41st Annual Premiers’ Conference

WINNIPEG, AUGUST 11, 2000 --Premiers remain very concerned about the current and growing imbalances between the federal and provincial/territorial governments' ability to finance their respective program responsibilities. Efficiency and equity in the provision of programs and services imply that both the long-term vertical fiscal imbalance, between the federal government and provinces and territories, and the horizontal fiscal imbalance, among provinces and territories, need to be addressed.

Premiers noted that the federal government's surpluses are projected to rise quickly over the next two decades as a result of large and growing revenue sources and reduced expenditure commitments. Provinces and territories, however, will collectively be hard pressed to keep their budgets in balance over this same period. They expressed their concern that their governments' finances are particularly vulnerable if cost pressures in key public services increase even moderately or in the event of a slowdown in the economic growth.

Premiers noted that the immediate and full restoration of the Canada Health and Social Transfer to 1994/95 levels, together with an escalator, is a modest step, and one that would still leave the federal government with substantial surpluses. Indeed, this proposal for the CHST would only partially address the fiscal imbalance that exists between the two orders of government. Premiers expressed concern that a number of federal initiatives, which require provincial/territorial contributions, have added to the financial pressures facing their governments and are increasing the fiscal imbalance in Canada.

Premiers noted that these conclusions are supported by a background paper, A Federation Out of Balance, which was commissioned by the Western Finance Ministers to provide Western Premiers with an independent analysis of trends in federal and provincial/territorial revenue and program cost pressures.

Premiers also discussed the horizontal fiscal imbalance, which exists if provinces and territories do not have the fiscal capacity to fund their programs at reasonably comparable levels while maintaining reasonably comparable levels of taxation. All jurisdictions must have the ability to provide a competitive mix of public services and tax levels to compete domestically and internationally.

The Equalization Program is constitutionally mandated to address the horizontal imbalance in Canada. Premiers called on the federal government to strengthen its commitment to the Equalization Program so that the Program meets its constitutionally mandated objectives. They noted that the ceiling on payments through the Equalization Program may be triggered by re-estimates later this year. Premiers reiterated that the federal government strengthen the Equalization Program including the immediate removal of the ceiling on Equalization payments, in concert with the restoration of the CHST and adoption of an appropriate escalator.

Premiers agreed that addressing the question of fiscal imbalance is an urgent financial challenge facing the federation today. Premiers instructed their Finance Ministers to advance their previous work on these issues and to identify reform proposals which would more durably address the vertical and horizontal fiscal imbalance in Canada. Premiers directed the Finance Ministers to conclude this work in time for their discussions with the federal Finance Minister before the next federal budget.

POST-SECONDARY EDUCATION AND SKILLS DEVELOPMENT

Premiers believe there is an opportunity to position Canada as a leader among the OECD countries in terms of investments in education and training. They stressed the importance of post-secondary education and skills development, including apprenticeship to the economic and social well-being of Canadians and to Canada's ability to remain competitive in today's global economy. Premiers noted that provinces and territories continue to institute measures to strengthen their post-secondary education and skills development systems and to encourage access to knowledge and skill development.

Premiers directed their Ministers responsible for post-secondary education, skills development and labour market matters to work more closely together and to suggest possible approaches to ensure that individuals have the skills they need to compete in the new economy and to report back at next year's Annual Premiers' Conference.

Premiers noted that student debt may be a consideration for some students intending to enroll in post-secondary institutions. Premiers agreed that graduates should be able to repay their student loans, recognizing that it can take time to become established in the work force. Premiers directed their Ministers responsible for Post-Secondary Education and Finance to work together to develop options to ensure that student aid programs are effective.

Premiers recognized the need for adequate, predictable and sustainable federal funding in support of post-secondary education and skills development. Premiers also called for the immediate increase in Employment Insurance Part II funding, to the maximum allowable under the Employment Insurance Act, to be made available to provinces and territories on an equitable basis. They stressed that any new federal investments in post-secondary education and skills development must be preceded by the full and immediate restoration of the CHST cash transfers, adoption of an appropriate escalator, and the increase in EI Part II funding to the maximum allowable under the EI Act. Flowing funding directly to provinces and territories will avoid duplication of government effort and could allow provinces and territories to work toward integrating post-secondary education, labour market training, and skills development opportunities within each of their jurisdictions.

Premiers agreed that the post-secondary education and skills development needs of Aboriginal people are especially pressing. They encouraged continued co-operation between governments and Aboriginal organizations toward addressing the education, skills development, and labour market needs of Aboriginal people.

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