Reading Joanis (2025) Through an Infrastructure Delivery Lens
Critical Analysis of: Marcelin Joanis, Fiscal Imbalance in Canada Twenty Years after the Séguin Commission, IRPP Insight No. 60, January 2025
“Apart from these specific recommendations, it is perhaps the absence of a regular forum for reflection, discussion and analysis dedicated to intergovernmental fiscal arrangements that stands out as the primary shortcoming of the Canadian approach to fiscal federalism.” — Joanis (2025, p. 21)
Figure 1. Major Federal Transfers to Provinces & Territories, 2015–16 to 2026–27 (C$B). Source: Department of Finance Canada. Note: 2025–26 and 2026–27 preliminary. The red dashed line represents the Council of the Federation’s target of federal funding covering 35% of annual provincial-territorial health spending.
Introduction: Two Conversations That Need to Meet
Marcelin Joanis’s retrospective on the Séguin Commission arrives at a significant moment in Canadian fiscal policy. Twenty-three years after the Commission on Fiscal Imbalance submitted its final report, the structural dynamics it identified remain largely unresolved: provinces bear the expenditure responsibilities for health, education, and infrastructure while the federal government retains the fiscal capacity to intervene in those domains through its spending power. Joanis traces this arc with precision, identifying both the institutional causes of imbalance and the mechanisms — equalization, social transfers, and federal spending power — through which it persists.
But there is a gap in the analysis that matters considerably for practitioners, governments, and policy researchers working in infrastructure. In the two decades since the Séguin Commission, the provinces’ primary institutional response to their fiscal squeeze has been the public-private partnership — the P3 model. Canada became one of the world’s most active P3 markets precisely because provinces, caught between rising expenditure responsibilities and inadequate federal transfers, needed mechanisms to access private capital for public infrastructure. Joanis’s paper does not mention P3 once.
This silence is analytically significant. It is not a criticism of Joanis’s focus — his paper operates within the tradition of fiscal federalism analysis, and P3 literature has developed in parallel. The problem is that these two conversations need to meet, and they largely have not. This article maps the connections: where Joanis’s framework is genuinely useful for understanding infrastructure governance in Canada, where it has structural blind spots, and what an integrated framework would need to address.
Key data points in context (all sources: Government of Canada, CCPPP, FCM, Oxford Economics)
• Federal major transfers 2024–25: C$99.4 billion | 2026–27: C$108.4 billion (Dept. of Finance Canada)
• Federal share of total provincial health spending: ~21% | Provinces’ target: 35% (Council of the Federation)
• Provincial health spending grows at 5.3%/yr vs CHT at 4.8%/yr (Godbout, Policy Options, 2024)
• Canada’s total health spending 2023: C$344 billion = 12.1% of GDP (CIHI/CMA, 2024)
• National infrastructure deficit: C$270 billion (FCM, 2025) | Range of estimates: C$150B–C$1T
• CCPPP P3 market: 247 projects, total value C$140B+ | Ontario = 51% of all projects
• Federal fiscal impulse 2026: >2% of GDP — largest since 1980 outside pandemic (Oxford Economics, 2026)
1. What Joanis Gets Right: Three Structural Insights Relevant to Infrastructure
1.1 The Three Principles of Fiscal Balance and P3 Governance Architecture
The Séguin Commission’s three principles of fiscal balance — sufficient own-source revenue to ensure accountability; total revenues sufficient to cover all expenditure responsibilities; and transfers that do not limit provincial decision-making autonomy — provide a sharper analytical lens for P3 governance than is commonly used in infrastructure policy. The third principle is particularly relevant.
Federal infrastructure programs have systematically conditioned capital transfers on procurement model choices. The former P3 Canada Fund (2007–2017) made P3 assessment mandatory for projects over C$100 million seeking federal support. Provinces seeking federal co-investment in transit, hospitals, or court facilities were effectively required to demonstrate P3 Value for Money analysis — or accept the risk of ineligibility. This is a structural exercise of federal spending power in provincial infrastructure procurement. Operating through exactly the mechanism Joanis identifies distorting fiscal autonomy in social programs. His framework can name this phenomenon with precision; it simply does not extend the analysis to capital programs.
The second principle — that total revenues must cover spending responsibilities — is the demand-side explanation for P3 adoption that Joanis never makes explicit. Provinces facing chronic underfunding of their infrastructure responsibilities turned to P3 to access private capital while keeping liabilities off the public balance sheet. This is not an engineering solution or a procurement innovation in the abstract; it is a fiscal workaround for a structural gap that fiscal federalism analysis identifies, but P3 literature rarely contextualizes.
