Sunday, February 18, 2007

A Perfect Image of Harper's Preferred Supreme Court

If a picture is worth a 1000 words, then an inspired political cartoon is worth 10,000 of them. Cartoonist, deAdder's brilliance shows through and he captures the essence of Prime Minister Harper's end game on Judicial Review Committee political meddling. There is a fine line between laughing and weeping but this cartoon made me do both!

I posted earlier on Graham Thomson, the Edmonton Journal political columnist going to Afghanistan. His piece today puts what is happening and how difficult it is to have a positive outcome for the Afghan people. Staying the course and keeping our eye on the long run is key to being effective. Thanks Graham for the insights and information. Keep them coming.

Kudos to Alberta's Finance Minister Lyle Oberg on his clarity and context on what equalization is and how it works. The Edmonton Journal Editorial Board and mark Lisac's Insight Into Government both comment on Dr. Oberg's enlightened approach this week. I get pretty hard on Dr. Oberg from time to time, but he has busted a Ralph Klein era myth that equalization is somehow a punishment by Ottawa on Alberta. I have posted on this in the past too.
There are real issues of Alberta's role in confederation we need to deal with. Now Lyle has to sit down with his PC Leadership Campaign supporter, Guy Boutilier, the new Alberta Intergovernmental Affairs Minister, and explain how Alberta fits in Canada in terms of equalization, and perhaps otherwise too. Guy's recent comments show he does not get it yet.
UPDATE: FEB 19: Excellent piece by Robert Roach of the Canada West Foundation in the Edmonton Journal today on equalization.


  1. Anonymous3:14 pm

    The Premier himself has stated that he is strongly opposed to the inclusion of resource revenue in the equalization formula? Does Oberg disagree?

    What are the facts about the net flow in(out) of Alberta re the equalization formula? If there is a net outflow of $10bn per year then it is difficult to see how our Premier could argue against such an amount flowing outside of the province's coffers? One may not call it "punishment" but it certainly reduces our province's standard of living.

  2. ken chapman6:12 pm

    Anon @ 3:14
    Resource revenues being included hampers Sask and Nfld mostly but it means nothing to the Alberta government.

    The outflow from provincial coffers is a myth that has been perpetuated by Klein (who seems to never have really understood how equlization worked) and the Reform/Alliance far right, because they were anti-Ottawa in so many ways.

    Even by the current Alberta Minister of Intergovermental Affairs, who also seems to not understand the workings of equalizations given recent media reports of his comments on the subject.

    To state we have a net outflow of $10B from the provinces coffers is the problem because it is not true. The province pays nothing into equalization so there is no provincial "outflow.".

    Canadians living in Alberta pay federal taxes like every other Canadian living anywhere in the country. The federal tax dollars are all that is used to pay equalization. NO PROVINCIAL FUNDS ARE INVOLVED.

    The formula as to what revenues and service levels get used is where the debate is centred. The issue is do we include a volatile commodity like oil and gas in the revenue side becsue we can't really depend on its stablity. It may move the total for equalization payments all over the map as a result...hard to plan for current government operational needs with such variability.

    The 50% of resource revenues being included in the formula to determine equalization is a compromise that seems to have most economists on side.

  3. The AB government may not pay anything into equalization, but if AB receives less we receive back after paying federal tax, then there is an outflow of dollars. In other words, if equalization did not exist, would AB be $10 bn richer each year?

  4. Anonymous8:03 am

    We do get less out of the federal government than other provinces. Whether it is due to the "equalization formula" or another mechanism is moot. Interestingly, as I understand it, the provinces that have debt (that would be all of them, except AB) have their interest payments factored into equalization. So, you are rewarded for going into debt to fund free daycare and the lowest tuition fees in the country (ala Quebec). There is no reward for being prudent, when you use the Fed's cheque-book.

  5. ken chapman10:07 am

    Eric and Anon...The purpose of equalization is to ensure Canadian citizens have equal access to certain public services, regardless of where you live. If there is not enough money locally to create that equality, then Canada makes up the shortfall via equalization payments.

