THE FEDERAL SPENDING POWER:

1

• THE FEDERAL SPENDING POWER
• Practices, Principles, Perspectives
• by
• Thomas J Courchene
• tom.courchene_at_queensu.ca
• IIGR and IRPP
• Slides for a Presentation to
• OPEN FEDERALISM AND THE SPENDING POWER
• A Symposium Sponsored by
• Queens Institute of Intergovernmental Relations
• Queens Law School
• January 25-26, 2008

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Outline

• Spending power challenge is two-fold i) provide
  protection against arbitrary and/or unwanted
  federal intrusion in areas of exclusive
  provincial jurisdiction, and ii) be flexible
  enough to allow provinces to work with Ottawa
  (including upward delegation) when they so wish.
• Part II Canadian Policies and Practice
• Quebecs PIT, UI/EI, CPP/QPP, EPF, CEU, Tax
  Harmonization, 1995 Budget, Martins Fiscal
  Cafeteria, CCTB, Pharmacare, Healthcare, Open
  Federalism
• Part III Evolution of Spending Power Principles
• Constitution Act 1867, Treaty Power, Early
  Trudeau, Later Trudeau, Equalization, Meech,
  Charlottetown, Calgary Declaration, SUFA
• Part IV Meta Perspectives
• Deux Nations, Networked Federalism, National
  Interest, Cities
• Part V Options weak and incomplete

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Canadian Practice The 1954 Quebec PIT

• Ottawa offers federal grants to universities
• Duplessis realizes Quebec has no revenue source
  to offset Federal spending power (Henceforth
  FSP) relating to PSE.
• Creates Tremblay Royal Commission on Fiscal
  Relations to introduce Quebecs PIT as
  countervail
• LESSON Spending power issue is inherently about
  revenue supremacy. In recent years, this is what
  the Séguin Commission was all about.
• Implications i) led to tax sharing (rather than
  tax rental) agreements and the decentralization
  of the PIT ii) led to the equalization program.
• Also led to major change in spending power
  approach. Up to 1954 Ottawa financed, regulated,
  and administered programs in exclusive provincial
  jurisdiction (UI, family allowances, pensions),
  usually via constitutional amendment). After
  1954, all future programs were shared cost with
  provincial administration.
• Quebecs PIT was a watershed in the evolution of
  both the exercise of the federal spending power
  and of Social Canada

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Canadian Practice UI and the FSP

• UI became federal in 1940. Therefore, UI does not
  constitute an exercise of the FSP because it is
  in federal jurisdiction
• However, Ottawa arguably used UI/EI to operate in
  provincial jurisdiction in areas like parental
  leave and training. Recently the feds have
  transferred responsibility for parental leave
  back to Quebec.
• One benefit of this may be that Ottawa, via
  UI/EI, introduced state-of-the-art social policy
  that can now be transferred back to the provinces
  or left with Ottawa as the provinces wish
• Lesson Programs in federal jurisdiction can also
  be deployed to operate in areas of provincial
  jurisdiction

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Canadian Practice CPP/QPP and the FSP

• Section 94A (1964) made public compulsory
  pensions Concurrent With Provincial Paramountcy
  (CWPP)
• Quebec exercised paramountcy to mount QPP
• Ends up being similar to s.94 spirit all common
  law provinces transfer power upward. Quebec
  remains put.
• Lesson Why do we say Quebec is opting out here?
  It has paramountcy in this area. Rest of Canada
  has OPTED IN!
• Lesson 2 Might something like CWPP be an
  approach to the FSP. Would allow opting in and
  opting out, as it were
• It is intriguing or at least consistent that,
  given the similarity of the CPP/QPP process to
  the spirit of s. 94, its section is 94A

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Shared Cost Programs EPF and CAP

• EPF and CAP were all 50-50 shared cost programs
  (although individually quite different in terms
  of the 50-50)
• Initially, and intriguingly, the provinces were
  able by their spending to trigger the FSP. Block
  funding stopped this.
• Over time the conditions were relaxed to allow
  more autonomy. This movement toward unconditional
  grants effectively enhances provincial powers
• Equalization allowed all provinces to be on a
  more level playing field in terms of funding
  these programs
• Lesson The genius inherent in the exercise of
  the FSP here was that it allowed the provinces to
  run these programs which, with federal co-funding
  and CEU provisions, effectively became national
  programs.

