first nations

Canadian governments damaging opportunities for First Nations

Fort McKay has prospered by selling services to oilsands corporations.

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The Community Capitalism of the Fort McKay First Nation: A Case Study

“Community capitalism” is the term used here to describe a politico-economic system in which a First Nation uses its assets (land, location, natural resources, and money) to generate income and provide social services for its members. The Fort McKay First Nation (FMFN) furnishes an important case study of community capitalism. As a result of its remarkable success, its characteristic features stand out in sharp relief. Its wholly owned and joint-venture business enterprises generated an annual average of $506 million gross revenue in the five-year period from 2012 to 2016. But FMFN does not just have an impressive business portfolio; it has also succeeded in raising the standard of living of its members, as measured by the Community Well-Being Index.

FMFN has achieved prosperity by participating in the economy of the Alberta oil sands, which is important because the best hope for prosperity of many First Nations in remote locations is involvement in nearby resource plays. Yet FMFN has never produced a drop of oil or earned a dollar in royalties; its success has come from providing services such as janitorial care, earth moving, logistics, and workforce lodging to corporations developing the oil sands.

For the last five years, government transfers have averaged only about 5% of FMFN’s total revenues. Own-source revenue (OSR) has accounted for the other 95%. Revenues consist of business profits, interest from investments, property taxes, rent on land and housing, and payments from corporations that have had an impact on FMFN’s traditional territory. There was one bad fiscal year ending March 31, 2016, when OSR plunged because oil prices plunged from US$109.89 per barrel (West Texas Intermediate) in June 2014 to US$29.67 in January 2016. But FMFN reduced its expenditures, liquidated non-performing enterprises, modified its investment strategy towards greater income stability, and quickly returned to the black. Its performance in dealing with this challenge was better than that of many senior governments faced with similar losses of revenue.

FMFN uses its revenues to provide an enhanced standard of living for members. Benefits include comfortable housing, better education and medical care, new community facilities, and annual cash distributions to members calculated by a formula based on business profits. Chief and council are considered to be business executives and remunerated accordingly. The relatively small population of the local community (560 in the 2016 census) fosters such generosity, but FMFN also provides benefits to off-reserve members, many of whom live in Fort McMurray.

FMFN’s economic and social success is underpinned by its practice of “consensus government,” which includes adherence to the rule of law, separation of business and politics, and extensive consultation with members. Political leadership is crucial, and Chief Jim Boucher has provided stable leadership and vision since 1986. But the model of consensus government is also an important part of its success. It means not only obtaining agreement of all members of council for important initiatives, but also holding frequent consultative meetings with members (both on and off reserve) while fully disclosing information such as annual audited financial statements and the compensation of Chief and Councillors. It also means separating business from politics by appointing independent boards of directors.

Community capitalism, based on consensus government and ongoing political support from members, is a promising model for promoting the independence and improving the standard of living of Canada’s First Nations. FMFN’s dramatic results are to some extent dependent on its relatively small population and the opportunities afforded by its location in the heart of the oil sands, but opportunities have to be seized in order to become beneficial. FMFN has developed friendly business relations with nearby corporations, reinvested revenues generated from impact-benefit agreements, and also used the Indian Act exemption from taxation to turn its reserve into a no-tax growth zone. Other First Nations, no matter their size and location, may benefit from studying the principles of FMFN’s community capitalism and adapting them to their own unique situation.

Community capitalism flowering among some First Nations

Ottawa is heavily indebted and will never be able to eliminate poverty through grants to First Nations.

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Bending the Curve: Recent Developments in Government Spending on First Nations

How much money are governments spending on Indigenous peoples? How have these amounts been changing over time? How effective is the spending? This is the third in a series of Fraser Institute studies of these questions. This paper extends the previous work on government spending in support of First Nations, including federal transfers from Indigenous Affairs and Northern Development (INAC), Health Canada spending on First Nations, Aboriginal program spending by provincial governments, and own-source revenue (OSR) generated by First Nation governments. Basically, the same methodology has been used as in the earlier papers: INAC expenses recorded here do not include Northern expenditures or internal administration. Own-source revenue is counted slightly differently from the previous attempt to tabulate it.

