The federal government owes Alberta $130 million in fiscal stabilization payments, according to a “secret” briefing note from Finance Minister Chrystia Freeland to then-deputy Finance Minister Michael Sabia. The note, dated February 21, 2023, revealed a disagreement between the federal government and the United Conservative Party (UCP) on the amount Alberta should receive from federal coffers.
The Fiscal Stabilization Program (FSP), established in 1967, provides federal support to provinces that experience revenue declines due to economic downturns. In the 2023 budget, Alberta documented its application for $707 million in payments for the 2020/21 fiscal year. However, the federal government’s calculations would only provide the province with $577 million through the program, as revealed in an access to information request by Postmedia.
These payments are triggered when there is a 5% drop in non-resource revenue or a more than 50% decrease in resource revenue. In December 2020, the federal government raised the cap on payments from $60 per capita to $169 per capita, which resulted in an increase in the maximum payment for Alberta to $748 million for the 2020-21 fiscal year. Without the cap, Alberta would have qualified for nearly $3 billion in fiscal year 2020/21.
Then-premier Jason Kenney criticized these reforms, calling them a “slap in the face” that shortchanged Alberta. He emphasized that Alberta is not looking for welfare but for fairness. Alberta’s finance minister at the time, Travis Toews, also expressed disappointment, stating that the fiscal stabilization program falls short of its original purpose and is not even a half measure of what the premiers wanted.
Toews pointed out that Alberta has contributed over $600 billion in net federal fiscal transfers to Ottawa since 1961. Meanwhile, the Trudeau Liberals plan to increase equalization payments to provinces such as Quebec, Manitoba, Ontario, and the Maritime provinces, with taxpayers there expected to receive $23.96 billion in equalization payments next year – a $2 billion increase from the previous year.
In response to the situation, Alberta’s Finance and the Treasury Board released a statement calling for fundamental reforms to the Fiscal Stabilization Program to ensure fair benefits for all Canadians. However, the province is caught in a difficult position, as there is no recourse mechanism to negotiate the amount owed, and the November 30 deadline for the final determination approaches.
The federal Finance Department claims that the $577 million figure was calculated using recent tax data and that they had discussions with the provinces and territories as required by the Federal-Provincial Fiscal Arrangements Act. However, Rebel News, which has been following the story, has not yet received confirmation from Alberta Finance and the Treasury Board regarding whether the province was consulted on fiscal stabilization.
In 2015 and 2016, Alberta received the maximum $250 million stabilization payment allowed under the program due to low oil prices. In the 2020/21 fiscal year, the lower payment covered only 39% of Alberta’s non-resource revenue loss, while the province’s higher figure would have covered 47% of the losses.
To address the issue of fairness, Tory MP Tom Kmiec introduced Bill C-263, the Equalization and Transfers Fairness Act, on February 1, 2021. The bill aimed to increase transparency and fairness in Canada’s equalization and transfer regime by removing the $169 per capita cap on fiscal stabilization payments and preventing unilateral changes to the equalization formula by the federal government. However, the bill did not progress past the First Reading and was ultimately not pursued further.
United We Roll, a grassroots movement advocating for Alberta’s equalization referendum, gained momentum with the introduction of Bill C-263. The movement argues that it has become impossible to ignore the need for fairness in Alberta’s participation in equalization payments.
As the dispute between Alberta and the federal government continues, Alberta remains committed to pursuing fundamental reforms to the Fiscal Stabilization Program to ensure that all Canadians benefit fairly from the program.