for RECE supervisors and home child care visitors.

The Ministry of Education plans to spend $1.5 billion in 2022-23 and $2.3 billion in 2023-24 under the Agreement. This includes $1.1 billion in 2022-23 and $1.6 billion in 2023-24 to reduce child care fees. The remaining planned spending in 2022-23 and 2023-24 of $353 million and $694 million, respectively, is for wage enhancements, professional development, growth in spaces, start-up grants and administrative costs.

Table 4 Ministry of Education planned spending under the Agreement by initiative, 2022-23 and 2023-24, $ millions Note: * Funding to support fee reductions and wage enhancements for new spaces are included under the “Growth in spaces” line. Source: Canada – Ontario Canada-wide Early Learning and Child Care Agreement.
Area Initiative 2022-23
($ millions)
2023-24
($ millions)
Affordability Reducing child care fees for children under age six* $1,139 $1,648
Quality Wage enhancements* $53 $94
Quality Professional development and other initiatives $50 $149
Access Growth in spaces (including fee reductions and wage supports) $53 $218
Access Start-up grants $106 $107
Implementation and ongoing supports Implementation, administration and IT costs $91 $126
Total $1,491 $2,341

Key Issues

This section provides a preliminary review of several key issues associated with the Agreement. Specifically:

How does the Province plan to create 71,000 net new licensed child care spaces for children under age six?

As of the end of 2021, there were 304,246 licensed child care spaces in Ontario for children under age six. Under the Agreement, the ministry has committed to create 71,000 net new licensed child care spaces by the end of 2026, including 27,000 net new licensed spaces by the end of 2023.[17] If achieved, this would bring the total number of licensed child care spaces for children under age six to 375,111 by the end of 2026.

The ministry plans to create 71,000 net new spaces through natural growth and induced demand. Natural growth is expected to add 48,459 spaces by the end of 2026, while induced demand is expected to add 22,406 spaces.

Table 5 Ministry targets for licensed child care spaces for children under age six, 2022 to 2026 Note: 2019 to 2021 are actuals. Source: FAO analysis of information provided by the Ministry of Education.
2019 2020 2021 2022 2023 2024 2025 2026 2022 to 2026
Start of year 289,111 299,984 298,004 304,246 313,374 330,936 348,780 364,838
Natural growth 10,873 -1,980 6,242 9,128 9,401 9,683 9,974 10,273 48,459
Induced demand 8,161 8,161 6,084 22,406
End of year 299,984 298,004 304,246 313,374 330,936 348,780 364,838 375,111
Net new spaces vs. end of 2021 9,128 26,690 44,534 60,592 70,865

The ministry expects to add 48,459 licensed child care spaces by the end of 2026 through natural growth. The ministry assumes that the number of spaces will naturally grow by three per cent each year, based on a long-term historical average that excludes several years affected by the rollout of full-day kindergarten. The ministry did not identify the factors that might drive natural growth.

The ministry also expects that the number of licensed child care spaces will increase through “induced demand.” The ministry expects that, as licensed child care becomes progressively more affordable, more families will seek licensed child care, which will result in child care providers increasing the supply of spaces.

Measures to increase the supply of licensed child care spaces

To support the creation of licensed child care spaces by providers, the ministry is implementing a number of measures:

However, uncertainties over some aspects of the $10-a-day child care program, such as the extent of ministry reimbursement of future cost increases to child care providers, could reduce incentives for child care providers to create spaces. Child care providers are likely to open and expand child care centres if their operations are expected to be financially viable. Conversely, child care providers are likely to disenroll or close if their operations generate a loss.

Impact of creating 71,000 net new licensed child care spaces

Overall, if the target of 71,000 net new licensed child care spaces is achieved, it would represent average annual growth of 4.3 per cent from 2021 to 2026. In comparison, between 2011 and 2019, the number of spaces for children under age six increased by 6.2 per cent annually.[18]

The FAO projects that the new licensed child care spaces would increase the number of licensed child care spaces as a share of the population of children under age six from 35.3 per cent in 2021 to 40.8 per cent in 2026. For context, the number of licensed child care spaces as a share of the population of children under age six was 20.4 per cent in 2011.

