How did Fords cover city budget gaps? Taxes
According to the province, the funding it is withdrawing from public health services, and asking cities to pick up the tab for, is hardly anything. $33 million a year to start! Maybe $42 million! A pittance!
(The ultimate size of the cut and its effect are disputed — never mind that for a moment. Let’s just focus for the sake of discussion on the numbers the province acknowledges.)
To emphasize how little being handed this bill should inconvenience Toronto’s city government, they keep repeating that it’s just “a third of 1 per cent” of the city’s total $13.5-billion budget. A hole so small you surely could just cover it with a little red tape cut from somewhere else in the bureaucracy, right?
Premier Doug Ford has even been making some noises about how he and his brother showed the way when they were running the clamshell on Bay.
So let’s take a look at how the Ford brothers plugged a similar-sized hole in the city budget.
In 2013, as Doug Ford never tires of reminding us, city council voted to extend the Bloor-Danforth subway farther into Scarborough.
The city’s share of the cost of doing so would need to be covered by a loan over 30 years. Even after raising development charges to cover part of it, Toronto was left with a budget gap of $38 million per year to service the loan. This is an interesting number, because as you may have heard, it is roughly one-third of 1 per cent of the city’s total budget.
So how did the Ford brothers and the council they led fill that hole? By putting the city on a gravy-restricted diet? No. They raised taxes. A 1.6 per cent dedicated property tax levy was imposed to pay for it.
You may ask yourself, listening to current Ford government rhetoric, how this can be.
Why would even such a self-proclaimed efficiency wizard and tax assassin as Doug Ford have to raise taxes to make up so small a budget gap?
Well, because the city’s budget is a lot less flexible than it seems.
The province has basically raised taxes — it has just outsourced the dirty work onto the city
Earlier in their term, the Ford brothers commissioned a study from the accounting firm KPMG to propose possible budget cuts. That Core Service Review concluded that 90 per cent of the city’s budget was basically untouchable — much of its spending is mandatory under provincial law (often in the form of flow-through spending from upper governments the city does not have any discretion over at all), much of it is in the form of things like TTC fares and user fees which by law directly go back to the services they charge for, and the rest of it is “essential” to the city’s effective functioning, like police service or water sanitation. Another 8 per cent was classified as “traditional” — things the residents of the city expect their government to provide and which have been provided by virtually every major city for many years. Only 1 per cent of spending, in their estimation, was “other/discretionary.”
One per cent of the city’s budget. Understanding that offers a different perspective on how easy it is to cut one third of one per cent of city spending suddenly and unexpectedly.
That is why, during the Ford years, the city spent so much time debating cost-saving options like cutting bus service, selling the zoo, closing libraries, eliminating snowplowing on side streets and slashing bus service. I’ve addressed before that Ford’s “$1 billion in efficiencies” argument about their time at city hall is dishonest gibberish, but even by his own supporting numbers you can see that almost none of it is even claimed to be caused by increases in efficiency: you have tens of millions of dollars of user-fee increases, tens of millions more in service cuts, tens of millions from raiding reserves and tens of millions more because costs were lower than expected or the province bailed out the city; more still from putting off spending into the future, and even more (well over $100 million) in phantom savings based on raises they gave to employees and increases in police budgets being smaller than some hypothetical alternative.
I don’t bring it up to relitigate yet again the billion-dollar claim (though Premier Ford was repeating it yet again in talking about public health cuts this week). I simply draw attention to the fact that here — as in the case of the subway extension — raising fees and taxes and slashing services were the main ways Ford and his brother dealt with the city’s budget struggles.
Did they also find genuine efficiencies and redundancies in the budget? Yes, at an annual rate that by most estimates (including that of then-city manager Joe Pennachetti) was similar to what David Miller’s council found when he was mayor, and a rate that has continued under Mayor John Tory. If anything, the $371 million freed up under Tory by refinancing community housing debt may be the largest and most significant “efficiency” — doing the same work with fewer resources — I can recall anyone finding in the past two decades.
Similarly, every city government in living memory has had end-of-year surpluses from unexpectedly high tax income or lower-than-expected expenses, but by their very nature these are things you cannot count on and budget for.
This week the premier’s nephew, Councillor Michael Ford, came to his defence by citing another regular occurrence — the auditor having found instances of a few million dollars wasted by employee and subcontractor cheating or bureaucratic errors. When fixed, these auditor-identified problems don’t usually reduce spending, they just make it more effective.
Doug Ford’s brother was fond of saying “there’s only one taxpayer” — meaning a tax increase (or spending decision) by the city or the province or the federal government had the same effect for the person paying it.
That was true as far as it went, and remains true now. If the province cuts public health funding to force the city to pick up the tab, and the city winds up having to raise taxes to make up the difference, then the province has basically raised taxes — it has just outsourced the dirty work onto the city.
In the case of public health, it is especially egregious, because the services public health provides are hugely beneficial and also hugely necessary. Infectious disease control, for example, is not a frill. Moreover, these services are rightly the responsibility of provincial governments: the benefits of prevention and the consequences of a crisis are not quarantined by a city’s borders, they are often regional or provincial in their effects. Like health care, they are things all Ontarians should expect, and things Ontario’s government should take responsibility for (which is why every other province funds all public health costs).
And because the provincial government is larger, has far more discretion over its own spending, and has access to more sources of revenue (including the income tax and sales taxes) it is in a far easier position to absorb the cost of continuing to fund this than the city is to pick up the slack. The province’s budget is more than 10 times the size of the City of Toronto’s.
Surely, by the very logic they have been preaching for others, they can make up the difference through efficiency and modernization. I mean, it’s less than one-thirtieth of one per cent of the province’s total budget.