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Custom Election Codes for First Nations

Many contemporary First Nation leaders, and even legal scholars, including the respected authors of a 2010 Senate standing committee report on Aboriginal peoples, have heralded custom election systems on reserves as the foundation for better band governance. Custom systems allow First Nation communities to design and adopt their own election code, albeit with some federal requirements that must be met before final approval.

Many of these Indigenous observers believe band elections held under the Indian Act system are inherently “colonialist” and even oppressive of Indigenous peoples’ legitimate aspirations. They argue that modern band leaders increasingly view these structures as illegitimate. It is the contention of this study that a thoughtful evaluation of how custom election systems really work shows that there is more than initially meets the eye.

This paper calls for sober second thought on this subject. Such considered reflection is especially critical in 2017 because currently, most First Nations in Canada hold band elections under custom code systems. Indian Act systems are now the minority across the country, although some regions still hold to them. Indigenous leaders continue to promote custom election systems as a better alternative to the Indian Act system.

The subject is important because there is a demonstrable connection between governance and improved socio-economic indicators. This paper argues that the end goal of Aboriginal self-government is good governance that elevates community well-being. Drawing on the work of Fraser Institute and other specialists in Indigenous governance, this paper makes the case for comparing custom election and Indian Act systems, evaluating how they favourably rebalance governance, especially in terms of greater democracy and accountability. Good governance helps unleash the economic potential of Indigenous communities, which is something First Nations should consider when they design electoral and governance structures for their impoverished communities.

This paper examines both the favourable and unfavourable aspects of custom election systems for First Nations, especially for modern Indigenous governance. While allowing Indigenous communities to escape the paternalistic aspects of the Indian Act, the study found that without federal oversight, custom election codes permit various forms of discrimination, such as that based on reserve residency. A wide range of scholars and parliamentarians had assumed that custom election systems could deal with the inherent weaknesses of the Indian Act system. To some extent, they can and have, but they have also introduced problems of their own that are not widely understood or mentioned.

The paper also mentions documented cases where once Indigenous Affairs Canada has signed off on a custom code, on-reserve governments act to subvert institutions – such as representative custom councils – that are meant to check excessive chief and councilor power or ensure financial disclosure and accountability to community members. In these cases, it could be argued that self-government has been used inappropriately as a cover for abuse of power. The paper also finds that without any intervention from Indigenous and Northern Affairs Canada (which happens for bands still under the Indian Act), custom bands find themselves thrown into divisive and costly court battles. The study discusses new data from the well-regarded Community Well-Being Index (CWB), which shows that bands adopting custom codes have no better community well-being than those under the Indian Act. Therefore, governments need to better understand these systems before they promote them in a sweeping and universal manner. While custom codes hold the promise of creating accountable and transparent governance structures, this study cautions communities planning to adopt them to think through both their pros and cons.

In the end, this study offers some practical next steps, such as the widespread adoption of band constitutions to prevent residency discrimination and other abuses, and to promote independent dispute resolution. Bands must also share best custom code practices with each other. Lastly, the federal government must help ensure that any movement towards custom election systems definitively improves Indigenous well-being.

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Sustainability of Health Care Spending in Canada 2017

Health care is the single largest budget item for every province in Canada, ranging from 34.3 percent of total program spending in Quebec to 43.2 percent in Ontario in 2016. Any changes in the amount spent on health care can have a significant impact on a government’s fiscal balance (deficits or surpluses), the resources available for other programs such as education and social services, and/or tax competitiveness.

It is therefore vital that we routinely assess historical, current, and expected trends in health care spending in order to determine if such spending is sustainable.

While a number of indicators can help determine the sustainability of changes to health care spending, the most common and informative of these indicators is the share of program spending represented by health care and the ratio of health care spending relative to the size of the economy (GDP). An increase in the former may result in the crowding-out of other spending while an increase in the latter may require a change in the current tax system or deficits.

