A new relationship? Reflections on the collaborative federal fiscal policy development process

Rosanna Nicol, Adam Perry, Bobby Clark, & Martin Papillon

No relationship is more important to me and to Canada than the one with Indigenous Peoples.
It is time for a renewed, nation-to-nation relationship with Indigenous Peoples,
based on recognition of rights, respect, co-operation and partnership.

— Justin Trudeau, Mandate Letter, Minister of Crown-Indigenous Relations, October 2017.

Canada recognizes that implementing this new fiscal relationship requires systemic change within
the federal government and the way it works with Indigenous governments.
This renewed fiscal relationship represents an important step in that direction.

— Paragraph 17, Canada’s Collaborative Self-Government Fiscal Policy, January 2019.

 

When the Trudeau government first came to power in 2015, “renewing” the relationship with Indigenous Peoples was a key priority. Indigenous organizations and governments, the new Prime Minister promised, would be considered equal partners in the development of policies and legislation that directly concern them. The collaborative federal fiscal policy development process is one example of this new approach to policy making. Under this process, representatives of self-governing Indigenous governments have been working with federal officials to rewrite the federal fiscal policy on how self-government is financed.

As of January 2019, the process has produced the new Collaborative Federal Fiscal Policy for Self-Government and an initial batch of technical annexes; it is now entering its second phase with work on the remaining annexes covering a range of topics from costing the expenditure need of an Indigenous government for lands and resource management to a new approach for addressing an Indigenous government’s fiscal capacity within the federal transfer calculation. This policy guides federal negotiators in their negotiations with Indigenous governments to develop legally binding fiscal agreements and associated transfers of funds. In contrast to previous policy, the framework presents a transparent costing methodology based on what it actually costs to run a self-government, rather than an opaque formula approach. It includes an interim solution to the federal practice of clawing back federal transfers if an Indigenous government generates its own revenue, even if still severely underfunded1, and it includes a new commitment and approach to closing the gaps in infrastructure, housing and social wellbeing experienced in self-governing communities2.

Significant work remains to be done on the policy, and it is too soon to pass definitive judgement on the outcome of this process; however, it is possible, after three years of sustained engagement, to draw some lessons from the standpoint of Indigenous governments. What are the main challenges Indigenous government representatives have faced in this process? Is this truly a joint policy-making exercise or is it merely, as King and Pasternak have argued in a report on the various “tables” set up by the federal government, window-dressing for the status quo?3

We build on some of the authors’ close engagement in the collaborative fiscal policy process to offer an insider’s view of the exercise so far. We highlight positive innovations in the process itself, which have led to less adversarial exchanges and a higher level of trust and openness between officials of the parties. However, at the time of writing, many of the policy changes resulting from this process remain to be implemented and some of the more difficult discussions on the structural elements of Indigenous governments’ financing have yet to take place. We remain cautiously optimistic about the potential of this collaborative approach to transform intergovernmental relations between Indigenous governments and federal departments. If this policy work results in improved fiscal relationships that accurately reflect the real costs of managing jurisdictional authority and administering services, there is greater potential to shift these intergovernmental relations out of the courts and into truly working relationships.

Our analysis is informed in part by participating in the fiscal policy development process, contrasted with knowledge and experience of decades of frustrations in the negotiation and implementation of modern treaties and self-government agreements. The analysis is also informed by a pragmatic approach to Crown-Indigenous relations, under which we assume transformative change will not occur in one day. Fundamental obstacles remain for developing government-to-government relations based on mutual respect and relatively equal bases of power, but we believe small advances like those achieved in the collaborative fiscal process should not be dismissed out of hand. Faced with a long history of colonial dominance which stripped them of many aspects of culturally-informed governance, coupled with chronic underfunding of governance responsibilities, many Indigenous governments have an interest in looking for all possible opportunities to make gains, even if they are incremental in nature. In this view, small steps over time may lay the groundwork for fundamental shifts. At the heart of inspiration for change are the citizens of the Indigenous governments, whose daily lives are deeply affected by intergovernmental relationships. For many communities struggling with the ongoing impacts of colonization, even the smallest of incremental gains may lead to improvements in peoples’ everyday lives. For that reason alone, this work is worth the effort.