Figure 6 Actual and planned licensed child care spaces for children under age six relative to their population

Source: FAO analysis of information provided by the Ministry of Education, Ontario Ministry of Finance, Population Projections Scenarios for Ontario by Age and Sex, 2021-2046 and Statistics Canada, Table 17-10-0005-01Population estimates on July 1st, by age and sex.

How many child care providers will enrol in the $10-a-day child care program?

Although the Agreement calls for the creation of 71,000 net new licensed child care spaces for children under age six, it does not specify a target for how many licensed child care providers (existing or new) will enrol in the program to provide $10-a-day child care. Therefore, it is not certain how many of the expected 375,111 licensed child care spaces for children under age six, as of the end of 2026, will be enrolled in the $10-a-day child care program.

Enrolment in the $10-a-day child care program is voluntary for licensed child care providers. Originally, the deadline for child care providers to enrol in the program was September 1, 2022. However, media reports have stated that many child care providers, particularly for-profit child care providers, had not opted into the program by the initial deadline of September 1, 2022.[19] In response, the ministry extended the deadline to apply to November 1, 2022 and clarified conditions relating to the right of child care providers to withdraw from the system and earn surpluses/profits.[20]

Child care providers who enrol in the program will provide discounted child care to parents in exchange for an equivalent amount in government subsidies. While the agreement offers a significant financial benefit for parents, child care providers will not receive any more revenue than they otherwise would have received for a given child. At the same time, enrolled child care providers will face new regulatory restrictions, including caps on future fee increases.

Despite the increase in regulatory burdens, child care providers may still have a strong incentive to enrol. Specifically, child care providers who do not enrol may face the risk of operating below licensed capacity as families may choose subsidized competitors.

Is there enough funding available to support $10-a-day child care for all who want it?

Based on the FAO’s preliminary analysis, the funding allocated to the $10-a-day child care program from 2022-23 to 2025-26 is likely sufficient to achieve the child care fee reduction targets for the planned 375,111 licensed child care spaces (assuming full take-up of the program by licensed child care providers). However, if more than the planned number of licensed child care spaces are created and enrolled, there is a risk that program funding could be exhausted.

Even if the Province is able to create and enrol 375,111 $10-a-day licensed child care spaces by 2026, the FAO estimates that there may still be significant excess demand for the $10-a-day program. By 2026, the FAO estimates that there will be 919,866 children under age six in Ontario, which would allow about 40.8 per cent of children to access $10-a-day subsidized child care spaces (assuming full child care provider enrolment). However, the FAO estimates that by 2026, Ontario families of approximately 602,257 children under age six will wish to have access to $10-a-day child care.[21] With only 375,111 $10-a-day licensed child care spaces planned, the families of 227,146 children under age six (25 per cent of the under age six population in 2026) would be left wanting but unable to access $10-a-day child care.

Figure 7 Planned supply and estimated demand for $10-a-day child care spaces in 2026

Source: FAO calculation from Statistics Canada Survey on Early Learning and Child Care Arrangements 2019 Public Use Microdata File and other sources.

Will the federal government continue to fully fund the program?

The Agreement signed by the Province and the federal government concludes in 2025-26. The federal government has signalled its intention to renew the Agreement[22] and has committed a minimum funding amount of $2.9 billion for 2026-27, while the Province has committed $128 million. Based on the FAO’s preliminary review of the $10-a-day child care program, the FAO estimates that the Province will need to spend $4.3 billion in both 2026-27 and 2027-28 to maintain the program. This means that there is a committed funding shortfall of $1.2 billion in 2026-27 (based on the minimum federal and provincial commitment) and $4.3 billion in 2027-28 (based on the absence of any federal or provincial commitment) pending a renewal/extension of the Agreement.

Table 6 Committed and required funding for the $10-a-day child care program in 2026-27 and 2027-28, $ millions Source: Canada – Ontario Canada-wide Early Learning and Child Care Agreement and FAO calculations.
2026-27 2027-28
Preliminary Federal Commitment 2,926 -
Preliminary Provincial Commitment 128 -
Total Preliminary Commitment 3,054 -
Required Funding (FAO Preliminary Estimate) 4,280 4,334
Estimated Funding Shortfall -1,226 -4,334

In addition to the risk of program underfunding, there is a risk that the federal government could choose not to continue the program after the Agreement expires in 2025-26. For example, in 2006, the federal government cancelled its 2005 Early Learning and Child Care Agreement with Ontario and did not provide any further funding beyond 2006-07 towards its commitments under that agreement.

