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Toronto's Budget and The Fiscal Imbalance
31/01/2006

There's not much to be said about the City of Toronto's budget woes that hasn't been said in the past.

As in previous years, Toronto has a huge hole in its budget and is waiting to see how much will be filled by the province.

And, as in past years, this gap is the result of a permanent structural problem in the fiscal relationship between the Province and the City. This won't be resolved until Queen's Park uploads the social service costs that were downloaded onto municipalities in the late 1990s. Predictably, this isn't a high priority for the McGuinty government.

However, John Barber's column today (Google News backdoor) tells us that "a group of powerful landowners and their corporate tenants" -- called The Toronto Office Coalition -- is starting a campaign to help the City. The idea is that any money Queen's Park receives as a result of Stephen Harper's fiscal imbalance reversal should be used to reduce the muncipal-provincial fiscal imbalance in Ontario. (I.e., use those savings to fix this problem.)

This would be nice if it happens and I'm glad that some advocating is going on. Paying for social services out of provincial income taxes makes a lot more sense than using municipal property taxes. And addressing the special taxes that Toronto businesses pay to Ontario "just because" is simply a matter of fairness.

But there are two connected problems here that prevent me from getting overly optimistic. The first is that the same political pressures that prevent Queen's Park from doing more to help Toronto now will continue to exist in the future, even if Ontario receives a windfall transfer. The second problem is that the "fiscal imbalance" is a bit of a sham that's unlikely to lead to any windfall for the Ontario government. (I plan on writing a bit more about this in a later post.)

Nevertheless, I don't mean to say that this political dynamic can't be reversed. Campaigns like The Toronto Office Coalition are a step in the right direction. But the Toronto budget has had a hole for a while, and it isn't getting any smaller. We've needed a bail-out every year since the amalgamation-downloading combo. What we need is real momentum behind the specific idea of uploading social service costs.


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