An examination of these two indicators of health care spending, that is health care spending as a share of program spending and health care spending as a share of the economy, shows clearly that the last 15 years (ie., between 2001 to 2016) saw provincial governments increase health care spending at an unsustainable pace. Indeed, during this period, health care spending grew by 116.4 percent, outpacing growth in other program spending (94.6 percent) and GDP (77.4 percent). It is therefore unsurprising that during the same period, the share of program spending represented by health care for the provinces in total grew from 37.6 percent to 40.1 percent. Further, while provincial health care spending (in total) represented only about 6.0 percent of Canada’s GDP in 2001, it had grown to represent 7.3 percent by 2016. However, growth in spending has not followed a consistent trend over this 15-year period. Notably, the average annual growth in health spending (6.7 percent) during the first 10 years between 2001-2011 was much higher than the average annual growth during the past 5 years (2.6 percent) between 2011-2016.

The pressing question today, however, is what can we reasonably expect to occur in the near future in the absence of any significant shift in government policy?

In order to answer this question, this paper presents the results of two scenarios based on a model for projecting health care spending in the future based on demographic factors (population growth and aging), inflation (general and health-specific inflation), and other factors (which may include factors related to government policy, income elasticity, developments in technology, etc.).

The first scenario (long-term trend model) is based on reasonable expectations of general inflation and demographic trends in the future, as well as assumptions regarding health-specific inflation, and other factors based on trends observed between 2001 and 2016. Under this scenario, health care spending is projected to grow at about 5.3 percent per annum on average between 2016 and 2031. As a result, health care spending is expected to consume a slightly larger portion of total program spending—growing from 40.1 percent in 2016 to 42.6 percent in 2031. The range of results for specific provinces is a low of 34.2 percent in Quebec to a high of 47.2 percent in British Columbia in 2031. As well, health spending in total is expected to grow from 7.3 percent of the economy in 2016 to 9.3 percent in 2031. Health care spending in four provinces (British Columbia, Prince Edward Island, Ontario and Nova Scotia) is projected to consume over 45 percent of total program spending—suggesting increases in spending along these lines may be unsustainable and carry some risk of crowding out other programs or requiring fiscal adjustments.

In the second scenario (short-term trend model), the assumptions regarding health-specific inflation and other factors are altered to reflect trends only between the shorter and more recent period between 2011 and 2016. Under this scenario, health care spending is projected to grow at about 2.9 percent per annum on average between 2016 and 2021. As a result, it is expected that health care spending will continue to represent about the same portion of total program spending—growing from 40.1 percent in 2016 to 40.5 percent in 2021. Relative to the size of the economy, health spending is again expected to remain roughly constant—decreasing marginally from 7.3 percent of the economy in 2016 to 7.0 percent of the economy in 2021. Under this scenario, there is less risk of crowding out other programs and requiring fiscal adjustments.

After years of increasing health care spending at an unsustainable pace, it seems as through provincial governments have started to reach their limits over the past 5 years—understanding that a continuation of such increases would result in either reductions in other spending, or higher taxation, higher deficits and debt, or some combination of these three.

Indeed, given expected inflationary and demographic pressures, if governments increase health care spending in the future in line with trends observed over the last 5 (rather than 15) years, the present ratio of health care spending to program spending and GDP may be preserved (at least in the near future). However, the continual presence of long wait times and low ratios of human and technological medical resources despite historically high levels of spending raise new questions about whether the public health care system will be able to deliver adequate services to patients without fundamentally altering its structure.

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Comparing Government and Private Sector Compensation in Alberta, 2017

Main Conclusions

  • Using data on individual workers from January to December 2015, this report estimates the wage differential between the government and private sectors in Alberta. It also evaluates four available non-wage benefits in an attempt to quantify compensation differences between the two sectors.
  • After controlling for such factors as gender, age, marital status, education, tenure, size of firm, type of job, industry, and occupation, Alberta’s government sector workers (from the federal, provincial, and local governments) were found to enjoy a 7.9 percent wage premium, on average, over their private sector counterparts in 2015. When unionization status is factored into the analysis, the wage premium for the government sector declines to 5.4 percent.
  • The available data on non-wage benefits suggest that the government sector enjoys an advantage over the private sector. For example, 72.7 percent of government workers in Alberta are covered by a registered pension plan, compared to 24.1 percent of private sector workers. Of those covered by a registered pension plan, 97.3 percent of government workers enjoyed a defined benefit pension compared to just under one-third (31.7 percent) of private sector workers.
  • In addition, government workers retire earlier than their private sector counterparts—about 1.1 years on average—and are much less likely to lose their jobs (4.6 percent in the private sector versus 0.4 percent in the public sector).
  • Moreover, full-time workers in the government sector lost more work time in 2015 for personal reasons (10.7 days on average) than their private sector counterparts (6.2 days).
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Comparing Government and Private Sector Compensation in Quebec, 2017

