Premier Grimes to represent province�s concerns at Annual Premiers� Conference

Premier Roger Grimes will be in Victoria, British Columbia, from August 1-3 to attend the 42^nd Annual Premiers� Conference (APC). The premier will be joined by Joan Marie Aylward, Minister of Finance and President of Treasury Board, and Tom Lush, Minister for Intergovernmental Affairs. Both ministers will provide advice and support to the premier on a number of matters.

A number of important issues will be addressed at this year�s conference. Among the key issues of concern for Newfoundland and Labrador include equalization, health care, post-secondary education, skills training, student debt and energy.

One of the most important issues to be addressed at the APC is the equalization program. "In recent days there has been much media coverage surrounding the equalization program and there is a misconception in many parts of the country that the wealthier provinces and their residents are somehow paying extra taxes or contributions to equalization recipient provinces. This misconception leads some to believe that equalization is a form of �welfare� for poor provinces," said Premier Grimes. "What everyone in Canada should understand is that we want nothing more than what is stated in the Constitution. The Constitution commits the federal government to making equalization payments, �...to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation.� This commitment is not being met."

Premier Grimes said while many fiscal challenges face the nation, now is the time to fix equalization. "It is essential that immediate improvement of the equalization program be made by removing the �ceiling� that the federal government has arbitrarily imposed which restricts the normal growth of the program, returning to a 10 province standard where equalization is based on the average revenues of all provinces rather than only five provinces, and ensuring comprehensive revenue coverage by reversing decisions to exclude some provincial revenue sources from the formula."

Health care is an area where the federal government needs to make further investments, said Premier Grimes. "Last September, the federal government partially restored previous cuts to the Canada Health and Social Transfer (CHST) but despite this, the federal government is paying only 14 per cent of provincial health care costs compared to 1994-95 when it contributed 18 per cent."

At the conference, Premier Grimes will be pressing his colleagues to improve partnerships among provinces and territories and to cooperate with the federal government to bring about substantial improvements in the way that post-secondary education, skills training and student debt are managed in Canada.

"Governments must work together to ensure that people have the education and skills training they need to compete in the �new economy�," said Premier Grimes. "We must ensure that colleges and universities have the necessary funding to maintain their infrastructure and we must ensure that getting a good education does not also mean a crushing debt load."

Premier Grimes said the recently announced U.S. energy strategy presents Newfoundland and Labrador with a significant development opportunity in energy resources. "I will be setting out the province�s view that the federal government has a clear obligation to consult with both energy producing and energy consuming provinces on the development of any agreements related to North American energy markets."

Other important issues to Newfoundland and Labrador which are on the agenda for discussion include early childhood development and child protection, and infrastructure needs as they relate to water quality and transportation.

While bulk water exports is not on the formal agenda, Premier Grimes is certain the matter will be raised in private discussions.

Media contact: Carl Cooper, Office of the Premier, (709) 729-3960.

INTER-PROVINCIAL/TERRITORIAL COOPERATION

1. Energy
2. Health
    - Pharmaceutical Issues
    - Health Human Resources
3. Post-Secondary Education/Skills

4. Fiscal Imbalance and Health Care Financing
5. Infrastructure
    - Water
    - Transportation
6. SUFA/Social Policy Renewal
    - Third-Year Review
    - Report to Premiers
    - Dispute Resolution
7. Children
    - Early Childhood Development (ECD)
    - Child Protection
    - National Child Benefit (NCB) Report
8. Agriculture

Federal cash transfers (CHST and Equalization) are a major component of the province�s revenue structure. In recent years; however, the federal contribution has fallen considerably behind expenditure pressures all provinces are experiencing in social programs, especially in health. Even though the federal government has been recording significant surpluses while many provinces struggle to balance their budgets, federal support for social programs, such as health, education and social services, through the CHST remains today below the level it was in 1994-95. The equalization program is also constrained by federal action, and inaction, from satisfying its Constitutional mandate. It is time for the federal government to renew its financial partnership with provinces so Canadians everywhere can have access to the social programs we deserve.

Commentary

Major cutbacks were implemented with the introduction of the Canada Health and Social Transfer (CHST) in 1996-97. While the province received $425 million in federal support for social programs in 1994-95, this year our CHST entitlement is only $333 million, more than $90 million below the level of eight years ago.

At the September 2000 First Ministers meeting, a partial restoration of CHST transfer cuts was announced. However, despite this, CHST cash for the country will not return to the 1994-95 level until next year when it will reach $19.1 billion (vs $18.7 billion in 94-95).

Due to federal changes in the method of allocating the CHST and our declining population, next year, when the CHST reaches the 1994-95 funding level, the share this province will receive will be $82 million below what it was eight years ago.

The Constitution commits the federal government to make equalization payments to enable provinces to provide reasonably comparable levels of public services at reasonably comparable levels of taxation. The adequacy of equalization to achieve this constitutional mandate is constrained by a number of factors including the level of the equalization standard and the existence of a ceiling that places a cap on program growth.

The constraints on the equalization program are evident in its decline as a share of GDP. Nationally, in 1994-95 equalization represented 1.12 per cent of GDP, but has now declined to 0.97 per cent and is continuing to fall. Provincially, it has declined from 9.34 per cent to 7.82 per cent.

The ceiling resulted in effectively no equalization growth in 2000-01, while GDP grew at more than eight per cent.

The federal government, while recording large surpluses and announcing large multi-year tax cuts, cites "affordability" as its rationale for constraining equalization, while the people of Newfoundland and Labrador are left to only imagine what it would be like to have reasonably comparable public services and reasonable comparable levels of taxation.

Graphs:

• CHST Cash Entitlements in Canada - 1994/95 - 2005/06p; 
• Federal Transfers for Social Programs, Newfoundland and Labrador - 1994/95 - 2005/06p; 
• CHST Cash as a Share of GDP in Canada - 1994/95 - 2005/06p 
• Equalization as a Share of GDP in Canada - 1994/95 - 2005/06p

2001 07 30                   2:15 p.m.