Cuts or Taxes or … ?

(First Posted May 27th, 2019)
 
When the Council for the Township of the Archipelago recently announced that they would increase taxes to offset potential funding reductions by the Ontario Provincial Government, my initial response was that it was good to see a local government get in front of a likely potential problem. This action being acceptable provided that the tax revenue be placed in a separate account to ONLY be used should the specific funding cut occur, otherwise it would just be an unjustified tax increase. Upon later consideration, and due to additional observations regarding the behaviour of other municipal governments, I am now not so sure that I still feel the same way.
 
As the governing Conservatives increasingly attempt to reduce financial transfers to various groups and service providers throughout Ontario, it is interesting to watch a number of municipal mayors and councillors complain that they just cannot absorb the loss of financial help from the Province. Obviously, their resistance is most supported by the public when the financial cuts are linked to highly visible services that affect people directly. The resulting emotional attachment to a service causes people to prioritize it over those that they perceive to be more ‘distant’ from their day to day lives. When a service is subject to funding reduction, this prioritization can cause them to focus only on their potential loss, and to neglect understanding, and actively addressing, both the root cause behind the need for increased financial restraint and any alternative solutions. Politicians commonly tap into the public’s emotions in order to rally support for what THEY want to do.
 
The ‘root cause’ behind the need for reductions in provincial financial transfers is our dangerously high $345 BILLION provincial government debt, which our governments, including the currently ruling Ontario Conservatives, have continually increased by running annual budget deficits. Because we don’t directly ‘experience’ this government debt, compared to most day to day services, it goes unnoticed and we do not have the same emotional attachment to it. But it does exist, and it does have a significant indirect affect on the level of service that we receive, since the accompanying $13 BILLION in annual debt interest payment wastes money that could be better used to pay for needed programs and services.
 
Any current, or potential, government that ignores the pressing need to address our debt is simply fiscally irresponsible. It will not disappear on its own. Until we get all levels of government spending under control, we will continue to run budgetary deficits, our debt will only increase, our wasted debt interest payments will increase, and we will be FORCED into even more substantial service funding reductions in the future. Very quickly, in order to maintain some level of required services, the financial reductions will need to be supported by tax increases. Since higher taxation will have a direct impact on us, we WILL respond emotionally, especially if we go through a period of low services and high taxes. Perhaps it is better to start ‘living within our means’ today before the taxman cometh in a BIG way.  
 
So what are they doing about it?
 
One would think that, since the budgeting and handling of our local tax dollars is a municipal government responsibility, they must have enough ‘financial savy’ to be aware of the current provincial (and federal) debt load and the subsequent current and future negative impact. So they SHOULD understand the reasons why the Province has less of our provincially donated tax dollars available to give them, both now and in the future. Yet do they really care? Rather than be blamed for a reduction in local services due to less provincial funding, isn’t it easier to protect their re-election self-interest by rallying an issue-sensitive emotional public with the hope of a Provincial policy reversal, despite knowing that ‘success’ would place us all in deeper debt? Isn’t it easier to hope that someone else will absorb the needed reductions; “cut somewhere, just not us”. Isn’t it easier to ‘pass a worse problem on’ to future governments and generations than to understand and adapt to the current situation, and to be an active part of the solution today?
 
Perhaps we need to shift some of the focus and evaluate what our municipal governments have done to reduce the impact of reduced provincial funding. Have they got their OWN finances under control? Have they streamlined their operations and costs to provide the most efficient and effective services? Or have they become so accustomed to receiving provincial donations that they don’t see the need to continuously improve their performance? And as a result, are their protestations simply an attempt to deflect attention away from their own lack of fiscal responsibility so that they can maintain the ‘status quo’? And are they positioning themselves to lay all of the blame on the Province so that their ‘only alternative’ will be to increase taxes to make up for the shortfall? It’s so much easier to tax then to change. 
 
Close but no cigar.
 
“So what about the Township of the Archipelago example? Aren’t they getting in front of the issue and preparing for the worst?”
 
Perhaps, but the question should similarly be asked; “has the Township of the Archipelago put in the effort to ensure that THEIR financial house is in order before defaulting to a tax increase?” On the surface this might seem like wise preventative planning but, rather than focus on rationalizing and reducing their expenditures, they are instead taking the easier route of simply passing the costs onto their constituents by raising taxes in advance of the actual need to do so. And without being challenged on this, we can expect that future tax increases will become the ‘go to’ solution while blaming the inevitable increased provincial funding cuts.   
 
“The best predictor of future behaviour is past behaviour”.
 
Do we fully trust the Township of the Archipelago to make fiscally responsible decisions? One might wonder since, at the Council level, there have been some questionable financial practices over the years. The fact that there are 10 councillors serving 6 wards should raise some obvious concerns since these 4 extra councillors accumulatively cost approximately $100,000 per year in extra salaries and expenses. Also, considering that some of the annual expenses of all 11 representatives (Reeve included) could be suspect (especially when, over the years, they considered it to be acceptable to expense alcohol on the taxpayer’s dime), one could question their overall financial integrity. Rather than reduce some of these expenditures to potentially cope with funding reductions, they are more than willing to raise our taxes.
 
By extension, these overt examples can create doubt that Council is providing effective financial oversight regarding the cost efficiency of the Township’s municipal operations. Since this is their approach to council fiscal responsibility, should we not wonder whether they are paying close enough attention to how our tax dollars are being spent? Are they truly holding our municipal staff accountable for the efficient and effective delivery of the services that we want? And again, is it not just easier to raise our taxes than to evaluate and improve upon municipal operations. No organization should be exempt from continuous improvement.
 
While we should continue to be aware and concerned about the loss of direct services, we need to accept that something has to be done to reduce the provincial debt. We need to get as emotionally attached to reducing government waste and keeping taxes low as we are to the services that we expect our governments to provide. We have to raise our expectations, and hold accountable, ALL Ontario municipal councils to ensure that near and future tax increases come ONLY after they have reduced their own costly inefficiencies. Otherwise this mess is only going to get worse.