Weather-vane federalism: reconsidering federal social policy leadership.

Kershaw, Paul

In their article, "The New Federal Tool Belt," (1) Boismenu and Graefe reorient analytic debates about hierarchy in Canadian intergovernmentalism since the Social Union Framework Agreement (SUFA). This agreement motivated two schematically different interpretations about the power that federal, provincial, and territorial (FPT) governments enjoy in the current era of social policy renewal. On one hand, the agreement reaffirms the value of federal spending in provincial jurisdiction by characterizing it as "essential to the development of Canada's social union" because it enabled "governments to introduce new and innovative social programs, such as Medicare ... that ... are available to all Canadians." (2) On the other hand, SUFA tempers this affirmation of federal spending by insisting that Ottawa "should proceed in a cooperative manner that is respectful of the provincial and territorial governments and their priorities." In fact, the agreement devotes an entire section to "Working in partnership for Canadians," which emphasizes joint planning and collaboration, as well as reciprocal notification and consultation between levels of government.

These commitments to cooperation, together with recent FPT agreements about labour-force training, children, and health care, motivated a number of scholars to label the SUFA-era as one of "collaborative federalism." (3) The collaborative modifier implies increased reliance on sector-specific agreements that are accompanied by ministerial councils responsible for fulfilling logistical and reporting requirements related to program implementation and review.

Some argue, however, that rhetoric about collaborative federalism belies the reality that the federal government has engaged in a great deal of unilateral decision-making. Ottawa largely set the timing, terms, and funding levels for reinvestments in health care that have dominated intergovernmentalism in the period. Outside of health care, the federal government increasingly circumvents the provinces and territories by relying on direct transfers to individuals or institutions. This pattern is evident in what Noel coined a series of "boutique programmes supporting research, innovation or higher education" that include the Millennium Scholarship Fund and the Canada Research Chairs. (4) The same pattern can be seen in the Supporting Community Partnerships Initiatives that delivers funding for homelessness; and the extension of parental leave by six months through Employment Insurance. McIntosh adds his voice to the federal unilateralism chorus in a recent article in this journal when he documents how Ottawa divided the Canada Health and Social Transfer (CHST) into two parts, unilaterally deciding in the face of opposition from some premiers to earmark nearly two-thirds of its funds for health. (5)

Boismenu and Graefe advance debates about intergovernmental hierarchy because they acknowledge that the diverging points of view both have merit. They therefore encourage the field "to account for both unilateral federal action and the federal government's ongoing engagement in intergovernmental bargaining." To this end they recommend that the traditional focus on federal spending power be supplemented by heightened attention to three additional tools that Ottawa is honing to restore its authority at the social policy table after decades of fiscal retreat: structuring investments; accountability; and expertise creation. With this broader focus, Boismenu and Graefe ask us to consider "how the different tools are used together and ... how effective they are in reaching federal objectives, particularly compared to earlier tools like conditional shared-cost and block grants." (6)

Their questions are the point of departure for this article. Adequate answers require empirical evidence, more than Boismenu and Graefe provide in their comparative analysis of health, labour market, and child policy. I focus only on child policy to review in more detail how the three new tools factor into intergovernmental activity related to the Early Childhood Development Agreement (ECDA) of 2000, the Multilateral Framework on Early Learning and Care of 2003, and the bilateral agreements-in-principle (7) that the Martin government signed with all ten provinces in the year before the 2006 federal election.

Selection of this policy area resists the assumption that the defining features of Canada's social safety net are in place and need only restructuring to adapt to evolving economic and social needs. I presume instead that the essential characteristics of Canada's social policy blueprint are incomplete or in flux: that in addition to health care, education, and social security, further systems may need to be developed or radically expanded. The early learning and care system under negotiation between FPT governments before the 2006 election is evidence of this position.

A national child care system has long been a goal of the feminist movement in Canada, and has more recently been recommended by scholars of early child development. Substantial investment in child care is now even heard among influential policy commentators who identify human capital as the engine of economic prosperity for affluent democracies in the coming decades. (8) For those who find some or all of this evidence compelling, a national system of early learning and care is a missing foundation of Canada's social policy blueprint. Despite several federal child care promises that date back to the Mulroney government, Canada has no national vision, framework or program for early learning and care. The OECD observed that Canada stands out for lagging behind most other member countries in this respect. (9)

Arguably, it is in regards to developing this sort or program that fiscal federal relations in Canada are most important because they can either facilitate or obstruct its evolution. Health care, education, and social security programs are established. All benefit from institutional forces and interest groups which collectively ensure programmatic refinement over time is a political priority regardless of FPT arrangements. Since the same is not true for nascent programs such as child care, fiscal federal mechanisms grow more important for directing child care's place on the pan-Canadian stage. It is therefore valuable to examine what role intergovernmental hierarchy now plays in fostering the expansion of new pan-Canadian programs. While SUFA retrospectively asserts that federal spending power has been responsible for "enabling governments to introduce new and innovative social programs" across the country, the more pertinent issue is whether this is true today.

Ottawa enjoys considerable leverage to set the agenda for policy design. But this leverage is ultimately vulnerable to dramatic shifts in direction once transfers are underway and subject to the political winds in provinces and territories

We will see that in the early child development (ECD) and child care policy envelope--one in which Ottawa has little legacy--federal leadership is best characterized by a pattern of permissive, "weather-vane" spending that is far from sufficient to facilitate implementation of major new initiatives across the country. This is not the pattern of federal steering and provincial or territorial rowing that Noel reports. Rather, it is one in which Ottawa employs what Boismenu and Graefe term structural investments to bring PT governments to the negotiation table. At the table, Ottawa enjoys considerable leverage to set the agenda for policy design. But this leverage is ultimately vulnerable to dramatic shifts in direction once transfers are underway and subject to the political winds in provinces and territories.

The primary reason for this weather-vane pattern, I will show, is one that Boismenu and Graefe cannot fully explain because their treatment of accountability obscures a related device in the federal tool belt: the citizen. The accountability mechanisms built into the ECDA, the Multilateral Frame work, and the bilateral agreements-in-principle insist that senior governments report only to their citizens, not to one another. While intergovernmental commitment to this tenet of federalism may respect the constitution, it frustrates the federal auditor general because it makes it difficult for Parliament to track and publicly comment on whether PT governments use federal funding for purposes to which they agreed. Ottawa's preferred recourse at this stage is for citizens to fill the void by serving as policy watchdogs who will hold all levels of government to account.