Ontario Teachers’ Pension Plan

The Province and the Ontario Teachers’ Federation (OTF) are joint sponsors of the Ontario Teachers’ Pension Plan (OTPP). OTPP spending represents the projected change in the provincial share of the OTPP liability for the year, net of returns on the plan’s assets. The FAO projects OTPP spending will grow at an average annual rate of 2.3 per cent, based on historical trends and other information.

In line with accounting treatment changes introduced by the Auditor General of Ontario in 2015-16, the Province has recorded an OTPP valuation allowance of $22.2 billion as of March 31, 2022. The valuation allowance reduces the value of the OTPP’s net pension asset because the Province does not have a unilateral right, or an agreement with the OTF, to access its share of the net pension asset. Changes to either the accounting treatment of the OTPP valuation allowance, or the methodology and assumptions underlying the valuations of the OTPP’s assets and liabilities, would have a material impact on the Province’s budget balance and net debt.[23]

Ministry Operations

Ministry operations includes spending to support the administration of the ministry, including financial and administrative services, human resources, and communications and legal services. This includes spending on salaries, wages and benefits for ministry staff, services to develop and provide operational support for education and child programs, and information technology services. The FAO projects ministry operations spending will increase at an average annual rate of 2.4 per cent. This is in line with the FAO’s wage growth and inflation projections.

Other Education Programs

Other education programs includes spending on non-school board education agencies and other parties including TVOntario (TVO), Télévision française de l’Ontario (TFO), the Education Quality and Accountability Office (EQAO) and any direct payments to parents. It also includes negative adjustments for education spending connected to colleges and hospitals. Corresponding positive adjustments are included with the Ministry of Colleges and Universities and the Ministry of Health. The FAO projects other education programs spending will increase at an average annual rate of 1.1 per cent, reflecting historical trends.

5. 2022-23 Expenditure Estimates Review

This chapter reviews 2022-23 requested and projected spending for the Ministry of Education, as outlined in the 2022-23 Expenditure Estimates, by program vote (Supply Bill spending), standalone legislation (statutory) spending, and other spending (consolidation and other adjustments).

Vote 1001 Ministry Administration Program

The Ministry Administration Program provides overall direction and administrative support. The total spending request for Vote 1001 is down $3 million (14.9 per cent) versus 2021-22 spending. The decrease this year is mostly attributed to lower planned services spending.[24]

Vote 1001 Ministry Administration Program Source: 2021-22 Public Accounts and the 2022-23 Expenditure Estimates.
Item Ministry Administration Program
(Vote 1001)
2021-22 Spending
($ millions)
2022-23 Estimates
($ millions)
1 Year Change
($ millions)
1 Year Growth
(%)
1 Ministry Administration
Salaries, Wages and Employee Benefits 14 15 1 7.3%
Services 9 5 -4 -47.4%
Other Spending -3 -3 <1 -6.2%
Total Supply Vote 20 17 -3 -14.9%

Vote 1002 Elementary and Secondary Education Program

The Elementary and Secondary Education Program provides financial support to school boards, schools and agencies in Ontario. At $29.2 billion, Vote 1002 accounts for 84.3 per cent of planned EDU spending in 2022-23. The overall spending request for Vote 1002 is up by $897 million (3.2 per cent) compared to 2021-22 spending. There are three main sub-programs (items) in Vote 1002:

Significant changes in the 2022-23 spending plan under Vote 1002 include the following items:

Also of note is that requested spending for Vote 1002 does not include funding for the Catch Up Payments program, which is expected to cost $365 million.[26] Funding for this program will need to be transferred from the Contingency Fund.

