Monday, July 21, 2014

Deficit? Public spending ain't the cause. Revenue, however...

With the election over, pressure to cut public programs has become quite intense. In almost all of the corporate owned media someone is barking on about it.

Another option -- increasing revenue from corporations and the wealthy is not mentioned.  However, data clearly indicates that Ontario does not have an overspending problem compared to the other provinces.

Instead, it indicates Ontario has very low revenue. 

Ontario has the lowest public spending of all the provinces on a per capita basis (see the chart from the 2014 Ontario Budget below).  So there is little reason to suspect that we have an over-spending problem.  If anything, this suggests we have an under-spending problem.

Ontario has lowest revenue and lowest spending of all Canadian provinces

The Ontario government has also now reported in the 2014 Budget that Ontario has the lowest revenue per capita of any province.  This is particularly notable as other provinces are quite a bit poorer than Ontario and therefore have a much more limited ability to pay for public spending.  (Also notable in this chart is the weak role federal government transfer payments play in Ontario finances.)

Low Ontario revenue is not a one-year flash in the pan.  Statistics Canada data for 2009 (the last year before Stats Can terminated the series) indicates that Ontario had the lowest per capita revenue at that time as well. And by quite a ways.

Ontario has lowest government revenue of all provinces

The Stats Can data, however, goes a little further.  It indicates that Ontario has the lowest revenue as a percentage of the economy (GDP) of all the provinces. Arguably, this is better way to compare provinces as it considers the capacity of each province to pay.   Below is a chart comparing "own source" revenues from the various provinces.  ("Own source" revenues are those only from measures imposed by the Ontario government - -they exclude transfers to the Ontario government from the federal government).

Ontario "own source" revenue 3.5 percentage points of GDP less than other provinces

Own source revenue for Ontario was 14.4% of GDP, while in the rest of Canada it was 17.9%, i.e. an astonishing 3.5 percentage points of GDP lower in Ontario.

Ontario own source revenue far less than rest of Canada as % of GDP

If Ontario had taken the same own source revenue as the rest of Canada, the treasury would have an extra $19.5 billion in 2009. The deficit would be toast and our big problem would be to figure out how to spend the extra cash.

Given the very limited assistance Ontario gets from the Harper federal government, the situation is more extreme if we consider total revenue (i.e revenue from measures imposed by the Ontario government and from transfers from the federal government to the Ontario government). Ontario total revenue falls a full 8.4 percentage points of GDP less than the average for the rest of the Canadian provinces.
Ontario government total revenue over 8 percentage of GDP less than rest of Canada

If Ontario hit the level of other provinces for total revenue, we would have an extra $46.8 billion in revenue.

It would be a challenge to spend it all.

Notably, the shortfall that arises simply because of smaller transfers from the federal government to Ontario is equal to 4.9 percentage points of the total Ontario economy -- $27.3 billion in 2009.

Little appears to have changed since 2009.  Using data from the ten year report in this year's Budget, government revenue as a percentage of GDP has remained pretty flat.

Ontario government revenue as % of GDP flat over ten years

The data behind these charts are attached here -- over two spreadsheets that can be downloaded.

The future?  Despite very low government revenue in Ontario, the Liberal government is not likely to significantly increase taxes on corporations and the wealthy -- unless the balance of power changes in favour of working people. 

So working people may be stuck with real spending cuts. Worse, as noted last week, without better job growth, the cuts may have to be greater than currently planned  if the government keeps to its official plan to balance the budget in 2017/18.   

Increased inflation in Ontario (now reported at 3% annually) may help improve revenue growth.  But it won't help workers in the public sector who are facing a government determined to keep settlements well below that level.   

Thursday, July 17, 2014

Ontario job creation falls well short of plan

100,000 new Ontario jobs per year forecast

If Ontario tries to cut its way to a balanced budget, weak employment figures suggest the cuts may have to get a whole lot worse.  Here's why.  

In the Budget, the government projected 100,000 job growth in 2014, 2015, 2016, and 2017. That's an annual increase of about 1.4%. 

But the government is having a problem meeting its jobs target in 2014.  

Comparing the average of the first six months of 2013 with the first six of 2014 shows an increase from 6.861 million jobs to only 6.904 million.  That's only 43,000 new jobs over the year, an increase 0.65% -- less than half of the government's target.  

The Public Sector: Given sharp public sector austerity, the main brake on job creation has been public sector employment. 

Even without Tim Hudak, public sector employment has decreased between the first six months of 2013 and the first six months of 2014 by some 40,000 jobs.  

The good news is that the decline may be easing.  For the most recent month reported, June 2014, public sector jobs were down only 18,700 compared with June 2013.  Earlier in 2014 we were much further back:  in February 2014, Ontario had 57,300 fewer public sector jobs compared with one year earlier.

Public sector job losses holding back job growth in Ontario

Given the austerity both the provincial Liberal and federal Conservative governments propose, public sector jobs are likely to continue to be a brake on job creation.   

The Private Sector: There are some signs of life in private sector job creation, but not nearly enough to offset public sector austerity.  

