$2.7B employment insurance surplus balanced Joe Oliver's books

Remember two decades ago, when surpluses in the employment insurance fund started giving the Chrtien government billions in extrarevenue to repay debt, cut taxesor fund other things?

For two years only just until 2017 those days are back. And howconvenient: it's just enough to nudge Joe Oliver's books into the black in time for this year's election.

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The last recession dipped the EI account balance into the red, accumulating a deficit of $9.2 billion by 2011. But as of 2015, that's paid off.

Arate freeze by former finance minister Jim Flaherty in 2013ostensiblyto protect employees and employers from morerate increases is keeping contributions higher than necessary to maintain that balance.

That translates intoan extra$2.7 billion for2015-16. Without it, Stephen Harper wouldn't have his balanced budget.

Next year, it'll be worth$1.4 billion extra.

Thenstarting in2017, contribution rates will be based onaseven-year "break-even" formula. Premiums will drop to a level that keeps the account in balance, not surplus.

The overallgoal? More transparent rates. And an end to multibillion-dollar dipping intoEIfunds to finance the ambitions offuture governments.

But first, a final windfall.

'Slush fund needs to stop'

The Canadian Federation of Independent Businesswas among those"screaming and yelling" aboutpayroll tax unfairness.

But president Dan Kelly says that while his members want lower premiums, they understand you needsurplus years to balance outdeficits.

"I am generally supportive of the government's approach," Kelly said, "and I say that with a bit of a heavy heart, because this year and next, because of this new formula, rates are not coming down as much as they could come down, and so the economy is missing out on that benefit."

"Right now, the EI surplus is subsidizing the books of the government of Canada, I think that's a fair statement," Kelly said.

But by that logic, in badtimes the government subsidizedthe EI account.

"That's why we haven't been lighting our hair on fire on this," he said, emphasizing that consistent rates are what counts.

Kelly saidhis group asked for a chart in the budget totrack the EI accountover time. (And sure enough, there is one.)

"We wanted to have that accountability," he said. "EI has been used as a bit of a slush fund for decades and that needs to stop."

Election 'jiggery-pokery'

Liberal deputy leader Ralph Goodalesaidthat while in theory the idea of a seven-year rate-setting mechanism is anti-cyclical stabilizing rates over time rather than making them rise and fall with economic fortunes the way the Harper governmentimplemented thiswaspro-cyclical, making things worse at a time when job creation was supposed to be the priority.

"This is not a time to playjiggery-pokerywith EIrates," he said.

Leading up to 2013,the revenue from payrollpremiumsincreased by$600 millionin each of the years 2011, 2012 and 2013. Then premiums were frozen at that "artificially high" level. Add it together up to2017 and you've got$14.4 billion in additional revenue for the Harper government, Goodalesaid.

The former Liberalfinance minister who also enjoyeda hearty EIsurplusin his budgeting days a decade ago saidTories have "used it in such a shameful fashion, all the while proclaiming that they weren't."

"This one was deliberately contrived to suit their election timing," he said."It wasclearly intended to pad the government's books."

Come 2017, Finance Canada confirmed Friday it will not applyits five cent cap on premium increases or decreases. Instead,premiums are expected to drop more substantiallyfrom $1.88 to $1.49 per $100 of insurable earnings tobeginthenew break-even strategy.

"They'll drop the rates in a dramatic fashion and say 'Oh my! What a good boy am I!" Goodale said,

'Almost like a tax'

The Canadian Taxpayers Federation isdisappointed that the governmentcontinues to treat EI surpluses likegeneral tax revenue.

"The current government is not going quite [as far as previously], but the principle is the same," said federal director Aaron Wudrick.

"Our big fear is that governments become dependent on it, and start to bake it into their assumptions," he said.

Extrarevenuerisks government "getting a little loose" withspending, Wudrick said. But ifsurpluses wereused to pay down debt, he'dsupport that.

"Some people might argue that it's not a big deal that it goes into general revenue," he said. "But we think it is reasonable that the government be honest about what it's doing with the money."

In 1998, former Reform party critic MonteSolbergtold thenfinance minister Paul Martin the government had a "moral obligation" to pay backtheextra billions belonging to the"waitresses and plumbers and all those people who have contributed to the EI fund."

Few Conservatives ofSolberg'svintage are left to feel discomfort now that the shoe is on the other foot.