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Canadian Practice the CEU and the FSP

• Because of s.92, our trade and commerce clause
  has been read less expansively than US and
  Australia interstate commerce clauses
• Pursuing a thoroughgoing CEU could be quite
  centralizing since almost every provincial policy
  affects the CEU
• Ottawa has used the CEU issue to curtail
  provincial demands (in the 1980-82 negotiations
  and in recent Finance documents).
• Reliance on s.91(2) is problematical to the
  provinces because Ottawa would not be bound (on
  EI, for example)
• AIT has two problems at least needs to be able
  to be triggered by citizens, and needs to be
  binding on provinces.
• Lesson Citizens want a CEU (and CSU) and if
  provinces do not deliver this, then citizens will
  insist that Ottawa will
• The BC and Alberta TILMA may be a good start here

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Tax Harmonization and the FSP

• The FPS has given Canada (and especially ROC) a
  decentralized yet harmonized tax system. Is a
  model for decentralized federations
• Ottawa collects the provincial PIT free of charge
  provided that the provinces adopt federal
  definitions for income and abide by the
  MacEachen guidelines for tax credits,
  surcharges, etc
• On the CIT side all provinces agree to assign
  profits of multi-province corporations in terms
  of an agreed formula. Provinces can also
  piggy-back on federal CIT (and 7 do)
• GST/PST issue remains a problem
• Quebec has its own PIT again it is ROC that has
  opted in to be with the federal system, and not
  Quebec that has opted out.
• Lesson Ottawa has successfully employed the
  spending power in the service of the Canadian tax
  union while simultaneously enhancing provincial
  tax flexibility and autonomy

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The 1995 Budget and the Federal Savings Power

• After a series of caps and freezes to cash
  transfers, the 1995 federal budget unloaded the
  savings power on the provinces, with the new
  CHST to be cut by 6 billion
• This budget was also a watershed in terms of the
  FPS. First, the deficit downloading was part of a
  package of initiatives that led to a
  near-decade-long set of federal surpluses, and a
  major fiscal balance in Ottawas favour.
• Second, this downloading and the continuing
  demands of Medicare led to a situation where the
  provinces were cash-starved across the board and
  even demanding the FSP.
• This was the perfect storm for the FSP the
  provinces demanding cash and Ottawa more than
  willing to supply
• This set the stage for the spectacular FSP binge
  (much of it in the form of bilateral deals)
  orchestrated by Prime Minister Martincities, day
  care, infrastructure, equalization health, i.e.,
  the fiscal cafeteria as The Economist noted

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More on Martins Fiscal Cafeteria

• What are the lessons here?
• Were the provinces so cash-strapped that they
  signed any and every federal deal, or were we
  witnessing ROC expressing a desire to work much
  more closely with Ottawa to create national
  programs? Probably some of both
• Were citizens on side? My guess is yes.
• This re-enforces the two-fold approach to the
  spending power elaborated earlier -- ensuring
  protection against unwarranted intrusions in
  areas of exclusive provincial jurisdiction and,
  in the spirit of s. 94 providing flexibility to
  allow provincial-initiated (and perhaps
  federal-initiated) fed-prov collaboration

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The Report to Premiers, the APCs and the CCTB

• The provinces response to the 1995 budget was to
  revitalize the Annual Premiers Conference and to
  commission the impressive Report to Premiers
  (Quebec had observer status). One of its
  recommendations led to the CCTB (Canada Child Tax
  Benefit).
• This was a very federalism friendly program.
  Provinces could reduce spending on welfare
  benefits provided that they re-deployed the money
  for low-income families. This may be a
  sufficiently flexible approach to try to
  replicate in other areas
• It appears that with the CCTB there is a de facto
  re-allocation of roles Ottawa looks after the
  kids and the elderly while provinces are
  responsible for adults (Ottawa even gives
  training to the provinces)
• With the election of Jean Charest in 2003, the
  APC becomes the Council of the Federation (COF),
  with addressing fiscal imbalance as its initial
  priority

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The COF Pharamacare

• At the (July, 2004) post-federal-election meeting
  of the COF, the provinces offer responsibility
  for pharmacare to Ottawa.
• The COF was unanimous that Quebec would keep its
  program
• It is understood hat Quebec will maintain its
  own program and receive a comparable compensation
  for the program put in place by the federal
  government.
• This is ROC opting in, ? la s. 94, but with a new
  twist compensation for Quebec maintaining its
  own program
• Lesson If the FSP issue is defined in terms of a
  deux-nations issue, then this approach may be
  compromise needed. But this will probably not sit
  well with all ROC provinces.

