NORTHERN ECONOMIST 2.0: June 2022

Thursday, 23 June 2022

Is There Really a Municipal Candidate Shortage in Thunder Bay?

Outgoing councillor Rebecca Johnson has joined city administrators in raising the alarm over what appears to be the low number of confirmed candidates for this fall’s municipal election. In 2018 there were apparently twice as many registered candidates at this point. On the one hand, this is probably not a surprise given the last few years have been exhausting because of the pandemic not to mention the worst winter in two decades has left people scrambling to repair damage to homes and basements. People are preoccupied on numerous fronts now and running for council is probably not at the top of their list. Moreover, there is still almost two months to go until the August 19^th deadline and if the past is any indication, there will be plenty of candidates springing from under the woodwork any day soon.

Of course, given the record low turnout in the recent provincial election, it is a reasonable question to ask if there is a lack of engagement with this year’s coming municipal election. Political life has never been more challenging given the presence of social media which makes election campaigns often more akin to a process of ritualistic character assassination than a debate of ideas. There is probably also a sense of fatigue in Thunder Bay over constant issues that never seem to be resolved and in recent years appear to have only grown whether it is crime or deteriorating infrastructure. One expects this year’s issues will be quite similar to those of 2018 and one senses this endless wheel of time litany is discouraging to many.

And then there is the process of running for municipal office which is not just about signing up to appear on a ballot, but which over time has involved like everything else into a more involved bureaucratic process. Nomination papers must be filed by appointment only. You need the endorsement of at least 25 people if you wish to run for Mayor or councillor – a spur of the moment decision it is not. There is a filing fee, a declaration of qualifications and a consent to release personal information. While one might want to discourage frivolous candidacies, at the same time, one may need to review the process to see if it can be made more candidate friendly.

Yet, it remains that there is probably not going to be a shortage of candidates. This type of hand wringing has happened before and will happen again. During the 2018 municipal election campaign in Thunder Bay, there were similar concerns being expressed by early July as with the exception of the Mayor’s position, there was a drop in the number of candidates seeking municipal office in most of the wards. It turns out after the story went out, a slew of candidates came forth and the total number of candidates running for municipal office in Thunder Bay rivalled that of much larger cities. There were 101 candidates vying for office of 2018 with 26 going after an at-large position which pretty much guaranteed victory for incumbents.

In the end, the chief beneficiary of a plethora of candidates is incumbents who already have deep rooted name recognition. More candidates split and fracture any opposition vote whereas fewer candidates running allows dissenting or dissatisfied voters an opportunity to coalesce around an opponent and bring incumbents down. It is noteworthy that many incumbents have not declared yet either – including the current Mayor. Incumbents announcing too early potentially scares off candidates and reduces the candidate pool, so the trick is to lay low and wait for the competition to reveal itself in sufficiently large numbers and then emerge. One suspects the same is going to happen yet again and by August we will be lamenting that there are too many candidates, and the same faces will be getting in again. Thunder Bay’s wheel of time continues.

Thursday, 16 June 2022

Health Care in Ontario: Not Getting Better Anytime Soon

Ontario’s public health care system is once again making headlines – this time with respect to emergency room waits. In the GTA, wait times in emergency rooms can be six to eight hours while in some smaller centres in Ontario you cannot even get an emergency room physician. Hospitals in general appear to be at 100 percent capacity or more and it is not just a bed shortage but also a staffing shortage. Growing and aging populations, continued COVID-19 admissions as well as treatment for long-COVID and not to mention the surgical backlog from procedures cancelled during the peak COVID waves and one begins to see alarming strains on a system that was already strained pre-pandemic. All of this does not even consider what has been happening in long-term care. And of course, a rather large chunk of Ontarians still does not have a family physician even though we now have more physicians per capita than we did a decade ago.

Of course, looking ahead one begins to see that Ontario’s health care spending by the provincial government – already amongst the lowest in per capita terms amongst Canada’s provinces – is not going to improve anytime soon. Indeed, if one looks at the spring 2022 Ontario budget, makes some projections for population growth and inflation, one sees that by 2025, real per capita Ontario government health spending will be where it was in 2019 just before the pandemic. Moreover, that spending in real per capita terms was essentially flat since the end of the Great Recession circa 2010.

