Briefing book for the Minister of Intergovernmental Affairs - 2021

[ * ] An asterisk appears where sensitive information has been removed in accordance with the Access to Information Act and Privacy Act.

Introduction to Intergovernmental Affairs

Your role as Minister of Intergovernmental Relations

As Minister of Intergovernmental Affairs, you support Canadian federalism, promote national unity and advance FPT priorities by maintaining open and collaborative relationships with provinces and territories (PTs). In this role, you support the Prime Minister in his engagement with premiers. Premiers see the Prime Minister as their primary counterpart (as First Ministers), however, the Minister of Intergovernmental Affairs typically establishes productive bilateral relationships directly with most premiers. You also have a direct counterpart in the province of Quebec, the only jurisdiction with a dedicated Minister Responsible for Canadian Relations and the Canadian Francophonie (all other premiers have responsibility for intergovernmental affairs).

Another key role of your position is to work with your federal colleagues to assess implications of, and exercise leadership on, policies and programs with a significant intergovernmental dimension. You also engage with PTs on a regular basis on a range of topics with intergovernmental implications (e.g., fiscal transfers, energy, and environmental policies), and lead the Government’s efforts with respect to reducing barriers to internal trade. You also support the Prime Minister in hosting First Ministers’ Meetings.

You have other roles and responsibilities related more generally to Canada’s system of responsible and parliamentary government, including your role on Cabinet committees. These roles will be communicated to you by the Prime Minister, and additional briefings can be arranged to provide you with more information about your mandate and purview. You can also find guidance related to your ministerial role in Open and Accountable Government.

You also have an oversight role of the Canadian Intergovernmental Conference Service (CICS), a portfolio agency with a mandate to provide administrative support and planning services for federal-provincial-territorial and provincial-territorial conferences of first ministers, ministers and deputy ministers, throughout Canada.

How we support you: the Intergovernmental Affairs Secretariat

You are supported by the Deputy Minister of Intergovernmental Affairs and the team at the Intergovernmental Affairs Secretariat at the Privy Council Office. The IGA Secretariat is made up of approximately forty policy analysts and researchers with a depth of intergovernmental expertise, which they bring to bear to support you in achieving your mandate. The Secretariat is led by a Deputy Minister, who will support you in your work. The Privy Council Office also provides public service support within your office to facilitate your work, as well as that of your team.

The IGA Secretariat provides strategic advice and support to you, as well as to the Prime Minister, in matters related to federal, provincial and territorial (FPT) relations. The IGA Secretariat also provides advice on engaging with municipalities, particularly in light of the growing economic and demographic importance and front-line service delivery roles carried out by this order of government. Furthermore, the IGA Secretariat provides guidance on advancing the Government’s reconciliation agenda, by bringing attention to initiatives, federal action or decisions that overlap with provincial and territorial jurisdiction or could have important FPT considerations.

The Intergovernmental Affairs Secretariat has a number of key functions:

1. Support for Bilateral and Multilateral Engagement: provides advice and support to you and the Prime Minister in your bilateral and multilateral meetings and engagement with PT counterparts and stakeholders, including ministers and premiers, and in meetings with municipal officials and other stakeholders (e.g., meetings, correspondence, regional trips, etc.).
2. Support for Bilateral and Regional Issues: provides advice and support on bilateral and regional issues [ * ] and specific projects/initiatives, such as infrastructure projects [ * ] and bilateral negotiations with all jurisdictions (e.g., housing, infrastructure, broadband, immigration, child care).
3. Policy Support: works with colleagues at the Privy Council Office and other government departments to advance priority areas, ensure coherence and alignment across the federal government in the federal approach to provinces and territories, and ensure that PT considerations are properly reflected in the federal agenda. The team also provides policy support on questions of Canadian federalism, as well as on effectively managing intergovernmental affairs and leveraging various intergovernmental negotiation instruments. The IGA Secretariat also works with PT partners, to advance shared objectives. The IGA Secretariat also supports you in your leadership role on the internal trade file, overseeing the implementation of Canada’s commitments under the Canada Free Trade Agreement.
4. Cabinet Support: provides you with information and advice to support you in your participation in Cabinet and Cabinet Committees.

The IGA Secretariat is also responsible for supporting the Prime Minister and you at First Ministers’ Meetings (see Tab G), in close collaboration with your office and the office of the Prime Minister, other secretariats in the Privy Council Office, and federal departments, as required, on approach, strategy, agenda items and logistics. The IGA Secretariat also provided support for the work of the Ministerial Coordination Table on Federal-Provincial-Territorial Issues (see Tab I), a Ministerial platform to facilitate horizontal coordination towards implementation of key governmental priorities with key intergovernmental considerations.

Overview of intergovernmental relations

Key dates and upcoming provincial and territorial elections

2021

• October 25: Nunavut election
• October 30: Manitoba Progressive Conservative (PC) leadership election and selection of a new Premier of Manitoba
• October: FPT Ministers Responsible for Justice and Public Safety meeting
• November 4: Ontario Fall Economic Statement
• November 7: Quebec general municipal election
• November 8 – 10: FPT Ministers of Agriculture annual conference
• November 17: Nunavut Leadership Forum and selection of a new Premier of Nunavut
• November 22: Return of Parliament
• November 23: Speech from the Throne (TBC)
• December 13: FPT Committee on Internal Trade (Minister of Intergovernmental Affairs to be invited as a member)
• December 13: Canadian Council of Ministers of the Environment (tentative)
• December: Nunavut hamlet election
• December: FPT Ministers Responsible for the Status of Women annual meeting
• Fall: Canadian Council for Tourism Ministers annual meeting (TBC)
• Fall: Forum of Labour Market Ministers meeting (TBC)

2022

• January/February: FPT Ministers of Transportation Meeting

Your first 100 days

A number of substantive policy files – both those held over from the previous mandate and new initiatives – include important intergovernmental dimensions, and will require your attention early in your mandate. Federal-provincial-territorial considerations can have significant bearing on the development and implementation of policy and programmatic initiatives. Your advocacy with Ministerial counterparts and engagement with provinces and territories will be essential to their successful implementation.

