Introduction
The intent of this paper is to explain the equalization program and Atlantic accord. First, what is equalization, why does the program exist, and how is it calculated?
Are there problems with today's equalization program? Next, what is the Atlantic accord and generic solution and why has it been an issue in the past six months? What were the offers the federal government gave Newfoundland and what was finally accepted by Newfoundland's provincial government? Finally, what do the future hold? Can the Atlantic accord deal affect the equalization sustainability? What are the other equalization formula, policy options? These are the issues that this paper will try and address.
What is Equalization?
The equalization program has its roots in the Rowell?Sirois report of 1940 and in 1950 James M. Buchanan defined payments that the federal government made to "weaker" provinces as equalization payments. Canada implemented the equalization program in 1957 and has been making unconditional grants since then. Today the department of financial Canada defines equalization as a:
"Federal transfer program that allows provinces, regardless of their ability to raise
revenue to provide roughly comparable levels of services at roughly comparable levels of taxation. Eligibility to receive equalization funding is determined by a formula measuring each province's revenue ? raising capacity against five ? province standard."
Note: The five provinces are British Columbia, Saskatchewan, Manitoba, Ontario and Quebec.
Equalization is so important that it has been acknowledged within the Constitutio ...