Ontario Premier Dalton McGuinty changes tune on equalization payments

When Ontario was a "have province", Premier Dalton McGuinty was forceful in his resolve to kill the federal equalization program.

Now that Ontario is a "have-not" province, he seems to be changing his tune.

Equalization was introduced in 1957 as a way to promote comparable public services in all 10 provinces. The federal program takes federal tax dollars and distributes them to "have-not" provinces with lower per-capita revenue.

Ontario joined the ranks of the "have-not" provinces for the first time in 2009/10 and now is the second-largest recipient of equalization payments in the country with $2.2-billion set to flow into its coffers this year.

Tom Courchene, an economist at Queen's University and a senior scholar at the Institute of Research on Public Policy, told the National Post, "Those other have-not provinces will find themselves increasingly squeezed out of a fixed pot of equalization money as Ontario takes a bigger share of the pie."

In other words, because the amount of money tendered to "have-not" provinces is capped at Canada's GDP growth, the more money Ontario gets the less money other provinces receive.

At the premier's conference in Vancouver this week, the equalization issue is causing tension between recipient provinces.

On Tuesday, McGuinty told reporters Ontario would "assert itself" and oppose any rejigging of federal transfers.

McGuinty said the province will oppose any federal effort to reduce transfers to Ontario, "just as we would be opposed to any effort to increase the size of the equalization package for all the Canadian provinces."

Ironically, in 2008, while Ontario was a 'have' province, McGuinty argued it was time to kill the equalization program.

"The way the federal government spreads money around this country - all the formulas, the calculations, the transfers - all have one core assumption: Ontario's rich and the others are not.

"Well that just isn't the case anymore. Ontario is strong and others are strong, too," McGuinty said. "To speak of 'have' and 'have-not' provinces in 2008 makes no sense. We're a nation of haves these days."

It's interesting to note how three years of fiscal troubles can alter one's thinking.

Have Not Provinces: for fiscal year 2011/12:

Prince Edward Island: $329 million

Nova Scotia: $1.2 billion

New Brunswick: $1.5 billion

Manitoba: $1.7 billion

Ontario: $2.2 billion

Quebec: $7.8 billion

(CP Photo)