Federal Budget 2008: Bracing for downturn?
by CBC News

Sixteen years of almost uninterrupted job growth has produced an embarrassment of riches in Canada's Employment Insurance account — a surplus, in fact, of $54 billion at current reckoning.

But with economic storm clouds gathering south of the border, the Conservative government looks to be preparing for some turbulence ahead. It is creating a special cushion of $2 billion in a side account to help pay for any quick surge in payouts caused by an economic downturn.

 

 

Ottawa is creating a new, independent Crown corporation called the Canada Employment Insurance Financing Board (CEIFB) to manage future surpluses in the EI account and will seed the agency with $2 billion from general revenues, Finance Minister Jim Flaherty announced in his 2008 budget.

The new arms-length agency is part of an attempt by the government to bring more predictability to the annual routine of setting EI premiums and benefits. As part of the change, the government will also legislate a maximum annual change in the premium rate to be set by the CEIFB at 15 cents.

Under the existing regime, Ottawa sets EI premiums once a year based on its employment expectation. For years now, large employers have complained that these projections have underestimated real job growth and have therefore led to an ever-increasing surplus in the EI account, the current $54 billion, which goes right into general revenues.

In opposition, the Conservatives often railed against this as well. But now, faced with a possible downturn and little in the way of projected budget surpluses over the next three years, Ottawa wants only to cushion the ups and downs.

Future premium increases will be limited and any surpluses on the EI front will go to this account with the CEIFB. In the event of a downturn, money from this fund will be used to pay for benefits that otherwise would have required a premium increase to keep the EI account solvent.

In good times, surpluses beyond a still-to-be-determined reserve level would be used to reduce EI premiums.
 

 

 

 

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