It’s been more than six months since the first case of COVID-19 was diagnosed in a Toronto man who had just returned to Canada after travelling to Wuhan, China. Since then more than 115,000 Canadians have caught the virus and more than 8,900 people have died from it, the vast majority of whom lived in long-term care facilities or a seniors residence.
But the number of deaths caused by COVID-19 only tells part of the story. The socio-economic impact of the pandemic and the shutdown that followed and continues to this day in many sectors including education, tourism, entertainment, minor sports and the hospitality industry will be far-reaching and devastating to our economy and services that many of us have come to take for granted.
The Parliamentary Budget Officer estimates that the federal deficit for 2020-2021 could be as high as $343 billion. That’s nearly 12 times higher than the federal deficit in the year previous. Or to put it another way, it’s equal to the entire amount of revenue the federal goverment took in during the 2019-2020 fiscal year. And that’s just the federal government. The provincial deficit is estimated to reach $41 billion this year.
How those two levels of government will combat the virus is anybody’s guess, but it’s highly unlikely they be able to do so without massive cuts to public services including health care and education.
The City of Ottawa is facing a $192 million deficit this year, which they plan to cover by dipping into reserve funds, deferring $82 million in capital projects and freezing a number of new staff hires that were in the current budget.
News that the provincial and federal governments plan to provide Ontario municipalities with $4 billion in COVID-19 fund-ing should help cover a sizeable portion of the city’s mounting 2020 deficit, just how much remains to be worked out, but it does mean that the city won’t have to dip into its reserves as deeply as first thought.
But that only takes care of this year.
Whatever money is taken from the reserve funds will have to eventually be paid back. How they will paid back is the issue facing city council as it looks forward to the 2021 budget process.
According to the city’s chief financial officer, a $192 million deficit would require an 18 per cent tax increase. That’s totally out of the question for Mayor Jim Watson, who wants to limit next year’s tax increase to just three per cent. He and several other members of council are hoping the feds and the province will bail them out – the same federal and provincial governments that are facing their own deficit issues.
At present, there is no plan for a second tranche of money coming from the provincial and federal governments, which means staff will have to come up with a list potential deficit reduction measures including possible cuts to “non-essential” services. We’ve been down this rabbit hole before in the early 2000s, when staff suggested closing everything from museums to libraries. It’s highly possible the same services will be back on the chopping block this time around.
The question is whether council will have the stomach to approve them?
Finding $192 million in savings is no easy feat and the situation will only get worse if the economic impact of the pandemic continues into 2021, which it very likely could, espe-cially in the area of transit revenues.
Of the $192 million deficit the city is currently facing, $120 million, or roughly two-thirds, is due to a massive decline in OC Transpo ridership which isn’t likely to rebound anytime soon. Government offices are expected to remain closed until at least January and the city’s universities and col-leges are implementing virtual instruction.
I am still amazed at how many buses are driving around the city empty. If council is serious about reducing the deficit they need to look at cutting the frequency of service and the number of drivers.
The 2021 budget process is going to be a huge challenge for even the most experienced of city councillors. It will be doubly so for whoever wins the Cumberland Ward byelection on Oct. 5 and will have to be brought up to speed tout suite. Which is why the seminal issue of the byelection should be the budget and where do the candidates stand on possible cuts.
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