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Total Federal Support for Health, Post-Secondary Education, and Social Assistance and Social Services (2004-05)

October 2004

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Summary - Key Facts

Health Care

• Total cash transfers under the Canada Health Transfer (CHT), Health Reform Transfer (HRT), CHST cash supplements and the CHT increase agreed to by First Ministers in September 2004 will rise from $13.9 billion in 2003-04 to $21.3 billion in 2007-08 (further support is provided by the underlying tax points).
• The federal government also provides direct support to Canadians in the form of services and tax measures. Total direct health support was $5.6 billion in 2003-04 and is expected to reach close to $6.0 billion in 2004-05, as a result of normal program growth and the creation of the new Canada Public Health Agency.

Post-Secondary Education

• The Canada Social Transfer (CST) provides support for provinces and territories for post-secondary education (PSE), social assistance and social services, including early childhood development and early learning and child care. Total CST cash will rise from $7.9 billion in 2003-04 to $8.8 billion in 2007-08. Further support is provided through underlying tax points.
• Provinces and territories are free to allocate the CST between their priorities in PSE, social assistance and social services.
• The federal government also supports PSE through direct assistance to:

• Total direct support for PSE amounted to $4.7 billion in 2003-04 and is expected to grow to $5.0 billion in 2004-05 (reflecting Budget 2004 initiatives with respect to Canada Student Loans, the Canada Learning Bond and research support).

Social Assistance and Social Services

• Provinces and territories can draw from annual federal cash transfers of some $7.9 billion (in 2003-04) under the CST. This amount will reach $8.8 billion in 2007-08.
• In addition, the federal government provides direct support for:

(Canada Child Tax Benefit, Children's Special Allowances, Child Care Expense Deduction) - some $8.9 billion in 2003-04. The Canada Child Tax Benefit accounts for $8.2 billion of this amount.

Total direct support for these social programs is expected to grow from $15.2 billion in 2003-04 to nearly $15.9 billion in 2004-05, reflecting full indexation of the Canada Child Tax Benefit and Budget 2003 enrichments to it.

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Introduction

The Government of Canada supports health, post-secondary education, and social assistance and social services (including early childhood development and early learning and child care) in a number of ways.

• The Canada Health Transfer (CHT), Canada Social Transfer (CST) and Health Reform Transfer (HRT) are the principal vehicles the Government uses to provide support to the provinces and territories in these areas.^[1]
• The Government of Canada currently provides 8 of the 10 provinces with equalization payments, and they have the flexibility to allocate these funds as they wish.
• The Government provides support to the 3 territories through Territorial Formula Financing (TFF), which enables them to provide a range of public services comparable to those offered by provincial governments.
• The Government also provides support directly to Canadians through financial assistance to individuals, both through the tax system and through a range of programs and services.

1.  Major transfers in support of health, post-secondary education, and social assistance and social services

Since balancing the budget, the Government of Canada has provided significant new funding in support of health, post-secondary education and social assistance and social services, most recently increasing health funding by $41.3 billion through the 10-Year Plan to Strengthen Health Care.

For 2004-05, the Government of Canada provides the majority of its support to provinces and territories for health and other social programs through three major transfers:

• The Canada Health Transfer, in support of health.
• The Canada Social Transfer, in support of post-secondary education and social assistance and social services, including early childhood development and early learning and child care.
• The Health Reform Transfer, in support of health reform in primary care, home care and catastrophic drug coverage. This transfer will be rolled into the Canada Health Transfer in 2005-06, as agreed by First Ministers in September 2004 (subject to passage of authorizing legislation).

In total, these federal cash transfers will grow from $21.8 billion in 2003-04 to $30.1 billion in 2007-08, an average annual increase of about 8 per cent, which is significantly higher than the projected 5.1-per-cent growth in nominal gross domestic product.^[2]

The Government of Canada also provides targeted funding to provinces and territories for medical equipment. In 2004-05, provinces and territories will receive $1.0 billion for medical equipment through the 2003 Diagnostic/Medical Equipment Fund and an additional $500 million as a part of the 10-Year Plan to Strengthen Health Care.

Further, provinces and territories draw upon the significant and predictable revenue they receive from federal tax transfers. The total value of CHT/CST tax transfers will grow from $17.1 billion in 2004-05 to $20.6 billion in 2007-08.

See Annex 1 for details.

2. Equalization and Territorial Formula Financing

The federal government makes equalization payments to less prosperous provinces to allow them to provide their residents with public services that are reasonably comparable to those in other provinces, at reasonably comparable levels of taxation. These unconditional funds are used by provinces to help pay for the programs for which they are responsible, including health care, education and social programs.

