Ebrahim, johnston jewell, oikonen, scott, starkman fundingsocialservicesshouldn'tbeashellgame

Funding Social Services Shouldn’t Be A Shell Game

Z. Ebrahim, D. Johnston-Jewell, K. Oikonen, P. Scott & A. Starkman

Funding Social Services Shouldn’t Be A Shell Game

TABLE OF CONTENTS 1.0 INTRODUCTION. . . . . . . . . . . . . . . . . . . . . 3 1.1 Question Evolution. . . . . . . . . . . . . . . . . . . . . . . . 3 1.1 Defining The Project. . . . . . . . . . . . . . . . . . . . . . . 4

1.1.1 “Social Services”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.1.1 “Funding” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.1.2 “Sustainable” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

2.0 ON THE MAP . . . . . . . . . . . . . . . . . . . . . . . 6 2.1 This is a wicked problem.. . . . . . . . . . . . . . . . . . . 6

2.1.1 Filling the Gap. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.1.2 Example: Babyboomers . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.1.3 Example: Immigration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

2.2 Stakeholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.3 Social, Public, Private & how they work.. . . . . . . . 8

2.3.1 Public Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.3.2 Private Funding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2.3.3 Charitable Funding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

2.4 Mixed Funding Tools . . . . . . . . . . . . . . . . . . . . . 11

2.4.1 Public-Private-Partnerships (PPP’s) . . . . . . . . . . . . . . . . . 11 2.4.2 Crown Corporations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2.4.3 Social Impact Bonds (SIBs) . . . . . . . . . . . . . . . . . . . . . . . 13

2.5 Politics and the Economy. . . . . . . . . . . . . . . . . . 13

2.5.1 Political Environment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.5.2 Economic Environment. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.5.3 Social Perceptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

3.0 CONCLUSION. . . . . . . . . . . . . . . . . . . . . . 15 3.1 The need for a holistic view.. . . . . . . . . . . . . . . . . 15 3.2 Next Steps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

APPENDIX 1: Giga-map. . . . . . . . . . . . . . . . . 16 APPENDIX 2: References. . . . . . . . . . . . . . . . 18 APPENDIX 3: Iterative Process . . . . . . . . . . . 21 2

SFIN 6B04: Understanding Systems and Systemic Design Winter 2013

By Z. Ebrahim, D. Johnston-Jewell, K. Oikonen, P. Scott, & A. Starkman

1.0 INTRODUCTION 1.1 Question Evolution “Why are the social services chronically underfunded?”

underfunded?’ was a wicked problem, and for all intents and purposes did not have an answer.

We verified our inclination that our question was a wicked problem by going through Rittel and Webber’s (1973) ten characteristics of wicked problems:

Our group sat around the table and blankly stared at each other, allowing the question to sink in.

The question itself was short, pertinent to current affairs, and seemingly straightforward. The answer was exactly the opposite: incredibly complex and seemingly infinite, dynamic and enduring, multifaceted and unique. In fact, what we came to realize was that what we were asking in the question, ‘Why are the social services chronically 1. There is no definitive formulation of why social services are underfunded, or how to properly fund them.

2. There is no stopping rule for the funding of social services since social services have no finite time period.

3. There is no true or false, yes or no, right or wrong answer to how to properly fund social services, only better and/or worse.

4. There is no exhaustive list of admissible operations for funding social services since both demand and supply drivers are constantly changing in the dynamic environment of their existence.

5. There is no single explanation for the chronic underfunding of social services.

6. The complex, dynamic interaction of social service funding at all levels displays an interdependency that proves all levels of social service funding are interconnected.

7. There is no way to determine if possible ‘solutions’ to the chronic underfunding of social services can be tested. Testing occurs simultaneously as live implementation.

8. Due to the complex, dynamic nature of the ever-changing environment of social services and their funding sources, there is no ability to complete trial and error testing or prototyping for possible ‘solutions’.

9. The environment of social service funding (from public, private and charitable sectors) changes with time and therefore is always unique. A ‘solution’ or fix that may work at one particular time or environment, will not work in the future or in another environment. In turn this means that in order to solve the problem of chronically underfunded social services continuously developed and independently tailored one-shot solutions would need to be developed.

10. We as a society are morally responsible and obligated to determine the best possible way to fund social services, and this project is an attempt at such a solution.

Submitted to Professors Peter Jones & Jeremy Bowes

3

Funding Social Services Shouldn’t Be A Shell Game

By using these ten characteristics as a Litmus test we confirmed that we were indeed dealing with a wicked problem. We also realized that in its current state our question was extremely broad.

We decided that we would have to draw some boundaries in order to make it more manageable considering the resource limitations of the project.

After discussion and debate, we were able to taper our research question to:

as healthcare, education, police services, and housing, however we needed a more concrete definition on which we could work from. Unable to find consistency across various governmental organizations we settled on a social service taxonomy provided by IBM’s Smart Cities Model (IBM, 2013). In describing what makes a city, IBM states that “a city is an interconnected system of systems” and is a tripod of three pillars: planning and management, human, and infrastructure.

These three pillars further breakdown as seen in the Figure 1.

How can a sustainable funding model be established to support social services in the City of Toronto?

1.1.1 “Funding” This reformed question provided the muchneeded boundary that enabled us to further our discussions into a manageable scope. By focusing on the City of Toronto we were able to look at financial distributions within a single level of government, rather than all three. We also decided that we would focus on a time period of 1990 to 2025. These dates provide the necessary time period to show the contemporary picture of social service funding within Toronto through multiple governments, mayors, economic environments, and social contexts. We believe that it is important to integrate these environmental characteristics into our thinking as they dynamically affect social service funding sources and amounts. Once we were comfortable with the question we had developed, we then defined our question’s key terms and the relative context.

1.1 Defining The Project

We started our inquiry by dissecting our question, attempting to define each particular element. What was a social service? What are we already familiar with in terms of social services and their offerings?

By taking these questions head-on from the beginning we were provided with deep insights into how our project would develop.

1.1.1 “Social Services”

Perhaps the largest hurdle we faced was defining what a social service entailed. Individually, we each brought our previous biases from personal experience that identified social services such 4

To determine how to develop a sustainable funding model we first needed to define how social services were being funded within the City of Toronto. Through research into social service providers we discovered that individual organizations and institutions are not funded directly by a single level of government or sector (private, public, or charitable), but were in fact often funded by a complex combination of various entities. Even though we were placing the boundary of the City of Toronto on our question, the funding models of the organizations within Toronto showed many different avenues on various levels of social and political structure. For example, healthcare in Canada is publicly controlled on the provincial level, funded primarily through public funds, but also consists of municipal operations, private funding, and charitable funding. Case in point is The Hospital for Sick Children which receives funding from the Ministry of Long Term Health (MOLTH), federal granting agencies such as the Canadian Institutes of Health Research (CIHR), Corporate Ventures and private philanthropic invests. Likewise, Immigration services is primarily controlled and funded at the federal level, but many provincial and municipal organizations are involved with immigration services as well, like ACCES Employment Services, which is a notfor-profit corporation that helps immigrants find work. Likewise police services are provided at all three levels, municipal (eg. Toronto Police Service), provincial (OPP) and federal (RCMP). To look at all social services would require many more manhours and resources than we were able to provide, and therefore we limited the context of actors on social service spending.

SFIN 6B04: Understanding Systems and Systemic Design Winter 2013

By Z. Ebrahim, D. Johnston-Jewell, K. Oikonen, P. Scott, & A. Starkman

1.1.2 “Sustainable”

The final term we will define from our above research question is “sustainable.” This term is one that is highly charged, as its definition and understanding can change depending on context, author, and reader. For the purposes of our giga-map and this accompanying report we use the term sustainability to indicate a level of financing for social services that would allow for the necessary flexibility to quickly adapt to the changing environment and act as the seed to transformational systematic change. This would include being able to adapt and meet the needs and demands of society in the face of such challenges as shifting demographics, economic cycles and anomalies, changing government, immigration, and increasing urbanization.

FIgure 1: IBM’s Smart Cities Model.

Submitted to Professors Peter Jones & Jeremy Bowes

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Funding Social Services Shouldn’t Be A Shell Game

2.0 ON THE MAP For easy viewing and dissection, our giga-map is composed of four sections. On the left we provide the stakeholders and the various elements that contribute to the issue of funding social services as a wicked problem. This section is titled “This is a wicked problem” and is highlighted in green.

In the center of the map we provide the current system and methods of social service funding.

We break down the three primary systems (The Public Tax Revenue System, The Charitable Sector, and The Private Sector) that make up social service funding, as well as some of the tools that are found at the overlap of these systems. This section is titled “Social, Public, Private, & how they work” and is highlighted in orange. At the bottom of our giga-map we present “Politics & the Economy.” This section, which is highlighted in blue, provides context for the viewer and allows them to incorporate the overarching environmental actors that influence the larger system of social sector funding at the municipal level for the City of Toronto. Finally, the right side of the map titled “The need for a holistic view”, conceptually displays how a design intervention should incorporate elements from all three primary systems in a holistic manner, and that true to nature of a wicked problem there is no single answer to our proposed research question. This section is highlighted in pink on our giga-map.

