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NDP Leader Andrea Horwath will allow Ontario Premier Kathleen Wynne's budget to pass, averting a spring election.Nathan Denette/The Canadian Press

Ontario Premier Kathleen Wynne capped her frenetic first 100 days in office by reaching a budget deal with the New Democrats that will avoid a spring election. The agreement, which, coincidentally, came on the Premier's 60th birthday Tuesday, buys her minority Liberals much-needed breathing space as they gird for what promises to be even more difficult work ahead.

After finally completing a protracted, politically fraught negotiation with the Opposition NDP, the government will now turn its attention to implementing the Premier's policy agenda, including an ambitious plan for new revenue streams – likely to include taxes, tolls or fees – to fund a massive expansion of public transit. The contentious file could ultimately lead to another confidence vote in the fall.

More immediately, Ms. Wynne must call two by-elections in hotly contested ridings, battles that will provide her administration with its first real barometer of voter sentiment.

"We've tried very hard as a new government to introduce positive change across Ontario," Ms. Wynne said at Queen's Park, a few hours after the NDP announced its support for the spending plan. "We've presented a budget that will make a difference in the lives of people across the province."

The fiscal blueprint includes numerous policies demanded by the NDP, including four job-creation programs for young people and a cut to car insurance premiums. With the Tories vowing months ago to vote down the budget and the Liberals eager to avoid an election, Ms. Wynne – to keep her government alive – had no choice but to meet Ms. Horwath's demands.

The measure that clinched the deal, said one New Democrat source, was Ms. Wynne's promise to create a financial accountability office. The independent watchdog, modelled on the federal parliamentary budget officer, will have the power to investigate government spending.

In a meeting with NDP Leader Andrea Horwath last week, Ms. Wynne agreed to her demand that such an office be established. Ms. Horwath consulted with her caucus over the ensuing days, and her office was in touch with the Premier's staff during the long weekend.

A visibly upbeat Ms. Horwath cheered the result of the talks. "We are very, very proud. It was heavy lifting. It wasn't easy. But it was the work that needed to be done to deliver results," she said.

She had been under pressure from the opposition Progressive Conservatives to vote the government down over the costly cancellation of two gas-fired power plants. But Ms. Horwath said getting the financial accountability office – which can flag potential cost overruns before they occur – was a better route to make sure such spending never happens again.

"We could have said no, we could have pulled the plug. Instead, we worked really hard … to get the kind of accountability put in place here in Ontario that will last through this government, and will last through coming governments in the future," she said.

A vote on the budget motion must take place before the end of the month. After that, the more detailed budget implementation bill will be picked over in committee. The NDP has reserved the right to push for further modifications at that time, but two party insiders said any changes are likely to be small.

Almost immediately after the agreement was reached, the by-election battle began. Ms. Wynne will be in Windsor on Wednesday, while Ms. Horwath will be in London. The two cities face by-elections that must be held before the end of summer to fill seats left vacant by former cabinet ministers Dwight Duncan and Chris Bentley, who resigned earlier this year.

Later this month, provincial transit agency Metrolinx will present recommendations on new revenue tools to fund construction of subways, light rail lines and dedicated bus corridors in the Greater Toronto and Hamilton Area. Ms. Wynne must then choose which of those tools to implement. She has promised to put them to a vote in the legislature.

Because such legislation would entail raising and spending money, it might count as a supply bill and trigger a confidence vote.

Ms. Horwath has already come out swinging against road tolls and gasoline taxes, setting the stage for another long negotiation or a full-on showdown with the Liberals.

With a report from Adam Radwanski