Vote 1002 Elementary and Secondary Education Program Source: 2021-22 Public Accounts and the 2022-23 Expenditure Estimates.
Item Elementary and Secondary Education Program
Vote 1002
2021-22 Spending
($ millions)
2022-23 Estimates
($ millions)
1 Year Change
($ millions)
1 Year Growth
(%)
1 Policy and Program Delivery
Priorities and Partnerships Funding - School Boards 750 355 -395 -52.7%
Priorities and Partnerships Funding - Third Parties 147 171 24 16.3%
School Board Operating Grants 18,190 19,273 1,083 6.0%
Education Property Tax Non-Cash Expense 7,076 6,947 -129 -1.8%
Provincial Benefits Trusts 0 <1 <1
Official Languages Projects 42 39 -3 -6.5%
Education Quality and Accountability Office 20 28 8 38.8%
Partner Sustainability Grants 2 3 1 56.5%
Salaries, Wages and Employee Benefits 75 84 9 12.7%
Services 44 24 -20 -44.6%
Other Spending 52 18 -34 -65.2%
Total Item 26,398 26,943 545 2.1%
2 Educational Operations
Payments in lieu of municipal taxation <1 <1 <1 36.1%
Provincial Schools Student Enhancement Program <1 <1 <1 158.9%
Office des télécommunications éducatives de langue française de l'Ontario (TFO) 25 25 0 0.0%
Ontario Educational Communications Authority (TVO) 43 43 0 0.0%
Salaries, Wages and Employee Benefits 44 52 8 17.9%
Services 13 15 3 20.1%
Other Spending 3 5 1 44.4%
Total Item 128 140 12 9.4%
3 Support for Elementary and Secondary Education
Climate Action Incentive Fund (CAIF) 14 0 -14 -100.0%
Investing in Canada Infrastructure Program (ICIP) 445 196 -249 -56.0%
Priorities and Partnerships Funding – School Boards 20 20 0 0.0%
School Board Capital Grants 1,251 1,792 541 43.3%
Early Learning Program 12 41 28 229.0%
School Board – Capital Funding for Child Care 65 94 29 43.6%
Office des télécommunications éducatives de langue française de l'Ontario (TFO) 1 1 0 0.0%
Ontario Educational Communications Authority (TVO) 2 2 0 0.0%
Other Spending 3 9 5 170.7%
Total Item 1,814 2,154 340 18.7%
Total Supply Vote 28,340 29,237 897 3.2%

Vote 1003 Community Services Information and Information Technology Cluster

The Community Services Information and Information Technology Cluster supports digital asset management and services for the Ministry of Education and three other ministries.[27] Overall, the $53 million spending request for Vote 1003 is up $7 million (16.1 per cent) versus last year’s spending. The $11 million (25.7 per cent) increase in planned services spending is offset by increased recoveries from other ministries through ‘other spending’.[28] Planned salaries, wages and employee benefits spending is up $4 million or 13.2 per cent.

Vote 1003 Community Services Information and Information Technology Cluster Source: 2021-22 Public Accounts and the 2022-23 Expenditure Estimates.
Item Community Services Information and Information Technology Cluster
(Vote 1003)
2021-22 Spending
($ millions)
2022-23 Estimates
($ millions)
1 Year Change
($ millions)
1 Year Growth
(%)
1 Community Services Information and Information Technology Cluster
Salaries, Wages and Employee Benefits 34 38 4 13.2%
Services 42 53 11 25.7%
Other Spending -31 -39 -8 26.0%
Total Supply Vote 46 53 7 16.1%

Vote 1004 Child Care and Early Years Programs

Child Care and Early Years Programs provide funding for child care programs and services, including the commitment to provide $10-a-day child care by 2025 and the Childcare Access and Relief from Expenses (CARE) tax credit.[29] At $3.8 billion, Vote 1004 accounts for 11.0 per cent of total Ministry of Education planned spending in 2022-23. There are two main sub-programs (items) in Vote 1004:

Compared to 2021-22 spending, the overall spending request for Vote 1004 is up by $1.6 billion (71.4 per cent). Significant changes in the 2022-23 spending plan under Vote 1004 include:

Vote 1004 Child Care and Early Years Programs Source: 2021-22 Public Accounts and the 2022-23 Expenditure Estimates.
Item Child Care and Early Years Programs
(Vote 1004)
2021-22 Spending
($ millions)
2022-23 Estimates
($ millions)
1 Year Change
($ millions)
1 Year Growth
(%)
1 Policy Development and Program Delivery
Ontario Child Care Tax Credit 202 360 158 77.9%
Child Care and Early Years 1,997 3,410 1,413 70.7%
Salaries, Wages and Employee Benefits 17 19 2 10.8%
Services 3 8 6 216.1%
Other Spending <1 <1 >-1 -53.4%
Total Item 2,219 3,797 1,578 71.1%
2 Child Care Capital
Child Care and Early Years Capital 2 10 8 493.6%
Total Item 2 10 8 493.7%
Total Supply Vote 2,221 3,807 1,586 71.4%

Standalone Legislation (Statutory) Spending

Standalone legislation (i.e., spending authorized by legislation other than the Supply Bill) primarily consists of $1.6 billion in planned spending for the Ontario Teachers’ Pension Plan (OTPP), which is $20 million (1.2 per cent) higher than 2021-22 spending. A small portion of statutory spending is for capital expenses, such as the amortization of EDU’s non-school board capital assets.

