To merge or not to merge

Depending on the situation it is facing, government will argue it is a good idea either to centralize or decentralize delivery of services.

Concerned about regional political disparities? Then decentralize, because nothing says 'we care' like the opening of a new government office. Worried about budget deficits? Why not re-centralize as an austerity measure? The problem is that after a few cycles of the 'merge-decentralize' equation, it's hard to know which is actually a better value for the taxpayer. Decentralizing may be a great way to share government largesse, but what if it's not cost-effective? On the other hand, even if re-centralizing is less costly, perhaps it is not as effective at delivering services.

This is the dilemma facing anyone trying to figure out Manitoba's 2012-13 provincial budget, where Finance Minister Stan Struthers came up with two austerity measures that involve a merger or re-centralization.

First, the province has decided to reduce the number of regional health authorities (RHA) from 11 to just five. Next was a decision to merge the Manitoba Liquor Control Commission and Manitoba Lotteries Corp. to form one super Crown: The Manitoba Liquor and Lotteries Corp. (An underwhelming name to be sure, especially with names like "Manitoba Vice" still available. But I digress.)

The province has been studying the number of RHAs for some time, and so the decision to rationalize is not that surprising. The liquor-lotteries merger, however, is more of a surprise. It seems to be an 11th-hour idea that only arose as part of deficit-reducing deliberations. There is some logic to having just one inspector checking both video lottery terminals and liquor-law violations, but this is not something that would have been considered if the province didn't need to cut, or be seen to be cutting.

After all, this is Manitoba's version of an austerity budget. Spending is down nearly four per cent over last year, although last year was abnormally high thanks to the costs of flood-fighting. Spending is not going down in core service areas -- health, education, justice, family services -- but it is in nearly a dozen other departments. There are some tax increases (gasoline, tobacco, investment dividends) and a few modest tax cuts (seniors' tax credit, a boost to Basic Personal Exemption).

This is not the kind of austerity budget tabled last month by the federal Conservative government, which cut billions of dollars and thousands of jobs. This budget still increases spending, albeit well below past levels.

Struthers might make a stronger case as a spendthrift if we knew more about the full impact of the RHA amalgamation and the Crown merger. To date, there aren't many details.

The liquor-lotteries merger will save about $300,000 from the move to a single CEO and board of directors. Other savings are expected to come as the merger proceeds. In the case of the RHAs, 30 to 35 executives are expected to lose their jobs, and six RHA boards will cease to exist, for a total savings of $10 million over three years. It's pretty clear those are spitball estimates for both initiatives.

Eliminating nearly half of the RHAs will certainly have a deeper impact. That doesn't necessarily mean layoffs, of course. But it will undoubtedly mean eliminating positions, and that's not likely to go over well with public-sector unions. Similarly, with the liquor-lotteries merger, Struthers indicated this would mostly impact senior level executives. OK. But it seems entirely possible that it will, at some point, affect the middle and lower levels as well. Although the merger starts right away, it might be years before we know the net impact of this decision.

And that's the frustrating aspect of all this merging and amalgamating. It is being sold to us as a cost-saving measure, but when you start to look at the complexity of the task, and the costs associated with having one super Crown or fewer RHAs, you begin to wonder if this is really about saving money, or being seen to save.

There is nothing insignificant about either of these decisions. They will have profound impacts on the delivery of health services, the provision of liquor and the management of gaming. And yet, it will take some time before we know if it really has anything to do with saving money.

For now, mergers are the way to go. At least until next year's budget.

dan.lett@freepress.mb.ca

Republished from the Winnipeg Free Press print edition April 18, 2012 A1