Can you say screwed?
TORONTO - Credit agencies and the wider business
community will be watching closely as Ontario's
minority Liberals table a budget Tuesday that will
have ripple effects across Canada as the cash-
strapped province attempts to slay a $16-billion
deficit.
Once the economic powerhouse of Canada but now
the recipient of equalization payments, Ontario needs
to strike the right balance between growing its
economy while reining in government spending.
It's a delicate exercise that could cost the province
hundreds of millions of dollars more each year to
service the debt, which already costs $9 billion
annually, should it get hit with a credit downgrade.
Moody's Investor Services put Ontario on credit watch
last fall.
A senior government source tells The Canadian Press
the budget will take steps to address the cost of
public sector pensions — costs which have been
forecast to jump 70 per cent between now and 2017-
18. The province's fiscal blueprint will call for a
review of the pension plans, but not specific
legislation, the source said.
The credit agencies will look closely at Ontario's fiscal
blueprint to make sure the plan to eliminate the
deficit gets approval from the opposition parties,
Finance Minister Dwight Duncan acknowledged
Monday.
"I'll remind you the United States of America was
downgraded not because of their numbers, but
because of their inability politically to deal with their
deficit," said Duncan.
"The credit rating agencies are one audience that we
need to speak to."
Ontario's debt was estimated at $241.5 billion for
2011-12, and its debt-to-GDP ratio of 37.4 per cent
was second only to Quebec's 51.2 per cent.
Economist Don Drummond, who reviewed
government programs and made hundreds of
recommendations for the province to lower its
spending and balance the books, warned Ontario
could end up with a debt-to-GDP ratio similar to
Quebec's if something isn't done.
"Ontario must act to put its finances on a sustainable
path and must be prepared for tough action — not
just for a few years, but until at least 2018,"
concluded Drummond.
The collapse of Ontario's manufacturing sector has
taken a stinging toll on the provincial economy.
Premier Dalton McGuinty has complained that a
petro-dollar fuelled by the oil and gas boom in the
West hurts Ontario's wellspring manufacturing and
export sectors, but critics — including Alberta's
Premier Alison Redford — have called that simplistic.
And while Ontario is often the target of national
scorn, professor Henry Jacek of McMaster University
in Hamilton says Tuesday's budget should be of
concern to people right across the country.
Despite qualifying for equalization payments in recent
years, Ontario still sends a lot more tax dollars to
Ottawa for distribution to the rest of the country than
it ever gets back, he added.
"There's been a lot more concern about the Ontario
budget, with the minority government and the big
deficit," said Jacek.
"When you look at the amount of money that flows to
the other provinces from Ontario on a net basis, we
still are supporting a lot of the rest of the country.
"We're still subsidizing the rest of Confederation."
The Liberals rejected a number of Drummond's cost-
saving ideas, such as scrapping full-day kindergarten,
lowering class sizes, ending the 10 per cent rebate on
electricity bills and charging parking fees at GO train
stations.
But Drummond's warning about public sector pension
costs jumping 70 per cent will not go unheeded, the
source said. While there won't be any specific
legislation, the Liberals feel it is important to start a
public debate about the future provisions of the
pension plans without lowering benefits for current
retirees.
"We're reviewing and proposing changes to public
sector pensions to make them sustainable for the
employees, and for the two-thirds of Ontario
taxpayers that don't have a pension plan," said the
source.
The Liberals already announced they would freeze
welfare and disability payments, delay promised
increases in the Child Benefit, cancel financial
supports for the horse racing industry and the
Ontario Northland railway service, and increase
licence fees for drivers.
The minority government is taking a balanced
approach to the fiscal problems and will introduce a
"uniquely Liberal budget," said Duncan.
The Liberals listened to the demands of the
Progressive Conservatives and New Democrats, but
did not give either opposition party all that they
wanted in the fiscal plan, he added.
