Introduction
We welcome this opportunity to provide a short submission of what we think should be the key priorities for the next federal budget, on behalf of almost half a million members of the Canadian Union of Public Employees working in communities across this country.
Our central argument is that the next federal budget should focus on reinvesting the large federal surplus in the broad range of social and economic programs needed to meet the needs of Canadian people and sustain this country’s future economic well-being.
It’s clear that the federal government will have a large financial surplus to allocate in the next budget. Budget documents estimated that the total federal surplus over the next five years would equal $100 billion. But if recent trends are any indication, it will be even larger. The latest economic data released by Statistics Canada August 31, 2000 shows the economy growing at a greater rate than previously forecast. The Royal Bank now predicts almost 4.8% real growth for 2000. The surplus will undoubtedly be higher than forecast.
Last year’s federal budget did not even come close to upholding the “50:50” promise of evenly splitting the surplus between program spending on one hand, and tax cuts and debt reduction on the other hand. Program spending got short-changed in the last federal budget. It provided more of a “25:75” split rather than the “50:50” promise that helped get this government elected.
What happened in the last budget is that out of the anticipated federal surplus of over $100 billion for the next five years, the Finance Minister allocated about 60 per cent of the surplus to tax cuts. When you factor in the $15-25 billion set aside for debt reduction (depending on how much of his contingency and “prudence” funds will be used for this purpose) the “50:50” rule became a “75:25” rule.
Under the five-year plan announced in the last federal budget, program spending (which includes all spending except for interest payments on the debt) will continue to decline as a share of Canada’s economy under this plan. Federal program spending has already declined from more than 15% of GDP in 1994 to 11.6 % of GDP in 2000-01.
The paltry amount dedicated to program spending in the last budget was immoral given that the federal budget surplus was created by drastically cutting program spending to bring it to its lowest level in 50 years, and by stealing from the unemployment insurance fund surplus $26 billion since 1994. Given the depth of previous cuts, even if the entire surplus had been spent in the last budget on program spending, it would not have brought federal program spending back to 1994 levels.
Cuts to spending over recent years contributed more to eliminating the federal deficit than did tax increases. Therefore the emphasis in the coming budget should be on restoring spending cuts over tax cuts.
We urge you to reject the calls for tax cuts from the most powerful and economically fortunate in favour or reinvesting the full surplus. We are firmly convinced by considerable evidence that the surplus should be reinvested rather than squandered on tax cuts. It is a more effective use of dollars to meet vital social and economic needs. As the Canadian health care system demonstrates in contrast to the American one, the public delivery and administration of social programs is more efficient than individuals trying to purchase comparable services through the market. And the macroeconomic effect of federal spending is far stronger on job creation than is tax cuts.
For the average CUPE member, last year’s federal tax cut amounted to about $1 a day – about the cost of a cup of coffee. Unfortunately, the federal spending cuts cost an individual a lot more in the higher user fees that result. For example, the increase in user fees for health care and education amount to an estimated $500 for the year, compared to a $375 tax cut. What good is a tax cut that amounts to the price of a cup of coffee a day, if you can’t get a hospital bed when you need it or child care for your kids? It does not make sense.
Also, tax cuts do nothing for the poorest members of our society – people with incomes so low they don’t pay taxes and therefore cannot benefit from a tax cut. They and other Canadians need federal investment in a childcare program, in a housing program, in social assistance and social services, in unemployment insurance, in training and job creation programs, in economic development, in health care, in education, in community infrastructure and programs, and more.
The next budget should increase spending to offset the major spending shortfalls it is responsible for. It is essential to restore the cuts made with the introduction of the CHST. We estimate the total cumulative cash cut to the CHST since 1993 is $25 billion.
