Commission on the Reform of Ontario's Public Services

There are further complications. Persistently high commodity prices in recent years have
not only contributed to strong economic growth in Alberta and Saskatchewan, but also to
the relatively slower economic growth in Ontario; they contributed to an inflated Canadian
dollar, making Ontario goods and services more costly in global markets. The deep recession
and underwhelming recovery of the U.S. economy were also key reasons for the downturn of
Ontario’s fortunes. Together with changes to the Equalization formula, these factors
contributed to Ontario becoming an Equalization-receiving province in 2009–10.
Even though Ontario receives Equalization, Ontarians continue to contribute more to the
program than they receive in return. This highlights a problem with the arrangements in the
federation — federal transfers disproportionately benefit other provinces, at a cost to
Ontarians. For instance, Ontario is fifth among provinces in ability to raise revenues, 4 but falls
to near last after federal transfers are included — above only Prince Edward Island.
454
Per Capita ($)
Per Capita ($)
CHART 20.4 Ontario’s Fiscal Capacity is 5th in 2011–12,
But Federal Transfers Bring Ontario to 9th
Per Capita Fiscal Capacities
Before Transfers
14,000
12,000
10,000
8,000
6,000
4,000
14,000
12,000
10,000
8,000
6,000
Provincial Average
Non-Resources Resources at 100% Federal Transfers
AB NL SK BC ON QC NS MB NB PEI
Per Capita Fiscal Capacities
After Transfers
Provincial Average
4,000
AB NL SK BC NB NS MB QC ON PE
Notes: Calculation of fiscal capacity is for the 2011–12 entitlement year for the purposes of Equalization. The fiscal capacity data is a weighted average of
the 2007–08, 2008–09, 2009–10 fiscal years, using 2011–12 population figures to determine per capita values. Calculated using 100 per cent natural
resource inclusion. Transfers include 2011–12 entitlements for the Canada Health Transfer, Canada Social Transfer, Equalization, offshore accords and
protection payments.
Source: Ontario Finance calculations based on data from Finance Canada.
4 The ability to raise revenue, generally termed as fiscal capacity, refers to the potential revenue a province could raise if it taxed at national
average tax rates.