Archived - Backgrounder on Repayable Floor Loans
- In March 2005, six provinces[1] received "Repayable Floor Loans" totalling $1.85 billion to help compensate for declines in Equalization payments in 2004–05, with the requirement that these loan amounts be recovered interest-free, and only from their Equalization payments over 10 years (from 2006-07 to 2015-16).
- Four provinces[2] completed their loan repayments on March 31, 2016—having paid back a total of $1.3 billion.
- While Newfoundland and Labrador and Saskatchewan paid back a total of $136 million, their recovery payments stopped in 2008–09 and 2007–08, respectively, when they ceased to qualify for Equalization payments under the Federal-Provincial Fiscal Arrangements Act ("the Act").
- After March 31, 2016, the Act provides broad discretion to the Minister of Finance with respect to how and when the balance is to be recovered.
- To mitigate the provincial cash flow impact of this provision, the previous Minister of Finance decided in March 2015 that the outstanding amounts for the two provinces, which then totalled $404 million ($271 million for Newfoundland and Labrador and $133 million for Saskatchewan), would be recovered on an equal monthly basis over a 10-year period beginning in April 2016 from other federal transfer payments (e.g. the Canada Health Transfer or the Canada Social Transfer).
- The two provinces were consulted prior to a decision being made, and the recovery of two payments per month commenced in April 2016.
- On May 2, 2016, Newfoundland and Labrador Premier Dwight Ball sent a letter to Finance Minister Bill Morneau in which he requested a deferral of payments on his province's loan until his province's planned return to surplus, in accordance with the targets established in his 2016–17 Budget. As of June 1, the loan balance will be $267 million, and payments are nearly $2.3 million per month.
- Minister Morneau has used his discretion to accommodate Premier Ball's request, and has granted Newfoundland and Labrador a deferral on its Repayable Floor Loan payments until April 1, 2022.
Table 1
Repayable Floor Loans
($ millions)
| N.L. | P.E.I. | N.S. | N.B. | Que. | Sask. | TOTAL | |
|---|---|---|---|---|---|---|---|
| Original Loans—2004–05 | 378 | 8 | 120 | 23 | 1,158 | 162 | 1,850 |
| Repayment by March 31, 2016 | 107 | 8 | 120 | 23 | 1,158 | 29 | 1,446 |
| Balance at March 31, 2016 | 271 | 0 | 0 | 0 | 0 | 133 | 404 |
| Balance at June 1, 2016 | 267 | 0 | 0 | 0 | 0 | 131 | 397 |
1 Newfoundland and Labrador, Prince Edward Island, Nova Scotia, New Brunswick, Quebec and Saskatchewan.
2 Prince Edward Island, Nova Scotia, New Brunswick and Quebec.
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