Challenging Austerity: Resources for OPSEU Members

Working people didn’t cause the Great Recession of 2008-09, but we’ve been paying for it from the start. First the high-rolling financiers whose risky bets torpedoed the private sector had to be bailed out by governments. Now those same financiers are demanding deep cuts to public services, jobs, and wages to pay for the bailouts – and protect the profits of private bondholders.

They might not get away with it. Around the world, working people are saying NO to this “austerity” agenda. We’re refusing to pay for a crisis they didn’t cause.

Here at home, fighting austerity starts with understanding it –and knowing how to talk about it with your friends, family, neighbours and co-workers. The materials listed here are designed to help OPSEU members do exactly that.

To order bulk (more than 20) quantities of any of the written documents, or to arrange for a presentation in your local, please e-mail us by clicking here.

Budget Bill 55 update

June 20, 2012

The Ontario Budget Bill 55 cleared the Legislature today, but not without changes forced by NDP Leader Andrea Horwath and the caucus.

Austerity in Ontario

May 18, 2012

This new OPSEU PowerPoint presentation provides basic facts about Dalton McGuinty’s “austerity” campaign to cut public services, jobs and wages. Complete with speaker’s notes, anyone can deliver it to local meetings, bargaining team caucuses, area councils, or any other group

Download this .ppt

Budget 2012 and the Public Sector’s Contribution to Ontario’s Economy

April 18, 2012

OPSEU commissioned this report from the Centre for Spatial Economics to quantify the economic damage to Ontario from the 2012 budget. The report also compares the economic impacts of public service cuts vs. tax increases.

Ontario Budget 2012 analysis: Executive summary

Government deficits are the result of the 2008-09 global recession. Ontario is no exception. The recession didn’t start in Ontario or in the public sector. It started on Wall Street and other financial capitals when bankers and hedge fund managers played their high-risk games.

Now, the Ontario government is telling us somebody’s gotta pay. And they’re saying it won’t be the richest people. It will be the people who are hit hardest and who can’t afford to lose any more.

In the 2009 and 2010 budgets, Ontario spent money to create and save jobs to lessen the recession’s impact. Without finishing the job and launching the province on the road to prosperity, the McGuinty Liberals are gunning it down the road to austerity. The Budget fails Ontario and will make working people, including a lot of OPSEU members, pay for the 2008 recession.

Here are some points you can use to lobby your MPP to say “NO” to this budget and the devastation it would mean for our province and the people.

The budget fails Ontarians because the Liberals:

1. Blamed the deficit on overspending rather than the recession
2. Exaggerated the size of the deficit
3. Ignored revenue options and refused to consider tax fairness to raise revenues from profitable corporations and high-income individuals
4. Bought into a plan that will hurt people, slow our economy, and sharply increase income inequality

1. Overspending is NOT the problem (a few supporting facts)

• Three budgets before the 2008-09 recession were balanced.
• Ontario spending per person is lower than any province in Canada.
• Program spending per capita is 11 per cent lower than average of the other nine provinces.
• Duncan estimates 2012-13 budget deficit at $15.3 billion.
• At 2.4 per cent of province’s economy, these deficits are lower than for five consecutive years from 1991-92 to 1995-96, the period for the last recession.

Still, Liberals are cutting real spending by 2.3 per cent per year. As bad as this budget is there is worse ahead.

2. Exaggerated deficit

Duncan has overestimated the deficit by billions every year since the recession began. Now he’s exaggerating how big the deficit will be in the years ahead to scare people into accepting the cuts.

Duncan’s adviser, Don Drummond, made future deficits look bigger when he:

• Underestimated growth
• Overestimated interest on Ontario’s debt
• Overestimated how much government spending would grow
• Built in a huge contingency fund to make the deficit look bigger

Duncan and Drummond also ignored revenue options:

• The Liberals refused to consider tax fairness as a way to strengthen the economy and reduce income inequality
• If Ontario had the same tax rates today as in 1994, the budget deficit would be a budget surplus
• While they froze cuts to corporate income and Business Education Tax this brings Ontario no new money

The only budget measures to bring in more revenue are user fees and plans to make more money from increased alcohol sales and gambling. This will account for $4.4 billion over three years, or just over 1 per cent of total revenues.

