9/8/17

More room for public spending in lead up to election

The 2016-17 Ontario Public Accounts came out yesterday – almost a month early. The Accounts finalize the books for 2016/17 and show that the deficit is down a further $500 million from the last estimate for 2016-17 (which was made in the spring in the 2017 Budget).  

The Shrinking Deficit: The deficit is now down below the billion dollar mark to $991 million.  That is a full $3.3 billion less than the estimate made in the 2016 Budget, continuing the long term trend by the Liberals to massively overestimate the deficit.  Contrary to those who have claimed the deficit was insurmountable, the real story is that it has been consistently overestimated for years.
    
Revenue wobbles: Revenue did beat the 2016 Budget estimate for 2016/17  -- but only by $2.2 billion, 1.6% more than projected. The spring 2017 Budget estimated that revenue would beat the 2016 Budget projection by a larger figure -- $2.64 billion, 2% more than projected (albeit with a somewhat different accounting methodology). So this is a bit of a come down. 

Total revenue increased by only 3.37% compared with 2015/16.  The main drag on revenue growth was the largest component of revenue -- tax revenue.  It increased by only 2.7%. 

This is a surprisingly modest increase given that the economy did significantly better than expected over the fiscal year. Nominal growth (the key driver of tax revenue) was better than expected, achieving 4.6% in 2016. The first quarter of 2017 (i.e. the last quarter of the 2016/17 fiscal year) was particularly impressive.  The province's first quarter 2017 economic accounts suggest nominal growth hit a very impressive 8% on an annualized basis (with real growth hitting an also impressive 4% annualized). The Canadian economy has continued to see strong growth in the second quarter of 2017. 

Spending Less than Expected: Expenses were $100 million lower than budgeted due to a $700 million lower than expected interest expense and $600 million in extra program expense. 

That is extra program spending of less than half a percent, i.e. not much. Given all the mid-year funding announcements made by the government starting in the fall of 2016, that may surprise some. But, as this government often under-spends its planned budgets, this very modest  program spending increase is pretty consistent with past practice.  

The health care budget got a $236 million in-year increase – mostly for hospitals (which we can take some credit for).  

Total program expenditures increased only 1.5% over 2015/16; health care expenditures increased 1.9%. That is well below the real cost pressures on public services of aging, population growth and inflation. Austerity was alive and well in 2016/17. 

The war with the AG continues: The Auditor General offered only a qualified opinion on the Public Accounts – due in part to the longstanding differences she has with the government over pension accounting (a difference that would add much to the deficit and debt).

The FAO misses, again: The Public Accounts provide further evidence that the Financial Accountability Office (FAO) estimates of the deficits are out of whack.  

Only a few months ago the FAO estimated (using the government’s pension  accounting method, not the Auditor's) the 2016-17 deficit as at $2.8 billion – i.e. 280% of the actual deficit. 

That is pretty much in line with the FAO's earlier gross overestimates.  I expect more  along these line from them when they release their long term fiscal forecast later this month -- hopefully they will at least adjust their base year estimate for 2016/17 now.

If you can't hammer public spending with the deficit, then what? The government continues to forecast balanced budgets for this year and the following two.  

The Progressive Conservatives wisely continue to pivot away from their previous excitement over the deficit  -- but continue to pivot towards complaints about the debt, despite the continued significant decline in debt to GDP that was achieved in 2016/17. Debt in 2016/17 was 1.4% less of the GDP than two years earlier.  

Ontario own source revenue to GDP


Debt charges to total revenue also continues to decline -- for the third year in a row:

Ontario debt load


Now is our best chance in years to bolster public services: All in all, Ontario continues to have more possibilities for public spending growth in the lead up to the provincial election in June. Now is the time to apply pressure.    

8/24/17

Public Health Restructuring Proposed

An “expert panel” appointed by the Minister of Health and Long-Term Care (MOHLTC) has now recommended the reduction in the number of Public Health boards from 36 to 14, matching the number of Local Health integration Networks (LHINs — provincially controlled regional bodies that oversee hospitals, long-term care, home care, and other health services).

The 36 currently existing public health units provide health promotion and disease prevention, health education, communicable disease control, immunization, screening services, and food premise inspections.  Each health unit is governed by a board of health and is administered by a medical officer of health who reports to the board. 

