$1 billion in federal funding to N.B. at risk in looming equalization fight
Premiers at odds over whether federal program is too generous to poorer provinces
New Brunswick's share of the federal funding pool used to supplement tax revenues of Canada's "have-not" provinces will exceed $3 billion for the first time in the coming year.
And Premier Susan Holt says she will be vocal in any national debate on whether that allocation should be cut by a third or more and redistributed to other provinces.
"I don't think it's something to be ambivalent about," Holt said in an interview about calls for major changes in the federal equalization program.
"We have some significant challenges and needs here, and I'm going to be fighting to make sure that we are getting every piece we are due."
In December, Ottawa released figures showing New Brunswick will qualify for $3.12 billion in equalization grants in the coming fiscal year to help it pay for basic public services.
It is a record amount of federal aid to the province and has been growing rapidly, including an increase of $763 million over the most recent three years.
But the amount of equalization money given to provinces like New Brunswick is not universally celebrated.
Several premiers whose provinces receive little or no funding from the program's complicated formulas and the $26.2 billion funding pool want some of that money redirected to themselves.
One proposal being promoted by Alberta and Saskatchewan would see New Brunswick's equalization allocation cut by more than $1 billion and redistributed across the country, mostly to Ontario, British Columbia and Alberta.
"We want to renegotiate the formula," Alberta Premier Danielle Smith told reporters in July during a premiers' meeting in Halifax. "We've been very clear about that."
Equalization is the largest single revenue item in the New Brunswick government budget, bringing in more money than provincial sales taxes or personal income taxes.
Holt said she can "appreciate the frustration" of provinces that receive little or no equalization funding but said the program fulfils important national objectives.
"I think it makes sense that as part of a country that there's some equality around access to services," Holt said.
"I will absolutely fight for the the right kind of equalization program."
Canada operates three major financial transfers with provinces. Two of those, for health care and social services, will be worth $72.1 billion this coming year and are divided up equally among jurisdictions based on population.
New Brunswick, with just over two per cent of Canada's population, receives just over two per cent of that money.
By contrast, equalization is divided up according to a formula that evaluates the strength and weakness of provincial economies. It directs money to those provinces deemed to have a "fiscal capacity" below what is needed to reasonably finance a national baseline of health, education, social and other services.
New Brunswick has one of North America's weakest economies as measured by gross domestic product per capita and regularly records household incomes that are 20 per cent below the national average. It will qualify for 12 per cent of the $26.2 billion equalization funding pool in the coming year because of those economic shortcomings.
It's nearly six times New Brunswick's share of the other major federal transfer programs.
Saskatchewan Premier Scott Moe, who is critical that his province receives no equalization money, has proposed changes that would see half of equalization funding divided as it is now and the other half divided according to a province's population.
A 2023 Alberta government report estimated that change would result in a "reduction of payments" to equalization receiving provinces of $8 billion, including a net $1.1 billion reduction in payments to New Brunswick.
In July, Danielle Smith said Alberta endorses Saskatchewan's proposal.
"One of the things we would like to see is something more along the lines of what Scott Moe proposed a year ago, where half would be equalization and half should be converted into per capita funding because every one of us has pressures," Smith said.
British Columbia also receives no equalization money and has called for that to change, although Premier David Eby has not specified how.
Newfoundland and Labrador is receiving some equalization funding this year but a fraction of what Premier Andrew Furey believes is reasonable. Last year, his government launched a court application challenging the distribution of equalization money.
"We're asking for the courts to evaluate the fairness of it, the mathematical calculations of it," Furey told CBC News in June.
The Canadian Constitution requires the federal government to provide equalization payments to poorer provinces, but the means to satisfy that requirement are not specified.
The federal government alone is responsible for setting formulas and amounts according to Daniel Béland, director of McGill University's Institute for the Study of Canada.
"It's the federal government that decides how the equalization formula works," Béland said in an interview. "It can consult with the provinces, but in the end it's a federal decision."
Last week during her regular Sunday radio appearance, Danielle Smith said she is encouraged that four premiers are now calling for equalization changes and she suggested an upcoming federal election and potential "change in government" offers hope that the program can be altered.
The existing equalization formula was devised by the former Conservative government of Stephen Harper, but current Conservative Leader Pierre Poilievre has not said if he is open to changing how it works if he wins an election.
Earlier this month, the party said a statement Poilievre gave last March that the public will "have to wait for our platform to get our plans on all of these types of subjects," remains the position.
Béland said equalization can be a polarizing issue and historically federal parties have tried to avoid wading into it. But Béland acknowledged that provinces that benefit from the current arrangement may have to join Holt in speaking out if the forces opposed to its current operation appear to be gaining favour.
"Then I think that the there would be a strong incentive to to be more vocal about defending equalization," he said.
Corrections
- A previous version of this story reported federal equalization payments to provinces for the 2024-25 fiscal year. In fact, the figures are projected for the 2025-26 fiscal year.Jan 13, 2025 2:01 PM EST
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