It seems an eternity ago, but it was soon after Stephen Harper became Prime Minister that the cry went up from Quebec about a "fiscal imbalance."
Both the Parti Québécois and the provincial Liberals insisted Ottawa had too much money, Quebec (and the other provinces) too little, and Ottawa should do something about this "imbalance."
In those now-forgotten days, Mr. Harper dreamed of a political breakthrough in Quebec. So, among other gestures toward Quebec, he "solved" (his word) the "fiscal imbalance" by transferring money.
Politically, alas for him, this gesture got him nowhere. Indeed, during his second election as Prime Minister, Quebec premier Jean Charest stabbed him in the back by insisting the "imbalance" remained, despite what Conservative campaign literature insisted.
The ballyhooed "imbalance" of Mr. Harper's early years was more rhetoric than reality, but today the imbalance is real and will likely worsen. Across Canada, provincial balance sheets except in British Columbia and Quebec have deteriorated appreciably while Ottawa looks forward to a long string of surpluses.
The decline in oil prices has hammered three provinces. Saskatchewan remains in surplus ($107-million), but oil revenue declined by $661-million from the previous year.
Newfoundland saw offshore royalties, which accounted for 20 per cent of provincial revenues, slump by $650-million. Red ink in the form of a $1.1-billion deficit is predicted for 2015-16 after a $924-million deficit in 2014-15. A surplus has now been pushed back to 2020-21.
Manitoba, where deficits appear to have become chronic, will have a $422-million shortfall this year, after a $424-million one in 2014-15. The NDP government drew $105-million from the province's rainy-day fund, leaving only $155-million in a fund that had $864-million in 2009. A balanced budget has been pushed back to 2018-19. The NDP will quite likely lose the next provincial election. Who knows how the Conservatives would govern?
Alberta will have nothing but hard choices to make unless oil prices rebound, which they are unlikely to do for some time. Alberta, of course, has swung from surplus to big deficits, a fiscal challenge the new NDP government must confront.
As for Ontario, the Kathleen Wynne government predicts a return to balance in two years, after piling up deficits of about $10-billion last year and $8-billion this year. Ontario's debt burden is worsening all the time, courtesy of many more years in deficit than surplus.
Nova Scotia has a $98-million deficit this year, but that forecast is built on a very rosy outlook for economic growth of 2.7 per cent. New Brunswick is almost a basket case with a $476-million deficit this year after six straight years of deficits.
This leaves British Columbia and Quebec as bright fiscal spots. B.C. expects a surplus of $284-million this year with surpluses for two years thereafter. Perhaps the biggest change has occurred in Quebec, where deficits were endemic until Premier Philippe Couillard arrived in office determined to end them, which his government did this year.
With most provinces in deficit, some of them heavily, higher taxes are the order of the day, from a rise of two points in the sales tax in Newfoundland, to an increase of the capital tax on financial institutions in Manitoba, to higher taxes on the better off in Ontario and New Brunswick.
The fiscal pressure on provinces, alas for some of them, will likely intensify, according to a report from the federal Parliamentary Budget Office. The Harper government will shortly reduce health transfers from an average increase of 6 per cent a year to something in the 3-to-3.5-per-cent range.
The result will whack provincial budgets, according to the PBO, and render their long-term fiscal situation "unsustainable." Meanwhile, the PBO predicts clear fiscal sailing for Ottawa. Now, there's a "fiscal imbalance" in the real world as opposed to the make-believe situation of a decade ago.
The Conservatives, if asked about this situation (and they have not been asked), would likely insist that they have been better managers of the public purse than provinces. Learn from us, they might brag, except that many of the services provided by provinces are very labour-intensive such as health, universities, K-12 education, police, welfare, whereas Ottawa writes a lot of cheques.
Those provincial services cost oodles of money. For the foreseeable future, many provinces will be stressed to find it.
Eds Note: An earlier version incorrectly said Nova Scotia's forecast growth of 2.7 per cent this year was higher than the national forecast rate. In fact, the forecast for the nominal national GDP is higher at 4.1 per cent.