So far in the pandemic, the fiscal picture in Canada looks like this:
- The federal government is splashing enormous amounts of cash through EI, CERB, CESB etc. to support individuals, and sustaining businesses through wage subsidies, rent subsidies, and cheap loans.
- Provincial governments have focussed mostly on meeting the front-line costs of the crises – such as costs in hospitals, long-term care centres – and on some boutique financial measures to help households (some extra money to seniors, breaks on energy costs, etc).
In other words, governments have provided financial support to individuals, firms, and hospitals. They haven’t helped the K-12 sector much, though since it is fully publicly-funded and in most provinces there have not been significant budget cuts yet, the need for federal dollars is not high. So that leaves two really big sectors: post-secondary institutions and municipalities.
There’s a fair bit of similarity between these two sectors. Both receive substantial funding from provincial governments, but both also raise a lot of their revenue on their own. And in both cases, those other sources of revenue are tanking, leaving both sets of institutions with big and potentially disastrous financial holes in their budgets.
Now, in a normal period, any financial assistance these institutions get is basically a matter between these institutions and their provincial government. But these are not normal times. We have at least one province which is essentially bankrupt; others are clearly feeling pretty stretched in meeting their current obligations. The federal government, on the other hand, is in full Money Printer Goes Brr mode. So, it’s natural that these groups are going to look to the federal government for assistance, too. The Federation of Canadian Municipalities, for instance, has already put in an $10 to $15-billion ask.
It’s a natural direction, but actually, it’s the wrong way to go. Sector-specific bailouts have the potential to go wildly wrong.
First of all, there’s no legal accountability mechanism for bulk transfers from one sector to another. Nor is there a distribution mechanism. Say you give $10 billion to municipalities: who decides how much goes to Montreal and how much goes to Victoria? What you’ll end up with is some godawful competitive mechanism that will take too long even if it isn’t focused on infrastructure, which – as I have said before – is not nearly what’s it’s cracked up to be as a stimulus measure. And that means not one big transfer but a whole bunch of individual projects that need to be managed, and while the feds are good at cutting cheques, it’s not obvious to me that they have any competitive advantage over the provinces as far as project-management goes. Moreover, it doesn’t necessarily help municipalities in the sense that their real needs are in operating budgets, not in capital ones (and the same goes for universities and colleges).
Let me underline that next-to-last point again: the federal government’s superpower right now is writing cheques. Nothing else. So, let it write big ones – to the provinces. Let the provinces figure out how to spend it: that’s their job.
The question is: how do you persuade the feds to do this? Well, let me suggest that in fact the way to do this is not to have each interest group demand its own private bailout. It’s important that each group (colleges, universities, municipalities) measure COVID impacts and set out a case for the amount of money it needs. But when it comes to asking for money – why not make a joint ask? One that can be met with a single set of cheques to provinces?
Think about it: the hospitals – or at least the public health sector could certainly be in on it (they’ll be needing more money for the next little while, too, even if their immediate needs are being met by provinces). A one-time massive payment through the Canada Health Transfer and the Canada Social Transfer – long-established programs, easy to scale-up and scale-down, destined for the MASH (Municipalities, Academic, Schools and Hospitals). The provinces could quickly pass that on to institutions using whatever formula they feel is correct, in order to fill gaps in their respective operating budgets. This is about ninety percent of provinces’ actual constitutional function, and they’ve spent the last 153 years mainly doing exactly this.
So: a joint MASH sector ask to the federal government. $20 billion, $30 billion, whatever-size is almost irrelevant at this point. But ask not for it as a plethora of bespoke programs and funding agreements: ask for it as One Big One-Time Transfer (OBOTT). Just get the money into the system fast, before the summer. Let the provinces work on the exact distribution mechanism.
Sure, it might be more satisfying for each sector to come up with its own fancy boutique program. But an OBOTT can deliver aid faster than any boutique program, in ways that will give institutions greater flexibility, with less bureaucracy, and in a manner that reduces federal over-reach into provincial jurisdiction. And that should outweigh any other consideration at this point.
This article originally appeared on the Higher Education Strategy Associates website.
