By Canadian Press

Ottawa’s buffer against provincial economic shocks needs reform: economist

Aug 6, 2020 | 10:12 AM

CALGARY — A new paper suggests a federal program meant to buffer provinces against economic shocks is not up to the task — especially in the COVID-19 era.

University of Calgary economist Trevor Tombe is urging Ottawa to review and reform the federal stabilization program so it can help provincial economies weather the effects of the pandemic.

He estimates provinces could be on track for a collective $35-billion revenue decline this fiscal year — equivalent to $1,000 per person.

But he notes that figure is offset by up to $23 billion thanks to taxable federal emergency benefits for individuals and employers.

Tombe says there’s still a big gap that can’t be adequately addressed by the fiscal stabilization, which has not been meaningfully reformed since its inception in 1967. 

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He says the $60 per person cap on stabilization payments to provinces hasn’t been updated since 1986 and should be at least double that, just adjusting for inflation.  

Tombe’s paper was published by the Canada West Foundation think-tank. He and other independent academics and policy experts have started the new Intergovernmental Fiscal Relations Commission, which aims to improve the fiscal relationship between Ottawa, the provinces and cities.

This report by The Canadian Press was first published on August 6, 2020

The Canadian Press