Issues and ideas

Concerns with the New Framework

The 3.5 percent escalator was not sufficient to address the rising cost of providing public services in the territories, particularly since it is not responsive to changes in population.

A number of concerns were raised with the New Framework for TFF.

The Joint Territorial Submission outlined four key concerns:

• The initial fixed amounts provided in the New Framework do not restore the adequacy of TFF funding and the allocations for 2005–06 do not reflect the full program responsibilities of the territorial governments.

“In short, Ottawa is once again imposing a solution on the North that has the single virtue of maintaining predictability for the federal government alone, and is bound to foster exactly the same deficiencies experienced under the previous agreement, i.e. a failure to adequately equate funding levels with actual need.” - NWT Chamber of Commerce and NWT Construction Association23

• The annual 3.5 percent increase in total funding is inadequate compared with the previous TFF formula.

• The growth in per capita funding for the territories under TFF will be less than for the provinces under Equalization. The 3.5 percent escalator is applied to the total amount of funding available for both TFF and Equalization. In the case of the provinces, this may be sufficient to accommodate their population growth, but in the case of the territories it doesn’t reflect their relatively higher rates of population growth.

• Setting a fixed envelope for TFF creates a “zero-sum game” for territories. Gains in one territory will come at the expense of the other territory or territories.

“... in a three-player game where the stakes are 70 to 90 percent of total revenues and in the absence of the flexibility of own-source revenues (as the provinces have) marginal gains are significant and competitive behaviour necessary.” - Joint Territorial Submission to the Expert Panel24

Other submissions to the Panel and discussions during the Yellowknife Roundtable echoed concerns with the New Framework, particularly the impact on changing the dynamics among territories and pitting territories against each other. Others suggested that the 3.5 percent escalator was not sufficient to address the rising cost of providing public services in the territories, particularly since it is not responsive to changes in population. It was also suggested that, while the New Framework was described as a way of providing greater stability and predictability, in fact, it provides more predictability only for the federal government. An individual territory’s share of the total pool of TFF funds could change substantially on a year-to-year basis, even though its economic and fiscal situation may not have changed. The Joint Territorial Submission indicated that the territories are less concerned with stability than they are with the adequacy and responsiveness of TFF.

23. NWT Chamber of Commerce and NWT Construction Association. (2005). Joint Submission to the Expert Panel on Equalization and Territorial Formula Financing, p.  2.
24. Government of the Northwest Territories, Government of Nunavut, Government of Yukon. (2005). Joint Territorial Submission to the Expert Panel on Equalization and Territorial Formula Financing, p.  26.

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