TORONTO - Arbitrators' awards giving unionized public sector workers wage hikes will not be funded by the Ontario government, Premier Dalton McGuinty said Tuesday after yet another ruling against the Liberals' two-year wage freeze.

An independent arbitrator awarded pay raises totalling four per cent over the next two years to about 17,000 nurses and other hospital workers. It's the fourth or fifth arbitrator's decision this year that has gone against the government's public sector wage freeze.

Hospitals will have to find the money for the pay hikes within their existing budgets because the province is not funding any wage increases for the next two years, warned McGuinty.

"Our interest is to ensure the taxpayers aren't paying any more and they won't," McGuinty said at an unrelated event in Hamilton.

"We've made that commitment already. They won't."

The province wants all public sector workers in Ontario to agree to a two-year wage freeze because of a record deficit of almost $20 billion, but the Liberals stopped short of introducing legislation imposing the measure.

"We've made it clear there is no more money over the next two years for new compensation, and if settlements are achieved that exceed that they're going to have to find the money from within," said McGuinty.

The Service Employees International Union said the latest arbitrator's decision means nurses and staff at more than 60 hospital sites will get raises in line with inflation.

In a statement issued Tuesday, the union said the ruling means the government's proposed wage freeze is dead.

Hospital workers would not want to see services cut just to pay for their salary increase, said McGuinty.

"I just can't believe that we have a public sector that is not prepared to acknowledge that," he said.

"We need to do everything we can to maintain service levels."

The Opposition warned the arbitrators' rulings will force hospitals to reduce services to patients.

"In order for hospitals to balance their books they're going to have to reduce services," said Progressive Conservative Leader Tim Hudak.

"I just think when it comes to our arbitration system that arbitrators need to respect the taxpayer who pays the bills at the end of the day, but unfortunately we're not seeing that."

The New Democrats, who oppose the wage freeze, say the plan was poorly thought out in the first place.

"If it does lead to service cuts then it certainly sits at the feet of the provincial government because they put forward a restraint plan that simply had no hope of working and now they're dealing with the fallout from that," said NDP Leader Andrea Horwath.

Finance Minister Dwight Duncan's spring budget called for a two-year freeze on wages for public sector workers to help fight a record provincial deficit.

The province has also frozen the pay of non-unionized public servants, while members of provincial parliament took a three-year wage freeze.

"We're doing our part to demonstrate responsibility in an era of fiscal restraint," said McGuinty. "I would appeal to those employed in the public sector to assume that responsibility as well."