Power and politics: Financing the spirit and intent of modern treaties

Frances Abele, Fahad Ahmad, & Caroline Grady

Modern treaties open a new relationship between Indigenous signatories and the Crown. Financial arrangements are a central feature of this evolving relationship for their symbolic and practical importance to the relationship and because they may empower, restrict or distract from the essential process of post-agreement nation-building. Like other features of contemporary nation-to-nation, government-to-government relationships, financial arrangements remain a work in progress – shaped and overshadowed by the imbalance of power between Indigenous Peoples and nations, and the Crown.

Financial arrangements are among the most complex and varied provisions of modern treaties and self-government agreements. In this introductory report on our research for the financing theme of the Modern Treaty Implementation Research Project we offer an inventory of financial arrangements in modern treaties along with a brief analysis of how the negotiating relationship has evolved over time. We conclude with a few encouraging words about further research opportunities to address some of the ways in which these arrangements could be improved.

The term “modern treaty” refers to the comprehensive land claim agreements negotiated between the Crown and Indigenous authorities since the mid-1970s. Land claim agreements have at times been accompanied by self-government agreements, some of which were negotiated at the same time (in the same document) while others have been negotiated separately. The reason for this variation lies in federal policy. Until the mid-1990s, federal negotiators explicitly excluded discussion of any new political arrangements for Indigenous nations (Drury, 1980). The few agreements negotiated under this constraint thus lack a full expression of self-government. However, despite the constraint the Indigenous parties were able to make some headway on governance – for example by entrenching substantial co-management powers in the agreements. Under pressure from evolving jurisprudence (particularly Sparrow and see Canada, 1993), the federal prohibition on negotiation of governance arrangements was reversed in 1995 with affirmation of the inherent right to self-government.

Shifting federal policy has thus created four sorts of outcomes. Some signatories of land claim agreements have gone on to negotiate “companion” self-government agreements (for example, the Sahtu Dene and Métis Comprehensive Land Claim Agreement), some new treaties have included self-government provisions (such as the Labrador Inuit Land Claims Agreement), land claim agreements have been negotiated without self-government agreements (such as the Nunavik Inuit Land Claims Agreement), and finally, stand-alone self-government agreements, both comprehensive and sectoral, were reached. In this discussion, our focus is on the first three of these outcomes – modern treaties, with and without self-government provisions, negotiated at one table or consecutively. We have not investigated stand-alone self-government agreements.

The financial components in modern treaties include cash payments for lands ceded by Indigenous nations, treaty implementation funding, resource revenue sharing mechanisms with federal and/or provincial governments, and economic opportunities for business development. Modern treaties also include provisions for funding specific activities such as the hunter support program in the James Bay and Northern Quebec Agreement, co-management boards in several agreements, the fisheries fund in the Nisga’a Final Agreement and the Tsawwassen First Nation Final Agreement as well as property tax assistance in the Tłı̨chǫ Land Claim and Self-Government Final Agreement. In the exceptional case of Nunavut, their agreement provides for the creation of a new territory, adding federal-territorial fiscal relations to an already complex arrangement. For reasons of space, we note but do not discuss these specific provisions and the connections among federal-territorial fiscal relations and treaty funding arrangements. These important matters will be discussed in future publications.

The description of fiscal arrangements below is based upon a reading of the revised (latest versions of) texts of all existing land claim and self-government agreements. We have not yet examined additions, amendments, subsequent agreements, or for that matter, actual practices. The original texts of the treaties are important historical documents in themselves. They reflect the results of negotiations among over 30 Indigenous Peoples and nations, six provinces and territories, and the federal government. As a set, the agreements reflect the compromises reached over forty years between priorities of Indigenous nations and Peoples and those embodied in Canadian public institutions – and taken together, form an important part of the framework of Canadian and Indigenous nation-building.