2.1 This is a wicked problem.

As we described in the opening paragraphs, without a doubt our research question meets all the stated characteristics of a wicked problem as defined by Rittel and Wbber’s 1973 article on the topic. Now we will examine specific factors that have dynamic and complex interaction with the funding of social services.

2.1.1 Filling the Gap

According to the Mowat Centre’s Filling the Gap study, there is approximately $11B gap between what Ontarians pay to the federal government and what they receive (Zon, N., 2013). This is a result of a multitude of factors including reduced subsidies 6

from higher levels of government to lower levels of government, the downloading of services from one level of government to another, and an increase of service demand. Ontario’s funding of a larger than average share of federal spending was established at time when the province was considered wealthy compared to other provinces. “However, Ontario is no longer wealthier than the Canadian average, with below–average GDP per capita (since 2006) and below–average government fiscal capacity (since the 2009–10 fiscal year)”, states the report.

Unfortunately, Canada’s fiscal shares have not been adjusted to reflect Ontario’s new status as a less than wealthy province. As a result, Ontarians continue to see their taxes redistributed away from Ontario at a time when the province cannot afford to do so. The resulting $11B gap is predominantly due to federal spending and program decisions that result in Ontarians receiving less.

2.1.2 Example: Babyboomers

In particular, the increase of service demand has become an especially heavy financial burden on the system. An example cause of the increased burden is the demographic shift of the population as the babyboomers enter the later years of life. As this demographic continues to age, it is predicted that in the next 3 to 8 years for the first time ever in Canadian history there will be more seniors (individuals over 65) than there will be children (individuals under 15 years of age) (CBC News, 2010). This demographic shift ultimately puts immense pressures on social service systems like the healthcare system that have evolved to care for a younger median age. Likewise, social insurance, pension, housing, emergency services, and the welfare systems will also see increased financial pressures.

2.1.3 Example: Immigration

Another example that is causing strain on social service funding is the high level of immigration.

In 2011, 77,739 people were recorded to have immigrated and settled in the City of Toronto (StatsCan, 2011). According to the 2012 Fraser Institute report the average fiscal burden on taxpayers is $6,051 per immigrant between 1987 and 2004.

SFIN 6B04: Understanding Systems and Systemic Design Winter 2013

By Z. Ebrahim, D. Johnston-Jewell, K. Oikonen, P. Scott, & A. Starkman

Federal Gov’t

+$ reduced subsidies

–$ demand on services

+$

+

+

+

Ontario Gov’t Services

Tax Payer

+$

reduced subsidies

–$

downloaded services

+

+ + +

City Services

–$

–$ approaching retirement

+

under-employed compared to skill level

+$

+ +

New Canadians

people moving to the city

Urbanization demand on services

Babyboomers

FIgure 2: The complexity of the wicked problem that is the funding of social services.

We illustrate this complexity by highlighting three trends: immigration, shifting demographics, and increased urbanization.

Both of these factors contribute to the fact that by the year 2025 the population in the GTA is predicted to grow to over 7.5 million people, and with a system already burdened by the current plight of social service funding, the future of funding for social services is looking very troubled.

The urbanization of the Canadian population is especially challenging for the City of Toronto due to the aforementioned $11 billion gap between what is provided to the federal government and what is received from the provincial government. What this means for Toronto is that despite the fact that

Submitted to Professors Peter Jones & Jeremy Bowes

7

Funding Social Services Shouldn’t Be A Shell Game

the population continues to increase within the city limits, the proportional funding received from the province remains the same – the gap is growing.

and resource at the three tiers of government alone, the complexity of the social services system becomes potently palpable.

Before we dive into how social services are currently funded, it is important to understand which bodies and institutions are involved in the flow of capital in order to fund the social services.

Despite the complexity of the entire system, the key stakeholders of the analysis are the taxpayer and non-tax payer. This is because these individuals are ultimately the source of the funding and recipient of the entire system’s input and output. The previously mentioned intermediate stakeholders comprise of the various levels of government (federal, provincial and municipal), the social services they offer (which includes all ministries, departments and agencies), and the social services provided through the City of Toronto as defined by the taxonomy of the IBM Future Cities Model (project scope). These include Education (TDSB), Shelter & Support, transit provided through the Toronto Transit Commission (TTC), and Toronto Public Health. There are many other forms of social services that are provided by the city, and by the provincial and federal governments, however for the sake of simplicity for this project we have examined the whole social service system through the lens of these particular sub-systems using the IBM Future Cities Model.

2.2 Stakeholders

A true stakeholder analysis would reveal that all individuals within society are subject to a wealth of both direct and indirect actions and reactions of social services. In order to keep within the previously defined boundaries of our research question we focused only on the general stakeholder groups that comprise those at the City of Toronto social service level. We also approached the stakeholder analysis from the perspective of funding, rather than other factors, such as services rendered, or organizational structure. Our analysis broadly represents an order from top to bottom that demonstrates the transfer of funds/services/ products between elements of the system.

The funds for social services are collected by the Federal Government via the Canadian Revenue Agency (CRA) from the taxpayers, and then distributed down the various levels of government until the services/products are ten utilized by the members of society.

Each level of government uses tax provided capital to fund its various agencies, departments, ministries, organizations and institutions. For example the federal government funds a large portion of social services for Canadians including immigration, foreign affairs, and national defense.

The provincial government is comprised of 26 ministries with the largest amounts of spending going towards the Ministry of Health and LongTerm Care (38% of provincial spending) and the Ministry of Education (18% of provincial spending) (Ministry of Finance, 2013). At the municipal level, the City of Toronto finances 47 divisions, 2 corporations (Toronto Community Housing and the Toronto Parking Authority) and oversees The Toronto District School Board (TDSB). With such an expansive list of stakeholders all vying for capital 8

Once we had defined our stakeholders and set out the boundaries and scope of the social service system, we then investigated how the larger system accumulates capital, how the capital is transferred within the system and to the subsystems, and where the capital for the social services comes from.

2.3 Social, Public, Private & how they work.

Through our research we identified three primary sector sources for the funding of social services: public funding, private funding, and charitable funding. Here we discuss the importance, advantages, and shortcomings of each.

2.3.1 Public Funding

Public sector capital, provided by the tax-payer through the tax system, is by far the largest contributor to the funding of social services. The tax system is used to administer capital on behalf of Canadians to finance programs and social

SFIN 6B04: Understanding Systems and Systemic Design Winter 2013

By Z. Ebrahim, D. Johnston-Jewell, K. Oikonen, P. Scott, & A. Starkman

How does Toronto’s Property Tax rate compare?

Toronto Real Estate Board Industrial Occupied

Multi-residential

Commercial Occupied

Residential 4.5%

4.0%

3.5%

3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0

Vaughan

Toronto

Oshawa

Oakville

Mississauga

Barrie (urban)

FIgure 3: How does Toronto’s Property Tax Rate compare? Quite well, in fact. Toronto has one of the lowest residential property tax rates in the GTHA. services for Canadians. For The City of Toronto only 24% of the operational budget is received from higher level Governmental Transfers, 15% from user fees, and 22% from other revenue sources. The vast majority of the city’s money is obtained through property taxes, which make up more than 39% of the city’s revenue stream.

With such a large portion of revenue coming from property tax, one would assume that as the city grows, and the economy does well, and property values increase, there would be extra revenue created for the city to provide funding for growth of services, however this is not the case.

Instead what occurs is that Toronto grows, and as a result the demand for services increases, but in order for extra revenue to come into the city’s budget, city hall would need to “raise taxes” which is never popular with public opinion, and consequently becomes a strategy avoided by most politicians. Therefore in order to free up capital in the city’s operating budget, city hall is required to

play a zero sum game, shifting capital from one needing service to another, or reduce service costs altogether (ironically another option that is not popular with public opinion).

Interestingly, Toronto has one of the lowest residential property tax rates in the Greater Toronto Area (GTA) at just 0.77% (Figure 3), and the city has competitive commercial and industrial property tax rates. With property taxes subject to both public distaste for increased taxes, and internal competition for funding between services, it is not surprising that social service funding struggles to meet demand.

The current state of social service funding for the City of Toronto was not always as difficult.

In 1994, the Progressive Conservative (PC) candidate Mike Harris campaigned for Premier of Ontario on a platform entitled the “Common Sense Revolution.” The plan promised to reduce

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9

Funding Social Services Shouldn’t Be A Shell Game

the size of government and lower income taxes by 30%. In order to realize his campaign promises, Harris proposed an amalgamation plan of the six municipalities of the Greater Toronto Area. A task force was convened to investigate the social and financial implications of amalgamation, which revealed that the most significant impact would be the download of social services (previously paid for or cost-shared by the province) to municipalities.

In 1997, a referendum was held which indicated that 70-81% of voters opposed the provincial government’s plan. In April 1997, the provincial government passed Bill 103, amalgamating the six municipalities, and downloading welfare, public transit, emergency services and social housing to the newly formed City of Toronto (Janeiro, J., 2012). The combination of the newly downloaded social services to the city and the termination of the provincial co-sharing of funding for some of the social services resulted in the city’s inability to sustainably finance their social service operations in light of the increasing challenges they face such as immigration, shifting demographics and the increase of urbanization.

