Truth and Fiction in City Hall, and City Budgets

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Truth and Fiction in City Hall, and City Budgets

This morning the City of Toronto will release its draft 2012 budget. While we don't know what it contains yet, what's certain is that the political rhetoric leading up to today has been vastly, overwhelmingly irresponsible.

Photo by {a href="http://www.flickr.com/photos/jonathancastellino/6031086562/"}Jonathan Castellino{/a} from the {a href="http://www.flickr.com/groups/torontoist"}Torontoist Flickr Pool{/a}.

There are a variety of different ways to govern responsibly. None have been in evidence in the lead-up to today’s budget launch.

For the better part of this year we kept hearing one number: $774 million. A warning, an invective, a call to action. This, we were told, is the measure of our despair as a city, the waste and frivolity and luxury we are indulging in. We are breaking the backs of the middle class, of seniors with property tax bills, of honest hard-working families, with our addiction to taxation and government programming. $774 million worth of greed.

To combat this, some bitter medicine: every department, board, agency, and commission would have to cut its budget by 10 per cent to help the City balance its books.

Except, as has since become evident, neither of these things have turned out to be true.

What’s galling about the $774 million figure isn’t that it’s false—though it is. What’s galling is the utterly irresponsible way it’s been wielded, like a baseball bat or heavy candlestick to the head, a blunt force object used to batter any real attempt at responsible fiscal conversation.

This is not, to be clear, a question of ideology. It is just math, and economics, and financial planning.


Where did the $774 million number come from?

This is the so-called opening pressure on our operating budget, the gap between how much we expect to spend and how much we expect to bring in over the fiscal year.

This number is a projection, made at the beginning of one year (technically, it was part of last year’s budget) looking forward to the next, based on best guesses for both revenue and expenditures; it isn’t an actual measure of an actual budget gap. We can’t entirely predict, for instance, how much snow clearing will cost, since we can’t foresee how much will fall. Nor can we safely project social assistance costs, as people’s needs rise and fall with the overall economy. Similarly, lacking crystal balls, we cannot say how the world markets will affect the interest that accrues to investments, nor how the real estate markets will alter how much tax revenue comes in via the land transfer tax or taxes on new construction.

So what City staff do is develop a budget based on estimates for those and many other figures, and to be safe they make those estimates very conservative. They assume revenues will be on the low end, especially, to be sure they are on safe terrain. The $774 million isn’t how much we are actually short, in other words: it’s how much conservative estimates projected, at the beginning of the year that’s now ending, we would be short if revenues were exceptionally low and we maintained all programs and services at existing levels.

But as the year unfolds we also have more information to work with: instead of estimates, real numbers start to come in. The City issues what are called variance reports every quarter; those summarize the differences between projected expenditures and revenues, and actual expenditures and revenues, and also include adjusted end-of-year projections based on this more current information. So, for instance, on October 4 the Budget Committee received the variance report for the first six months of 2011. That report showed that the City was doing $39 million better than expected as of June 30, and was projected to do $139 million better by year’s end. Since then other indicators have also come in, and the pressure on the budget is now significantly lower; the Star pegged it at $200 million this morning. It’s more than a rounding error, to be sure. But on an $11 billion budget, neither is it a sign of doom.


Truth in Numbers

Though a great deal of attention has been focused on the so-called $774 million gap, until relatively recently another significant number was getting far less attention: 10 per cent. That is the amount by which every City department, agency, board, and commission has been asked to reduce its budget for 2012.

The request was never voted on by council; it came via a memo from City manager Joe Pennachetti’s office. It is, at this point, just a request—council could give the TTC 10 per cent more rather than 10 per cent less if it voted to and found a way to pay for it—though most departments have acceded to it. And so we have another projection: a figure determined (we know not how) by the City manager, his estimate of how we could best manage that $774 million gap.

The rhetoric has been firm: Budget chief Mike Del Grande (Ward 39, Scarborough-Agincourt) has talked nobly of wrestling our incalcitrant overspending into line, leaving no stone unturned and with no policy area untouchable. Decisions, however, have been less so. The police, most notably, have been exempted from this tough love. Earlier this year they told the City that, regrettably, they wouldn’t be able to cut their budget by 10 per cent (in fact, it is going up 0.6 percent) and the City said: okay.

The police budget, by the way, is the second biggest line item in the City’s operating budget.


The Spin Machine

Toronto is not, by any reasonable definition, even close to the brink of bankruptcy, but we are perennially short of cash. Asking how to manage this—on both the spending and revenue sides—is exactly what we should be doing. It is the right question. We will make no progress answering it by hurtling intellectually fraudulent soundbites around in our attempt to answer it.

Which brings us to the actual ugly truth about our budget, which is that we haven’t had one honest day’s conversation about it at City Hall this calendar year. Just about every Torontonian who took a day off work or stayed up until 4 a.m., for instance, to get their precious three minutes of speaking time and ask councillors to save a library, or retain a bus route, or preserve Riverdale Farm, was met with the same question: and just how would you suggest we close this yawning chasm of $774 million? The question came often from Del Grande, sometimes from other committee members equally loyal to Mayor Ford. All of them wielded the same threat: if we don’t impose these cuts, the only way to make up our budget shortfall is with a 35 per cent property tax increase. They tried to scare residents, but not because they were bravely offering up frank talk about hard truths—it was nothing more than ideological bullying.

For one thing, as mentioned, the shortfall wasn’t that big. For another, property taxes aren’t the only ways to raise revenue in the City of Toronto. (Cue the funereal violins for the repealed Vehicle Registration Tax, or last year’s foolhardy property tax freeze.) But those don’t fit the message of the day, and they didn’t make it into those conversations between councillors and their constituents at City Hall.

Consider this astonishing bit of reporting from the Star, which discusses the Ford administration’s plan that led to this moment:

[The] 2011 budget would be pain-free. The mayor would drain hundreds of millions in surplus and reserve funding left by David Miller and get three huge payoffs for it. One, Ford could deliver an unexpected property tax freeze to curry favour with the voters who just put him in office. Two, he could fill the structural deficit gap without making a single significant service cut. And three—the most important—it would remove the safety net.

“Councillors will be forced to approve what we put forward,” said the official. “It was never about 2011. The real showdown will be for 2012.”

Mull that over for a minute. What we have here is a confession that the administration (or at least one top official in it) was intentionally making City finances more precarious, and they did so to score political points. It’s not, unfortunately, all that rare in politics, but it is no less unconscionable for all that.

There are a variety of ways to govern responsibly. Certainly, there are a variety of policy positions you can legitimately take with regards to whether and to what extent government ought to finance a library system, or mass transit, or seek to reduce its environmental impact. But our municipal government hasn’t done any of those things. Our muncipal government says: “we’d like to pay for these things, but we just can’t afford it”—as though what it could and couldn’t afford was a settled question.

One response: we can afford whatever it is we decide it behooves us to pay for. Telling us what we can afford to spend beforehand (for instance, by saying that the only way to pay for things is with a property tax increase) is playing the game with loaded dice.

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