Introduction
Ontario government needs to reform its
involvement in various public services.
The introduction of competition and market
conditions to these centrally controlled
services:
Improves Efficiency.
Empowers the consumer.
Provides accountability.
School Choice
Educational Reform In Ontario
Identifying the Problem
Ontario schools are not reaching their full
potential due to:
A centrally controlled decision-making system.
Weak incentives.
Lack of freedom of choice on the part of the
student and parent.
Absence of quality information regarding
performance.
Providing a Solution – Thesis
Source: Free to Choose
Reform is essential to provide students with
the education that they deserve.
A comprehensive ‗school voucher‘ program
similar to what was proposed by economist
Milton Friedman.
Parents would be given a voucher – a receipt
for the average amount of money needed to
educate their child.
This voucher would be valid to spend at any
public or private school in the district.
Problems with Central Planning
Source: Fraser Institute
Ontario school boards are based on a
command model.
Administration tends to focus on inputs rather
than outputs.
Input model ensures schools are
standardized – very little room for variety.
Input model makes it difficult for parents to
measure school‘s performance.
Principals and teachers are encouraged to
give only mediocre results due to ―one size
fits all.‖
Decentralization as an Alternative
The proposed voucher system is based on
output – the school performance.
School performance can be measured by
attendance – if parents are dissatisfied
they can spend their vouchers and send
their children elsewhere.
Principals and teachers have more power
over funding, have opportunities to
innovate or experiment.
Evidence Supporting Decentralization
Source: Reason Foundation
Californian Experimentation with regard to
decentralization of funding has been
successful.
Two school districts, Oakland and
Compton have attempted two radically
different approaches to school reform.
Oakland has experimented with
decentralization, while Compton has
attempted tighter centralized control.
Similarities in Demographics:
Oakland vs. Compton
Source: Reason Foundation
Oakland Compton
High crime inner city High crime inner city
district. district.
Large Hispanic, Black Large Hispanic, Black
population, small Asian, population, small Asian,
white population. white population.
Average family income, Average family income,
$40,000. $33,000.
―In need of improvement‖ ―In need of improvement‖
No Child Left Behind Act No Child Left Behind Act
Differences in Doctrine:
Oakland vs. Compton
Source: Reason Foundation
Oakland Compton
Funds allocated based on Funds allocated by
average daily attendance. central planners.
Decentralization gives Funds allocated based on
principals given total regulations.
control over funding. New regulations and
Neighbourhood-based tighter rules implemented.
school attendance lifted – Reduced class size (12%)
all schools in district Tougher Curriculum
available. Improved Teacher
Credentials
Differences in Results:
Oakland vs. Compton
Source: Reason Foundation
Oakland Compton
75 new advanced 2 new advanced
placement classes. placement classes
California high school exit California high school exit
exam scores increased exam scores stagnate in
by 5% in English, 6% in English, decrease 2% in
math. math.
30-point increase on Significant decrease on
Academic Performance Academic Performance
Index. Index
Problem: Lack of Incentives
Teachers have few real incentives to
perform better than average in Ontario.
The current uniform pay scale ensures
that teachers are paid based on how long
they‘ve taught, not how well they‘ve taught.
Principals are often penalized for good
performance – a top-notch school has to
deal with more bureaucratic red tape.
School Vouchers:
A Real Incentive
Decentralization of funding will allow
principals to reward teachers based on
performance.
A less uniform curriculum will allow
administration to play to the strengths of
the staff.
Permits a greater degree of specialization
and innovation on the part of the teacher.
Supporting Evidence from Sweden
Source: The Fraser Institute
Beginning in 1991 Sweden implemented a
series of school reforms, cumulating in a
school voucher program.
Within two years, National Agency for
Education:
―85 percent of Swedes Value their new school
choice rights‖
―59% of Swedish parents think that schools
work harder when there is school choice.‖
Sweden, Part II
After implementation of school choice,
attendance at independent (privately
operated) schools increased from 1
percent to 6.8%
―Competition from independent schools
improved the academic results of students
in public schools in both statistical and real
terms.‖
Do school vouchers hurt the poor?
