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CAPITAL BEAT: Ottawa gives and Ottawa takes back


As Finance Minister Allen Roach prepares his 2017-2018 budget, there is suddenly a $30 million hole he must deal with.

The shortfall comes from an overpayment from the federal government, related to its share of the Harmonized Sales tax. All four Atlantic provinces were caught in a shortfall situation after the estimated share of the joint tax they received from federal government turned out to be more than what actually went into the till.

Ottawa collects the combined tax and makes a projected payment to each province. However, it is often a period of years before the final data is collected and the provinces either then make more payments or get more money, depending on the final numbers.

In his fall economic update, Finance Minister Allen Roach projected a slight decrease in the deficit for the current fiscal year - down from $9.6 to $7.9 million. Depending on how the shortfall is allotted, that projection could be out the window. The province is currently in the process of consulting Islanders and a department statement said they are reviewing the adjustment.

The opposition is criticizing not only the current Wade MacLauchlan administration but the previous Liberal administration of Robert Ghiz, which implemented the tax in 2013. Ottawa notified the provinces of the readjustment in December, but the issue was not made public until a newspaper story in late January.

Opposition Leader Jamie Fox maintains "a $30 million hole in the budget could have real impacts on vital public services for Islanders like schools, health care, and manors. "Both Fox and Georgetown-St Peters MLA Steve Myers argued the shortfall should have been made public during the budgetary process.

In a province with a small and aging population, every dollar matters. Obviously, that $30 million going to Ottawa can't be used to provide government services, although Roach is vowing no front line services will suffer as a result of the decision.

Islanders won't have a chance to judge that for themselves until the budget is tabled in the house, likely in late April or early May. Will that mean a tax increase to help pay the bill? That seems unlikely since a carbon tax is slated to come on stream in 2018 to help implement Canada's climate change obligations.

Just days after the announcement of the shortfall, Health Minister Robert Henderson announced  the province had reached health funding agreement with Ottawa. The premiers originally presented a united front last fall, walking away from negotiations with the federal government.

However, one by one, they have been signing the same agreement they rejected. In P.E.I.'s case, there will be an additional $45 million over 10 years, largely for home care and mental health programs. Ottawa has essentially tried to divide and conquer by promising renegotiation if another jurisdiction was able to  get a better deal. That hasn't happened yet, although the four largest provinces are among the five holdouts. While the other three Atlantic provinces already signed on to the deal, P.E.I. really didn't have much choice but to sign on the dotted line.

Andy Walker is an Island-based journalist and commentator.

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