Ontario’s budget: On second thought, this might hurt

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There's a lot of confusion about the budget that Ontario Finance Minister Charles Sousa introduced – or rather reintroduced – on Monday. There shouldn't be. Budgets are normally unveiled and passed quickly; this one has been on hold and under klieg lights for nearly three months. It's the same budget the Liberals introduced in the spring, the same budget that provoked the fall of their minority government, the same budget they ran an election on and the same budget they promised to recycle if re-elected. They've returned, and so has it. "As I was saying..." is how Mr. Sousa opened his reprise of the budget speech. It was a good line, and it was true. The Liberal government has picked up right where it left off. Nothing in this budget should surprise.

And yet apparently so much does. The confusion comes from the gap – the very wide gap – between the Kathleen Wynne government's rhetoric surrounding the budget, and the actual budget. The words have been all about new programs, new spending and new ways in which the government can better lives and stimulate the economy. That story suited the Liberals during the election. It also suited their main opponent, the Progressive Conservatives, running on a platform of smaller government. In the spring, Ontario Federation of Labour president Sid Ryan was calling it "the most progressive budget this province has seen in recent years," and many union leaders agreed. Headline writers this week continued to describe it as "big spending" and "spending packed," a plan for more government and an attempt to grow a sluggish economy through new spending. Left-wing pundits cheered. Right-leaning pundits winced. Conclusions have differed, but almost everyone has told the same story.

The thing is, the actual budget doesn't tell that story. At all.

The actual budget, the Liberal government's multi-year spending plan, is an austerity budget. Or at least that's what's promised. The budget calls for no new spending for three years. Yes, there are new programs, led by a 10-year, $29-billion fund for roads and public transit, but any new spending initiatives – and there aren't many – are supposed to take place within that budget envelope. The promise is that program spending will be essentially flat – rising by just one-third of 1 per cent per year – until 2016-17. Given inflation and a growing population, that's a plan for spending to fall, in real terms, by 3 per cent a year. Government spending is supposed to shrink as a share of the economy, with the goal of eliminating the $12.5-billion deficit and balancing the budget in three years.

If the Liberal government sticks to this budget, there will be pain. There will be hard choices. And there will be disappointed supporters.

Out on the campaign trail, there was little talk about cutbacks – at least not from the Liberals. The Conservatives under Tim Hudak talked about nothing else. They lost the election, and lost badly, because they came across as gleeful in their desire to take an axe to government, led by a giddy pledge to get rid of 100,000 public sector employees. Mr. Hudak made himself the issue, and the Liberals won because they were able to get people to vote against his promises rather than their record. But with four years of majority government ahead of her, Premier Wynne is going to have to face some of the hard choices she studiously avoided talking about during the election.

The government appears to be gingerly pivoting in that direction. Mr. Sousa's budget speech, round 2, seemed to put more emphasis on committing to spending and deficit targets than he did back in May. And on Friday, the new Health Minister, Eric Hoskins, told physicians that the cupboard is bare and "there is no new money available outside the envelope that's provided." If Mr. Sousa is going to meet his targets, other public servants are going to be hearing a similar message. A budget with a spending envelope that isn't supposed to grow for three years doesn't leave a lot of room to negotiate. It's possible to give raises to public sector employees – but only by cutting elsewhere.

The good news in all of this is that Ontario isn't suffering a crisis, either economic or fiscal. Ontario's per-capita spending is the lowest in the country, which means that Ontario has Canada's most efficient (or least inefficient) provincial government. It's also a relatively low-tax jurisdiction: Ontario has the lowest per-capita revenues of any provincial govenrment. And that $12.5-billion deficit isn't so large, relative to the size of the province's economy, that it can't be brought back into balance in three years. It is entirely doable. It's just not doable without disappointing some of the government's core supporters.

Over the past few months, the Liberal Party has been a bit like Dr. Jekyll and Mr. Hyde. One wrote the budget. The other won the election. Which one will govern?