Source: CCPA
Theory: Decentralization of funding and
the use of school vouchers will hurt the
poor.
The demolition of location-dependent
enrolment zones would theoretically divide
schools by social class.
CCPA:―The market system produces
winners, but it also requires losers…and
further entrenches the inequities that
already exist for the most disadvantaged
among us‖
Do school vouchers hurt the poor? Part II
Source: Reason Foundation
Fact: The introduction of a market system in
Oakland was beneficial to low income
families.
Oakland students performed 60% better on
API testing than centrally-controlled Compton.
ESL students performed a whopping 120%
better than their counterparts in Compton.
Oakland‘s performance is not an anomaly:
San Franciscan students of all grade levels
consistently perform above the state average.
Hydro
Benefits of Privatization of Hydro
The issues are prioritized
Focus and full commitment into functions,
distribution, communication and other
activities that need attention—efficiency is
brought into the situation with market-
focused managers
Would likely become an oligopoly and so
there would not be issues such as failure
to use inputs.
Private suppliers would be able to produce
efficiently at maximum production rate
Government controlled hydro
Inefficient
As a public supplier, Hydro One must look
out for the interest of the public and
therefore should not exert its power over
the determination of price but this often
creates fails in proper use of inputs.
Being a monopoly, there is no crucial limit
above or below in regards to production
and so it is likely that the company would
operate below potential productivity since
there is no incentive.
Helps to pay off debts
By 1997, Ontario Hydro, the 90 year monopoly in electricity
market, accumulated a debt total of over $35 billion largely
due to overbuilding nuclear power plants
At the time, the only option was to shut down portions of
the plants
It was known that by 1999, privatization was generating
roughly $160 billion (US dollars) in revenue (Meridien, T.
Management Review, 88(6), 16-23
Economists from the World Bank and International
Monetary Fund suggested that privatization was the critical
step in economic reform
Gets rid of stranded debt
“OEFC has stranded debt. Stranded debt is defined as debt
that the successor corporations could not service as
commercial entities in a competitive market. The Province
has stated that it will dedicate certain of its revenue
streams from the restructured electricity industry (e.g.,
payments in lieu of corporate taxes made by Hydro One,
OPG and local distribution utilities) to service stranded debt.
The Province anticipates that these dedicated revenue
streams will service the majority of the stranded debt.”
(1999 Hydro One annual report)
This statement suggests that even if hydro stays regulated
and public, the price of wholesale would still increase and
probably by more and at a higher rate than privatization
would push the price
Reduces the waste of
government treasury
Eliminates losing business from the
government sector that may not be
profitable and in turn, causes the
government to invest in a ―black hole‖
Failed projects and businesses would
not be funded by the treasury
Stimulates competition
The economy would benefit from
the competition created as
businesses
Ready-made plants
This is also a key part of a
successful privatization
Ontario Government Decision
Coal Shut-down
Last four remaining coal mines; Lambton,
Nanticoke, Thunder Bay, and Atikokan.
Provides 20% of Ontario‘s electricity
Two studies conducted after the shut-downs and
both showed that no health or environmental
benefits were offered as a result
Possible lack of power with the shut-downs
The average household in Ontario uses 1000kwh
per month (Independent Electricity System
Operator)
What Went Wrong?
California
The California hydro crisis of 2000-2001
was during the activity of Enron. Although
it was not known at the time how Enron
was ripping off Californians, other hydro
companies were doing the same, but it
was not the main reason why the prices of
electricity sky-rocketed, reaching
$150/MWh. Strategically, the California
government was not prepared.
Consumption of electricity far
exceeded expectation levels
For the decade from 1990-2000 and into
2001, there was rapid growth in the
technology sector which pushed demands
for electricity from 240,000 to over
300,000 gigawatt-hours per year (The
Economist, California’s Power Crisis,” Jan.
