ARCHIVED — Vol. 147, No. 26 — December 18, 2013

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Registration

SOR/2013-224 December 6, 2013

FEDERAL-PROVINCIAL FISCAL ARRANGEMENTS ACT

Regulations Amending the Canada Health Transfer, Canada Social Transfer and Wait Times Reduction Transfer Regulations

P.C. 2013-1326 December 5, 2013

His Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to section 40 (see footnote a) of the Federal-Provincial Fiscal Arrangements Act (see footnote b), makes the annexed Regulations Amending the Canada Health Transfer, Canada Social Transfer and Wait Times Reduction Transfer Regulations.

REGULATIONS AMENDING THE CANADA HEALTH TRANSFER, CANADA SOCIAL TRANSFER AND WAIT TIMES REDUCTION TRANSFER REGULATIONS

AMENDMENTS

1. Section 2 of the Canada Health Transfer, Canada Social Transfer and Wait Times Reduction Transfer Regulations (see footnote 1) is replaced by the following:

2. For the purposes of these Regulations and Part V.1 of the Act, the manner in which the Chief Statistician of Canada shall determine the population of a province for a fiscal year is by basing that determination on Statistics Canada’s official estimate of the population of the province on June 1 of that fiscal year.

2. (1) Subsection 4(1) of the Regulations is amended by adding the following after paragraph (a.1):

  • (a.11) shall make an estimate of the amount of the transfer payment related to the Canada Health Transfer to a province for each fiscal year beginning after March 31, 2014,
    • (i) during the period beginning on September 1 and ending on December 31 prior to that fiscal year, and
    • (ii) during the period beginning on September 1 and ending on October 12 of that fiscal year;

(2) The portion of paragraph 4(1)(a.2) of the Regulations before subparagraph (i) is replaced by the following:

  • (a.2) shall make an estimate of the amount of the transfer payment related to the Canada Social Transfer to a province for each fiscal year beginning after March 31, 2007,

(3) Subsection 4(2) of the Regulations is replaced by the following:

(2) If an estimate made under any of subparagraphs (1)(a)(i), (a.1)(i) or (i.1), (a.11)(i) or (a.2)(i) or (i.1) or paragraph (a.3) establishes that a transfer payment is to be made to a province for a fiscal year, the Minister shall pay to the province, on account of the final payment for the fiscal year, an amount equal to 1/24 of the amount so estimated on the first and 3rd working days after the 15th calendar day of each month in that fiscal year.

(4) The portion of subsection 4(3) of the Regulations before paragraph (a) is replaced by the following:

(3) If an estimate made under any of subparagraphs (1)(a)(ii) or (iii), (a.1)(ii), (a.11)(ii), (a.2)(ii) or (b)(i) or paragraph (c) establishes that the amount payable to the province under the immediately preceding estimate for that fiscal year should be revised, the Minister shall

3. (1) Subsection 5(1) of the English version of the Regulations is replaced by the following:

5. (1) In respect of each fiscal year referred to in subsection (1.1), the Chief Statistician of Canada shall prepare and submit to the Minister, within the period set out in that subsection, a certificate in respect of that fiscal year based on the most recent information prepared by Statistics Canada for that fiscal year, setting out, in respect of each province, the population of the province for the fiscal years required by the Act.

(2) Paragraph 5(1.1)(a) of the Regulations is replaced by the following:

  • (a) for the Canada Health Transfer,
    • (i) in respect of each fiscal year in the period beginning on April 1, 2004 and ending on March 31, 2014, not later than 30 months after the end of that fiscal year, and
    • (ii) in respect of each fiscal year beginning after March 31, 2014, not later than six months after the end of that fiscal year;

(3) The portion of paragraph 5(1.1)(b) of the French version of the Regulations before subparagraph (ii) is replaced by the following:

  • b) à l’égard du Transfert canadien en matière de programmes sociaux :
    • (i) pour chaque exercice compris dans la période commençant le 1er avril 2004 et se terminant le 31 mars 2007, dans les trente mois suivant la fin de l’exercice,

(4) Subparagraph 5(1.1)(b)(ii) of the Regulations is replaced by the following:

  • (ii) in respect of each fiscal year beginning after March 31, 2007, not later than six months after the end of that fiscal year; and

(5) Paragraph 5(1.1)(c) of the French version of the Regulations is replaced by the following:

  • c) à l’égard du Transfert visant la réduction des temps d’attente, pour chaque exercice compris dans la période commençant le 1er avril 2009 et se terminant le 31 mars 2014, dans les six mois précédant la fin de l’exercice.

