Federal Transfers: New Brunswick's Financial Lifeline

New Brunswick will receive approximately $4.3 billion in federal transfers for 2024-25, an increase from $4,015 million in 2023-24. This includes an estimated $1.1 billion in Canada Health Transfer payments and $352 million in Canada Social Transfer payments. The federal government will also provide $52.1 billion to provinces and territories under the Canada Health Transfer in 2024-25, a 5.4% increase from 2023-24. This increase follows significant financial support during the COVID-19 pandemic, with the federal government contributing approximately 80% of the funding to fight the virus and support Canadians.

New Brunswick's 2024-25 federal transfers

New Brunswick's federal transfers for 2024-25 are expected to total $4.3 billion, according to the Government of Canada. This includes an estimated $1.1 billion for the Canada Health Transfer and $352 million for the Canada Social Transfer. In addition, the province qualifies for an Equalization payment of $2.9 billion for 2024-25.

The federal transfers for New Brunswick have seen an increase from the previous year, 2023-24, when the province received a total of $4,015 million in major transfers. This included $1,038.5 million for the Canada Health Transfer and $345 million for the Canada Social Transfer. The increase in federal transfers is in line with the overall increase in federal support for provinces and territories, with a 5.4% rise from 2023-24 to 2024-25.

The Canada Health Transfer and Canada Social Transfer amounts for 2024-25 are preliminary and may be subject to change. Final amounts will be determined in September 2025.

In addition to the major transfers, New Brunswick has also received other federal support in recent years. For example, the province was eligible for $900 million over 10 years to address its unique health system needs, such as expanding access to services, improving mental health support, and modernizing health systems. However, to receive the funding for 2023-24, New Brunswick was required to sign a bilateral agreement by March 31, 2024.

Furthermore, New Brunswick has also experienced deductions in federal transfers in certain areas. In March 2023, the federal government announced it would claw back $1.3 million in health transfer payments from the province. This was primarily due to user fees that patients paid for medically necessary services, including abortion access and diagnostic imaging.

Canada Health Transfer

New Brunswick has one of the oldest populations in Canada. In 2019, 21.3% of its population was 65 or older, compared to the Canadian average of 17.5%. This demographic situation has a significant impact on the province's healthcare requirements and associated costs.

The Canada Health Transfer (CHT) is a crucial component of federal transfers to provinces and territories, providing substantial funding for healthcare services. In 2024-25, the Government of New Brunswick will receive $4.3 billion through major transfers, which include the CHT, the Canada Social Transfer, and other allocations. The CHT for New Brunswick for 2023-24 was approximately $1 billion, with a total of $49.4 billion allocated for all provinces and territories, marking a 9.3% increase from 2022-23.

The Honourable Chrystia Freeland, the federal Minister of Finance, communicated these transfer payment amounts to the Honourable Ernie Steeves, New Brunswick's Minister of Finance, in a letter dated April 20, 2024.

The CHT plays a vital role in upholding Canada's universal, accessible, and publicly funded healthcare system. However, the strain on healthcare workers and the system itself has prompted calls for additional investments. In 2023, the Government of Canada announced a $198.6 billion investment over ten years, including $46.2 billion in new funding, to bolster healthcare services. This included an immediate $2 billion CHT top-up to address immediate pressures, such as those in paediatric hospitals and emergency rooms, and long wait times for surgeries.

The Government of Canada has also entered into agreements with New Brunswick to enhance healthcare and long-term care in the province. Through the Working Together Agreement, the federal government committed over $313 million to support New Brunswick's three-year action plan for healthcare improvements. Additionally, the Aging with Dignity Agreement allocated nearly $117 million to support New Brunswick's five-year plan for helping residents age with dignity, with access to home care or long-term care facilities. These agreements aim to improve healthcare access and services, address health worker retention, expand mental health services, and modernise health data systems.

Canada Social Transfer

The Canada Social Transfer (CST) is the Canadian government's transfer payment program in support of post-secondary education, social assistance, and social services, including early childhood development and early learning and childcare. It was made independent from the Canada Health and Social Transfer (CHST) program on 1 April 2004 to allow for greater accountability and transparency for federal health funding.

