Equalization reforms must be negotiated, Alward says

Premier David Alward is confident the federal government will consult the provinces before reforming the equalization program despite actions surrounding this week's health-funding deal.

Premier David Alward says Ottawa must consult the provinces on equalization reform

Premier David Alward is optimistic that Prime Minister Stephen Harper will consult with the provinces before making any changes to the equalization program, despite the federal government’s handling of the recent health-funding plan.

Federal Finance Minister Jim Flaherty announced on Monday the federal government would scale back its health payments to the provinces starting in 2017.

Alward condemned that action as "unilateral" and said it was unfair to smaller provinces. But the New Brunswick premier isn’t willing to say yet whether he believes the health-funding arrangement could be the beginning of a pattern of financial retrenchment on the part of the federal government.

The next major deal that is coming up for renewal between the federal government and the provinces surrounds the equalization program.

Alward said despite being shut out of the health decision he expects the Harper government to consult the provinces on updating equalization.

"We will be working to see that there is an opportunity to be at the table," Alward said.

The equalization program is designed to help close the fiscal gap between the wealthier provinces and the cash-strapped provinces, such as New Brunswick.

New Brunswick receives $2.4 billion out of its $7.5 billion budget in federal transfer payments. Equalization payments account for $1.6 billion of those federal transfers, followed by $605 million in health transfers and $251 million in transfers for other social programs.

While he’s anticipating the federal government will consult with the provinces on the upcoming equalization deal, Alward is not shying away from reminding the Harper government of its constitutional responsibilities.

"Equalization as an example is a program that is in the Constitution as the responsibility of the federal government," he said.

That means while the federal government may be able to change the formula used to calculate payments, the program itself cannot be eliminated.

The equalization program often creates contentious debates between the provinces and the federal government. Some provinces would like to see the complicated formula amended in a way that would be more beneficial to them or their region, while others would like to see the amount of money put into the transfer program reduced.

Earlier this week, Saskatchewan Premier Brad Wall called for the equalization program to be revamped to benefit provinces that produce hydro power.

Liberal concerns

Alward’s belief the federal government will enter into negotiations over the equalization program is not shared by New Brunswick’s interim Liberal leader.

Opposition Leader Victor Boudreau said the Harper government's decision on health transfers does not bode well for New Brunswick.

"If they were able to throw the health accord on the table like this, with no negotiation and no warning, they can do the same for other programs, whether it be equalization or the social transfers," Boudreau said.

Any reductions in federal transfers would have a significant impact on the New Brunswick government.

The Alward government is forecasting a $545.7 million deficit this year, which is almost $100 million higher than anticipated in March.

Alward had promised in the last election to balance the budget by the end of his four-year mandate.

The provincial government has launched a series of internal reviews to identify ways to save money. And Alward warned in his November throne speech that tough decisions were coming in the upcoming budget in March.