28 June 2018
Province Calls for Fairer Equalization Program
Each year at this time we come together to celebrate our country, its identity, our shared values, and our collective good fortune to live here.
Canada is a country that works, but like all countries, Canada is imperfect and one of its enduring imperfections is the federal equalization program. The objective to ensure all Canadians have access to a comparable level of service is commendable, but the program designed to do that is flawed.
Consider how the economies of Saskatchewan, Alberta and Newfoundland have been hit hard by a sharp decline in resource prices. While the impact on government revenues and employment has been significant, all three provinces are ineligible for equalization payments.
Saskatchewan has received no equalization for 11 years and is not expected to receive equalization for the foreseeable future. Over the same period, Quebec received $100 billion, including $11.7 billion this year alone. Equalization has allowed Quebec to pay for public services that in some areas far exceed what is typically provided by other provinces. The money continues to flow to Quebec, even as Premier Philippe Couillard declares that his province “has never been so well off as it is now.”
It is true that provinces don’t pay directly into equalization. However, Canadian taxpayers finance the program through the federal taxes they pay. On average, each Canadian contributes about $500 per year to equalization. That amounts to about $600 million a year for Saskatchewan.
Saskatchewan has received equalization in the past, but what our province has received is less than two per cent of the $430 billion paid out since the program began in 1957, while Quebec has collected more than 50 per cent of the total. This is not fair to Saskatchewan taxpayers.
Your Saskatchewan Party government recently released a proposal calling for a simple change to a complicated formula that would make equalization fairer.
Under the 50-50 formula we’ve proposed, the overall amount of equalization and relative fiscal capacity of each province would continue to be calculated in the same way it is now, using the same revenue sources. Half of the total equalization pool would be distributed on this basis.
The other half would be distributed on a per capita basis, based on the population of each province relative to the other provinces. This would ensure that all provinces receive some amount of funding from the equalization program, while continuing to ensure the “have not” provinces receive significantly more relative to their size, based on their relative fiscal capacity.
Even under this proposal, the benefit to Saskatchewan remains quite small. Saskatchewan would receive about $300 million, or about 1.6 per cent of the overall equalization amount. This is more than reasonable in terms of its benefit to our province.
Unfortunately, rather than engage in meaningful discussions, the Trudeau Liberals have decided to renew the same flawed formula. This means five more years of zeroes for Saskatchewan, Alberta and Newfoundland, while Quebec will continue to receive between $50 billion and $60 billion.
Saskatchewan is offering a simple solution in keeping with the spirit of fairness and generosity that has come to define our nation.
We can build a better equalization program and in doing so, we will build a better Canada.
If you have a question about this Legislative Report or any other matter, just Contact Nadine.
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