Ottawa Citizen

McGuinty takes aim at PS wages

Freeze part of 8-year plan to slay deficit

- BY LEE GREENBERG

Ontario’s Liberal government, which earned a reputation as labour-friendly in its first six years in power, now seems to be girding for a battle with public sector unions after telling them in Thursday’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 MPP salary increases for three years and ordering a similar freeze for political staff and non-unionized employees in the broader public sector.

Provincial hospitals will also feel the pinch as funding to the sector will rise by a meagre 1.5 per cent on average.

The wage freezes are part of an eight-year plan to wrestle the largest deficit in Ontario history — $21.3 billion in 2009 — to zero. The deficit is projected to fall to $19.7 billion in 2010-11.

“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.”

He 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 tabled the budget Thursday afternoon 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.”

It is unclear how the government, which does not negotiate directly with most unions, will enforce the wage freeze on funding partners.

Neverthele­ss, the controvers­ial measure raises the spectre of a battle with the very constituen­cy that put Premier Dalton McGuinty and his Liberal government in power.

Unions, some of whom stood behind McGuinty at campaign stops in the 2007 provincial election, were caught unaware by the move and reacted angrily.

“ The reality is, what this does is create the right environmen­t for labour unrest in the broader public sector,” said Fred Hahn, provincial president of the Canadian Union of Public Employees.

As many as 700,000 unionized public employees — including teachers, police, nurses, professors — could be affected. However, their collective agreement would have to expire within the next two years. It is unknown whether the government’s appeal for restraint would impact negotiatio­ns that go to arbitratio­n, as could be the case with nurses next March.

Municipal employees will be exempted.

The government said it will enforce the wage freeze on non-unionized workers through legislatio­n enacted Thursday.

Progressiv­e Conservati­ve leader Tim Hudak questioned the effectiven­ess of the measure. Hudak estimated only 10 per cent 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.

Thursday’s budget opens the door to another potential struggle with a public-sector group. Hospital funding will rise by a meagre 1.5 per cent on average, well below the estimated four-per-cent rate of inflation in those institutio­ns.

While Duncan spoke of early signs of economic recovery Thursday, off icials made clear the effects of the year-long recession that ended in mid-2009 will continue.

Only about 100,000 of the 250,000 jobs lost during the recession have been regained. The province has only recouped about $ 10 billion of $ 25 billion in real GDP lost during the downturn.

Economic activity will not return to peak pre-recession levels until the first quarter of 2011, according to government prediction­s.

Duncan, who had talked of upcoming austerity measures, said Thursday 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 per cent in 2010, reaching $115.9 billion annually.

Meanwhile, the government will save money by delaying a raft of capital projects. Several Toronto transit projects will be postponed, as will plans to build a Toronto courthouse and a $1.4-billion off ice complex at Queen’s Park.

The province will also scrap a program that paid up to one-third the cost of replacing city buses in all municipali­ties, including Ottawa, saving $50 million per year.

However, the budget put $500 million into a struggling pension insurance fund that steps in when insolvent companies like Nortel Networks dump their plans.

The Ontario pension benefit guarantee fund tops up the first $1,000 of monthly pension benefits. But it has been underfunde­d for years because levies on other pension plans can’t meet demand, particular­ly in tough economic times. The government said “This grant will help ensure the PBGF has sufficient assets to cover claims in the near term.”

The government is pledg- ing 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 per cent.

Critics scoffed at that pledge, pointing to the McGuinty government’s record of increasing spending by 65 per cent since taking of- fice in 2003.

“Dalton McGuinty will never balance the books,” Hudak said. “ He likes to spend, he likes to increase taxes. It’s only a matter of time until we f ind what his next tax increase is going to be.”

 ?? MIKE CASSESE, REUTERS ?? Finance Minister Dwight Duncan, right, laid out the government’s eight-year plan to erase a record $21.3-billion deficit on Thursday. Also included in the budget was funding to open space for 20,000 additional post-secondary students.
MIKE CASSESE, REUTERS Finance Minister Dwight Duncan, right, laid out the government’s eight-year plan to erase a record $21.3-billion deficit on Thursday. Also included in the budget was funding to open space for 20,000 additional post-secondary students.

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