History of First Nations-Canada Fiscal Relations

FISCAL TRANSFERS, PROGRAMS & SERVICES: THE END OF THE LINE? A BRIEF SURVEY OF CROWN-INDIAN FISCAL RELATIONS. 17 SEPTEMBER 1996.

A BRIEF SURVEY OF CROWN-INDIAN Fiscal relations.

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TABLE OF CONTENTS. EXECUTIVE SUMMARY. ............................................................................................................1 1. BACKGROUND .........................................................................................................................7 2. OFF-LOADING & FEDERAL-PROVINCIAL ISSUES ............................................................8

2.1. Off-loading is not new ..................................................................................................8 2.2. The Emergence of Programs & Services After WWII .................................................9 2.3. Devolution of Program Delivery to the Provinces, 1950-1966. ...................................9 2.4. The White Paper on Indian Policy, 1969 ....................................................................11

3. THE FAILURE OF PROGRAMS & SERVICES .....................................................................12 4. FISCAL RESTRAINT AND DEVOLUTION ..........................................................................13

4.1. The Nielsen Task Force (Buffalo Jump of the 1980's) ...............................................13 4.2. Implementation of the Nielsen Task Force Recommendations ..................................17

5. SETBACKS AND REMEDIAL MEASURES ..........................................................................17

5.1. The Guerin Decision, 1984 .........................................................................................17 5.2. Bill C-31, 1985 ...........................................................................................................18 5.3. Accelerating the Programme.......................................................................................19

6. LIBERALS ADOPT TORY POLICY. ......................................................................................20

6.1. Fundamental Structural Change & Fiscal Retrenchment ...........................................20 6.2. Program Review, 1994-1996. .....................................................................................21 6.3. Continued Federal-Provincial Off-Loading ................................................................23

7. FIRST NATIONS CAUGHT IN SQUEEZE PLAY .................................................................25

7.1. The Financial Transfer Agreement .............................................................................25 7.2. Criminalization of Commercial Activity ....................................................................29 7.3. Bleak Prospects ...........................................................................................................30

Attachments. ..................................................................................................................................31

A BRIEF SURVEY OF CROWN-INDIAN FISCAL RELATIONS. EXECUTIVE SUMMARY. 1. A primary objective of the treaty process - for both the Indian nations and the Crown - was to seek economic and social security for their respective citizens, in the short term and into the future. For the Indian nations this meant guarantees that they would maintain their freedom and liberty to benefit from their lands and resources with flexibility, to take advantage of emerging commercial opportunities. It also meant the assurance of access to new forms of health care and education, as well as development assistance (ie., powder & shot, agricultural implements, livestock, fish nets, etc). For the Crown it meant peace, places for settlement, access to lands & resources, and the ability to engage in commerce in a stable environment. 2. Given this country’s current ranking as a desirable place to live, and its standard of living, things should have worked out fine. But Canada at some point decided that sharing on an equitable basis was not enough, and it colonized the Indian nations, reducing them to a state of enforced dependency. The dispossession of lands & resources and economic & social dislocation which followed have been well documented. These measures also led to a system of fiscal arrangements designed as tools of social & political control, and the emergence of a bureaucracy with a vested interest in administering Indian poverty and underdevelopment. 3. Once Indian nations’ proprietary interest in their traditional lands & resources ceased to be recognized by other governments, they became paupers in their own land. And so, successive governments regarded Indians - and the administration of Indian affairs - as a burden on the public purse, to be eliminated and off-loaded. 4. This process began in earnest after the War of 1812, when Great Britain’s treasury began to hurt at the cost of funding the Imperial government’s colonial ambitions. Between 1830 and 1866, the Imperial government traded the costs of operating local government to the colonies in exchange for the devolution and delegation of administrative powers to those same colonial governments. Included among these powers was Indian Affairs - the management of Indian lands & assets, and general administration. It was at this time that colonial legislatures began passing legislation which breached the treaties & interfered with Indian nations’ internal affairs. They also liquidated Indian assets to offset reductions in Imperial grants for their own operations. 5. At Confederation, off-loading took another step: Britain delegated to the federal government legislative responsibility for Indians and lands reserved for Indians. However, the division of powers laid out in the British North America Act, 1867 gave the provinces the beneficial interest in Indian lands & resources, and the revenues from them. Because of this, the federal government was stuck with the costs of the “Indian administration”, without having access to the revenues from tribal lands. This original flaw in the terms of Confederation continues to distort any discussion of Crown-Indian fiscal relations.


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6. Canada’s original plan was that the Indian nations would either become assimilated or become extinct. In either case, the short term costs of maintenance after their dislocation could be regarded as a transitional “cost of doing business”. Once assimilated or extinct, Indians would no longer be a burden on the public treasury. 7. But the plan did not work. Not only did Indian nations not disappear, their numbers started once again to grow, eventually surpassing the growth rate of the non-Indian population. Although the First Nations - and their needs - were growing, economic opportunities remained out of reach, because lands & resources and commercial opportunities continued to be withheld by Canada and the provinces for the benefit of their own citizens. As a result, the burden of the Indian administration has increased significantly, in financial and political terms. 8. The impact was not really significant until after WWII. In 1948 there were less than 1,000 Indian Affairs employees, and in many cases education and health care had been left to the churches. There was no Central Registry for Indian Lands, and estates and trust fund management were haphazard at best. Ten years later, the Indian Affairs budget had grown from $10.3 million to $27.8 million; staff had increased to over 2,000; and the direct federal role in education, health, housing and social programs had increased significantly. 9. Government and social programs grew significantly in the post-war years. As more programs and services were offered to Canadians generally, federal officials felt that provincial governments should assist in the delivery of these programs & services to Indians as well (and ultimately pay for them). Between 1950 and 1966 Canada used its spending powers to get provincial governments to deliver social programs - and apply the relevant provincial laws - to Indian people. By the mid-1960's however, they had only managed to create a patchwork of federal-provincial agreements which were neither consistent nor comprehensive. Between 1964 and 1966, efforts to harmonize federal Indian programs with provincial general programs were increased to facilitate transfer. 10. In 1969, the federal Liberal Government of Prime Minister Pierre Elliot Trudeau and his Minister of Indian Affairs, Jean Chretien, released the White Paper on Indian Policy. It called for the termination of Indian status and treaties; the extension of full provincial jurisdiction and service delivery responsibility to Indians; and the dismemberment of reserve lands. Although a year later the White Paper was publicly repudiated by Prime Minister Trudeau, this policy established the underlying long term objectives of successive federal governments. Instead of expecting results in a matter of years, Canada resigned itself to the fact that it would take incremental measures, spread over decades, to achieve its goals. This commitment has remained at the foundation of federal Indian policy since that time. 11. The aftermath of the White Paper saw a substantial increase in federal funding dedicated to Indian programs, development and political organizations. Provincial involvement increased, but at the same time, Indian organizations and Bands themselves were also drawn into program administration. However, despite the array of new programs and the increase in dollars, the overall situation for Indian people continued to worsen. There are a number of reasons for this:


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policy & programming continued to be designed and imposed by the bureaucracy; federal spending priorities focused on “maintenance” (ie., social assistance) as opposed to “development” (ie., economic initiatives); provincial and federal laws and policy prevented Indian people from obtaining economic benefit from Tribal lands & resources; and federal policy development generally suppressed the exercise of Aboriginal & treaty rights. The net result however, was that money and programs were having only a marginal impact on the decline. 12. In 1984, the new Tory government of Brian Mulroney set out to reduce the deficit and also the size and role of government. Deputy Prime Minister Eric Nielsen led a Task Force on Program Review whose mandate was to identify programs which could be eliminated, reduced, or transferred to another level of government, and determine alternative delivery mechanisms. A special study team on Indian programs was set up and it reported to Cabinet in the spring of 1985. There had been no formal First Nation involvement in the Task Force; it did not consider issues related to Aboriginal & treaty rights, or the Crown’s fiduciary duties; and its report only became public when it was leaked by an official. 13. The key recommendations of the study team on Native programs were to cap and reduce DIAND budget growth in the long term, and work towards increased provincial involvement in service delivery. The “devolution of native problems to native communities” was seen as an essential element in the expenditure reduction program. In November 1986 Treasury Board granted formal authority to DIAND for the devolution program, on the understanding that it would not lead to “program enrichment”, and instead support expenditure reduction targets. New fiscal arrangements such as the Alternative Funding Agreement were also implemented around the same time, with the same objectives. 14. Two events setback these plans. In 1984, the Supreme Court of Canada ruled in Guerin, and found that Canada had a legally enforceable fiduciary obligation to the Indian nations, with particular respect to reserve lands and Indian assets. After over a century of denial, this gave rise to significant liabilities and increased costs. The following year, Bill C-31 was passed, which amended the Indian Act to remove discriminatory sections. DIAND seriously underestimated the financial impacts of C-31. It originally estimated implementation costs at $300 million in total (including MSB). By 1990, this estimate had been revised upward to $2 billion, not including MSB. The extra costs of C-31, added to the costs of fulfilling its legally enforceable fiduciary duties, threatened to derail the expenditure reductions which had been agreed to between DIAND and the Central Agencies. 15. Steps were taken to accelerate the programme on other fronts to see that expenditure reduction targets were met, or at least that these new cost factors offset by other reductions. As a result, some devolution plans were speeded up; the Lands Revenues and Trusts Review was carried out to identify fiduciary duties and prepare for their discharge; and many program responsibilities for off-reserve Indians were unilaterally off-loaded to the provinces, with federal expenditures being reduced accordingly. 16. Jean Chretien’s Liberals were elected to power during a time when Canada - and the


