CANADA

PRIME-TIME PREMIER

BOB RAE FACES IRRECONCILABLE PRESSURES AS HE SEEKS A WAY OUT OF ONTARIO’S FISCAL MESS

PAUL KAIHLA January 27 1992
CANADA

PRIME-TIME PREMIER

BOB RAE FACES IRRECONCILABLE PRESSURES AS HE SEEKS A WAY OUT OF ONTARIO’S FISCAL MESS

PAUL KAIHLA January 27 1992

PRIME-TIME PREMIER

CANADA

BOB RAE FACES IRRECONCILABLE PRESSURES AS HE SEEKS A WAY OUT OF ONTARIO’S FISCAL MESS

Gone was the beaming demeanor of the boyish-looking politician. At a special all-day cabinet meeting last month, Ontario Premier Bob Rae sat grimly as officials from his treasury ministry conducted an exhaustive and exhausting five-hour presentation, illustrated with 84 transparencies of pie charts and graphs, laying bare his government’s empty pockets. Their goal was to convince the 24 New Democrat cabinet ministers assembled around the 30foot-long oak table at the Queen’s Park legislative building to reduce Ontario’s deficit. In the face of tumbling revenues, the assembled New Democrats agreed that would mean some combination of higher taxes and program cuts. But Rae remained anguished by that painful prospect—and its political consequences. Then, an aide suggested: “Why don’t you go on television and explain it to the people?” Replied Rae: “That’s it.”

With that appeal to Ontario’s taxpayers scheduled to air this week, Rae will launch an exercise in public pre-budget consultation of epic proportions. The premier is expected to present several options for making up a budget shortfall that could exceed $14 billion next year—with a clear invitation for the public to indicate its preference among them. At the same time, he is limiting government spending. Maclean ’s has learned that Rae’s government is set to announce the first freeze in payments to Ontario’s municipalities, universities, schools and hospitals since 1945.

Rae’s positions are certain to intensify the vortex of conflicting pressures already at work on the 43-year-old premier, the first New Democrat to manage Canada’s largest provincial economy. The outpouring of advice directed at Rae’s office ranges from the left-wing councils of rank-and-file New Democrats— many of them claiming that there is no danger in running up the deficit—to business leaders who urge the slashing of the public service. Friends of Rae—who is married, with three school-age daughters—say that the demands on his time, attention and favor have taken a harsh personal toll. Declared Leonard Wise, a Toronto lawyer and a close friend of Rae’s since 1966: “He has lost his sense of humor.”

Clearly, the outlook for Ontario’s economy is worrying for the government. Last April, Treasurer Floyd Laughren projected a record deficit of $9.7 billion for the 1991-1992 fiscal year, in a budget designed to stimulate Ontario’s economy out of a year-old recession. At the time, Laughren undertook to reduce that deficit to $8.9 billion for the new fiscal year that begins in April. But that prediction was based on the expectation that the recession would have ended in Ontario in the summer and that the economy would start to recover.

That did not happen. During the last three months of 1991, layoffs and plant and retail closures cost Ontario 38,000 jobs, bringing the total losses to 252,000 since February, 1990. This week, Rae will point out that for the first year in four decades, provincial tax revenues declined during 1991. That continuing trend, combined with increased welfare costs of $1.6 billion, could push next year’s budget shortfall more than $5 billion beyond Laughren’s forecast.

But Rae now plans to reassert his government’s determination to meet Laughren’s original $8.9-billion deficit target—even at the cost of some painful measures. As the premier prepared for his speech, advisers urged him to make it plain that his government has already acted to rein in its spending. To that end, Maclean's has learned that Rae is set to order all of his ministers to freeze their budgets at current levels. As well, the premier will stress the agreement that his administration struck last week with the Ontario Public Service Employees’ Union, giving 68,000 provincial civil servants a pay increase of one per cent this year and two per cent next year. That settlement is down sharply from the 5.8-per-cent increase that the same employees received in 1991, when Rae’s government was the only provincial administration that did not restrain public-sector wages.

In spite of those minimal raises, the union’s members appear likely to accept the settlement in a vote next week. For one thing, the NDP made it plain during negotiations that the alternatives included layoffs for up to 10,000 employees during the next two years. But the proposed settlement contains critical tradeoffs, as well: in exchange for wage restraint, the union won job security provisions and a two-year deferment of a plan to transfer 5,100 government jobs out of Toronto to less prosperous regions. The relocation plan, which the NDP inherited from the Liberals, has been widely resisted by provincial employees. But the job security provisions are more likely to prove decisive. Said one union negotiator, who requested anonymity: “Members have phoned saying, ‘All we want is our job—we don’t care about a wage increase.’ ”

The tentative settlement is important to Rae’s government. For one thing, officials say they hope that it will serve as a model for municipalities, universities and school and hospital boards negotiating new contracts with their employees in the coming months. All of those agencies face sharply reduced income from the provincial government. The scope of that reduction was to be made clear earlier on the day of Rae’s television address, when Laughren planned to announce a one-year freeze on any increase in provincial transfer payments to municipalities and public institutions. In addition, Laughren is expected to announce that payments will rise by only two per cent in each of the next two years. Those rates are down sharply from increases that averaged more than eight per cent a year in the past two years.

The action will provoke a protest from the affected communities and institutions. The Ontario Hospital Association, for one, maintained that its members would need an 8.6-per-cent increase in payments from Queen’s Park simply to maintain current services. With payments frozen, the association insists, Ontario’s 223 hospitals would be forced to lay off more than 13,000 employees and close more than 4,000 beds. Acknowledged one of Rae’s advisers: “We know that hospital and school boards will be hollering, that mayors will be upset and that students associations will be unhappy.”

