The Grinch came early to the Yukon this year dressed as a Statistics Canada bureaucrat to steal away our beloved transfer payments.
Well, kind of. Actually he just left us with a note telling us not to expect our annual payments to continue to increase like they have been.
Just two days before Christmas it was announced that Statistics Canada had changed the way it calculated one of the numbers that in turn gets plugged into the equation that determines Territorial Formula Financing meaning less money will flow to the territory over the next five years.
Twenty-three million dollars less will come to the Yukon in 2016 meaning that government will have substantially less money to spread around.
Unlike many of the announcements we are accustomed to, the decision to cut our transfer payments does not appear to have been a political one. The formula that is used to calculate transfer payments is set in legislation. It was not as if newly-minted Finance Minister Bill Morneau sat down with his bean counters and eyed up the large sums heading to the territory as a way to eke out some savings.
In fact, it is entirely possible that this mundane bureaucratic change was set in motion months earlier (perhaps at a time when the former government was still in power) by statisticians with no idea that it would result in significant hardship for the northern territories.
But now that the change has been made the new federal government has a political choice. It does have the power to reverse the decision by amending the formula thus allowing our payments to continue to rise as scheduled. The question is will they do it.
According to Premier Pasloski, the federal finance minister promised to look into the issue but was non-committal. Liberal MP Larry Bagnell appears to have been caught completely off guard by the announcement that territorial politicians learned of earlier this month.
Time will tell how the federal government will respond. After sweeping the north in October’s federal election it will be loath to start things off on the wrong foot.
But the next election is a long way off and Ottawa is facing hard financial times of its own. Falling oil prices have caused serious damage to the Canadian economy and by extension government revenue. And there are indications that the bleeding has not yet been stopped – particularly in Alberta where nearly as many jobs have been lost in this past year as were lost during the great recession of 2008-2009.
The feds now have an opportunity to gauge the political fallout from this trial balloon. If the backlash isn’t too severe they may find it convenient to blame Statistics Canada while finding some much needed savings in these hard fiscal times.
It would be hard to judge the feds too harshly if they did decide to hold the line. It has been a good run of steadily increasing transfers but I believe in spreading out the pain of hard economic times and it is a defensible position to say that the north should shoulder some of the burden as Ottawa and the provinces are seeing revenues growth lagging or, in some cases, declining.
Unfortunately all of this puts the Yukon Party in a difficult position that it has not faced in its 13 years in power. For once it may have to actually make some hard choices about where money is spent.
There is no question that $23 million is a significant amount of scratch for the territorial treasury and money that could help boost the local economy at a time when private sector activity is lagging.
But let us keep things in perspective. It is not fatal in the context of $930 million in total transfers and it is not a “cut” per se. As stated at the outset we are actually not even seeing a decrease in the amount of transfers that we receive but rather a slowing in their growth. The government can weather this change by holding the line on spending and without making deep cuts.
The pain will be mitigated somewhat by the fact that costs are not increasing like they used to and falling oil prices have and will continue to have benefits for the territory—which has no meaningful oil and gas industry to speak of. Not only will Yukoners save significantly on heating their homes and fueling their vehicles (I know I have), but lower transportation costs should filter their way through the supply chain affecting other consumer goods. Last year’s consumer price index measuring inflation here in Whitehorse was close to zero. Individual Yukoners will also all benefit at tax time from significant enhancements to the Northern Residents Deduction promised by the new Liberal government in Ottawa.
All this to say is that while we’re getting less the cost of being a Yukoner will likely increase less in the short term than they have in a while as they did in the last year.
We will have to wait and see if this change actually stands as Ottawa could make this whole issue moot before this column goes to print. I think there is a good chance that it will as Ottawa faces a cash crunch of its own. Unfortunately it could not come at a worse time for a territory where the bad economic news doesn’t seem to end. Kyle Carruthers is a born-and-raised Yukoner who lives and practises law in Whitehorse.