Newfoundland and Labrador, Nova Scotia, Prince Edward Island, New Brunswick, Quebec, Manitoba and Saskatchewan have been consistent recipients of equalization payments. In recent years, British Columbia has also qualified for payments. Over the period 1999-2000 to 2003-04, the equalization program transferred an average of $10 billion a year to these provinces.

Provinces use their equalization payments to help fund their health and social programs. More than $55 billion in payments will flow to equalization-receiving provinces over the next five years, from 2004-05 to 2008-09.

The three territories do not receive equalization; instead they receive Territorial Formula Financing (TFF). TFF fills the gap between a territory's own-source revenue means and its expenditure requirements, including health care, education and social programs. TFF transfers have grown significantly since 1993-94, reaching an estimated $1.8 billion for 2004-05 which, in per capita terms ($13,900 for the Yukon, $15,000 for the Northwest Territories and $24,000 for Nunavut), is significantly higher than the support provided to provinces, in recognition of the high costs of providing services in the North.

In order to provide greater stability to provinces and territories in 2004-05, the Government of Canada has announced fundamental changes to Canada's equalization and Territorial Formula Financing arrangements. The new framework, subject to the passage of enabling legislation, will ensure that equalization payments total a minimum of $10 billion for 2004-05 and that TFF payments total a minimum of $1.9 billion for 2004-05. In addition, each province and territory will be guaranteed that its equalization or TFF payments for 2004-05 will not be lower than the amount announced in official estimates for 2004-05 included in Budget 2004.

Starting in 2005, the Government will establish a legislated financial framework for both equalization and TFF. The new framework will establish fixed payment levels, which will provide predictable and growing funding for provinces and territories. Funding levels for 2005-06 will be set at $10.9 billion for equalization and $2 billion for TFF (the highest levels ever) . These amounts will grow at a rate of 3.5 per cent per year thereafter. Over the 10 years to 2013-14, and subject to review after the first five years, these changes will provide an estimated additional $28.8 billion for equalization and $4.6 billion for TFF compared to 2004-05 levels.

Additional information on federal transfer programs is available on the Department of Finance Canada Web site at http://www.fin.gc.ca/access/fedprove.html.

3. Other support: direct and tax measures

In 2004-05, the Government of Canada will provide an estimated $27 billion for health, post-secondary education, and social assistance and social services through direct and tax measures. These investments consist of:

• Nearly $6.0 billion for health in areas of federal responsibility, including First Nations, Inuit and veterans' health care, health protection and disease prevention, health-related research and tax credits for medical expenses. In 2004-05 this figure is estimated to grow by $400 million, bringing the total up to almost $6 billion.
• An estimated $5.0 billion for post-secondary education, including student financial assistance, support for research and support for Canadians saving for their children's education.
• Approximately $15.9 billion for social assistance and social services, including the Canada Child Tax Benefit, social assistance and services and K-12 education for First Nations, social housing, and programs and services for disadvantaged Canadians (e.g. youth at risk, the homeless and persons with disabilities).

See Annex 2 for details.

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Annex 1

Federal Transfer Support

Table 1:  
Major Transfers in Support of Health, Post-Secondary Education, and Social Assistance and Social Services ($ millions)

	2003-2004	2004-2005	2005-2006	2006-2007	2007-2008
Canada Health Transfer (CHT)1,4	12,276	13,650	19,000	20,140	21,348
Canada Social Transfer (CST)1,2	7,549	7,900	8,225	8,500	8,800
Health Reform Transfer (HRT)3,4	1,000	1,500
2003 CHST cash supplement	1,000	1,000	500
2004 CHST cash supplement    for health		1,000	1,000
Total cash transfers	21,825	25,050	28,725	28,640	30,148
CHT/CST tax transfers5	16,508	17,137	18,141	19,386	20,633
Total (cash and tax transfers)	38,333	42,187	46,866	48,026	50,781
Note: CHT/CST/HRT amounts are currently legislated until 2007-08. New federal transfer funding in support of the 10-Year Plan to Strengthen Health Care (2004-05 to 2013-14) is subject to passage of authorizing legislation. 1 2003-04 amounts are based on the notional shares of the CHST allocated to health and other social programs respectively. 2 Cash amounts under the CST include funds for early learning and child care ($1,050 million) and for early childhood development ($500 million annually). Excludes targeted health funding provided under the Diagnostic/Medical Equipment Fund and Public Health and Immunization Fund. 3 The HRT will be integrated into the CHT starting in 2005-06, as agreed by First Ministers in September 2004 (subject to passage of authorizing legislation). 4 Reflects commitments to strengthen the CHT in support of the 10-Year Plan to Strengthen Health Care (subject to passage of authorizing legislation): $1 billion in 2004-05; establishing a CHT base of $19 billion in 2005-06; and applying a 6-per-cent escalator as of 2006-07. Design and implementation of wait times reduction funding ($5.5 billion over 10 years) have not yet been determined; therefore it is not included here. Also excludes targeted funding for medical equipment. 5 Department of Finance October 2004 estimates.

