Quebec delivers balanced budget

[chuckChuck]

Quebeck gets $10billion of the $17 billion in the pot.

I understand that somehow Hydro electric power isn't included in the formula for calculating transfers between provinces, so really their biggest resource income isn't shared at all, and is used for their own citizens, while other provinces(western) subsidize Quebecks provincial budget with income from western resources.

The timeline for the formula to react to downturns happens so slowly that SK and AB will likely keep the transfers flowing to Quebeck, Ont, and the Maritime for 2-3 more years.

If things don't pick up in the west in 2-3 years, I'm sure the taker provinces will want to change the formula before it turns against them in 4 or 5 years.

Saskatchewan's Brad Wall questions equalization formula
Treatment of oil, hydro in Ottawa's revenue-sharing formula with provinces scrutinized

CBC News Posted: Aug 05, 2015 4:12 PM CT Last Updated: Aug 05, 2015 4:12 PM CT
Saskatchewan Premier Brad Wall zeroes in on equalization, Ottawa's revenue-sharing formula with the provinces.

Saskatchewan Premier Brad Wall zeroes in on equalization, Ottawa's revenue-sharing formula with the provinces. (Liam Richards/Canadian Press)

Saskatchewan Premier Brad Wall set off a debate about equalization — the revenue-sharing formula between Ottawa and the provinces — Wednesday.

In a series of media interviews, Wall called for a re-examination. Specifically, he took aim at how hydro-electric power is treated. It's a major source of energy in B.C, Manitoba, Ontario, Quebec and Newfoundland and Labrador.

"Hydro, as a resource, is basically excluded from the formula," Wall told CBC Radio's Blue Sky. "Whereas other sources of energy, especially hydrocarbons, oil and gas are properly very much part of the formula."

Wall's assertion set off a confusing set of rebuttals.
Contradictions from Manitoba premier, Alberta economist

"The actual revenues are already counted," said Manitoba Premier Greg Selinger.

But according to an economist at the University of Alberta, Melville McMillan, it's a little of both.

"I believe to the extent that hydro revenues accrue from sales outside the province, I believe those are included," McMillan said. "But to the extent that [a province] sells hydro to its citizens at a low cost, that subsidy is not included."

Furthermore, McMillan said just 50 per cent of resource revenues such as gas and oil are included in the formula.
Lag time offers stability: Selinger

Meanwhile, Wall also complained about the lag time in recalculating equalization when resource prices drop.

"But yet there will be a lag of three to five years before that works its way through the formula, and that could be modernized in my view," Wall remarked.

McMillan said it's three years, and has a "smoothing" effect.

"If there's been a change in the numbers from the time the initial payment was made, the following year the numbers may be corrected and improved, and there has to be some adjustment in some of the payments," McMillan explained. "With the lag, it modifies those adjustments."

He added that averaging over a period of time reduces the "rapid or unexpected adjustments" from volatile swings in resource revenues.

"Frankly, does it reflect the demands and the needs of the country?"
- Brad Wall, Premier of Saskatchewan

"The lag issue works both ways," Selinger said. "[It] protects you if your revenues go up dramatically or go down dramatically, so it creates stability in the country."

Wall also suggested that half of the $17 billion in equalization be redirected to infrastructure or a combination of infrastructure and tax cuts.

"Frankly, does it reflect the demands and the needs of the country? And I would say that infrastructure's at the top of that list," Wall explained.

"The savings are not necessarily all that great, and the consequences for the have-not provinces are particularly large," was MacMillan's reaction.

"It's a constitutionally protected program that allows all of us to ensure that we can grow our economies, educate our people to participate in the economy, and provide essential services like health care," Selinger said.

[chuckChuck]