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world - were undergoing fundamental structural and fiscal change. As a part of this process, the functions and presence of government generally are being reduced, resulting in off-loading to other levels of government, who themselves are reducing their functions and responsibilities; deficit reduction is the priority; and the right wing - the likes of Preston Manning, Ralph Klein, and Mike Harris - is in control of the political agenda. The federal Liberals made a strategic decision to move far to the right as a way of pre-empting the Reform Party and reducing the chances of a rebirth of the federal Progressive Conservatives. As a result, they adopted the policies of Brian Mulroney’s Tories and put them into high gear. 17. Between 1994 and 1995, the federal Liberals carried out a government-wide Program Review, similar in purpose to the Nielsen Task Force of the mid-1980's. Like the Nielsen Task Force, there was a component on Native programs, and, as before, the First Nations had no role in its design, implementation, or consideration. The results of Program Review were evident in the spring 1995 budget: DIAND’s budget growth was to be “moderated” at 6% for 1995/96, 3% for 1996/97, and 3% for 1997/98. Other Departments took far more serious hits, so Minister Irwin was able to announce that he had “protected” Indian interests. However, by capping budget growth to these levels, it was clear that available resources would not be able to match growing needs at the community level. 18. In 1995 Finance Minister Paul Martin determined that more money had to be cut from government programs, and Program Review II began. DIAND was under special scrutiny, since it had escaped cuts the first time around. As a result, when the 1996 budget was announced, the previous year’s caps on growth were rolled back and extended: 3% in 1996/97 (the same as Program Review I); 2% in 1997/98 (a 1% reduction from Program Review I); and 2% in 1998/99 (an extension of the cap for an additional year). Even before Program Review, DIAND budgets could not keep pace with growing First Nation needs. Now, it was an impossibility. 19. To meet its expenditure reduction targets in the area of Native programs, Canada has continued to off-load costs and responsibilities to the provincial governments. Over the past two years, the provinces have become increasingly angered by this, especially when combined with other federal off-loading initiatives such as the CHST. At the same time, Canada has introduced a new generation of fiscal arrangements which it wants to impose: the Financial Transfer Agreement (FTA), which will have the effect of giving Canada almost complete control over Bands’ fiscal affairs, leaving Councils with fiduciary responsibilities for programs & services, but without the fiscal means to fulfil them. The FTA’s are also intended to draw the provinces further into Band administration and programs. 20. Clearly, there is a need to change the fiscal relationship between First Nations and the Crown. As things now stand, it still serves as a mechanism of social and political control, focused on mere maintenance and survival, just as in the days of relief. Last July the Chiefs in Assembly passed two resolutions regarding the FTA and the need for a new approach to fiscal relations: to date, Canada has not responded seriously to them. 21. At the same time, however, it is just as clear that the long term fiscal security of the First


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Nations cannot depend only on transfers from other governments, even if those transfers are eventually linked in some way to the revenues that come from Tribal territories. Economic development and the renewal of First Nation economies are essential. Yet other governments have made their hostility towards this prospect very clear. It is no coincidence that all of the most recent Supreme Court of Canada decisions relate to prosecutions that were intended to attack First Nation commerce and revenue generating activities: Vand der Peet, NTC Smokehouse, Gladstone, and Pamajewon & Jones. The lower courts are full of similar prosecutions, while at the same time Revenue Canada is using heavy handed tactics to prevent First Nations and their members from making use of the competitive advantages inherent in reserve lands - ie., they are harassing and prosecuting Bands and individuals who are engaged in commerce with non-Indians. 22. The message from other governments seems to be: do more with less, but don’t do anything that involves the exercise of inherent, Aboriginal, treaty, or even legislative rights. And certainly don’t do anything that competes with established non-Indian economic interests. 23. Taking all of this into account, the First Nations find themselves in a difficult position. Canada is moving ahead unilaterally and cutting transfers to First Nations and the provinces, while at the same time increasing their responsibilities. The federal government is using fiscal coercion to obtain First Nation consent to these measures. At the same time, after a decade of devolution and AFA’s, many First Nations find themselves locked into a debt trap with no way out, and they continue to be pressured into taking on additional responsibilities without any assurance of a stable revenue base from which to cover the costs. As the quality of life on-reserve continues to be eroded, off-reserve migration continues to increase. The final implementation of the White Paper’s long term objectives is now in sight: dispersal of the Indian nations, dismantling of special rights, and absorption into the provincial mainstream. 24. The current round of “pilot projects” being advanced by Canada as symbols of its commitment to Indian self-government are not immune from the trends which we have described in this paper. In fact, it is suggested that the “pilot projects” are central to Canada’s expenditure reduction and off-loading strategy. The Nielsen Task Force report of 1985 and the 1986 Treasury Board decision on devolution were both explicit on this point: devolution and the meeting of federal expenditure reduction targets are intimately connected. 25. In other words, all First Nations are in the same boat - whether they are on their own, part of a Tribal Council, participating in a “pilot project”, negotiating community based self government, or negotiating land claims. Canada is applying the same principles and underlying objectives in all of its current negotiations, regardless of the cosmetic appearances specific to each individual initiative. For Canada one of the advantages of the pilot project or sectoral approach is that it can impose conditions in isolation, without reference to national standards or any form of oversight. First Nations, Tribal Councils or regional organizations simply cannot match the immense resources which Canada brings to the table, and therefore the negotiating position of the two parties is far from equal. 26. This is not to speak against bilateral negotiations between First Nation organizations and


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Canada. Rather, it is to say that for these negotiations to take place without some kind of national standards or oversight, First Nations are left in an extremely vulnerable position. 27. The amendments to the Indian Act which Minister Irwin is currently proposing are a departure from the tactics which the federal Liberals have employed to date: they represent an across the board change which would affect all First Nations. It is suggested that Canada needs these amendments to facilitate completion of its various “pilot projects” and sectoral initiatives, and that is why it has finally returned to the national level. These issues need to be considered and acted upon by the Chiefs.


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1. BACKGROUND.1 Economic and social relations are the basis of everyday life for the citizens of any nation. A secure economic and social environment is required so that productive and healthy development can take place. A prime objective of relations between nations - and treaty making - has been to establish understandings about how the political, economic and social interests of the parties would interact and coexist. Each party, of course, seeks security and certainty regarding the short and long term interests of its citizens. Many if not most of the treaties in Canada came about as a result of conflict over land, resources, trade, and their social impacts. The treaty making process was intended to provide certainty and security as an alternative to conflict and disarray - to protect the rights of each party to sustain themselves, thrive, and develop. For Indian nations, this meant the ability to continue using their land and its resources freely - for personal use, community use, barter and trade. It also meant the assurance of access to new forms of health care and education, as well as development assistance in the form of ammunition, fish nets, agricultural implements, livestock, etc. For the Crown, it meant peace, lands for settlement, access to lands & resources, and the ability to engage in commerce in an atmosphere of stability. Theoretically, things should have worked out all right for both parties. Canada’s current wealth and its high ranking in terms of quality of life would indicate that there are enough fiscal resources to go around. However, things did not turn out that way. Instead of sharing equitably, Canada has colonized the Indian nations and reduced them to a state of enforced dependency. The Indian nations have been dispossessed of their lands and resources. Their traditions of commerce have been criminalized. As societies they have been marginalized and denied basic services which other Canadians have long taken for granted. This has led to economic and social dislocation, with all of the negative indicators that result. It has also led to a system of fiscal arrangements designed as tools of social & political control, and the emergence of a bureaucracy with a vested interest in administering Indian poverty and underdevelopment. Canada’s original plan was that the Indian nations would either become assimilated or become extinct. In either case, the short term costs of maintenance after their dislocation could be regarded as a transitional “cost of doing business”. Once assimilated or extinct, Indians would no longer be a burden on the public treasury.

