The Equalization Program Lightning Rod

You, telling me the things you’re gonna do for me
I ain’t blind and I don’t like what I think I see.
The Doobie Brothers Taking it to the Streets

The Alberta government has announced the wording for the referendum on the federal Equalization Program.  The wording is “Should Section 36(2) of the Constitution Act, 1982 — Parliament and the Government of Canada’s commitment to the principle of making equalization payments — be removed from the Constitution?”

The program that distributes federal cash to ‘have not’ provinces has become the target of discontent in Alberta.  The Equalization Program pays out $21 billion, $13 billion to Quebec $5 billion to the Maritime provinces and $3 billion to Manitoba. In the 1950s at inception its purpose was to level the playing field for public services across Canada, but it became a federal weapon to fight separatism in Quebec.

Finances of the Nation, Equalization Payments Simulator, last modified March 12, 2021,

Discontent in Alberta runs deep

The Liberal government is shifting to the philosophical left in the interest of reducing the votes for the socialist New Democrats and attracting voters in Quebec. So, the mostly conservative prairies are out of step. The philosophical divide was so deep that in 2019 election voters between Winnipeg and the Lower Mainland of BC could not bring themselves to elect a single Liberal member of Parliament.  

Alberta is the cash cow for the federation. In the past decade or so the net outflow from Alberta was $250 billion, roughly $20 billion annually.  At the same time, federal spending in the province on a per capita basis has been in the basement.

Not forgotten in Alberta are the list of policies the Liberal’s pursued to restrict the energy industry in the name of climate change.  As pipeline access faltered, capital investment stalled, and when oil prices cycled down; there were brutal job cuts, business failures and a steep decline in provincial revenues.  When Alberta’s budget dropped by $6 billion in a single year, a federal relief program provided just $250 million.  

Meanwhile, the Quebec government decided that it too wants to change the Constitution.  It proposes to make French the single official language and declare that Quebec itself was a nation.  It says it will change the Constitution unilaterally.  All national political parties, each anxious to win seats in the next election quickly announced their support.  But changing the equalization formula… not so much!

As these grievances stack up, the Equalization Program becomes the poster child for federal indifference.  The unpopular Alberta government, always eager point out federal shortcomings linked the referendum to upcoming municipal elections. 

A major complaint is how revenue from hydroelectric resources are calculated into the program’s formula. The program doesn’t calculate hydro at market value of Quebec and Manitoba’s as their citizens pay an artificially low electricity rate.   If Quebec charged the market based rate that people in Ontario pay, Quebec’s Equalization payment would drop from $13 billion to $5 billion.  

Courtesy Energy Hub https://www.energyhub.org/electricity-prices/

The issue spawned a cottage industry of economists explaining how the program works.  More than a few opinion columnists are happy to expound on the futility of it all.  At the fringe, western separatists argue it is a reason to separate. A particularly useful resource can be found at http://www.financesofthenation.ca/equalization.

The Referendum Announcement Jump-Started Objections and Support in the Province

The objections to holding the referendum are:

  • The program works to support needed spending in ‘have not’ provinces.
  • Albertans are meanspirited, stingy and anti-Quebec.
  • Albertans should solve their problems themselves, with more taxes.
  • The referendum is meaningless because Albertans can’t change the Constitution.
  • The referendum is a ploy to deflect attention from government’s failings.
  • The timing in the middle of a pandemic is wrong.
  • The referendum is the first step to a vote to separate.

Those who support the referendum counter with:

  • The program contributes to unequal treatment of Alberta by Ottawa.
  • The program’s calculation methodology is flawed.
  • The divide between ‘have’ and ‘have not’ provinces is decreasing while the program is expanding quickly.
  • The referendum is necessary to federal attention since other methods have failed.
  • The program is mostly a cynical bribe to keep Quebec happy.

Is Equalization the Biggest Issue?

While the Equalization Program uses up much of the oxygen in the political debate. There are other arguably more serious issues that ought to remain top of mind for severely normal Albertans:

  • Alberta’s reluctance to ‘bite the bullet’ and accept it has a revenue problem and include a sales tax referendum.
  • Federal debt that is ballooning due to Covid-19 related spending and more social programs.
  • The growing problem of unsustainable provincial budgets across Canada.