Social Policy in Ontario

Dwight Duncan demands Ottawa release censored report showing Ontario is shortchanged by equalization

Posted on January 28, 2012 in Governance Debates

Source: Toronto Star — Authors: Robert Benzie

TheStar.com – news/Canada/politics/Ontario
Published On Thu Jan 26 2012.   Robert Benzie, Queen’s Park Bureau Chief

Finance Minister Dwight Duncan is demanding Ottawa release a classified federal report that reveals Ontario gets shortchanged by the national equalization wealth-sharing scheme.

In the wake of revelations in the Star, Duncan wrote Finance Minister Jim Flaherty on Thursday urging the federal government to lift the veil of secrecy shrouding the 67-page study.

“The report makes it increasingly clear that because of the policies of the government of Canada, Ontario families are subsidizing programs and services in other parts of Canada that Ontarians themselves do not enjoy,” the Ontario treasurer wrote.

Duncan fired off his letter after the Star obtained an uncensored version of a 2006 report entitled, “An Operational Expenditure Need Equalization Formula for Canada.”

Written by Peter Gusen, then director of federal-provincial relations at the finance department in Ottawa, it concluded Ontario and B.C. are at a severe disadvantage to Quebec and the Atlantic provinces.

That’s because the federal government does not take into account that it’s more expensive to live and work in some provinces than others when doling out funds from the $15.4 billion equalization pool.

While Gusen’s report was completed in the final days of former prime minister Paul Martin’s administration in 2006, a blacked-out version wasn’t released until 2010 after Matthew Mendelsohn, director of the Mowat Centre for Policy Innovation at the University of Toronto, sought its release.

“We’ve always said that the equalization formula penalizes Ontario,” Duncan said from Washington, where he is attending pre-budget meetings.

“The system in use is inherently biased against Ontario. This year, for instance, we’re putting in about $6 billion and then getting back $2.2 billion. That does rise next year to $3.2 billion,” he said.

Flaherty’s office did not commit to releasing the complete report even though the censored version has 27 redactions, including key charts to compare provinces’ needs for health, education, and other services.

Instead, federal officials countered that Gusen’s study had been surpassed by other research.

“The report in question was prepared in 2005-06, well before our Conservative government’s landmark changes to the transfer system and before Ontario qualified for equalization for the first time ever,” said a senior official, insisting “the report that matters” is a 147-page review led by former Alberta deputy treasurer Al O’Brien in May 2006.

O’Brien’s panel said equalization should continue to focus on provinces’ “fiscal capacity” instead of their respective spending needs.

“There is no conclusive evidence that it would have a material effect on the size and allocation of equalization payments,” it said.

Gusen, however, argued that that is too simplistic.

“Cost matters as much or more than work load,” he wrote. “Ontario and B.C., typically regarded as ‘rich,’ are invariably the high-cost provinces. As a result, they are more often than not the most needy.”

Duncan stressed it isn’t just semantics, warning that with a $16 billion provincial deficit to eliminate, Ontarians can expect to hear more about Canada’s fiscal imbalance in the March budget.

“We’ll have a very strong and potent narrative in the budget around the fiscal arrangements of the federation,” he said.

“It’s time that the biases against Ontario be removed and that we begin to look at this thing realistically.”

< http://www.thestar.com/article/1121975–dwight-duncan-demands-ottawa-release-censored-report-showing-ontario-is-shortchanged-by-equalization >

Tags: budget, standard of living, tax

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