AG casts doubt on government's plan to slash spending

TORONTO - A plan by Ontario's Liberal government to slash the increase in annual spending by almost 400 per cent is too optimistic and could lead to service cuts, Auditor General Jim McCarter warned Tuesday.

The Liberals increased spending by 7.2 per cent a year since they were elected in 2003, but in the March budget vowed to cut the growth in spending to 1.8 per cent annually to help trim the $16.7-billion deficit.

Ontario voters, who head to the polls Oct. 6, should view the Liberal plan with "a moderately big grain of salt," said McCarter. "Basically take that into consideration when you look at the pre-election report."

The Liberals' revenue projections were fine, he said, but their plan to keep the growth in spending below the rate of inflation for the next three years is "aggressive" rather than prudent.

"You've really got to have a pretty hard look at the assumptions underlying those expenses, and you may be forced to make some hard decisions from a service delivery point of view," said McCarter. "The assumptions underlying those expense projections, rather than being cautious and prudent, were optimistic, they were aggressive, and in a lot of cases really reflected a best-case scenario."

The government and its funding partners, from children's aid societies to hospitals, will be "challenged" to maintain current levels of service if the spending cuts don't pan out, he cautioned.

"It depends on whether they're willing to let service providers make reductions in the level of service being provided, especially if they're saying they won't make any service reductions whatsoever, it's going to be even more challenging to be able to do it," said McCarter.

Finance Minister Dwight Duncan was quick to respond to the criticisms.

"I've said right from the beginning that our expenditure assumptions are aggressive, he uses the term optimistic," said Duncan. "There are enormously difficult choices ahead. This will give Ontarians greater insight and clarity as to the challenges coming at us."

Duncan said the Progressive Conservatives and New Democrats had based their campaign platforms on his expenditure plans, so voters should carefully consider which party is more likely to defend health care and education.

The Tories said the auditor's report was proof the Liberals will be forced to raise taxes again if they win the Oct. 6 election.

"The auditor general indicted Dalton McGuinty today," said PC critic Lisa MacLeod. "Let's be very clear: the auditor general today said that Ontario does not have a revenue problem, it has a spending problem, and our plan is fully outlined."

The New Democrats said they are committed to balancing the budget and the auditor's report will help them chart the path.

"The auditor's findings are exactly why we've waited to release a plan on achieving a balanced budget," said NDP critic Gilles Bisson.

McCarter questioned the Liberals' assumptions on how much the government will have to spend on public sector salaries, noting that many arbitrators have ignored the Liberals' call for a two-year wage freeze for about one million public sector workers.

The auditor also doubted the government's ability to cut the increase in health-care spending in half to about 3.6 per cent annually. If the province doesn't give hospitals the money to pay for higher wage settlements, and hospitals aren't allowed to run deficits, they'll be forced to make some hard choices, warned McCarter.

"The hospitals are going to be in a difficult situation," he said. "Do they raise the money through their foundations or are they in a situation where they may have to cut services?"

Expecting to find billions of dollars in health savings with a growing and aging population may prove too optimistic, cautioned McCarter.

Health care eats up 42 per cent of all program spending by the province, and the government hopes to find efficiencies by getting people out of hospitals and into community-based services or home care, but those services are hard to find, he said.

"With respect to health care services in the community, the growth rate had actually decreased by two-thirds," he said.

The auditor general's pre-election report on the province's financial plan was a requirement set up by the Liberals after they won the 2003 election and found the previous Progressive Conservative government had hidden a deficit of $5.6 billion.