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Sam Hammond, president of the Elementary Teachers Federation of Ontario, responds to Education Minister Laurel Broten's comments in Toronto, Ont. Thursday, April 12/2012.Kevin Van Paassen/The Globe and Mail

Labour leader Sam Hammond felt blindsided the moment he walked into the Toronto hotel conference room.

The president of the Elementary Teachers' Federation of Ontario was there to begin contract talks. But instead of meeting with education ministry negotiators, he came face to face with James Farley, a retired high-profile insolvency judge hired by the government. Mr. Farley wasted no time tabling the government's offer: a pay freeze for two years; no movement within the existing salary grid; an end to retirement payouts for unused sick days.

"No one had ever hinted that they were looking at the salary grid, at sick days," Mr. Hammond said. "There is a deep sense of shock and a deep sense of betrayal."

For someone who calls himself the province's Education Premier, Dalton McGuinty is ushering in an era of labour strife with the very constituents he spent the past 8½ years wooing. It's a battle that also hits close to home: Mr. McGuinty's wife, Terri, is a Kindergarten teacher.

But with the province facing a $15.3-billion deficit, Mr. McGuinty's minority government is in a much bigger fight to preserve the improvements it has made in education and health care: smaller class sizes, full-day kindergarten, more family doctors, shorter waiting times for key medical procedures.

If the government were to cut funding for health care and education, it would in essence renounce everything that got it elected in the first place.

"We're asking for a pause right now on the wages and benefits," Finance Minister Dwight Duncan said in an interview on Sunday. "This is not at all about demonizing teachers. This is all about continuing to work together to make progress in public education."

The Liberal government was elected in 2003 on a pledge to restore labour peace in the province following dramatic funding cuts to health care and education as part of the former Harris government's Common Sense Revolution. Former New Democratic premier Bob Rae used a similar strategy of unpaid days off to deal with a deficit in the early 1990s, which the unions condemned as "Rae Days."

The McGuinty government is taking a more middle-of-the-road approach to deal with the deficit, by calling on teachers, doctors and other public-sector workers who bargain collectively to do their part to protect the gains made in health care and education and freeze their wages for two years. If they don't agree, the government warns, all these gains are at risk.

Michael Decter, an economist and a former deputy health minister of Ontario, doubts that the government can get labour leaders on side.

"It's apparent that it's exceedingly difficult to get to bargained outcomes," Mr. Decter said in an interview. "They are going to, I think, be driven to something legislative."

Bargaining talks with the province's 26,000 doctors, whose contract expired on March 31, are also off to a bumpy start. But the escalating battle with elementary teachers is already resonating in the classroom.

Ms. McDougald said no one can deny that the McGuinty government has improved working conditions for teachers, along with their salaries and benefits. And teachers, in turn, rewarded the Liberals by helping them get re-elected in 2007 and 2011.

If the government's budget is defeated on April 24, forcing a snap election, it is no longer clear that the Liberals can count on teachers' support.

"[Premier]McGuinty's obviously going to lose the teachers' vote, that's for sure," said one elementary teacher.

Mr. Hammond, the labour leader, says the one-hour meeting with insolvency judge Mr. Farley on Feb. 22 ended the "respectful relationship" between teachers and Premier Dalton McGuinty's government.

"We are not used to Premier McGuinty taking such a hard line," Janet McDougald, chairwoman of the Peel District School Board, said in an interview. "I think it is distracting and unsettling."