Provinces risk their finances by relying on federal transfers for programs in areas of provincial jurisdiction

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CALGARY—As the federal government promises to increase spending in areas of provincial jurisdiction, including pharmacare, dental care, and childcare programs, provincial policymakers should remember that future transfers are not guaranteed, potentially leaving enormous costs to the provinces to continue those programs in the future, finds a new study released today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

“When the federal government makes spending commitments in areas of provincial jurisdiction, there is always the risk that when the federal government changes, or federal government priorities change, the provinces will be on the hook to finance those programs and their increasing costs,” said Tegan Hill, a senior economist with the Fraser Institute and co-author of Repeating the Past: Provinces Accept Federal Money at Their Peril.

The study draws on the experience of Canada’s recent past—specifically the 1990s—when the federal government reformed and reduced transfers to the provinces to tackle the federal deficit and mounting debt.

In 1996-97, the then-existing federal transfers to the provinces (CAP and EPF) were combined into the Canada Health and Social Transfer, but those payments were $41.0 billion (51 per cent) lower over a three-year period compared to what the provinces expected based on previous transfers.

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