February 26, 1998

To: Budget Committee

From: City Clerk

Subject: Public Health Budget Process

Recommendation:

The Board of Health on February 23, 1998 requested that the Budget Committee be advised of the Board=s support for the A2% solution@, which is a proposal of the Citizens for Public Health that urges the new City of Toronto to allocate 2% of its total budget to public health programs.

The Board of Health on February 23, 1998, had before it a report (February 20, 1998) from the Acting Medical Officer of Health respecting the 1998 operating budget estimates for Public Health prepared in the context of the budget pressures facing the Corporation and which outlined the implications of a 15% budget cut on public health programs and services.

The Board of Health also had before it the following communications respecting the aforementioned report:

- (February 20, 1998) from Rita Luty, Chairperson, Northern Health Area Community Health Board of the former City of Toronto which expressed deep concerns about any potential cuts to public health programs and services; and

- copy of a slide presentation titled A1998 Budget Presentation@ presented by the Acting Medical Officer of Health.

- Press Release (February 20, 1998) from the Citizens for Public Health advocating for an expansion of public health programs to undeserved areas in the new City and the need to increase spending to 2% of the total city budget on public health programs

The Board of Health:

(A) Recommended to Council for its meeting on March 4, 1998 that:

1. The current investments in public health be maintained and any savings resulting from the amalgamation be reinvested back into public health to ensure that:

2. standardization of user fees for Environmental Health Services be implemented to the highest level; and

3. Council use as a guideline for future City budgets, the A2% solution@, which is a proposal of the Citizens for Public Health that urges the new City of Toronto to allocate 2% of its total budget to public health programs.

B) Found Council=s directive to reduce the gross 1998 Public Health Operating Budget by 15% unachievable.

C) Requested the Acting Medical Officer of Health, in accordance with the comments in her report (February 19, 1998) AState of the City=s Health@, to prepare a report to the Board which delineates where public health programs fall short of current requirements and where greater needs in Toronto require a higher level of service.

D) Requested the Acting Medical Officer of Health to report back to the Board on elements of a reinvestment strategy for public health.

E) (1) Requested the Acting Medical Officer of Health to present the Public Health 1998 Operating Budget of $84,663.300, inclusive of the savings within the AA@ and AB@ lists to the Budget Committee; and

(2) established a sub-committee consisting of the Chair and Vice Chair, in conjunction with the Acting Medical Officer of Health, to prepare a presentation to the Budget Committee which would address the cost-savings of the AA@ and AB@ lists, and the need to reinvest these savings.

F) Requested the Acting Medical Officer of Health to prepare an alternative budget to reflect costs if services were expanded to address current gaps.

G) Agreed to hold public deputations on the health implications of the proposed 1998 budget and the alternative budget and invited members of the Budget Committee to attend that meeting.

H) Requested the City Solicitor, in consultation with the Acting Medical Officer of Health, to report back to the Board on the statutory requirements of the Board of Health and City Council regarding the provision and funding of public health programs

City Clerk

Item No. 5

February 20, 1998

To: Board of Health

From: Dr. Sheela Basrur, Acting Medical Officer of Health

Subject: 1998 Operating Budget

To present the 1998 operating budget estimates for Public Health in the context of the budget pressures facing the Corporation, and to outline the implications of a 15% budget cut on public health programs and services.

Effective January 1, 1998 funding of public health is primarily a municipal responsibility, with over $40 million of provincial funding for public health programs being downloaded to the new City of Toronto. Provincial funding will continue only in specific areas, as outlined below.

Table 1a. Ongoing Provincial Funding for Specified Public Health Services

As well, the Province recently announced one-time (15-month) grants for the following Toronto programs, pending final resolution of long term funding:

Table 1b. One-time Provincial Funding for Specified Public Health Programs

It is recommended that:

Background:

For the past several months staff of the former municipalities have been working with the Toronto Transition Team to consolidate the separate budgets of the seven former municipalities that make up the new City of Toronto. Since each had its own way of presenting / consolidating budgets, it was necessary to develop a single consistent format for budget presentation purposes. For Public Health it was agreed that the budget estimates would be consolidated under 10 Asub-programs@; these are for budget purposes only and are not indicative of current or future organizational structure.

The Transition Team, in cooperation with the staff of the former cities, recently submitted a preliminary draft 1998 budget to Council. The Transition Team=s draft budget assumes that existing service levels in the former municipalities are maintained across the new City in 1998. The preliminary gross operating budget for 1998 is approximately $6.4 billion, including the impact of provincial downloading. The budget is funded through a combination of grants, user fees, and other revenues, with the net balance funded through property taxes.

