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Partnership with Provinces and Territories

Ensuring Fairness in Transfers

The Government is keeping the commitment it made, in restoring fiscal balance, to long-term and growing transfer support to provinces and territories. Federal transfer support is now at an unprecedented level: major transfers are currently $49.1 billion, and they will continue to grow. The Canada Health Transfer (CHT), at $22.6 billion in 2008–09, will continue to grow by 6-per-cent a year, providing an increase of $1.4 billion for a total of $24 billion in 2009–10. The Canada Social Transfer (CST), at $10.6 billion in 2008–09, will grow by 3-per-cent a year for a total of $10.9 billion in 2009–10. Equalization will be $14.2 billion in 2009–10. Territorial Formula Financing (TFF) will be $2.5 billion in 2009–10, an increase of $185 million over 2008–09.

Chart 3.5 - Major Federal Transfers Will Continue to Grow

As announced by the Minister of Finance at the November 3, 2008 Federal-Provincial-Territorial Finance Ministers meeting, the Government is taking action to ensure major transfers continue to provide growing support in a way that is sustainable and fair.

Driven largely by higher resource revenues, Equalization has grown by 56 per cent since 2003–04. This rate of growth is clearly not sustainable. The report by the Expert Panel on Equalization (the O’Brien report)—on which the current Equalization program is based—recognized the importance of keeping Equalization growth sustainable, and recommended an approach to achieve this objective.

The Government will make adjustments to the Equalization program consistent with the O’Brien recommendations and within the principle-based structure set out in Budget 2007, which provide for long-term funding growth. Specifically, Equalization will grow in line with the economy. The growth provision will also act as a floor to protect provinces against reductions in overall Equalization.

The growth path will reflect a three-year moving average of nominal gross domestic product (GDP) growth, which will help to ensure stability and predictability for both orders of government while still being responsive to changes in economic conditions.

For 2009–10, the Equalization program will provide a total of $14.2 billion to the provinces, up from $13.5 billion in 2008–09. In order to provide provinces with certainty for their budget planning, they were informed of their Equalization amounts for 2009–10 on November 3, 2008 two months earlier than normal. These payment levels—as well as associated transition payments—will be set out in legislation.

Table 3.9
Year N.L. P.E.I. N.S. N.B. Que. Ont. Man. Sask. Alta. B.C.
  (millions of dollars)
2005–06 1,050 277 1,375 1,348 4,798 1,601 89 590
2006–07 1,016 291 1,443 1,451 5,539 1,709 13 459
2007–08 972 294 1,533 1,477 7,160 1,826 226
2008–09 557 322 1,571 1,584 8,028 2,063
2009–10 465 340 1,571 1,689 8,355 347 2,063
Note: Figures for Newfoundland and Labrador and Nova Scotia include both Equalization and offsets.

The Government is also taking action to ensure the fairness of major transfers. On November 3, it announced that, given Ontario’s entry into Equalization, the fiscal capacity benchmark in the new Equalization program was being set at the average fiscal capacity of the Equalization-receiving provinces. Complementary technical adjustments to ensure fairness in the CHT will also be introduced. All Equalization-receiving provinces, including Ontario, will receive the same per capita CHT cash, and no province with a high fiscal capacity will receive more than the average of the Equalization-receiving provinces, subject to transition protection. This transition protection will ensure that any province with a high fiscal capacity and currently receiving more CHT cash will be protected against real declines in CHT cash from amounts already announced for 2008–09. These adjustments will facilitate a smooth transition to equal per capita CHT cash in 2014–15, as committed to in Budget 2007.

Table 3.10
Canada Health Transfer
  N.L. P.E.I. N.S. N.B. Que. Ont. Man. Sask. Alta. B.C.
  (dollars per capita)
2008–09 713 713 713 713 713 674 713 804 508 725
2009–10 734 734 734 734 734 734 734 822 532 734
  (millions of dollars)
2008–09 362 100 669 533 5,520 8,706 860 816 1,817 3,172
2009–10 372 103 690 550 5,716 9,584 890 832 1,923 3,248

The actions that the Government has taken to restore fiscal balance and ensure long-term, growing transfer support to provinces and territories add to Canada’s fiscal advantage. This long-term, growing support ensures that all provinces and territories have the resources they need to provide essential public services, and contributes to shared national objectives, including health care, post-secondary education and other key components of our social safety net. It also means that all governments are in a position to work together on the current economic challenges.

Working Together to Strengthen Canada’s Economy

In developing its fiscal stimulus plan, the Government consulted with provinces and territories. Most recently, First Ministers agreed at their meeting on January 16, 2009 to work together on a number of important actions to provide stimulus to the Canadian economy. These include:

  • Striking a working group of finance ministers to develop options on access to financing. This is an important step toward ensuring businesses have access to capital to expand and create jobs, and ensuring that Canadians have access to borrowing to meet their needs.
  • Amending the Agreement on Internal Trade to enhance full labour mobility by recognizing, across all jurisdictions, any worker certified for an occupation by a regulatory authority of one province or territory.
  • Taking immediate steps to get shovels in the ground and to flow the money faster for infrastructure projects in the 2009 and 2010 construction seasons.
  • Cutting red tape on infrastructure projects in order to flow the money faster.
  • Accelerating Building Canada infrastructure projects on which provinces and territories are in agreement.
  • Developing a common framework to recognize foreign credentials by September 2009.
  • Identifying new ways to provide effective and complementary responses to workers and the unemployed.

The Government is acting on many of its commitments as part of this budget, including accelerating and augmenting funding for provincial, territorial and municipal infrastructure projects. Building on past investments, total federal funding available for such projects will reach more than $18 billion over the next two years. Provinces, territories, and municipalities will also contribute toward these projects. This represents significant action on the part of all levels of government to support the economy.

The Government is also providing additional support for the construction and renovation of housing. Provinces and territories are being asked to support these investments and provide additional funding. In this way, federal-provincial-territorial support for housing will reach $6.1 billion in 2009–10 and $3.1 billion in 2010–11.

Even as funding to the provinces and territories in these areas is increased to support the economy, the Government remains committed to providing growing and predictable support through its major transfers to provinces and territories, with the CHT and CST growing by 6-per-cent and 3-per-cent a year, respectively, and Equalization growing in line with the overall economy.

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