Please note the portion of resource revenues that are used in the Equalization calculations. Also, where do you think the largest porton of equalization comes from year after year?

Equalization Program

• Budget 2007 introduced a renewed and strengthened Equalization program. For 2008-09, six provinces will receive over $13.6 billion in Equalization payments.

What is Equalization?

• Equalization is the Government of Canada's transfer program for addressing fiscal disparities among provinces. Equalization payments enable less prosperous provincial governments to provide their residents with public services that are reasonably comparable to those in other provinces, at reasonably comparable levels of taxation.

• The purpose of the program was entrenched in the Canadian Constitution in 1982:

• "Parliament and the government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation." (Subsection 36(2) of the Constitution Act, 1982)

• Equalization payments are unconditional - receiving provinces are free to spend the funds according to their own priorities.

How Equalization Works

• Equalization entitlements are determined by measuring provinces' ability to raise revenues - known as "fiscal capacity".

• A province's Equalization entitlement is equal to the difference between its fiscal capacity and the average fiscal capacity of all provinces - known as the "10 province standard".

• Provinces whose fiscal capacity is above the standard do not receive Equalization payments.

Six provinces to receive over $13.6 billion in Equalization payments in 2008-09

A Renewed and Strengthened Equalization Program

• Budget 2007 introduced a new program legislated through 2013-14 to provide long-term predictability for provinces. The new program is based on the recommendations made by the Expert Panel on Equalization and Territorial Formula Financing (O'Brien Report).

• • Equalization payments are determined using a 10-province standard.

• • 50% of natural resource revenues are excluded in determining each province's fiscal capacity and the standard.

• • The new Equalization program includes a fiscal capacity cap to ensure that Equalization payments do not raise a province's total per capita fiscal capacity above that of any non-receiving province.

• Provincial fiscal capacity is measured using five tax bases - personal income tax, business income tax, consumption tax, property tax and natural resources.

• To ensure stability and predictability, Equalization payments are made based on a single estimate system. Payments will be based on a three-year weighted moving average of provincial fiscal capacity lagged two years. Payments will be determined in advance of the year and will not be subject to revision.

• Other elements of the new program include:

• • Under the new Equalization program, provinces get the greater of the amount they would receive by fully excluding natural resource revenues, or by excluding 50% of natural resource revenues.

• • Nova Scotia and Newfoundland and Labrador maintain the benefits of the Atlantic Accords. The two provinces are able to continue to operate under the previous Equalization system to receive the full benefits that they are entitled to under the offshore agreements. These provinces can choose to permanently opt into the new program at any point prior to the expiry of the offshore accords. If either of these provinces chooses to opt into the new program, it will benefit from a guarantee that it will do at least as well, on a cumulative basis, as it would have under the formula agreed to at the time the Accord was signed.

• • In recognition of the recent significant impact of the property tax change on British Columbia, the new program provides additional protection to British Columbia by retaining the existing adjustment factor for its residential property tax in the calculation of its Equalization payments for a three-year transitional period. Payments to other provinces will not be affected.