Municipal and Hospital Spending – At Your Service?

This article was triggered by my reading a story in the Aug 12 Freeps that had the following sub-headline:

Two city politicians want their colleagues to pull $3 million from municipal savings to slightly reduce the relatively large tax increases that will hit Londoners over the next three years

In the story itself one then finds the following:

“The new motion proposes pulling $1 million from a city reserve fund each year from 2025-27. This amount would cut next year’s property tax increase by 0.13 per cent (from 8.7 to below 8.6), which [Councillor] Pribil acknowledges isn’t much.”

No, Jerry – not much, but I know we ratepayers appreciate the gesture.

In case any of you Londoners haven’t been paying attention, the current and future property tax increases in the multi-year city budget are:

• 2024: 8.7 per cent
• 2025: 8.7 per cent
• 2026: 5.7 per cent
• 2027: 6.7 per cent

The two years at 8.7% represent greater increases than I can remember seeing in my 40+ years of living here. I do wonder how they arranged things so that the percentage increase in every year was x.7. Someone at City Hall believes in lucky 7?

However, we Londoners are not alone. A report from the Fraser Institute called Municipal Dollars in Ontario – Where did the Money Go?, dated April 2024, reports the following:

“Municipal budget season in Ontario recently ended and the evidence reveals some fairly substantial tax increases around the province. For example, Waterloo Region approved a property tax increase of 6.9 per cent while Toronto passed an increase of 9.5 per cent. Hamilton ultimately saw an increase of 5.8 per cent after fears of a double-digit tax increase were unveiled in the fall while Kingston saw one of the lower increases coming in at 3.5 per cent.”

Note that London’s 2024 increase came in second to only that of Toronto, at least in this group.

What I found most interesting in the report was the discussion of how the increased tax revenues are being spent. Again quoting from the report:

“So, pulling everything together, here’s the story that emerges. Municipal operating expenditures in Ontario over the period 2000 to 2022 have grown 2.5 times faster than general inflation and double that of population. They have also grown a bit faster than the province’s output.”

“The increase in spending is driven by spending on wages and salaries but not in the manner one might think. Average salaries in the municipal sector for those making more than $100,000 annually since 2000 have grown by only 8 per cent but the number of individuals making those salaries has grown in the thousands of per cent. Within the broader public sector, in 2000 municipal employees accounted for 6 per cent of individuals on the salary disclosure list whereas by 2022 they accounted for 23 per cent.”

So municipalities are not necessarily employing very many more people, as one might think they must to serve increasing populations, but rather they are paying the people they employ much better.

Now, to be fair, this could be because they are employing people with different sets of skills than they did in the past. More folks with university degrees or highly specialized (and highly remunerated) training. Another factor left out of the report is the extent to which Ontario municipalities have shifted from having services provided by city employees to having them provided by private firms that bid for the city contracts. To the extent this happens, it will reduce the number of city employees, and – I suspect – reduce most the number of relatively low-paid employees. A municipal sanitation division is going to employ a lot of low-wage workers and a few managers, so if you contract out garbage pickup to a private contractor, that takes a lot of low-wage jobs off the city books, but only a few better-paid managerial positions. The cost of the contract with the private provider then does not come under the heading of ‘employee compensation’, but rather ‘payments for goods and services’. I suspect that has happened a good bit over the last 20 years, but can’t find any data on it: the Fraser report is silent on this possibility.

If you’re wondering how much of municipal spending goes to employee compensation (and you know you are) the Fraser folks have the answer for you:

“The composition of major expenditures is revealing: 37% of operating expenses are in employee compensation, another 28% are from the purchase of goods and services to run municipal operations, and 20% are expenses associated with fixed capital-consumption costs.”

So, yea – employee wages are kinda driving the expenditure bus, but as noted above, not because municipalities are employing more people to serve you better; they’re just paying the people they employ better. Or, putting it another way, they’re just employing more people who are better-paid.

I’d guess that will not surprise anyone who has tried to get any kind of service out of London City Hall. So far as I and those around me can tell, no London City employee ever answers their phone if they know (and they do) the call is coming from outside the building. ‘Your call is very important to us, please leave a message.’

