Chapter 8 — Federalism
Builds on Chapter 6 - The Constitution by examining how constitutional authority is actually distributed and contested between Ottawa and the provinces.
Key Concepts
- Federalism divides constitutional authority to make laws and raise revenue between national and regional governments
- Canada’s federal design was originally intended to be centralized, but evolved into one of the most decentralized federations in the world
- The courts interpret the division of powers, but their rulings are rarely the final word — politics continues afterward
- Fiscal imbalance drives much federal-provincial tension: provinces spend more than they can raise on their own
What is Federalism?
A system of government under which the constitutional authority to make laws and raise revenue is divided between a national government and some number of regional governments.
Two distinct approaches to studying federalism:
- Legal approach — focuses on federal constitutions: the formal, written division of powers
- Sociological approach — focuses on federal societies: the underlying diversity (linguistic, regional, cultural) that makes federalism necessary
Remember
A country can have a federal constitution without a deeply divided society (and vice versa). Canada has both.
How Many Federal States?
Federal systems are a minority globally but govern a large share of the world’s population and territory. Major examples include Canada, USA, Australia, Germany, India, Brazil, and Russia.
Reasons for Choosing Federalism
Rational Explanations
Federalism allows states to combine the benefits of greater size (economic scale, security, defence) with the retention of regional control and recognition of diversity.
Political Sustainability
A federal state is ultimately sustained by:
- A sense of political nationality or community, OR
- Failing that, a belief that the status quo is preferable to the consequences of break-up
Exam Alert
When these sustaining conditions are absent or under pressure, the federal union is likely to be questioned or challenged. Examples: Soviet Union, Czechoslovakia (broke up); Spain, Belgium, UK, Canada (ongoing tensions).
Origins of Canadian Federalism
- The American model (pre-Civil War) appeared to be a failure — its weak central government seemed to contribute to secession and war
- Despite some Ontario (Canada West) politicians preferring a unitary system, most colonial leaders were unwilling to surrender all powers to a new national government
- French Canadian politicians in Quebec wanted to retain control over culture (language, civil law, religion)
- Maritime leaders also insisted on a federal form of government — they would not join otherwise
- Result: a compromise federal system established by the Constitution Act, 1867
Remember
The reasons Canada chose federalism map onto the general reasons in Table 8.1: regional diversity, need for unity, retention of local identity.
Original Expectations Under the Constitution Act, 1867
Although there was no complete consensus among the Fathers of Confederation, several provisions signal that the federal government was expected to be the superior level:
- Greater legislative powers: s.91’s residual “peace, order and good government” (POGG) clause
- Greater revenue-raising powers: Ottawa retained customs/excise; provinces limited to direct taxation
- Quasi-federal features — powers that undermine true federalism:
- Reservation: Lieutenant-Governor could reserve provincial bills for federal approval
- Disallowance: Federal Cabinet could disallow any provincial law within two years
Exam Alert
Reservation and disallowance are “quasi-federal” because they give Ottawa formal supremacy over provinces — unlike true federalism where each level is sovereign in its own sphere. These powers fell into disuse but remain in the constitution.
Common Mistake
Courts have been reluctant to base decisions on the “original intentions” of the founders — those intentions are disputed and courts prefer textual/structural interpretation of the constitution.
Federal Division of Powers
The core division is found in sections 91 and 92 of the Constitution Act, 1867:
| Section | Level | Examples of Powers |
|---|---|---|
| s.91 | Federal | Criminal law, banking, trade & commerce, POGG residual |
| s.92 | Provincial | Property & civil rights, education, health, municipalities |
| s.92A (added 1982) | Provincial | Non-renewable natural resources |
| s.93 | Provincial | Education |
| s.95 | Concurrent | Agriculture, immigration (federal paramountcy) |
Exam Alert
Most major policy fields are characterized by divided governmental authority — there is no clean separation. Health, environment, and social policy all involve both levels. See Box 8.3 in textbook.
