By Lorne Gunter
EDMONTON -OK fellow fiscal conservatives (and especially my fellow Albertans), sit down. I’m about to agree with Premier Dalton McGuinty that Ontario is getting the shaft in federal-provincial fiscal arrangements.
Yes, Albertans contribute more — far more per capita — than any other Canadians to transfer and equalization payments. Each man, woman and child in Alberta kicks in $3,000 a year to Confederation’s interregional wealth transfer. Second-place Ontarians contribute $1,800.
But Alberta is at present in a much stronger fiscal position than Ontario. Alberta’s “fiscal capacity” — a province’s ability to raise the money it needs to fund basic services — is by any measure well above the national average, while Ontario’s is slipping.
Albertans personally, too, are much better off. At the beginning of the 1990s, Ontarians’ per capita incomes, for instance, were 115% of the national average. Now that figure has slipped to 103% of the national average and is in danger this year or next of dipping below 100%. Albertans, by comparison are earning about 135%, or more.
I resent my Alberta being Confederation’s cash cow, but I’d be even more upset if it were in Ontario’s position.
It is entirely likely that within the next couple of years, Ontarians will be contributing to equalization payments to Atlantic provinces that have a greater “fiscal capacity” than there own.
Put simply, by 2008 or 2009, it is very likely Ontario will have ceased to be a “have” province in any meaningful sense. Meanwhile, Newfoundland and Nova Scotia, with their burgeoning oil and gas revenues, will have ceased to be “have-nots.” Yet because of the perverse rules (and politics) surrounding federal-provincial funding in Canada, Ontarians will still be sending huge chunks of their incomes to Ottawa each year so the federal government can continue to pour rich equalization payments into Atlantic coffers.
Consider this: When equalization began 50 years ago, the Atlantic provinces had per capita incomes around two-thirds that of the national average, while Ontario had incomes about one-quarter above — a gap of about 50 points. Today, Newfoundland and Nova Scotia have incomes over 90% of the national average, while (as I said above), Ontario’s are at around 100%.
Instead of 50 points, the Ontario-Atlantic income gap today is less than 10 points. Yet federal transfers to Newfoundland and Nova Scotia — equalization, plus health and social transfers– now account for far more of those provinces’ budgets than they did when the income gap was five times are large.
Even though Newfoundland and Nova Scotia have per capita incomes rapidly approaching Ontario levels, Newfoundland gets nearly 60% of its provincial budget from Ottawa and Nova Scotia nearly 40%, while Ontario gets less than 16%.
It’s little wonder than that after all federal transfers are accounted for, Ontario is the least fiscally capable province in the country — the least!
According to Halifax’s Atlantic Institute for Market Studies, Ontario is third in fiscal capacity (behind Alberta and B.C.) “before equalization,” but dead last after. As a result, as my colleague Andrew Coyne pointed out last week, “for 2007-08, Newfoundland’s per capita revenues, equalization included, total $7,094, to Ontario’s $6,631.”
Ontario has 2.7 hospital beds per 1,000 population while PEI has 3.4, Nova Scotia 4.0 and New Brunswick 5.3. It has 30% fewer nurses per capita than the Atlantic-province average and significantly fewer doctors, too.
Remember all this when Newfoundland Premier Danny Williams or Nova Scotia Premier Rodney MacDonald clamour about Prime Minister Stephen Harper breaking the Atlantic Accord.
Harper did no such thing. He told the Atlantic provinces they could keep the Atlantic Accord, which shielded their new resource wealth from equalization calculations, or they could go with the new higher equalization in this spring’s budget, but they would have to count 50% of their resource revenues. They could choose whatever was better for them, and they could switch back and forth between the two formulas each year to maximize.
To call that a broken promise is to take demagoguery to new heights.
Still, Harper’s offer is not generous enough for Williams and MacDonald. They want all their resource income and the higher equalization.
There is no limit to their greed for cash from other provinces, from taxpayers who cannot reach them politically.
Both premiers have argued that since Alberta’s resource wealth is not included in equalization payments, theirs should not be either.
But there is a critical difference: Alberta is not demanding equalization payments. Alberta is not insisting it should get extra funds from Ottawa even though it is booming. It is not, as Newfoundland and Nova Scotia are, insisting the rest of the country still treat it as if Albertans were poor when they are not.
If anything, Dalton McGuinty is being too polite. An Alberta premier in his position would be screaming bloody murder.