Main Conclusions

  • Using data on individual workers from January to December 2015, this report estimates the wage differential between the government and private sectors in Quebec. It also evaluates four available non-wage benefits in an attempt to quantify compensation differences between the two sectors.
  • After controlling for such factors as gender, age, marital status, education, tenure, size of firm, type of job, industry, and occupation, Quebec’s government sector workers (from the federal, provincial, and local governments) were found to enjoy a 9.1 percent wage premium, on average, over their private sector counterparts in 2015. When unionization status is factored into the analysis, the wage premium for the government sector declines to 5.5 percent.
  • The available data on non-wage benefits suggest that the government sector enjoys an advantage over the private sector. For example, 89.3 percent of government workers in Canada are covered by a registered pension plan, compared to 23.8 percent of private sector workers. Of those covered by a registered pension plan in Quebec, 96.9 percent of government workers enjoyed a defined benefit pension compared to just over half (57.9 percent) of private sector workers.
  • In addition, government workers retire earlier than their private sector counterparts—about 2.8 years on average—and are much less likely to lose their jobs (4.5 percent in the private sector versus 0.6 percent in the public sector).
  • Moreover, full-time workers in the government sector lost more work time in 2015 for personal reasons (16.5 days on average) than their private sector counterparts (9.6 days).
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The Chrétien Consensus was an implicit agreement that transcended political party and geography regarding the soundness of balanced budgets, declining government debt, smaller and smarter government spending, and competitive taxes that emerged in the early 1990s and lasted through to roughly the mid-2000s.

The reforms began in Saskatchewan under the NDP led by Premier Roy Romanow in 1992. The quick success of the Romanow reforms set the stage for even more aggressive reforms in neighbouring Alberta one year later by Premier Ralph Klein. The combination of the successful reforms in both provinces were a catalyst for the federal government to enact similar reforms, what we have coined the Chrétien Consensus, under the leadership of Liberal Prime Minister Jean Chrétien in 1995. These reforms spread across the entire country and were implemented in every province to varying degrees and at different times during the decade.

Balanced budgets created a stable business and investment environment by eliminating the threat and uncertainty of future tax increases that are inherent to deficits. Declining government debt meant that there was more domestic capital available for private investment. Smaller and smarter government spending meant both that governments were playing a smaller role in the economy—relying more on individuals, families, and businesses to make economic decisions—and that governments were delivering greater value-for-money in the remaining programs. Finally, competitive taxes meant that the incentives for work effort, investment, and entrepreneurship were improving and that Canada was strengthening its relative attractiveness for businesses and entrepreneurs globally.

These policies created an environment conducive to and supportive of entrepreneurship and investment, which formed the basis for a robust, prosperous economy that lasted well over a decade after the reforms were implemented. Specifically, Canadians enjoyed rising incomes, incredibly strong job growth and the opportunities such growth provides, and a prolonged period of business investment, which ultimately forms the foundation for long-term prosperity.

This success was no doubt aided in part by other factors such as the commodity price boom and the success of the US economy during this period. However, the basis for that success was the policies imbedded in the Chrétien Consensus. In other words, Canada capitalized on these opportunities because it had established a foundation for success and an environment supportive of economic growth.

The better part of the last decade ending in 2016 has seen most Canadian governments moving away from the Chrétien Consensus. Governments across the country, particularly those in Alberta, Ontario, and now federally, have decisively and purposefully moved away from the policies of the Chrétien Consensus by increasing government spending through both borrowing (deficits) and increased taxes. The increases in spending have often been haphazard and without much attention paid to prioritization or importance. Governments have taken a much more active, larger role in the economy of the nation and most provinces. And finally, many governments have also increased taxes without regard for how such increases affect incentives or competitiveness. In short, the country has rejected the Chrétien Consensus and this is nowhere more evident than in Ottawa today, where the Trudeau Liberals ran on and are now governing based on a set of economic principles that are the antithesis of the Chrétien Consensus.