Seeking a renewed fiscal relationship
Modern treaty and self-government signatories experience ongoing challenges in implementing their agreements, in large part due to inadequate funding. The refusal of Canada to ensure sufficient funding to fulfil its treaty commitments presents a significant challenge. For example, Canadians are entitled to comparable public services regardless of where they live, yet communities within Indigenous government jurisdiction suffer significant deficits in public infrastructure (e.g. water treatment facilities), in housing, and in access to education and health services.

Underfunding can also limit an Indigenous government’s ability to adequately participate in environmental and resource management decisions and processes, as required in their agreements and treaties. This practice of underfunding was criticized in a number of reports over the years, including from the Auditor General of Canada, the Senate of Canada, and the United Nations Special Rapporteur on the Rights of Indigenous Peoples. The 2008 Senate Committee Report states that “time and again, witnesses told us that far from achieving a level of fiscal certainty, they experience chronic problems in securing the provision of timely, adequate funding to meet the various undertakings set out in the agreements. Funding shortfalls limit the ability of Aboriginal signatories to properly discharge their treaty responsibilities and restrict enjoyment of the rights promised to them under their Agreements.”4

For signatories, disputes over what constitutes adequate financing consume time and resources that would be better used to implement agreements and improve the quality of life of their citizens. A number of conflicts on implementation funding have led to court cases, some forcing Canada to revise its approach in negotiating bilateral agreements with treaty signatories, and, in other instances, settle significant out of court settlements, as was the case with the Nunavut Agreement.5

The election of the Trudeau Liberals created an opportunity to shift the focus towards a more collaborative approach to addressing implementation issues, and the launch of the collaborative federal fiscal policy development process was part of this shift. This process was meant to be a new relationship in action: Indigenous government and federal officials were to share the pen in drafting a new federal fiscal policy for self-government, as equal partners. Most of the officials involved had known each other from years of working together, often in challenging and adversarial circumstances. This presented an opportunity to work together in a new way, requiring a level of trust and transparency beyond what the parties were accustomed to.

Overview of the collaborative federal fiscal policy development process
Meetings between the Minister of Crown-Indigenous Relations and Northern Affairs Canada (CIRNAC) and the Land Claims Agreements Coalition leaders and subsequent meetings with Yukon chiefs led to an agreement to pursue a collaborative policy development process. Officials were given an initial six-month timeline to trial this new way of working together and demonstrate whether it held potential. In May 2016, Indigenous governments and federal representatives gathered in Vancouver to lay the foundation of the work ahead. Technical working groups were formed to develop detailed policy elements, such as defining principles and policy scope for the process; addressing issues of comparability; establishing a transparent method for assessing the expenditure need of self-government based on actual historical costs of implementing self-government; and developing an approach to revenue and cost sharing. It was agreed that federal and Indigenous government officials would share the work of drafting relevant documents. Recognizing that the task of helping Canada rewrite its fiscal policy was above and beyond the scope of Indigenous governments’ regular intergovernmental work, Canada agreed to finance portions of this process. These meetings were attended by a variety of professional advisors, technical experts, Indigenous government staff, and the occasional elected leader. On the federal side, working group members consisted mostly of senior staff within CIRNAC, policy analysts and advisors, director-level involvement as needed, and regular check-ins at the senior assistant deputy minister level.

The first seven months focused on drafting principles for the new policy, but it became clear that developing principles in the absence of tangible policy change was challenging and perhaps not useful. In January 2018, work shifted to building a model of expenditure need for self-government, based on treaties and agreements, operational requirements, existing benchmarks, and the expertise in the room. For the next year, Indigenous governments6 and federal representatives worked closely, organized into six working groups and a steering committee. These groups met monthly in-person, and documents were drafted via email and teleconference between meetings. The pace and volume of materials were intense as the group worked to meet deadlines often dictated by windows of opportunity within the federal system for Cabinet and budgetary review.

