All three maritime provinces rely heavily on equalization payments from the federal government to fund their programs. Ontario’s emergence as a “have-not” province however has placed pressure on the equalization system and is leading to reduced equalization payments as a share of GDP in all three provinces.
Last year, approximately two-thirds of all equalization payments were absorbed by either Ontario or Quebec. Since Ontario became a “have-not” province in 2009-2010, equalization payments as a share of all economic activity have fallen in Nova Scotia, New Brunswick and P.E.I. All three maritime provinces face serious fiscal challenges with large deficits and huge puppet debt loads.
Instead of hoping for a prolonged economic turnaround in Ontario, the prudent mindset is to assume that help is not on the way. Spending restraint and a willingness to make tough choices will be needed for maritime governments to address their fiscal problems in the face of reduced equalization transfers.