OTTAWA – For the first time in a decade, Ontario will not receive an equalization transfer from Ottawa, prompting the provincial finance minister to appeal to the federal government to review how the program is installed.
Canada's finance ministers are in Ottawa for the second of its two annual meetings, which began with a work dinner at an Ottawa hotel on Sunday night.
Just before dinner, Federal Finance Minister Bill Morneau publicly announced the amount of money Ottawa will transfer to the provinces and territories in 2019-20, including nearly $ 20 billion in equalization.
It is almost $ 880 million this year, but this amount will be divided into just five provinces – Quebec, Manitoba, Nova Scotia, Prince Edward Island and New Brunswick. For the first time since the 2008 recession, Ontario has put the province of Ontario on the list of provinces that have no province. Ontario is not among them.
Quebec, on the other hand, is receiving more than $ 13 billion from the program, an increase of almost $ 1.4 billion.
Technically, Ontario's economic growth was good enough in 2016-17 to force it out of non-ter status when the province's finances are considered below average and qualify them for equalization. However, because of the way the program works, Ontario still received $ 963 million in 2018-19.
Of course, we are calling the feds for an analysis of their federal transfer payments because we want to make sure that Ontario businesses and families are getting our fair share
The government was well aware that it would not qualify this year for equalization, but Finance Minister Vic Fedeli said it is further evidence of why the equalization program needs a general overhaul. He said that Ontario will contribute $ 8 billion to equalization and will not get any of it. Overall, Ontario will give Ottawa $ 12.9 billion more in taxes than federal spending, he said.
"So we are inviting the feds to an analysis of federal transfer payments because we want to ensure that Ontario businesses and families are getting our fair share," Fedeli said.
Alberta, Saskatchewan and Newfoundland also called for changes in the formula.
Morneau said the formula was renewed earlier this year for a period of five years after extensive discussions of his department, but he knows that the formula will be raised at the table.
"The removal of Ontario from this program is a reflection of positive economic results sustained in Ontario and I hope that is generally positive, but it will almost certainly be a discussion," said Morneau.
Morneau added that the program is just one of the ways Ottawa helps the provinces with their finances, pointing to a stabilization program that has helped Alberta and Newfoundland to go through a difficult phase in recent years.
Ontario's exit from this program is a reflection of positive economic results sustained in Ontario and I hope this is generally positive, but it will almost certainly be a discussion
He also suggested Ottawa's decision to spend $ 4.5 billion to buy the Trans Mountain pipeline to secure its expansion as another aid program for the province, made to try to help Alberta overcome the challenges of putting its oil in the market. He did not mention the fact that the expansion is suspended pending further environmental and indigenous consultations after the Federal Court of Appeals has breached the original federal approval.
Quebec's Finance Minister Eric Girard said Quebec has 22% of Canada's population but accounts for 19% of its economy, and that's something his new elected government wants to change. Girard said the Avenir Quebec Coalition wants to see the need for Quebec's equalization to fall as it works to improve its economic position but said that it will take some time.
Fedeli also said that although carbon taxation was not on the agenda, he would make sure it was discussed. Ontario and Saskatchewan are challenging in court Ottawa's plan to impose a carbon tax on their provinces next year.
Fedeli and Saskatchewan Finance Minister Donna Harpauer wrote to Morneau last week asking her to do an economic impact analysis of what the carbon tax will do, particularly when companies pay more for contributions from the Canada Pension Plan . CPP's long-planned expansion begins next month, with contributions from employees and employers increasing over the next five years, so the program can increase benefit payments.
Morneau said companies will see a decrease in their employment insurance payments at the same time, and he said that as Ottawa is returning carbon tax revenue for individuals, there should be no economic impact.
With files by Andy Blatchford