Provincial-Territorial Meeting of Finance Ministers

Halifax, June 26, 2003 - Provincial and Territorial Ministers of Finance met last evening and today to discuss a number of economic and fiscal issues.

Fiscal Imbalance

A key issue discussed by Finance Ministers related to the continuing imbalance that exists between the Federal Government and provinces with respect to the resources they have available to meet their expenditure responsibilities. The Federal Minister has confirmed that they will have a surplus in the current year and next. Ministers believe it is critical that the Federal Government act immediately to ensure that the $2 billion contingent funding for health care is secured and available to provinces and territories for health care. Provinces and territories believe that these surpluses will continue to grow over the medium term, while they struggle to maintain vital services in healthcare, education and social services. Given the high priority that provinces and territories place on correcting this imbalance, they will be developing and forwarding recommendations to the Annual Premiers Conference with respect to the formation of a new secretariat for information and cooperation on fiscal imbalance.

Equalization

Ministers expressed disappointment that so little progress has been made in the current round of equalization renewal. Ministers are in full agreement that the Federal Government must work in true partnership with provinces and territories to address the disparities that exist among provinces. Ministers agree that it is critical to have meaningful discussions with the Federal Minister before the Federal proposals are finalized in September. The opportunity exists now to provide a meaningful strengthening of the equalization program. They expressed their concerns over the significance and seriousness of the issues facing the equalization renewal and require an immediate meeting with the Federal Finance Minister to ensure that the program is strengthened in a meaningful way as sought by all provincial and territorial Premiers and Finance Ministers. Ministers noted that the equalization ceiling has been removed, but this removal has had no immediate fiscal impact for provinces or the Federal Government. Ministers support the removal of the equivalent ceiling in the Territorial Financing Arrangements.

Health Care

Specifically with regard to health funding, while good first steps were taken towards the goal of a new funding partnership for health in the February First Ministers’ Arrangement on Sustaining and Renewing Health Care for Canadians, Finance Ministers agreed that the increased funding still falls far short of what Premiers have clearly indicated is required to meet existing and emerging program needs. The new funding arrangements have raised the share of federal funding for provincial and territorial social program expenditures from 14% in 2002/03 to about 16%. This falls short of the recommended 25% funding levels advanced in the Romanow Report as well as by all Premiers. Now that the Federal Government has confirmed another surplus, Ministers also agreed that the Federal Government must work with provinces and territories to ensure that adequate and sustainable funding is available under the new Canada Social Transfer for education and social programs, which is due to be implemented in April 2004.

Census

Ministers recognized that the revision of population figures this September to embody the 2001 Census could have significant impacts on transfer payments to provinces and territories. While the exact impacts are not yet known, it is evident that some provinces and territories could face very large negative adjustments. The timing of the release of data, combined with the unknown effects of the data itself, will require some provinces and territories to react to potentially large negative impacts well into their fiscal year. As a result, Ministers call on the Federal Government to provide census forgiveness and fair and meaningful relief to provinces and territories that face dramatic data shocks that negatively affect their fiscal arrangements with the Federal Government.

Disaster Relief

Ministers also discussed some of the significant challenges posed when disasters like SARS and BSE strike. Ministers agree that, when one part of the country is hurt by disaster, all parts of the country are affected and it is incumbent on all of us to pull together to lend support and assistance. Ministers noted that the Federal Government’s response to the SARS challenge was too slow, unpredictable and inadequate. As well, a more predictable and dependable response is needed from the Federal Government when disasters strike. Finance Ministers agreed to form a working group to review criteria for federal disaster relief and make recommendations to Premiers. Action is needed now.

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