The federal government has rolled out emergency aid for businesses, the unemployed, seniors, students, parents, low-income essential workers, the homeless, women’s shelters, cultural industries and farmers.
There is, however, one rather important constituency still not on the list: the provinces. They are the level of government that runs most of the country’s public services, including health care. And as a result of COVID-19, their finances are in a bad way.
While the private sector must pull back in a recession, with people and companies cutting spending and reducing debts, the last thing wanted in the sharpest downturn since the Great Recession is for the public sector to do likewise. If provinces feel compelled to cut spending, that will only worsen the economic situation. It also risks short-changing the health and public-health systems, which are the keys to overcoming the virus and resuscitating the economy.
Ottawa should help the provinces, and in a big way. But at least three things may be holding back the feds.
There’s the fact that the provinces collectively spend more than Ottawa. To make a difference, a federal cheque needs 11 digits after the dollar sign.
There’s the question of how best to assist the provinces.
And there’s the political calculus. The mass of transfers to provinces and territories, budgeted at $81.6-billion this year, fly under the radar of public opinion. Federal emergency funds for business and people, rolled out over the last month, are directly experienced by Canadians; the impact is personal and ongoing. Money for the provinces, despite its real impact, risks being just a one-day news story.
If a dollar falls in the forest, and voters don’t hear it, will it make a sound in the next election?
So here’s a plan for the Trudeau government to help the provinces, while boosting badly needed provincial spending on the thing Canadians are, with good reason, most worried about right now: health.
Ottawa’s current support for the provinces in this area is the Canada Health Transfer, or CHT. Each province’s share is based on its population. This year, Ottawa is scheduled to distribute $41.9-billion to the provinces, and that figure will increase next year by 3 per cent, to just over $43-billion.
Ottawa should top up the CHT. Not a small adjustment. Not a little tinker. A big, one-time, emergency payment.
We’d suggest that Ottawa give the provinces an extra $42-billion. Spread it over two years, basically sending the provinces three years of CHT in two years.
Instead of transferring $85-billion to the provinces this year and next for health care, give them $127-billion.
Right now, Canada urgently needs to strengthen health care in preparation for the next round of battle against COVID-19. The country needs to bulk up the long-term care system, to control current outbreaks and to prevent their recurrence. It needs better funding of public health. It needs support for all the businesses that will reopen, so they can operate while maintaining physical distancing. Each province also needs the tools to test far more people, and robust systems, likely in the form of an army of trackers, for tracing the contacts of every infected person.
A bulked-up CHT would fund that. Call it the Emergency Health Program. It’s needed to tackle an unprecedented national health emergency.
How big an impact would a lot more health money have on the provinces? Take Ontario. Last year, it received $15.6-billion for the CHT, but it spent more than four times as much – $64.4-billion – on the health care sector. In March, it said it expected to spend $67.8-billion this year, an increase of just 5.3 per cent. Given the expanding demands for staff, equipment and testing, from hospitals, public health agencies and long-term care homes, it’s difficult to believe that budget plan is realistic.
Some, such as the Premier of Manitoba, have called on Ottawa to borrow on behalf of the provinces. We get the impulse, but the approach is not ideal. For the sake of federalism, Ottawa shouldn’t upload provincial balance sheets.
However, Ottawa should take advantage of its ultra-low borrowing cost. The yield on the 10-year Canada bond is a mere 0.6 per cent, which means servicing $100-billion in debt costs just $600-million a year.
That gives Ottawa the room to help the provinces spend where that spending is most needed: health care.