Figure 1 provides some evidence. Real per capita spending from 1975 to 2021 is calculated from the most recent edition of the Canadian Institute for Health Information’s 2021 National Health Expenditure Release. Another series for 2021 to 2025 is calculated from the Ontario Spring 2022 budget with the numbers assuming inflation of 2.5 percent annually until 2025 and population growth of 1.2 percent. The money is inclusive of COVID-19 support spending with 2021 marking an interesting break point depending on whether you use the CIHI estimates for 2020 and 2021 or the Spring 2022 budget medium term fiscal plan numbers that start in 2020-21.

For 2021, the CIHI has Ontario provincial government health spending forecast at $75.2 billion (including COVID-19 supports) and $71.7 billion excluding them. On the other hand, the Ontario spring 2022 budget says base health care spending for 2021 (fiscal 2020-21) will be $64.4 billion with COVID-19 limited time funding at $19.1 billion bringing us to a total of $83.5 billion. There have been issues with what the provincial government has said they would spend on COVID-19 and what they actually have.

No matter, combining the numbers and going forward to 2025, real per capita provincial government spending including COVID-19 spending (in $2020 dollars) was $4,523 in 2019 and in 2021 reached $4,987 using the CIHI numbers and $5,538 using the 2022 Ontario spring budget numbers. Spending on health in Ontario did rise dramatically during the pandemic - it is just a question of by how much. The provincial budget then shows base spending in health rising to $78.3 billion by 2025 (up from $64.4 in 2021) while COVID-19 spending declines to $12 billion in 2022, $6.9 billion in 2023 and then is zero afterwards. So, by 2025 real per capita provincial government health spending will be $4,486 dollars – down from $4,523 in 2019. From 2010 to 2025, real per capita provincial government health spending will have grown from $4,388 to $4,486 – an increase of 2.2 percent spread out over 15 years – annual growth of just over one-tenth of one percent.

How can the Ontario government increase health spending by billions of dollars more and yet spending per person is essentially flat for a fifteen-year period? The spending on health has essentially not kept up with inflation, and population growth as well as given the additional demands being made for new drugs and treatments and an aging population. Moreover, compensation has grown in the health sector – with additional payments during the pandemic – and the fact is that despite all these demands for additional in real terms we will be spending the same amount per person that we were fifteen years ago.

From a historical perspective, flat real per capita health spending appears to be a new era given the increases of 1975 to the early 1990s and then the late 1990s to about 2010. Real per capita spending fell from about 1991 to 1996 in Ontario as the federal fiscal crisis led to a reduction in transfer payments. The last fifteen years are in a league of their own when it comes to trends. Not automatically spending more every year and keeping up with inflation and population growth means that the health care cost curve that everyone was worried about as being unsustainable has been sustainable for over a decade now – once you factor out the effects of the pandemic. In some ways, one might claim this as a success story unless of course you are in an ER waiting for a bed.

At the same time, keeping spending per capita constant means that over time more and more difficult choices will need to be made as the population ages, labour shortages worsen, and new treatments clamour for funding. And remember that per capita spending has been constant, but Ontario already ranks pretty much as the bottom of several health resource indicators including hospital beds per capita and spending per capita.

There is no immediate way out of this. How to get more resources into the system? You can raise taxes and spend more – an unpopular solution especially now during a time of inflation and rising costs. You can spend less on other things such as education, social services, transportation, and other government services and spend more on health. This will of course generate political winners and losers in the government funding sweepstakes and generate as many unhappy campers as happy campers. Governments generally like to keep as many campers as possible happy unless they happen to be considered an inconsequential voting bloc. Just ask families with one stay at home parent when it comes to tax treatment by the income tax system.

