Strategic Thoughts

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Note: Since this article was posted on February 22, the Ministry has clarified that "restated estimates" do not mean that they reflect actual expenditures, only that they reflect how the accounts are organized. In other words, they ran a sufficient surplus in 2006-07 that they think they can accommodate the rate increase within that budget reduced by $7 million even though they are assuming no significant reduction in caseload.

February 22, 2007

Welfare Rates Paid with Caseload Cuts

A spokesperson for the Ministry of Employment and Income Assistance has answered many of my questions regarding the Ministry's Service Plan and how it reconciles with the announced increase in income assistance rates. I am puzzled how the Ministry can fund a rate increase for temporary income assistance out of a budget that will be $7 million less than last year. I am surprised by the answers, as they suggest that either the restated estimates for 2006-07 might not be accurate or that the assumptions provided in the budget documents regarding the change in the caseload between 2006-07 and 2007-08 are inaccurate. Before I elaborate on the calculations that lead me to those suspicions, here is the latest information from the Ministry:

  • 40% of income assistance recipients do not receive the full shelter allowance because they pay less rent than the maximum allowed for reimbursement ($325 for a single person);

  • People on income assistance in subsidized social housing pay on average about $240 a month;

  • Some clients who live with their parents or relatives or close friends often pay considerably less--sometimes just a nominal payment to the home's expenses; sometimes they may pay nothing.

  • The temporary assistance budget for 07/08 is less by $7 million than last year's budget, as indicated in Service Plan. (They do not agree that it is a "cut"; rather they emailed that it is the amount of money necessary to fund the total caseload that they expect to be in this category in the coming fiscal year, including the rate adjustments.)

The points cited above are the reasons the Ministry gives for why its projected annual cost for the $50 per month increase in the shelter allowance will be $33 million in 2007-08, rather than more than the $60 million that I naively calculated. The Ministry uses the word "case" to refer to one welfare file, a single person, couple or family. The Ministry reported that in December 2006 there were 102,394 cases, which included 136,399 individuals. Using round numbers, 100,000 cases times $50 times 12 months equals $60 million or almost double what the government says the $50 per month increase in the shelter allowance will actually cost.

While the Ministry reports that it expects a sufficient reduction in the number of people receiving temporary assistance so they can get by, despite the rate increase, with $7 million less than last year's budget, under "material assumptions -expense" (Table A11) the budget documents report that they assumed there would be 41,870 temporary income assistance cases in 2007-08, down only 30 cases from a revised projection of 41,900 in 2006-07.

The original caseload estimate for temporary assistance in 2006-07 was 47,150. That is a reduction of 11.2% in the temporary assistance caseload in 2006-07; 11.2% of the original temporary assistance budget for 2006-07 of $373.2 million is $41.8 million but the Ministry only restated its 2006-07 estimates to $365.4 million. The difference of $34.0 million might account for part of the reason why the Ministry thinks it can reduce the temporary assistance budget by $7 million and yet cover the rate adjustments with the remaining $27.0 million. The $365.4 million figure for the restated estimates for the temporary income assistance budget appears in both the Ministry's Service Plan and in the "Estimates Book" for Vote 26. If the true figure was $331.4 million, it would amount to misleading the House to knowingly present an inaccurate restated estimate; consequently, the $365.4 million probably doesn't include a pad of $34.0 million, but someone must then explain how much was "saved" when the Ministry assumed a caseload of 47,150 and ended up with 41,870.

Page 29 of the budget documents reports that approximately 16,300 individuals on income assistance will benefit from the rate changes for single employable people, yet the Ministry's data show that there were 18,508 single employable people receiving assistance. They might be assuming that the average single temporary assistance caseload in 2007-08 will be 2,200 less than December 2006. That's an 11.9% reduction, even though the reduction between December 2005 and the average for 2006 was just 6%. While the caseload has declined steadily over the past 11 years, there is bound to be a point of diminishing returns.

