(OTTAWA) The federal government is considering extending equalization payments to provinces until 2029, as part of an omnibus motion in Parliament that aims to implement budget measures.
Some provincial politicians criticized the Liberals in 2018 when they used a budget implementation bill to bury plans to extend the current formula until 2024.
The latest promise of another five-year extension appears on nearly 200 pages in a more than 400-page “ways and means” motion tabled in the House of Commons this week.
The government makes annual equalization payments to the provinces based on their ability to raise revenue, which means that contributions are necessarily unequal across the country – unlike payments such as health, which are paid on a per capita basis.
Saskatchewan Premier Scott Moe has proposed changing the equalization formula to be paid on a per capita basis, but the idea has caught on at the federal level since he proposed it for the first time in 2018.
In a statement, Saskatchewan Finance Minister Donna Harpauer said the province raised concerns about equalization at a meeting between federal, provincial and territorial finance ministers earlier this year.
“A number of provinces have asked to be consulted further, and it is disappointing that the federal government is moving forward with these changes without additional consultation,” the minister said.
Ms. Harpauer said the province had proposed a number of improvements to the way equalization payments were calculated, but none of those suggestions were taken on board.
“It seems that these fundamental questions have not been addressed, which again is very disappointing,” she said.
Quebec received $14 billion in equalization payments for fiscal year 2023-24, followed by Manitoba, Nova Scotia, New Brunswick, Prince Edward Island and Ontario for amounts received as equalization payments in 2023-2024.
The Government of Alberta is developing an equalization policy paper following a 2021 referendum in which nearly 62% of voters in the province said Canada should remove equalization from the Constitution.
Trevor Tombe, professor of economics at the University of Calgary, explains that the equalization program is at the heart of the concerns of the people of Alberta.
“Many people in Alberta, including the government, see equalization as a symbol of the other challenges of the federation,” he said. It is fair to say that the current Prime Minister would equate issues such as pipelines and energy policy with equalization. »
“These ongoing federal attacks on our economy and our provincial rights cannot go on,” she said at the time.
According to Mr. Tombe, the case for fundamental equalization reform is growing stronger as economic pressures across regions become increasingly unequal, in part due to aging populations.
“Right now we don’t really have fiscal arrangements that allow serious thought to be given to how to support regions that are aging much more than others,” he said, quoting the provinces of the Atlantic as a region where demographic development poses problems.
“The fiscal capacity of older regions might struggle to keep up so we need to think about ways to support them, and equalization is a natural way to do that,” he added.
Like many other federal fiscal envelopes, equalization payments have traditionally been decided on the basis of five-year cycles dating back to the 1940s. The most recent significant change occurred after the 2008 financial crisis, when Ontario started qualifying for the payments.
Since then, minor technical changes have been made to the formula, but no major reforms have been undertaken.
If the current formula stays in place until 2029, it will be one of the longest periods that the formula would not have undergone major changes.
