| Chapter 1: | Examining Provincial Variability |
care delivery systems. Nevertheless, one may assume that before such equalization funding is taken into account, over 40 percent of Canadian health care spending involves federal expenditures in either cash or tax points (CIHI 2009; Finance Canada 2009). Under existing agreements, equalization payments are made only to the less prosperous provinces; when a province has a revenue-raising capacity above the national average, it will not receive equalization payments. In other words, provinces with a fiscal capacity above the standard do not receive equalization payments (Finance Canada 2007). From 2004 to 2008, Ontario and Alberta did not receive equalization payments. Since fiscal year 2008 British Columbia has not received equalization payments, and for fiscal year 2009 Saskatchewan did not receive any such payments (Finance Canada 2008). Newfoundland ceased to receive equalization payments as of fiscal year 2010.
Federal fiscal matters have been topics of discussion and negotiation at most meetings of provincial and territorial ministers of health and of provincial and territorial ministers of finance (Alberta 1989; Contandriopoulos 2007; Boychuk 2006; Finance Canada 2003a). More recent direct and difficult discussions have been held between the poorer provinces and the federal government on the equalization payment issue and on the delicate matter of revenue distribution regarding offshore and nonrenewable provincial resources, particularly with respect to negotiations with Newfoundland and Labrador and Saskatchewan (Crosby and Martin 2007; Greenway 2007; Lecours and Béland 2010; Mandel 2007). Ultimately, the Conservative government entered into bilateral agreements regarding these matters.
To tackle this particular problem, in 2007 the new federal budget introduced a new equalization program legislated through fiscal year 2013 to provide long-term predictability for provinces. The new program is based on the recommendations in a report prepared by the Expert Panel on Equalization and Territorial Formula Financing, known more briefly as the O’Brien report. Equalization payments are determined using a ten-province