1.2 The Long-Term Fiscal Gap and the P3 Demand Driver
The Conference Board of Canada projections Joanis cites are striking for infrastructure analysts. Projected provincial deficits rising from 15 percent of budget expenditures in 2019–2020 to 20 percent in 2039–2040 represent a trajectory of growing fiscal pressure in exactly the domains — health infrastructure, transit, courts, schools — where P3 procurement has been most active. The Canadian Medical Association adds specificity: health care already consumes 30–40 percent of provincial and territorial budgets, and those costs are expected to increase at an average annual rate of 5.2 percent over the next decade — well in excess of projected revenue growth.
In 2023, Canada’s total health spending reached C$344 billion (12.1% of GDP), with provinces generating 78 percent of the cost. The CHT provided C$52.1 billion in 2024–25 — a 53.1 percent increase over the C$34.0 billion in 2015–16 — yet the federal share remains approximately 21 percent, far short of the 35 percent target that the Council of the Federation has repeatedly demanded. These projections are the macro-level expression of the problem that P3 is deployed to manage; Joanis’s framework captures the diagnosis but never reaches the instrument.
1.3 Federal Unilateralism and the Instability of the P3 Framework
Joanis’s critique of the federal government’s unilateral approach to fiscal arrangements — renewed every five years; the most recent renewals conducted “practically behind closed doors” — has a direct and underappreciated parallel in P3 policy. The federal P3 support framework has changed substantially with each government: the P3 Canada Fund under Harper, the Investing in Canada Plan under Trudeau, and now the Building Canada Act and its associated funds under Carney. Each transition creates uncertainty for long-duration P3 projects.
A 30-year DBFM (Design-Build-Finance-Maintain) contract involves a financing structure, a risk allocation framework, and service payment obligations calibrated at financial close against a specific federal program environment. When the federal infrastructure framework changes — as it has with each change in government — the assumptions embedded in those P3 structures can become misaligned with the new policy environment. The institutional critique Joanis directs at equalization renewals applies with equal force to P3 program renewals
◆ The diagnostic link: Joanis identifies the institutional problem — federal unilateralism in fiscal arrangements — that also generates instability in Canada’s P3 framework. The absence of a structured, recurring forum for intergovernmental fiscal discussion is simultaneously the absence of a structured framework for long-term infrastructure financing policy.
Figure 2. Canada’s P3 Market by Sector and Province. Sources: CCPPP / InfraAmericas. Note: Provincial shares based on project count to end-2024. The concentration of institutional P3 capacity in Ontario and BC mirrors — and reinforces — the fiscal capacity asymmetry that Joanis identifies in fiscal federalism, but does not analyze.
2. The Central Omission: P3 as a Fiscal Gap Response
The paper’s most significant gap for infrastructure and fiscal policy is its failure to treat P3 and alternative financing as mechanisms provinces use to manage fiscal imbalance. Canada’s P3 market — with the CCPPP tracking 247 projects and total realized and active value exceeding C$140 billion — exists substantially because of the structural dynamic Joanis describes: provinces bear expenditure responsibilities that their revenues cannot adequately fund, federal transfers are insufficient and unpredictable, and the fiscal gap is growing.
The P3 model allows a province to access private capital for infrastructure today; convert a lump-sum capital expenditure into an annual service payment stream spread over 25–35 years; and transfer construction cost risk and lifecycle maintenance risk to a private consortium. None of these functions resolve the underlying fiscal imbalance. The long-term availability payment obligations of a P3 contract represent a future fiscal commitment as real as a bond issuance, though one that appears differently on the provincial balance sheet. The fiscal imbalance is deferred, not eliminated.
This has a precise implication for how P3 Value for Money assessments should be interpreted. The standard VFM methodology compares the risk-adjusted cost of P3 delivery against a Public Sector Comparator — a hypothetical conventionally-financed and managed project. What this comparison does not capture is the counterfactual fiscal context: if the province could adequately fund the project through direct capital expenditure, P3 financing would carry no premium. The “value” in many P3 Value for Money analyses is partly a measure of fiscal constraint, not purely of procurement efficiency.
