NORTHERN ECONOMIST 2.0

Friday, 17 January 2020

Why Hospitals (And Long-Term Care) in Ontario Need More Funding

When it comes to provincial budget season, Ontario’s health sector invariably will lobby for more funding. As part of the string of posts I have been doing on health care spending in Ontario starting in November dealing with the four “ages” of Ontario spending, I want to explore the case for more funding for one aspect of the Ontario health care system in particular – hospitals. In the lead up to the 2020 budget, the Ontario Hospital Association has made the case that with Ontario’s aging and growing population, there are too many patients waiting for beds. Given that Ontario spends less per capita than any other provincial government in Canada, it needs this year an increase of $922 million for hospitals – a 4.85 percent increase – simply to maintain access.

While the shortfall compared to other provinces is a good point, the case for hospitals is evident even if one looks at Ontario hospital funding on its own. Figure 1 plots both nominal and real (in $2019) per capita hospital spending in Ontario from 1975 to 2019 using data from the Canadian Institute for Health Information’s National Health Expenditures (NHEX) database. Real per capita nominal spending has grown from $210 in 1975 to reach a peak of $1,494 in 2019. This may seem impressive until one adjusts for inflation and reveals an increase from $1,118 to $1,494 instead. Indeed, real per capita spending has essentially declined since 2010 when it peaked at $1,583. In other words, Ontario hospital spending has not kept up with the combination of both inflation and population growth since 2010 and has actually declined by 6 percent.

Things look even worse when you look at the average annual growth rate of real per capita spending that compares hospitals to the other categories as done in Figure 2.

The capital category – which of course means new or expanded facilities such as hospitals and long-term care homes as well as equipment has dropped on average -4.8 percent annually. So much for all of that infrastructure money at both the federal and provincial levels. Where has it gone is a good question. After capital, the next largest declines average annual declines are for other professionals at -2.3 percent (i.e., provincial funding for things like eye exams are a factor here), hospitals at -0.6 percent and then other institutions – which include mainly long term care homes. The increases are for physicians, drugs, and most dramatically public health, administration and “other health spending” which includes things like home care services.

Institutional care in Ontario – namely hospitals and long-term care – are one area that needs some spending revitalization (including both capital and operating spending) if there is to be any hope of dealing with both rising costs, as well as the greater service demands from a population that is both aging and growing.

Sunday, 12 January 2020

Declaring a Climate Emergency

On Monday evening, Thunder Bay City Council will be hearing from a deputation that will ask it to declare a climate emergency. According to a front page story in the January 11^th Chronicle-Journal: “Thunder Bay’s EarthCare climate adaptation working group, led by chairperson Aynsley Klassen, is set to make a deputation to council asking for them to declare a symbolic climate emergency.” According to Chairperson Klassen, they are not asking for a declaration under the Emergency Management and Civil Protections Act that would include asking for actual resources but are simply asking for a symbolic message to be sent. Thunder Bay City Councillor Foulds – who is the chairperson of the City’s EarthCare Advisory committee - is championing this cause and argues that: “Declaring a climate emergency is a way for governments to publicly acknowledge the need for urgent action.”

This is the kind of declaration Thunder Bay City Council will enjoy debating and making and will likely spend several hours on it as each Councillor voices their lengthy support for dealing with the effects of climate change, making sure everyone publicly knows that they are on the side of the environment and future generations by declaring a climate emergency. Moreover, given that it is “symbolic” it means they will not have to ask the provincial government for any resources or better yet not have to commit any City resources to dealing with the “emergency.” In many respects, they are simply doing what climate activist Greta Thunberg has railed against – the inaction against climate change.

As she noted in her address to the UN - “How dare you continue to look away, and come here saying that you are doing enough when the politics and solutions needed are still nowhere in sight,” … ““You say you ‘hear’ us and that you understand the urgency. But no matter how sad and angry I am, I don’t want to believe that. Because if you fully understood the situation and still kept on failing to act, then you would be evil. And I refuse to believe that.” I also refuse to believe politicians are evil when self-absorbed, opportunistic and short-sighted are much better descriptors.

I would opine that simply declaring a climate emergency and not acting on it is simply paying lip service to climate change and trying to score some political points with climate change activists. If Thunder Bay City Council really wants to do something to deal with a climate emergency, then they need to back up their “feel good” declaration with some concrete action. It is not about what they have done to date – such as the stated reduction in greenhouse gas emissions by 25 percent since 2007 – it is about what they are going to do.

An emergency requires drastic action. What will be done to expand use of Thunder Bay Transit in order to reduce reliance on personal automobiles? Is not raising city transit fares by 11 percent - as proposed in the 2020 budget – contrary to bringing about a more sustainable economy? Maybe City Council should aim to reduce the “footprint” of City government by pledging to reduce its employment via a process of attrition – that is through not filling retirements and exits – by 10 percent over the next five years and reinvesting the savings in climate initiatives such as planting more trees in the intercity area or expanding sewers to deal with heavier rainfalls? Maybe there should be a permanent reduction in property tax rates for new homes constructed that are under 1000 square fit in order to promote more sustainable lifestyles with less “stuff”? Need I go on?

