SOURCE: Canadian Centre for Economic Analysis

Canadian Centre for Economic Analysis

February 12, 2016 08:00 ET

Federal Government Surpluses, Provincial Infrastructure Deficits

A Case for Co-Operation on Infrastructure

TORONTO, ON --(Marketwired - February 12, 2016) - A new report by the Canadian Centre for Economic Analysis (CANCEA) shows that an imbalance in infrastructure investment levels in Ontario by tier of government (federal, provincial and municipal) continues to exist, and that investment remains below what the economy needs to support its best chance of success.

Report author Paul Smetanin, CANCEA president and CEO, said, "While governments benefit from what productive public infrastructure does for economic growth, investment in Ontario is still well below what is needed to maximize economic prosperity. It's natural to want to understand why, which motivated our research to analyze how the risks and rewards from public infrastructure investment in Ontario are currently split between the three tiers of government."

The analysis found that if a sustainable investment strategy maximizes economic returns while minimizing the risks for "investors" (i.e., different tiers of government), then the federal government would contribute about 38% of the investment. Currently, the federal government is covering only 11% of the investment, less than a third of what is required. This current imbalance puts the Province in a serious financial predicament. If the Province attempts to increase infrastructure investments on its own without federal support, it will result in continued deficits or the need to seek other solutions. The experience for the federal government is somewhat different. As a significant net beneficiary of infrastructure investment in Ontario (through taxation), Ottawa is easily able to run fiscal surpluses.

"Historically, federal government contributions to public infrastructure in Ontario have been inadequate. The pledge of the recently-elected federal Liberal government to increase federal funding of public infrastructure investment is a step in the right direction and it is hoped that with it brings a new era of cooperation between Ottawa, Queen's Park, and municipalities to determine long-term, sustainable approaches to infrastructure investment in Ontario."

To download a copy of the report, click here.

Who is CANCEA?

CANCEA is a state-of-the-art interdisciplinary research organization that is dedicated to objective, independent and evidence-based analysis. CANCEA has a long history of providing holistic and collaborative understanding of the short and long-term risks and returns behind policy decisions and prosperity.

Who funded this research?

This is independent, CANCEA-funded research. The design and method of research, as well as the content of this study, were determined solely by CANCEA. The research was conducted by David Stiff and Paul Smetanin.

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