N.L. says it will take Ottawa to court over equalization formula

May 30, 2024 Canuck

Two politicians sit behind a table in a media briefing room. — Justice Minister John Hogan and Finance Minister Siobhan Coady speak with reporters Thursday at Confederation Building. (Darrell Roberts/CBC)

Two Newfoundland and Labrador cabinet ministers said Thursday the province will take the federal government to court to try to push a change in the equalization formula, arguing the province is being cut out of potentially billions of dollars in the long term.

Finance Minister Siobhan Coady and Justice Minister John Hogan said the province decided to head to the courts when the federal Liberal government extended the current formula to 2029, effectively rejecting a series of pleas for change.

Because equalization — the federal program that provides recipient provinces with cash to allow for a fair level of services across the country — accounts for the role of oil in gross domestic product, Newfoundland and Labrador has not received equalization since 2008.

The province announced earlier this year that it will receive equalization next fiscal year.

Hogan told reporters he hopes the issue can be resolved without a trial.

“Going to court is a last option,” said Hogan, who is also the province’s attorney general.

“Settlements reached out of court are always preferred, and I have always advised my clients to consider out-of-court settlements.”

Hogan said Coady and Premier Andrew Furey have been advocating for changes “to make the formula fair.”

Hogan said documents will be filed in Supreme Court of Newfoundland and Labrador in the coming weeks.

In a letter to federal Finance Minister Chrystia Freeland last June, Furey said the formula does not account for the challenges that Newfoundland and Labrador has serving a small population over a vast terrain. He also asked for the removal of what’s called the fiscal capacity cap.

“[Newfoundland and Labrador] is geographically nearly three times the size of the Maritime provinces combined, but with roughly only one-quarter of the population,” Furey wrote in the June 1, 2023, letter.

“While the Maritime provinces have received $45 billion in equalization payments in the last 10 years, N.L. has received $0.”

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