20, 2001).
In January 2001, the usage came within
1.5% of full capacity
Weather
Capped and Uncapped prices
The wholesale price was not capped. This,
along with the increase in cost of
production caused generating costs to rise
from $50/MWh to nearly $450/MWh over
the course of three years from 1999-2001
(Time Magazine, Jan, 29, 2001)
At the same time state regulations and
part of the hyperdemocracy that
decreased the competition in hydro thus
limiting the owners to be large companies
like Enron and Reliant Energy along with a
few others.
Ontario Deregulation
Circumstances were considerably better than that
of California, but the Tory government forgot
other aspects of deregulation
Political timing was off: Confidence levels in the
Conservative party dropped 9% to 44% at the
time when the Tory government decided to
deregulate
Companies and hydro related businesses were
not consulted and so no real public feedback was
ever acknowledged
The same essential system was set-up as that in
California. Government put a cap on retail prices
and not wholesale
Alberta Deregulation
Likeall conversions to privatization,
Alberta started off on a rocky road
where prices reflected what
happened to California, but the
government got control and adjusted
to the market as time went on and
progress was made
Passing of new EUA (Electrical Utilities Act) to ensure efficiency in
the development of all utilities in Alberta as well as keep order
among the distributors
New regulation was proposed to create competition and
motivation in the export market.
Alberta‘s major downfall was the fact that it kept on relying on
outer sources of energy imported to the province. This kept the
prices of hydro high at the beginning. Alberta then went on to
invest more into self-reliant. It now has 19 power plants as
opposed to the one they had a dozen years ago
Also, the timing was quite fortunate. As Alberta‘s privatization
emerged, Enron faded off the markets. This is significant due to
the fact that Enron was planning on moving north, into Canada
and with Alberta beginning privatization; it became a solid target
for Enron.
At the time, there were also lower demands and lower economic
activities so the prices did not jump the way the will during
Ontario‘s later attempt
Privatization Practices
Afterwhat happened to Hydro One
back in 2001, it has become difficult
to try to convince Ontario residents
that privatization is way to reform
the economy and become the leading
province in Canada. The debts of
Hydro One are still there and none of
the issues have been completely
resolved at this point.
A successful privatization
Investigations on how the market is
doing and what aspect should be
focused on once hydro is open on the
market and scenario planning
The public must be informed
Do not limit the price for suppliers
Right Regulations (environmental
laws, supply assurance, etc)
Medicare
Identifying the Problem
Public health care is not reaching its full potential
because Ontario’s:
• available revenue trails its health care funding
• health care funding is mismanaged
• system hinders freedom of choice on the part of the patient
• salary/compensation removes incentives
• salary/compensation plan causes a Brain Drain and a money
drain
• health care system cannot be held accountable for its actions,
or lack thereof
Revenue Vs. Spending
On average, provincial government spending on health care
has been growing faster than our ability to pay for it through
public means alone without counter-balancing reductions of
spending on all other responsibilities of government
• In 2006/2007, government health expenses used up 43.1% of
total available revenue in Ontario (The Fraser Institute)
• In 2004, the McGuinty government levied a $2.6 billion Ontario
Health Premium to help shorten wait times, hire more nurses
and doctors and open more beds (Toronto Star)
Mismanagement of Funding
Even with the exorbitant budget, changes still do not occur
because the administration of care is fundamentally
inefficient
• the average patient waited more than 18 weeks in 2007
between seeing family doctor and receiving the treatment they
required (F.I.)
• Public Sector Efficiency: An International Comparison ranked
Canada 10th among the 23 industrialized countries, citing that
Canada wastes about 25% of all public funding (European
Central Bank)
• study recently released by the Fraser Institute in Vancouver,
B.C., compared industrialized countries in the Organization for
Economic Cooperation and Development (OECD) that strive to
provide universal health-care access. Among those countries,
Canada spends most on its system while ranking among the
lowest in such indicators as access to physicians, quality of
medical equipment and key health outcomes (F.I.)
