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Imagine Canada

Strong Charities. Strong Communities.

Federal Budget 2016 and the Charitable and Nonprofit Sector

Monday, April 4, 2016
Imagine Canada's Summary of Budget 2016

On March 22, Finance Minister Bill Morneau tabled the new federal government’s first budget. The government ran on a broad-ranging and activist platform during the 2015 election, and the budget proposes action on many of the commitments that were outlined in that platform, including significant new investments in infrastructure and in a new family benefit regime to be delivered through the income tax system.

The budget foresees a deficit for the 2016-2017 fiscal year of just over $29 billion. This is scheduled to decline in subsequent years, but while the government has reiterated its commitment to a balanced budget, it has not specified a specific timeline for achieving this.

The budget does seem to use cautious forecasting. It includes a contingency fund of $6 billion a year – double the amount used in previous budgets. Oil prices have been pegged lower than they currently are, and lower than many forecasters predict. Economic growth projections have also been lowered. This means that, should conditions be better than forecast in the budget, the deficit may be lower than predicted. It also means, that in the case of unexpected disruptions, the government should be able to maintain spending plans without jeopardizing the headline deficit figure.

Since the budget, a number of detailed summaries with a focus on charities and nonprofits have been prepared – we link to some of these below. Our intent with this summary is to put the budget’s themes and specific measures into the context of what charities and nonprofits had sought through their submissions and testimony during the Commons Finance Committee’s pre-budget consultations.

The federal election campaign and the transition to a new government led to a very different consultation process than is traditional. Organizations were given less time than usual to prepare submissions to the Finance Committee, and Committee hearings were compressed into a one-week period. Nonetheless, our sector was extremely active in outlining its priorities. By our count, 66 charities submitted briefs to the Committee – double the number that did so last year. And even though Committee hearings were abbreviated, some 18 charities appeared as witnesses. 

Sector-wide issues

The budget contained a few measures that will be of general interest.

With regard to political activity and advocacy by charities, the budget states:

“Pertaining to rules governing charities and their political activities, the CRA, in consultation with the Department of Finance, will engage with charities through discussions with stakeholder groups and an online consultation to clarify the rules governing the political activities of charities.”

This is very similar to commitments made during the election campaign, and instructions provided to the Ministers of Finance and National Revenue in their mandate letters. We will seek further clarification as to the timeline for this initiative, and work to ensure broad consultation and outcomes that reflect the needs and concerns of charities.

The 2015 budget proposed new tax measures to encourage donations of real estate and private company assets to charities. Budget 2016 announced that these proposals will not be proceeded with. This is troubling to us; we will seek clarification as to whether the new government is opposed to these incentives in principle, or if they have concerns with how the draft legislation was worded.

One measure from the 2015 budget that will proceed is new rules allowing registered charities, particularly foundations, to invest in limited partnerships. This will allow for a broader range of asset management options in general, but also means that foundations will be able to invest in limited partnerships that involve other charities – a potentially significant development for social investing.

The budget also announced an amendment to the Excise Tax Act regarding the application of GST to donations, where a good or service is provided in return for the donation. Under the Income Tax Act, charities “split” receipts to separate a pure donation from the value of, for example, the dinner at a fundraising event. The new measure will bring the Excise Tax Act in line with the Income Tax Act, specifying that in all such transactions the GST will only apply to the portion of the transaction representing the good or service provided. 

Issues raised by organizations

Social infrastructure

Many charities and public benefit nonprofits seized on the government’s campaign promise of major investments in social infrastructure. Inuit Tapiriit Kanatami and Makivik Corporation advocated for targeted infrastructure investments in the North, while First Unitarian Congregation of Ottawa asked for investments targeting homelessness and to maintain affordable housing. Pillar Nonprofit Network and the Social Economy Working Group sought out investments in community hubs and initiatives. The Canadian CED Network advised on the creation of a social impact-scoring component on all infrastructure contracts, while the Institute for Research on Public Policy advised that “shovel-worthy” projects should take precedence over those that are “shovel ready”.

Budget 2016 outlines initial social infrastructure investments totalling $3.4 billion over five years, with $1.4 billion directed towards affordable housing (including shelters for victims of violence), early learning and child care, and the renewal of cultural and recreational infrastructure. As well, $1.2 billion of the total will be invested in First Nations, Inuit and northern communities. A National Housing Strategy will be developed over the next year in consultation with key stakeholders. Finally, the budget announced the government will consult with stakeholders in coming months as it determines where future social infrastructure investments will be made. 

