Ontario Joins ‘Have-Nots’, Gets First Equalization Payment

Worth A Look, Equalization, Frontier Centre

TORONTO — Ontario received its first equalization payment in history Tuesday, banking a $14.46-million federal transfer and officially inaugurating a “have-not” era for the once-mighty province.

The payment is the first of 14 that will total $347 million in equalization for Ontario this fiscal year. Critics said the latest development is another reason the much-maligned system should be totally rewritten or abolished altogether.

“We’ve lost all sense of fairness and reasonableness on these transfers within Canada,” said David MacKinnon, a former senior bureaucrat and bank executive who is one of equalization’s most vocal critics.

MacKinnon said while Ontario, Alberta and British Columbia are reeling from the effects of the recession, taxpayers from those provinces are funding relative prosperity elsewhere.

Unemployment in the three big provinces rose by 36 per cent, 72 per cent and 69 per cent respectively over the past 12 months.

The increases in other, equalization-receiving provinces were much smaller. Prince Edward Island saw unemployment rise by a relatively paltry seven per cent over the same period. Quebec (13.4 per cent) and New Brunswick (12 per cent) also fared much better than the three main contributors to equalization.

“The situation is so serious that (Ontario, Alberta and B.C.) are expected to provide enough funding to effectively insulate these jurisdictions from the impact of the economic crisis,” said MacKinnon, a former CEO for the Ontario Hospital Association. He noted 40 per cent of Manitoba’s budget is funded by federal transfers while its public sector is 50 per cent bigger than Ontario’s on a per-capita basis.

Premier Dalton McGuinty and Finance Minister Dwight Duncan both ridiculed predictions of Ontario’s descent into ‘have-not’ status one year ago.

Now they say Ontario is being bailed out “with our own money,” complaining the province (through its taxpayers) sends close to $20 billion more to Ottawa than it receives in transfers each year.

“We’ll be getting a tiny portion of our own money back this year,” said Alicia Johnston, a spokeswoman for Duncan.

Equalization was introduced in 1957 as a means of transferring wealth from the richer to poorer provinces. The goal was to have equivalent public services in all jurisdictions.

The last time Ontario – which for more than 50 years has provided the lion’s share of funds transferred to poorer provinces – came close to receiving payments was in the late 1970s, the rules of the program were suddenly changed.