Government: "collective bargaining is achieving results & protecting services"

Yesterday I noted that the Liberal Budget plainly states that they are planning many more years of austerity.  So how does it see collective bargaining with public employees? And, moreover, public sector pensions?  

Collective Bargaining: The government claims that provincial public sector agreements are much lower than other sectors –i.e. private sector settlements, municipal settlements, and federal public sector settlements:

Indeed, the government headlines the claim “Bargaining Is Achieving Results and Protecting Services”.

The government does not say it will try to dictate results in collective bargaining (as the previous McGuinty/Duncan government tried to do), but proposes that compensation settlements should fit "within Ontario's existing fiscal framework" and suggests that productivity improvements could be one way to achieve fiscal and service delivery goals:

Going forward, compensation costs must be addressed within Ontario's existing fiscal framework, which includes no funding for incremental compensation increases for new collective agreements. The government is confident that broader public sector partners can work together to achieve outcomes that remain within the fiscal plan while protecting services. In future rounds of bargaining, the government is willing to work with employers and bargaining agents to look at mechanisms such as productivity improvements as a way to achieve fiscal and service-delivery goals. (My emphasis.)

Pensions

Aside from wages, the government also claims to have achieved huge reductions in pension expenses for employees in the broader provincial public sector.

The government claims, extraordinarily, that their pension expenses will fall dramatically.

Projected Pension Expense
	2012–13	2013–14	2014–15	2015–16	2016–17	2017–18
Current Forecast	3.0	3.1	2.6	2.4	2.4	2.4
2012 Budget Forecast	3.1	3.6
Difference in Forecast	-0.1	-0.5
Drummond Commission	3.1	3.7	3.6	3.7	4.0	4.2
Difference in Forecast	-0.1	-0.6	-1	-1.4	-1.6	-1.8
Note: Numbers may not add due to rounding. Source 2013 Budget Table 1.3 and 2012 Budget Table 4.5

That's $500 million savings in 2014-15 over this year’s pension expense and $700 million a year in the following years. At $700 million that is an incredible 22.6% reduction in their pension expense compared with 2013-14. Indeed, compared to the pension expense they forecast in last year’s Budget ($3.6 billion in 2013-14), the annual savings by 2015-16 would be $1.2 billion. That would be a 33% reduction on a $3.6 billion expense.

If the government’s figures are meaningful, even a $700 million savings would mean the government has saved about 1% in compensation costs -- before collective bargaining has even begun.

The Budget document also compares the current forecast with Don Drummond's even higher forecast of pension expense -- this is the same guy who suggested health care expenditures were headed to 70% of spending when it has actually been heading back down to less than 40% for some years. So -- big surprise -- Dummond's figures are way off here as well. 

Photo: Metrix X

Health care spending continues decline

Contrary to the hysteria from conservatives, health care spending continues to decline as a percentage of the provincial budget.   Last year, health care accounted for 38.5% of total expenditures, this year the government plans to bring it down to 38.3%.  This continues the trend downwards since 2003/4 when health care accounted for 40% of total expenditures.

Austerity Redux

The provincial Budget reports that program spending is going up an impressive sounding 2.99% and health care spending is going up 2.3%.  Although that sounds like a larger than expected increase in these days of austerity, these figures are, unfortunately, misleading. The reason is that last year funding fell well short of the Budget plan and the government is now playing catch-up.

The 2013 Budget indicates that the government spent considerably less than it budgeted in the 2012 Budget.  For example, the Ontario government spent $595 million less on health in 2012-13 than it budgeted, a 1.2% reduction.

Overall, total spending was $2.4 billion less than budgeted -- that is a decrease of  just less than 1.9%.  Indeed, comparing Budgets, total interim expenditure in 2012-13 was actually $600 million less than total interim expenditure in 2011-12. This reduction is entirely accounted for by a reduction in program spending of $900 million (falling from $114.5 billion in the interim report for 2011-12 to $113.6 billion in the interim report for 2012-13).

Bottom line – the 2.99% increase in program spending promised for this year is catch-up.  With that increase we do equal the program spending planned for this year in last year's Budget, but, given considerably lower than expected interest on debt, the total expenditure plan is actually $600 million less than planned in the 2012 Budget for 2013-14.