You can delist services currently being provided by the Ontario public health care system and transfer them onto the public as private spending which will provide more money to spend on the remaining public services. However, this always seems to be forbidden territory in Canadian public health care despite it being a feature of other public health care systems we sometimes hold up as models – namely western Europe - and is therefore done incrementally. Over the years, Ontario has delisted certain services but always on a piecemeal basis rather than part of a comprehensive reform package to contain the political fallout. It also remains that Ontario already has the largest private financed share of health spending in Canada at about 66 percent.

You can try to reform the current system to make it more “efficient” but short of delivering a pay cut it is hard to see how much more efficient you can get after fifteen years of standing still in per capita terms. Sure, there are some efficiencies from reorganizing and implementing new technology or changing payment systems for health professionals or having physicians take on more patients but that will take more money in the short term and as the aftermath of the Romanow Report shows, more money for transformative change does not always get you the change you were looking for.

As a result, it is unlikely that we will see any dramatic changes or improvements to Ontario’s public health care system. Any changes will likely be a short-term response to an immediate problem driven by which affected parties scream the loudest. Right now, its emergency services but next week it might be driven by headlines in another long-term care home or perhaps a flare-up of monkeypox. Firefighting driven by the media focus of the moment is not the way to deal with long-term public policy but that seems to be the world we live in. With a four-year majority mandate and a collapsed opposition, this might be a window of opportunity for more dramatic change in Ontario health care but don’t count on it. All governments are inherently conservative when it comes to change. No pun intended.

Wednesday, 8 June 2022

Rising Surpluses, The Other Shoe Drops...and Manure

Well, the City of Thunder Bay’s finances just keep getting better. After projecting a positive variance of $3 million for the 2021 budget year, and then a surplus for 2021 that was supposed to be coming in at $5.6 million, the 2021 surplus has now come in at $10.9 million. Thunder Bay will have its seventh consecutive positive budget variance making for accumulated variances of $31.3 million over seven years. Indeed, this is the largest surplus in seven years. While much of the savings will come from lower-than-expected COVID costs for which the city has received substantial federal and provincial support, it remains that the City of Thunder Bay could obviously use some some help in crafting their budget projection and forecast models.

Figure 1 plots the annual tax levy increase since 2015 against the corresponding surplus at year end. For example, in 2015, the tax levy increase was $9.4 million – a 5.7 percent increase on a $164.7 million levy the year previous. The year’s end saw a positive variance of about $1 million which on $174 million tax levy was just over one-half of one percent. Since 2015, however the size of the surplus has increased substantially, often coming close to matching the size of the tax levy increase that year. In 2017 for example, the levy increase was $5.96 million – a 3.3 percent increase – but the year-end surplus came in at $5.6 million – almost 95 percent of the value of the original levy. For 2021, there is now a surplus of $10.9 million – which is more than double the original tax levy increase of $4.3 million. This is indeed a first, a surplus bigger than the year's tax levy increase. I suppose if they had some creative economists working for them, the City of Thunder Bay could spin this as a tax levy surplus multiplier of 2.53.

If Thunder Bay had been able to correctly forecast the surplus each year and implement a tax increase incorporating the surplus and balancing the budget, what could have the alternate tax levy increase have been? Figure 2 plots the actual percentage tax levy increase since 2015 and the alternate increases. In 2017, for example, the budget could have been balanced with an increase of 0.2 percent but instead there was an increase of 3.3 percent. The year 2020 saw an increase of 2.7 percent but all that was needed is an increase of 0.6 percent. Meanwhile, the surplus for 2022 means that rather than a 2.1 percent levy increase, there could have been a levy reduction of 3.3 percent.

Outrageous? Not so much as the other shoe that has dropped in the face of growing surpluses - a hefty pay increase for some City Managers. Some managers this year will see raises as high as 12 percent with the range for 319 management and non-union staff ranging from 4 to 12 percent this year. Given the stress of managing city services during a pandemic, one can certainly understand the need for raises. At the same time, there have been a lot of stressed-out public-sector employees in health and education and guess what? The provincial government held them at one percent a year for the last three years. What should we think of all this during a municipal election year? Well, here is another great juxtaposition – the City of Thunder Bay is offering free compost to residents while quantities last with a half-ton load limit per person. With a $10.9 million dollar surplus, one would think the supply of compost would be endless. They really have stepped into it this time.