The boards are largely made up of elected representatives from the local municipal councils (and, in some cases, are the municipal council).  The MOHLTC cost-shares
the expenses with the municipalities, providing up to 75% of costs for ministry approved programs, 100% of costs for certain programs (e.g. Healthy Smiles Ontario, the Infectious Disease Control Initiative, Smoke-Free Ontario), and 100% for programs in areas without municipal organization.



The expert panel states that its members “agreed with findings and observations of
a series of reviews over the past 20 years, which all determined that Ontario’s public health sector would be stronger if:
·       there were fewer health units with greater capacity
·       there was a consistent governance model
·       the sector was better connected to other parts of the health system.”

The panel was comprised of nine people:  four public health officials, one municipal official, a hospital official, an advisor from an indigenous nation, a LHIN official, and
an academic.  The panel has devised a proposal that would leave public health with significant independence from the municipalities, the LHINs, and, to some extent, the province. 


The new regional public health organizations would have similar but not identical geographic boundaries as the LHINs.  The new organizations would have free-standing, autonomous boards.

The restructuring would impact existing legislation.  The expert panel, however, notes that “a detailed analysis will be required to determine how much of the proposed structure and governance model will require legislative amendments”.


The expert panel also notes that the “current public health funding model may be a barrier to implementing the proposed structure” and adds that “the ministry will need
to re-visit funding constructs in order to implement the recommendations”.


Municipal response:  Municipalities currently play the lead role in public health and have legislated authority for public health.  Public health geographic boundaries are based on municipal boundaries.  Moreover, in many large municipalities, the municipal council directly controls public health and the public health workforce is integrated into broader municipal bargaining units.  So, the response of the municipalities to this proposal is important. 

The Association of Municipalities of Ontario (AMO) plans to convene its Health
Task Force in early September to consider the report.  The Task Force will help
the AMO Board develop a response at the AMO Board’s September meeting.
There was also be a session at the AMO Conference on the future of public health on August 15th.


Some municipalities may not be too pleased with the expert panel proposal, particularly those municipalities with direct control over public health (Toronto, Ottawa, Hamilton, York Region, Durham Region, etc.).  They will lose control over a significant portion of their operations, but may still be required to fund those operations.

Toronto public health would be divided up several ways.  So, for example, Scarborough residents would be lumped into a public health unit that would extend into Algonquin Park.  Aside from Toronto, six other existing public health units would be split in two.  Most large municipalities (e.g. Ottawa) would have their pubic health unit placed in public health units with much larger geographic areas, including large rural and country-side areas.

Municipalities that formally controlled their own public health would have to vie with other municipalities for seats on the public health board.


Notably, the expert panel places the Ministry of Health and Long-Term Care at the top of the public health pyramid, just as is the case for the LHINs:


Labour relations: There is no contemplation or consideration in the report of the impact on industrial relations.  The panel only notes that “it may be helpful to engage consultants with a strong track record in change management to help with transition planning”.  The impact on working conditions, collective bargaining, bargaining units, and work locations are unknown at this time, but could be significant. 


The provincial response:  To move this proposal ahead, the provincial government must consider a myriad of legislative, funding, and implementation issues.  It must provide significant political support for the proposal.

Publicly, the Ministry of Health and Long-Term Care (MOHLTC) was non-committal in its initial response to the report — claiming only that the Ministry is now reviewing the recommendations provided by the panel, and exploring options for further engagement. Health minister Eric Hoskins said that this report and the “subsequent conversations” are “important first steps”.

Political viability:  To date, the proposal has received little or no media scrutiny.  The Ministry of Health and LTC released the report over the summer in a “bulletin” rather than with a media release.  Large urban municipalities that currently directly control public health may have the most to lose if this proposal goes ahead, but those same geographic areas have in the past been the main base of support of the Ontario Liberal government.
  
While municipal concerns about this proposal may grow, a provincial election is scheduled for June 2018 making passage of the required legislation challenging for a Liberal government trying to focus on “good news” in the remaining months before the election.  Public health alignment with the LHINs may be controversial.  In the past, the Progressive Conservatives have been highly critical of LHINs. 

