Government Financing Overview

By Bob Runciman
Leeds-Grenville MPP

As our government starts preparing for its next budget, one that will have many challenges because of the downturn in the economy, I feel it is important that constituents in Leeds-Grenville have some insight into the process we, as government members, face.

I am very proud of the fact that this government has brought Ontario's financial situation under control. We have had three balanced budgets in a row and have started the process of reducing Ontario's overall debt while at the same time reducing the tax rate of our citizens.

This hasn't been easy but it's been necessary. When the Mike Harris government came to power Ontario was moving quickly towards bankruptcy with huge annual deficits. Ontario was fast approaching the situation where the cost of servicing the debt would become the province's largest annual expenditure.

I can share with you that all ministries have been instructed to find savings for the new budget although health care and education will not face budget reductions. This will be extremely difficult for some ministries such as Environment where a great many programs are being introduced to guarantee Ontarians safe drinking water and Transportation where many major capital projects are needed.

One of the greatest misconceptions people hold is that the Ontario government has been forced to reduce spending to finance tax cuts. Actually lower tax rates have spurred greater economic activity in the province and as a result, government revenue has increased steadily. And so have expenditures.

When we took office in 1995, government spending for the previous year was $52.3 billion. The 2001-2002 budget spending is estimated at $63.3 billion, an increase of about 18.8 per cent. This government has not reduced spending but it has curtailed the rate of the increase of spending. Between 1990 and 1995 under the NDP government, spending increased over 21 per cent and the result was higher taxes and larger deficits.

This government will not go that route. Through legislation we have guaranteed our citizens that spending will be dictated by revenue without deficits. This is a tough stand but a necessary one. We can no longer mortgage the souls of our children and grandchildren through burdening them with increased debt.

The demand for increased spending in every sector is deafening. But we all realize that we have a set amount of money to work with and cabinet ministers are constantly reminded that requests for new programs require spending cuts in other areas.

Unlike the people who demand more resources without offering any suggestions where the money should come from, cabinet ministers face this question every time they recommend spending on a new program.

Every day I am faced with demands for more money for extremely worthwhile programs _ programs that I agree are needed. Just once, I would like to have someone _ whether it be municipalities, people in health care or in education _ say to me when they are demanding more money where this money should come from.

We know from hard-learned experience that increasing taxes stymies economic activity and therefore reduces overall revenue. We have proven that our program of tax cuts has increased government revenues and has allowed us to spend more money on needed programs.

The other alternative is to reduce spending in some areas and moving needed resources to others. This is a constant process for our government but every shift in spending priorities brings a wave of criticism from the people affected.

Many people suggest there is a crisis in health care. I am not sure crisis is the correct term but providing the best possible health care for the citizens of Ontario is a top priority for every member of this government.

This is an area where demands for more funding are endless. This government has made many changes in the health care system to improve services and introduce efficiencies.
When the Liberals came to power in the federal government in 1993 they started to put their financial house in order by reducing health care transfers to the provinces. Originally the plan under the Canada Health Act was to have health care costs shared 50-50 between the federal government and the provinces.

At the present time with recent increases to health care transfers, the federal government contributes 14 per cent towards the cost of health care in Ontario. That's still less than the 18 per cent it was contributing before it reduced transfer payments.

When the federal government reduced its contribution to health care spending, the provinces were forced to make up the difference. Cutting spending was not an option for the provinces then nor is it today. Right now, 44 per cent of every dollar spent on government programs goes to health care.

With an aging population, the introduction of new procedures _ both diagnostic and treatment _ and a never-ending parade of new expensive drugs, the demand for increased spending is endless.

This brings up another misconception constantly perpetuated by our opposition and the media. We are constantly berated for the cuts that we have foisted on health care in the province of Ontario. Since this government took office there has never been a reduction in health care spending. During the current fiscal year, this government will spend about $24 billion on health care compared to $17.6 billion in 1995-1996. Spending has increased every year.

The question facing everyone is whether our current health care system is sustainable under the burgeoning demand for services especially given the federal government's reluctance to increase its share of the cost.

I believe the whole issue of health care needs to be analysed to determine how we can meet the demands of the future and pay for them.

Education is another field where there is a perceived notion that our government has reduced spending. When this government first took office, educational spending including post-secondary was $9.1 billion. During the current fiscal year, the budget calls for $11.9 billion in spending.

One of our most pressing problems in education concerns school buildings. A recent study indicated it would take more than $10 billion to bring all existing schools in the province up to standard. This problem is compounded by shifting populations that have resulted in half-filled schools in some areas and space shortages in others. Even though schools are half-filled and costly to operate on a per-student basis, boards are reluctant to close them and amalgamate school populations. Many parents don't care about the costs involved nor do they care that keeping these schools open denies boards the financial resources they need to build new schools.

An alarming number of schools in the province need total reconstruction or replacement. Two high schools in the area, Smiths Falls District High School and North Grenville District High School in Kemptville, have outlived their usefulness. Many other schools have structural and infrastructure problems that require costly capital funding.

It should be pointed out that these problems did not evolve overnight.
Until 1995, local school boards set their own budgets and then requisitioned the necessary funding from local taxpayers through the municipalities. These local boards were constantly criticized for their spending and often they put off school maintenance programs and new building projects because of this criticism.

Now that funding of the education system comes under the control of the provincial government, these same school boards that shelved maintenance programs and building projects when they had control of their budgets are demanding this work be done immediately.
This is a problem the Ontario government is grappling with but the solution will not be immediate and other ways of meeting the demand for new schools and upgraded facilities need to be investigated.

Health care and education are just two of the concerns faced by our government. There are major needs in every ministry, including Community and Social Services, Environment, Agriculture, Corrections, and Transportation.

I believe we are making tremendous strides in all areas but we must never lose sight of the fact that government, any government, can only provide the services that it can afford. Running government is similar to running a household. We all have to live within our means.
Putting future generations deeper in debt is not an option for this government.