Examination of public reports submitted by parties to the ECDA and Multilateral Framework shows, however, that it remains tremendously difficult for citizens to track government spending, let alone evaluate its efficacy. Citizens are thus not a very powerful third force for accountability, and certainly no replacement for auditors or policy bureaucrats in federal departments. If Ottawa intends reporting to citizens to function as a tool to restore federal leadership, the ECD and child care policy domain reveals that the efficacy of this tool will increase only as citizens are empowered with expertise. In short, the potency of the federal government's current tool belt (as well as that of the provinces who wish to hold Ottawa to account) is intimately implicated in the so-called democratic deficit.

My argument starts by reviewing Boismenu and Graefe's discussion of structuring investments, accountability and expertise creation, using the ECDA objectives and accountability measures to critically reflect on their analysis. The ECDA accountability measures are then examined in the light of several PT reports that show some governments did not allocate federal funding for agreed-upon purposes. Ottawa's response to these PT reports is considered, as are the challenges that citizens confront in auditing PT accounts. I suggest a new child care experiment in citizenship engagement funded by the federal government may be a partial solution to these challenges. But if such experimentation does not work, then I argue that the contemporary value of federal spending authority merits review in the light of costs that accompany it, including costs to national unity, policy innovation, and substantive debates about equality. This review is timely given that the new federal Conservative government has committed to "fix, in collaboration with the provinces, the problem of the fiscal imbalance by increasing the amounts allocated to provincial transfers, by reducing taxes, or by transferring tax points to the provinces." (10)

Other federal tools

Structuring investments

Boismenu and Graefe define structuring investments "as relatively small investments that nevertheless attempt to shape the overall direction and philosophy of existing programs." They may take the form of "pilot projects, strategic initiatives, or transition funds," all of which seek "to set the direction of policy change by building a repertoire of measures and ideas for reform to existing programs, and by creating related administrative capabilities." In health policy, examples include federal investments of $1 billion (over two years) for diagnostic and treatment equipment in 2000, along with $500 million for health information technologies, and $800 million (over four years) for a Health Services Transition Fund. (11)

The criteria by which Boismenu and Graefe distinguish traditional federal spending from structuring investments are not obvious. Their alignment of the latter with "relatively small" expenditures indicates that size matters. On this view, the ECDA of 2000 should also be considered a structuring investment. The federal government used the agreement to transfer $2.2 billion over five years to PT governments on the condition that recipients use the funds to invest in four priority areas: to promote healthy pregnancy, birth, and infancy; to improve parenting and family supports; to strengthen early childhood development, learning, and care; and to strengthen community supports. The 2003 Multilateral Framework and the bilateral child care agreements of 2005 also represent structuring investments. The former granted $1.05 billion over five years for regulated care, while the bilateral measures will add another $5 billion over five years if not cancelled by the new government.

Collaboration should in turn be viewed euphemistically to signal federal strategies that may structure national debate, but which resist delivering the funds necessary to implement meaningful innovation in expensive social policy areas like child care

It is worth noting that Boismenu and Graefe resist labelling the ECDA as a structuring investment in favour of describing it as a "major development in the child policy field." (12) But this characterization is suspect, especially when their own figures show that Ottawa reinvested nearly $19 billion in health during the same period. It is more suspect still when we recognize that the ECDA'S half-billion dollar annual transfer across the entire country is less than half of what Quebec spends in a single year on its provincial child care system.

Misidentification of the ECDA is symptomatic of the tendency for Boismenu and Graefe to downplay the different leadership tools that the federal government deploys in areas in which it enjoys a policy legacy, like health, relative to areas in which it does not, such as child care. This oversight is unfortunate since even the most vocal champion of the federal unilateralism viewpoint, Noel, concedes that genuine intergovernmental collaboration has occurred irregularly in "areas where the federal spending power previously had been less significant and where there were fewer pre-existing patterns of hierarchy, standards and control." (13) His insight is important because it signals that federal interest in tilling new policy ground sees Ottawa more regularly deploy tools suited to collaboration than when exercising leadership over policy it formerly influenced. Collaboration should in turn be viewed euphemistically to signal federal strategies that may structure national debate, but which resist delivering the funds necessary to implement meaningful innovation in expensive social policy areas like child care.

Accountability

Boismenu and Graefe remind us that "use of money to buy leadership," regardless of the dollar value, "has traditionally been associated with an accountability tool." (14) This tool is central to the leverage over PT policy decisions that money buys for Ottawa because it is accountability that anchors its power to require that federal money be allocated to the objectives it negotiates. In the three decades following the Second World War, cost-sharing served as the prototypical form of accountability for Ottawa. But cost-sharing was intrusive into provincial jurisdiction, because the federal government would reimburse the provinces only for eligible costs. Determination of eligibility often required PT governments to send detailed accounts of their expenditures to federal counterparts who had control to interpret the intergovernmental agreement and adjudicate which expenses qualified for cost-sharing.

no one level of government is more responsible than any other for reporting on program results; all share responsibility for program outputs equally; and citizens (possibly represented by third parties) emerge as judge and jury over the issue of whether transfers were used for the agreed upon purposes

As the administrative capacity and political clout of provincial governments increased over time, their opposition to the level of federal intrusiveness that accompanied cost-sharing grew. Provincial opposition dovetailed with concern in Ottawa over the extent to which cost-sharing tethered federal expenditure levels to provincial discretion. This convergence laid the groundwork for an intergovernmental shift from cost-sharing arrangements to tax point transfers and block grants that did not require provincial governments to share with Ottawa their financial records. The Established Programs Financing for health care and post-secondary education in 1977 marked the beginning of this transition and continued until the federal government terminated cost-sharing in its entirety with the introduction of the CHST in 1995.

