[redforever]

Originally Posted by SebC

What is a fundamental problem with the system, though, is that it does not account variations in delivery costs.

Exactly!!!

If the original rules set out in the late 1950s still applied, only P.E.I. would still qualify for equalization.

Geographic and demographic shifts aren't accounted for in the equalization formula, nor does it factor in the difference in costs for delivering services.

Our equalization system is good at calculating how much a province should receive relative to its fiscal capacity, such as its ability to raise revenues from income, sales and corporate taxes, but it fails miserably by not taking into account each province's actual expenditure needs.

However, no consideration is given to how much it actually costs to provide basic public services and no consideration is given to how the received monies are spent.