Provincial Deficits and Debt Loads: Cut Spending Across the Board, Privatize Some Healthcare Functions, Say CEOs and Business Leaders

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1 Provincial Deficits and Debt Loads: Cut Spending Across the Board, Privatize Some Healthcare Functions, Say CEOs and Business Leaders COMPAS Inc. Public Opinion and Customer Research July 5, 2010

2 1.0 Overview By an overwhelming margin, the CEOs and business leaders on the COMPAS panel call on provincial governments to cut spending rather than raise taxes as a response to rising deficits and debt loads. Opinion tends to be hawkish. Thus, 91% want provincial governments to undertake commitments to pay down provincial debt in varying degrees over the next 5 years. To do so, 89% favour some form of reducing spending. No consensus emerges as to where the cuts should be made. Thus, there are segments favouring cuts in social service and post-secondary spending (along with heightened tuition costs), higher fees for government services, and various forms of privatization of services in healthcare. These are the key findings from this past week s Internet survey of CEOs and business leaders on the COMPAS panel. The weekly business survey is undertaken for Canadian Business magazine under sponsorship of BDO Dunwoody LLP. We were seeking the Panel s advice about what provincial governments should do about mounting debt and deficits. Ontario has been the worst off with a $ 20 billion deficit, increasing its total debt from $ 212B to $232B. Quebec s debt is $ 110B and its deficit almost $ 5B. BC s debt is almost $ 50B while its deficit is approaching $ 1B. Oil rich Alberta now has both a debt and a deficit. 2.0 Details Panelists were asked what the provinces should do about debt loads. 1 More than nine-tenths of panelists want provincial governments to undertake pay down of debt at varying rates over the next five years. Almost as many favour 1 The preface was as follows: We re seeking your advice about what provincial governments should do about mounting debt and deficits. Ontario is the worst off with a $ 20 billion deficit, increasing its total debt from $ 212B to $232B. Quebec s debt is $ 110B and its deficit almost $ 5B. BC s debt is almost $ 50B while its deficit is approaching $ 1B. Oil rich Alberta now has both a debt and a deficit. 2

3 some form of cut in government spending, as shown in table 2. About one in ten favours raising taxes, raising fees for government services, or privatizing hospitals while keeping them inside the public monopoly. Slightly higher percentages favour allowing competition from private or non-profit medical service suppliers; a still higher percentage favours across-the-board spending cuts outside health, education, and social services. Table 2: Canada s larger provinces spend almost three-quarters of their budgets on health, education, and social services. In percentage terms, what proportion of the deficit reduction should come from? Raising taxes 11 Raising fees for government services 9 Privatizing hospitals but keeping them inside the public monopoly 8 Allowing purchase of medical services from the private sector 16 % Exploring other forms of healthcare privatization (e.g. government funded medical accounts for individuals) 11 Raising fees for colleges and universities 6 Cutting social service spending 14 Cutting all services other than health, education, and social services 24 The following comments are verbatim suggests from respondents: Significant curtailment of spending and major government restructuring. There are substantial opportunities for positive, sustainable savings in spending through elimination of redundant, inefficient activities, and elimination of non-value added programs and initiatives. 3

4 Stop wasteful spending. favourable tax treatment for long term job creation-at least 3 years. 12 month capital write-off for new plant and equipment. Fire Dalton. Control over spending and the proper application of the additional tax benefit derived from the HST Reducing corporate welfare. I don't get it, why should the big banks and industrialists [receive benefits not available to small business]? Cap spending and raise taxes by an average of $2000 annually per individual taxpayer, on a progressive basis until the debt is eliminated less the HST windfall for Ontario and BC. Stop government corruption and waste Reduce unemployment, support and work with the business community, and pray that the world economy recovers quickly Provincial governments have to live within their means like the rest of us do. Politicians have to have the fortitude to live within their means. Stop buying our votes with our money. Stop pandering to special interest groups. Curtailing spending and getting the maximum value out of the balance. Lay people off. There has been a [Leynesian] economic theory taught for years. Spend in bad times and SAVE (pay off debts) in good times. Governments need to make decisions on good business practices - not politics. Reduce size and quit spending. Run it like a business. I am writing about Ontario but the comments are equally applicable to the other provinces. Reduce the size of the civil service and keep increases within CPI for the province. 4

5 Consider a small tax increase for all taxpayers, individuals and corporations. Have a high level committee comprised of a cross section of Ontarians that can create a plan for the health care system to get greater efficiency in costs and delivery of services. This committee must have teeth and the bureaucrats must provide input. Their recommendations should be incorporated into the political process. I feel the main problem with the health care system is government regulations that hampers sound business practices and adds frustration and costs to the system. Have a strong audit review of government spending to reduce the type of incidents that have resulted in waste, such as the OLG and the E-Health programs. Create jobs. Working people spend money and pay taxes. Ontario is rife with hidden taxes and an increasing burden of regulations. Ontario is not a friendly place to do business. Labour practices are anti business. Poor productivity is accepted and welfare is too easy to get. Reduce spending. One billion dollars on solar panels is foolish. Too much expensive regulation. Cut the size of government. A real committemnt to living within our means - might take a threat of federal intervention. A good start is railing in the size of the civil service, the "golden" pension/early retirement provisions and the ongoing wage increases in spite of declining tax revenues. Balanced approach to increase tax and attract new investors. Not to mention job creation. Becoming fiscally prudent. Better efficiency, and smarter spending would help. Ontario will be getting more $ from the HST. Better evaluation of projects and recurring spending to expected results or objectives. A results based approach to fiscal management would serve the provinces well. And like most individuals, a realistic expectation of anticipated 5

