This is a tale of what happens when governments attempt to compensate people for losses incurred in the context of a disaster. When governments do that, the rich get compensated and the poor lose out. The rich own more and the poor own less. And the poor pay less for things like shelter and food in the first instance.
This is a cautionary tale that can instruct governments to compensate based on need and income as opposed to losses and how much they pay for things
Listen to my story.
On May 31, 1985, a swarm of tornadoes broke out across southern Ontario. The one that hit Barrie was an almost ‘unheard of’ Category 5 while Category 2’s hit Orangeville, Dundalk and a few other towns especially along Lake Huron and Georgian Bay.
In the weeks after, the Ontario government put together a team of public servants to design a compensation package. I was there for GWA, FBA and GAINS, the predecessors of Ontario Works (OW) and Ontario Disability Support Program (ODSP).
My orders were to ensure all payments were exempted pure and simple. My involvement in this was thought by Ministry executives to comprise maybe a half day’s work and a bit of monitoring but nothing I couldn’t do off the side of my desk as an operational policy manager for FBA and GWA.
What a gross understatement.
Among other things, I had to draft directives for staff to ‘stand down’ on forcing people to apply for the compensation (that is the default – as it is now) and then assuring that they were going to be able to keep it if they got it.
What the legal team put together with the direction of a new government (that was formed just 26 days after the tornadoes) was an ‘actual property loss compensation model’ which has parallels to providing assistance with actual rents in the COVID19 crisis.
We pored through dozens of applications for compensation for days and one of the most public cases was a fellow whose child was killed in one of the tornados. He was receiving what we would now call ODSP.
We analyzed his expenses. His ODSP dropped by more than 25%. As a result, he could no longer meet his expenses because his child was no longer in the family.
However, we could not include his ODSP payment loss as a property loss (it was a benefit loss) and so he was stuck with the new ODSP profile as a smaller family.
When local people started up a fund for him (he was in the newspapers a lot), we had to ensure that the local office did not charge the fund as either assets or income. The fund, of course, was not part of the government’s compensation package and it was therefore not immediately exempt.
We had to squirrel away the payments under a clause that provided an exemption of the fund as ‘deemed payments for the health and well-being of the recipient’ and this had to be approved by a doctor.
We got a doctor’s signature real quick.
When we did the assessment of this man’s property loss, we discovered that almost everything he owned of value was borrowed or rented and most of the rest of his assets were not worth much money. It was mostly worn out possessions that that had become more broken. I think he may have gotten about $500 as we tortured the compensation rules to come up with something for him. (These funds were later ‘correctly’ seen as improperly paid in an audit of the compensation.)
In the end, the fellow had to move his family because of damage but also had to move since his social assistance was much lower.
Fast forward to today.
I cannot stop thinking of the Barrie Tornado committee when, as experts, we go back and forth on ‘actual rent’ vs. a measure of ‘median rents’ for a recommended housing benefit.
The reason I am in the corner of a median vs. actual benchmark is that, like the Barrie Tornado, COVID19 is a natural disaster and we need to get money into the pockets of people who have suffered and to help them stay safe in the immediate future.
If we compensate on the basis of actual rent, we adhere to a compensation model which, in theory, is both accurate and fair. The most money will go to people with the highest rents where the rent is the highest percent of overall income. Those with extremely low rents are unlikely to get compensated. Why should they? They don’t need it as their rents are low and often may be a low percentage of their income.
One might well say: “What is wrong with that?” Why should someone who is doing OK according to the compensation model be compensated?
I am hoping with the use of the ‘Barrie Tornado parable’, we should all be able to see what is wrong with actual rent or price-based compensation models in a natural disaster.
And at least with a reasonable income test on the back end, we won’t have the result we had with the Barrie Tornado.
I recall a fellow who owned a marina and who lost many boats walked away with one of the largest cheques. Not that he shouldn’t have gotten a big cheque but the guy who lost a child, 25% of his income and almost lost access to a local fund to help him out, ended up with $500, later seen as improperly paid out.
I would have given anything to have been able to change the property compensation model we were handed by the government. Poor people lose little property but do lose access to programs. Rich people lose property and don’t qualify for programs that disallow wealth. Those two simple facts mean that compensation programs must always adjust their designs to meet need in order to work well.