Ontario has been hit harder than most provinces by the global recession. Hundreds of thousands of contributing members of our province have lost their jobs and haven’t even had an Employment Insurance (EI) system to fall back on.

Many Ontarians are silently hurting. For some, the recession meant joining the growing ranks of poor people in this province. Others were forced to take lower paying jobs. Still others struggled with the brutal reality of poverty long before recession made each and every one of us vulnerable to an economic transformation that is nowhere near finished.

25 in 5 has prepared its Pre-Budget Submission for the Standing Committee on Finance and Economic Affairs, and the message is simple.

Ontario must stay the course. Rash moves to eliminate the deficit by cutting public sector spending could be disastrous – for Ontarians and for the province’s economic recovery.

Ontario is not yet out of the woods, nor is the rest of the world. The World Bank has already warned that the global economic recovery could wilt if governments pull back on their stimulus efforts too quickly. Without bold provincial leadership, we risk plunging back into recession or faltering with a jobless recovery. We cannot afford either scenario.
Read the full submission here. And read the entire Blueprint here.

Partners and supporters of 25in5 can use the information in the submission when preparing their own submissions to the Standing Committee (william_short@ontla.ola.org by February 3) or to the Finance Minister (submissions@ontario.ca).
25 in 5 will be presenting this submission to the Standing Committee on February 1st.

December 7, 2009

Presented by
Michael Creek, Voices from the Street
Greg deGroot-Maggetti, Mennonite Central Committee Ontario
Co-chairs of the 25 in 5 Network for Poverty Reduction

Background

The 25 in 5 Network for Poverty Reduction is a multi-sectoral organization comprised of more than 450 provincial and Toronto-based organizations and over 1,000 individuals working on the elimination of poverty in Ontario. We believe that making good on the province’s commitment to reduce child and family poverty by 25 percent in the next five years is key to addressing the challenges facing Ontario today and into the future.

It is critical that Ontario apply a “poverty lens” to any new initiative that it is bringing forward. Be it fiscal, economic or social policy, new proposals must be subject to questions about how they will contribute to, or undermine, Ontario’s Poverty Reduction Strategy.

Poverty reduction must be top of mind because:

More and more people are hurting. Action on poverty reduction is crucial to support hard-hit Ontarians right now, so that we can ensure that we can all get back on our feet as quickly as possible. Now more than ever inaction isn’t an option.

A focus on poverty reduction is key to Ontario’s economic recovery strategy. Policies to tackle poverty lay the foundation for a stronger, well-equipped workforce where all hands are on deck ready to take on the challenges of a 21st century global economy.

Social investments will continue to stimulate the economy and help to prevent a longer recession. Investments in economic stimulus targeting the poor are helping to stave off the worst of the recession and create jobs.

Poverty Reduction Benchmarks for HST

The 25 in 5 Network has identified five key areas that must be addressed to ensure that the HST contributes to the objectives of the poverty reduction strategy:

1. Introduction of mitigating measures, such as:
   • indexed tax credits for low income families; and
   • the exclusion of key household items from any tax increases.
2. Regular payments of credits to ensure that low income households have access to regular cash flow. These credits should be staggered with the GST credits to ensure a more even distribution of income throughout the year.
3. Outreach efforts in partnership with communities, including First Nations communities, to ensure take up by low income Ontarians of the refundable sales tax and property tax credits.
4. Monitoring of the impact of the HST and related mitigating measures on low and income households (including annual reporting in the Budget), and a commitment to further action if it is found that there are negative impacts on low and modest income households.
5. Careful consideration of the cost of the proposed personal and corporate income tax cuts proposed in Bill 218.

Mitigating Measures

We note that the Bill 218 proposes a refundable sales tax credit of up to $260 per adult and child per year for low and modest income individuals and families. In addition, Ontario is also committing to $270 million in annual property tax relief for low- to middle- income homeowners and tenants.

We recommend that the Government move ahead with these measures, to monitor their impact on low and modest income households, and commit to further action if it is found that there are negative impacts on low and modest income households.

Bill 218 also sets out to exclude key household items—including diapers, feminine hygiene products — and low-cost meals from the provincial portion of the HST.
We recommend that the Government move ahead with these measures, monitor their impact on low and modest income households, and commit to further action if it is found that there are negative impacts on low and modest income households.

We also recommend that the Government consider increasing the refundable sales and property tax credits as a way to improve income security for low and modest income households and thus contribute to the goal of poverty reduction in Ontario.

Payment Schedule

We note that Bill 218 proposes to provide HST credits quarterly starting in August 2010, to be staggered with federal GST credits, to ensure a more even cash flow to help lower-income families.

