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Inside Stats NZ’s gaping money hole

The Government is readying tens of millions of dollars to cover a Stats NZ budget blowout. David Williams reports.

In a series of meetings in February and March, Stats NZ’s top brass briefed Minister James Shaw about the looming financial hole.

The message from executives, including Government Statistician Liz MacPherson, was that it needed more money. A lot more.

The beleaguered department, under pressure after bungling last year’s census, had already filled a blowout in “baseline” spending by funnelling $6 million of insurance payouts and $4.5 million capital spending to its operational side. That money was dubbed “unsustainable revenue”.

Stats NZ had tried, but failed, to increase external funding and was preparing to axe “several lowest priority products”. Plus, last year’s chaotic census meant it had already spent the money it had earmarked for the next financial year.

“A combination of time-limited funding ending, rising costs, and a growing role for Stats NZ means that it faces a minimum funding gap of $20 million (15 percent) in 2019/20, and $33 million-$43 million in subsequent years,” says an aide memoire for Shaw, dated February 27, released to Newsroom under the Official Information Act.

The purse strings are already opening. The “Vote Statistics” document from this year’s Budget apportions an extra $16 million this financial year, starting on July 1, “to ensure that Statistics New Zealand can maintain current products and services by covering a growing shortfall in operating expenditure due to cost and demand pressures and a declining nominal baseline”. That figure is estimated to rise to $35 million in 2020/21, $40 million the following year, and $46 million in 2022/23.

Last year, MacPherson was re-confirmed in her role until August 2021. But before her term is up she’s sure to face tough questions over her financial management, and, once the findings of an independent review are made public, the mismanaged census.

Billions at stake

The five-yearly survey is used to determine electoral boundaries, and distribute billions of dollars dollars for Government spending on health, education and roads. The 2018 edition was to be a landmark “digital-first” census, pushing people to the official website through posted online codes, which would limit spending on paper forms and field staff.

But the move backfired.

In the months leading up to census day, March 6 last year, there was a paper form shortfall. Addresses were missed from its internal database. People had trouble reaching the call centre.

So-called non-private dwellings, like hotels and rest homes, ordered census forms but they didn’t arrive in time. About 3 percent of households didn’t have an online code by census night.

That maelstrom of problems swirled into a low response rate that led Stats NZ to twice delay the release of census data, reduce the information it planned to put out, and launch an independent inquiry.

Those are huge headaches for a project with a $126 million budget.

In April of this year, as Shaw considered Stats NZ’s Budget bid, the census data scandal blew up again. MacPherson was threatened with contempt for not providing information about the number of partial responses to a select committee.

She gave in, eventually, revealing that five percent of responses were only partially completed, meaning one-in-seven people, or about 700,000 people, didn’t fully complete the census. That level of census under-count was described by one academic as “disastrous”.

“Stats NZ has exhausted options to self-manage financial risk other than stopping work.” – Briefing to James Shaw

At the last post-Cabinet press briefing in April, Statistics Minister Shaw took the podium with Prime Minister Jacinda Ardern to announce a $16 million budget boost for Stats NZ – $5.8 million to cover a census 2018 budget shortfall and $10.4 million to prepare for the next census, in 2023.

Those figures are also mentioned in Shaw’s February 27 briefing, large parts of which are redacted. The most significant factors for Stats NZ’s budget “hump” are listed as “remuneration, IT as a service, and rent”. These costs are described as “non-discretionary”.

As part of the pre-Budget discussions, Stats NZ offers to try and earn more, and cut its cloth. A “key assumption” is the department increasing external revenue by $5 million, while noting “increasing third-party funding is proving difficult”.

It then tries to have a bob each way. On one side, Stats NZ says its proposed budget for the coming financial year is “constrained but achievable”, thanks to “organisational priorities and careful financial management”. But it adds: “Stats NZ has exhausted options to self-manage financial risk other than stopping work.”

In his response to Newsroom’s OIA request, Shaw says: “By 18 March, Stats NZ had received an indication of a likely level of funding, so further discussion on options to meet a continued gap were also discussed – including the intended cost recovery for third party products, inability to do so, and thus the expectation and eventual need to cease products.”

Surveys for the chop

The February aide-memoire to Shaw lists 10 “products” for the chopping block, after unsuccessfully asking for more money to produce them. They are: Research and development in New Zealand; business operations survey (A, B, C); regional gross domestic product; tourism satellite account; cruise survey; New Zealand energy use survey; internet service provider survey; screen industry survey; accommodation occupancy survey; and land/property transfers.

In June, Stats NZ announced it was cutting four surveys – the monthly accommodation survey, energy use, screen industry, and internet service providers. (The axe hovers over the other six surveys, with Stats NZ telling Shaw it’ll stop these products “over the course of the next two years if agencies do not fund”.)

The Stats NZ press release explaining why it was cutting the quartet of surveys blamed “significant cost pressures”. Deputy Government Statistician Denise McGregor – the former head of the census – added: “Government agencies regularly look at how taxpayers’ money is spent.”

In the background, however, there was clearly an arm-wrestle between government agencies over cost. Tourism Industry Aotearoa boss Chris Roberts told Stuff that the Business Ministry (MBIE) refused to pay about $2 million, a hike of $1.5 million, for the accommodation survey to be produced.

A matter of priorities

An appendix document to Shaw’s February briefing raises the prospect that, without extra money, some Government priorities – surveys on social statistics, child poverty, and the household labour force survey – might have to stop.

Stats NZ, which employs more than 900 people, seems keen to cut surveys rather than staff. It says budget constraints “would limit our ability to ensure remuneration kept pace with the market, and Stats NZ would lose capability”.

(For the year ended June 30, 2018, Stats NZ’s personnel costs were $115 million, up from $83 million the year before. The census accounted for 81 percent of the increase. This year’s estimate, contained in the last annual report, is for an $89 million personnel bill.)

One way to raise more money, Stats NZ suggests, is to start charging a “value-add service” for use of its so-called integrated data infrastructure, or IDI. That’s data used by government agencies, researchers and academics to better understand societal issues. A quick search reveals research topics using IDI such as “causes and consequences of criminal activities”, “child obesity prevalence”, and “predicting suicide and self-harm risk”.

Substantial increases in the use of IDI would require “more aggressive charging”, Stats NZ tells Shaw. In fact, the appendix says forecasts of increased Stats NZ revenues rely on charging more for IDI.

After its clash with MBIE over the accommodation survey, you’ve got to wonder how much success Stats NZ will have in demanding other agencies and universities pay for the data.

These budget figures are just a fore-runner, of course, to the next census cycle. Beyond the money announced in April, there is nothing earmarked in the budget estimates for the 2023 census. Its total estimated cost is between $120 million and $150 million.

Given its financial track record, it would be fair to ask if Stats NZ is capable of delivering the project within the stated budget.

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