Well, I decided to finish off my postings on provincial revenues and go to the Federal Fiscal Reference Tables which provide a federal transfer revenue variable for each province from 1987/87 to 2009/10 as well as provincial revenues. I have a plot of nominal per capita transfer revenues and not surprisingly it shows an upward trend. More importantly, I then construct a share of provincial revenue accounted for by federal transfers.
First, there is clustering into two tiers of transfer recipients. Historically, the four Atlantic provinces and Manitoba are in the top tier while everyone else is in the lower grouping. This top tier of transfer recipients currently averages about 36 percent of its revenues from federal transfers – double the share of the bottom tier recipient provinces, which is at 18 percent. Moreover, by 2009/10, average per capita transfers for the top tier group are between 3,000 and 4,500 dollars while for the lower tier they are between about 1,400 and 2,000 dollars per capita. While per capita transfers have risen, the share of provincial revenues from federal transfers has declined since the mid 1980s. For the top tier, the average revenue share dropped from 43 percent to 36 percent while for the bottom five it was a smaller drop – 21 percent to 18 percent.
However, the averages mask some interesting fluctuations. There has been some recent change with Newfoundland and Labrador dropping downwards and it now has a federal transfer share of revenue equivalent to Quebec. As for the members of the lower tier – Ontario, Saskatchewan, Alberta, British Columbia, and Quebec – their revenue share from transfers declined from the mid 1980s to the late 1990s but then began to rise. Ontario has seen some of the steepest growth going from about 8 percent of total provincial revenues from federal transfers in 1998/99 to 19 percent in 2009/10. Obviously, Ontario has been successful in having its “fiscal imbalance” issue addressed though another interpretation is simply that Ontario has really been having a tough economic time and this has affected its own-source revenue side.
Trying to pull everything together, it appears that provincial revenues overall have risen over the last two decades but the proportion accounted for by federal transfer revenues has declined though there has been some recovery in the share since the late 1990s – particularly for Ontario, Quebec, Saskatchewan, Alberta and British Columbia. This is quite interesting as it suggests when transfers are revisited – as they inevitably will be even before the expiry of the Health Accord in 2014 – any reductions in either the levels or the growth rate will not just hurt the traditionally transfer dependent provinces but also some of the new beneficiaries. Ontario, for example, has seen its nominal per capita transfer revenues rise from about 400 dollars per capita in the late 1990s to just over 1400 dollars at present. In percentage terms, this has been the largest increase in per capita transfers – followed by Alberta, Quebec and British Columbia. My guess is that the case for increasing federal transfers this time around will see the loudest advocates not from the traditional recipient provinces but from the new beneficiaries.