James opposes federal proposal to change equalization program
Provinces with high property values would have harder time qualifying for payments
OTTAWA — A decades-old sore spot in the Canadian federation is days away from another flare-up as the country’s finance ministers prepare to discuss potential tweaks to the formula behind equalization payments.
B.C. Finance Minister Carole James said in an interview that the federal government is proposing a change to include non-residential property values as part of the complex calculation.
The adjustment would likely make it more difficult for provinces with property values well above the national average — such as B.C. and Ontario — to qualify as recipients of equalization payments from Ottawa.
Equalization is designed to help poorer provincial governments provide public services that are reasonably comparable to those in other provinces. The program is coming due for its twice-a-decade update before the 2019-20 fiscal year — and since it’s a federal program, Ottawa can make unilateral changes.
Under the current formula, the provinces that received shares of this year’s $18-billion equalization envelope — the so-called “havenot” provinces — included Quebec, Manitoba, Nova Scotia, New Brunswick Prince Edward Island and Ontario. Quebec easily took in the largest share in 2017-18 at $11 billion.
The other provinces — B.C., Alberta, Saskatchewan and Newfoundland and Labrador — did not receive anything through the constitutionally guaranteed equalization program.
The B.C. government warns that going forward, the inclusion of non-residential property values in the formula would make it more difficult for the province to qualify for payments in the event of an economic downturn.
The issue is a top concern for James ahead of meetings Sunday and Monday in Ottawa with her federal, provincial and territorial counterparts.
“We certainly don’t agree with that direction — we’ve seen no research that has shown that it makes sense to change the weighting in the equalization payments,” James told the Canadian Press.
“I’ll certainly be standing up for our province … and telling the federal minister of finance that these aren’t acceptable changes.”
James said the update would mean the formula would deem B.C. to have untapped capacity to generate additional property tax revenue. It’s based on the assumption B.C. municipalities could raise tax rates on properties, she said.
Ontario Finance Minister Charles Sousa said he shares James’s concerns.
Chloé Luciani-Girouard, a spokeswoman for federal Finance Minister Bill Morneau, said Ottawa will listen to the concerns of provinces and territories — and take them “very seriously.”