Limits in the growth of Equalization payments net feds $14.5B over 10 years, says PBO

The Parliamentary Budget Officer (PBO) today released his assessment of federal transfers to provincial and territorial governments over the last decade under the three largest programs: the Canada Health Transfer (CHT), the Canada Social Transfer (CST) and Equalization.

The CHT and CST were designed to support provincial and territorial expenses in specific areas. Equalization payments, paid out of federal revenues, are made to provincial governments to address disparities in fiscal capacities between the provinces and are enshrined in the Constitution.

The report, Federal Support through Major Transfers to Provincial and Territorial Governments, finds that total federal transfers under the CHT, CST and Equalization programs increased from $47.1 billion to $71.7 billion from 2008-09 to 2018-19.

“The Government realized savings of $14.5 billion over 2010-11 to 2019-20 as a result of limiting the growth in Equalization payments to nominal GDP growth,” says Yves Giroux, PBO. “This constraint on Equalization growth prevented a significant increase in payments that would have otherwise occurred after the 2009 recession.”

Since 2010-11, six provinces have been ongoing recipients of Equalization payments, while Newfoundland and Labrador, Saskatchewan, Alberta and British Columbia did not receive Equalization payments during this period. On a cumulative basis, Ontario accounted for $8.1 billion of the $14.5 billion in federal savings. Quebec was the next largest contributor, accounting for $4.6 billion of the federal savings.

Over the same period, the CHT increased from 27.7 to 32.3 per cent of provincial-territorial government health spending in CHT-targeted categories. In contrast, most provinces observed a decrease in federal CST support from 13.6 to 13.3 per cent of targeted spending on social services.