In its budget report, the Transition Team outlined major financial/budget pressures of $150 million (5.8% potential tax increase), resulting from normal year-to-year pressures (Appendix A). To address these pressures, the Transition Team identified expenditure reductions and revenue enhancements of about $117 million (Appendix B) without reducing service levels, imposing any new user fees or deferring expenditures. They deemed the remaining $33 million worth of reductions as Aachievable@ resulting in a 0% increase to the corporate budget prior to the impacts of downloading. Proposals for expenditure reductions or revenue enhancements submitted by the Public Health Service Review Team were reviewed by budget staff to ensure they were reasonable and that identified savings or increased revenues could be realized.

In addition to normal year-to-year budget pressures, the new City faces major increases in costs due to provincial downloading. In December 1997 the Province revised its estimates of the cost of downloading to the City from $66 million to $164 million. The $164 million represents a 6.4% increase over the 1997 net operating budget, adjusted for changes in the education tax (Appendix C).

The Transition Team report also outlined one-time costs associated with amalgamating seven separate municipalities into one, ranging from $100 - $175 million in 1998. These costs include spending on computer technology required to achieve the efficiencies associated with identified savings, accommodation changes, relocation and retrofitting costs, and human resource costs including early retirements, severance, and retraining programs. Transition costs over three years are estimated to be about $385 million.

In order to address both the normal year-to-year budget pressures of $150 million, and the downloading pressure of $164 million, all departments, divisions, agencies, boards and commissions were directed by Council=s Budget Committee to submit plans outlining how they would manage a budget reduction equivalent to 15% of their 1998 gross budget estimates, including but not limited to the reduction strategies/revenue enhancements recommended by the Transition Team. Based on 1998 gross expenditure estimates, the 15% target reduction equates to $13.4 million for public health and $0.8 million for animal services.

The 1998 Preliminary Operating Budget Submission for Public Health is attached (Appendix D). This information was presented to the CAO on February 9, and staff advised at that time that the Board had not had an opportunity to review the budget submission and would be providing its own comments directly to the Budget Committee.

The 1998 net budget for Public Health (including Animal Services) is estimated at $89.2 million prior to the amalgamation savings/revenue enhancements recommended by the Transition Team. Net budget represents all expenditures minus revenues. These estimates are based on the 1997 budget of the six former Public Health and Animal Services units and assume that existing service levels in the former units are maintained in 1998. Overall the 1998 net budget is up $40.3 million over 1997. 99% of this increase is due to provincial downloading.

The administrative and political process for budget consideration is in constant flux. At the moment, it appears the CAO will present to Budget Committee on Feb 23-24 a recommended budget that will outline measures to meet the internal pressures of $150 million while minimizing impacts on services. The report may also contain additional proposals for Council=s consideration to address the downloading pressures of $164 million which, if adopted, will have a substantial impact on services across the corporation. Although details of the CAO=s report are not yet public, its contents are expected to be based largely on staff submissions.

Following the CAO=s report, staff will provide informal briefings to Budget Committee members from February 25 - March 3. Public deputations will occur when the budget is reviewed by Standing Committees (week of March 23) and then Community Councils (week of March 30). A 2-day session for public deputations on March 23-24 is also being considered. From there, the budget will be referred to Strategic Policies and Priorities Committee (April 7) and then to Council (April 15-17).

The public health budget process at a staff level has mirrored that of other boards and operating divisions. Council=s Budget Committee established a target reduction of 15% on the gross budget, which includes expenses related to programs which are 100% provincial funded. As cuts can only be made in municipal expenditures, the actual % target is somewhat higher for both public health and animal services (Table 2). This is magnified by the time already elapsed in 1998, which further reduces our flexibility and increases the amounts that must be found in 1998 to meet this target. These additional reductions cannot be absorbed in one-time expenses, putting our base budget at substantial risk of a permanent reduction that may exceed even the Budget Committee=s target.

Table 2. Public Health 1998 Budget Reduction Targets ($000's)

The Public Health submission on the implications of such a reduction is contained in Section C of the budget submission (Appendix D). The reductions/revenue enhancements contained in the budget reduction plan are divided into three categories:

(A) Transition Team/Service Review Team Recommendations:

Outlines amalgamation savings and revenue enhancements recommended by the Service Review Teams, and approved by the Toronto Transition Team.

(B) Staff Recommendations:

Outlines additional cost reduction/revenue enhancement strategies recommended by Public Health.

(C) Not Recommended:

Outlines reductions in programs and services that would be inevitable in a -15% scenario. These reductions are NOT recommended by Public Health staff.

Table 3a & 3b below summarizes the dollar savings identified in the three categories.

Table 3a -- Public Health

Table 3b -- Animal Services