Hopes raised for equalization compromise

Déséquilibre fiscal

TORONTO - At least some of Canada's premiers are talking compromise as they arrive in Newfoundland and Labrador this week for another attempt to resolve differences over proposed changes to the national equalization program.
''The interests of each province are very, very diverse, there's no doubt about it,'' Newfoundland and Labrador Premier Danny Williams told CanWest News Service on Monday. ''Having said it, if everybody compromises a little bit there's an ability to do a ... balanced solution.''
Williams, who will chair this week's annual premiers' meeting, said the key to a deal lies with ''some enhancement of equalization as well as a commitment to some (additional federal) transfers,'' aimed particularly at post-secondary education and transportation infrastructure.
News reports out of Ottawa suggest the federal Conservatives have arrived at a similar conclusion. Prime Minister Stephen Harper, the reports suggest, is considering trying to win over poorer provinces with a $1-billion boost to the equalization program while placating Ontario and British Columbia with increases in per capita transfers. Income- and corporate-tax cuts are also being considered.
Ontario Premier Dalton McGuinty has vehemently opposed an increase in the $11.5-billion equalization fund established by the federal government for redistribution to poorer provinces so that citizens in all jurisdictions can enjoy roughly the same quality of services at the same rates of taxation.
McGuinty has argued that the equalization fund is big enough and that the federal government should instead put its substantial surpluses into increasing per capita social transfers to provinces for post-secondary education. Currently, Ontario gets only $846 per capita in federal transfers, while the rest of the provinces get $932, except for Alberta, which receives $740 per person.
During that past week, however, there were signs that the Ontario premier is prepared to moderate his opposition to enriching the equalization program as long as the other premiers support him in his campaign for higher per capita transfers.
''Premier McGuinty is willing to talk about where middle ground can be found while still addressing Ontario's issues,'' a government source said Monday.
Another senior Ontario official said McGuinty's tough stand against enriching equalization was designed to get the other premiers' attention so they understood ''we're not going to sit by and watch Ontario taxpayers' money distributed in ways that don't benefit Ontario.
''We travelled across the country to see if there's grounds for consensus here, and we think there is yes.''
For all the talk of compromise, however, Williams conceded there are still some tough issues to wade through.
The sticking points include deciding on what would constitute a reasonable increase in the equalization fund.
''A billion dollars won't cover it,'' Williams said bluntly when asked about the proposals being touted by the Harper government. ''Exactly what the number is has to be decided.''
Also at issue is whether the income of all 10 provinces should be used as the basis for calculating the national average income and, from there, the amount that needs to be redistributed to bring each province up to the same level. Currently, the incomes of only five provinces, not including Alberta, are used in the calculation.
Another contentious issue is whether natural resource revenues read oil and gas should be included in the calculation of the national average. Moving to the 10-province average and including resource revenues would raise the bar for equalization and lead to a major increase in the amount of money to be redistributed.
Alberta Premier Ralph Klein said Monday his province has already compromised by agreeing to a 10-province formula, which would add Alberta's leading wealth to calculations. He said he'd drawn ''a line in the sand'' regarding the calculation of resource revenues, but acknowledged Ottawa could choose otherwise.
''If the feds want to do it, I guess there's nothing to stop them because it's their program,'' Klein told reporters.
Saskatchewan Premier Lorne Calvert said Monday he is not willing to compromise on his opposition to including resource revenues in the equalization formula, but is willing to discuss other aspects of transfer payments and the fiscal imbalance.
Calvert, whose province would lose out on equalization payments if its oil and gas revenues were to be included in the calculation of its overall wealth, said that the final decision on what the equalization formula will look like rests with the Conservatives in Ottawa.
Harper, he noted, promised during the election campaign to exclude non-renewable natural resources from the calculation.
''That position was advanced very publicly by his members of Parliament in Saskatchewan. That's the fair position for Saskatchewan. There's no reason for us to change that position. We think it's the right thing to do. It's something we lobbied for and we expect they'll follow through.
''From Saskatchewan's point of view, the most significant fiscal issue is the matter of equalization,'' Calvert said. ''As members of Parliament have suggested, this could mean upwards of $1 billion to the people of Saskatchewan. I look at the needs we have in terms of more nurses, more highways all of that public call for good work can be much assisted by a fair equalization.''

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