Standalone Legislation (Statutory) Spending Source: 2021-22 Public Accounts and the 2022-23 Expenditure Estimates.
Statutory Spending 2021-22 Spending
($ millions)
2022-23 Estimates
($ millions)
1 Year Change
($ millions)
1 Year Growth
(%)
Ontario Teachers’ Pension Plan 1,610 1,630 20 1.2%
Amortization 3 4 1 43.5%
Bad Debt Expense 0 <1 <1
Salaries <1 <1 >-1 -3.0%
Total Statutory Spending 1,613 1,634 21 1.3%

Other Spending

The financial results of government organizations controlled by the Province, including school boards and certain provincial agencies, are consolidated into the financial results of the Province. Adjustments are made through ‘other spending’ to account for spending by school boards from sources other than transfer payments from the Province. Net capital adjustments are also made to reflect amortization expenses, mainly for school board infrastructure. Total ‘other spending’ is projected to increase by $650 million compared to 2021-22.

Other spending (operating), at $0.3 billion, is up $0.8 billion compared to 2021-22. The large year-over-year change is due to the Schools adjustment, which reflects spending by school boards. The $0.8 billion increase in the school boards spending adjustment largely reflects:

Other spending (capital) is projected to decrease by $0.2 billion compared to 2021-22. This mainly reflects higher planned spending on school board infrastructure in 2022-23. Spending on school board infrastructure is expensed (amortized) over the life of the asset. These adjustments ensure that the financial statements of the Province reflect the annual amortization expense of school boards’ infrastructure assets.

Other Spending Source: 2021-22 Public Accounts and the 2022-23 Expenditure Estimates.
Other Spending 2021-22 Spending
($ millions)
2022-23 Estimates
($ millions)
1 Year Change
($ millions)
1 Year Growth
(%)
Operating
Office des télécommunications éducatives de langue française de l'Ontario (TFO) 16 5 -12 -71.6%
Education Quality and Accountability Office >-1 -1 -1 274.6%
Ontario Educational Communications Authority (TVO) 17 14 -3 -16.0%
School Board Trust Debt Repayment Reclassification -66 -66 <1 -0.2%
Schools -417 423 840 -201.4%
Colleges -22 -22 <1 0.0%
Hospitals -10 -7 3 -30.5%
General Real Estate Portfolio -1 -4 -3 321.7%
Other -4 0 4 -100.0%
Total Operating -487 342 830 -170.2%
Capital
Office des télécommunications éducatives de langue française de l'Ontario (TFO) 1 1 <1 18.6%
Ontario Educational Communications Authority (TVO) 2 2 >-1 -7.3%
Education Quality and Accountability Office <1 <1 <1 75.4%
Schools 123 -263 -386 -314.7%
Federal - Flowthrough Expense Reversal -367 -156 211 -57.5%
General Real Estate Portfolio -3 -9 -5 158.7%
Total Capital -244 -424 -180 73.6%
Total Other Spending -732 -82 650 -88.8%