The expert panel proposal is brief and is vague on many important implementation issues.  The panel itself suggests that more work is required to identify the scope of legislation that needs to be revised.  The panel also suggests that the MOHLTC will have to review “funding constructs” to implement the proposal—that alone could be a very difficult issue.  The panel also suggests that a change management consultant is needed to deal with “transition issues”.  No comment was even made on labour relation issues by the panel. 

Public Health is a vital public service and should not be tampered with lightly.

8/1/17

Ontario long-term care staffing falls far short of other provinces

CUPE and others are campaigning for a legislated minimum average of four worked hours of nursing and personal care per resident per day in long-term care (LTC) facilities.  New research indicates that not only is LTC underfunded in Ontario, it is also understaffed compared to the other provinces. 

LTC staffing falls short:  The latest data published by the Canadian Institute for Health Information (and based on a mandatory survey undertaken by Statistics Canada) indicates that staffing at long-term care (LTC) facilities falls far short of other provinces. 

Part of this is driven by a low level of provincial funding for LTC.





Ontario has 0.575 health care full-time equivalent employees (FTEs) per bed staffed and in operation.[1]  The rest of Canada reports 0.665 health care FTEs.[2]  The rest of Canada has 15.7% more health care staff per bed staffed and in operation than Ontario.[3] 



No other province reports fewer LTC health care staff per resident (or per bed) than Ontario.[4]

Occupancy rates are slightly higher in Ontario than in the rest of Canada (97.4% in Ontario versus approximately 96.8% in the rest of Canada).  As a result, there are
0.590 health care FTEs per resident in Ontario and 0.687 in the rest of Canada.
Ontario:  (0.575*100/97.4) = 0.590
Rest of Canada:  (0.665*100/96.8) = 0.687

This is equal to 3.15 paid hours per day in Ontario and 3.67 hours in the rest of Canada.
Ontario: (0.590*1950 hours) / 365 days = 3.15 hours per day
Rest of Canada: (0.687*1950 hours) / 365 days = 3.67 hours per day



This means the rest of Canada has 16.4% more health care full-time equivalent staff per LTC resident than Ontario.  That is over half an hour of extra paid care for every resident on every day.

Other LTC Staff:  This gap is not made up by more of other sorts of staff.  In Ontario, there are 0.220 FTEs per bed in non ‘health care’ occupations (i.e. “administration and support”: dietary, housekeeping/laundry, administration, maintenance, plant, security, and other general services).  But in the rest of Canada there are 0.276 FTEs per bed.  In other words, there are 25.5% more administration and support employees per bed in the rest of Canada than in Ontario.

In total, there are 0.931 FTE staff per bed staffed and in operation in the rest of Canada but only 0.794 in Ontario.  Per resident the ratio is 0.962 staff in the rest of Canada compared to 0.815 in Ontario.

Another way of putting this is that there are 18% more paid staffing hours per resident in the rest of Canada than in Ontario.  That is 47 more minutes of paid care and service for each resident every day than in Ontario. 



Conclusion:  Care in long-term care facilities across the country falls short of what is required.  However, care in Ontario facilities is lower than anywhere else across Canada.  Stronger staffing levels are required.  Residents in long-term care facilities are becoming sicker and so low levels of staffing is becoming a bigger problem.  

The low level of provincial funding and staffing of LTC facilities is consistent with the low level of funding and staffing of Ontario hospitals demonstrated in reports from the Ontario Council of Hospital Unions / CUPE, the Ontario Health Coalition, and others.


The latest CIHI data on LTC staffing is available by clicking here.  The CIHI data on LTC occupancy rates is available by clicking here.


[1] Notably, this is lower than reported for 2012 – which showed 0.598 FTEs per staffed and operational bed.
[2] CIHI defines a FTE as total paid hours per year divided by 1,950 hours.  For the CIHI numbers, see the links above.  
[3] Quebec is not included in the CIHI data.   The CIHI “health care staff” category includes somewhat more staff than included in the proposal for 4 hours worked care put forward by CUPE and others.   While the bulk of staffing hours fall within the CUPE proposal (RN, RPN, and PSW) the CIHI health care category also includes a few other staff - -physiotherapists, occupational therapists, recreation staff, etc.  The CIHI figures also report ‘paid hours’ rather than “worked hours”.   CUPE however focuses on the latter as it more directly measures the actual amount of care provided to residents. We estimate that worked hours equal roughly 88% of paid hours. Also note: the most recent year reported by CIHI is for the 2013 fiscal year. 
[4] BC is however close – with 0.596 health care FTEs per resident.

