Finance Minister Bill Morneau is asking his department for a quick analysis of provincial calls for an expanded stabilization program, and wants the report in January.
The deadline suggests the analysis will be completed in time for Mr. Morneau to factor it into his decisions on the 2020 federal budget.
Mr. Morneau made the announcement after two days of meetings in Ottawa with his provincial and territorial counterparts, who presented him on Tuesday with a proposal to expand the Fiscal Stabilization Program. The program provides special financial transfers from Ottawa when a province experiences a steep and sudden drop in tax revenue owing to economic factors. Provinces say its qualification limits are outdated and its maximum payments are too small.
“We need to take a look at what’s being proposed,” Mr. Morneau said on Tuesday afternoon. "The system, as originally set up, was intended to deal with provinces that are going through difficult financial times, and I don’t think anyone would argue that Alberta and Saskatchewan and Newfoundland and Labrador aren’t going through difficult financial times. So I think we need to look at it in that context. We plan on doing that. But we’ve got no conclusions until we do the analysis.”
A prolonged slump in oil prices has hurt government finances and increased unemployment in the three energy-producing provinces.
The proposal would remove the program’s cap of $60 per capita. The provinces also want lower thresholds to qualify, and for changes to be retroactive to 2015. The current program applies only when a province has a year-over-year decline in its non-resource revenues greater than 5 per cent. A decline in resource revenues is taken into account only if it exceeds 50 per cent.
Alberta Finance Minister Travis Toews said the changes would produce a $2.4-billion payment for his province. Saskatchewan and Newfoundland and Labrador would also likely qualify if the program is expanded retroactively.
The provinces and territories also asked Mr. Morneau to increase federal health transfers, with some provinces saying this is more important than a national pharmacare program, which the federal Liberals promised to work toward during the 2019 election campaign.
“That’s the priority," Quebec Finance Minister Eric Girard said. "Before looking at what more we can do, we have to start by properly funding the current [health-care] system.”
Manitoba Finance Minister Scott Fielding said his province already has pharmacare, and that increased health transfers would allow provinces to focus on their own priorities.
“We’re very proud of our pharmacare system in Manitoba, so we would say that isn’t as big a priority as things like wait times in ERs and [for] knee and hip replacement," he said.
The calls for billions more in transfer payments came one day after Mr. Morneau released a fall update that pegs next year’s deficit at $28.1-billion, which is $8.4-billion higher than Mr. Morneau projected in his budget in March. The revised deficit figure is before accounting for many Liberal campaign promises.
Mr. Morneau noted that the finance ministers had a private discussion about the limits on new spending.
“We have multiple demands on the federal government,” he said. “We talked about the reality that we all face fiscal constraints. And so that analysis will be done and it will be done in a fair way and then we’ll have to take a close look at how we respond.”
Several finance ministers acknowledged that Mr. Morneau has larger-than-expected deficits, but pointed to an analysis from the Parliamentary Budget Officer that found provincial governments have far more serious budget pressures, primarily because of high debt and health-care spending pressures.
Mr. Toews said Alberta views higher stabilization transfers as urgent.
“I was very satisfied with the robust, frank discussion,” he said. "I can’t overemphasize the fact that timing’s important here. Certainly within Alberta, there’s a sense of alienation out west. … We trust that the federal government will move quickly on that request.”
Newfoundland and Labrador Finance Minister Tom Osborne said he’s confident Mr. Morneau will support expanding the stabilization program.
“I get a sense from the federal minister that they’re open to our proposal," he said. "I’m absolutely certain we’ll see a refined program.”
Prince Edward Island Finance Minister Darlene Compton said Ottawa must recognize that health-care costs are growing as Canada’s population ages.
“There’s never enough money for health care, that’s for sure,” she said. “And with the aging population we have in Prince Edward Island, a lot of people moving there to retire, it’s definitely a concern for the island.”