The public sector does have advantages as the primary funder of social services. One of major advantages of public sector funding as opposed to primary funding from either the private or charitable sectors is that the public sector has the ability to tackle large overarching social service needs that would be too large for either private or charitable institutions to tackle. Also, the public sector has incredible power in that the public governmental institutions are responsible for policy decisions that steer social service demand. This will be discussed in further detail in the section below titled Politics and the Economy.

2.3.2 Private Funding

The private sector relies on the economic return on investment in order to justify spending, strategy, and decisions. The organizations that comprise the private sector run their businesses of selling goods and/or services in order to gain profitable returns, which are then used to further sustain the practice of the business of selling goods and/or services.

In a system that funds only ventures with possible capital return, the incentive for private institutions to be invested in social service funding is either 10

indirect or non-existent. Given the opportunity to monetize the social gains received from funding social services, the private sector would then play a larger role in direct funding of social service.

Currently, the private sector is involved in funding of social services through financial models that allow private entities to purchase risk, partner with the public sector, or provide services or goods for financial gain to another social service providing sector (either public or charitable). Below we provide examples and explanations of two tools, private-public partnerships and social impact bonds, which allow private sector involvement into the funding of social services.

2.3.3 Charitable Funding

Charitable funding of social services is carried out by organizations that are driven by a mission for positive change. These organizations fundraise, collecting money for their cause and then allocate the funds either by applying direct capital or by providing goods and/or services. In Canada there are over 85,000 registered charities, each providing activities in relief of poverty, advancement of education, advancement of religion, and other social purpose proven by case law (CRA, 2013).

Despite being individually operated, it should be noted that 49% of all funding for the operations and mission work of charities originates from some level of government, and therefore from the Canadian taxpayer. In turn this equates to 14% of all governmental spending. According to the website TheCharitiesFile.ca, which helps enhance the awareness and capacity of Canadian charities in order for the charities to comply with the Canadian Income Tax Act, the highest number of charitable donations are given to healthcare organizations. This often leaves many charitable organizations that gather funds for other social causes in highly competitive markets for funding.

A troubling tend for the charitable sector is the decreasing number of Canadians making charitable donations year-over-year. Between 1990 and 2011 there has been a 7% decrease in the number of people who included charitable donations as part of their tax filing (CBC News, 2013). Also, the decreasing service responsibility that government claims has placed more social needs demand on charities. As a result of these factors, charities now rely more than ever on

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donations from individuals to fulfill their mandate.

Even the organizations that do have largely government funding (for example the Friendship Center – a drop-in center with a budget of $500 000, 50% coming from the Provincial government and 50% from the city) are at the whims of budget cuts and political swings in power.

Despite the challenges of funding social services through charities, there are also some major advantages to applying this sector as a funding source. Firstly, charities are often smaller in size compared to larger governmental institutions and large private organizations. Smaller size charities can take advantage of their ability to be nimble to adapt to changing environments, and as a result can often be more innovative. Secondly, charities in general, tend to be ‘closer to the consumer’, often having direct relations with the final user of the social service. This fosters relationships of trust and community, providing emotional connections to the charity as a brand and organization. Finally, charities have the advantage over public and private entities in that they can effectively mobilize volunteer workforces in the need of social service provision (Wright, T, 2008).

FIgure 4: Private-pulbicpartnerships are a mixed funding tool based off of a contract between the public and private sector transfer risk in return for capital.

2.4 Mixed Funding Tools

We examined the various methods that the aforementioned sectors utilize in providing social service funding. In particular, we recognized that no single sector of social service funding can or should provide all the funding for social services.

With this in mind, we decided to investigate the funding tools that utilize a mixed approach as their funding base in order to meet social service demand. Specifically three mixed funding tools, private-public partnerships, crown corporations, and social impact bonds, provided insight into how partnerships between sectors can amount to greater social service funding.

2.4.1 Public-Private-Partnerships (PPP’s)

A PPP is a financial tool that allows risk to be offloaded from public entity to private entity in return for a higher capital transfer (Siemiatycki, M., and van Koeverden, A., 2011). PPP’s are usually used for large scale, high risk, projects that carry considerable capital investment and cost. Examples would include build-own-operate

Public Sector

Is built for

Partners with Pays

$50m+ Project

Private Sector

Borrows

Could borrow $ and fund directly at a lesser rate

Funds

Accepts risk

$ + Submitted to Professors Peter Jones & Jeremy Bowes

Delays

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Funding Social Services Shouldn’t Be A Shell Game

Private money Public money

Service Providers

2.

3.

funding for operating costs

performancebased payments

1.

FIgure 5: Social Impact Bonds are an emerging mixed funding tool. In this case, government provides financial return if a private investor funds social service programs and saves the government money.

12

Social Impact Bond-Issuing Organization

working capital

Government

4. repayment & ROI from performancebased payment

Private Investors

projects (such as the 407 Electronic Toll Route) or build-operate-transfer projects. The four major features of PPPs are as follows: • Contract developed by public sector detailing operating services • Asset transfer from public to private entity • Development by private sector • Transfer of property back to public sector

rapid expansion, or underinvestment. PPP’s also play off of the strengths of both the public and private sector in a combined strategy. The private sector utilizes its abilities to maximize efficiencies while taking on and monetizing the risk associated with the projects, while the public sector backs the risk with consistent income from the tax base.

PPP’s provide an innovative way to share the costs of large projects between private and public institutions for social services. However by sacrificing portions of projects to the private sector, the public sector looses complete control of a project. Also, the debt that is taken on in order to finance the project is forwarded to future generations of tax-payers; in essence, PPP’s work very similarly to leasing a car. This provides the private sector a higher interest rate for the portions of working capital they contribute, while the public sector puts off immediate payment. As a result PPP funded projects can cost up to 16% higher than if the public sector had paid for them solely (McKenna, B., 2012).

Although PPP’s have their criticisms and shortfalls (McKenna, B., 2012, and NUPGE, 2013), they allow public institutions to offset amounts of immediate financial risk for large-scale projects.

(See Figure 4) This can allow new ways to finance projects that are otherwise not possible due to capital strapped governments, backlogged need,

2.4.2 Crown Corporations

Although officially owned by the provincial government crown corporations are arms-length entities that function as private entities. This means that they are not as subject to political change of office as other public entities such as ministries and agencies, and they are not as subject to change in economics or strict financial return for survival as private institutions. This provides crown corporations the security and consistency of both a private institution’s management and a public institution’s financing, while also being able to mandate non-finance driven decisions such as educational programs, and social service provision.

In Ontario there are three crown corporations, the Ontario Power Generation (OPG), the Ontario Lottery and Gaming Corporation (OLG), and the Liquor Control Board of Ontario (LCBO). At the municipal level the City of Toronto oversees two corporations, Toronto Community Housing and the Toronto Parking Authority.

SFIN 6B04: Understanding Systems and Systemic Design Winter 2013

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2.4.3 Social Impact Bonds (SIBs)

A SIB is a contract between a private entity and the public sector that offers a rate of return dependent on successful improved social outcome that results in financial savings for the public sector. SIB’s are an emerging financial tool that have shown promise in providing private sector monetary incentive to contribute and solve public sector issues. The key to SIB success is their ability to measure social impact in monetary terms. An example of this type of financial tool is the Peterborough Prison example in the United Kingdom. This program has raised £5 million from 17 social investors to fund a consortium of nonprofit organizations over six years to work with 3,000 prisoners after they are released. If the nonprofit organizations can achieve a drop in reoffending rate by 7.5% or more, then the investors will receive a 13% return on investment over an eight-year period (socialfiannce. ca, 2013).

By leveraging the private sector need for profit, SIB’s show much promise as a successful tool for providing monetary incentive for the funding of social services from the private sector (see Figure 5). Unfortunately, due to the fact that SIB’s are still emerging as a tool and many of the SIB projects are still in the pilot phase, they have yet to accumulate significant amounts of successful data on positive performance measures, and therefore there is still hesitation about using them to finance social services.

Private sector funding for social services may also be non-monetary, where social capital gets generated through corporate social responsibility (CSR). CSR can also become a unique tool, similar to other social funding model approaches.

It provides an opportunity for the private sector to volunteer them selves to contribute towards social impact without being asked to do so. Often, corporations are willing to write social initiatives into their corporate mandate. But because CSR is a more self-regulated practice, it is often also not seen as a robust approach. Still, if corporations are willing to put resources toward creating social impact, without expecting monetary returns, this can also be is an important approach, in combination with others. Again, measuring the right metrics is the key to success here.

2.5 Politics and the Economy

Not only is the makeup of funding towards social services complex and varied, it is also dynamic and multifaceted, changing with the environmental conditions of the particular era. Considering that it would be nearly impossible to demonstrate every actor that influences social service funding, we decided to focus on the following major overarching environments; Political environment, Economic environment, and Social perceptions.

