Equalization Payments and Ontario

Equalization payments are Canadian governments’ grand design to ensure all its citizens can live in a Province that will have the resources necessary to deliver similar levels of public services. This system has the Federal Government redistribute payments from those Provinces that are richer to those Provinces that are poorer. So, tax money is taken from the “Have-Provinces” and given to the “Have Not-Provinces” (sort of like a Robin Hood).

(An important note to make here is that, even with this redistribution of wealth, citizens across Canada do not enjoy similar levels of service. It falls to the respective Have-Not Provinces to responsibly administer the equalization payments received in order to meet their health care, education and infrastructure demands.)

This year, Ottawa will pay $17.3 billion, unconditionally, to six have-not provinces for the fiscal year that began on April 1. They are the Provinces of Nova Scotia, New Brunswick, Prince Edward Island, Quebec, Ontario and Manitoba.

Did you know?? 20 cents of every dollar that is raised by federal government taxes goes directly and unconditionally to Provinces – and this amount is at a 20-year high.

Ontario will get $20.4 billion from Ottawa in 2015-16 for health, social services and equalization (this total is up $1.3 billion from $19.2 billion last year). When looking at the increases paid to Ontario, the equalization payment to this largest of Canada’s Provinces has risen 88% since federal Conservatives have been governing the redistribution of payments in 2006.

Yet, for the Ontario Government, which has now recorded 10 years of deficits and are being squeezed by $11 billion of debt payments annually – of course, the equalization cheques are never enough. The Provincial Government refers to federal payments as inadequate and the Ontario Premier has repeatedly openly criticized the Federal Government for not giving Ontarians their fair share.

Surprisingly, many Ontarians think they are being short-changed with the whole equalization scheme. A recent poll found that 48% of Ontarians insisted their province paid into the pot when, in fact, it does not.

Yet the debt hole that the Ontario Liberal Government has dug for itself is so deep that it will take years of austerity for this Have-Not Province to turn things around. How bad is it? Well consider these four facts:

  • The McGuinty – Wynne Liberals have increased Ontario’s public debt to almost $300 billion, or by 115% since taking power in 2003.
  • The Liberals are raising spending by $2.4 billion this year – offering no specifics on how they plan to reduce the deficit.
  • With this year’s $10.5 billion deficit announcement, the province’s debt is still on track to balloon to $325 billion by 2018 (that is $23,000 per person in Ontario).
  • Ontarians pay $11 Billion per year for to service their interest on the Province’s debt. in 2014/15, more than nine cents of every revenue dollar collected in Ontario goes to debt interest payments and not towards government programs or tax reductions.

With this type of spending piled onto the out-of-control debt levels, no amounts of increased equalization payments will be enough to sustain the Ontario Government (mis)management of its economy.

 

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