Although at the periphery of federal budget debates, transfers the provinces were put in focus again this week. The Chretien government with Paul Martin as finance minister put Canada through the most recent cuts to program spending to erase the deficit starting in 1996. Part of the result was cuts to provincial transfers which in turn created a crisis in health care funding.
Flash forward 15 years and a similar battle may be brewing again. The federal government has yet to decide what it will do when current provincial transfer agreements expire in 2014. The recent Update on Economic and Fiscal Projections retained the previous escalators. However the federal government appears interested in cutting those transfers and letting the debt-burdened provinces deal with the increased demands alone.