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Lecture 5: Public Administration and the Management of Money
Introduction
- scarcity and diversity.
o diversity issues such as one group or another having privileged access to jobs or
programs are linked to scarcity of resources and money
o Diversity is a greater issue when economic conditions are poor
- Federal/provincial/local conflict is often about money:
o who raises the taxes and risks lower popularity
o who spends the taxes and gets the credit for the programs and benefits provided.
- an important element of policy making
o Governments spend money on things they think are important
o budget process is the most important way of priorizing government behaviour.
Budgets
- Budgets are supposed to be a management tool:
o devices for ensuring that money is spent as originally approved
o devices for ensuring that money is spent efficiently and effectively
o devices for comparing and evaluating the desirability of maintaining current programs
and creating new ones.
- Despite neoconservative/neoliberal governments and the new public management most
governments spend more than their predecessors.
Fiscal Federalism
- Federalism is a form of governmental structure intended to bring the benefits of a larger state
to peoples divided by at least one significant cleavage: language, region, ethnicity, economic
resources, economic disparity
- Federal states are bound together by:
- history
- Geography
- flags, symbols and myths
- institutions, including social policy and programs
Federal Provincial Financing
- financing relationships between the federal and provincial governments including the
evolutionary pattern which led to the current relationships; changes in the relationship; and
suggestions of its next destination.
Origins of fiscal federalism
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- in the Constitution the federal government received a much larger and more significant capacity
to generate cash for spending
- provincial governments received responsibility and legislative authority for social programs
which ultimately became much more important and expensive!!!
- 30 years of increases
- Inevitable change due to fiscal management problems; globalization and neo-conservatism
- Is the remaining 'patchwork quilt' of federal-provincial programs sufficient
Fiscal transfers
- Types of fiscal transfers vary
- conditional grants provinces must meet federal standards in order to receive the grant
- Unconditional grants are the form preferred by the provinces
- Shared-cost/matching grants may be offered where the federal government provides funds
(often on a 50/50 basis) if the province and/or municipality will match the federal spending
- Another form of unconditional grant is the block grant - no conditions attached to the grant and
the province may spend as it wishes
- Cash or tax points or a combination?
o Tax points: federal government agrees to reduce the percentage of income rate and to
offer the province the opportunity to increase its rate by the same amount of the
federal decrease
o the feds can say they have lowered taxes
- 2012 federal and Ontario income tax rates
o Federal 15% on the first $42,707 of taxable income, + 22% on the next $42,707 of
taxable income (on the portion of taxable income over $42,707 up to $85,414), + 26%
on the next $46,992 of taxable income (on the portion of taxable income over $85,414
up to $132,406) + 29% taxable income over $132,406.
o Ontario: 5.05% on the first $39,020 + 9.15% on the next $39,023, + 11.16% on the
amount over $78,043
1957
- Evolution of fiscal federalism begins in 1957 when an equalization program appears with
unconditional grants to the poor provinces to help provide public services
- hospital grants appear as a 50% shared cost or matching program
- 1960s financing of universities is added
- Quebec holds out for tax points and avoids direct federal aid to its universities.
1966- 1967
- In 1966/67 there are more changes with three sets of programs:
- Canada Assistance Program (CAP) replaces previous welfare programs with equal cost-sharing;
- medicare with conditional payment of 50 % of medical care
- 50 % of colleges and universities on a combination of cash and tax points.
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