Moe’s proposal for equalization is ineffectual

(Moe’s) plan is to pretend fiscal capacity doesn’t matter.

It wasn’t long ago that Saskatchewan’s political leaders were largely able to agree on a single, principled position on equalization: That the federal equalization formula should be changed to exclude non-renewable resource revenues.

That position — developed by then-NDP premier Lorne Calvert, and once supported by the federal Conservatives and the then-opposition Saskatchewan Party — evaluated what should be included in an effective equalization system, and questioned how the existing formula was affected by resource production.

From an economic standpoint, it emphasized that a province shouldn’t end up worse off as a result of the sale of its resources — as happened to Saskatchewan under a system which more than clawed back its resource revenues.

And beyond making economic sense, Calvert’s position was also one which could be supported with a viable legal argument.

Equalization is intended to ensure “reasonably comparable levels of public services at reasonably comparable levels of taxation.”

That principle requires the equalization program to consider each province’s fiscal capacity in order to allocate a pool of federal money. And a meaningful difference in the comparability of a province’s revenue — such as the distinction between the structural ability to raise money every year, and the one-time return from the sale of capital resources — fits with the purpose of ensuring the availability of comparable public services across the country.

Unfortunately, Harper reneged on his promise when he took power federally. And Saskatchewan’s provincial consensus was broken once Brad Wall decided his loyalty to Harper far exceeded his interest in planning for our province’s future.

Now, with resource prices having returned to normal levels, the cost of failing to secure a better deal on equalization has become obvious. And as part of his search for external battles to distract from his government’s scandals and failures, Scott Moe is trying to peddle something far less defensible.

Moe isn’t making any argument based on the constitutionally mandated goals of equalization, nor its still-distorted formula. Instead, his grand plan is to pretend fiscal capacity doesn’t matter, and instead allocate half of Canada’s equalization dollars based on nothing more than percapita funding. In other words, try equalization lite — now with 50 per cent less equalizing!

Of course, federal funding aimed at specific service areas is already provided on a per-capita basis. It’s then nonsensical to turn half of the equalization system into the same type of funding mechanism by another name.

While Moe’s scheme can’t be defended based on any coherent principle, it would also produce dubious results in practice. If Moe’s campaign rooted in Quebec-bashing and Western alienation were to succeed, the largest beneficiary would be … Doug Ford’s Ontario, which would take a windfall of over $3 billion in unneeded funding every year.

As for our own finances, under the Calvert proposal, Saskatchewan would have seen a revenue boost of up to $800 million per year. Moe’s scheme would provide less than half that, or $300 million per year.

Meanwhile, Moe’s other gratuitous battle against Ottawa has involved carbon pricing. But Moe could boost our province’s revenues by $800 million every year by setting up either a carbon tax or a cap-and-trade system — which would also enable Saskatchewan to be recognized as a contributing partner on the environment, rather than settling for being a notorious climate change laggard.

Even if we ignored the fact that Moe’s equalization bluster is futile, we’d thus be far better off as a province if he actually made responsible use of his government’s power. And if Moe can’t show reasonable judgment in picking his fights, we’ll need to do better in picking our government.