WINNIPEG — Sitting in the catbird’s seat is a phrase that explains the great advantage the hitter in a baseball game has when the count is three balls and no strikes. Sure, the batter might get unlucky and take three straight strikes and an out, but far more likely is that the batter will walk or get a hit. If the great Canadian equalization sweepstakes now underway between Ottawa and provinces can be called a game, and probably they can, then Manitoba is in the catbird’s seat. To be sure, Premier Gary Doer publicly frets and worries about the possibility that other provinces and Prime Minister Stephen Harper will start pitching screwballs that end the game on a sour note for Manitoba, but he has to know privately that is highly unlikely. “Don’t assume we can’t lose,” he intoned in an interview. OK, let’s not assume it. Let’s assume instead that Mr. Harper and the other premiers decide that the equalization formula will be re-written in the worst possible way so as to replace the five-province formula with a 10-province formula that excludes non-renewable resources. Neither expert panel report, not the one commissioned by the premiers nor the one commissioned by Ottawa, thinks that’s a good idea. Further, such a wrong-headed formula would actually shrink the equalization pot, which is the opposite of what Mr. Harper wants to do to fix the “fiscal imbalance” and help buy a majority government in the next election. So, sure, anything’s possible, but far more likely is that Manitoba will get a walk — the equalization formula will not change and the generous $1.6 billion share of the pie Manitoba enjoys will continue to grow at a rate of three per cent a year — or Manitoba will get a hit. The hit will not be a home run, but rather the single that the federal experts panel has recommended and which is almost certain to prevail despite righteous charges of treachery from Saskatchewan. That formula replaces the five-province standard with the 10 province standard and includes 50 per cent of non-renewable resources. The 10-and-50 per cent formula has a bunch of political advantages, not the least of which is that it is very generous to Quebec, which, coincidentally, suits the prime minister’s strategy of courting voters there, and it also has no great impact on the federal treasury. Under 10-and-50 per cent, the total equalization pie grows as Mr. Harper has promised it should, but only by $887 million to $12.6 billion, not the $4 billion the premiers’ expert panel recommended. The smaller hit on equalization leaves lots of fiscal room for Mr. Harper to sprinkle more billions of per-capita dollars on post-secondary education and infrastructure, which, again coincidentally, will make vote-rich Ontario, British Columbia and, you guessed it, Quebec very happy. All of this will make Mr. Doer very happy, too, but he doesn’t want to say it, not yet. Better to keep expectations low, better to not count chickens before they’re hatched, even from the comfort of the catbird’s seat. Instead, what Mr. Doer says is that the provinces should not get greedy — kill the golden goosebird, so to speak — which is in line with the proposed modest increase in equalization. “No one wants to argue that you should hurt the federal government’s ability to have a surplus and pay down debt,” is how he put it. He also praised, repeatedly, the federal report recommending 10-and-50 per cent as “very intelligent and rules based,” a position that he reminds that is identical to the position of the previous Conservative government. So don’t conclude that he is being self-serving, or at least, no more self-serving than those other guys were. As was said earlier, if nothing is done, Manitoba will do just fine. Under the existing formula, its take will increase by about $100 million a year. Under the “intelligent and rules based formula,” Manitoba’s take will increase by about $120 million a year, not that much more, than the other way around. But, hey, what’s to complain about? Manitoba can take the high road on the formula and some money too. Nothing wrong with that. And Manitoba doesn’t want to be seen as complaining. The province is doing very well by federal transfers — 30 cents of every dollar it spends comes from Ottawa. We simply can’t be seen as ingrates. Nor do we want to draw too much attention to an oddity concerning renewable resources like hydro-electricity. The 10-and 50 per cent formula will count revenue from but that disguises the fact that Manitoba Hydro sells electricity cheap to Manitobans. If electricity rates in Manitoba were set at market rates, revenue would increase by about $1 billion. That’s $1 billion of advantage that Manitobans enjoy that is not factored into the equation but that arguably should be. Mr. Doer also doesn’t want to attract undue attention to an Atlantic Institute of Market Studies report that finds equalization-dependent provinces are wasteful of federal transfer money because, well, easy come, easy go. Manitoba, which is equalization dependent, spends about $1,600 more per capita than does Ontario, the greatest contributor to equalization. Manitoba’s budget is balanced, Ontario’s is not. Go figure. And, of course, equalization is not the only pot to be sweetened. Federal Finance Minister Jim Flaherty has stated that on the equalization front, the balance is just about achieved (a nod to 10-and-50 per cent) and that Ottawa wants to move on enhanced transfers for post secondary education and municipal infrastructure. On the post-secondary front, it is generally agreed that Ottawa should restore funding to at least the level it was at before Ottawa tightened its belt and saved the country from bankruptcy in the 1990s. Returning to that level will add about $2 billion to the “social” transfer. Manitoba’s share on a per capita basis would be about $80 million a year. What is in the cards on infrastructure is not known. Mr. Doer believes that “in principle” all gasoline taxes collected by Ottawa should be returned to infrastructure, which would mean another $100 million or so a year to Manitoba. So, without doubt, Manitoba is in the catbird’s seat. More to the political point, Mr. Doer is in the catbird’s seat. If he doesn’t start swinging at wild pitches, he’ll walk or run into the next election with money needed to do all the things that he hasn’t done, in particular repair the damage his foolish post-secondary tuition policies have done to post-secondary institutions and fix the roads that aren’t fixed despite all the money that Atlantic Institute says is being wasted. Little wonder he stews and frets. The AIMS Commentary Series has attracted the attention of media across the country. Click on the links below to read some of the stories written in response to the Commentaries.
