Canada's often contentious equalization program has come under fire again.
OTTAWA—Quebec’s finance minister brushed off complaints from Alberta on Monday about his province’s share of the federal equalization-funding pie, calling them pre-election posturing in the Prairie province.
Canada’s often contentious equalization program has come under fire again after the public learned over the weekend that Alberta, despite dealing with a painful collapse in oil prices, once again failed to qualify to receive payments from Ottawa.
The energy-producing province has been struggling with the economic consequences of a global oil-price drop as well as an extra discount on the price of western Canadian crude caused by transportation constraints.
Opposition politicians in Alberta’s legislature and other observers quickly expressed anger that Quebec will see its payment from the $19.8-billion program rise nearly $1.4 billion to $13.1 billion next year.
Quebec will receive two-thirds of the entire national envelope, even though its economy has strengthened in recent years and its government is predicting a budgetary surplus.
In comparison, Alberta is facing several years of deficits. Critics charge that equalization is based on a flawed formula.
“Equalization does not work for Alberta,” said Alberta’s Finance Minister Joe Ceci, at a national meeting of finance ministers in Ottawa.
Quebec Finance Minister Eric Girard said protests about his province’s equalization share are likely louder than usual because of Alberta’s forthcoming provincial election in May 2019.
“The fact that Alberta will be in an election may be raising the volume on the equalization payment,” Girard said.
Girard, part of the newly elected Coalition Avenir Quebec government, said he recognizes and sympathizes with Alberta’s difficult situation caused by the recent plunge in oil prices—which has meant cheaper gasoline for consumers but punched holes in Alberta’s finances. He said he hopes things will improve for the province.
“For me, it has nothing to do with equalization,” he said.
The complex equalization formula is based on a three-year moving average of economic performance, so a province’s have- or have-not status can lag behind economy-altering events. It’s designed to help poorer provincial governments provide public services that are reasonably comparable to those in other provinces.
Girard also defended Quebec’s equalization payment, arguing his province is 20-per-cent less rich than the Canadian average and has the second-highest debt burden after Newfoundland and Labrador. He said Quebec is also home to 23 per cent of Canada’s population, but only 19 per cent of the national economy.
The goal for his government is to improve on all these fronts with the aim of eventually reducing Quebec’s dependence on equalization, Girard said.
British Columbia, Saskatchewan, Ontario and Newfoundland will also not get equalization payments in 2019-20. Alberta and other so-called “have” provinces have been calling for a review of the program, which was renewed last year for another five-year term.
Federal Finance Minister Bill Morneau, who hosted Monday’s meeting, showed no willingness to re-open the equalization formula until its next renewal. He said the system was renewed after a “robust discussion.”
Even with renewal years away, Alberta’s Ceci said there are changes that can be made right away. For example, Ceci said provinces with strong economies should not receive “floor payments” under equalization, loans that go to provinces that are no longer eligible for equalization payments they had been expecting.
And he pitched for help solving his province’s oil-transportation trouble.
Ceci said the entire national economy will benefit if Alberta can get its oil to international markets beyond the United States and he insisted pipelines are the safest way to get crude to ocean ports.
TransCanada Corporation had proposed a $15.7-billion pipeline called Energy East, to carry western crude through Quebec to New Brunswick for shipment overseas—but the company abandoned the project more than a year ago, citing market changes and red tape.
With a shortage of pipeline capacity, Alberta recently announced it will buy rail cars to ship another 120,000 barrels of oil a day. The province has been seeking help from the federal government, but Ottawa has been reluctant to offer financial support.
Following Monday’s meeting, Ceci said he repeatedly pressed Morneau to pitch in.
“It’s Christmas, I’m certainly hopeful that there are some things under the tree,” Ceci said.
Asked about rail cars Monday, Morneau said he believes the most important thing Ottawa can do is focus on long-term solutions such as its purchase of the Trans Mountain pipeline. The goal is to get it expanded and carry more Alberta oil to the B.C. coast.News from © Canadian Press Enterprises Inc. 2016