Provincial Liberals introduce budget that relies on a public sector wage freeze to balance the books.
Ontario can eliminate its deficit by the 2017-2018 fiscal year, announced Finance Minister Dwight Duncan today, and maintain key services like full-day kindergarten and the 30% tuition tax credit all the while—but only if public sector workers accept a pay freeze and significant pension cuts when they come to the bargaining table this year.
This year’s budget is a particularly tough needle to thread for the Liberals. They are facing a $15.2 billion deficit that will only grow without serious cutbacks, but were elected on a platform that enshrined several expensive programs as untouchable. They have a minority government and have opted to offer some concessions to both the Tories and the NDP, without offering enough to either party to secure agreement on the budget from the outset. And facing rounds of bargaining with most of the province’s public sector workers, they’ve opted to call for a wage freeze and pension cuts, but have not included those in the budget legislation that will face a confidence vote at Queen’s Park shortly.
In broad strokes, today’s budget is the Liberal roadmap for eliminating the budget deficit by the 2017–2018 fiscal year. Much of that would be accomplished with that public-sector wage freeze, and a great deal more from scaling back spending in most ministries via yet-to-be-spelled-out efficiencies. (Most of the latter are scheduled to kick in during the 2014–2015 fiscal year; presumably the government is calculating that finding and implementing those efficiencies will take some time.) Personal income taxes will not be going up, and confirming widespread speculation, the government announced that it will be delaying the implementation of corporate tax cuts until the deficit is eliminated—key to winning support from the NDP.
Many of the measures included in today’s budget were well-leaked beforehand, including executive compensation freezes, welfare freezes, and pension reductions for public-sector workers. The government also assured Torontonians in advance that, dire circumstances notwithstanding, they would not pull a promised $8.4 billion in transit funding off the table, and indeed that is still on the books. (Despite Rob Ford’s ardent wishes though, no increase in transit spending seems anywhere on the horizon.) Toronto will be taking a hit in other areas though: several cultural agencies are losing funding, as is at least one hospital, and Toronto-centric immigration services.
Tim Hudak said the Progressive Conservatives will not support the budget, which calls for $17.7 billion in cost-containment measures—the sort of thing that generally gladdens Tory hearts. Still, he says, it contains no job creation strategy, maintains the government’s commitment to unaffordable green energy, and isn’t a budget his party believes in. Premier Dalton McGuinty, therefore, is banking on the NDP to maintain its stated commitment to making the minority government work.
Given that the Liberals have stern words for the public sector today, the gamble might seem risky. Andrea Horwath made much noise today about needing to “have a serious conversation with Ontarians across the province” in the coming days, to see how they feel about the budget, and did not promise to support it. But nor did she dismiss the budget outright, public-sector wage freeze and all. The Liberals have built in a very handy loophole for her into this budget: since that wage freeze is expressed only as a negotiation goal and not instantiated automatically, the NDP can support this budget but protest the wage freeze later on.
(McGuinty is also well aware that the Liberals have less outstanding debt than the other parties, and will be able to stump on the fact that the opposition sent voters back to the polls just five months after the last election.)
The other loophole that’s built in: the wage freeze is necessary, according to the budget, to “allow full-day kindergarten to continue to roll out as scheduled, keep class sizes at current levels and…protect nearly 10,000 teaching positions.” In short: if the unions don’t play ball on the wage freeze there may be room for the provincial government to move, but it will be at the expense of programs that are central to their mandate, and they will blame the unions if they need to be cut. Given that those cuts might include reductions in the ranks of public-sector employees themselves, the government’s opening position in negotiations is something like: accept a wage freeze, or some of you are risking your jobs. As put in the budget briefing notes:
Where collective agreements cannot be negotiated that are consistent with the fiscal plan and the shared objective of ensuring the long-term sustainability of public services such as education and health care, or in the face of significant disruption, the government is prepared to propose necessary administrative and legislative measures.
There has been a great deal of ominous talk leading up to today’s announcement; in a classic game of expectation management, the government is no doubt hoping people look at the budget and say “oh, well that really isn’t so bad.” Whether voters—and public-sector workers who will entering negotiations with the government soon—agree, is yet to be seen.