Main empirical findings

  • INAC support for First nations as measured in constant dollars continued to increase from 1995/96 to 2015/16, but not as rapidly as in the preceding 40 years. The very large cost of the Residential Schools Settlement Agreement (about $5 billion), which was paid to individuals rather than First Nation governments, has inflated the apparent amount of transfers.
  • INAC spending per Registered Indian has declined in this 20-year period because legal changes have led to a rapid increase in the number of Registered Indians. INAC spending per Registered Indian living on reserve has experienced ups and downs but is now about the same as it was 20 years ago.
  • After growing rapidly from 1995/96 to 2005/06, provincial spending on First Nations grew less rapidly in the last ten years. It is a significant total but remains small compared to overall federal spending.
  • Own-source revenue declined slightly in constant dollars from 2013/14 to 2015/16; the reasons for this decrease are not certain, though it was obviously a time of low natural resource commodity prices.

In its first two budgets, the Liberal government of Canada promised a substantial increase in federal spending on First Nations, but figures from the Public Accounts are not yet available to determine how great an increase has actually been implemented. The announced spending hikes will have to contend against an already large deficit, increasing interest rates, and other claims on the budget, such as higher defence spending.

Increased expenditure is not a panacea because some problems faced by First Nations have deeper causes than shortage of money. Clean water, for example, may be difficult to supply in remote locations subject to flooding. Educational deficits may arise more from family disorganization and lack of community support than from budgetary shortfalls. Thus, increased spending should be accomplished by rigorous program evaluation to ensure the increases actually achieve results and are not merely transferred to organized rent seekers.

Own-source revenue, which is already equal to over 50% of federal spending, is a way for many First Nations to improve their well-being. Natural resource development is promising for some First Nations in remote locations but, unfortunately, the contemporary environmental movement and the federal government are making resource development more difficult even as it promises to increase fiscal transfers to First Nations.

Assigning benefits on the basis of heredity is not compatible with liberal democracy

The largest First Nation in Canada is the recently recognized Qalipu Mi’kmaq of Newfoundland.

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Incentives, Identity, and the Growth of Canada's Indigenous Population

Statistics Canada has reported unprecedented growth in Canada’s Indigenous population (Indian, Métis, and Inuit). Over the 25 years from 1986 to 2011, it grew from 373,265 to 1,400,685, an increase of 275%, while the population of Canada increased by only 32% in the same period of time. Although Canada’s Indigenous peoples have higher birth rates than other Canadian groups, most of this increase resulted from “ethnic mobility”—individuals changing the identity labels they apply to themselves.

By far the greatest growth occurred in the categories of Métis and non-status Indian, which is purely a function of how respondents describe themselves in the census. But the numbers of Registered Indians (a distinct legal status) have also grown much faster than can be accounted for by natural increase. This paper deals with identity issues surrounding Registered Indian status and First Nations membership; a subsequent paper will deal with the Métis.

Ethnic mobility resulting in the growth in the numbers of Registered Indians has been fostered by adoption of equality rights in the Canadian Charter of Rights and Freedoms (1982); court decisions such as Lovelace (1981), McIvor (2009), and Gehl (2017); statutes such as Bill C-31 (1985) and Bill C-3 (2011); and the recognition by order-in-council of landless bands such as the Qalipu Mi’kmak First Nation (2011). The Registered Indian population is now at least 40% larger because of these legal changes than it otherwise would have been.

An important factor in the growth of the status Indian population is the set of positive economic incentives conferred by Registration, including free supplementary health insurance for all Registered Indians and Inuit, and in some circumstances financial assistance for higher education, exemption from taxation on reserve, and special wildlife harvesting rights. Such benefits can be substantial and are particularly attractive now that the former legal disabilities connected to Indian status, such as not being able to vote, have been repealed. The medical insurance plan alone is worth about $1,200 per person per year. Though social disadvantages of Indian status may still exist, the legal and economic benefits are now substantial enough to create incentives to seek Registered status.

First Nations were established as distinct political communities; but political, judicial, and administrative trends are combining to confer Registered status upon many people who have some degree of Indian ancestry but are not really part of First Nation communities. Ethnic mobility resulting in growth of the Registered Indian population means upward pressure on federal and provincial budgets, because population counts affect Indigenous programming. But expense is not the only concern; these changes also raise a fundamental question: is it justifiable to offer special government benefits solely on the basis of ancestry?

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