Ontario budget big on spending, NDP has a week to support it

CME notes some positives for manufacturers, but it doesn’t go far enough.

May 2, 2014   by CANADIAN PRESS, files from PLANT

Premier Kathleen Wynne and Finance Minister Charles Sousa present the 2014 Ontario budget May 1.

Premier Kathleen Wynne and Finance Minister Charles Sousa present the 2014 Ontario budget May 1.

TORONTO — The minority Ontario Liberal government has tabled a spring budget and given the New Democrats a week to decide whether they’ll support it or send voters to the polls.

Premier Kathleen Wynne asked to meet with NDP Leader Andrea Horwath by May 8 to discuss whether the NDP will support the $130.4-billion spending blueprint.

“I recognize that you and your colleagues may want to spend some time reviewing the budget,” Wynne wrote in a letter to Horwath. “But, given that much of the budget’s content has been discussed for several months and that the budget bill is in front of the House, I believe one week is a sufficient amount of time for you to complete your review.”

If Horwath agrees to support the budget, Wynne said she wants a plan to pass it before the legislature rises in June. But the premier didn’t say whether she would dissolve the legislature and ask for an election if Horwath declined.

The Liberals need the support of at least one of the opposition parties to pass their budget and avoid an election. The New Democrats have propped them up for the past two years, but Horwath won’t say whether they’ll do it again.

Click here to read the budget.

The budget includes ambitious promises for a provincial pension plan, levies to raise billions of dollars for public transit, roads and bridges, billions more for corporate grants, a minimum wage hike and higher taxes for individuals earning more than $150,000.

A number of the challenges province’s manufacturing sector faces are noted in the budget and there are several positives, but “the government falls down on how far they’re going,” says Ian Howcroft, vice-president of the Ontario Canadian Manufacturers & Exporters (CME).

He cited rising energy costs as an example, which he said are hurting manufacturers’ ability to compete. But measures that will help manufacturers include:

• $2.5 billion jobs investment fund

• New measures to help manufacturers reduce energy costs including the GAM adjustment and surplus allowances for businesses expanding or hiring

• Regulatory burden reduction

But he also noted the scant details on how the jobs fund will be spent, the particulars of the mandatory pension program and what business support programs will be continued punctuated the announcement. The limit of one regulatory reduction per ministry per year is also too limited, said Howcroft.

The Liberals are expecting to spend $12.5 billion more than they take in this year, up from $11.3 billion last year and the $10.1 billion projected in their 2013 budget, but they still plan to slay the deficit in 2017-18.

Last year’s revenues came in $1.2 billion short to $115.6 billion, largely due to a sharp $1.5-billion drop in sales tax revenue.

Total spending, including interest on the debt, came in $636 million less than expected, mainly from clamping down on public service retiree benefits and pensions as well as “constraint measures” from ministries.

But spending is forecast to jump by $3.4 billion this year, $900 million more than projected in the 2013 budget, with program spending expected to climb by nearly $3 billion to $119.4 billion.

That’s going to help push up the province’s net debt by $20.1 billion to $289.3 billion this year, a staggering 40 per cent of gross domestic product.

Ontario’s current ratio of nearly 39% is almost 50% higher than it was just six years ago – “a longer-term vulnerability” for the province, said TD Bank deputy chief economist Derek Burleton.

“The government still faces an enormous fiscal challenge,” he said. “After four years of restraint, getting operating spending down and implementing a lot of the Drummond commission (austerity report) proposals, they still have four more years ahead to get back to balance.”

The Liberals beat their budget targets five years in a row and are planning to hold program spending growth to one percentage point below revenues until the debt returns to pre-recession levels of 27% of GDP, he said. They also have the lowest program spending per capital among the provinces.

Many of their spending promises are spread out over many years, such as $11 billion to repair and build new schools and $11.4 billion to expand and improve hospitals over a decade.

Some of their shiny new programs, such as the Ontario Retirement Pension Plan, won’t cost them a thing since it will come out of the pockets of workers and employers. They’re also looking to “unlock the full value” of their assets, including Ontario Power Generation and the Liquor Control Board of Ontario.

But ratcheting down that key debt-to-GDP figure that debt rating agencies watch closely won’t be easy, Burleton said. The province would likely have to hold spending at 3% for the next decade, given the current economic growth projections.

The Liberals say they’re aiming to save $250 million in their programs this year and double it over the following two years, with public servants squarely in their crosshairs.
With compensation accounting for over half of Ontario’s program spending, the budget said any wage increases must be absorbed within existing budgets through “efficiency and productivity gains, or other tradeoffs.” They’re also planning to find $1.4 billion in savings by 2017-18 from public-service retirement benefits.

The Liberals are already headed for a showdown with AMAPCEO, the union that represents many managers and professionals in the civil service, with a possible strike or lockout looming in mid-May.

But other public-sector workers in the education and health-care sectors – groups that have traditionally supported the Liberals – will see their paychecks increase.

The budget proposed raises for personal support workers, early childhood educators and other licensed child-care workers, leaving the impression that the Liberals may be circling the wagons before a possible election.

© 2014 The Canadian Press

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