Waiting for the 2012 Ontario Budget .. and wondering what will happen next?

Mar 27th, 2012 | By | Category: In Brief

“Confused by Helga Weber.”

[UPDATED MARCH 27, 5 PM ET]. The Ontario budget that finance minister Dwight Duncan is unveiling later today will be “a uniquely Liberal” document. “We are taking a balanced approach. We will be asking everyone to do their share,” the minister told “a large media throng in his office” yesterday.

He’s also hoping his “spending plan will garner enough support from either the Progressive Conservatives or the New Democrats for the minority Liberals to pass the budget.” And Mr. Duncan is apparently a bit concerned : “There will be some things in the budget that they like, yes, but there will be some things that they won’t like.”

Dwight Duncan has been thinking very hard about what to do.

Hopefully, we will not be having yet another Ontario election, only six months or so after the last one this past October 6, because the McGuinty government can’t get its first budget since the election through the legislature. But we will apparently just have to wait and see. Meanwhile, here are three quick and dirty further factoids – on recent relevant “experience in other jurisdictions,” and on one intriguing experience in the province’s own history:

(1) Public sector pensions are reported to be a controversial issue that may not be addressed in detail in today’s Ontario budget, but “will be dealt with separately after a wide-ranging review.” The Wall Street Journal this past weekend published a interview with Rhode Island’s Democrat treasurer Gina Raimondo – “about how she persuaded the voting public, labor rank-and-file and a liberal legislature to pass the most far-reaching pension reform in decades.” As a Democrat Ms. Raimondo “believes in government as a force for good.” But she also urges: “a government that doesn’t work is in no one’s interest.”

Jerry Brown, Governor of California (another interesting North American place facing economic challenges) is ready to raise at least some taxes.

(2) On the other side of the USA today: “California voters strongly support [Democrat] Gov. Jerry Brown’s new proposal to increase the sales tax and raise levies on upper incomes to help raise money for schools and balance the state’s budget, according to a new USC Dornsife/Los Angeles Times poll … Sixty-four percent of those surveyed said they supported the governor’s measure, which he hopes to place on the November ballot.” The McGuinty government still seems not quite ready to contemplate any higher taxes in Ontario.

(3) One reason for deep worry about Ontario’s current finances is the prospect that without some significant “belt tightening” the province will have to pay too much higher interest on its debt, in response to the concerns of “bond vigilantes.” Without in any way casting aspersions on the seriousness of all this, we just note that we reported on a related Ontario historical case this past summer, that probably ought to be a little better known. See “Disciplining the bond vigilantes with the Province of Ontario Savings Office .. a teachable moment from the 1930s.”

Millo Jovovich In Resident Evil: Afterlife. The Resident Evil franchise has proven especially lucrative for Ontario's film and television industry, which reaped a record $1.26-billion for the provincial economy last year.

(And for those who believe the bond vigilantes and their friends never make mistakes, here is some wisdom from Bank of Canada Governor Mark Carney, this past December: “Hard experience has made it clear that financial markets are inherently subject to cycles of boom and bust and cannot always be relied upon to get debt levels right.”)

Our general sense is that it is not going to be easy to figure out just who is closest to the plainest public financial truth when the 2012 Ontario Budget is tabled later today, and the provincial Conservatives and New Democrats, various media, and assorted self-interested parties and false prophets start weighing in. But along with everyone else we will be trying , at what certainly is a challenging moment in the evolution of the Ontario regional economy. (Like quite a few other such moments, since the middle of the 1970s, or even the middle of the 19th century! And one thing almost certainly worth bearing in mind is that we hard-working Ontario residents are all still here, and will no doubt continue to be, for quite a while yet.)

UPDATE MARCH 27, 5 PM ET : For the official collection of documents that are now available, see 2012 Ontario Budget … “Strong Action for Ontario.”

