Canadians are generous, but government spending on charities is not

TheGlobeandMail.com – ROB/Economy/Economic Insight
Feb. 10, 2017.   ANDREW JACKSON

Every year, just before Christmas, the Fraser Institute publishes a “Generosity Index,” which compares charitable giving in Canada and the United States. The widely-publicized message in 2016 was that Canadians are relative tightwads, with just 21.3 per cent of us making tax-deductible charitable donations in 2014, compared with 23.5 per cent of Americans, and total donations amounting to just 0.6 per cent of Canadian family incomes compared with 1.2 per cent in the United States.

Consistent with their philosophy of small government and individual responsibility, the Fraser Institute seem to think a low “scope of government” and lower after-tax costs of donating help underpin greater generosity and better-funded charities south of the border. The reality is much more complex.

While we can all applaud individual generosity, the data used by the Fraser Institute are not the whole picture. Statistics Canada’s General Social Survey reports that 82 per cent of Canadians made donations averaging $531 in 2013, for a total of $12.8-billion. Many of us appear to make cumulatively significant small donations which are not reported for tax purposes.

In addition, 44 per cent of Canadians donated volunteer time equal to one million full-time jobs to charitable and non-profit organizations, hardly a sign that our better instincts to care and to share have been suppressed by “big government.”

More important, public spending is actually far more critical to the health of the charitable and not-for-profit sector than charitable donations. Canadian charities delivering community-based social, health, educational, housing, cultural, recreational and immigrant settlement services among others often rely upon strong partnerships with governments.

Because of the unfortunate discontinuation of a regular survey of not-for-profit sector by Statistics Canada, the data are now a decade old. But we know that, in 2007, the “core” charitable and not-for-profit sector (a category which excludes publicly-funded hospitals and postsecondary educational institutions) was surprisingly large in scale, accounting for 3.3 per cent of GDP and 1.3 million paid jobs.

Donations from households accounted for just 12 per cent of charity revenues, much less than the 20 per cent of revenues received from governments (mainly provincial governments) as grants. Almost one half of revenues (45.6 per cent) came from sales of goods and services, with the remainder coming from investments and memberships.

Many governments choose to supply social and community services by awarding contracts for services to charities and not-for-profit agencies. Once this is taken into account, it is clear that public support is much more crucial to the operations and financial health of the charitable sector than are individual donors.

A comprehensive study by the Canadian Council on Social Development for the Voluntary Sector Initiative, Funding Matters, found the key financial issue for not-for-profits as far back as 2003 was not a lack of donations, but government cuts, especially to core funding, and a shift to competitive tendering.

When it comes to delivery of services such as home care for the elderly, community support for persons with disabilities and child care, charities and not-for-profits have been increasingly forced to compete for contracts with commercial providers, putting downward pressures on already-low wages for paid employees and on the quality of services to clients. In effect, governments have cut social and health services costs by squeezing charities and forcing them to do more with less.

The key problem for charities is not a decline in the generosity of individual Canadians, which has been quite steady in the context of a soft economy, but the general retrenchment of government social spending. In the early 2000s, the Liberal government initiated the Voluntary Sector Initiative to build closer links with the charitable and not-for-profit sector on the grounds that it is well placed to assess and meet the needs of clients and communities. While this left little in the way of an enduring legacy, the Trudeau government has promised to develop a “social innovation” strategy and to increase investment in “social infrastructure.”

Charitable donations are to be encouraged. But a strong charitable and not-for-profit sector also requires strong public financial support.

http://www.theglobeandmail.com/report-on-business/economy/economic-insight/canadians-are-generous-but-government-spending-on-charities-is-not/article33988576/

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