Equalization Transfers in Canada: Emerging Challenges

Prakash Chandra Jha, Prakash Chandra Jha (2017): Equalization Transfers in Canada: Emerging Challenges.

Abstract

Since the last one decade or so equalization transfer programme has been a principal source of dispute between federal and provincial governments and among provinces. It has become politically controversial given the lack of predictability, accountability and adhoc change in the formula and use of transfer for electoral purpose, among others. Resource federalism has become another major challenge as provinces are now strongly divided between those that possess natural resources and those that do not. Unlike earlier, the major proportion of Canadian population today resides in equalization receiving have-not provinces. This has had profound consequence on fiscal federalism. The very nature of equalization programme and institution of executive federalism through which transfer is operated are highly politicized. The idea of having a non-partisan and independent body responsible for determining and allocating equalization transfers is resisted by both orders of government. The paper examines these challenges.

• Item Type: MPRA Paper
• Language: English
• Keywords: Equalization Transfers, Fiscal Federalism, Resource Federalism, Executive Federalism
• Subjects: H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations

References

Ahmad, Ehtisham and Jon Carig (1997), “Intergovernmental Transfers”, 73-107 in Teresa Ter-Minasin (ed.) Fiscal Federalism in Theory and Practice, Washington, D.C.: The World Bank.

B’eland, Denial and Andre Lecours (2011), “The Ideational Dimension of Federalism: ‘The Australian Model’ and Politics of Equalization in Canada”, Australian Journal of Political Science, 46(2): 199-212.

Beltrame, Julian (2014), ‘Conservatives’ Equalization Payment Formula Good for Alberta and Quebec, Bad for Ontario: Report’, National Post, June 19. (Online: Web) Accessed 23 October 2014, URL: http://news.nationalpost.com/2014/06/19/conservatives-equalization-payment-formula-good-for-alberta-and-quebec-bad-for-ontario-report/

Black, Errol and Jim Silver (2004), Equalization: Financing Canadians’ Commitment to Sharing and Social Solidarity, March, Canadian Centre for Policy Research Alternatives-MB.URL: http://www.policyalternatives.ca/sites/default/files/uploads/publications/Nova_Scotia_Pubs/NSequalization.pdf

Brown, D. M. (1996), Equalization on the Basis of Need in Canada, IIGR working paper, Kingston, On: Institute of Intergovernmental Relations, Queens’ University.

Bernard, Jean-Thomas (2012), “The Canadian Equalization Program: Main Elements, Achievements and Challenges”, The Federal Idea, A Quebec Think Tank on Federalism, December, URL: http://ideefederale.ca/documents/Equalization.pdf

Boadway, Robin (2005), “Notes for the Expert Panel on Equalization and Territorial Formula Financing”, Kingston, ON: Queens’ University.

Cameron, David and Richard Simeon (2002), “Intergovernmental Relations in Canada: The Emergence of Collaborative Federalism”, Publius: The Journal of Federalism, 32 (2), Spring: 49–71.

Chassin, Youri (2012), “Equalization: Towards a Formula that Promotes Further Resource Development”, June, Montreal: Montreal Economic Institute, URL: http://www.iedm.org/files/note0712_en.pdf

Clark, Douglas H. (1998), “Canada’s Equalization Programme: In Principle and in Practice”, in Robin W. Boadway and Paul A.R. Hobson, (eds.), Equalization: It’s Contribution to Canada’s Economic and Fiscal Progress, Kingston and Montreal: McGill-Queens’ University Press.

Cowan, James S. (2014), “Motion to Strike Special Committee on Equalization and Fiscal Federalism, Presentation to the Senate, 5th March. http://liberalsenateforum.ca/hansard/motion-to-strike-special-committee-on-equalization-and-fiscal-federalism/

Courchene, T. (2004), “Confiscatory Equalization: The Intriguing Case of Saskatchewan’s Energy Revenues”, Choices, 10(2), 1-42.

Dahlby, Bev (2014), “Eliminate the ceiling on equalization payments”, National Post, 9 September. URL: http://fullcomment.nationalpost.com/2014/09/09/bev-dahlby-eliminate-the-ceiling-on-equalization-payments/

Expert Panel on Equalization and Territorial Formula Financing (2006), Achieving a National Purpose: Putting Equalization Back on Track, Ottawa: Department of Finance Canada.URL: http://publications.gc.ca/collections/Collection/F2-176-2006-1E.pdf

Gusen, Peter (2012), “Expenditure Needs: Equalization’s Other Half,” Mowat Centre 46. (Toronto: Mowat Centre, School of Public Policy and Governance, University of Toronto, 2012).

Jha, P. C. (2007), Comparative Perspectives on Fiscal Federalism in Brazil, Canada and India: A Study of Intergovernmental Transfers, Unpublished PhD Thesis, New Delhi: Jawaharlal Nehru University.