The ECDA reflects this intergovernmental shift. The agreement included a commitment to develop a shared public accountability framework by which all parties report on progress in improving early childhood development programs in four priority areas. Each PT government was invited to submit a baseline report that documented extant early childhood development expenditures in its own jurisdiction. Provincial and territorial allocation of federal ECDA transfers would henceforth be judged annually according to this baseline. In addition, the framework included a set of jointly agreed-upon indicators of child well-being by which the impact of ECDA investments in each province and territory could be assessed.

So long as public reporting is to citizens and not to government partners, the development of expertise to which citizens have meaningful access will be critical

Boismenu and Graefe conclude that this new version of accountability is "a much blunter tool than cost-sharing;" but reporting "nevertheless provides the federal government with some leverage. It can hold the provinces to spend funds within certain broad envelopes (e.g., broad fields of early child development), or on occasion fairly narrow ones (e.g., diagnostic equipment). The choice of performance measures can also be deployed to push provinces to focus on particular problems, or ultimately to justify further federal intervention to rectify recurrent under-performance. One problem with their analysis, however, is that they presume that accountability in the post-SUFA era continues to be "contrary to the federal principle" because "it creates a hierarchical relationship of accountability and control." (15) But this claim is misleading because the ECDA states explicitly that "the purpose of performance measurement is for all governments to be accountable to their publics, not to each other." The same assumptions are built into the multilateral framework and affirmed again in the bilateral agreements-in-principle about child care. The implication is that no one level of government is more responsible than any other for reporting on program results; all share responsibility for program outputs equally; and citizens (possibly represented by third parties) emerge as judge and jury over the issue of whether transfers were used for the agreed upon purposes. While Boismenu and Graefe concede that "the federal government can steer the emphasis on public accountability to its favour" by inviting citizens "to pressure outlier provinces to conform," their analysis ultimately suffers because they fail to examine specifically the new role of citizens in federal efforts to restore influence over social policy.

The auditor general was quick to urge caution about intergovernmental accountability premised on reporting to citizens alone when it first emerged in the National Child Benefit (NCB). The NCB's "Governance and Accountability Framework ... distinguishes government-to-government accountability from government accountability to legislatures and from government accountability to the public." While the NCB prioritizes the latter, the auditor argues that "there is no need to emphasize one type of accountability over another. Accountability to the public for the NCB is consistent with, but different from accountability to other governments, or accountability to legislatures ... These differences are important. Care will be required to ensure that all three types of accountability are maintained." (16)

All three types are important, the auditor general adds, because "partnering arrangements" between FPT governments "require more and not less accountability." In particular, such arrangements require "clarity ... on just how and by whom performance will be reviewed and adjustments made--how improvements will be made to performance and to the arrangement." (17) So far, however, no such process is specified in the reporting frameworks in any intergovernmental agreements about ECD or child care introduced since SUFA.

Creation of expertise

Expertise is a third tool available to the federal government to exert leadership over social policy design. Boismenu and Graefe observe that Ottawa is shaping policy by investing aggressively in the creation of specialized institutes and think tanks. What they neglect in their examination of this leadership tool, however, is its interaction with other devices in the federal belt, specifically the accountability mechanism. So long as public reporting is to citizens and not to government partners, the development of expertise to which citizens have meaningful access will be critical if they are to function as accountability monitors who have the knowledge necessary to evaluate policy development and budget allocations from a perspective attuned to previous expenditures.

Provincial and territorial ECDA reporting Reporting by provinces and territories about deployment of ECDA transfers has been late, fractured, and difficult to follow. By the end of fiscal year 2004/05, expenditure data from all jurisdictions were available only for 2001/02--the first year of federal payments. Nova Scotia, Prince Edward Island, and the Yukon never issued a year one report, although all three included comparable information in year two reports. Excluding Quebec which did not sign the agreement, six jurisdictions publicly reported that they did not fully invest ECDA transfers from Ottawa in the negotiated areas (see Table 1). This finding is somewhat startling because it takes PT reports at face value, which have not been subject to any external audit. One might have expected that the rate of failure to comply with ECDA commitments would be high if one were to interrogate PT figures by questioning the decision matrix and method by which governments assign budget figures to programs. But granting that PT governments have a vested interest in presenting their accounts favourably, there was good reason to expect that the latitude administrations have to massage un-audited reports would have resulted in higher rates of apparent compliance. Despite this, six of twelve PT parties to the agreement acknowledge that some (or in the case of the Northwest Territories, all) of the federal transfer went to general revenue for purposes beyond the scope of the ECDA in year one of the agreement. This fact is more surprising still when we recognize that the four mutually negotiated priority areas of the ECDA are so broad that almost any PT investment associated with children, parents, families or communities could be defended as a qualifying expenditure.

Despite receiving copies of all PT reports, federal publications about the ECDA make no mention that half of the provinces and territories claim not to have spent all of the federal transfer for agreed upon purposes in year one. (18) While Ottawa summarizes federal revenue transferred to provinces and territories annually, it is not accompanied by any summary of PT reinvestments. Instead, the reports only describe areas of investment in PT jurisdictions, leaving the policy analyst and citizen to track down budget figures separately.

Rather than publicize such deviation from ECDA commitments, Ottawa retreated to patterns of executive federalism behind closed doors. Federal bureaucrats contacted their PT counterparts in underinvesting jurisdictions to urge their governments to roll over unspent year one funds to year two expenditures. Then Human Resources minister Jane Stewart articulated a similar message to her provincial and territorial ministerial colleagues. The correspondence was often informal. Even if letters were drafted, they were deemed private documents not accessible to citizens or researchers.

The results of these executive federal tactics are not impressive (see table 2). Of the six underinvesting governments, only Nova Scotia rolled over the unused ECDA funds from year one into its year two budget; British Columbia, Saskatchewan, Newfoundland, and the Northwest Territories failed to allocate all of the year two ECDA transfer to the priority areas. The sixth jurisdiction, Nunavut, had yet to issue a report for 2002/03 at the time this research was being conducted, so it was impossible to know the influence of executive federal suasion in this instance.

Just as federal reports make no mention of underinvestments in year one, so the year two documents are silent about underinvestments. (19) The effect is for the federal government to forgo accountability both to its own legislature for ensuring that federal revenue is used for assigned purposes, and to the SUFA commitment by which each FPT signatory agreed to "use funds transferred from another order of government for the purposes agreed."

