Morneau ‘open’ to revisions in stabilization

Harpauer says federal plan insufficient when provincial economies contract

The federal government is making no commitments, but federal Finance Minister Bill Morneau says he is “open to considering” changes to a program aimed at providing financial assistance for provinces that experience an economic downturn.

That is likely welcome news for Saskatchewan Finance Minister Donna Harpauer, who is expected to raise the Fiscal Stabilization Program when she meets with Morneau and her provincial and territorial counterparts in the nation’s capital this week.

“Program funding is not sufficient for provinces that experience unexpected fiscal challenges, and the program needs to be more responsive to economic shocks and downturns,” Harpauer wrote in a prepared statement. She was not available for an interview.

“Saskatchewan is calling on the federal government to make the necessary immediate improvements to fiscal stabilization.”

Harpauer wants the federal government to remove the $60-per-capita cap on stabilization payments, lower the qualifying threshold for non-resource revenue and make the changes retroactive to the 2015-16 fiscal year.

Those are the same requests made by the provincial and territorial premiers earlier this month, which have taken precedence over — but not simply replaced — Premier Scott Moe’s list of more combative postelection demands.

The new proposals are seen by the province as achievable in the short term compared to the longer fight over the equalization formula.

That is not good enough for the Saskatchewan NDP, which is accusing Moe of not doing enough on the equalization file. The NDP previously sued Ottawa over the exclusion of resource revenue from the formula; the Saskatchewan Party government later dropped the suit.

NDP Leader Ryan Meili called the government’s proposals “reasonable,” but questioned why Moe and Harpauer were not prioritizing the fight for a fairer equalization program, funds from which could be invested in government programs and reducing emissions.

“Obviously, equalization is more contentious. But just because it’s more contentious doesn’t mean that it’s not still unfair and not still something that needs to be fixed,” Meili said, adding that the various requests are not an “either-or” situation.

Speaking in Ottawa on Monday, Morneau signalled he is willing to look at the stabilization program, which functions as an insurance program under which provinces can make claims up to 18 months after the fiscal year in question.

Established in the 1980s, the program is designed to account for economic downturns rather than changes in provincial policy. Non-renewable resource revenue is included only if the annual decline exceeds 50 per cent.

If its requests are granted, Saskatchewan would likely qualify for payments for which it was not previously eligible.

Saskatchewan did not qualify for the program between 1982-83 and 2015-16; according to the provincial Ministry of Finance, it was the only province not to qualify during that period.

Saskatchewan’s claim for the 2016-17 fiscal year is under discussion with Ottawa.

“We’ve been clear this is a program that hasn’t been reviewed for a long time,” Morneau said of fiscal stabilization, which, according to a recent University of Calgary study, “distinctly disadvantages” provinces with resource-dependent economies.

“But until I hear what the views are, the different views from different parts of the country, and until I hear what other issues are on people’s minds, I can’t evaluate what actually we should do in that regard,” Morneau added.

According to the U of C study, collapsing oil prices caused Alberta’s revenues to contract by $8.8 billion in 2015, or $2,114 per person, but the $60-per-capita cap meant the program paid out only a “meagre” $248 million that year.

Harpauer is also set to ask Ottawa to re-examine the mortgage stress test — Morneau’s mandate letter asks the same — and make changes to the Investing in Canada Infrastructure Program to allow the provinces to set priorities and approve projects.

The almost $1-billion ICIP was the subject of a spat between the provincial and federal governments this summer, with accusations of political manoeuvring by both sides and disagreement over the terms of the original funding agreement signed last year.