Alternative federal budget 2026-27: First Nations

This is from a larger publication, Alternative federal budget 2026-27: Bridge to independence

Introduction

Federal, provincial and territorial governments are fast-tracking infrastructure and resource development on First Nations territories using processes that specifically bypass or exclude them, circumventing their unique rights and interests. This reflects ongoing patterns in which First Nations are positioned as stakeholders rather than rights holders, limiting meaningful participation in decisions that directly impact their communities and lands.

The way forward is to establish robust mechanisms to ensure that development proceeds in a way that benefits industry and all orders of government, including First Nations, and in a manner that respects First Nations’ rights.

This chapter is focused on the following:

Investing in First Nations students, workers and businesses to ensure they are supported and prepared to participate as full partners to development in their territories.
Establishing mechanisms that ensure First Nations’ participation in and economic benefit from those projects.

Doing so would support the broader pursuit of First Nations’ fiscal autonomy, self-determination and the opt-in statutory funding regime that is necessary to establish the New Fiscal Relationship (NFR) between First Nations and Canada. These actions would also reduce long-term costs associated with litigation, mediation, project delays, environmental remediation and court-ordered compensation.

Overview

As Canada seeks to become a global energy superpower, it has chosen not to treat First Nations as partners. Noting commendable exceptions such as the first two guarantees under the federal Indigenous Loan Guarantee Program (ILGP),¹ Canada is not leveraging First Nations business acumen, expertise and knowledge of their lands and waters.

This won’t work. No development project will succeed long-term if it does not obtain First Nations’ free, prior and informed consent. These requirements are enshrined in instruments like the United Nations Declaration on the Rights of Indigenous Peoples² (UN Declaration), which provides that:

Article 23: Indigenous peoples have the right to determine and develop priorities and strategies for exercising their right to development, to be actively involved in economic programs that affect them, and to administer such programmes through their own institutions.

Article 32(1): Indigenous peoples have the right to decide how their lands, territories, and resources are developed and used.

Article 32(2): States must consult and work in good faith with Indigenous representative bodies and obtain their free, prior, and informed consent before approving projects that affect their lands or resources, especially resource extraction.

Article 32(3): States must provide fair remedies and take steps to prevent or lessen environmental, economic, social, cultural, or spiritual harms caused by such activities.

Reconciling with First Nations is the surest way to secure sustainable economic growth. The recommendations at the end of this chapter outline how Canada can effect economic reconciliation through investments that advance First Nations’ education, skills/training/certification, procurement, employment and entrepreneurial opportunity, and fiscal autonomy.

Health and socio-economic outcomes depend largely on social and environmental determinants,³ with income, income security and educational attainment considered to be among the most important. First Nations have also always known that language, cultural continuity and self-determination are also among the most important determinants.

As former Truth and Reconciliation Commission of Canada Chair, The Honourable Murray Sinclair, famously said, “Education is what got us into this mess and education is key to getting us out of it.” Sinclair also observed that education did not merely fail First Nations. It was central to creating the conditions that produced and sustain intergenerational poverty, housing and infrastructure gaps, and economic exclusion. Education and gainful employment are the key to dismantling longstanding barriers to health, wellness and economic self-determination.

The new fiscal relationship

In 2016, the Assembly of First Nations (AFN) and Indigenous Services Canada (ISC) agreed to establish initiatives that would advance First Nations’ right to self-determination and support efforts to close persistent socio-economic gaps.

The creation and uptake of New Fiscal Relationship (NFR) 10-year grants represents significant progress in economic reconciliation. This is a successful first step in the transition to fiscal autonomy for First Nations because it provides more flexibility and predictability in how First Nations governments can use funding to address their priorities. It consolidates and escalates program funding for the areas enumerated in section 6(2) of the Department of Indigenous Services Act,⁴ including health, infrastructure, economic development, education, and governance through Band Support Funding (BSF) and other Indigenous governance and capacity supports provided by ISC.

By the end of 2024-25, ISC had provided more than $6.5 billion in NFR grants to 160 First Nations.⁵ By 2026 there were 191 recipients,⁶ 173 of which are First Nations. Average grant escalation was 4.9 per cent, adding $48 million to recurring recipients. However, the Office of the Auditor General of Canada reported in May 2026 that, over a period of 10 years, ISC had not effectively implemented, monitored or assessed the NFR initiatives it had committed to. These included replacing the Default Prevention and Management Policy⁷ and the development and implementation of a mutual accountability framework that would be centered on measurable outcomes for closing socio-economic gaps between First Nations and other Canadians.

