When Albertans go to the polls Monday to vote for new mayors, councillors and school board trustees, they’ll also be asked to weigh in on a referendum that asks whether or not equalization should be stripped from the Canadian constitution.
But even if the referendum receives majority support, it doesn’t mean equalization will be removed from the Constitution or reformed automatically. Rather, the Alberta government says it believes a clear majority on a clear question will mean the federal government must negotiate with the province over equalization.
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It’s by no means clear that will happen.
Equalization has been an Alberta bogeyman for decades. Mary Janigan, a historian and the author of The Art of Sharing, a history of equalization, said it has been contentious since the government under Louis St. Laurent created the program.
“It was controversial right from the start. It resolved a huge quarrel among the provinces, but it couldn’t placate those provinces or their populations and it helped cost Louis St. Laurent his election in 1957,” Janigan said.
Simply put, the system works like this: The money is not taken from the “province” as a whole, but every Canadian, including Albertans, pays taxes to the federal government. Ottawa then disburses money from a communal pot to other provinces.
The territories receive funding through a separate program.
The money is meant to help finance public services and sustain a relatively equal standard of living across the country without disproportionately high levels of taxation.
Alberta referendum on equalization puts federal leaders in difficult position
Alberta moves forward on equalization referendum
The formula is based on per capita income. Therefore, poorer provinces receive money, wealthier provinces do not. And wealthier Canadians pay more into the system because they pay more in federal taxes.
In 2021-22, equalization payments to provinces will be roughly $20 billion.
Conservative politicians have long suggested the system takes money from Albertans and gives it to Quebec and the Atlantic provinces, and that Albertans would have far more money in their own pockets if the program was reformed or eliminated.
The grievance, basically, is the idea that Albertan money is used to finance lavish welfare states in other provinces.
And so, after years — decades — of griping, Alberta’s putting it to a referendum. Here’s what it means, and what might happen next.
Why is this controversial in Alberta?
Equalization has been a part of Canadian life since 1957. Under the program “have not” provinces receive equalization payments, while “have” provinces do not.
In the intervening 64 years, Alberta has been a “have not” province only eight times.
Even as Alberta has weathered the ups and downs of energy prices, it has not received equalization since the mid-1960s.
Quebec, in comparison, has been a “have not” every single year; in fact, more than half of all money disbursed via equalization has gone to Quebec. That said, per capita equalization spending is actually lower in Quebec than it has been in Maritime provinces.
This has fed the perception among some Albertans that they are paying the bills for other provinces.
“This is a chance for us to speak up in a way that they can’t ignore and start getting some meaningful reforms to this country that helps … secure prosperity for future Albertans,” said Bill Bewick with Fairness Alberta, which supports the referendum.
It’s worth noting that at various times, a good number of provinces, among them Saskatchewan, Ontario, and Newfoundland and Labrador, have condemned the equalization program.
Janigan points out that equalization complaints have also gone in the opposite direction.
“The demands for more money among the poorer provinces have been equally strong, and equally … vehement about how they are owed more money,” Janigan said. “There’s always a reason to find a complaint.”
What is the actual referendum question?
“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?”
A “yes” vote means equalization should be removed from the constitution. A “no” vote means it should stay.
What happens if it passes? What happens if it doesn’t?
If the referendum passes, it doesn’t necessarily mean anything will actually happen regarding equalization.
Bewick says it’s a matter of “common sense” that if a province speaks up about their frustration, “it should get addressed.”
“It’s a conversation that, frankly, the politicians have shown a preference to avoid … but this referendum, sort of forces it onto the agenda in a way that just one or two premiers asking for it does not,” Bewick said.
Alberta Premier Jason Kenney says that if the referendum passes, the province will have a strong mandate to negotiate with Ottawa regarding equalization. In a press conference earlier this year, Kenney said a “yes” on the referendum would lead to a motion passed in the legislature to ratify a constitutional amendment on equalization, which the province would then take to the federal government.
“A positive vote on a proposed constitutional amendment … (would) compel the government of Canada to engage in good faith negotiations with Alberta about the proposed constitutional amendment,” said Kenney.
The reason for this dates back to 1998, when the Supreme Court heard a reference case on Quebec secession. Basically, what the court said is that “a legitimate attempt by one participant in Confederation to seek an amendment to the Constitution is an obligation on all parties to come to the negotiating table.”
The question is whether or not that applies to a referendum on something like equalization, or exclusively to the threat of secession.
Eric Adams, a constitutional law professor at the University of Alberta, maintains there is no duty for the provinces and Ottawa to negotiate in this instance. The Supreme Court laid out when such a duty exists, Adams explains, and that’s in the instance of a true constitutional crisis, like the possible breakup of the country.
“Let’s imagine a scenario in which any time a province holds a vote on any constitutional topic, and the positive outcome of that required every other province and the federal government to immediately engage in constitutional negotiations … it’s unfathomable, because of the dysfunction,” said Adams.
But, Adams said, there could be discussions about equalization reform. There may even be a duty for other provinces to discuss this, given the referendum — but that’s a few degrees away from a literal duty to negotiate constitutional change.
If the referendum doesn’t pass, then, theoretically, nothing happens. Some Albertans will continue to harbour grievances towards equalization. Less well-off provinces will continue to receive money.
Bewick says if that happens, it’ll be a setback, but the fight isn’t over.
“This is a valuable way to elevate the discussion, or make it a little more urgent, but ultimately getting people in Ontario and B.C. wanting the same kind of rebalancing of fiscal federalism, will be the key to long-term success,” Bewick said.
Could the federal government just reform it? Without all the drama?
The federal government, at any time, could reform the equalization system.
The Liberals, under Prime Minister Justin Trudeau, actually had the opportunity to do so in 2019 when the formula by which equalization is calculated expired.
They didn’t do so.
The system we have now is basically the same system developed under Stephen Harper’s Conservative government around the time of the 2008 financial crisis, said Trevor Tombe, an economist at the University of Calgary who’s written extensively about equalization
“It would be wise for the government to consider reforms, because the economic, fiscal and demographic landscape that Canada is going into now post-COVID … is very different than some of the features of the formula that were put in place during the financial crisis,” said Tombe.
Why is this coming up now?
When the United Conservatives formed government in Alberta in 2019, one of their promises was to seek a “fair deal” for Alberta. A panel was convened, and it travelled the province seeking input on what that might look like.
When the panel returned its report in May 2020, one of the 25 recommendations was to hold a referendum on equalization.
But the impulse to fight over equalization is a long-standing feature of Alberta politics.
It’s even bipartisan. In 2018, Joe Ceci, the NDP government’s finance minister, criticized the program.
“The program has not worked for Alberta, even during the depths of our recession, which started late 2014,” Ceci said.
In 2010, then-premier Ed Stelmach proposed a fight over equalization. In 2006, Ralph Klein threatened to pull out of the program (that’s not something Alberta can do, but nevertheless, Klein threatened it).
What is the argument in favour of equalization?
We’ll let Tombe answer that: “Canada is a diverse country with low-income regions and high-income regions, and if we want provinces to have the ability to deliver health and education, which is their constitutional responsibility, then as a country we need some mechanism to ensure that lower income regions can do that.”
What is the argument?against?equalization?
“The program is clearly bloated and sends money to the wrong places. And, in particular, Quebec should not be getting a $13-billion equalization cheque. And, more than ever, I think people are very conscious about how important their provincial services are.”
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