3. Options the government ignored to increase revenue

• Eliminate lower tax rates for income earned from stock options. This cost Ontario $180 million in 2010-11.
• Make income tax rates more progressive. Canada’s top one per cent of taxpayers earn more than 13 per cent of the total individual aggregated income.
• Introduce Financial Transactions Tax (FTT). Even a tax of 0.1 per cent on the $1.5 trillion in trades through the Toronto Stock Exchange would bring in well over $1 billion a year.
• Tackle problem of offshore tax havens. Canadian banks avoided $2.4 billion in taxes in 2007 alone. Money earned in Canada should be taxed in Canada.
• Restore corporate tax rates to 2009 levels to bring in an extra $1.5 billion a year.

4 Cuts, Cuts, Cuts

• Government through budget measures is cutting $17.7 billion in spending.
• There are so many cuts, the government had to publish them in their own book, available at: http://www.fin.gov.on.ca/en/budget/ontariobudgets/2012/addendum.html

LOOKING AT CUTS – MINISTRY BY MINISTRY

Corrections

• Three new closures will affect nearly 500 active OPSEU members: Brantford and Chatham jails and full closure of Toronto West Detention Centre.
• That’s in addition to previously-announced closures of Owen Sound, Walkerton, and Sarnia jails.

Environment

The axe will fall on every ministry, but none more heavily than environment.

• More than nine per cent cut in dollar terms. That’s more than 12 per cent after accounting for inflation and population growth.
• Ministry budget already 45 per cent less, in real terms, than in 1992.

Social services

• Social assistance rates frozen, and in real dollars will soon be half of 1995 rates.
• Slow down increases to Ontario Child Benefit, now $1,100 per child per year.
• Possible funding changes in developmental services that threaten services and jobs
• Plans to integrate Ontario Works, Ontario Disability Support Program, and Employment Ontario.

Health Care

• Limit spending increases to 2.1 per cent per year, a drop of 1.2 per cent after inflation and population growth.
• Zero increase for hospitals, except 2 per cent for a few specific programs such as wait-times initiatives.
• Home and community care get 4 per cent, 0.7 per cent after inflation and population growth. But, they face greater transfer of hospital patients.
• Long-term care gets 2.8 per cent (or 0.5 per cent after inflation and population growth). Only 1 per cent goes to frontline care for residents.
• Local Health Integration Networks get more ‘flexibility’, or power, to allocate resources.
• ‘Routine’ medical procedures to shift from hospitals to not-for-profit clinics.
• Health-Based Activity Model extended to take ‘price’ into account for services and treatments through Community Care Access Centres and Long Term Care Homes.
• Wealthier seniors will pay more for drugs with no adjustment for inflation. Over time, more seniors will pay more for drugs. Government won’t use the extra money to increase access to prescription drugs for working age, low-income Ontarians.
• Mental health . . . no mention.

Restructuring Public Services

• Amalgamate some school boards.
• Integrate employment and training services.
• Move to industry self-regulation in more areas.
• “Modernize” court services.
• Merge the Ministry of Economic Development and Trade with the Ministry of Research and Innovation.
• “Rationalize” some functions of the Ministry of Municipal Affairs and Housing.
• Bring in a new funding model for Children’s Aid in a hazy cloud of talk about “restructuring.

Education

• Spending increases capped at 1.7 per cent per year for next three years. (A 2.7-per- cent cut after inflation and population growth.)
• Two-year freeze on salaries with threat to intervene if strikes occur.
• Amalgamations of some school boards.
• School closures.
• Colleges
• Average annual increase over next three years before inflation and population growth of 1.04 per cent, even less than Drummond Commission recommended.
• Ontario has lowest per-student provincial operating grant in Canada.

Privatization

• Budget document sings praises of ServiceOntario for “fast, easy access to government information and services”, “exceptional track record”, and 93-per-cent customer satisfaction.
• ServiceOntario brings in $10 for every $1 it costs to run; yet, the government plans to run it as a “public-private partnership” (P3).
• McGuinty Liberals talking about “expanding the role of the private sector” in Ontario Lottery and Gaming.

