In June, municipal politicians gathered at the annual meeting of the Federation of Canadian Municipalities (FCM), held in St. John’s. As they have for the last half- decade, they awaited news of yet another innovative pro- gram in the federal New Deal for Cities and Communities. They didn’t get it. And they won’t, for the foreseeable future. That’s because the basic outlines of the New Deal are now in place, and what will follow now are roll-outs and back-filling, set against the broad context of a federal attempt to shape Canadian political culture.
True, there had been mention of new public transit money, an additional $800 million of additional federal money offered for two years, separate from and in addition to the $5 billion already announced in gas tax rebate money already announced in the 2005 federal budget. (Much of the $5 billion was destined to transit.) This, however, did not rate more than a sentence in a seven-page speech to the FCM by Prime Minister Martin, and had already been announced where it really counted, to the big cities dispro- portionately represented in the Canadian Urban Transit Association (CUTA), those who had complained about the per capita bias of the budget’s New Deal money. This was back-filling.
The 2005 budget was a transformative one. Transformative budgets set the parameters for government decisions for years to come. There are not many in recent history. One could cite, for various reasons, 1963 (econom- ic nationalism), 1974 (indexing), 1977 (Established Programs Financing), and 1995 (Canada Health and Social Transfer). Now there is 2005, with its uncharacteristic multi- year budgeting and providential proportions. Cities will not see many more large federal programs because the magni- tude of the expenditures foreseen, across a wide variety of policy sectors, will preclude many major departures from the plan. L’état providentiel est venu.
Yet, who could blame cities for expecting more innova- tion? For half a decade they had been the objects of unprecedented federal attention.
In 2000, infrastructure and environmental lobbies had effect at the federal level. Ottawa, through its Infrastructure Canada Program (ICP), committed $2.65 bil- lion over six years for provincial and municipal capital expenditures. The program was twofold: $600 million went to provincial highways through what was called the Strategic Highway Infrastructure Program and $2 billion was dedicated to municipal infrastructure (water, sewer, transportation, and housing). Almost all of the ICP funding has been committed; the federal gov- ernment estimates that close to 3000 projects benefited from the program. Further rounds are being contemplat- ed. Also introduced in 2000 were two complementary federal programs amounting to $125 million: the Green Municipal Investment Fund and the Green Municipal Enabling Fund; both were to be managed by the Federation of Canadian Municipalities (FCM).
In 2001 we saw some halting recognition of the needs of larger cities and their importance to nation- al economic growth. The December 10, 2001 federal budget announced the Canada Strategic Infrastructure Fund (CSIF), which featured an addi- tional $2 billion (over and above the $2 billion ICP commitment). CSIF was designed to fund large-scale infra- structure projects, like transportation projects and sewage treatment sys- tems, of a scope too large to be con- sidered under the ICP. CSIF projects were less formula-driven and more open to partnerships in areas of major national and regional significance and sensitive to projects with signifi- cant economic growth potential. The 2001 budget also doubled the Green Funds amount to $250 million.
In 2003 the urban file was not as central to the federal vision, in part because the cities’ champion, Martin, had been banished from cabinet. The 2003 Throne Speech committed Ottawa to an additional 10-year public infrastructure plan, but the following budget speech specified that there was to be only $3 billion in additional investment for this ten-year period, for both strategic and municipal infrastructure. CSIF was to be allocated two- thirds of the new money, so it was now a $4 billion program. Rural Canada saw additional funds of $1 billion with the introduction of Municipal Rural Infrastructure Program (MRIF), designed to aid smaller-scale munici- pal infrastructure programs, also over a ten-year period.
The years 2004 and 2005 saw the rebirth of the urban file with the advent of Martin as prime minister. Budget 2004 announced a goods and services tax (GST/HST) rebate estimated at the time to bring municipalities $7 billion over ten years, created the External Advisory Com- mittee on Cities and Communities, to be headed by Mike Harcourt, and pledged municipalities partnership status in the making of federal budgets and urban pol- icy. A parliamentary secretary was appointed to handle the urban agenda.