The 2013 Budget sets total spending only 1.1% higher for 2013-14 than the 2012 Budget planned for 2012-13.  Similarly, health care spending planned in the 2013 Budget for 2013-14 is only 1% higher than planned in the 2012 Budget for 2012-13.

As noted repeatedly on this blog, the government consistently (and wildly) overestimates its deficits.  But it's not just spending that it gets wrong, it's revenue too.  This year, revenue was almost $2 billion more in 2012-13 than forecast in the 2012 Budget.  (They also overestimated the interest on debt by $200 million.)

The government plans more of the same tiny funding increases in the future. 

Summary of Medium-Term Expense Outlook $ Billions Interim Plan Outlook 2012–13 2013–14 2014-15 2015-16 Health Sector 47.8 48.9 49.8 50.8 Education Sector 22.4 24.1 24.6 24.8 Post-secondary & Training 7.4 7.7 7.8 7.8 Children's & Social Services 13.8 14.3 15 15.2 Justice Sector 4 4.1 4.1 4.1 Other Programs 18.3 17.8 17 16.1 Total Programs 113.6 117 118.3 118.8 % Increase 2.99% 1.11% 0.42% Interest on Debt 10.4 10.6 11.1 12.2 Total Expense 124 127.6 129.5 131  Source: Budget Table 2.19

Program spending is supposed to increase another 1.1% in 2014-15 and then really head to the cellar with a 0.4% increase in 2015-16, a miserly 0.0% in 2016-17, and a miserable 0.7% decrease in 2017-18.  This is supposed to balance the budget by 2018, but will be a dead weight for the economy  -- something even the Budget documents quietly recognize.  It will also provide sharply shrinking public services, as population, aging, and inflation will more than eat up such tiny nominal increases. 

Notably, the Budget reports that Ontario already has the lowest public sector program spending per capita:

Health Care

The government sticks to its usual script on health care in the Budget:

•  They will continue to move surgeries and procedures currently conducted in hospitals to specialized “not-for-profit” clinics. The government specifically sites colonoscopies, dialysis, and vision care (citing, in particular, expanded glaucoma and retina surgery at the Kensington Eye Institute).

• The Ontario Drug Benefit (ODB) program will become less and less universal by requiring higher-income senior ODB recipients to pay a larger share of their prescription drug costs starting in August 2014;
• Hospital base funding (i.e. funding for existing services) will continue to be frozen, but other pockets of money will be available, with a total funding increase of 1.7%. The Budget adds that a 1% increase in hospital funding equals $217 million, so this should equal $369 million in new hospital funding.
• Funding for “home and community care services” (however that is defined) will increase by 5% -- up from a promise of a 4% increase last year (although whether that was delivered, who knows?).  For what it’s worth, the Budget suggests 5% increases will continue for 3 years. The government says it will be investing to reduce home care wait times for nursing services and improve personal support services for clients with complex care needs.

• Long-term care homes will get a “two per cent annual increase in funding for direct resident care to address the increasingly complex care needs of patients.” Despite the rhetoric, there is no sign that the government will require LTC facilities to use this money to improve staffing levels through a legislated staffing standard.
• The government continues their promise of 23 “Health Links” to encourage greater collaboration to enable high-needs patients, such as seniors and people with complex conditions, receive more responsive care in the right place.

More on how the government sees collective bargaining and public sector pensions in the Budget tomorrow.

Photo: The Ontario Legislature, redux

Now the doctors speak out about hospital cuts

Scarborough General Hospital. Photo by  Benson Kua

While physicians and surgeons have not usually been at the forefront of campaigns against cutbacks, more of them have begun to express concerns about hospital cuts in Ontario. Here are three recent examples. with a different emphasis from each.

At a Rotary Club meeting May 3, Dr. Robert Ting, president of the Medical Staff Association at the Scarborough Hospital, noted the issue isn't management, it's a lack of funding, and it's getting worse.