COMING INTO FORCE

4. These Regulations come into force on the day on which they are registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the regulations.)

Issue

Through statutory transfer programs, the Government of Canada provides financial support to provincial and territorial governments on an ongoing basis to assist in the provision of programs and services. There are four major transfer programs: the Canada Health Transfer (CHT), the Canada Social Transfer (CST), Equalization, and Territorial Formula Financing (TFF). All four programs are legislated under the Federal-Provincial Fiscal Arrangements Act (the Act).

The CHT is a federal transfer to support health care, while the CST supports post-secondary education, social assistance and social services, including early childhood development and child care.

The Equalization and TFF programs provide unconditional funding to the provinces and territories. Equalization enables less prosperous provincial governments to provide their residents with public services that are reasonably comparable to those in other provinces, at reasonably comparable levels of taxation. TFF provides territorial governments with funding required to provide public services comparable to those provided by provinces at comparable levels of taxation taking into account the unique circumstances of each territory, including the higher cost of providing programs and services in the North.

Prior to Budget 2012, the statutory authority for the four major federal transfers was set to expire on March 31, 2014.

Policy decisions related to the legislative renewal of the CST and the CHT were announced at the December 2011 Finance Ministers’ Meeting in Victoria and confirmed in Budget 2012. As part of the implementation of Budget 2012 measures, the Jobs, Growth and Long-term Prosperity Act renewed the legislative mandate for the CST and the CHT for 2014–15 and beyond, and removed spent provisions relating to the Health Reform Transfer.

At the December 2011 Finance Ministers’ meeting, it was also announced that the Government would renew the Equalization and TFF programs for a period of five years, ending on March 31, 2019. At the December 2012 Finance Ministers’ Meeting at Meech Lake, a small set of technical changes were announced to complete the renewal of these two programs. Budget 2013 confirmed the renewal of Equalization and TFF. Subsequent implementation legislation, the Economic Action Plan 2013 Act, No. 1, extended the Minister of Finance’s authority to make Equalization and TFF payments to March 31, 2019, and made the remaining legislative changes to the Federal-Provincial Fiscal Arrangements Act required to implement the renewal of the four major transfer programs.

Given that the details of the payment calculations for the four major transfers are set out in regulations, the renewal of these programs also requires amendments to be made to the Federal-Provincial Fiscal Arrangements Regulations, 2007 and the Canada Health Transfer, Canada Social Transfer and Wait Times Reduction Transfer Regulations (hereafter collectively referred to as “the regulations”). Additionally, consequential to the removal of expired legislative provisions, the Health Reform Transfer Regulations should be repealed.

Objectives

  • Support the legislative renewal of the four major federal transfer programs;
  • Implement the set of technical changes announced for Equalization and TFF;
  • Clarify various aspects of the calculation of Equalization and TFF;
  • Establish the timing of estimates and final computations of the CHT and CST starting in 2014–15; and
  • Update and rationalize the regulatory regime for the major transfer programs.

Description

The Health Reform Transfer Regulations are being repealed, and the regulations are being amended as follows:

CST

The regulatory authority to make interim estimates and final computations is extended beyond 2013–14. There will continue to be two interim estimates. The timing of the final determination of payments will continue to be in the year following the year in respect of which entitlements are determined (Canada Health Transfer, Canada Social Transfer and Wait Times Reduction Transfer Regulations).

CHT

The cycle of interim estimates and final computation of the CHT will be aligned with that of the CST as of 2014–15. As a result, the number of interim estimates for this program will be reduced from four to two. The final computation of entitlements will occur in the year following the year for which entitlements are computed (Canada Health Transfer, Canada Social Transfer and Wait Times Reduction Transfer Regulations).