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The 2004 FMM Healthcare Agreement

• The Sept. 2004 First Ministers Meeting (FMM),
  led to a 10-year, 41 billion healthcare
  agreement.
• This too appeared as a deux nations approach
  because while Quebec would collaborate with
  others, its own policies would be determined in
  accordance with the objectives, standards, and
  criteria established by the relevant Quebec
  authorities (from the FMM addendum Asymmetric
  Federalism that Respects Quebecs Jurisdiction).
  
• In the final countdown to the deal, Ottawa
  verbally agreed that Alberta and BC (and by
  extension all provinces) could have the same deal
  as Quebec. This is in line with the Calgary
  Declaration, as will be elaborated.
• Since no other province has acted on this, it may
  be along the lines of de jure symmetry but de
  facto asymmetry

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Harpers Open Federalism and the FSP

• This tour dhorizon of Canadian policy/practice
  concludes with Harpers une chartre du
  fédéralisme douverture.
• This is defined to include
• A recognition and respect for the constitutional
  division of powers
• A recognition that there exist a fiscal imbalance
  in the federation
• A commitment to redress this fiscal imbalance
• A related commitment to rein in the federal
  spending power
• A commitment to work with the COF to improve the
  management and workings of the federation
• And, on a more political note, a commitment to
  halt the domineering and paternalistic
  federalism of the Chrétien-Martin Liberals.
• The challenge is to design frameworks that can
  deliver this
• The analysis now addresses the evolution of
  principles relating to the FSP.

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PRINCIPLES RELATING TO THE FSPCONSTITUTION ACT,
1867 s. 94

• S.94 Uniformity of Laws in ON, NS, and NB
• Notwithstanding anything in this Act, the
  Parliament of Canada may make Provision for the
  Uniformity of all or any of the Laws relative to
  Property and Civil Rights in Ontario, Nova
  Scotia, and New Brunswick, and of the Procedure
  of all or any of the Courts in those Three
  Provinces, and from and after the passing of any
  Act in that Behalf of the Parliament of Canada to
  make laws in relation to any Matter comprised in
  any such Act shall, notwithstanding anything is
  this Act, be unrestricted but any Act of the
  Parliament of Canada making Provision for such
  Uniformity shall not have effect in any Province
  unless and until it is adopted and enacted as Law
  by the Legislature thereof.
• Frank Scott suggested that, unable to secure a
  legislative union, this provision was inserted to
  allow the common law provinces to pursue a more
  uniform future. Quebec would not be able to veto
  this.
• Sam LeSalva notes that it should have been
  entitled Transferring Constitutional
  Jurisdiction, to make it clear that it is in
  fact an amending procedure.
• As noted, the CPP/QPP and the 2004 pharmacare
  proposal are in the spirit of s.94. This section
  is relatively unused, if not viewed as a dead
  letter. It merits reconsideration in the context
  of open federalism/FSP

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Principles Relating to the FSPThe Treaty Power
and the Division of Powers

• Can the central government, simply through the
  exercise of its capacity in the field of foreign
  relations, significantly alter what otherwise
  would be the constitutional division of powers?
• Greg Craven notes that in Australia, the answer
  is yes
• the federal balance achieved by the Constitution
  is now at the mercy of the treaty making powers
  of the federal executive. (1993,22)
• However, in Canada, pursuant to the Labour
  Conventions Case in 1937 while the government
  can enter into any international obligations they
  wish, they can implement only those obligations
  only as far as they are matters of federal
  constitutional responsibility (D. Wilkinson,
  1993,208)
• Might this be revisited in this increasingly
  globalized environment?

