Identifying the issues

Addressing provincial expenditure needs in Equalization may add too much complexity

“... unlike with revenue equalization, the notion of comparable levels of public services is inherently very difficult to measure.” - Robin Boadway14

To date, the Equalization program has focused only on measures of fiscal capacity with no attempts to measure or assess variations in expenditure needs across the provinces. Most provinces support this direction and are concerned that addressing needs would add further complexity to an already complex program. It also could result in indirect intrusions by the federal government into decisions that are the responsibility of provinces. Others said that needs should be taken into account in targeted transfers to provinces such as the Canada Health Transfer or the Canada Social Transfer, but not for general purpose transfers such as Equalization payments. On the other hand, some provinces and experts argued that there are real differences in needs that are not adequately captured in the Equalization program. They suggested that the idea of assessing needs deserved further study.

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