Ontario strained by $11B 'fiscal gap'

Photo: The Canadian Press. All rights reserved.

Protesters gather outside the Ontario Legislature in Toronto on April 21, 2012 to protest the cuts in the tabled provincial budget. THE CANADIAN PRESS/Chris Young

Outdated policies that cause Ontario to turn over roughly $11 billion more to the federal government each year than it receives in return are placing an unfair strain on the province, a public policy think tank said in a report released Monday.

The study by the University of Toronto's Mowat Centre points to what it calls the province's "fiscal gap," which it blames almost entirely on "inequities in federal spending," including transfer payments and investments.

Ontario continues to contribute a disproportionate amount to federal coffers, even though it's no longer wealthier than the average province, the report says.

As a result, its prosperity and quality of life are being undermined, it says.

What was once Canada's economic engine officially became a "have-not" province, meaning it qualified for the equalization program, in 2008 as its manufacturing sector took a tumble and trade with the U.S. weakened amid the global recession.

"One might assume that, given Ontario's below average fiscal capacity, it would now be a net recipient of redistribution in the federation, but that turns out not to be the case," the document reads.

"Canada's fiscal arrangements have not evolved to reflect changing circumstances. As a result, Ontarians continue to see their federal taxes redistributed away from Ontario on a net basis at a time when the province can ill afford it," it adds.

The findings are based on fiscal data from 2009, the latest figures available.