Feds Should Fix Equalization

Equalization, Frontier Centre, Uncategorized, Worth A Look (historic)

Anyone with even a fleeing memory of Saskatchewan's former battles with Ottawa over equalization might consider Premier Brad Wall utterly mad even for mentioning the topic today, let alone express concern about the federal program.

After all, with Saskatchewan joining the ranks of Canada's "have" provinces on the strength of its high-performing resources sector, and the premier enjoying a level of popularity that's the envy of his colleagues elsewhere, he seems to have little to gain from getting embroiled in a debate over equalization.

Yet, there might be some method to Mr. Wall's seeming madness if his objective is to have the federal government rethink not just the decidedly ill-designed equalization program but also its impact on other cash transfers to the provinces for such things health and social programs.

Premier Wall certainly makes a good point about the equalization formula when he says it benefits those provinces with hydroelectric power generation – primarily big equalization recipients Manitoba and Quebec – more than jurisdictions without such hydro capacity.

"We would say, 'Well, if you've got a lot of hydro that means cheap electricity and the chance to export a lot of it and create a lot of wealth. Maybe you should qualify for less,'" Mr. Wall said recently. "For the same reason that Manitoba perhaps or Quebec doesn't have a lot of oil we don't have a lot of hydro opportunity. … It's no fault of the jurisdictions, but it's a reality and it should be contemplated in the formula."

Hydro power is being recognized worldwide as a great asset and could surpass oil in importance before long.

While his argument isn't new, having been made previously by Saskatchewan under NDP premier Lorne Calvert with some vigour, it's likely at least to now get a somewhat better reception from Prime Minister Stephen Harper.

Unlike Mr. Calvert, Premier Wall isn't arguing for Saskatchewan's oil and other resource revenues to be excluded from the formula as Mr. Harper once had promised to do. Instead he argues that at least some revenue generated by the sale of hydroelectricity should be deducted from equalization payments.

For instance, Quebec is slated to receive $7.4 billion under the $15.4 billion equalization program in 2011-12 while it collects about $323 million from hydro power exports; Manitoba is slated to get $1.7 billion while exporting $398 million in power. Ontario, once Canada's largest contributor to equalization, is slated to receive a hefty $3.2 billion.

Meanwhile, unlike hydroelectricity revenue in Quebec and Manitoba, Saskatchewan's $1.4 billion from the sale of oil counts against the formula. While it might not make much difference in these halcyon days of Saskatchewan, the advantage in terms of capacity building and competitive power rates that Manitoba and Quebec enjoy as a result of the extra federal assistance does and will continue to have long-term implications for this province.

Rather than going out on a limb, the premier is making a defensible case for Ottawa to reconsider a flawed formula, which could free up some scarce federal dollars to buttress other programs that benefit everyone in Canada.

The editorials that appear in this space represent the opinion of The StarPhoenix. They are unsigned because they do not necessarily represent the personal views of the writers. The positions taken in the editorials are arrived at through discussion among the members of the newspaper's editorial board, which operates independently from the news departments of the paper.