Archived - The National Child Benefit Progress Report 2004

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Chapter 3
Components of the National Child Benefit Initiative

The National Child Benefit (NCB) initiative includes both federal, provincial, territorial and First Nations components.7 The federal component, described in Chapter 2, involves increased benefits paid to low-income families with children through the NCB Supplement. This federal investment makes it possible for provincial and territorial governments to adjust the income support to families with children on social assistance without impacting the overall disposable income of these families. As noted in Chapter 2, First Nations follow the approach of the relevant province or territory. Greater detail on First Nations reinvestments and investments8 is provided in Chapter 4.

This adjustment to social assistance/child benefit payments produces savings that provinces, territories and First Nations then reinvest to enhance existing programs or implement new programs or services aimed at reducing child poverty and supporting low-income families with children. Reinvestment funds comprise social assistance/child benefit savings and, in some jurisdictions, Children’s Special Allowance recoveries (see Appendix 2 for further details). In addition to reinvestments, many jurisdictions invest additional funds in benefits and services that are consistent with the goals of the NCB initiative (see Appendix 2 for further details).

The Children’s Special Allowance

The Children’s Special Allowance (CSA) is paid by the Canada Revenue Agency for children who are in the care of provincial/territorial child welfare authorities. It mirrors the maximum Canada Child Tax Benefit payments, including the base benefit and the NCB Supplement. Jurisdictions have the option to either recover, or pass on the increased NCB Supplement amount to child welfare authorities for child maintenance costs. In jurisdictions that recover the increase to the NCB Supplement, the amount is included in their reinvestment funds available for NCB initiatives.

In 2003-2004, it is estimated that $14.5 million or 2.1 percent of the total reinvestment funds came from CSA recoveries.

The resulting programs and services benefit children in low-income families whether their parents are employed or receiving social assistance. These supports, combined with the NCB Supplement, help reduce the “welfare wall” and aim to make it easier for families with children to become self-sufficient.

Approaches to Replacing Social Assistance Benefits for Children

Since the inception of the NCB initiative in 1998, three distinct approaches have evolved regarding the replacement of social assistance benefits for children through the NCB. These are:

  • the social assistance offset approach;
  • the integrated child benefit approach with adjustment; and
  • the integrated child benefit approach without adjustment.

Two provinces, New Brunswick and Manitoba9, do not adjust social assistance benefits for children and, instead, flow through the NCB Supplement directly to recipients.

The three approaches are briefly explained below.

1. The Social Assistance Offset Approach (see Figure 5)

Under this approach, provinces and territories either treat the NCB Supplement as an unearned income charge against social assistance or reduce their social assistance rates for children. In the case of income offset, social assistance recipients have the amount of the NCB Supplement they receive deducted from their social assistance entitlement. This approach is used in Prince Edward Island, Ontario10, Yukon, Northwest Territories and Nunavut. In the case of rate reduction, the social assistance rate is reduced by the maximum NCB Supplement. Alberta11 uses this approach.

Each family that leaves social assistance continues to receive the NCB Supplement. Reinvestment funds under this approach are the savings in social assistance.

Figure 5 - The Social Assistance (SA) Offset Approach

Figure 5 - The Social Assistance (SA) Offset Approach

description

The illustration compares the interaction between federal and provincial/territorial child benefits and services prior to the introduction of the NCB initiative (pre-1998) and after its introduction (post-1998) for jurisdictions using the Social Assistance Offset Approach.

Pre-1998, most provincial/territorial social assistance systems contained child benefits embedded within overall social assistance payments to families with children. Low-income families with children also received provincial/territorial services and the federal Child Tax Benefit.

Post-1998, increases in the federal NCB Supplement are replacing the embedded social assistance child benefits as provinces and territories reduce their social assistance payments to families with children by the amount of the NCB Supplement.

The resulting social assistance savings are reinvested by provinces and territories, along with additional funds, into new or enhanced benefits and services for low-income families with children.

