NEWS
02/15/2012 02:34 EST | Updated 02/15/2012 04:25 EST

Drummond Report: Ontario Will Need Severe Cutbacks To Avoid Greece's Fate, Report Warns

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TORONTO - Bigger class sizes, higher electricity and water bills and new parking fees at public transit stations are among the bitter pills deficit-ridden Ontario must swallow to avoid the same fate as debt-plagued Greece, economist Don Drummond warned Wednesday.

Unless all 362 of his recommendations are implemented, Canada's most populous province will wind up doubling its deficit by 2017-18 and increasing its debt to a staggering $411.4 billion — a little more than half its gross domestic product, he predicted in his long-awaited austerity blueprint for Ontario.

"Ontario's finances do not yet constitute a crisis, and with early strong action a crisis can be averted," the report states.

"The lessons of history and of what is happening elsewhere today are clear: the government must take daring fiscal action early, before today's challenges are transformed into tomorrow's crisis."

Even if the governing Liberals stick to their current plan to slay the deficit by 2017-18, the province will still end up with a $30 billion shortfall, according to Drummond's calculations.

The province's debt is still "relatively small" by international standards and its spending "is neither out of control nor wildly excessive," the report states. But "unprecedented" action must be taken over the next six years before Ontario drowns in red ink.

"Our message will strike many as profoundly gloomy," the report states. "It is one that Ontarians have not heard, certainly not in the recent election campaign, but one this commission believes it must deliver."

Ontario needs to cap annual growth in program spending at just 0.8 per cent, which would slash real program spending by 16.2 per cent for every man, woman and child, the report advises.

Annual spending growth in health care must be capped at 2.5 per cent, education at one per cent, post-secondary education at 1.5 per cent and social programs at 0.5 per cent. Spending in all other programs will have to be cut by 2.4 per cent.

The government will have to rethink everything it does to wring as much as it can out of every dollar spent, the report advises.

About a third of the former TD Bank chief economist's recommendations were directed at health care, which will need to become more efficient in order to maintain services without the generous budget increases of past years.

Ontario should band together with the other provinces and federal government to buy drugs, tie public drug plan benefits to income, allow nurses, physician assistants and pharmacists to provide more services where possible, and divert patients who don't require acute care out of hospitals and into less expensive care and accelerate the adoption of electronic records.

It should follow Nova Scotia and require emergency medical technicians to provide home care when not on emergency calls, have doctors talk to their middle-age patients about end-of-life care such as living wills, give its regional health networks much more power to oversee care in each region and resist the temptation to build more long-term care homes and focus instead on home care.

Household bills could also take a hit, with Drummond recommending that the province scrap a 10-per-cent rebate on electricity bills, charge more to recover the full cost of water and wastewater services and commuters pay for parking at GO Transit stations in the Greater Toronto Area.

Ontario should increase class sizes, reduce per-pupil funding for textbooks and supplies and charge high-school students if they want to do a "victory lap" to improve their grades after completing the required 32 credits.

It should also scrap its new 30-per-cent tuition rebate for college and university students, keep annual tuition increases of five per cent, tie funding to "quality objectives," and have post-secondary institutions examine whether they can compress some four-year degrees into three with summer school.

It should also close one of two Niagara casinos, have the Liquor Control Board of Ontario do more with its buying power, sunset direct subsidies for business and lower the high prices offered through the province's feed-in-tariff programs for solar and wind projects.

Workers in the broader public sector will also have to do their part to reduce the deficit, Drummond said.

Ontario should force teachers to retire later and pay more for their benefits. It should also try to reduce pension contributions, since it matches what the teachers pay in.

Government workers and doctors should have their wages frozen, and doctors shifted to a pay model where fees for service account for only 30 per cent of their compensation.

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