National Post (Latest Edition)
$650M reserve spent, city flirts with ‘disaster’
With Toronto’s welfare caseload expected to surge, a former budget chief worries the city could be on the brink of financial “disaster” by the end of 2009 after raiding its reserves during the good times to fund successive operating budgets.
“My stomach turns over when I look at what’s been presented [in the 2009 operating budget], what we’re facing,” said Councillor David Shiner, chairman of the budget committee under previous mayor Mel Lastman.
Money set aside for emergencies has been used up in recent years to stave off budget shortfalls that should have been solved with restraint, he said.
“Since Mayor Miller took office, he has taken over $650million out of reserves, the savings of the citizens of Toronto that were put aside for rainy days and other important initiatives,” Mr. Shiner said.
The city manager confirmed the cupboards are now bare.
About $300-million was taken from various stabilization funds to plug a $697-million hole in this year’s proposed $8.7-billion operating budget.
Included is the last $8-million in Toronto’s welfare reserves, which will be paired with a $15-million surplus, due to lower need, from the 2008 program to fund, in part, a $33-million welfare injection. The increase is being made to cover an anticipated jump in the welfare load to 100,000 cases by the end of 2009.
“There is literally nothing left in that reserve for the Ontario Works welfare program,” city manager Joe Pennachetti told reporters on budget day. “There is no longer any more reserve.”
The proposed operating budget for Toronto Employment and Social Services for 2009 is $318-million, up 15% or $43-million from the previous year. Of the new money, $33-million is for a spike in demand, from 76,000 last year to an average of 90,000 a month throughout 2009. The remaining $10-million was to fund a legislated increase in benefits.
But the welfare reserve is not the only savings account that is empty.
“We virtually have no reserve,” said Mr. Pennachetti. “All the other reserves are capital or dedicated reserves.”
After going through a decade of good times, Toronto is in worse shape financially than ever, Mr. Shiner complained.
“The problem is we’ve never yet delivered a balanced budget,” he said of the stop-gap measures, new taxes and one-time funding sources that have been used to yank Toronto from the brink of a projected deficit it is not allowed to run. “It seems we have an American-style budget: spend, spend, spend, borrow, borrow, borrow and worry about it tomorrow. Well, tomorrow is here.”
But Councillor Shelley Carroll (Don Valley West), the city’s budget chief, said structural problems in the shared cost and administration of the welfare program with the province are in large part responsible for the depletion of reserves. Those are gradually being remedied, she said, with the “uploading” of Ontario Works to the province.
A report issued by TD Bank Financial group on the eve of Tuesday’s city budget warned that will happen too gradually to spare Toronto during this recession.
The TD analysis warned the welfare caseload could surge by 20,000 cases over 2009, possibly requiring $65-to $70-million more from the city to meet demand. The load currently sits at 81,000 cases.
Ms. Carroll said the city did incorporate those projections into its budget.
But Toronto’s focus with this budget is maintaining programs, services and spending to keep people off of social assistance, Ms. Carroll said.
“We don’t want to put people on welfare rolls,” she said. “What we’re doing, and this is a different approach to recession than has ever been taken before, is keeping this a strong and functioning and desirable world market city. Now is not the time to make yourself a city that is attractive to no one… We didn’t do that last time and we spent 10 years of excellent economic environment in the globe, not being a No. 1 city.”