Don Drummond has done his first draft. And the results will create a firestorm.Most Ontario ministries face deep budget cuts, some as high as 30 per cent over the next few years, according to the influential economist conducting a sweeping review of government operations.
Without the massive savings he is recommending, Queen’s Park can’t possibly meet its balanced budget target for 2017-18, Drummond warns.
“The numbers don’t add up,” he says. Health and education will be spared — somewhat — but “everything else will have to decline.”
His long-awaited report on public services goes to the printers and lands on the premier’s desk before month’s end. Within weeks it will be released to the public, at the very time that bond rating agencies have placed Ontario’s vaunted credit rating on a negative outlook and the province faces protracted negotiations with doctors and major public sector unions.
Nothing and no one will be spared, the former federal bureaucrat and retired bank economist says. Despite the temptation to go easy in certain areas and avoid political controversy, his commission has pulled no punches in its attempt to transform the way Ontario operates — and spends.
“There are going to be a ton of things in our recommendations that the government is not going to be pleased with,” he muses.
And the public should also brace for bitter medicine: “There will be lots of negative reaction, lots of anger.”
But Drummond argues that his is an unavoidable exercise to transform a $124 billion government operation that is facing a fiscal wall.
Most of his attention is focused on big ticket items — ranging from how government services are delivered to the way universities educate students (and pay teachers).
He recommends that everything from employment counselling to training and social services be radically overhauled, with many programs spun out to private contractors. Unions would be invited to bid (along with everyone else) for their old jobs — not at the lowest price, but with minimum government standards and value for money in mind.
The corporate sector is also targeted to take a hit: A massive $2 billion in tax breaks and handouts (known to budget crunchers as “tax expenditures”) face fresh scrutiny as Ontario’s dwindling revenue base makes them unaffordable. Drummond has printouts of scores of economic development programs (spread across at least a half-dozen ministries) that have traditionally been overlooked because they were created to buffer declining industries.
And health care faces radical surgery to bend the cost curves even harder — down to less than half of what hospitals have counted on for annual increases. That means yearly increments must be scaled back — not just down to 3 per cent as the government had planned, but pushed even further to 2.5 per cent, or less than half of the annual rises until now (about $1.2 billion less than hospitals had been counting on).
With health spending taking up about 42 per cent of Ontario’s budget, Drummond has spent about half his time on the sector, which he believes cries out for overhaul. Despite his ambitious goals, he is confident they can be achieved because of an unprecedented consensus among doctors, pharmacists, nurses and hospitals that the old ways of doing things no longer makes sense: “I think the stars are more closely aligned than they’ve ever been before.”
He is staggered by the statistic that a mere 1 per cent of the population accounts for fully half of all hospital spending, or about one-third of total health expenditures. “That just flabbergasted me,” Drummond says, arguing that even a 10 per cent gain in efficiency — through better integration and expansion of community and chronic care or mental health services — could save $1.5 billion a year, without even affecting the other 99 per cent of the population. “There are very tangible things you can do that would save a lot of money.”
Universities and colleges also face new cost pressures — and performance obligations — to reduce waste if they want to continue receiving government funding. The blank cheques of the past should be phased out because rapidly rising post-secondary costs are a major budget hotspot that is ripe for reform.
“This is the only area where government cuts the cheque and says, over to you,” allowing professors to spend only 40 per cent of their time teaching (and the other 60 per cent on research and community work, whether or not they are any good at it). His ambition is to enforce new “mandates” while limiting postsecondary increases to 1.5 per cent, with elementary and high schools scaled back to 0.5 per cent increments.
The bookish but high-profile economist also revealed that he hopes to conduct public hearings over his controversial report next month, with politicians from all three parties invited to participate in a finance department “working group” as he travels across the province. That would allow opposition and Liberal MPPs to sidestep a bitter procedural disagreement that has prevented committees from operating since voters elected a minority government late last year, though it’s unclear whether the Tories and New Democrats would go along.
Drummond fully expects the fallout from his report to trigger a strong public debate about alternatives to budget cuts — namely that raising taxes is a better way of digging Ontario out of debt. Although tax increases are specifically excluded from his mandate, Drummond welcomes the challenge.
“We should be having that debate,” he says flatly.
But reflexively raising taxes will only reduce the pressure to eliminate waste, Drummond counters. It makes more sense to “keep the screws on that process,” forging a consensus to find savings and only considering tax hikes as a last resort — after Ontario gets its house in order.
In any case, it would have been pointless for him to tackle tax increases because they are so easy to recommend. It is the politics — not the economics — of taxation that requires careful consideration.
While his goal is avowedly transformational — targeted restructuring rather than across-the-board cuts — he concedes that changing direction will take time to plan and carry out. Savings are needed immediately. So in the short term, government must meet its budget targets by harvesting the low-hanging fruit.
The government has given itself five more years to balance the budget, so there is still time to identify savings in a two-step process of restraint and reformation, he insists.
“I think you can do both.”
Original Article
Source: Star
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