March 24, 2005

Fight heats up between Ottawa and provinces over revenue-sharing

OTTAWA

Provincial claws were unsheathed Monday in reaction to a federal review of a multibillion-dollar revenue sharing arrangement between Ottawa and the provinces that seems to be coming unglued.

Finance Minister Ralph Goodale’s study of the 48-year-old equalization program was announced just as Newfoundland dazzled many with a free-spending budget based on billions in new cash the province was able to wring out of Ottawa.

The windfall for Premier Danny Williams has fanned the desires of other provinces for special deals, outside the historic program originally designed to even out regional economic differences.

Saskatchewan Premier Lorne Calvert quickly dismissed the federal panel and its year-end deadline as too slow for his purposes.

“There is a limit to one’s patience,’’ said Calvert, who earlier urged a travelling Commons committee to consider his bid for a similar deal to what Williams struck in January with Prime Minister Paul Martin.

That promised Newfoundland at least $2 billion in funding as the province is allowed to continue receiving equalization payments while keeping all of its energy revenues.

That’s contrary to the basic rules of equalization, where federal support was traditionally clawed back when provinces earned their own money from energy production.

Nova Scotia won a deal similar to Newfoundland’s pact, which allowed Williams to spend an extra $180 million on provincial health in his Monday budget. As well, he pledged construction of a provincial arts and culture centre in St. John’s.

Saskatchewan wants similar treatment but won’t wait until Goodale’s panel finishes its lengthy review, said Calvert.

“We would like to see resolution to this (energy issue) before we really get into the nitty gritty of the more detailed equalization review,’’ said the NDP premier.

A so-called Saskatchewan accord would be more complicated, since the province recently emerged from have-not status and doesn’t receive equalization.

But Calvert says he’s worried about the future and wants a deal that excludes all its energy revenues from future calculations.

In the opposite camp, populous Ontario’s Premier Dalton McGuinty is worried such expensive side deals will drain more and more from his province’s coffers.

Ontario — a “have” province — sends $23 billion more to Ottawa each year than it gets back in federal services, McGuinty has complained.

Ontario wants to focus on that, rather than a federal-driven study of the entire equalization program.

“What we’re looking for is the federal government to start addressing the $23-billion gap,’’ an Ontario official said Monday.

“We’re looking for the federal government to close the gap, not widen it.’’

McGuinty was travelling Monday and couldn’t be reached for comment.

But he helped organize a rival, provincial-focused review of equalization last fall, to offset Goodale’s study. That panel is still being organized.

In the past, provinces have been able to present a united front against Ottawa, although fault lines began to appear last October when they sat down to hash out a new arrangement.

Williams stormed out of those meetings, starting what ultimately became a successful pressure campaign on Ottawa for a better side deal for Newfoundland, based on promises Williams said the prime minister made during the June 2004 federal election campaign.

The Canadian Press

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