Commission on the Reform of Ontario's Public Services

CHART 20.3 Ontario’s Fiscal Gap 1
$ Billions
30
20
10
0
(10)
(20)
(30)
1999–2000 2000–01 2001–02 2002–03 2003–04 2004–05 2005–06 2006–07 2007–08 2008–09
Ontario’s Fiscal Gap with the Federal Government [A]
Ontario’s Fiscal Gap, Equal Per Capita [B]
Ontario’s over/(under) contribution versus an equal per capita share [A–B]
Chapter 20: Intergovernmental Relations
2009–10
1 Comparing Ontario’s fiscal gap with the federal government against Ontario’s share of the federal fiscal gap on an equal per capita basis.
Note: Federal revenue and program spending have been adjusted to include the Quebec Abatement. Excise taxes have been adjusted to be
distributed on a per capita basis.
Sources: National Accounts and Ontario Economic Accounts.
Federal-Provincial Transfers
The three major federal transfer programs — Canada Health Transfer (CHT), Canada Social
Transfer (CST) and Equalization — all have roots in bygone eras. Equalization, traceable
back to the Federal-Provincial Tax Sharing Arrangements Act of 1957, was entrenched as a
principle in the Canadian Constitution when it was patriated in 1982, while CHT and CST have
direct lineages to Established Programs Financing and Canada Assistance Plan, which began
in 1977 and 1962 respectively.
Unlike today, the world economy in those times was less globally competitive. In part because
of significantly higher tariffs, trade among provinces was more important then than it is now.
Accordingly, federal wealth redistribution tended to flow back through Ontario, justifying wealth
distribution among provinces. With the breaking down of world trade barriers through the latter
part of the 20th century, all provinces including Ontario now battle for business with a much
larger suite of competitors. Ontario’s trade flows are now considerably more international,
so the effects of redistribution increasingly leave Ontario shorthanded in the competitive
global economy.
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