A prudent budget, with two missteps

TheStar.com – Opinion/Editorial
Published On Fri Mar 26 2010

The provincial budget tabled Thursday contains few new initiatives and wisely avoids a panicky reaction to the deficit. While some commentators were calling for immediate spending cuts or a fire sale of government assets, provincial Finance Minister Dwight Duncan, like his federal counterpart Jim Flaherty three weeks ago, has elected to stay the course and put off the heavy lifting until later, when the economy has had a chance to recover fully.

“We will not put job creation and economic growth at risk by cutting too soon,” Duncan told reporters in the budget lock-up.

Indeed, the budget schedule shows that the deficit, now standing at $21.3 billion, will not be eliminated for eight years.

The burden of getting back to balance will be borne mainly by public sector workers, who have until now largely escaped the impact of the recession. Stealing an idea from the opposition Conservatives, the government is imposing an immediate wage freeze on the non-unionized public sector.

As for the unionized workers, their contracts will not be torn up, as they were in Bob Rae’s days. Rather, the government is giving notice that there will be no further wage increases once those contracts expire. The general public will likely cheer.

And if that leads to messy strikes, they won’t happen until after the 2011 provincial election, as the contracts of the doctors, teachers and provincial public servants don’t expire until 2012.

In this respect, Duncan’s budget is politically astute. It steals some of the thunder from the opposition at little immediate cost. In two other respects, however, the budget is a disappointment.

First of all, the budget speech had nothing to say about the government’s poverty reduction plan, which suggests it is a low priority. The background document says the government will hike welfare rates by 1 per cent, but that will be more than offset by the elimination of the special diet supplement. We will have more to say on this subject in an editorial Saturday.

The other budget disappointment is the announcement that the province is delaying implementation of transit expansion in the Greater Toronto Area to save $4 billion over five years. This is a wrong-headed move, given that the new transit lines are needed to fight grid-lock, to reduce auto emissions and to create employment.

The government would have been better advised to introduce some form of road tolls to help maintain the transit expansion schedule.

On the positive side, the budget includes $63.5 million to make up for the loss of federal daycare funding, $310 million in additional funding for 20,000 new spaces in colleges and universities, and $600 million for retraining of 30,000 workers in the Second Career program. These are wise investments in knowledge and skills.

Finally, the budget acknowledges the elephant in the government’s room: health, which now accounts for 46 cents of every dollar spent on provincial programs and is slated to rise to 70 cents in 12 years, crowding out spending on everything else.  Plans to rein in this spending are announced in the budget, but the details remain vague. This is a political hot button issue that bears watching.

Overall, Duncan’s budget is prudent and should enable the economic recovery to continue while at least pointing the province in the right direction on deficit reduction. As for the budget’s missteps on poverty and transit, they are subject to correction in the future.

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