Backgrounder: The Fiscal Stabilization Program

The federal Fiscal Stabilization Program provides protection to provinces in the event of extraordinary year-over-year declines in revenues.

How the Fiscal Stabilization Program Works

The Fiscal Stabilization Program is authorized by the Federal-Provincial Fiscal Arrangements Act and falls under the responsibility of the Minister of Finance. It enables the federal government to provide financial assistance to any province faced with a year-over-year decline in its non-resource revenues greater than 5 per cent.

Provinces must apply for payments under the program, and each claim is subject to analysis and verification by the federal government. A province may submit a claim to the Minister of Finance as late as 18 months after the end of the fiscal year in question, but may also submit a claim for an advance payment on account based on as few as five months of data for the fiscal year in question.

There are two constraints on eligibility for payments:

  1. The program compensates for year-over-year revenue declines due to economic downturns, not for declines due to provincial decisions to reduce taxes; policy changes made by the province in the rate or in the structure of provincial taxes are factored out when measuring revenue declines.
  2. A decline in resource revenues is taken into account only if—and to the extent that—the annual decline exceeds 50 per cent.

How Much Can a Province Receive?

The maximum payment to a province that makes a claim for a given fiscal year is $60 per person.

Provinces may also request an interest-free loan for any amounts in excess of the $60 per person limit, to be recovered over a five-year period. However, the decision of whether to provide such a loan is at the sole discretion of the Minister of Finance.

How Much Have Provinces Been Paid in the Past?

Since 1967, the federal government has provided payments totalling over $2 billion to the provinces through the Fiscal Stabilization Program. For example, the first province to qualify was British Columbia, which made a claim for payments under the program for 1982–83 in June 1983. British Columbia was paid $174 million in instalments over a three-year period as the data required to assess its claim became available.

Stabilization Claims by Qualifying Year
($ million)
Province 1982–83 1986–87 1990–91 1991–92 1992–93 1993–94 Total
N.L. - - - 31 - - 31
P.E.I. - - - 5 8 - 13
N.S. - - - 55 - - 55
N.B. - - - - 30 6 36
Que. - - - 103 72 - 175
Ont. - - 227 284 567 - 1,079
Man. - - - 43 - - 43
Sask. - - - - - - 0
Alta. - 419 - - - - 419
B.C. 174 - - - - - 174
Total 174 419 227 522 677 6 2,025

For additional information on federal transfer payments, see the Department of Finance website.