BY BRENT FOX

Kings County Register

It’s complicated and it’s going to cost Nova Scotia in the long run - but not nearly as much as it will impact Newfoundland.

The impact of the 2007 federal budget’s new equalization program affects the Offshore Accords between Newfoundland and Nova Scotia and the federal government – apparently costing the provinces in the long-term. The real cost depends on a lot of things, including petroleum prices and the Ontario economy.

The accords’ aim is to provide more equalization while provinces such as Newfoundland and Saskatchewan prepare to become “have” entities, with Ontario as the standard.

Newfoundland Premier Danny Williams has been vocal on the matter, while Nova Scotia Premier Rodney MacDonald has been more conciliatory.

Equalization payments aren’t to be confused with Canadian health and social transfers to the provinces for health care, post secondary education and other fields.

Acadia economics professor Dr. Paul Hobson spoke on “Equalization and the Offshore Accords: What is all the fuss about?” at a seminar at the university Sept. 13, part of the economics department’s fall series.

Hobson and Dr. Wade Locke of Memorial University, St. John’s have studied those effects in depth.

“It has been politically charged,” Hobson acknowledged. But, “it’s really quite complicated.... It’s a difficult exercise.”

Nova Scotia and Newfoundland could - under their respective Nova Scotia-Canada and Atlantic Accords - opt to stay under the old system and the fixed funding formula, and keep 100 per cent of offshore resource income. Or, they could go under the new program, potentially losing 50 per cent of that money over a certain cap.

“The cap has been very controversial,” Hobson said.

Because of its greater immediate offshore resource income potential, Newfoundland stands to lose the most - and quicker - under the new formula. In fact, it has no choice: the province is expected to go into the “have” status in three years.

Nova Scotia can opt to remain under the old program, or go with the new one and its cap. It has a period in which to decide; if it goes with the new one, there is no going back. There appears to be a gain in the first years of the new formula, but with an overall loss of $1.4 billion by the end of the Accord in 2020. The heaviest losses would be in 2010/ 2011.

On the opther hand, Ontario’s economic woes could turn that province into a recipient.

Hobson acknowledged, with all of this, “it is not clear what is a good deal and what is not a good deal.... It shows how complicated the Nova Scotia decision is.”

As for the Atlantic Provinces with no offshore resource accords, New Brunswick would gain $68 million in the first two years, losing $1.1 billion overall. Prince Edward Island would gain $7 million in the first two years, losing $196 million overall.