Notes:

  1. Figure is for illustrative purposes only and is not drawn to scale.
  2. CTB - Child Tax Benefit.

2. The Integrated Child Benefit Approach with Adjustment (see Figure 6)

Some jurisdictions have chosen to restructure their social assistance system to pay children’s benefits through a separate income-tested child benefit program that is integrated with the Canada Child Tax Benefit (CCTB) program. Under this approach, increases in the NCB Supplement are offset in full or in part against the provincial child benefit. The savings from this offset become the province’s reinvestment funds. Saskatchewan and British Columbia have adopted this approach.

Figure 6 - The Integrated Child Benefit Approach with Adjustment

Figure 6 - The Integrated Child Benefit Approach with Adjustment

description

The illustration compares the interaction between federal and provincial/territorial child benefits and services prior to the introduction of the NCB initiative (pre-1998) and after its introduction (post-1998) for jurisdictions using the integrated child benefit approach with adjustment.

Pre-1998, most provincial/territorial social assistance systems contained child benefits embedded within overall social assistance payments to families with children. British Columbia, however, had restructured its social assistance system to deliver provincial child benefits through a separate income-tested child benefit that was integrated with the federal Child Tax Benefit. Low-income families with children also received provincial/territorial services and the federal Child Tax Benefit. With the introduction of the NCB, Saskatchewan joined British Columbia in restructuring its social assistance system to deliver provincial child benefits through a separate income-tested child benefit that was integrated with the federal Canada Child Tax Benefit.

Post-1998, increases in the federal NCB Supplement are replacing the British Columbia and Saskatchewan integrated child benefits, as these provinces reduce their child benefit payments by all or part of the NCB Supplement. The resulting savings are reinvested, along with additional funds, into new or enhanced benefits and services for low-income families with children.

Notes:

  1. Figure is for illustrative purposes only and is not drawn to scale.
  2. CTB - Child Tax Benefit.

3. The Integrated Child Benefit Approach without Adjustment (see Figure 7)

After the inception of the NCB in July 1998, some jurisdictions chose to restructure their social assistance system to provide children’s benefits through a separate income-tested program. In these cases, however, there was no offset of the NCB Supplement against child benefits. In jurisdictions that implemented this type of approach, the amount of reinvestment funds is set at the funds that were being used for child benefits under the social assistance system at the time the system was restructured. The amount of reinvestment funds is set at that time and remains the same for subsequent years. Newfoundland and Labrador and Nova Scotia have adopted this approach.

Newfoundland and Labrador redesigned its income support program in 1999-2000, with the introduction of the Newfoundland and Labrador Child Benefit as the provincial reinvestment initiative. This new initiative resulted in removing all basic benefits for children from the newly created Income Support Program as these benefits are now provided through the combined Canada Child Tax Benefit and Newfoundland and Labrador Child Benefit. Since basic benefits for children were removed from the Income Support Program, Newfoundland and Labrador does not adjust its Income Support benefits for increases in the National Child Benefit Supplement, nor does it adjust the Newfoundland and Labrador Child Benefit.

With the advent of the NCB Supplement in 1998, Nova Scotia enhanced the supports available for children of low-income families by introducing the Nova Scotia Child Benefit as a provincial reinvestment initiative. In 2001, children’s benefits were removed from the province’s income-assistance program, substantially increased and fully integrated with the CCTB to establish a single, non-taxable monthly payment for all low-income families with children. At the same time, Nova Scotia ensured that any future increases to the NCB Supplement flowed directly through to families receiving income assistance.

Figure 7 - The Integrated Child Benefit Approach without Adjustment

Figure 7 - The Integrated Child Benefit Approach without Adjustment

description

TThe illustration compares the interaction between federal and provincial/territorial child benefits and services prior to the introduction of the NCB initiative (pre-1998) and after its introduction (post-1998) for jurisdictions using the integrated child benefit approach without adjustment.

Pre-1998, most provincial/territorial social assistance systems contained child benefits embedded within overall social assistance payments to families with children. Low-income families with children also received provincial/territorial services and the federal Child Tax Benefit.

Post-1998, Newfoundland and Labrador and Nova Scotia restructured their social assistance systems to deliver provincial child benefits through separate income-tested child benefits that are integrated with the federal Canada Child Tax Benefit.

These provinces do not offset the amount of the federal NCB Supplement against their provincial integrated child benefit programs. Provincial reinvestment funds, which are set equal to the amount of funds that were used for child benefits under social assistance at the time of restructuring, are used for new or enhanced benefits and services for low-income families with children. These provinces also devote additional funds for benefits and services for low-income families with children.