An updated analysis in the spirit of the Séguin Commission would need to ask: to what extent has Canada’s P3 market been driven by structural fiscal imbalance rather than genuine procurement efficiency gains? The national infrastructure deficit is estimated at C$270 billion by the Federation of Canadian Municipalities — and at a range of C$150 billion to C$1 trillion by other analysts. If the fiscal gap were adequately addressed through either increased transfers or a transfer of tax room, as the Séguin Commission recommended, the demand for P3 financing would change fundamentally. This question has not been rigorously posed in either the fiscal federalism or the P3 literature.
◆ Research question: If the fiscal gap between provincial responsibilities and revenues were adequately addressed — through either increased transfers or a transfer of tax room, as the Séguin Commission recommended — how would the demand for P3 financing change? This question has not been rigorously posed in either literature, and it goes to the heart of P3 Value for Money assessment.
3. Four Analytical Blind Spots for Infrastructure Policy
3.1 The Conditionality of Federal Infrastructure Transfers
Joanis’s discussion of transfer conditionality — one of the three principles of fiscal balance — focuses exclusively on social programs: healthcare, early childhood education, and dental care. But the conditionality mechanism operates with equal force in infrastructure. The former P3 Canada Fund (2007–2017) made P3 assessment mandatory for projects over C$100 million seeking federal support. The current Buy Canadian Policy, confirmed by Torys LLP in December 2025, requires steel, aluminum, and wood procurement from Canadian manufacturers in large contracts, with the threshold dropping from C$25 million to C$5 million by end of 2026. The Trade Diversification Corridors Fund (C$5 billion over seven years) and the Arctic Infrastructure Fund (C$1 billion over four years), announced in Budget 2025, carry conditions that will shape procurement frameworks for a generation.
In the Séguin Commission’s precise language, each of these conditions is a constraint on provincial decision-making autonomy within provincial areas of jurisdiction. Joanis’s framework can identify and critique this mechanism. His paper simply stops at social programs. An updated analysis must extend the conditionality critique to capital programs, where the financial stakes in any individual project can exceed the annual value of the CHT for smaller provinces.
3.2 Institutional Capacity Asymmetry Among Provinces
The paper notes the heterogeneity of provincial fiscal capacities — the fact that a “tax point” is worth less in a have-not province than a have province — and explores how this affects the politics of equalization and the transfer of tax room. It does not explore the institutional capacity dimension, which for infrastructure is equally determinative.
Infrastructure Ontario, Partnerships BC, and the Société québécoise des infrastructures have developed deep P3 transactional expertise over two decades. Ontario alone accounts for 51 percent of all Canadian P3 projects by count — and Ontario plus BC represent 68 percent of the market. Prince Edward Island or New Brunswick cannot replicate this capacity for a regional hospital or courthouse. They lack the transactional depth, the legal sophistication, and the project volume to sustain competitive P3 procurement. The consequence is that the same fiscal gap hits different provinces with qualitatively different infrastructure outcomes: larger provinces can use P3 to manage it; smaller provinces cannot.
Provincial P3 market share — structural asymmetry (Source: CCPPP / InfraAmericas)
• Ontario: 51% of all Canadian P3 projects
• Ontario + BC combined: 68% — the two provinces with the most developed P3 agencies
• Quebec: 10% | New Brunswick: 6% | Alberta: 6% | Saskatchewan: 5%
• Small provinces lack institutional capacity to run competitive procurements independently
→ Joanis framework identifies fiscal asymmetry but not the institutional capacity layer that determines P3 access
3.3 Indigenous Governments as a Third Layer of Infrastructure Governance
Joanis acknowledges Indigenous governments as a blind spot in the Séguin Report. For infrastructure policy in 2026, this is not a marginal omission. The duty to consult and accommodate, Impact and Benefit Agreements (IBAs), revenue-sharing requirements, and Indigenous equity participation in infrastructure projects transform the governance structure of major P3 contracts in ways that a two-order fiscal federalism framework cannot capture.
LNG Canada Phase 2, critical minerals projects in northern Ontario and Quebec, and the Arctic Infrastructure Fund’s target projects all involve Indigenous governance relationships that operate neither as provincial procurement decisions nor as federal spending power exercises in the traditional sense. They represent a third layer of governance with material effects on project timelines, risk allocation, and long-term financial structures. The Séguin Commission’s fiscal balance principles — designed for a two-order Canadian federation — do not address this layer. An updated analysis must.
