March 28, 2005

Tax increase ruled out in budget

McGuinty wants a break from feds

OTTAWA

Ontario’s newly revised $6-billion deficit is another reason the federal government has to cut the province a break on equalization payments, Premier Dalton McGuinty said last week.

It was McGuinty’s first comment on the ballooning deficit since his government was forced to revise its 2004-05 estimate upward from the $2.2 billion it projected last May.

McGuinty ruled out raising taxes in his next budget, saying that as Canada’s economic engine, Ontario already generates all the wealth it needs to pay for its provincial programs.

But with Queen’s Park claiming that Ontarians currently send $23 billion more annually to Ottawa than they get back in federal services and transfers, something has to give.

Recent federal side-deals that sweetened the equalization pot for Newfoundland and Nova Scotia have irked governments in Ontario and Saskatchewan.

Last Friday’s announcement that Ontario’s deficit is dramatically worse than projected — the result of an accounting fix — has ratcheted up the pressure on McGuinty to extract concessions from his federal Liberal brethren.

“We are pleased and proud to support quality public services in the rest of the country,’’ McGuinty said following a conference on bullying in Ottawa.

“But, you know, $23 billion? At a time when we come last in funding for our colleges and universities? When we come second last in the country when it comes to funding our healthcare?

“Twenty-three billion bucks? That’s too much.’’

Finance Minister Ralph Goodale has formally launched a study of the 48-year-old equalization program.

He dismissed McGuinty’s complaint, arguing the equalization program “does not specifically apply to Ontario,’’ because the province doesn’t collect from it.

Goodale gave similar short shrift to a Conservative motion, presented last week in the Commons, that called on Ottawa to stop trying to claw back Saskatchewan’s non-renewable resource revenues.

Newfoundland and Nova Scotia negotiated what amount to long-term holidays from having energy resource revenues factored into their equalization payments.

If Saskatchewan had a similar deal, it would have received an additional $8 billion from the program over the last decade, said Regina MP Tom Lukiwski.

As it stands now, the province doesn’t qualify for equalization because of its resource wealth.

“Now that the deal has been done, they’ve set a national principle,’’ Lukiwski said outside the Commons.

“Saskatchewan deserves the same deal. I know that we’re getting shafted, quite frankly.’’

Goodale responded that extending the Newfoundland deal to all provinces “would tend to create additional inequities.’’

McGuinty said that a decade ago, Ontario’s net contribution to the federation was just $2 billion.

A study this month by TD economists found that in 2002, Ontario sent $21.1 billion more to Ottawa than it got back. Alberta contributed $7.8 billion and B.C. coughed up $1.6 billion.

On a per-capita basis, Albertans contributed $2,500 each to the federation and Ontarians $1,700.

The Canadian Press

“We are pleased and proud to support quality public services in the rest of the country.”

—Dalton McGuinty

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