You will want to begin reaching out to provinces and territories, as well as key stakeholders, to build connections, establish new collaborative relationships, and obtain their perspectives as you begin your mandate. The IGA Secretariat will provide you with advice and considerations on how to proceed and support these engagements. Other stakeholder organizations with a focus on intergovernmental affairs will also want to engage you early to advance their priorities, including the Federation of Canadian Municipalities, municipal leaders, and organizations with an interest in advancing internal trade.

In terms of policy priorities and engagement, your views will be sought on plans for potential First Ministers’ Meetings. [ * ]

Early Learning and Child Care agreements have been signed with a number of jurisdictions. Agreements with Ontario, Alberta, and New Brunswick, as well as the Northwest Territories and Nunavut are still outstanding. Your support will be important to advancing and finalizing agreements early in the mandate with these remaining provinces and territories in order to achieve this major commitment.

Progress has been achieved in close collaboration with provinces and territories on rolling out proof of vaccination credentials (PVCs) that meet a Pan-Canadian standard. Your engagement will be required to facilitate the use of PVCs across the country, and to help unblock any obstacles that provinces and territories may face.

Additional policy priorities that will necessitate your engagement also include housing – for example, operationalizing the Housing Accelerator Fund or creating a national Home Buyers’ Bill of Rights – and climate, given the need to implement commitments emanating from Canada’s participation in the upcoming 26th UN Climate Change Conference of the Parties (COP 26) in Glasgow, Scotland (from October 31 – November 12, 2021).

The IGA team stands ready to brief you separately on the background, status, and intergovernmental implications of the files noted above, as well as other policy initiatives and priority areas. This includes:

• COVID-19 response, including border measures, next steps on vaccine mandates and follow-up on the next stage of vaccine rollouts (including paediatric vaccines and boosters);
• Health and social files, including early learning and child care and health systems reform;
• Climate and energy files, including climate change and carbon pricing; and the Atlantic Loop and Lower Churchill;
• Reconciliation priorities, including Child and Family services; Missing and Murdered Indigenous Women and Girls; and the United Nations Declaration for the Rights of Indigenous People; and
• Economic Recovery priorities, including infrastructure and transit; and Regional Development Agencies.

[ * ]

On the international scale, Canada’s foreign policy priorities and actions can have important domestic repercussions, particularly on intergovernmental relations. In addition to the UN Climate Conference of Parties (COP 26) noted above, Canada’s engagement with the United States is of particular interest to provinces and territories. With respect to the Line 5 dispute between Enbridge and the State of Michigan, Canada is an interested party to the legal dispute, and has also triggered the dispute mechanism of the 1977 Transit Pipelines Treaty with the United States. The Line 5 dispute has implications for Ontario and Quebec, given that the pipeline provides nearly half of the fuel supply in Canada's two largest provinces. The U.S. House of Representatives is also expected to vote on an infrastructure bill that includes Buy American provisions that could have significant impacts on Canada’s cross-border trade and supply chains. [ * ]

Equally, there are a number of provincial and territorial developments that could have repercussions for the Canadian federation. For example, follow-up may be required on [ * ]

Finally, within your first 100 days, you may wish to determine a path forward on the [ * ]

Key interlocutors and stakeholders Canada’s Premiers

Other stakeholders and interlocutors

Ministerial counterparts

• Sonia LeBel, Minister responsible for Canadian Relations and the Canadian Francophonie, Québec
• George Chow, Chair of the Committee on Internal Trade and Minister of State for Trade, British Columbia

Municipal interlocutors

• Mike Savage, Chair of the Big City Mayors’ Caucus and the Mayor of Halifax
• Carole Saab, Chief Executive Officer, Federation of Canadian Municipalities
• Joanne Vanderheyden, President, Federation of Canadian Municipalities
• City mayors from across the country

Internal trade interlocutors

• Goldy Hyder, President and Chief Executive Officer, Business Council of Canada
• Perrin Beatty, President and Chief Executive Officer, Canadian Chamber of Commerce
• Dan Kelly, Chief Executive Officer, Canadian Federation of Independent Business
• Dennis Darby, President and Chief Executive Officer, Canadian Manufacturers and Exporters

Constitutional experts, academics

• There are a number of experts from academia, think tanks and other non-governmental organizations across the country that can provide unique insights into constitutional and policy questions. PCO can arrange discussions with these experts based on your interests.

FPT governance

Intergovernmental machinery

In Canada, important public policy issues cut across jurisdictional lines. Various mechanisms exist to manage this jurisdictional overlap and facilitate intergovernmental cooperation. These mechanisms are formal and informal, multilateral and bilateral, and exist both between the federal, provincial, and territorial (FPT) levels of government, as well as among provincial and territorial (PT) governments themselves. Recently, municipalities have also been exerting greater influence on FPT relations, primarily through the Federation of Canadian Municipalities and direct bilateral engagement by mayors.

The main formal processes and mechanisms at the level of First Ministers are First Ministers’ Meetings, the Council of the Federation, the Western Premiers’ Conference, the Council of Atlantic Premiers, and the Northern Premiers’ Forum. Of these, only First Ministers’ Meetings include any presence in the form of the Prime Minister’s participation.

At the sectoral level, FPT ministers, deputy ministers and senior officials meet on a regular basis to deal with sector-specific issues.

