New Brunswick has officially assumed the title of Canada’s poorest province and will begin receiving the most funding per capita from the federal government’s equalization support program, starting in April.
The bottom ranking and the poor economic numbers that caused it are unlocking significant new federal financial support for New Brunswick, but that is cold comfort for ending the longtime reign of Prince Edward Island as Canada’s neediest province, according to New Brunswick Finance Minister Ernie Steeves.
“Wow. That’s tough to take,” said Steeves in an interview Tuesday.
“When your transfer payments go up, it’s a sign your economy is weak. I’m not crazy about that. We want New Brunswick to be a have province, not a have-not province.”
Federal Finance Minister Bill Morneau met with provincial ministers and finance officials this week. His department released figures showing New Brunswick would receive the highest per-capita amount of equalization payments next year, replacing P.E.I. as Canada’s most have-not province. (Adrian Wyld/Canadian Press)
The federal Finance Department released figures late Monday of what equalization-receiving provinces will qualify for in funding next year.
New Brunswick’s share is jumping 9.2 per cent to $2.21 billion, the largest increase among receiving provinces.
A sign of the times
The new amount is calculated by Ottawa to be worth $2,826 per person in New Brunswick, the most ever paid to a province, and a razor-thin $1 per person more than P.E.I. will receive.
It’s a remarkable turnaround for both provinces.
Last year, P.E.I. received $65 per person more in equalization than New Brunswick and, as recently as three years ago, was receiving $301 per person more — a sign of how quickly P.E.I.’s economy has closed in and, for its size, surpassed New Brunswick’s.
Equalization is a $20.6-billion federal program designed to help poorer provinces provide comparable levels of service to citizens at similar levels of taxation to richer provinces.
Payments are determined by a complex mathematical formula that measures the revenue-generating ability of each province against a national standard. Those with a below average ability to raise money for themselves qualify for funding.
New Brunswick will receive a record $2.21 billion in equalization funding from Ottawa next year to pay for basic government services, like heath care and education, that it cannot afford to pay for on its own. Pictured is the Saint John Regional Hospital. (Wikipedia)
Quebec receives the most money from the program — $13.25 billion next year — but at $1,547 per person in Quebec, it’s 45 per cent less than what New Brunswick will get.
Equalization amounts per person:
New Brunswick: $2,826
Prince Edward Island: $2,825
Nova Scotia. $2,184
Manitoba: $1,815
Quebec: $1,547
The three territories do not receive equalization, but have a separate financing formula with the federal government.
New Brunswick hike ‘stood out,’ says prof
Trevor Tombe, an economics professor at the University of Calgary and one of Canada’s leading experts on equalization, said the $187-million jump in New Brunswick’s equalization allotment next year is remarkable, but the causes will take some time to analyze.
“The increase in New Brunswick is actually something that stood out,” said Tombe. “lt’ll be interesting to dig deeper to see what’s driving that specific change.”
The equalization formula uses three years of data and, according to Tombe, next year’s payments are based on provincial economic performance recorded between April 2016 and March 2019.
New Brunswick’s GDP growth over those three years was an estimated 3.7 per cent. That’s the weakest among equalization-receiving provinces, less than the national average and well below the 10 per cent growth recorded in P.E.I..
New Brunswick has long vowed to get itself off equalization. In 2006, former premier Shawn Graham set a “self-sufficiency” goal to be free of equalization payments by 2026. Instead amounts owing to New Brunswick have grown by $900 million, including by $550 million in just the last three years.
Steeves said being a “have” province is still New Brunswick’s goal even though, as Canada’s poorest provincial jurisdiction now, the need for equalization is undeniable.
“We want to be the ones that help everybody else, but right now we do need the help,” said Steeves.
“We’re trying to get our debt back in place where it should be and get it lowered so that we won’t need as much help. But right now we are reliant on Canada and Canadians.”
Demands for government intervention in Air Canada labour talks could negatively affect airline competition in Canada, the CEO of travel company Transat AT Inc. said.
“The extension of such an extraordinary intervention to Air Canada would be an undeniable competitive advantage to the detriment of other Canadian airlines,” Annick Guérard told analysts on an earnings conference call on Thursday.
“The time and urgency is now. It is time to restore healthy competition in Canada,” she added.
Air Canada has asked the federal government to be ready to intervene and request arbitration as early as this weekend to avoid disruptions.
Comments on the potential Air Canada pilot strike or lock out came as Transat reported third-quarter financial results.
Guérard recalled Transat’s labour negotiations with its flight attendants earlier this year, which the company said it handled without asking for government intervention.
The airline’s 2,100 flight attendants voted 99 per cent in favour of a strike mandate and twice rejected tentative deals before approving a new collective agreement in late February.
As the collective agreement for Air Transat pilots ends in June next year, Guérard anticipates similar pressure to increase overall wages as seen in Air Canada’s negotiations, but reckons it will come out “as a win, win, win deal.”
“The pilots are preparing on their side, we are preparing on our side and we’re confident that we’re going to come up with a reasonable deal,” she told analysts when asked about the upcoming negotiations.
The parent company of Air Transat reported it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31. The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
It attributed reduced revenues to lower airline unit revenues, competition, industry-wide overcapacity and economic uncertainty.
Air Transat is also among the airlines facing challenges related to the recall of Pratt & Whitney turbofan jet engines for inspection and repair.
The recall has so far grounded six aircraft, Guérard said on the call.
“We have agreed to financial compensation for grounded aircraft during the 2023-2024 period,” she said. “Alongside this financial compensation, Pratt & Whitney will provide us with two additional spare engines, which we intend to monetize through a sell and lease back transaction.”
Looking ahead, the CEO said she expects consumer demand to remain somewhat uncertain amid high interest rates.
“We are currently seeing ongoing pricing pressure extending into the winter season,” she added. Air Transat is not planning on adding additional aircraft next year but anticipates stability.
“(2025) for us will be much more stable than 2024 in terms of fleet movements and operation, and this will definitely have a positive effect on cost and customer satisfaction as well,” the CEO told analysts.
“We are more and more moving away from all the disruption that we had to go through early in 2024,” she added.
This report by The Canadian Press was first published Sept. 12, 2024.