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Principles Relating to the FSPEarly Trudeau,
1969

• From 1969 FMC, Trudeau tabled the following
  (Watts,1999)
• the federal spending power should formally be
  entrenched in the constitution
• Parliament should have an unrestricted power to
  make conditional grants to provincial governments
  for the purpose of supporting their programs and
  public services and
• Parliaments power to initiate cost-shared
  programs involving conditional grants in areas of
  provincial jurisdiction should require both a
  broad national consensus ... and a per capita
  reimbursement of the people (not the government)
  of a province whose legislature decided not to
  participate.
• This would come close to importing the Australian
  approach to its spending power. Specifically,
  s.95 of the Australian constitution states that
  Parliament may grant financial assistance to any
  State on such terms and conditions as Parliament
  thinks fit.
• Since Quebec has never accepted the
  constitutionality of the federal spending power
  (Telford, 2003,4), there was no chance that
  formal entrenchment of the spending power in this
  form would find acceptance.

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Principles Relating to the FSPLater Trudeau,
1978-79

• A more acceptable approach from the Trudeau
  government emerged a decade later in the context
  of the 1978-79 constitutional discussion with the
  provinces.
• Again from Watts (1999,2) ... the exercise of
  the federal spending power would have been made
  subject to a provincial consent mechanism (a
  majority of provinces with a majority of the
  population), with unconditional compensation for
  non-participating provinces (though there was no
  agreement on whether compensation was to be paid
  to non-participating provincial governments or
  directly to their residents).
• While enshrining this version would also have
  created problems for Quebec, one should note that
  this was part of a best efforts draft relating
  to overall constitutional change that was much
  more province-friendly than what resulted,
  post-Referendum, from Trudeaus promise of a
  renewed federalism.
• En route to the final agreement in 1980-82, the
  gang of eight (all provinces except Ontario and
  New Brunswick) proposed that the overall
  Patriation package include a provision whereby a
  province would be able to opt out from federal
  programs with full compensation. Although this
  proposal fell by the wayside, the concept of
  opting out with full compensation would
  resurface on several later occasions. What did
  become enshrined were the s.36 equalization
  principles, which have FSP implications .

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Principles Relating to the FSPConstitution Act
1982 Section 36 (Equalization)

• 36. (1) Without altering the legislative
  authority of Parliament or of the provincial
  legislatures, or the rights of any of them with
  respect to the exercise of their legislative
  authority, Parliament and the legislatures,
  together with the government of Canada and the
  provincial governments, are committed to
• (a) promoting equal opportunities for the
  well-being of Canadians
• (b) furthering economic development to reduce
  disparity in opportunities and
• (c) providing essential public services of
  reasonable quality to all Canadians.
• 36. (2) Parliament and the government of Canada
  are committed to the principle of making
  equalization payments to ensure that provincial
  governments have sufficient revenues to provide
  reasonably comparable levels of public services
  at reasonably comparable levels of taxation.
• While the generally-accepted view is that s.36 is
  non-justiciable, it nonetheless does provide
  constitutional underpinning for the exercise of
  the spending power to achieve provincial fiscal
  adequacy and equity (s.36(2)) and to promote
  equality of opportunity and access to public
  services for individual Canadians (s.36(1)).
  More on this latter role in the later reference
  to SUFA.

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Principles Relating to the FSPMeech Lake
Accord 1987-90

• The Meech Lake Accord was intended to become
  enshrined in a Constitution Act, 1987 and it
  represented the first attempt to limit the
  federal spending power consitutionally (Telford,
  2003,38). Section 106A was to read as follows
• 106A. (1) The Government of Canada shall provide
  reasonable compensation to the government of a
  province that chooses not to participate in a
  national shared-cost program that is established
  by the Government of Canada after the coming into
  force of this section in an area of exclusive
  provincial jurisdiction, if the province carries
  on a program or initiative that is compatible
  with the national objectives.
• Telford (2003, 38-8) notes that Premier Robert
  Bourassa was comfortable with this wording
  because (quoting Bourassa) the new section 106A
  is drafted so that it speaks solely of the right
  to opt out, without either recognition or
  defining the federal spending power ... so Quebec
  keeps the right to contest before the courts any
  unconstitutional use of the spending power.

