The Centre Cannot Hold Summer Series: The Budget Was Met, The Problem Wasn't

Every year, government sets a budget for social programs. But almost nobody asks what those numbers are supposed to produce — or checks whether they did. This episode follows Lamrock's team as they ask the Department of Finance some very basic questions about its 2023 budget: what will this money do, for how many people, and how will you know if it worked? The answers — or the absence of them — will make you shake your head.  

How it All Broke Report

Kelly Lamrock Interview

How It All Broke Videos

Transcript

SPEAKER_00 0:12

Hi everyone, welcome back to Shift and my special summer series, The Center Could not Hold, based on the 2024 report, How It All Broke, by Kelly Lamrock. As previously mentioned, the ideas and concept in this episode are all Mr. Lamrock's. I'm just trying to bring his insights to more people as food for collective thought. In the last episode, we talked about governance flaw number one, the lap of effective human resource planning, how governments fail to train for need by capping training enrollments at job postings to control costs and then act so very confused as to why there aren't enough care professionals in the system. If you missed it, it may be worth going back and listening to. Today we're going to talk about governance flaw number two. Mr. Lamrot calls it the curious detachment of the budgeting process from reality. And here's how he frames the problem. There are budgeting targets which governments must hit cheer. Through the budgeting process, governments will ask, what is an acceptable amount of spending this year? What is an acceptable level of deficits or surpluses for the year? These are worthy questions, and these numbers are important because it's the way we hold government departments accountable. When the actual amounts spent do not match the budgeted amounts, someone needs to answer for that. However, budgets are not only fiscal documents. They represent a balance of how we achieve our fiscal goals alongside our policy goals. The reason we have a budget process is to make distinctions between and wants to determine what government needs to do in order to justify the money it takes from citizens. The numbers don't simply set limits on expenditures. They tell us what government has decided it must do to provide services to address collective needs, from roads to social services to schools to long-term care. So when a government releases a budget, they are making two promises. Number one, that the budget they have set will meet our fiscal goals. And number two, that when they assign an amount to a social priority by funding it at a certain level, they've chosen that number because they know what the goals are and they have determined the amount of money they are spending on and will be enough to achieve those goals. In New Brunswick, Mr. Lamrock calculated the combined budgets of the big three social departments in New Brunswick, health, education, and early childhood development, and social development amounted to just over $7 billion per year. That's over $8,000 requested from each person in the province. So it would be a disservice to tell those of us that pay the tab that the expenditure was only set because we wrote down numbers and then adjusted them based on fiscal goals. The budget is government's assurance that they had determined what services residents should be able to count on and what we're spending to meet those commitments, right? Wrong. When Mr. Lamrock asked the departments charged with preparing the budgets why they chose a particular number to spend, he wanted to hear that they had received and understood the models of what is to be done for how many people and what they're trying to achieve. If money is added, we should know what standard is expected to be reached. If funds are reduced, we should know why they believe that that service can achieve the goals with less funding. In short, if the departments who prepare the budgets have the power to determine what they will spend on a social objective, they should share in the accountability for whether that plan met the objective. Decoupling funding authority from accountability is always a bad idea. To spell it out, imagine if two people are responsible for hosting a steak dinner, and the objective is to ensure that everyone has a steak. Person A sets the budget. Person B buys the food and prepares the meal. When we arrive, we see that five people are eating and 100 angry people milling about hungry. Person A points to person B and says, we gave them the money, so don't look at us. The question is, of course, whether or not person A made a wise decision when they set the funding amount. If the budget assumptions were correct and person B hired a limousine to go to the grocery store instead of buying food, we have a delivery problem. If person A assumed we could get a fillet mignon for $1 per steak, we have a budget problem. And if no one can tell us what they assumed for any of the inputs, we have a complete governance failure. In most cases in New Brunswick where failure of social services is examined, neither the service nor the ministry can offer any objective measurement to determine if we have delivery or a budget problem. That means we are systemically living in a continuous loop of governance failure.

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Mr.

