Re: McGuinty plans cuts to balance Ontario's books SLASH ATT
               
Jan. 14, 2004. 01:00 AM
Will McGuinty set us straight?
CAROL GOAR
It's been a long time — seven Elysian years — since we've had to grapple with a "structural deficit."
That's the kind of budgetary shortfall that doesn't go away when times get better. It can't be eliminated by temporary spending cuts or wiped out by asset sales.
It means, as Ontario Finance Minister Greg Sorbara said last month: "We have a serious long-term problem. It is a problem rooted in a chronic mismatch of revenues and expenditures."
There are only two ways to get rid of a structural deficit: Provide fewer services or raise taxes.
That is the stark choice that Premier Dalton McGuinty faces.
If he intends to keep his election pledge to balance the budget — as he insists he does — he'll have to break one of his other two campaign commitments. He'll either have to jettison his promise to reinvest in Ontario's schools, hospitals and municipal infrastructure or he'll have to renege on his vow not to increase taxes.
The Premier can talk as much as he likes about "results-based budgeting," "measurable outcomes" and "reinventing government" but he cannot obscure a simple reality: The province can't afford what it is doing now, let alone more.
The real purpose of this winter's "citizens' dialogue" will be to find out whether Ontarians want to pay for the agenda they voted for, or whether they want the Liberals to scrap it.
Economist Hugh Mackenzie of the Canadian Centre for Policy Alternatives has analyzed the province's fiscal prospects under every conceivable economic scenario.
No matter how he crunches the numbers, he concludes that McGuinty's election platform is unfeasible, unless the government raises taxes or borrows money.
If the economy grows at the rate the Liberals are expecting — by an average of 3 per cent a year over the course of their mandate — they'll be able to deliver approximately 40 per cent of their promises, Mackenzie estimates.
If the economy performs better than expected — 1 per cent a year above the projected growth rate — McGuinty will be able to implement 75 per cent of his platform, he predicts.
If the economy fares worse than anticipated — falling 1 per cent short of the projected growth rate — the government will need every dollar it takes in just to eliminate the deficit it inherited, Mackenzie warns.
"Something has to give," he says. "The government cannot meet its balanced budget commitment and fulfill its public services renewal commitment, without raising taxes."
The Premier can postpone the day of reckoning, but he cannot avoid it.
Undoubtedly, there are savings to be found in Ontario's $70 billion budget. But trimming programs, capping public sector salaries, charging user fees and selling Crown property won't produce nearly enough income to bring expenditures and revenues back into line.
Anything more drastic will provoke fierce resistance.
Health and education, the public's two highest priorities, account for 60 per cent of provincial spending. Cutting either would be highly risky.
The Premier's recent musings about restricting drug benefits to seniors, for instance, have raised questions about his commitment to medicare and his willingness to sacrifice the interests of vulnerable citizens.
Any attempt to disinvest in education would violate McGunity's central campaign commitment to reverse the damage that eight years of Tory cutbacks did to Ontario's public schools.
Nor does the remaining 40 per cent of the budget offer much room for belt-tightening.
The $8.2 billion that Ontario spends on debt servicing is obviously off limits. Cutting social assistance, when 390,000 children in Ontario live in poverty, would be heartless. Chopping environmental protection would be short-sighted. Skimping on justice, when the courts are facing huge backlogs, would be irresponsible.
Juggling priorities sounds good in theory, but McGuinty is likely to find that Ontarians aren't willing to sacrifice what they have to get what he promised.
They voted for better — not fewer — public services. They elected the Liberals to improve their lives, not find new ways to pare and privatize.
It is unfortunate that McGuinty has to clean up the fiscal mess left by the Tories. It is unfortunate that the Liberals promised more than they can deliver. It is unfortunate that taxpayers can't have better services for free.
But it is possible that Ontarians still want the change that they chose. They might even be willing to pay for it.
They certainly deserve a chance to look at the revenue side of the equation.
According to the federal Finance Department, the tax cuts enacted by the former Conservative government cost the province $11.9 billion in forgone revenues last year. By 2005-6, the price will mount to $17.5 billion.
Maybe the reason that Ontario has a structural deficit is that taxpayers were led to believe they could have good schools, hospitals, universities, courts, highways and public services on the cheap.
Maybe McGuinty's real task is to set them straight.
Carol Goar's column appears Monday, Wednesday and Friday.
Additional articles by Carol Goar
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