Table 1: Modern Treaties (MTs) and Self-government agreements (SGAs) (Source: CIRNAC, Final Agreements and Related Implementation Matters, https://www.rcaanc-cirnac.gc.ca/eng/1100100030583/1529420498350)

Table 1: Modern Treaties (MTs) and Self-government agreements (SGAs) (Source: CIRNAC, Final Agreements and Related Implementation Matters, https://www.rcaanc-cirnac.gc.ca/eng/1100100030583/1529420498350)

 

Financial arrangements in modern treaties Cash payments
All of the modern treaties include cash payments in compensation for lands ceded to the Crown. These tax-exempt funds are transferred at intervals over a substantial period. For example, the 1984 Inuvialuit Final Agreement provides for $45 million (1977 dollars) to be paid to the Inuvialuit Regional Corporation in installments during 1984-1997, while the 1993 Nunavut Agreement mandates payment of $1.173 billion over 14 years to Nunavut Tunngavik Incorporated (NTI). In British Columbia, the 2016 Tla’amin Final Agreement, provides for a total of $41 million to be dispersed over 10 years. The Yukon Umbrella Final Agreement stipulates a value of $242.673 million (1998 dollars) is to be dispersed among the different Yukon First Nations. The large range in amounts of capital transfers is apparently loosely related to population size of a nation and, of course, reflects the rate of inflation.

As the cash transfers are compensation for ceded land rights, they are meant to create a capital fund that the Indigenous parties could use as they choose – a means to build economic self-determination. They were not meant to replace funding for programs that are provided to other citizens of Canada from public funds. Treaty-holding organizations have made portfolio investments and they have also purchased or founded regional airlines, local transportation and power companies, fisheries enterprises as well as other businesses. Treaty-holding organizations have also chosen to subsidize social initiatives that are not meant to be profitable. For example, NTI funds bereavement and compassionate travel programs, an Elders’ benefit program, a scholarship, and hunter support programs, in part with revenue from cash compensation funds.

There are also two aspects of federal negotiating policy that have significantly reduced the value of the capital transfers: the system of issuing loans against a final settlement to provide Indigenous parties with the means to negotiate, and the failure to include the cost of treaty implementation in some early agreements’ overall financial provisions.

Since no Indigenous nations or Peoples have been in a position to fund their own land claim preparations and negotiations, they have relied upon federal funding advanced as a loan against a final settlement. Indebtedness grew over the decades of negotiation, placing pressure on negotiators to settle and leaving a legacy of post-settlement debt for the new governments and organizations. This constraint was removed in the March 2019 federal budget, which announced the federal intention to forgive outstanding loans and to return to Indigenous signatories the amounts they have already paid back. The funds are substantial; according to Budget 2019 amount to $1.4 billion over seven years, with $938 million to be dispersed by end of fiscal 2018-19.

If negotiations require funding, so does implementation of the agreement – as these require further internal discussion and deliberation, research and development, and the establishment of new institutions. The first modern treaties (the James Bay and Northern Quebec Agreement and the Inuvialuit Agreement) include no mention of implementation funding, an omission that has forced these early signatories to use their capital for this purpose. Subsequent agreements do include implementation funding, though the amounts provided vary wildly. For example, the 1993 Yukon Umbrella Final Agreement provides a total of $4.5 million for implementation to the Council for Yukon Indians and individual First Nations, while the 2005 Nunatsiavut Agreement includes provision for federal payments of $190 million over nine years for implementation of the agreement. One might ask how these amounts are determined, and what precisely counts as “implementation” as distinct from program development and administration.

Funding of treaty negotiations
Treaty negotiation is expensive. Funding is required for research, internal consultation, legal and other expertise, analysis and travel as well as salaries for teams of negotiators who have often worked over many years. Besides the financial cost, there are important costs to personal and family life imposed by long negotiations, frequent absences, and the pressures of negotiating the future of one’s people.