Postsecondary education and research

Colleges and Institutes Canada, McGill University, the University of British Columbia, the University of Toronto, the University of Ontario Institute of Technology, Universities Canada, the University of Manitoba, the U15 Group of Canadian Research Universities, and the Canadian Alliance of Student Associations all called for increased federal support for the research granting agencies. Recommendations for post-secondary infrastructure projects were met with $2 billion over three years for a new Post-Secondary Institutions Strategic Investment Fund. A few institutions and organizations including Canadian Association for Graduate Studies called for support for training and exchanges, According to budget proposals, $14 million in funding for the Mitacs Globalink program will support 825 internships and fellowships, while $73 million over four years will fund the launch of the Post-Secondary Industry Partnership and Co-operative Placement Initiative.

Youth employment

Many organizations are currently active around the issue of youth employment. Nature Conservancy of Canada and the Green Budget Coalition called for the creation of youth employment jobs in the environment sector, while Oxfam Canada and Oxfam Québec recommended investments in youth-led development initiatives and entrepreneurship. Pathways to Education Canada called for funding for the Youth Employment Strategy more generally, as did the Canadian Association for Co-operative Education, Canadian Association for Graduate Studies, and the University of Ontario Institute of Technology. Budget 2016 proposed $339 million over three years to create up to 35,000 additional youth jobs each year, including in the nonprofit sector. This program provides funding to nonprofit organizations with 50 or fewer employees to create summer job opportunities for students aged 15 to 30. The Budget also allows for the creation of an Expert Panel on Youth Employment to assess the barriers faced by vulnerable youth in finding sustainable employment, including an examination of the role of non-governmental organizations to improve these opportunities.

Child poverty

As part of advocacy efforts for a broader approach to addressing child poverty, Pathways to Education Canada and Campaign 2000 called for investments in the Canada Child Benefit (CCB). The Budget announced, in keeping with the government’s electoral commitment, that the new CCB provide a maximum benefit of up to $6,400 per child under the age of 6 and up to $5,400 per child for those aged 6 through 17. Households with less than $30,000 in net income will receive the maximum benefit.

Arts and culture

A few organizations from the field of arts and culture, including the Professional Association of Canadian Theatres, expressed support for the government’s campaign commitments of investments in Canada Council for the Arts. This charity also joined Orchestras Canada in supporting investments in strategic development of international arts markets; while Budget 2016 proposed to invest $35 million over two years to support the promotion of Canadian artists and cultural industries abroad. The Budget also announced $168.2 million over two years in the Canada Cultural Spaces Fund to support the renovation and construction of arts and heritage facilities including nonprofit organizations and those with an Indigenous focus.

Health care and research

A number of charitable and nonprofit organizations requested and received direct program funding. The Brain Canada Foundation received funds for research; Canada Health Infoway received funds to support its short-term digital health initiative; and support is provided to the Canadian Foundation for Healthcare Improvement for developing innovations in the health-care system. Finally, the Heart and Stroke Foundation was offered $5 million in funding support for research on women’s heart health.            

Human rights and development

YWCA Canada called for implementation of the Government’s funding commitment toward the National Inquiry into Missing and Murdered Indigenous Women, to which the budget allocated $40 million over two years.

A number of organizations with international development or advocacy mandates, including the McLeod Group, Oxfam Canada and Oxfam Québec, Action Canada for Sexual Health and Rights, RESULTS Canada, and the Interagency Coalition on AIDS and Development, advocated for renewed funding to the International Assistance Envelope (IAE). The budget proposes new funding to the IAE, including $256 million over two years to augment Canada’s capacity to respond to international assistance priorities. The budget also commits $450 million for the Global Peace and Security Fund, which includes initiatives that promote pluralism.

Environmental Assessment

Budget 2016 proposes to provide $14.2 million over four years, starting in 2016–17, to the Canadian Environmental Assessment Agency. This is meant to increase the Agency’s capacity to undertake public consultations, including the Participant Funding Program that provides support for individuals, nonprofit organizations, and indigenous groups to participate in federal environmental assessments.

Conclusion

While Budget 2016 did not contain very many measures of broad applicability to the sector, we did not expect it to, given our reading of the government’s election platform and the mandate letters to individual Ministers. As noted above, though, it included a number of new policies and initiatives that are relevant to organizations’ missions – several of which respond to the advocacy efforts of individual organizations, coalitions, and umbrella organizations.

The budget also deferred action on some major issues that are of interest to the sector. The issue of a Guaranteed Annual Income was championed by a number of organizations, and the Finance Committee recommended a pilot project. Several organizations, including Imagine Canada, raised the issue of access to federal business development programs for charities and nonprofits. The budget was also largely silent on social finance and social innovation, which were key issues in ministerial mandate letters. Obviously, there remain policy areas to which the government has indicated a commitment, which remain to be addressed. And there are clear indications that the sector’s input on these and other issues are welcome. We have an opportunity over the coming months to influence the government’s thinking, and we urge you to continue to make yourselves heard.

Annotated federal budget summaries focussing on charities and nonprofits are available from Blumbergs, Carters, and Miller Thomson LLP.

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