Private sector employment has increased by 80,400 jobs, comparing the first six months of 2014 with the first six of 2013.  That is a 1.8% increase. Notably, however, for the most recent month reported, there was a loss of 49,600 private sector jobs –  a one month 1.1% drop in the number of private sector jobs.  

49,600 private sector job losses in June 2014 in OntarioSlow job growth and the impact on public services and public healthcare:  The recent provincial Budget was of course an election Budget  -- so it plans a larger funding increase than we have seen in recent years. A whopping 2.55% program funding increase is officially planned. In contrast, the previous three Budgets only increased program spending 4.1% in total. Aan annual rate, that is about half the increase proposed in the election Budget .

Many voices for big business are now urging the government to return to a full on attack on public spending. 

Obligingly, the Ontario government’s spending plans for the following three years are extremely grim, much worse even than the three Budgets before the election Budget. A tiny 0.59% increase is proposed for next year, followed by 0.08% (yes  -- 8 one hundreds of one-percent) in 2016-17, followed by a spending cut of 0.67% in 2017-18 to balance the Budget.  In fact the plan is to spend exactly the same in 2017-18 as in 2014-15. 

With inflation and population growth, this means significant real cuts in programs. Even the Globe and Mail estimates this at a real spending cut of 3% per year.

The jobs and growth solution: One easy way out of such an unsettling picture for public sector services (and public sector workers) would be better than expected growth, and better than expected job growth.  

So far, that is not happening.  Quite the reverse.

Of course, it is early days yet.  We will see where the job and growth outlook goes in the months leading up to the next Budget

But without some improvement, even the draconian spending plans now in place may not be enough to balance the budget.

Cutting real public spending is the government's main strategy to end deficits. But it is coming with weaker than planned employment growth and that means we may fall short of the government's plan for revenue growth.  That will drive up the deficit and we are back to square one.  

What's the option then?

If jobs and growth fall short, other ways to deal with the deficit would be [1] more public spending cuts or [2] revenue increases or [3] simply putting off balancing the budget.  More on those options next week.

The full Statistics Canada numbers behind this employment report can be downloaded here.  


Tuesday, July 15, 2014

Ontario hospital capacity falls short of other provinces

Rest of Canada has 38% more hospital capacity than OntarioOntario has far fewer hospital beds than other provinces.  Compared to other countries, we are even further behind. 

For the club of the 33 richest nations (the Organization of Economic Cooperation and Development), the average is 4.8 hospital beds per 1000 population in 2012 (or the reported year closest to that).  The OECD reports  just 2.74 beds per 1000 population for Canada for 2011.(The OECD data can be downloaded here) 

Canadian Institute for Health Information (CIHI) data suggests a very similar average for Canada -- 2.79 beds per 1000 population in 2012. Ontario beds however only come out at 2.34 hospital beds per 1000 population.  For the rest of Canada, it is 3.24 beds, closer to the norm. (The CIHI data can be downloaded here)

In other words,  the rest of Canada has 38% more hospital beds per 1,000 persons than Ontario.   The average of the 33 OECD nations is more than two times higher than Ontario. 

In 1990, according to OECD data, the OECD countries had on average 10% more beds per capita than Canada. By 2000, that had increased to 47% more beds.  By 2005, 71% more.  And by 2012, the OECD countries had 78% more hospital beds per capita than Canada.

OECD countries have 78% more hospital beds than Canada. Sharply up from 1990.

But compared to Ontario, OECD countries had 108% more beds per capita in 2012. 

Despite this, bed cuts are happening all over Ontario as austerity forces cuts in hospital capacity. 

The low number of beds in Canada goes hand in hand with the low number of hospital discharges in Canada -- we have about half the number of the OECD average.  

Unlike other countries, Canada provides universal, comprehensive public provision only to hospital and physician services.  So it is not so surprising that in Canada government especially focus on reducing hospital beds and services.

Comparing the mix of beds: The CIHI data indicates that the mix of beds in Ontario resembles the mix found in the other provinces. Notably, however, the share of acute and “LTC” beds is somewhat lower in Ontario than the rest of Canada.  

As a result, acute beds (medical and surgical beds), fall even further behind: the rest of Canada has 49% more acute beds compared to Ontario.

Rest of Canada has 49% more acute beds than OntarioOntario has far fewer acute care beds than rest of Canada

Some limits on this data: the CIHI figures are current as of April 2012 and the data does not include Quebec and Nunavut.   Note also: the CIHI data refers to only hospital beds used for hospital purposes – it does not refer to residential long-term care (LTC) beds that are sometimes found in hospitals  (presumably CIHI's definition of “LTC” is mostly comprised of complex continuing care beds).  

Tuesday, June 24, 2014

Rest of Canada spends 23% more on hospitals than Ontario

Rapidly increasing gap between what other provinces & Ontario spend on hospitals
Provincial government hospital expenditure per person in Ontario compared to the rest of Canada based on CIHI data.
A large gap has grown between what the Ontario provincial government spends on hospitals and what other Canadian provinces spend. 