The Joint Advisory Committee on Fiscal Relations (JACFR)⁸ has outlined many more elements of the NFR, that remain unimplemented. Among these are building First Nations statistical⁹ and fiscal policy¹⁰ institutions and establishing a First Nations Auditor General.¹¹

It is in Canada’s interest to prioritize the ongoing transition to the NFR. Ultimately, that means implementing JACFR Recommendation 11, developing a regime of optional statutory transfers to be made available to First Nations governments, where eligibility for those transfers is tied to a commitment to collect and share statistics and to be subject to performance audits by a First Nations Auditor General.

Meanwhile, Band Support Funding is the key source of capacity support for First Nations governments and funding for community-based professional personnel. This funding is a core constituent of NFR grants. Although NFR grants ease reporting and provide escalation, funding still falls far short of actual governance needs.

A recent AFOA Canada report¹² on modernizing Indigenous governance and capacity programs reconfirmed what First Nations have long expressed: funding is well below the level of actual expenditures in each of the ten governance functions ISC recognizes. Further, it does not account for the seven additional functions of modern governance: human resource management; information management and technology; robust financial management systems; creation and implementation of laws, bylaws and codes; community planning; and accountability and community engagement processes.

Current funding only meets, on average, 30 per cent of First Nations’ financial governance needs. An immediate tripling of BSF is warranted.

Canada must also:

Support more First Nations to qualify for the NFR grant.
Before the first 10-year grants are up for renewal in 2029, create an optional regime for eligibleFirst Nations to graduate into a statutory funding arrangement rather than renew.

First Nations Benefits Sharing Framework

To supplement this federal funding, industry and all orders of government should work to develop a First Nations Benefits Sharing Framework (FNBSF) that guarantees First Nations’ participation and revenue-sharing in all projects occurring in their territories. This is not only to support fiscal autonomy for First Nations, but to ensure Canada is successful in its nation-building ambitions. It is true partnership with First Nations that will improve project certainty, avoid delays, and promote the increased foreign direct investment and competitiveness in global energy markets that Canada aspires to.

Education and labour market initiative

The First Nations Labour Market Initiative (LMI) pilot, under the Indigenous Skills and Employment Training (ISET) Program, is a critical tool for strengthening employment strategies and advancing economic development in First Nations. By filling longstanding data gaps, the project equips communities with accurate, First Nation-specific labour market information to identify workforce needs, design training programs, and create targeted employment strategies that support long-term growth, wellness and self-sufficiency.

In value-for-money terms, the LMI represents the best-known strategy¹³ for addressing First Nations-specific challenges with respect to labour productivity, unemployment and underemployment. Transitioning the pilot into a national, permanent component to the ISET Program would go a long way to closing the educational attainment rate, employment rate, employment income, and employment productivity gaps between First Nations and non-Indigenous Canadians. The Centre for the Study of Living Standards has estimated cumulative GDP gains of $457 billion by 2041 if Indigenous labour outcomes improve.¹⁴ Other estimates¹⁵ project a $26.7 billion annual GDP increase and $6.7 billion in net fiscal benefits from fewer people living on low income.

First Nations procurement authority

Adequate labour information and training will only add to the fact that First Nations are poised to participate more fully in the domestic and global economies and to contribute to Canada’s nation-building ambitions. Since 1996, the Procurement Strategy for Indigenous Business has been well-intended but largely ineffective in advancing First Nations’ economic participation. Efforts to ensure that a minimum five per cent of the total value of federal contracts is held by Indigenous businesses have been characterized primarily by fraud and lack of due diligence. This has been documented extensively, including by the Office of the Auditor General of Canada and the Procurement Ombud,¹⁶ who recently summarized the Procurement Strategy for Indigenous Business as a “cascading failure.”

The way forward is First Nations–led certification and procurement support. The First Nations Procurement Authority (FNPA) was incorporated in May 2025. All levels of government and industry should commit to supporting and partnering with the FNPA and to attaining a five per cent First Nations procurement target.

