Federal transfers to provinces at all-time high

Fraser Institute report says they can't blame Ottawa for a lack of money

TORONTO — After accounting for inflation and population changes, federal transfers to the provinces and territories are at an all-time high, according to a Fraser Institute study.

The public policy think tank with offices across Canada notes that between 2005-06 and 2015-16, federal transfers increased by 62.3% – a rate much higher than required to offset both increasing overall prices (inflation) and a growing population (31.6%). The report observes major federal transfers are now higher than at any other point in Canadian history.

In 2005-06, federal transfers represented 14.8% of all provincial revenues. This year they are projected to reach 17.3%, the highest level in recent history.

In Ontario, with its projected deficit for 2016 of $7.5 billion, transfers to Ontario increased 87.8% from 2005/06 to 2015/16, more than transfers to most other provinces. The report notes this is more than twice the amount that would have been necessary to keep pace with both inflation and population growth in the province (31.1%).

Major federal transfers now represent 16.4% of Ontario’s revenues, up from 12% in 2005/06.

Ontario is also gaining an increasing share of total federal transfers. The province received 26% in 2005/06 but that’s projected to increase to 30.1% in 2015/16.

This means that even as the total federal transfer “pie” has grown substantially over the past decade, Ontario’s share of the pie has also increased, due primarily to its relatively recent “have-not” status (as of 2008-09) within Canada’s equalization program.

Despite this rapid increase in transfers, Ontario ran a persistent string of deficits since 2008/09.

“Ottawa is already sending record amounts of money to the provinces. Provincial governments can’t reasonably blame a lack of federal transfers for the fiscal challenges they face,” said Charles Lammam, study co-author and Fraser Institute director of fiscal studies.

Click here for a copy of Are the Provinces Really Shortchanged by Federal Transfers?


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