Although federal-provincial equalization is a source of regular debate in Canada, the importance of provincial-municipal equalization is often ignored. And, yet, provincial-municipal equalization is essential to ensure that that all residents of a province can access a reasonably comparable level of municipal services at reasonably comparable tax rates.
In a new paper for the Institute on Municipal Finance and Governance (IMFG) and the Urban Project, the late Richard M. Bird and IMFG Director Enid Slack review the current state of provincial-municipal equalization transfers in Canada and suggest ways to improve their design.
Arguing that no province provides adequate equalization for municipalities, the authors take a critical look at the mechanics of such a transfer, and how it should ideally operate. Issues that first need to be resolved range from determining how local needs are calculated to ascertaining how municipal fiscal capacity is measured. Bird and Slack conclude with some suggestions for what is needed to devise fair, efficient, and transparent provincial-municipal equalization systems.
This paper is the fourth in a series of papers IMFG is preparing for the Urban Project, an initiative led by the Federation of Canadian Municipalities (FCM) that brings city leaders together with other levels of government, academia, civil society, and the private sector to identify actionable and scalable solutions to the biggest challenges facing Canada’s cities. With generous support from Maytree, Metcalf Foundation, McConnell Foundation, and TD Bank Group, IMFG has commissioned papers focused on municipal legislative and fiscal autonomy, governance, and intergovernmental relations, drawing on discussions convened by the Urban Project.