For those who have the time and interest the following link delves into the equalization question. It is not as simple as it might seem.
https://www.policyschool.ca/wp-content/uploads/2016/03/feehan-equalization.pdf
CANADA’S EQUALIZATION
FORMULA: PEERING INSIDE THE
BLACK BOX ... AND BEYOND
†
Jim Feehan
SUMMARY
Ontario only started receiving equalization payments, for the first time in its history, in 2009. As soon as Ontario
slipped into that “have-not” status, the federal government imposed a cap on the growth of equalization payouts.
That led to substantial federal savings, but has cost Ontario and other recipients what would have been much larger
payments since then. The federal government’s move to rein in the potential ballooning cost of equalization may have
been understandable, from a cost-control perspective, but it ultimately defied the very purpose of equalization.
The fixed-growth rule imposed by the federal government is just one of several elements within the current
equalization arrangement that should be corrected. The federal government should end that practice and absorb
any resulting increase in cost. However, if that cost is onerous, then it could consider adjustments of its other major
transfers to the provinces – Canada Health Transfer and the Canada Social Transfer – and reduce those per-capita
transfers to provinces that are well ahead of the equalization norm. That would be better than shifting the entire
burden to the those below the norm.
Another flaw in the current equalization arrangement is the inclusion of Crown-owned hydro corporations’
remittances of earnings to their provincial owners in the natural resources category of equalization calculations.
Many of these corporations are not simply energy producers, but are also vertically integrated, with transmission
and retail sales operations, and some have no resources at all, but rely instead on fuel purchased in the marketplace.
Moreover, taxes paid by private energy corporations are not considered part of the natural resource category but
are included in the business income tax category. This means the formula is essentially inconsistent, discriminating
based on the ownership profile. Hydro remittances should be removed from the natural resource revenue category
in the formula that calculates equalization. They should go in the business income tax category, just as do the
earnings of other commercial Crown corporations and taxes paid by private businesses. Going beyond the formula,
it is time to re-consider the practice of exempting commercial Crown corporations from corporate income taxation.
A more fundamental and long-recognized problem is the incentive for provinces receiving equalization payments
to underprice the water-rental rates they charge for hydro production. Lowering water-rental rates has the effect
of reducing provincial hydro revenues, which can entitle those provinces to larger equalization payments, while
benefitting residents with cheaper hydro rates. Looked at empirically, “have-not” provinces do charge lower
average rates for hydro than do “have” provinces, lending credence to the criticism that non-recipient provinces
subsidize cheaper energy for residents of recipient provinces. The increased development of competitive North
American wholesale electricity markets in recent decades has made it more feasible to assess what a fair market
price for water-rental rates could be. Updating the equalization formula to consider not water-rental revenue, but
water-rental fiscal capacity, should be the highest priority of all in reforming Canada’s equalization formula to align
it more closely to the principles behind its creation.
It is also time to include municipal government revenues from user fees in the formula. Those revenues are
significant and it makes little sense to exclude them when municipal property tax revenues are included.
Equalization is not out of control but reform is needed. Action on these fronts should be the priorities. These inside-
the-box issues should be resolved before going beyond and considering the more complex task of extending the
formula to account for provincial governments’ different expenditure needs and costs.
†
This paper is based on a presentation given at the Equalization Grants conference, hosted by The School of
Public Policy, University of Calgary, January 28-29, 2014. I am grateful to Mel McMillan and David Péloquin, as
well as two anonymous referees, for valuable comments. I am solely responsible for any errors.

[sofa.king]

It's time to seperate I never thought I'd say this but I'm tired of getting fuked. Lol.

[macdon02]

I'd have no problem giving quebec equalization if they were using Canadian oil .......

[Oliver88]

Time to end equalization and give Quebec an incentive to be more productive.

[stonepicker]

What prov. do you come from again chuck?

[chuckChuck]

Time to end equalization and give Quebec an incentive to be more productive.

If that was politically feasible why didn't Harper try to cut it? It will never happen because there is very little chance of getting elected without Quebec support. Do you have any evidence that productivity is lower in Quebec or is it because the economy is structurally different? And what happens in the future if the value of resources in western Canada are much lower and Alberta and Saskatchewan become have not provinces? The formulae can be tweaked but there is no appetite for scrapping equalization especially since the majority of the population is benefiting from the program. Ontario and Quebec residents are also contributing tax revenues towards equalization payments to themselves and other provinces. If the have provinces can't make a strong case for change then nothing will happen. Separation is just a pipe dream.

[chuckChuck]

What prov. do you come from again chuck?

I live Right here in Saskatchewan. And I believe the benefits of one time finite resources should be shared with all Canadians. Just because you are sitting on oil or potash doesn't make you a more deserving Canadian. And if you are not sitting on oil one who deserves less education or less healthcare. I think we are squandering our one time benefits from resources. Future generations will look back and say what the **** did you guys do with all the money? Did you save anything? Party on till it's all gone!!!

[stonepicker]

Nothing wrong with sharing, but the province with the resource should get more than their fair share. What happens when as you say,the resource runs out? And your left with a couple of strong prov.. ( quebec, ontario? ) and these huge prov. continue to squander their money, alta and sask will never see anything come back. Welfare doesn't build character. I'm tired of western money going east just to be squandered.

[Robertbarlage]

wish we could party like all the bombardier executives. 50% pay raise nice! thanks western Canada.

[stonepicker]

What a slap in the face they gave the rest of canada with that move.

[furrowtickler]

Chuck you just explained the your support for the wheat board
You think we should all share regardless how productive you are.
Look at that map again and tell me how that Quebec has a balanced budget and Sask / Alta does not ?
I agree Alberta especially has squandered money , they were going down hill at $100 oil. We are 1/2 behind here in Sask.
so can we sustain a carbon tax on top ?
$100/ tn on fert ? And still give money away by the wheel barrel full to JT's x mass buddy with the island and mega millions to First Nations ?
Enjoy the main road you travel cause it's about to get far worse than any back road that you've ever traveled.
Schools will soon be K - 12 with one teacher . .... tell me I am wrong ..