2.5.1 Political Environment

The political parties in power at a particular time provide direction to the public policy discourse, creating effects on policy that are felt long after they have left office. Therefore, it is important to take into consideration the parties in power at the various levels of government when examining social service funding. To give our giga-map viewer a brief overview of the political environment over the time span of 1990 to present, we visually displayed the political party that was in power at the three levels of government (municipal, provincial, and federal) and their tenure on a timeline. This is important because governmental policy and ideologies can directly impact the funding of social services. For example, a more socially minded governing body at any of the three levels of government is more likely to promote and direct funding towards social services.

On the other hand, a conservative or capitalist minded government is more likely to divert funds away from social services, and/or privatize social services. In order to provide the viewer a sense of context of political power we have also included whether the party in power was in a state of majority or minority governance.

2.5.2 Economic Environment

Much like the political party in power during a time period, the economic environment also will have significant influence on social service spending and funding (and likewise, the political party and their platform that is voted into power). During periods of economic prosperity social service spending and funding increases, while times of economic downturn result in reduced social service funding.

The economic climate is represented both by the

Submitted to Professors Peter Jones & Jeremy Bowes

13

Funding Social Services Shouldn’t Be A Shell Game

unemployment rate in the City of Toronto and by the province of Ontario and national GDP.

2.5.3 Social Perceptions

The third and final environmental actor we display is a time span of political cartoons representing the social perceptions and public political opinion at various times throughout our time span. Although lighthearted and fun, one can gain an interesting perspective from the political cartoons at the time.

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SFIN 6B04: Understanding Systems and Systemic Design Winter 2013

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3.0 CONCLUSION

By mapping out the systems of social services we provide ourselves a birds-eye-view of this very complex and dynamic system. We have also identified and examined the tools and functions of the system.

3.1 The need for a holistic view.

Through the process of understanding complex public, private and charitable systems, it is revealed that the sustainable funding model for social services lies in the movement of money. There is no silver bullet when it comes to funding social services – the sustainable funding of social services is actually centralized around more efficiently allocating money to institutions, organizations or government that can systemically address social problems. When this happens, there doesn’t have to be an investment of money into services to the same extent as current funding and demand would dictate. Therefore government can turn taxpayers’ money towards decreasing the financial burden created by the structural gap between what Ontarians pay to the federal government and what they receive. With the compounding effects of the aging population, urbanization, and increased immigration escalating the stresses on the larger social systems, it is essential to think of the charitable, public, and private systems not in isolation, but rather how we can make transparent to the public which systems are best equipped to address specific problems. This would take advantage of each individual system’s strengths and experiences. By comprehending that ultimately there is only so much money in the entire social system, the public can begin to understand that by deferring paying for social services through taxes, they will end up paying for the same social services downstream through charitable and/or private pathways. There is only one bucket of money.

The combination of public, private, and charitable sectors in the funding of social services is the natural progression of the larger whole of social service funding. To approach social systems from a singular perspective would negate the fact that social service funding is intrinsically a wicked

problem, and therefore cannot be solved with simple one-solution answers. In fact, it cannot be solved at all. As we point out in the opening pages of this document, sustainable social service funding as a wicked problem is forever changing (largely due to the complexities of the environment in which it lives – as we have described). Each social service issue or project requires a tailored solution specific to the characteristics of that particular issue. What is for certain is that the solution must include a wider breadth of input from all three sectors, and they must utilize blended funding tools (such as PPP’s and SIB’s) in order to take advantage of each sector’s strengths, while mitigating individual sector weaknesses.

As with any wicked problem there is no one solution to the question, “How can a sustainable funding model be established to support services in the City of Toronto?” However, as intelligent financial tools increasingly enter and are validated in the marketplace, we will hope to see the opportunities they present being monetized to lighten the strain on the city to fund social services in Toronto.

3.2 Next Steps

As we look to what could be the next phase of this project (should we have the opportunity to keep researching), we feel strongly that moving beyond a siloed approach to funding social services and rather focusing on the utilizing and approach that involves “complete capital” (Antony Bugg Levine, 2013) would be significantly more effective.

Complete capital involves the mobilization of human, social, financial, and intellectual capital in order to better address how to better utilize seemingly more implicit capital, but are in reality resources that deliver significant and competitive contributions to addressing the challenges of an underfunded social service system. With the City of Toronto facing revolving budget cuts alongside increased needs for social services in the city - we think that complete capital would mobilize funding alongside investment capital, organizational innovation and government collaboration (Antony Bugg Levine, 2013) and would result in leveraging the strengths as well as latent resources of each of the funding systems.

Submitted to Professors Peter Jones & Jeremy Bowes

15

Funding Social Services Shouldn’t Be A Shell Game

APPENDIX 1: Giga-map This is a wicked problem.

Social, Public, Private & how they work.

The government funding gap

Stakeholders

Based on a March 28, 2013 study conducted by the Mowat Centre titled Filling the Gap, Ontario funds a disproportionate share of federal spending compared to other provinces even though Ontario is no longer a wealthy province.

The federal government oversees a wide range of Departments, Agencies, Crown Corporations, Special Operating Agencies and various affiliated organizations that are all responsible for providing social service funding.

The study finds “that there is roughly an $11B structural gap between what Ontarians pay to the federal government and what they receive.

The provincial government has 26 ministries with the largest spending on the Ministry of Health and Longterm Care (38%) and the Ministry of Education (18%).

Each ministry is mandated to administer financing to its specific social service under direction from the minister and the government of Ontario.

+$ –$ demand on services

+$

The City of Toronto has 47 divisions (including Parks and Recreation, Police Services, Waste Management, Water, etc.) , 2 corporations (Toronto Community Housing and Toronto Parking Authority) and oversees one body (The Toronto District School Board).

+$

+

+

–$

User Fees 15%

downloaded services

+

City Services

For the purpose of this project Social Service providers in the City of Toronto are defined as Education (TDSB), Shelter & Support, Transit (TTC) and Toronto Public Health.

approaching retirement

+

User Fees 15%

78%

of immigrants to Ontario settle in Toronto

11% 40%

1.0%

0.5%

0

Toronto

Oshawa

Oakville

Mississauga

Barrie (urban)

TTC and Transportation Services

New Canadians

Social Services 16.6% (Housing, Health, Children and Senior’s Police, Fire, EMS Services, Employment 16.6% Services) 30.5%

The population of the GTA is expected to grow to over 7.5 million by 2025

“We can solve o problems the sam thinking created th

Collection of money

Library, Culture, Parks, City Planning, Facilities 13.4% Governance and Internal Services 4.9%

13.4%

Library, Culture, Parks, City Financing (Capital and Corporate) Planning, Facilities

4.9%

15.1%

Albert Einste

Property taxes don’t work like other taxes:

Governance & Internal Services

The City of Toronto, like all municipalities faces increased challenges in funding social services in part because of the taxation policies that are imposed by the Ontario Government.

to cover the rate of inflation.

Property tax rate is tied directly to the City’s operating budget meaning that if the municipal government wants to generate more revenue from the existing property base they must increase the city’s budget.

Pri

15.1% Financing (Capital & Corporate)

16.6% Police, Fire, EMS

One might think that as the city grows, and as property values continue to rise year-over-year, that revenue generated for the city would also increase. But property taxes don’t work like other taxes.

Unlike other forms of taxation, such as sales tax, property taxes are not tied to economic growth. In fact, property taxes don’t even increase

According to a Fraser Institute report released in March 2012, “Canada’s immigrant selection policies resulted in an average fiscal burden on taxpayers of $6,051 per immigrant who came to Canada between 1987 and 2004.”

Tax System

30.5%

Police, Fire, EMS 16.6%

Other Revenues

Country of Origin by Continent: 79% Asia, 11% Europe, 6% America/USA, 4% Africa

Re-allocate funds

Financing (Capital and Corporate) 15.1%

TTC & Transportation Services

22%

* Immigration by Category: 63% Economic Immigrants, 23% Refugees, 11% Family Class, 3% Others

15.1%

TTC and Transportation Services Governance and Internal Services 4.9% 19.5%

19.5%

User Fees

Babyboomers

4.9%

Government gathers money

Library, Culture, Parks, City Planning, Facilities 13.4%

Social Services (Housing, Health, Children & Senior’s Services, Employment

15%

people moving to the city

TaxTax System Public System

19.5%

13.4%

Government Transfers (Federal, Provincial & Subsidies)

63%

$6,051

1.5%

30.5%

Property Tax

What is the role of business?

78%

Public-Private Partnerships: the funding model

Make money

Public Sector

This means that as Toronto grows and the demand for social services increases the City has no choice but to “raise taxes” which in today’s political climate is a very unpopular position.

