Federal Equalization Payments 2024-25

caleb gibbons Follow Me

Posted this 2023-12-18 11:46 AM AST

Equalization 2024-25.

The intent of the Federal equalization program is to equalize reasonably comparable public services with reasonably comparable levels of taxation across our vast country. Natural resource fiscal capacity is obviously the big focus of the resource rich provinces, but non-resource fiscal capacity shortcomings are part of the intent with this program too.

Premier Scott Moe (Sask. $0 in equalization) weighed in on the topic via Twitter/X on Dec 15, 2023;
"As Guilbeault and Trudeau commit to move away from fossil fuels, let’s have a look at the new equalization payments to provinces for 2024-25 to see how energy producing provinces help support the rest of Canada."

Premier Moe got 6.1k likes and over 1,000 comments on his Tweet/X post.

On a per capita basis Quebec, with a population of over 8.5 million receives $1,600 per (not really, but to put these payments in context from a scale perspective), roughly 1/2 the per capita equalization payment of PEI ($3,900), NB ($3,740), NS ($3,300) and Manitoba ($3,200).

In Nova Scotia, HRM (Halifax Regional Municipality), boasting 40% of Nova Scotia's 1 million residents, hoards the lion's share of the $3.3bln. As the centre of government in the province, Halifax has an enviable position in terms of fiscal capacity, especially when compared to Cape Breton Island.

Poorly named CBRM (Cape Breton Regional Municipality) is the 2nd largest municipality in the province. The last change of government provincially was in part due to a "handful of magic beans" commitment to "double" the Municipal Capacity Grant to CBRM from $15 million to $30 million. The "bonus" has been confirmed as a 1-time deal, trickling down to the real economy via a cut in property taxes. With a budget of $174 million, $15 million is almost 9%. CBRM taxes, already excessively high vs. HRM are slated to increase by 3.5%, to help bridge the CBRM budget deficit resulting.

With a CBRM mayoral race set for 2024, expect equalization to lead the issues that get the new (old) mayor and councillors back in their seats.

The current equalization formula is set through March 1, 2029. Inflation math is taking hold.

Alberta has floated leaving the Canada Pension Plan in favour of a stand-alone provincial plan.

Carbon tax relief for heating oil (3-years) has not been well received by the west. The exemption for heating oil solely is seen as a way for the minority government Liberals to keep hold of the 30+ seats in the 2025 federal election. NS lacks the infrastructure for natural gas options. 17% now heat their homes via heat pumps (payback sub 5 years) and there are just over 4,000 residential solar arrays (including the author, payback 8.5 years).

Things are heating up! COP28 in Dubai UAE is a wrap. A sub agreement from 140+ countries to treble renewable energy by 2030 was lauded as progress, but a 1st time agreement on fossil fuels proved more elusive. Wordsmithing at its finest. There are a lot of election cycles between now and 2050, remember that.

Our dominant neighbour to the south seems to be doing a victory lap on executing a "soft-landing" (no recession). The Federal reserve's latest "dot-plot" reflects 75bp in interest rate cuts for 2024, but the Fed's forecast for the economy despite approx. 3.5% GDP growth is a 90% recession probability! (note: deficit spending is running at 7%+ of GDP in the USA). For Canada, stagflation is a bigger risk. Sticky inflation and no growth.

Heady concerns, but let us pause for a holiday celebration with family and friends. Merry Christmas one and all. Cheers, Caleb Gibbons

Posted by caleb gibbons
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Equalization payments, always a hot topic in Cape Breton. This infographic on LinkedIn got > 300 comments in 24 hours! Sask. Premier Scott Moe tweet 6k likes!

