When Ontario Finance Minister Charles Sousa was asked in a meeting with The Globe and Mail's editorial board this week about whether he has a problem with Ottawa heading for ahead-of-schedule budget surpluses while Ontario and other provinces struggle with deficits, he replied that he's fine with it – "provided it's not on the backs of provinces." And it's not – on the surface.
Ottawa can point to its annual transfer payments as solid evidence that its budget-balancing quest hasn't short-changed its provincial counterparts' annual budgets. Since the economic recovery began, federal transfers to the provinces have risen, each year, at a higher rate than both inflation and federal revenues. Indeed, with the exception of Newfoundland (whose transfers declined when payments under the 2005 Offshore Accord expired), no other province has seen its transfer payments decrease since Ottawa pledged in 2010 to gradually eliminate its deficit; the median increase in transfers to provinces over that time was 15 per cent.
Federal Finance Minister Jim Flaherty deserves praise for reducing deficits without dipping into the transfer cookie jar; some of his predecessors in the job weren't able to resist the temptation. But transfer payments aren't the only measure of sharing fiscal burdens in this country. In the face of a national infrastructure crisis that requires governments to step up to the plate with substantial long-term investment in the name of protecting Canada's future economic competitiveness, Ottawa has kept its eye on its balanced-budget ball while the provinces have been taking on additional weight that many can ill afford.
Yes, the federal government has pledged $53-billion for infrastructure spending over the next 10 years. That's not chump change. But a report from the Parliamentary Budget Officer (PBO) last April found that Ottawa had routinely underspent its infrastructure budget since it first unveiled a long-term commitment in 2007. And the 10-year commitment affirmed in the 2013 budget doesn't represent a significant increase in Ottawa's existing spending levels; indeed, in real (inflation-adjusted) terms, the PBO projected that federal infrastructure spending will actually decline over the next decade.
Meanwhile, Ottawa's $5-billion-a-year plan pales in comparison with what the provinces themselves are doing. Ontario alone has been spending, on average, nearly $11-billion a year on infrastructure since 2006, and has budgeted for nearly $12-billion a year over the next three years. Quebec plans to spend more than $9-billion a year on infrastructure over the next decade. British Columbia is budgeting $6-billion a year over the next three years; Alberta is budgeting $5-billion a year. These four provinces have committed to a combined six times as much annual spending on infrastructure as Ottawa has – on a combined revenue base about equal to that of the federal government.
A 2007 study by the Federation of Canadian Municipalities and McGill University estimated that Canada has more than $300-billion of existing infrastructure repair and expansion needs. While much of this would not traditionally fall under Ottawa's jurisdiction, the national economic benefit of healthy infrastructure – and, on the other hand, the risk to investment and economic growth if infrastructure needs are not met – are compelling reasons for Ottawa to take a more active funding role.
A case in point is the mineral-rich Ring of Fire region in Northern Ontario. More than $2-billion of infrastructure is required to meet the needs of investors who want to develop the region, which Mr. Sousa called a potentially "massive revenue generator" for government. Ontario wants Ottawa's help to pay for it.
The federal government has given itself the financial flexibility to help on this, and other economically lucrative projects across the country. What it needs now is the vision.