A new report is warning that the net debt of the country's provinces, territories and municipalities is on an unsustainable path with health spending set to accelerate along with the aging population.
The parliamentary budget office estimates the net debt of these subnational governments will climb above 200 per cent of the gross domestic product in 75 years unless steps are taken to ease the burden — such as increasing federal health transfers.
The federal budget watchdog says by contrast, Ottawa's books are on a sustainable path and that its net debt is set to be eliminated in 35 years.
The annual report comes out less than a week after Canada's premiers urged Ottawa to boost federal health-care funding so that it covers at least 25 per cent of all health spending by the provinces and territories.
The document says the provinces, territories and cities can get back on a sustainable trajectory by adding a total of $28 billion to their bottom lines this year through options such as higher federal transfers, reduced program spending or increased revenues.
The analysis also found recent policy changes such as the increased universal child care benefit and the expanded limit on tax-free savings accounts will have little impact on the federal government's bottom line over the long term.