June 9, 1998
(Executive Council)

The following is being distributed at the request of the Conference of Atlantic Premiers:

Redesign of Fiscal Arrangements

At their meeting in Fredericton, Atlantic Premiers reviewed the progress of negotiations for a Framework Agreement on the Social Union. They noted that the 1996 and 1997 Annual Premiers' Conferences asked that provincial and territorial finance ministers work with their federal colleague to ensure that the redesign of fiscal arrangements was coordinated with the work on Social Policy Renewal. The premiers identified shared concerns which they believe must be addressed in the development of any new fiscal arrangements.

Atlantic premiers have serious concerns over the increasing spending pressures in health care and social programs. This continuing problem has been made particularly difficult for the provinces in light of the substantial withdrawal of federal financial support with the introduction of the Canada Health and Social Transfer (CHST).

The federal government's major fiscal priority should be the restoration, and enhancement, of long-term federal/provincial financing arrangements in support of provincial health and social programs. A significant portion of any additional federal dollars not applied to federal debt should be used to strengthen the major existing transfers of Equalization and CHST.

The Atlantic premiers share the view that enhancement of the Equalization program should be a priority for the federal government so as to further reduce the considerable disparities in relative fiscal capacity which continue to exist under the current program. CHST cash funding should be increased beyond present levels, so as to restore some of the significant federal cutbacks of social program funding. Allocation of this funding should be fair and equitable, taking into account social and economic conditions.

The premiers expressed serious concerns with the concept of re-balancing the CHST towards an equal per capita funding formula. Premiers believe that fiscal arrangements should be sensitive to the specific circumstances and needs of the region.

Given high essential fixed program costs, Atlantic provinces share the concern that present (and potentially future) funding arrangements are highly vulnerable to population change and that there is little protection in the event of population loss.

Atlantic premiers also have concerns over any shift in federal funding arrangements that would substitute greater tax point transfers for cash. Given that the value of per capita tax points differs across provinces, this would invariably lead to an increase in regional disparities over the longer term, resulting in increased provincial inequities. The only way that all provinces might derive the same benefit from a full tax point transfer is to equalize to the top province.

Atlantic premiers recognize the importance of the federal government's role in meeting the needs of the region, assisting in the development of our opportunities, and in ensuring that the provinces have adequate funds to enable them to provide levels of public programs and services that are comparable to those in other jurisdictions. Federal-provincial collaboration and joint funding should continue.

Contact: Kim Thomson, information officer, Conference of Atlantic Premiers, P.O. Box 2044, Halifax, NS, B3J 2Z1, (902) 424-8975.

1998 06 09                                   12:10 p.m.