Citizens: The new accountability watchdogs

By not reporting to each other, governments in the post-SUFA era intend citizens to hold first ministers to funding commitments through the power of public censure. As the federal government's fiscal health improved in the late 1990s, Ottawa bargained hard for public accountability as a way of pressing the provinces to fulfill social policy obligations associated with renewed federal investment. Given intergovernmental convergence around this theme, the principles and structure of SUFA were organized to depict citizens as an emergent "third force in federalism--not so much as a means of creating a social union that truly addresses the democratic deficit that has been so widely deplored, but as a third-party barrier to the actions of one government against another." (20) In this spirit, section three of SUFA explicitly commits each signatory to "monitor and measure outcomes of its social programs and report regularly to its constituents on the performance of these programs"; "use third parties, as appropriate, to assist in assessing progress on social priorities"; and to "ensure effective mechanisms for Canadians to participate in developing social priorities and reviewing outcomes."

SUFA language notwithstanding, Phillips argued in 2001 that "both levels of government have failed miserably" to facilitate genuine citizen engagement. Five years hence, government reporting about the ECDA corroborates this conclusion. The research time and effort required to track down the expenditure data necessary to produce this paper is qualitatively informative about the challenges that citizens encounter when they seek to become engaged in reviewing FPT partnership programs.

In the absence of a single report from Ottawa that summarizes FPT expenditures, citizens must rely on their fingers to do a lot of walking by phone or internet. A phone call to Human Resources and Social Development, the one government ministry where all of the ECDA reports are collected, will not always result in access to hard copies of each jurisdiction's accounting. In my initial phone call to the ministry, I was provided with information about Ottawa's spending; but told to contact the provinces and territories directly to learn about their public reports. A research assistant subsequently made ten phone calls to provincial governments, and dedicated roughly ten hours of time to searching for documents on line, only to track down three reports. Given the poor results at the provincial level, I redirected my effort to the federal ministry and successfully convinced bureaucrats in the Children's Policy branch to email a list of all of the provincial and territorial reports on line, with their corresponding URL. In the months that followed, FPT governments agreed to create a shared website where each jurisdiction would link URLS related (although often indirectly) to ECDA reporting. The joint web portal became operational in November 2004.

The ministry does not keep a public list of which provinces and territories fully reinvested the ECDA dollars, nor a list of those jurisdictions that did not. Ministry staff refused to identify in writing which provinces had not fully reinvested, leaving me to explore the PT reports individually. Only after several phone messages and conversations was I able to convince someone in the ministry to tell me over the phone which provinces had under-spent the federal transfers. Subsequent analysis of provincial rePorts revealed that the ministry information was inaccurate. When asked why the federal ministry did not report publicly about which jurisdictions did not live up to ECDA requirements, bureaucrats explained that their responsibility was to report only federal expenditures.

There are also serious questions to be asked about the quality of expenditure data published in the provincial and territorial documents. In its 1999 audit of the NCB accountability framework, the auditor general emphasized that:

A key mechanism for demonstrating accountability is credible reporting. While mechanisms for reporting to the public tend to vary according to the nature of each program, arrangements for reporting to legislatures are well defined and involve auditors general and legislative committees. The partners in the NCB state that one advantage of accountability to the public is that it will "minimize administrative reporting." However, accountability is unlikely to be served best by minimized administrative reporting. Administrative data are part of the accountability and operational relationship between partners. They are also necessary for reporting both outputs and performance outcomes. The goal, therefore, should be to report appropriately. (21)

The shared reporting framework produced for the ECDA does not demand the level of vigilance to administrative detail that the auditor general urges, and the annual reports from British Columbia illustrate this point. The bulk of the 2002/03 report includes brief textual descriptions of the province's commitments to ECD under the four national priority areas. In terms of "Strengthening Early Childhood Development, Learning and Care," the textual analysis claims that provincial ECDA investment in child care was $5.41 million, plus another $1.53 million in Supported Child Care for children with disabilities. However, these budget figures are completely out of step with the 2002/03 program expenditure summary table that concludes the document. Rather than a $7 million increase, calculations based on the more thorough summary of provincial figures reveal that child care spending in the province dropped by $16.6 million. (22)

The analysis of provincial figures is more complex still because the annual report provides expenditure figures about programs for children age zero to six years. Many child care programs, however, target children up to age twelve in the province. The reports provide no methodological discussion of how program expenditures are pro-rated to capture only the younger group. In the absence of this formula, administrations can present figures favourably in a way that is not subject to external verification.

There are also questions about what British Columbia counts as a child care expenditure. In 2003 the province eliminated wage redress negotiated by child care providers in select, unionized child care centres as part of a mediated labour agreement for the social services sector. The expenditure on child care wages in 2002/03 was $10 million. However, this funding stream is not included in the province's calculation of operating expenses for child care programs in the ECDA report and, therefore, the funding reduction does not affect the province's ECDA budget bottom-line. According to then minister of state for child care, Lynn Stephens, rescinding this pay equity award does not mean her "government is ... cutting funding to child care centres. What we have at play is a labour negotiation ... It's up to the centres to do those contract negotiations, and we are not interfering in any way with free collective bargaining." (23) This deserves careful scrutiny, however, since wages represent roughly three-quarters of child care operating costs in the licensed sector in British Columbia.

By raising questions about the quality of data reported in provincial ECDA documents, these examples illustrate the onerous task that the citizen must tackle if he/she is going to serve as the third force in federalism. The resources, time, technical skill, and knowledge of the provincial policy contexts are not things we can reasonably expect of most citizens or citizenry groups. In effect, the main implication of ECDA accountability provisions is, to make "social scientists of us all." (24) This expectation is not reasonable.

The multilateral framework and bilateral agreements-in-principle: accountability in action?

