The governing Liberals are phasing out a "pooling" compensation arrangement by 2016 that was created to share the cost of Toronto's social programs, which is relatively high compared to other municipalities.
The news sent Ford into a verbal rampage, saying he's furious that the city is now facing a $150 million cut that will force it to make cuts to social housing.
But Toronto will actually get more money in the end, since the province is uploading costs like welfare, Wynne said Tuesday.
"I'm sorry that the relationship has deteriorated at this point, but I believe because we are treating the city fairly and because we're working with municipalities across the province, we'll get that back," she said.
"We'll continue to talk with the mayor's office and with other city councillors and as I say, the city of Toronto is better off."
Ford said the Liberals told him to hike taxes. But he's refusing to go beyond his self-imposed limit of 1.75 per cent and won't reconsider plans to cut the land transfer tax by 10 per cent.
"I'm getting punished for running an efficient government," Ford said Monday following an hour-long meeting with Finance Minister Charles Sousa.
"That's exactly what's happening here. ... It's disgusting. It's absolutely disgusting."
But Wynne said she's not asking Ford to raise taxes if the city needs more money.
"I'm not," she said. "I'm saying the city of Toronto, I believe, as the largest city in the province and a very complex city and part of region that is so critical to the province, that the City of Toronto Act is appropriate, and it's not just the powers around taxation and revenue tools."
The dispute has only amplified tensions between Ford and Wynne, who sparred recently over proposed new levies to pay for public transit in the Greater Toronto and Hamilton Area.
Personal conflicts have "nothing to do with this particular discussion," Wynne insisted. But she said it's in everyone's best interest to avoid "negativity" in politics.
"We'll get through this," she said. "We'll continue to work with the mayor's office and with council."
The pooling arrangement was established in 1998, when the former Conservative government downloaded social program costs on municipalities.
The pooling burden was shared across the Greater Toronto Area, which local governments complained was unfair. The Liberals say they've now taken over the entire cost.
But they argue the money is no longer needed because they're gradually taking over the social program costs that were dumped on municipalities. It will also level the playing field among municipalities, they say.
The province is trying to control costs to eliminate a $11.7-billion deficit, Sousa said.
Toronto will get $364 million this year to pay for social programs, growing to $500 million by 2016, Sousa said. The province is also waiving a $200-million loan after the city missed 16 payments and appeared to have had no plan to repay.
Ford said Monday he was blindsided by the pooling cut and Sousa refused to give him a few days to figure out what to do.
But the Liberals said they tried twice to contact the mayor's chief of staff before sending a letter June 13 saying they would phase out the arrangement by 2016. But there was no response, they said.
The city was given a timeline by the province in 2008 showing the special funding continuing until 2018, but Sousa said that was a "what if" scenario and no provincial money was committed beyond 2016.
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