After years of discussion, the federal gas tax sharing was finally announced in budget 2005. Budget 2005 also promised ”œsignificant funding will flow toward infrastructure projects” through the CSIF and related programs like Municipal Rural Infrastructure Fund (now to be implemented over five, not ten years) and Border Infrastructure Fund, and that future budg- ets would ”œrenew and extend” these infrastructure programs as they expired. The intention behind these measures was to ensure that the gas tax sharing revenue program announced in the budget would provide addi- tional revenues for municipal govern- ments rather than displacing other funding. The budget announced an additional $300 million for Green Funds, which will be accounted for by the government in 2004-05, but will flow to municipalities via the FCM over time. John Godfrey was transformed from parliamentary secretary to the first minister of state for Infrastructure and Communities.
Budget 2005 estimated that the goods and services tax (GST) rebate implemented in budget 2004, the gas tax sharing announced in budget 2005, and the continuing and enhanced Green Municipal Funds pro- gram, will provide Canadian commu- nities with over $9 billion between 2005 and 2010 (see table 1).
On June 1, Godfrey announced an additional $800 million, over two years, for public transit at the CUTA annual conference. Godfrey said that Ottawa would use the same principles for public transit funding as it did for the gas tax funds. Agreements would be reached with each province and ter- ritory, which would receive a per capi- ta share of the $800 million and the funds would be distributed to munici- palities and transit agencies based largely on ridership. The same five spending (”œinvestment”) categories that are used for the gas tax money (refurbishing fleets; upgrading garages; investing in light rail, subway and rapid transit systems; rehabilitating stations and other structures; and uti- lizing new, intelligent transportation systems) would be used for the public transit money.
There is a common theme to all the federal expenditures: In Martin’s words, at the FCM conference, ”œUnder the New Deal, communities are gaining access to new, reliable and predictable sources of funding… the way [to ensure prosperity for Canadians] is to ensure that our cities, our towns, have the rev- enue they need to run public transit, to build infrastructure, to protect and maintain green spaces.” The handlers made sure Godfrey was singing from the same hymnbook to the FCM: ”œWe want this [New Deal] because we need strong local government if we’re going to succeed as a country in child care, in increasing productivity, in getting the environment right and in helping new Canadians to get a good start. And we recognize that to get there, you need long-term, stable, predictable funding.”
Of course, long-term, stable and predicable funding does not only benefit cities and communities. Given the right context, it can benefit the ruling political party and the federal order of government. To set this up, however, it is necessary to review the budgetary context.
It is important to place the New Deal in context. It is not the only policy area where the 2005 budget, or initiatives associated with it, established long-term fund- ing and ramped it up in later years. In the 2004 ”œNew Frame- work,” Equalization and Territorial For- mula Financing (TFF) were enriched by $33 billion over ten years, relative to their 2004-05 levels, with the long- term funding levels legislated in advance, not dependent on the formu- las used to measure revenue disparities.
The Canada Health and Social Transfer was also enriched, by $41 bil- lion, to rise significantly over ten years, in an ascending fashion.
The 2005 budget presented five- year, escalating plans (especially for years 4 and 5) in other areas:
$5 billion over five years to build a framework for early learning and child care
Over $5 billion over the next five years (including over $3 billion of new funding) to ensure a sustain- able environment
Over $12 billion in new money for defence ($7 billion in budgetary funding) over five years ”” the largest increase in a five-year period in the last 20 years
An increase of $3.4 billion over the next five years for internation- al assistance with the goal of dou- bling assistance by 2010–11 from its 2001-02 level
In fact, if one Googles the ”œBudget in Brief” document using ”œfive years” as the search term, one comes up with 25 programs where five-year plans are mandated.
Five-year plans used to be the gov- erning style of Stalin and Mao. What could possess a modern Canadian government to use this tech- nique? There are a number of answers.
It can provide a phalanx of support- ers for a minority government from the recipients of the multiyear program(s), at opportune times. Meeting in St. John’s before the annual conference, the FCM’s ”œBig City Mayors Caucus” (BCMC), the mayors of Canada’s 22 largest cities, called upon federal parliamentarians to pass the 2005 budget, which had been stalled by the Conservatives and Bloc Québécois. The BCMC feared for the fate of the $5 billion of gas tax revenue trans- fer offered in the February budget, as well as for the $800 million for public transit and $1.6 billion for affordable housing. The fate of the Atlantic Accord, with its multiyear offsets tied to the fate of the main budget bill, rated similar attention.