3.4 Crisis-Driven Recentralization and Its Consequences for P3
Joanis’s most prescient observation is that crises drive fiscal and political recentralization, citing both COVID-19 and the broader literature on crisis-induced centralization (Canavire-Bacarreza et al., 2021). The Iran war and the Hormuz disruption of March 2026 have produced exactly this dynamic. Oxford Economics estimates the federal fiscal impulse in 2026 at over 2 percent of GDP — the largest since 1980, outside the pandemic period. The Major Projects Office, established under the Building Canada Act in August 2025, and the federal government’s explicit deployment of government contracting “as a core tool to counter the economic impacts of global trade disruptions” (Norton Rose Fulbright, 2026) represent a significant recentralization of infrastructure investment decision-making.
For P3 markets, recentralization has asymmetric consequences. On one side: a materially higher volume of federally driven project announcements, accelerated timelines, and increased capital flows into LNG, critical minerals, northern transportation, and defence infrastructure. On the other side: federal prioritization may override provincial procurement frameworks, compress the early-design engagement timelines that Progressive P3 requires, and introduce federal conditions that provincial P3 agencies have not been structured to absorb.
The Progressive P3 model — detailed in the CCPPP’s 2024 practice guide and piloted by Ontario on the Ontario Line — requires early contractor and engineer engagement before prices and designs are locked. In a market where aluminium has risen 39.1 percent year-over-year and steel 20.9 percent (ABC, March 2026), this model is structurally essential. But it is structurally incompatible with the federal government’s tendency, under crisis conditions, to announce projects and timelines before procurement frameworks are ready. The recentralization that Joanis’s framework predicts will test the Progressive P3 model in precisely the project categories where it is most needed.
◆ The institutional tension: Federal recentralization through the Building Canada Act generates project volume but compresses the early-engagement timeline that Progressive P3 requires. Infrastructure policy needs a framework for managing this tension — Joanis’s fiscal federalism analysis identifies its cause without proposing its resolution.
Figure 3. The Fiscal–Infrastructure Nexus: connecting Joanis’s fiscal gap diagnosis to P3 as the operational bridge and the 2026 recentralization dynamic. The diagram shows where Joanis’s framework is analytically productive and where it ends. Sources: Joanis (2025); CCPPP; FCM (2025); Oxford Economics (2026); Norton Rose Fulbright (2026).
4. The 2025–2026 Context: When the Two Conversations Converge
The geopolitical environment of early 2026 has accelerated the convergence of fiscal federalism dynamics and infrastructure delivery pressures in ways that make the gap between the two literatures more consequential than at any point in the past decade.
First, the fiscal impulse. Oxford Economics estimates the federal fiscal impulse in 2026 at over 2 percent of GDP — the largest since 1980, outside the pandemic period. This represents a large-scale exercise of federal spending power in infrastructure and defence sectors that are constitutionally provincial or shared. The Trade Diversification Corridors Fund (C$5 billion over seven years) and the Arctic Infrastructure Fund (C$1 billion over four years) are conditional transfers with procurement requirements that will shape provincial infrastructure governance for a generation.
Second, the materials cost environment. ABC’s chief economist noted in March 2026 that aluminium mill shapes had risen 39.1 percent year-over-year and steel mill products 20.9 percent — before the Hormuz disruption’s full effect was reflected in prices. P3 contracts priced under the traditional fixed-price model face severe stress in this environment. Material risk management — Escalation Clauses tied to BLS PPI indices, Material Price Escalation Funds, early lock-in of long-lead items — is the operational response. The Progressive P3 model addresses this at the procurement structure level. But both responses require the procurement stability that recentralization tends to disrupt.
Third, the export dimension. Canada’s near-trade-agreement with Indonesia, the relaunched India negotiations, and the Oslo agreements with Norway and Germany in March 2026 represent a structural opening for Canadian EPC and engineering services exports. Asia Pacific Foundation of Canada has framed this as a once-in-a-generation alignment: Canada’s energy diversification imperative and Asia’s energy security imperative have never been more compatible. For Canadian engineering firms, this alignment creates premium-priced project opportunities in markets where “Canadian EPC firm with LNG experience” commands significantly higher rates than local competitors — but only for firms with the institutional capacity and international presence to compete.
5. Conclusion: Toward an Integrated Framework
Joanis’s paper makes a compelling case for updating the Séguin Commission’s analysis of Canadian fiscal federalism. Its strongest contribution is identifying the institutional causes of fiscal imbalance — the absence of a regular, structured forum for intergovernmental fiscal discussions — and demonstrating that the structural dynamics identified in 2002 remain substantially unresolved.
