Canada: The State of the Federation 2006/07, Transitions, Fiscal and Political Federalism in an Era of Change

The theme of Canada: The State of the Federation 2006-07 is "transitions". These have been initiated by a variety of factors with profound implications for the working of our federation. First, with respect to fiscal federalism, several contributors examine the ramifications of the major changes to equalization-largely along the lines suggested by the Expert Panel on Equalization and Territorial Formula Financing-contained in the federal 2007 budget. While these changes have restored the program to being principles based, contributors note that the adoption of a ten-province standard, the inclusion of resource revenues and the institution of a cap will have far-reaching and, in some cases, troubling implications. Indeed, their interaction with existing energy prices may cause Ontario to join the ranks of the "have not" provinces. The new formula may thus fail to achieve the longevity of its predecessor, the five-province standard from which resource revenues were excluded.