By Deani Neven Van Pelt
and Ben Eisen
The Fraser Institute
Over the past decade, government spending on public education in Ontario has grown at an unsustainable rate, driven largely by significant growth in employee compensation costs. To help fight the province’s daunting budget deficit, the provincial government must hold the line on teacher compensation
In its recent contract negotiations with the various teacher unions, the government required “net-zero” terms. In other words, money for any raises would have to be found within existing funding envelopes.
This week, it was revealed that the government had made a total of $2.5 million in payments to three different unions to cover their expenses for the collective bargaining process under the new framework. Some have cited this development to criticize the government’s negotiation framework, which includes the net-zero provision. NDP leader Andrea Horwath, for example, stated that the new framework with a net-zero rule and centralized negotiation on salary issues “a failure.” OECTA union president Ann Hawkins defended the payouts, saying they are necessary due to the new framework that the unions claim is more complex.
The payments to unions to cover negotiating costs are unseemly – in principle, taxpayers should not be made to pay for both sides of the collective bargaining process. These developments, however, should not cause us to lose sight of the fact that a net-zero approach to salary negotiations is justifiable and necessary.
A quick look at the numbers demonstrates why it’s important for the government to hold the line on compensation costs.
Statistics Canada data show that between 2003/04 and 2012/13 (the last year of available data) annual education spending increased by 50 percent in Ontario, despite a shrinking school-age population. Per-student spending reached $12,299 in 2012/13, up 57 percent from a decade earlier.
This run-up was driven primarily by an increase in compensation costs for public school employees. Total spending on salaries and wages in Ontario’s schools increased by 50.6 percent over the 2003/04-2012/13 period while spending on pensions increased by 103.8 percent. Only two provinces (Alberta and Saskatchewan) experienced a larger increase in spending on public school compensation costs than Ontario during this period.
The rapid rise in education costs is a significant source of fiscal pressure on Ontario’s finances. Consider this. If Ontario had increased education spending over the same time period, but only at the rate necessary to account for inflation and changes in enrollment, it would have saved $6.1 billion in 2012/13 alone – enough to reduce the provincial budget deficit by two-thirds that year. Similar restraint over time would result in a substantially reduced debt burden and more money available for other priorities.
In this context, the government’s decision to hold the line on compensation spending and pursue a net-zero approach was the right course.
Of course, the government’s execution of the framework has been far from perfect. The decision to reimburse the teachers’ unions for negotiation expenses is not reasonable to taxpayers. Further, the recent decision to fund a 1.5 percent salary increase, and 1 percent lump sum payment to Ontario high school teachers, by reducing planned funding for programs that help students at risk of not graduating may not be a wise use of finite taxpayer dollars. The government deserves scrutiny and possibly criticism for these decisions, but this should not cause us to lose sight of the basic fact that a net-zero negotiation structure is needed for this round of contract negotiations, and possibly future rounds.
A popular narrative holds that schools are underfunded and education spending had been cut in Ontario and across Canada in recent years. This narrative is completely false. The reality is that education spending in Ontario has increased rapidly, with the costs largely driven by increases in employee compensation. Despite the problems in the execution of the framework, the net-zero approach to contract negotiations in Ontario’s education system is a necessary step to help halt these unsustainable trends.
Deani Neven Van Pelt is the Director of the Barbara Mitchell Centre for Improvement in Education and Ben Eisen is a Senior Policy Analyst at the Fraser Institute.