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Principles Relating to the FSPCharlottetown
Agreement

• A provision should be added to the Constitution
  stipulating that the Government of Canada must
  provide reasonable compensation to the government
  of a province that chooses not to participate in
  a new Canada-wide shared-cost program that is
  established by the federal government in an area
  of exclusive provincial jurisdiction, if that
  province carries on a program or initiative that
  is compatible with the national objectives.
• A framework should be developed to guide the use
  of the federal spending power in all areas of
  exclusive provincial jurisdiction. Once
  developed, the framework could become a
  multilateral agreement that would receive
  constitutional protection. The framework should
  ensure that when the federal spending power is
  used in areas of exclusive provincial
  jurisdiction, it should
• (a) contribute to the pursuit of national
  objectives
• (b) reduce overlap and duplication
• (c) not distort and should respect provincial
  priorities and
• (d) ensure equality of treatment of the
  provinces, while recognizing their different
  needs and circumstances.

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Principles Relating to the FSPThe Calgary
Declaration

• The provinces way of reaching out to Quebec after
  the 1995 Referendum took the form of the Calgary
  Declaration. This declaration was signed by all
  provinces (except Quebec, in large measure
  because this was to be a message to Quebec). The
  Calgary Declaration was then taken back to each
  of the nine provinces for further consultation
  and discussion and was eventually (1998) given
  assent in all nine provincial legislatures, in
  several cases with considerable fanfare. Of the
  7 articles of the Declaration, three are of
  important for present purposes
• 5. In Canadas federal system, where respect for
  diversity and equality underlies unity, the
  unique character of Quebec society, including its
  French speaking majority, its culture and its
  tradition of civil law, is fundamental to the
  well being of Canada. Consequently, the
  legislature and Government of Quebec have a role
  to protect and develop the unique character of
  Quebec society within Canada
• 6. If any future constitutional amendment
  confers powers on one province, these powers must
  be available to all provinces.
• 7. Canada is a federal system where federal,
  provincial, and territorial governments work in
  partnership while respecting each others
  jurisdictions. Canadians want their governments
  to work cooperatively and with flexibility to
  ensure the efficiency and effectiveness of the
  federation. Canadians want their governments to
  work together particularly in the delivery of
  their social programs. Provinces and territories
  renew their commitment to work in partnership
  with the Government of Canada to best serve the
  needs of Canadians.

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Principles Relating to the FSPThe Calgary
Declaration 2

• Article 5 represents a formal recognition on the
  part of the provinces that Quebec is a distinct
  society.
• Article 6 allows Ottawa to make bilateral deals
  with any province (but clearly this was written
  within Quebec in mind) which could then become
  multilateral. Again this is de jure symmetry but
  perhaps de facto asymmetry
• Ron Watts (1999,4-5) notes that Article 7 has
  acknowledged the interdependence of governments
  and called for more cooperation between the
  difference orders of government in their
  respective jurisdictions, pointing implicitly to
  the significance of the federal spending power.
  To the extent that this is so, it is important to
  note that these nine provinces are speaking about
  Quebec in article 5 and probably article 6 as
  well. But they are not speaking for Quebec in
  article 7 since Quebec is not a signatory.
  Rather, in 7, these are the common-law provinces
  speaking, ? la s.94. My guess is that the Calgary
  Declaration influenced the 2004 pharmacare
  proposal, which in turn is in the spirit of s.94.

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SUFA Canada-Wide Initiatives Supported by
Transfers to Provinces and Territories

• The Government of Canada will
• .36. Work collaboratively with all provincial
  and territorial governments to identify
  Canada-wide priorities and objectives
• 37. Not introduce such new initiatives without
  the agreement of a majority of provincial
  governments.
• 38. Each provincial and territorial government
  will determine the detailed program design and
  mix best suited to its own needs and
  circumstances to meet the agreed objectives.
• 39. A provincial/territorial government which,
  because of its existing programming, does not
  require the total transfers to fulfill the agreed
  objectives would be able to reinvest any funds
  not required for those objectives in the same or
  a related priority area.
• 40. The Government of Canada and the
  provincial/territorial governments will agree on
  an accountability framework for such new social
  initiatives and investment
• 41. All provincial and territorial governments
  that meet or commit to meet the agreed
  Canada-wide objectives and agree to respect the
  accountability framework will receive their share
  of available funding.
• Some have raised concerns that in terms of
  section 37, Ottawa could go ahead with a
  shared-cost program which was opposed by Ontario,
  Quebec, BC and Alberta. Indeed, the more likely
  scenario, as Tom Kent (2007) has noted, is that
  we may never see another major shared cost
  program because Ottawa would have little
  incentive to spend federal money on a presumed
  pan-Canadian program that would allow opting out
  by the four largest provinces. In a sense,
  therefore, the SUFA approach to the traditional
  spending power may have gone too far in
  accommodating opting out of federal programs.