Inefficiency Savages Canadian
Economy
Study, conducted for the Canadian Medical Association by
the Centre for Spatial Economics, found that it cost the
economy $14.8-billion in 2007 to have patients wait longer
than medically recommended for four procedures: joint
replacements, cataract surgery, coronary bypass, MRI
scans
• Time spent waiting robs economy of workers, patients and
caregivers
• leads to increased costs on the health-care system, as patients
needs extra appointments, tests and medication
• medical association says waiting longer than recommended
for joint replacement cost the economy an average of $26,400
per patient, followed by MRIs at $20,000, coronary artery
bypass graft surgery at $19,400 and cataract surgery at
$2,900 (Globe and Mail)
• In 1999, 71 Ontario heart patients died before surgery, 121
were removed from the list permanently because they had
become medically unfit for surgery and 44 left the province to
have their coronary artery bypass graft surgery elsewhere
(Canadian Medical Association Journal, Dr. Richard F. Davies)
Lack of Freedom of Choice:
Brain Drain
Unlike other countries that also provide public health care
such as Sweden, Japan, Australia and France, Canada
outlaws most private health care
• Only allowed to use if the public system is unable to perform
the service you need quickly enough
• If the government provides a medical service, it's illegal for a
Canadian citizen to pay for and get the service privately
• At the same time, to try to keep spending down, the
government chips away at the number and variety of covered
services.
• Ontarians take their business somewhere else (why not keep
the money in Canada?)
Canadian physicians' frustration with their inability to
provide quality and timely care is resulting in a brain drain
• Since doctors in Canada have a salary cap, there is no
incentive to work more here, while in the US, more hours
means more money
• Applying the rules of the market system increases efficiency
(The Seattle Times)
Medical Savings Accounts
demand management tool that gives consumers incentives
to economize on medical expenses
a publicly funded system that incorporates market
dynamics
MSAs can bring efficiency enhancing incentives to the
supply side, creating consumer choice and empowerment
with a public system that meets Medicare‘s key principles
a consumer of medical services wants the best possible
treatment, and it does not matter to the consumer whether
it is provided by a government-managed facility or a
private facility, so long as government pays the bill
Medical Savings Accounts
In its insistence that the system be a public monopoly. In
virtually all other nations, including social democratic
nations like Sweden, the government funds private services
as well as public services
With a public-sector monopoly mandated by law, public-
sector union leaders enjoy enhanced power and a large,
steady income from Medicare‘s dues-paying union members
government would fund an MSA for each Canadian based
on expected medical expenses, as determined by age, sex,
and medical condition
Medical Savings Accounts
Each Canadian would be provided a government-funded
MSA and then would be able to choose among private and
public providers to obtain the treatment that best suited his
or her needs
Consumer and provider incentives are aligned as providers
seek to meet consumer demands for the most effective and
efficient services
current system, neither the provider nor the consumer have
any incentive to avoid waste—and can often benefit from
it—while the distant bill-paying bureaucracy simply does
not have the tools or information to enforce efficiency
not just the bill-paying bureaucracy that suffers: choice and
market dynamics are absent from the system. Patients
have to take what they can get, when they can get it,
regardless of the wait or the quality
Proposed Solution
Immediate reform of Medicare is necessary in order to
prevent a negative impact on the Canadian economy, a
reduction in our global competitiveness and further
degradation of health care standards.
• Ensure current expenditures are spent as effectively as
possible
• Encourage efficient use of health care by requiring patients to
make co-payments for any publicly funded goods or services
they use
• Legalize the right of patients to pay privately for health care
• Create incentives for cost and quality improvements by
permitting for-profit health providers to compete for the
delivery of health services
• Implement the use of Medical Savings Accounts