To date, the process has yielded the Collaborative Federal Fiscal Policy for Self-Government. The new policy includes two elements: a commitment to ongoing and sufficient fiscal resources to provide comparable public services (a financing approach) and a framework for achieving equity in socioeconomic outcomes (the “gaps-closing” element). The policy details a method for costing governance and administration expenditure needs for self-government; an approach for culture, language and heritage expenditure needs; an approach to funding infrastructure maintenance and replacement; an interim approach to addressing fiscal capacity, and a new framework for achieving equity in socioeconomic outcomes that focuses on social wellbeing and infrastructure7. The new policy and its annexes were adopted by Cabinet and are reflected in the 2019 federal budget.8 Indigenous governments are presently renegotiating their respective fiscal agreements to reflect these policy changes. While critical work remains to complete the remaining annexes, the policy framework so far is an improvement over previous policy, chiefly in that it reflects approaches that acknowledge and incorporate actual governance costs and their variations between different signatory environments, while leaving space for bilateral negotiation as required by the agreements. The policy, if adopted and honored by Canada, will create a new and improved fiscal relationship.

Reflections on a dynamic process
The process is now entering its second phase, where the focus is on building out the remaining annexes that will provide details for implementing elements of the Collaborative Federal Fiscal Policy for Self-Government. While it may be too soon to pass judgement on the new policy and its impact over the long term, we can draw lessons from the process itself. The questions shaping this analysis include: Was this truly a joint policy-making exercise? If so, what could be described as success features, what challenges arose and how were these mitigated (or not)?

Gatekeeping
From the outset, we note that Canada set basic eligibility criteria for participation in the process. Canada opened the process to those Indigenous governments operating under comprehensive9 self-government regimes, whether connected to a land claim agreement or not. This has the effect of excluding signatories to land claim agreements that do not include self-government agreements and including self-government signatories, regardless of whether they have a land claim agreement.10 While there may be arguments in favor of this approach for particular expenditure need areas, it is notable that Indigenous governments and land claim agreement holders do not organize themselves this way. The distinctions created for this process are, in this respect, a false one, and one imposed by Canada, which may have far-reaching consequences in terms of the inter-governmental relationship. This has also caused hurdles within the process, for example, recently, Canada has had to create an “add on” technical working group to engage directly with land claim agreement signatories that do not have self-government agreements, in order to develop an approach to financing lands and resources authorities held by modern treaty holders outside of self-government agreements.

Status, agenda-setting and mandates
While unequal power relations are often inevitable in a joint policy exercise, notably because of unequal resources and allocation of authority among the parties in relation to each other, the potential for a successful process is perhaps best achieved when partners are considered with equal status and value. This involves more than symbolic language. It involves a willingness to listen and to work on the basis of mutual agreement and consensus. The capacity to set the agenda is an important aspect of such policy-making, particularly if a process is intended to be transparent. If the agenda is set unilaterally by one of the partners or if the mandate of officials representing decision-making bodies is set too narrowly, it is hard to establish a process that can effectively develop solutions.

The early days of the fiscal process included difficult moments, when Indigenous government representatives had to push to make sure the openness expressed in high-level political statements was visible in the officials-level approach and mandate. Since then, much of 2017 was spent collaboratively setting the agenda – developing the framework of the new policy and getting direction to proceed. The Collaborative Federal Fiscal Policy sets out that co-developed agenda, yet the real test for meaningful collaboration will likely rest with developing annexes and finalizing costing approaches. For example, it will be important to watch if critical issues that Indigenous governments have always insisted need addressing are sidelined, specifically questions around access to revenues (e.g. from corporate income tax generated on Indigenous government’s traditional territories) and how service population is defined when it comes to calculating the funding for service delivery (e.g. in the First Nation context, funding is often still based on Indian Act status rather than the Indigenous government’s own citizenship list).

Building trust
A collaborative process requires a high level of trust between participants at the political and officials level. There is a long history of broken promises by Canada in treaty implementation, as evidenced by court cases, out of court settlements, and reports of Canada’s Auditor General. Initially, participants experienced trust levels that were quite low. One worry on the side of Indigenous governments was that the “spirit and intent” of discussions would not be adequately reflected in decisions, since federal decision-makers were rarely in the room. There was concern that senior government officials with decision-making authority should demonstrate commitment to a meaningful process to address long standing problems with Canada’s financing approach. One way that Canada signaled this commitment early in the process was placing a moratorium on own-source revenue claw-backs.11 Additionally, the interim funding announced in the 2018 federal budget was a confidence-building measure signaling that, while the policy development work was taking longer than hoped, Canada was committed to putting resources behind this. The 2018 budget funds provided support for increased funding for governance costs and initial funds for addressing gaps in infrastructure, housing and social wellbeing.

