Morneau set to hear from provinces pushing for more financial help

OTTAWA — The Trudeau Liberals opened the door Monday to changing the way the federal government decides how much financial help it gives cash-strapped provinces, ahead of talks among the country’s finance ministers.

But federal Finance Minister Bill Morneau was clear that any decision will depend on other concerns his provincial and territorial counterparts bring up during a day-long meeting Tuesday.

Already, the federal government has heard objections about how Ottawa calculates the amount of equalization payments for so-called have-not provinces and territories so they can provide similar levels of services at similar levels of taxation as provinces that are better off.

Five provinces will receive equalization in the fiscal year that starts in April. Numbers released Monday just prior to a working dinner among all the ministers laid out almost $20.6 billion in payments to P.E.I., Nova Scotia, New Brunswick, Manitoba, and Quebec, which will receive the lion’s share at almost $13.3 billion. Quebec is by far the most populous of those provinces.

Alberta, Saskatchewan and some other provinces have been angry over how such assistance is calculated, and are pushing for Ottawa to expand a shorter-term federal program — the fiscal stabilization program — set up to help provinces dealing with sudden economic downturns.

The program is easier to change than the more complex equalization program, and amendments could be worth billions to provinces whose finances have been hit by low oil prices. They want the program revised to eliminate a $60-per-person cap on payments and to allow retroactive payments that could be worth billions to Alberta in particular.

Ontario Finance Minister Rod Phillips confirmed that provincial and territorial ministers are coming to the meeting with a unanimous proposal for boosting the fiscal stabilization program, arrived at last week during a conference call organized by his Saskatchewan counterpart, Donna Harpauer.

“I think we have something to put forward that’s a great starting point. It reflects particularly the emphasis that Alberta and Saskatchewan and Newfoundland and Labrador have brought forward,” Phillips said prior to the working dinner.

He wouldn’t go into details but said it “reflects the complexity of Canada’s economy today.” While the proposed changes would immediately benefit the three oil-producing provinces, Phillips noted that other provinces could find themselves in sudden need of federal aid in future.

“I think we have to look at this as a nation-building opportunity and something that all the provinces should be supporting because we need to be aware those challenges could be our’s tomorrow.”

For his part, Morneau noted that he agreed to put the matter on the agenda for Tuesday’s meeting and that his lone one-on-one meeting since the election has been with Alberta’s Finance Minister Travis Toews.

“We’ve been really clear that this is a program that hasn’t been reviewed for a long time, and that we’re open to considering that,” Morneau said Monday after unveiling an update on the state of federal finances.

“But until I hear what the views are — the different views from different parts of the country — and until I hear what other issues are on people’s minds, I can’t evaluate what actually we should do in that regard.”

While finance ministers could make progress on the issue Tuesday, a final resolution might have to await a first ministers’ meeting that Prime Minister Justin Trudeau has promised to hold early in the new year.

Quebec Finance Minister Eric Girard said he doesn’t expect a deal to be reached on Tuesday.

Other issues on the minds of provincial and territorial finance ministers include the amount of money the federal government transfers to them to pay for health care. The provinces are looking for annual increases of 5.2 per cent, up from the current three per cent.

Morneau has an issue of his own he wants to raise: universal pharmacare. However, at a recent meeting of their own, premiers expressed varying degrees of caution about going down that road when, in their view, basic health care needs are not being met.

The federal spending update released Monday shows that payments to provinces and territories are to increase from $76.3 billion this fiscal year, which ends in March 2020, to $81.6 billion in the ensuing 12 months and ultimately to $91 billion by March 2025.

The largest transfers next year will be $26 billion to Quebec, including the equalization payments, and $22.1 billion to Ontario.

Transfers overall to provinces will stay flat as a percentage of the economy. The Finance Department projected that transfers will remain at 3.3 per cent of the country’s economic output in each of the next five years.

Morneau called this round of meetings a first step in revamping the financial relationship between federal and provincial governments.

“It’s not that we’re not going to get to a conclusion. It’s that the conclusion needs to first have an openness to listen, which is what we’re doing.”

Morneau’s fiscal update also showed that the federal deficit will be billions of dollars bigger than previously projected over the coming years.

Among the hits to this year’s bottom line was a $1.9-billion payment to Newfoundland and Labrador as part of deal to give the province resource revenues from the Hibernia oil operation more than 300 kilometres off the coast of St. John’s. Payments will continue through to 2056, but the largest portion of the costs land this year before plummeting to $36 million next year and continuing to decline in the ensuing years.

The Liberals are also writing off $27 million in three-year-old overpayments to Alberta and Newfoundland and Labrador as part of the fiscal stabilization program.

This report by The Canadian Press was first published on Dec. 16, 2019.

The Canadian Press

Alberta fiscal plan

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