Disinvestment in child care of the sort witnessed in British Columbia was not what former HRDC minister Jane Stewart had in mind, especially when it was echoed in Ontario, which did not invest any ECDA funding in regulated child care in the first year of the agreement. In response she negotiated with PT leaders the subsequent Multilateral Framework on Early Learning and Care. Under this framework, Ottawa started in 2003/04 to invest another $1.05 billion over five years "in provincially/territorially regulated early learning and child care programs for children under six. In the context of this framework, regulated programs are defined as programs that meet quality standards that are established and monitored by provincial/territorial governments." Eligible programs are those that "primarily provide direct care and early learning for children in settings such as child care centres, family child care homes, preschools, and nursery schools." (25)

ECDA government reporting treats public involvement in policy review as an afterthought without considering the time and resources auditing requires even of experts, let alone the general public

The federal government's determination to negotiate the multilateral framework may appear counter-example to any claim that Ottawa has resigned itself to becoming a permissive spending authority in areas of PT jurisdiction where it does not enjoy a policy legacy. Some provinces and territories were not living up to the spirit of the first ECD intergovernmental agreement, so Ottawa forged a new compromise with the provinces to advance the child care agenda specifically. The bilateral agreements-in-principle add further credence to this interpretation, since they increase the multilateral framework investment by a scale of five and require the added funding to go only to regulated child care.

Analysts should be cautious, however, before accepting this interpretation; it is not obvious that the multilateral framework or bilateral agreements-in-principle will result in reluctant provinces such as British Columbia investing in the child care settings that Ottawa envisions. For instance, since the announcement of the framework, the province is changing administrative practices regarding regulation of child care services. The local child care sector includes a class of "regulated licence-not-required" service providers that are exempt from the ministry's formal licensing standards. Historically, this cluster of services is considered 'regulated' because providers are subject to a home inspection by representatives of provincially funded child care resource and referral programs before being listed on public directories available for parent consultation. But in 2004, provincial practice changed. Resource and referral program directors indicate that provincial administrators urged them to add licence-not-required providers to public lists of regulated services in advance of conducting any home inspection. Such child care services are now eligible to benefit from multilateral framework dollars, despite the fact that the framework defines regulated programs as those that meet quality standards established by the PT government. The trend in British Columbia ignores this expectation by decoupling regulation from any inspection of quality for a significant share of the local child care sector.

Making the connections: experimentation with citizenship engagement and expertise creation

The majority of citizens who do not enjoy the luxury of studying policy as a career will not be aware of nuances in the changes that the British Columbia government implemented in its child care sector. This is a problem for accountability because the devil is in the details when it comes to monitoring PT use of transfers. One consequence is that any meaningful expectation that citizens will function as a third force in federalism must be accompanied by a genuine commitment to empower the public with access to policy expertise.

the Social Development Ministry committed funds to a child care project in 2005 that has potential to become the cutting edge of Canadian experimentation in citizenship engagement

Currently, however, ECDA government reporting treats public involvement in policy review as an afterthought without considering the time and resources auditing requires even of experts, let alone the general public. So long as this pattern persists, public involvement will not emerge as an integral part of the policy process or improve policy outcomes. To the credit of the federal government, the Social Development Ministry committed funds to a child care project in 2005 that has potential to become the cutting edge of Canadian experimentation in citizenship engagement. The project is titled "Making the Connections." It pays $600,000 over three years to the Child Care Advocacy Association of Canada to monitor provincial and territorial reporting about child care expenditures funded by the ECDA, multilateral framework, and any agreements that may remain from the federal commitment of $5 billion over five years. The association will engage with public reports released by PT governments to determine whether their accounts conform to intergovernmental agreement conditions. Findings from this analysis will be translated to local constituents in each province and territory in ways that are intended to enrich debates within local jurisdictions.

The project marshals a unique range of relevant expertise. The Child Care Advocacy Association includes a team of child care providers and representatives from all provinces, including Quebec. The association has subcontracted with Lynell Anderson to lead the project. She is arguably the certified general accountant with the most familiarity and expertise with child care across the country. Project directors have also established a reference group of Canadian academics (political scientists, economists, and public policy scholars) who specialize in child care. The project thus unites informed citizens, relevant service providers and third-party experts to coordinate the citizen review of intergovernmental transfers and mobilize knowledge among the broader population across the country.

While the emergence of this project provides some reason for optimism about federal commitment to citizen engagement, there remain a number of issues about Making the Connections that will need to be addressed if the project is going to be more than a photo op for Ottawa. Project funding is an obvious issue. It is one thing for the Child Care Advocacy Association to collect in each of three years all relevant PT reports, audit budget figures, and develop and publish knowledge translation material for a fee of $600,000. But it seems unrealistic that this kind of funding can mobilize this knowledge in each province and territory, given the amount of time and travel involved. It is therefore necessary to question whether Ottawa is merely downloading accountability responsibilities for intergovernmental transfers to the voluntary sector, thus effectively privatizing these costs to the female child care labour force which already articulates pay equity concerns. This question is important since the terms "public participation" and "public consultation" have become associated with cynicism with public officials, since many of these policies are perceived as instruments Of cost-cutting.

Making the Connections is also not empowered by legislative authority to access PT financial data. The terms of reference for the project are to engage only with budget figures publicly reported by the provinces and to inform local citizens about how spending patterns match ECDA and multilateral framework expectations. But, as the auditor general notes, genuine accountability requires that PT financial claims can be verified. The association cannot demand access to these data to perform this role.

The politics of appointing the Child Care Advocacy Association of Canada as the lead citizen watchdog in Making the Connections is a third concern that requires attention. The organization lobbies for what some might call the gold standard of child care in Canada that would create a system similar to those in many countries across Europe. But there remains a lack of consensus in Canada about the value of this program, especially in the province of Alberta. One can expect, therefore, that some provincial governments will raise questions about the legitimacy of the association serving as the third force in federalism regarding early learning. This stands in contrast to the reference group established for the National Child Benefit, which consisted of representatives from ten groups of non-governmental organizations concerned with children in poverty. It is also contrary to the dispute settlement practice in the health care domain, which forms panels composed of one representative selected by the disputing province, a second federal representative, and a third who is jointly chosen by the first two to serve as chain This practice of provincial involvement in selecting third-party evaluators is absent from the Making the Connections project. If it is to break new ground in accountability in Canada, more work is necessary to plan and justify selection processes to citizenry committees.

What does the new federal tool belt mean for debates about intergovernmental hierarchy?