Bilateral relations

Prime Ministers typically use extensive bilateral engagement with PT premiers to build and maintain positive relationships across the federation. The bilateral approach enables governments to address specific PT issues, and foster key partnerships and advance federal interests with willing partners. Bilateral engagement is also critical to managing challenges and tensions, particularly on key regional issues, and thus helps to uphold national unity.

It should also be noted that various provinces have cooperated bilaterally through holding joint cabinet meetings, often culminating in signing agreements for joint cooperation. These meetings are somewhat infrequent.

First Ministers’ Meetings

First Ministers’ Meetings (FMMs) are the apex of intergovernmental machinery. Throughout the years, Prime Ministers have used them in different ways. Prime Ministers Mulroney, Martin and Pierre Trudeau, for example, tended to favour large, high-profile, high-stakes meetings to negotiate agreements. Prime Minister Chrétien, by contrast, preferred more private business-like meetings to bring closure to issues that had already undergone extensive intergovernmental work by officials. Prime Minister Harper had a strong preference for fewer and more low-key, private meetings, which tended to focus on consultations with premiers on broad issues.

Prime Minister Justin Trudeau chaired five FMMs between 2015 and December 2018. These meetings sought FPT agreement on central issues, such as the adoption of the Pan-Canadian Framework on Clean Growth and Climate Change. The last in-person FMM was in Montreal in December 2018, and covered trade diversification and internal trade, clean growth and jobs, environment and energy.

A sixth in-person FMM was planned to take place on March 13, 2020, focusing on economic competitiveness; the impacts of climate change; PT priorities on infrastructure and health care; northern priorities; and fiscal stabilization. This meeting was cancelled due to the pandemic. A First Ministers’ teleconference on COVID-19 was scheduled in its place on the same date. Since then, the Prime Minister has held 33 First Ministers’ calls to engage premiers to coordinate governments’ response to COVID-19, and ensure complementarity in the measures taken by federal, provincial and territorial governments to limit the spread of the virus. These meetings sought FPT agreement and served as forums for consultations/information sharing, as well as discussions on horizontal issues. Additional information regarding the FMMs can be found at Tab G.

Annual Premiers’ Conference/Council of the Federation

Provincial and territorial premiers have met regularly over the years to work together on shared priorities, and to present common priorities or approaches for discussion with the Government of Canada. In 2003, premiers established the Council of the Federation to formalize their collective work. The Council meets on at least an annual basis and is supported by a steering committee of provincial and territorial deputy ministers of Intergovernmental Affairs and a small secretariat. Decision-making is consensus-based and the Council is chaired on an annual rotational basis. More information about the Council of the Federation can be found at Tab H.

Federal-Provincial-Territorial Sectoral Tables

Approximately two dozen intergovernmental sectoral tables (e.g., FPT Ministers Responsible for Immigration, the Canadian Council of Ministers of Environment) exist to facilitate collaboration and the sharing of information between governments. While sectoral tables have proven to be effective at identifying and moving forward on shared priorities and finding innovative approaches to resolving differences, there can also be difficulties in achieving consensus. To resolve such difficulties, officials could be tasked by Ministers to work together in national working groups or bilaterally to advance key objectives.

There are federal-provincial-territorial ministerial tables covering almost every major policy area. An exception is Intergovernmental Affairs, where there is no sectoral table. This, in part, reflects the fact that the majority of provinces and territories do not have Ministers dedicated to intergovernmental relations – this function is filled by Premiers, except in Quebec, where there is a Minister for Canadian Relations. Most sectoral tables hold regular (annual or biannual) Ministers’ meetings. To support ministers, working groups of deputy ministers and other officials also meet periodically.

Most sectoral tables have representation from all jurisdictions, are co-chaired, and have agendas that are developed collectively. Certain sectoral tables have expanded their representation to include municipalities, such as the FPT Ministers responsible for Infrastructure. However, there are some exceptions, such as the Finance Ministers’ Meetings, which are chaired by the federal Minister of Finance, and the Canadian Council of Ministers of the Environment and the Canadian Council of Forest Ministers, the chairs of which rotate among the fourteen responsible ministers. Communiqués, if issued at the conclusion of meetings, tend to reflect the consensus position of all governments.

Meetings of FPT Clerks and Cabinet Secretaries

Since January 2010, Canada’s Clerks and Cabinet Secretaries have met semi annually to discuss common challenges they face with respect to public sector management. The meetings provide an opportunity to establish strong personal connections and working relationships, and have enabled the Clerks and Cabinet Secretaries to share information and best practices on how Canada’s public services can improve their overall efficiency and effectiveness. Clerks and Cabinet Secretaries use these meetings to discuss common issues and share best practices in the management of Canada’s governments. Clerks and Cabinet Secretaries have continued to meet virtually since the pandemic, including most recently in May 2021 to discuss the Federal Budget and post-COVID Economic Recovery. The table had also previously discussed Canada-U.S. relations under the Biden Administration, Canada’s dependency on global supply chains and diversification, among others.

Western Premiers’ Conference

The Western Premiers’ Conference is comprised of the four Western and three territorial premiers and meets annually in the spring. Western and Northern premiers have often been effective at using these meetings to formulate regional positions on priorities in advance of the annual meeting of the Council of the Federation. The most recent meeting was held virtually in June 2021 where premiers discussed reopening plans, strong economic recovery, and the health of western and northern Canadians.

Council of Atlantic Premiers

The Council of Atlantic Premiers (CAP), which was established in May 2000, consists of the premiers of the four Atlantic provinces, with the Chair rotating annually. The CAP meets at least once a year and sometimes more frequently to discuss issues of common interest. In general, CAP meets prior to meetings of First Ministers and the Council of the Federation to establish a united Atlantic view on key issues. The most recent meeting was held in September 2021, where premiers renew their commitment to improving health care, addressing the COVID-19 pandemic, and promoting a robust recovery for the region’s economy.