"We have a strong plan. We’re prepared to go to an
election with it if necessary," said Duncan.
"I hope that doesn’t happen. I hope the opposition
won’t compel an election five months after the last
one."
However, all signs were the Tories would to vote
against the budget, especially if the Liberals delay
planned cuts in the corporate tax rate, from 11.5 to
10 per cent, in order to get NDP support.
"We were sent here to fight for two things: balancing
the books and getting our economy moving with
private sector jobs, and if those things aren’t in the
budget, we can’t support it," said Opposition Leader
Tim Hudak.
"I am worried about the signals I’ve received from this
government so far, because they seem to have no
jobs plan whatsoever and they just keep increasing
spending."
The Liberals could put the entire PC campaign
platform in their budget and the Tories would likely
vote against it, said Jacek.
"They are so negative and they are so against the
Liberals they will vote against whatever’s in that
budget," he said.
"I can’t imagine how they would ever, ever vote for a
Liberal budget."
The Tories have already warned they would consider a
delay in the corporate tax cuts — which the Liberals
are expected to include in order to get NDP support
on the budget — as a tax hike on job creators.
But the New Democrats really don't like the Liberals'
decision to freeze welfare and disability payments
that go to some of the poorest people in Ontario and
say the minority government should not take their
support for granted.
"We’re definitely taking a wait and see approach," said
NDP Leader Andrea Horwath. "I'm pretty disappointed
with some of the things we’ve seen already."
The minority Liberal government needs the support of
at least two opposition members to pass the budget.
Fifty-five cents of every dollar the cash-strapped
provincial government spends goes for salaries and
benefits to about one million public sector workers.
The Tories want a mandatory two-year wage freeze
for the public sector, while the New Democrats want
the government to cap salaries and benefits for public
sector CEOs and executives. Duncan suggested it was
the NDP idea that would get the nod.
"There will be a robust narrative on executive
compensation in the budget," he said.
Finance Minister Jim Flaherty will table the federal
government's budget in Ottawa on Thursday.
TORONTO - Credit agencies and the wider business
community will be watching closely as Ontario's
minority Liberals table a budget Tuesday that will
have ripple effects across Canada as the cash-
strapped province attempts to slay a $16-billion
deficit.
Once the economic powerhouse of Canada but now
the recipient of equalization payments, Ontario needs
to strike the right balance between growing its
economy while reining in government spending.
It's a delicate exercise that could cost the province
hundreds of millions of dollars more each year to
service the debt, which already costs $9 billion
annually, should it get hit with a credit downgrade.
Moody's Investor Services put Ontario on credit watch
last fall.
A senior government source tells The Canadian Press
the budget will take steps to address the cost of
public sector pensions — costs which have been
forecast to jump 70 per cent between now and 2017-
18. The province's fiscal blueprint will call for a
review of the pension plans, but not specific
legislation, the source said.
The credit agencies will look closely at Ontario's fiscal
blueprint to make sure the plan to eliminate the
deficit gets approval from the opposition parties,
Finance Minister Dwight Duncan acknowledged
Monday.
"I'll remind you the United States of America was
downgraded not because of their numbers, but
because of their inability politically to deal with their
deficit," said Duncan.
"The credit rating agencies are one audience that we
need to speak to."
Ontario's debt was estimated at $241.5 billion for
2011-12, and its debt-to-GDP ratio of 37.4 per cent
was second only to Quebec's 51.2 per cent.
Economist Don Drummond, who reviewed
government programs and made hundreds of
recommendations for the province to lower its
spending and balance the books, warned Ontario
could end up with a debt-to-GDP ratio similar to
Quebec's if something isn't done.
"Ontario must act to put its finances on a sustainable
path and must be prepared for tough action — not
just for a few years, but until at least 2018,"
concluded Drummond.
The collapse of Ontario's manufacturing sector has
taken a stinging toll on the provincial economy.
