Abstract

The federal government’s fiscal stabilization program was created in 1967 to provide support to provincial governments when they experience sudden and significant drops in revenue. With provincial economies increasingly subject to their own unique economic shocks, the program is needed more than ever. So why has it atrophied to near insignificance? The limit on payments to $60 per capita is under particularly intense scrutiny, and pressure for reform is growing. The cap on payments should be eliminated, but more fundamental reforms should also be considered, such as making stabilization a function of a province’s fiscal capacity or economic performance rather than its revenue.