What’s New on the “Fiscal Imbalance”?

The Institute for Research on Public Policy (IRPP) organized a breakfast forum in Ottawa today (September 12), to launch a special issue of Policy Options on the so-called “fiscal imbalance” issue. A moderately decentralist (France St Hillaire) to distinctly pro province/ right of centre (Tom Courchene and Gilles Paquet) panel of economic experts lamented the collapse of provincial unity around any new fiscal formula, or coherent re-definition of federal and provincial government roles and responsibilities. The educated guess for a temporary fix in the next Budget? Enhanced equalization to keep Quebec happy (Quebec gets upwards of 60% of equalization payments); plus increased transfers to all of the provinces in the form of new and reconfigured spending on post secondary education and infrastructure. That means the federal Conservatives can do a financial fix with the provinces under the rhetoric of a budget for skills and competitiveness. But this will leave the remaining Canada Social Transfer (minus pse funding) as the orphan in the room of federal-provincial finance. Some see this as a plausible source of funds for an earned income tax credit for the working poor, as called for by the recent Task Force on Modernizing Income Security for Working Age Adults, Goodlae’s last Budget, and Flaherty’s first Budget.