5 items to watch for in the federal budget

Last year's budget brought $5.2 billion in cuts to federal government spending, trimming the civil service and projecting future cuts to Old Age Security. With the 2012 budget outlining cuts for the following three years, the 2013 budget isn't expected to hold many additional trims. Finance Minister Jim Flaherty has hinted at some of what will be in the budget.

1. Skills development and retraining money

Last year's budget announced changes to Employment Insurance that came into effect in January, making it harder to turn down work and still receive EI. This year's budget may have more measures to push workers to fill open jobs, particularly those in the skilled trades. As CBC News reported earlier this week, Prime Minister Stephen Harper is worried about those open jobs. Flaherty echoed that sentiment in a letter to caucus.

"There are too many jobs that go unfilled in Canada because employers can't find workers with the right skills," he said in a letter to the Conservative caucus.

"Training in Canada is not sufficiently aligned to the skills employers need."

Expect to see measures in the budget to promote apprenticeships, break down provincial licensing barriers that prevent skilled workers from moving across the country and train or retrain aboriginal workers, older workers, recent immigrants and people with disabilities. This measure may also include taking back some of the $2 billion a year transferred to the provinces now under labour market development agreements, or the federal government could renegotiate those agreements to direct more of the money to include private sector training partners.

There's also a separate category of labour market agreements with the provinces, worth about $500 million a year, that are designed to retrain people who aren't eligible for EI. The government could use this program to turn people toward skilled trades work by using incentives like retraining and personal tax breaks. It could also be a way to target young Canadians with no labour market experience. The national unemployment rate was 7.0 per cent last month, but unemployment for Canadians aged 15 to 24 was nearly twice that, at 13.6 per cent.

Flaherty also noted that, in terms of manufacturing, "There is more we can and will do to support this important sector of the Canadian economy."

2. Money for cities

Last November, Canada's big city mayors hit Ottawa and called for billions of dollars and a 20-year plan to fix the country's crumbling roads and sewer systems. The current Building Canada infrastructure program set up by the Conservatives in 2007 is set to end in spring 2014, leaving room for the federal government to offer a new deal to the cities, which say that for every dollar of taxes Canadians pay, municipalities get only eight cents.

The mayors called for $5.75 billion a year, a $2.5 billion increase over the current funding. They pledged to match that amount, along with the provinces, and said $1 billion of that should be dedicated to fighting gridlock. The Federation of Canadian Municipalities says gridlock costs the economy $10 billion a year in lost productivity.

In the letter to caucus, Flaherty said the government "will do more" to build on investments it's already made in infrastructure.

3. First Nations education cash

Funding for on-reserve education is one of the key issues for Assembly of First Nations National Chief Shawn Atleo, who has repeatedly called for increases. Money for First Nations education has been capped at two per cent per year since 1996, an amount Atleo says hasn't kept pace with population growth and is nowhere near the provincial funding provided for off-reserve schools.

The government promised $275 million for early literacy programs and on-reserve school renovations in the last budget. Some of that money has already been delivered. The Conservatives have also started consultations on a First Nation Education Act, aiming to have a bill ready to go in 2014, although Atleo said in October that he was instructed by the chiefs to reject it. It's possible after a difficult year for the government's relations with First Nations people there could be something in the budget to ease that relationship.

4. Small cuts

Since last year's budget announced cuts over three years, it's not likely Canadians will see large cuts included in this year's budget. But with the government trying to eliminate the deficit by 2015, it's possible Flaherty will find new places to scale back federal programs.

5. Closing tax loopholes

The government has been looking at closing tax loopholes as one method to to address falling revenues and dealt with a handful of obscure loopholes in previous budgets. It may also look at measures to deal with offshore tax dodgers, something Liberal Senator Percy Downe says the Canada Revenue Agency is doing little to address.