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SUFA 2 Direct Federal Spending

• From SUFA
• 42a. Another use of the federal spending power is
  making transfers to individuals and to
  organizations in order to promote equality of
  opportunity, mobility, and other Canada-wide
  objectives.
• At one level, this can be viewed as a rather
  straightforward attempt to make operational some
  of the principles contained in s.36(1) of the
  Constitution Act, 1982.
• In general, one could anticipate that the
  exercise of this direct federal spending would
  appeal to a broad majority of Canadians (as will
  be elaborated in Tom Kents paper).
• However, the exercise of the direct spending
  power would clearly be anathema to Quebec. That
  this is so should be rather obvious since it was
  an exercise of this direct spending power in the
  form of federal grants to universities that
  triggered the Quebec PIT and Quebecs FSP
  concerns in the first place

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Addressing the FSP Meta Perspectives

• There is a wealth of Canadian practice and
  principle to draw upon (and much comparative
  experience as well), in addressing the FSP
  challenges
• The first task, however, is to recognize that
  there are other perspectives that need to be
  brought to bear on designing an approach to the
  spending power. Not all of these will be
  compatible with open federalism. Among them are
• The deux-nations approach (which has already been
  alluded to)
• Networked Federalism
• Cities and the spending power
• The National-Interest/Provincial-Jurisdiction
  Nexus
• Attention is then directed to the alternative
  approaches to the design of spending power
  instruments

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Meta Perspectives Deux Nations

• For Quebecers, Quebec is their nation and Canada
  is their state. For ROC, Ottawa is (typically)
  the embodiment of both nation and state.
• Therefore, nation stuff (social envelope,
  property and civil rights) stays at the province
  level in Quebec, whereas ROC may want
  pan-Canadian programs.
• It is important to remember that property and
  rights was assigned to Quebec in 1774 Quebec
  Act.
• If the goal is to satisfy both conceptions of
  nation, the way forward is for asymmetrical
  treatment for Quebec, perhaps in the spirit of
  s.94
• This is why the pharmacare proposal is so
  intriguing. ROC must have realized two things i)
  because of the SUFA possibility for the large
  provinces to opt out, the initiative had to come
  frorm ROC and had to be inclusive in order to
  interest Ottawa, and ii) ROC recognized that
  Quebec would need to run its own program. This
  approach will work as long as the programs fall
  under the Nationhood rubric.
• However, if the issues at stake are more along
  the decentralization lines, then several ROC
  provinces will want to be treated equivalently to
  Quebec, so more symmetric options will be needed.
  

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Meta Perspectives Networked Federalism

• The network is the dominant and pervasive
  organizational form in the Information Age. This
  has led Janice Stein to propose Networked
  Federalism. From Stein
• the federal project in Canada is not to
  disentangle overlapping jurisdictions. It is to
  acknowledge complexity and to pull on the best
  from the private, voluntary, and public sectors
  to create shared policy space across levels of
  government for new ideas, feedback, and
  correction
• Although networks have existed for centuries, the
  revolution in information and communications
  technology enabled them to proliferate and grow.
  They are only now becoming socially important
  because of their comparative advantage in
  handling the large volumes of information that
  flow around the world at unprecedented speed.
• the most serious obstacle to networked federalism
  is the deeply embedded political culture of
  rights and entitlements of both orders of
  government and their emphasis on control. our
  challenge is not another round of constitutional
  design, but a shift in culture to accommodate
  networked politics.
• This harkens back to Carl Friedrichs view that
  federalism is the process of adopting joint
  policies and making joint decisions on joint
  problems

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Meta Perspectives National Interest /
Provincial Jurisdiction 1