Northern Premiers’ Forum

The Northern Premiers’ Forum is comprised of the premiers of the three territories and was established under the Northern Cooperation Accord signed in 2003. This forum aims for greater cooperation among the territories and is used to develop common positions in advance of multilateral meetings. The most recent meeting of June 2021, held virtually, saw Northern premiers discuss priorities in the North, including health care, infrastructure, education and climate change. Northern Premiers also reacted to the confirmation of unmarked remains at the Kamloops Indian Residential School and called on all levels of government to support Indigenous Peoples in moving towards reconciliation.

First Ministers’ meetings

First Ministers’ Meetings (FMM) are called and chaired by the Prime Minister and are opportunities to demonstrate the Government’s leadership and commitment to intergovernmental collaboration. The FMM serves as a forum for consultation, information sharing, and discussion on national issues. Discussions at this table help to identify areas of concurrence or divergence on key policy files, valuable intelligence that can help FPT Ministers advance initiatives at the sector level. You provide advice to the Prime Minister on the approach and strategy for the meeting, including soliciting input on agenda items and following up on key issues raised at the meeting. PCO supports you in these functions.

As noted in the previous section, the Prime Minister chaired five in-person FMMs between 2015 and December 2018. A sixth in-person FMM was planned to take place on March 13, 2020, but was cancelled due to the pandemic. A First Ministers’ teleconference on COVID-19 was scheduled in its place on the same date.

COVID-19 FMM calls

Since the beginning of the pandemic, the Prime Minister has held 33 FMM calls to coordinate governments’ response to COVID-19 at the most senior level, and ensure complementarity in the measures taken by federal, provincial and territorial governments to limit the spread of the virus. First Ministers have called it “unprecedented collaboration”. Discussion topics have included border measures, vaccine rollout, testing, personal protective equipment (PPE), and contact tracing. Since fall 2020, more traditional issues, such as Canada-U.S. relations, have also been discussed. Importantly, these meetings led to:

• a joint statement by First Ministers on April 28, 2020, on principles for restarting the economy;
• the FPT Safe Restart Agreement, announced on July 16, 2020 – an investment of more than $19 billion to help PTs address key priorities, including testing and contact tracing, health care system capacity, vulnerable populations, municipalities, procurement of PPE, child care, and sick leave; and,
• the Safe Return to Class Fund, announced August 26, 2020 – an investment of up to $2 billion for PTs to adapt learning spaces, improve air ventilation, increase hand sanitation and hygiene, and purchase PPE and cleaning supplies.

December 10, 2020 FMM – Health care

A special virtual FMM took place on December 10, 2020, to discuss the continued response to the COVID-19 pandemic and vaccine rollout, and the future of health care, including sustainable funding and the Council of the Federation’s Canada Health Transfer request (see subsequent sections for further information). The meeting was organized at the request of premiers to have a focused discussion on health care funding. During the meeting, the Prime Minister acknowledged that additional federal funding is needed to accommodate rising health costs, but that further discussions would wait until after the pandemic ended. In the interim, First Ministers agreed to evaluate FPT fiscal capacity to seek a common understanding. [ * ]

Planning for FMMs in the new mandate

There will be an opportunity early in your mandate to provide your views on the approach and plan for First Ministers’ Meetings. [ * ]

More broadly, the pressure on the federal government to engage on the Canada Health Transfer (CHT) will continue. Premiers met on September 23, 2021, by teleconference to discuss what they characterized as the urgent need for a genuine partnership with the federal government so that provinces and territories can address crucial health priorities. Premiers also discussed the pandemic and the need to spur economic growth. Premiers asked the Prime Minister to hold a First Ministers’ Meeting on long-term, “unconditional health funding prior to the federal Speech from the Throne and certainly by the end of the calendar year.” [ * ] Here too, your guidance and input into planning this First Ministers’ Meeting will be essential.

[ * ]

Indigenous engagement

Since 2016, in-person FMMs have been preceded by a distinct meeting of First Ministers and leaders of the three National Indigenous Organizations (NIOs): the Assembly of First Nations (AFN), Inuit Tapiriit Kanatami (ITK), and the Métis National Council (MNC). These tripartite meetings are in addition to separate meetings directly between the Prime Minister and these NIOs. [ * ]

During the 2021 elections, and as part of earlier platform commitments, the Prime Minister committed to holding an FMM on First Nations, Inuit, and Métis priorities. [ * ]

[ * ]

The Council of the Federation

Canada’s provincial and territorial premiers are members of the Council of the Federation (COF), whose objectives are to:

• Promote interprovincial-territorial cooperation and closer ties between Premiers, to ultimately strengthen Canada;
• Foster meaningful relations between governments based on respect for the Constitution and recognition of the diversity within the federation; and,
• Show leadership on issues important to all Canadians.

British Columbia Premier John Horgan assumed the Chair of the Council of the Federation on September 16, 2021. Premier Horgan had served as Vice-Chair since June 17, 2021. Manitoba’s interim Premier Kelvin Goertzen assumed the role of Vice-Chair, and will return as chair in 2022, following British Columbia’s term.

Priorities

While COF meets regularly, including before each FMM, the Council’s last formal annual meeting was on September 24, 2020. At that meeting, the premiers reiterated their top three priorities and expressed disappointment that their first priority – rebalancing health care funding through an increase to the Canada Health Transfer – was not included in the Federal Speech from the Throne. The COF’s top three priorities are:

1. Rebalance Health Care Funding: COF is calling for an immediate and unconditional injection to the CHT to bring the federal share of health care funding from 22% to 35% of the Canadian total. COF wants this ratio to be maintained over time with a corresponding increase to the annual escalator.
2. Fiscal Stabilization Program: COF is calling for changes that would make it easier for provinces facing significant annual declines in revenue to become eligible for this federal program. The federal government partially addressed this request through the November 2020 Fall Economic Statement, announcing that the maximum payment would increase from $60 to $170 per capita. [ * ]
3. Infrastructure: COF has called for an increase to total federal support to PTs by $10 billion per year for 10 years. COF would also like to see the federal approach to infrastructure streamlined so current investments can be used without further delays to support PT priorities.