As noted above, the financial costs of negotiation will no longer be borne by the Indigenous parties. The new terms for receiving negotiation funding, however, are stringent. They require that Indigenous parties qualify for funding against a list of nine criteria, such as departmentally approved work-plans that define “measurable objectives” and evidence of sound financial management practices (audits). Payments are based upon deliverables outlined in contribution agreements.

The distribution of funding is envisioned as follows, with no rationale offered to explain the amounts:

Table 2: Negotiation Funding Levels (000s/year) as at 2019 (adapted from https://www.aadnc-aandc.gc.ca/eng/1386360760450/1386360857470) *The department will determine the most appropriate source for the population figures depending on the Indigenous group which has responsibility for such statistics. **Where applicable, maximums are higher to allow for travel costs in remote regions of the country.

Table 2: Negotiation Funding Levels (000s/year) as at 2019 (adapted from https://www.aadnc-aandc.gc.ca/eng/1386360760450/1386360857470) *The department will determine the most appropriate source for the population figures depending on the Indigenous group which has responsibility for such statistics. **Where applicable, maximums are higher to allow for travel costs in remote regions of the country.

 

Revenue from land ownership and resource development
Revenue from Indigenous lands and the regulation of development on these lands is a topic of enormous complexity. Current practices have deep roots in the history of colonization and settlement. The negotiations leading up to Confederation in 1867 (from which Indigenous nations were excluded) assigned revenues from Crown lands to the provinces. Although in the late 19th century resource development taxation was not seen as an important source of revenue, it has grown to be a major part of the income of many provinces. Once Indigenous jurisdiction and rights to revenue are recognized, it inevitably entails some loss to provincial and – in the territorial North – federal and territorial orders. After long years of agitation and negotiation by territorial governments for “province-like” jurisdiction (Dacks, 1990), the public governments of the Yukon and N.W.T have benefitted from devolution of land and resource management responsibilities and access to revenue.

All comprehensive land claim agreements identify lands for which the Indigenous parties hold certain surface and/or subsurface rights, variously specified. The first comprehensive claim agreement that was negotiated, the 1975 James Bay and Northern Quebec Agreement, states that all lands in the settlement area remain provincial public lands, though on “Category I” lands, the Indigenous parties’ consent is required for any new development. There is no mention of revenue from development on these lands. In 2002, however, the Cree Nation negotiated an accord with the province that provides for shared resource revenues from hydro-electric, mining, and forestry operations on Cree territories. Payments from these sources will reach $70 million a year for 50 years (Coates, 2015, p. 17). Unlike the 1975 Agreement, the 2002 accord is not constitutionally protected.

In all subsequently negotiated modern treaties, treaty-holders have negotiated the capacity to tax development on selected lands. In addition to revenue from development on their own selected lands, 21 out of 26 modern treaties (Yukon agreements counted separately) include resource revenue-sharing provisions concerning revenue from other parts of their original territory (see Table 1). As an example, under the Tłı̨chǫ Final Agreement, the territorial government agrees to pay the Tłı̨chǫ Government, in each calendar year, 10.429% of the first $2 million of annual resource revenues from the Tłı̨chǫ traditional territory and 2.086% of any additional annual revenues.

Resource revenue from subsurface resources has been the subject of contentious negotiations. For example, the Yukon Umbrella Final Agreement defines Category A lands as those over which Yukon First Nations have complete surface and subsurface ownership and Category B lands as those where Yukon First Nations only own surface rights. Yukon First Nations receive 100% of the resource revenue from category A lands but share resource revenue with the territory on category B lands. The agreement specifies that, for the first $2 million in annual resource revenue, Yukon First Nations will receive 50% of the difference between crown/territorial royalty and Yukon First Nation royalty. As per the Crown interpretation, if a Yukon First Nation already owned revenue-generating category A land, then, it would count toward First Nation royalty, thus reducing the amount available to other First Nations owning category B lands. In 2018, after long-drawn negotiations, this problematic interpretation was updated, so that now a nation’s revenues from category A lands will not affect Crown royalty payments for other First Nations.