On an annual basis, we believe the minimum amount that the CHST cash transfer should be increased by is about $6 billion to restore funding for health, post-secondary education and social services to their historic high levels (and increased to account for inflation). Our estimate is that health care and post secondary education funding levels are each about $1.2 billion below what they would have been if the 1993-94 cash transfer had been allowed to grow with inflation. The social services transfer is a massive $3.5 billion below what it would have been if the 1994-95 transfer had been allowed to grow. We also feel it is crucial to increase the annual CHST transfer by an appropriate escalator so that its value doesn’t diminish over time, as it has during the 1990s. But this increase would only bring funding levels up to what they had been prior to the CHST cuts. It does not address the need for increased spending to rebuild and expand these vital services.
It is abundantly clear that in the country’s economic surplus means that the next budget offers a tremendous opportunity for public reinvestment to meet social and economic needs.
We urge the Standing Committee to call for the next federal budget to signal a change in direction. It should stop the general retreat of the federal government from our economic lives. To continue in this direction is clearly a matter of choice, not because we don’t have the money.
Below we outline a number of key priorities for public investment in the coming budget.
Health Care
We fully expect that the federal government will announce increased funding for health care before the next budget at the First Ministers meeting September 11th that will then be reflected in the 2001/02 federal budget. It is essential that this next federal budget lay out a long term plan for restoring federal health care funding. The last two budgets pretended to be restoring cash transfers by making one-time allocations to the CHST. But the cash transfers now planned for 2003-04 will only be $15.5 billion. That is $3.3 billion less than the $18.8 billion that was ten years earlier in 1993-94. Plus costs would have risen significantly over the decade given population growth, inflation and the cost of new medical technology and drugs.
The $2.5 billion announced in the last budget is essentially only one-time funding, allocated over four years. At the end of 2003-04, this one time funding expires and the CHST reverts back to its 1997 level - $12.5 billion for all of health care, post secondary education and social assistance. The health care crisis will continue and be deepened. To prevent this, there needs to be a long-term plan for restoring the level of federal cash contributions from the current low point of approximately only 13% federal funding, back to the 50:50 federal/provincial shares of funding in the 1970s. A budget that provides one-shot funding over four years will not do it.
As well, the level of funding must be high enough to take the wheels off the move to privatize health care in response to a deteriorating public system. It’s clear that federal under funding of health care is read as a green light to privatize health care services by premiers like Ralph Klein and Mike Harris. Premier Klein used the drastic decline in federal health care spending to justify opening up private hospitals in Alberta in the face of tremendous public opposition. Corporate medicine has in turn interpreted the under funding as an opportunity to establish private for-profit clinics in several provinces which fly blatantly in the face of the principles of the Canada Health Act. Under funding of health care is undermining Medicare and is fostering the emergence of two-tier health care. This must stop and the first step is for the federal government to re-establish its prominence in the funding of health care. Only then will Health Canada have the capacity to impose meaningful sanctions.
The provinces have asked the federal government to come up with $4.2 billion for health care spending, by increasing the total cash transfer for the CHST from $12.5 billion to $18.7 billion. We question that this is sufficient. CUPE is currently in the midst of looking closely at what level of federal funding is needed for health care. In part, this is tied to our vision for health care reform that we are also close to completing. We look forward to discussing this in greater detail with the Committee during your consultation sessions. Until then, it is clear to us that federal funding must increase significantly and consistently over a long period of time. As well, it must to tied to a guarantee that it will not be used for private health care delivery but will be used to both strengthen existing health services and to expand the range of public health care programs. These should include home and community care, a national drug plan, a publicly administered health information system and federal funding for public long-term care.
Child Care
Last year’s federal budget was a major disappointment when it came to funding for child care. Instead of investment in a national child care program we got an increase in the Canada Child Tax Benefit. However, the budget did commit to invite federal/provincial/territorial governments to work together to develop a national action plan to support early childhood development by December 2000.
Recent government discussions on this are moving forward and public pressure is mounting to ensure an agreement is reached. CUPE is working with child care, anti-poverty and women’s organizations to gather a million voices to urge the governments to establish an Early Childhood Development (ECD) services agreement by December 2000. In turn, the next federal budget will need to guarantee an adequate level of funding for this new, badly needed program. We will be extremely disappointed is the agreement fails to establish a comprehensive program including child care.