This, alongside other investments in First Nations education outlined in the actions listed below, will support First Nations workers and businesses to contribute to the One Canadian Economy as well as the global economy.

Actions

The AFB will increase Band Support Funding to $1.329 billion per year (5.06 per cent escalator) beginning in 2027-28 to support the modernization of governance funding and the New Fiscal Relationship (NFR) transition.¹⁷

The AFB will invest $65.68 million in contributions annually to First Nations Indigenous Skills and Employment Training (ISET) agreement holders, to transition the First Nations Labour Market Initiative (LMI) pilot into a fully funded national program that includes all 95 First Nations ISET agreement holders.

The AFB will invest $36.6 million over five years to support the operations of the First Nations Procurement Authority in delivering a national certification and procurement support system. Further, it will commit all federal departments and new entities like Build Canada Homes and the Build Communities Strong Fund to achieving a five per cent target for genuine First Nations procurement.¹⁸

The AFB will establish new, reliable financing mechanisms for First Nations to better address housing and infrastructure needs, including $200 million per year over 20 years to establish a dedicated Infrastructure Monetization Program.¹⁹

The AFB will renew and double the Indigenous Community Infrastructure Fund to $8.6 billion over four years and include a First Nations-specific stream.

The AFB will renew the $2.4 billion over five years announced in budget 2022 to support First Nations on-reserve housing.

The AFB will enhance funding for First Nations education infrastructure to meet safety and overcrowding standards and adhere to best practices in asset management with $2.59 billion in operations and maintenance funding and $5.76 billion in capital funding to construct, operate, and maintain First Nations schools and teacherages over the next five years.²⁰

The AFB will establish a new permanent First Nations adult education program to close the secondary school attainment gap, reduce poverty and increase employment opportunities for First Nations adults. This stream of funding would replace the time-limited $350 million over five years investment announced in budget 2021. It would amount to $194 million per year.

The AFB will ensure reliable access to education for First Nations by investing an additional $1.52 billion over five years to replace aging school buses.

The AFB will restore and enhance First Nations elementary and secondary education with $4.23 billion over five years to sign Regional Education Agreements and cover the true costs of First Nations education.

The AFB will renew and expand the sunsetted funding for Indigenous Languages Act section 8 & 9 agreements with a total of $233 million over five years. These agreements allow First Nations and First Nations organizations to enter into collaborative agreements with the federal government and provincial and/or territorial governments (tripartite) to advance language revitalization efforts.

The AFB will renew and increase Specific Claims research funding to $35 million per year over five years as called for by the First Nations-in-Assembly through AFN Resolution 57/2025, Condemning Canada’s Specific Claims Research Funding Cuts.

The AFB will:

Initiate a constitutional review of the Natural Resources Transfer Agreements and their equivalents in other provinces and territories, for compatibility with section 35 of the Constitution Act, 1982.
Work with First Nations and their representative institutions to develop a First Nations Benefits Sharing Framework (FNBSF) that guarantees participation and revenue sharing for First Nations in the development of infrastructure and natural resources on their territories.
Commit $142 million over five years to support these activities, which are of a scope and scale akin to the Royal Commission on Aboriginal Peoples.²¹

The AFB will enhance the recently renewed Pacific Salmon Strategy Initiative ($412.9 million over five years) to the $647 million announced in budget 2021. The additional $234 million will be dedicated to First Nations-led initiatives for the long-term protection and restoration of both Atlantic and Pacific salmon.

The AFB will invest $25 million per year for two years to support First Nations’ engagement in the development of Canada Water Agency legislation, policies and programs. This will include the modernization of the Canada Water Act and a National Water Security Strategy.

The Monitor

Our Schools/Our Selves

Alternative federal budget 2026-27: First Nations

Introduction

Overview

The new fiscal relationship

First Nations Benefits Sharing Framework

Education and labour market initiative

First Nations procurement authority

Actions

About the author

Alternative Federal Budget Working Group

Alternative federal budget 2026-27: Health care

Alternative federal budget 2026-27: Veterans

Alternative federal budget 2026: First Nations

Budget fédéral alternatif 2026 : Premières Nations

Alternative Federal Budget 2020

Budget fédéral alternatif 2020

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