Table 1.6 on page 28 of the budget documents reports that the government's estimate of the cost of rate adjustments for 2007-08, in addition to the shelter increase, is $15 million for families with children and $11 million for the increase in the support allowance for single employable persons. It would take a 3.0% reduction in the temporary assistance caseload to pay for the $11 million increase in the support allowance, and a 5.0% reduction to pay for both that and the $7 million budget reduction. There then remains the question of what is necessary to pay for the increase in the shelter allowance for people receiving temporary assistance. If that cost is only half of naive assumption of the caseload times $50 per month, the annual cost assuming a $25 per month average uptake for the December 2006 caseload is $8.9 million. It would take a further 2.5% reduction in the caseload to pay for that, for a total reduction of 7.5%.

If the restated 2006-07 temporary assistance estimates are based on 41,860, it will take a reduction of over 3,100 cases to be consistent with the budget, not the reduction of only 30 cases indicated on page 158 of the budget documents. That again draws into question the credibility of the restated 2006-07 estimates, as well as the ability of the Ministry to achieve its target caseload reductions.

The Ministry needs to come clean on what it really expects expenditures to be for temporary assistance in the year ending March 31, 2007. It needs to say what it really expects the change in the temporary assistance caseload to be; a reduction of just 30 as shown in Table A11 raises suspicions. The Ministry should also release information on what it knows about the housing situation of its clients, including a distribution of rents paid by clients. In short, the Ministry should try to be open, honest, transparent and accountable.


February 20, 2007

Welfare Rate Increase

There may be some confusion on the details of the welfare rate increase. Finance Minister Carole Taylor was interviewed live in front of the legislature by Bill Good on CTV. Good said: "Shelter rates going from $325 to $375, I'm hard pressed to know where someone can find a place to live for $375 a month.

Taylor responded: "Of course the shelter part is only a portion of the assistance they receive … on top of that we've increased the support payment for those who are single employables by $50, and the third thing we've done for income assistance is to harmonize the rates for children."

A new rate table is available on the Ministry's website which confirms that the rate for single clients who are expected to work is increasing by $100 per month, but the rate for couples is increasing by only $50 per month. Rate increases vary from a high of 20.1% to a low of 4.3%.

The overall budget for the Ministry of Employment and Income Assistance will increase from an estimated $1.387 billion in 2006-07 to $1.480 billion in 2007-08, an overall increase of almost $100 million. The Ministry's Service Plan shows the following:

Core Business Area
2006-07 restated estimates
2007-08 estimates
2008-09 plan
2009-10 plan
Operating Expenses ($000)
Employment Programs
95,689
97,867
99,025
99,987
Temporary Assistance
365,387
358,180
349,501
346,890
Disability Assistance
663,735
732,884
761,217
793,206
Supplementary Assistance
235,624
263,809
271,855
283,230
Employment and Assistance Appeal
Tribunal
2,019
2,070
2,070
2,070
Executive and Support Services
24,139
24,718
25,187
25,472
Total
1,386,5933
1,479,528
1,508,855
1,550,855

It appears to be in need of revision since it shows a cut in temporary assistance of $7 million, yet the rate increases will require $22.2 million more per year just for single employables. The budget for disability benefits is shown increasing by $69.1 million, and the budget for supplementary assistance benefits is shown increasing by $28.2 million. Supplementary assistance consists of crisis supplements for emergency needs, medical supplies and equipment, dental and optical services, medical transportation, subsidized bus passes, alcohol and drug treatment programs, and employment related expenses. The combined shelter and support increases are not part of the supplementary assistance budget.

Using data on the number of income assistance cases by type of case as of December 2006, and multiplying by the corresponding rate increases, gives an estimate of the annual cost of the rate increase as $80.2 million or $18 million more than the amount allocated in the service plan for changes in the budgets for temporary and disability benefits. This estimate shows an average annual increase of $821 per case which is higher than the figure derived using data from the Ministry's fact sheet which said that the "full cost of all rate increases will be $58.1 million in 2007/08" for 135,000 individuals.

The welfare rate increase is long overdue, and many would argue the rates should be increased further. Let us hope that the Campbell government isn't counting on paying for them by further reducing the number of people on assistance before they are truly capable of being self-supporting.

 
 

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