New Brunswick Premier Blaine Higgs speaks to reporters as Canada's premiers hold a press conference to close the Council of the Federation meetings in Halifax on July 17.Darren Calabrese/The Canadian Press
A growing number of premiers are throwing their support behind Newfoundland and Labrador’s bid to sue Ottawa for what they say are unfair principles in the federal equalization program, which provides billions of dollars to have-not provinces.
At the final day of the Council of the Federation in Halifax, British Columbia Premier David Eby and Saskatchewan Premier Scott Moe said they will both intervene in the court case that N.L. intends to launch, in an effort to seek a more equitable distribution of transfer payments to provinces.
While there are obvious differences in the arguments each province will make to the court, they all hew to a similar critique, Mr. Eby told reporters at a news conference Wednesday alongside N.L. Premier Andrew Furey.
The B.C. Premier, who has been signalling his displeasure at the current equalization formula at various times over the past month, described the federal system as having “perverse outcomes.” He said it’s unreasonable for B.C. residents – who are struggling to afford the soaring cost of living – to fund a program that doles out money to other provinces, including half a billion dollars to Ontario.
“The system is clearly broken, and the federal government made the explicit decision not to sit down and renegotiate the formula with premiers,” said Mr. Eby, adding that, every five years, they’re supposed to do a review.
The B.C. Premier pledged to intervene in N.L.’s case and share legal information to support their claim when it goes to trial: “We’ll co-ordinate with them on legal strategy, and in addition, British Columbia will look at whether we should be filing our own litigation.”
Each year since 1957, Ottawa has made these payments to various “have-not” provinces based on their ability to raise revenue for government services. The program was codified in the Constitution in 1982 to ensure all provinces provide “reasonably comparable levels of public services at reasonably comparable levels of taxation.”
Unlike provincial health transfers, which are paid out using a per-capita formula, each province receives a different amount each year mostly based on a formula devised by an expert panel called by former Liberal prime minister Paul Martin in 2006 and implemented a year later by his successor, Conservative prime minister Stephen Harper.
According to the latest federal update in December, Quebec will receive $13.3-billion this year, followed by Manitoba at $4.4-billion, then Nova Scotia with $3.3-billion. New Brunswick is set to receive $2.9-billion, Prince Edward Island $610-million, and Ontario $576-million. N.L. will receive a payment for the first time since 2008 of $218-million. Alberta, Saskatchewan and B.C. don’t receive anything.
The N.L. Premier said he’s grateful to have B.C.’s support. He said his province is being shortchanged by the current federal equalization formula because it doesn’t consider the cost to deliver services in its many rural and remote communities.
“We’re asking for the courts to evaluate the fairness of it, the mathematical calculations of it, and hopefully that offers all Canadians the opportunity to have a broader conversation about, not just the spirit, but the distribution of the outcome of this formula,” he said.
Mr. Moe also said Saskatchewan intends to intervene in N.L.’s court case challenging the “flaws to the formula,” adding that he has previously raised the idea that half the equalization dollars should be allocated on a per-capita basis and the other 50 per cent through the existing formula.
Quebec Premier François Legault said his goal is to get rid of his province’s need for equalization payments altogether, but, in the meantime, he supports other provinces’ push to seek equivalence in services. Over the last five years, he said Quebec has reduced its dependence on the payments after it increased its gross domestic product per capita compared with the rest of the country.
Alberta held a referendum in 2021 on removing equalization from the Constitution, and on Wednesday, Premier Danielle Smith reiterated that the formula is fundamentally broken – adding that she doesn’t necessarily want the Supreme Court of Canada deciding a solution.
“It’s up to us to come together at this table together with a new formula that will work for all of us and hopefully have a partner in the federal government who will modify it,” she said.
Daniel Béland, a political scientist and director or McGill University’s Institute for the Study of Canada, said in an interview that this dispute has echoes of one from 2007. At the time, Saskatchewan’s NDP premier, Lorne Calvert, sued Mr. Harper’s government and was supported by N.L.’s Progressive Conservative premier, Danny Williams. Mr. Calvert’s successor, Brad Wall, decided to ditch the suit at the behest of Mr. Harper after becoming premier the following year.
Facing such united pushback from premiers of all political backgrounds, Dr. Béland said Prime Minister Justin Trudeau could do what Mr. Martin did and call an expert panel to review and rework equalization. Doing so, Dr. Béland said, would avoid opening a political “Pandora’s box” of tinkering with the formula before the next federal election.
“Then let the government decide after the next election to implement reform or not,” he said.
Editor’s note: An earlier version of this story described the federal equalization program as transferring money from wealthier provinces to poorer ones. That description was inaccurate. It also contained an incorrect figure for Newfoundland and Labrador’s federal equalization payment for this year. This version has been corrected.