Tuesday, September 4, 2012

Quebec's Federal Transfers - Living on Borrowed Time?

Since most provinces fiscal situation "lives and dies" by relying on Federal transfers, I wanted to take a look at how much Quebec, Canada's most likely to separate province , relies on Ottawa.

Here is a chart showing how each province benefits from Ottawa's largesse in order from west to east:

Here is the same data in graph form showing the size of the federal transfers to the provinces from the least to the greatest:

Quebec, as Canada's second most populous province, naturally comes in second place with overall transfers of $17.431 billion in fiscal 2012 - 2013.  Of the $57.609 billion in transfers this year, Quebec accounts for 30.3 percent of the total.  In case you were wondering, according to Statistics Canada, at the end of 2011, Quebec had 23.1 percent of Canada’s total population.

Here is a graph showing the even more telling per capita transfer for each province from the least to the greatest:

Quebec sits in the middle of the pack, well below the three Maritime provinces and Manitoba but 50 percent higher than Ontario.

Here is a graph showing the history of federal transfers to Quebec since fiscal 2005 - 2006:

Quebec's transfers have risen by $5.291 billion or 43.6 percent from the benchmark level of $12.140 billion in fiscal 2005 - 2006.  Growth in Quebec's transfers have increased very little since fiscal 2010 - 2011 and, if one looks back, between the benchmark fiscal year and fiscal 2010 - 2011 when transfers plateaued, in that five year period, Quebec saw its transfers rise by 43.4 percent or a compound annual growth rate of 7.46 percent, well above the national rate of inflation as shown here:

Here is a graph showing Quebec's historical per capita transfers:

Quebec's per capita transfers peaked at $2204 per man, woman and child in fiscal 2010 - 2011 and have fallen back slightly to $2170 in fiscal 2012 - 2013.  This is still up 35.5 percent from the benchmark year of 2005 - 2006 and works out to a compound annual growth rate of 6.6 percent from the benchmark year to the peak year, again, well over the rate of inflation over that period of time as noted previously in this posting.

In closing, where does the Federal transfer get allocated?  In fiscal 2012 - 2013, of the $17 billion and change, $6.77 billion or 39 percent goes to Quebec's health care system, $2.735 billion or 15.7 percent goes to social programs and $7.391 billion or 42.4 percent goes to equalization, a program that "equalizes the fiscal capacity of the have-not provinces" for those of you that are not Canadian.  Looking at Quebec's 2012 budget, these equalization payments make up 24.5 percent of the province's total revenue (including Federal transfers plus own source revenues) and, with total expenditures of $70.879 billion in fiscal 2012 - 2013, Federal transfers will supply 24.6 percent of the province's spending needs.

As I have stated previously, one wonders how Mme. Marois and her Pequiste counterparts can possibly think that Quebec can do it on their own.  Without billions of dollars of annual transfers from Ottawa, an independent Quebec would certainly find itself in an interesting fiscal situation very, very quickly.


  1. My question is, how much is paid in to the federal coffers, per capita, by province. This is crucial is the comparison. Quebecers could argue that they pay more than they receive.

  2. Agreed with Anon below.I know the conservative party of Canada is financing the oil sands a lot and the automotive industry. Quebec has its own pension regime and is already more independant than most provinces.Many studies have shown that an independant Quebec would be better economically in the long term.

    Standard and Poors have modified their approach when they evaluate Quebec credit rating. They take Hydro Quebec, Loto Quebec and SAQ into account. Their assets and revenue are very strong. I'm not saying Quebec fiscality is perfect, although its structure is very misunderstood. It's not that simple

  3. Anon 9:36

    Please see http://thoughtundermined.com/2012/04/24/equalization-misconceptions/ for information on who funds transfers. It is an excellent summary and shows how complex the revenue side is.

  4. That is great. It is really a helpful information. An excellent post on a little - covered topic on Transfer to Quebec

  5. Fascinating information. Very useful. Many thanks to shared & post it !