Notes:

  1. Figure is for illustrative purposes only and is not drawn to scale.
  2. CTB - Child Tax Benefit.

NCB Reinvestments and Investments 2003-2004 to 2004-2005

In 2003-2004, the fifth full year of the NCB initiative, provincial, territorial and First Nations reinvestments and investments are estimated at $879.4 million12. It is estimated that reinvestments and investments will reach a total of $919.0 million in 2004-2005. Table 3 provides a breakdown of each jurisdiction’s expenditures over two full fiscal years of the initiative: 2001-2002 and 2002-2003. Estimates are given for 2003-2004 and 2004-2005, as final data are not available for many provinces and territories.

Table 3
NCB Reinvestments & Investments by Jurisdiction and Fiscal Year ($ millions)

Jurisdiction Expenditures Estimates
2001-2002 2002-2003 2003-2004 2004-2005
Reinvestment Reinvestment & Investment (Total) Reinvestment Reinvestment & Investment (Total) Reinvestment Reinvestment & Investment (Total) Reinvestment Reinvestment & Investment (Total)
Newfoundland and Labrador 8.8 16.8 8.8 17.0 9.2 18.9 9.7 18.8
Prince Edward Island 2.1 2.6 2.3 3.1 2.5 3.7 2.8 3.7
Nova Scotia 20.4 29.5 20.1 30.9 20.2 30.6 20.2 30.6
New Brunswick 7.2 8.3 8.4 9.3
Ontario* 191.6 227.7 202.5 231.2 214.5 249.3 218.5 255.6
Manitoba** *** 12.1 34.4 8.0 38.2 6.3 45.6 4.1 55.7
Saskatchewan 38.0 39.6 40.8 40.8 37.2 37.2 40.5 40.5
Alberta 28.7 32.0 32.7 38.1 35.3 45.6 37.7 47.2
British Columbia 270.3 270.3 284.8 297.8 314.0 379.0 333.8 397.0
Yukon 0.3 1.0 0.3 1.2 0.3 1.5 0.3 1.5
Northwest Territories 0.8 2.2 0.8 2.0 0.8 1.9 0.8 1.9
Nunavut 2.3 2.6 2.7 2.7 2.8 2.8 2.8 2.8
P/T SUB-TOTAL 575.2 665.9 603.8 711.3 642.9 824.4 671.1 864.6
First Nations 51.2 57.0 53.5 56.0 51.8 53.2 50.2 52.5
Citizenship and Immigration Canada **** 2.1 2.9 1.7 1.9 1.9 1.9 1.9 1.9
“Other” Sub-Total 53.3 59.9 55.3 57.9 53.6 55.0 52.0 54.4
Total 628.5 725.7 659.1 769.2 696.6 879.4 723.1 919.0

* Figures exclude an additional $40 million previously committed to the Ontario Child Care Tax Credit.

** Figures include funding which is provided through remaining NCB Supplement recoveries, Children’s Special Allowance recoveries, federal transfers under the 2000 Early Childhood Development Agreement ($11.1 million in 2001-2002, $14.7 million in 2002-2003, $18.3 million in 2003-2004 and $18.3 million in 2004-2005), federal transfers under the 2003 Multilateral Framework on Early Learning and Child Care ($0.9 million in 2003-2004 and $5.5 million in 2004-2005), as well as provincial revenue.

*** Figures for Manitoba’s reinvestments and investments include expenditures on the Employment and Income Assistance Rate Increase and the Restoration of the NCB Supplement for families in receipt of Employment and Income Assistance benefits. In 2001-2002, Rate Increase and Restoration of the NCB Supplement expenditures totalled $5.6 million. In 2002-2003, $7.3 million was spent on the Restoration of the NCB Supplement. It is estimated that in 2003-2004, $11.0 million was spent on the Restoration of the NCB Supplement, and that in 2004-2005, $13.7 million was spent.

**** Citizenship and Immigration Canada administers the Resettlement Assistance Program (RAP) for refugees.

Notes:

  1. Some expenditures for 2001-2002 differ from those reported in The National Child Benefit Progress Report: 2003 due to data revisions.
  2. 2) Totals may not add due to rounding.