1Parts of this section are drawn from Nation to Nation: Indian Nation-Crown Relations in Canada

(Thalassa Research, Vancouver, December 1994), a report prepared for the Royal Commission on Aboriginal Peoples.

But the plan did not work. Not only did Indian nations not disappear, their numbers started once again to grow, eventually surpassing the growth rate of the non-Indian population.


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Although the First Nations - and their needs - were growing, economic opportunities remained out of reach, because lands & resources and commercial opportunities continued to be withheld by Canada and the provinces for the benefit of their own citizens. As a result, the burden of the Indian administration has increased significantly, in financial and political terms. Other governments and the Indian nations themselves are now dealing with the consequences of this legacy. This paper is intended to provide some background and analysis to assist in consideration of the current situation. We have had neither the time nor the opportunity to prepare a comprehensive review, but we have tried to present the critical themes and issues which need to be taken into account. 2. OFF-LOADING & FEDERAL-PROVINCIAL ISSUES. 2.1. Off-loading is not new. With negligible assets and scant revenues, Indian nations and their members have come to be a fiscal point of contention for successive settler governments. The practise of off-loading responsibilities (and costs) related to the Indian nations has a long tradition in Canada. It began in earnest between 1830 and 1867, when the Imperial government in Britain could no longer afford its colonial adventures. During that period, it traded the costs of operating local government to the colonies in exchange for the devolution and delegation of administrative powers to those same colonial governments. Included among these powers was Indian Affairs - the management of Indian lands & assets, and general administration. It was at this time that colonial legislatures began passing legislation which breached the treaties and interfered with Indian nations’ internal affairs.2 The Imperial government had succeeded in off-loading the cost and responsibility of the Indian administration to the colonies. However, it did not properly supervise its delegates, and the colonies set about to dissipate the Indian capital monies that had come from land sales and further encroach on Indian interests.

2 See The Indian Act: Protection, Control, or Assimilation? (Assembly of First Nations, September 1996).

At Confederation, the Imperial government off-loaded its responsibilities still further: “Indians and lands reserved for Indians” became a legislative (and financial) responsibility of the new federal government pursuant to s.91(24) of the British North America Act, 1867. The provinces got legislative responsibility over lands, resources, and the regulation of local commerce and social programs. This was a bad deal for the federal government - in fiscal terms, Canada had to pay for the “Indian administration”, but it was the provinces who reaped the revenues from Indian lands & resources. This was because the division of powers laid out in the British North America Act, 1867 did not adequately provide for the need to fulfil the Crown’s existing and future obligations to the Indian nations. Neither did it accommodate their spheres of


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jurisdiction. 2.2. The Emergence of Programs & Services After WWII. Until after WWII, the provinces were effectively sheltered from expenditures or responsibilities related to First Nations. But to a significant degree, so was the federal government. Education and health care had been largely left to the churches, and relief was kept at a minimum. Administration was austere: in 1948 there were only 946 staff employed by the Indian Affairs Branch (including some teachers at federal schools), there was no central Indian Lands Registry, and modern accounting practises were not applied to estates or trust funds.3 By the late 1950's this had changed. In 1958, Indian Affairs Branch staff numbered over 2,000, and in the previous ten years the annual budget had grown from $10.3 million to $27.8 million. This was due to a combination of factors: the extension of universal social programs such as Old Age Security to reserve Indians, increased spending on infrastructure and housing, and an increased direct role in education.4 Between 1958 and 1967, many new federal programs were made available to reserve residents. (Social workers, cash welfare, housing & loans, job placement in urban areas, Winter Works, etc.). 2.3. Devolution of Program Delivery to the Provinces, 1950-1966. With the increase in programs and services available to the Canadian population generally, federal officials felt that provincial governments should assist in service delivery to Indian people. The federal government was glad to be able to off-load the responsibility for service delivery, if not the cost. It used its spending powers as an incentive to get the provinces to agree to deliver certain services. * In 1950 the first federal-provincial agreement on the integration of Indian children into

the provincial school system was signed by B.C. * In 1956 Ontario signed an agreement to extend services of the Children’s Aid Society to

Indians * In 1958-59 Indian Affairs established a Welfare Division whose mandate was to

negotiate the extension of provincial services to on-reserve Indians

3 John Leslie, A Historical Survey of Indian-Government Relations, 1940-1970 (DIAND Claims &

Historical Research Centre, December 1993): p.31. Prepared for DIAND’s Royal Commission Liaison Office.

4Leslie, 1993: pp. 31-32.

* In 1959-60 Ontario extended the General Welfare Assistance Act to 17 Bands pursuant to agreement with the federal government. During the same period, Canada committed to changing its welfare programs to match provincial programs, as a way of facilitating


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transfer to the provinces. * Between 1961 and 1962, Manitoba, Nova Scotia and Saskatchewan begin to apply

provincial laws and deliver provincial services to on-reserve Indians in a variety of social program areas.

* In 1963-64 Indian Affairs created a Federal-Provincial Relations Division “to deal

exclusively” with the negotiation of federal-provincial agreements devolving the administration of Indian programs. Two federal-provincial conferences were held to discuss standards and devolution to the provinces.

* In 1965, Canada tied social assistance payments to provincial rates “in order to facilitate

the transfer of public assistance administration to the provinces”, and proposed a national agreement devolving welfare and community development services to the provinces.5

In 1967, the federal Cabinet considered recommendations regarding changes to the Indian Act and the role of the provinces in service delivery. The proposed policy had two central aims:

(a) To prepare and enable Indian band councils and individuals to take more responsibility, authority, and initiative in municipal type government and economic development.

(b) To facilitate arrangements and understandings with provinces and the territorial governments which would permit the extension of their educational, welfare, health, municipal and other services to Indians according to the same legislation and standards that apply to non-Indians.6

The same memorandum to Cabinet went on to provide a rationale for the transfer of service delivery responsibility to the provinces. It stated that although the BNA Act gave Parliament “exclusive legislative jurisdiction” for Indians and lands reserved for Indians, and although Canada had been in the practise of providing some services, this in no way meant that Indians were the sole responsibility of the federal government:

5For a more detailed summary, see Leslie 1993, Annex C: “Historical Outline of Developments in Indian

Social Welfare, 1945-1966".

6Memorandum to Cabinet: The Indian Act: Proposed Revision (draft #3 15 November 1967).

It is true that the provinces are constitutionally incapable of making valid laws in relations to Indians or lands reserved for Indians. However, in the absence of any federal Indian legislation provincial laws of general application apply to Indians. The fact that Indian needs have historically been met by federal policies and programs is also not evidence of constitutional responsibility on the part of Canada. Federal involvement arose initially to carry out treaty obligations entered into by the Imperial government and


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in part because at Confederation a substantial portion of the Indian population resided on federal Crown lands....

The long range federal objective is to see all services, available to citizens of a province, extended to Indians on and off reserves. The proposed revision of the Act is designed to enable Indians to be treated in accordance with the law and custom of the province in which they reside....7

The memorandum went on to explain that the provinces were generally resistant to the notion of spending money on Indians who did not pay tax, and who were a federal responsibility, and then laid out a plan for ensuring a smooth long term transition:

In view of the provincial attitude and since Canada has traditionally provided and/or paid for most services to Indians, in order to achieve the long range federal objective Canada will likely have to offer interim or transitional financial assistance to provinces undertaking to extend normal services to Indians. It may in fact be necessary to assume the full cost for some period of years. In the long term normal federal-provincial cost-sharing policies should apply and where necessary arrangements can be worked out to offset the tax-exempt position of reserve lands.8

This process of policy development was laying the groundwork for the 1969 White Paper, which we will now turn to. 2.4. The White Paper on Indian Policy, 1969. The Liberal government of Pierre Elliot Trudeau was committed to the principle that Canada would not accommodate “special” or “collective” rights on the part of any segment of the Canadian population. His vision was of a Canada where rights & freedoms focused on the equality of individuals, and not on the respective rights and interests of collectivities. This policy would be the same for Indian nations, Quebec, or anyone else. According to the policy of Multiculturalism, each cultural group would be encouraged to celebrate their identity, but without any recognition of group rights flowing from that identity.

7Memorandum to Cabinet, Draft #3, 15 November 1967.

8Memo to Cabinet Draft #3.