Graphical Descriptions

Figure 1: Ministry of Education spending projections, FAO vs. 2022 Ontario Budget, $ billions Note: Ministry of Education spending includes the Ontario Teachers’ Pension Plan (OTPP). Source: 2021-22 Public Accounts of Ontario, 2022 Ontario Budget and FAO analysis of information provided by the Province. Back to image
2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28
2022 Ontario Budget 31.5 34.7 35.9 36.8 37.5 38.2 38.9
FAO Projection 31.5 35.1 36.1 37.2 38.6 40.0 40.9
Figure 2: Historical and projected enrolment growth, 2015-16 to 2027-28 school years Source: Statistics Canada, Ministry of Finance, and FAO analysis of information provided by the Province. Back to image
School Year Enrolment
Historical 2015-16 1,957,871
2016-17 1,970,722
2017-18 1,981,099
2018-19 2,003,421
2019-20 2,020,765
2020-21 1,990,938
2021-22 1,999,826
Projection 2022-23 2,000,321
2023-24 2,028,861
2024-25 2,039,726
2025-26 2,050,425
2026-27 2,063,302
2027-28 2,078,027
Figure 3: Potential impact of a successful Bill 124 court challenge to the FAO’s projection for school board compensation spending, 2021-22 to 2027-28 Note: If the Bill 124 court challenge is successful, assumes that unionized school board employees are compensated for Bill 124 wage growth restrictions that have applied since 2019, estimated as the difference between historical average wage growth and the amount received under collective agreements subject to Bill 124 wage restraint. Source: FAO estimates. Back to image
2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28
FAO Base Case 19,067 18,809 19,094 19,393 19,904 20,463 21,047
Bill 124 Challenge Scenario 0 1,458 554 563 578 594 611
Figure 4: Actual and planned investments in education sector infrastructure assets in nominal and real ($2021) dollars, 2012-13 to 2031-32, $ millions. Source: FAO analysis of information provided by the Province. Back to image
Nominal Real ($2021)
2012-13 to 2021-22 Actual Spending 2022-23 to 2031-32 Spending Plan 2012-13 to 2021-22 Actual Spending 2022-23 to 2031-32 Spending Plan
19,663 21,198 21,370 18,323
Figure 5: Estimated average daily cost of licensed child care in Ontario for children under age six under the $10-a-day child care program, 2022 to 2026, $ Note: “Average” daily rate includes all licensed child care (homes and centres). Daily rate by category is for licensed child care centres only. Source: FAO analysis of the Canada – Ontario Canada-wide Early Learning and Child Care Agreement. Back to image
2022 2023 2024 2025 2026
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Infant $73 $55 $55 $55 $37 $37 $37 $37 $37 $37 $23 $23 $23 $23 $10 $10 $10
Toddler $61 $46 $46 $46 $30 $30 $30 $30 $30 $30 $20 $20 $20 $20 $10 $10 $10
Preschool $53 $40 $40 $40 $27 $27 $27 $27 $27 $27 $18 $18 $18 $18 $10 $10 $10
Kindergarten $48 $36 $36 $36 $24 $24 $24 $24 $24 $24 $17 $17 $17 $17 $10 $10 $10
Kindergarten before and after school $26 $19 $19 $19 $13 $13 $13 $13 $13 $13 $11 $11 $11 $11 $10 $10 $10
Average $46 $35 $35 $35 $23 $23 $23 $23 $23 $23 $17 $17 $17 $17 $10 $10 $10
Figure 6: Actual and planned licensed child care spaces for children under age six relative to their population Source: FAO analysis of information provided by the Ministry of Education, Ontario Ministry of Finance, Population Projections Scenarios for Ontario by Age and Sex, 2021-2046 and Statistics Canada, Table 17-10-0005-01 Population estimates on July 1st, by age and sex. Back to image
Year Licensed Spaces as a Share of Population (Under age 6)
2011 20.4%
2012 21.4%
2013 23.0%
2014 24.9%
2015 28.2%
2016 29.2%
2017 30.5%
2018 31.8%
2019 34.5%
2020 34.2%
2021 35.3%
2022 36.2%
2023 37.8%
2024 39.3%
2025 40.5%
2026 40.8%
Figure 7: Planned supply and estimated demand for $10-a-day child care spaces in 2026 SSource: FAO calculation from Statistics Canada Survey on Early Learning and Child Care Arrangements 2019 Public Use Microdata File and other sources. Back to image
Children Under Age Six
Planned Supply of $10-a-Day Spaces 375,111
Estimated Demand for $10-a-Day Spaces 602,257
Excess Demand 227,146

Footnotes

[1] Spending also includes transfers to 10 school authorities that oversee schools in hospitals, treatment centres and remote regions of the province.

[2] Although the Ontario legislature passed the Keeping Students in Class Act, 2022, which imposed a collective agreement on approximately 55,000 education workers who are members of the Canadian Union of Public Employees (CUPE), the Province has announced that it intends to introduce legislation that, if passed, would repeal the Keeping Students in Class Act, 2022.

[3] The FAO projects inflation will average 4.5 per cent per year between 2021-22 and 2023-24, followed by a return to a historical average of 2.0 per cent per year.