We recommend that the Government move ahead with this measures, to monitor its impact on low and modest income households, and commit to further action if it is found that there are negative impacts on low and modest income households.

Take Up by Low-Income Households

In order to benefit from the HST credits, households must complete annual income tax returns. Many low income people do not file tax returns, for a variety of reasons, yet will be required to pay HST on many daily items.

We recommend that the Government of Ontario work with community partners and First Nations communities to implement strategies that will ensure maximum uptake of the refundable sales and property tax credits by low and modest income households. For example, providing funding for annual tax filing clinics would both ensure uptake and support the work of these partners in their local communities.

Monitoring

Advanced planning is critical to ensure that the HST aligns with poverty reduction objectives. Such attention must be sustained throughout the roll-out of the new initiative to ensure that the proposals are having their intended impact.
We recommend regular monitoring of the impact of the HST and related mitigating measures on low and modest income households, including annual reporting in the Budget.
We also recommend that the Government commit to further action if it is found that there are negative impacts on low and modest income households.

The Cost of Corporate and Personal Income Tax Cuts

In addition to the sales tax credit and the property tax credit, Bill 218 proposes reductions to personal income tax and corporate income tax rates. We understand that the aim of these tax cuts is to make the introduction of the Harmonized Sales Tax revenue neutral for the Government, to ensure that the HST includes mitigation measures for all households across the income scale and to create low corporate tax rates.

The 25 in 5 Network feels it is important to emphasize that taxes are the way we all – individuals and businesses – contribute to the public services and public programs that set a foundation for a prosperous and inclusive society.

As we look toward the recovery from the current recession, for example, we need to be sure that people have the education, skills and training to take up the jobs that will be created. Businesses will need to be able to find people with the skills to do the jobs they have available. And businesses benefit substantially from the public investments that are put into everything from early learning and child care, to primary school, high school, colleges and university, as well as training programs. Corporate income taxes contribute to having a well educated and highly skilled workforce. The lost tax revenue due to corporate tax cuts depletes the resources needed to ensure businesses can find the people they need with the skills they need.
In a similar way, as individuals and households we benefit from public education, public healthcare, public transit and public income security programs. Many of the jobs that were created in the last two recoveries did not provide extended health insurance – to cover dental care, prescription drugs, and vision care. The few dollars in personal income tax cuts that individuals and households will receive will not be enough to meet those expenses. That is why it is so important to develop public dental, prescription drug and vision care for those who do not have private coverage. Public revenue from personal and corporate income taxes would make it possible to do that.

We recommend that the Government – and Ontarians – carefully consider the cost of the proposed personal and corporate income tax cuts for the public infrastructure and services that provide the foundation for a productive, prosperous and equitable society.

Conclusion

Aside from the benefit to individuals and families of our recommendations, we want to emphasize that investing in poverty reduction benefits everyone and needs to be an integral part of Ontario’s economic recovery. Every dollar provided through the Ontario Child Benefit and through new HST credits ends up with local retailers and grocery stores. These dollars will help prevent a longer and deeper recession and get Ontario into recovery mode faster. Investments in public programs and services help ensure that all Ontarians can be a part of that recovery.

For further information contact:

Michael Creek
Voices from the Street

Greg deGroot-Maggetti
Mennonite Central Committee Ontario

“There are consequences when societies develop an underclass, demoralized and falling out of contact with the mainstream. The inequality that matters here is … between the poor and the middle class. A poor family is not demoralized because it cannot afford a yacht, but because it cannot aspire even to the sorts of everyday things that average families take for granted.”

Who said it? Andrew Coyne, in Maclean’s Magazine, December 8, 2009.

Ontario Auditor General’s Report Underlines Need for Social Assistance Reform

From: Income Security Advocacy Centre

Whether he meant to or not, the auditor general’s December 7th analysis of OW/ODSP let a dysfunctional social assistance system off the hook, instead laying blame with the people who have nowhere else to turn for basic support.

The ensuing debate risks losing sight of the simple fact that when it comes to social assistance, it’s not the people who are the problem. Instead it’s the 800+ rules that trap people in poverty and powerlessness, fail to provide social and community supports and education and training tools to enable opportunity, and leave people so short of income that living a healthy, dignified life is impossible.