In deciding what benefits and services to support through NCB reinvestments and investments, provinces and territories are guided by a national reinvestment framework that was agreed to by the Ministers Responsible for Social Services. Under this framework, jurisdictions have the flexibility to direct reinvestments and investments to meet their own priorities and needs, provided they support the objectives of the NCB initiative.

Many provinces, territories and First Nations base their reinvestment decisions on consultation with their residents, or have included such consultation as part of an overall redesign of their income-support programs.

Under the reinvestment framework, reinvestments and investments are providing new or enhanced supports for low-income families. These supports are categorized in six key areas:

  • child-/day-care initiatives;
  • child benefits and earned income supplements;
  • early childhood services and children-at-risk services;
  • supplementary health benefits;
  • youth initiatives13; and
  • other NCB programs, benefits and services.

Citizenship and Immigration Canada

Citizenship and Immigration Canada (CIC) administers the Resettlement Assistance Program (RAP), which provided refugees with $30 million in income support in 2003—2004, reflecting the amounts that jurisdictions provide through social assistance. This includes $1.9 million, which is the NCB reinvestment portion of the RAP program. CIC reinvestments occur in two of the six key areas of investments and reinvestments: child benefits and earned income supplements, and other NCB programs, benefits and services.

First Nations

First Nations follow a reinvestment framework administered by Indian and Northern Affairs Canada. First Nations reinvestments tend to cover a wider range of program areas than those of the provinces and territories, and address the local needs of communities. First Nations reinvestments are categorized in five key areas:

  • child/day care;
  • child nutrition;
  • early childhood development;
  • employment opportunities/training programs; and
  • community enrichment.

First Nations reinvestment and investment amounts constituted approximately 6.1 percent of total reinvestments and investments in 2003-2004. First Nations reinvestments and investments are included in the summary provided in Figure 8. However, because First Nations report on their NCB reinvestments according to these five activity areas, the analysis by key areas in this chapter does not include these amounts. Instead, First Nations reinvestments are discussed separately in Chapter 4, First Nations and the National Child Benefit Initiative, and Appendix 2, Provincial, Territorial and First Nations National Child Benefit Reinvestments and Investments.

Figure 8 - Summary of NCB Reinvestments and Investments by Program Area, 2003-2004 Estimates

Figure 8 - Summary of NCB Reinvestments and Investments by Program Area, 2003-2004 Estimates

description

A pie chart illustrates in what proportions the NCB reinvestments and investments are directed to each program area:
Child benefits and earned income supplements 26 percent
Child/day care 29 percent
Early childhood services and children-at-risk services 16 percent
First Nations 6 percent
Supplementary health benefits 5 percent
Youth Initiatives 4 percent
Other 14 percent

NCB Reinvestments and Investments by Program Area

Child-/Day-Care Initiatives

Child care must be accessible and affordable so that low-income parents can enter and stay in the labour market. Improving access to affordable child care provides this opportunity and contributes to healthy child development.

Provincial/territorial NCB reinvestments and investments in child care have taken a variety of forms, with nine jurisdictions devoting NCB funding to this area. In 2003-2004, child-/day-care programs accounted for the largest share of NCB initiative funding. About 65 percent of the total NCB-related child-care expenditures are for a single program: the Ontario Child Care Supplement for Working Families.

Some jurisdictions provide funding through subsidies to child-care facilities. These subsidies allow facilities to offer low-income working families access to child care at a more affordable price. Other jurisdictions provide assistance directly to families. This reduces families’ share of child-care costs while allowing them to choose the form of child care that best meets their needs. Some jurisdictions combine both approaches. Each of these forms of support is designed to help low-income families cover the costs of child care associated with being employed. Table 4 provides data on child-/day-care reinvestments and investments.

