“Fixed Growth Rate” means Equalization is a worse deal for Alberta every year
“Canada’s equalization program should shrink when the ability of provinces to raise revenues—particularly between so-called have and have-not provinces—moves closer together, but instead, because of a design flaw, the program’s costs are required to grow every year,”
https://www.todayville.com/fixed-gr...ation-is-a-worse-deal-for-alberta-every-year/
AI Overview:
Provincial fiscal capacity in Canada has experienced a "great convergence" since roughly 2015, marked by a shrinking gap between "have" and "have-not" provinces, particularly accelerated by declining natural resource revenues in traditionally wealthy provinces. Despite this narrowing of fiscal disparities, the total cost of the federal equalization program has continued to rise, largely due to a "fixed growth rate" rule that prevents payments from decreasing, acting as a floor rather than a ceiling.
AI Overview:
The "Fixed Growth Rate" (FGR) rule, introduced in 2009, mandates that total Canadian equalization payments grow in line with national nominal GDP, functioning as a "floor" rather than a cap. While designed to control costs, it currently forces payments to rise even when provincial fiscal capacities converge, costing roughly $10.5 billion. Critics, such as the Fraser Institute, contend that the rule violates the spirit of the program to provide support only when disparities in fiscal capacity between "have" and "have-not" provinces exist, rather than mandating unconditional growth. Canadian real GDP growth has been heavily impacted by inflation, with
real GDP per person stagnating or falling over the past five years, even when nominal figures appear positive.
Me:
Didn't read the Fraser Institute full study.
If the authors intent to be so partisan as to omit mentioning inflation the likely driver of higher equalization payments, "Good luck". The Canadian Constitution, patterned after Britain's North America Act, mandates mineral resources as provincial jurisdiction. Canadians learned from results of failed Charlottetown Accord and Meech Lake Accord in the '90s the Canadian Constitution virtually impossible to amend. In the meanwhile, Canadian governments tinker with work-arounds and tolerate charges from allies of not being a real nation.