Key Doctrines
Paramountcy doctrine: Where valid federal and provincial laws conflict, federal law prevails and the provincial law is inoperative to the extent of the conflict.
Ottawa’s “spending power”: The federal government can spend money in areas of provincial jurisdiction (e.g., health, post-secondary education) — this is controversial but widely practised. It is not explicitly in the constitution but is derived from federal taxing/spending authority.
Spending Power
The claimed federal authority to make payments to individuals, institutions, or provincial governments for purposes that fall within provincial legislative jurisdiction — used to create national programs like medicare.
The Courts and Federalism
Peace, Order and Good Government (POGG) — s.91 Residual Power
POGG is the federal residual clause. Courts have interpreted it through two main tests:
| Test | Case | Meaning |
|---|---|---|
| National dimensions test | Local Prohibition (1896) | Federal jurisdiction if matter has a truly national dimension provinces cannot address individually |
| Emergency doctrine | Board of Commerce (1922); broadened in Anti-Inflation Act (1976) | Federal jurisdiction during national emergencies (war, economic crisis) |
Exam Alert
POGG and the “national dimensions” test was recently applied in the carbon pricing reference case (2021 — SCC case 38663/38781/39116). The Supreme Court upheld the federal carbon price as a matter of national concern under POGG.
Trade and Commerce Power — s.91(2)
- Citizens’ Insurance Co. v. Parsons (1881): Narrowed the federal trade and commerce power; expanded provincial authority over “property and civil rights” (s.92(13)) — the most expansive provincial head of power
- In recent decades, courts have supported a broader interpretation of Ottawa’s power to regulate interprovincial trade
Is Canada a single market? — R. v. Comeau (2018):
- New Brunswick charged Gerard Comeau for bringing beer from Quebec in excess of provincial limits
- SCC upheld provincial liquor controls; confirmed provinces can restrict internal trade under s.92
- Canada is not constitutionally required to be a single internal market for goods
R. v. Comeau (2018)
The “free the beer” case. Comeau purchased alcohol in Quebec and brought it to New Brunswick, violating provincial liquor laws. The SCC ruled s.121 of the Constitution Act, 1867 (goods “admitted free” across provinces) did not create a free trade zone — it only prohibits tariffs, not regulatory barriers. See Box 8.4 in textbook.
Impact Assessment Act (Recent)
The 2023 SCC reference on the federal Impact Assessment Act (formerly known as Bill C-69) found most of the Act unconstitutional — it encroached on provincial jurisdiction over natural resources (s.92A). This is a significant constraint on federal environmental regulation of resource projects.
The Impact of Court Rulings
Court rulings on federalism often do not provide the final word in jurisdictional conflicts:
- They may provide a basis for further intergovernmental negotiations (Re Constitution of Canada, 1981 — the Patriation Reference led to the 1982 constitutional negotiations)
- They may be one element in an ongoing political struggle (Reference re Secession of Quebec, 1998 — the court said unilateral secession was unconstitutional but that Ottawa would have to negotiate in good faith after a clear referendum result)
Exam Alert
The Secession Reference (1998) is a landmark case: the SCC said Quebec could not unilaterally secede under Canadian or international law, but that a clear majority vote on a clear question would obligate Canada to negotiate. This led to the Clarity Act (2000).
What’s Going on in Alberta? (Western Alienation)
Alberta has been a flashpoint for federal-provincial tensions, especially around equalization and resource revenues.
-
October 18, 2021 referendum: Albertans were asked: “Should section 36(2) of the Constitution Act, 1982 — Parliament and the government of Canada’s commitment to the principle of making equalization payments — be removed from the constitution?”
