Alberta premier Jason Kenney wants revenge against the rest of Canada for disrespecting his province’s oil and gas, so he decided to take a swipe at federal equalization payments.
Kenney added a referendum on equalization to the ballot for his province’s municipal elections on Monday, October 18th. The premier asked Albertans whether or not they were in favour of amending the Canadian constitution to remove the clause that guarantees equalization payments to economically disadvantaged provinces.
We will not have official results until October 26, but partial and unofficial tallies indicate Albertans voted Yes.
(We do have final results for the local elections. Among the highlights: Calgary elected its first woman mayor, Jyoti Gondek, and Edmontonians chose former Liberal cabinet minister Amarjeet Sohi to be their mayor.)
As for equalization, it seems a good many Albertans in both urban and rural areas believe they get the fuzzy end of the fiscal stick in Canada. Kenney appears to have convinced them that by voting yes in his referendum they can bargain for a better deal.
Sadly, Kenney has only succeeded in gaslighting a good many of his fellow citizens. In fact, the entire Alberta debate over equalization is based on massive confusion as to what the program is, and how it works.
Oil and gas revenues do not contribute to equalization payments
In Canada, the federal government makes annual equalization transfer payments to provinces whose per capita revenues fall below the national average. Most recently, five provinces qualified for such payments, worth a total of somewhat more than $20 billion.
Do not confuse equalization payments with the far bigger federal transfers to provinces for health, social services and higher education.
Those transfers currently amount to more than $83 billion per year. They go to every province, including Alberta. The amount per province is calculated almost entirely on the basis of each province’s population. The more people, the more money.
On a per capita basis the Atlantic provinces benefit most from equalization.
Quebec also receives equalization – less per person than the provinces to its east, but still a fairly large piece of cash – and Quebec is the target of most of Jason Kenney’s ire.
Kenney is particularly annoyed at Quebec politicians’ characterization of Alberta oil as “dirty.” He also thinks Quebeckers are ungrateful for the wealth he claims Alberta shares with the rest of Canada.
The Alberta premier claims the federal government channels too much of Alberta’s oil and gas wealth into equalization payments. At the same time, Kenney finds it galling that recipient provinces such as Quebec obstruct potential oil and gas infrastructure, such as the Energy East pipeline (which would carry Alberta products through Quebec).
In fact, as political scientist Nikola Brassard-Dion shows in a recent study for the Forum of Federations, the Canadian-based global network on federalism, not a penny of Alberta’s oil and gas revenue goes toward equalization.
The federal government pays equalization out of its own revenue and none of that revenue comes from Alberta’s oil and gas.
In Canada, all of the royalties from natural resources on or in their territories go to the provinces. That is one of the main reasons why there is such a deep economic gulf between the richer and the poorer provinces in Canada.
As Brassard-Dion puts it: “Provincial ownership of natural resources and their uneven geographic distribution actually contribute significantly to the regional wealth disparities that equalization tries to mitigate.”
The Louis St. Laurent Liberal government instituted the current equalization program in 1957. Twenty-five years later, Pierre Trudeau’s massive reform of the constitution, which most notably featured the Charter of Rights and Freedoms, constitutionally guaranteed equalization.
Jason Kenney’s referendum proposes removing that constitutional guarantee. The referendum results will have no legal impact, of course.
Amending the constitution requires the agreement of the federal government and at least seven provinces whose populations total more than half of the country’s.
Don’t expect any provinces, with the possible exception of Saskatchewan, to join Kenney’s campaign anytime soon. And even Saskatchewan will be unlikely to pick fights with the rest of Canada at a time when it has been forced to ship intensive care patients to other provinces.
Equalization is a normal practice in federal countries
The concept of equalization is not uniquely Canadian. Many federations do it, including India, Australia, Austria, Germany, Switzerland and Spain.
They do it in different ways.
Some, like Canada, assign the task entirely to the federal government. Others have an arm’s length commission which determines the criteria and amounts for equalization payments. A few, such as Germany, provide for the richer states (called Länder in Germany) to directly transfer money to the poorer ones.
With the notable exception of the United States, most federal countries have decided it is necessary to assure that regardless of how rich or poor their regions are, all citizens should benefit from roughly the same level of public services. That is the main motive for equalization in Canada and elsewhere.
If the Alberta premier hopes to convince anyone that there is something bizarre and exceptional about equalization as practiced in Canada, he is barking up the wrong tree.
Where Canada is something of an outlier is in its assignment of the lion’s share of natural resource revenues to the provinces. Among decentralized and federal countries, only United States and Australia share Canada’s approach. In all others, revenues from oil, gas, hydroelectricity and other natural resources are shared between the national or federal governments and what we in Canada would call the provincial governments.
Handing over control and benefit from most natural resources to the provinces is especially egregious in this country because a good part of that wealth is on unceded Indigenous territory.
These days, we in Canada – belatedly and entirely symbolically – acknowledge Indigenous peoples as founders of this country together with the French and English. But when the rules for the new country were drawn up more than a century and a half ago there was not a single Indigenous person at the table.
The white, male Fathers of Confederation gave themselves all the power and all the wealth. The existence of Indigenous nations barely registered on their radar.
Ignoring the British Crown’s promise of a century earlier in the 1763 Royal Proclamation, the architects of Canada consigned Indigenous communities to the status of wards of the state, with, at best, some vestigial rights to engage in subsistence-level harvesting of fish and game.
Not only did Indigenous peoples not derive any benefit from the exploitation of oil, gas and other natural resources, they bore the greatest brunt of the pollution and other forms of environmental degradation that exploitation engendered.
Non-Indigenous Albertans, and both Canadian and foreign corporations, got rich from Alberta’s oil and gas.
That province still has the highest per capita annual income in Canada, and Jason Kenney’s complaints of an unfair deal for his province within the Canadian federation are pure political hokum, without any basis in fact.
On the other hand, Indigenous peoples in Alberta could legitimately point to a long history of exclusion from the sources of much of that province’s wealth.
If the Alberta premier were looking for a cause to champion, he might think about abandoning his phony war on federal equalization payments and consider focusing, instead, on justice for Indigenous peoples.
Editor’s note, Oct. 20: A previous version of this story stated the Pierre Trudeau government reformed the constitution 15 years after the Louis St. Laurent Liberal government instituted the current equalization program in 1957. In fact, the constitution was amended in 1982, 25 years after Louis St. Laurent introduced equalization in 1957. The story has been updated to reflect this change.