    Albertans have enough local wealth that generates public taxes (known as a "have" province) that it can provide the necessary services without assistance from Canada. The sobering reality is there are only 3 have provinces, Alberta, BC and Ontario and the latter 2 are dodgy in terms retaining that status. This is not sustainable for the good of the country.

    If equalization did not exist, Alberta would not be $10B richer because it has nothing to do with Alberta government revenues.

    Albertans would not be $10B richer as citizens without equalization either because they would still be paying the same rate and amount of tax just as everyone else in Canada. It is just that other Canadians would benefit less if equalization did not exist.

    This is a matter of priorities in public policy spending - not making winners and losers.

    Anon - I don't know if interest costs on provincial debt is calculated in the formula. I do know the Harris government in Ontario used federal funds to reduce taxes instead of increasing services as it was supposed to do. Harris ten borrowed funds to meet the service needs equalization was supposed to address. That presumably would "increase" Ontario's needs for equalization but I am not positive on that impact.

  6. I see your argument regarding a minimum equal level of services, but it is internally inconistent with you view a program like the $5 a day daycare program.

    "If equalization did not exist, Alberta would not be $10B richer because it has nothing to do with Alberta government revenues."

    Okay, it has nothing to do with the provincial revenues BUT much much more money ($10B) is spent by the federal government in other provinces as opposed to AB because it is a have-province. Presumably, if there was no equalization formula, the federal government could cut taxes at the federal level as it would not have to distribute equalization payments to the provinces.

  7. The Journal Article: "Someone earning $75,000 a year in Quebec pays exactly the same amount into the federal coffers as someone earning $75,000 in Alberta. The difference is that the federal government takes some of this money and gives it to the provincial government of Quebec in the form of equalization payments, but not to Alberta."

    That's exactly my point. The federal government, if it did not pay out equalization payments, could reduce the overall federal tax rate. This would be a huge benefit to Albertans.

  8. ken chapman3:56 pm

    eric! This is an admittedly insufficient answer because I am comparing numbers from different fiscal years but an hour search of the Finance Department as only revealed certain things to me. Transparency and obfuscation are cousins in the world of Canadian public financial disclosure.

    Here is the definition of equalization from the Finance site:

    equalization (péréquation).

    Federal transfer program that allows all provinces, regardless of their ability to raise revenue, to provide roughly comparable levels of services at roughly comparable levels of taxation. Eligibility to receive equalization funding is determined by a formula measuring each province's revenue-raising capacity against a five-province standard. Currently, eight provinces receive equalization: Newfoundland, Prince Edward Island, Nova Scotia, New Brunswick, Quebec, Manitoba, Saskatchewan and British Columbia. See Federal Transfers to Provinces and Territories for more information.

    The current questions under review in revisiting the formula - NOT THE CONCEPT - is do we use all 10 provinces and non-renewable resource revenues in the formula?

    Here is what I "know." The Federal Budget revenue was $221B in 2005-06. Equalization was pegged at a minimum payment of $10B (and boy is that a "guess" when you try to find a simple number from the department in a matter that is constitutionally required).

    Do the math eric...if Alberta did not contribute to equalization and kept the money here by having an Alberta federal tax rate...what you you would be retaining for Albertans

    IF we did a per capita return to Alberta on the $10B we may get a cool $1B. BUT THAT IS NOT THE POINT.

    You guys who see Confederation as an Income and Expense Statement think we should get out what we put in and beggar the other provinces and our place in the country.

    Some folks can't grasp this concept intellectually or ideologically, and others are merely motivated by a distrust of any central government. While other Albertans are simply selfish and see no value in being Canadian if it "costs" them money.

    The latter group of Albertans is akin to Quebec separatists who also mistakenly believe they pay more for the privilege of being Canadian than they get out of it.

    Two myths do not make a fact!

  9. I'm not sure where I fit in your spectrum but it is a distrust with a federal liberal party that holds no seats in Alberta as well as being a little selfish - our Premier should look after his or her constiutents. Quite different from the separatists - I just want the feds not to intrude on provincial jurisdiction.