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Welcome to Fantasy Island, also known as Ontario

Some fantasies are hard to give up, even in the face of evidence that they will never, ever come true. The victorious Vancouver Canucks lifting the Stanley Cup. Getting a date with Megan Fox. Freedom 55.

Politicians harbour impossible fantasies, too. In Ontario, some of them dream that the provincial budget, now deep in the red for six straight years and counting, can be painlessly fixed with a tweak or two that voters will never notice. One idea, popular on the political left and right, is to squeeze the fattest cats of the public service.

Cut the pay of hospital bosses and deputy ministers, the fantasy goes, and you can easily close the $12-billion fiscal gap, with little harm done to the health and education systems that eat up 60 per cent of the program budget. Here's Andrea Horwath, the leader of the province's New Democrats: "Money that should be going to front-line health care or lowering tuition fees is being spent on CEO salaries, and that's not fair for families who are struggling." Such outrage has become, like turkey hunting season, a perennial on the spring calendar, accompanying the release of the "sunshine list" of provincial employees earning $100,000 a year or more.

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The list was created in 1996 and the number of workers above that threshold has grown like mad, making it less meaningful. The first disclosure included about 4,500 names; this year's had 88,412.

Very few of them make CEO-type money, however. About 3,500 of them earn more than $200,000; fewer than 850 get more than $300,000. Only two—the heads of Ontario Power Generation and Hydro One—earn more than $1 million. You can find more million-dollar earners walking a single trading floor on Bay Street.

So do the math. How much can really be saved by taking out the biggest earners? Assume those 3,500 highest-paid people earned an average of $400,000 each—that's more than they really make—then suppose their jobs could be eliminated tomorrow. Total savings: about $1.4 billion, or about 1.1 per cent of what the province will spend this year.

The focus on the top end of the sunshine list is a distraction, one that turns our attention away from more important factors that have caused Ontario to add about $100 billion to its debt load since the Great Recession. It isn't the rare highly paid executive who is the problem but the vast armies of $120,000 middle managers and college instructors. It's not about the public-sector's elite, but about its bloated middle class.

Ontario's public payroll has grown quickly, starting with the later years of the Mike Harris government, whose reputation for hacking the civil service far outweighed its skill at actually doing it. Program spending declined in the early days of the Tory regime, but only about 4 per cent, and then began rising again. The Liberals hit the accelerator upon taking power in 2003.

The number of people working in the health and social services sector rose 39 per cent from 2003 to 2011. The education sector grew 34 per cent. The electorate, weary of labour battles and enjoying a reasonably healthy economy, raised barely a peep of protest.

Compensation jumped as well. Even as the factories that form Ontario's economic backbone were cutting workers and pressing for lower pay, public-sector workers saw their pay go up 28 per cent over the same period, outpacing both inflation and private-sector wage growth. The $100,000 club now includes some 19,000 employees from colleges and universities.

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What to do about it? Don Drummond's commission on public-service reform made it clear that you can't ignore paycheques in solving the deficit: About half of the province's program spending goes to wages, salaries and benefits. But the report stopped short of advocating a hard line to reel in those costs. Others haven't been so reticent. The Fraser Institute, a conservative think tank, published 2011 salary data purporting to show that Ontario public workers are paid 14 per cent more than private-sector employees to do comparable jobs—with even larger gaps in areas like daycares and clerical work. Yet it's a hard gap to close, because most public-sector workers are unionized. The public's tolerance is limited for closed schools and nurses on the picket line.

The only answer is to take politics out of it. The institute suggests the creation of a "wage board," an independent body that would set government pay scales based on what the private sector pays for equivalent work.

Here's another option: Take a page out of the corporate playbook and make a greater proportion of pay dependent on revenues. Once a public-sector worker makes the sunshine list, at least 10 per cent of his or her pay would become dependent on the health of the economy. In flush times, the money would be paid; in recessions, when tax revenues drop, it wouldn't. It would save money automatically when it's needed most. It would also send a message that has been lacking in Ontario since the recession: that the public sector is willing to share the economic pain.

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