Perhaps the most inspiring and fruitful meetings in the process have been those where officials demonstrate an understanding of the benefits of building shared capacity and learning together. While the tone of meetings has varied depending on the nature of the work at hand, it has evolved over time away from a bargaining logic between established positions towards what we view as a problem-solving logic. The focus has been less on the respective positions of the parties than on finding innovative solutions to respond to collectively identified challenges. This iterative process is not only more effective at achieving results, it is also more conducive to establishing trust and positive working relationships. This could not have happened without clear support from the senior assistant deputy minister level within CIRNAC for department officials to engage in policy discussion transparently and without the usual limitation of needing prior higher-level approval before entertaining new ideas or approaches.

The willingness, especially from certain Indigenous governments, to have their representatives engage in the work of deepening perspectives and developing policy content and costing methodologies with federal representatives has been instrumental to creating this collaborative problem-solving environment. This is despite a hurriedly evolving process whereby technical working groups meet by phone almost every day and over monthly week-long meetings. With this amount of time spent working together, significant collegiality has developed between Indigenous government and federal participants, fostering expectations of shared problem-solving. However, new faces at the table can disrupt this developing dynamic. Integrating new participants into the process is an important challenge that will likely grow as the process continues. The collegiality and the jargon that develops over years of working together, along with the sheer volume of material developed over time, presents a barrier to new participants, which can limit collaboration.

The process to develop the Collaborative Federal Fiscal Policy for Self-Government has been a uniquely multilateral process. Building trust and maintaining proper communication mechanisms within the Indigenous government caucus has been essential, albeit at times difficult to manage given the diversity of stakeholder involvement. The level of solidarity, support and information sharing is significant and promises to be a positive legacy of this process. Significant time in caucus is critical to build solutions that work for everyone. Indigenous government representatives must tactfully navigate the priorities and circumstances of their respective governments. Each Indigenous government has its bilateral relationship with the Crown as well as unique cultural and structural circumstances, including provincial and territorial government dynamics. The collective process has to be balanced with the bilateral relationships and negotiations that are required in self-government agreements. Overall, a balance has been struck between collective work and bilateral implementation. This has allowed Indigenous governments to achieve tangible gains, but whether it is the right balance is likely to be debated for years to come.

Keeping a narrow focus while building a whole of government approach
A key to success so far has been the ability to maintain discussions focused on mutually agreed goals that are ambitious but targeted enough to lead to concrete results. Occasionally this focus has been challenged by federal departments looking to use the fiscal process meetings to further their own unrelated initiatives. Indigenous governments, engaged in the process for the purpose of collaborating on developing a federal fiscal policy, have been clear that the process is not a “one-stop-shop” for federal engagement with self-government signatories. Such an approach risks undermining legally-protected (and in some cases constitutionally-protected) bilateral relationships. Using the fiscal policy process as a means to other ends also risks undermining the collaborative work ethic that emerged out of a discrete and relatively narrow focus.

The example of the work and effort required to build the trust within the fiscal process might provide a template for similar relationships across the various directorates, departments, and agencies, directly, or indirectly, involved in self-government implementation. The potential held by this approach is not uniquely relevant to Indigenous-Crown relations; all intergovernmental processes could benefit.

One lesson we take is that it is essential for federal government leaders such as deputy ministers, ministers, and prime minister, to understand this process so that their departments can learn from it and replicate it where possible, participate in it when appropriate and, most importantly, avoid duplication of work and efforts. The fiscal process has not yet proven entirely successful in building a coherent, whole of government approach. Despite efforts to bring key decision-makers from a range of departments to the collaborative table, federal representation is often limited to mid-level CIRNAC officials. It is then up to these representatives to ensure other departments and agencies are aware of discussions and commitments made. This is challenging for Canada, whose departments have historically worked in silos; thus, it remains vertical, rather than horizontal, in its approach to decision-making. Recent approvals of collaborative policy work have been encouraging, but improvements to federal internal coordination are urgently required to reduce working in silos. Self-government agreements are with the Crown, not with a particular department, yet the federal government has not organized itself in a way to recognize and uphold these commitments that cross-cut its current organizational structure. The resulting time-consuming duplication of efforts by various government departments needs to be avoided to ensure funding and human resources are utilized effectively.

