According to 2023 figures, Canada's municipalities are now spending more than 25% more taxpayer dollars per person annually than they did in 2000. With spending growths exceeding inflation, one has to ask: is this money being spent wisely or are municipalities overspending? In this episode, I speak with Austin Thompson, a senior policy analyst for the Fraser Institute, to discuss this issue.
00:00:00.000Good day everyone, my name is Leah Muschett. I'm a reporter here at the Western Standard and today
00:00:04.160I have with me Austin Thompson, a senior policy analyst for the Fraser Institute who recently
00:00:09.680published an article on the irresponsible spending of municipalities in Canada. According to 2023
00:00:16.360figures, Canada's municipalities are now spending more than 25% more taxpayer dollars per person
00:00:23.020annually than they did in 2000. With spending growths exceeding inflation, one has to ask,
00:00:29.060is this money being spent wisely or are municipalities overspending? So Andrew's
00:00:34.300going to help me answer some of these questions. And the first question I had was, is inflation,
00:00:41.140like the 25% increase, if municipal governments had matched inflation rates, do you believe this
00:00:48.920would be advisable? Yeah, so let me just maybe clarify one of the findings of the study. So
00:00:54.520what my studies found is that local governments, and that's a category that includes municipal
00:00:58.920governments, but also school boards and indigenous governments, increased their spending by 25%
00:01:04.060above and beyond inflation growth and population growth between 2000 and 2023. So what that means
00:01:10.200is that, you know, in the year 2000, in inflation adjusted terms, local governments were spending
00:01:16.120$4,673 per person. And 23 years later in 2023, they were spending $5,851 per person. So that's an increase of $1,178 for every Canadian resident. If they had instead increased spending only at the rate of inflation, that would have stayed costed throughout. So that $4,673 per person amount we saw in 2000 would have remained the same in 2023. And what we saw instead was a 25% increase.
00:01:44.120Okay, that makes sense. Good to know. Well, then, in that case, I was also wondering,
00:01:51.400so what your findings is that's basically the average for the whole of Canada, right?
00:01:55.260Yeah, so those figures there reflect local governments across the entire country. But you can drill in on the details. The data for municipalities in particular is only available in a shorter timeframe.
00:02:07.320But if you look between 2008 and 2023, municipal spending grew faster than population growth and inflation in all 10 provinces. And so while the average figure is for a significant increase across the country, it reflects increases in every major province.
00:02:22.440Okay, that makes sense. Okay, I guess then my next question would be, if like, there has been like this big increase and services doesn't hasn't seem to improved in most of these municipalities, where do you think most of this money, this extra increase of spending is going?
00:02:43.440Sure, of course. So my study was based on fairly high level data. So I didn't have access to spending in specific categories, like local transport, or, you know, parks and recreation.
00:02:56.440But what I did have were the major spending categories. And among these, the largest spending category, by significant margin is the compensation of employees. So the amount that local governments spend on wages for their employees, and also benefits. So that's the largest spending category, and it's growing faster than inflation. But other spending categories are growing faster than inflation as well.
00:03:18.440So local governments spend money on goods and services, you know, they buy buses and gas for the buses, they buy, you know, computer equipment for their employees, those expenses are raising faster than inflation. And as well, municipalities make investments in infrastructure, new municipal buildings and roads, and there too, expenses are growing faster than inflation.
00:03:39.440Okay, okay. Okay, well, also, then my next question would be the 170 billion in infrastructure you mentioned in your article. So this, like you said, it would probably be averaged out over the whole entire country, but you're talking about like, so you're talking about like, roads, just any infrastructure that the city, the maintenance is, it's piling up, because they're spending it on other things, right?
00:04:09.440Because you said like, they argue, because you said like, they argue, this is why they need more money. But essentially, yeah, go ahead.
00:04:15.440Yeah, that's right. So Canadian municipalities, they get together and advocate for their interests through the Federation of Canadian Municipalities and organization.
00:04:24.440And that organization looked at a Statistics Canada study from 2020, which found that if you look at municipal infrastructure across the country, so that's water, wastewater, local transportation infrastructure, the things that are the responsibility of municipalities,
00:04:39.440they found that if you were to try to improve or replace the infrastructure that had been assessed as being in poor or very poor condition, it would require $170 billion of maintenance.
00:04:54.440So the Federation of Canadian Municipalities takes that number and says, look, you know, we have this large infrastructure deficit, we need more dollars from our taxpayers, we need more dollars from the provincial and federal governments in order to maintain and improve local infrastructure.
00:05:10.440And that's just not how I would frame that issue. What I found in my study is that local governments and specifically municipalities have increased their spending per person over time faster than the rate of inflation.
00:05:21.440And yet even while they have had this increased spending, they have allowed an infrastructure deficit, a rather large one to increase.
00:05:28.440And so I think it's incumbent upon Canadian taxpayers to first ask really difficult questions about City Hall.
00:05:34.440You know, why are you spending more per person, you know, at a faster rate than the growth in inflation and yet have allowed local infrastructure, one of your core responsibilities to fall by the wayside?
00:05:45.440And that's something I think we ought to do before we, you know, say, you know, yes, here's more of our tax dollars to fix this issue.
00:05:55.440Okay, yeah, that makes sense. Well, to close it off, I have one more question that I wanted to ask you.
00:06:02.440Do you think it's even related to I guess what you just said on like the infrastructure and stuff like that?
00:06:09.440Do you think this should be something that Canadians and, for example, the Alberta elections, municipal elections are coming soon in October?
00:06:18.440Do you think this is something that Canadians should be looking at when they're choosing whoever they decide to choose?
00:06:24.440Yeah, of course. So, you know, I think a major function of what municipal governments do is they raise taxes from their residents.
00:06:33.440They receive grant payments from the provincial government, the federal government, and they spend that money on our behalf to deliver local services.
00:06:40.440And, you know, that's the core of what they do.
00:06:43.440And what matters to a taxpayer like myself and many others is whether or not we're getting good value for our dollars.
00:06:50.440We can really only make that assessment if we first understand how much our city spending on our behalf and how has that changed over time.
00:06:58.440My studies found that across the country, you know, local and municipal governments are spending more per person, and that increase has outpaced the rate of inflation.
00:07:07.440To me, that's a good cause for concern and a reason to ask, you know, has that spending increase resulted in better local services?
00:07:15.440And where it hasn't, you know, it's something that voters may consider when they go to the ballot box.
00:07:34.440Is it like a set amount that like the municipal governments get like depending on like the province and stuff like, is that how that works?
00:07:42.440Or do they request it? Like, how does that work?
00:07:47.440Different provinces assign different responsibilities to municipal governments.
00:07:51.440Some provinces have an additional layer of government, a regional government that spends on transit and other issues.
00:07:58.440But across the country, municipalities receive about 20% of their funding directly from provincial governments.
00:08:05.440And so it's a reason to be concerned about local government spending, even if you're happy with the spending in your local government.
00:08:13.440Because the reality is everyone who's paying city taxes is also paying provincial taxes.
00:08:18.440And if any city is spending in a way that isn't efficient or isn't aligned with priorities, then that falls on all of us as provincial taxpayers as well.
00:08:27.440Yeah, that makes sense. Well, that's all I got. So I thank you very much, Austin.
00:08:35.440I really appreciate that you joined us here today. Yeah, thank you.
00:08:40.440Well, all I have to say is, if you enjoyed this content, we have more of it on our channel.
00:08:48.440So if you want to subscribe, you should. And yeah, hope you guys have a wonderful day. Bye bye.