Archived - Backgrounder: The Fiscal Stabilization Program

The federal Fiscal Stabilization Program provides protection to provinces in the event of extraordinary year-over-year declines in revenues.

The Fiscal Stabilization Program is authorized by the Federal-Provincial Fiscal Arrangements Act and falls under the responsibility of the Minister of Finance. It enables the federal government to provide financial assistance to any province faced with a year-over-year decline in its non-resource revenues greater than 5 per cent.

Provinces must apply for payments under the program, and each claim is subject to analysis and verification by the federal government. A province may submit a claim to the Minister of Finance as late as 18 months after the end of the fiscal year in question, but may also submit a claim for an advance payment on account based on as few as five months of data for the fiscal year in question.

There are two constraints on eligibility for payments:

1. The program compensates for year-over-year revenue declines due to economic downturns, not for declines due to provincial decisions to reduce taxes; policy changes made by the province in the rate or in the structure of provincial taxes are factored out when measuring revenue declines.
2. A decline in resource revenues is taken into account only if—and to the extent that—the annual decline exceeds 50 per cent.

The maximum payment to a province that makes a claim for a given fiscal year is $60 per person.

Provinces may also request an interest-free loan for any amounts in excess of the $60 per person limit, to be recovered over a five-year period. However, the decision of whether to provide such a loan is at the sole discretion of the Minister of Finance.

Since 1967, the federal government has provided payments totalling over $2 billion to the provinces through the Fiscal Stabilization Program. For example, the first province to qualify was British Columbia, which made a claim for payments under the program for 1982–83 in June 1983. British Columbia was paid $174 million in instalments over a three-year period as the data required to assess its claim became available.

For additional information on federal transfer payments, see the Department of Finance website.