Equalization

The Federal-Provincial Fiscal Arrangements Regulations, 2007 are being amended to implement the technical improvements to the program announced at the December 2012 Finance Ministers’ Meeting and confirmed in Budget 2013. Specifically, certain revenue sources such as hospital and medical insurance premiums and miscellaneous revenues are being reclassified to be grouped with other similar revenue sources; calculations are being simplified by using a revenue measure gross of all refundable tax credits and by reducing the number of expenditure categories used for the consumption base; certain weighting factors used in the measures of fiscal capacity are being recalculated using more recent data; and certain user fees are being excluded from the calculation. Other amendments are being made to update references to sources of data entering the calculation of payments; better describe the procedures to be followed where data required for the calculation are missing or incorrect; clarify, where necessary, the description of various other aspects of the calculation, including revenue base and revenue source definitions; and update the language and structure of the Regulations to reflect current drafting conventions.

TFF

The Federal-Provincial Fiscal Arrangements Regulations, 2007 are being amended to implement the technical improvements to the program announced at the December 2012 Finance Ministers’ Meeting and confirmed in Budget 2013. Specifically, the amendments will eliminate the Revenue Block in TFF and replace it with Representative Tax System (RTS) measures of fiscal capacity, equivalent in most cases to measures used in Equalization. Weights and parameters for existing RTS measures are also being updated to better reflect the evolving taxing practices of provinces and territories. Similar to the above-mentioned Equalization amendments, amendments are also being made to update references to sources of data entering the calculation of payments; better describe the procedures to be followed where data required for the calculation are missing or incorrect; clarify, where necessary, the description of various other aspects of the calculation, including revenue base and revenue source definitions; and update the language and structure of the Regulations to reflect current drafting conventions.

“One-for-One” Rule

The “One-for-One” Rule generally does not apply to the regulations under the Act as these do not impose an administrative burden or costs on businesses. However, the repeal of the Health Reform Transfer Regulations is considered a removal of a regulation for the purpose of the “One-for-One” Rule.

Small business lens

The small business lens does not apply, as there are no costs on small business.

Consultation

Provinces and territories have been consulted throughout the policy-making process and were informed of all the proposed technical changes to Equalization and TFF at the December 2012 Finance Ministers’ Meeting. Additional consultations were held during the drafting phase for these amendments and no significant concerns were identified. Various minor suggestions to improve the drafting of the Regulations were provided by provincial and territorial officials and have been taken into account.

Rationale

The regulatory amendments are required to fully implement decisions regarding the legislative renewal of major transfer programs so that they can be incorporated into the Minister’s determination of Equalization and TFF payments for 2014–15. The Act requires that the determination of payments for 2014–15 be completed by the end of December 2013.

The amendments will not impact the overall size of the CHT, CST and Equalization transfer payments since their growth rates have been set in legislation: the CHT will continue to grow by 6% annually until 2016–17 and follow the three-year moving average of nominal Gross Domestic Product (GDP) growth starting in 2017–18 (with a minimum growth rate of 3%); the CST will continue to grow by 3% annually; and Equalization will continue to grow at the rate of growth of the three-year moving average of nominal GDP. Although the amendments will not impact the overall size of Equalization transfers, the allocation of payments among provinces will be slightly affected.

The amendments may result in either slightly higher or lower TFF payment amounts relative to the current formula; actual amounts will only be known at the time of the annual TFF calculation in December.

Provinces and territories did not express any concerns with the changes to Equalization and TFF that were announced at the December 2012 Finance Ministers’ Meeting. Provinces and territories are aware of the magnitude of potential impacts on by-province Equalization and TFF payments that may result from the implementation of the amendments to the regulations, as these were discussed during the policy consultation process that preceded the December 2012 meeting.

Contacts

Arndt Vermaeten / Tom McGirr
Department of Finance Canada
Federal-Provincial Relations Division
140 O’Connor Street
15th Floor, East Tower
L’Esplanade Laurier
Ottawa, Ontario
K1A 0G5
Telephone: 613-943-0917 / 613-944-7681