This review of intergovernmentalism shows that federal leadership over nascent social policy issues such as child care will rely typically on modest expenditures that function as structuring investments. Even small transfers, however, like the multilateral framework, remain sufficient to attract hesitant PT partners to the social policy table. This power is even more evident in the bilateral federal tactic deployed by the Ministry of Social Development under Ken Dryden's leadership. Many bilateral agreements-in-principle about child care were negotiated with the most reluctant provinces in October and November of 2005 when a weak minority Liberal government was no longer assured re-election in the forthcoming campaign. Despite this, the risk of forgoing even minimal federal funding that other provinces were about to access proved too much to resist for the PT governments that had opposed pan-Canadian child care just months before.

This finding must be considered as discussions about intergovernmental hierarchy heat up in the light of the Conservative government's commitment to address provincial frustration over fiscal federal arrangements through measures that may include a one-time tax point transfer. The most publicized tax point exchange options are Courchene's once much discussed ACCESS proposal and the more recent Seguin recommendation, each of which would replace the cash transfer represented by the former CHST with a transfer of tax points. Save for equalization funding, both proposals would nearly eliminate the federal capacity to broker deals between ideologically divided, and sometime reluctant, provinces to create new pan-Canadian programming. One consequence would be that the only Canadian government constitutionally responsible for citizenship would forgo much of the potential that inheres in social policy to cultivate a sense of national citizenship in response to dynamic social and economic needs.

If tax point transfers remain under consideration, the division of the CHST into a social transfer that is separate from a health cash grant opens the door to a more modest tax point exchange than Courchene or Seguin contemplate by converting the less valuable (roughly $8 billion annual) CST into a one-time transfer of equalized tax points to PT governments. So long as the CHT remains a cash transfer, the federal government retains a convenient spending mechanism through which it can offer the carrot of new money to leverage PT policy decisions. The cash transfer also provides a stick to enforce national standards, not only for health care, but also for post-secondary education and other social services. As McIntosh notes, (26) there is solid reason to believe that the CHT'S cash component is relatively large in part because it has siphoned money from the federal transfers historically targeted to non-medical social spending. Arguably then (and one can anticipate much argument), it would be appropriate for the federal government to withhold CHT cash to enforce intergovernmental obligations associated with social spending.

Regardless of one's take on tax point transfers, the level of federal social policy leadership should not be overstated in this era of weather-vane federalism. While it may succeed in attracting PT governments to the negotiating table and framing the debate by means of structuring investments, the ECD and child care policy envelope also provides strong indication that Ottawa is unlikely to inject funding at a level necessary to facilitate major policy innovation.

In the absence of social science and financial resources that will allow citizens to function as well-informed evaluators of public policy, the post-SUFA accountability framework that rests on reporting to publics is also no match for postwar cost-sharing. The federal government can get provinces and territories to sign on to new agreements, but has limited control over them once they are susceptible to the winds of change in PT jurisdictions. Even if we imagine that projects like Making the Connections may expand substantially with the investment of $100 million for a child care accountability framework in the 2005 federal budget, it is hard to imagine that citizenry groups will ever enjoy legislated access to PT financial records for the purpose of auditing. This leaves the provincial and territorial governments with a great deal of flexibility to showcase figures in ways that will appear favourable to their constituents, and adapt regulatory practices, as British Columbia has done under the ECDA and multilateral framework.

Renewed discussion of an exchange of tax points between senior governments thus opens the door to reconsider whether the new federal tool belt packs enough leadership punch to tolerate the costs associated with existing fiscal federal relations. The costs merit closer attention as Ottawa acquiesces to weather-vane spending. If disingenuous reporting to citizens is as good as post-SUFA intergovernmental accountability gets, then the costs may start to outweigh (potential, but less often practised) benefits.

National unity is an undisputed area in which fiscal federal patterns presently exact costs. The concept of vertical fiscal imbalance powers the sovereignty movement in Quebec, as indicated by the Seguin Commission. More recently, it threatened to derail the Liberal minority federal Parliament of 2004 following its first throne speech because the Bloc Quebecois refused to approve the legislative agenda unless it formally acknowledged that a fiscal imbalance is penalizing Quebec.

As far as national unity is concerned, it is irrelevant whether a fiscal imbalance actually exists: it is perception that counts. A modest exchange of equalized tax points between Ottawa and the PT governments would therefore take some of the wind out of separatist sails.

Whether fiscal federalism is imbalanced or not, recent work by Courchene shows that the last three decades have witnessed a significant divergence in the fiscal health of the federal government relative to its provincial and territorial counterparts. Whereas the national government bore the brunt of deficit and debt growth during recessions triggered by the oil crisis of the late 1970s, the cap on CAP that Ottawa instituted to shield its expenditures from economic downturn contributed substantially to the provinces shouldering about two-thirds of the recession costs in the early 1990s. Of the roughly $32 billion increase in yearly national (federal plus provincial) deficits between 1989/90 to 1992/93, the collective provincial deficit grew by $20 billion (from $4.3 in 1989/90 to $24.7 billion in 1992/93), with the federal government absorbing the rest. CHST and EI reform subsequently exacerbated this situation for the provinces. While Ottawa has reported surpluses consistently since 1997, the provinces together managed to achieve a surplus only in 1999. Looking forward, the same economic trends that project balanced budgets for the federal government predict that nearly all provincial budget statements will end up in the red. (27)

These structural changes to provincial revenue, together with rising demand for provincial services, have circumscribed the fiscal latitude available to premiers to address pressing social problems by innovating with new social expenditures. Yet provincial innovation has long been a key to policy enrichment across the country. (28) Tommy Douglas's experimentation with health care in Saskatchewan has attained near mythic status among Canadians. Similarly, Quebec efforts to establish a unique social policy identity in the 1960s and early 1970s regularly upstaged Ottawa and motivated the federal government to invest in social policy areas it might not have done otherwise. The same pattern is now unfolding in family policy. An innovative parental leave plan tabled in Quebec in 1997 pushed Ottawa to extend parental leave benefits in 2001. And the early learning and care component of Quebec's family policy is the model to which Ken Dryden regularly pointed in many public presentations about the national system of child care that his government wanted to set in motion.

