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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.
A new "cushion" for the EI account
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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