They are promoting privatization even though repeatedly proven to be a failure. Privatization creates investment opportunities. It doesn’t save public dollars. The public pays.

Here are a few examples:

• Province’s air ambulance service, now called ORNGE, is tale of scams and rip-offs.
• Average lab test costs $22 at public hospitals, $33 at private labs, according to recent Ontario study.
• Government sold Teranet, its electronic land registry service, to private investor for barely one third of its real value.
• Other failures: meat inspection, super-jails, over-budget ‘P-3′ hospitals, and Highway 407.

Cutting Wages

Budget is more about cutting wages than anything else even though Ontario already has the leanest, most efficient public sector in Canada.

• Ontario Public Service has 14 per cent fewer employees than in 1995.
• Of the $17.7 billion the government wants to cut over the next three years, $6 billion is to come from pay to physicians and public servants and restraint for school boards.
• Another $6.8 billion in cost-cutting in the broader public sector will certainly cut wages and jobs.
• Government not clear about whether it expects all workers to accept two-year wage freeze, or whether it wants more from some.
• Government claims to respect collective bargaining process, but says if it can’t get the agreements it wants through bargaining, it will use legislation.

Pensions

Proposed changes could affect how much it costs you to retire, when you can retire, and what your retirement income will be. OPSEU is seeking actuarial and legal advice.

Legislation would:

1. Force pension plans to make up shortfalls in a way that government as the employer won’t have to pay more and plan members will receive less when they retire.
2. Have costs for all public pension plans shared 50-50 by employers and employees.

Other changes:

• Major change to historical relationship between parties in jointly-sponsored pension plans: force “third-party dispute resolution” when plan sponsors can’t agree on benefit reductions through bargaining.
• “Pool investment management functions” of smaller pension plans, with specific reference to the 25 pension plans at Ontario’s 20 publicly-funded universities.

Collective Bargaining

• Anticipate difficult bargaining with restraints.
• Government threatens to force agreements if can’t get what it wants through bargaining.
• OPSEU seeks legal opinions.

Download this document

The "Shock Doctrine" Comes to Ontario

An overview of the 2012-13 Ontario Budget

March 28, 2012

“The bad bank debt that triggered the crisis in 2008 never went away – it was simply shifted on to governments. Private debt became public debt.”
– David McNally, Global Slump

Naomi Klein’s 2007 best-selling book The Shock Doctrine describes how big business and governments around the world have learned to take advantage of crises to create new investment opportunities and boost corporate profits. Any kind of crisis will do – an earthquake, or a war, or a recession – and it doesn’t matter who is to blame. Because when the crisis hits, the “solution” put forward is always the same: money moves upward from people who can’t afford to lose it to people who already have a lot. Usually, the people who are hit hardest are too disoriented and intimidated by the crisis to fight back.

The global recession of 2008-09 did not start in the public sector, and it did not start in Ontario. It started on Wall Street and in other financial capitals, where a small number of bankers and hedge fund managers took insane risks that sank the global economy. Now, regular people in countries around the world are being told to pay up for the colossal mistakes of the richest people on the planet.

In the 2009 and 2010 budgets, the Ontario government responded to the Great Recession by spending money. This “stimulus spending” was the right approach to take, and governments around the world took the same path. Government spending created jobs, and it saved jobs. It did not prevent the recession, but it did lessen its impact on people.

The recession has left governments everywhere with Budget deficits, and Ontario is no exception. Finance Minister Dwight Duncan has estimated the deficit for 2011-12 (the year just ending) at $15.3 billion. For the year ahead (2012-13), Duncan says the deficit will be $15.2 billion. The Budget introduced on March 27, 2012 says the deficit will be reduced to zero by 2017-18 (see chart at right, from p. 6 of the Budget).

How Big is the Deficit?