Complex multiyear budgeting can help to reinforce interdependency between different policy sectors, and different levels of government. What the federal government is doing with the multiyear gas tax rebate, public tran- sit, and green funds is to have municipal ”œNew Deal” politicians buy into the long-term federal environmental dossier, which has often lacked firm support at the provincial level.
Long-term infrastructure budgeting can be used for political imagery. Martin’s speech to the FCM tied the New Deal for the first time to past nation- building efforts: ”œThroughout our nation’s history,” he said, ”œpursuing the enduring goals of prosperity and security has required the federal government to set out the new national projects that were essential at each period. This was true when the West was settled after Confederation, when the railroads were built, when in the post-war years our social foundations were strengthened with the creation of medicare and the Canada Pension Plan. The New Deal is a national project for our time.”
Roll-outs ”” the whole politi- cal theatre of putting long-term agreements into effect, the speeches to interest groups, the signing of agreements with provinces, the announcements of specific projects ”” have obvious implications for governing party fortunes. This is compounded when the amounts involved esca- late in later years. It is the gift that keeps on giving. In the tense political atmosphere of early 2005, when the government seemed to be on constant elec- tion footing, it helped to have gas tax agreement signing cere- monies with British Columbia, Alberta and the Yukon, as well as those for agreements-in-principle on early learning and child care with Nova Scotia, Newfoundland and Labrador, Ontario, Saskatchewan and Manitoba.
Multiyear budgets can reinforce the political brand of a government in a way that thematically elusive annual budgeting cannot. Prime Ministers Chrétien and Martin have sought membership in a loosely defined inter- national club, the ”œThird Way,” dating from 1999, which involves meetings of progressive national politicians intent on forging a third way between the Keynesianism that foundered in the 1970s, and the free-market neo- liberalism exemplified by Margaret Thatcher and Ronald Reagan in the 1980s. Although the club has tended to lose its way in later years, it has provid- ed an attractive persona for Canadian politicians to adopt. Committing gov- ernment to environmentalism, child care and international assistance sever- al years in advance helps win progres- sive credentials internationally.
It also helps on the domestic scene. Probably the most politically useful aspect of the 2005 Goodale budget was ts transformative vision. The power to transform the political landscape was what neo-conservatives did so effective- ly in the eighties and early nineties. Now the centre-left is attempting the same thing: carving its vision in stone ”” or the closest thing to it ”” with a cascading list of support from citizens, cities, provinces and interest groups, each buying into the long-term vision. Even the Liberals’ parliamentary partners, the NDP, saw the logic in long- term budgeting and demanded their ”œown” budget deal ””Bill C-48 ”” which also provides for a five-year plan of $4.6 billion, for affordable housing, the environment, foreign aid and educa- tion. It received royal assent July 20.
The New Deal has spawned new opti- mism. A 2005 report by the Big Cities Mayor’s Caucus vaunted the New Deal, but noted an impressive list of unmet infrastructural needs, and point- ed to a need for access to growth- sensitive taxes and more long-term federal programs. An IRPP Work- ing Paper by Tom Courchene complained about the insensitiv- ity of the New Deal to Canadian ”œglobal city regions” ”” Canada’s few large cities ”” and advocated special revenue-sharing, infra- structure, and intergovernmental consultation deals for them.
The optimism is misplaced. Outside of future adjustments to existing infrastructure programs, Ottawa does not seem in the mood for a ”œnew” New Deal. It tends to keep expenditure cate- gories in proportion to one another, and the proportions in this new providential state seem right. Godfrey at the FCM gave his vision for the coming year, and what it amounted to was get- ting all the gas tax and MRIF deals signed with provinces. Martin, faced with a growing list of spending demands, stressed fiscal restraint at the FCM. This, when he is faced with premiers’ demands for a dedicated post- secondary education fund, and analogues of the Atlantic Accord for other provinces, is understandable. To engage in new spending adventures would place the 25 already planned five years ahead in jeopardy. Cities and com- munities have liked what they got, but may not get what they like.