7/17/17

Hospitals rely on private sector funding more and more

The Canadian Institute for Health Information (CIHI) reports that total expenditures on Ontario hospitals increased to $23.7 billion in 2016.

This is an increase of 2.4% since 2015 and 6.1% since the 2012. While provincial government expenditures increased 4.7% over the four years between 2012 and 2016, private sector expenditures on hospitals increased at a much faster rate -- 15.8%That is more than three times the percentage increase of the provincial government increases. 

Private sector expenditures increased $124.9 million in 2016 to $3.62 billion.  That was a typical increase. The four year private sector increase was $493.1 million, averaging $123.3 million per year.  

That's  a lot more than chump change. Key types of private sector payments to hospitals are payments by private insurance companies and out-of pocket payments by individuals. 

Hospitals are now relying significantly more on private sector funds.  In 2012 private sector expenditures accounted for 13.99% of total expenditures on hospitals but by 2016 they accounted for 15.27%.  

Looking deeper, this in fact continues a decades long trend of an increasing portion of expenditures on hospitals coming from the private sector.

In 1975 just 6.17% of expenditures on hospitals came from the private sector.  But this has continuously increased:

• 10.57% in 1985
• 11.95% in 1995
• 13.34% in 2005
• 13.99% in 2011
• 15.09% in 2015
• 15.27% in 2016

The average increase in private sector expenditure on hospitals since 1975 has been 8.9%  compared with a total average expenditure increase on hospitals of 6.4%.  Over the last 41 years, private sector percentage increases have averaged almost one-third more than public sector expenditure increases. 
Private sector payments to Ontario hospitals compared to total payments to hospitals
Over the last four years, however, private sector percentage expenditure increases have been over twice as much as total expenditure increases.

Here is a comparison of the annual percentage increases for the last four years:





This is an alarming trend -- private payments are made for a purpose and that purpose is likely access to some aspect of hospital service on better terms than the general public.  

As this change is four decades long, it likely reflects some deeply entrenched trends that will not be easy to reverse, unfortunately. It certainly sounds like it fits with the squeeze of public services and the increasing inequality that has characterized developed capitalist societies since the 1970s.   

But the larger role of private sector expenditures on hospitals also indicates that provincial government or public sector expenditures no longer paint a full story of hospital funding. 

Even with provincial government (austerity) expenditure increases of only 4.7% over the last four years, total expenditures on hospitals increased 6.1% thanks entirely to a 15.8% increase in private payments.

The relevant CIHI numbers are embedded below. (For all the CIHI health care expenditure data download "data tables" on this CIHI hyperlink)






6/7/17

Ontario is not sinking into deficit: Better public services can be won

The Financial Accountability Office (FAO) predicts significant deficits over the next several years - despite also predicting significant economic growth. Using the government's accounting method, the FAO is predicting budget deficits of $0.5 billion this year, increasing to $3.6 billion in 2021-22. 

If the FAO is right then we do have a problem in terms of building our campaigns for better funding. Deficits will be used to clobber popular expectations for improved public services.  Already the right has taken up the FAO report to spread the deficit alarm.  

While the FAO does make some useful other points, its conclusions about the deficit are likely off base.



Revenues and Expenditures: The FAO expects tax revenue to grow 3.9% on average over the next five years, slightly below their expectations for nominal economic growth.  This is significantly better than their forecast for expenditure growth of 3.3% (which, notably, is a little below the underlying cost and demographic pressures identified of 3.6%). 

However the FAO also expects much slower growth for the second largest source of revenue, federal transfers -- 1.9% growth. 

As a result, the FAO places revenue growth at a more moderate 3.3% average over the five years -- exactly the same as their estimate for average expenditure growth. 

That sounds odd as the they expect the deficit to grow from $600 million this year (2017/18) to $3.6 billion by 2021-22.  

The base year problem: A big part of the explanation is that the base year for their five year forecast is not this year but last year, 2016/17, and they put the deficit for that year at $2.8 billion. 