Trudeau’s Minister of Indian Affairs, Jean Chretien, was charged with the task of implementing this policy. Like any Minister, he relied on the advice of his officials, who had already laid out the basis of a plan to Cabinet in 1967, which we described in the preceding section. Chretien presented Cabinet with the White Paper, which was subsequently approved. The White Paper proposed a course of action, and provided a final solution to the off-loading question: * the constitutional and legislative recognition of Indian nations’ unique status would be


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repealed; * the treaties would be terminated for a one-time pay out; * reserve lands would be eliminated incrementally; * taxation would be introduced; * programs & services would be delivered by the provinces, funded at first by Canada but

eventually by provincial governments; and * Indian people would be dispersed and absorbed into the provincial mainstream and enjoy

the same rights & responsibilities as other Canadian citizens. The Indian response to the White Paper is well known, as is the fact that Prime Minister Trudeau formally withdrew it the following year. However, a review of subsequent federal-provincial initiatives indicates that the “long term” objectives described in the 1967 memorandum to Cabinet and in the White Paper itself continue to persist even today. 3. THE FAILURE OF PROGRAMS & SERVICES. The formal demise of the White Paper saw a substantial increase in federal funding dedicated to Indian programs, development, and political organizations. As an interim step in meeting the long term objective of handing program responsibility to the provinces, Indian Bands and organizations were encouraged to administer federal programs. However, despite growing budgets and an array of new programs, the situation did not improve. Part of the reason for this is that programs & services continued to be designed and dictated by the bureaucracy. The “success” of these programs has normally been measured simply by ensuring that the dollars allocated are spent according to the terms and conditions of the contribution agreement or the program (ie., in conformity with regulations, or how many houses were built, or how many Indian children were sent to school). These criteria have nothing to do with finding out whether or not the program or policy actually improved the quality of life for Indian people, or whether it actually resolved problems. Another reason for the failure of programs & services is that federal budget priorities have always favoured “maintenance and survival” instead of real “development”. A review of spending priorities over the past 20 years bears this out. In 1978-79 Indian Affairs program expenditures for social assistance and support accounted for 22.3% of its budget, compared to 6.6% for economic development. In 1981-82, the figures were 27% for social assistance, and 7.5% for economic development.9 By 1992-93, “social development” transfers from DIAND

9The Economic Foundations of Indian Self Government (Thalassa Research, 1983): pp. 46-47. A report


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formed about 43% of the total budget, while economic development (including Pathways, ISTC’s Aboriginal Economic Program, etc.) were less than 20% of federal program dollars dedicated to Indians.10 But this points to a much more fundamental problem: the DIAND budget process has nothing to do with meeting the needs or priorities of the Indian nations, and it makes no connection between the revenues that come from Indian lands & resources and the funding of First Nation governments. Part of this, of course, stems from the division of powers first laid out in the BNA Act, 1867 which we described earlier: the federal government was left with legislative responsibility for Indians and land reserved for Indians, but the provincial governments got revenues flowing from Indian land & resources. Yet another reason for the failure of policies and programs is that they are unconnected to the wider issues that impact on them. For instance, economic development on-reserve continues to be suppressed by federal and provincial laws that restrict access to off-reserve lands & resources, or that restrict on-reserve commercial activity. Mere programs & services cannot make up for the denial or suppression of Aboriginal & treaty rights. Much more could be said about the reasons why the programs & services approach has failed. Suffice it to say that in themselves, they are no solution. Expenditures for maintenance and survival continue to spiral upwards: on-reserve social assistance expenditures increased 12% annually between 1964 and 1994, while during the same period on-reserve population (less C-31) was only growing by about 3% annually.11 4. FISCAL RESTRAINT AND DEVOLUTION. 4.1. The Nielsen Task Force (Buffalo Jump of the 1980's).

prepared for the House of Commons Special Committee on Indian Self Government.

10Torben Drewes & Harry Kitchen, Dept. Of Economics, Trent University: Current Practises in Financing Aboriginal Government (March 1994): pp. 21, 32-33, 40. A report prepared for the Royal Commission on Aboriginal Peoples.

11Andrew Webster, The Impact of the Spring 1994 Federal Budget Changes in INAC on First Nations (Assembly of First Nations, 26 February 1994): p.6.


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In 1984, the newly elected Tory government of Brian Mulroney came to power promising to reduce government spending and also to reduce the size of government itself. As part of this process, in September 1984 Deputy Prime Minister Erik Nielsen was directed to undertake an across the board review of government programs & services, known as the Task Force on Program Review (aka the Nielsen Report). The review was to be carried out by federal officials, with assistance from the private sector, provincial and municipal governments. One component of the review was Native Programs.12 Each study area was to identify: * areas of duplication between federal and provincial governments, or within the federal

government; * programs that could be eliminated, reduced, or shifted to another department or another

level of government; * alternative delivery mechanisms (including the private sector); * areas for legislative change to facilitate program implementation; and * impacts on the overall objective of reducing government expenditures.13 The Native program study team was led by Jim Collinson, Assistant Secretary to the Cabinet, Aboriginal and Constitutional Affairs, Office of Federal/Provincial Relations. It should be noted that any consideration of Aboriginal & treaty rights, or the Crown’s fiduciary and trust duties, was absent in the Study Team’s work. This is not surprising, since the development of the Task Force’s terms of reference, and its implementation, were carried out behind closed doors and without any kind of formal participation by the First Nations. In fact, the Task Force results only became publicly known when they were leaked to Indian organizations by an Indian Affairs employee. The intent of the Task Force report was clear, and was not disavowed by Canada: it was federal officials themselves who dubbed it The Buffalo Jump of the 1980's. The report noted that although federal expenditures on Indians had increased to about $3 billion by 1984/85, the money had at best a “marginal” impact on Indian living conditions: negative indicators still dominated the landscape. It concluded that “The continuing dilemma of high government expenditures and socio-economic inertia demands significant adjustments to government policy.”14 The report also stated that “Services have been provided far beyond the federal government’s constitutional and legislative responsibility”. It asserted that only 25% of these expenditures were directly connected to treaty or Indian Act obligations; another 38%

12See Indian and Native Programs: A Study Team Report to the Task Force on Program Review, April

1985 (Dept. Of Supply & Services, Ottawa, 1986).

13Study Team Report, April 1985.

14Ibid. p.21.


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would normally be statutory provincial responsibilities; leaving 37% as purely “discretionary” spending.15

15Ibid. pp.21-22.

The provision of on-reserve services and expenditures related to housing and infrastructure came under particular attack:

Universality -- a complete array of services is provided to all reserves as if they were a “right”, irrespective of need.


16

Standards -- the level to which these services are provided has the effect of recreating modern suburbs in the northern bush with no consideration of the communities’ long-term economic capacity to pay for the maintenance and replacement of this level of service.16

Some of the Task Force recommendations included: * Taking “specialist” programs out of DIAND and placing them with other federal

departments (ie., policing, justice, economic development). * “Establishing exit-strategies for some programs” (code talk for elimination of programs). * “Enhancing” and consolidating federal-provincial arrangements (by 1985 there were 634

different federal-provincial agreements related to Aboriginal people). This would include getting provincial governments to assist in the management of Indian lands, and eventually having them deliver health services and welfare programs on-reserve.

* Reduce expenditures in the areas of health (particularly non-insured benefits) and

education (particularly post-secondary). * Off-loading the administration of Indian monies to “an independent national Indian

heritage trust company” - essentially privatizing the management of Indian assets. (This was an early response to the Guerin decision which was superseded by the Lands, Revenues & Trusts Review of 1987-90.)

* Increasing private sector involvement in program delivery. * “Capping expenditures and turning the responsibility back on native communities to

resolve their problems for themselves”. * Reduce standards applied to infrastructure and capital to minimum standards, instead of

national standards, to prevent the continued creation of “modern suburbs in the northern bush”. Introducing “user-pay” schemes, making Bands pay for a portion of their own capital and O&M. Remove incentives (ie., housing assistance) for families to remain in areas of high unemployment (ie., on-reserve).

16Ibid. P.23.


