Budget Reviews

Minister Steele’s budget landed on carefully prepared terrain. Like his federal counterpart, he had issued a series of dire warnings, making the final product seem comparatively mild. In fact, all of the bad news was old news while the new information was mostly positive.

The previous provincial and current federal governments deserve much of the credit.  Income from federal sources will increase by $220 million.  Equalization is up sharply because of the success of other provinces which have been exploiting their natural resources and was further enhanced by a special arrangement negotiated by the MacDonald government. Federal health transfers are going up far more rapidly than provincial spending. The same is true for social transfers.

Debt servicing costs are well below previous expectation because of historically low interest rates. The province has done well to lock these in by increasing the proportion of its debt financed by long term bonds.

Cuts to schools and universities persist, and health care spending is severely restrained, although not cut as previously forecast.

The prospect of deficit elimination and gradual phase out of the HST increase are both welcome, even if substantially aided by events over which the current government had no influence.

But in two areas this budget is an admission of failure.

Previous budgets had forecast a reduction through attrition of 1,000 civil service positions. In fact there are more civil servants today than when the government took power. There appears to have been no plan to achieve  this reduction, which would save perhaps $100 million per year.

Secondly a large and growing pension adjustment is forecast. This is the additional amount taxpayers are providing for civil servant and teacher pension funds, even after the recent $536 million bailout. Over the next four years the budget forecasts a further $420 million of expense to taxpayers with no corresponding employee contribution. Meanwhile the Ontario and Federal governments are moving to a 50/50 cost sharing arrangement. And the former says that benefits will have to be reduced if current funding is insufficient.

Astonishingly the Minister’s self-congratulatory speech and hundreds of pages of supplementary information included barely a word about this enormous problem. The one brief mention is a move toward joint sponsorship of the civil servant plan which could actually make things worse if it takes away the Minister’s right to make unilateral changes as he did two years ago.

Fulfilling the promise to reduce staffing and taking the volatility out of pension costs could free up perhaps $200 million per year for health care and education, while maintaining the path to balance and HST reduction.

Surely these should be the priorities.