We need to refocus our budget discourse on what makes it meaningful, argues Alex Mazer.
Imagine you have created a budget for your household. Your domestic partner, who has little patience for financial details, asks about it.
You might reply by explaining how you are planning to spend less on eating out, but more on travel. Or how by buying used clothing instead of new, you can start saving for your kids’ university education. Most likely, you would talk about resource allocation and household priorities.
Here’s what I doubt you’d say: “Our income from my part-time job will increase by 1.85 per cent this year.”
This weirdly precise figure would tell your partner little about where you will actually spend your money—and, more importantly, how your personal finances are likely to affect your family’s life.
Yet this is how the City of Toronto’s budget is framed, and as we prepare for the municipal budget’s public release Tuesday morning, we should change that thinking.
The planned increase in residential property tax revenues (not to be confused with the actual property tax rate) has become the anchor of our city’s budget debate. Should it be two per cent or three per cent? Or 1.75 per cent or 2.25 per cent? This simple percentage figure is often the focus of the mayor’s budget instructions to City staff. It shapes much of the budget reporting and debate at council. And it informs how the public thinks about the budget.
There are three problems with this narrow focus on property tax revenues.
First, it creates the misleading impression that property taxes are high and rising. In fact, although the revenue the city generates from residential property taxes has increased roughly in line with inflation, the actual property tax rate has steadily decreased for years. And Toronto ranks near the bottom of its regional municipal peers both in terms of property tax rates and, even after considering its higher property values, absolute amount of property tax paid.
Second, residential property tax represents only about one eighth of the City’s total revenue for its operating and capital budgets— $2 billion on a base of $15 billion. It is an important revenue source but far from the only one. Other major revenue streams include: water rates, development charges, business property tax, TTC fares, the land transfer tax, and user fees for city services. With the exception of TTC fares, there is often little discussion about these other sources.
Third and most important, the narrow focus on the property tax levy diverts attention from what the budget is actually meant to accomplish: allocating scarce resources to priorities in order to achieve outcomes.
The property tax levy is far from irrelevant. It reflects what the average Torontonian can expect to pay in the main source of taxes they pay to the City in a given year. For some Torontonians, especially those living on a fixed income, this matters a great deal. But there is much more that our city budget debate should focus on.
We need new frames for thinking about the budget. Here are three alternative ways to think about the budget that I believe will lead to more meaningful public conversations and better outcomes.
Priorities. What activities and goals does the budget favour? Which does it deprioritize? How does budget’s resource allocation compare with the expressed political and policy aspirations of the mayor and council?
Outcomes. What social and economic outcomes does the budget aim to achieve? How likely, given the budget’s allocation of resources, are these outcomes likely to be achieved?
Performance. How well is City government performing? How healthy are its finances? How efficient and effective are its operations? How productive is its workforce? What is the multi-year plan for the City to improve its financial, operational, and organizational performance?
Reframing the budget can happen at multiple levels. The mayor’s instructions to City staff that kick off the budget process can put greater emphasis on broader objectives and less emphasis on property taxes.
Budget briefings for council, stakeholders, and members of the public can more explicitly link revenue and spending decisions to the City’s broader strategic plan, making it clearer what resources are being allocated to what priorities, and shedding light on the gaps between aspiration and funding.
The City can make greater use of evidence-based policy tools such as cost-benefit analysis, creating a better understanding of how programs and services lead to social and economic outcomes, and at what cost.
Journalists can report differently on the budget, talking about the priorities, desired outcomes, and performance of City government before talking about the property tax levy.
A reframed budget will better reflect a reality about public finance that too few people appreciate: that budgets are less about math and more about what we want government to do, and the kind of society to which we aspire. Through Toronto’s budget, we allocate nearly 10 per cent of our city’s GDP. With so much at stake, we can afford a wider lens.
Alex Mazer is a co-founder of Better Budget TO, a civic initiative dedicated to creating a more democratic, effective budget process in the City of Toronto.