Federal budget expected to include $7-billion to provinces for health, municipalities and COVID-19 funding

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Ottawa plans to double to $4.4-billion in next month’s budget a fund cities and towns use to build infrastructure as part of a package of COVID-19 spending dedicated mostly to health care costs and vaccination efforts.

The one-time increase of the gas-tax fund, which was called for last month by the NDP, would mean an extra $2.2-billion this year for municipalities and First Nations communities. The proposed boost was lauded by mayors and groups representing municipalities, many of which have major infrastructure backlogs.

“Doubling the funding to municipalities this year is a clear recognition that cities, including Toronto, will drive Canada’s economic recovery in the wake of COVID-19,” Toronto Mayor John Tory said in a statement released by his office.

The bulk of the $7.2-billion package announced Thursday is a one-time funding boost to the provinces and territories for health care, $4-billion for what Deputy Prime Minister Chrystia Freeland described as “immediate” needs and $1-billion to aid vaccination efforts.

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“COVID-19 has placed extreme pressure on health care systems across the country. The pandemic is still here and many parts of our country are facing the threat of a third wave right now,” she told reporters at a virtual announcement.

“This money, flowing through the Canada Health Transfer, will … ensure that our health care system does not buckle under the continued strain of the pandemic, under the pressures of the third wave and new variants.”

A statement from provincial and territorial leaders applauded the funding but said that more was needed. The premiers reiterated their request that Ottawa increase its share of health care costs from 22 to 35 per cent, which they said would require an additional $28-billion in federal funding.

There were few details Thursday about the new health funding. According to the federal government, the $4-billion was intended to address pressures in the medical system, including backlogs accessing care amid the pandemic. The $1-billion is “to ensure the COVID-19 vaccine roll-out continues to accelerate and keeps pace with growing supply.”

Ms. Freeland said that more details about the spending will be included in the budget, scheduled for April 19.

As with previous years, the gas tax money must be invested in local infrastructure such as transit, garbage and broadband in cities, many of which are facing serious economic fallout from the pandemic. Revenues such as transit fares have been down substantially over the past year even as costs for shelters and public health went up.

Toronto city council in February passed an operating budget with a $650-million hole in it, hoping that higher levels of government would help close the gap. A number of subsequent announcements by the province have cut the deficit roughly in half.

In its budget Wednesday, Ontario touted $1-billion in recent funding announcements for municipalities to help cover operating costs, homeless shelters and transit system shortfalls.

The province has repeatedly urged Ottawa to step in with more money for local governments – on top of the cash the federal government committed last year as part of the Safe Restart Agreement. Under that deal, Queen’s Park and Ottawa agreed to share the cost of a $4-billion cash infusion for Ontario municipalities.

On Thursday, the Ontario government welcomed the gas-tax announcement and pushed for more federal money.

“We continue to call on the federal government to match our previously announced $500-million in provincial funding for municipal operating budgets, which will be critical as they continue to recover from the ongoing impacts of COVID-19,” Stephanie Bellotto, spokeswoman for Steve Clark, Minister of Municipal Affairs and Housing, said in an e-mail.

What Ottawa dubs the “gas tax fund” is no longer linked directly to money raised through the gas tax, meaning that this year’s doubling will have no effect on how much Canadians pay at the pumps. Reflecting that disconnect, the government plans to rename it the Canada community-building fund.

The proposed increase was praised by the Federation of Canadian Municipalities.

“[Gas-tax funding] flows directly to our cities, and we turn that very quickly into better lives for residents,” Don Iveson, chair of the FCM’s big city mayors’ caucus, said in a statement.

“That means everything from better transit for lower emissions to better recreation facilities that promote health and social inclusion.”

With a report from Bill Curry in Ottawa

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