The Honourable Stephen McNeil
Dear Premier McNeil:
I am writing with regard to the issue of the Nova Scotia government's distribution of the Federal Equalization Transfers, public concern over which has now reached a critical level here on Cape Breton Island, and in other non-metropolitan areas of the province.
I was part of a delegation from the group, Nova Scotians for Equalization Fairness, who met with you in the Sydney Marine Terminal (beside the "Big Fiddle"), during the election campaign which resulted in your party's defeat of the NDP and your forming your first government.
At that time, we presented to you and your campaign staff copies of documents detailing the cumulative fiscal consequences of previous provincial governments' refusal to address the obvious injustice in their distribution of the Federal Equalizition Transfers to the 42 Nova Scotia municipalities then eligible to receive a share of that distribution.
Attached to this e-mail are three pages of the most recent evidence of that continuing injustice, which is inflaming public resentment for what is now widely regarded as an irresponsible, and unconstitutional, policy of diverting equalization transfers away from their intended purpose, in order to support the centralization of economic development in Halifax.
Public demonstrations to call for a change in the province's equalization policy are currently being organized for Sydney, Halifax and the Canso Causeway. Provincial and federal officials have been contacted, requesting forensic audits to determine how recent Nova Scotia governments have spent the equalization money which they withheld from the intended municipal recipients. And the constituents of Nova Scotia MLA's are being urged to bring political pressure on your government to do something to rectify this manifest injustice.
The reflexive response of Nova Scotia government agencies, in rebuffing previous attempts to engage them in a discussion about this misguided and economically counter-productive, equalization policy, has been that the federal transfer payments to Nova Scotia are "unconditional;" and, that it is therefore permissible for the provincial government to use that money in any way it may choose.
The invalidity of that argument is readily apparent from any reading of Section 36 of The Constitution Act of 1982, which sets out the purpose of the Federal Transfer Payments to the provinces (See excerpt below). That explicit purpose is "to provide reasonably comparable levels of public services at reasonably comparable levels of taxation." [emphasis added].
The only aspect of equalization that is "unconditional" is how eligible municipalities choose to apply their transfer grants: either to the improvement of particular public services, or to the reduction of local taxes. Although there are no conditions imposed on which public services the province may choose to provide in the eligible municipalities, it is absurd to argue that the provincial government can arbitrarily spend equalization money on any other purpose than those public services for which it is responsible, in the eligible municipalities.
Should you be in any doubt about the glaring disparities in levels of public services and levels of taxation between those in Halifax and those in, say, the CBRM, consider the following Nova Scotia government data:
(1) The residential and commercial tax rates in Sydney have increased over the past five years, and are now 87% and 68%, respectively, higher than the corresponding rates in Halifax, where they have actually decreased.
(2) In 2014, the median total family income in Halifax was $84,560; $20,850 more than in Cape Breton, and $5,690 more than the national average.
Similar disparities exist between the annual amounts that Halifax is able to spend on public services and those that the eligible municipalities can afford.
Furthermore, Nova Scotia Labour Market Statistics show that every region of Nova Scotia, except Halifax, has been experiencing continuing demographic declines and decreasing employment levels.
Approximately 26% of the federal Equalization Transfer to Nova Scotia is intended to be distributed, as "Fiscal Capacity" equalization grants, among those of its municipalities that are unable to raise sufficient revenue from local property taxes to be able to pay for municipal public services that are reasonably comparable to those provided by other Canadian municipalities, for reasonably comparable tax rates.
The remaining 74% of the Equalization Transfer is intended to enable the Nova Scotia government itself to provide the public services for which it is responsible and that are not covered by the Health Transfer and Social Transfer to those same municipalities which are eligible to receive the equalization grants.
The attached worksheet - which presents the relevant Nova Scotia government data - shows that, over the 20 years since fiscal year 1999/2000, the Nova Scotia government has received a total of $30 billion in annual Equalization Transfers,which have increased from $1.2 billion to over $1.9 billion over that period. The 26% "Fiscal Capacity" portion of those transfers intended to supplement the property tax revenues of municipalities unable to afford municipal services for which they are responsible, because of insufficient property tax revenues has totalled $7.8 billion.
Over the same two decades, the 74% portion of the Equalization Transfers, intended to enable the provincial government itself to provide the public services for which it is responsible, to the same municipalities (and not covered by the annualHealth Transfers and Social Transfers), has totalled $22.2 billion.
However, for some reason, the provincial government arbitrarily decided that those Nova Scotia municipalities for whom the 26% Fiscal Capacity portion of the Equalization Transfers was intended were only "entitled" to receive a tiny fraction of the amount which had been provided for them by the federal government.
Until 2014/2015, this so-called "Entitlement" amounted to an average of merely 12% of the Fiscal Capacity portion of the federal Equalization Transfer. Since then, as the federal Equalization Transfers have steadily increased, the Nova Scotia government has been concealing the amount it defines as the municipalities' "Entitlement" - presumably to preclude further comparisons to be made.
