Matthew Shugart, always on the look-out for comparative federalism issues, takes note of Ralph Klein's hissy fit yesterday on the subject of including oil revenues in equalization formulae. Ralph claimed, incorrectly, that this would be unconstitutional. Matthew, more wisely, noted the similarity to issues in Nigeria and Iraq (all, with Canada, artificial creations of the British Empire, cursed with ill-distributed fossil fuels).
In a nutshell, in Canada, provincial governments have constitutional jurisdiction over, and to a large extent directly own, natural resources. The central government also has complicated formulae for equalization and transfers, designed in theory to ensure that all jurisdictions can have comparable public services at comparable levels of taxes. Oil and gas revenues are excluded from consideration.
There is no doubt that the system is broken, but much question of how to improve it. Not surprisingly, the debate tends towards zero-sum regionalist bickering. The most recent step in the dance has come from Klein, the Premier of Alberta, who threatens to leave the equalization system altogether.
Much to say on this subject, but for now, I'll just note that Matthew may be reading the politics wrong. In general, fed-bashing is a favourite sport of domestically weak politicians, and Klein is a lame duck. After being humiliated in a leadership review on March 31, 2006, he is going to leave when a new leader is chosen. It is quite possible that the new leader will be closer to Harper than Klein is. So this kind of rhetoric may be more of a sign of weakness than strength.
That's not to say that Alberta won't fight hard for its interests. But there are multiple dimensions to any deal, and Alberta would have a lot to gain if the federal government visits "tax room" on the provinces. There are bitter memories of the genuinely destructive policies of Trudeau a quarter century ago, but I think Alberta will ultimately compromise.