WHY WOULD THE FEDERAL GOVERNMENT CUT A MONEY-MAKER?

A couple of months ago, I told the extraordinary story of how a local government tore up the federalism rule book and initiated a very promising tri-level government program for getting welfare recipients placed in good jobs. In this entry, I’d like to reflect on a curious aspect of that story that I didn’t stress in my other account: The program was a conspicuous success in its first year, but the federal government cut it even though it had actually made money on it.


Russ Simmonds, The City of Winnipeg’s director of social services, proposed the program in 1992, when unemployment was high, and the city was responsible for short-term welfare. Simmonds saw an opportunity to offer welfare recipients on-the-job training through an investment by all three levels of government in the restructuring and resurfacing of city roads, back lanes and sidewalks.
In a city with an infrastructure deficit that, in the mid-1990s, ran to the hundreds of millions – a crisis so serious that vehicle-sized sink-holes were appearing in the streets – the case for renewal was easily made. Simmonds’s idea called for welfare recipients to do infrastructure repairs, learning on the job to become construction workers, with much of the work paid for out of money saved on welfare payments. After the Liberals came to power federally in 1993, the government agreed to fund the program for two years, with the costs to be split three ways by the three levels of government.
Since the project was designed at the local level, in partnership with the City’s Public Works Department, it was informed by awareness of the needs of both the local community and participants in the program, and it worked. Over the course of the program’s first year, each level of government spent $759,266 on wages for social assistance recipients participating in the program, as well as their supervisors.
The total amount spent on wages was approximately $2.3 million. However, when calculated against the savings in social assistance accrued at each level of government, the project garnered $2.3 million worth of wages for $550,000. In fact, the federal government actually saved more in welfare costs than it spent on infrastructure renewal.
Work on the first year of the program took place over the summer of 1994 and, at the same tine, Finance Minister Paul Martin was wrestling with a massive federal government deficit by looking for cuts. One of the victims was Winnipeg’s Infrastructure Renewal Program. Come again? you say. In order to save money the government cut a program that had produced savings of more than $100,000 in a year?
Exactly. How could such a thing have happened? A search for the answer would make a good Ph.D thesis topic, but if we know a little bit about how government works, it’s not hard to speculate. One possible scenario: In the process of preparing next year’s budget, an order goes out to government departments to prepare draft budgets reflecting cuts of X per cent. Each department goes to work looking for cuts. What to do? Cut back our own department or eliminate a budget item that gets spent at another level of government?
From the department’s viewpoint, the temptation is ever-present: Down-load the cuts and let your colleagues live to fight another day. When cabinet approved the budget, it was probably not their intention to cut a money-saver – assuming that it really was a money-saver – but a government scrambling desperately to find billions will not be worrying about what, from its perspective, looks like nickels and dimes. With so much money and so many details to worry about, a perverse cut might not have been noticed at all.
There are other ways it could have happened. The point is that it can happen and it apparently did, and it is more likely to happen the bigger and more distant the government is. At the local level, such a cut would be much less likely to go unnoticed. This is only one of a number of reasons why it is important for local communities to be much more involved than they are in governance.
I’m not arguing for local autonomy. We need the power and the resources of the federal government, and sometimes we need the feds to ensure that we remain a united country, and one that treats its citizens fairly, regardless of where they live and who they are. But when it comes to ensuring that our good intentions as a nation are carried out in a manner appropriate to the different circumstances in different communities, we need a great deal more local participation.
The irony is that governance has moved in the opposite direction. Since the mid-1990s, short-term welfare has been removed from local hands and placed under the purview of the provincial government. Today, good ideas like the infrastructure renewal project are the responsibility of a government that is less likely to think of them in the first place, and more likely than local government to cut them in the unlikely event that someone does think of them.
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The story of Winnpeg’s infrastructure renewal project is discussed in detail and compared with other welfare-to-work and workfare schemes in Christopher Leo and Todd Andres, “Unbundling Sovereignty in Winnipeg: Federalism through Local Initiative.” Canadian Journal of Political Science, 41 (1) 2008, pp. 93-117.

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