Jha, P. C. (2012), “Theory of Fiscal Federalism: An Analysis”, MPRA Paper No. 41769, URL: http://mpra.ub.uni-muenchen.de/41769/1/MPRA_paper_41769.pdf

Joanis, Marcelin (2014a), “Take the politics out of equalization”, National Post, September 10. Available at http://fullcomment.nationalpost.com/2014/09/10/marcelin-joanis-take-the-politics-out-of-equalization/

Joanis, Marcelin (2014b), “The Politics of Chequebook Federalism: Can Electoral Consideration Affect Federal-provincial Transfers?”, The Public Policy Research Paper, 25 (7) September, University of Calgary, URL: http://www.policyschool.ucalgary.ca/sites/default/files/research/joanis-equalization.pdf

Leuprecht, Christian (2008), “Reforming fiscal federalism and equalization: Lessons from the Canadian Experience”, 259-74, URL: http://post.queensu.ca/~leuprech/docs/Cad.III_Leuprecht_endg.pdf

Lecours, A. and D. Be´land (2010), “Federalism and Federal Policy: The Politics of Equalization in Canada” Publius: The Journal of Federalism, 40(4): 569–96.

Milne, David. (1998). “Equalization and the Politics of Restraint” 175–203 in Robin W. Boadway, and Paul A. R. Hobson, (eds.) Equalization: Its Contribution to Canada’s Fiscal and Economic Progress, Kingston: John Deutsch Institute for the Study of Economic Policy.

Milke, Mark, (2014), “Equalization, Ontario, and the Politics of Division”, Fraser Institute Bulletin, URL: http://www.fraserinstitute.org/uploadedFiles/fraser-ca/Content/research-news/research/publications/equalization-ontario-and-the-politics-of-division.pdf

Mackinnon, David (2011), “Dollars and Sense: A Case for the Modernising Canada’s Transfers Agreements”, Ontario Chamber of Commerce, URL: http://www.occ.ca/Publications/Fiscal-Imbalance_final-electronic1.pdf

Mendelsohn, Matthew (2002), “Canadians’ Thoughts on Their Health Care System: Preserving the Canadian Model through Innovation”, Commission on Future Health care of Canada. URL: http://www.queensu.ca/cora/_files/MendelsohnEnglish.pdf

Oates, Wallace E. (1999), “An Essay on Fiscal Federalism”, Journal of Economic Literature, 37(3), 1120–49.

Oates, Wallace E. (2005), “Towards a Second Generation Theory of Fiscal Federalism” International Tax and Public Finance, 12 (4), 349-73.

Parliament Budget Officer (2014), “2014-15 Federal Transfers to Provinces and Territories”, Ottawa: Government of Canada, 19 June, URL: http://www.pbo-dpb.gc.ca/files/files/TransferPayments_EN.pdf

Parliament of Canada (2013), Canada’s Equalization Formula, URL: http://www.parl.gc.ca/Content/LOP/ResearchPublications/2008-20-e.pdf

Rodden, Jonathan (2002), “The Dilemma of Fiscal Federalism: Grants and Fiscal Performance around the World”, American Journal of Political Science, 46 (3), July, 670-87.

Shuffelt, Tim (2008). “Time to end outdated federal equalization program: McGuinty”. Ottawa Citizen, May 9, URL: http://www.canada.com/ottawacitizen/news/story.html?id=b5660f22-5bf2-4379-a919-513e45cdce15

Simeon, Richard (2001), “Making Federalism Work: Intergovernmental Coordination and Institutional Capacity”, International Seminar on ‘Modernization and Fiscal Federalism: Alternatives to Tax Wars: Sustainable Economic Development in Brazil’, 21-22 June, Sao Paulo.

Smart, Michael (2009), “The Evolution of Federal Transfers since the O’Brien Report’”, May Paper prepared for the John Deutsch Institute conference on “The 2009 Federal Budget: Challenge, Response and Retrospect” held at Queen’s University on May 7-8, 2009. http://homes.chass.utoronto.ca/~msmart/wp/jdi09-v2.pdf

Stevenson, Garth (2007), Fiscal Federalism and the Burden of History in Fiscal Federalism and the Future of Canada, Working Paper, Kingston,On: Institute of Intergovernmental Relations, URL: www.queensu.ca/iigr/working/fiscalImb/Stevenson.pdf4

Watts, Ronald L. (2003), “Introduction: Comparative Research and Fiscal Federalism”, Regional and Federal Studies, 13(4), Winter, 1-6.

Weingast, Barry R. (1995), “The Economic Role of Political Institutions: Market-Preserving Federalism and Economic Development”, Journal of Law, Economic & Organization, 11(1), April, 1-31.

Wibbels, Erik (2001),“Federal Politics and Market Reforms in the Developing World”, Studies in Comparative International Development, 36( 4), Summer, 27-53.

Wibbels, Erik (2002), “Federalism and the Politics of Macroeconomic Policy and Performance”, American Journal of Political Science, 44 (4), October, 687-702.

Wilson, L. S. (1998), “Lessons for Canada from Other Federal Systems’, in Robin W. Boadway and Paul A.R. Hobson, eds., Equalization: It’s Contribution to Canada’s Economic and Fiscal Progress, (Kingston: Queen’s University Press) 205-41.

Yakabuski, Konard (2014), “Is Ontario becoming the new Quebec?”, The Globe and Mail, June. 09. URL: http://www.theglobeandmail.com/globe-debate/is-ontario-becoming-the-new-quebec/article19046078/