CCA Bulletin 7/10

March 4, 2010

2010 Federal Budget: The Action Plan Winding Down,

but Administrative Reform Ramping Up

Executive Summary

The 2010 Budget includes stable funding to arts and culture with no cuts, but also yields no new investments into the creative economy. The CCA sees no investment towards cultural infrastructure, or funds for promotion abroad and audience development. It is encouraging that charities are given more flexible means to conduct business, and research granting associations will have an increased ability to fund higher education within the knowledge economy. Moving forward, some concerns include administrative reforms, freezes on departmental operating budgets, and changes to strategic reviews. These measures may not be viewed as cuts at the moment, but may lead to financial difficulties for the arts sector down the road.

Just the Facts

After an uncharacteristically long Speech from the Throne yesterday, the Hon. Minister of Finance, James Flaherty tabled the Federal Budget for 2010 titled: Leading the Way on jobs and Growth. The government returned to Parliament yesterday after a two-month long prorogation, taken to recalibrate the agenda. Today, with the Main Estimates for 2010-2011 in hand, the CCA examines how the 2010 Federal Budget will impact Canada’s arts and culture sector.

To begin, there is no mention of arts in the 2010 Federal Budget. The overarching theme of the Budget places an emphasis on winding down the second year of Canada’s Economic Action Plan, and preparing for frugal spending in years to come – a total of $17.6 billion in savings over the next five years. In the following analysis the CCA will outline how government spending will impact the ability of programs to stabilize and nurture the arts sector and the creative economy.

Budget 2010

Though arts were absent, we did see culture mentioned in today’s Budget, where generalized spending measures were mentioned to support industries and communities. “In 2010–11, the Government will provide $1.3 billion in support to affected sectors, including forestry, agriculture, small business, tourism, shipbuilding and culture. These investments will help to maintain and create jobs across the country.” Unfortunately, the budget does not go into detail on how funding for Canadian culture will be addressed, nor is arts or culture mentioned under the purview of the Department of Industry.

As we saw yesterday in the Speech from the Throne, this government will seek to advance a digital economy strategy. The “Government will develop a Digital Economy Strategy that will enable the ICT sector to create new products and services, accelerate the adoption of digital technologies, and contribute to improved cyber security practices by industry and consumers.” It is interesting that innovation is continually mentioned in the 2010 Federal Budget; however, there is no mention of the impact made by innovative artistic producers within Canada’s creative economy.

In addition to the digital economy strategy, the CCA also previously mentioned increased competition and foreign investment in telecommunications. With the full Budget in hand, it appears that this will only affect foreign ownership of Canadian satellites and should not, at present, impact the production or distribution of content by Canadian creators. The CCA will continue to keep a watchful eye over this issue.

Some good news for the arts and culture sector is included in the proposal of reforms to the disbursement quota for charities. Until now, quotas were intended to ensure that a significant portion of a registered charity's resources is devoted to its charitable purposes. However, with unpredictable donations and fiscal activities, this led to much uncertainty and instability for Canada’s charities.

“Budget 2010 proposes to eliminate all disbursement quota requirements except those related to the requirement to annually disburse a minimum amount of investments and other assets not used directly in a charity's operations. This requirement is being updated to provide charitable organizations a greater ability to maintain reserves to deal with contingencies. The reformed disbursement quota rules will apply to charities for fiscal years ending on or after March 4, 2010.”

Also within the realm of culture, Budget 2010 will provide $1 million per year (over two years) towards the Community War Memorial Program to partner with communities across our country who wish to build memorials. The CCA hopes that this program will contribute to the commissioning of works by Canadian artists and creative producers.

Budget 2010: Tell me more

The 2010 Budget is very clear that the goal is to return to a balanced budget. There are certain strategies being taken which may affect programs, grants, and contributions within the realms of arts, culture, and heritage.

This “exit strategy” will wind down the Economic Action Plan and introduce other measures to curb governmental spending. Some telling themes include a move from public spending to private and corporate spending: “The decision to phase out the stimulus measures as planned reflects the Government's belief that, over the long term, the private sector is and should be the primary source of jobs and growth. Governments have an important role to play in creating the right conditions for Canadians and businesses to thrive.”

