DFAA Funding and New Brunswick

The Province of New Brunswick has incurred millions of dollars in damages to highways, bridges, and other critical infrastructure this spring and there are currently over 75 road closures throughout the province, some more severe than others, and the timeline for repair remains uncertain. Many individuals have also suffered losses related to flooding from snowmelt and heavy rains. Yet, while weather is uncontrollable, it is necessary to ask whether the government could have taken steps to lessen the extent of damage. If they could have, it becomes more important to ask why it did not.

The Department of Transportation and Infrastructure’s budget had declined in years past. In 2013, the departmental budget was $272,296,000–although the Department spent $284,265,000–and grew roughly 0.5 per cent in 2014 to $273,447,000. There are several concerns about the Department’s budget, which funds construction, maintenance, and repairs, with some expressing concern about the state of provincial infrastructure and how to improve it.

Though the province has other financial obligations, the risk of damage from spring weather is perennial and poorly maintained infrastructure is very costly to repair. There is another political element, however, that determines how provinces allocate money in their budget: federal transfers.

Ottawa’s Disaster Financial Assistance Arrangements (DFAA) has provided the provincial governments with $2.5 billion since inception in 1970 and eligible expenditures include damage to public infrastructure from natural disasters. The federal government allocates funds using a per-capita cost-sharing formula and the provinces are eligible for assistance once damages exceed $750,000.

Rural provinces like New Brunswick have a lower threshold before the federal government steeps in to help cover the cost of repairs because the funding uses a per-capita formula. They also have a very high ratio of infrastructure-to-population, which could theoretically incentivize them to allocate less in their budget to keeping infrastructure in good condition. Even though preventative measures help avoid some of the devastating effects of weather-related damage, the provincial government may benefit from spending less on infrastructure and using financial aid from the federal government instead. Furthermore, the fund covers damages to private property and compensates individuals for damage to their houses or land, creating more incentive issues. For instance, some individuals have received financial assistance multiple times and critics are questioning whether it is wise to subsidize living in risky areas. This is why it is important to look deeper into the DFAA program and analyze how it influences provincial expenditures, which also entails asking whether it is the best program for assisting the provinces during crises.

Rachel Lowe is a 2013-2014 Atlantic Institute for Market Studies’ Student Fellow. The views expressed are the opinion of the author and not necessarily the Institute

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