In his most recent report, the Auditor General reported that Ottawa collected $7.2 billion dollars more in Employment Insurance (EI) premiums than Jane Stewart managed to shovel out the door in unemployment benefits and various other sundry programs. Just for reference, this works out to $236 for every man, woman and child in the country.
The cumulative surplus in the EI account is now $28.2 billion. And that $28.2 billion is not in a savings account in Ottawa. Instead of saving these surpluses, Ottawa has been redirecting EI surpluses into general revenues and spending them on an annual basis.
The Ontario Tories have been making the loudest complaints about this rip-off, and for good reason. EI premiums per Ontarian amounted to $667, while total EI expenditures in the province of Ontario amounted to $256 per person. Ottawa is skimming more than $400 per person in Ontario to fund programs in other areas.
EI treats the western provinces better than Ontario, but only in the sense that four cattails hurt less than nine. Ottawa is skimming $284 for every man, woman and child in Manitoba, $240 for each resident in Saskatchewan, and $254 for each resident in British Columbia. Alberta is in the eight-cattails range of paying $360 more per person than it gets back in total EI program payments.
These net contributions are not just due to differences in unemployment rates. If you strip away what the EI defines as “regular benefits” (basic unemployment benefits which include different rules for high unemployment regions), the same five provinces are still getting ripped off. Alberta and
Ontario get $70 per capita in other benefit programs (including maternity, parental, sickness and fishing benefits) while the national average is $78 per person.
And when it comes to labour force programs which are also funded by EI premiums, Ottawa shovels between $100 and $275 per capita to the five eastern provinces, but only between $54 and $77 to Ontario and the west. Regular benefits are the only portion of EI spending that can really be called “insurance.”
In reality, then, Ontarians are paying $534 more per person than Ottawa spends on bona fide unemployment insurance in that province. Alberta’s net contribution per person on this basis rises to $492. Given that the federal Equalization program redistributes revenues across the country so that all provinces have access to comparable revenues, what possible defense is there for this “Super-Equalization”?
It is, I would argue, nothing short of a vote-buying exercise where Ontario and the west, in particular, are getting snookered.
But what can be done? Ottawa controls the EI levers — it sets the contribution rates and recently relaxed the rules to make the redistribution outlined here even worse. It turns out that provinces could make some trouble for Ottawa on the EI front, if they were willing to be creative.
There is a rule in our Constitution that says Ottawa cannot tax provincial or municipal governments — the Crown cannot tax the Crown.
Provincial governments do, however, pay the employer portion of unemployment insurance premiums on behalf of their employees. They do this on the basis that EI premiums are not a tax, but a cost for a program for their employees.
However, the current EI program hardly fits this role. Not only is Ottawa collecting billions more than it is spending, the program itself is effectively a slush fund for excessive redistribution.
What provincial governments should do is stop paying the “tax” portion of employer funded EI premiums. For Alberta this would mean withholding the employer portion of the $492 per Albertan that Ottawa is skimming off the program for non-insurance purposes.
Alberta could do this only for its own employees, but doing so would send a powerful message to Ottawa. Alberta would then wait for Ottawa to react, confident that it could win any court challenge to pay up, and relishing a parliamentary debate that would expose the EI ripoff for all to see.
The only real question is whether Ontario or Alberta will be the first to act.
Ken Boessenkool, a former policy adviser to Stockwell Day when he was treasurer, is one of six Albertans who authored the Alberta Agenda, urging the provincial government to make full use of the powers granted to provinces under the Constitution.