Canada should change the terms of the equalization program to prove to oil-rich Alberta that its non-renewable resource wealth is being used wisely by the have-not provincial recipients, according to Alberta’s finance minister.
Ron Liepert, who delivered a big-spending deficit budget this week based on sky-high oil price and production projections, told a business audience in Calgary on Friday that the economic wealth shift to the West could pose a “real problem federally.”
“If you qualify for equalization, you should have to show some results-based performance,” Mr. Liepert said in a speech to the Chamber of Commerce.
The transfer program, which comes up for renewal in 2014, has long been a point of contention for buoyant Alberta. Premier Alison Redford has said that discussions around equalization have not begun, but that hasn’t stopped her ministers, most vocally Energy Minister Ted Morton, from publicly complaining about the existing accord.
“I think we have to start to put some parameters around it to show that we’re meeting a certain bar,” Mr. Liepert told reporters later. “I get the sense from Albertans that there’s a growing resentment to just continuing to have money flow into other provinces without some accountability behind it.”
Enshrined in the constitution and aimed at addressing fiscal disparity among the have- and the have-not provinces, equalization payments are considered unconditional, which allows the benefactors to spend the money they receive as they see fit. However, Alberta has repeatedly noted that the constitution doesn’t actually spell out how the payments are to be calculated or made.
In 2012-13, six provinces were to receive $15.4-billion in equalization payments, according to the federal Finance Department. They are: Prince Edward Island ($337-million), Nova Scotia (almost $1.3-billion), New Brunswick (almost $1.5-billion), Quebec (close to $7.4-billion), Ontario (more than $3.2-billion) and Manitoba (more than $1.6-billion).
Meanwhile, Alberta this week introduced a 2012-13 budget with $40.3-billion revenue forecast with $41.1-billion in expenses and reiterated its promise to balance the books by next year. By 2014-15, Alberta will post a $5-billion surplus – predicated on estimates that non-renewable resource revenues, primarily the oil sands, will soar.
Mr. Liepert, who will not run for re-election when Albertans go to the polls some time this spring, suggested that $5-billion surplus could look like “literally nothing” as a cash “gusher” comes out of the oil sands. He figured that the surplus could jump into the double-digit billions in the not-so-distant future.
Meanwhile, most observers expect the stampede to the West, which was shown in the census figures released this week, will continue for the foreseeable future. That’s another reason Mr. Liepert believes the equalization formula should be redesigned. He said it’s time to have a conversation about where money is going and whether Albertans support those programs.
“If the wealth is all being generated in one part of the country that flows to another part of the country, that causes some tension sometimes and I think we have to have that discussion,” Mr. Liepert said, “What’s wrong with talking about it?”