Rae’s apparent determination to meet his treasurer’s deficit target also leaves the Ontario NDP leader out of step with much of his own party. Several riding association presidents canvassed by Maclean ’s across the province said that the government should allow the deficit to increase rather than cut programs or force hospitals to close beds. Jonathon Robinson, for one, a 35-year-old schoolteacher who is the NDP president for the eastern Ontario riding of Lanark/Renfrew, would accept a provincial deficit as high as $14 billion—rather than see program cuts. “Is it realistic to expect people to starve?” asked Robinson. Added Lois Miller, association president for the economically depressed northern riding of Algoma/ Manitoulin: “The deficit last year was not a big problem. People here see themselves as beneficiaries of the deficit.”

Rae’s hard line on the deficit may widen a gap that has opened between the premier and his grassroots supporters recently over other issues. One is the so-called environmental bill of rights that the new NDP government planned to enact quickly after coming to office in the fall of 1990. It was a centrepiece of NDP campaign promises. But the policy remains stranded in the provincial bureaucracy—and party activists are growing impatient. Among the problems:

Environment Minister Ruth Grier remains distracted by a number of disputes over new landfill sites for municipal waste. Said Leeds/Grenville NDP riding president William Geiling: “She has essentially become the minister of garbage.”

As well, party stalwarts have criticized Rae severely for shelving plans last fall to introduce public auto insurance. Said Robert Wood, NDP association president for the southern Ontario riding of Burlington South: “We are a lot less concerned with the performance of the government on economic issues than on auto insurance and the environment—where we don't think they have gone far enough.”

But it is not only the party left that is pressing Rae. At the other extreme, conservative critics have attacked him for allowing Ontario’s deficit to rise as far as it has. In a column published on Jan. 10, Financial Post editor Diane Francis called on Rae to resign, dismissing the premier’s plans to go on the air as “a cynical attempt to appear consultative when in actual fact he knows that he intends to slavishly follow a socialist, union-leader agenda.” Paul Nykanen, Ontario vice-president of the Canadian Manufacturers Association, which represents 1,500 Ontario businesses, said that Rae must slash spending and reduce the size of the province’s 90,000-member bureaucracy. Declared Nykanen: “The bottom line is that the province is broke. You can’t spend yourself rich.”

But the voices that Rae will likely listen to most closely belong to the few friends and intimates who have quietly worked with him from the beginning of his 15-month-old government. Among them: Julie Davis, secretary treasurer of the Ontario Federation of Labour and co-leader of Rae’s successful 1990 campaign; former Ontario NDP leader Stephen Lewis, whose sister, Janet Solberg, works as an adviser in the premier’s office; Jeff Rose, Ontario’s deputy minister for intergovernmental affairs and a close friend of Rae’s for more than 25 years; and the premier’s policy adviser, Ross McClellan, a former New Democrat MPP. Other influential advisers include the premier’s brother, John Rae, a vice-president of Montreal-based Power Corp. who is also a confidant of federal Liberal Leader Jean Chrétien, and David Agnew, the premier’s principal secretary and an aide since 1981.

But there is disagreement even within that inner circle. For his part, Lewis has advocated avoiding both tax increases and program cuts by letting the deficit rise above $10 billion. Other advisers, like McClellan and Agnew, have urged Rae to follow the advice of treasury economists and cut the deficit.

In the end, the choices will clearly weigh heavily. Said Wise, a close friend of Rae’s since they met as students at the University of Toronto: “The guy is so preoccupied that I don’t know where he is. The deficit so overwhelms him, and he’s got so many things on his mind, he doesn’t listen anymore in a conversation. He nods in the wrong places, and he keeps looking at his watch for some reason.”

According to Wise, the demands of power have strained Rae’s relationship with other friends, as well. When Rae was opposition leader between 1985 and 1990, Wise would frequently drop in unannounced to have lunch with his friend at Queen’s Park. Now, notes Wise with evident regret, “he’s got about 50 secretaries whose job is to stop people from seeing him.” When Wise does see Rae at his office—usually for less than 10 minutes—the premier abruptly cuts off the visit at the scheduled time. Rae’s 24hour police bodyguard is an additional obstacle to relaxed companionship. On one occasion at Queen’s Park, Wise recalls, Rae asked the guard if he would mind waiting outside while he and Wise visited the men’s room. The guard insisted on escorting the two men inside. Said Wise: “The cop had to watch us while we peed.”

The premier is clearly not alone in feeling the political pressures on his government. To many veteran observers of Queen’s Park, the tension among even junior government staff members has become palpable. Quipped a bemused Wise: “When I walk into Queen’s Park, all I see is people looking around corners, people wondering who is talking to who and people scared of being seen with certain people.”

Even without the intrusions of high office on Rae’s personal life, Ontario’s top politician is clearly in an unenviable position. No matter what economic course he sets in the government’s spring budget—which will be presented a few weeks after the legislature returns on March 9—he will leave powerful interests unsatisfied. Said Judy Jones, NDP association president for the Toronto riding of Etobicoke West: “I’m glad I’m not Bob Rae.”

PAUL KAIHLA with BRIAN BERGMAN and PEETER KOPVILLEM in Toronto

PAUL KAIHLA

BRIAN BERGMAN

PEETER KOPVILLEM