This theme is continued by an emphasis on containing the administrative costs of government.“For 2010–11, departmental budgets will not be increased to fund the 1.5-per-cent increase in annual wages for the federal public administration. Employees will continue to see their wages increase as set out in collective agreements and the Expenditure Restraint Act, which is in effect through 2011. However, departments will be required to reallocate from the remainder of their operating budgets to fund these increases. For 2011–12 and 2012–13, operating budgets of departments, as appropriated by Parliament, will be frozen at 2010–11 levels. The Government expects that other federal organizations, for which expenses are not appropriated by Parliament (for example, enterprise Crown corporations), will follow suit and freeze their operating expenses.”

In addition to freezing departmental operating budgets to their 2010-2011 funding levels, there will be a continued review process for government operations. The new piece of information here is that in the past, when programs were asked to assess and identify 5% of their budget which was achieving lowest priorities and lowest performances, those departments were also asked to suggest a course of reinvestment for the identified funds. Going forward, “To maximize savings in future strategic reviews, departments will no longer be asked as a matter of course to suggest reinvestments of strategic review savings.”

The National Film Board of Canada, Telefilm, CBC, and the Canada Council for the Arts were all recently subject to strategic review of their direct program spending. However, the CCA is pleased to report that no reallocations were necessary as programs delivered by these organizations are aligned with the priorities of Canadians. The CCA hopes that in the next four years these programs will be exempt from review so they can continue to fulfill their mandates to all Canadians.

As well, the Budget notes that the “funding provided to organizations is tied to furthering government priorities and achieving results for Canadians.” The CCA will continue to watch this trend and where 5% of operating budgets will be moving? We will pursue the question of whether these funds will be re-allocated to consolidated revenue.

In the 2010-2011 Main Estimates, we see that Operating Expenditures for the Department of Canadian Heritage have gone from $265,654,000 in 2009-2010 to $216,811,000 in 2010-2011. As well, grants and contributions went from $959,770,000 in 2009-2010 to $901,281,000 in 2010-2011. However, the Estimates here do not take into account measures announced in Budget 2010 or expected adjustments to fund cost pressures. With the increase in annual wages for federal public administration, programs under a 5% strategic review, and a freeze on departmental budgets, it is apparent that arts and culture spending will be seeing a pinch as the Action Plan comes to an end.

The 2010 Budget sees no cuts to arts and culture with stable funding levels, but also sees no new investments into the creative economy. The CCA sees no investment towards cultural infrastructure, or funds for promotion abroad and audience development. It is encouraging that charities are given more flexible means to conduct business, and research granting associations will have an increased ability to fund higher education within the knowledge economy. Moving forward, some concerns include administrative reforms, freezes on departmental budgets, and changes to strategic reviews. These measures may not be viewed as cuts at the moment, but may lead to financial difficulties for the arts sector down the road.

A Fifth Report to Canadians

Included in the 2010 Budget document was the government’s fifth fiscal report to Canadians. Some interesting elements in the arts and culture sphere include:

The re-appearance of $25 million for Canada Prizes for Arts and Creativity in 2010-2011
In 2009–10, the Canada Cultural Spaces Fund committed $27 million of a total of $30 million in cultural infrastructure funding and committed $24 million of the 2010–11 allocation of $30 million, supporting 96 cultural infrastructure projects across Canada.
As of March 2010, the Canada Arts Training Fund has funded nine projects worth $5 million to support the highest-calibre institutions in Canada to train the most talented emerging artists for professional careers.
A $15-million investment in 2009–10 provided Canadians with continued access to more than 1,000 Canadian magazines and community newspapers.
In 2009–10, a $100-million investment in the Canadian Television Fund is supporting projects, in partnership with the broadcasting industry, to produce high-quality, distinctively Canadian television programs.

What can I do?

Read the 2010 Federal Budget and comment on our blog on how you think this Budget will affect Canada’s arts, culture, and heritage sector.