Equalization system ‘extremely flawed’
The Saskatchewan government is once again criticizing the equalization formula in Canada, with Finance Minister Donna Harpauer saying Monday it is “extremely flawed.”
Nearly $20 billion in equalization is being split among five provinces this year: Quebec, Manitoba, Nova Scotia, Prince Edward Island and New Brunswick.
Quebec will receive the bulk of it — more than $13 billion — prompting the finance minister to say equalization amounts to “redistribution of wealth, basically to one province with a little bit to a few others.”
Harpauer said Ottawa has “brushed aside” concerns with the formula when raised by provinces.
“This particular division we’re seeing on this year’s equalization is pretty stark on how flawed it is,” she said, noting Alberta’s continued and Ontario’s new-found opposition to the current formula.
Based on the basic premise of ensuring all Canadians have access to equitable services, the complex formula will likely not be reviewed any time soon. Earlier this year, the federal Liberal government quietly extended the formula, as it is in its current form, until 2024 as part of a wide-ranging detailed budget bill.
That came shortly after the Saskatchewan government put forth its own proposal for equalization changes, which would see 50 per cent of the current equalization pot the same as it is now, with the remainder of the funds being distributed to the provinces on a per-capita basis.
Equalization has long been a source for outrage in Western Canada, while other federal transfers to provinces (health, social services) generally equal out on a per-person basis.
During the 2019-20 fiscal year, Saskatchewan will receive roughly $1.7 billion from the federal government as a result of federal transfer programs, but none of that money is from equalization. That’s $1,465 on a per-capita basis. Including equalization dollars, Quebec will receive $25.5 billion, or $3,013 per capita.
Harpauer’s comments came in response to federal Finance Minister Bill Morneau releasing the equalization dollars for 2019-20.
He did so ahead of a meeting of Canada’s finance ministers in Ottawa, the second of two yearly meetings. Harpauer did not attend for personal reasons, but officials from Saskatchewan made the trip.
Last week, Harpauer penned a letter to Morneau with Ontario Finance Minister Vic Fedeli asking the federal minister to do a thorough economic impact analysis of what the carbon tax will do, particularly when it comes at the same time as businesses are going to pay more for Canada Pension Plan contributions.
The CPP expansion kicks in next month, with contributions from employees and employers rising over the next five years so the program can increase benefit payments.
Harpauer said she signed onto the letter because, “We recognize there will be an impact, not just to employers but to employees on this” and felt those changes coupled with the introduction of a carbon tax will be too much “piling on at the same time.”