Ontario to receive $347M in equalization: Flaherty

Ontario will qualify for the federal government's equalization program and receive $347 million in transfer payments next year, federal Finance Minister Jim Flaherty said Monday after a meeting with his provincial and territorial counterparts.

Although Ontario has qualified under the nearly $12-billion federal wealth-sharing plan five times in the past, the payment will be the first time the province has received money under the program, in which richer provinces provide funds to poorer provinces to ensure they can provide basic government services.

With its struggling manufacturing sector, Ontario is on the brink of becoming a have-not province, which allows it to qualify for payments. Flaherty, a former Ontario finance minister, said he "regrettably" expects the province to be in a similar position "for some time to come" as the province's manufacturing woes and decreased consumer demand in the U.S. continue.

"I’m an Ontarian, and I don’t rejoice at this," Flaherty told reporters in Mississauga, Ont., after the one-day session.

"Having said that, the reality is that Ontario is entitled to enter the program and will be receiving substantial funds next year."

Flaherty made the comments after the ministers gathered to discuss the global financial crisis, a possible recession and plans to curb growth in equalization payments, which the finance minister said were increasing at an "unsustainable" rate of about 15 per cent a year.

He again warned that without capping those cost increases, the government risks running a deficit and bankrupting the equalization program.

"Quite frankly, I don't think Canadians will have any difficulty in saying that's the responsible thing to do," Flaherty said.

Flaherty also said Quebec will get $8.35 billion, Manitoba $2.1 billion and P.E.I. $340 million in transfer payments. Nova Scotia will receive equalization payments of $1.57 billion and New Brunswick $1.69 billion.

Payments 'not unexpected': Duncan

Speaking moments after Flaherty's announcement, Ontario Finance Minister Dwight Duncan expressed concerns that his federal counterpart wants to limit growth in the equalization program just as Ontario is poised to start receiving payments.

"Well, we're paying ourselves, effectively," Duncan said. "We just anticipated this, and we don't think that it's going to last long, based on the constraints that he put on growth in the future."

While acknowledging that "every bit helps," Duncan said he would have preferred to see investment in Ontario's manufacturing and auto sector similar to government packages in the European Union and the United States.

Ontario is the only province that has never received any payments under the 51-year-old equalization program.

The meeting is the first to bring together the federal and provincial finance ministers since the election and the global economic meltdown. It also comes after Canada's top economists last month said the country is headed into a worse recession than anyone expected, one that could last until almost 2010.

A recession is commonly defined as two or more quarters of decline in the gross domestic product (GDP).

Canada's economy contracted by 0.3 per cent in August, a turnaround from the growth of 0.7 per cent in July, Statistics Canada reported last Friday. The third quarter ended on Sept. 30, but growth figures for the quarter won't be released by the federal agency until Dec. 1.