So an increase to a $3.6 billion deficit after five years is in fact a modest increase in the deficit - - an increase of $800 million by 2021 -2022, or just under 0.5% of total expenditures.  On average, the deficit is expected to increase by less than 0.1% of expenditures each year for five years. 

In other words, there will be a big deficit in five years because there already is a big deficit. 

Is there really a big deficit in the base year?  The forecast deficit of $2.8 billion in the  base year of 2016/17 is itself quite odd.  It is well over a billion dollars higher than the Ministry of Finance estimated in the 2017/18 Budget.  

Key here is that the FAO estimates $1.2 billion less revenue for 2016/7 than the 2017/18 Budget estimated.  This is entirely due to a lower estimate of tax revenue by the FAO.

However, the 2017/18 Budget came out a month after the 2016/17 fiscal year ended. The finance ministry should have a pretty good estimate of revenue from the previous year one month into the next fiscal year.  They will, after all, finalize the books for that year in just a few months.  

Indeed, if past practice is any guide, this government almost always starts out with a very pessimistic assessment of the state of the deficit and then achieves a lower deficit.

Like a cautious middle manager, the government almost always initially overestimates the deficit and then in successive announcements beats its target and reports a lower deficit. Last year, for example, when they finalized the books for 2015/16 in the fall of 2016, they recognized that revenue was actually $2 billion higher than they had estimated in the 2016/17 Budget.

So the FAO forecast of a $2.8 billion deficit in the base year of 2016/17 is suspect. If past experience is any guide, it is more likely lower than the $1.5 billion the government has estimated rather than higher.  

What's the impact if the deficit in the base year is overestimated?  If the FAO's deficit in the base year is an overestimate, then what of their forecasts for the following five years? Well, Ontario will start from a much better position to avoid future deficits.

Notably, the FAO's predicted five year dollar growth in the deficit from $2.8 billion to $3.6 billion is based on the idea that a sizable deficit exists -- that expenditures in the base year were $2.8  billion more than revenues.  

Much of the predicted growth in the deficit is not because revenues are predicted to increase at a slower percentage rate than expenditures, but because the two are predicted to increase at the same percentage.     

As a result of this, the gap between the larger amount (expenditures) and the smaller (revenues) grows in dollar terms (although not in percentage terms). 

Over $500 million of the FAO's predicted $800 million increase in the deficit over five years is simply the result of the fact that both total expenditure and total revenue are supposed to increase at exactly the same percentage rate and expenditures are supposedly starting out at much higher dollar amount than revenues. 

But the math changes and the growth of the deficit is much less if the existing deficit is not as big as supposed.

(It is not clear where the FAO's other $300 million predicted growth in the deficit comes from -- rounding differences perhaps.)

The FAO Deficit Track Record: Notably, the FAO forecasting record has not been great. Well into the 2015/16 fiscal year (November 2015), they estimated the deficit for that year as between $6.8 billion and $8.5 billion.  The FAO now recognizes the deficit for that year as $3.5 billion, i.e. $3.3 billion to $5 billion less than they predicted.   

Even after 2015/16 ended the FAO was still way off.  Last year’s FAO spring economic and fiscal report (dated May 18, 2016) concluded the 2015/16 deficit would be $2.2 billion more than they now admit.  

In other words, a month and a half after the fiscal year ended, the FAO forecast the deficit as 63% higher than it was. 

If the FAO was off by that much predicting what happened the previous year, how much might they be off forecasting five years in the future?  Particularly as much of the FAO's predicted deficit five years in the future is based on the questionable notion that there already is a big deficit. 

Federal Transfers: On another related point, a big part of their modest revenue forecast is very modest  growth in federal transfers.  Part of this makes sense -- as Ontario's economy improves, federal equalization payments to Ontario will decline.  

But it is certainly worth considering that federal transfers for future years may turn out to be greater than currently announced.  The Feds don't get a lot of political credit for promising money years in the future.  They get more credit for cash that will come shortly. The federal election in 2019 may also shake some more federal cash loose (for example we won  a big increase in federal health care money from the Conservatives in the 2011 election).   As a result, the FAO's approach may inherently tend to underestimate future federal transfers.  

