An education in equalization

If an Alberta student wants to attend the University of Alberta or the University of Calgary, he or she will pay about $6,000 a year for tuition. If he or she enrolls at McGill University in Montreal, the cost will also be around $6,000, not including books, room and board and living expenses.

It’s the same if a young Montrealer comes west. Tuition for out-of-province Canadians at Alberta’s largest universities runs about $6,000 annually.

Ontario university students face much the same — about $6,000 a year if they stay home or choose to study in Quebec.

But a young Quebec scholar who stays in Quebec will pay only a little more than $2,000 for a year of college or university. Given that nearly 90% of Canadian university students stay in their home provinces for post-secondary study, this subsidy of nearly $4,000 a year paid to tens of thousands of in-province Quebec scholars amounts to a provincial budget expense of tens of millions a year.

So what? Why is the extent to which the Quebec government chooses to subsidize its own students any business of the rest of Canada?

The short answer is: It wouldn’t be any of our business if Quebec were paying the subsidy itself. If the taxes of Quebecers were underwriting this largesse, it would matter only to them and them alone.

The trouble is, Quebec is the beneficiary of at least $8 billion annually in federal top-up funds — about 12% of the provincial budget. This money makes it possible for Quebec’s provincial government to offer generous social benefits such as cheap tuition without taxing its own citizens for the full cost.

It can afford to be so generous because it can count on Ottawa to shift some of the cost burdens to taxpayers in other provinces.

Albertans and Ontarians are net contributors to Confederation — Ontarians to the tune of about $25 billion a year, Albertans at about $14 billion (despite having just one-quarter of Ontario’s population) — yet those provinces’ students have to pay higher tuition even if they stay in their home provinces so their parents’ taxes can be sent to Quebec to cover the cost of tuition subsidies for Quebecers.

And it’s not just Quebec. The other have-not provinces (currently P.E.I., Nova Scotia, New Brunswick, Ontario and Manitoba) are able to pay higher civil service wages or keep provincial taxes lower or offer more public services because they can count on Ottawa to put its hands into the pockets of have-province taxpayers and root around for the cash needed.

According to a study on the effect of equalization on provincial budgeting released in February by the Mowat Centre for Policy Innovation at the University of Toronto, most of the provinces receiving equalization don’t need it — or at least not as much of it. For instance, the formula Ottawa uses to calculate equalization does not take into account the lower cost of goods and services in most have-not provinces.

It doesn’t cost the same to provide a public service in Antigonish or Chicoutimi as it does in Toronto or Calgary. Still, Ottawa pays have-not provinces as though it did, meaning equalization payments carry no incentive for recipient provinces to use the cash efficiently.

Moreover, since equalization began in 1957, every province (including the have-nots) has grown wealthier — so much wealthier that now just one province (P.E.I.) would still qualify for payments under the original criteria.

Nonetheless, even though equalization is needed less than ever, it is now nearly as rich a scheme as it has ever been because have-not provinces have become dependent on the cash and no federal government has the political courage to cut them off.

Original Article
Source: toronto sun
Author: Lorne Gunter