17

* Clarifying the beneficiary issue - ie., who is entitled to programs & service (code talk for reducing entitlements).17

The authors of the Task Force report acknowledged that Indian people would initially resist such changes, but expressed the view that they would get used to it:

The growth pattern of programs and federal expenditures for native people has created a massive administrative superstructure. In Indian communities it has also nurtured an entire sub-economy as well as a generation whose avocation is to exploit these programs. Instant elimination of this artificial economy would be like the post-war phenomenon of economic readjustment.... Over several years, however, the native world would right itself again with a new structure (e.g. Self-government) with much clearer lines of accountability between the self-governing bodies and their constituents.18

The study team left it with Cabinet to determine how far and how fast the changes should be implemented. As we shall see, Cabinet decided to take the incremental approach. On April 12 1985, Nielsen tabled the results of the Task Force on Native Programs with the federal Cabinet. He noted that the Report needed to be considered in connection with other outside factors - such as constitutional discussions and self government. He also highlighted the fact that “the federal government’s need to reduce expenditures was an important consideration in the Task Force’s work”.19 In light of this last directive, Nielsen recommended that:

.... unlike other Task Force studies, the objective for the Indian and native study should not be immediate expenditure reductions but the reduction over time of the rapidly escalating trend in federal expenditures. .... The important financial aspect of these recommendations... is to contain the rapid escalation of future costs that would derive from leaving existing programs unchecked.20 [emphasis added]

Most of the Study Team’s recommendations were included in the Cabinet submission, although some of the more drastic ones were slated for long term, phased-in implementation. One of the fundamental strategic objectives presented to Cabinet was this:

17Ibid. pp.32-38. See also Memo to Cabinet of 12 April 1985.

18Study Team Report, April 1985: p.38.

19Memorandum to Cabinet Report of the Ministerial Task Force on Native Programs, April 12, 1985: p.1.

20Ibid.


18

Devolution of native problems to native communities from the federal government for resolution through negotiation of local community plans based on community priorities and funded on a multi-year block basis.21 [emphasis added]

4.2. Implementation of the Nielsen Task Force Recommendations. Implementation of the recommendations was underway soon after Cabinet considered them. In November 1986, Indian Affairs sought and was granted formal authority from Treasury Board to “devolve, over time, to the greatest extent possible within existing legislation and current administrative arrangements, its programs and services to Indian people”.22 Treasury Board was assured that devolution would not result in any “enrichment” of existing programs & services. It was also told that devolution as proposed would advance projected expenditure reductions and departmental downsizing:

The departmental downsizing plan provides for a net reduction of 1230 person-years and approximately $36.0M in annual expenditures (excluding reductions in the Northern Affairs Program). While part of these reductions is independent of program transfers, other parts are either directly or indirectly contingent on program transfers.23 [emphasis added]

Other initiatives which advanced the objectives of the Nielsen Task Force Review were launched in parallel during the same period: Alternative Funding Arrangements (AFA); the Community Based Self Government process; transfer of DIAND programs to “specialist” departments (policing, economic development, fisheries, etc.), and so on. In promoting each of these initiatives, Canada emphasized the benefits to First Nations - increased local control, more flexibility in targeting expenditures, certainty over funding levels, etc. At the same time, many First Nations were told that these changes were inevitable in any event, so that it would be in their interests to go along. There is truth in all of these statements. However, at the same time Canada chose not to disclose how these initiatives were connected to its fundamental long term objectives: expenditure reductions, off-loading to the provinces (with off-loading to First Nations too), reduction of its fiduciary and trust duties, etc. Because Canada was selective in its disclosure, First Nations were not in a position to consider these offers in light of all the material facts. 5. SETBACKS AND REMEDIAL MEASURES.

21Ibid.

22Decision of the Treasury Board Meeting of November 27, 1986 re: Devolution Plan.

23Ibid.: pp. 12-13.


19

5.1. The Guerin Decision, 1984. In 1984 the Supreme Court of Canada found that Canada owed a legally enforceable fiduciary duty to the First Nations, specifically in the management of reserve lands and assets, but also in more general terms. This was contrary to what DIAND had always contended - that even though it had almost total control over the management of Indian lands & assets, it was not legally accountable for its actions. The Guerin decision was a major setback for the Nielsen Task Force agenda, since it introduced new liabilities for the federal government, and implied significant additional operational costs (ie., proper maintenance of the Indian Lands Registry, estates, membership rolls, etc. etc.).24 5.2. Bill C-31, 1985. In 1985, Parliament passed a series of amendments to the Act known as Bill C-31. The stated objectives of the Bill were to remove the sections of the Act which discriminated against women (particularly s.12(1)(b)); to restore status and membership rights; and to provide Bands with more control over their membership. Canada was forced to make these amendments to comply with the Charter of Rights and Freedoms25 and with international law. First Nations expressed serious concerns about the impact of Bill C-31 as it was proposed, and some actively challenged it in the courts. At the time, then Minister of Indian Affairs David Crombie publicly gave the assurance that “no Band would be worse off” as a result of the amendment. The result was not as he predicted. By 1990, around 80,000 Indians had obtained (or regained) status as a result of C-31, adding 25% to the Registered Indian population. This exceeded DIAND’s projections by almost 50%. Needless to say, the unexpected numbers wreaked havoc with DIAND’s implementation plan and its budgets. The government’s commitment to expenditure reductions in the area of Indian Affairs now ran the risk of running off the rails.

24See The Indian Act: Protection, Control, or Assimilation? (AFN, September 1996) for more detail on the

Guerin decision, its financial implications, and Canada’s policy response.

25Constitutional Amendment Act, 1983 s.35(4).


20

In 1985, the Department had estimated that the total costs for C-31 implementation would be $300 million (including Medical Services Branch (MSB)). By 1989, this figure had been revised upwards to $2 billion, not including MSB.26 The costs were substantial. Between 1985 and 1990, expenditures for C-31 non-insured health benefits grew from $2.5 million to $39 million. During the same period, C-31 post secondary education costs ballooned from $900,000 to $27.9 million.27 It has been said that the cost-impacts of C-31 were intentionally under represented by DIAND in order to ensure Cabinet and Parliamentary approval of the Bill, although this has not been independently confirmed. Nevertheless, there is no doubt that the actual impacts must have come as a shock to the officials at DIAND and the Treasury Board. By itself alone, C-31 threw all of the federal government’s expenditure reduction targets into the waste bin. Add to this the potential costs and liabilities arising from the Supreme Court of Canada’s decision in Guerin, and the magnitude of the problem facing DIAND and other federal departments begins to be clear. 5.3. Accelerating the Programme. If anything was to be salvaged, new and more aggressive measures on other fronts would be required. Over the next few years, these measures began to make themselves apparent, although of course there was no corresponding announcement from government that it was taking these steps to offset the costs of its own mismanagement. Efforts at containing and off-loading Crown fiduciary duties (and the costs associated with them) that arose as a result of Guerin surfaced in the Lands, Revenues and Trusts Review of 1987-1990.28 In mid-1993, Treasury Board ordered a halt to off-reserve social assistance charge-backs (with some exceptions), immediately cutting Indian welfare expenditures by 20%, and increasing provincial expenditures accordingly.29 In Manitoba alone, the additional cost to the provincial government was in the neighbourhood of $20 million annually.30 Gone were the old days when Canada used its largesse as an enticement to get provinces to deliver services to Indian people: now it was unilateral off-loading of responsibilities and costs, without apology.

26Report of the Auditor General (Canada, Ottawa, 3 December 1991): pp.334-335.

27Impacts of the 1985 Amendments to the Indian Act (Bill C-31): Information about government programs & statistics (Supply & Services Canada, 1990): p.71.

28See The Indian Act: Protection, Control or Assimilation? (AFN, September 1996).

29Andrew Webster, The Impact of the Spring 1994 Federal Budget Changes in INAC on First Nations (AFN, 26 February 1994): p.7.

30Yngve George Lithman, The Feathers of a Bird and the Frosts of Winter - Portability of Treaty Rights in an Era of Restraint and Off-Loading, 1994: p.80. A report prepared for the Royal Commission on Aboriginal Peoples.


