The call for equalization reform is gaining unexpected momentum as Newfoundland and Labrador Premier Andrew Furey publicly backed Alberta Premier Danielle Smith’s push to overhaul Canada’s contentious fiscal program. What started as a western grievance has now found an ally on the Atlantic coast, potentially reshaping the national conversation on federal transfers.
“The equalization formula doesn’t reward provinces for economic success,” Premier Furey told reporters following a meeting with his Alberta counterpart last week. “When we discovered oil and began producing, we saw our payments drop while still managing significant debt and demographic challenges unique to our region.”
This rare east-west alliance breaks from traditional regional divides that have characterized Canadian fiscal federalism for decades. Equalization, enshrined in the Constitution Act of 1982, aims to ensure comparable public services across provinces regardless of their fiscal capacity. But critics have long argued the formula fails to adapt to changing economic realities.
The current framework, renewed by the Trudeau government in 2019 with minimal changes, will remain in place until 2024. This looming deadline has intensified calls for reform from provinces feeling shortchanged.
For Alberta’s Smith, whose United Conservative Party campaigned on addressing what they view as fiscal unfairness, the issue represents a core promise to constituents. “Albertans contribute billions more to federal coffers than we receive back,” Smith said during last month’s Council of the Federation meeting. “We’re not asking for special treatment – just a formula that doesn’t penalize resource development or economic growth.”
What makes this alliance noteworthy is Newfoundland’s position as a province that has both received and contributed to equalization throughout its history. Since offshore oil production ramped up in the early 2000s, the province has periodically found itself ineligible for payments despite carrying the highest per-capita debt in Canada.
Dr. Trevor Tombe, economics professor at the University of Calgary and public finance expert, notes this creates a peculiar scenario. “Newfoundland faces a triple challenge – high debt, declining population, and volatile resource revenues. The current formula doesn’t adequately address these factors, especially how resource revenues are calculated.”
Parliamentary Budget Officer estimates show that under current projections, Newfoundland and Labrador will receive no equalization payments through 2025 despite facing nearly $16 billion in provincial debt.
Smith and Furey propose several modifications to the formula, including how natural resource revenues are counted and greater weight for demographic challenges like aging populations and out-migration. They’ve also suggested a smoother transition mechanism when provinces move between recipient and contributor status.
The federal response has been measured. Finance Minister Chrystia Freeland acknowledged the concerns but defended the program’s core principles. “Equalization remains a fundamental commitment to fairness across Canada,” Freeland stated at a recent economic forum. “We’re always open to discussions about improvements, but any changes must preserve the program’s essential purpose.”
Quebec Premier François Legault, whose province receives the largest share of equalization payments at approximately $13 billion annually, expressed skepticism about major reforms. “The system exists precisely to address fiscal disparities between provinces. Changing fundamental parameters could undermine this purpose,” Legault told Radio-Canada.
Saskatchewan has quickly aligned with Alberta and Newfoundland, with Premier Scott Moe calling the current formula “fundamentally unfair to resource-producing provinces.” Ontario, currently not receiving payments despite years as a recipient, has taken a more cautious stance, with Premier Doug Ford indicating openness to discussing reforms without specific commitments.
The unexpected Newfoundland-Alberta alliance has energized reform advocates and complicated political calculations in Ottawa. With a federal election expected within 18 months, the Trudeau government must navigate these provincial demands against broader concerns about national unity and fiscal responsibility.
Kevin Page, former Parliamentary Budget Officer, sees both challenge and opportunity in the debate. “This conversation could be healthy if it moves beyond regional grievances toward genuine fiscal modernization. The question is whether we can address legitimate concerns without unraveling the program’s fundamental purpose.”
For many Canadians outside policy circles, equalization remains confusingly complex despite its impact on provincial services. A
