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Ontario Liberals brace for a tumultuous year

Expected to make tough decisions to sort out Ontario's troubled finances, while dealing with province's first minority legislature since the 1980s, Dalton McGuinty's Liberals are in for a rough-and-tumble 2012. Here are some of the key subplots that will determine where they – and Ontarians – stand 12 months from now.

Don Drummond's bombshell

The Liberals have put a lot of eggs in one basket: former bank economist Don Drummond's commission on reforming public services. Early in the new year, we'll find out whether they're still as keen once they see what Mr. Drummond has come up with.

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The whispering suggests he'll be unsparing in his diagnosis of the province's fiscal woes, and offer remedies that might be less than politically palatable. The government will have to either accept some of his controversial recommendations, or quickly come up with its own ideas.

Duelling with doctors

The next big test of the government's commitment to reining in labour costs, and an absolutely pivotal one at that, will be negotiations with the Ontario Medical Association. Unless it's able to achieve significant concessions, there will be little chance of curbing growth in health-care spending – central to deficit-fighting plans.

Heading in, it looks like an uphill battle for the government. The OMA is well-funded, well-organized and braced for a fight. The Liberals don't yet seem to have decided what exactly it is they're aiming for, or how they'll achieve it.

Biting the hand that feeds?

Among the other labour negotiations this year, it's the ones with the province's teachers' federations that the Liberals really have to be dreading.

Peace in schools has been key to their brand, allowing them to strike a contrast with the previous Progressive Conservative government, and teachers have provided them with lots of support during elections. But can the government really afford to hold up its end of the bargain with another round of generous deals?

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Keeping FIT

The Liberals got mixed results campaigning heavily on their investment in green energy. With a review of the province's feed-in-tariff program nearing completion, we'll soon find out what it looks like going forward.

There will likely be adjustments to the rates being paid for wind and solar power. But the most interesting question will be whether the Liberals try to repair their relationship with rural Ontario by giving municipalities a say in the placement of wind turbines. If so, it will lead to considerably fewer of them going up.

Compromising positions

Sooner or later, to stay alive, the government may have to make concessions to the opposition parties – in particular the New Democrats, who are more inclined than the Progressive Conservatives to co-operate.

The most obvious compromise, toward which Finance Minister Dwight Duncan suddenly seems open, would be to put off planned corporate tax cuts. A milder one would be to take aim at the salaries of public executives, an NDP bugaboo. But given the unlikelihood they'll be brought down in the next 12 months, the Liberals will also want to keep some bones in their back pockets, for when they really need them.

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Going nuclear

The province has been stalling for years on the multibillion-dollar procurement of new nuclear reactors. Now, one of the main obstacles – the uncertain future of Atomic Energy of Canada Ltd. – seems to have been resolved with the recent sale to Quebec's SNC Lavalin. And Chris Bentley, the new Energy Minister, has been sending signals that he's more eager than some of his predecessors to move forward.

But there's also a new catch. Opposition to new investment in nuclear power is a bedrock position of the New Democrats. Will the Liberals be willing to antagonize them, given that they'll also intermittently need their support?

Committees that count

Legislative committees at Queen's Park generally have been easy to ignore – seen, fairly or not, as rubber stamps for government policy. But with the Opposition now enjoying a majority on many (if not all) of them, that's about to change.

Thus far, the parties haven't even been able to agree on how the committees will be composed. It's a worrisome sign that there could be much dysfunction to come, and a lot of bogged-down legislation as a result.

Tim 2.0

Progressive Conservative Leader Tim Hudak is likely to get an endorsement from his party's members at their February convention. But changes will continue to happen behind the scenes, as the Tories make adjustments following their disappointing election showing.

Mr. Hudak has already overhauled his office at Queen's Park. But it remains unclear whether he'll do likewise with his campaign team. That's something he'll need to sort out soon because, before long, the uncertainties of minority government will require a state of election readiness.

The evolution of Andrea

By most readings, Andrea Horwath had a good (if not great) 2011 – leading the NDP to its best election result since 1990. But she remains a work in progress, and her provincial New Democrats still lack the professionalism that Jack Layton instilled in their federal cousins.

Ms. Horwath's ability to continue making the NDP more competitive, in 2012 and beyond, will have a big influence on the current government's longevity. If the New Democrats get to a point where they think they can make major gains, they'll have every reason to help the Tories bring down the Liberals.

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