If the future is like the past, we will see an improved fiscal situation than predicted in the provincial Budget when the books are finalized for 2016-17 -- and not a worse situation, as predicted by the FAO.  

If that is the case, we will be in a much better situation to face the years ahead than the FAO forecasts -- even if revenue percentage increases simply match expenditure increases, as the FAO predicts

One last point: any long term forecast is dodgy, and the further into the future, the more dodgy.  Economic crisis, or revenue bonanza are hard to predict years in advance. But it is in the longer term that the FAO is more pessimistic. In the shorter term their forecast is much more optimistic.   

In  the immediate future, the FAO estimates very significant revenue growth for 2017/18 -- growth of $8.2 billion or 6.3%. That is very similar to the increase estimated by the Ministry of Finance for 2017/18 and is far above the FAO's five year forecast of only 3.3% annual revenue growth. 

This also provides some reason to think there is a little more gold to come, this year at least. 

Economic crisis will come at some point and create another crisis that will be used by our rulers to undermine public services.  

Good prospects: But barring economic crisis, discount the deficit doomsayers (they have been getting it wrong for years) and don't be discouraged. 

We remain in a good position to win better public services -- just as we did last year when the FAO (and the government) grossly overestimated the deficit.  

5/16/17

Hospital funding increase less than last year's

Ontario revenue and  expense projections 2017/18


In  the lead up to the Budget, the government crowed  that they had heard the public and would improve funding for hospitals. However, based on government  announcements, they actually plan to lower the hospital funding increase this year.  

They state they will increase hospital funding $518 million, a 3% increase.  But, on closer inspection, the funding increase announced for last year was significantly higher.


In the 2016 Budget, Ontario announced that it would increase hospital funding $345 million -- about a 2% increase.  Subsequently, the government announced another $140.3 million for hospital funding in the Fall Economic Statement – bringing the total increase to $485 million.   That is, of course, already quite close to the much ballyhooed hospital funding increase of $518 million for 2017/18. 

But it looks very much like the actual hospital funding increase in 2016/17 was higher than $485 million – higher in fact than the $518 million increase announced for 2017/18.

A little after announcing the $140.3 million hospital funding increase, the province, in its 3rd quarter report, announced an investment of $95.4 million to support additional capacity for stem cell transplants in Ontario.  Sunnybrook hospital will become the second hospital in the Greater Toronto Area -- along with Princess Margaret hospital-- to provide a full range of Complex Malignant Haematology, including stem cell transplants.  Apparently a very small portion of this work goes outside of the country, but most of this work is done in Ontario hospitals. 

Now, in the new Budget, the government has raised their estimate of the in-year health care spending increase from $348 million (in their 3rd quarter report) to $483 million – i.e. another $135 million increase.  The Budget describes the $483 million health care in-year increase as “primarily due to additional investments in hospitals to support the needs of patients and reduce wait times, and funding to support additional stem cell transplants in Ontario.”

So, it is likely that at least half ($242 million) of that $483 million in-year increase went to hospitals.  In total that would mean that hospitals got, at least, a $587 million increase last fiscal year ($345 M + $242 M = $587 M).

That would be $69 million more than the announced increase for 2017-18 – 13% more.   

The announced hospital funding increase for this year (3.1%) is in fact exactly half of the percentage increase announced for all other non-Ministry of Health programs (6.2%).
  
This all suggests that more funding has got to be announced over the course of this fiscal year if they are going to keep crisis from the door - -just like last year.

Premier Wynne told the media shortly before the Budget that she had heard the complaints about hospital funding "loudly and clearly", that she knew hospitals needed her support and  that  help would be coming. 

On Budget day, however, we got an announcement of a smaller increase than the announced increases for last year and (as discussed last week) further confirmation that they plan to decrease hospital capital funding for new hospital beds and facilities. 

Apparently, we will have to speak more loudly and clearly to be properly heard. 

P.S. - - the "good" news?  Hospitals in low population growth communities around the province  are beginning to report funding increases at around 2% of ministry funding for the hospital.  This tends to confirm the suggestion in the Budget that all hospitals will get at least a 2% increase in ministry funding. That is better than has been the case.  The confirmation of at least that level of funding early in the fiscal year (which began April 1) provides some basis for supporters of public hospitals to build on as the year unfolds.