March 22, 2012

Smart Social Investments Save Money

There is no doubt that Ontario has to deal with the current deficit.  But the Drummond Report itself points out "spending is neither out of control nor wildly excessive. Ontario runs one of the lowest-cost provincial governments in Canada relative to its GDP and has done so for decades."  Rather the current deficit is largely the result of the recent economic recession. And alot of the economic challenge facing Ontario stems from the high dollar, as the Drummond Commission also indicates. To tackle the deficit we have to make decisions based on accurate information. The risk with over-estimating the deficit is that it can lead to rash decisions that could result in higher costs for Government.

Public investment in programs to end homelessness is a good example. Here is an illustration from MCCO's experience. MCCO's Circle of Friends program in Kitchener helps women who have experienced persistent homelessness as they make the transition from the emergency shelter at the YWCA-Mary's Place into stable housing of their own. It is a program that does receive some public funding from the Region of Waterloo. That funding is more than matched by many volunteer hours of women who become the circle of friends, meeting each week with the women moving from Mary's Place.

Circle of Friends works. It has helped dozens of women in recent years maintain housing and stabilize their lives. MCCO recently evaluated Circle of Friends and found that every dollar invested in the program delivers more than $3 in social benefit. A large part of that benefit comes in the form of fewer ambulance calls, emergency room visits, police calls, in-patient mental health unit stays and shelter nights. Many of the women still rely on Government supports, like subsidized housing and income supports. But that costs alot less than more expensive Government services they used when their lives were in crisis. And as a result, many are able to get involved volunteering and working in the community.

There is alot in the Drummond Commission report that aims to deliver public services more effectively and efficiently. But as the report Ontario's Fiscal Reality explains, the Drummond Commission artificially inflates the size of the deficit -- manufacturing a fiscal crisis that is out of proportion to the real challenge. And that leads to the Drummond Commission recommending deep cuts in  social services, cuts that would ultimately drive up costs to more expensive public services like health care and policing. Better to make smart social investments that save money.

March 20, 2012

How to manufacture a fiscal crisis

In his recent report on reforming public services in Ontario, retired bank economist Don Drummond painted a picture of Ontario on the verge of fiscal ruin. But a close analysis of the assumptions that Mr. Drummond used to reach his projected $30 billion deficit by 2017-18 contends that number is unrealistic.

That analysis was done by another economist, Hugh Mackenzie, for the Canadian Centre for Policy Alternatives. Mackenzie has years of experience analysing and forecasting provincial finances. Here is a summary of the findings of his analysis, Ontario's Fiscal Reality: Cup Half Empty or Half Full.

Although the Drummond exercise ended up producing a massive report with hundreds of  recommendations, its main role was to establish the atmosphere of financial crisis that is needed to create the political space for painful spending cuts.
To that end, the exercise began with a pessimistic economic forecast that implied a modest but manageable deficit persisting until 2017–18. From that base, step-by-step, it built that economic forecast into an unmanageable fiscal crisis.
That forecast of crisis is based on five key assumptions, each of which was carefully designed to inflate the 2017–18 deficit.
It assumed that Ontario’s corporate tax cut plan would remain intact and on schedule, despite its growing impact on the province’s fiscal capacity.
In a departure from the norm in long-term fiscal forecasts, it added a contingency amount of $1.9 billion to the projected deficit in 2017–18.
It assumed that debt service costs in Ontario would soar from their current rate of 3.5% for new debt to 5.3%.
It assumed that program spending would increase at a rate greater than the rate of inflation and population growth, creating a politically-inspired straw man on the expenditure side of the fiscal projection.
And most tellingly, it assumed that revenue would grow at a substantially lower rate than the already pessimistic assumed rate of growth of Ontario’s economy—a development which, if it were to take place, would be without precedent.
Together, these five assumptions turned a $6.4 billion projected deficit in 2017–18 into a $30.1 billion catastrophe. More to the point, this manipulative exercise turned an issue that would go away by itself with even a modest improvement in growth rates (and would be readily manageable even without) into a steadily increasing deficit culminating in a fiscal crisis.

Mackenzie's analysis suggests Ontario has the fiscal room to make the kind of smart social investments that MCCO recommended in its recent letter to Finance Minister Dwight Duncan.

March 19, 2012

Ontario needs a balanced approach to fiscal sustainability and commitment to poverty eradication

MCCO recently wrote to Finance Minister Dwight Duncan with recommendations for the 2012 Provincial Budget.  Our submission emphasizes the need to balance fiscal restraint with smart social investments, ongoing commitment to caring for creation, fostering community safety and considering ways to raise more revenue based on the principle of fiscal fairness.
Part of MCCO’s Budget submission is based on our response to the Social Assistance Review Commission’s second discussion paper. That letter underscores the need to redesign and revision income security with the goal of eradicating poverty in Ontario.
You can send your own message to the Provincial Government through Make Poverty History's recent Ontario provincial budget action: Let's create an Ontario that doesn't put people into poverty.
Finance Minister Dwight Duncan will release the 2012 Provincial Budget on Tuesday, March 27. 

March 13, 2012

Revisioning Income Security in Ontario

MCCO's submission to the Social Assistance Review Commission urges the Government to redesign income security  with the goal of eradicating poverty in Ontario.
In short, the reform of Social Assistance in Ontario needs to be viewed as a redesign of income security with the goal of eradicating poverty. That requires revisioning and redesigning the delivery of income supports and services in a way that treats people with dignity. Making more basic services like dental care, vision care, pharmacare, supports to housing affordability, employment services and basic income supports available to people whether they are receiving a greater amount of income through paid employment or through social assistance will help get us to that goal. Such an approach will better reflect the dignity of each person and help dismantle the punitive elements of the present social assistance system. It should help realize the vision of “A 21st century income security system that enables all Ontarians to live with dignity, participate in their communities, and contribute to a prospering economy."
 You can read MCCO's submission here.