ST. JOHN'S, N.L. - Newfoundland's fight with Ottawa was rejuvenated Friday after an economist found that an alternative equalization formula offered under the federal budget offers the province $1 billion less for its treasury.
Last week, Memorial University professor Wade Locke delivered a presentation that showed the budget could provide Newfoundland with $5.6 billion in additional revenues. His analysis came as Prime Minister Stephen Harper rolled out print and radio ads throughout the province telling Premier Danny Williams the budget left his province "blessed."
But Locke said Friday he has revised his figures, which indicate the budget offers the province $1 billion less than if it sticks with the Atlantic Accord and old equalization formula until 2020.
The discrepancy came about after federal Finance officials told him there was new legislation in the budget that outlines a new criterion for Atlantic Accord eligibility, something he was not told when he did his analysis, he said.
Under the previous federal equalization program, provinces that were eligible for equalization received it.
But under Ottawa's new formula, if a province wants to receive equalization, it can't have more ability to collect revenues from its citizens - known as "fiscal capacity" - than the next lowest, non-receiving equalization province, which is now Ontario.
In other words, under the new formula provinces that qualify for equalization won't receive it if they're over what bureaucrats call a "fiscal cap."
"The cap changed everything," Locke said.
Locke went over his numbers again. He found that Newfoundland would receive $18.5 billion until 2020 if it stays with the Atlantic Accord, which protects the province against equalization clawbacks on offshore royalties for at least the next five years, and the old equalization formula.
But if it decided to leave the accord and follow a formula where a fiscal cap is implemented and 50 per cent of non-renewable resource revenues are included, it would take in $17.5 billion over that same period, down from the $24.1 billion Locke originally estimated.
If Harper removed non-renewable resource revenues and not implement a fiscal cap in a new equalization formula - something Williams says Harper promised to do - the province would take in $28.6 billion, Locke found.
Williams is on vacation and was unavailable for comment, but Newfoundland Finance Minister Tom Marshall said the new numbers prove the premier's case that the budget deals a harsh economic blow to the province.
"The federal ads say the facts do matter," Marshall said.
"Well, the facts are now clearly showing, based on Dr. Locke's independent assessment, that we're $11 billion worse off from the prime minister's promise to us . . . and we're $1 billion worse off than we would be under the status quo."
Locke based his calculations on a range of factors, including a two per cent inflation rate and a $51US barrel of oil price, and said his numbers were reasonable estimates.
The dispute over the federal revenue-sharing program has ignited a battle between Williams and Harper, though the prime minister denies he broke a promise.
Federal Finance Minister Jim Flaherty emphasized that Newfoundland won't lose a dime if it simply sticks with the Atlantic Accord, an agreement negotiated under the previous federal Liberal government.
"I think most people looking at it reasonably, quite frankly, would say that Newfoundland and Labrador has done rather well under the Atlantic Accord and will continue to do so as long as it's in place," Flaherty said in an interview from Washington.
"But we are clear that you can't be a have-have province . . . one hopes this will happen, that Newfoundland and Labrador will become a so-called have province in the future. One then does not continue to receive equalization payments in Canada. That's not the way the system works."
It's time the province stops squabbling over equalization, Flaherty said.
"We have other issues to deal with I think that Canadians want us to deal with, rather than this navel-gazing that goes on about transfer payments."
