Fiscal Arrangements for Aboriginal Self-Government in Canada

Issues & Principles

This paper has been prepared by Aboriginal Affairs and Northern Development Canada for the purpose of a policy engagement with Aboriginal governments and negotiating groups, and provincial and territorial governments. This is not a formal statement of federal policy but is intended to inform discussion that may lead to the development of new federal policy.

In 2010, the Minister of Aboriginal Affairs and Northern Development announced that the federal government intended to develop a new approach to fiscal relations with self-governing Aboriginal communities in Canada. The new approach would be "more transparent, fair and efficient," while taking account of "the unique circumstance of self-governing groups." The Minister also committed to engage in policy discussions with representatives of Aboriginal self-governments and negotiating groups and representatives of provinces and territories about these issues and federal proposals before finalizing and adopting the new approach.

The first round in the engagement process will be discussions on the principles that should guide design of fiscal arrangements. Following the initial engagement sessions, Canada will distribute a discussion paper that sets out the new approach to be discussed in a subsequent round of engagement meetings.

This document is intended to inform that first round discussion on principles. The document includes (1) challenges facing Aboriginal governments, (2) issues with the current approach, and (3) principles to guide fiscal arrangements.

Challenges Facing Aboriginal Governments

Aboriginal governments can face several significant challenges, which include:

Geographic circumstance – Many Aboriginal communities are situated in remote locations, where access to employment opportunities and government services can be difficult;

Small populations – The population of Aboriginal communities is relatively small, many with only a few hundred residents, some far fewer;

Socio-economic conditions – Aboriginal communities suffer disproportionately from unemployment, lower educational attainment and poor health outcomes;

Overlapping government responsibilities – Different levels of government, including the local, provincial or territorial, and federal governments may have overlapping roles to provide services for Aboriginal community members, resulting in some diffusion of responsibility;

Limited fiscal capacity & high fiscal need – Aboriginal communities typically have a limited ability to raise revenues (fiscal capacity) and face higher costs of delivering services given their smaller scale and remoteness (fiscal need).

Issues with the Current Approach to Fiscal Arrangements

After two decades of self government and growing experience with the current approach, federal officials have recognized a number of pressing issues negotiating the first and subsequent fiscal agreements:

Negotiation time and cost – Fiscal negotiations can be time-consuming and expensive, often requiring protracted and contentious discussions. At times, the resources devoted to negotiating a deal are disproportionately high compared to the dollar values at stake.

Varying terms – Current arrangements may be driven by specific negotiating contexts, with key terms, conditions and funding amounts varying by agreements across Canada and over time as mandates and policies evolve.

Risk & inflexibility - Aboriginal communities – especially those with small populations – can face heightened fiscal risk if local service needs change substantially between renewals. The current approach sets a fixed "block" amount which is not directly responsive to changes in program workload.

Lack of clarity / loss of information – The current approach to block funding can obscure the underlying basis on which funding was provided, leading to future disputes over what programs have been funded or not.

Timing of fiscal negotiations – Under the current approach, the details of fiscal arrangements, including funding levels and terms and conditions, are not clearly set out until later stages of treaty and self government negotiations.

Principles

The following are principles which may guide the design of fiscal arrangements, each balanced against the others.

Fairness and consistency – Fiscal arrangements should treat Aboriginal governments in reasonably comparable fiscal circumstances in a reasonably consistent manner.

Comparability – Citizens of self governing Aboriginal communities should have access to reasonably comparable programs and services as other Canadians in comparable circumstances.

Transparency – Fiscal arrangements should be managed openly and transparently, with funding policies and methods set out clearly.

Accountability – Fiscal arrangements should provide clarity of roles and responsibilities, promote sound public administration, and ensure appropriate public reporting standards are met by all governments.

Shared responsibility – Aboriginal, federal, and provincial or territorial governments share an interest in, and responsibility for supporting, Aboriginal governments and citizens.

Manageability – The fiscal arrangement must be manageable and designed to support efficient and effective administration by both the federal government and the Aboriginal government.

Policy neutrality – Fiscal arrangements should not distort policy choices for governments.

Flexibility and responsiveness – The arrangements should provide flexibility to accommodate changes over time and be reasonably responsive to changing circumstances and fiscal need of each Aboriginal community.

Predictability and stability – Adjustments to fiscal transfer payments over time should be relatively stable and predictable, and the policy and related institutional arrangements upon which they are based should also ensure stability.

Affordability – The costs of managing the implementation of fiscal arrangements must be affordable. Legislative authority – Arrangements must respect the authority of legislatures in the appropriation of funds.

Legislative authority – Arrangements must respect the authority of legislatures in the appropriation of funds.