The Canada Assistance Plan was a financing program created in 1966 by the Pearson government. The CAP consisted of a cost-sharing arrangement between the federal government and provinces, territories and municipalities whereby the federal government would partially fund eligible social programs. The 1995 Canadian federal budget announced that both the Canada Assistance Plan and the Established Programs Financing would be combined into a new block-fund fiscal arrangement called the Canada Health and Social Transfer starting in 1996-97 fiscal year. Payments with respect to fiscal years ending on March 31, 1996 or before could be made until March 31, 2000. The Canada Assistance Plan therefore officially remained under existence until March 31, 2000.
Structure
As of the early 1990s, the Canada Assistance Plan consisted of 3 parts :
Part I under which the federal government would cover 50% of eligible costs for social programs ;
Part II was never enacted as no agreement had been signed between the federal government and the provinces;
Part III under which the federal government would cover 50% of eligible costs for improvement of employability of unemployed people.
Debates
From its inception the Canada Assistance Plan was under scrutiny from the federal government. As the arrangement was a cost-sharing program and open-ended in nature, the federal government was concerned about an escalation of costs it could not control. The 1990 Canadian federal budgetcapped the growth of the Canada Assistance Plan at 5% for provinces who did not receive equalization payments for 1990-91 and 1991-92 fiscal years. That decision was incorporated into the Government Expenditure Restraint Act that was passed in February 1991. The 1991 Canadian federal budget extended the measure through 1994–95. The government of British Columbia challenged that provision in courts and the Supreme Court of Canada, in the landmark Reference Re Canada Assistance Plan decision, ruled on August 15, 1991 that the capping was indeed constitutional. Further restrictions were applied when the 1994 Canadian federal budget froze CAP payments to their 1994-95 levels for the 1995-96 fiscal year. Unlike the 1990 freeze it applied to all the Canadian provinces, including those who received equalization payments.