Table 4
Child/Day-Care Initiatives: NCB Reinvestments and Investments ($ millions)

  2001-2002 2002-2003 2003-2004 2004-2005
Expenditures Expenditures Estimates Estimates
Provincial/territorial expenditures $196.5 $201.0 $253.5 $264.4
Percentage of total NCB reinvestments & investments 27.1% 26.1% 28.8% 28.8%

Note: First Nations reinvestments and investments are reported separately in Chapter 4

Child Benefits and Earned Income Supplements

Child benefits and earned income supplements provide important financial support to low-income families through monthly cash payments to the parent or guardian of the child. These benefits improve the financial stability of low-income families by helping make up for relatively low wages that often come with entry-level jobs, and by supporting parents to stay in the labour market and work toward higher wages in the future.

A number of provinces and territories are now providing child benefits outside of the social assistance system, so that families receive these benefits regardless of the parents’ employment situation. Several provinces have completely restructured their social assistance systems so that they now provide child benefits to all low-income families with children, while benefits for adults continue to be provided through social assistance. As a result, families in these provinces keep their provincial child benefits—in addition to the NCB Supplement—when parents make the transition from social assistance to work. Several other jurisdictions provide child benefits that top up the amount that families receive through social assistance in support of their children. In most of these cases, the provincial or territorial child benefit is combined with the federal CCTB in a single monthly payment, which is administered by the Canada Revenue Agency.

Some jurisdictions also provide low-income working families with children with an earned income supplement in order to provide incentives to work. Eligibility is tied to earning a certain minimum amount from employment. Earned income supplements top up family-earned income for low-wage earners, helping families to cover the added costs of employment.

In 2003-2004, child benefits and earned income supplements accounted for the second largest portion of NCB reinvestments and investments. Table 5 provides expenditures for 2001-2002 and 2002-2003 and estimates for 2003-2004 and 2004-2005.

Table 5
Child Benefits and Earned Income Supplements: NCB Reinvestments and Investments ($ millions)

  2001-2002 2002-2003 2003-2004 2004-2005
Expenditures Expenditures Estimates Estimates
Provincial/territorial & CIC expenditures $194.3 $213.5 $226.4 $236.7
Percentage of total NCB reinvestments & investments 26.8% 27.8% 25.7% 25.8%

Note: First Nations reinvestments and investments are reported separately in Chapter 4.

Early Childhood Services and Children-at-Risk Services

Experts on child development agree that the first six years of life are critical to a child’s development and future well-being. Several jurisdictions are focusing NCB reinvestments and investments on services that provide early support to children in low-income families in order to optimize child development and give young children a healthy start in life. These programs range from prenatal screening to information on mother and child nutrition and parenting skills. Children-at-risk services, ranging from early literacy classes to recreation programs, can make a positive difference in the lives of these children.

Programs in this key area accounted for the third-largest share of NCB initiative funding for the last four years. Table 6 provides reinvestment and investment data on early childhood services and children-at-risk services.

Table 6
Early Childhood Services and Children-at-Risk Services: NCB Reinvestments and Investments ($ millions)

  2001-2002 2002-2003 2003-2004 2004-2005
Expenditures Expenditures Estimates Estimates
Provincial/territorial expenditures $108.0 $125.2 $140.0 $152.3
Percentage of total NCB reinvestments & investments 14.9% 16.3% 15.9% 16.6%

Notes:

  1. Prior to The National Child Benefit Progress Report: 2003, youth initiatives were reported in this section. These are now reported separately.
  2. First Nations reinvestments and investments are reported separately in Chapter 4.

Supplementary Health Benefits

Supplementary health benefits include a range of benefits that go beyond basic medicare coverage, such as optical care, prescription drugs, dental care or other benefits. The nature of these benefits varies among jurisdictions, many of which have long provided similar benefits to families with children receiving social assistance. Now, NCB reinvestments and investments in some provinces and territories are providing these benefits to all children in low-income families. These programs ensure that families do not lose important health benefits for their children when they move from social assistance to the labour market.

The health benefits that are provided as NCB reinvestments and investments vary among jurisdictions. Approximately 41 percent of the NCB-related Supplementary Health Benefits can be attributed to Alberta’s Child Health Benefit, which was the largest program of this type in the country in 2003-2004. Table 7 provides data on these supplementary health benefits.

Table 7
Supplementary Health Benefits: NCB Reinvestments and Investments ($ millions)

  2001-2002 2002-2003 2003-2004 2004-2005
Expenditures Expenditures Estimates Estimates
Provincial/territorial expenditures $29.3 $38.5 $46.3 $50.5
Percentage of total NCB reinvestments & investments 4.0% 5.0% 5.3% 5.5%

Note: First Nations reinvestments and investments are reported separately in Chapter 4.

