Ottawa needs to 'unshackle' Alberta's economy and potential, says Fairness Alberta

During the most recent meeting of premiers in Ottawa, Ontario premier, Doug Ford, praised Alberta specifically for its generosity in aiding Ontario in their efforts to flatten the curve, despite facing the most considerable economic contraction in Confederation.

"I want to remind everyone: when we were in desperate need, who was one of the provinces that came to our rescue?" said premier Ford, as he pointed towards premier Kenney. He cites the "truckload of PPE," and ventilators sent in April when hospitals faced shortages, and the number of patients in critical conditions rose, as 'real collaboration.'

Ontario received 250,000 N95 masks, 2.5 million procedural masks, 15 million gloves, 87,000 goggles, and 50 ventilators from Alberta, with Quebec netting 250,000 N95 masks, 2 million procedural masks, and 15 million gloves.

However, that is a mere drop in the bucket regarding Alberta's net contributions to neighboring provinces.

Historically, Alberta has made an outsized contribution to Canada's economy and federal public finances, according to a 2017 publication by the Fraser Institute. Alberta contributed disproportionately (relative to its population) to federal revenue, GDP growth, job creation, and business gross fixed capital formation.

At the height of the energy boom in 2014, Alberta contributed 18.8 percent of GDP despite only 11.6 percent of its population.

Between 2004 and 2014, 32.5 percent of all private-sector jobs created in Canada were created in Alberta.

During that period, Alberta’s 3.4 percent GDP growth rate was more than twice the other nine provinces (1.6 percent). It was nearly a full percentage point greater than the next fastest-growing province.

Between 2007 and 2015, Albertans paid $188.6 billion more in federal taxes than they received in transfers and federal programs. This measure excludes contributions and payments from the Canada Pension Plan. Once these amounts are included, Alberta's net contribution rises to $221.4 billion.

Clearly, throughout the past decade, Alberta’s economic engine has represented a large and growing Canadian economy share. Canadians in other provinces should consider Alberta to be a “friend in need” and avoid policy choices that will unduly hinder Alberta’s prosperity.

Yesterday, Fairness Alberta, a newly formed grassroots, non-partisan, and non-separatist association of concerned citizens launched a billboard in downtown Toronto showing that Canada needs Alberta's economy to be productive again to recover from this COVID-induced financial crisis. The billboard and online campaign show that Ontarians and Albertans carry a heavy fiscal load in the federation.

"There's a tremendous amount at stake as we navigate our way through the current crisis," said Dr. Bewick. "We want Canadians here on Bay Street and across the country, thinking about how critical Alberta's productivity has been to Canada's economy and federal budgets."

"Canada needs to unshackle every province's economy to get out of this jobs and fiscal crisis, but Alberta's potential, in particular, is held back by existing federal barriers as well as fears of those to come," said Fairness Alberta Executive Director Dr. Bill Bewick. "This billboard shows Ontario and Alberta have been covering a big tab for federal spending in the have-not provinces – if Alberta's contributions fall away, there's a massive imbalance that will persist long after COVID."

Alberta’s recent recession was severe, and revenues declined substantially: between fiscal years 2014-15 and 2016-17, resource revenues decreased by $5.9 billion while non-resource own-source revenues declined by $3.3 billion.

At the same meeting, Premier Kenney was not afraid to mince his words, stating, "This year [Alberta] should be receiving $3.8 billion [through fiscal stabilization] and instead we'll receive $266 million. Over the last five years, we should have received $2.9 billion from fiscal stabilization. Instead, we received half a billion. So we've been shortchanged by about $6 billion."

As part of the list of recommendations provided by the Fair Deal Panel, Albertans called for a referendum on Equalization and the removal of Fiscal Stabilization Program constraints, including 'unfair' caps at $60 per person, and exclusions if natural resource revenue is significant but less than 50 percent.

In a publication by Trevor Tombe, Associate Economics Professor at the University of Calgary, he estimates that under the original 1967 formula, Alberta would have received a $6.996 billion payment for the $8 billion in lost revenues from 2015-2016.

Since only drops above 50 percent in natural resource revenue are covered, the deductible that year left a $1.6 billion stabilization amount. But the $60 per capita limit lowered this to $248 million. In 2016-17, the drop in total provincial revenues was due entirely to a decline in non-resource revenues of $2.2 billion. After a smaller 5 percent deductible, the resulting stabilization payment would have been nearly $1.2 billion, but the cap on payments meant that only $251 million was paid. Overall, between 2015-16 and 2016-17, total stabilization payments to Alberta were $2.25 billion lower than they otherwise would have been.

According to Tombe, "For resource revenues, a drop of 50 percent or more is also a rare event. Among the provinces with meaningful resource revenues, only in 1986 and 2015 were declines that large. That amounts to less than 5 percent of observations over the 1982-2018 period for the three oil-producing provinces. A 50 percent natural resource revenue decline is therefore as rare an event as a 2 percent decline in non resource revenues."

In the February 27, 2018 budget, federal Finance Minister Bill Morneau proposed a five-year renewal of the previous equalization regime beginning April 1, 2019, until 2024. The Budget Implementation Act received Royal Assent on June 20, 2018. Under the renewed plan, the federal government is gradually increasing the number of equalization payments to the provinces from $17.9 billion in 2017-2018 to $22.1 billion by 2022-2023.

Some experts estimate that the total net payment to the rest of Canada back to 1961 amounted to $661 billion.

Fairness Alberta previously released analysis and recommendations for reforms to Equalization and the Fiscal Stabilization program to their website fairnessalberta.ca/.