Minister disappointed no new equalization formula

Loyola Sullivan, Minister of Finance and President of Treasury Board, today said he is very disappointed that the federal government will not make the fundamental changes to the equalization program which premiers and provincial/territorial finance ministers have been repeatedly calling for. Minister Sullivan learned the news Sunday night on a conference call with federal Finance Minister Ralph Goodale and the other provincial and territorial finance ministers.

"The equalization program comes up for renewal every five years. As 2004 is a renewal year, we expected the federal government to recognize the deficiencies with the equalization formula, and to make the necessary changes," said Minister Sullivan. "Now it seems we must wait another five years, and once again, the federal government is putting our province at a distinct disadvantage."

The provincial government had been advocating that the current equalization program hinders financially disadvantaged provinces such as Newfoundland and Labrador, and that the program must return to a 10 province standard and include the full value of user fees in the formula. These changes would see in excess of $200 million per year coming to our province.

"All provinces recognize that the current equalization formula does not fully address the disparity issue. Given our province�s fiscal situation, Newfoundland and Labrador could certainly use the additional funding. While it would not solve all our problems, it would be a help in fixing the situation," said Minister Sullivan. "I am disappointed that the federal Finance Minister Ralph Goodale rejects the notion that the current equalization program does not live up to the constitutional commitment."

Minister Sullivan said the federal government is putting an additional $150 million into the equalization program in 2004-05 and $25 million in 2005-06. These amounts will be distributed on a per capita basis. "Newfoundland and Labrador will only receive $4.8 million from this additional funding in 2004-05 and $700,000 in 2005-06. Allocating on a per capita basis is completely contrary to the principles of equalization, particularly while fiscal disparities continue to exist between provinces," he said.

"I will continue to present our province�s case at all opportunities," said Minister Sullivan. "Our province is losing $200 million a year due to the imbalance in the equalization formula. This cannot continue, and as Finance Minister I will continue to pressure the federal government to change the equalization program."

Media contact: Diane Keough, Communications, (709) 729-6830

2004 03 23                                        11:30 a.m.