The CST is the third-largest federal block transfer to provinces and territories, after the Canada Health Transfer and Equalization. It is allocated on an equal per capita cash basis to provide comparable treatment for all Canadians, regardless of where they live. Since 2009-10, CST funding has been legislated to grow by 3% annually.

The CST is provided to provinces and territories on a largely unconditional basis, with the exception of minimum residency requirements in the provision of social assistance. The provinces and territories are not required to report on how CST funds are disbursed. However, pursuant to the Federal-Provincial Fiscal Arrangements Act, the federal government can withhold CST cash payments if a province or territory imposes waiting periods for social assistance on Canadian citizens, permanent residents, protected persons who have not yet obtained permanent resident status, and victims of human trafficking who hold temporary resident permits.

In 2023-24, the first estimates of New Brunswick's Canada Social Transfer payments were $345 million. In 2024-25, the Government of New Brunswick will receive $4.3 billion through major transfers, which include the Canada Health Transfer, Canada Social Transfer, and Equalization payment.

Equalization payments

The amount of equalization payment a province receives is decided relative to its estimated fiscal capacity or ability to generate tax revenues. A province that does not receive equalization payments is often referred to as a "have province", while one that does is called a "have-not province". The fiscal capacity of provinces is measured using a representative tax system, which covers all own-source revenues. This includes estimates of provincial tax bases, actual provincial revenues, and population.

In 2023-24, all provinces and territories will receive $94.6 billion in major federal transfers, including $23.96 billion in equalization payments across 6 provinces. In 2024-25, provinces and territories will receive $99.4 billion through major transfers. New Brunswick will receive $4.3 billion through major transfers in 2024-25, with its equalization payment for 2023-24 being $2,631.3 million.

The equalization program is designed to help poorer provinces provide comparable levels of service to citizens at similar levels of taxation to richer provinces. New Brunswick has been described as Canada's poorest province and will receive the most funding per capita from the federal government's equalization support program. In 2020, New Brunswick received a record $2.2 billion in equalization funding, accounting for 10.7% of the entire federal funding pool. This amount is calculated to be worth $2,826 per person in New Brunswick, which is the most ever paid to a province.

The equalization formula uses three years of data and is based on provincial economic performance. The formula has built-in protections to shield the poorest provinces, meaning that equalization cuts are less of a threat to New Brunswick than to other provinces closer to the national average in fiscal capacity.

Federal-Provincial Fiscal Arrangements Act

The Federal-Provincial Fiscal Arrangements Act (R.S.C., 1985, c. F-8) is a piece of legislation in Canada that outlines the fiscal relationship between the federal government and the provinces. The Act includes regulations on various transfer programs, such as the Canada Health Transfer and the Canada Social Transfer.

One of the key purposes of the Act is to renew the Equalization Program, which aims to reduce disparities among the provinces' revenue-raising abilities or fiscal capacities. The Equalization Program is a major federal government transfer program and is the only transfer program enshrined in the Constitution Act (section 36). The federal government redistributes wealth to allow less prosperous provinces to provide public services of comparable quality and taxation levels to those in other provinces.

Equalization payments are calculated according to a formula set out in the Federal-Provincial Fiscal Arrangements Act. This formula takes into account each province's fiscal capacity, which is determined by applying an average national tax rate to provincial and local tax bases. The Act also includes provisions for floor and ceiling equalization payments, which protect provinces from excessive reductions and protect the federal government from rapid growth in equalization payments, respectively.

In the context of New Brunswick, the Federal-Provincial Fiscal Arrangements Act plays a significant role in determining the province's transfer payment amounts. For example, for the year 2023-24, the total major transfers to New Brunswick were expected to be around $4,015 million, including Canada Health Transfer and Canada Social Transfer payments. The Act also enables the federal government to "claw back" transfer payments in certain situations, such as when patients are charged user fees for medically necessary services.

The Federal-Provincial Fiscal Arrangements Act has undergone several amendments since its inception, with the most recent changes made in 2023. These amendments aim to address various aspects of the fiscal relationship between the federal government and the provinces, including stabilization payments, tax collection agreements, and the inclusion of new revenue sources in the calculation of equalization payments.

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