The COF met virtually on September 23, 2021, in the first days following the result of the federal election. In their meeting communiqué, premiers called on the Prime Minister to engage in a constructive dialogue on healthcare, and reiterated the need for a genuine and sustained FPT partnership to address crucial health priorities. Premiers advocated for a meeting prior to the Speech from the Throne and before the end of the calendar year to bring resolution to this long-standing demand.

Ministerial coordination Table on Federal-Provincial-Territorial Issues

Cross-departmental coordination on federal-provincial-territorial issues is a key element to successfully implementing the government’s agenda. Specifically, it facilitates more strategic collaboration with other orders of government, mitigates negative responses, provides an opportunity to address irritants proactively, and can help unblock challenging PT relationships. Various governance mechanisms are available to facilitate cross-departmental coordination – these can exist as part of the formal Cabinet structure, outside of it (i.e. a more informal “table” approach), or be a combination of the two.

Towards the end of the last mandate, the Minister of Intergovernmental Affairs established a Ministerial Coordination Table on Federal-Provincial-Territorial Issues to focus on implementation and strategic coordination of key federal FPT priorities. [ * ]

Meetings in the previous mandate

[ * ]

The Ministerial Coordination Table on Federal-Provincial-Territorial Issues served as a productive forum for strategic coordination in advancing key FPT files. [ * ]

Future of the Ministerial Coordination Table on Federal-Provincial-Territorial Issues

Should the Ministerial Coordination Table on Federal-Provincial-Territorial Issues be re-constituted, [ * ]

Going forward, it will be important to consider the best mechanism or mechanisms through which to ensure ongoing and strategic alignment among federal Ministers in their engagement with provinces and territories. The IGA Secretariat will provide you with recommendations and seek your views in the first weeks of your mandate on whether to re-establish the Ministerial Coordination Table on Federal-Provincial-Territorial Issues.

Provincial and territorial fiscal situation and fiscal transfers

Background

Concerns about the long-term fiscal challenges facing provinces and territories, affecting the overall health of the federation, will be a key ongoing theme in FPT discussions. Significant federal support and resilient economic activity throughout the pandemic led a majority of provinces to project smaller deficits in 2020-21 than initially forecast. Nevertheless, provincial debt burdens have increased considerably in 2020-21, from 30.7 per cent of GDP to 37.0 per cent in aggregate, and many provinces have signalled it would take longer than anticipated to balance their budgets. Part of this is linked to PTs’ abilities to raise revenues, and part of it is based on PTs’ decisions to keep tax rates lower.

[ * ]

The federal government distributes roughly 24% of the revenue it collects to other levels of government, most of which comes from the four major transfer programs, the Canada Health Transfer (CHT), the Canada Social Transfer (CST), Equalization, and Territorial Formula Financing (TFF).

The CHT and CST are distributed on an equal, per-capita basis to provinces and territories (PTs) and are unconditional, except for broad, principle-based conditions.

Equalization is a formula-based program that is a function of a province’s fiscal capacity, or a province’s ability to raise revenue. Even at identical tax rates, less wealthy provinces will raise less tax revenue. Equalization aims to compensate these lower capacity provinces by topping up their tax revenues to the amount that they would have received if they had an average fiscal capacity. Although the specific formula that determines these payments can be changed through legislation, the principle behind them was entrenched in the Canadian Constitution in 1982 (Subsection 36(2)):

"Parliament and the government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation."

Territorial Formula Financing (TFF) is similar to equalization in that it tops up territorial revenues, given their weaker fiscal capacities. Each territory’s grant is based on the difference between a proxy of its expenditure needs and its capacity to generate revenues.

Provinces can also draw from the Fiscal Stabilization Program, which provides financial assistance to provinces experiencing significant year-over-year declines in provincial revenue that are greater than 5% for non-resource revenue, and greater than 50% for resource revenues. Total payments for a province are capped at $170 per person (increased from the previous $60 limit by the 2020 Fall Economic Statement).

Current status

Provinces receive between 15% and 37% of their revenue from federal transfers. The CHT and the CST are the backbone of these transfers and are based on per capita calculations, making them meaningful for all provinces and territories. Differences in reliance on transfers mainly come from Equalization, as it is only distributed to provinces with below-average fiscal abilities.

Territories receive considerably more of their income from federal transfers, between 82% and 88%, mainly from Territorial Formula Financing (TFF). Territories also receive the CHT and CST.

[ * ]

Intergovernmental considerations

[ * ]

The constitutional requirement to make equalization payments was also the subject of a referendum in Alberta. The referendum would not affect the federal ability to maintain the program, but would signal Alberta’s desire to begin constitutional negotiations to remove the requirement. A positive result in a constitutional referendum is binding on the Government of Alberta, which, pursuant to provincial legislation, must take steps as soon as practicable to pursue the constitutional change (i.e., adopting a resolution to initiate the general procedure for amending the Constitution). To amend the Constitution, the resolution of the Alberta legislative assembly must then be supported by resolutions from the Senate and the House of Commons, and two-thirds of the provincial legislative assemblies representing at least 50 per cent of the Canadian population.

Since that threshold for constitutional change is high and unlikely to be met, [ * ]

Provincial and territorial profiles

Provincial and territorial profiles and bilateral issues

British Columbia

Fiscal situation

Solid real GDP growth around 2.3 per cent is expected in 2020-21 following a 5.3 per cent decline in 2020. A 4.7 per cent growth in employment is expected with employment in service sectors increasing. British Columbia’s deficit is forecasted to be $8.1 billion for 2020-21. Taxpayer-supported debt is forecasted to increase from $60 billion in 2020-21 to $92.7 billion in 2023-24, but will remain below 30 per cent of GDP in each year of the fiscal plan.

