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Tough summer ahead for Ontario politicians as legislature breaks until fall

TORONTO - Ontario's law-making school is out for the summer, but provincial politicians aren't breaking out the flip-flops and cracking open a cold one just yet.

The legislature adjourned Thursday after the governing Liberals passed their budget 56 to 37 over the objections of the opposition parties, just three weeks after starting the new session.

But all three major parties won't have many lazy days before they reassemble in three months.

The Liberals are girding for a fight with public-sector unions in the fall, the Progressive Conservatives are heading into a leadership race and, like the New Democrats, will be mending fences after a disappointing election defeat.

There's a lot of work to do before Oct. 20, said Premier Kathleen Wynne.

"Make no mistake, this is not an extended vacation that MPPs are going on, and certainly I will be working very hard over the coming weeks to prepare for all the implementation that comes with the passage of the budget," she said.

"The momentary glee at the passage of the budget is just that."

It was the same $130.4-billion spending plan that triggered the June 12 election when her minority government couldn't muster the necessary support from the Progressive Conservatives or the New Democrats.

But when the Liberals were re-elected with a majority of seats, the budget's passage — just 11 days after it was re-introduced — was a foregone conclusion.

It allows the province to spend an estimated $12.5 billion more than it takes in this year and gives the green light to a made-in-Ontario pension plan, as well as spending $29 billion on transit projects and $2.5 billion in corporate grants to attract businesses over 10 years.

It also hikes taxes on tobacco, aviation fuel and people earning more than $150,000 a year.

The Progressive Conservatives warn the additional debt will lead to a downgrade by debt-rating agencies.

"I'm concerned about a downgrade that could well mean hundreds of millions of dollars more in interest being paid to service debt when we could be using that money to build hospital, to provide better health care, better education and to build infrastructure," said deputy Tory leader Christine Elliott.

Ontario's net debt is expected to reach $290 billion this year — about 40 per cent of its gross domestic product — and it pays about $11 billion a year in interest, the third largest expenditure after health care and education.

But that could skyrocket if interest rates rise, a prospect former finance minister Dwight Duncan once said kept him up at night.

Standard and Poor's Ratings Services has reaffirmed its rating and negative outlook for Ontario, but Moody's Investors Service lowered its outlook from stable to negative. Both are watching closely for progress in slaying the deficit.

Freezing compensation for public sector workers — what Treasury Board president Deb Matthews refers to as a "net zero" — is a big part of that plan.

Her determination will be tested this fall when the government goes back to the bargaining table with teachers. Their agreements, which expire at the end of the summer, were re-written last year after the teachers went to war over forced contracts that froze wages.

Labour unions used their substantial resources during the election to help defeat the Tories, but Matthews said that won't sway her. They ran on a budget that made it clear there's no new money for wage increases.

"So anyone who supported us during the campaign knew what the ground rules were and that's remained unchanged," she said.

The Liberals will end up cutting public-sector jobs to balance the books — something they vowed they wouldn't do during the campaign, the NDP said.

The government likes to say it's a "progressive" budget, but it's all about austerity, said NDP Leader Andrea Horwath.

"It includes a number of initiatives that aren't progressive at all, including the likelihood of 100,000 people being fired in their province or laid off, including the massive sell-off of assets and the privatization of services," she said.

It'll be a busy summer for Wynne as well. She said she's headed to a raspberry field Friday with her granddaughter, but she'll be travelling further afield to Prince Edward Island in late August to meet with her provincial and territorial counterparts.

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