These are a few examples of the ways in which the future of Indigenous self-government has been shaped by apparently technical decisions related to finances and interpretation of financial clauses in agreements.

The challenges of financial arrangements in self-government agreements
As we noted earlier, federal opposition to negotiating self-government with Indigenous nations and Peoples dissolved after some landmark Supreme Court of Canada decisions that interpreted Section 35 of the Constitution Act to include an inherent right of self-government. Since 1995, it has been possible for modern treaties to include self-government provisions. Some Indigenous nations have chosen to negotiate a land claim and self-government in sequence, while others have chosen a single agreement to cover both (see Table 1 above).

Canada’s Fiscal Approach for Self-government Arrangements policy (2015) commits the Crown to “consistent and equitable allocation of federal funding” under a fiscal methodology to support governance, treaty implementation, and social services, among other categories of funding (and see Assembly of First Nations and Canada, c. 2018). The methodology also specifies offsets to federal funding based on income that Indigenous governments may generate from resources revenues, taxation, economic development projects, and other fees, together called “own source revenue” (OSR). Current funding arrangements under self-government are described in the following figure:

Numerous issues have arisen in the application of Canada’s fiscal methodology for self-government. One of the components of the fiscal transfer from the federal government is supposed to enable Indigenous self-governments to provide adequate social services, healthcare, and education offerings for residents of their nation and, more generally, develop public infrastructure as they assume responsibilities that previously lay with federal or provincial governments. Modern treaties and self-government agreements specify that the social transfer should allow Indigenous self-governments to provide these public services at levels that are “comparable” to municipal and provincial services in other (non-Indigenous) jurisdictions. However, the levels of funding in the fiscal transfer continue to be insufficient and do not take into account the need for services to meet emerging community needs or the possibility that original baseline funding was inadequate (McCarthy, 2013). In assessing the Labrador Inuit Land Claims Agreement, a 2015 report by the Auditor General of Canada noted that insufficient funding levels to the Nunatsiavut government limited the government’s ability to address the housing needs of Nunatsiavut residents.

Figure 1: Fiscal Transfer Model specified in Canada’s Fiscal Approach for Self-Government Agreements, 2015 (https://www.aadnc-aandc.gc.ca/DAM/DAM-INTER-HQ-LDC/STAGING/texte-text/canadaS-fiscal_approach_1438090806392_eng.pdf)

Figure 1: Fiscal Transfer Model specified in Canada’s Fiscal Approach for Self-Government Agreements, 2015 (https://www.aadnc-aandc.gc.ca/DAM/DAM-INTER-HQ-LDC/STAGING/texte-text/canadaS-fiscal_approach_1438090806392_eng.pdf)

 

Another point of contention relates to own source revenue (OSR). Fiscal agreements assume Indigenous self-governments will be able to generate OSRs at a steady annual pace and based on these projected OSR calculations, the fiscal transfer amount is clawed back over time. Based on OSR projections, in the sixth year of an agreement, 3.3% of the fiscal transfer is clawed back, and after 20 years, the clawback rate is 50%. However, the assumptions about OSR are based on an unrealistic understanding about the sources of revenue available to Indigenous self-governments and how quickly emerging Indigenous self-governments will be able to generate OSR (McCarthy, 2013). These issues combined with the inflexible nature of the agreements essentially translate to less financial resources available to Indigenous self-governments for purposes of governance, treaty implementation, and other important functions.

In conclusion
It is evident that the recent negotiations about how to fund self-government are in effect replicating some of the negotiations that took place in advance of Confederation, and subsequent agreement among Canadian elites about how public finance would be managed in the new country of Canada. It is likely that the 2018-9 negotiations will be just as consequential for Indigenous governments as were those of a century and a half ago for the other two orders. As was no doubt the case in the 19th century, the negotiations have taken place under the umbrella of a fairly clear sense of direction, but among the weeds of detail and practice.

