Monday, October 30, 2006

Poor Lorne Calvert

Lorne Calvert, the Premier of Saskatchewan, is on a mission these days. He’s fighting an uphill battle trying to convince Canadians that the Saskatchewan government deserves an extra $800 million in annual Equalization payments from Ottawa. The truth is, he doesn’t deserve a dime.

For those of you who aren’t too familiar with the platitudes of federal transfers, Equalization is a program by which the federal government makes payments each year to the poorest provinces, in order to enable them to provide reasonably comparable services as in the richer provinces at reasonably comparable tax rates.

During the last federal election, Stephen Harper’s Conservatives promised to exclude resource revenues from the Equalization formula. Concretely, that means that the hundreds of millions of dollars in revenues that Saskatchewan extracts each year from its oil and gas fields would not be counted as part of its “fiscal capacity” or relative wealth, thus making the province appear poorer and entitling it to larger Equalization payments in the order of an extra $800 million per year. That’s a lot of dough.

Now the Saskatchewan government is already one of the richest in Canada, mainly due to its lucrative energy reserves. They’re doing so well that this year will mark their 13th consecutive budgetary surplus, tied with rich Alberta for the longest current streak. They’re doing so well that Premier Calvert has decided to lower the provincial sales tax from 7% to 5%, at a cost of more than $300 million per year. The province’s debt burden is among the lowest in the country, as is the unemployment rate (only 4.3%, well below the national average of 6.4%).

Clearly, Saskatchewan is doing quite well, thank you very much. To give them an extra $800 million that could be used to help poorer provinces would be ridiculous. It’s like giving a winning lottery ticket to a multi-millionaire.

Premier Calvert insists that a promise is a promise and that the feds should cough up the cash. After all, he says, Newfoundland and Labrador as well as Nova Scotia already benefit from such a privileged treatment for their offshore oil and gas resources. It would only be fair to extend that same privilege to Saskatchewan.

Unfortunately, those two provinces aren’t even in the same galaxy as Saskatchewan when it comes to their relative economic and fiscal fortunes. Those two provinces have much higher debt burdens, much higher unemployment rates and face much more severe economic and fiscal challenges. A case could be made that those two provinces were in a real bind and needed an extra push to help them dig their way out of their respective holes. But Saskatchewan is certainly in no need of any help. Not even close.

Please, Premier Calvert, give up your fight. Don’t waste your taxpayers’ money with your misleading ad campaign and don’t try to deprive other poorer provinces from Equalization cash they deserve.