Ottawa has quietly renewed the equalization formula to keep it in its current form to 2024, but the move seems to have caught those looking for changes to the sometimes contentious federal program off-guard.
Provinces such as Saskatchewan and Alberta – “have” provinces under equalization still suffering lingering economic effects as a result of a sharp downturn in oil and gas sector activity – said this week they are looking for modifications to the program.
But federal Finance Minister Bill Morneau’s office said a five-year renewal of the program, mostly in-line with the formula that exists today, will come into force in April, 2019, after the Budget Implementation Act received royal assent on Thursday. His office said Ottawa’s intention to renew the program was clearly communicated to the provinces.
From the archives:
The news could ratchet up tensions at a finance ministers meeting convened to discuss trade and global competiveness issues in Ottawa on Tuesday. But Dan Lauzon, a spokesman for Mr. Morneau, said federal officials have stayed in close contact with provincial counterparts.
“The process of renewal began long ago, and provinces and territories were consulted and kept informed every step of the way. It was on the agenda and discussed at the political level at the finance ministers meeting in December,” Mr. Lauzon said. He added there was mention of the renewal in the February federal budget, in letters to provincial finance ministers, and specifics were laid out in the Budget Implementation Act.
However, the renewal seems to have caught some western provinces unawares. Saskatchewan Premier Scott Moe announced his province’s new proposal for equalization this week, and said he wanted it discussed at the summer meeting of premiers next month in Saint Andrews, N.B.
In an interview on Wednesday, the Saskatchewan Premier did not know that Ottawa already had definitively decided the fate of the program for the 2019-2024 period.
“That would be news to me. It’s my understanding that the time for a decision for the five-year review is 2019,” he said when informed that Mr. Morneau’s office had said the equalization formula will remain as it is to 2024.
Later, Saskatchewan officials said the province’s Finance Minister Donna Harpauer indicated both at a finance ministers meeting in December, 2017, and afterwards through correspondence, that the province is not satisfied with a status-quo renewal of the program. In a March response letter to Ms. Harpauer, Mr. Morneau wrote that Ottawa “proposes to maintain the main program parameters,” with some technical changes.
“Saskatchewan was aware that the federal government was in favour of a status-quo formula, but was at no point formally notified of renewal in the federal budget, and we are unaware of anywhere that the federal government has publicly reported that the equalization formula had been renewed,” Jim Billington, press secretary for Mr. Moe, said Thursday. “Further, there is nothing stopping the federal government from listening to the concerns of provinces and revisiting renewal in legislation prior to the April 1st, 2019 renewal date.”
Equalization is a $19-billion federal program that distributes federal cash to provinces and territories with below-average fiscal capacity, to make sure Canadians across the country have access to a similar level of public services. Provincial governments do not pay anything into the program – only federal taxpayers do. There is no official onus on Ottawa to get a green light from the provinces on the scheme.
This year, Quebec will receive the lion’s share of equalization payments, at $11.7 billion. The “have” provinces that receive no equalization payments are British Columbia, Alberta, Saskatchewan and Newfoundland and Labrador.
“Have” provinces with economies strongly linked to resource extraction have expressed concerned that while their citizens have contributed billions through federal taxes to the program, the provinces themselves haven’t benefited properly as their economies have weakened in recent years. Resentment over the structure of the program has grown as major energy infrastructure projects such as the Energy East pipeline and the Trans Mountain expansion have been hindered by opposition from municipal and provincial governments, or protests, in other parts of the country.
Newfoundland and Labrador, where unemployment sits above 14 per cent, doesn’t qualify for equalization – a point its Liberal government often criticized. (Premier Dwight Ball’s office had no comment this week.)
Mr. Moe’s “50-50 Formula” proposal this week sees the equalization program changed so that only half of the monies in the equalization pool is distributed in the same manner as now, while the rest gets distributed on a per capita basis.
In Edmonton this week, Alberta Finance Minister Joe Ceci indicated that he also saw the equalization issue as one open for discussion.
“It has not worked for Alberta, even during the depths of our recession – which started in late 2014 and continued ’15, ’16 and part of ’17,” Mr. Ceci told reporters on Wednesday. “I’d like to see changes to it so that we as Albertans can get a better deal from equalization.”
However, the Alberta government offered no further comment on the renewal of the equalization formula by Ottawa this week.