Context

On September 16, Premier Horgan assumed the role of Chair of the Council of the Federation. [ * ]

In July, British Columbia was the first province to conclude a bilateral Early Learning and Child Care agreement with the Government of Canada. The province also worked closely with the Government of Canada and Indigenous communities over the past summer on wildfire management and relief efforts.

[ * ]

Alberta

Fiscal situation

The impact of the pandemic was compounded by the collapse in oil prices in 2020. The province’s 2021 budget forecasts that real GDP declined by 7.8 per cent in 2020, but will rebound in 2021 and 2022 with 5.9 per cent and 3.7 per cent growth respectively.

Energy investment is anticipated to turn a corner in 2021 with rising oil production and prices. The unemployment rate is projected to fall gradually from 11.4 per cent in 2020 to 7.3 per cent in 2023. Alberta’s deficit for 2020-21 is estimated to be $20.2 billion, or 6.6 per cent of GDP; the deficit is $19.8 billion larger than the $7.3 billion deficit forecast in the 2020 budget, released in February 2020. The province will spend $3.1 billion in 2021-22 to support Alberta’s economic recovery.

Context

[ * ] Alberta held a referendum on whether to remove the principle of equalization from the constitution in conjunction with municipal elections on October 18. Results will be announced on October 26.

[ * ]

Saskatchewan

Fiscal situation

Saskatchewan expects real GDP growth of 5.7 per cent in 2021 and 3.2 per cent in 2022, following an estimated contraction of 4.2 per cent in 2020. An estimated 60 per cent of employment losses from 2020 will be recovered in 2021, though the entirety of employment losses from 2020 will not be recovered until 2023. For 2021-22, the deficit is expected to deteriorate to $2.6 billion, reflecting a number of new spending initiatives to support the economy, as well as to boost health and public safety. Among the economic measures with the largest financial impacts are an auto fund recovery rebate, further funding for the accelerated site closure program, customer electricity rebates, and tax expenditures to support home renovations and small businesses. Beyond 2021-22, the deficit is expected to improve gradually, with balance expected by 2026-27.

[ * ]

Manitoba

Fiscal situation

Manitoba’s deficit position took time to improve after the 2008-09 recession, growing to 1.4 per cent of GDP in 2015-16. The province exerted more fiscal effort in recent years and achieved balance in 2019-20, although the Parliamentary Budget Officer warned more policy adjustments are needed to achieve long-term fiscal sustainability. In its April 7, 2021 budget, Manitoba projected its deficit for 2020-21 at $2.1 billion (6.6 per cent of GDP), improving slightly to $1.6 billion (5.4 per cent of GDP) in 2021-22. Manitoba will not balance its budget until after 2024-25. The province’s net debt-to-GDP has increased to 39.9 per cent in 2021-22 (from 34.2 per cent in 2019-20), but will start to improve after 2021-22. The budget estimates that without the COVID-19 impacts on revenue and expenditure, the 2020-21 fiscal balance would have been in a surplus position.

Context

Premier Goertzen was selected as interim leader of the Progressive Conservative Party of Manitoba following the resignation of Premier Brian Pallister. A Progressive Conservative Party leadership election to select a permanent leader (and Premier) is being held on October 30, 2021.

Canada recently approved $40 million over two years for urgent repairs and continued operation of the Hudson Bay Railway to the Port of Churchill, beginning with $30 million in 2021-22 and $10 million in 2022-23, with 50 per cent of the funding designated for track repairs and 50 per cent for operations. This funding was announced on August 6, 2021.

[ * ]

Ontario

Fiscal situation

Ontario has recorded successive deficits since 2008-09 but has so far been able to stabilize its net debt-to-GDP ratio at around 40 per cent until the start of the pandemic. Prior to COVID-19, the government was planning a return to balance by 2023-24, mostly by limiting program spending. In its March 24, 2021 budget, Ontario projects a budgetary deficit of $33.1 billion or 3.7 per cent of GDP in 2021-22, an improvement from an expected deficit of $38.5 billion in 2020-21. The budget provided an updated Debt Burden Reduction Strategy, including a target maximum net-debt-to-GDP ratio. Given the uncertainty in the outlook, the 2021 budget includes both high and low growth scenarios. Under these alternative scenarios, a return to budget balance could occur as early as 2027-28 or as late as 2031-32. The high-growth scenario assumes the pre-pandemic level of real GDP is reached by the third quarter of 2021, while the low-growth scenario assumes the pre-pandemic level is not reached until well into 2022.

Context

Premier Ford is prioritizing recovery from the COVID-19 pandemic, red-tape reduction to foster investment and create jobs, and growth in its export sector. Through its 2021 budget, Ontario provided support for vaccine rollout, as well as to address shortcomings in the province’s long-term and hospital care. Economic supports are being provided to both individuals and businesses to help protect and create jobs and to reignite the province’s economic engine. Overall, Budget 2021 includes $51 billion in total supports over the next four years.

In May 2021, the Government of Canada announced it is contributing 40 per cent of funding for public transit projects in the GTA, up to a total of $10.4 billion. On July 29, 2021, the Government of Canada and the Government of Ontario announced a joint investment of more than $1.2 billion to bring high-speed internet to nearly 280,000 rural Ontario households. Discussions on an ELCC agreement did not conclude before the election, but there may be an opportunity to advance them early in a new mandate.

