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Ontario's Liberals will have to move this fall to a much more austere agenda if they are to have any hope of fulfilling their pledge to eliminate Ontario's $12.5-billion deficit by 2017-18.

While forecasting a flattening of expenditures starting next year, the plan reintroduced by Finance Minister Charles Sousa on Monday is extremely vague on how the Liberals intend to play against type to achieve that.

They don't appear to have entirely figured it out themselves. But from hints that have been dropped, it is possible to get a sense of some of the ways they'll try to do the heavy lifting.

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Doing battle with their union friends

Despite benefiting greatly from organized-labour support in this spring's election, the Liberals have been signalling a hard line during the next round of public-sector contract negotiations.

For now, the province appears likeliest to focus on something approximating a wage freeze – "net zeroes," as Treasury Board president Deb Matthews put it in a recent interview. In the long run, the hunt for savings could also include structural changes to the work force that the unions find at least as bothersome. The Liberals seem to think that such changes could be done over the course of a contract rather than during negotiations.

It is unlikely the government will cut anywhere approaching the 100,000 jobs that former Progressive Conservative leader Tim Hudak proposed; Premier Kathleen Wynne even said during the campaign that the broader public sector will be "at least as big" four years from now.

Putting on the squeeze

For all their defences of the public sector during the recent campaign, Liberals have privately been expressing the view that there is plenty of fat to be trimmed without affecting front-line services.

Although Ms. Wynne has some inclination toward micromanaging, the government doesn't appear under any illusion it can root out billions of dollars in savings centrally. Instead, it's likelier to tell service providers to make do without significant annual funding increases and leave it to them to find efficiencies.

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An objection to this approach, voiced as it has been applied in some measure to hospital funding, is that it can penalize institutions that are leaner than others to begin with.

Taking aim at the (comparatively) overserved

Some of Ms. Matthews's more interesting comments, in that interview, came on the subject of "rationalization." When she was health minister, she said, the province was able to provide more funding to hospitals in fast-growing areas by not spending as much on those in areas where the population has been shrinking or stagnant.

By her account and those of other Liberals, the government will be looking to apply such funding formulas more broadly – including for education, child care and other social services.

That could mean a growing shift in funding away from rural- and small-town Ontario to meet needs of urban and suburban areas. Rational though that may be, it could cause plenty of backlash toward a government already seen in some parts of the province as too Toronto-centric.

Privatization and contracting out

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As Mr. Sousa highlighted in his budget speech, the province has enlisted former TD Bank CEO Ed Clark to review three big provincial assets – the LCBO, Hydro One and Ontario Power Generation – and how they can be "optimized."

While the Liberals insist that doesn't necessarily mean privatization, there is much speculation in provincial circles about at least one selloff. Hydro One, the energy transmission utility, is seen as the most likely candidate.

Unrelated to Mr. Clark's review, but likely to generate a similar outcry from the Liberals' left, is openness to contracting out more service delivery.

Ms. Wynne herself, who has strong faith in the power of government, might have some discomfort with such moves. But considering the alternative may be doing away with some public services altogether, shrinking government's scope in other ways could be the least unappealing of her options in the years ahead.

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