Plunging oil prices are forcing governments and families in Alberta and Saskatchewan to keep an eye on every bill. One of those bills may come as a surprise: next year’s equalization costs are going up to $499 per Canadian.
Taxpayers in Alberta and Saskatchewan will be paying more, but despite their struggling economies, they won’t be receiving a dime back.
The federal government’s financial projections show the total cost of the program will be nearly $17.9 billion next year. Ultimately, federal money belongs to Canadians and each Canadian’s share of the equalization bill is $499. That’s up from the $488 last year.
Equalization is intended to ensure that each province is able to provide similar services. So, Ottawa takes cash from taxpayers and hands it to the less wealthy “have-not” provincial governments.
While equalization is funded from Ottawa’s communal pot, the benefits are decidedly unequal. Quebecers each get $726 more from equalization than they contribute. Manitobans get $854. Prince Edward Islanders are the biggest winners with $2,108 each.
Ontario gets some money from equalization, but not enough to cover thee per capita contributions and it’s citizens ultimately lose $321 each.
The so-called “have” provinces get diddly squat: Newfoundland and Labrador, Saskatchewan, Alberta and British Columbia. Add up the $499 per capita shares and Albertans lose a combined $2.1 billion while Saskatchewanians loses $565 million.
Even if wealth transfers could be justified with record highs on energy markets, surely we can’t be expected to pay more when prices plunge. If the wealth is to be shared equally, shouldn’t we equally tighten our belts when times are tough?
Years ago provincial governments on the receiving end pointed out that it’s hard to budget when market volatility impacts equalization payments. So the formula was amended to average the numbers over three years. How convenient.
That leaves Alberta and Saskatchewan to deal with the shock of plunging energy prices for years before the equalization program starts to reflect that economic reality.
As for taxpayers in the “have-not” provinces: they’re also paying into equalization on an individual basis. But their governments — not the people — are receiving the payments. “Have-not” taxpayers must ask themselves: is your government giving you bang for your buck? Or is equalization propping up irresponsible spending?
It’s time for a national conversation about equalization and our provincial governments should lead the charge.
“There’s no discussion about any changes (to equalization),” said Alberta Finance Minister Joe Ceci after meeting with fellow federal and provincial finance ministers. “It was an acknowledgement that it’s an important part of Confederation and will continue to be so.”
Saskatchewan’s government is taking a different stance. Premier Brad Wall points out that “have” provinces have achieved much of their success due to resource revenues that are now “suffering mightily.”
“Alberta and Saskatchewan perhaps should be provided some of that (equalization money) back,”said Wall.
Perhaps? Absolutely. But at least Premier Wall is getting the conversation started.
Real reforms are needed. The CTF has proposed transitioning equalization from a federal welfare program to a fiscal recovery program, providing funding to poorer provinces on the condition they make necessary economic reforms, such as using the cash to match provincial debt repayments.
Equalization reform is no easy task, but avoiding the issue in the name of political correctness hurts taxpayers in all provinces.
Paige MacPherson is Alberta director and Todd MacKay is Prairie director of the Canadian Taxpayers Federation.