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CAUT Bulletin Archives

October 1996

Paul Martin and the 40 Per Cent Solution

For many years by far the largest amount of federal money for post-secondary education has come through federal transfers to the provinces.

This system was created after World War II by the Liberals and culminated in the creation of Established Programs Financing (EPF) in 1976-77 for health and post-secondary education. There can be no doubt that federal financial support fuelled the massive increase in post-secondary education in Canada over the past 40 years.

In the 1995 budget the Liberals abandoned any pretence of federal financing of post-secondary education. This budget mandated the creation of a single consolidated block transfer to the provinces in lieu of the separate funding for health, post- secondary education and social assistance.

This new transfer, originally referred to as the Canada Social Transfer, was later renamed the Canada Health and Social Transfer (CHST). CAUT advocates that it should be renamed again as the Canada Health, Education and Social Transfer or CHEST.

Last year Finance Minister Paul Martin announced a dramatic cut of $3.5 billion (cash) in the CHST for 1996/97, and in the 1996 budget added another $2.5 billion (cash) in cuts for 1997-1998, followed by cuts of almost $700 million in both 1998-99 and 1999-2000.

The CHST total entitlements will increase slightly after the year 2000. The total cuts since the Liberals came to power will be $7.6 billion in cash or a decline of 40.7 per cent to the year 1999-2000.

Some provinces are already passing on these recent cuts to post- secondary education.

"Cuts to provincial operating grants in the 1990s mean that in just five years, government support has fallen by $800 per student in constant dollars and now accounts for barely 70 per cent of operating income. In 1990, it accounted for almost 80 per cent." (AUCC Trends 1996, pg. 17).

On the other hand the operating income from fees has increase from 1988 to the present.

In a letter to Secretary of State Jon Gerrard, commenting on the S&T strategy, the then president of CAUT Joyce Lorimer noted the huge cut in the transfer payments to the provinces which "will translate into accelerated degradation of the research infrastructure of universities."

Mr. Martin did, however, respond to many critics including CAUT who had pointed out that the cash portion would inevitably disappear after the turn of the century. He announced there would be a floor of $11 billion in cash below which the CHST could not fall.

Problems with EPF and the CHST

Lack of accountability and of transparency was a problem of EPF: Who was responsible for what? The federal government or the provinces? This problem has not been solved by the creation of the CHST.

The past and current budgeting arrangement allows both the provincial and federal governments to act in a politically irresponsible manner. Each level has used the complex and arcane EPF (and now the CHST) funding arrangements to blame the financial squeeze and lack of policy on the other.

Indeed, CAUT considers that a part of the responsibility for the underfunding crisis in the universities is directly attributable to this unresolved inter-governmental struggle.

Even if the provinces were to spend the money as they wished, the EPF transfers were for health and post-secondary education. Furthermore, the Finance Department calculated the share for health and post-secondary education.

It was always argued the provinces had a moral obligation to spend those amounts on health and post-secondary education. With the CHST, all this is over. There is no distinction made between programs. Furthermore, the money for the Canada Assistance Plan is added to the pot.

In its hearings in 1995, the Finance Committee heard testimony that the cash transfers under the CHST should be divided into three components, one each for health, post-secondary education and social assistance.

In its January 1996 report, the Liberal majority of the committee did not agree with this approach. They argued that "creating three separate diminishing cash transfers, each targeted to a specific program, would give far less leverage to the federal government to enforce national objectives. It would mean, for example, far fewer funds with which to enforce compliance with the provisions of the Canada Health Act, as was recently necessary in the case of Alberta, and to enforce the non-residency requirements for social assistance as was the case in British Columbia."

We could ask "what about post-secondary education?"

Reporting on the CHST

In the sixteenth report of the Standing Committee on Finance the liberal majority "recommends that the government report annually to Parliament on the spending of this transfer." CAUT is in agreement with this proposal. Up to now Mr. Martin has refused to act on this recommendation.

Principles and Objectives of the CHST

In 1995, Bill C-76 provided:

13.(3) The Minister of Human Resources Development shall invite representatives of all the provinces to consult and work together to develop, through mutual consent, a set of shared principles and objectives for the other social programs referred to in paragraph (1)(d) that could underlie the Canada Health and Social Transfer.

The other social programs referred to were post-secondary education and social assistance. To our knowledge there has been little "consultation and working together" in the last year.