Ontario's Liberal government, which earned a reputation as labour-friendly in its first six years in power, is girding for a war with public sector unions after telling them in yesterday's budget there is no funding for salary increases over the next two years.
The government will lead the attempted public-sector wage freeze by example, stopping salary increases for members of the legislature for three years and ordering a similar freeze for political staff and non-unionized employees in the broader public sector.
The wage freezes are part of an eight-year plan to wrestle to zero the largest deficit in Ontario history, $21.3 billion.
"All of us who are paid with public tax dollars have a role to play here," Finance Minister Dwight Duncan said in a speech to the legislature. "We're all in this together."
Mr. Duncan said salary restraint would save the government up to $750 million by next year.
"As contracts are renegotiated, the government will work with transfer partners and bargaining agents to seek agreements of at least two years' duration," he said as he introduced the budget at Queen's Park. "These agreements should help manage spending pressures, protect public services that Ontarians rely on and provide no net increase in compensation."
The controversial measure raises the spectre of a war with the very constituency that put Premier Dalton McGuinty and his Liberal government in power. Unions, some of whom stood behind Mr. McGuinty at campaign stops in the 2007 provincial election, were caught unaware by the measure.
"No, we didn't discuss this with Sid," Mr. Duncan told reporters, referring to a meeting just days ago with labour leader Sid Ryan.
Roughly 700,000 unionized employees in the broader public sector -- from nurses, whose collective agreement expires in roughly one year, to university professors, could be affected. Municipal employees will be exempted.
The government said it will enforce the wage freeze on non-unionized workers through legislation to be enacted in the coming months.
However, Progressive Conservative party leader Tim Hudak questioned the effectiveness of the measure. Mr. Hudak estimated only 10% of collective agreements will expire over the next two years, rendering the effort mostly symbolic.
"It's a bit like the captain of the Titanic saying we just have to worry about the tip of the iceberg," he said.
Yesterday's budget also opens the door to another potential struggle with a public sector group. Hospital funding will rise by 1.5% on average, well below the estimated 4% rate of inflation in those institutions.
The funding shortfall is expected to lead to cuts, despite a long-standing warning of lower transfers.
The budget projected a deficit of $19.7 billion for 2010.
Mr. Duncan, who had talked of upcoming austerity measures, said yesterday he would attempt to balance cuts with continued spending.
"We will not put job creation and economic growth at risk by cutting too soon," he told reporters. "Nor will we spend as if there's no deficit."
Program spending will thus rise by 6.5% in 2010, reaching $115.9 billion annually, the government said.
Meanwhile, the government will save money by delaying a raft of capital projects, many of them in Toronto. Several GTA transit projects will be postponed, as will plans to build a Toronto courthouse as well as a $1.4-billion office complex at Queen's Park.
The province will scrap a program that paid up to one-third the cost of replacing city buses in all municipalities, saving $50-million per year.
The government is pledging to renew its spending review, which it will need to enforce if it is to meet its plan to cut program spending in 2011 by 2.6%.
Critics scoffed at that pledge, pointing to the Mc-Guinty government's record of increasing spending by 65% since taking office in 2003.
The eight-year deficit elimination plan comes with a huge price tag. By year's end, each man woman and child will owe $16,674 toward the provincial debt, a staggering 23% increase over two years. The debt will make up 37% of GDP.
Meanwhile, Ontario, which became a "have-not" province in 2009 for the first time in its history, continues its slide in stature. The former engine of Confederation is slated to collect $972 million in equalization payments, nearly triple the amount collected last year.
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