Monday, March 26, 2007

Response to the Ontario Budget 2007-8 - A short summary of a budget that’s short on anything new

March 2007
By Hugh Mackenzie
Canadian Centre for Policy Alternatives

Take the self-congratulation out of the 2007–8
provincial budget and you’re left with a very short
list of very modest initiatives spread out over a
very long period of time.

Most of the space consumed by the budget
speech and the background documents is devoted
to a repeat of announcements the government has
made over the past 3 ≥ years—many of them made
repeatedly—along with a running commentary
about what a good idea each and every one of
those announcements was. In Finance Minister
Sorbara’s own words, the purpose of the
government was to ‘celebrate’ the government’s
characterization of its own record.

In answer to a question in the media lock-up,
the Minister went as far as to describe his budget
as “magical”.

The worst-kept pre-budget secret, the new
Ontario Child Benefit, is the only new initiative
of any significance in the budget. But it is to be
phased in over a five-year period. It will be time for
the 2011 election before this new benefit is fully
phased in. This year the amount allocated to this
new initiative will be less than $200 million.
There is more money for child care. But at an
annual rate of $50 million per year, it is roughly
half Ontario’s share of the new child care spaces
transfer announced in the Federal budget. The
new funding for housing—$150 million—is less
than half Ontario’s $392 million share of new
Federal housing funding.

Despite the new postsecondary transfers
announced by the Federal government, the budget
is silent on how it will spend Ontario’s $320 million

The budget promises to bring in a uniform
rate of tax for education on business, replacing
the current mish-mash of different rates across
the province, but it won’t be fully implemented
until 2014—a delayed day that would have set a
record for deferred promises if it weren’t for the
Nanticoke coal fired generating station.

The budget makes a big deal about property
taxes, announcing that it is going to develop a
new system after consulting with the Municipal
Property Assessment Corporation and the
Assessment Review Board—not the public. But
all it is really going to do with the system is move
to every-four year assessments from annual and
spread out the implementation of assessment
increases over four years.

The government is going to end a small part
of the download of provincial costs onto local
governments by ending the pooling of social
assistance costs across the GTA, at a cost to
the province of $200 million per year. But that
change is to be phased over seven years as well.
And the budget contains no response at all to the
complaints from municipalities about the much
larger downloads of responsibility for housing and
20% of social assistance costs.

Even if you take the budget on its own terms,
it falls far short. It touts itself as the answer to
child poverty. But by limiting increases in social
assistance rates to 2%, it persists in ignoring
the obvious—that children don’t live in poverty
by themselves. They live with parents who
live in poverty. Distinguishing between the
“deserving poor”—children—and the undeserving
poor—everyone else, including their parents—may
make for good politics, but it doesn’t deal with the
reality of families living in poverty.
And it has nothing new to say about one of
the fundamental issues of poverty in Ontario—
whether the working poor or the poor living on
social assistance—the lack of affordable housing.

The government says the new Ontario Child
Benefit will bring down the so-called “welfare wall“.
But while the provision of child benefits that will
be portable from social assistance to employment
is obviously a step forward, the government’s
continuing failure to deliver on the need for
affordable child care means that the biggest
obstacle to employment faced by social assistance
recipients—child care availability and costs—will
remain unchanged.

The budget continues the overriding political
theme of the McGuinty Government—ignoring
many of the glaring public services shortfalls it
inherited from the Conservatives in 2003-4 and
governing as if they had never happened.

The government congratulates itself on
increasing social assistance rates by 2%—an
increase that, when implemented in November
2007, will actually come close to matching
inflation since the government was elected. But
it continues to ignore the devastating impact on
the poorest Ontarians of the Harris Governments
22% cut and eight year freeze in Ontario Works
benefits and its eight year freeze of Ontario
Disability Support Plan benefits.

The government congratulates itself on having
delivered on its promise to end the clawback of
the National Child Benefit Supplement, but it
won’t get there until the Ontario Child Benefit is
fully phased in five years from now and even then
only gets there by counting general increases in
social assistance benefits against the cost.

In 2003 when the government was elected,
hundreds of thousands of Ontario families were
faced every day with the unacceptable choices
that go with incomes that fall far short of the
minimum required for a decent life. In 2007,
hundreds of thousands of Ontario families still
face those same choices every day.

When it is fully phased in by 2011, the
Ontario Child Benefit will deliver $745 million
more to Ontario families with children than the
programs that it replaces. Of that amount, only
$125 million will go to families receiving social
assistance—equivalent to an increase of 7.5%
in social assistance benefits for children—or an
additional 1.4% per year for five years.
That compares with the nearly 35% loss in the
purchasing power of social assistance benefits for
children under the Harris and Eves governments.

While the government has again increased
funding for elementary and secondary education
at well above the rate of inflation, the new funding
is focused entirely on the Liberals’ new initiatives
and does nothing to address the fundamental
flaws in the funding formula that it inherited from
the Conservatives—flaws that are at the root of
the problems faced by school boards struggling
to balance their budgets. And ultimately, these
flaws lead to underfunding of the very programs
to help students at risk for which the government
continues to congratulate itself.

The strategy of denial of what preceded
the government’s election repeats itself when
it comes to postsecondary tuition fees. It has
steadfastly refused to address the fact that, in the
ten years before it was elected in 2003, student
tuition fees had already more than doubled. And
its 5% cap on annual tuition fee increases will leave
tuition fees higher at the end of the government’s
term in October 2007 than they would have been
had the Eves government’s policy of matching
increases to inflation had remained in effect.

And while the government’s claimed increase
in operating grants for colleges and universities
from $2.9 billion in 2003–4 to $4 billion in 2007–8,
when you take into account the 22% increase
in enrolment and inflation since 2003–4, the
inflation- and enrolment-adjusted increase is less
than 3% over that four-year period.

Despite the obvious crisis facing
manufacturing industries in Ontario, with tens
of thousands of layoffs in the past year, the best
the government can come up with is an as-yetundefined
Manufacturing Council, an acceleration
of a cut in capital taxes that is of principal benefit
to banks, and a cut in business education tax rates
that won’t be fully implemented until 2014.

The Premier has announced that climate
change is the issue for our generation, but so
far all the government has really embraced
is recycling—of old promises. Despite the
heightened public concern about climate change
and the Premier’s declaration, the sum total of
new funding for climate change is a $2 million
grant to the Trees Ontario Foundation and a
rebate of up to $150 for individual home energy
audits—and all of that money comes from the
federal clean air and climate change trust.

On the fiscal side, those in the government
who insisted that the government had to appear
to be balancing the budget clearly won the day.
By cutting reserves and contingency funds and
delaying the implementation of its major new
initiatives, the government is projecting a deficit
of $400 million, less than the $750 million in
contingency funds.

Canadian Centre for Policy Alternatives
410-75 Albert Street, Ottawa, on k1p 5e7
tel 613-563-1341 fax 613-233-1458 email

This report is available free of charge from the CCPA website at Printed copies may be ordered through the
National Office for a $10 fee.

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