21

Devolution plans were accelerated in many cases, to capture the benefits of the projected expenditure reductions associated with them. Many more examples could be provided if time and space allowed. The point to be made is that unforseen costs and liabilities arising from Bill C-31 and the Guerin decision did not deter Canada from the long term expenditure reduction and off-loading objectives contained in the Nielsen Task Force report. Instead, these impacts were accommodated by making cuts or accelerating the long term plan in other areas. Finally, it is the First Nations themselves that have ultimately been made to pay the price for this turn of events. 6. LIBERALS ADOPT TORY POLICY. 6.1. Fundamental Structural Change & Fiscal Retrenchment. Upon their election, the federal Liberals inherited a world and a government that had changed a lot in ten years. The deficit - and the national debt - had ballooned during Tory rule, despite Prime Minister Brian Mulroney’s professed commitment to deficit reduction. A decade of constitutional discussions had led to nothing except acrimony and failure. The prospect of Quebec separation was more real than ever before, and western alienation was reaching hysteric proportions. But beyond this, global forces, and the emergence of the new right within the Canadian political system, were forcing all levels of government to re-invent themselves. Deficit reduction was being demanded by foreign creditors and bond-rating agencies. Intolerance was on the rise, with social programs and “special interests” at the top of the hit-list. “Big government” and the Canadian tradition of government intervention (and expenditure) were under attack like never before. The Reform Party of Preston Manning and provincial Tory parties under the likes of Mike Harris and Ralph Klein were on the ascent, while the federal Tories and the NDP were self-destructing. In a changed world, Jean Chretien’s Liberals found that there was no longer any middle ground for their party to occupy. From subsequent events it appears that they decided to out-flank the Reform Party (and pre-empt a Tory resurrection) by moving far to the right, and creating a new middle ground. As a result, in the past three years they have pursued expenditure reduction, downsizing, and the reduction of federal presence far more aggressively than Brian Mulroney’s Tories ever did during their decade in power. At the same time, failure on the constitutional front has not removed the necessity of realigning jurisdictional and fiscal arrangements between the levels of government. This realignment is now taking place outside of the constitutional process, through administrative & legislative measures and changes to fiscal flows. Generally speaking, the federal government’s presence will become smaller, and the provinces and their subsidiary governments will be left to fill the


22

gaps. Since many provincial governments themselves are also reducing their own expenditures, programs and responsibilities, it appears clear that the buck is being passed on down the line. The fiscal health and prospects of the First Nations - and the policies which Canada is offering them - must be assessed against this backdrop. Although they had adopted a neo-conservative agenda once in power, the Liberals - at least for appearances sake - were bound by their election platform and promises, as contained in the Red Book and their Aboriginal Electoral Platform. With respect to Indian policy, their challenge has been to fulfil their new right wing agenda while giving the impression that they are delivering on their Red Book and Aboriginal Electoral Platform commitments. 6.2. Program Review, 1994-1996. In the spring of 1994, the Liberal government created a Cabinet Task Force under the leadership of Marcel Masse, then Secretary to Cabinet and Minister of Intergovernmental Affairs.31 The Task Force, reporting to the Privy Council Office, was directed to carry out a government-wide review of programs, policy and services with the dual objectives of (a) cutting government spending and reducing the deficit, and (b) overhauling the bureaucracy and cutting down the actual size of government. Similar in scope and intent to the Nielsen Task Force that had been carried out at the beginning of the Tories’ first term, Program Review became central to Canada’s policy directions and budgetary planning. Unlike the Nielsen Task Force, Program Review was carried internally by government officials. Each policy or program group in each federal department was requested to apply seven tests to their area of responsibility:32

1. The public interest test: is the policy or program in the public interest?

2. The role of government test: Is the policy or program one that government should be involved in? Why?

3. The federal test: Should the federal government deliver the program or service? Does it intrude on provincial jurisdiction or spending power? In the case of overlap, should responsibilities be handed over to the provinces? (Areas under consideration included environmental assessment & regulations; social housing; labour market training; health.)

4. The partnership test: Could the program or policy be delivered by the private or non-profit sector? (Code talk for privatization.)

31For more detail, see Peter Di Gangi, Federal Program Assessment & Review: Buffalo Jump II? (Report

prepared for the Union of B.C. Indian Chiefs, 15 November 1994).

32Canadian Federal Government Handbook (Globe Information Services, Toronto, 1994): p. vii.


23

5. The efficiency test: Could the policy of program be run more cheaply and efficiently? (Identify areas in which to reduce cost.)

6. The affordability test: Is the program affordable in today’s climate of fiscal restraint? What are the returns?

7. The consequences test: What are the political consequences of terminating or withdrawing a particular program or policy? (Note: this last test did not appear in the information materials which were circulated publicly, but it was central to the internal government process of assessment.)

Although Program Review was publicly characterized as an effort to “renew” government and make it more responsive, there was little doubt that its real objective was to find ways of reducing expenditures and federal responsibilities. It was a budget-driven exercise from the beginning. In the context of Indian Affairs, Program Review suffered from the same deficiencies that contaminated the Nielsen Task Force process (and the LRT Review). Being focused primarily on expenditure reduction and down-sizing, it did not consider key issues like the Crown’s fiduciary and trust duties, the treaties, or Aboriginal rights. At the same time, it was an internal exercise, marred by conflict of interest: how can a fiduciary who has been negligent be trusted to review his own conduct? Notwithstanding these shortcomings, DIAND carried out Program Review between the spring and winter of 1994. No formal consultations with First Nation leadership took place, during its development or its implementation (in this respect it was similar to the Nielsen Task Force process). In fact, DIAND has refused Access to Information requests for the program reports which came out of the Program Review, on the basis that since they were prepared for consideration by a Cabinet Committee, they are exempt. However, the scant documentation that has been released by DIAND indicates clearly that the Liberal’s Red Book commitments regarding housing, the inherent right, post-secondary education, claims reform, a treaty process etc. were termed “Red Book Pressures” in the context of Program Review, subordinate to the overall imperative of reducing costs and the reducing federal presence.33 However, the results of Program Review were made clear in the spring 1995 budget, and subsequent announcements by Indian Affairs Minister Ron Irwin. While other federal departments took serious reductions, DIAND was able to say that it had managed to protect its budget. Instead of taking cuts, DIAND’s budget growth would be “moderated” - to 6% for 1995/96, 3% in 1996/97, and 3% again in 1997/98.

33Program Review: Programs & Activities Requiring Full Reviews and Strategic Action Plans, Annex C (DIAND, 1995).


24

Soon after, Finance Minister Paul Martin stated that deficit reduction needed to go further, and in 1995/96 the federal government embarked on Program Review II, which set the basis for the 1996 budget. This time around, DIAND was under particular scrutiny since it had come out of the first Program Review relatively unscathed. As a result, DIAND’s budget growth was further “moderated” - to 3% in 1996/97 (consistent with Program Review I), 2% in 1997/98 (a reduction of 1% from Program Review I), and 2% in 1998/99 (and extension of the cap for an additional year). Minister Irwin tried to soften the impact by stating that in tough times, everyone had to tighten their belts: “Fiscal restraint is a reality. All federal government departments and all segments of the Canadian population, including First Nations, are affected.”34 Since the natural rate of increase among First Nations (excluding C-31) has averaged around 3% annually for the past ten years, this translates into a net reduction. DIAND budgets could not keep up with First Nations’ needs as it was. Now, the prospects became more troubling. Part of the federal strategy in implementing these fiscal targets has been to redefine (and thereby reduce) the Department’s mandate and responsibilities. Now, the focus is on DIAND’s “core obligations to First Nations” - to ensure that “basic needs are met”. These “basic needs” are maintenance-level responsibilities - water, sewage, social assistance, education, etc.35 In the process, terminology is also being redefined. It used to be that monies appropriated by Parliament for the use and benefit of Indians were known as “Indian monies”. So were the sums held in Band Capital and Revenue accounts. The term was pretty clear in explaining the purpose and there was not a distinction. In fact, the definition contained in the Indian Act is as follows: “Indian moneys means all moneys collected, received or held by Her Majesty for the use and benefit of Indians or bands”.36 Today however, Canada makes a distinction. When it refers to funds appropriated by Parliament for the use and benefit of Indians, it uses the term “Public Monies” or “Public Funds” - ie., they are not Indian monies, but other peoples’ money. The term “Indian monies” now only seems to be used by Canada when it is discussing funds that are in Band Capital and Revenue Accounts from land sales, leases, etc. It is important to note that there does not appear to be a legal basis for this change in terminology (at least with reference to the Indian Act). Instead, the change is a result of policy decisions related to expenditure reduction for Indian programs & services. A review of DIAND’s proposed FTA and related materials provides concrete examples of this change.37

34Results of DIAND Program Review and 1996 Budget (DIAND Press release, 6 March 1996).

35The Outlook on Priorities and Expenditures, 1995-1996 to 1997-1998 (DIAND, June 1995).

36Indian Act, s.2(1).

37See Discussion Paper on Accountability (DIAND, 24 April 1996), which was circulated by DIAND as a


25

part of its move to implement the FTA. See also DIAND’s generic FTA (draft #4, 18 January 1996) which consistently refers to “public funds” and “public funding”, but makes no mention of “Indian moneys”.

6.3. Continued Federal-Provincial Off-Loading. In this area, as with other sectors, the federal Liberals have adopted and accelerated Tory policy and practise. By replacing the Canada Assistance Program (CAP) with the Canada Health & Social Transfer (CHST), the federal government has been able to cut billions from its commitments, leaving the provinces to make up the shortfall. At the same time that they are reducing transfers to the provinces, they are also off-loading additional responsibilities, including programs & services for Indians. Part of the redefinition of DIAND’s “core responsibilities” which we have already mentioned includes restricting eligibility for federal programs and services to on-reserve residents. Canada’s “inherent rights” policy framework states clearly the federal government’s position: that off-reserve Indians, as well as non-status and Metis people, are primarily a provincial responsibility.


