Balancing needs with revenues in the Ontario budget equation

| March 26, 2012
Photo: Kitty Canuck

On March 27, residents of Ontario will get a clear picture of the implications of choosing to eliminate the public debt by 2017-18 within the current public revenue framework.

The key question to be considered: how much are we willing to lose in order to eliminate the deficit without increasing government revenue?

Based on Ontario public accounts, over the last five years (fiscal year 2006 to fiscal year 2010), health-care spending in Ontario increased at an average nominal rate of 7.1 per cent per year.

If health-care spending were to grow at this rate in the following five years, we would see a total increase of $18.3 billion. Breaking this down, $9.1 billion would be needed merely to cover inflation and growth in Ontario's population. This would leave $9.2 billion over five years, which could pay for:

- The building of 24,000 long-term care beds -- enough for all the Ontario elders waiting for long-term care, plus

- Post-natal hospital and community care for 17.2 million mothers and their infants, plus

- 4,000 new personal support workers at a living wage, plus

- Pay equity for front-line registered nurses in Ontario -- bringing them in line with workers in male-dominated professions with the same amount of education and experience, plus

- 13,729 new registered nurses -- enough to bring Ontario up to the level of the rest of Canada in terms of RN-to-population ratios, plus

- One year of long-term care for 35,197 elders in Ontario, plus

- Four years of home care for the 10,000 elders or/and people with disabilities currently on the home care wait lists.

Not only does this list of estimates account for a variety of pressing health-care needs in Ontario, it is an example of democracy in action. That is, making public spending decisions based on need.

How to generate the revenue to cover needs?

A host of taxes could be considered. If Ontario's corporate capital tax were reinstated on financial institutions alone, it would generate $2.5 billion over five years. If individuals earning $500,000 or more annually were taxed at 13 per cent -- making up for just some of the Harris tax cuts on the wealthy -- the public purse would have $2.5 billion more over five years. Returning to an Ontario corporate tax rate of 14 per cent would add $12 billion over five years. And the creation of new, financial activities tax at 5 per cent on financial sector profits and compensation in Ontario would bring an additional $10 billion to the public purse.

Such revenue would cover not only health-care needs but the dire need for social services and poverty reduction measures -- while continuing to gradually pay off the debt.

Rather than an approach that balances needs with revenues, the going wisdom, as per Don Drummond's recommendation, is that health-care spending should be limited to 2.5 per cent growth per year until 2017-18. At 2.5 per cent, we can't even cover the basics -- inflation and population growth.

As always in questions of budgeting, the equation is determined by political choices, not mathematical imperatives.

Are residents of Ontario willing to accept the deep losses that come with an unbalanced approach?

Salimah Valiani is Associate Researcher with the Centre for the Study of Education and Work at the University of Toronto. She is the author of Rethinking Unequal Exchange: The Global Integration of Nursing Labour Markets, released this month by the University of Toronto Press.

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