It is not surprising to those involved in this project that Canada is now struggling economically since the policy foundation for our success in the 1990s and 2000s has been rejected. Returning to the principles of the Chrétien Consensus will require first and foremost that citizens demand such policies. Only then will governments start to make the difficult decisions needed to rein in government spending, achieve balanced budgets, begin reducing debt, and start to refocus on tax competitiveness. Such policies delivered strong economic prosperity in the 1990s and 2000s, and given the opportunity will do so again.

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Myths of Infrastructure Spending in Canada

As the federal government and several provincial governments plan on collectively spending hundreds of billions of dollars over the coming decade on infrastructure, this report dispels five common myths used to argue for why now is a good time to ramp up government infrastructure spending.

Myth 1: Government must ramp up infrastructure spending to make up for past neglect

Proponents of large-scale increases in infrastructure spending often argue that governments have not spent enough in recent decades to expand, or even to maintain, the value of infrastructure that exists in Canada. However, the stock of government infrastructure per person (total value net of depreciation) has been growing steadily over the past 15 years and is now at the highest level since 1971. After adjusting for inflation, the net stock of government infrastructure per person has grown 27.3 percent, from $16,394 per person in 2000 to $20,876 per person in 2015 (all in 2015 dollars). Since 2008, annual spending to acquire new public infrastructure has been particularly high, with Canada ranking relatively high on international comparisons of government capital spending.

Myth 2: Infrastructure is largely the domain of governments

There is a misperception that Canada’s infrastructure is largely provided by governments, with minimal contributions from non-government organizations such as businesses and charities. As a result, those who argue that Canada would benefit from increased infrastructure spending usually focus on making the case for more government spending on infrastructure, overlooking the major contribution made by the private sector. For over 40 years, the net stock of infrastructure per person from non-government organizations has exceeded that of the government sector. In 2015, the net stock of non-government infrastructure represented 72.6 percent of Canada’s total infrastructure stock, up from 63.4 percent in 1971.

Myth 3: Increased infrastructure spending will spur economic growth

The argument that infrastructure spending will spur economic growth is one of the most prominent arguments made in favour of increased infrastructure spending. In principle, sound infrastructure spending (a high-in-demand road, railway, or port) can increase long-term economic growth by improving the economy’s productive capacity through more efficient transportation corridors that move people and goods across our country and to borders and ports. In practice, however, not all public infrastructure spending fits this bill. For instance, just 10.6 percent of what the federal government plans to spend on new infrastructure will be on trade and transportation infrastructure. Most is on so-called “green” and “social” infrastructure, the latter including projects such as social housing, community centres, and hockey arenas. Although these initiatives may be appreciated by the community in which they are built, they are unlikely to provide productivity gains. Moreover, infrastructure spending generally fails to stimulate the economy in the short-term because of considerable delays and because the spending may not target the sector of the economy most in need.

Myth 4: With interest rates low, now is the time to ramp up government infrastructure spending

Low interest rates have been used to argue for increased government spending on infrastructure. However, interest rates are only one factor in assessing the costs of increased infrastructure spending. Failing to account for other relevant fiscal and economic costs exaggerates the opportunity provided by low interest rates. Other fiscal considerations include the future operation and maintenance costs of a new infrastructure asset, which can be up to 80 percent of the total lifetime cost and are not influenced by current interest rates. In addition, the economic costs of the taxes that fund the infrastructure spending add considerably to the overall costs and should be properly accounted for. A more fundamental problem is that the interest rate argument wrongly assumes that infrastructure spending should always be largely or completely financed by debt.

Myth 5: The federal government should take the lead on infrastructure

A recurring argument in Canada is that the federal government should take on a greater role in provincial and local infrastructure, primarily through conditional infrastructure grants. Such grants give the federal government influence over which projects are undertaken and how they are managed, imposing federal priorities that may not reflect the particular needs of every region. Conditional grants distort local decision making in counterproductive ways by encouraging recipient governments to undertake projects that are more likely to receive funding over others that may be of higher priority to the local region. Federal infrastructure grants can also lead to a deterioration of accountability of the recipient government to taxpayers. If provincial and local governments wish to spend more on infrastructure, they can prioritize the use of available revenue for that purpose rather than calling for additional resources from the federal government. Tellingly, provincial and local government own-source revenues (total revenue minus transfers from other governments) have grown faster than federal own-source revenues over the past 15 years.

