A number of premiers have lashed out against a report that recommends boosting the federal equalization program, with some urging the prime minister dump the plan.

The premiers were responding to a federal panel's report, released Monday, on revamping the $10.9-billion program that distributes federal tax revenues to poorer, "have-not" provinces. Among its recommendations, the panel suggested that half of each province's natural resource revenues should be included in the equalization calculations.

Newfoundland and Labrador Premier Danny Williams warned of 'dire consequences' if Ottawa acts on the report.
(CBC)

Newfoundland and Labrador Premier Danny Williams said the move would wipe out financial gains that the province made through the Atlantic Accord under a 2005 revision, which allows the province to keep 100-per-cent of its oil and gas revenues for eight years.

'My first reaction was that this has to be some kind of joke.'-Newfoundland and Labrador
Premier Danny Williams

Instead, the move would cost the province at least $200 million per year in net revenue, Williams said.

"My first reaction was that this has to be some kind of joke," Williams told reporters Monday after he was briefed on the report.

"Otherwise, it's just a bad dream."

'Dire consequences' if Harper proceeds

He issued a warning to Prime Minister Stephen Harper, saying there would be "dire consequences" if the federal government proceeds with the panel's plan.

The panel, appointed by the former Liberal government, estimated that including 50 per cent of each province's natural resource revenues would add nearly $900 million annually to the equalization program.

Currently, Ottawa reduces equalization payments to some provinces to offset the revenues generated by oil and gas production.

During the campaign before the Jan. 23 federal election, Harper's Conservatives pledged to remove non-renewable resource revenue from the equalization formula.

But last week at a meeting of western premiers, Harper said he was willing to read the expert panel's report before making a decision.

Ontario and Alberta are the only provinces that do not receive equalization payments, while Saskatchewan and British Columbia go in and out of the program.

'Insatiable entitlement program': B.C. premier

B.C. Premier Gordon Campbell urged Harper to dump the panel's report, saying its recommendations would mean the province would never again receive equalization payments.

'The prime minister should deep-six this report. It's a fatally flawed report.'-B.C. Premier Gordon Campbell

"The prime minister should deep-six this report. It's a fatally flawed report," said Campbell.

"It once again shows equalization has become an insatiable entitlement program as opposed to a program that should unite the country."

Harper promised not to touch revenues: Klein

Alberta Premier Ralph Klein said it doesn't make sense to include some natural resource revenues.

Klein said the proposal goes against a letter he received from Harper during the election campaign that indicated he wouldn't include non-renewable resources in the equalization formula.

"We would prefer that he keep his election promise," said Klein.

Saskatchewan would be worse off: Calvert

Saskatchewan Premier Lorne Calvert said he was disappointed with the report, saying it would leave the province no better off than it is now.

"The panel recommends a cap on Saskatchewan's equalization entitlements that would create a new clawback on our natural resource revenues costing our province $500 million per year," Calvert said in a news release.

"This is clearly unacceptable to the people of Saskatchewan."

Ontario Premier Dalton McGuinty also criticized the plan.

The province, which pays 40 per cent of the equalization bill, is against enriching the program, believing the have-not provinces don't need any more money.

Quebec would be the biggest winner if the recommendations are carried out, receiving $653 million more than it already does.