Ottawa announces $2 billion boost in equalization, Manitoba thanks 'prosperous, resource-rich provinces' for the extra doe

The Canadian Press / Sean Kilpatrick

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The Trudeau Liberals are increasing equalization payments to 'have-not' Quebec, Manitoba, Ontario and the Maritime provinces next year. Taxpayers there can expect $23.96 billion in equalization payments — a $2 billion increase from 2022/23.

Equalization is a federal program that addresses fiscal disparities among provinces, transferring tax dollars collected by Ottawa from across the country to 'have-not' provinces which they can spend however they deem fit.

It is funded entirely by the federal government and is aimed at letting poorer regions offer similar levels of service at similar taxation levels as richer ones.

Trudeau's Finance Minister, Chrystia Freeland, said that Quebec would receive the most at $14.04 billion, while Manitoba would get $3.51 billion. Nova Scotia, New Brunswick, and Prince Edward Island (PEI) will receive $2.8 billion, $2.63 billion, and $561 million, respectively, while Ontario gets $421 million.

Starting next April, Manitoba's equalization share will jump by $577 million — a 19% increase from the current fiscal year and roughly double the amount it received in 2016. The uptick in equalization comes when the province has continued to rack up successive deficits since 2009, except for a $5 million surplus in 2019.

In September, its PC government estimated a $202 million deficit for the current fiscal year.

However, The Manitoba 2022/23 Mid-Year Report — Fiscal and Economic Update forecasts a deficit of $193 million, representing a $355 million improvement from the $548 million deficit projected in Budget 2022.

A statement from the finance ministry notes that the increase in equalization is because of more significant economic growth and higher natural resource prices in the more prosperous provinces. "Even with equalization, Manitoba's fiscal capacity is still below the capacity of those resource-rich provinces," it reads.

However, Friesen added that Manitoba, like other Canadian provinces, has seen a significant increase in taxation revenue this fiscal year.

Though it had a challenging 2021, it rebounded with 3.7% growth in 2022 as crop production recovered. But, rising interest rates will inhibit the province's growth to 1.8% in 2023 and 2.4% in 2024 — slower than their prairie counterparts.

Finance Minister Cameron Friesen applauded the province's strong employment growth and a solid rebound in the agricultural sector for propelling the provincial economy forward in 2022.

Manitoba's projected economic growth ranks third highest in the country and best amongst non-resource-based provinces.

Expenditures are projected to be $20.7 billion in 2022/23, $774 million higher than the budget forecast of $19.9 billion. The increase reflects new investments to improve the healthcare system, support for Ukrainian temporary residents, and implementation of economic recovery and affordability measures.

But, given the rising potential for an economic downturn in 2023, the government remains focused and disciplined in facing the current global environment of economic uncertainty.

"While uncertainty persists on the global and Canadian economic landscapes, our government continues to make progress on helping families make ends meet, strengthening health care, making Manitoba more competitive, and building strong and safe communities," said Friesen.

Opposition NDP Leader Wab Kinew wants the added equalization monies to fund health care improvements, especially for X-ray technicians and laboratory workers, who have been without contracts for years.

"That would be one step that I'd like to see happen right away," he said on Monday.

Equalization is separate from all provinces' federal health and social services transfer payments, which remains a heated debate.

Discussions between Canada's premiers and the Trudeau Liberals recently ended in a stalemate, with the federal government noncommittal in increasing its healthcare funding share from 22% to 35%.

The Trudeau Liberals calculate equalization payments through a formula that measures the ability of each province to raise its revenues. On February 27, 2018, then-federal Finance Minister Bill Morneau proposed a five-year renewal of the previous equalization regime starting April 1, 2019, until 2024. The Budget Implementation Act received Royal Assent later that year and gradually increased payments to 'have-not' provinces from $17.9 billion in 2017/18 to $22.1 billion by 2022/23.

According to Statistics Canada data on the population of 'have-not' provinces in Q3 of 2022, the equalization per capita estimate ranges from $28 to over $3,000. PEI has the highest payment per person at $3,287, followed by New Brunswick ($3,240) and Nova Scotia ($2,749). Manitoba is in fourth place at $2,491, followed by Quebec ($1,614) and Ontario ($28).

Equalization is an especially contested topic in Alberta, which its former Premier Jason Kenney pledged to remove from the Constitution.

Despite nearly 62% of Albertans supporting the call to action from last year's referendum, his administration took no subsequent action to address the issue as outlined in its Fair Deal Panel.

Alberta has had a long-standing grievance over the redistribution of wealth to other provinces under the equalization scheme, as contributions from the energy-rich province make up a sizable portion of the payments to other regions. Between 2009 and 2018, Albertans made a net contribution of almost $240 billion to the rest of Canada. Some experts estimate that the province's total net payment to the rest of Canada since 1961 amounted to $661 billion.