Ontario’s Speech from the Throne was delivered on October 4 and highlighted the efforts the province has undertaken in responding to the pandemic, focusing on priorities in healthcare, long-term care, and hospitals that have already been announced. The Speech reiterates Premiers’ calls for an increase to the CHT. There is a commitment to an economic and fiscal recovery that is fueled by economic growth, rather than tax increases or spending cuts, and a focus on infrastructure spending and avoidance of COVID-19 lockdowns. The Speech noted that Ontario will continue to work with the federal government on the issues that matter to the people of Ontario.

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Québec

Fiscal situation

Quebec expects real GDP to grow by 6.5 per cent in 2021 following a decline of almost 5.2 per cent in 2020. Real GDP growth is expected to slow to 1.5 per cent in 2024 and 2025. The recovery of the labour market will be supported by the pace of vaccinations and the easing of public health measures. The unemployment rate is expected to decline from an average of 8.9 per cent in 2020 to 6.3 per cent in 2021, but to remain above its pre-pandemic level throughout the forecast horizon.

Quebec forecasts a deficit of $3.8 billion or 0.7 per cent of GDP in 2020-21 (before transfers to the Generations Fund and the use of its stabilization reserve in-line with the province’s balanced budget legislation). The province’s net debt-to-GDP ratio is projected to peak at 45.5 per cent of GDP in 2021-22, before gradually declining to 43.4 per cent by 2025-26.

Context

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Over the past few months, the Governments of Quebec and Canada have concluded major bilateral agreements on high-speed internet, childcare, temporary foreign workers, affordable housing, virtual care and investments in the aerospace sector. On October 19, 2021, Premier Legault outlined his government’s priorities for the coming parliamentary year, including the economy, education, childcare, governance and health. He reiterated the Quebec government’s demand for increased federal health transfers without conditions. He also said that Quebec must have more immigration powers in order to respect Quebec’s capacity for integration and protect the French language. He announced that Quebec would end all extraction of hydrocarbons from its territory and create world-class hubs in the electric transportation, electric battery industry and green hydrogen production sectors. Premier Legault also said that Quebec would soon present a plan to add 100,000 qualified workers in the construction, information technology and engineering sectors. Mr. Legault noted it is the duty of Quebecers to fight racism while paying particular attention to Indigenous communities. A government motion also reintroduced Bill 96, affirming that French is Quebec’s official and common language.

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New Brunswick

Fiscal situation

The Province released audited financial statements for the 2020-21 fiscal year showing a surplus of $408.5 million - up from the $92 million forecast. The government is now projecting a $37.7 million surplus for the 2021-22 fiscal year instead of a budgeted deficit of $244.8 million. Minister Steeves credited the surplus to a one-time federal influx of $148 million received in July and said the Province cannot count on that same kind of funding in the future. He indicated the fourth wave of the pandemic is causing financial pressures because of the number of people who are hospitalized for long periods of time. By the end of March 2022, the province's net debt is expected to be $13.4 billion - an improvement of $701.3 million over the budget projection. New Brunswick has postponed plans to return to balance until the economy is on a stable footing.

Context

Premier Higgs was re-elected in September 2020 with a majority government. Budget 2020-21 outlines his government’s plan to address public health challenges and support a strong recovery while maintaining fiscal responsibility. The government is focused on six priorities: energizing the private sector; vibrant and sustainable communities; dependable public healthcare; world-class education; affordable, responsive and high-performing government; and the environment. [ * ]

Nova Scotia

Fiscal situation

Following four years of balanced budgets, Nova Scotia recorded a $706 million deficit in 2020-21 (1.6 per cent of GDP) and is projecting a $584.9 million deficit (1.2 per cent of GDP) in 2021-22. While the new government has yet to release its updated fiscal forecasts, Premier Houston indicated during the campaign that his party would invest an additional $553 million this fiscal year, with approximately $430 million directed to healthcare. Premier Houston committed to balancing the budget within 6 years.

Context

Premier Houston’s Progressive Conservative Party won a majority government in the province’s August 17, 2021 election, with 31 of 55 seats. On October 12, Nova Scotia’s Lieutenant-Governor opened the first session of the 64th General Assembly of Nova Scotia with a Speech from the Throne. The Speech was consistent with the Premier’s major campaign commitments with priority placed on significant investments in health care, mental health and long term care. Two tax-based measures were announced to increase competitiveness and boost the retention of skilled trades. Fixed election dates will be enacted this legislative session. Addressing the healthcare crisis is the government’s number one priority, with a focus on listening to healthcare providers and bringing forward solutions.

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Prince Edward Island

Fiscal situation

Prince Edward Island (PEI) has been able to bring its finances under control after recording a series of deficits starting in 2008-09. PEI recorded sizeable surpluses from 2017-18 to 2019-20, which enabled the province to achieve the lowest debt-to-GDP ratio east of Saskatchewan. The 2021 budget forecasted a $120 million deficit (1.7 per cent of GDP) in 2020–21, an improvement of about $50 million over 2020 projections. Looking forward, PEI is projecting a deficit of $112 million for 2021-22, followed by narrowing deficits through 2023-24. The net debt-to-GDP ratio is projected to rise temporarily but resume its declining trend in 2022-23.

Context

Premier King was elected in April 2019 to a minority government but subsequently secured a slim majority with a by-election victory in November 2020. PEI’s 2021-22 Budget outlined four priorities: healthcare, education, the environment and the economy. Concerning healthcare, the focus is on rural health, senior care, virtual care, mental health, and the recruitment of nurses. Education priorities include universal pre-kindergarten, affordable childcare, more childcare spaces, post-secondary grants, and additional front-line staff. With the Green Party as the Official Opposition, the environment and climate change are key areas of focus. [ * ] In July, Canada and PEI announced an agreement to support an average of $10 a day early learning and child care in the province by 2024.