With the provinces in a more precarious fiscal position than three decades ago, the extent to which the current division of tax room between senior levels of government puts the brakes on PT social policy innovation deserves closer scrutiny. This line of investigation will inevitably invite a whole host of other questions related to the appropriate level of taxation, public debt, and competition for scarce public resources. In particular, the fact that provincial governments have generally reduced income taxes in recent years (most notably in Ontario, Alberta, Saskatchewan, and British Columbia) may incline some to conclude that provincial lamentations about a vertical fiscal imbalance are disingenuous political posturing. Why cut taxes if provincial social expenditure demands are growing?

My intention is to raise this question in the context of weather-vane federalism, not answer it. The question is important, however, because Lazar, St-Hilaire and Tremblay remind us that in practice "both orders of government--and governments of all political stripes--believe there are effective limits to taxation and behave accordingly. Thus, if the overall tax burden (all levels of government combined) is equal to or exceeds the assumed limit, then [the fact that provinces enjoy] the constitutional power to tax is not of much value if, for practical economic or political reasons, it is not desirable to do so." (29) Given this observation, if recent provincial (and federal) income tax cuts signal that citizens feel at or near the taxation threshold, it is not obvious that social policy across the federation is best served by the current division of tax room if it risks thwarting policy experimentation at the provincial level.

Current intergovernmental arrangements also perpetuate a national political context that obscures substantive debate behind the closed doors of executive federal practices. When aired in the media, dialogue privileges distributive questions about regional equity at the expense of debate about distribution along class, gender, ethnic and other lines. Simeon captures this problem when he observes that "the constitution and related issues of national unity tend to trump or dominate debate on substantive, functional policy issues" in Canada. "Questions about the regional distribution of costs and benefits [therefore] tend to trump debate in terms of alternative aspects of distribution"; and "fiscal and financial issues tend to trump debate on social policy." (30)

Canadians witnessed this cost in action during the February 2005 inter-governmental negotiations about a child care system. Analysis of media coverage by the Globe and Mail, the National Post, and the Vancouver Sun in the weeks preceding and following the meeting reveals that regional resistance by PT governments to any deal with Ken Dryden was a theme in fifteen articles written by journalists, whereas the theme of women's equality enjoyed no formal coverage. In fact, discussion of the relationship between women's equality and child care only appeared in these newspaper when editors published four op-ed submissions that addressed this theme in passing. This failure to report public debate about the latter theme is striking when we recall that it was women's equality that first motivated the call for a national system of child care in the report of the Royal Commission on the Status of Women. Moreover, when policy debates are about intergovernmental flexibility and fair treatment for regions, citizens and their parliamentary representatives risk losing track that it is for reasons of women's equality, investments in child development, and looming labour shortages linked to baby-boomer retirement that the country ought to think seriously about building a system of early learning and care.

In short, substantive economic issues and distributive justice between the generations, sexes, ethnic groups, and income quintiles are just as pressing, if not more so, for the social policy envelope in Canada than questions of regional equality. Existing fiscal federal relations deter debate and risk extinguishing public consciousness about these issues to such an extent that the public demand for policy innovation and investment may be minimized.

Citizen engagement of the sort envisioned by the Making the Connections project has some potential to remedy this situation. Since representation on the project extends beyond regional membership to include service providers who regularly witness familial needs, as well as social scientists attuned to distributive questions that are not limited to regional equality, the project's public reporting about PT deployment of federal transfers has potential to feature issues that are muted on the executive FPT scene. If projects like this one can become a template for fostering genuine deliberative democracy whereby citizens participate actively in considering different points of view to negotiate a reasoned evaluation of policy trends, then concerns about the harm fiscal federalism presently yields over substantive debates about justice may be set aside.

If not, however, then the dampening influence that the present division of tax room exerts over provincial innovation merits even more concern. Provincial legislatures are not distracted in the same way by issues of inter-provincial equality. Debates internal to provinces and territories thus offer more potential for dialogue that focuses on the substantive reasons for implementing or retaining a policy, not FPT wrangling. Given this recognition, a transfer of tax points to the provinces and territories may enhance the quality of policy debate in regions across the country, because these debates are less likely to be distracted by cross-Canada distribution questions which are so salient on the national scene.

Another tax point transfer--one that is more modest than that proposed by Courchene or Seguin--is raised in this article as a policy option to consider, not a recommendation. The costs considered above do not offer decisive evidence that extant fiscal federal arrangements are significantly flawed. One's judgment about the severity of the costs will ultimately depend on views about federalism and the role of government in social provision. Nevertheless, these costs should be factored into the debates about hierarchy in Canadian intergovernmentalism. As the Harper government weighs its options, proponents of federal spending authority, including many anglophone child care advocates, must measure these costs in the light of structural-level funding with which the federal government is generally bargaining. They must also be realistic that the post-SUFA era is not one of shared-cost accountability. Federal transfers are, and will likely be, subject to considerable PT diversion now that accountability to constituents means citizens are left to blow against the wind to hold intergovernmental partners to account.

Notes

The author thanks anonymous reviewers for insightful comments on an earlier draft, as well as participants at the 2005 CPSA annual meetings, the November 2004 Child Care for a Change conference sponsored by the Canada Council on Social Development, and the March 2004 conference Constructing Tomorrow's Federalism: New Routes to Effective Governance at the University of Regina. All errors are the author's alone, although any errors in this article further illustrate its point. Public reporting by FPT governments about early childhood development and chil care agreements is difficult even for social scientists to track.

(1) Gerard Boismenu and Peter Graefe, "The New Federal Tool Belt: Attempts to Rebuild Social Policy Leadership," Canadian Public Policy 30, no. 1 (2004).

(2) A Framework to Improve the Social Union for Canadians: An Agreement between the Government of Canada and the Governments of the Provinces and Territories, 4 February 1999, s. 5, at http://www.socialunion.gc.ca/news/020499_e.html.

(3) Harvey Lazar, "Non-Constitutional Renewal: Toward a New Equilibrium in the Federation," in H. Lazar, ed., Canada: The State of the Federation 1997--Non-Constitutional Renewal, (Kingston: Institute of Intergovernmental Relations, Queen's University, 1998); and David Cameron and Richard Simeon, "Intergovernmental Relations in Canada: The Emergence of Collaborative Federalism," Publius: The Journal of Federalism 32, no. 2 (Spring 2002), pp. 49-71.