Is built for

Pr

Partners with Pays

$50m+ Project

Private Sector

Borrows

Could borrow $ and fund directly at a lesser rate

Funds

Accepts risk

$ How the funding of social services in Toronto changed with Amalagamation

Politics & the Economy 12.68%

City of Toronto Unemployment Rate

In 1994, Progressive Conservative Candidate Mike Harris campaigned for Premier of Ontario on a plan entitled the “Common Sense Revolution.” The plan promised to reduce the size of government and lower income taxes by 30%. In order to realize his campaign promises, Harris proposed an amalgamation plan of the six municipalities of the

10.20%

Ontario GDP

49% of total reve 85,000 charities ment, and gover registered chariti of all governmen

2.0%

39%

39%

demand on services

23%

60%

s 2ELIEF OF POVERTY s !DVANCEMENT OF s !DVANCEMENT OF s /THER PURPOSES

19.5%

39% 30.5%

24%

Urbanization

3%

2.5%

Where the $ goes

24%

63%

3.0%

Children and Senior’s Services, Employment Services) Property Tax

Government Transfers (Provincial, Federal, and Subsidies) 24%

+

of immigrants to Canada are economic immigrants*

22%

3.5%

15%

immigrants that arrived in Canada settled in Toronto

40%

The activities of c are limited to:

4.0%

Vaughan

Where the $ comes(Housing, from Health,

+

+ +

under-employed compared to skill level

+$

–$

Residential

In the City of Toronto:

Other Revenues 22% Government Transfers (Provincial, Federal, 22% and Subsidies) 24%

+

–$

Multi-residential

Commercial Occupied

Ontario’s tax system supports the province’s programs and investments in education, health care, transportation infrastructure, andProperty skills.Tax

Other Revenues 22%

Ontario Gov’t Services

reduced subsidies

Industrial Occupied

4.5%

39%

Social Services

of immigrants to Canada settle in Ontario

Toronto Real Estate Board

Social Services

All citizens of the City of Toronto.

77,739

Tax structure “A well-functioning tax and benefit system is an essential part of a healthy economy, a sustainable public infrastructure, and a strong democracy.

Cana by the

They then use this tax revenue to finance programs and services for Canadians.”

+

Tax Payer

Canadian Immigration in 2011

How does Toronto’s Property Tax rate compare?

The tax revenue we collect each year is either given back to taxpayers in the form of benefit payments or tax credits, or is provided to the federal, provincial, territorial, and First Nations governments on whose behalf we collect the tax revenue.

Federal Gov’t

reduced subsidies

Why we pay taxes.

GST 1991 NAFTA 1994

Greater Toronto Area. A task force was convened to investigate the social and financial implications of amalgamation, which revealed that the most significant impact would be the download of social services (previously paid for or cost-shared by the province) to municipalities. In 1997, a referendum was held which indicated that 70-81% of voters

+

opposed the provincial government’s plan. In April 1997, the provincial government passed Bill 103, amalgamating the six municipalities, and downloading welfare, public transit, emergency services and social housing to the newly formed City of Toronto (Schwartz, 2001).

Social services were most affected by these changes.

Delays

“ A P3 wor like leas

The Canadian Council for Private Partnerships define as, “A cooperative venture b the public and private secto on the expertise of each par best meets clearly defined p needs through the appropria allocation of resources, risks rewards.”

Positives s NEW WAY TO l NANCE LARGE P s BRINGS TOGETHER THE STRENG both sectors

8.66%

SARS 2003

Dot Com Bust 2001

5.65%

6.35%

Federal Government

1995–96 “slump”

early 1990s recession

Brian Mulroney 1984–93 (majority)

early 2000s recession

Paul Martin 2003–2006 (minority)

Jean Chrétian 1993–2003 (majority) Kim Campbell 1993–93

Government of Ontario Bob Rae 1990–95 (majority)

Mike Harris 1995–2002 (majority)

Dalton McGuinty 2003–2006 (majority) Ernie Eves 2002–03

Metro Toronto

Amalagamation: City of Toronto

2005

2004

2003

2002

2001

2000

David Miller 2003–2010 Considered a “socialist” mayor

1999

1998

1997

Mel Lastman 1998–2003

1996

1993

1992

1991

1990

1995

Barbara Hall 1994–1997 Considered a “socialist” mayor

1994

June Rowlands 1991–1994 Art Eggleton 1980–91

Funding Social Services Shoul Project2_GigaMap_FINAL_R.indd 1

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SFIN 6B04: Understanding Systems and Systemic Design Winter 2013

By Z. Ebrahim, D. Johnston-Jewell, K. Oikonen, P. Scott, & A. Starkman

.

The need for a holistic view.

adian Charities e numbers

Get money.

Spend money.

F EDUCATION F RELIGION PROVEN BY CASE LAW

Canada. Charities File indicates that the largest number of donations are given to healthcare organizations, leaving remaining charities focusing on the other areas of activity struggling to diversify their funding base.

enues from Canada’s come from governnment funding of ies represents 14% nt spending in

The number of tax-filers in Canada making charitable donations has been steadily decreasing from 30% in 1990 to 23% in 2011.

As government funding to social

charities in Canada

services decreases, government offloaded the responsibility of social services to large charitable organizations to fill the gap. These charitable organizations rely on donations from the public to fulfill their mandate, and with decreasing numbers of charitable donations (as donors choose increasingly to individualize their giving), this puts these organizations at risk of losing a large part of their funding base.

Fundraising

+$

Gov’t

Gov’t Agencies

+$

Charitable System Charitable System

+$ +$

Charities

give money to

Reserve Funds

deliver

deliver are required to pay taxes

Giving to charities

+$

spend money on

+$

“…there will be more seniors than children (under 15 years) in Canada for the first time ever, sometime between 2015 and 2021.”

Governance

Earned Income

Social Services

Each of the established funding models have their advantages and their limitations.

Private Donations

benefit

optionally give money through these mechanisms

Mission-driven positive change

Gather money for a cause

Tax Payer

Organizations

Fundraising

Social Impact Bond: An emerging funding model Social Impact Bonds (SIB) are an emerging investment tool that enables the government to offer a financial return to private investors who fund vital social services. The ability to offer a financial return hinges on successfully meeting agreed upon measurements and demonstrated government savings.

n not our s with me that hem”

An example: The pilot social impact bond in Peterborough Prison in the United Kingdom is a program to reduce reoffending rates of short term prisoners. £5m was raised from 17 social investors to fund a consortium of nonprofit organizations over six years to work with 3,000 prisoners after they are

ein

Service Providers

working capital

Business

Organizations

Crown Corporations

Selling of goods & services

rks essentially sing a car.”

Publices PPPs between ors, built rtner, that public ate s and

Charitable Sector

There’s no magic pile of money.

OLG

$2.0B

Ontario Gov’t

s MAXIMIZE EFl CIENCIES OF private sector s FREES PUBLIC FUNDS FOR CORE

economic & social programs s PRIVATE SECTOR ASSUMES THE RISK

$0.9B

$4.5B

4.4% of provincial budget

There’s only one pot of money and it gets circulated in many different ways.

OPG

Through the process of understanding complex public, private and charitable systems, it is revealed that the sustainable funding model for social services lies in the movement of money.

There is no silver bullet when it comes to funding social services – the sustainable funding of social services is actually centralized around more efficiently allocating money to institutions, organizations or government that can systemically address social problems. When this happens, there doesn’t have to be an investment of money into services at the same extent as current funding and demand would

$1.6B

Negatives s LOSS OF PUBLIC CONTROL s PUBLIC DEBT GETS DEFERRED INTO the future s PRIVATE SECTOR BORROWS MONEY at a higher rate, therefore the project often costs more s CONTRACTS OFTEN @HIDDEN FROM the public s PROJECT COSTS CAN BE HIGHER than if government run

PROJECTS GTHS OF

Government

4. repayment & ROI from performancebased payment

Private Investors

Three crown corporations exist in the province of Ontario: Ontario Power Generation (OPG), Ontario Lottery and Gaming Corporation (OLG) and Liquor Control Board of Ontario (LCBO).

Crown corporations are peculiar hybrid entities—somewhere between a government body and a private enterprise. They are wholly owned by the state but operate at arm’s length from government.

rivate System

performancebased payments

Organization

1.

y

Social Impact Bond-Issuing

LCBO

9.98%

The philanthropic sector by definition provides a formalized mechanism that enables charitable individuals to give in order to help those who are in need. However, the system relies predominantly on the generosity of individual donors thus creating a challenge in long-term sustainable funding.

The funding of Social Services in the City of Toronto

Public Sector

3.

funding for operating costs

Public money

ivate System

The private system has an incredible ability to generate huge amounts of revenue however it is primarily motivated by profits and therefore any private funding of social services will likely require a return on investment. This return does not necessarily have to be a direct financial return but it is important to recognize that the success of this system hinges on individualistic motivations.

Private Sector

released to reduce their reoffending, measured by convictions. If the social impact bond delivers a drop in reoffending beyond 7.5%, investors will receive an increasing return capped at a maximum of 13% per year over an eight year period. (socialfinance.ca)

2.

Private money

The public taxation system is an effective tool of collecting money from the citizens and redistributing those funds towards infrastructure and services that benefit the entire city. While this system is sustainable, due to the political cycle it is challenged in its ability to generate exponential revenue.

