This presentation discusses the equalization payment program including issues facing the program as part of the renewal of the program in 2018. The program is under pressure due to recession in Alberta and Saskatchewan as well as rhetoric from provinces when it comes to wanting more money from the equalization program.

1. TRUTHS ABOUT CANADIAN
EQUALIZATION PAYMENTS
BY: PAUL YOUNG, CGA, CPA
NOVEMBER 13, 2016

2. DISCLAIMER
• This presentation discusses Truth about Equalization

3. PAUL YOUNG - PRESENTER
Bio
• CPA/CGA
• 25 years of experience in Academia, Industry and Financial solutions
• Youtube Channel - https://www.youtube.com/channel/UCAArky1bAXPSuV2NLtUnyLg

4. AGENDA
• GDP Growth 2010-2014
• Equalization/GDP Growth
• Comments from Alberta
• Comments from Newfoundland
• Tuition Example (Equalization)
• Bottomline

5. GDP GROWTH

6. GROWTH RATES 2016-2018 Fact
• Ontario $1.8B in equalization for 2017
and its economy is growing at 2%+
• Quebec will received $10B and its
economy is growing at 2%
• Pipelines to move oil from AB to east
coast refineries would increase
revenue for both SK/AB which would
help their economy and lead to more
money for equalization
• Exports lack the capacity, i.e ports,
rails, pipelines, etc. Adding the
capacity could expand revenues for
provinces and allow more money for
social programs

7. COMMENTS/ALBERTA – EQUALIZATION
• Another surprising conclusion is the extent to which equalization is only part of the transfer picture: from 2007 to 2014, Albertans sent $190
billion, or $24 billion a year on average, more to Ottawa in taxes than we ever got back.
• One example of the ways this occurs besides equalization is the employment insurance program.
• The equalization fairness panel notes that EI is much easier to get, and for a lot longer, in eastern provinces. Nearly 100 per cent of the
unemployed in Newfoundland, P.E.I. and New Brunswick receive EI benefits, compared with about 55 per cent in Quebec and about 38 per cent
for Ontario and Alberta. In 2013, Albertans paid $1.9 billion more into EI than we received back in benefits.
• Many Albertans have learned first hand about one of the biggest discrepancies: fishers are one of the only self-employed groups who can get EI.
While job loss numbers show over 100,000 Albertans have lost work over the past year, there are tens of thousands more self-employed
contractors who have found themselves out of work and haven’t received a penny in regular EI benefits.
• We simply cannot afford the status quo any longer.
• The panel’s report has six recommendations to get our country moving in the right direction. They include re-evaluating what exactly the
constitutional support for equalization means, fundamentally restructuring the equalization formula, fixing regional imbalances in the current
employment insurance program and calling on the Alberta government to establish a special commission to examine the finances of the
federation
• Source - http://calgaryherald.com/opinion/columnists/jean-canadas-equalization-system-is-broken-and-we-need-to-fix-it

8. COMMENTS / NEWFOUNDLAND
• Finance Minister Cathy Bennett said Thursday she is disappointed Quebec asked the federal
government to not extend a loan guarantee for her province’s Muskrat Falls hydroelectric project.
Bennett says Quebec just announced it would post a surplus of $2.2 billion in the 2015-16 fiscal year
while receiving $10 billion in equalization payments. Bennett told reporters Newfoundland and
Labrador will face a $1.6-billion shortfall this fiscal year and is scheduled to receive nothing in
equalization. She says Quebec should take into account Canadian values in its relations with its
neighbours in Confederation. The Muskrat Falls project has seen its cost estimate increase to $11.4
billion from the initially projected $6.2 billion.
• Source - http://www.thetelegram.com/Business/2016-10-27/article-4673603/Newfoundland-and-
Labrador-reminds-Quebec-about-Canadian-values-on-hydro-project/1

9. COMMENTS/KEY POINTS
• Source : - http://www.statcan.gc.ca/daily-quotidien/160907/dq160907a-eng.pdf
Comment
• Quebec has one the
lowest tuition rates in
Canada. Quebec is also the
recipient of over $10B in
equalization.

10. EAST-WEST PIPELINE
• In Atlantic Canada we need to be reminded of how the oil refining business has been sustained.
More importantly, that its presence has maintained a viable linkage to national resource
development and export trade.
• The Irving Oil people commenced refining at approximately 50,000/bld [barrels per day] in the early
1960s. It is now the largest and likely most modern refinery in Canada.
• But this feat has not been easy. Some readers will remember that at one point within the past three
decades Nova Scotia had three refineries: Gulf at Point Tupper, Texaco at Eastern Passage and
Imperial Oil at Dartmouth. The only other refinery as of this date in Atlantic Canada is the older and
smaller refinery at Come-By-Chance, N.L. A smaller refinery at Conception Bay has been shut down.
• So one can concede that there is room to use existing technology to further clean bitumen-based
petroleum and to improve pipeline technology. But society has become overconsumed with the
idiosyncrasies of social and environmental issues at the expense of economic growth. An
unintentional consequence of this reality is a form of embargo on meaningful future development of
Canada West Oil resources, including development of future technologies for oil cleansing and
value-added products.
• In Eastern Canada, Irving Oil has maintained and grown the single largest oil refining plant in the
country and likely along the Atlantic seaboard. Just recently, Irving announced completion of its new
$80-million Halifax Harbour Terminal. As a small but important region, we are indeed fortunate that
the Irvings have secured a major and forceful presence here in the refining and petroleum
distribution sector.
• Source - http://www.capebretonpost.com/Opinion/Columnists/2016-10-31/article-
4676049/Atlantic-Canadians-should-support-pipelines-/1
Comment:
• Quebec continues to fight
expansion of East-West Pipeline.
PQ receives $10B of equalization.
• Ontario has also fought the East-
West Pipeline. Ontario receives
about $1.8B un equalization
• Alberta Oil could help make Canada
Energy Independent as well as
expand exports of oil to markets.
East-West pipeline would support
refineries and exports to Europe as
well as other markets.

11. BOTTOMLINE
• Equalization agreement is up in 2018. A new deal is required to ensure there is proper balance in terms
of sharing of revenue.
• Provinces need to break down internal trade barriers. Internal trade barriers are leading to issues with
productivity as well as profitability for companies.

12. Q&A
• Contact: Paul Young
• Paul_Young_CGA@Hotmail.com