26

The provinces are not pleased. In December 1995 they released a joint report on social programs and federal-provincial relations, which cited the recent rends towards off-loading and asserted the position that “the federal government accept full responsibility for all programming for Aboriginal people, both on and off reserve, with a gradual transfer to Aboriginal communities”.38 Their use of the term “Aboriginal people” - meant to include Metis and non-status people - is in stark contrast to Canada’s focus on status Indians. The Premiers have continued to keep up the pressure. In August 1996, after meeting in Jasper Alberta, they released a paper on social policy reform which laid out their expectations regarding key federal-provincial issues: health, income support, fiscal relations, labour markets & training, national standards, and - not surprisingly - federal off-loading of costs of services to Aboriginal people. In their words,

A mixture of federal, provincial/territorial, and Aboriginal-delivered social programs provide for the needs of Aboriginal people in Canada. Financial responsibility for on-reserve costs is generally borne by the federal government. In decades past, federal financial responsibility also extended to Status Indians living off-reserve. However, the federal government has followed a pattern of continuous withdrawal from special financial arrangements to support programming for this group, leaving provinces and territories with an increasing and substantial share of these costs. This off-loading is occurring at a time when federal support for the funding of social programs in general is rapidly diminishing.

This off-loading is also occurring at a time when the special needs of Aboriginal persons with respect to achieving full participation in the labour market are expected to grow over the next few years. For example, by the year 2001, one in four entrants to the workforce in some Prairie provinces will be of Aboriginal descent.

The resolution of issues related to Aboriginal Canadians is vital to the future of our country. The federal government must honour its responsibilities and provide sufficient resources to ensure that services to Aboriginal Canadians are comparable to those provided to other Canadians. Social policy reform and renewal must ensure that appropriate directions are established for the future of social programs and services for Aboriginal people. These issues cannot simply be dismissed by the federal government.39

38Report To Premiers (Ministerial Council on Social Policy Reform & Renewal, December 1995): p.10.

39Social Policy Reform and Renewal (The 37th Annual Premiers’ Conference, Jasper, Alberta, 21-23 August, 1996): pp.11-12.


27

In making their case, the provinces are invoking Canada’s treaty, constitutional, legislative and fiduciary duties to the First Nations as a means of arguing that all Indians are a federal responsibility. They go on to assert that the federal government has a general “responsibility” to cover programs and services for all Aboriginal people.40 Of course, these protests would be easier to believe if these same provincial governments showed any inclination to respect treaty & Aboriginal rights, or to provide greater access to lands & resources for the First Nations. Be this as it may, the Premiers agreed to pursue their concerns directly with relevant federal ministers, and stated that “input from Aboriginal leaders should be sought”. Towards this end, Premier Klein of Alberta has committed to inviting the National Chief to meet with Premiers this fall. 7. FIRST NATIONS CAUGHT IN SQUEEZE PLAY. First Nations are now caught between the federal and provincial governments as they jockey for position in the new Canadian framework. As stated above, these structural changes are not being accomplished by Constitutional amendment. Instead, they are the result of legislative & administrative changes, and plain old-fashioned power politics. 7.1. The Financial Transfer Agreement. Enter the Financial Transfer Agreement (FTA). The federal government is undertaking a consolidation of practise & policy related to fiscal transfers. Canada's objective is to flow all transfers going to Bands, Tribal Councils, and other First Nation organizations through master Financial Transfer Agreements (FTA). As proposed, these master agreements would include transfers not only from DIAND, but all federal Departments and Agencies. Provision is being made for provincial governments to be a party to FTA's in some instances. These new agreements are to be phased in over a period of years. 'Pilot projects' have been carried out. The initial emphasis for 1996/97 is on the development and implementation of Accountability Mechanisms among recipients. The FTA system is to be introduced across the board between 1997/98 and 1998/99. Some First Nations are already being presented with versions of the FTA to replace expired AFA's and other agreements. One of the stated selling points of the FTA - similar to the AFA's that preceded it - is that it provides a stable level of funding over a multi-year period, to allow for planning and certainty. However, the provisions related to General Reductions and Funding Restrictions contained in the draft do not inspire confidence on that count41:

40Ibid.: p.20.

41Note: throughout this paper, we are referring to DIAND’s generic FTA, Draft #4 dated 18 January 1996.

5.7.1. Notwithstanding any other provision in this Agreement, if a Funding


28

Restriction occurs, a reduction in an amount of Block Funding, Targeted Funding or both otherwise payable under this Agreement may result, the extent of which reduction to be determined by Canada.

This subsection allows the Government of Canada to unilaterally reduce the level of committed funding at any time - in other words, to default on the terms of the initial agreement. The grounds upon which a Funding Restriction may be imposed are buried in Schedule "A", Definitions:

Funding Restriction means a situation which affects a Fiscal Year during the term of this Agreement where:

(a) the Parliament of Canada by appropriation approves a lesser amount than that put

forward in the budget estimates; or

(b) pursuant to a spending restraint direction from the Parliament of Canada or Treasury Board Secretariat, whole or partial reductions or restrictions are applied to the grants and contributions budgets of the Department of Indian Affairs and Northern Development; or

(c) a re-structuring or re-ordering of the federal mandate and responsibilities

negatively impacts the funding available for the types of Services or Projects to be funded, in whole or in part, under this Agreement.

For the purposes of this paper, we will focus on these last two. Item (b) is a direct reference to the Program Review process which we have already described. Inclusion of this clause means that the parties agree to subordinate the resourcing of Indian governance - and the needs of Indian people - to federal deficit recovery. Item (c) refers to the ongoing federal-provincial negotiations regarding social and other programs, including responsibility for resourcing and delivering Indian programs & services. It is significant that First Nations have been excluded from both the Program Review and the federal-provincial discussions referred to. An yet they are being requested to give Canada a blank cheque for arbitrary change in both areas. This licence for discretion should seemingly increase the fiduciary duty of the Crown. However, there are other clauses in the draft FTA which appear intended to relieve the Crown of those very duties. Far from providing certainty, the FTA as proposed requires Indian governments to formally consent to uncertainty: the prospect of unilateral funding cuts, and transfers in the federal responsibility. One wonders why DIAND's drafters resorted to such provocative and undisguised language. It could be a trial balloon to assess the response it gets. Or it could be a transparent acknowledgement of the fact that they must obtain consent, and that they are willing


29

to go to great lengths to obtain it. There are many other parts of the proposed FTA which also give rise to serious concerns. A detailed analysis is beyond the scope of this paper42, but here is a short list of some of the issues that it raises: * Double standards: Canada wants to hold First Nations to a much higher standard than it

does for itself in the areas of accountability and debt. For example, Canada wants to hold First Nations to a maximum debt ceiling of 8% of annual revenues, while Canada’s debt is in the neighbourhood of 74% of its annual revenues.43

* Provincial encroachment: The FTA clearly articulates DIAND’s position that provincial

laws of general application shall apply on-reserve in the delivery of programs and services, and that provincial standards and regulations in those areas will be paramount. There are indications that Canada is prepared to have provincial governments as co-signatories to FTA’s, opening the door even further. This is clearly another step in the long term objective of “harmonizing” federal-provincial laws and arrangements regarding programs & services to Indians.

* No responsibility for meeting needs: The FTA describes DIAND’s responsibility as

being “to financially assist the Council in the provision of services and projects” [emphasis added]. The message is that Canada has no responsibility to meet First nation needs, and that First Nations are responsible for any shortfalls. This seems geared towards nudging First Nations into levying taxes on their own people, and/or forcing them to go to their respective provincial governments for funds to fill the gap.

* Grounds for Default: This is a one-way deal. All of the grounds for default are aimed at

the First Nations. To provide just two examples, any deviation from the agreed upon terms, or any circumstance where “in Canada’s sole opinion, the political, managerial, or administrative regime of the Council” threatens the delivery of services, can be deemed as grounds for default, allowing Canada to come in with sweeping powers of control. At the same time, there are no similar conditions binding Canada to a set standard of performance. On the contrary, Canada can change anything at any time without being deemed to be in default (ie., sections on expenditure reductions mentioned above).

42For more detailed information on the FTA, see: Andrew Webster, Issue Summary: DIAND’s New Funding

Mechanism: The Financial Transfer Agreement (AFN, 27 July 1996), and Peter Di Gangi, Fiscal Transfers and Dismantling of the Fiduciary Duty (Union of Nova Scotia Indians draft, 18 June 1996).

