Ontario to receive $1.25-billion increase in federal transfers

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Ontario will receive a $1.25-billion increase in federal transfers due in part to higher equalization payments.

Finance Minister Joe Oliver released new details Monday on provincial transfers and the figures show Ontario is in line for the biggest increase by far.

The revelation marks a sharp change from this time last year, when Ontario Finance Minister Charles Sousa reacted furiously to what he said was the surprising news that Ontario would lose $640-million in transfers. The new increase more than offsets last year's controversial decrease, bringing total federal transfers to Ontario to $20.4-billion in 2015-16, up from $19.2-billion last year and nearly double the $10.9-billion transferred in 2005-6.

Finance Canada released the figures as Mr. Oliver meets in Ottawa with his provincial and territorial counterparts Monday. The finance ministers also met Sunday evening for an annual dinner.

On the way in to Monday's meeting, Mr. Oliver expressed confidence that Ottawa will still be able to post a surplus in 2015-16 in spite of the continuing decline in the price of oil. He said it was too early to say how much federal revenue will be lost as a result of the most recent price drop.

"Because of the volatility of the oil market… we're not about to come out with a number at this point," he said. "However we are confident we will achieve a budgetary balance next year."

The total level of federal transfers to the provinces and territories will grow to $67.9-billion in 2015-16, up from $64.8-billion this year.

The main reason why transfers continue to rise is because of a legislated promise to increase health transfers by 6 per cent a year until 2017-18. After that time, health transfer growth will be linked to growth in the economy, with minimum increases of at least 3 per cent.

Ottawa also increases the growth of the social transfer by 3 per cent a year. The third major transfer – equalization – is far more complicated to calculate and project into the future. The equalization program, as defined by Ottawa, is a transfer program that "enables less prosperous provincial governments to provide their residents with public services that are reasonably comparable to those in other provinces, at reasonably comparable levels of taxation."

Currently, British Columbia, Alberta, Saskatchewan and Newfoundland and Labrador do not receive equalization payments, while all other provinces do receive the payments. Territories receive a separate transfer called Territorial Formula Financing.

Ontario began receiving equalization in 2009-10 with a payment of $347-million. It reached a peak of $3.3-billion in 2012-13, dropped to $2-billion last year and will grow to $2.4-billion in 2015-16.

The Ontario-based Mowat Centre has challenged the equalization formula, arguing that Ontario sends as much as $11-billion more to Ottawa in the form of tax revenue than it receives in federal support.