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Nova Scotians for Equalization Fairness Follow Me 2023-12-19 11:49 AM AST Reply 0 0 MONTREAL – Professor James Buchanan, 1986 Nobel Laureate in Economics, says that equalization programmes can be captured and destroyed by politics and bad design. Known as one of the "fathers of equalization" because his early writings were highly influential in the design of equalization programmes such as Canada’s, Buchanan revisited his arguments of 50 years ago in Montreal today. He said that he didn’t take enough account of how political interference with the operations of such programmes can outweigh the good intentions behind them. While not commenting directly on Canada’s equalization programme, Prof. Buchanan pointed out that a defensible programme must not be captured by political coalitions in equalization-receiving provinces and used for their narrow political purposes, such as enriching specific government programmes that benefit only their supporters. Equalisation only works if its benefits flow to all residents of recipient provinces. The keynote speaker at a conference in Montreal on "Equalization: Helping Hand or Welfare Trap?", Professor Buchanan also noted that a badly designed equalization programme can do more harm than good: for any of the desired results of equalization to be achieved "rather precise implementation" is required, without which "perverse resource shifts might occur." Part 1 Part 2 below
Nova Scotians for Equalization Fairness Follow Me 2023-12-19 11:50 AM AST Reply 0 0 Part 2 A number of leading experts on Canada’s $10-billion-plus equalization regime also spoke at the Montreal conference, which was co-sponsored by three public policy institutes (the Atlantic Institute for Market Studies, the Montreal Economic Institute and the Frontier Centre for Public Policy) representing all of Canada’s equalization-receiving provinces. Several of those experts took up Prof. Buchanan’s challenge of examining the details of Canada’s equalization regime to see to what extent its original intent might have been distorted or undermined by constant political tinkering over the years, as well as by poor design, such as in the way natural resource revenues are handled, and perverse incentives for equalization-receiving provinces to engage in imprudent behaviour in order to maximize their equalization entitlement. According to the heads of the three Institutes, equalization in Canada is in need of a serious and rigorous re-examination in light of the remarks made by Professor Buchanan and others.
Nova Scotians for Equalization Fairness Follow Me 2023-12-19 11:51 AM AST Reply 0 0 part 3 Brian Lee Crowley, President of the Atlantic Institute for Market Studies, speaking on behalf of his colleagues, argued that it was time to look past the good intentions of the equalization programme, and to analyse objectively at how politics at both the federal and provincial levels may have taken Canada’s programme far from its original and laudable objectives. "When the father of equalization comes to Canada and says ‘I didn’t take enough account of how politics and poor design can make equalization go wrong’, and then some of Canada’s leading experts on equalization – such as Ken BoessenkoolFinance in Saskatchewan and Michel Boucher of the École nationale d’administration publique – all agree that there are major flaws in the way equalization operates in Canada, we think that the stage is set for a major re-think of all aspects of the programme. of the C.D. Howe Institute, Paul Boothe, former Deputy Minister of We are going to continue to work to draw the attention of opinion leaders and policy makers to the many ways in which equalization may in fact be a drag on economic growth in the country’s poorer regions, and the alternative approaches that would better serve what must be our ultimate objective: a Canada in which every region has achieved a level of prosperity and self-reliance such that equalization is unnecessary." Copies of Professor Buchanan’s remarks are available on the two Institutes’ websites (www.aims.ca; www.iedm.org; www.fcpp.org). The other papers presented at the conference will be posted over the next few months. – /publications/speeches/hpg/oct252001/father_equalization.html Equalization is the programme by which Ottawa ensures that each provincial government, regardless of the strength of its local tax base, receives sufficient revenues to provide adequate services, such as education, health care and transport, to its residents. It is currently one of Ottawa’s largest spending programmes, out of which payments are made
caleb gibbons My Post Follow Me 2023-12-21 8:09 AM AST Reply 0 0 NSEF: It may appear that political interference is higher than than in the past (i.e. 1982 when the Federal equalization was written into the Canadian constitution), but I am not sure I agree. The Equalization program began in 1957. The Equalization program would likely be a distant memory, were it not the the fact that it is entrenched in our constitution. In particular, when right leaning "leaders" have the pulpit and dole out pitchforks to those that agree with them, there is always a tendency for grinch-like public policy. Inputs to the equalization formula are estimates of provincial tax bases, actual provincial tax revenues and population. The payment in a given year is based on a 3 year weighted average, lagged by 2 years. This has a "smoothing" effect and clips off some of the potential spikes, be they positive or negative (C-19). The program is reviewed on a periodic basis, not in a binary sense like a light switch (yes/no on the program itself), but to ensure the Equalization program is meeting its' objectives and that the most timely and accurate measures are being used to determine provincial entitlements. Consolidation at the municipal level will beget provincial consolidation, in my view. Would a new amalgamated "Acadia/Maritime" province, made up of the former NB, PEI and NS) with a population of 2+ million (5% of Canada's population) receive more in equalization? Would Cape Breton's seat at that larger table have more influence or less? Interested in your localized thoughts on this, vs the legacy views of a deceased (2013) American Nobel Laureate in Economics. The $10bln + Equalization program now stands at $25.3bln! Raymond Mac Donald Follow Me 2023-12-24 7:54 AM AST Reply 0 0 "DOLE OUT PITCHFORKS TO THOSE THAT AGREE WITH THEM" is an awesome quote but it is appropriate for all sides of the issue.Just sit back and think about all that is said about equalization which is just one sample.Do you really think the folks at TIMS or THE STEEL CITY understand it?They are smart enough if they put the time into it and think about it but they don't.They have more important things on their mind like groceries,a movie or a hockey game.Then there are people that "agree" with this or that but really don't have a clue what the comment is about.So..........let's hope for the coming year commentators hit people in the forehead with comments that make quick and appropriate sense on issues that really matter to regular Joe's.Most of us out here are really not interested in how smart someone is.HAPPY NEW YEAR.