But for infrastructure policy — for the practitioners, economists, and government officials who operate in the P3 market — the paper has a structural gap that mirrors the gap it diagnoses in Canadian fiscal federalism: the absence of a regular, integrated framework for connecting macro-fiscal dynamics to project-level delivery mechanisms. Fiscal federalism analysis and infrastructure delivery analysis have developed as parallel literatures. The problem is that the practitioners in each field need the other’s tools.
An integrated framework would need to address three questions that neither literature has yet answered:
- To what extent has Canada’s P3 market growth been driven by structural fiscal imbalance rather than procurement efficiency? If the fiscal gap were adequately addressed through increased transfers or a transfer of tax room, what would remain of the case for P3? This question has direct implications for how P3 Value for Money assessments should be designed and interpreted.
- How should an updated fiscal federalism framework account for the institutional asymmetries among provinces in their P3 capacity? Should federal infrastructure programs provide transactional and institutional support — not just capital — to smaller provinces that cannot run competitive P3 procurements independently?
- As federal recentralization accelerates through the Building Canada Act and the Major Projects Office, how can P3 governance frameworks — particularly the Progressive P3 model — be designed to protect provincial procurement autonomy and market-viable pricing while meeting federal program objectives and timelines?
Prime Minister Carney’s Davos formulation — “Nostalgia is not a strategy” — applies with equal force to the institutional frameworks through which Canada delivers infrastructure. A fiscal federalism framework designed for the era of Chrétien surpluses and Séguin deficits, and a P3 model designed for the stable interest rate environment of the 2010s, both need updating for a world of geopolitical supply chain disruption, national security infrastructure, rapidly escalating materials costs, and Indigenous equity in public assets.
Joanis’s paper is the right place to start that update. Its analytical rigour, its institutional critique, and its call for a structured, recurring forum for intergovernmental fiscal discussion are all directly applicable to infrastructure delivery. The task ahead is to connect the macro-fiscal diagnosis to the project-level instruments — P3 structures, procurement models, risk allocation frameworks — through which that diagnosis is actually experienced by the engineers, contractors, and government owners who build Canada’s infrastructure.
Key References and Data Sources
Joanis, M. (2025). Fiscal Imbalance in Canada Twenty Years after the Séguin Commission. IRPP Insight No. 60. Institute for Research on Public Policy.
Commission on Fiscal Imbalance. (2002). A New Division of Canada’s Financial Resources. Gouvernement du Québec.
Department of Finance Canada. (2024). Major Federal Transfers. Canada.ca — $99.4B in 2024–25; $103.8B in 2025–26; $108.4B in 2026–27.
Godbout, L. (2024). Is the federal health transfer really growing faster than provincial spending? Policy Options, September 2024. Provincial health spending: +5.3%/yr; CHT: +4.8%/yr.
Canadian Medical Association. (2024). How is health care funded in Canada? Health spending: C$344B (2023) = 12.1% GDP; prov. share 78%; federal share ~21%; target 35%.
CCPPP / InfraAmericas. P3 Projects in Canada (updated 2024). 247 projects; total value C$140B+; Ontario 51%; Ontario+BC 68%; average project C$482M.
Federation of Canadian Municipalities (FCM). (October 2025). Canada risks stalling nation-building without strong local infrastructure. National infrastructure deficit: C$270B. Municipalities: 60% of core infrastructure, 8–10¢ per tax dollar.
Oxford Economics. Canada Key Themes 2026. January 2026. Federal fiscal impulse 2026: >2% of GDP — largest since 1980 outside pandemic.
McCarthy Tétrault. Building the Future in a Ruptured World: 7 Key Takeaways on Canada’s 2026 Infrastructure Priorities. February 4, 2026.
Norton Rose Fulbright. Budget 2025: Government Contracting and Buy Canadian. 2026.
ABC (Associated Builders and Contractors). Construction Input Price Analysis. March 27, 2026. Aluminium +39.1% YoY; steel +20.9% YoY.
CCPPP. P3 Guide for Municipalities. 2024. Progressive P3 model; CCPPP Modernizing Canada’s Approach to P3s, August 2024.
Torys LLP. Federal Government Implements the Buy Canadian Policy. December 2025. Threshold: C$25M → C$5M by end-2026.
Asia Pacific Foundation of Canada. Canada as a Solution to Asia’s Structural Energy Security Crisis. March 2026.
Canavire-Bacarreza, G., Evia Salas, P., & Martinez-Vazquez, J. (2021). The effect of crises on fiscal and political recentralization. Working Paper 21-11. Andrew Young School of Policy Studies, Georgia State University.
PM Mark Carney — World Economic Forum, Davos, January 2026.