Abstract
|
Municipal Responses to the Economic/Fiscal Downturn in Canada
The world wide fiscal crisis has impacted on the Canadian economy as it has in other major countries around the world. In the North American context the impact on has not been as severe as in the US due to the fact that the lending practices of Canadian Banks for residential mortgages are more restrictive than the banks in the US. However, there have been job losses in a number of sectors that have effected employment and economic activity in most Canadian cities. This in turn has lead to decreases in revenues in cities and increased in demand for a number of services especially social services.
The Federal government response to the fiscal crisis is similar to many other countries around the world in that they have provided stimulus funding via its Action Plan to lower tier governments. This is especially significant in terms of federal government grants to local governments as the practice in Canada has been for very few federal grants/transfers to be provided to local governments. Municipalities, according to the British North America Act, are “creatures of the Provincial governments” and whatever local governments undertake are based on Provincial enabling legislation. Consequently, the majority of transfer funds come from Provincial governments, and in some cases there are Federal-Provincial matching funds that are distributed based on some joint funding agreement negotiated between the Provinces and the Federal government.
As the rationale in the Economic Action Plan was to provide funding for “shovel ready” capital projects that will create jobs and a multiplier effect, municipalities and universities were asked to submit projects to be funded under established guidelines. In addition to the employment impacts, investments in Universities are desirable because it provides longer run impacts by investing in human capital.
As local governments face declines in local revenues, and increase demands for social programs they may also be facing increased operating costs for infrastructure in the near future. With increased capital spending on new infrastructure, they will have additional infrastructure to operate and maintain. Furthermore, the increased or accelerated capital transfer payments from senior governments may impact on deficits and debts of these governments. For example, the Province of Ontario has a $24.7 billion deficit resulting from its contribution for stimulus spending. This suggests that local governments cannot count on increases in local government transfers for operating costs in the near future.
The municipal financial situation includes a decline in local tax revenue, increase cost for social programs, and additional operating costs for new capital. Given provincial government deficits there may also be less provincial transfers in future once stimulus funding disappears. Municipalities will be expected to do more with less.
One municipal response that is being advocated by Provincial governments such as Ontario and has been practiced by some progressive municipalities is to apply performance management of budgeting. This is an attempt to make more efficient use of the existing revenue and expenditures.
The paper will discuss the nature and causes of the impact of the fiscal crisis in Canada. It will then explain the use and benefits of performance budgeting by providing several case studies of how it has been applied n Canadian local governments. It will comment on the successful aspects of these applications as well as the areas or aspects that can benefit from improvement. Both the successes and the weaknesses will provide important lessons for how performance budgeting can be applied in other jurisdictions.
Selected Bibliography
Altmayer, Christina, 2006, “Moving to Performance Based Management”, Government Finance Review, Vol 22, no 3.
Artrip, Diane, et al, 2004, “ Case Study: City of Phoenix: Use and the Effects of Using Performance Measures for Budgeting, Management and Reporting”.
Collins, Craig, and Marieta Goudova, 1999, “Elements of a Performance Management System”, in Activity Based Management, Steve Player and David Keyes eds, John Wiley and Sons , New York City.
Epstein, Paul, and Wilson Campbell, 2002, “Case Study: City of Austin: Use and the Effects of Using Performance Measures for Budgeting, Management and Reporting”, Presented at ICMA Best Practices, Austin Texas, 2005.
Government of Canada, 2009, Economic Action Plan
Hix, Kathleen, et al, 2005, “Meaningful Performance Measurement: Westminster, Colorado”.
Kelly, Janet M., and William C. Rivenbark, 2003, Performance Budgeting for State and Local Government, M E Sharpe, Armonk New York.
Kluvers, Ron, 2002, “An Analysis of Introducing Program Budgeting in Local Government”, Public Budgeting and Finance, Vol 21, Issue 2.
Murry, David, and Brian Dollery, 2005, “Local Government Performance monitoring in New South Wales: are at Risk Counicls really at Risk?”, in Economic Papers, Vol 24, no 4.
Wall, Anthony, and Gary Borland, 2005, “The Problem of Local Government Performance Indicators in the Republic of Ireland”, The Irish Accounting Review, vol 12, no1.
|
