B.C. backing legal challenge of equalization formula, may launch its own lawsuit

British Columbia Premier David Eby said Wednesday his government is offering its “full support” to Newfoundland and Labrador’s court case against the federal government over equalization payments — and is looking at filing a lawsuit of its own.

Eby made the announcement in Halifax as the premiers’ annual summer meeting was winding down.

“B.C. taxpayers are sending tax dollars to Ontario through equalization. That is completely absurd. Ontario is not struggling to provide schools or hospitals,” Eby said at the onset of the meetings.

Eby said his provincial government will intervene in Newfoundland’s case “at the appropriate moment,” and B.C. officials will share information to support the legal claim at the trial level while co-ordinating on strategy in court.

Regarding the prospect of B.C. launching its own challenge, Eby said that while there are differences between his government’s legal arguments and those Newfoundland and Labrador is presenting, the two provinces are united in seeking to reverse what he called the equalization program’s “perverse outcomes.”

For decades, the federal program has transferred money from some provinces to others to allow for a roughly equal level of government services across the country. Payment amounts are decided based on “fiscal capacity” — a province’s ability to generate tax revenue.

The provinces that don’t receive payments, or feel they don’t receive enough — Alberta, Saskatchewan, British Columbia and Newfoundland and Labrador — have been increasingly vocal about their discontent.

“I will acknowledge it is very hard for British Columbians to be paying into a program right now at a time when they are facing serious cost of living concerns,” Eby said Wednesday.

“Every person in every province deserves high quality health care and schools and so on. But that is clearly not what the program is doing anymore.”

Newfoundland and Labrador launched a lawsuit against the federal government earlier this year, arguing the province is being cut out of what could be billions of dollars in the long term. 

Saskatchewan Premier Scott Moe, who also supports the court case, said he’s hoping to have a “grown-up” conversation about changing the program, which was started more than half a century ago in an attempt to reduce service disparities across the country.

“It is a formula that is, I think, very flawed,” he said of the current framework.

Moe said he’d like to see the equalization program adopt a new formula — one that distributes half of the money on a per capita basis and the other 50 per cent under the existing formula.

It’s a suggestion Alberta Premier Danielle Smith said she supports.

“We also have pressures associated with the high growth in education and health care as well. So I think that there needs to be a revamp of the equalization formula,” she said.

Smith said her government is still deciding whether to intervene in the lawsuit.

“What we don’t want to do is create a situation where Alberta is the only net payer into the equalization system because the rules have changed so that Newfoundland and Labrador receives payments,” she said. “Then presumably everyone but Alberta will also receive payments. And we don’t think that that’s a very fair situation either.”

Nova Scotia Premier Tim Houston, who is chairing this year’s Council of the Federation meetings, said he’ll review the proposals coming from his counterparts. His province will get $3.3 billion in equalization payments for the 2024-2025 fiscal year.

“My interest is always in Nova Scotians, but I believe in this country as well. So I have a view of what’s fair across the country,” he said.

Houston said that despite disagreements around the table, the tone at this year’s Council of the Federation meetings has been collegial.

“We certainly have a position on equalization. Others have their position and we’ll work through it,” he said. 

“Everybody’s just trying to do the same thing — govern, do what’s best for … their citizens.”

Ontario Premier Doug Ford, whose province gets $576 million in equalization for the 2024-2025 fiscal year, said he “just wants to make sure everyone’s taken care of equally right across the country and we work together.”

A spokesperson for Finance Minister Chrystia Freeland said the current formula was reviewed this year and is up for another review by 2029.

“British Columbia and British Columbians have no better partner than our federal government. We have a strong track record of working collaboratively with Premier Eby and his government to ensure fairness for all British Columbians,” said Navpreet Chhatwal.