As Premier McGuinty recently stated, social assistance “stomps people into the ground” and something must be done to make the system work the way it should. That something cannot come soon enough, as evidenced by the confusing picture painted by the auditor general’s report:

• The AG’s analysis compares apples with oranges: Comparing the yearly cost of OW and ODSP ($5 B annually) with the historical value of all unrecovered overpayments in the system over decades ($1.2 b over 5+ years) is highly misleading;
• The AG’s analysis inflates the reality of overpayments: The comparison between annual and historical amounts invites the public to falsely conclude overpayments make up 24% of the cost of OW and ODSP. It’s more like 1.4%. That’s not even including the 20% municipal contribution which would bring this numbers even lower
• Overpayments are endemic to the OW and ODSP systems and are routinely generated because of the way the system works. In fact, ‘Overpayment’ is a misleading term: ‘Overpayments’ are automatically generated by the system for the smallest of routine changes, such as a recipient getting long-awaited back pay from a previous job or child support arrears.
• The AG questions the growth of “special diet” benefits simply based on the growth of claims. No medical evidence is offered to suggest that a single recipient does not qualify for this vital medical benefit.
• The AG report does not address the fact that incomes for people on social assistance are dangerously low and compromise people’s health and dignity, leaving society with higher costs down the road. Welfare literally makes people sick. People who experience chronic food insecurity and a lack of access to a healthy diet suffer from numerous negative effects on their health, including higher risk of chronic illness, depression, heart disease, diabetes, and high blood pressure.

Backgrounder: Just the Facts

From: Income Security Advocacy Centre

1) Overpayments and Program Costs: Comparing Apples to Oranges

The yearly cost of both OW and ODSP was reported by the auditor general as $5 billion. In addition, the historical value of all overpayments in the system, potentially reaching back many decades, was reported as $1.2 billion. Comparing these two numbers leads to the faulty conclusion that overpayments make up 24% of the cost of programs.

This is simply not true. It’s unfair and misleading.

Doing the math the right way compares annual program costs with the annual amount of overpayments – which the report indicates is about $26 million. That means that overpayments account for only 1.4% of the cost of the programs. That’s not even including the 20% municipal contribution, which would bring this numbers even lower

2) What Is An Overpayment?

The auditor general’s press release on Ontario Works states that, “More should be done to ensure these overpayments do not occur in the first place,” and “if the required financial and other eligibility procedures were being properly followed, many of these overpayments might not have been given out.”

The problem is, even the term ‘overpayment’ is misleading.

In other business systems, what social assistance calls ‘overpayments’ are called ‘adjustments’ or ‘debits’. Heating and hydro bills, for example, are typically adjusted at the end of the year to account for credits or debits. When families use more heat or water than expected, they owe money to the utility company. We don’t think of this as ‘abuse’ or ‘fraud’.

Unfortunately, OW and ODSP calls these routine debits and adjustments ‘overpayments’, which contributes to a misperception that there is widespread abuse in the system.

3) The System Routinely Generates Overpayments

The real issue is that overpayments are endemic to the OW and ODSP systems and are routinely generated because of the way the system was set up in the first place.

Both OW and ODSP subtract any income a person makes in a month from their monthly benefit cheque. But any number of daily life occurrences can cause an “overpayment” to be generated by the system. For example, overpayments are automatically generated when:

• Income from work or any other source is estimated by a worker or a recipient and the amount actually received is higher than estimated;
• A benefit like back pay, child support arrears, or any kind of retroactive payment is paid to a recipient for a previous time period.

The fact is, the vast majority of what we call ‘overpayments’ are these kinds of routine occurrences. They are systemic differences between ‘budgeted’ and ‘actual’ amounts of assistance caused by normal changes in people’s lives. So, for example:

• Being asked by a part-time employer to work an extra hour will result in an overpayment;
• An former spouse unexpectedly paying a bit more child support in a month will result in an overpayment;
• An unexpected cheque from any program will create an overpayment.

The irony is that from the point of view of the system, overpayments are a good thing. They mean that more money is being paid to recipients from ‘other sources’ – which reduces the cost of social assistance to government. In fact, if there were fewer overpayments, the programs would cost much more.

4) Overpayments are Generated Monthly – Increasing Misperceptions

The income tax system and businesses like hydro or home heating companies reconcile debits (or ‘overpayments’) and credits on a yearly basis.

For example, the federal government determines how much GST credit or child benefits a person is entitled to once a year. Typically, the amount that person gets from credits or benefits is not adjusted until the following tax year. Utilities also do a yearly reconciliation of their billings and costs and either credit a person’s account or send a notice for payment.

OW and ODSP, on the other hand, adjust credits and debits on a month-to-month basis.

Not only does this result in additional paperwork and scrutiny, it also multiplies the appearance of abuse twelve-fold over other similar systems. It also results in a huge number of underpayments, which continue to cause hardship for people but so far have not been accounted for by either the auditor general or the public at large.

