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Budget Supports Post-Secondary Education and Health Care

"The first announcement of the first budget of the 21st century is that we will increase funding for post-secondary education and health care."

Finance Minister Paul Martin
2000 budget speech

Canada Health and Social Transfer (CHST) payments will be increased by $2.5 billion to help provinces and territories fund post-secondary education and health care.

This is the fourth consecutive enhancement of the CHST. It provides an additional $1 billion in 2000-01, and $500 million in each of the following three years.

Starting in 2000-01, CHST cash will reach $15.5 billion, almost 25 per cent higher than in 1998-99.

Provinces and territories will have flexibility on when they draw upon the $2.5 billion that is being added to the CHST. They can draw upon it to meet the most pressing needs in universities and hospitals, or at any time over the course of four years, as they see fit.

The CHST is the largest federal transfer, providing support in the form of cash and tax transfers to provinces and territories. The federal government has already acted three times to strengthen the CHST.

Builds on Past Support

In 1996, the government took action to end the projected decline in CHST cash due to the growing value of tax transfers, with the introduction of an $11 billion cash floor.

In 1998, as soon as a balanced budget was at hand, the government increased the CHST cash floor to $12.5 billion.

In the 1999 budget, the government announced the single largest investment it has ever made – an $11.5-billion increase in funding specifically for health care, over five years. This increased total CHST cash to $14.5 billion in 1999-2000. Combined with the value of tax transfers, total CHST is $29.4 billion this year – higher than in 1993-94

Tax Transfers

The CHST tax transfer is an important part of the federal government's ongoing support for provincial social programs, including post-secondary education and health.

The tax transfer occurred in 1977 when the federal government agreed with provincial and territorial governments to reduce its personal and corporate income tax rates, allowing them to raise their tax rates by the same amount.

As a result, revenue that would have flowed to the federal government began to flow directly to provincial and territorial governments – and continues to grow in line with growth in the Canadian economy.

Cash Plus Tax

The $2.5 billion investment, combined with growing tax transfers, means that total support through the CHST will reach a new high of close to $31 billion in the coming fiscal year.

Growing Economy, Growing Transfers

The strong performance of the Canadian economy has significantly increased the value of other major transfers to provinces and territories.

Equalization to less prosperous provinces is up $500 million for this year over last year's budget projection, taking entitlements to $9.8 billion from the $9.3 billion previously projected. Territorial Formula Financing is nearly $100 million higher this year than projected, taking entitlements to about $1.4 billion from about $1.3 billion previously projected.

Total transfers to the provinces and territories will reach an estimated $39.4 billion this year and will continue to grow over the next four years, allowing provinces and territories to strengthen post-secondary education, health care and other social programs important to Canadians.

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