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While receiving provinces are primarily concerned with the adequacy
of Equalization, they also expressed concerns particularly with the predictability of Equalization payments. Because of the use of several estimates and adjustments, some receiving provinces have experienced substantial drops in the amount of Equalization they receive as a result of changes in data. These shocks can occur up to three and a half years after their original entitlement was determined. In terms of stability, provinces suggest that Equalization should respond to changes in their fiscal capacity over time, but they prefer to have smoothing or “averaging” mechanisms in place so there aren’t dramatic changes on a year-to-year basis.
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