6 revenues compared with anticipated expenses...individuals cannot operate like government or they'd become bankrupt. Charger des frais sur assurance maladie -ticket moderateur - restriction sur certain soins -privatiser des soins. Control expenditures. The revenue stream will return but not for 2 years. Control spending - reduce staff and unnecessary services. Controlling government expenditures by cutting back on ministers and employee salaries, social programs, Inefficiencies in their operations and increasing taxes. Cut spending and privatize services in the delivery of medical care. Cut spending including public sector pensions. Cut spending. We have to look at healthcare and start imposing user fees to free up resources. Free goods are an invitation to use these goods. Cut the size of Government. Review all programs for redundancy and value and eliminate those that are of little or no value. Dispense with further expenditure on frivolous, ideologically driven social engineering programs. Eliminate the deficit and let economic growth reduce the debt to GDP ratio Elimination of waste; streamlining; increase other revenues to offset expenditures Ensuring top value to prod growth & investment & innovation. Financial discipline and ability to say "no" Flat income tax rate of 20% with no credits or deductions. 10% HST on all goods and services with no exemptions or credits. Freeze on spending. Elimination of all grants and subsidies to all businesses/festivals/arts and culture events. 6

7 Use technology to make the delivery of government services more efficient. Get rid of unions Government intrusion into too many aspects of life, excessive staffing and a culture which accepts low productivity as a way of life. Governments need to limit spending! We have been living well beyond our means for years and if we don't put a plan in place to end it, it will only get worse, along with the pain we will suffer as a result. Major review of programs and reductions plus far more attention to ensuring economy is robust especially manufacturing. Make sure we have a healthy agricultural sector. History has proven when Ag does well, so does the rest of the economy Politics...nobody willing to make the truly difficult cuts for fear it will cost them at the polls. Provincial governments need to be more business-like in their financial management as opposed to utilizing expenditures to buy votes. Reduced spending, beginning with as much contracting out as possible to reduce the impact of overinflated wage packages given to public service employees. Reducing the size of Provincial Government, and cutting Start cutting out waste i.e. non-productive programs and employees. Unlike business where you can't simply cut to prosperity our governments can cut, including salary levels. Stop duplicating federal programmes. The elimination of non essential programs & tax increases. Zero based budgeting, improving the delivery of health services by funding outcomes not inputs and instituting a deductable system or some other partial user pay, examining all program spending for affordability and need 7

8 making public sector pay less than private sector not greater. Our demographics are not going to make the debt situation Better provincial budget controls should be applied to ensure that savings are placed against debt and that budgets are not just spent so the same budget can be introduced next year. Capping spending and redistribute on essential priorities with a large personal tax increase. Governments must stop pretending they can work magic with non essential but politically desired spending. When the debt is paid live on a balanced budget like every fiscally responsible person or corporation has to do in the long run. It must start now but of course politically it will start never. Cutting public salaries and benefits to match the private sector. Governments should be looking at Departmental inefficiencies and reducing staff wherever possible. In the private sector, you either increase sales or reduce overheads in 'tough' times. Government can only increase revenues by increasing taxes, helping increase the number of taxpayers (i.e. reducing unemployment) or cutting overheads. Government loses sight of the programs because there are so many dept and programs. Is it possible that we need a smaller section to run, make the dept a zero based budget and push the programs to be lean and mean. WSIB should not be running a deficit, welfare or social assistance needs to be thought out better and run tighter. How about a new law that says that provincial government's budget spending can not exceed the previous year s revenue? The government needs to help native reserves to learn accountability and to be accountable within 20 years. 8

9 It is time to consider that we as a nation are allowing doctors and the medical community to decide what services we provide and to whom regardless of the prognosis. We should come to the realization that no-one gets out alive, and there has to be some cost effectiveness introduced for these expensive services, this is a very touchy subject and unfortunately we will probably ignore it until we have no option but to deal with it. Part of the deficit reduction should also come from cost cutting measures within the government but that was not an option in the previous question. The balance in the deficit reduction should come from having a healthy economy. Unless we can get the country into surplus, we cannot pay down debt. If the interest rates go up, which will happen over time, this eats into tax revenues. The responses would need to be province by province. Health care efficiencies are needed but vast improvements in wait times are also needed. Net savings is doubtful. The size of Government has to be heavily reduced at all three levels of Government wages and conditions should be reduced to wages only. Pensions and perks should be eliminated and bonuses only paid out of profits earned. No Government should be allowed to spend funds it does not have. 3.0 Methodology The COMPAS web-survey of CEOs and leaders of small, medium, and large corporations was conducted June 29-July 2, Respondents constitute an essentially hand-picked panel with a higher numerical representation of small and medium-sized firms. 9

10 Because of the small population of CEOs and business leaders from which the sample was drawn, the study can be considered more accurate than comparably sized general public studies. In studies of the general public, surveys of n=86 are deemed accurate to within approximate 10.6 percentage points 19 times out of 20. The principal and investigator on this study is Conrad Winn, Ph.D. 10