Getting a control on spending

When I watch governments spend money, I frequently make the sort of naive observation that suggests I just fell off a turnip truck. Such as: To avoid a tax increase, Ottawa council has to stop big programs from getting way more expensive year after year. If they can’t, they should admit it and explain why. It could be tricky. I’ve complained before about the paradox that as western societies grow richer, governments keep taking more and more of our income. With poverty falling and most goods and services being produced more efficiently, you’d expect the reverse. Yet Councillor Clive Doucet reminded readers in Wednesday’s Citizen that when the old city council tried to freeze taxes in 2004, they “ended up slashing everything from yard waste pickup to public health.”

Why? If your budget is the same as last year, can’t you pick up as much trash? I’m also puzzled that the people who govern us for a living seem not just bad at it but strangely incurious. Don’t they wonder where the money keeps going?

My most rustic suggestion for tax control is to decide how much money you have to spend, and every time you add a spending item subtract its cost from the available total. When it’s all gone, stop adding things. If there are vital things you missed, take some others off first to make room for them.

Instead, Ottawa city council responded to this year’s budget crunch by assuring a swarm of special-interest groups their funding was safe. Say, fellers, maybe you’re going about this backward. To see why the budget is out of control, stop promising to spend and look for large spending areas that consistently grow faster than the tax base.

No, don’t change the subject to complain about too little revenue. I know Ottawa, like all municipalities, claims to be cash-starved. And yes, our cities are too reliant on property taxes. The provinces should give them other taxing powers, because as much government as possible should be provided at the lowest level possible in the name of accountability. And when one government raises money that another spends there’s too much room for buck-passing in a crisis (as between the feds and provinces on health care).

Still, for the city to cry poverty is a stretch. The total 2006 Ottawa budget was around $3.17 billion ($1.917 billion operating, $197 million police services and $1.183 billion capital, but $127 million of that comes from the operating budget). But $729 million of the capital budget was for light rail, leaving $2.4 billion. That’s over $2,800 for each of the 865,000 or so residents.

The federal government’s $210 billion for 32.8 million citizens is over twice as much, around $6,400 per person, but must cover defence, transfers to provinces for health and education, elderly benefits and so on. The province of Ontario spends about $84 billion a year on 12.5 million people, about $6,700 each, but, again, must cover health (over $32 billion), education ($15 billion or so), etc. Really $2,800 per city resident is quite a bit. The question is, where does it go? They can’t spend it all plowing big wet sticky heaps of snow across my driveway.

Since I’m not a city councilor I don’t have the details at my fingertips. So as an experiment I started researching this question at 11:00 on Wednesday. By 11:10 I’d managed to download the budgets from 2002 on and by 11:30 I think I’d figured out that from 2002 to 2006 the operating budget rose 23 per cent from $1.7 to $2.1 billion (counting police), with “Compensation” up 18 per cent, “Purchased Services, Material & Supplies” 25 per cent and “Transfers/ Grants” just seven per cent. In the alternative breakdown of the operating budget by function the biggest villain isn’t “Corporate, HR, Development Services, City Manager,” up 28 per cent, but “Transportation, Utilities, Public Works” at 40 per cent.

With light rail included, the capital budget would be big trouble, doubling in four years. But take out light rail’s $729 million and it’s down from $520 million to $371 million. That bothers me a lot because I’m an infrastructure hawk. An engineering rule of thumb says repair costs at least five times as much as maintenance, and replacement five times as much as repair. So it’s insane to delay infrastructure work. But if we truly cannot afford needed capital spending without hiking taxes just tell us. And cancel any fancy new spending projects (goodbye, light rail) while you fix the existing sewers, OK?

City staff can dig out details. But in principle, the problem is simple.

In a few major areas, spending keeps growing faster than revenue. Make it stop or you won’t be able to hold our taxes down.

Say, did I just drop a turnip?

[First published in the Ottawa Citizen]