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The Drummond Report nails it when it comes to explaining Ontario’s current plight

Written by: James Murray on February 22, 2012.

Dalton McGuintyTHUNDER BAY – The Drummond Report nails it when it comes to explaining Ontario’s current plight: “How did we get to this point? For most of the past decade, Ontario’s economic growth has lagged that of the rest of Canada, as changing economic conditions hit Ontario harder than other provinces. A strong dollar made Ontario’s exports more expensive for foreigners to buy while making imports cheaper; as a result, foreign trade, once a net contributor to GDP growth, is now a net drag. In the recent recession, Ontario lost 5.0 per cent of its GDP from peak to trough, while the rest of the country lost only 3.7 per cent. The human cost of this lacklustre performance is apparent in jobs and incomes: Ontario’s unemployment rate has been above the national rate for over five years now; average personal income in Ontario, more than 20 per cent higher than the average in the rest of Canada in the second half of the 1980s, was 0.5 per cent lower than this average in the third quarter of 2011″.

The report states, “Ontario faces more severe economic and fiscal challenges than most Ontarians realize. We can no longer assume a resumption of Ontario’s traditional strong economic growth and the continued prosperity on which the province has built its public services. Nor can we count on steady, dependable revenue growth to finance government programs. Unless policy-makers act swiftly and boldly to prevent such an outcome, Ontario faces a series of deficits that would undermine the province’s economic and social future”.

Tim HudakThe executive summary continues, “Our message will strike many as profoundly gloomy. It is one that Ontarians have not heard, certainly not in the recent election campaign, but one this Commission believes it must deliver. If Ontarians and their government are going to come to grips with the fiscal challenges that lie ahead, they must understand the depth of the problem and its causes. Ontario must act soon to put its finances on a sustainable path and must be prepared for tough action — not just for a few years, but at least until 2018. We believe Ontarians can make — and implement — the kind of thoughtful decisions needed to resolve the province’s fiscal dilemma while protecting, to the greatest degree possible, the public programs on which Ontarians rely, many of which are a source of justifiable pride”.

The strong words in this report appear to be ones that could be setting Ontario on a course for the next election. The sunshine and roses scenarios that some still seem willing to accept in Queen’s Park, and in Northwestern Ontario are now likely more a pipe dream than they are affordable, both financially and politically.

Ontario has to start taking stock of what works, and what doesn’t work and start preparing for some serious cuts in government spending.

Andrea HorwathThe cuts that the McGuinty Liberals have decried for their entire time in office made by the previous Mike Harris government are likely to pale beside what the Drummond Report is saying that Ontario must do in order not to hit the wall politically.

With the minority government in Queen’s Park, politics is likely to play a greater role in decision making than making hard choices.

The report adds, “High-debt governments are always vulnerable to the whims and demands of the financial markets from which they have borrowed; governments in this position can be forced to take draconian measures to keep their lenders happy (Greece and Italy are recent vivid examples). Low-debt governments have much more flexibility to set their own priorities — ones that meet the needs of their citizens and the good of their jurisdictions as a whole”.

In Ontario there appears a continual swinging of the political pendulum over the past twenty years. There was massive spending under the Rae Government which led to the “Common Sense Revolution” of Mike Harris taking over to attempt to achieve balance. Those cuts were not popular, and the McGuinty Goverment headed down a trail of spending more than we could afford.

Ontario’s current crisis may not be as serious as that of Greece, but it is going to likely lead to a government which will be forced into major spending cuts as outlined in the Drummond Report.

Voters are likely going to be asked to make those hard choices, and based on the reaction from the McGuinty Government, it is quite possible an election could come as a result of the coming budget. A spring election might not be what politicians say the voters want, but it could well be what Ontario needs.

Likely to implement the needed spending cuts from the Drummond Report, a majority government will be needed.

James Murray
Chief Content Officer

  • Bekeen

    Don Drummond is a Genius!

