Canada’s system of fiscal federalism, specifically the program of equalization that divides the country into “have” and “have-not” provinces and transfers revenues from the former to the latter, is fundamentally broken. And, for the first time in my lifetime, some Canadians are finally being given the chance to do something about it.
During next week’s municipal elections, Albertans will have the rare opportunity to participate in direct democracy and vote on the fairness of Canada’s equalization program.
Specifically, they will be asked whether equalization payments should be removed from the constitution.
A “yes” vote will not change the program immediately, but it will send a strong message to the political class that the people are not on board with a program designed to syphon tax dollars away from provinces with diversified economies and funnel them to provinces that are chronically mismanaged and refuse to develop their natural resources.
Dr. Bill Bewick, who runs Fairness Alberta (EqualizationReferendum.ca) tells me that a “yes” vote is the most powerful tool ever given to Albertans.
“Albertans have a hard time getting heard in Canada. One major party takes us for granted, the other writes us off and sacrifices Alberta for the rest of the country. It’s tough for Albertans to get heard,” said Bewick.
“So we need to be creative. It’s far more powerful for the people to speak up. It’s a lot harder to ignore the expressed will of the people, and we hope this will elevate this issue to the top of the agenda in Ottawa.”
I couldn’t agree more.
I’ve been writing about the broken equalization system in the pages of Sun newspapers for nearly a decade. My first column on the topic came in 2013, when I wrote: “equalization should not be a federal welfare program. Instead, it should be a temporary fiscal recovery program to help provinces transition and diversify their economies. Equalization should provide bridge funding to “have-not” provinces on the condition that they bring their fiscal house in order.”
In 2015, I wrote that provinces who refuse to develop their natural resources despite proven oil reserves — notably PEI, New Brunswick, Nova Scotia and Quebec — are rewarded through equalization, while the provinces with the initiative to develop their resources — namely Alberta, Saskatchewan, BC and Newfoundland — are punished.
A few years later, in 2016, I got into a back and forth debate on these pages with former Finance Minister Joe Oliver. We both agreed that the system was outdated, that it punished the “have” provinces and that it was time for an overhaul of the system.
The reason I say it was a “debate” is because I told Oliver that he should have reformed the system when he had a chance.
“(The Equalization program’s) flaws were as self-evident when Oliver was finance minister as they are today. But when the old equalization agreement expired in 2014 and was renegotiated by the feds, Oliver and company cowered to the recipient provinces. They quietly renewed the status quo rather than making the difficult but important changes Oliver acknowledges today.”
Once again on these pages in 2018, I wrote about how even though Alberta was struggling and its economy was in decline, the punitive system still took money from Alberta and distributed it to the other provinces.
“Unemployment levels in Alberta are the highest in decades, one of four Calgary offices sit empty, investors and Canadian energy firms are fleeing the country, and, all the while, Albertans are still being forced to pay equalization transfer payments to the rest of the country.”
I no longer live in Alberta and thus do not get to vote in the upcoming referendum on Oct. 18, but I hope readers of this column in Alberta will send a message to the political class: the free ride is over, Albertans (and indeed many Canadians) are no longer willing to fund this fiscal dysfunction.