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Manitoba will receive a 2.6 per cent bump in its annual transfer payments from the federal government for the next fiscal year, Finance Minister Greg Dewar confirmed Sunday.

In total, Manitoba will receive $3.522 billion in transfers, Dewar said. This includes payments under the Canada Health Transfer ($1.305 billion), the Canada Social Transfer ($82 million) and equalization ($1.736 billion).

The total is $89.6 million more than the province received the previous fiscal year.

Dewar said although the increase is welcome, Manitoba continues to be concerned about the formulae used to calculate transfer payments, particularly equalization. Manitoba receives $300 million less in equalization than it did in the 2009-10 fiscal year.

Dewar said Manitoba has lost support from the equalization program because its economy has performed better against the average of all provincial economies. Although that means more in the way of own-source revenue, it means less money from Ottawa under this one stream of transfer support.

"It’s partly a good news story," Dewar said from Ottawa. "We’re doing very well relative to the other provinces. Unfortunately, that means we get less from equalization."

The news on federal transfers was delivered to provincial finance ministers meeting in Ottawa this weekend. Traditionally, Ottawa provides firm numbers on transfer payments, including equalization, just before Christmas so the provinces can effectively plan their budgets for the following fiscal year.

The transfer payments revealed this year are based on policies and formulae set by the previous Conservative government. For that reason, there aren’t a lot of surprises contained within this year’s numbers.

Only Manitoba and Ontario will see their equalization payments go down next year. Prince Edward Island and Quebec both led the way in equalization payment growth, seeing a 5.3 per cent bump for 2016-17. Four provinces — British Columbia, Alberta, Saskatchewan and Newfoundland and Labrador — will not receive any equalization.

Of the other six provinces, four saw increases in equalization of between 1.9 and 5.3 per cent. Only Manitoba and Ontario saw a decline in overall equalization.

The provinces are still waiting for hard numbers on the new federal infrastructure program promised by Prime Minister Justin Trudeau during the fall election campaign. Further details are expected to be revealed early next year.

For the fourth consecutive year, Manitoba will see less money in equalization than it has the year before. How Manitoba has come to suffer a loss of federal support is a good news, bad news story.

Manitoba’s economy was hurt less by the recent recession, and bounced back sooner. Over the next couple of years, Manitoba is expected to be near, or in, the top three provinces for economic growth.

However, as Manitoba’s economy has improved relative to other provinces it has received a smaller portion of the total equalization pool, which this year will top $70 billion. "There is good news here because Manitoba’s position is improving as our fiscal capacity has improved," Dewar said. "But it also means our equalization transfers are down."

Manitoba finds itself in an unusual fiscal position. Its economy is growing steadily but each dollar in revenue generated for government from that additional economic activity is eroded by a corresponding loss in equalization support.

It is not a straight dollar-for-dollar swap; the increase in own-source revenues is larger than the losses in equalization. However, it does mean Manitoba’s treasury — currently mired in what appears to be a structural deficit — can’t reap the full benefit of its own economic growth. Manitoba is not alone in facing this mathematical dilemma.

Ontario, for example, has been a recipient of equalization since the 2008-09 global economic slowdown eviscerated that province’s once-booming manufacturing sector. Ontario’s economy is slowly recovering, but will still qualify for equalization in the next fiscal year.

The problem for Ontario is that, like Manitoba, its economy is improving relative to the average of all provinces. As a result, it will receive $2.3 billion in equalization next year, $60 million less than it received in the current year.

Manitoba and Ontario are expected to lose even more in upcoming years as the economic slowdown in Alberta and Saskatchewan makes them seem stronger against the average. That means both provinces will see less equalization.

dan.lett@freepress.mb.ca