However, there have been positive developments in bringing in a whole of government approach to the fiscal process, which have yielded results, especially with the Department of Finance and Statistics Canada. The Department of Finance is a key decision-maker within the federal government and its willingness to have representatives participate in the process and raise concerns at the collaborative table (rather than afterwards behind closed doors) so that solutions can be developed together has been critically important and reflects a new approach. Similarly, Statistics Canada has recently become involved in some of the work around socioeconomic gaps, bringing a willingness to share information about the limitations to the current data landscape and improve access to data about their citizens for Indigenous governments. In the next phase of the process, as the work shifts to areas like heritage, fisheries, and housing, similar involvement of other federal departments will be necessary to ensure a whole-of-government understanding of and support for effectively implementing a new fiscal relationship.

Leadership and knowledge building
The collaborative fiscal process is resource intensive, requiring a high level of engagement for all parties involved. While capacity can be a challenge for Indigenous governments, this is also true for Canada. Much time and effort has been devoted to educating federal representatives about self-government and the roles, responsibilities, and expenditure needs of self-governing Indigenous governments. The process of correcting assumptions and misconceptions brought to the table by federal officials unfamiliar with self-government agreements has helped to achieve mutual understanding, and consequently a fiscal policy that respects the extensive responsibilities of Indigenous governments, their respective modern treaty or self-government agreements, and their unique circumstances.

To this end, Indigenous governments have offered their experience-informed analyses of implementation as a basis for innovative ideas for a more workable fiscal approach. Indigenous governments have used their skilled professionals, lawyers, economists, social scientists, and consultants, who bring a depth of experience on the issues that many federal officials simply do not have. Strong Indigenous leadership support for the process has been important to properly resource the process with the technical and experiential knowledge of implementation, which has often resulted in federal officials finding themselves responding to Indigenous-led solutions rather than proposing their own. In spite of this, the strength of collective Indigenous government voices and their accumulated knowledge and expertise has resulted in previously well-entrenched federal positions being challenged (although many remain).

Conclusion
For decades prior to the collaborative fiscal process, Indigenous governments have experienced lengthy difficulties in implementing their agreements in a context of inadequate fiscal agreements coupled with lack of understanding of treaties and agreements across most federal government departments. While there have been some false starts and many difficult conversations along the way, the collaborative fiscal process has been fairly successful. A federal fiscal policy is being developed through a process in which Indigenous government representatives are playing a key role in setting the agenda and developing policy solutions to the identified problems. Two major contributing factors include the trust that has been built between the officials involved, and the capacity of Indigenous government officials to meaningfully drive the process. It has been a joint policy-making exercise so far, and we will be watching closely to see that it continues.
The process has proved itself in terms of delivering the basis for the Collaborative Federal Fiscal Policy for Self-Government and the associated budget necessary for its implementation. It is too soon to say if this collaborative process will result in only incremental, though important, changes to the levels of federal transfers Indigenous governments receive and the resulting on-the-ground changes to the lives of their citizens, or whether it will be transformative on a larger, structural scale, affecting the Canadian federation and supporting the meaningful sharing of jurisdiction as set out in the agreements.

The success of the process may in fact reveal its relatively limited ambitions. The focus was, and still is, strictly on fiscal aspects of self-government implementation. While this narrow focus facilitated the development of a results-oriented approach with concrete, targeted goals, it leaves little space for questioning some of the other problematic aspects of the Crown-Indigenous relationship. To paraphrase King and Pasternak’s previously cited study, the re-packaging of policy problems to focus on fiscal responsibilities and accountability is an effective way to avoid addressing fundamental concerns over jurisdictional rights and the protection of land and resources. If the genuine intent is to change the very foundation of the relationship, energy and focus must extend beyond fiscal renewal discussions. While we do not disagree with their analysis, in our view transforming the Crown-Indigenous relationship on a larger scale is ongoing work, and this collaborative fiscal process is a route to fulfill a specific relational goal within that effort.