Enough with the political grand standing. Where are the solutions? If you are going to declare an emergency, back it up with some action. Words and symbols are not enough. Thunder Bay does have a climate emergency – it is the climate at Thunder Bay City Hall.

Saturday, 4 January 2020

Thunder Bay Budget 2020: A First Look

The City of Thunder Bay has released its preliminary budget for 2020 and the proposed 2020 capital and operating budgets propose a municipal tax levy of $200.2 million which represents an increase in the levy of 3.17 percent over 2019. This is by no means the final number and there will be public meetings and deliberations on January 9th and February 3rd as well as council budget reviews on January 14th, 16th, 22nd and 29th. As usual much is being made of the net increase being only 2.32 percent after "growth" in the tax base but it remains that an increase in the total levy is what the increase in tax revenue ultimately is. Taxes will be going up.

As the accompanying figure shows, the trend in the total levy over the last thirty years has been steadily upwards. And, do not forget that on top of this, the 2020 increase in the water rate will be 4 percent and that for the wastewater surcharge will be another 4 percent.

A key driver of the proposed 2020 budget is an expansion of nearly $2 million dollars for the Thunder Bay Police Service. This will be on top of funding being received from the provincial government spread over the next three years of $2.7 million for projects in human trafficking, flood way patrol and mobile crisis response. There is also some anticipation that more provincial funding is on the way to specifically address gun and gang violence. Thus, there is a major expansion in police spending on the way but a significant chunk of the money is short-term funding from the province. A key question is once the expansion has been implemented - and the short term funding ends - how sustainable will all that spending be?

In the end, the total increase in tax levy funded new spending will be $6.1 million and in percentage terms the proposed increase of 3.17 percent is well above the combined rate of population growth - effectively zero - and inflation which is at best 2 percent. The argument has been made by the City Manager that policing costs are rising faster than other categories but that has been the case for some time. Even if one accepts the $2 million increase in policing without question, there is another $4 million in new spending that needs to be justified and made more transparent. The list of items as it stands are for amounts of $0.4 million here and $0.6 million there which the average ratepayer does not really understand. One could almost accept some increases if one could see something in the way of a new and needed service. Yet, that does not seem to be the case here.

A key addition that comes to mind and has been rejected in the past is dealing with the snow left at the end of your driveway by the City plows after a major snowfall. Given Thunder Bay's aging population and the effects of climate change bringing larger storms, the additional work required is starting to impose a significant strain on the home owning public. Yet, to date such pleas have fallen on deaf ears. As noted by the City:

"No, windrows across driveways will not be cleared by City Crews. Residents are responsible for the maintenance associated with their driveway, including the portion that is on City property. It is that portion of the City property which has been designed to provide snow storage during the winter. The City does not give up the right to store snow in that area of the boulevard when it allows the residents’ driveway to encroach across City property. It is important to note City crews have the important task of plowing snow on all City streets as quickly as possible. Snow removal from driveways is not a program offered by the City. "

Apparently, our driveways over the boulevard to access the street are an "encroachment" on City property so they can do whatever they want with the land - I suppose they could store gravel or manure there too if they wanted. One is surprised the city does not put a toll gate at the end of everyone's driveway and charge a fee to drive onto their roadway but I digress. It remains that windrow removal programs are offered by many other cities whose climate is actually milder than our own in the winter though to be fair they often do not clear the residential City sidewalks as done in Thunder Bay.

Some of the programs are targeted towards seniors or disabled residents such as in Milton or Oshawa. Then there is Richmond Hill which has the cadillac of programs and now removes the windrows on all residential driveways. The Richmond Hill windrow removal project was implemented in 2019 for all 55,000 households for a total annual cost of $4.4 million dollars. Markham also does windrow removal but for qualified registered applicants who must either be over 60 years of age or if under 60 have a medical note saying they cannot shovel snow. Even Toronto has some windrow removal depending on your location in the city. While one does not expect the upper end Richmond Hill program, it remains that when it comes to windrow removal, Thunder Bay is not even trying.

If the City of Thunder Bay is going to raise spending by $6.1 million dollars in 2020, one really needs to see a more concrete demonstration of value for money. In the absence of new spending that can be tangibly seen as providing some direct benefits to homeowners who are footing more and more of the bill, it becomes difficult to accept we need levy increases in excess of the combined rate of inflation and population growth. It is even more difficult given that over the last few years, the city inevitably posts surpluses - positive variances - in the millions of dollars that are then put into reserve funds. Indeed, 2018 was close to a $4 million surplus though it should be noted that 2019 was tracking closer to a few hundred thousand with the associated plea that 2020 would require a larger tax increase. One suspects the final surplus for 2019 will be larger once the 2020 budget deliberations are over and done with.

Sunday, 15 December 2019

Making Decisions at Thunder Bay City Council

Thunder Bay City Council does have a tough job when it comes to making decisions that affect the public welfare that have to balance diverse interests and needs as well as financial and economic criteria. At the same time, they sometimes do not do themselves any favours. Two cases in point come to mind - the soccer bubble on Golf Links Road and Dease Pool.

