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Facts on Equalization in Nova Scotia, January 25, 2013

January 29th, 2013 Leave a comment Go to comments

Facts on Equalization in Nova Scotia January 25, 2013

                Confirmation has been received from the Finance Department Canada that approximately 26% of the federal Equalization transfer for 2012-2013 to Nova Scotia is allocated due to the province’s relative weakness in property tax fiscal capacity. Since the Municipal Government Act, SNS, 1998 c18 states that councils are authorized to collect residential and commercial taxes for municipalities, and because the provincial government doesn’t collect municipal taxes it is evident that the relative weakness in property tax fiscal capacity applies to transfers to municipalities, and that 26% of the federal transfer is allocated toward municipalities.

At this time we are informed that this applies to the 2012-2013 Equalization transfer of $1,268 million and excludes the 2005 Accord amount of $443 million. We have therefore replaced the FAQ 0f September 29, 2012 with this revision.

The Nova Scotia Offshore Accord is an arrangement reached between the government of Canada and Nova Scotia on February 14, 2005 that, for a time-limited period, provides 100% protection from Equalization reductions resulting from the inclusion of offshore revenues as source revenues. It is therefore a part of federal equalization transfers to the province. Federal Support for Nova Scotia 2005 to 2014 is listed below for the periods from 2009 to 2013. (In millions)

                            2009/2010      2010/2011                   2011/2012       2012/2013                                                                                                                                                                                                                                          

Fed. Amts.         1,391                     1,110                                    1,167                     1,268

2005 Accord       180                       227                                        250                         443

Totals                   1,571                   1,337                                     1,417                      1,711

The 2012-2013 Equalization Grant Revised January 18, 2013 is a compilation from Services Nova Scotia and Municipal Relations published Municipal Indicators with an added column by N.S.E.F comparing provincial government’s distributions with the Federal Allocation of 26%.

The provincial government distributed $32.05 million for each period under the Grant of 50.22% column.

The total of the Foundation Grant of $1.55 million, and $17 million of the total Grant 50.22 % of Entitlement is funded from Nova Scotia Power Inc. Grant-In-Lieu-Of-Taxes  (NSPI-Q&A) so that only $13.5 million is from the .federal transfer for each period. The remainder of the federal equalization is transferred to General Revenues.

N.S.E.F. previously used a factor (derived from annual operating expenditures of municipalities of approximately 14% of combined provincial and municipal expenditures for providing public services) to calculate a Fairness Grant for each eligible municipality and town based on the total of the Equalization and the Offshore Accord transfers.

With the federal allocation of 26% of $1,268 million, the factor by which the present provincial Grant of 50.22% of $30.5 million must be multiplied is about 10.81; therefore the federal allocation of 26% would require that the total Grant of 50.22% should be about $329.7 million.The factor of 10.81 is derived by dividing 26% of the federal equalization by the Grant of 50.22% ($30.5 million), and the Federal Allocation of 26% is the government’s Grant of 50.22% for each municipality multiplied by 10.81.

The government is currently placing $1,254. 50 million from federal equalization plus $443 million from the 2005 Accord transfer into general revenues. If it distributed the full allocated total it would still have $1,381 million to distribute at its discretion.

The caps (percentage) on the Grants that were legislated very early in the provincial equalization program , we believe violate the explicit purpose of the Constitution Act, 1982 and need to be rescinded allowing those funds to be distributed to municipalities and towns that host NSPC facilities. The federal allocation of 26% for municipalities is also being violated and transferring federal equalization transfers into General Revenues where they can be used for political purposes also violates the Constitution Act, 1982.

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