Albertans are getting a raw deal from Ottawa and Premier Ralph Klein needs to construct a “firewall” to protect against current and future raids on our treasury. This was the key suggestion that we, along with a number of other Albertans, made in an open letter to the premier last week. But just how raw a deal is Alberta getting? 

Any examination of Alberta’s contribution to Canada must begin with the equalization program. Through equalization, Ottawa tops up the revenues of Canada’s less well-off provinces so that all provinces have roughly the same amount of money to spend on each of their citizens. Looking back to 1997 (the latest year for which complete data is available), Ottawa sent Newfoundland $1,971 in equalization payments for every man woman and child. New Brunswick received $1,474 per person and $191 went to Saskatchewan. 

As a result, every provincial government in Canada had at least $5,516 in combined federal and provincial revenues to spend on each of their residents. 

Many analysts have suggested that equalization is flawed because it leads provinces to depend on Ottawa rather than strengthening their own economy. But because equalization is mentioned in the constitution, it could not be changed by Alberta alone. 

But for many Albertans, equalization itself is not the principal source of angst. Rather, the angst arises, or rises, because Ottawa regularly engages in “super-equalization” — it uses nearly every program at its disposal to tilt the fiscal balance away from Alberta, and toward regions more likely to provide votes for the incumbent party. 

The biggest offender is the unemployment insurance program. In 1997, according to the C. D. Howe Institute, families in Alberta were net payers to the tune of $1,000 for unemployment insurance, while families in Newfoundland were net recipients to the tune of $2,100. Families in the rest of Atlantic Canada were also net recipients of at least $416. Quebecers were net payers to the tune of $150. 

And it’s not just that they have higher unemployment rates. If you remove the impact of differing unemployment rates, Quebec and the Atlantic Provinces received between $50 and $405 per person while each Albertan paid $52. And it is worth noting that since 1997, Ottawa has relaxed the tighter eligibility rules so these disparities have widened. 

Ottawa distorts more than just the benefits portion of the program. Unemployment insurance premiums fund a myriad of labour-force programs that not only have a disastrous track record, but infringe on provincial jurisdiction. That they even exist is odd enough, given Jean Chretien’s 1995 promise to transfer labour force programs to the provinces. 

The expenditures for these labour-force programs follow a familiar pattern. In 1997, Albertans got an average of $23 per person while Quebec got $52 per person and Newfoundland got $140. (Incidentally, residents in Saskatchewan were net payers for benefits with $616 and received only $33 per capita in labour-force programs.) 

Ottawa also operates a number of “shared-cost” programs. These are special deals where Ottawa goes to provinces where it “prefers to do business” and agrees to fund a portion of a program in areas such as agriculture, culture, environment, health, housing and transportation — all are areas of provincial jurisdiction. These programs are buried deep in Ottawa’s public accounts, but a vigilant researcher at the C. D. Howe Institute reported that in 1996, Alberta received $44 per person in such programs, while Saskatchewan received $133 per person, Quebec $77 per person and Ontario $70 per person. P.E.I. and Newfoundland received about $250 per person. 

And where did Ottawa get all this money to slush around the rest of the country? In 1997 Ottawa collected more than $10,000 per household from Alberta, but only $6,500 to $7,500 per household in the Atlantic Provinces and Quebec. 

So Alberta paid more and got back less — much less — even if you exempt the constitutionally protected equalization program. 

Nearly all of the super-equalization detailed here (and we have ignored disparities in farming bailouts, export development grants, Canada Health and Social Transfers and the Canada Pension Plan) arises because Ottawa has found ways to invade provincial jurisdiction. While Quebec grumbles about Ottawa sticking its hand where it does not belong, the other provinces too often ignore the constitution, grab the cash and run. 

This has to end. Alberta must forcefully reject the Orwellian notion that while all Canadians have to share equally, some have to share more equally than others. Alberta may well find allies among other “more equal” provinces as well as in Quebec, though for different reasons. And Ottawa must redirect its efforts at finding ways of buying off politically loyal regions (which is a major source of distortion in these regional economies) into an effort to boost growth in all regions of the country. If it did that, all Canadians would be better off. 

One more thing. Wasn’t 1997 an election year? 

Ken Boessenkool was a policy adviser to provincial treasurer Stockwell Day and has authored a number of commentaries on federal-provincial transfers for the C. D. Howe Institute. Stephen Harper is the president of the National Citizens’ Coalition. They are two of six signatories of a recent open letter to Ralph Klein promoting an “Alberta Agenda.”