Commentary on the Eves mock budget

Eves Promised Vox Populi; Delivered Magna Vox
March 1, 2003

There's only one real message in Ernie Eves' faux budget, released to an intimate group of friends in Brampton today. These guys only know how to do one thing -- cut taxes.

They cut taxes when they're running a deficit. They cut taxes when they're not running a deficit. They cut taxes when the economy is strong. They cut taxes when the economy is weak. And they cut taxes, regardless of the state of the public services that it is their responsibility to deliver.

Demonstrating clearly that there never was a new Ernie Eves, the Government has reverted right back to the form that led the Harris Government to bring critical areas of public services to their knees.

Tax cuts rule

Tax cuts are front-and-centre -- cuts with a full-year cost of over $1 billion. But that amount doesn't begin to describe the extent of the commitment to tax cuts in this budget. The tax cut projections don't include the ultimate costs of reductions promised in this budget, but not fully implemented yet.

It doesn't count the corporate income tax cuts that have been put back on line, effective January 1, 2004. That schedule will result in a reduction in corporate tax revenue of $2.6 billion by the time it is fully phased in.

It doesn't count the cost of the continued phase-in of the tax credit for private school tuition, total cost in 2003, $200 million; cost when fully phased-in, $500 million.

And it doesn't count the cost of eliminating Ontario's personal income surtaxes -- what used to be called the Fair Share Health Levy. When the surtaxes have been eliminated completely, they will cost Ontario $3.1 billion -- 94% of which will go to the 5% of taxpayers with incomes over $100,000 a year.

Spending commitments don't stand up to a close look

On the expenditure side, the Government makes a lot of noise about new investments in health care; elementary and secondary education; and colleges and universities.

Announced multi-year funding for hospitals provides increases of $500 million, or 5%, for 2003-4 and $300 million, or 3% for 2004-5. These increases, however, address only inflationary cost increases since 2002-3, and do nothing to address the financial crisis that hospitals are in today -- with total operating debts in excess of $1 billion.

What the government didn't say is that it took $967 million of the new Federal money announced in February, 2002 in advance and used it to offset the revenue loss from the fact that they didn't sell Hydro One. The result of all of those publicly funded ads attacking the Federal Government for underfunding health is a contribution of nearly $1 billion to the cover-up of the Eves Government's Hydro One mess.

In post-secondary education, operating grants are projected to increase by $200 million in 2003-4; another $200 million in 2004-5 and $100 million in 2005-6.

This increased funding, however, falls far short of what is needed to enable these institutions to meet the challenges of the double-cohort and avoid further cuts to other programs. Based on current projections for increased enrolment in 2003-4 and beyond, $200 million in additional funding will not even accommodate the increased enrolment, leaving nothing to deal with the impact of increased costs.

In elementary and secondary education, the Government claims to be implementing Rozanski. In fact, it is doing the opposite. The projected funding for school boards over the next three years will deliver roughly 55% of what Rozanski recommended. And by 2005-6, when Rozanski will supposedly have been fully phased-in, the school system will be more than $1.6 billion behind what Rozanski recommended. That compares with the catch-up funding that Rozanski recommended of $1.4 billion (a total of $2.1 billion, $700 million of which was new investments).

Elementary and secondary education funding will be $200 million further behind it was when Rozanski was appointed, using Rozanski's logic and method.

Public services funding crises get nothing

Even more important than what is underfunded in this budget is what is not funded at all.

There is nothing in the budget for child care. The only mention of the early years was a restatement previous program commitments, commitments which have been condemned as both inadequate and ill-conceived.

There is nothing in the budget for housing. Nothing.

There is nothing in the budget for the least fortunate families in Ontario -- those on social assistance. Social assistance benefits will remain 21.6% below their level in 1994; their real value will deteriorate further over the year covered by the budget.

There is nothing in the budget to address the critical funding needs of Ontario's major urban areas. Cash-starved older urban areas like Toronto, Hamilton, Windsor, Sudbury and Ottawa get nothing. Indeed, the only specific mention of Toronto's financial needs in the budget was funding for helicopter for the Toronto Police Service.

Tax cuts -- upside down equity at work

Focusing in on tax cuts, on the surface, it looks as if the big ticket item is a property tax grant to seniors equal to the full amount of their education property tax, at a full-year cost of $450 million. While this ought to generate some controversy itself -- it is directly related to the value of the property you own and is therefore worth more, the more valuable your property is. And it is clearly tightly targeted to upper-income seniors. It replaces the property tax credit for seniors in the income tax -- a measure that is targeted to low-income seniors.

The property tax relief for seniors also serves a useful purpose as a smokescreen for other, larger and less politically attractive measures.

Corporate tax rate cuts reannounced in this budget will cost Ontario an additional $2.6 billion a year by the time the phase-in period is complete. That cost isn't accounted for in any budget documents.

The elimination of the capital tax on corporations in this budget will eventually cost Ontario $1.1 billion, when the phase-out period is complete. In this year's budget, they show a cost of only $3 million.

The phase-out of the surtaxes on higher-income taxpayers will cost more than $3.1 billion in 2003-4 dollars, 94% of which will go to the 5% of taxpayers who report incomes above $100,000. Only $105 million of that cost is accounted for in budget documents.

The government's renewed commitment to the tax credit for private school education will add a total of $240 million to the cost of the first step of $60 million, for a total cost of $300 million.

In what is otherwise a dismal budget document, however, there is some humour, albeit unconscious.

On page 4 of the budget speech, the Minister of Finance proudly declares that it has eliminated corporate welfare. And at the same time, she is taking credit for billions of dollars in tax give-aways for corporations and confirming another $3 billion in corporate tax rate cuts and another $1.2 billion in new corporate tax cuts.

The Government talks proudly about its fifth consecutive balanced budget. But on its own numbers, last year's budget was only balanced by taking $1 billion in Federal health money and using it to shore up a budget pushed into deficit by the failed sale of Hydro One. And this year's budget is only balanced by selling off another $2.2 billion in public assets.

But there's a broader set of questions that need to be asked.

How can a budget be called balanced, when it sets up the elementary and secondary education system to drift further into crisis?

How can a budget be called balanced, when it does absolutely nothing for housing?

How can a budget be called balanced, when it drives Ontario's least advantaged citizens deeper into poverty by refusing to increase social assistance rates that are 21.6% below where they were in 1994?

How can a budget be called balanced when in the face of an unprecedented financial crisis in our largest urban areas, the only new measure announced is the purchase of a new helicopter for the Toronto police?

How can a budget be called balanced, when it foretells billions of dollars in tax relief for corporations and the highest-income of Ontarians and does nothing at all for the least advantaged of our society. And how can you call a budget balanced that takes money intended for health, and uses it to generate a phony budget surplus.

When Ernie Eves took the budget out of the legislature, he promised us "vox populi". What we clearly got was Magna vox.

Commentary on the Eves mock budget