With a federal election on the horizon, Alberta and Saskatchewan’s premiers are again making noise about the country’s contentious equalization program.

The federal equalization program is funded through general revenues, mostly sourced through federal taxes, and is used to ensure comparable services across the country.

Last week, Alberta Premier Danielle Smith and Saskatchewan Premier Scott Moe took aim at the program, with Smith charging the current arrangement isn’t fair or sustainable.

While the Liberal government has locked in the equalization formula for payments to provinces until 2029, it’s unclear how other parties might approach the issue.

Though the equalization program goes through five-year renewal cycles, a new government could decide to change course on the 2029 plan.

So far, Conservative Leader Pierre Poilievre has not marked out his plans for the program. When CBC News asked whether a Poilievre government would extend the current formula or enact changes, the Conservative Party pointed to comments the leader made in March.

“You’ll have to wait for our platform to get our plans on all of these types of subjects. I think we all share the goal of enriching all of the provinces by unleashing the free enterprise economy, so that we develop more revenues to fund our programs,” he said.

CBC News has requested comment from the federal NDP regarding its position on equalization.

Controversial in Alberta

The program has long drawn criticism from provincial officials.

In Alberta, it was the subject of a 2021 referendum that was part of the United Conservative Party’s platform in the 2019 provincial election under Jason Kenney.

Nearly 62 per cent of voters said they wanted to remove the equalization section from the Constitution.

Former Alberta Premier Jason Kenney is pictured in a file photo. Under Kenney, Alberta held a referendum on equalization payments, though the province has no power to unilaterally reform the program. (Jeff McIntosh/The Canadian Press)

On her weekly phone-in radio show Your Province Your Premier on Saturday, Smith said she believed other provinces increasingly were getting involved in a discussion around changing the program.

“What I’m delighted to see is that other provinces have begun to speak up … we cannot continue to be the principal funder of expensive social programs in Quebec. Let’s call it what it is,” Smith said.

“They’ve got to either right-size the amount that they’re spending, or they’ve got to improve their economy so that they can generate more of their own tax revenue.”

Smith had responded earlier in the week to a post on X from Moe, who wrote that “once again, Saskatchewan, Alberta and British Columbia will be helping support the rest of Canada” in response to the $26.17 billion for equalization set aside in major federal transfer numbers for 2025-26.

Alberta, British Columbia and Saskatchewan don’t currently receive equalization transfers. With $13.56 billion, Quebec will take in the most from the program, while Manitoba will get $4.69 billion.

Use of funds unconditional

At a high level, the numbers for the coming year are largely similar to the numbers seen last year, and the underlying reasons why some provinces are receiving transfers and others are not are largely the same, said Trevor Tombe, an economics professor at the University of Calgary.

“Higher-income provinces like Alberta, British Columbia, Ontario, do disproportionately have higher-income individuals, more profitable corporations, certainly in Toronto and Calgary, and so disproportionately pay federal income, personal and corporate taxes to the federal government,” Tombe said.

Trevor Tombe is an economics professor at the University of Calgary. He said equalization has always been a policy where different provinces at different times have raised concerns around whether or not it is fair, spanning political parties. (Colin Hall/CBC)

Tombe noted that some say the federal equalization program is indirectly redistributing from higher-income regions to low, but added that’s a natural consequence of having an income tax system in the first place.

“There are critiques one can make against the formula design, but no province funds it. And no individual taxpayer contributes anything as well. Of course, taxpayers fund the federal government, and this is a federal spending area,” Tombe said.

“There is no such thing as a contribution to equalization or a funder of equalization, aside from the federal government.”

Federal Conservatives respond to call for ‘better deal’

When asked for comment last week on Smith’s call for a “better deal” on equalization, the federal Conservatives provided a statement attributed to Jasraj Singh Hallan, Conservative shadow minister for finance.

The statement didn’t address the request from Smith directly but said that for nine years, “Justin Trudeau has caused unprecedented misery and divided Canadians.”

“We will put an end to Trudeau’s economic vandalism that is causing misery and despair in every province and territory, and we will bring our people together to unite Canadians around our common values, our common sense, our common history and our common optimistic future,” the statement reads in part.

Conservative finance critic Jasraj Singh Hallan rises during question period in the House of Commons on Parliament Hill on Oct. 26, 2023. (Sean Kilpatrick/The Canadian Press)

Issue often oversimplified: former finance minister

John Manley, federal finance minister in former prime minister Jean Chretien’s government, said equalization is a very complex formula intended to compare the fiscal capacity of provinces against a norm. He suggested that populist rhetoric can mislead the public about the program’s intent.

“Sometimes I think there’s a perception that the money is loaded into railcars right outside the Palliser Hotel in Calgary and it’s unloaded in Montreal. Doesn’t quite work that way,” Manley said in an interview.

John Manley, pictured in a file photo, filled several roles in former prime minister Jean Chretien’s cabinet. (CBC)

Manley noted different provinces have different fiscal capacities and make varied policy choices. For instance, while Alberta chooses not to have a retail sales tax, it has the capacity to implement one if desired.

“Alberta may have other sources of revenue that other provinces choose not to use. So, there’s an attempt to look at the whole landscape of what capacity there is and compare,” he said.

“Not so that everybody’s equal, but so that those that are the lowest — typically the Atlantic provinces — are given a little boost so that people living there can get the kind of standards of health care and other things that other Canadians expect.”

A frequent ‘source of grievance’

Lisa Young, a professor of political science at the University of Calgary, said equalization has been a persistent source of frustration for provincial governments, particularly in Alberta and Saskatchewan.

“We’ve seen provincial governments in those places really try to play that up. But they’re going to face a real dilemma in the coming months,” Young said. “I suspect that the Poilievre Conservatives will not want to talk about equalization, they’re not likely to include promises to change equalization in their platform, because it would have significant electoral effects potentially in other provinces.

“This is a source of grievance that never really goes anywhere in Canadian politics, and I’m not sure that that’s going to change.”

Tom McIntosh, a professor of politics and international studies at the University of Regina, said critiques of equalization were made in the past by various governments.

“Saskatchewan as a recipient of equalization, while it’s been a number of years, is not nearly as ancient history as it is in Alberta. So, I think there’s an interesting difference there,” he said.

“It’s never resonated in this province, that sort of unease with equalization as it has in Alberta.… It’s only in the last couple of decades that we’ve been a net contributor to equalization.”

Alberta and Saskatchewan aren’t alone in voicing frustrations with the program. In July, British Columbia Premier David Eby said his government was in support of Newfoundland and Labrador’s court case against the federal government over equalization payments.