Fiscal Stabilization Program – Indexing the maximum per capita payment

This is an independent cost estimate of a budgetary measure contained in the federal government’s Fall Economic Statement 2020 (FES 2020).

In the 2020 Fall Economic Statement, the Government proposed to index the maximum payment of $60 per capita (set in 1987) available to a province each year through the Fiscal Stabilization Program (FSP). This indexation increases the maximum payment to $169.82 per capita for both fiscal years 2019-2020 and 2020-2021 and will grow with the Canadian economy, that is, nominal gross domestic product (GDP) per person, for subsequent years.

PBO estimated FSP payments to provinces using provincial government revenue projections and the FSP’s formula from the Federal-Provincial Fiscal Arrangements Act. The maximum per capita payment is adjusted using Canadian nominal GDP as well as Canadian population projections.

PBO assumes that an FSP payment is booked one year after the province qualified for the payment. In addition, PBO assumes that any eligible revenue declines exceeding the maximum payment are requested by provinces in the form of interest-free loans from the federal government as is made possible through the FSP program.

Provincial revenues are forecasted and therefore are subject to the continuing uncertainty linked to the COVID-19 pandemic. This fact compounds the uncertainty related to revenue adjustments due to policy changes made by provincial governments. Furthermore, resource revenues are volatile and as such may contribute to future FSP payments to some provinces.

Since 1987, no province has taken a loan as part of the FSP program. Given the uncertainty related to the up take of the interest free loans, the interest costs may be lower than estimated.

• Estimates are presented on an accruals basis as would appear in the budget and public accounts.
• Positive numbers subtract from the budgetary balance, negative numbers contribute to the budget balance.
• Numbers may not add due to rounding.