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Brad Duguid, Ontario’s Minister of Training, Colleges and Universities, speaks in Toronto on June 5, 2013.DELLA ROLLINS/The Globe and Mail

Ontario is warning it will soon have to cut training programs aimed at vulnerable Canadians including youth and the disabled as negotiations drag on over Ottawa's proposed Canada Job Grant.

The new training scheme was first proposed by Ottawa in last year's federal budget and was supposed to begin April 1, but there is still no deal with the provinces.

Ontario Training Minister Brad Duguid said the main objection remains: Ottawa plans on paying for its share of the program by cutting transfers to the provinces aimed at "under-represented" groups, including immigrants, persons with disabilities, aboriginal people, youth and older workers.

"The clock is ticking," said Mr. Duguid, who said provinces must soon decide whether to start cancelling some of these programs as of April 1. "Provinces and territories are in a very awkward position of not knowing whether we're going to have to cut some of those programs to accommodate the federal government's Canada Job Grant," he said.

A spokesperson for federal Employment Minister Jason Kenney said any provincial decision to cut programs would be a "political" move.

"We still have not received a counter offer to the offer we sent the provinces a month ago," Nick Koolsbergen said.

Ottawa's original plan was to create a grant worth up to $15,000 that Canadians could use to receive training for a specific job opening. Ottawa wanted the cost of each grant to be shared three ways among the federal and provincial governments and a business.

Ottawa plans to pay for its share of the grants by cutting transfers to the provinces for training by $300-million a year. Provinces were also being asked to find an additional $300-million to pay for the matching share of the grants, but Mr. Kenney waived that requirement in his latest proposal, which was delivered to the provinces on Dec. 24.

That concession was welcomed publicly by some premiers, but provincial labour ministers who took a closer look at Ottawa's latest offer rejected it during a Friday conference call and are planning to send Mr. Kenney a counter-proposal.

The main stumbling block appears to be paying for existing programs for "under-represented" groups. Currently, these are funded through a $500-million a year transfer called Labour Market Agreements for people who do not qualify for employment insurance. Ottawa's initial proposal was to gradually reduce this transfer to $200-million, a 60-per-cent cut.

Ottawa's latest proposal is to reduce that cut from $300-million to $200-million, but to balance that by cutting a separate fund by $100-million. That separate fund – called Labour Market Development Agreements – is paid for by EI premiums and is supposed to help people who qualify for EI.

"I think it's really important that Canadians not get too spun on this," said Mr. Duguid, adding the provinces want to ensure the grant "is not funded on the backs of our vulnerable people."

Several business groups are pressing the provinces to accept the grant as an improvement on the status quo, but public policy expert Matthew Mendelsohn of the Mowat Centre said Ottawa's blurring of the lines between the two major training funds raises a lot of questions.

"The federal government came up with an idea on the back of a napkin with no evidence and no plan," he said. "From my perspective, coming up with a really bad idea and making it a little less bad is not progress."