First, the decision to finally allow a private developer to go ahead with a project to build a soccer bubble on Golf Links Road. According to the news story, the project - which was proposed in spring of 2019 - was intended to open for winter 2020 but zoning restrictions halted the progress. Essentially, the area of the building site was zoned "Prestige Business Park" which meant that a recreational facility could only be built as an auxiliary feature to a "prestige" item like a hotel. This hurdle was finally overcome apparently by allowing the project to proceed with a promise to build the hotel later. No doubt, the City of Thunder Bay probably also has a planning definition of what a prestige hotel should be like and will intervene when it sees fit.

Why this could not have been done sooner is a good question. There is a shortage of space for soccer in the city and having a private developer step up is a good idea. Indeed, why should the City spend scarce resources on a publicly funded indoor turf facility at all if the private sector could provide the services thereby freeing up resources for things the private sector would likely not fund - like a swimming pool in a socio-economically challenged neighborhood? One wonders if the decision to stall the private developer was in part in the hopes they would go away so that there would be less competition for the City run turf facility - once it was finally built. If that is the case, they should move faster - taking years to decide and build the facility while not allowing for an alternate facility is a disservice to those who want their children to play soccer - and are willing to pay the fees for it. The need for the space is all the more urgent given the collapse of the Sports Dome in 2016.

Regarding the decision to close Dease Pool and "repurpose" the space, I have already opined at some length on the issues here in a previous blog post. The final decision is apparently going to be made tomorrow night and the outlook is grim for the people who want a new pool rather than any of the suggested alternative uses given the recommendation is for demolition. Moreover, there is some division in the local community itself given that the survey respondents happy with the alternatives proposed by the City (44%) is greater than those who are unhappy (38%). At the same time, one suspects that those happy with the alternatives are divided four ways while those who are unhappy all want to see a new pool but that nuance will likely escape the decision makers.

In the end, a decision will be made and the appropriate imperial decree made that public comment has been received and considered and had no effect on Council’s Decision as the proposed accepted redevelopment is consistent with all relevant planning legislation and represents good planning.

Thunder Bay City Council has spoken, the case is closed.

Tuesday, 3 December 2019

Should Lakehead University Go Private?

Universities in Ontario are in a transition period as the provincial government brings in a new performance based funding formula that ties a substantial portion of the government grant revenue to a set of ten indicators. The new Strategic Mandate Agreement – known as SMA3 - includes performance indicators such as “Research Funding”, “Graduation Rates” and oddly enough “Graduate Employment Earnings”. How a university is expected to acquire information on the latter is a bit of a puzzle to me.

While the previous formula also had a set of performance based indicators, they were more numerous. It remains that a reduction in the number of indicators while increasing the proportion of revenue tied to those indicators makes the prospects of future short-term revenue volatility a greater possibility. The public may be willing to accept a 5 or 10 or 20 percent revenue fluctuation in its local university and the subsequent disruption to programs and enrollment, that it would not tolerate if a similar model were applied to say hospitals or physician services or the provincial drug plan. In these latter examples, people could die in the wake of disruption from sudden funding changes, whereas in the case of universities it would be unlikely.

Lakehead will of course also be impacted by these changes to the funding formula and one wonders if in the long-run, Lakehead – not to mention other universities – should give serious consideration to ending their dependence on provincial government funding entirely and go completely private. The immediate reaction to this is to cringe given that provincial grants in Ontario still account for anywhere from 30 to 50 percent of university revenues and their elimination would probably necessitate as much as a doubling of tuition fees. Lakehead University is for example closer to 50 percent for its revenue share from grants, while University of Toronto is closer to 30 percent.

However, freeing oneself from the clutches of the provincial government might come with some benefits. Provincial governments in general have been encroaching on university autonomy for the last 50 years. In Ontario, if one goes back to the 1960s and 1970s, provincial grant revenues for some universities accounted for well over 50 percent of their revenue. Even more interesting is that despite accounting for the lion’s share of their funding, the provincial government generally left them alone to run their own affairs. Over time, as the provincial government has reduced its relative contribution, it has also gradually become more intrusive by setting performance targets, establishing lengthy bureaucratic quality assurance reviews and tying more and more funding to short term goals linked to provincial economic development and employment visions.

At the same time as grant funding has been reduced, the provincial government has also regulated and circumscribed the ability of universities to raise tuition because of the political fall-out. So, universities in Ontario – like many in the country – have come to have less autonomy from the provincial government while at the same time having their funding growth restricted. The government is calling more and more shots while providing less and less funding value. For its 30 to 50 percent funding share, it basically wants universities to operate as arms of the provincial training, education and economic development ministries. Moreover, its mandated goals end up affecting 100 percent of university operations and performance while only providing at best half the general grant revenue.

It is unlikely that any Ontario university would want to push the envelope and drastically change its funding. It would require a degree of innovation and risk taking that universities as currently structured and configured in their operations would be quite averse to. Indeed, the lack of experience in operating as a private and more profit oriented institution is a significant obstacle. Still, one wonders how much more autonomy universities in Ontario are willing to cede to the provincial government. Are there any rams among the sheep?