"The politicians, they can criticize the management and everything, but even if they had the best management in the world, they wouldn't be able to keep the hospitals open under this kind of scenario...This is just the tip of the iceberg," Dr Ting warned.   The hospital is facing $19.6 million in cuts and more than 300 doctors have signed a petition decrying the cuts.

In Perth-Smith Falls, the Lanark County Medical Society organized a well attended public meeting about the local hospital cuts.  Following the meeting the president of the Medical Society wrote: 

"The local LHIN lead was full of the predictable empty rhetoric of surgical efficiencies, telehealth, health connect and improved access to home care. Nobody was buying it.

"Yes surgical techniques have reduced hospital length of stay but hospitals are not just for surgery; they also look after the frail elderly with chronic complex illness. Many people in that audience had experienced the dislocation of senior loved ones to other hospitals because of lack of beds or experienced prolonged waits in the ER for the same reason. Visitng loved ones in a neighbouring hospital is difficult when you don't drive and there is no bus.

"Those in the audience have come to understand that telehealth is a one way ticket to the ER. Many of the four thousand residents in Smiths Falls without a family doctor have realized that Health Connect is largely a PR exercise and many in our community have tried to access home care to find out that it is largely a phantom program with no meaningful support offered.

"To suggest that with an increasingly ageing population, who despite the best wishes of government continue to get ill as they grow older, we will need less hospital capacity is, at best an exercise in wishful thinking and at worst, a deliberate attempt to mislead the public.

"The beauty about being in a rural farming community is that everybody recognizes BS when they smell it. This doesn't pass the sniff test."

Health Sciences North, Sudbury. Photo by mysudbury.ca

Finally, Dr. Peter Zalan, president of the Medical Staff Association at Health Sciences North in Sudbury told the hospital's board Tuesday night that provincial austerity measures are increasing wait times for non-emergency procedures and that the city's surgeons are not happy. Many surgeons have told him "they are embarrassed to meet new patients in the office since they cannot offer them timely help."

The Sudbury Star reports that Zalan doesn't disagree hospitals need to be downsized, but called it "curious" the province isn't directing hospitals on what services to cut. "They give no directions on what to downsize...Just, 'suck it up.' "He wants the province to tell hospitals what to get rid of and to "tell the public what not to expect any more."  That leaves the province's 149 hospitals each trying to decide on their own what programs and services to chop. "That's chaos...You want a system."

Ontario Finance Minister plans cuts in public services

The Ontario government just lopped another $2.1 billion off their 2012-13 deficit estimate, cutting it from $11.9 billion (as of January) to $9.8 billion. This means that since 2010 when they started their public sector austerity drive, they have now cut their deficit estimates by $18.1 billion.

Deficit (in billions of dollars)	2009–10	2010–11	2011–12	2012–13	Total
2010 Budget	21.3	19.7	17.3	15.9	74.2
2013 April	19.3	14	13	9.8	56.1
Reduction in Deficit (billions)	2	5.7	4.3	6.1	18.1

Since the 2012 Budget, the government has repeatedly cuts its deficit forecast for 2012-13.  It started this year estimating a $15.2 billion deficit (just slightly lower than it estimated in 2010, as noted above). It now puts the deficit at a whopping $5.4 billion less.

That is one mighty big error over the course of just one year.

To put it in perspective, the government only hoped to save $8.8 billion over 3 years through the wage freeze and concessions it proposed for public sector workers last summer.

The attack on collective bargaining by the McGuinty government led to a lot of trouble and disruption for savings that were being achieved largely through other means -- and at a faster rate.

Despite the consistent write down of the deficit during the course of the fiscal year, the McGuinty /Duncan government (for political reasons) intensified its attacks on public sector workers and collective bargaining, changing its position last summer from demands for a two year wage freeze to one where it demanded concessions (as well as the wage freeze).

Perhaps the Wynne government has dialed it down a bit on free collective bargaining.  But will it do likewise on public services? Comments from the new Minister of Finance, Charles Sousa, suggest otherwise.  He told  (who else?) a corporate crowd yesterday that he would deliver a funding increase of  less than 1%.  

