Backgrounder: The Fiscal Stabilization Program

Backgrounder

The  federal Fiscal Stabilization Program provides protection to provinces in the  event of extraordinary year-over-year declines in revenues.

How the Fiscal Stabilization Program Works

  The  Fiscal Stabilization Program is authorized by the Federal-Provincial Fiscal Arrangements Act and falls under the  responsibility of the Minister of Finance. It enables the federal government to  provide financial assistance to any province faced with a year-over-year  decline in its non-resource revenues greater than 5 per cent.

  Provinces  must apply for payments under the program, and each claim is subject to  analysis and verification by the federal government. A province  may submit a claim to the Minister of Finance as late as 18 months after  the end of the fiscal year in question, but may also submit a claim for an  advance payment on account based on as few as five months of data for the  fiscal year in question.

  There  are two constraints on eligibility for payments:

  1. The  program compensates for year-over-year revenue declines due to economic  downturns, not for declines due to provincial decisions to reduce taxes;  policy changes made by the province in the rate or in the structure of  provincial taxes are factored out when measuring revenue declines.
  2. A  decline in resource revenues is taken into account only if—and to the extent  that—the annual decline exceeds 50 per cent.

How Much Can a Province Receive?

  The  maximum payment to a province that makes a claim for a given fiscal year is $60  per person.

  Provinces may also request an  interest-free loan for any amounts in excess of the $60 per person limit,  to be recovered over a five-year period. However, the decision of whether to  provide such a loan is at the sole discretion of the Minister of Finance.

How Much Have Provinces Been Paid in the Past?

  Since  1967, the federal government has provided payments totalling over $2 billion  to the provinces through the Fiscal Stabilization Program. For example, the  first province to qualify was British Columbia, which made a claim for payments  under the program for 1982–83 in June 1983. British Columbia was paid $174  million in instalments over a three-year period as the data required to assess  its claim became available.

Stabilization Claims by Qualifying Year ($ million)
Province 1982–83 1986–87 1990–91 1991–92 1992–93 1993–94 Total
N.L. - - - 31 - - 31
P.E.I. - - - 5 8 - 13
N.S. - - - 55 - - 55
N.B. - - - - 30 6 36
Que. - - - 103 72 - 175
Ont. - - 227 284 567 - 1,079
Man. - - - 43 - - 43
Sask. - - - - - - 0
Alta. - 419 - - - - 419
B.C. 174 - - - - - 174
Total 174 419 227 522 677 6 2,025

For additional information on federal transfer payments,  see the Department of Finance website.


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