- Result: 61.7% YES, 38.3% NO
- (Advisory only — cannot change the constitution through a provincial referendum alone)
-
Alberta Sovereignty Within a United Canada Act: Passed by the UCP government; allows the provincial cabinet to direct provincial entities not to enforce federal laws deemed to violate Alberta’s jurisdiction or interests
-
Canada Pension Plan (CPP): Alberta has explored withdrawing from CPP and creating its own provincial pension plan — a major ongoing issue
Western Alienation
The persistent sense among many western Canadians (especially Albertans) that the federal government serves central Canadian (Ontario/Quebec) interests at the expense of the west — particularly in energy, taxation, and equalization policy.
Fiscal Federalism
The Core Problem
The vertical fiscal imbalance: provinces are responsible for expensive services (health, education, social services) but have more limited revenue-raising capacity than the federal government.
- At Confederation (1867): Provincial responsibilities (roads, municipalities, education) were comparatively inexpensive — this justified giving Ottawa most revenue powers
- By the mid-to-late 20th century: Provincial programs became enormously expensive (universal healthcare, post-secondary education, social welfare)
- Ottawa entered the picture using the spending power to help finance shared-cost programs administered by the provinces
Major Federal Transfers to the Provinces (millions of dollars)
| Transfer | 2016-17 | 2020-21 | 2024-25 | 2025-26 |
|---|---|---|---|---|
| Canada Health Transfer | 36,068 | 41,870 | 52,081 | 54,685 |
| Canada Social Transfer | 13,348 | 15,023 | 16,909 | 17,416 |
| Equalization | 17,880 | 20,573 | 25,253 | 26,170 |
| Territorial Formula Financing | 3,603 | 4,180 | 5,159 | 5,489 |
| Total | 70,943 | 81,732 | 99,401 | 103,759 |
| Per Capita (dollars) | 1,959 | 2,149 | 2,407 | 2,440 |
Exam Alert
Three main transfer types to know:
- Canada Health Transfer (CHT) — largest; supports provincial health care
- Canada Social Transfer (CST) — supports post-secondary education and social assistance
- Equalization — redistributes wealth from “have” to “have-not” provinces
Equalization Payments (2024-25)
The equalization program ensures provinces can provide “reasonably comparable levels of public services at reasonably comparable levels of taxation” (s.36(2), Constitution Act, 1982).
Who receives equalization (2024-25)?
- Quebec: $13.3 billion (by far the largest recipient)
- Ontario: $0 (historically a “have” province, occasionally receives small amounts)
- Manitoba: $4.4 billion
- Nova Scotia: $3.3 billion
- New Brunswick: $2.9 billion
- PEI: $610 million
- Newfoundland & Labrador: $218 million
- BC, Alberta, Saskatchewan: $0 (net contributors)
Remember
Equalization is paid by the federal government from general revenues — it is not a direct transfer from “rich” provinces to “poor” ones. Alberta’s complaint is that it pays large amounts of federal tax that fund equalization but receives none.
Fiscal Federalism
The financial dimension of intergovernmental relations — encompassing federal transfers, equalization, tax agreements, and the fiscal gap between provincial responsibilities and revenue capacity.
Definitions
Federalism A system of government under which the constitutional authority to make laws and raise revenue is divided between a national government and some number of regional governments.
Paramountcy Doctrine The principle that where valid federal and provincial laws conflict, federal law prevails and the provincial law is inoperative to the extent of the conflict.
POGG (Peace, Order and Good Government) The federal residual power in s.91 of the Constitution Act, 1867; interpreted through the “national dimensions” and “emergency” doctrines.
Reservation A quasi-federal power allowing the Lieutenant-Governor to withhold royal assent from a provincial bill, reserving it for federal consideration.
Disallowance A quasi-federal power allowing the federal Cabinet to nullify any provincial law within two years of its passage.
Equalization Federal payments to provinces with below-average fiscal capacity, constitutionally enshrined in s.36(2) of the Constitution Act, 1982.
Western Alienation The political grievance of western Canadians, particularly Albertans, that federal policy systematically favours central Canada at the expense of the west.
Spending Power The claimed federal authority to spend money in areas of provincial jurisdiction, used to fund shared-cost programs like medicare and post-secondary education.