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Annual Survey of Mining Companies: 2016

This report presents the results of the Fraser Institute’s 2016 annual survey of mining and exploration companies. The survey is an attempt to assess how mineral endowments and public policy factors such as taxation and regulatory uncertainty affect exploration investment. The survey was circulated electronically to approximately 2,700 individuals between August 30th and November 18th, 2016. Survey responses have been tallied to rank provinces, states, and countries according to the extent that public policy factors encourage or discourage mining investment.

A total of 350 responses were received for the survey, providing sufficient data to evaluate 104 jurisdictions. By way of comparison, 109 jurisdictions were evaluated in 2015, 122 in 2014, 112 in 2013, and 96 in 2012. The number of jurisdictions that can be included in the study tends to wax and wane as the mining sector grows or shrinks due to commodity prices and sectoral factors.

The Investment Attractiveness Index takes both mineral and policy perception into consideration

An overall Investment Attractiveness Index is constructed by combining the Best Practices Mineral Potential index, which rates regions based on their geologic attractiveness, and the Policy Perception Index, a composite index that measures the effects of government policy on attitudes toward exploration investment. While it is useful to measure the attractiveness of a jurisdiction based on policy factors such as onerous regulations, taxation levels, the quality of infrastructure, and the other policy related questions respondents answered, the Policy Perception Index alone does not recognize the fact that investment decisions are often sizably based on the pure mineral potential of a jurisdiction. Indeed, as discussed below, respondents consistently indicate that only about 40 percent of their investment decision is determined by policy factors.

The top

The top jurisdiction in the world for investment based on the Investment Attractiveness Index is Saskatchewan, which moved up to first from second place in 2015. Manitoba moved up to second place this year after ranking 19th the previous year. Western Australia dropped to third, after Saskatchewan displaced it as the most attractive jurisdiction in the world. Rounding out the top ten are Nevada, Finland, Quebec, Arizona, Sweden, the Republic of Ireland, and Queensland.

The bottom

When considering both policy and mineral potential in the Investment Attractiveness Index, the Argentinian province of Jujuy ranks as the least attractive jurisdiction in the world for investment. This year, Jujuy replaced another Argentinian province—La Rioja—as the least attractive jurisdiction in the world. Also in the bottom 10 (beginning with the worst) are Neuquen, Venezuela, Chubut, Afghanistan, La Rioja, Mendoza, India, Zimbabwe, and Mozambique.

Policy Perception Index: A “report card” to governments on the attractiveness of their mining policies

While geologic and economic considerations are important factors in mineral exploration, a region’s policy climate is also an important investment consideration. The Policy Perception Index (PPI), is a composite index that measures the overall policy attractiveness of the 104 jurisdictions in the survey. The index is composed of survey responses to policy factors that affect investment decisions. Policy factors examined include uncertainty concerning the administration of current regulations, environmental regulations, regulatory duplication, the legal system and taxation regime, uncertainty concerning protected areas and disputed land claims, infrastructure, socioeconomic and community development conditions, trade barriers, political stability, labor regulations, quality of the geological database, security, and labor and skills availability.

The top

For the fourth year in a row, the Republic of Ireland had the highest PPI score of 100. Ireland was followed by Saskatchewan in second, which moved up from 4th in the previous year. Along with Ireland and Saskatchewan, the top 10 ranked jurisdictions are Sweden, Finland, Nevada, Manitoba, Wyoming, New Brunswick, Western Australia, and Northern Ireland, which was included for the first time in the 2016 survey.

The bottom

The 10 least attractive jurisdictions for investment based on the PPI rankings (starting with the worst) are Venezuela, Afghanistan, Zimbabwe, Mongolia, Philippines, Indonesia, Chubut, South Sudan, Mendoza, and Ecuador. Venezuela, Zimbabwe, and Chubut were all in the bottom 10 jurisdictions last year. Two out of the 10 lowest-rated jurisdictions based on policy were Argentinian provinces.

