Report suggests Quebec has unfair advantage in Canada’s equalization payment scheme

Another report, this time from the Mowat Centre for Policy Innovation, suggests that Canada's equalization program is unfair.

Equalization was introduced in 1957 as a way to promote comparable public services in all 10 provinces. Essentially, the 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.

But according to the Mowatt Centre report, Ontario deserves more money and so do B.C., Alberta, Saskatchewan and Newfoundland, because the system doesn't account for cost of living discrepancies between the provinces.

"Provinces … differ in their ability 'to provide reasonably comparable levels of public services' because they have to spend different amounts to offer similar services; in other words, because they have different expenditure needs," writes author and equalization expert Peter Gusen.

The Toronto Star did the math:

If the equalization formula factored "need" into it, Ontario would have received an additional $822 million from Ottawa in 2008-09 while B.C. would have been given an extra $879 million.

Alberta, Saskatchewan and Newfoundland, where cost-of-living expenses are growing fast, would have gained $526 million, $332 million and $310 million respectively.

Quebec would be the big loser in this scenario: they would have been given $3.11 billion less that year.

"Ontario and Quebec would receive equally large equalization payments of just over $4.5 billion each," the report states.

"Under the current fiscal capacity-only system, Quebec receives more than twice as much as Ontario, $7.6 billion versus $3.7 billion (in 2009/2010)"

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