Table 2:
Major Federal Health and Social Transfers, 1993-94 to 2007-08

Note: Includes funding provided under the Canada Health and Social Transfer (CHST) and its successors, the Canada Health Transfer (CHT) and the Canada Social Transfer (CST), as well as cash increases to the CHST/CHT/CST base for health, early childhood development and early learning and child care. Also includes the 2003 and 2004 CHST supplements, the Health Reform Transfer (which will be rolled into the CHT in 2005-06, subject to passage of authorizing legislation) and the CHT increases from the 10-Year Plan to Strengthen Health Care (subject to passage of authorizing legislation). Excludes targeted health funding provided under the Diagnostic/Medical Equipment Fund, Public Health and Immunization Fund, and funding for wait times reduction and medical equipment in the 10-Year Plan to Strengthen Health Care.

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Annex 2

Federal Direct and Tax Expenditures
Related to Health¹ (Estimates) - 2003-04

	2003-04
	($ millions)
Direct expenditures
Health Canada	2,961
Department of Veterans Affairs	776
Canadian Institutes of Health Research	595
Department of National Defence	117
Solicitor General Canada (now Public Safety and Emergency Preparedness Canada)	160
Other government departments/agencies2	76	4,6853
Canada Health Infoway		604
	Subtotal	4,745
Tax measures5
Medical expense tax credit		700
Refundable medical expense supplement		65
Caregiver and infirm dependant credits		65
	Subtotal	830
	Total	5,575
Note: This total is estimated to grow by some $400 million in 2004-05, as a result of normal growth in federal health expenditures and the creation of the new Canada Public Health Agency. This would bring the total to nearly $6.0 billion in 2004-05. 1 Sources: Canadian Institute for Health Information (CIHI); Coming Together, 2003-04 Annual Report and Corporate Plan Summary 2004-05, Canada Health Infoway; Department of Finance estimates of tax expenditures. 2  Includes: Statistics Canada, Citizenship and Immigration Canada, Canada Foundation for Innovation, Canadian Health Services Research Foundation, Canadian Institute for Advanced Research. 3 Forecast from CIHI for calendar year 2003. Includes both delivery of services and funding of services that are provided by a third party. Note: Breakdown by department for 2003 was calculated by using 2001‑02 CIHI departmental figures and pro-rating the global 2003 forecast proportionally. 4  2003-04 annual report, page 26. 5 Estimates for the 2003 taxation year.

Federal Direct and Tax Expenditures
Related to Post-Secondary Education (PSE)¹ (Estimates) - 2003-04

		2003-04
($ millions)

Support for PSE Access
Canada Student Loans Program		794
Canada Education Savings Grant		395
Canada Millennium Scholarship Foundation2		300
Canada Graduate Scholarships		25
Aboriginal post-secondary education programs		304
	Subtotal	1,818
Support for Research in PSE Institutions3
Granting councils (excluding Canadian Institutes of Health Research)		850
Canada Research Chairs		156
Canada Foundation for Innovation2		180
Indirect cost of research		225
CANARIE		37
Genome Canada		41
	Subtotal	1,489
Tax measures4
Partial scholarship exemption		22
Tax credit for student loan interest		70
Tuition/education tax credits (including transfer and carry-forward)		1,165
Registered education savings plans		125
	Subtotal	1,382
	Total	4,689
="" ="" Note: This total is estimated to increase by approximately $350 million in 2004-05, primarily as a result of initiatives in Budget 2004 with respect to Canada Student Loans, the Canada Learning Bond and research support. This would bring the total to roughly $5.0 billion in 2004-05. 1  Various sources including Main Estimates, Departmental Performance Reports, Department of Finance estimates of tax expenditures, Budget Plans, and the Consolidated Report on Canada Student Loans. 2  Annual flow of disbursements. 3 Excludes expenditures on medical research, which are included in the health table. 4  Estimates are for taxation year 2003.

Federal Direct and Tax Expenditures
Related to Social Assistance and Social Services¹ (Estimates) -
2003-04

 

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¹  The CHT and CST replaced the Canada Health and Social Transfer (CHST) as of April 1, 2004. [Return]

²  Cash transfers include the CHT, HRT, CST and the 2003 and 2004 CHST supplements. The average annual growth rate over the four-year period is calculated using 2003-04 as the base. [Return]

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