SPEAKER_00 4:42

Lambrock's office put this to the test. In April 2023, after the release of the provincial budget, they asked the Department of Finance some questions to see if basic modeling was done before determining expenditures. They deliberately focused on what looked like good news announcements, areas where resources were increased, not cut, to encourage expansive answers rather than defensive ones. What they got back was rather revealing. There were several tax incentives for landlords designed to lower rent costs and stimulate housing development. When asked what indicators would be measured to track the impact on affordability and what results would need to be met for the program to be continued, the Department of Finance affirmed the goal and declined to name even one indicator that would be measured to determine success or failure. A multimillion dollar initiative was launched without any sense of what exactly the result would be. There was $1.7 million in new funding for First Nations mental health initiatives. When asked for specific needs assessment done to arrive at that number, how many people were waiting, and what the acceptable service delivery time was, what results would look like if it worked, the Department of Finance responded only that there would be new initiatives and that the government was moving forward. What forward meant in terms of any particular result was unclear. Inputs were funded, outcomes were not considered. There was a budget for child protection services that was lower than the actual expenditure from the year before. When asked for the basis of this prediction, the Department of Finance replied only that the previous year had higher caseloads and costs per case. And if that situation happened again, they would simply add more funding at the end of the year. There was no information on why the caseloads were higher, what upstream investments might have prevented the surge, or any particular basis of the assumption that caseloads would go down. The only possible consequence of this odd budgeting, writing down a number that was wrong last year and making a wish upon some star that it wouldn't happen again, is to put the department responsible for child protection in a state of uncertainty about their resources for 11 months before shrugging and spending millions more at the end of the year in the least strategic way possible. And then there was long-term care. When specifically for modeling and benchmarks of the seniors waiting in hospital beds when they should be in long-term care, the Department of Finance could provide nothing. They mentioned that only in the previous fiscal year, 35 seniors had moved from hospitals to nursing homes. They set no targets for the year to come. They mentioned they were committed to improvements in home care and were recruiting staff successfully from the Philippines. Where these new staff would go and what results would be expected was apparently unknown. And here is where it gets even more troubling. Mr. Lamarck says in his province, the Executive Council office, the body that should provide social policy counterweight to finance, that should be asking what will this do for people, has over time been hollowed out of its policy expertise and effectively absorbed into the Department of Finance and Treasury Board. What should be a creative tension between fiscal discipline and social outcomes has become total fiscal domination. Finance guards all the power to make final decisions over how to resource social programs, but none of the accountability for its outcomes. Mr. Lamrock puts it plainly. If social services turns down a $500 home care service and the senior winds up in a significantly more expensive hospital bed, that is fiscally compliant but fiscally stupid. If education puts a child on partial days and can't pay for the services to help them get back to school, then the parent loses her job and goes on social assistance because she must stay home with the child. That is fiscally compliant but fiscally stupid. We are managing billions of dollars worth of social programs with a fiscal approach that would not fly in any business setting anywhere in the world. And the result, as Mr. Lamrock notes, is that even more generous budgets of recent years have been far worse at delivering meaningful social outcomes, because 30 years of budget models working without proper planning have divorced even generous health budgets from actual results. Somewhere along the way, we built systems where staying inside the budget line became the outcome, the whole finish line, when it was only ever supposed to be a constraint we work inside of while chasing something bigger. So I want to ask you, beyond wait times, what are we actually measuring? How are people going through our system doing better or worse by the time they come out the other side? And if the honest answer is I don't know, that's not a small gap. That's the whole ball game. Because a system that can tell you exactly how much money it spent, but can't tell you if people's lives got better, isn't measuring the wrong thing by accident. It's measuring the wrong thing on purpose. In the next episode, we're going to look at that flaw that flows directly from this one. Because if you don't measure results, if your budget is completely disconnected from the outcomes, eventually you stop knowing what good looks like. Flaw number three is about what happens when a system stops measuring itself. Thanks for listening. And remember, systems don't change unless we do. This is shift next time.