Ottawa, November 8, 2005
2005-074

Archived - Expert Panel on Equalization and Territorial Formula Financing Report: Minister Extends Deadline

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Minister of Finance Ralph Goodale today announced that he has accepted the request of the Expert Panel on Equalization and Territorial Formula Financing (TFF) for an extension of the deadline of its final report to the spring of 2006.

"Given the complexity and importance of its work on Equalization and TFF, the Panel should be given the opportunity and time necessary to ensure every relevant consideration is reflected in its final report," stated Minister Goodale.

Minister Goodale also announced that the methodology used to determine provincial and territorial payments for 2005-06, as agreed to by First Ministers at their October 2004 meeting, will be extended to 2006-07 and updated to include more recent economic and fiscal information. This will provide provinces with payment certainty based on a previously agreed-upon approach, while ensuring that the Panel is provided with sufficient time to fulfill its mandate. Under the new framework announced following the First Ministers' October 2004 meeting, total Equalization will be $11.3 billion for 2006-07 while total TFF will be $2.1 billion, an increase of 3.5 per cent from the 2005-06 levels.

Details on the levels of Equalization and TFF payments for 2006-07 are provided in the attached backgrounder.

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Backgrounder

In the fall of 2004, First Ministers agreed upon a new framework for Equalization and Territorial Formula Financing (TFF).

Under this framework, funding levels for 2005-06 were set at $10.9 billion for Equalization and $2 billion for TFF and legislated to grow at a rate of 3.5 per cent per year thereafter, putting the two programs on a predictable annual growth track.

At the same time, the Government of Canada set up the Expert Panel on Equalization and Territorial Formula Financing to examine and advise the Government of Canada on provincial and territorial allocation of the annual Equalization and TFF amounts set in legislation. The Panel was to report back to the Government by December 2005.

On October 19, 2005, the Minister of Finance received a letter from the Panel requesting a deadline extension of its final report to the spring of 2006. The Government of Canada has accepted this request.

To provide provinces and territories with certainty as to their payments for 2006-07 without pre-empting the work of the Panel, the methodology used to determine provincial and territorial payments for 2005-06, as agreed to by First Ministers at their October 2004 meeting, will be extended to 2006-07 and updated to include more recent economic and fiscal information.

Under the proposed transitional mechanism, Equalization payments are based on an average of:

  • a three-year average of shares of transfers under the "five-province standard" used under the old Equalization framework; and
  • a three-year average of shares of transfers under a fixed payout, i.e. a three-year average of fiscal capacity shares applied to the fixed payout.

TFF payments are based on an average of:

  • a three-year average of shares of transfers that would have been provided under the previous arrangements; and
  • the shares of TFF transfers that would have been paid for the 2005-06 fiscal year.

The following table provides details on Equalization and TFF amounts for 2006-07.

Equalization and TFF Amounts for 2006-07


  ($ millions)

Newfoundland and Labrador 687
Prince Edward Island 280
Nova Scotia 1,379
New Brunswick 1,432
Quebec 5,354
Ontario -
Manitoba 1,690
Saskatchewan -
Alberta -
British Columbia 459
Total Equalization 11,282
   
Northwest Territories 738
Nunavut 827
Yukon 506
Total TFF 2,070

Note: Totals may not add due to rounding.