Youth Initiatives

Youth initiatives include a range of benefits and services that are designed to assist and support youth, with particular attention to youth-at-risk. These programs are valuable in providing youth-at-risk with support to help them develop in positive directions. Youth initiatives, ranging from alcohol and drug strategies to transitional support for youth leaving child welfare, can make a positive difference in the lives of these young people.

This is the second year that youth initiatives have been reported separately. In earlier reports, they had been included under either Early Childhood/Children-at-Risk Services, or Other NCB Programs, Benefits and Services. Table 8 provides reinvestment and investment data on youth initiatives.

Table 8
Youth Initiatives: NCB Reinvestments and Investments ($ millions)

  2001-2002 2002-2003 2003-2004 2004-2005
Expenditures Expenditures Estimates Estimates
Provincial/territorial expenditures $28.1 $28.5 $35.4 $37.2
Percentage of total NCB reinvestments & investments 3.9% 3.7% 4.0% 4.0%

Note: First Nations reinvestments and investments are reported separately in Chapter 4.

Other NCB Programs, Benefits and Services

The flexibility of the NCB enables provinces and territories to address particular challenges facing their jurisdictions. Seven jurisdictions and Citizenship and Immigration Canada (CIC) have investments in this category of "other" benefits and services.

Ontario municipalities, which share responsibility for social assistance with the province, provide a wide array of reinvestment and investment programs and services, which are included in this category. These range from early intervention and child care to employment supports and prevention programs. Other reinvestments and investments account for the fourth-largest share of NCB initiative funding.

Table 9 shows the level of expenditures in this category for 2001-2002 and 2002-2003, with estimates for 2003-2004 and 2004-2005.

Table 9
Other NCB Programs, Benefits and Services: NCB Reinvestments and Investments ($ millions)

  2001-2002 2002-2003 2003-2004 2004-2005
Expenditures Expenditures Estimates Estimates
Provincial/territorial & CIC expenditures $112.5 $106.5 $124.7 $125.5
Percentage of total NCB reinvestments & investments 15.5% 13.8% 14.2% 13.7%

Notes:

  1. Prior to The National Child Benefit Progress Report: 2003, youth initiatives were reported in this section. These are now reported separately.
  2. First Nations reinvestments and investments are reported separately in Chapter 4.

7 This report does not include data for Quebec. All Quebec residents benefit in the same way as other Canadians from the Canada Child Tax Benefit. Moreover, they benefit from substantial investments made by the Quebec government, in the context of its family policy, in services for families with children.

8 Indian and Northern Affairs Canada reimburses Saskatchewan and the Yukon for the portion of provincial/territorial children’s benefits paid to all low-income families living on reserve.

9 Effective July 2000, Manitoba discontinued recovering increases in the NCB Supplement for families receiving income assistance. Effective July 2001, Manitoba stopped recovering the NCB Supplement for children age six or under. Effective January 2003, Manitoba stopped recovering the NCB Supplement for children age seven to eleven; and effective January 2004, it stopped recovering the NCB Supplement for children age 12 to 17 years.

10 In the 2004 Budget, Ontario announced that, for one year, social assistance benefits would not be reduced by the July 2004 increase for indexation to the NCB Supplement. Similarly, in the 2005 Budget, Ontario announced that, for one year, social assistance benefits would not be reduced by either the July 2004 or the July 2005 increases to the NCB Supplement.

11 In 2003, Alberta enhanced the mix of income and in-kind benefits and services to families receiving assistance through the Supports for Independence program by flowing through the full increase of the NCB Supplement. Alberta extended the flow-through of NCB Supplement increases again in 2004 and in 2005 under the new Alberta Works — Income Support program.

12 This amount includes $1.9 million in NCB reinvestments by Citizenship and Immigration Canada.

13 Starting with The National Child Benefit Progress Report: 2004, "youth initiatives" were included as an additional key area. In earlier reports, these programs and services had been included under either Early Childhood/Children-at-Risk Services, or Other NCB Programs, Benefits and Services.

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