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Permit Times for Mining Exploration in 2016

Since 1997, the Fraser Institute has collected information from mining company executives, who evaluate mining policies in jurisdictions around the world. One theme that regularly appears in the comments we receive as part of that survey is a perception that permit time—the length of time it takes to get approval for mining exploration—has grown longer and applications for permits more onerous over time. In our 2016 survey, we added supplementary questions about the time and effort required to obtain exploration permits. These questions were limited to jurisdictions in Canada, the United States, Australia, and the Scandinavian countries, as mining, environmental, and other policies in these jurisdictions are broadly comparable.

In general, based on the perceptions of respondents, many of the Canadian jurisdictions, Saskatchewan in particular, appear to be performing quite well compared to their international competitors. However, there is also room for improvement across Canada: British Columbia is one province that appears to be a laggard, along with the territories. Respondents indicated that not only were they waiting longer to receive their permits in British Columbia than in competing provinces like Ontario and Quebec, the province also offered less transparency and certainty throughout the permitting process than most of the jurisdictions included in the survey. Northwest Territories and Nunavut also showed considerable room for improvement.

At the other end was Saskatchewan, which performed relatively well compared to jurisdictions both in Canada and around the world in limiting the time it takes to receive permits,as well as ensuring that the process is highly transparent. On one of the dimensions of permit times that we asked respondents to assess—how long it takes to receive the necessary permits—Saskatchewan performed well, with 91% of respondents answering that they received the necessary permits in six months or less compared to 88% of respondents in Quebec, 80% of respondents in Ontario, and only 73% in British Columbia. Canadian jurisdictions tended to perform much better on this measure than did most competing jurisdictions in Australia and Finland and Sweden.

Saskatchewan was the only jurisdiction to have no respondents to the survey indicate that permit approvals had either lengthened somewhat or lengthened considerably over the last 10 years. Yukon had the highest percentage of respondents, at 50%, who found that the time to permit approval had lengthened considerably, with an additional 20% of respondents who found that they had lengthened somewhat. British Columbia’s 60% of respondents who said that permit times had lengthened and Ontario’s 55% was much larger than the 38% of Quebec respondents who noted that permit times had lengthened in that province. Again, on average fewer respondents in the Canadian jurisdictions indicated that permit times were lengthening compared to respondents in the United States, Australia and Scandinavia.

When asked whether transparency in the permitting process was either an encouragement or deterrent to investment, 91% of respondents for Saskatchewan found the level of transparency to either be encouraging investment or at least not deterring investment, compared with 65% in Ontario, 63% of respondents in Quebec, and 54% in British Columbia. This is an area where many Canadian jurisdictions performed more poorly than their counterparts in the United States and Scandinavia.

Saskatchewan was the highest-ranked Canadian province or territory for the level of confidence that mining executives had that the necessary permits would eventually be granted. Nunavut performed poorly on this measure, with 45% of the province’s respondents saying that they either had low confidence or were not at all confident that they would be granted the necessary permits. Like the results for transparency, a number of the jurisdictions in the United States, Australia, and Scandinavia outperformed many of the Canadian jurisdictions for ensuring certainty in the permitting process.

Based on the evidence from the survey, we can say that, although some of the Canadian jurisdictions performed quite well compared to international competitors, the exploration permitting process can certainly be improved in many of Canada’s provinces and territories. Policy reform in these areas may help Canada’s provinces and territories unlock their considerable mineral potential.

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Report Card on Ontario's Secondary Schools 2017

The Report Card on Ontario’s Secondary Schools 2017 collects a variety of relevant, objective indicators of school performance into one, easily accessible public document so that anyone can analyze and compare the performance of individual schools. By doing so, the Report Card assists parents when they choose a school for their children and encourages and assists all those seeking to improve their schools.

Where parents can choose among several schools for their children, the Report Card provides a valuable tool for making a decision. Because it makes comparisons easy, it alerts parents to those nearby schools that appear to have more effective academic programs. Parents can also determine whether schools of interest are improving over time. By first studying the Report Card, parents will be better prepared to ask relevant questions when they visit schools under consideration and speak with the staff.