A new Early Childhood Development (ECD) services program should ensure that every family has access to pre- and post-natal care, early learning and child care services, and parenting support. These services would meet the needs of all families regardless of income or employment status. The people who provide these services and supports would be recognized and respected for the value and importance of the work they do.
A publicly funded system of Early Childhood Development (ECD) services requires the federal government to transfer federal dollars to the provinces/territories to develop programs that are consistent with common principles. Provinces and territories would make a commitment to financially support the ECD services in their jurisdictions and would work with communities to ensure responsive service delivery. The agreement would include a timetable for implementation and common principles to ensure that the services are high quality, comprehensive, integrated, affordable and accessible.
Designated funding for Early Childhood Development services would be initiated by the federal government for the operation of quality ECD services. The federal funding should begin with an initial investment of $2 billion and grow until the ECD service needs of all Canada’s children are met. Designated funding would be ongoing.
The federal/provincial/territorial governments would develop a timetable with clear targets for implementation of ECD services. Provinces/territories would establish their own infrastructure and operating framework for ECD services. Local authorities and/or communities would be responsible for the design and delivery of services that respond to their needs.
Mechanisms to transfer federal funds need to be established. It is optimal to improve coordination of programs with a view to integrating the existing patchwork of services. One mechanism for consideration is a separate block fund, which could be used to transfer federal funds to provincial/territorial governments for community-based ECD services. The provinces would be eligible for the funds if they implemented an early childhood development system that met the common principles outlined in the federal-provincial/territorial agreement.
Federal Infrastructure Program and Water
The federal budget tabled Feb. 28, 2000 did not come close to providing the money needed to maintain, upgrade and renew public infrastructure such as municipal water systems. The federal government announced a new infrastructure program to replace the former Canada Infrastructure Works Program (CWIP). But it appears that the new program will be provided with less funding than the last one, despite the growing need and the increasing cost of infrastructure that has been articulated by so many in the public sector.
Through under funding and outright invitation the last federal budget encouraged greater private sector involvement in infrastructure projects including the areas of water and wastewater, arenas and highways. This has to stop in the next budget. There needs to be a higher level of funding for vital infrastructure such as municipal water systems. And as the tragedy in Walkerton has shown us, reliance on the private sector jeopardises Canadian public safety. We need to ensure there is funding for high quality public infrastructure and services.
The last federal budget established a new infrastructure program that will cover almost all types of infrastructure including housing and highways. The federal commitment started out at a very low level to increase gradually over three years with a total amount of $2.65 billion over six years. When matched by monies from the municipalities, the fund should total $7.95 billion. But that is if provincial and municipal governments match the federal portion. However, some smaller municipalities in poorer regions of the country have suggested that they may not be able to contribute an equal share due in part to cutbacks and downloading from upper levels of government.
As well, the last budget provided $25 million to help municipalities determine the feasibility of and the best approach to renewable energy, building retrofit, water conservation, waste management and urban transit projects. And the creation of a $100 million revolving fund – the Green Municipal Investment Fund – that will loan money to municipalities to support projects in areas such as water and energy savings, urban transit and waste diversion. Loans from the fund will be repaid and then recycled to support new projects. It is anticipated that projects would attract “considerable funding” from the private sector, as much as $10 from the private sector for every dollar from the fund. Administration of the above funds will be the responsibility of the Federation of Canadian Municipalities, which will establish councils to oversee the funds and advice on project proposals. Representatives of the private sector will sit on the boards.
We strongly object to the invitation to the private sector to play such a strong role in renewing our public infrastructure in the last budget. The private sector is not only provided with an opening to become more involved in infrastructure development and operation, it is warmly invited to the table as a partner. Public Private Partnerships will flourish under the proposed programs. Here is why:
As noted above, the proposed national infrastructure program, based on funding from three levels of government, will probably be less than the $8.3 billion spent on the CIWP in the 1994 to 1999 period. The CIWP was generally viewed as a positive program, but there was a recognition that it was able to address infrastructure problems in a very limited way. The new program is not as well funded as the previous plan and includes no commitment beyond six years. The high cost of infrastructure maintenance and renewal as well as the need for ongoing long-term attention to these problems mean that the proposed program has too little funding and too short term a perspective.