In 2017, an updated mandate letter to the Minister of Indigenous Affairs directed her to:

deepen work with the Minister of Finance to establish a new fiscal relationship with Indigenous Peoples that moves towards sufficient, predictable, and sustained funding for communities, a renewed economic and fiscal relationship that ensures nations have the revenue generation and fiscal capacity to govern effectively, and to provide programs and services to those for whom they are responsible.

This direction has led to high level negotiations, memoranda of understanding, and negotiations about detailed procedures at a number of working-level tables. Working-level negotiations have consumed many months of effort by technical staff from across the country and are expected to bear fruit before the next election. Whatever the result is, it is unlikely to be the end of discussion.

For the community of scholars and practitioners who are attentive to the power of public finance to shape human affairs, there is a need for much more research on fiscal matters to support the negotiation of amendments to the fiscal federation that lives up to the grand purposes of reconciliation and Indigenous resurgence. We are some distance from that goal. There remains a lack of a common understanding of jurisdiction and service comparability between the Crown and Indigenous governments. Moreover, the federal government views (and wishes to cost) Indigenous governments as municipalities when, in fact, the scope of authority and responsibilities of Indigenous governments makes their governance function uniquely complex and well beyond the scope of municipal government. These discrepancies are also evident in the funding of Indian Act governments and over the generations it has proven very difficult to remedy. It is important that the current processes to address funding of the Indigenous governments whose relationship with the federal government is shaped by modern treaties address this problem before it is institutionalized. There are many related questions, such as, for example, determination of adequate funding levels for the smaller nations who are parties to treaties, recognition that “baselines” drawn from past practice may simply institutionalize historical inequality, and recognition of Indigenous nations’ entitlement to the full array of funding available to the provincial order of government, including such things as special purpose infrastructure funds that are not “in the constitution” but are necessary to public well-being. The federal purse, being the most capacious, must be open to this. ◉

 

Authors
Frances Abele is Chancellor’s Professor in the School of Public Policy and Administration, Carleton University.

Fahad Ahmad is a nonprofit consultant and a PhD candidate at the School of Public Policy and Administration at Carleton University. He is a member of the team researching treaty financing and fiscal relationships on the SSHRC funded Modern Treaties Implementation Research Project.

Caroline Grady is Southern Tutchone and is a member of the Ta’an Kwäch’än Council. She is currently an LL.M. candidate at the University of Victoria.

References
Assembly of First Nations and Canada. (N.d. c 2018). A new approach: Co-development of a new fiscal relationship between Canada and First Nations.
https://www.aadnc-aandc.gc.ca/DAM/DAM-INTER-HQ-ACH/STAGING/texte-text/reconciliation_new_fiscal_rel_approach_1512565483826_eng.pdf

Canada, Royal Commission on Aboriginal Peoples. (1993). Partners in Confederation: Aboriginal Peoples, self-government and the Constitution. Ottawa: Ministry of Supply and Services Canada.

Coates, K. (2015). Sharing the wealth: How resource revenue agreements can honour treaties, improve communities, and facilitate Canadian development. McDonald-Laurier Institute.

Dacks, G. (1990). Devolution and constitutional development in the Canadian North. Ottawa: Carleton University Press.

Drury, C.M. (1980). Constitutional development in the Northwest Territories. Report of the Special Representative. Ottawa: Government of Canada.

McCarthy, T. (2013). Sources of funds, sources of frustration. Northern Public Affairs, 1(3), 26-33.

Office of the Auditor General of Canada. (2007). Chapter 3: Inuvialuit Final Agreement.
http://www.oag-bvg.gc.ca/internet/English/parl_oag_200710_03_e_23827.html#ch3hd5f

R. v. Sparrow [1990] 1 SCR 1075.


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