Premier Dalton McGuinty has complained that a
petro-dollar fuelled by the oil and gas boom in the
West hurts Ontario's wellspring manufacturing and
export sectors, but critics — including Alberta's
Premier Alison Redford — have called that simplistic.
And while Ontario is often the target of national
scorn, professor Henry Jacek of McMaster University
in Hamilton says Tuesday's budget should be of
concern to people right across the country.
Despite qualifying for equalization payments in recent
years, Ontario still sends a lot more tax dollars to
Ottawa for distribution to the rest of the country than
it ever gets back, he added.
"There's been a lot more concern about the Ontario
budget, with the minority government and the big
deficit," said Jacek.
"When you look at the amount of money that flows to
the other provinces from Ontario on a net basis, we
still are supporting a lot of the rest of the country.
"We're still subsidizing the rest of Confederation."
The Liberals rejected a number of Drummond's cost-
saving ideas, such as scrapping full-day kindergarten,
lowering class sizes, ending the 10 per cent rebate on
electricity bills and charging parking fees at GO train
stations.
But Drummond's warning about public sector pension
costs jumping 70 per cent will not go unheeded, the
source said. While there won't be any specific
legislation, the Liberals feel it is important to start a
public debate about the future provisions of the
pension plans without lowering benefits for current
retirees.
"We're reviewing and proposing changes to public
sector pensions to make them sustainable for the
employees, and for the two-thirds of Ontario
taxpayers that don't have a pension plan," said the
source.
The Liberals already announced they would freeze
welfare and disability payments, delay promised
increases in the Child Benefit, cancel financial
supports for the horse racing industry and the
Ontario Northland railway service, and increase
licence fees for drivers.
The minority government is taking a balanced
approach to the fiscal problems and will introduce a
"uniquely Liberal budget," said Duncan.
The Liberals listened to the demands of the
Progressive Conservatives and New Democrats, but
did not give either opposition party all that they
wanted in the fiscal plan, he added.
"We have a strong plan. We’re prepared to go to an
election with it if necessary," said Duncan.
"I hope that doesn’t happen. I hope the opposition
won’t compel an election five months after the last
one."
However, all signs were the Tories would to vote
against the budget, especially if the Liberals delay
planned cuts in the corporate tax rate, from 11.5 to
10 per cent, in order to get NDP support.
"We were sent here to fight for two things: balancing
the books and getting our economy moving with
private sector jobs, and if those things aren’t in the
budget, we can’t support it," said Opposition Leader
Tim Hudak.
"I am worried about the signals I’ve received from this
government so far, because they seem to have no
jobs plan whatsoever and they just keep increasing
spending."
The Liberals could put the entire PC campaign
platform in their budget and the Tories would likely
vote against it, said Jacek.
"They are so negative and they are so against the
Liberals they will vote against whatever’s in that
budget," he said.
"I can’t imagine how they would ever, ever vote for a
Liberal budget."
The Tories have already warned they would consider a
delay in the corporate tax cuts — which the Liberals
are expected to include in order to get NDP support
on the budget — as a tax hike on job creators.
But the New Democrats really don't like the Liberals'
decision to freeze welfare and disability payments
that go to some of the poorest people in Ontario and
say the minority government should not take their
support for granted.
"We’re definitely taking a wait and see approach," said
NDP Leader Andrea Horwath. "I'm pretty disappointed
with some of the things we’ve seen already."
The minority Liberal government needs the support of
at least two opposition members to pass the budget.
Fifty-five cents of every dollar the cash-strapped
provincial government spends goes for salaries and
benefits to about one million public sector workers.
The Tories want a mandatory two-year wage freeze
for the public sector, while the New Democrats want
the government to cap salaries and benefits for public
sector CEOs and executives. Duncan suggested it was
the NDP idea that would get the nod.
"There will be a robust narrative on executive
compensation in the budget," he said.
Finance Minister Jim Flaherty will table the federal
government's budget in Ottawa on Thursday.