The State of Canada's Cities and Communities 2012 - FCM

Chapter 1
Page 9
not available for other uses. When the costs are
spread out over time, a significant portion of the
local budget becomes a fixed obligation, and
debt charges can constrain local fiscal flexibility.
Moreover, less-indebted governments tend to be
more highly rated by the bond-rating agencies,
and thus face lower borrowing costs. A municipality
with low debt also has more flexibility
in responding to unanticipated future events. 9
Nevertheless, borrowing by local governments
to meet at least some capital expenditure
requirements is certainly justified. As Casey
Vander Ploeg notes, “a completely debt-free city
should not be the ultimate goal of fiscal policy,
regardless of how well it plays out politically.
This is especially the case if the trade-off is an
under-funded capital stock.” 10
4.
EXPENDITURE TRENDS AMONG
FEDERAL AND PROVINCIAL/
TERRITORIAL GOVERNMENTS
Figure 5 compares expenditures for all three
orders of government during the period 1989–
2009. 11 It indicates that federal expenditures
per capita in constant dollars have fallen during
the period, that provincial expenditures have
9 TD Economics. Mind the Gap: Finding the Money to Upgrade Canada’s Aging Infrastructure, Toronto 2004, p. 14.
increased, and that municipal expenditures have
increased, albeit at a slower rate than provincial/
territorial expenditures.
4.1. Federal Expenditures
Federal expenditures per capita in constant
dollars fell at an average annual rate of 0.3%
over the 20-year period. Figure 6 shows federal
government expenditures per capita for
selected categories from 1989 to 2009. In 1997,
Established Programs Financing (EPF) and the
Canada Assistance Plan (CAP) were replaced by
the Canada Health and Social Transfer (CHST).
This change explains the increase in generalpurpose
transfers, and the reduction in social
services expenditures at the federal level. Other
spending categories that declined over the
period are transportation and communications,
and education. At the same time, federal expenditures
increased for protection and health.
4.2. Provincial Expenditures
Figure 7 shows the trends in provincial government
expenditures from 1989 to 2009. Overall,
provincial expenditures per capita in constant
dollars increased at an annual average rate of
1.8% per year. The largest provincial government
expenditures both in 1988 and 2009
FIGURE 5: FEDERAL, PROVINCIAL AND MUNICIPAL GOVERNMENT EXPENDITURES PER CAPITA,
1989–2009, IN CONSTANT (1988) DOLLARS
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
10 Vander Ploeg, Casey, “No Time to be Timid: Addressing Infrastructure Deficits in the Western Big Six,” Calgary: Canada West Foundation, February
2004, p. 17.
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Municipal Government Provincial and Territorial Government Federal Government
SOURCE: STATISTICS CANADA, NATIONAL ECONOMIC ACCOUNTS, CANSIM TABLE 385-001, 002, AND 0024.
11 The estimates for federal and provincial/territorial governments cover the period 1989–2009, because their fiscal year is April 1 to March 31. The year
1989 thus refers to 1988–1989.