Over the last three weeks, I had the students in my public management course simulate the Ontario budget process, and here’s what happened.
I assigned them to two-person teams, including the premier and chief of staff, minister and deputy minister of finance and of the largest program departments (Health; Education; Training, Colleges, and Universities; Community and Social Affairs; Transportation; Children and Youth Services; Energy and Infrastructure; Municipal Affairs and Housing; Environment), as well as a minister and deputy minister of the privatization secretariat.
The program departments were asked to contribute to reducing the deficit by decreasing aggregate spending by $3 billion, roughly a 5 per cent base budget cut. The privatization secretariat was asked to analyze total or partial privatization of the LCBO or Ontario Lotteries and Gaming (OLG). User fees were accepted as a substitute for budget cuts. The exercise was thus designed to reflect the challenges of restoring fiscal balance that Canadian governments will face in the aftermath of the Great Recession.
The program department teams had two weeks to research their department’s programs and budget and prepare submissions with proposed budget cuts or increased user fees. The minister and deputy minister of finance analyzed the proposals and made their own recommendations. The premier then convened a cabinet meeting to discuss the proposals and, a few days after the cabinet meeting, announced his decisions.
What, with the advice of cabinet, did the premier decide? To meet the $ 3 billion deficit reduction target, there would a partial privatization of the LCBO to bring in $1.5 billion, $ 940 million (32 % of the total) in budget cuts, and $ 560 million (18 %) in increased user fees. The budget cuts were primarily in Health (Local Health Integration Networks and the mismanaged eHealth initiative, rather than OHIP), Education (the public and Catholic school boards saving money by operating a joint school bus system), and Transportation. The bulk of the increased revenue came from higher hydro rates. The students, like the Ontario government they are simulating – as evidenced by its Throne Speech earlier this week – have little appetite for cuts in public services and preferred to balance the budget by increasing revenues.
As an instructor, my concern is whether this was a successful learning exercise. In general, the task of organizing a process to achieve a collective goal that conflicts with individual departmental interests is one that engages students. Consider more specifically the form the exercise took. We would like public sector budgeting to be as easy as managing a Facebook page, where you can readily add new friends or drop ex-friends. In reality, governments tend either to add many new programs, or cut many existing programs, but do not do both simultaneously.
A simulation that deals with new programs (say a pot of $ 3 billion in new spending) is relatively easy because the participants can find ideas for new programs bruited about in the media, and then concentrate on new programs to the exclusion of their departments’ existing ones.
A simulation that deals with cuts to existing programs is more challenging because it forces the students to learn about their department’s programs and mandate, go through the Estimates, and then make some choices about what to cut. Learning how to make sense of the Estimates is particularly valuable. In addition, looking for efficiencies gives students an incentive to search intensively. For example, the Ministry of Education team found a pilot program in the Peterborough area where the public and Catholic school boards are sharing buses and recommended scaling this up province-wide.
One of the fascinating things about a simulation is that teams in a comparable situation may react differently. For example, the Community and Social Services (COMSOC) team refused to offer any cuts, arguing that their mandate involved helping the hardest hit victims of the recession, and these people should be spared any additional pain. On the other hand, the Children and Youth Services (CYS) team reluctantly were willing to propose cuts to child welfare benefits and programs targeting at risk, low-income, and disabled children. The finance minister and premier, acting compassionately, agreed to exempt COMSOC and rejected most of the proposed CYS cuts.
One question that arises is whether some of the cuts proposed were classic “Musical Ride cuts.” The Ministry of Education team went so far as to propose merging the Catholic and public school boards. They were not aware that Ontario’s Catholic schools have their status enshrined in the Constitution, so at most this would have been an unconscious Musical Ride cut. But I think there is more to it than that.
We have had quite a few things entrenched in the Constitution – for example assured ferry service to Prince Edward Island – or enshrined in agreements – the Crows Nest Freight Rate – that have ultimately been modified in response to economic and technological change. So, for the students to challenge the separate status of the Catholic schools was not a clever attempt to outsmart a budget cut, but rather an honest recognition that the province bears additional cost in having two school systems and that, under conditions of fiscal constraint, it is reasonable to look for ways, such as shared bus service, to rationalize them.
Another concern in a budget-cutting exercise is what Eddie Goldenberg calls the PIMBY, or please in my backyard, syndrome. While there are some public investments that most constituents and legislators don’t want in their backyards – prisons, garbage dumps, nuclear waste storage facilities – there are others – highways, government offices, museums – that they yearn for.
The Ministry of Transportation proposed delaying construction of the Windsor-Essex Parkway, but the minister of finance and premier rejected the proposal. If you look through the cabinet lineup, you’ll discover that Finance Minister Dwight Duncan represents Windsor-Tecumseh and Economic Development Minister Sandra Pupatello represents Windsor West, so it’s easy to see why that proposal wouldn’t make it through Cabinet. On the other hand, if at some point in the future the Ontario Government becomes very intent on balancing the budget, then you could imagine the Windor-Essex Parkway would be the first major transportation project to be delayed, with Finance Minister Duncan leading by example.
For an instructor, a simulation project like this takes considerable time for design, social engineering, consultation, evaluation, and feedback. However, I’m convinced that the students gain a deeper understanding of the budget process, discover how concepts apply in practice, and enhance their management skills by being responsible for a management process. And they now await the McGuinty Government’s budget to see how it tackles the issues they have confronted.