Canada: An Eye On The Taxpayer, Part VI: Public Purse Challenges Persist

Last Updated: March 10 2016
Article by André R. Nowakowski

The challenge of public finance and fiscal restraint continues to persist across Canada.  Depending on who you ask, some governments are exhibiting more restraint than others.  Regardless of who you ask, the challenges are real and present, including on the labour front. 

Recently, British Columbia tabled a balanced budget.  This was noteworthy in an uneven economy.  By contrast, the Alberta Government is warning of a $10 billion budget deficit – more to come on this and the impact when the budget is tabled in the spring.  Ontario recently tabled its budget which included the news that the 2015-16 deficit was $5.7 billion (almost $3 billion lower than projected).  The Ontario Government is projecting a balanced budget somewhere between 2017 and 2019, or thereabouts.  At the federal level, we are being prepared for an $18 billion deficit for next year.

As covered in earlier parts of this series, various governments have attempted to control spending, in part, by trying to control broader public sector compensation.  This is easier said than done, particularly when dealing with the unionized portion of the broader public sector.  There are some recent examples in Ontario that illustrate the challenge.

For several years there has been tension between the teachers' unions in Ontario and the provincial government's attempts to restrain compensation.  The strategy of the government has been to strive for a "net zero increase" in collective bargaining.  In short, any compensation increases have to be offset by corresponding decreases in other compensation for those employees.  (There have also been other issues that were not strictly monetary that added to the discord.)  So, after not achieving a collective agreement, what did the various teachers' unions do?  Go on strike?  No.  We can only make assumptions about why, but part of the answer must lie in the unions assessing that a strike would not win support in the public.  Instead, the unions conducted "work to rule" campaigns.  As an example, this meant at the elementary level that teachers did not provide comments on year-end report cards for the 2014-15 school year.  For its part, the Ontario Government chose not to lock the teachers out and exert pressure on the unions to get a deal done.  We can only make assumptions about why there was no lock out, but part of the answer must lie in the Government assessing that a lock out would not win support in the public.  And this illustrates the challenge in collective bargaining in the public sector at this time – neither party is willing to use its considerable leverage of a strike or lockout to force the issue.  This means, in the teachers example, things dragged on over the summer and into the new school year and fall.  There were new work to rule actions such as not conducting extracurricular activities on specified days of the week.  Ultimately the Government reached collective agreements with the unions that apparently achieved net zero increases, but it was a lengthy process with  many ruffled feathers along with the way with all stakeholders.  (I will leave aside for now the controversy that erupted when the news was made public that the Government had made significant payments to some of the unions over the last rounds of bargaining for the "costs" of collective bargaining.)

More recently, the City of Toronto has been engaged in some difficult bargaining with the unions representing "outside" and "inside" workers.  For the outside workers, a last-minute deal was recently reached with an extended strike deadline.  The collective agreement was recently ratified and reports peg the salary increase at 5% over 4 years. 

Interestingly, in the lead up to the legal strike/lockout deadline for the city, citizens were told what services would and would not be delivered by the City during a strike.  This of course begs the question – did the City have a contingency plan in place to bring in replacement workers to continue delivering those services?  If not, why not?  Having a contingency plan in place to keep services being delivered would seem to have two benefits:  1.  it keeps the taxpayers happy; and 2.  it increases the City's leverage to achieve the best possible collective agreement – any pressure on the City to "give" on key issues would be significantly reduced compared to a situation involving the cessation of certain services during a strike which would leave, at a minimum, the affected taxpayers/voters unhappy.

Negotiations were more prolonged with the insider workers at the City with a strike (and lockout) deadline long passed without a collective agreement.  Was there a labour disruption?  You guessed it – no.  The union did not go out on strike and the City did not lock the employees out.  The union, like the teachers' unions, engaged in a work to rule campaign involving the non-performance of certain duties outside the job description of the workers (which is a different topic on its own).  So, we entered a phase in Toronto of a slow, labour dispute that went past a legal strike/lockout deadline. This past Sunday, the City made public its "final offer" to the union which included a 5% base salary increase over 4 years.  After a couple quiet days, the union provided its response to the City's "final offer".  The parties have now reached a tentative collective agreement, subject to ratification by the union membership and approval by City Council.  When the terms are made public, it will be interesting to see whether the City's "final offer" last Sunday was truly "final" or if it improved in these last few days (which is a different topic on its own as well).  The Mayor had stated that the agreement had to be fundamentally the same as the one accepted by the outside workers.

It is difficult to tell any more what "business as usual" is, but it is clear that the business of governments trying to control broader public sector compensation as part of broader fiscal restraint measures continues to be a challenge.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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André R. Nowakowski
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