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Ontario Liberal budget promises new transit spending, pension plan

Ontario Finance Minister Charles Sousa speaks to reporters before delivering the 2014 budget at Queen's Park in Toronto on Monday, July 14, 2014.

Darren Calabrese/THE CANADIAN PRESS

The Ontario government is promising to build transit and roads, create a new provincial pension plan and dole out grants to business – all while balancing the budget in three years.

Backed by their newly won majority, the Liberals on Monday reintroduced the sprawling budget that caused last month's election. The $130.4-billion plan – virtually identical to the one first tabled in May – is Premier Kathleen Wynne and Finance Minister Charles Sousa's bid to leave a major legacy in the province.

"As I was saying," a smiling Mr. Sousa said at the start of his speech, to laughter and applause in the packed legislature. "We will make the right investments, in skills training, in infrastructure and in business, to strengthen our competitive advantage."

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The fiscal blueprint provides $29-billion in new funds for transit, roads and bridges, plus tens of billions more for other capital costs, including schools. It allocates a billion for a new road or rail link to the Ring of Fire, a Northern Ontario mineral deposit that the government estimates will yield $60-billion worth of economic activity. A new $2.5-billion fund for businesses is meant to help lure corporations to the province. New social spending includes raises for personal-support workers and more cash for programs helping people with developmental disabilities.

The document's centrepiece is the Ontario Retirement Pension Plan, a pension system for people who do not already have one through their employer.

The plan adds more than a billion dollars to the deficit – which now stands at $12.5-billion – but Mr. Sousa promised to erase the red ink by fiscal year 2017-18.

"We will limit the growth in expenses. We will eliminate the deficit. We will continue to cut where we can. But we will continue to invest where we must," he said.

Among other budget-balancing measures, Mr. Sousa is hiking income taxes on people making more than $150,000 a year, and jacking up levies on airplane fuel and tobacco. The budget also pledges to cut hundreds of millions in program spending, but there are few specifics on how this will be done.

Public sector union leaders, for their part, signalled they would not be satisfied taking pay freezes, setting up a tough fight as the government tries to hold the line on labour costs.

"People deserve more – nobody deserves a wage freeze for six years," CUPE Ontario President Fred Hahn said after the budget was tabled.

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Progressive Conservative interim leader Jim Wilson called the budget "a fiscal fairy tale," warning a reckoning with the province's creditors is coming.

"It is immoral to give people false hope with a budget … only to have to take away services and programs when the lenders put a gun to your head and say, 'your line of credit has dried up.'" he said.

New Democrat Leader Andrea Horwath, on the other hand, said the government's plans to curb spending go too far.

"It goes back to the story of the Trojan Horse that is brought in. It is seen as a big gift and everybody idolizes it, and it's a wonderful thing to behold. Except that inside are warriors that create havoc," Ms. Horwath said. "That's what this budget is. It's dressed up to look like something progressive but if you scratch the surface, you can see real problems."

Richard Ivey School of Business economist Paul Boothe said the budget's approach – setting broad deficit-cutting targets without getting into specifics – makes sense, contending it's better to leave the details to be sorted out in a collective process, in which all cabinet ministers and civil servants contribute ideas for cuts, than to dictate them from on high.

"It's not really possible, when you have to make really big reductions, to lay it all out ahead of time," he said in an interview. "You have to go through this process to build consensus in government over the hard things that you have to do."

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It's a particularly tall order to find cuts in some areas while at the same time ramping up spending in others– infrastructure and some social programs for instance -- dividing the government's attention between numerous files. "The more things you have on your plate, the harder it is," said Prof. Boothe, a former high-ranking civil servant in the federal and Saskatchewan governments. "But it can be done."

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