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Newfoundland and Labrador

Fiscal situation

Newfoundland and Labrador (NL) has been recording large deficits since 2012-13. NL’s program spending per capita is by far the highest among provinces. The NL government had taken steps to correct its fiscal course since Budget 2016, including tax increases and spending level reductions. However, the COVID-19 crisis and crude oil price shocks have exacerbated NL’s fiscal position. NL projects that reduced economic activity and lower oil royalties will result in a deficit of 5.8 per cent of GDP in 2020-21. Its debt burden is projected to increase to 47.1 per cent of GDP, representing a significant increase from its low point in 2011-12, but still below the record 1998-99 level of 69.5 per cent of GDP. The province’s 2021 Budget committed to “modernize and transform government, improve service delivery, and address financial concerns.” It also committed to introducing balanced budget legislation; achieving fiscal balance within five years; and a surplus by 2026–27. Further fiscal measures are expected in response to recommendations from a series of expert panels, including the Premier’s Economic Recovery Task Force (PERT). PERT issued its report, The Big Reset, in May 2021 with 74 recommendations aimed at reducing deficit spending; streamlining operations; increasing transparency and accountability in publicly funded organizations; diversifying the economy; and leading a green transition.

Context

Premier Furey was elected in March 2021 and leads a majority government. His government’s priorities include stabilizing the province’s finances, achieving a net-zero economy by 2050, investing strategically to support the province’s burgeoning technology sector, and identifying ways to enhance the environmental performance of its extractives sector. The province is expected to rely on its extractives as the key revenue generator for the next several decades. A number of joint announcements were made with Newfoundland and Labrador in the lead-up to the federal election, including an agreement-in-principle on the financial restructuring of the Lower Churchill projects, and agreements on ELCC, virtual care and long-term care.

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Yukon

Fiscal situation

Yukon was one of two jurisdictions in Canada to record real GDP growth in 2020; the territorial economy is projected to grow by 6 per cent in 2021 and 8.1 per cent in 2022. Growth is lower in 2021 and higher in 2022 than what was presented in Yukon’s 2021-22 Budget from this May; revisions to the forecast in Yukon’s Interim Fiscal and Economic Update, released in October 2021, are primarily due to changes in mineral production expectations from local operating mines, with some production being shifted forward into 2022. Yukon’s 2021-22 First Supplementary Estimates, tabled in October, include $72.2 million in new expenditures (4 per cent increase over the Main Estimates and offset by $49.4 million in recoverable funding from Canada and third-parties), resulting in Yukon’s projected deficit for 2021-22 rising to $18.2 million, from the $6.6 million annual deficit forecast in the 2021-22 Budget. Spending increases are largely the result of COVID-19 spending, the response to the “unprecedented flood response” this summer, and additional support for early learning and childcare (nearly $10 million for Yukon’s ELCC initiatives, an increase that is 100 per cent recoverable from Canada).

Context

Premier Silver’s Liberal Party was re-elected to a second term in office in April 2021. The Yukon Liberal and NDP Caucuses have negotiated a Confidence and Supply Agreement, which is in effect until January 31, 2023 to support a Yukon Liberal government. [ * ] Bilateral agreements on virtual care, child care, and long-term care have been concluded with Yukon in recent months.

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Northwest Territories

Fiscal situation

NWT experienced economic contraction in 2019 owing largely to weakening business investment (reflecting declining mineral capital investment), and in 2020 amid the pandemic (NWT’s GDP dropped by 10.4 per cent last year, the largest in Canada).
NWT is anticipating an operating deficit of $31.7 million in 2020-21, returning to a projected surplus ($68 million) in 2021-22. Territorial debt will increase to $1.59 billion by March 2022, leaving $215 million in available borrowing room. NWT’s federal borrowing limit was raised from $1.3 billion to $1.8 billion in summer 2020 (NWT had requested an increase to $2.2 billion, the figure at which it estimated that its long-term infrastructure plan could be achieved). While the increase of federal transfers to the Territory has been welcome in 2021-22, Finance Minister Caroline Wawzonek’s Budget 2021 Address noted that NWT’s fiscal independence has weakened as a result.

Context

Caroline Cochrane was selected as Premier of the NWT on October 24, 2019. In her September 2, 2021 letter to federal party leaders, Premier Cochrane posed a series of questions on their plans and views, if elected, on how to support territorial priorities including fiscal flexibility and capacity to invest in a number of areas (e.g., infrastructure including housing, affordable internet and greener energy sources), economic development, climate action, and reconciliation. Premier Cochrane has since said that she looks forward to working with the newly-elected federal government on fiscal flexibility, infrastructure investment, economic recovery and diversification, and climate change.

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Nunavut

Fiscal situation

Nunavut is anticipating an operating deficit of $21.4 million 2020-21 (0.6 per cent of GDP), narrowing to $14.2 million in 2021-22 (0.3 per cent of GDP). The forecasted operating deficit includes a $75 million contingency fund to manage unforeseen spending pressures. Territorial borrowing remains below the federal borrowing limit of $750 million ($446.8 million as of December 2020), which was last increased in summer 2020. Nunavut was of one of two jurisdictions in the Canada to record growth in 2020 with a real GDP increase of 2.7 per cent (this is, however, a significant decline from the projection of 12.9 per cent growth in Budget 2020, released last February). Economic growth is largely attributable to developments in the gold-mining industry while its long-term prospects are linked to the territory’s mineral potential, global commodity prices, and workforce education and skill development to integrate local residents into the resource development sector.

Context

Joe Savikataaq was selected as Premier of Nunavut on June 14, 2018. Premier Savikataaq has generally sought to foster collaborative relations with the federal government; specifically, and as identified in his August 16 letter to federal party leaders, to address persistent gaps that Nunavummiut face with respect to housing, infrastructure and health. Following the October 25 territorial election, incoming MLAs will convene as the Nunavut Leadership Forum to select the Speaker, Premier and Ministers in a secret ballot vote on November 17.

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