Ontario Finance Minister Dwight Duncan.Peter Power/The Globe and Mail
The McGuinty government's plan to erase Ontario's multibillion-dollar deficit by reining in spending on health care, education and other social programs has been called into question by the provincial auditor.
Many of the assumptions that underpin the government's spending estimates over the next three years are optimistic and aggressive rather than cautious, Auditor-General Jim McCarter said in a pre-election report on Ontario's finances released on Tuesday.
While the report casts doubt on the government's resolve to reverse its past spending habits, it also has implications for the Progressive Conservatives and the New Democrats. Both opposition parties are adopting the governing Liberals' fiscal plan for their campaign platforms. But the Tories go even further by including a rosier revenue outlook and $3.5-billion in tax cuts.
Finance Minister Dwight Duncan said the report gives Ontarians a clear sense of the "enormously difficult choices ahead" as the province grapples with a deficit that is forecast to hit $16.3-billion this fiscal year.
"And it demands that we all ask ourselves, if you care about education, if you care about health care, if you care about public services, if you want a balanced budget, who do you trust?" he told reporters.
Since the Liberals came to power eight years ago, program spending has climbed an average of 7 per cent a year. The Liberals are pledging to curtail the growth rate to 1.8 per cent a year, without putting vital public services such as health care and education at risk.
Mr. McCarter said the Liberals' spending projections should be taken with a "big grain of salt." His report is particularly critical of the government's assumption that it will not provide additional funding for public sector wage increases. The government froze salaries for non-unionized public sector workers in 2010 for two years and called for a voluntary freeze for those who bargain collectively. Labour leaders and arbitrators have all but ignored that call, and many workers have received pay hikes of about 2 per cent a year.
"Given historical as well as recent salary increases awarded to public-sector workers, we believe that the assumptions that public-sector pay increases can be held to zero per cent is optimistic," Mr. McCarter said in the report.
By way of example, the report notes that the Ontario Medical Association has negotiated fee increases for the province's doctors that exceed inflationary growth. Doctors bill the Ontario Hospital Insurance Plan for the medical services they provide, and payments for the plan have climbed 8 per cent in each of the past eight years.
The government's assumption of no fee increase for doctors when their OMA agreement expires next April is "clearly aggressive," the report said.
The report also questions how the government will rein in spending on health care while protecting front-line services. Health care consumes 42 cents of every dollar the government spends on social programs. The Liberals are vowing to halve the annual growth rate in spending to 3 per cent a year.
The province's 156 hospitals will have to find $1-billion in savings over two years to meet this target, the report said. If they cannot, it cautioned, they likely will run deficits or be forced to cut services.
Mr. McCarter said the Liberals were cautious in estimating the province's revenues, but their spending forecast is contrary to the government's fiscal-transparency and accountability legislation, which requires the fiscal plan to be based on cautious assumptions. The government says it can balance the province's books by fiscal 2018.
By law, the Ministry of Finance must release a pre-election report about the province's finances for review by the auditor.
Karen Howlett