Mayor’s misguided argument ignores other reform options for Toronto

In recent weeks, Toronto Mayor John Tory (pictured above) has slammed the Ford government’s spending plans, arguing that proposed funding levels for municipalities will lead to service reductions. City officials have chimed in, arguing these changes may also necessitate tax increases. Reporting in recent days suggests the Ford government will in fact provide cities with more money than previously planned for the current fiscal year, but that doesn’t solve the disagreement surrounding the future.

The suggestion, however, that less money from the province (compared to when the Wynne government was in power) will necessitate either higher taxes or service reductions seems misguided. Toronto has other options, including curbing spending on its wage bill for city employees, reducing administrative costs and reforming public services so they’re as good or better—at lower cost.

Let’s start with the wage bill. A recent study found that government-sector workers in Ontario (a category that includes municipal workers) enjoy a 10.6 per cent wage premium over similar workers in the private sector, on top of a host of other superior non-wage benefits compared to workers in the private sector. The study doesn’t disaggregate employees at the various levels of government, so we don’t know how large the pay premium is for municipal workers specifically—but it strongly suggests there are savings to be found by bringing city government wages into line with private-sector norms.

There’s further evidence that Toronto might find room for savings in this area. All municipalities spend a significant share of their budgets on wages and salaries, like all levels of government. However, in Toronto the share of all spending on compensation for employees is higher than in most other nearby municipalities. In fact, more than half of all City of Toronto spending is on wages and salaries. Out of the 26 municipalities in the Greater Toronto and Greater Hamilton area, only two other city governments dedicate more than half of spending to employee compensation.

Moving beyond the issue of compensation costs, Mayor Tory should also recognize it’s sometimes possible to reduce expenditures from planned levels while maintaining—or improving—service quality. This can happen when governments actually reform how they deliver services rather than just doing exactly the same thing but with less money than they hoped.

We saw this across Canada in the 1990s when provincial governments transformed their social assistance programs in various ways including by introducing time limits and worker training programs. The results were impressive. Spending fell but poverty fell as more people found gainful employment and increased their incomes above poverty levels.

If the Ford government sticks with its plan to substantially slow the rate of spending growth below what prevailed in the last years of the Wynne government, it’s bound to face more opposition from city governments expecting more revenue from Queen’s Park. But the argument that there are no options besides service-quality reductions or tax hikes is simply mistaken. Rather than make this misguided argument, municipal officials across the province including Mayor Tory should examine their budgets (and Canadian history) for opportunities to reform the operations of government. Indeed, to lower costs without raising the spectre of tax hikes or lower-quality services for residents.