9.96%

EU/US Debt Crisis 2011

7.98%

dictate. Therefore government can turn taxpayers’ money towards decreasing the financial burden

The sustainable funding model for social services lies in the movement of money. created by the structural gap between what Ontarians pay to the federal government and what they receive. With the compounding

effects of the aging population, urbanization, and increased immigration escalating the stresses on the larger social systems, it is essential to think of the charitable, public, and private systems not in isolation, but rather how we can make transparent to the public which systems are best equipped to address specific problems. This would take advantage of each individual system’s strengths and experiences. The key understanding for the public is that if they do not pay for a social service through their taxes, they continue to carry the cost through the consumption of goods and services.

By comprehending that ultimately there is only so much money in the entire social system, the public can gain to understand that by deferring paying for social services through taxes, they will end up paying for the same social services downstream through charitable and/or private pathways. There is only one bucket of money.

Global Credit Crisis 2008

“Great Recession”

Stephen Harper 2006–present (minority)

Citizens Vote

(2011 election = majority)

Next Federal Election, October 2015

Kathleen Wynne 2013 (minority)

Government Elections: Federal, Provincial, Municipal

Next Provincial Election, October 2015

Rob Ford 2010–present Next Municipal Election, October 2014

2025

2020

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

The political cycle will repeat itself. Either the current government will be re-elected or the government will change which will have implications on funding, priorities and promises made.

A full list of resources/references are available in the paper.

ldn’t Be a Shell Game

How can a sustainable funding model be established to support social services in the City of Toronto?

Zahra Ebrahim Dustin Johnston-Jewel Karen Oikonen Peter Scott Adam Starkman

SFIN 6B04 Understanding Systems & Systemic Design Project 2 April 11, 2013

4/9/13 6:51:06 AM

Submitted to Professors Peter Jones & Jeremy Bowes

17

Funding Social Services Shouldn’t Be A Shell Game

APPENDIX 2: References Alexandra, M. (2008). The Role of Public-Private Partnerships in Funding Social Housing in Canada.

Canadian Policy Research Networks. Retrieved from: http://rcrpp.org/documents/50550_FR.pdf [April 1, 2013].

Black, S. (2012). Getting Past Zero: Maintaining Services and Balancing Toronto’s 2013 Budget.

Wellesley Institute Advancing Urban Health, November 2012. Retrieved from: http:// www.wellesleyinstitute.com/wp-content/ uploads/2012/11/Getting-Past-Zero.pdf [March 18 2013] Brittain, L. (2002). Financing Capital Expenditures.

Canadian Tax Journal, 50 (2), pp.552-575.

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CBC News (2011). Will a retirement boom start in 2011? Retrieved from: http://www.cbc.ca/news/ canada/story/2010/12/30/f-boomers-retire.html [March 28, 2013].

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Cra-arc.gc.ca (n.d.). Canada Revenue Agency, Britten, J. (1998). City of Toronto: City Council, Making a Difference for Canadians. Retrieved from: Amalgamation. Retrieved from: http://www.toronto. http://www.cra-arc.gc.ca/agency/menu-e.html ca/toronto_history/amalgamation/amal_report1.

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Wikipedia, the free encyclopedia. Retrieved from: CBC News (2013). Donations to charity rise http://en.wikipedia.org/wiki/Immigration_to_ despite fewer donors. Retrieved from: http://www. Canada [March 27, 2013]. cbc.ca/news/business/story/2013/02/13/charityfewer-canadians-giving.html [April 4, 2013].

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SFIN 6B04: Understanding Systems and Systemic Design Winter 2013

By Z. Ebrahim, D. Johnston-Jewell, K. Oikonen, P. Scott, & A. Starkman

En.wikipedia.org (2013). List of Prime Ministers of Canada. Wikipedia, the free encyclopedia.

Retrieved from: http://en.wikipedia.org/wiki/List_ of_Prime_Ministers_of_Canada [March 22, 2013].

McConnell, P. et al. (2010). Downtown Information Session: City of Toronto 2011 Operating and Capital Budget. Retrieved from: http://www. toronto.ca/budget2010/pdf/bb2010_full.pdf [March 18, 2013].

En.wikipedia.org (2013). List of premiers of Ontario.

Wikipedia, the free encyclopedia. Retrieved from: McKenna, B. (2012). The Hidden Price of Publichttp://en.wikipedia.org/wiki/List_of_premiers_of_ Private Partnerships. The Global and Mail Online.

Ontario [March 22, 2013].

Retrieved from: http://www.theglobeandmail.com/ report-on-business/economy/article4611798.ece En.wikipedia.org (2013). List of mayors of Toronto. [March 28rh, 2013].

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Fraserinstitute.org (n.d.). Recent immigrants not faring as well as those who arrived before 1987, costing taxpayers more than $16 billion annually | Fraser Institute. Retrieved from: http:// www.fraserinstitute.org/publicationdisplay. aspx?id=18104&terms=immigration [March 18, 2013].

Hall, H. (1995). Funding Charities: Dependency on Government and Implications of Cutbacks.

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Janeiro, J. (2012). E. Pluribus Unum: Municipal Amalgamation and the City of Toronto. PP+G Review: Politics and Policy, 3 (2), pp.74-93.

Johnston, A. (2011). Facing Up to Social Cost: The Real Meaning of Corporate Social Responsibility

by Andrew Johnston SSRN. Retrieved from: http:// papers.ssrn.com/sol3/papers.cfm?abstract_ id=1927066 [April 2, 2013].

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Mr. G (2012, June 27, 2012). “Immigration to Canada 2011: Who, Where and How”.

The Zieglers Blog. Retrieved from: http:// thezieglersblog.com/2012/06/immigration-tocanada-2011-who-where-and-how/ [March 18, 2013].

National Union of Public and General Employees (NUPGE) Research (2013). The Underfunding and Accountability Crisis in Canada’s Communitybased Social Service Sector. National Union of Public and General Employees. Retrieved from: http://www.nupge.ca [March 28, 2013].

National Union of Public and General Employees (NUPGE) Research (2013). Social Impact Bonds: A new way to privatize public services. National Union of Public and General Employees. Retrieved from: http://www.nupge.ca [March 28, 2013].

OneCity Transit Plan for Toronto (2009).

What is “CVA Uplift?” Retrieved from: http:// onecitytransitplan.com/funding-of-onecity-transitplan/about/ [March 2013].

Submitted to Professors Peter Jones & Jeremy Bowes

19

Funding Social Services Shouldn’t Be A Shell Game

Ostler, T. (1997). Profile Toronto: Population and Household Growth. Retrieved from: http://www. toronto.ca/demographics/pdf/profile01.pdf [April 4, 2013].

Reid, D. (2008). Property taxes are weird. Spacing Toronto. Retrieved from: http://spacing.ca/ toronto/2008/03/28/property-taxes-are-weird/ [March 2013].

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Zon, N. (2013). Filling the Gap: Measuring Ontario’s Balance with the Federation. The Mowat Centre, pp.2-3.

Schwartz, H. (2001). The Financial Implications of Amalgamation: The case of the City of Toronto.

York University. Retrieved from: http://www.econ. yorku.ca/research/workingPapers/working_papers/ MontrealPaper3.pdf Siemiatycki, M. and Van Koeverden, A. (2011).

Visualizing Trends in Transportation Infrastructure Public-Private Partnerships: Introduction to Public Private Partnerships. Retrieved from: http:// individual.utoronto.ca/siemiatycki/PPP%20 About%20Us.html [March 28, 2013].

Slack, E. (2012). Is Toronto Broke, Financing the City of Toronto. University of Toronto, Munk School of Global Affairs. Retrieved from: http:// munkschool.utoronto.ca/imfg/events/?cur_ year=2011 [March 2013].

Socialfinance.ca (2013). Social Impact Bonds | Social Finance. Retrieved from: http:// socialfinance.ca/social-impact-bonds March 28th, 2013].

Thecharitiesfile.ca (2013). Fast Facts on Canadian Charities | The Charities File. Retrieved from: http:// thecharitiesfile.ca/en/fastfacts March 5, 2013].

Treasury Board Of Canada Secretariat (2005).

Meeting the Expectations of Canadians: Review of the Governance Framework for Canada’s Crown Corporations. Retrieved from: http://www.tbs-sct. gc.ca/report/rev-exa/gfcc-cgse-eng.pdf [March 17, 2013].

Wright, T. (2008). Too much of a good thing? The Guardian, Retrieved from: http://www.guardian. co.uk/society/2008/jul/09/voluntarysector.policy [March 28th, 2013].

20

SFIN 6B04: Understanding Systems and Systemic Design Winter 2013

By Z. Ebrahim, D. Johnston-Jewell, K. Oikonen, P. Scott, & A. Starkman

APPENDIX 3: Iterative Process Our initial discussions centralized around the flow of capital to fund all social services. These initial conversations demonstrated to us how complex the system of social service provision is and gave us the insight to add boundaries and scope to the project.

The added focus on the City of Toronto provided the boundary to the project that we needed to better comprehend the system and its actors.

Submitted to Professors Peter Jones & Jeremy Bowes

21

Funding Social Services Shouldn’t Be A Shell Game

Here we roughly map the system as we then understood it, focusing on how various actors and tools interact with each other.

