Liberal budget generosity stops cold at Alberta
Alberta continues to face discrimination in federal stabilization payment program
The federal budget severely shorted one province even while it uncorked a mighty torrent of spending.
Right, it's Alberta. Such a shock!
The Liberals did not abolish the per-capita limit on fiscal stabilization payments, despite Alberta demands that were backed by all nine other provinces.
“We are gravely disappointed that the federal government once again missed an opportunity to fix the fiscal unfairness of the federation by acting on the unanimous request of provinces to retroactively lift the cap on the fiscal stabilization program,” said Alberta Finance Minister Travis Toews.
This plan is meant to compensate provinces that have severe and sudden economic declines.
Is there a better definition of Alberta's economy today?
But the province has faced federal discrimination in this program since the 1980s, when Ottawa imposed a per-capita limit of $60 on compensation.
Linking payment to population means the big provinces, Ontario and Quebec, would get far more cash from Ottawa for exactly the same revenue loss.
Last December, the Liberals said they would raise the payment to $170 per capita, basically indexing it to historical inflation. This was in the budget released Monday.
But we can restrain the joy. The feds weren't acting to help Alberta. They did it because COVID-19 was suddenly biting hard into many provincial economies.
University of Calgary economist Trevor Tombe has calculated that the provinces now likely to qualify for stabilization are Ontario, Quebec, Alberta, Saskatchewan, and Newfoundland and Labrador.
Magically, the program is more generous just when the big provinces rich in Liberal voters are likely to make their own claims.
Maybe that should be a lesson to Alberta politicians — don't ask Ottawa for anything until Ontario and Quebec want it, too.
Stabilization has another discriminatory twist.
Originally, payment was triggered when a province lost five per cent of its “non-resource revenues.”
Today there's a kind of deductible, explained firmly on a federal website: “A decline in resource revenues is taken into account only if — and to the extent that — the annual decline exceeds 50 per cent.”
No other revenue source is treated this way. The rule makes stabilization payments much more difficult to obtain for the biggest resource provinces.
Toews calls this built-in discrimination against provinces that develop essential resources subject to price swings.
The feds rake in their share of revenue in good times, but when trouble comes they use every trick to limit payments.
All this explains why Premier Jason Kenney has called the new changes to stabilization “a slap in the face.”
It gets worse, though.
Alberta demanded that payments be retroactive to 2015. But the new $170 per-capita payment will only apply for 2019-20 and 2020-21.
Most other provinces will likely be pleased enough with this, since they didn't need the program until COVID-19 flattened their revenues.
Alberta will likely get $750 million for 2020 under the $170 cap. But that will replace only about 15 per cent of the province's revenue loss.
All told, Alberta will be about $6 billion short of federal payments that would be payable back to 2015 with no population cap.
The UCP and the NDP Opposition both want the per-capita limit abolished.
Tombe, one of Alberta's most respected voices on economics, says, “I'm not a fan of any cap because the whole point of a plan like this is to shift the burden to the federal government, which has more capacity to handle the burden.”
Some will say, correctly, that Alberta has received a lot of money from Ottawa for pandemic relief, just like other provinces.
But stabilization is different, and fundamental — it's supposed to be a long-term mechanism that protects a province from catastrophic revenue loss.
Stabilization is rigged. Always has been.
Today, more than ever, the program shows the powerful Liberal impulse to suppress resource development.