The Wynne administration’s first budget found a solid balance between fiscal prudence and a desire to sustain high-quality public services.

The budget introduced Thursday renews the Liberals’ commitment to restrain spending to achieve fiscal balance or even a small surplus by 2017-18. And it confirms the deficit forecast for the past year as $9.8 billion, representing a $5 billion improvement from the 2012 forecast.

There are few surprises and the budget seamlessly intertwines NDP policy proposals with those of the Liberal government.

The Premier seems to be comfortable with the incorporation of NDP Leader Andrea Horwath’s policy ideas to the extent that they might well have been her own.

Horwath is a little sulky about her success and is heading out to “consult with Ontarians” before deciding whether to support the government when it comes to a budget confidence motion in a couple of weeks.

Polling shows that she is punching well above her weight. There is no other scenario in the foreseeable future in which the NDP could deliver on the policy and spending commitments outlined in this budget.

Horwath’s choice is stark: support the Liberals and enjoy her policy gains - or hope for a better deal from an early election that the NDP is unlikely to win. Sid Ryan, the president of the Ontario Federation of Labour, sees the writing on the wall and is advising against an election.

Horwath’s political theatre aside, the biggest question raised by critics will be whether balance by 2017-18 is achievable.

Like previous Liberal budgets, this one emphasizes the government’s intention to “protect the high-quality services that people expect and deserve.”

In a poke at the Progressive Conservatives, it rejects across-the-board cuts on the basis that these threaten priorities in health care, education and job creation.

And as Finance Minister Charles Sousa added in his budget speech, the Liberals also “reject uncontrolled growth in program spending.”

This is not a hollow statement:

The past two years have seen the rate of growth of program spending stay below one per cent.
Program spending for this year is projected to increase by just over one per cent and by 1.5 per cent on average by 2015-16, as a result of increases in education, health care and children’s and social services. As a consequence of the focus on these three priority programs, spending on other programs will have to drop by 4.3 per cent.
Sixteen out of 25 ministries are already spending less this year than they were last year.
3,400 Ontario Public Service jobs were cut between 2010 and 2012, and a further 1,500 will be gone by March 2014.
The ministry of health and long-term care consumes the lion’s share of total program spending (42 per cent). Annual health spending will increase by only 2.3 per cent this year, and will grow on average by 2 per cent over the next three years. Contrast this to 6 per cent annual spending increases that have been the norm across Canada and in Ontario until recently.

Overall, this is a big reduction in spending growth. The challenge is that these reductions must be sustained if the government is serious about balancing the books.

As Sousa pointed out in his budget speech, “Ontario is beating its fiscal targets, due in part to the transformation of how we deliver public services.”

Sousa said that going into this fiscal year, the government is on target to see 60 per cent of the 362 recommendations in Don Drummond’s report on the reform of Ontario’s public services.

The budget continues to build on key themes in the report in signalling a focus on transforming Ontario’s public sector. This includes reviewing the way all public service programs are delivered and looking for efficiencies, standardization and consolidation where appropriate.

High-spending program areas must be priorities for transformation so it’s no surprise that health and social care figure prominently in the budget.

A key element of this lies in ensuring that patients and clients are receiving the right care, at the right time, in the right place. This translates into diverting both funding and patients away from hospitals and toward community-based and home-care options where this is more appropriate. Too many people – especially the elderly – occupy high-cost acute care hospital beds or lie on gurneys in emergency rooms because too few options are available in the community.

Accordingly, the budget would pump an additional $700 million into home and community care by 2015-16 in comparison to spending in 2012-13. This is money that would previously have been plowed into the health care budget.

There will also be a greater emphasis on more income testing for benefits, particularly in the case of wealthy seniors.

And public sector compensation, which accounts for well over 50 per cent of program spending, will stay in the spotlight – as will benefits and pensions.

The budget commits to respecting traditional collective bargaining processes but it is equally clear that it sees compensation pressures as a potential threat to the path to fiscal balance.

It says: “Going forward, compensation costs must be addressed within Ontario’s existing fiscal framework which includes no funding for incremental compensation increases for new collective agreements. … In future rounds of bargaining, the government is willing to work with employers and bargaining agents to look at mechanisms such as productivity improvements as a way to achieve fiscal and service-delivery goals.”

The budget also highlights recent successful discussions on public sector pensions that will reduce the impact of potential cost pressures on employees, employers and the government.

Given the long-term economic slump and Ontarians’ thirst for more and better public services, the task of achieving fiscal balance is enormous. The Liberal plan has many challenging components and hitting the target will require most, if not all, of them to be successful.

Evidence from other jurisdictions suggests that this sort of approach to reform works, especially where targeted approaches to raising new revenues are part of the mix.

And it calls into question across-the-board spending cuts, especially when these are combined with tax cuts.

The main message in this budget is that there is a very tough slog ahead for governments of any political stripe. The Liberals do not shy away from this and they have mapped out a plan that – while tough to accomplish – offers the possibility of getting the deficit down without slashing and burning important public services.

Transformation vital to protect public services

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