For the official sketch, see 2012 Ontario Budget: Highlights … The 2012 Budget is the next step in the government’s five-year plan to keep Ontario on track to balance the budget by 2017—18 … The Budget proposes to reduce program spending growth and contain costs by $17.7 billion over the next three years, while increasing revenues by $4.4 billion without raising taxes …

Proposed Measures: (1) $4.9 billion in planned savings from removing overlap and duplication, implementing more efficient delivery models and focusing on core business ; (2) $6 billion in government actions to restrain compensation for school boards, payments to physicians and others in the public sector ; (3) $6.8 billion to contain costs across the broader public sector ; (4) Freezing the general Corporate Income Tax rate and Business Education Tax rate reductions until the budget is balanced ; (5) Extending the pay freeze for executives at hospitals, colleges, universities, school boards and agencies for another two years – for a total of four years ; (6) Extending the pay freeze for MPPs for two years – for a total of five years ; (7) Ensuring Ontario user fees recover more of the cost of providing programs and services.

For a very quick look at some initial reactions from the Globe and Mail and Toronto Star, click on “Read the rest of this page below,” and/or scroll down the page.

Coverage in the Globe and Mail:

KAREN HOWLETT … Ontario’s austerity budget sets up public-sector showdown …  The Ontario government is threatening to impose a mandatory wage freeze on public-sector workers, marking a sharp policy reversal as it seeks to erase its multibillion-dollar deficit over six years while preserving social programs … The provincial budget tabled Tuesday asks everyone from affluent seniors to corporations to do their part during tough economic times to help the government tackle the deficit. But the budget reserves its harshest measures for public-sector employees, whose compensation accounts for just over 50 cents of every $1 in program spending … Whether the measures aimed at addressing the province’s deep fiscal challenges are enough for the minority Liberal government to survive, however, remains uncertain. Progressive Conservative Leader Tim Hudak outright rejected the budget and vowed to have every member of his caucus vote against it. New Democratic Party Leader Andrea Horwath was non-committal … Mr. Duncan said the Liberals are more than prepared to go to the polls and campaign on the budget if the opposition parties force another election.

ADAM RADWANSKI … Duncan’s budget a good start down Ontario’s rough road … Save for cancelling corporate tax cuts, it could mostly pass for a Progressive Conservative budget – which makes Tim Hudak’s flat rejection of it more than a little peculiar. Conversely, it may be too much for the provincial New Democrats to swallow, which means that the Liberals have placed their minority government in some jeopardy just months into its existence … But if the budget passes, which remains the likeliest outcome, there’s a big caveat before declaring the province well on its way out of its deficit … While there is no shortage of immediate cutbacks and revenue increases in Mr. Duncan’s plan – abandonments of planned infrastructure projects, cancellation of corporate tax cuts, freezes of base funding for hospitals – many of the big-ticket items will require sustained effort and focus, rather than just strokes of the pen … Many other measures could similarly be described as long-term projects, as opposed to quick fixes. Reforms to public-sector pensions, to reduce future benefits if funds run short, are to be enacted only after consultation to develop a “legislative framework.”

Coverage in the Toronto Star:

ROBERT BENZIE … Ontario budget 2012: Public servants hit with wage freeze … Ontario will freeze wages for 1.2 million public servants in an austerity budget that could trigger an election as early as May … In a major policy shift, Premier Dalton McGuinty’s minority Liberal government used Tuesday’s Ontario budget to warn the two-year salary edict would be legislated if necessary … But with the Progressive Conservatives threatening to defeat the budget and the New Democrats on the fence, Ontario could be plunged into another election just six months after the Oct. 6 vote.

THOMAS WALKOM …  Wrong-headed Ontario budget tough on public sector, vague on the rest … A tough budget? For public sector workers, yes. For the rest of us — well, the jury’s still out.

KENYON WALLACE … Ontario budget: Get out that wallet – increased fees to hit drivers, seniors and homebuyers … Ontario drivers, high-income seniors, homebuyers and businesses that create hazardous waste are just some of the groups being targeted with increased fees as the cash-strapped Liberal government attempts to rid the province of a $16-billion deficit by 2017-18 … The government says such fees will go towards investments in public transit, road safety, and highway maintenance and infrastructure.

DANA FLAVELLE … Opposition parties slam lack of job focus.

For our own very quick and dirty first reaction, we’d just underline the last sentence in our excerpt from Ms. Howlett’s report above: “Mr. Duncan said the Liberals are more than prepared to go to the polls and campaign on the budget if the opposition parties force another election.”

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