The collaborative federal fiscal policy development process has resulted in concrete change and provides an example of successful joint policy making that could be emulated in other contexts. For many, change is not happening fast enough to improve the lives of First Nations, Métis, and Inuit. The pace of change is painfully slow. Improving relationships is complex, interpersonal, and will take time and this effort must be undertaken in many different ways. Having patience and making time to build positive working relationships is important for establishing and sustaining long term, transformative change. As the fiscal process transitions to its second phase, we remain cautiously optimistic that change is possible through patient hard work and commitment to working together. ◉

Authors
Rosanna Nicol works as a consultant in project management and facilitation at NVision Insight Group Inc. and is the assistant coordinator for Indigenous governments in the collaborative federal fiscal policy development process. She is a Rhodes Scholar with a Master’s in Development Studies from Oxford University.

Adam Perry has a PhD in social anthropology and works for the Nisga’a Lisims Government as a data analyst. His academic interests include understanding societal and cultural change, aspects of rural social and economic development, and the political and social processes that exist in and between formal institutions.

Bobby Clark is the Director of Communications and Intergovernmental Relations with Nisga’a Lisims Government. He is the Chair for the Nisg̱a’a Museum Advisory Committee and is a board member representing his home community of Lax̱g̱alts’ap on the Wilp Wilx̱o’oskwhl Nisg̱a’a Institute (WWNI). He has a Bachelor of Arts in First Nations Studies from WWNI and the University of Northern British Columbia.

Martin Papillon is Associate Professor in the Department of Political Science at the Université de Montréal, where he is also Director of the Centre de Recherche sur les Politiques et le Développement Social (CPDS). His academic work focuses on multilevel citizenship and governance in the context of Indigenous-Crown relations in Canada.

Notes
1. Often called “own-source revenue” offsets, this previous policy was a major barrier to pursuing self-government. The new policy reframes it as “fiscal capacity” and includes a commitment to co-develop an approach that takes into consideration an Indigenous government’s fiscal capacity. Until that time, an Indigenous government’s fiscal capacity is not taken into consideration when calculating the federal fiscal transfer, which means Indigenous governments are able to focus additional resources on improving quality of life for their citizens (Paragraph 73-75 Canada’s Collaborative Self-Government Fiscal Policy, January 2019). See also: https://nelliganlaw.ca/blog/indigenous-law/source-revenue-reconcili-action/

2. https://www.theglobeandmail.com/news/politics/close-the-gap-between-canada-and-its-aboriginal-people-afn-chief/article24430620/

3. See H. King and S. Pasternak, Canada’s Emerging Indigenous Rights Framework: A Critical Analysis, The Yellowhead Institute, June 2018: https://yellowheadinstitute.org/wp-content/uploads/2018/06/yi-rights-report-june-2018-final-5.4.pdf

4. Standing Senate Committee on Aboriginal Affairs, Honouring the spirit of modern treaties: Closing the loopholes. special study on the implementation of comprehensive land claims agreements in Canada, Senate of Canada, May 2008: http://publications.gc.ca/site/fra/394531/publication.html, at p.40.

5. In 2006, Nunavut Tunngavik Inc., the Inuit organization that represents the Inuit of Nunavut, filed a $1 billion lawsuit against the Government of Canada for failure to fully implement the Nunavut Land Claims Agreement. The suit was settled in 2015 with an award of $255.5 million.

6. There are 24 self-governing Indigenous governments participating in the process at varying levels of intensity, from a core group who consistently has technical representatives at in-person and working group meetings through to others who follow the process via email and check-in occasionally. The Indigenous government participants have contracted coordination support and organize themselves with regular caucus meetings, by phone and in-person.

7. See Crown-Indigenous Relations and Northern Affairs Canada, 2017–18 Departmental Results Report: https://www.rcaanc-cirnac.gc.ca/eng/1539041238525/1539041286526

8. We are still waiting on a public announcement regarding the Cabinet approval and adoption of this policy; however, it is reflected in Budget 2019 including “investments to support a new co-developed collaborative self-government fiscal policy” (page 148, Investing in the Middle Class Budget 2019).

9. There are two sectoral self-government arrangements in Canada at present, in the realms of health and education. These signatories were not included in the fiscal process.

10. There are a few self-government arrangements that are not part of a land claim (Westbank, Sechelt, Sioux Valley Dakota Nation), which is quite a different arrangement than self-government as part of a land claim.

11. See CBC News, Self-governing First Nations can keep all revenues, Ottawa says, June 27, 2017. https://www.cbc.ca/news/canada/north/first-nations-own-source-revenue-policy-moratorium-1.4180624


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