Friday, 3 June 2022

Ontario's Road Ahead

The people of Ontario have spoken – at least 40 percent of eligible voters anyway – and Doug Ford and the Conservatives have been awarded a second and more substantial majority. As of this morning, the Ontario PCs hold 83 of Ontario’s 124 seats compared to 31 for the NDP, 8 for the Liberals and 1 for the Greens. The PCs garnered 41 percent of the popular vote, and the NDP and the Liberals 24 percent each while the Greens came in at about 6 percent. Despite some initial clumsy handling of the COVID-19 pandemic, It turns out that Ontarians have decided they approve of Premier Ford and have generally put the pandemic behind them despite its lingering issues. Moreover, given the alternatives to the status quo, a lot of Ontarians seem to have decided not to vote.

The Ontario PCs have essentially made gains in the GTA, the Southwest and Northern Ontario. The NDP union vote has essentially gone to the Conservatives while the Liberal vote along with being poorly distributed also seems to have either stayed home or gone to the Conservatives – especially in the GTA. In the end, the message of the Ford Conservatives to rebuild the economy with mining and electric vehicle investment, a move towards worker friendly policies such as raising the minimum wage, ambitious infrastructure projects including highway projects throughout the province and some inflation fighting measures such as reducing the gas tax all struck a chord. The NDP focused on health while the Liberals seemed to have no focus at all. In terms of its spending plans and pragmatic centrism, the PCs essentially have captured a lot of previous Liberal voters. Indeed, the Ford government has spent more than the McGuinty/Wynne Liberals ever did.

Looking ahead, a lot can happen to the economy over the next year or two in terms of a recession and rising interest rates that can derail the most ambitious of plans but for the time being, it is a win. The size of the majority and the lack of an effective opposition with the resignation of the two opposition leaders gives the Ontario PCs pretty much carte blanche for the next year or so. In many ways, this may be the recreation of the Ontario Big Blue Machine of the 1970s and the start of another long-term period of Conservative rule. However, it is not the 1970s, Doug Ford is not Bill Davis, and the problem is that large majorities and the lack of an immediate effective opposition can generate complacency, carelessness and ultimately the seeds of a government’s downfall - in that order. One assumes the Premier will have to keep a tight rein on a rather large caucus.

Things have certainly taken an interesting turn in the two Thunder Bay riding. The long-standing Conservative drought at the provincial level has finally been ended. Thunder Bay-Atikokan – which under its previous incarnation of Fort William – was last held by Conservative Mickey Hennessy in the 1980s – has elected Conservative Kevin Holland. It was a relatively tight race with Holland taking 36 percent of the vote, NDP incumbent Judith Monteith-Farrell 33 percent and Liberal Rob Barret 24 percent. A tight race bodes well for the future in terms of attention from all three parties during the next election campaign. As well, Mr. Holland provides a voice at the government table though with 83 MPPs it will be a rather crowded proposition and he will have to compete with Greg Rickford in Kenora.

The north side riding of Thunder Bay-Superior North saw the end of a quarter century of Liberal wins at the provincial level as Michael Gravelle’s riding went to NDP Lise Vaugeois who took 34 percent of the vote. Relatively close behind – for a Conservative in Thunder Bay-Superior North – was Peng You at 31 percent followed by Liberal Shelby Ch’ng at 28 percent. The tightness of this race also ensures that the next provincial election will see considerable attention paid to the riding by all three parties. In the end, it is important for sa maller and more remote riding to do all in their power to not be taken for granted.

The final point is the rather low turnout of the election and the fact that 40 percent of 40 percent turnout means that in the end barely 20 percent of eligible Ontarians have elected a majority government. Of those that voted, more voted against Doug Ford than for him. Still it is a majority under our current first-past-the-post system and those who did not vote and are unhappy really have only themselves to blame. At the same time, the fact that Premier Ford’s hefty majority and crushing of the opposition was achieved with about 20 percent of eligible Ontario voters should be a sobering check on any tendencies towards an imperial premiership.