Of course, the choice of a school should not be made solely on the basis of a single source of information. Web sites maintained by Ontario’s Education Quality and Accountability Office (EQAO), the provincial ministry of education, and local school boards may also provide useful information. Parents who already have a child enrolled at the school provide another point of view.

Naturally, a sound academic program should be complemented by effective programs in areas of school activity not measured by the Report Card. Nevertheless, the Report Card provides a detailed picture of each school that is not easily available elsewhere.

The act of publicly rating and ranking schools attracts attention and this can provide motivation. Schools that perform well or show consistent improvement are applauded. Poorly performing schools generate concern, as do those whose performance is deteriorating. This inevitable attention provides an incentive for all those connected with a school to focus on student results.

However, the Report Card offers more than just incentive. It includes a variety of indicators, each of which reports results for an aspect of school performance that may be improved. School administrators who are dedicated to their students’ academic success accept the Report Card as another source of opportunities for improvement.

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Examining the Revenue Neutrality of British Columbia's Carbon Tax

British Columbia’s carbon tax is often praised as a model for other jurisdictions to follow, in part due to its alleged revenue neutrality. However, in the eight years since it was introduced, the offsetting tax measures used in the government’s revenue neutral calculation have changed, prompting questions about whether the carbon tax is still revenue neutral.

Revenue neutrality simply means that the amount of revenue the government generates through the carbon tax is used to implement new reductions in other taxes that are equal to the revenue generated by the carbon tax. Revenue neutrality is also important for economic efficiency since cuts to economically damaging taxes, such as personal and corporate income taxes, can help offset the economic costs of a carbon tax.

When the carbon tax was first implemented in 2008/09, the BC government enacted four offsetting tax measures which included a reduction in the bottom two personal income tax (PIT) rates, a reduction in the general corporate income tax (CIT) rate, a reduction in the small business CIT rate, and the introduction of the low income climate action refundable tax credit. These four tax measures offset enough revenue to make the carbon tax revenue neutral in its first fiscal year.

However, by 2013/14, the first full fiscal year with the carbon tax at its highest value ($30 per tonne), a major issue arose with the way the BC government was calculating revenue neutrality. At this point, the government was no longer solely relying on new tax measures to offset the carbon tax revenue and instead began using pre-existing tax reductions in its revenue neutral calculation.

Specifically, the pre-existing tax measures are the Training Tax Credit—Individuals, the Interactive Digital Media Credit, the Training Tax Credit—Businesses, Film Incentive BC Credit, the Production Services Credit, and the Scientific Research and Experimental Development Credit (SRED), which first appears in the revenue neutral calculation in 2014/15. The two film industry tax credits and the SRED tax credit were first introduced almost 15 years before they were included as carbon tax revenue offsets.

If the pre-existing tax measures are properly removed from the government’s revenue neutral calculation, then BC’s carbon tax ceases to be revenue neutral as of 2013/14, with a net tax increase of $226 million that year. In 2013/14 and 2014/15, the two years for which final data are available, British Columbians bore a combined $377 million net tax increase.

If the available historical data are combined with the government’s projections to 2018/19, then from 2013/14 to 2018/19, the carbon tax is projected to result in a cumulative $865 million net tax increase for British Columbians. If we were to distribute this tax increase equally among the province’s populace, each British Columbian would pay $182 more per person, or $728 for a family of four.

In addition, the composition of the offsetting tax measures has changed over time. Rather than most of these measures coming from cuts to broader, more distortionary taxes that help mitigate the economic costs of the carbon tax, the government has increasingly used targeted tax measures (i.e., boutique tax credits) to offset the carbon tax revenue. Specifically, before 2013/14, cuts to the general corporate income tax (CIT) rate and two personal income tax (PIT) rates totaled, on average, over 60% of the revenue generated by the carbon tax. However, from 2013/14 onwards, cuts to the general CIT rate and two PIT rates account for less than 45% of the revenue generated by the carbon tax.

The BC government should take the appropriate steps to ensure that the carbon tax is revenue neutral in a way that mitigates the economic damage of the carbon tax by reducing existing distortionary taxes to the greatest possible extent. Barring this, proponents who praise BC’s alleged “revenue neutral” carbon tax reform as a model for others to follow should temper their enthusiasm and more accurately describe the actual model that currently exists, not the model that existed back in 2008.

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