The deficit is the difference between how much money the government is taking in compared to how much it is spending. Fifteen billion dollars sounds big, but compared to what? Any government’s ability to pay depends on the size of its economy. Viewed in that way, $15.3 billion is about 2.4 per cent of the province’s economy. To put that in context, Ontario’s deficit was worse than that for five years in a row from 1991-92 to 1995-96, as the chart below shows.[1]

If the government’s goal is simply to balance the Budget, it seems obvious that this can be done without the severe cuts that happened in the mid-1990s. But Don Drummond, the bank vice-president who advised the government on how to balance the Budget, has recommended spending cuts that are deeper and longer lasting than those of the 1990s. In his Feb. 15, 2012 report, Drummond called for cuts in real per capita spending[2] of 2.5 per cent per year for six years.[3] This means a real cut, after compounding, of more than 16.2 per cent.

In the 2012-13 Budget, Finance Minister Dwight Duncan has more or less accepted Drummond’s target, choosing to spend a mere 0.2 per cent more than Drummond recommended. For the next three years, the Budget will increase spending by 1.0 per cent in dollar terms. But after inflation and population growth are taken into account, what sounds like an increase is actually a cut. Overall, the Budget plans for a real spending cut of about 2.3 per cent per year.[4]

It is important to emphasize that the current Ontario deficit was in no way caused by government spending. Prior to the recession, Ontario’s Budget was in balance for 2005-06, 2006-07, and 2007-08. Furthermore, Ontario spending per person is the lowest of any province in Canada. “This is the backdrop to Ontario’s efforts to bring down its deficit,” says Matthew Mendelsohn, director of a University of Toronto think tank. “It already runs the least expensive, most efficient programs in the country.”[5] In fact, for the year just ended, Ontario’s program spending per capita is 11 per cent lower than the average of the other nine provinces.[6]

The idea that Ontario’s public services need to be slashed to pay off the deficit does not stand up to scrutiny. There must be another explanation.

Exaggerating the Deficit

In the 2009 Budget, the McGuinty government decided to speed up major investments in infrastructure to save jobs and create jobs in the construction industry, with the goal of injecting stimulus into the whole economy. At the same time, the government made two major moves that transferred money from people and public services to Ontario’s corporations. The first was to introduce the Harmonized Sales Tax (HST), which caused Ontario consumers to pay consumption taxes that had previously been paid by businesses. The second was to announce a cut in the Corporate Income Tax rate from 14 to 10 per cent of taxable profits. The government said this move alone would cost provincial coffers $2.4 billion a year when fully phased in. (As of July 1, 2011, the rate had reached 11.5 per cent and was costing $1.5 billion a year.) It was obvious in 2009 that the money lost could only be recuperated by a) raising taxes; or b) cutting public spending. It was also obvious that the McGuinty government had made a decision to transfer money from regular Ontarians to business – including some of the richest corporations in the country.

The 2012-13 Budget is another step on the journey the government began in 2009.

Cuts to public services like health, education, transportation, environmental protection and so on are seldom popular. That is why scaring Ontarians has been an important part of the government’s deficit strategy. By claiming that the deficitS will grow rapidly unless drastic measures are taken, the Liberals hope to make Ontarians accept severe cuts that they would never accept in normal times.

In his report, Don Drummond claimed that Ontario’s deficit would reach more than $30 billion in six years if the province did not change its ways. Hugh Mackenzie, a researcher with the Canadian Centre for Policy Alternatives, has documented the assumptions Drummond makes in order to get the number that high:

1. Drummond assumes that government revenue will grow more slowly than the economy. It won’t. Revenue growth normally outstrips growth in the economy.
2. Drummond assumes the average interest rate Ontario pays on its debt will go up. It won’t. Right now, all Ontario debt that comes due is being refinanced at a lower interest rate. The average interest rate on our debt right now is 4.3 per cent, but we are refinancing new debt at 3.5 per cent. With a struggling economy, the U.S. has vowed to keep interest rates low. Interest rates aren’t going up any time soon.
3. Drummond assumes real per capita spending (after inflation is taken into account) will go up by 0.5 per cent a year. It won’t. It could be maintained at the current level.
4. Drummond’s assumptions include a contingency fund that will add $1.9 billion to the deficit in six years.