Well-Paid Bureaucrats

We live in the Age of The Well-Paid Bureaucrat. This is not just a government phenomenon. I would suggest that all LBOs (Large Bureaucratic Organizations), whether government, non-profit or for-profit, see over time an increase in the proportion of their employees who are highly paid; say $150k+.  As an org grows, it tends to increase its employment of senior management types faster than its general increase in employees. (This is absolutely inarguable for universities….) Why? Wish I knew……

An illustration of this general principle shows up in another article published in the Freeps over the weekend. London Health Sciences Centre, the administrative monster that is now being run by an ‘interim chief executive’ brought in to reorganize it (and deal with a looming $150 million deficit), has let go two of its senior administrators. According to the Freeps, the administrators are

• Brad Campbell, corporate hospital administration executive, was in charge of overseeing the presidents of University Hospital, Children’s Hospital and Victoria Hospital
• Sandra Smith, who was regional vice-president for the southwest regional cancer program at LHSC

The title ‘corporate hospital administration executive’ is suitably vague, and his job was ‘overseeing three presidents’. Well, that clarifies his duties, right?

For this he was paid, according to the Freeps again –  ‘$475,423 in 2023, a significant raise over the $217,007 he made in 2022’. Significant raise, indeed, but what the heck did he do to earn such a salary? What does ‘overseeing presidents’ entail, exactly? (Smith made a modest $244k in 2023. I don’t know what a regional VP does, either.)

Sadly, as high as those salaries are, eliminating them from the LHSC budget is no more than a drop in the $150 million bucket.

Of course, LHSC is not a City of London operation, and I suspect (but don’t know) that there is no one in the London City administration making the lofty salary that Mr. Campbell did in 2023 – at least I hope not. But the general principle remains. As amalgamation turned three hospitals into one giant org, the number of senior administrators – and the salaries they earn – went up, and just kept going up. It takes a lot of highly paid people to run a LBO – just ask those highly paid people, they’ll tell you its true.

A worthy research project, if one could get the data – and I bet one could not – would be to look at a large set of LBOs of all types and see how the number of highly paid senior administrators has changed relative to total employment over, say, 20 years. My hypothesis obviously is that proportion has gone up over time, but I wonder in which type of org it has gone up the most. Non-profits, universities,  for-profit corporations, government bureaucracies? It would be interesting to see if there is any discernible pattern. My money would be on universities as the leaders, but that’s probably because I saw it happen in one of those first hand over the last 20 years.

But I betcha $100 no LBOs of any type would give one the data one would need to find out.

PostScript

Just as I was about to post this, a story popped up on the CBC-London website, saying that LHSC had just fired 5 more senior administrators. To quote the CBC story:

“Five executives with a combined tenure of over 20 years, and a combined 2023 salary of over $1.6 million, are no longer with the organization, Musyj said. They are:

• Abhi Mukherjee, CFO, who joined LHSC in September 2022

• John French, clinical diagnostic executive, who joined LHSC in September 2022

• CJ Curran, corporate health disciplines executive, who joined LHSC in September 2022

• Dipesh Patel, capital redevelopment and environmental operations executive, who joined LHSC in July 2013

• Jatinder Bains, corporate academic executive, who joined LHSC in April 2021

‘….combined tenure of over 20 years’? C’mon, CBC, only one of them has been around more than three years, the other four are all very recent hires. CBC did not give their salaries (I suspect the public broadcaster is a little sensitive about executive salaries these days), but you could look them up on the sunshine list. I think I know what a CFO does, but the other titles? Like, ‘corporate academic executive’? Surely they just made that up.

Let me quote once more from the article.

“Dr. Jackie Schleifer Taylor, the former CEO, left this past spring after a seven month medical leave. Her salary in 2023 was almost $804,000. ”

“During Dr. Schleifer Taylor’s tenure, president positions were created, one at each Victoria, University and Children’s, replacing the former structure which had just one one[sic] president for the entire hospital system.”

So, now we know what the afore-mentioned Brad Campbell did to earn his big salary. When Schleifer Taylor created three presidential positions where there had previously been only one, she of course had to create a fourth position – held by Campbell – to oversee those three. Now that is bureaucratic thinking par excellence.