What a referendum on equalization could cost Sask. and why the government may pursue it

Premier Scott Moe asked his followers on social media last weekif the province should hold a referendum on equalization.

Incoming Alberta Premier Jason Kenneyalready promised his own referendum on taking the equalization question to the federal government if pipeline projects remain stalled.

Moe has cited similar motivations to hold his own vote, but following through on the notion would requirehimtosort out a few issues.

When asked if a referendum was an option, Moe said he, "wouldn't rule it out".

An online survey conducted for CBC News last month found 57 per cent of people in Alberta either somewhat agreed or strongly agreed that a referendum should be held, according to data provided by Vote Compass, a tool designed by Vox Pop Labs for CBC.

What would a referendum accomplish?

Neither province could force the federal government to act withareferendum, but University of Regina economics professor Jason Childs says it could add pressure.

"If the federal government decided they didn't want to come to the table and negotiate on equalization in response to a referendum that is going to be a really bad set of optics," Childs said.

"I suspect more political theatre than legally binding in terms of getting the federal government to do anything specific, but it would create a real moral problem."

The ongoing debate over the fairness of the equalization formula has intensified in the last year.

"This has been the policy that never seems to go away and never seems to satisfy anybody," Childs said.

In 2018, Moe suggested a formula adjustment: take half of the roughly $19 billion doled out by the federal government to so-called "have-not" provinces and split it among all provinces, based on population.

The change would see millions of dollars go from Quebec to Ontario. Moe said Saskatchewan would gain $300 million per year right now under his plan.

Saskatchewan has not received a dollar from the formula in 11 years.

Last June, the federal government announced it was extending the current payment formula to 2024.

In 2019-20, five "have-not" provinces will receive payments:Quebec, Manitoba, Nova Scotia, New Brunswick andPEI. The "have" provinces which will not receive payments are Ontario, Alberta, Saskatchewan, British Columbia and Newfoundland and Labrador.

"Quebec has been a big beneficiary in financial terms from equalization but so have the maritime provinces. The conceptualization was not this sustained draw but to deal with short-term up and downs. More of a reciprocal arrangement," Childs said.

"I'm not convinced this is an economic policy so much as a political policy."

P&P Explainer: How do equalization payments work?

6 years ago

Duration 0:47

As Saskatchewan's premier calls Canada's equalization formula 'flawed', P&P looks at the federal program.

What would a referendum cost and when would it be?

Three years ago, Saskatchewan Premier Brad Wall floated the idea of a referendum on a potential sale of SaskTel.

That prompted Elections Saskatchewan CEO Michael Boda to publish a discussion paper in 2016 on the subject of modernizing referendum rules .

"A first finding is that Saskatchewan's current legal framework for conducting provincial referendums and plebiscites is out-of-date and largely unworkable, as it has not been updated over the past 25 years," Boda said.

In a letter accompanying the report Boda wrote, "I am concerned that the province's current legislative and regulatory framework would not allow Elections Saskatchewan to administer a referendum/plebiscite in an efficient and economical manner or at service levels that citizens would expect."

In 2016, Elections Saskatchewan estimated the cost of a mail-in vote to be $4 million. It said the cost could fluctuate and it would require a minimum of 164 days from getting the directive from government to completing the vote.

Last November, Calgary held a plebiscite on whether the city should host the Olympics. More than 300,000 votes were cast. The plebiscite cost $2-million, which was covered by the province.

Saskatchewan's last plebiscites were held concurrently with the 1991 election and included one where voters opposed publicly-funded abortions. In 1956, a plebiscite was held to try and determine which time zone Saskatchewan would use.

Wall promised a referendum on daylight saving time if he won the2007 election. His government abandoned that in 2011 after conducting polls.

Elections Saskatchewan, in its annual report published in 2016-17, elaborated on the practical issues with holding a vote.

"The province currently has no cost-effective means of conducting a referendum or plebiscite between general elections," it said.

It also foundthe government would have to introduce and pass a bill on the matter,something that hasn't seen the assembly floor to this point.

Elections Saskatchewan said identifying the process for conducting a public consultation vote between general elections will be a primary topic of its CEO Assessment Report due out in 2019.

Government and opposition on potential referendum

Last week, Saskatchewan Attorney General Don Morgan said a potential referendum could be a standalone or it could be combined onto the ballot. The government would not need to amend the legislation have it on the election ballot.

"You'd have to do some [legislative] changes to make it work as a standalone or you could put it on with a general election. We haven't had a discussion about that," Morgan said.

Saskatchewan NDP Leader Ryan Meilisaid he does not think a referendum is the right course of action.

"If we had a referendum tomorrow saying we need a better deal, there's nothing to force the federal government to engage in at all," he said.

Meili said he wants to know what federal Conservative Leader Andrew Scheer thinks.

"Whether he's willing to commit to a change on equalization and again whether he'll commit before an election what he would actually do after he was elected," Meili said.

Meili said he would like to see the formula change.

"I would encourage us to go down a more productive route which is actually pursuing our legal options to get a better deal on equalization."

Saskatchewan's equalization history

In 2005the Saskatchewan NDP government, with unanimous support from the Saskatchewan Party opposition, passed a motion calling on the then-Liberal federal government to take non-renewable resources like oil and gas out of the equalization formula. The province estimated it was losing out on $800 million a year.

In Nov. 2005, Regina Conservative MP Andrew Scheer said in the House of Commons, "Mr. Speaker, Conservatives have been fighting for a fair equalization deal for Saskatchewan for years, but all along the Liberal finance minister has been fudging the surplus numbers and telling the people in Saskatchewan that they do not deserve a fair deal."

In 2006, Stephen Harper and the Conservative Party campaigned on a promise to change the equalization formula by returning to a 10-province standard and exempting non-renewable resources.

During the federal campaign that year, Regina Conservative MP Tom Lukiwski said those two changes could mean at least $2 billion a year extra for Saskatchewan government coffers. The Conservatives ended up winning 12 out of 14 federal seats in Saskatchewan.

In the fall of 2007, NDP Premier Lorne Calvert's government launched a lawsuit over the formula. That fall, Calvert was defeated by Brad Wall and the Saskatchewan Party in the provincial election.

In March 2008, Wall told Calvert during question period that Harper asked him to drop the lawsuit.

In July 2008, Attorney General Don Morgan confirmed the government dropped the suit.

"The litigation is always the elephant in the room when you're trying to negotiate something," Morgan said at the time. "When you're litigating you can't sit down and say, `well let's jointly fund a bridge, let's set some priorities here.'

Wall said in a speech in Toronto in Sept. 2008, "part of our exhilaration about our new status as a have province and our determination to stay that way, is so that we can pay back a little bit. So that we can contribute more to the country and in the future of this country than we ever need to get in return."

How equalization works

The program is intended to address fiscal disparities between provinces, and was entrenched in Canada's Constitution in 1982.

"Parliament and the government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation," the Constitution reads.

"Have-provinces" do not send money directly to Ottawa for the program. All Canadians pay income tax to the federal governmentand then that money is paid out to provinces based on each region's ability to raise revenues compared with the average.

The formula that calculates how much each province gets has been controversial due to how it accounts for natural resource revenues.

For decades, Alberta has received no federal support through equalization payments, while Quebec, for example, is set to receive $13.1 billion in 2019-20.