STAFF REPORT
February 2, 2000
To: Community Services Committee
From: Commissioner of Community and Neighbourhood Services
Subject:Provincial Regulation Change Affecting the Treatment of User Revenue
From Subsidized Child Care
Purpose:
This report identifies the financial and service implications for the City of a change to Section 67.1 of regulation 262 of the
Day Nurseries Act which will go into force April 1, 2000 and which governs cost sharing provisions for child care.
Financial Implications and Impact Statement:
The fiscal and annualized net impact of this regulation change on the year 2000 budget request of Children's Services is
identified in this report and will be discussed as part of the budget review process. The fiscal net impact is $8.9 million and
the annualized net impact is $11.8 million. The Chief Financial Officer and Treasurer has reviewed this report and concurs
with the financial impact statement. :
Recommendations:
It is recommended that:
(1)this report be referred to the Budget Advisory Committee for consideration during the 2000 operating budget process;
(2)as part of the negotiation of the City's Annual Service Contract with the Ministry of Community and Social Services,
City Officials discuss with provincial officials the impact that this regulation change will have on both current service
levels in subsidized child care and the City's future capacity to address child care demand in both the Ontario Works and
regular subsidy program;
(3)the City endorse the recommendation communicated to Council by the Chatham-Kent Council in its letter dated
January 11, 2000, "that Council encourage AMO to speak on behalf of municipalities on this issue (child care funding
changes….clawback of user fees) and to petition the Ministry of Community and Social Services to retain current funding
arrangements for child care operations"; and
(4)the appropriate City Officials take the necessary action to give effect thereto.
Background:
On November 18, 1999 the Honourable Chris Hodgson, Chair of Management Board of Cabinet announced a program of
government savings that included a change in the treatment of fees from subsidized child care users for the purposes of
provincial/municipal cost sharing. Through a change to Section 67.1 of Regulation 262 under the Day Nurseries Act, which
will go into force April 1, 2000, the Province is changing the method of calculating the municipal share of fee subsidies.
After April 1, 2000 cost sharing will be based on provincially approved expenditures after user fees have been deducted. In
effect, this will mean that for every one dollar raised in subsidized user fees, the Province will receive 80 cents, which will
substantially reduce their overall level of contribution towards the cost of subsidized care. Currently all user fees
contributed by subsidized families are retained by the City and applied against the local 20 per cent contribution to the cost
of care. The regulation change will increase the City's net contribution by $8.9 million fiscally and $11.8 million on an
annualized basis.
The November 18, 1999 provincial announcement was totally unexpected. As part of the local service realignment process,
the Province had previously amended Regulation 262 in 1997 to give municipalities the additional financial flexibility
required to maintain service levels and to accommodate the impact of downloading. Under this 1997 amendment, cost
sharing was based on the total provincially approved expenditures without the deduction of user fee revenue
One significant cost of the downloading process included the revision of cost sharing of administrative costs for child care
from 80:20 to 50:50. The 1997 revision of Regulation 262 also made this change easier to accommodate. Municipalities
understood that provided they did not reduce their service levels following transfer of system management responsibility
for child care, Regulation 262 would allow them to retain all of the user revenue generated from their subsidized families
and apply it against their local cost sharing contribution.
The 1997 provisions of Regulation 262 resulted in significant financial benefit to the City. A report entitled "Resolution of
a Projected Shortfall in Child Care User Revenue", which was adopted by the Council of the former Municipality of
Metropolitan Toronto on August 13 and 14, 1997, outlined the level of financial relief provided to the City. The fees from
subsidized child care users have represented a sizeable portion of the local 20 per cent contribution towards the cost of
child care during 1997, 1998 and 1999. The amounts were $13.2 million, $13.7 million, and $13.7 million, respectively.
The November 18, 1999 provincial announcement, when it comes into force April 1, 2000 will return the City to the
pre-1997 era of provincial cost sharing and will result in a net cost to the City of $8.9 million fiscally and $11.8 million on
an annualized basis.
Comments:
The Association of Municipalities of Ontario, AMO, has conducted a survey of its members to assess the financial and
service impacts of the provincial regulation change. AMO is also petitioning the Province to retain the 1997 version of
Regulation 262 and not to bring the announced cost sharing changes for child care into effect. Some individual
municipalities, like the Municipality of Chatham-Kent have passed Council resolutions opposing the child care funding
changes, which they refer to as the "clawback of user fees" by the Province.
Since the Province has already sent the City a copy of the text of its regulation amendment for inclusion in the "Ontario
Child Care Service Management Guidelines" and has directed the City to resubmit its year 2000 budget reflecting the
revised method for calculating its share of fee subsidies beginning April 1st, it seems unlikely that it will now be persuaded
to reverse its original November 18, l999 announcement. From the provincial perspective, the financial impact of this child
care cost sharing change is offset by welfare savings accruing to affected municipalities.
The City should be ensuring that provincial officials realize the full financial and service implications of the regulation
change for Toronto. The additional financial pressure of $8.9 million net put on the City's operating budget makes
maintaining the current service levels and planning for the new service pressures created by Ontario Works and LEAP
much more difficult.
Should the City be unable to recognize the added fiscal cost of $8.9 million resulting from the regulation change, then the
only remaining option is to cut service. Based on the cost sharing formula, a net cut of $8.9 million would generate a
corresponding loss of $35.6 million in provincial subsidy. The resulting gross cut of $44.5 million means a loss of
approximately 9,500 spaces assuming a cut date of May 1, 2000 and 8,500 spaces on an annualized basis. This represents a
service cut of approximately 35 per cent of the entire subsidized child care system. A cut of this magnitude would make it
totally impossible to achieve Ontario Works targets, which in turn would result in financial penalties for the City.
The financial climate created by this intended regulation change also increases the importance to the City of securing some
increased flexibility from the Province with respect to licensing standards for service provision. To address the service
demand pressures associated with the Ontario Works program in general, and the LEAP program in particular, it is
imperative that at least some of the existing licensed service stock be shifted to care for the youngest aged children. To do
this without depriving school aged children currently in care, new models of school age service delivery are required. The
City has repeatedly pressed the Province for the legislative flexibility to pilot new safe models of care tailored to the
developmental needs of older children. This flexibility should also feature in the negotiations of a new Service Contract for
Child Care post April 1, 2000.
Conclusions:
The City should register its opposition to the announced regulation change due to come into force April 1, 2000 and join
AMO in petitioning for the retention of Regulation 262 in its 1997 form. If and when the regulation change does come into
effect, the City should pursue at least two concessions from the Province as part of the annual Service Agreement
negotiation process. First, it should be clearly understood that current service level ceilings are open for renegotiation and
secondly special dispensation under the Day Nurseries Act should be sought to allow the pilot testing of more flexible
models of care for school aged children. Finally, resolution of the financial impact of Regulation 262 on the budget of the
Children's Services Division should be sought during the City's 2000 operating budget deliberations.
Contact:
Marna Ramsden-Urbanski
General Manager, Children's Services
Tel.: 392-8128
Fax: 392-4576
E-mail: ramsden@csis.csis.csd.metrotor.on.ca
_______________________________________________
Marna Ramsden
General Manager of Children's Services
_______________________________________________
Shirley Hoy
Commissioner of Community & Neighbourhood Services