• The new societal order is privileging knowledge
  and human capital in much the same way as the
  Industrial Revolution privileged physical capital
• From Lester Thurow
• If capital is borrowable, raw materials are
  buyable and technology is copyable, what are you
  left with if you want to run a high wage economy?
  only skills, there isnt anything else!
• Given that knowledge and human capital are
  critical to
• Competitiveness and wealth creation
• Enhancing living standards
• Addressing cohesion and income distribution, it
  follows that
• Ottawa has to become involved in areas like PSE,
  early child development, etc., and aspects of
  health because they are in the national interest,
  even though they are largely under provincial
  jurisdiction (henceforth NI/PJ)

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Meta Perspectives NI / PJ Global Cities

• Cities (especially global city regions, GCRs)
  have become the dynamic motors of the global and
  national economies
• They are the centres of dense concentrations of
  human capital, RD, high-value added services,
  which allows them to become national nodes in the
  networks that drive growth, trade and innovation.
  
• From Simon Frasers Rick Harris
• Canadas future in terms of productivity, growth
  and living standards will depend how well our
  GCRs will fare against US and international GCRs
• Again, Ottawa has to become involved even though
  Canadas cities are constitutionless, i.e.,
  creatures of the provinces. Once again, a
  national-interest/provincial-jurisdiction (NI/PJ)
  dilemma
• Arguably, GCRs need to become more integrated
  into the processes of fiscal and political
  federalism

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Options for FSP for programs in provincial areas
Revitalizing s.94

• Would be a constitutional approach the FSP
• Template legislation passed by participating
  govts
• Would accommodate ROC opting into policy
  uniformity
• Has deux nations feature, (allows Quebec to
  maintain own program, or to legislate similar
  program if it wishes).
• Could be triggered by ROC or by Ottawa
• Problems
• Can legislation be changed
• Is it reversible
• Can Quebec get in if it wishes
• Compensation if not in?
• How does one ensure that these considerations are
  part of the revitalization of s.94?

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Options for FSP for programs in provincial areas
A Non-Constitutional Approach

• Possible text, from Throne Speech guided by
  our federalism of openness, our Government will
  introduce legislation to place formal limits on
  the use of the federal spending power for new
  shared-cost programs in areas of exclusive
  provincial jurisdiction. This legislation will
  allow provinces and territories to opt out with
  reasonable compensation if they offer compatible
  programs.
• Could be triggered by provinces or by Ottawa.
• Would allow provinces to isolate themselves from
  unwanted intrusions, as well as let them pass
  powers up to Ottawa (as in pharmacare proposal).
• Could set limits on inclusion say, at least 7
  provinces with at least 50 population (adjust
  for territories) plus Ottawa
• Ottawa and participating provinces would
  legislate the identical template. Would serve to
  make it more binding.
• Quebec could stay out of any initiative, but
  would not have distinct status in so doing as it
  has under s.94
• Should have an accessible dispute resolution
  procedure (as in FTA)

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Options National Interest/Provincial
Jurisdiction

• Regardless of what the Constitution may say,
  Ottawa will be legislating in areas like cities,
  early childhood development, human capital since
  they are key to economic competitiveness and
  social cohesion in the new global order. They
  will also be key to electoral success.
• Citizens will likely want provinces to be
  partners in this
• This is not a narrow division-of-powers/FSP issue
  as much as it is a intergovernmental-process/netwo
  rked federalism/fed-prov co-determination issue.
• The real challenge here in terms of federal
  spending may be to ensure that the bilateral
  federalism or contractual federalism the
  characterized the Martin administration is
  addressed by a set of protocols that would
  constrain Ottawas ability to arbitrarily
  discriminate across provinces.
• One might adopt as a principle a reworked version
  of the 6th clause of the Calgary Declaration
  e.g., Ottawa may sign a deal with any province
  relating to areas in (not necessarily exclusive)
  provincial jurisdiction, bur this deal must then
  be made available to all provinces. This may
  serve two purposes. First, to minimize
  federal-induced asymmetry at the provincial level
  and, second, to allow Ottawa to take the lead in
  introducing new programs that the provinces may
  want to be part of.

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OPTIONS Help!

• This list of options is admittedly unsatisfactory
• I would welcome suggestion here, and indeed
  comments on the entire presentation (e-mail is on
  first slide)
• Thank you

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