3.2.1. What Change had the Biggest Impact on Revenue Actuals? (PSAB.)
Which Legislative Change Rescoping Municipalities’ Revenue Capacity had the Biggest Impact?
None of them. The break in data continuity created by the Jan. 1, 2009 effective date for PS 3150 was more influential for trend analysis than 30 years of additions to and subtractions from municipalities’ revenue-raising authority because:
It obscures the impact of changes pre-data, with container comparability issues; and
Of the two datasets created, 1990-2008 and 2009-2019, only one is deep enough for portfolio-wide, source and sub-source analysis. It ended 13 years ago.
Takeaways:
The data structure reflects macro policy shifts in the worlds municipalities exist in as decision-takers, not makers, and better reflects them than changes in local revenue policy.
The transition from a modified-cash basis of accounting to accrual accounting, as reflected in statistics, is a prime example. While all Canadian governments had to comply with PS 3150, the purpose of the tangible capital asset part of the new standard was to round out in financial statements the net worth of the provincial and federal governments running large deficits in the 1990s with the ongoing value of their infrastructure stock (Radford, 2008, p.3). Transitioning made their books look better, so most adopted pre-emptively; without the power to run deficits and much less capacity to staff the transition, municipal compliance was just that.
What else is wrong with “creatures of provinces”?
An unintended consequence of focusing on the municipal part of the phrase and its debilitating connotations may be lionizing provinces; as long as municipalities are the reference point, 'the province’ has complete control.
Casual use of the expression has become common; we caution that it fails to acknowledge that power is relational - what is provincial authority worth without local deference? Treating it as absolute displaces municipal choice, which is active and ongoing, and compliance is not measured.
Giving it and municipalities’ relationship with provinces so much energy is also problematic because it props up provincial ‘bigness’ in a global sphere in which provincial authority is practically and increasingly limited. Taking the example above, once the GFS was established as the global standard for government finance statistics by the IMF, provincial discretion in adopting it shouldn’t be overstated, nor should that of the Public Sector Accounting Board in pulling it through to the accounting realm. The source of the need to change to an inter-jurisdictionally comparable framework was the global economy through the international organizations empowered to create the standards that make them so. As a member of supranational bodies, Canada is also a decision-taker.
Data is used to make whatever it represents real. The irrelevance of most rows of revenue data in both formats highlights a structural barrier to municipal evolution: Beyond our own personal experience, we know what we know about municipal revenue, and finance, through data collected by provincial and federal agencies for their own purposes. Meaning:
Statistics Canada’s is the most credible warehouse of local revenue data. Its database unpacks it by source starting in 1989, (before then it is shown as a total) there is an 11-month reporting lag for releasing annual financial results and the entities consolidated in the series are not exclusively municipalities. For subscribers of the Winston Churchill quote, “Those that fail to learn from history are doomed to repeat it[,]” the unavailability of data before recent history to learn from is ominous.
So is the relevance of data from 1990 onward. With so few material categories, the information can hardly be used as evidence with which to inform Council decision-making. Without the ability to understand a problem and potential remedies in depth through measurement and iteration, there is also a limit to how effectively issues and approaches can be managed sector-wide. Or at least it leaves the evidence to municipalities to collect themselves where they are at a disadvantage through fragmentation.
Indistinguishable from other amounts rolled into aggregate categories, the data structure can also conceal anecdotal and observable trends. For instance, higher water and wastewater rates and revenues post-Walkerton are not evident in this framework.
This mini-series explored two frames of reference for understanding municipal revenue: changing authorities and data structure. Spending needs are another, and the framework change was even more damaging for analyzing costs than it was for revenues. Pre-2009 FMS expenditure categories were functional, i.e. Transportation; from 2009 on, GFS’ refer to an economic transaction, i.e. Compensation of Employees.
Balanced budget rules require municipalities to show sufficient revenue to cover forecast expenses, i.e. spending plans determine overall revenue need. The 2009 change divorces spending from service areas, though, so analysts don’t have an intelligible expense landscape, or specific cost pressures, through which to understand revenue.
Historically, the biggest expense drivers noted in municipal budgets have been provincial policy decisions. Political accountability for these decisions was already frustrated by the different scales of government at which cost creation, and revenue collection. By dissociating the language in the announcements, press releases, Acts and regulations that new requirements with a municipal cost come through from the expense categories they eventually register in, the accounting change further obscures provincial accountability for their cost.
It is also unlikely that stories not in the federal or provincial interest are able to be told through their data - a barrier advocates of a new fiscal deal have yet to overcome.
4. Municipalities can’t see where their funders have been
Going into the most granular detail on different kinds of lieu and transfer payments, the FMS’ main interest in municipal revenue appears to be surfacing every non-local dollar supplied to local government. “Transfers” went from 47 data points per year (funder, type, service and conditionality) to two under the GFS:
Grants from foreign governments and international organizations; and
Grants from general government units.
The running total for the first type is zero, so there is really only one number aggregating transfers sector-wide after 2008. Therefore, the effect of political terms and parties on the nature and volume of federal and provincial aid is invisible after it and will continue to be into the foreseeable future.
Transfers and own-source revenues behave like independent and dependent variables. One lump number for “Grants from general government units” subdues that interplay, and, therein, the context for big, sector-wide own-source revenue trends from 2009 on.
5. Deceptive nomenclature
In moving from a Canadian to a globally comparable reporting standard, we were bound to lose precision in how well new categories described their contents. The extent to which the new categories misrepresent the transactions they purportedly record is notable though.
For instance, without another category to log its portion under, provincial payments to municipalities to cover part of the cost of the social services it unilaterally transferred delivery of to municipalities surface as “Grants from General Government Units.”
“Taxes on use of goods and on permission to use goods or perform activities” is the bucket for cost recovery tools, i.e. permits and development charges.
Generous-sounding GFS names for revenue categories show how seemingly banal features of data architecture restrict the range of stories the information within is capable of telling downstream - pre-data. For instance, have grants stayed relatively level because federal capital spending substituted for provincial?
This is the real power of fragmentation: Individually, municipalities have relatively small bases over which to spread the costs of internal functions common to other scales of government. Collectively, there does not appear to be a critical mass of long-term interest in data collection and maintenance of a statistical warehouse to generate the data municipalities want, and without which local data is hard pressed to tell local stories.