The $40 Billion Child Care Plan

(continued from this post, and this one)

After discussing the Conservative "child care plan", the last post left off with the question: If we accept, for the sake of argument, that we want the federal government to have a child care program, what form should it take and how large a financial commitment should it be?

First of all, I don't think anyone is recommending that the Federal
government get into the business of building child care centres or running child care programs itself. And if they are, they're crazy, so let's rule that out.

So that leaves us with the question of whether funding should be given directly to parents or given to the provinces.

My personal preference would be to approach this the same way we approach other social services delivered by the provinces but partially funded by the federal government. That is, the federal government would take a look at spending levels across the country, commit to providing funding equivalent to, say, 25% of what the average province spends, create a targeted Child Care transfer, and then perhaps attach a few conditions to this transfer.

One condition for sure would be to make sure that provinces aren't just taking the federal child care money and then cutting back what they spend on child care and using the money freed up for tax cuts, or the health system or whatever. The other conditions could set certain standards that provinces would have to maintain in order to keep their funding.

The one advantage of giving money to parents directly would be that there is no risk of the provinces 'clawing back' the money the federal government is trying to direct towards child care but, given the lack of federal expertise in child care, I don't think it wise for them to do an 'end-run' around the provinces to fund child care directly¹.

As I understand it (and details are hard to come by), the Liberals $40 billion child care plan involves giving money to the provinces with some strings attached. What? You haven't heard about the $40 billion plan? Well initially, it was $5 billion for 5 years, with the annual amount rising each year until it hit $1.2 billion / year but when the Conservatives announced a (not really) child care plan worth $10.9 billion over 5 years the Liberals got $$$ envy and upped their offer to $11B over 10 years adding 5 more years at $1.2 billion each. So, to avoid looking foolish in case the plan is extended further, I have simply assumed a Liberal plan of $1.2B/year, and carried it forward to infinity, discounting it 3% every year to adjust for inflation. When you do the math, the net present value of the plan works out to $40 Billion. So the $40 billion plan it is. But I digress.

With Paul Martin's characteristic (and unwise in my opinion) asymmetrical federalism approach, the Liberals are crafting individual deals with each province to give them money for Child Care. Here's a quote from a summary of the agreement in principle between Ontario and the Federal government back in May:

"Martin, Federal Social Development Minister Ken Dryden and Ontario Children and Youth Services Minister Marie Bountrogianni were at a Hamilton day care on Friday to present the $1.9-billion agreement.

"Today is a day that shows why politics matter," Dryden said.

The deal follows similar agreements with Saskatchewan and Manitoba last week.

Among the remaining provinces, Quebec and Alberta have so far opted out of the new day-care scheme, saying they don't want the federal government to dictate to them how to spend the money. But Martin said that the agreement moved the country "significantly closer to fulfilling a shared vision for early learning and child care."

Under Friday's deal, the federal government would transfer an additional $272 million to Ontario in 2005, $253 million in 2006 and about $450 million annually for the following three years.

Bountrogianni said the money would make a huge difference in day-care spending for Ontario.

Bountrogianni said the federal funds would be spent on phase one of the province's Best Start Program.

That initiative would subsidize before- and after-school care for junior and senior kindergarten students.

So it seems like the Liberals are trying at least somewhat to dictate how the money is spent (based on the reactions from Alberta and Quebec), but I don't see any details on what it is they might be dictating, so it's hard to comment one way or another, other than to note that the plan is lacking a lot in the transparency department.

So besides trying to ensure that the provinces don't just take the money and spend it on something else entirely (like tax cuts or health care) what conditions might the Federal government be placing on the money given to the provinces. What conditions, if any, should they place on the money?

This question is a reminder that, through all I've written on child care so far, I haven't really addressed the question of what a good government child care program would look like. Mostly, I've just been talking generally about the concept of federal involvement in an area of provincial jurisdiction. So the time has come to look at specifics of child care programs, using the existing provincial programs as examples to see what makes sense and what doesn't.


Next post, that is.

To be continued...


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¹I realize that this isn't a exactly a watertight argument, but regardless of whether the Feds are giving money to parents directly or giving money to the provinces with conditions, they will face the same questions about what kind of system they are trying to create with that money, so it is not really a crucial point anyway.