Since 2004/5 the gap has grown from a mere $9.43 per person to $316.50 per person in 2012/13. 

Nine years ago, the difference was 1%. Now, the other provinces and territories (as a whole) spend  23% more per person on hospitals than Ontario does.   

That is an astonishing difference. 

Or at least the size of the difference is astonishing.   But that gap completely fits with the low level of nursing hours per inpatient in Ontario compared to the rest of Canada, the higher number of nursing sensitive "adverse events", the low level of hospital beds in Ontario, the low level of hospital admissions in Ontario, and the high level of hospital bed occupancy in Ontario.

Ontario has fallen so far behind almost entirely during the tenure of the Ontario Liberal government. 

The Canadian Institute for Health Information data goes back to 1974/75. For the first four years, Ontario actually spent slightly more than the rest of Canada. 

Ontario hospital spending declines while rest of Canada grows

After that (except for several years during the early 1980s), Ontario and the rest of Canada spent about the same.  At least until more recent years.  

The current Ontario Liberal government has taken a radically different tack, with Ontario falling much further behind over the last nine years. In the last year reported, per person spending (in nominal dollars) actually went down in Ontario -- it went up $43 per person in the rest of Canada. 

With austerity much sharper in Ontario than in other provinces, and hospital spending restraint a central focus for the Ontario Liberals, Ontario is almost certain to fall even further behind in the next few years. 

The Mike Harris government initially sharply attacked hospital spending, but then quietly changed directions when problems became apparent. There is no such sign of a change in policy now. Expect the line on the chart below to go higher. 

Gap between Ontario hospital spending and rest of Canada

(The full figures behind these charts are below.)

Notably, the sharp differences between Ontario and the rest of Canada stand up no matter how the average is created.  The un-weighted average of the spending of the other nine provinces  (created by simply adding together the average per person expenditure of the other nine provinces and dividing by nine)  leads to even more stark results: the un-weighted average of the other nine provinces was $1845 in 2012/13, fully $501 more than the Ontario government per person expenditure of $1344. 

Ontario may be in a more difficult fiscal situation than the other provinces, but this sort of difference in spending is not likely sustainable.  Something has to give -- sooner or later.  

Provincial government hospital expenditures
Total expenditure divided by population.
Total expenditure divided by population.

Ontario per capita expenditure
Canada (excluding Ontario) per capita expenditure
Canada (excluding Ontario) per capita -Ontario per capita: 
$ difference
Canada (excluding Ontario) per capita/ Ontario per capita
 $                   189.81
 $                   172.59
-$                       17.23
 $                   217.45
 $                   217.24
-$                         0.21
 $                   252.23
 $                   244.71
-$                         7.53
 $                   256.23
 $                   253.47
-$                         2.75
 $                   267.20
 $                   277.31
 $                        10.12
 $                   284.88
 $                   302.78
 $                        17.90
 $                   315.48
 $                   356.25
 $                        40.77
 $                   374.29
 $                   416.29
 $                        42.00
 $                   430.66
 $                   496.80
 $                        66.14
 $                   470.03
 $                   524.26
 $                        54.23
 $                   499.58
 $                   540.64
 $                        41.06
 $                   533.30
 $                   561.95
 $                        28.65
 $                   581.35
 $                   600.34
 $                        19.00
 $                   613.68
 $                   633.93
 $                        20.25
 $                   656.00
 $                   671.04
 $                        15.04
 $                   728.01
 $                   718.69
-$                         9.32
 $                   735.23
 $                   761.74
 $                        26.51
 $                   820.10
 $                   799.59
-$                       20.51
 $                   807.36
 $                   822.27
 $                        14.91
 $                   790.21
 $                   810.75
 $                        20.54
 $                   760.80
 $                   782.25
 $                        21.45
 $                   742.97
 $                   767.46
 $                        24.49
 $                   755.13
 $                   744.55
-$                       10.58
 $                   690.92
 $                   745.83
 $                        54.91
 $                   749.12
 $                   783.86
 $                        34.74
 $                   752.02
 $                   809.50
 $                        57.48
 $                   851.85
 $                   866.03
 $                        14.18
 $                   830.90
 $                   930.77
 $                        99.87
 $                   910.08
 $                   981.80
 $                        71.72
 $                   984.99
 $               1,028.85
 $                        43.87
 $               1,069.63
 $               1,079.06
 $                          9.43
 $               1,085.31
 $               1,130.40
 $                        45.09
 $               1,147.34
 $               1,199.11
 $                        51.78
 $               1,188.86
 $               1,260.90
 $                        72.04
 $               1,255.91
 $               1,359.10
 $                     103.18
 $               1,296.66
 $               1,444.27
 $                     147.61
 $               1,343.41
 $               1,613.50
 $                     270.09
2011–2012 f
 $               1,373.59
 $               1,641.24
 $                     267.65
2012–2013 f
 $               1,367.89
 $               1,684.39
 $                     316.50
Developed from [1] CIHI provincial government hospital spending data and [2] Statistics Canada population figures for July of each year.  Download this spreadsheet for more detail.