Wynne government gives public employees a raise despite deep red ink
Earlier this week, Premier Wynne’s government offered a four-year contract extension to Ontario government workers with 7.5 per cent pay raises over the life of the deal. This follows a two-year extension recently offered to teachers and education workers, which includes a four per cent raise.
According to Premier Wynne, her government can now afford to offer bigger wage increases than previous agreements because the province’s budget is balanced. This explanation fundamentally misunderstands the severity of Ontario’s fiscal problems.
Yes, the province’s operating budget might be balanced this year but that fact doesn’t erase the consequences of nine straight budget deficits that came before it. All of the debt racked up over the past decade hasn’t vanished. It must be serviced and currently consumes about one billion taxpayer dollars every month. More money servicing the debt leaves less for public programs and tax relief.
What’s more, Premier Wynne seems to imply that the province now has its debt problem under control and can afford to spend freely. Nothing could be further from the truth.
The government plans to rack up new debt each year while still claiming a balanced operating budget. How so? Because it plans to spend a lot on debt-financed capital projects, which aren’t fully accounted for in the operating budget.
In reality, the pace of debt accumulation in Ontario isn’t even slowing down. Over the past three years Ontario’s debt grew by $34.7 billion. Over the next three, the debt is expected to grow by $34.1 billion. Again, this is due to spending on capital (road and bridges) financed with debt.
Subsequently, the notion that because the operating budget is now balanced, the province can now afford to spend freely is frankly absurd.
Rather than maintaining fiscal restraint, the Wynne government keeps making new spending promises. In its spring budget, for example, it committed to increase program spending by 4.8 per cent this year—far more than would be needed to offset inflation (rising prices) and a growing population.
Which brings us back to the government worker pay raise announced this week—the latest sign that the government will ratchet up spending in the years ahead, making the same mistakes that created Ontario’s fiscal mess.
Obviously, given the scale of Ontario’s debt problem, spending discipline should remain a priority. And given that wages and salaries for government employees are the biggest single area of expenditure for any provincial government—half the entire provincial budget, in fact—this is an area where spending decisions make a big difference to the bottom line.
It’s also an area where significant savings are likely possible. Consider a recent Fraser Institute study that shows, on average, government workers in Ontario earn 13.4 per cent more than their private-sector counterparts for similar work. This wage premium comes on top of other superior non-wage benefits in the government sector including earlier retirement, greater job security and more time off for personal reasons.
Given the scale of Ontario’s debt problems, it’s reasonable to ask whether maintaining or padding this pay premium is the best use of scarce public funds. Ontarians bear huge public debt load that’s costing them money today and represents an enormous burden on the next generation.
To repair Ontario’s finances, there’s much work to be done. Unfortunately, Premier Wynne’s government seems content to pass the buck and spend freely.