That would actually be a cut from Dwight Duncan's budget last year.  There, total spending was supposed to increase 1.4%  (with program spending budgeted to increase 1.2% --see Budget table 2.31 ). In the previous year, 2011-12, total spending increased 2.8%, and in 2010-11 spending increased 4.9%.

With the population growing about 1.15% per year and inflation estimated for this year and the next two at 2% by the Ontario government, a spending increase of less than 1% would mean a very significant real decrease in public services --  even assuming ambitious efficiency gains.

Indeed, the nominal funding increase proposed for 2013-14 is worse than last year under Dwight Duncan. And if inflation does goes higher...

Photo: ammiiirrr

Are Ontario P3 projects plagued by corruption?

A commission of inquiry has heard that SNC-Lavalin deliberately went around Quebec's political party financing rules, leading to a flurry of donations to the governing Quebec Liberal Party in 2009. The donations came as the engineering firm was bidding on a major hospital construction project, the media reports.

What is not reported, however, is that this is a privatized P3 project.

One of the biggest in fact. These privatized P3 projects are designed so private sector corporations get their mitts on a much larger share of the booty than they would under normal procurement (e.g. billions of dollars in financing for the projects).

Former SNC-Lavalin vice-president, Mr. Yves Cadotte said SNC-Lavalin knowingly reimbursed its senior staff for their political donations. (Corporations are not allowed to make donations, or to reimburse their executives for their donations to political parties in Quebec.) SNC-Lavalin employees gave $101,200 to the Quebec Liberals in 2009, just as the P3 contract was being decided.

The firm won the $1.3 billion bid for the McGill University Health Centre project.

This is just the latest issue regarding the same P3 project. The (now) former SNC-Lavalin CEO and another former SNC-Lavalin vice-president have been charged in connection with the alleged transfer of $22.5 million to hospital bosses for the P3 project.

The (now) former top McGill hospital boss (who was also Stephen Harper’s CSIS oversight man) remains at large, having left the country before police could arrest him.

The McGill University Health Centre is now laying off staff in an effort to cut $50 million.

These aren't the first problems for SNC-Lavalin. The same VP implicated in the Quebec P3 hospital is now languishing in a Swiss jail for allegedly bribing the son of deceased Libyan leader Moammar Ghadafi. SNC-Lavalin won over a billion dollars in contracts in Libya, reportedly.

SNC-Lavalin is not exactly unknown to the Ontario P3 market either.  Indeed, a consortium involving SNC-Lavalin  won a $2.1 billion P3 privatization project for an Ottawa light rapid transit project in December. This was just days after its former CEO was arrested on the charges connected to the Quebec P3.

Despite the timing, there was little commentary in the media about this, even though the Ottawa P3 deal was announced by our then Liberal premier, Dalton McGuinty. There are dozens of P3 projects planned or underway in Ontario, involving billions of provincial tax dollars.

There have been multiple scandals in recent years as the Liberals expanded the scope of privatization (e-Health, Ornge, lax private clinic oversight, chemotherapy drug preparation problems, the extra costs associated Brampton hospital P3, and, last week the P3 gas plant problems exposed by the Auditor General).  Is another brewing?

Is it likely that similar practices have been avoided in Ontario? How was the Ontario government able to move ahead with the Ottawa LRT P3 project so soon after charges were laid against the former SNC-Lavalin CEO? What steps have they (or did they) take to avoid such problems?

Presumably, the government has developed some speaking notes to respond to concerns that might be raised by the media about these latest P3 scandals, but no one, as far as I know, has asked. And, in any case, if they do have a rationale, does it pass the sniff test?

Last week SNC-Lavalin Inc. agreed to a ten year suspension from bidding on projects funded by the World Bank because of another scandal (allegations of bribery in Bangladesh). The World Bank reportedly said the case against SNC-Lavalin is "testimony to collective action against global corruption." 

 But we are good to go in Ontari-ari-ario.

Photo 1 SNC-Lavalin by boldorak2208; Photo 2: Hassan_Madhoun. The Ottawa O-Train will connect to the Ottawa LRT project.
Photo 3: Voters at Kingston Health Coalition P3 Plebiscite 13 April 2013 by Doug Allan;