The $7.95 billion allotted to the program, if the other levels of government contribute matching dollars averages approximately $1.3 billion a year. This amount falls far short of the $6 billion per year that could be spent on water and wastewater infrastructure alone. Public private partnerships in the areas of water and wastewater treatment as well as arenas and other recreation facilities are likely.
Also, $600 million of the almost $8 billion is designated for highways, but this is a small amount for such costly infrastructure. Will we therefore see more Toll Highways like the ones in Ontario, New Brunswick and Nova Scotia constructed under a public private partnership arrangement? Probably so.
The $25 million for feasibility studies and the $100 million revolving fund is to be administered by the FCM with consultation by municipal and private sector representatives. Needless to say, unions are excluded from participating while the private sector has significant participation.
Insufficient funding for infrastructure investment opens the door to the corporate takeover of our water, roads, social housing, community arenas and more. Therefore, we can expect to see a further undermining of the public sector’s role in providing and operating infrastructure and the services associated with them through the establishment of more public-private partnerships. This is bad public policy that only erodes public services and the people who rely on them. Only a firm commitment to protecting public services by the federal government will suffice.
Post-Secondary Education
The last federal budget was woefully inadequate in dealing with needs for post-secondary education. Essentially all it contained was $2.5 billion on a one-time basis to the Canada Health and Social Transfer (CHST) to be used for health care and post secondary education over four years.
The deliberate underfunding of post-secondary education confirms the Liberals’ October’98 announcement that the education sector was ‘open for business’. The last budget did little to salvage post secondary education from its cash strapped status because the CHST did not earmark where the provinces must spend the money. The announcement of $2.5 billion (over 4 years) increase in the CHST forces provinces to choose between easing the health care crisis or the education crisis—to choose between hospital beds and university spaces. Not to mention the need to fund social assistance from this amount as well.
The last Budget set the stage for corporations to take over publicly funded university and college labs to do market-driven, profit-oriented research by tying research funding to partnerships with industry. The $900 million promised for the Canada Foundation for Innovation (CFI) continues the Liberals’ public/private partnership scheme. The CFI is a spawning ground for public private partnerships. It requires private sector partners to put forward 60% of the project funding and the CFI will provide 40%.
As with health care, the underfunding of post-secondary education fuels the move toward privatization. Premier Mike Harris lost no time after the last federal budget in announcing his intention to allow private universities in Ontario. In New Brunswick, where private universities are already allowed, federal funds in the amount of $600,000 were granted to Unexus, Canada’s first Internet university, in its first year of operation.
If federal funding for post secondary education is not increased we will see these disturbing trends continue:
Corporate giants will continue investing directly in universities and colleges, in exchange for more control over what programs are offered and even course content. Mega-corporations will continue to invade campuses with cola monopolies, fast food outlets and advertising to win the hearts, minds and wallets of emerging consumers.
Jobs and wages will continue to be threatened as our members’ work is contracted out and privatized. Universities will continue to pass costs off to students in the form of higher tuition and user fees. Students and their parents will continue to mortgage their futures for a degree or diploma. Private colleges and universities will emerge draining resources from the public system, and equity seeking groups will find their fight for accessibility even more difficult as post-secondary education increasingly becomes a privilege for the rich.
In the coming budget we need a higher commitment of sustained funding in post-secondary education for general expenditures and capital spending. As with health, we need a federal plan to restore the level of funding to what it was in the past and a National Post-Secondary Act that guarantees all Canadians access to quality post-secondary education and establishes core national standards. As well, a National System of Student Grants, based solely on need is badly needed.
Conclusion
There are many social and economic programs that require federal financial support in the coming budget. What we have identified above is in no way a comprehensive list. It is only the identification of what we consider some of the key priorities to be addressed in the coming federal budget.
CUPE Research
JS:as/opeiu 491
September 1, 2000