We then performed a stakeholder analysis, and stakeholder need(s) assessment.

In actuality, this task had multiple iterations and therefore the image you see here is but one of the many versions of the stakeholder analysis we performed.

22

SFIN 6B04: Understanding Systems and Systemic Design Winter 2013

By Z. Ebrahim, D. Johnston-Jewell, K. Oikonen, P. Scott, & A. Starkman

Another version of the stakeholder analysis. In the previous image we used our personal experiences to guide us through the process. In this image we rely on the IBM Smart Cities Model to guide us through the process.

The eventual gigamap would include a combination of both, as both processes were valuable.

After settling on our stakeholders and their needs, our research based insights lead us to start building the various components of what would be the final gigamap. Here is our initial conception of the overarching environments that influence social service funding.

Submitted to Professors Peter Jones & Jeremy Bowes

23

Funding Social Services Shouldn’t Be A Shell Game

The funding gap for social services and the three trends creating pressure on social service funding: shifting demographics, immigration and urbanization.

One of the most challenging parts of the giga-map was determining how the three sectors (private, public and charitable) would interact visually on the map to represent both their independent actions and their partnerships.

24

SFIN 6B04: Understanding Systems and Systemic Design Winter 2013

By Z. Ebrahim, D. Johnston-Jewell, K. Oikonen, P. Scott, & A. Starkman

Specifically looking at Canadian immigration, mockup version.

A breakdown of the tax system for the Ontario government and the City of Toronto.

With all the components accounted for, we then began to map how they would interrelate and fit on the map.

Submitted to Professors Peter Jones & Jeremy Bowes

25

Funding Social Services Shouldn’t Be A Shell Game

The first ‘big picture’ look at the gigamap showing the general layout that we would use; a far cry from the finished product.

On the go inspiration. Always carry pen and paper so that when genius hits you, you are ready. Karen was ready, and lead the charge on the final layout.

26

SFIN 6B04: Understanding Systems and Systemic Design Winter 2013

By Z. Ebrahim, D. Johnston-Jewell, K. Oikonen, P. Scott, & A. Starkman

Another more detailed iteration of the map layout.

Ensuring that all of the components on the map were placed properly so to deliver a narrative that was best representative of this very large and complex system proved very difficult.

The first printed mock-up of the final layout.

Submitted to Professors Peter Jones & Jeremy Bowes

27

Funding Social Services Shouldn’t Be A Shell Game

Here, the giga-map is starting to come together and look like what would eventually be the final product.

28

SFIN 6B04: Understanding Systems and Systemic Design Winter 2013

By Z. Ebrahim, D. Johnston-Jewell, K. Oikonen, P. Scott, & A. Starkman

A final round of touchups, adjustments, additions, refinements, and debate, ensured that the final product would be up to our rigorous quality standard.

And one more time on the following pages, the final gigamap.

Submitted to Professors Peter Jones & Jeremy Bowes

29

Funding Social Services Shouldn’t Be A Shell Game

This is a wicked problem.

Social, Public, Private & how they work.

The government funding gap

Stakeholders

Based on a March 28, 2013 study conducted by the Mowat Centre titled Filling the Gap, Ontario funds a disproportionate share of federal spending compared to other provinces even though Ontario is no longer a wealthy province.

The federal government oversees a wide range of Departments, Agencies, Crown Corporations, Special Operating Agencies and various affiliated organizations that are all responsible for providing social service funding.

The study finds “that there is roughly an $11B structural gap between what Ontarians pay to the federal government and what they receive.

The provincial government has 26 ministries with the largest spending on the Ministry of Health and Longterm Care (38%) and the Ministry of Education (18%).

Each ministry is mandated to administer financing to its specific social service under direction from the minister and the government of Ontario.

+$ –$ demand on services

+$

The City of Toronto has 47 divisions (including Parks and Recreation, Police Services, Waste Management, Water, etc.) , 2 corporations (Toronto Community Housing and Toronto Parking Authority) and oversees one body (The Toronto District School Board).

+$

+

+

–$

User Fees 15%

downloaded services

+

City Services

For the purpose of this project Social Service providers in the City of Toronto are defined as Education (TDSB), Shelter & Support, Transit (TTC) and Toronto Public Health.

approaching retirement

+

User Fees 15%

78%

of immigrants to Ontario settle in Toronto

11% 40%

1.0%

0.5%

0

Toronto

Oshawa

Oakville

Mississauga

Barrie (urban)

TTC and Transportation Services

New Canadians

Social Services 16.6% (Housing, Health, Children and Senior’s Police, Fire, EMS Services, Employment 16.6% Services) 30.5%

The population of the GTA is expected to grow to over 7.5 million by 2025

“We can solve o problems the sam thinking created th

Collection of money

Library, Culture, Parks, City Planning, Facilities 13.4% Governance and Internal Services 4.9%

13.4%

Library, Culture, Parks, City Financing (Capital and Corporate) Planning, Facilities

4.9%

15.1%

Albert Einste

Property taxes don’t work like other taxes:

Governance & Internal Services

The City of Toronto, like all municipalities faces increased challenges in funding social services in part because of the taxation policies that are imposed by the Ontario Government.

to cover the rate of inflation.

Property tax rate is tied directly to the City’s operating budget meaning that if the municipal government wants to generate more revenue from the existing property base they must increase the city’s budget.

Pri

15.1% Financing (Capital & Corporate)

16.6% Police, Fire, EMS

One might think that as the city grows, and as property values continue to rise year-over-year, that revenue generated for the city would also increase. But property taxes don’t work like other taxes.

Unlike other forms of taxation, such as sales tax, property taxes are not tied to economic growth. In fact, property taxes don’t even increase

According to a Fraser Institute report released in March 2012, “Canada’s immigrant selection policies resulted in an average fiscal burden on taxpayers of $6,051 per immigrant who came to Canada between 1987 and 2004.”

Tax System

30.5%

Police, Fire, EMS 16.6%

Other Revenues

Country of Origin by Continent: 79% Asia, 11% Europe, 6% America/USA, 4% Africa

Re-allocate funds

Financing (Capital and Corporate) 15.1%

TTC & Transportation Services

22%

* Immigration by Category: 63% Economic Immigrants, 23% Refugees, 11% Family Class, 3% Others

15.1%

TTC and Transportation Services Governance and Internal Services 4.9% 19.5%

19.5%

User Fees

Babyboomers

4.9%

Government gathers money

Library, Culture, Parks, City Planning, Facilities 13.4%

Social Services (Housing, Health, Children & Senior’s Services, Employment

15%

people moving to the city

TaxTax System Public System

19.5%

13.4%

Government Transfers (Federal, Provincial & Subsidies)

63%

$6,051

1.5%

30.5%

Property Tax

What is the role of business?

78%

Public-Private Partnerships: the funding model

Make money

Public Sector

This means that as Toronto grows and the demand for social services increases the City has no choice but to “raise taxes” which in today’s political climate is a very unpopular position.

Is built for

Pr

Partners with Pays

$50m+ Project

Private Sector

Borrows

Could borrow $ and fund directly at a lesser rate

Funds

Accepts risk

$ How the funding of social services in Toronto changed with Amalagamation

Politics & the Economy 12.68%

City of Toronto Unemployment Rate

In 1994, Progressive Conservative Candidate Mike Harris campaigned for Premier of Ontario on a plan entitled the “Common Sense Revolution.” The plan promised to reduce the size of government and lower income taxes by 30%. In order to realize his campaign promises, Harris proposed an amalgamation plan of the six municipalities of the

10.20%

Ontario GDP

49% of total reve 85,000 charities ment, and gover registered chariti of all governmen

2.0%

39%

39%

demand on services

23%

60%

s 2ELIEF OF POVERTY s !DVANCEMENT OF s !DVANCEMENT OF s /THER PURPOSES

19.5%

39% 30.5%

24%

Urbanization

3%

2.5%

Where the $ goes

24%

63%

3.0%

Children and Senior’s Services, Employment Services) Property Tax

Government Transfers (Provincial, Federal, and Subsidies) 24%

+

of immigrants to Canada are economic immigrants*

22%

3.5%

15%

immigrants that arrived in Canada settled in Toronto

40%

The activities of c are limited to:

4.0%

Vaughan

Where the $ comes(Housing, from Health,

+

+ +

under-employed compared to skill level

+$

–$

Residential

In the City of Toronto:

Other Revenues 22% Government Transfers (Provincial, Federal, 22% and Subsidies) 24%

+

–$

Multi-residential

Commercial Occupied

Ontario’s tax system supports the province’s programs and investments in education, health care, transportation infrastructure, andProperty skills.Tax

Other Revenues 22%

Ontario Gov’t Services

reduced subsidies

Industrial Occupied

4.5%

39%

Social Services

of immigrants to Canada settle in Ontario

Toronto Real Estate Board

Social Services

All citizens of the City of Toronto.

77,739

Tax structure “A well-functioning tax and benefit system is an essential part of a healthy economy, a sustainable public infrastructure, and a strong democracy.

