Needy oil provinces to get $1B relief

• Bill Morneau’s federal budget in March is set to include $1 billion in targeted relief for oil-producing provinces that are coping with a severe economic downturn.

Officials and political insiders speaking on condition of anonymity said the Liberals will roll out a number of measures, from extending employment insurance coverage to money for new specific infrastructure projects, to be funded from a $1-billion pot earmarked to buffer the impact of falling oil prices.

Alberta received $250 million in stabilization funding on Monday for the current fiscal year. But that fund is accessible only to provinces whose revenues have fallen by 5 per cent or more, ruling out Saskatchewan.

Newfoundland and Labrador also applied for funds under the stabilization program but did not receive any money when the finance minister unveiled his latest fiscal update. Since payments are capped at $60 for every provincial resident, the benefits for smaller provinces are relatively modest.

But provinces hit hard by the oil price collapse have been pushing for broader relief, such as temporary changes to the accessibility and duration of employment insurance.

“I asked the prime minister to consider ways to ensure employment rules make access to EI easi er for Albertans and to consider increasing the length the benefit is available,” said Premier Rachel Notley after meeting Justin Trudeau earlier this month.

A spokesman for Morneau said he would not comment ahead of the budget, set for release on March 22. But Trudeau has previously said Albertans could expect to see “concrete measures” in the fiscal blueprint.

Separately, Saskatchewan has asked the federal government for $ 156 million to reclaim and clean up orphaned oilwells, using unemployed oilpatch service workers.

Earlier this month, Regina MP Ralph Goodale said the government is “actively engaged” with such provinces as Alberta and Saskatchewan to work out measures that “will provide the appropriate degree of relief and support in terms of the immediate dislocation of employment, the more medium- term challenges and opportunities in relation to infrastructure.”

One source suggested earmarking funds for the oilproducing provinces would open the door to a bailout for Bombardier, which might be politically difficult if there were no new funding for the West.

Both measures, if included in the budget, will add to a deficit that is likely to top $ 25 billion in the next fiscal year.

However, the Liberals are convinced that the slowdown in growth makes it doubly important to engage in stimulus spending.

“A less ambitious government might see these conditions as a reason to hide, to make cuts or be overly cautious,” Morneau told a town hall audience i n Ottawa Monday.

Most economists believe Canada has the fiscal flexibility to run large deficits. But there are concerns that higher structural spending, excluding infrastructure, will make it harder to return the budget to balance. Such spending should be covered by revenue increases and/ or program cuts, not larger deficits and higher debt, wrote economists C. Scott Clark and Peter Devries in The Globe and Mail.

“Government spending should be financed by current taxpayers, not future taxpayers,” they wrote.