Federal Finance Minister Bill Morneau said his department will look at ways to change how Ottawa hands out money to provinces in need, in a Dec. 17, 2019 story. (Photo by THE CANADIAN PRESS)

Wheels in motion to rework payments to budget-strained provinces, Morneau says

OTTAWA — Federal Finance Minister Bill Morneau is ordering his officials to come up with ways to change how Ottawa hands out money to cash-starved provinces — hinting changes could be coming soon — but left the details to be determined in 2020.

Resource-rich provinces like Alberta and Saskatchewan had put proposals on the table at Tuesday’s finance ministers meeting to expand the fiscal stabilization program that helps provinces and territories facing sudden holes in their budgets, such as those created by cratering oil prices.

The program, which has not changed since 1995, provides help to provinces facing a year-over-year decline in non-resource revenues, but the money available to eligible provinces is capped at just $60 per resident. The provinces called for changes to the program’s spending caps, lowering qualifying thresholds for different types of revenue, and retroactive payments for the last five years.

Morneau said the Finance Department will analyze the various options and come back with suggestions for potential changes in January.

But he also suggested that whatever his officials say will be a step in a longer path towards updating the program.

“We have multiple demands on the federal government as every one of the finance ministers behind me have as well. We talked about that reality today, we talked about the reality that we all face fiscal constraints,” Morneau said at a closing news conference.

“That analysis will be done, it will be done in a fair way, and then we’ll have to take a close look at how we respond. That is the challenge that we all face in dealing with issues that are important to Canadians.”

Pushing things off to next year, possibly for when Prime Minister Justin Trudeau meets with the country’s premiers, was a recurring theme as Morneau and his fellow finance ministers emerged from a day-long meeting.

The group called conversations robust and frank, saying Morneau was open to provincial suggestions.

The ministers also expressed optimism the federal Liberals would help resource-rich provinces relatively soon.

“I get a sense from the federal minister that they’re open to our proposal,” said Tom Osborne, Newfoundland and Labrador’s finance minister, adding a moment later: “I am absolutely certain we will see a refined program.”

The fiscal stabilization 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.

“Time will tell. I can’t overemphasize the fact that timing is important here,” said Alberta Finance Minister Travis Toews.

Pushing things off to 2020 also echoed in talk about increased payments to widows and widowers through the Canada Pension Plan, which the Liberals promised in the fall campaign, and on increasing the money Ottawa provides for health care — a concern for ministers from Manitoba, Prince Edward Island and Quebec.

The provinces want annual funding increases of 5.2 per cent, while the Liberals have baked an annual three-per-cent bump into their fiscal forecasts.

Morneau noted the existing deal, which was hammered out in 2017, was meant to be a decade-long agreement.

The Liberals also promised to create a national pharmacare program, but some provinces have been pressing Ottawa to fix the existing system first.

“We acknowledge that is an area for discussion, but our priority is around the funding of the core health care system,” said Ontario Finance Minister Rod Phillips.

Territorial finance ministers raised the issue of flexible infrastructure funding to help adapt to climate change and bridge a gap for roads and internet connectivity, said Caroline Wawzonek, finance minister for Northwest Territories.

None of those going into the meeting Tuesday morning expressed strong concerns about the federal government’s ballooning budget deficits, saying they believe Ottawa has more room to manoeuvre.

Figures released Monday showed the federal deficit is slated to hit $26.6 billion this fiscal year, up from last spring’s projection of $19.8 billion.

This report by The Canadian Press was first published Dec. 17, 2019.

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