(4) Alain Noel, "General Study of the Framework Agreement," in A.-G Gagnon and H. Segal, eds., The Canadian Social Union Without Quebec: 8 Critical Analyses (Montreal: The Institute for Research on Public Policy, 2000), p. 46.

(5) Tom McIntosh, "Intergovernmental Relations, Social Policy and Federal Transfers after Romanow," CANADIAN PUBLIC ADMINISTRATION 47, no. 1 (Spring 2004), pp. 27-51.

(6) Boismenu and Graefe, "The New Federal Tool Belt," pp. 72-75.

(7) First Ministers' Meeting Communique on Early Childhood Development, 11 September 2000, at http://www.socialunion.gc.ca/news/110900_e.html. Multilateral Framework on Early Learning and Child Care 2003, at http://www.socialunion.gc.ca/ecd-framework_e.htm. Quebec, Manitoba, and Ontario signed child care agreements with Ottawa in 2005, while the remaining provinces signed agreements-in-principle in which they committed to formalizing a provincial action plan in the months ahead. They can all be viewed at http://action.web.ca/home/crru /rsrcs_crru_online.shtml?cat_name=A+--+Policy+developments+-+Canadian.

(8) D. Kohen, C. Hertzman, and J.F. Tremblay, "The Importance of Quality Child Care," in D. Willms, ed. Vulnerable Children (Edmonton, AB: University of Alberta Press, 2002); Thomas J. Courchene, A State of Minds: Toward a Human Capital Future for Canadians (Montreal: Institute for Research on Public Policy, 2001); Gosta Esping-Andersen, Why We Need a New Welfare State (Oxford: Oxford University Press, 2002).

(9) OECD Directorate for Education, 2004, "Early Childhood Education and Care Policy: Country Note, Canada," p. 6, at http://www11.sdc.gc.ca/en/cs /sp/socpol/publications/reports/2004-002619/Country.pdf.

(10) Conservative Party of Canada, Policy Declaration (19 March 2005), p. 7, at http://www.conservative-cfc.ca/20050319-policy-declaration.pdf.

(11) Boismenu and Graefe, "The New Federal Tool Belt, pp. 78-81.

(12) Ibid., p. 82.

(13) Alain Noel, "Power and Purpose in Intergovernmental Relations," Policy Matters 2, no. 6 (November 2001), p. 15.

(14) Boismenu and Graefe, "The New Federal Tool Belt," p. 76.

(15) Ibid., p. 77.

(16) Report of the Auditor General of Canada (Ottawa: Office of the Auditor General of Canada, 1999), Ss. 6.30, 6.56.

(17) Report of the Auditor General of Canada (Ottawa: Office of the Auditor General of Canada, 2002), ss. 9.63, 9.42.

(18) Government of Canada, Early Childhood Development Activities and Expenditures: Government of Canada Report 2002-2003, at http://www.socialunion.gc.ca/ecd/2003/RH64-20-2003-AE.pdf.

(19) Ibid., 2003-2004 at http://www.socialunion.gc.ca/ecd/2004/english/english.pdf.

(20) Susan Philips, "SUFA and Citizen Engagement: Fake or Genuine Masterpiece?" Policy Matters 2, no. 7 (December 2001), p. 9.

(21) Report of the Auditor General of Canada, (Ottawa Office of the Auditor General, 1999), s. 6.57.

(22) British Columbia's Annual Report on Early Childhood Development Activities--2002/2003 (Victoria: Ministry of Children and Family Development, 2003), p. 7, 9, 20, at http://www.mcf.gov.bc.ca/early_childhood/pdf/ecd_annual02_03_fina1.pdf.

(23) British Columbia, Legislative Assembly, Debates, 3rd Session, 37th Parliament, 8 November 2002, pp. 1410-20.

(24) Philips, "SUFA and Citizenship Engagement," p. 20.

(25) Multilateral Framework on Early Learning and Child Care.

(26) McIntosh, "Intergovernmental Relations after Romanow," pp. 33-36.

(27) Thomas J. Courchene, "Half-Way Home: Canada's Remarkable Fiscal Turnaround and the Paul Martin Legacy," Policy Matters 3, no. 8 (2002), pp. 18, 32.

(28) John Richards, Retooling the Welfare State: What's Wrong, What's to Be Done (Ottawa: C. D. Howe Institute/Renouf Publishing Company Ltd., 1997).

(29) Harvey Lazar, France St-Hilaire, and Jean-Francois Tremblay, "Vertical Fiscal Imbalance: Myth or Reality?" in H. Lazar and F. St-Hilaire, eds., Money, Politics and Health Care (Montreal/Kingston: Institute for Research on Public Policy and the Institute for Intergovernmental Relations, 2004), p. 149.

(30) Richard Simeon, "The Political Context for Renegotiating Fiscal Federalism," in K.G. Banting, D.M. Brown, and T.J. Courchene, eds., The Future of Fiscal Federalism (Kingston: Queen's University School of Policy Studies, 1994), p. 136.

The author is assistant professor, Faculty of Graduate Studies, Human Learning Partnership, at the University of British Columbia.

Table 1. Provincial and territorial use of federal ecda transfers in
01/02

 Federal PT Spending % of transfer
 Transfer 01/02 not spent by
 (millions) (millions) $ Difference PT

BC $39.4 $33.6 $5.8 14.7
Saskatchewan $9.7 $6.3 $3.4 35.1
Newfoundland $5.1 $4.1 $1 19.6
Nova Scotia $9.0 $4.4 $4.6 51.1
Northwest $.4 -$2.3 $2.7 684.3
 Territories
Nunavut $.3 .095 $.205 68.3

Table 2. Provincial and Territorial Use of Federal ECDA Transfers in
02/03

 Provincial
 Federal Spending
 Transfer 02/03 % of transfer
 (millions) (millions) $ Difference not spent

BC $52.5 $50.2 $2.3 4.4
Saskatchewan $12.7 $9.1 $3.6 28.3
Newfoundland $6.6 $5.6 $1.0 14.9
Nova Scotia $11.9 $16.7 -$4.8 -40.2
Northwest $.5 -$2.08 $2.58 516
 Territories
Nunavut $.4 No report N/A N/A