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Officially a 'have-not,' Ontario receives funding boost

From Wednesday's Globe and Mail

OTTAWA — The Ontario government is a winner among provinces, grabbing a share of the equalization pie for the first time and reaping extra millions thanks to tweaks in the Canada Health Transfer formula.

The 2009 budget officially brings Ontario into the ranks of the six “have-not” provinces, due in large part to the province's ailing manufacturing sector. Ontario will now get $347-million in equalization funding from the four “have” provinces in the coming year.

In addition, Ontario will get a total increase of $880-million in the funding it receives as part of the Canada Health Transfer (CHT), thanks to amendments to the complex formula that determines the size of each province's cheque.

When it was a member of the “have” provinces, Ontario could receive less money per capita for its health care system than the other provinces. But as a “have-not” province, Ontario is in line to receive as much money per capita ($734) as such provinces as Quebec and New Brunswick, more than the $674 it got last year.

As a result, Ontario is receiving $9.6-billion in the coming year under the CHT, which is $350-million more than it would have received under the old formula.

While Ontario has seen its CHT transfers increase, two “have” provinces – Newfoundland and British Columbia – saw their transfers capped to the same per-capita level ($734) as all the other provinces. Without the cap, the two provinces would have received relatively more funding.

Saskatchewan, meanwhile, is receiving more money per capita ($822) than the other provinces, but it's less money under the new formula than it would have received in the past.

Finance Minister Jim Flaherty also confirmed that the government will extend its regional development cash in Ontario. “While continuing our support for Northern and Eastern Ontario, we will provide $1-billion over the next five years to establish a new Southern Ontario Development Agency,” he said.

Ontario's Finance Minister, Dwight Duncan, said his government is generally pleased with the budget, and the province will work with Ottawa to “get shovels in the ground.”

Quebec's Finance Minister, Monique Jérôme-Forget, found enough positive signs in the budget to overcome some of the elements that have become major irritants between the province and Ottawa.

These include unilateral changes to federal equalization payments to Quebec, which according to the minister represent a drop in revenue of $75-million in fiscal year 2009-2010 and $695-million in 2010-2011. “This was, I would say, a very authoritarian move and to change the formula like that without almost any warning was unacceptable,” she said.

The federal government announced in November that it wants to cap the growth of the subsidy program that is designed for the country's poorer provinces. Federal officials said the change was essential because equalization has grown by 56 per cent since 2003-2004, and that the pace was unsustainable.

According to the new federal position, the growth in equalization payments will be “in line with the growth of the economy,” meaning minimal annual increases.

Ontario's share of the equalization pie, meanwhile, amounts to just $27 for every man, woman and child in the province. But it signifies a dramatic reversal of fortune for Canada's manufacturing heartland, which has in the past helped propel the rest of the country to prosperity.

The equalization program is designed to give money to poorer provinces so they can provide social services comparable with those of the richer ones. The federal government will distribute $14.2-billion to every province except British Columbia, Alberta and Saskatchewan, up 4.4 per cent from the previous year. Newfoundland is now considered one of the rich provinces, but it still gets $465-million this year, as part of a previous agreement with Ottawa.

With a report from Rhéal Séguin in Quebec

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