If social assistance adopted the same reconciliation rules as most other businesses and major public sector programs, they could slash overpayments and underpayments by a factor of 12 – and they could do it with one simple rule change.

5) Overpayments and Breaking the Rules

While government and society need to be concerned about fraud, it’s clearly the case that fraud in the social assistance system is low.

The number of people convicted of social assistance fraud is a tiny fraction of the number of overpayments in the system. In fact, to quote one report, “more people cheat on their income taxes and lie about their cross-border shopping than defraud the welfare system. Corporate crime, white collar fraud and tax evasion in Ontario cost the public more every year than the entire cost of the social assistance system,” (Six Degrees from Liberation: Legal Needs of Women in Criminal and Other Matters” Department of Justice, Canada, 2003.)

The difference is that, under social assistance, breaking the rules is often committed out of desperation.

The system may in fact encourage breaking the rules by setting rates at levels that no one can live on, and by clawing back half of any income that people earn from employment. Worse yet, on Ontario Works, any money that a person receives from any source other than employment is clawed back at a rate of 100%, forcing people to live on incomes that are below subsistence levels.

It would be laudable and visionary to undertake an accounting of just how far social assistance incomes are from any measure of acceptable living standard. For example, how does one account for the feasibility of having a healthy life given a monthly income of $585 for a single person on Ontario Works in a city like Toronto?

Indeed, under these dire living standards, expecting recipients to quickly settle overpayments and is unrealistic and punitive.

6) Program Complexity and 800 Rules

The social assistance system is so overly and unnecessarily complicated that any number of situations can generate an overpayment.

In fact, in a 2004 report, Deb Matthews, the former Minister for Poverty Reduction and current Minister of Health, indicated that,

“There are now approximately 800 rules and regulations within the system that must be applied before a client’s eligibility and the amount of their monthly cheque can be determined. Many of those rules are punitive and designed not to support people, but rather to keep them out of the system. Because there are so many rules, they are expensive to administer and often applied inconsistently from one caseworker to another, even within the same office. Further, the rules are so complicated that they are virtually impossible to communicate to clients, and it takes years to train a caseworker.”

Little has changed since then. The system is overburdened. Overpayments – and, more troubling for people who need the support, underpayments – are inevitable. It’s time for a new system.

7) “Temporary” Assistance?

Unfortunately, the auditor general made unwarranted comments on issues outside the laws and rules that are in place. He observed that:

“Although the government considers Ontario Works assistance as temporary, about one-third of recipients in three municipalities were paid longer than two years and 13% longer than five years.”

There is no legislation, no regulation, no guideline or government directive that places time limits on the receipt of Ontario Works.

Rather than commenting on issues outside the legal and accounting frameworks within which government does business, it would be more helpful to comment on issues like the systemic nature of overpayments or the other procedures endemic to social assistance that cause the situations that the auditor general calls to task.

For example, it would be more than fair to comment that a 55% increase in Ontario Works rates is required to bring them to the levels that they stood at in 1993. It is possible to argue that many of the “problems” that have been identified in the social assistance system can be related to the considerable loss in purchasing power of the extremely low incomes on which people have to survive.

8) Special Diet

The Special Diet program provides additional funds for people whose medical needs, as determined by a physician, require particular nutritional treatment. There are a limited number of conditions for which a special diet allowance is available, and these conditions must be verified by a physician.

There are many people on ODSP who continue to suffer from medical conditions with documented nutritional treatment needs that are not funded by the program because they don’t appear on a list of conditions for which support will be provided.

In fact, the government appointed Special Diets Expert Review Committee recommended a number of conditions that can cause unintended weight loss be added to the list, including multiple sclerosis, congestive heart failure and muscular dystrophy. Multiple sclerosis and lupus were added to the list only after a legal challenge to the program.

The auditor general makes the following observation:

“Many special dietary allowances were paid under questionable circumstances. The total amount spent on the allowances has increased from $5 million in the 2002/03 fiscal year to more than $67 million during 2008/09.”

He does not mention that the increase in program costs were in large part a result of Ministry staff promoting what had been an under-utilized program.

Furthermore, what does “questionable” mean in this instance? Innuendo rules the day over facts, debasing a program that provides vital support to people for whom nutritional treatment can mean the difference between managing a health condition or sliding into serious deterioration.

CONCLUSION

The welfare system as it now stands fails to adequately provide for people’s basic needs and offers few real supports or opportunities to help people climb out of poverty, build better lives and play their part in the economy.

That’s why it’s critical that Ontario move ahead with its promised review of social assistance – to remove the stigma and shame that accompany these programs and to align these programs with what should be their real goal – support and opportunity for all Ontarians.

