Wednesday, February 07, 2007

Alberta Firewall Guy Clarifies Equalization Payments

There is a very good op-ed in the Globe and Mail today that clarifies many of facts and the questions around equalization payments from the government of Canada to the so-called have-not provinces. The piece is written by Ken Boessenkool, now GM of Hill and Knowlton Alberta and one of the famous Firewall Letter signatories in 2001.

The myth busting article reflects and aligns with the same reality outlined in an early post in this blog. No wonder I like it.

The Firewall letter was signed by other notables including now Prime Minister Harper, but then he headed the National Citizens’ Coalition. Failed PC Leadership candidate, now Alberta Cabinet Minister, Dr. Ted Morton also signed the letter. It was a letter addressed to Premier Klein recommending that Alberta withdraw from the Canada Pension Plan and set up its own cheaper scheme offering the same benefits. It recommended replacing the RCMP with a provincial police service. Both of these issues were part of the debates in the recent Alberta Progressive Conservative Party leadership campaign.

Other recommendations included Alberta collecting its own income tax and take complete control of Medicare even if that resulted in breaches of the Canada Health Act and withdraw of federal funds to the province for health care. These two recommendations have proven to be non-starters politically and economically in Alberta.

The motivation for the Firewall letter is captured in this sentence from the document: "It's imperative to take the initiative, to build firewalls around Alberta, to limit the extent to which an aggressive and hostile federal government can encroach upon legitimate provincial jurisdiction."

Another telling part of the letter dated January 2001 noted "As economic slowdown, and perhaps even recession, threatens North America, the government in Ottawa will be tempted to take advantage of Alberta's prosperity, to redistribute income from Alberta to residents of other provinces in order to keep itself in power."

Albertans overwhelming see themselves as Canadian even with a core group of about 10% separatist sentiment in the province. The mythology of a federal government plundering Alberta’s resources runs deep in certain sectors of Alberta society. It arises in the ghosts of another National Energy Program or the mistaken assumption that equalization payments are from Alberta resource revenues. The belief that equalization payments are made from federally expropriated Alberta resource dollars. There is no evidence for either of these myths but that rarely matters to some people in Alberta.

It really helps to have people like Mr. Boessenkool clarify the terms and scope of equalization as part of the national conversation, particularly around fed-prov relations and the role equalization plays as part of our Constitution.


  1. The issue is not the source, but rather what the NET OUTFLOW of Alberta dollars flows out of Alberta each year. There are estimates that it is currently between $10 and $12 billion per year.

    I agree that including resource revenues in the equalization formula will not drastically increase the transfers above that $12 billion range.

    If that is not a redistribution of income, I don't know what is.

  2. ken Chapman2:23 pm

    eric, eric, eric...Of course it is redistribution of income - that is the essense of the equalization provision in the Constitution. That is exactly what the program is all about...redistribution.

    Albertans make more money - we pay more taxes as a results. And a larger portion of our tax money goes to the benefit of other Canadians so they can have an equitable level of government services.

    An Alberta making $100,000 per year pays the same contribution to equalization as a Quebecer making $100,000 per year. We just have a larger portion of our population in that tax bracket than they have in Quebec.

    If we were not able to access federal government services on the same equitable basis as other Canadians then we could say we were being discriminated against. That would be a legit argument.

    Surely an Alberta based Prime Minister like Stephen Harper will not be letting that happen. Do you know if we are not getting equitable access to any specific federal services?

    I have argued in an article I did on Senate Reform for the Canada West Foundation that Senate seats are federal service where we do not enjoy equal or equitable access.

    Do we Alberta Canadians withhold the chunk of out taxes to Canada used for equalization until we get an equal Senate? There is a Senate Reform strategy that will get some attention.

  3. btw, I understand that the equalization formula is in the Constitution. Then why would an inclusion of non-renewable resources not require a constitutional amendment?

  4. ken chapman6:17 pm

    eric @ 4:11 pm - the equalization formula is not in the Constitution. It is a constitutional provision section 36 and 36(2) in particular that says Canada is "committed to the principle of making equalization payments...etc."

    The is no formula included in the equalization provisions - as there is for the amending formula.

    We have to muddle through all the detail, in true Canadian fashion, to figure out how we express the committment to "the principle of making equalization payments."

    In that spirit are non-renewal resource revenues in or out of the formula? It all is part of the muddle that we call defining the country.

  5. Thanks Ken. You've helped hear up some confusion regarding equalization.