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Ottawa, December 8, 1997
1997-116

CHST Cash Floor Increased To $12.5 Billion For 1997-98

Related documents :

• The Canada Health and Social Transfer.
• Overview.
• Impact of Raising CHST Cash Floor.

Finance Minister Paul Martin and Health Minister Allan Rock today tabled proposed amendments to the Federal Provincial Fiscal Arrangements Act to increase the floor for cash payments to the provinces under the Canada Health and Social Transfer (CHST) from $11 billion to $12.5 billion.

When the CHST cash floor increase was announced in April 1997, it was to apply beginning in fiscal year 1998-99. The legislative proposals announced, however, will commence this enrichment a year earlier to ensure that cash does not fall below $12.5 billion in 1997-98. Therefore, in addition to the enrichment of cash transfers for 1998-99 and beyond, CHST cash will be increased by $143 million for 1997-98.

"Governing is about choices, priorities and values. Our choice is clear: health care is a priority for this Government. For this reason, and because we are ahead of schedule on balancing the books, the first fiscal dividend is being re-invested in the health care system," said Minister Martin. "We will therefore act on the recommendation of the National Forum on Health and increase cash transfers to the provinces. For each and every province and territory this means more cash than what they have projected – cash that can be used to strengthen the health care system."

"This increase raises the CHST cash floor to the precise amount recommended by the National Forum on Health," said Health Minister Allan Rock. "It reflects the government's strong commitment to work in partnership with the provinces and other stakeholders to ensure Canada's health care system will provide Canadians with high quality care when they need it. Provincial and Territorial governments have said in the past that they require additional money to invest in Health care. Today's announcement allows them to do that."

The ministers referred to page 13 of Canada Health Action: Building on the Legacy, the final report of the National Forum on Health which states: "…we recommended in early 1996 that a cash floor be determined for the Canada Health and Social Transfer. We suggested that it be established at the 1997-98 level of $12.5 billion."

The Canada Health and Social Transfer is a block fund that provides transfers – both cash payments and tax point transfers – to provinces and territories in support of health care, post-secondary education, social assistance and social services programs. Current CHST legislation sets out a funding arrangement that provides for stable and predictable transfers to provinces until 2002-03. In 1997-98, CHST will total more than $25 billion in cash and tax point transfers. Transfers are slated to increase 2.5 per cent annually, on average, and are projected to reach more than $28 billion by 2002-03.

More detail on the Canada Health and Social Transfer is provided in the attached backgrounder.

___________________
For further information:

Peter Gusen
Federal Provincial Relations Division
(613) 943-0916

The Canada Health and Social Transfer

• In order to improve the effectiveness of the Canadian federation, the federal government announced in its 1995 Budget a significant reform to the system of federal transfers to the provinces and territories – the Canada Health and Social Transfer (CHST).

• The CHST came into effect in April 1996 to replace federal transfers for social assistance and social services under the Canada Assistance Plan (CAP), and for health and post-secondary education under Established Programs Financing (EPF).

• This transfer system represents a new approach to federal-provincial fiscal relations marked by greater flexibility and accountability for provincial governments, and more sustainable financing arrangements for the federal government.

• Under the CHST, provinces have enhanced flexibility to devise and administer social programs in a cost efficient way, while the criteria and conditions of the Canada Health Act are maintained and access to social assistance is safeguarded against provincial residency requirements.

• As under the former CAP and EPF transfers, CHST transfers are provided in the form of both cash payments and tax points (a reduction of federal tax rates allowing provinces to raise additional revenues without increasing the overall tax burden on Canadians). The value of the tax points continues to increase over time with the expansion of provincial economies, providing a growing source of revenue for provincial governments.

• This legislated funding arrangement provides stable and predictable CHST transfers for provinces until 2002-03.

- In 1997-98, the federal government will transfer more than $25 billion to provinces and territories under the CHST.

- By 2002-03, CHST entitlements are expected to grow to over $28 billion.

- CSHT cash payments are guaranteed to be no less the $12.5 billion throughout the period of the legislated funding arrangement.

• Provincial CHST entitlements are determined by an allocation formula which ensures that levels of federal funding for health and social programs become more comparable for Canadians across the country.

- In 1996-97, provincial shares of CHST were based on shares under the CAP and EPF predecessor programs.

- For 1997-98, provincial shares of the CHST were adjusted to reflect relative population changes among the provinces since 1995-96.

- Until 2002-03, each province's CHST allocation will be gradually adjusted to more closely reflect provincial population distribution. By 2002-03, per capita disparities across Canada will have been reduced by half.

- Allocations in 1997-98 ($ millions) are as follows:

Note: The totals may not add up due to rounding.

Overview

This Bill increases the cash floor of the Canada Health and Social Transfer (CHST) from $11 billion to $12.5 billion and makes the cash floor operative beginning in the 1997-98 fiscal year.

Legislative Clause:

Clause 1: Subsection 15(3) currently reads as follows:

Where in any of the 1998-99 to 2002-03 fiscal years the sum of $11 billion and the total of all equalized tax transfers applicable to all provinces calculated under section 16 for that fiscal year exceeds the total entitlement determined under subsection (2) for that fiscal year, the total entitlement in respect of the Canada Health and Social Transfer applicable to the whole of Canada for that fiscal year shall be increased by the amount of that excess.

Proposed amendment:

Where in any of the 1997-98 to 2002-03 fiscal years the sum of $12.5 billion and the total of all equalized tax transfers applicable to all provinces calculated under section 16 for that fiscal year exceeds the total entitlement determined under subsection (1) or (2) for that fiscal year, the total entitlement in respect of the Canada Health and Social Transfer applicable to the whole of Canada for that fiscal year shall be increased by the amount of that excess.