Alberta 'shortchanged' $130 million by Ottawa in fiscal stabilization payments: briefing note

Alberta applied for $707 million in fiscal stabilization payments for the 2020/21 fiscal year last September, with Ottawa saying they would only give the province $577 million.

Alberta 'shortchanged' $130 million by Ottawa in fiscal stabilization payments: briefing note
THE CANADIAN PRESS/Darren Calabrese and Facebook/ Nate Horner
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Albertans continue to be shortchanged on fiscal stabilization, with a 'secret' briefing note proving they are owed $130 million from the federal government.

A February 21, 2023 note between Finance Minister Chrystia Freeland and then-deputy finance minister Michael Sabia highlighted a disagreement with the UCP on how much Alberta should receive in fiscal stabilization payments from federal coffers.

Established in 1967, the Fiscal Stabilization Program (FSP) provides federal support for provinces that experience year-over-year revenue declines "resulting from extraordinary economic downturns." 

Ahead of last September's deadline, the province applied for $707 million in payments for the 2020/21 fiscal year, as documented in the province's 2023 budget. 

Freeland's note to then-finance minister Travis Toews indicated the federal government's decision. According to an access to information request by Postmedia, Ottawa's calculations would give the province $577 million through the program.

Payments to provinces are triggered when there is either a 5% drop in non-resource revenue or a more than 50% decrease in resource revenue.

Since 1987, the feds capped payments at $60 per capita but raised it to $169 per capita in December 2020 after all provinces called for its removal the year before.

Those changes also raised the maximum payment for Alberta for the 2020-21 fiscal year from $265 million to $748 million. Alberta would have qualified for nearly $3 billion in fiscal year 2020/21 if no cap existed.

Then-premier Jason Kenney called the reforms a "slap in the face" that shortchanged Alberta. 

"This is not Albertans getting out a begging bowl," he clarified. "We don't look for welfare as a province; we look for fairness."

"Even with the modified cap, the fiscal stabilization program will fall well short of its original purpose of protecting provinces from adverse revenue shocks," Toews told reporters in December 2020. He said the program was "not even a half measure" of what the premiers wanted.

"There's a recognition across the country, by other provincial governments, of Alberta's contribution to our net federal fiscal equation," said Toews. Since 1961, Alberta's net federal fiscal transfers have amounted to more than $600 billion to Ottawa.

In a statement to Postmedia from Alberta Finance and the Treasury Board: "Alberta continues to call for fundamental reforms to the Fiscal Stabilization Program to ensure the program benefits all Canadians."

With no recourse mechanism to negotiate that amount, the November 30 deadline for the final determination leaves the province between a rock and a hard place.

According to the federal Finance Department, it tabulated the $577 million using recent tax data. As stated in the Federal-Provincial Fiscal Arrangements Act, the feds supposedly conversed with the provinces and territories.

Rebel News attempted to reach Alberta Finance and the Treasury Board to confirm if the feds consulted the province on fiscal stabilization but have yet to hear back at the time of writing.

In 2015 and 2016, Alberta received the maximum $250 million stabilization payment allowed under the program amid low oil prices.

In the 2020/21 fiscal year, the lower payment from Ottawa covered 39% of Alberta's non-resource revenue loss. According to the briefing note, the province's higher figure would have covered 47% of the losses. 

On February 1, 2021, Tory MP Tom Kmiec introduced Bill C-263, the Equalization and Transfers Fairness Act, to increase transparency and fairness in Canada's equalization and transfer regime.

The bill advocated fairness for Alberta by removing the $169 per capita cap on fiscal stabilization payments to prevent the federal government from unilaterally changing the equalization formula. 

In 2015/16, Alberta's revenues dropped by $8.8 billion. At the time, however, there was a $60 per capita limit on fiscal stabilization payments, resulting in Alberta receiving only $248.3 million from the fiscal stabilization program. 

"Without the cap, Alberta would have received $2.9 billion," said Kmiec.

While Bill C-263 generated more dialogue for Alberta's forthcoming equalization referendum — making it "impossible to ignore" — the bill did not make it to the second reading and was ultimately quashed.

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