Even more inexplicable, since 2007/2008, the Nova Scotia government has arbitrarily capped the amount of this "Entitlement" which it then actually distributes to the eligible municipalities at $30,500,000. Consequently, the percentage of the "Entitlement" amount which is actually distributed to the eligible municipalities has now fallen to only 44.5% of the provincial government's own, creatively-styled, "Entitlement," and only 6.4% of the "Fiscal Capacity" portion of theEqualization Transfer provided to Nova Scotia, in trust for these municipalities, by the federal government, to enable them to attain the "reasonably comparable," Constitutional standards of public services and taxation.
Over the past two decades, on the evidence of its own public disclosures, the Nova Scotia government has misappropriated and diverted to purposes other than what was Constitutionally intended to be provided to these eligible non-urban municipalities throughout the province a total of $7.2 billion.
To put into perspective the impact that this historical misuse of the federal Equalization Transfer has had on the municipalities for which it is intended, consider that the CBRM has received, over this 20-year period, only $306 million, or 7.4%, of the $4,128 million that the federal government intended it to receive, in accordance with both the spirit and the letter of the federal and provincial commitments in Section 36.2 of the Constitution.
Until recently, newspaper editors in Nova Scotia, and their readers in Cape Breton, have seemed unwilling to reflect on the implications of the above observations. This was understandable, since self-serving business interests and party loyalists were aggressively mocking and distorting the information, in order to discredit John Morgan, the former CBRM mayor, and to thwart his conscientious efforts to engage the provincial government in a responsible discussion of the impact that its indefensible equalization policy was having on communities throughout the province - the same communities the data on whose dire economic circumstances the provincial government seems to have been only too happy to rely upon, each year, to justify as large a Federal Equalization Transfer as possible.
Now, however, several factors have combined to create an environment in which there is an escalating level of anger and impatience with politicians at all government levels. These factors include: (1) growing public awareness of the alarming demographic and economic decline taking place throughout Cape Breton Island,, as well as in other rural areas of Nova Scotia; (2) heightened public vigilance aroused by problematic, secret agreements associated with development of the Port of Sydney; and (3) the reopening of public debate over Cape Breton's separation from Nova Scotia and establishment of independent, provincial status.
I respectfully suggest that you initiate, and lead, an open, sincere - and historic - effort to negotiate changes to the provincial government's equalization policy that will not only comply with the Constitutional purpose of equalization, but will also serve the interests of citizens throughout Nova Scotia, not just the financial and political interests of the Halifax establishment.
Having studied, promoted, and written about, genuine local economic development, I have been shocked at the willingness of otherwise reputable scholars and responsible business leaders to acquiesce in the unjust, and counter-productive, concentration of development spending in Halifax, especially in an age of networked creativity, innovation and markets. Young people are leaving this province in droves, not simply because of a lack of good jobs, but because they view its leaders as stuck in the antiquated, and exploitive, colonial attitudes of the 18th and 19th centuries.
Our young people see that our elected representatives are co-opted by their parties into supporting immediate establishment interests, rather than their own communities' long-term interests. They see the looming effects of global climate change compounding during their lifetime, yet Nova Scotia's renewable energy policies are distorted to protect and serve the interests of traditional monopolies. They see educational policies set by people whose own education was intended to serve the obsolete economic activities of previous generations. Science, engineering, mathematics and technology are still treated as optional subjects, rather than as the foundational pillars of all future economic opportunity.
One has only to observe how young people use their smart phones to realize how badly our educational system has underestimated their potential, their awareness of the world, and their fear of missing out ("FOMO") on all of the interesting things going on elsewhere - virtually guaranteeing the increasing inflexibility and senescence of Nova Scotia society.
Finally, as you are aware, local governments across Nova Scotia are now closing down, because the preferential, and ethically unjustifiable, pampering of Halifax has been perpetuated by every, successive, Nova Scotia government, despite that policy's socially and economically destructive consequences to their communities.
Thank you for your thoughtful consideration of my remarks and the suggestion of a summit meeting, to determine how Nova Scotia's communities can cooperate in reversing their demographic and economic debilitation, and in rebuilding this province's future.
N. Paul Patterson, Ph.D.
Syncom Strategic Planning Consultants
(formerly, Chair in the Management of Technological Change,
Cape Breton University, ret.d)
Co-author of The Loom of Change; Weaving a New Economy on Cape Breton Island (2003)
Sydney Forks, Cape Breton
The Constitution Act, 1982
EQUALIZATION AND REGIONAL DISPARITIES
36. (1) Without altering the legislative authority of Parliament or of the provincial legislatures, or the rights of any of them with respect to the exercise of their legislative authority, Parliament and the legislatures, together with the government of Canada and the provincial governments, are committed to
(a) promoting equal opportunities for the well-being of Canadians;
(b) furthering the economic development to reduce disparity in opportunities; and
(c) providing essential public services of reasonable quality to all Canadians.
(2) Parliament and the government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation.( 19)
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NSEF Letter to Premier Stephen McNeil RE: Equalization
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