    Sometimes you just can’t see the forest for the trees! Mr Drummond is a genius, not because he has given us the solutions to the province’s deficit problem but because he identified the areas that need to be addressed.  It’s up to us to cultivate the ground-work he has done and plant the solution seeds!

    One of the problem areas Mr Drummond identified for us involves the revenue sharing agreements with the horse racing industry. Millions and millions of dollars have been paid to the race track operators and the Ontario race horse breeders over the past 10 or so years under the OLG Slots at Racetrack agreements.  The 2010 payments totaled $334 million alone. Half of that goes to the track owners and operators and half goes to the horse people.

    The horse people use those funds to improve the breeding stock in the province and support race purses to attract quality breeders to the tracks.  This side of the current formula supports 55,000 jobs (according to the HLT Report on Horse Racing) in Ontario and generates tons of tax revenues and spending for and in the province.  It would be like shooting yourself in the foot to tamper with this part of the arrangement so leave it alone. The industry derives its income from three sources: wagering on horse races, the sale of Ontario-bred racehorses and slot revenue. The Ontario Horse Racing Industry Association (OHRIA) manages the use of the slot revenues.

    The second part of the formula involves payments to the track owners and operators.  These payments to the 17 Slot at Track partners totaled $169 million in 2010 and many millions in previous years. The agreements anticipated that improvements would be made to racetrack infrastructures, they did not specifically require improvements to be made and benchmarks and controls were not put in place by OLG to ensure that this would happen. Most track operators did initially make improvement to their racing facilities to accommodate the slots, some more than others. With some exceptions, much of these millions of dollars paid to the track operators simply evaporated and most certainly have not been used to improve the facilities.

    Maybe Don Drummond saw this loop-hole in the Slots at Track program or maybe not but this is where a change and a new solution should be found; a solution that will NOT affect the revenue to the horse owners.

    Here is my solution to the later problem!  Transfer the ownership of the racetracks to OLG so that 50% of this subsidy or whatever you want to call it goes back to the government to help pay down the province’s staggering deficit. There is more!  Close some of the 17 racetracks and build Super-tracks with full service casinos at geographically disbursed locations, like Woodbine, Mohawk, Ajax Down, Fort Erie, Rideau and Sudbury. Oh, did I forget some of the tracks? Yes, because we need to eliminate some to consolidate.

    Now for the bite that will hurt the most but will help both the horse people and the industry. Close the Windsor, Sarnia, Dresden, Clinton and Western Fair tracks and add a Super-track to the Dealtown Casino Initiative where the government already owns a 250 acre parcel of prime real estate and where they already have a 650,000 sq ft resort facility that can be transformed into the Dealtown Casino Racetrack and Retirement Village AT NO COST TO ONTARIO TAXPAYERS! The casino and racetrack will be paid for by one of the major gaming and hospitality developers, like Penn National or Delaware North who have impressive track records in both racetracks and casinos, or partners like Paragon Gaming of Las Vegas or Donald Trump who both have solid track records in Canada.

    Thank you Mr Drummond for identifying the problem!  Now it’s time to implement the solutions!

    By Brian Keenan, Chairman of the Dealtown Casino Initiative

  • Bekeen

    Accountability and Transparency for payments from OLG to Racetrack Owner and Horse industry People will calm the rough waters!

    My only question is, “can the track owners/operators and the horse people who each receive a10% share of the slot revenue at the tracks provide any reasonable accounting for the proceeds that have been received?”. We are living in a day and age of transparency. If both groups can show the government, the 60,000 strong horse people and the rest of the tax payers in Ontario that the monies paid to them under the program was indeed used to improve the tracks and the industry then everyone might settle down and get back to business as usual.

    But, and there always is a but, if there is any problem with accountability and transparency then the Liberals may have both cause and concern over the continuation of the slot program. So get those bean counters working on the numbers so that the industry can show that it is squeaky clean.
    MrBekeen

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