43See Laurel Lemchuk-Favel, Back to the Future: An Analysis of DIAND Funding Methods (Band Indebtedness Project, 27 March 1996): p.43.


30

* Dismantling the Fiduciary Duty: The FTA explicitly insulates Canada from any fiduciary

duties related to the content of the FTA, while at the same time transferring a number of fiduciary responsibilities onto the First Nation. Without any assurance of adequate resourcing to meet needs or the terms & conditions of the FTA, this puts First Nations and their members into a potentially damaging position.

* Perpetuating the Master-Servant Relationship: Far from recognizing the inherent right of

self government, or the government-to-government relationship between First Nations and Canada, the FTA perpetuates the colonial relationship of the past by giving Canada sweeping control and putting First Nation governments in a position of fiscal servitude. The only substantive difference is that this time around, Councils will be consenting to assuming fiduciary duties as well (without any assurance of adequate resources to fulfil those duties).

Like so many of the other government-driven initiatives that have been described in other parts of this paper, the FTA is an exercise in double-speak. Although it is characterized as a means of allowing First Nations more control, certainty, and flexibility, its effect will be the opposite: consolidate DIAND control, institutionalize uncertainty, and lock First Nations into a fiscal straight-jacket. While giving lip service to First Nation priorities, the FTA manages to focus solely on the federal

government's policy objectives, while avoiding fundamental issues which First Nations have been advancing consistently for years. The issues which are being avoided include:

-Measures required to ensure that the Crown is accountable to the First Nations for its conduct, including provision for "transparency, disclosure and redress" in federal policy development, budgeting, and decision-making.

-The underlying relationship between the Crown and Indian nations, and how that relates to fiscal transfers, taxation, and the provision of government services & programs. (ie., the inherent right, Aboriginal rights, treaty rights)

-The inadequacies of current funding formulas, programs and policies, and their effect on the ability of Indian governments to function effectively, provide services, and remain solvent.

-Matters of trade, commerce, taxation, and the redistribution of wealth, and how these relate to good government and the provision of services. (This includes the issue of increased access to off-reserve lands & resources, and the revenues therefrom.)


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-Meaningful participation by Indian nations in policy development, planning, and program reviews related to fiscal transfers and programs. (As mentioned already, First Nations have never been given in role in Program Reviews or assessments.)

First Nations are well aware of the dangers posed by the FTA. These issues were discussed at the XVII AFN AGA in July 1996, and as a result, two resolutions were passed. Resolution No. 8/96 notes that the FTA’s as proposed make no provision for meeting the growing needs of First Nations, and that no independent impact analysis has been carried out to determine their impact on First Nations’ quality of life (see attachment #1). It directed the National Chief to seek assurances from DIAND that FTA’s will not be forced on any First Nation, and further requested DIAND to work jointly with the AFN to commission an independent impact analysis “on any new funding arrangement”. Resolution No. 5/96 deals with Canada/First Nation fiscal relationships in the broader context (see attachment #2). It observes that current funding mechanisms to not take First Nation growth and needs into account, and highlights the fact that FTA’s, AFA’s and ISG’s “require First Nations governments to bear more risk without compensation”. The resolution calls for Canada and the First Nations to establish new fiscal relationships based on the following principles: choice, fairness, certainty of government service delivery to comparable jurisdictions, clarity of revenue raising jurisdictions, economic incentives, cost effectiveness & efficiency. (Needless to say, each of these principles require further elaboration and definition.) It goes on to mandate the National Office to work cooperatively with First Nations in the development of a First Nations Transfer Act or amendment which would “facilitate the transfer of financial resources from the Government of Canada to First Nation governments consistent with the government-to-government relationship affirmed in the recognition of the inherent rights of First Nations”. Predictably, Canada has not responded substantively to either of these resolutions. On the contrary, indications are that DIAND is proceeding according to its agenda, and imposing FTA’s on First Nations. Each of the resolutions, and the follow up that is required, require further discussion by the Chiefs in Assembly if Canada is to be brought to account on this issue. 7.2. Criminalization of Commercial Activity. Obviously, transfers from other governments - even if they are eventually linked in some way to revenues from resources or economic activity within Tribal territories - cannot be the sole long term solution to the fiscal future of the First Nations. Economic development and the renewal of First Nation economies is essential. One would think that efforts on this front would be actively supported by other levels of government. But this is not necessarily the case. We have already described how federal funding has traditionally favoured “maintenance” funding for social assistance, as opposed to “developmental” monies for economic renewal. At


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the same time, in recent years, commercial activity based on inherent, Aboriginal or treaty rights has been increasingly criminalized. First Nations and Indian people who try to engage in commercial activity to break out of the vicious cycle which we have described are finding themselves the object of criminal prosecutions. It is noteworthy that the most recent Supreme Court of Canada decisions relating to Indians have involved prosecutions for commercial activity: Van Der Peet, NTC Smokehouse, Gladstone, and Pamajewon & Jones all involved communities or individuals who were trying to better their situation independent of government programs or policy. Many other First Nations who have tried to regulate commerce or gaming on-reserve as a means of generating their own revenues have also been hit with prosecutions or Revenue Canada strong-arm tactics. The provinces themselves, although they complain about federal off-loading, do not appear willing to provide more equitable access to lands & resources as a way for First Nations to generate their own revenues. Neither are the federal or the provincial governments willing to allow First Nations to make use of the competitive advantages inherent in reserve lands (ie., using tax room to encourage commercial transactions with non-Indians) to generate revenues. In fact, Canada is actively seeking to eliminate First Nation tax immunity, for individuals and for reserve lands generally. The message from other governments seems to be: do more with less, but don’t do anything that involves the exercise of inherent, Aboriginal, treaty, or legislative rights. And certainly don’t do anything that competes with established non-Indian economic interests. These circumstances do not bode well for the future of the First Nations. 7.3. Bleak Prospects. Taking all of this into account, the First Nations find themselves in a difficult position. Canada is moving ahead unilaterally and cutting transfers, while at the same time off-loading responsibilities and costs to the provinces, who want none of it. The federal government is using devolution and fiscal transfer agreements to obtain Indian consent to these measures, and to the dismantling of the fiduciary duty. After a decade of devolution and AFA’s, many First Nations find themselves in a debt trap: they cannot cover the costs of meeting growing needs within the fiscal constraints set by Canada. However, they are being made to assume the liabilities and risks, and fiduciary duties. The fiscal situation for First Nations appears to be quickly reaching critical mass. As a result, the quality of life on-reserve continues to diminish, and off-reserve migration continues to increase. Other governments have contrived to create a set of circumstances which are finally bringing about the White Paper’s long term objectives: dispersal of the Indian nations, dismantling of special rights, and absorption into the provincial mainstream.


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The current round of “pilot projects” being advanced by Canada as symbols of its commitment to Indian self-government are not immune from the trends which we have described in this paper. In fact, it is suggested that the “pilot projects” are central to Canada’s expenditure reduction and off-loading strategy. The Nielsen Task Force report of 1985 and the 1986 Treasury Board decision on devolution were both explicit on this point: devolution and the meeting of federal expenditure reduction targets are intimately connected. In other words, all First Nations are in the same boat - whether they are on their own, part of a Tribal Council, participating in a “pilot project”, negotiating community based self government, or negotiating land claims. Canada is applying the same principles and underlying objectives in all of its current negotiations, regardless of the cosmetic appearances specific to each individual initiative. For Canada one of the advantages of the pilot project or sectoral approach is that it is enabled to impose conditions in isolation, without reference to national standards or any form of oversight. First Nations, Tribal Councils or regional organizations simply cannot match the immense resources which Canada brings to the table, and therefore the negotiating position of the two parties is far from equal. This is not to argue against bilateral negotiations between First Nation organizations and Canada. Rather, it is to say that for these negotiations to take place without some kind of national standards or oversight, First Nations are left in an extremely vulnerable situation. The amendments to the Indian Act which Minister Irwin is currently proposing are a departure from the tactics which the federal Liberals have employed to date: they represent an across the board change which would affect all First Nations. It is suggested that Canada needs these amendments to facilitate completion of its various “pilot projects” and sectoral initiatives, and that is why it has finally returned to the national level. These issues need to be considered and acted upon by the Chiefs. Attachments. 1. AFN Resolution No. 8/96 re: Financial Transfer Agreements. 2. AFN Resolution No. 5/96 re: Canada/First Nation Fiscal Relationships.

Documents

History of First Nations-Canada Fiscal Relations