Fiscal Relations: Background and Context

on November 24, 2016

First Nations must control their own affairs. Self-determination and self-government are not only fundamental rights, they are the best way forward for First Nations and for Canada. Studies like the Penner report and the Royal Commission on Aboriginal Peoples (RCAP) center on recommendations towards a new relationship that supports a return to self-government for First Nations.

In 1983, the Penner report recommended the recognition of First Nations as a distinct, constitutionally protected order of government with a full range of government powers, and that First Nations governments should be regarded as the equivalent to a province, with financial support from the federal government.

In 1996, RCAP said the “new relationship between Aboriginal and non-Aboriginal people that we have proposed consists of three key elements:

  • Aboriginal self-government based on a recognition of the right of self-determination and the inherent right of self-government for Aboriginal peoples;
  • a relationship between Aboriginal and non-Aboriginal people and their governments that takes the form of a nation-to-nation relationship;
  • recognition of Aboriginal governments as one of three constitutionally recognized orders of government in Canada.

In each case, a new relationship includes a new fiscal relationship, one that meets the needs of First Nations as they move toward self-government. This has also been the subject of much study. Over the past fifteen years, there have been several attempts to work with the Government of Canada on these issues. Common principles have arisen about working toward government-to-government arrangements that fully meet the financial needs for First Nations programs and services while providing primary accountability to First Nations citizens and improving outcomes for them. First Nations continued to press for a new fiscal relationship and are doing the hard work of examining the many issues involved, while waiting for a willing partner in the Government of Canada to move forward with the fundamental changes required.

In December 2015, Prime Minister Justin Trudeau stated: “It’s time for a new fiscal relationship with First Nations that gives your communities sufficient, predictable and sustained funding.  This is a promise we made, and a promise we will keep.”

Keeping the promise of sufficient, predictable and sustainable funding means more than eliminating the 2% cap that has created so much hardship over the past 20 years.

Certainly, the $8.4 billion over 5 years promised in the 2016-17 federal budget represents a strong overall commitment that exceeds even the amounts promised under the Kelowna Accord. More specifically, for the first time since 1997, the funding escalators applied to First Nations education and child and family services both exceed 2% on core services in this fiscal year. There is more to do on education and social development, as well as band support funding and capital operations and maintenance, but real progress is being made.

Looking ahead, the Assembly of First Nations and Indigenous and Northern Affairs Canada are working on options and recommendations for a new fiscal relationship that will identify what sufficient funding means across all areas. It is about more than lifting the 2% cap.  It is about programs and services for First Nations citizens that are comparable to those provided to others in Canada and closing the gap in outcomes for First Nations citizens. This involves a thorough examination of cost drivers and inputs. It demands a response that deals with future escalators as well as historical disadvantages. And it involves restructuring the way financial allocations are determined.

Creating a new fiscal relationship requires us to look at the most effective and efficient means and mechanisms for transferring funds to allow for strategic planning at the community level, as well as creating efficiencies of scale between communities that share some key services.  The government must move beyond treating First Nations like special interest groups and instead identify what government-to-government fiscal transfers would look like.

And a new fiscal relationship must address the best way for First Nations governments to deliver accountability first and foremost to First Nations citizens.  Mutual accountability between the federal and First Nations governments also is part of a true government-to-government relationship. We will need to develop performance measures that help tell us measure whether the gap between First Nations and the rest of Canada is closing and how quickly that is happening.

Finally, the work on a new fiscal relationship could involve describing new institutions to facilitate the changes and, if necessary, the legislation needed to ensure that the process will continue into the future, regardless of changes in federal governments or priorities.

First Nations must drive this work and determine the outcome. The work underway will lead to a report that will provide First Nations with the information, recommendations and options to move forward with the Government of Canada in building a new fiscal relationship.

To borrow the words of the RCAP report, this work is about a new fiscal relationship built on “mutual recognition, mutual respect, sharing and mutual responsibility”, a relationship that supports the move toward self-government for First Nations, to the benefit of everyone.

rdbrinkhurstFiscal Relations: Background and Context
Assembly of First Nations