2015: Threat or Menace?

Warning, serious wonkery ahead.

So I was a tad alarmed to see, in last month’s council agenda, this operating budget variance report projecting a year-end deficit of $1.783 million. And I’ve also been going back to David Hains’s look at the formidable 2015 budget gap and wondering if there’s anything to it. Basically, I’m wondering 1) how much of a mess will the next mayor inherit?, and 2) do they even know?

The End-of-Year Surplus

Outgoing mayor David Miller left Rob Ford with a hefty $360M-some surplus. What can our next mayor expect to find under the couch cushions?

Admittedly at this point in the year we’ve only got the three-month variance report. Guessing the final number at this point is kind of a crapshoot. But how much of a crapshoot, exactly? I looked up the past several years of variance reports and noted down the surplus projected in March-ish; the surplus around budget time; and the definitive number when previous year’s report has come in.

(Note: budget figures are surprisingly slippery, so before you start riding my dick, minor discrepancies are normal and unavoidable.)

Operating Budget Year-End Surplus

Projected Preliminary Final
2008 -6.340 79.526 88.577
2009 -1.857 354.817 359.597
2010 103.356 268 367.466
2011 139.295 292.741 285.134
2012 90.256 307.917 248.183
2013 14.265 232.011 168.084
2014 -1.783

A couple of things I noticed:

  • City staff like to lowball the projected surplus. Fair enough.
  • The preliminary figure is higher than the final number, I think, because some of the surplus is already earmarked for other stuff and so the amount the City actually has available to spend/save/burn/dive into like Scrooge McDuck is always a bit lower.
  • There seems to be a bit of a downward trend.

Now, maybe the Ford administration is going to pull a Miller and whip a few hundred mil out of its ass for the next mayor. And maybe I’m Marie of Rumania. It’s too early to tell (I’m waiting on the six-month variance report), but while I doubt we’ll actually see a deficit in 2015, I feel safe predicting the surplus will be lower than this year’s.

To be fair, it won’t make much of a difference. We’ve done dick-all with the surplus this past term, for political reasons: they think it sounds wasteful to spend the operating surplus on operating costs, and so policy has been to throw it into various reserve funds instead, a slightly more genteel version of buying an Escalade with cash. (The really aggravating part is that the City skims a little bit off of capital and reserves — about $0.600M last year — to fund the operating budget. But cutting out the middleman and using the surplus to directly improve services is, apparently, a bad look.)

I would be very interested to know what the various mayoral candidates think about the disposition of the surplus. Should we continue to use it to beef up reserves, or is it better used to improve programs and services?

2015 Opening Budget Pressure

Like the year-end surplus, the budget gap is a number that looks impressive on paper but bears only an indirect relation to the city’s financial state or the acumen of the administration. (See Ed Keenan’s column for a breakdown.) However, if you look at it in more detail, it can still tell us some things about upcoming funding challenges.

(Note: See previous caveats about numbers. Also, it’s hard finding two-year outlooks prior to 2013.)

Operating Budget Opening Pressure

Predicted (prev. year) Predicted (2 yrs.) Actual
2008 417 615
2009 448 679
2010 821 821
2011 469 706
2012 774 774
2013 465 465
2014 383 328 213
2015 450 322
2016 324

Observations:

  • That big, scary, much-vaunted 774 doesn’t actually look so alarming when you see the previous four years, eh?
  • Look at those big jumps down in 2012 and 2013. What the heck happened there? (I was totally around for this and should remember, but I can’t.)
  • 2014 actual vs. 2015 predicted lol.

Should we panic because the 2015 gap is twice as big as 2014’s? Well, don’t start hoarding canned goods. A good chunk of it is stuff that comes up year after year — TTC operating costs, for example; because we don’t get operating subsidies from the province we’re always falling behind. And periodically a source of provincial or federal funding dries up. It’s painful, but not dogs-and-cats-living-together apocalyptic. I think.

Admittedly the City kind of kicked the can down the road with regards to losing pooling compensation (and probably some other stuff too). The next mayor will sweep into office promising that everything’s going to be better from here on out, then inevitably be blamed for the consequences of a situation they had absolutely no hand in. It was ever thus. I don’t expect it to change, but I do want the candidate I vote for to be aware of the scope of the problem.

Some Questions for Candidates

Which I would ask in the dream world where I can totally have them answer.

  • What is the City’s current policy regarding the disposition of the year-end surplus?
  • What would you change about it (if anything)?
  • Which is closest to the expected budget gap next year: $0.500M, $5M, or $500M?
  • What are the top 3 expenditures that you will lobby Queen’s Park to re-fund/upload?
  • Why do these things deserve funding? (Show your work.)

Some Questions for People Who Will Actually Read This

Fellow budget nerds: what’s your take on the situation? What do you expect 2015’s surplus/shortfall to be like? Is there a candidate that you feel has a good understanding of the budget?

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