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Premiers' focus on transfers

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Federal funding cuts will be top of mind when the premiers' annual two-day meeting gets underway in Niagara-on-the-Lake Thursday. Premiers could gain strength by standing together with those affected rather than standing by while the federal government dismantles public programs and Canadian values of respect, equality and justice.

The changes are happening with little notice but their impact is huge. In early June, for example, the federal government cut 30 per cent of funding to programs in 43 key aboriginal organizations across the country. This is in addition to cuts in 2012, severely limiting First Nations' ability to provide essential services such as health care and clean water. Last year, the federal government unilaterally stopped paying for refugee health care and abandoned already vulnerable people. The Manitoba government stepped in to foot the bill -- about $5 million per year.

The off-loading increasingly forces Manitoba to fend for itself. A reduction in federal transfers limits the province's ability to meet current needs and tackle under-resourced issues like poverty. Lack of a federal funding also limits its role in setting national policy frameworks and standards. In the context of severe reductions, it is not surprising Manitoba has had to increase the PST.

Transfers to the provinces are a cornerstone of Canadian federalism, helping to maintain a standard of living across the country.

Federal money, however, is drying up. Federal transfers to Manitoba in 2013-14 are the same as 2012-13 -- $3.4 billion. This is broken down as follows: $1.1 billion in Canada Health Transfer, $443 million for the Canadian Social Transfer for post-secondary education, social assistance and social spending; $1.8 billion in equalization payments. Federal money is 31 per cent of the total provincial budget of $11.5 billion.

Manitoba's 2013 budget papers explain the combined federal cash transfers already are 4.5 per cent lower per Manitoban than in 2009-10. Factoring in inflation, transfers have declined 11 percent per Manitoban.

This lack of income will make it hard for Manitoba to continue to offer services citizens have come to rely on. For example, the health care system will face financial pressures as it deals with aging baby boomers: 18 per cent of lifetime health costs are incurred during the last year of life.

When medicare first started in the 1960s, the federal government footed 50 per cent of the costs. The federal share is projected to decline from 20.5 per cent in 2010-11 to 17.1 per cent in 2030/31. Health spending in Manitoba is 44.3 per cent of the budget, or $5 billion per year.

Provinces will be forced to replace the decreasing federal funding for health with money from elsewhere in their budgets. This is especially difficult to swallow when the federal budgetary surplus is expected to be $3.4 billion in 2015-16 and $7.8 billion in 2016/17. Ottawa is balancing its books on the backs of the provinces.

Premiers are aware of the situation. Premier Greg Selinger is leading finance ministers working on fiscal arrangements. This committee reported over the next four years provinces and territories will receive $23 billion less in federal transfers than under the current arrangement. Another committee is looking for ways to improve health care delivery.

Premiers seem reluctant to speak to citizens about these issues, choosing instead to study and solve the challenges on their own. This is ironic considering the huge public popularity -- borne out in polls -- of medicare and Canada's social programs. Perhaps they are held back from taking a strong stand publicly because they need to maintain their negotiating relationship with the federal government, which holds the purse strings. Premiers, however, need to realize the benefits of working proactively together with those also impacted by federal cuts, such as First Nations. At the same time, premiers need to educate their constituents on the financial limitations the federal government is placing on social and economic development in Canada. If not, health and social spending will continue to gobble up the provincial budget and the ability of Manitoba to address under-invested areas of need such as social housing and the environment will be severely impaired.


Molly McCracken is the director of the Canadian Centre for Policy Alternatives -- Manitoba office.

Republished from the Winnipeg Free Press print edition July 24, 2013 A9

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