Cana by the

They then use this tax revenue to finance programs and services for Canadians.”

+

Tax Payer

Canadian Immigration in 2011

How does Toronto’s Property Tax rate compare?

The tax revenue we collect each year is either given back to taxpayers in the form of benefit payments or tax credits, or is provided to the federal, provincial, territorial, and First Nations governments on whose behalf we collect the tax revenue.

Federal Gov’t

reduced subsidies

Why we pay taxes.

GST 1991 NAFTA 1994

Greater Toronto Area. A task force was convened to investigate the social and financial implications of amalgamation, which revealed that the most significant impact would be the download of social services (previously paid for or cost-shared by the province) to municipalities. In 1997, a referendum was held which indicated that 70-81% of voters

+

opposed the provincial government’s plan. In April 1997, the provincial government passed Bill 103, amalgamating the six municipalities, and downloading welfare, public transit, emergency services and social housing to the newly formed City of Toronto (Schwartz, 2001).

Social services were most affected by these changes.

Delays

“ A P3 wor like leas

The Canadian Council for Private Partnerships define as, “A cooperative venture b the public and private secto on the expertise of each par best meets clearly defined p needs through the appropria allocation of resources, risks rewards.”

Positives s NEW WAY TO l NANCE LARGE P s BRINGS TOGETHER THE STRENG both sectors

8.66%

SARS 2003

Dot Com Bust 2001

5.65%

6.35%

Federal Government

1995–96 “slump”

early 1990s recession

Brian Mulroney 1984–93 (majority)

early 2000s recession

Paul Martin 2003–2006 (minority)

Jean Chrétian 1993–2003 (majority) Kim Campbell 1993–93

Government of Ontario Bob Rae 1990–95 (majority)

Mike Harris 1995–2002 (majority)

Dalton McGuinty 2003–2006 (majority) Ernie Eves 2002–03

Metro Toronto

Amalagamation: City of Toronto

2005

2004

2003

2002

2001

2000

David Miller 2003–2010 Considered a “socialist” mayor

1999

1998

1997

Mel Lastman 1998–2003

1996

1993

1992

1991

1990

1995

Barbara Hall 1994–1997 Considered a “socialist” mayor

1994

June Rowlands 1991–1994 Art Eggleton 1980–91

Funding Social Services Shoul Project2_GigaMap_FINAL_R.indd 1

30

SFIN 6B04: Understanding Systems and Systemic Design Winter 2013

By Z. Ebrahim, D. Johnston-Jewell, K. Oikonen, P. Scott, & A. Starkman

.

The need for a holistic view.

adian Charities e numbers

Get money.

Spend money.

F EDUCATION F RELIGION PROVEN BY CASE LAW

Canada. Charities File indicates that the largest number of donations are given to healthcare organizations, leaving remaining charities focusing on the other areas of activity struggling to diversify their funding base.

enues from Canada’s come from governnment funding of ies represents 14% nt spending in

The number of tax-filers in Canada making charitable donations has been steadily decreasing from 30% in 1990 to 23% in 2011.

As government funding to social

charities in Canada

services decreases, government offloaded the responsibility of social services to large charitable organizations to fill the gap. These charitable organizations rely on donations from the public to fulfill their mandate, and with decreasing numbers of charitable donations (as donors choose increasingly to individualize their giving), this puts these organizations at risk of losing a large part of their funding base.

Fundraising

+$

Gov’t

Gov’t Agencies

+$

Charitable System Charitable System

+$ +$

Charities

give money to

Reserve Funds

deliver

deliver are required to pay taxes

Giving to charities

+$

spend money on

+$

“…there will be more seniors than children (under 15 years) in Canada for the first time ever, sometime between 2015 and 2021.”

Governance

Earned Income

Social Services

Each of the established funding models have their advantages and their limitations.

Private Donations

benefit

optionally give money through these mechanisms

Mission-driven positive change

Gather money for a cause

Tax Payer

Organizations

Fundraising

Social Impact Bond: An emerging funding model Social Impact Bonds (SIB) are an emerging investment tool that enables the government to offer a financial return to private investors who fund vital social services. The ability to offer a financial return hinges on successfully meeting agreed upon measurements and demonstrated government savings.

n not our s with me that hem”

An example: The pilot social impact bond in Peterborough Prison in the United Kingdom is a program to reduce reoffending rates of short term prisoners. £5m was raised from 17 social investors to fund a consortium of nonprofit organizations over six years to work with 3,000 prisoners after they are

ein

Service Providers

working capital

Business

Organizations

Crown Corporations

Selling of goods & services

rks essentially sing a car.”

Publices PPPs between ors, built rtner, that public ate s and

Charitable Sector

There’s no magic pile of money.

OLG

$2.0B

Ontario Gov’t

s MAXIMIZE EFl CIENCIES OF private sector s FREES PUBLIC FUNDS FOR CORE

economic & social programs s PRIVATE SECTOR ASSUMES THE RISK

$0.9B

$4.5B

4.4% of provincial budget

There’s only one pot of money and it gets circulated in many different ways.

OPG

Through the process of understanding complex public, private and charitable systems, it is revealed that the sustainable funding model for social services lies in the movement of money.

There is no silver bullet when it comes to funding social services – the sustainable funding of social services is actually centralized around more efficiently allocating money to institutions, organizations or government that can systemically address social problems. When this happens, there doesn’t have to be an investment of money into services at the same extent as current funding and demand would

$1.6B

Negatives s LOSS OF PUBLIC CONTROL s PUBLIC DEBT GETS DEFERRED INTO the future s PRIVATE SECTOR BORROWS MONEY at a higher rate, therefore the project often costs more s CONTRACTS OFTEN @HIDDEN FROM the public s PROJECT COSTS CAN BE HIGHER than if government run

PROJECTS GTHS OF

Government

4. repayment & ROI from performancebased payment

Private Investors

Three crown corporations exist in the province of Ontario: Ontario Power Generation (OPG), Ontario Lottery and Gaming Corporation (OLG) and Liquor Control Board of Ontario (LCBO).

Crown corporations are peculiar hybrid entities—somewhere between a government body and a private enterprise. They are wholly owned by the state but operate at arm’s length from government.

rivate System

performancebased payments

Organization

1.

y

Social Impact Bond-Issuing

LCBO

9.98%

The philanthropic sector by definition provides a formalized mechanism that enables charitable individuals to give in order to help those who are in need. However, the system relies predominantly on the generosity of individual donors thus creating a challenge in long-term sustainable funding.

The funding of Social Services in the City of Toronto

Public Sector

3.

funding for operating costs

Public money

ivate System

The private system has an incredible ability to generate huge amounts of revenue however it is primarily motivated by profits and therefore any private funding of social services will likely require a return on investment. This return does not necessarily have to be a direct financial return but it is important to recognize that the success of this system hinges on individualistic motivations.

Private Sector

released to reduce their reoffending, measured by convictions. If the social impact bond delivers a drop in reoffending beyond 7.5%, investors will receive an increasing return capped at a maximum of 13% per year over an eight year period. (socialfinance.ca)

2.

Private money

The public taxation system is an effective tool of collecting money from the citizens and redistributing those funds towards infrastructure and services that benefit the entire city. While this system is sustainable, due to the political cycle it is challenged in its ability to generate exponential revenue.

9.96%

EU/US Debt Crisis 2011

7.98%

dictate. Therefore government can turn taxpayers’ money towards decreasing the financial burden

The sustainable funding model for social services lies in the movement of money. created by the structural gap between what Ontarians pay to the federal government and what they receive. With the compounding

effects of the aging population, urbanization, and increased immigration escalating the stresses on the larger social systems, it is essential to think of the charitable, public, and private systems not in isolation, but rather how we can make transparent to the public which systems are best equipped to address specific problems. This would take advantage of each individual system’s strengths and experiences. The key understanding for the public is that if they do not pay for a social service through their taxes, they continue to carry the cost through the consumption of goods and services.

By comprehending that ultimately there is only so much money in the entire social system, the public can gain to understand that by deferring paying for social services through taxes, they will end up paying for the same social services downstream through charitable and/or private pathways. There is only one bucket of money.

Global Credit Crisis 2008

“Great Recession”

Stephen Harper 2006–present (minority)

Citizens Vote

(2011 election = majority)

Next Federal Election, October 2015

Kathleen Wynne 2013 (minority)

Government Elections: Federal, Provincial, Municipal

Next Provincial Election, October 2015

Rob Ford 2010–present Next Municipal Election, October 2014

2025

2020

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

The political cycle will repeat itself. Either the current government will be re-elected or the government will change which will have implications on funding, priorities and promises made.

A full list of resources/references are available in the paper.

ldn’t Be a Shell Game

How can a sustainable funding model be established to support social services in the City of Toronto?

Zahra Ebrahim Dustin Johnston-Jewel Karen Oikonen Peter Scott Adam Starkman

SFIN 6B04 Understanding Systems & Systemic Design Project 2 April 11, 2013

4/9/13 6:51:06 AM

Submitted to Professors Peter Jones & Jeremy Bowes

31