Tuesday, June 05, 2007

Only Because I Love Math

Zorpheous asks over at Jeff's place:
So what's yourr take, you think John can cut taxes, increase healthcare spending and balance the books, or are we looking at another bend over and trust me Politican (which really disappoints me, I was holding on to hope with John Tory)

This is in somewhat a rough form as I'm trying to pound it out.

The Progressive Conservatives have indicated they would roll back the health premium over a 4 year period.

The Progressive Conservatives are basing their projections on Toward 2025: Assessing Ontario's Long-Term Outlook.

This is what the Ontario Liberals said in that report:

Total revenue is projected to grow at an average annual rate of 4.6 per cent over the 2005-06 to 2009-10 period, while annual growth in total spending is projected to average 3.5 per cent over this period.

Actual revenues for 2005-2006 were 84,225 million based upon:

1. higher than expected tax revenues, including higher revenues from personal income tax returns due to stronger-than-forecast wage and salaries growth, higher corporate tax returns and higher revenues from the electricity sector, and

2. the impact of the consolidation of broader public sector organizations - specifically school boards, hospitals and colleges

In short, higher tax revenues from wage and salary growth, corporate taxes and electricity sectors - plus finding efficiencies in the public sector. Remember, they're evil.

So, I will go under the assumption that revenues will increase by 4.6%, and spending will increase by 3.5%. Assume too that it's a straight 1/4 reduction in the health premium over each year.

In 2005-2006, actual revenues were 84,225 (including the 2,600 million health premium) and actual expenditures were 83,939. A difference of 286 million.

  • For 2006-2007, revenues will be 87,330 million, and expenditures will be 86,877 million. A difference of 453 million.

    Here's the math for the first one:

    (84,225 - 2,600) x 4.6% increase + (2,600 x 1/4 decrease)
    = 85,380 + 1,950
    = 87,330

    83,939 x 3.5% increase
    = 86,877
Now, going on:
  • 2007-2008, revenues will be 90,607 (1,300 from health premium) and expenditures will be 89,918. Difference is 690 million.
  • 2008-2009, revenues will be 94,605 (650 from health premium) and expenditures will be 93,065. Difference is 1,001 million.
  • 2009-2010, revenues will be 97,712 (0 from health premium) and expenditures will be 96,322. Difference is 1,391 million.
John Tory has committed to about 2.1 billion additional spend per year over 4 years (8.5 billion total), which incidentally, is only slightly more than what the Liberals figured would be required in the 3.5% increase in spend [Toward 2025: Assessing Ontario's Long Term Outlook]:
Spending on health is projected to grow on average by 5.1 per cent annually during the 2005-06 to 2009-10 period. Spending on education is projected to grow on average by four per cent annually and spending on social services by 3.4 per cent annually.

On health, the Progressive Conservatives are committed to the 5.1% spend to 2010, going up to 5.2% to 2011, and 5.3% to 2012 [Improving Healthcare].

So, can we increase spend and cut the health tax? I think so. If the Liberal projections are incorrect, maybe not. I trust John to make the right decision in that case.

I don't trust Dalton McGuinty to make the right decision.

Now, it's 10:46, and I'm willing to be corrected.

Updated: See? I knew I'd muck it up somehow. I got the years wrong for when the health premium would be reduced. But, I'm saved by the line in the Outlook:
Revenues and expenses are projected to grow at a similar pace over the 2010-11 to 2014-15 period.

I think it's still doable, and if I can alleviate the math-induced headache, I'll take another run.

Updated x 2: Oh, wait. No, I didn't. I think I got it right.

Updated x 3: Fixed a typo.


James Bow said...

That's still pretty tight, and I think urban affairs is going to be a bit of a wildcard that throws off your projections. The GTA needs some things addressed within the next term of office, and the cost to taxpayers could be hefty.

But this is a problem for BOTH McGuinty and Tory to face. So the question is, how does one leader or the other respond to surprises? Care to tackle that question?

Jim said...

Care to tackle that question?

I only do one hard question at a time. :)

Surprises can derail the best laid projections - "The best-laid plans of mice and men," and all that.

I think it depends on where you believe the onus lies for funding infrastructure or other surprises, and whether the income tax base should be the sole source.

I think there are other sources of funding available that can be tapped into outside of the income tax base.

I'm not entirely adverse to public/private partnerships (I know the Ontario Liberals were initially against it, but have since somewhat embraced it). I say that "not entirely", because I believe there should be a clear investment directive for the private part (you must deliver X, in order to earn Y; or, if you quote us X, we only pay X).

I'm also for user fees for infrastructure - like toll roads (perhaps, again, not in the same strain as the 407), but users pay the costs for infrastructures.

Now, having said that, that works for infrastructure (which tends to be the bulk of the surprises), but not social services, which I don't think should come from user fees.

I'm saved by the report also forecasting growth for increased spending in health care, education, and social services.

That said, I understand there's a flip side.