OHA 2006 Federal Budget Summary and Analysis

For the Attention of Hospital Board Chairs, CEOs, CFOs, OHA Board of Directors and CACN Members

From Anthony Dale, Vice President, Policy and Public Affairs

OHA 2006 Federal Budget Summary and Analysis

On Tuesday, May 2, 2006, Canada’s Finance Minister, the Honourable Jim Flaherty, presented the Harper government’s first Budget to the House of Commons. The 2006 National Budget, entitled “Focusing on Priorities”, and its accompanying documents, is available at http://www.fin.gc.ca/budtoce/2006/budliste.htm

The OHA has developed a brief summary of the proposed Budget. This summary is attached to this Bulletin.

In terms of next steps, OHA Policy and Public Affairs will monitor the 2006 Budget as its enabling legislation proceeds through the legislative process. The OHA will also continue pressing the Government of Canada to resolve the issues of Goods and Services Tax (GST) hospital rebate apportionment and to seize the opportunity to address the federal-provincial fiscal imbalance. The OHA will update Members about new developments as they arise.

If you have any questions about Canada’s 2006 Budget or the attached analysis, please contact Lou Reidel, OHA Health Finance and Research, at 416-205-1320 (email: lreidel@oha.com) or Chris McPherson, OHA Public Affairs, at 416-205-1305 (email: cmcpherson@oha.com).

OHA 2006 NATIONAL BUDGET SUMMARY AND ANALYSIS

General:

The Government of Canada’s 2006 Budget, “Focusing on Priorities”, provides 29 separate tax reductions.
The surplus for the 2005-06 fiscal year is estimated at $8 billion, based on monthly financial information through February 2006.This surplus will be applied to reducing Canada’s national debt.
Total government expenses (program expenses plus public debt charges) in 2005-06 is $220.9 billion; total government expenses in 2006-07 are projected to be $227.1 billion.
The forecast level of nominal GDP in 2006 and 2007 is over $20 billion higher than projected at the time of the November 2005 Economic and Fiscal Update.
Program expenses as a share of GDP are projected to decline from 13.7% in 2004-05 to 13.0% in 2007-08.
The Government of Canada plans to reduce Canada’s national debt by $3 billion annually. As a result, the debt-to-GDP ratio is projected to fall to 31.7% by 2007-08.
The Government of Canada has adopted a two-year budget planning horizon.

Health Care:

The 2006 Ontario Budget:

Reaffirms the Government of Canada’s commitment to implement the “10 Year Plan to Strengthen Health Care”. Transfers to the provinces for health care will rise by 6% in 2006-07 and 2007-08. The government has already provided provinces with $5.5 billion through the Wait Times Reduction Transfer.
States that the Government of Canada will work with the provinces to “develop a Patient Wait Times Guarantee to ensure all Canadians receive medically necessary treatment within clinically acceptable wait times.”
Reaffirms the Government of Canada’s commitment to implement the Canadian Strategy for Cancer Control by investing $52 million per year for the next 5 years.

OHA Commentary: As expected, the 2006 National Budget contained few surprises in terms of health care. The Budget reaffirmed the health care promises made by the Conservative Party of Canada (CPC) during the 2006 Federal Election related to the “10 Year Plan to Strengthen Health Care”, the establishment of a Patient Wait Times Guarantee, and the implementation of the Canadian Strategy for Cancer Control.

Public Health and Health Promotion:

The 2006 Budget proposes to:

Provide $1 billion over the next five years to improve Canada’s ability to respond effectively to pandemics and other public emergencies.
This money will be used for a variety of pandemic preparedness activities including the purchase of additional anti-virals for the national stockpile, animal health guidelines and surveillance for wild birds and commercial poultry, laboratory enhancements and research, and improvements in vaccine readiness and emergency management preparedness.
Allocate $19 million per year to Public Safety and Emergency Preparedness Canada to enhance capacity to manage catastrophes.
Provide a physical fitness tax credit for up to $500 to cover registration fees for children’s sports.

OHA Commentary: The Budget confirmed the CPC campaign commitment to provide a tax credit to offset the cost of enrolling children in sports programs. The OHA supports measures – like this – which are designed to promote healthier lifestyles for Ontarians.

The OHA also welcomes steps to improve Canada’s capacity to manage pandemics and other health and public emergencies.

Federal Fiscal Imbalance:

The 2006 Ontario Budget committed the Government of Canada to further action on addressing the federal-provincial fiscal imbalance. This action will be based on a “principle-based framework” outlined in a 2006 Budget companion document, entitled “Restoring Fiscal Balance in Canada”. Issues to be considered include:
The “Restoring Fiscal Balance in Canada” document can be found at http://www.fin.gc.ca/budget06/fp/fptoce.htm

OHA Commentary: The OHA is encouraged by the Government of Canada willingness to work with the Government of Ontario to address the federal-provincial fiscal imbalance. We believe that there is a great opportunity for both levels of government to narrow the existing gap and ensure that Ontario’s cherished health care system can meet the needs of patients into the future.

Taxation and Hospitals:

The 2006 Budget proposes to:

Cut the Goods and Services Tax (GST) by 1% percent, from 7% to 6%, effective July 1, 2006.
Eliminate the capital gains tax on donations of publicly listed securities to charities, effective immediately.
NOTE: The 2006 Budget did not directly address the issue of GST/HST Hospital Rebates.

OHA Commentary: Because most hospital purchases qualify for sizable GST rebates, the OHA estimates that the proposed 1% reduction in the GST will have a minimal impact in terms of savings. The OHA will continue pressing the Government of Canada to make zero-rating all not-for-profit health care activities for the purposes of GST a priority. The elimination of the capital gains tax on donations of publicly listed securities may have a positive impact on hospital institutions and foundations, depending on how they are organized for tax purposes.

Hospital Infrastructure:

The 2006 Budget proposes to:

Maintain the estimated $3.9 billion in current funding under existing infrastructure initiatives.
NOTE: The 2006 Budget did not renew the expired Diagnostic Medical Equipment Funding program.

OHA Commentary: The federal program that provided the majority of the diagnostic medical equipment funding received by Ontario’s hospitals over the past three years ended in 2005-06. At present, there is no indication that federal or provincial monies have been earmarked for hospital diagnostic medical equipment funding for 2006-07 or beyond.

Post-Secondary Education and Professional Credentials:

The 2006 Budget proposes to:

Eliminate federal income tax on all income from scholarships, bursaries and fellowships.
Create a new, two-year, $260 million Textbook Tax Credit.
Confirms up to $1 billion to provinces and territories to support urgent investments in post-secondary education infrastructure.
Establish a Canadian Agency for Assessment and Recognition of Foreign Credentials.

OHA Commentary: The Budget affirmed the CPC campaign commitment to establish a Canadian Agency for Assessment and Recognition of Foreign Credentials as part of a strategy to address Canada’s health human resources requirements.