The 25 in 5 Network for Poverty Reduction has offered the following five benchmarks for a successful Social Assistance review.

• The review must be grounded in a bold vision: economic security and opportunity for all Ontarians. Tinkering with Ontario Works and Ontario Disability Support Program rules is simply not enough. We need social assistance programs that ensure people’s well-being, and provide the opportunities people need to contribute to the province’s prosperity – because the province is going to need all the help it can get.
• The review must be proactive. Immediate changes must be made to unfair and counterproductive rules that deny people supports they need to get ahead – rules like asset limits that virtually guarantee more hardship, not less, and that continue to hamper Ontario’s recession recovery efforts.
• A timely process to launch deep reforms must be part of the review package. A fundamental transformation must be made to overcome the silos of current programs and make further progress in crucial areas like the early childhood years, housing security, dental care and more.
• Providing decent, adequate income supports must be a stated outcome of the review. Immediate and longer term steps must ensure that people who rely on social assistance, and all low-income people, are assured living standards of health and dignity as well as access to supports and tools, like meaningful training and education, to enable the pursuit of opportunity. The 25 in 5 Network has proposed two policy actions that government can take to move quickly on adequacy – a $100 a month nutritious food supplement for adults on social assistance, and the creation of an Ontario Housing Benefit to help low income renters, including the working poor.
• People who have had to rely on Ontario Works and the Ontario Disability Support Program must have a leading role in shaping the review’s recommendations. This means seeking out and heeding the expertise of people who have been there. They have much to teach the committee – and all of us – in the review.

Right now, Ontario’s social assistance system is simply not up to the task. Making social assistance consistent with Ontario’s goals for poverty reduction and economic opportunity is the right move now.

What Can You Do? TAKE ACTION

Renowned social justice activist Anna Willats writes in today’s Toronto Star that “we must not allow ourselves to descend into the shameful poor-bashing that was used so cynically by the Mike Harris Tories to propel themselves to power.”

Send a letter to the editor of your local paper, phone in to call-in shows, use Facebook, Twitter, your blog, and other web-based media.

It is critical that we make our voices heard in support of the integrity of people on social assistance is challenged. Send the message that poor-bashing does not belong in today’s Ontario!

Let’s underscore that:

• When it comes to social assistance, it’s not the people who are the problem, it’s the system that is broken.
• The welfare system as it now stands fails to adequately provide for people’s basic needs and offers few real supports or opportunities to help people climb out of poverty, build better lives and play their part in the economy.
• That’s why it’s critical that Ontario move ahead with its promised review of social assistance and take action to ensure everyone can live in dignity.

Are you a recipient of OW or ODSP? Tell your story of how the system really works at www.sareview.ca/tell-your-story.

Please forward your letters, op-eds, web posts, and any record of calls to radio to info@25in5.ca.

TORONTO – One year into the Ontario government’s commitment to reduce child poverty by 25 per cent by 2013, the 25 in 5 Network for Poverty Reduction warns the province risks missing its target unless further action is taken.

An anniversary report released today by 25 in 5 that tracks Ontario’s progress shows the province’s poverty reduction strategy has taken significant steps in the first year, but the next steps cannot come soon enough to support struggling Ontarians and help with the province’s economic recovery.

“A year into the promise to reduce poverty, the damaging effect of the recession has taken root in every community in this province,” says Greg deGroot-Maggetti, co-chair of 25 in 5. “Hundreds of thousands of Ontarians have lost jobs and many are losing hope. Without immediate public support, the province’s poverty rate will explode.”

In its anniversary report, 25 in 5 documents positive progress but warns that several challenges lay ahead:

• The impact of the last year of recession makes poverty prevention and reduction an even more urgent but very do-able task for the provincial government;
• Repeating the mistakes of the 1990s – especially cuts to public sector programs and services – will act as a drag on the province’s economic recovery and perpetuate poverty;
• The province must make good on its promise to review social assistance, especially in light of the recession that is forcing many more Ontarians to seek support;
• The province must speed up several other measures necessary for poverty reduction, including an improved Ontario Child Benefit, stimulus measures in affordable housing and early learning, action to raise the minimum wage and social assistance incomes, and a new dental program for low income Ontarians.

“The good news is that investing in poverty reduction benefits everyone and can be a crucial player in Ontario’s economic recovery,” says Mike Creek, co-chair of 25 in 5. “For instance, every dollar provided through the Ontario Child Benefit and other income programs ends up with local retailers and grocery stores. These dollars will help prevent a longer and deeper recession and get Ontario into recovery mode faster.”

Read the report online.