[4] Government of Ontario, “$13.2 Billion Child Care Deal will Lower Fees for Families,” March 28, 2022.

[5] Canada – Ontario Canada-wide Early Learning and Child Care Agreement.

[6] These targets are sometimes expressed relative to the start of 2019 instead of relative to the end of 2021. Measured relative to the start of 2019, the targets are a 42,000 increase in spaces by the end of 2023 and an 86,000 increase in spaces by the end of 2026.

[7] Government of Ontario, “Ontario Releases 2021-2022 Public Accounts,” September 2022 and https://www.ontario.ca/page/catch-up-payments.

[8] Spending also includes transfers to 10 school authorities that oversee schools in hospitals, treatment centres and remote regions of the province.

[9] Excluding time-limited COVID-19-related spending in 2022-23, the FAO projects compensation spending will grow at an average annual rate of 2.8 per cent from 2022-23 to 2027-28.

[10] The Protecting a Sustainable Public Sector for Future Generations Act, 2019.

[11] The FAO projects inflation will average 4.5 per cent per year between 2021-22 and 2023-24, followed by a return to a historical average of 2.0 per cent per year.

[12] The FAO’s projection for non-compensation spending reflects the FAO’s inflation forecast for education sector-specific spending, which includes a select basket of goods and services from the Consumer Price Index. Education sector spending includes spending on computer equipment, school textbooks and supplies, transportation, and consulting services.

[13] Government of Ontario, “$13.2 Billion Child Care Deal will Lower Fees for Families,” March 28, 2022.

[14] Canada – Ontario Canada-wide Early Learning and Child Care Agreement.

[15] The Agreement sets a deadline to reach an average of $10-a-day child care by “the end of fiscal year 2025 to 2026” but the ministry has committed to meeting the target by September 2025. Government of Ontario Backgrounder, “Ontario’s Child Care Action Plan Puts Families First,” March 28, 2022.

[16] The initial fee reduction targets under the Agreement are relative to 2020 average child care fees; however, the FAO has used January 2022 child care fees as a baseline as child care fees were largely unchanged from 2020 to 2022.

[17] These targets are sometimes expressed relative to the start of 2019 instead of relative to the end of 2021. Measured relative to the start of 2019, the targets are a 42,000 increase in spaces by the end of 2023 and an 86,000 increase in spaces by the end of 2026.

[18] Ninety per cent of the new licensed child care spaces for children under age six over this period were added in child care centres in publicly funded schools. From 2011 to 2019, the number of licensed child care spaces in publicly funded schools grew by 11.7 per cent annually, compared with an average annual growth rate of 1.4 per cent for licensed child care spaces in the community.

[19] CBC, Ontario extending $10/day child-care opt-in deadline in hopes of more operators, August 17, 2022.

[20] Ministry of Education, Update: Implementation of the Canada-Wide Early Learning and Child Care Plan between the Province of Ontario and the Government of Canada (August 17, 2022).

[21] The FAO’s estimate is based on Statistics Canada’s Survey on Early Learning and Child Care Arrangements using pre-pandemic data. The estimate is based on the number of children in Ontario who either already use child care, or did not use child care because it was too expensive for their family, there was a shortage of spaces, or they could not find licensed care. The share of children who would continue to use care by relatives and non-relatives in the home was estimated by analogy to Quebec.

[22] Under the Agreement, a program review is planned for completion by June 2024 and discussion on renewal is planned for fiscal year 2024-25.

[23] For a longer discussion and additional analysis, see FAO, “Expenditure Estimates 2019-20: Ministry of Education,” 2019.

[24] ‘Services’ include advertising, communications, machine repairs and other items.

[25] Government of Ontario, “Canada and Ontario Invest in School Infrastructure to Respond to the Impacts of COVID-19,” April 14, 2021.

[26] Government of Ontario, “Province Takes Action to Ensure Students Catch Up,” October 20, 2022.

[27] The Ministries of Colleges and Universities; Municipal Affairs and Housing; and Heritage, Sport, Tourism and Culture Industries.

[28] The cost of services provided to other ministries is recorded as a ‘recovery’ by the Ministry of Education and as spending by the other ministries. The net impact is to decrease Ministry of Education spending and increase spending in the other ministries.

[29] Listed in the Expenditure Estimates as the Ontario Child Care Tax Credit.