Report of the Council of the Federation Working Group on Fiscal Arrangements

Assessment of the fiscal impact of the current federal fiscal proposals

The funding parameters for major transfer programs announced by the federal government on December 19th, 2011 will improve the medium and long-term fiscal prospects for the federal government. However, the amount of federal support associated with the announcement has made the provincial/territorial fiscal situation less sustainable and will result in a declining federal share of funding for provincial/territorial health care and other social programs.

To estimate the fiscal impact on provinces and territories, the Working Group on Fiscal Arrangements developed projections of major transfer entitlements based on the December 19th federal announcement and a number of alternative scenarios. See full report for details.

The fiscal impacts of the December 19th announcement will be as a result of:
• The lower CHT growth rate beginning in 2017/18 (from 6% to nominal GDP growth);
• Limited protection being provided for the move to equal per capita CHT cash in 2014/15;
• The extension of the “caps” on the Equalization Program until at least 2018/19.