TORONTO - While champagne corks pop in Newfoundland to celebrate that province's historic admission to the most exclusive club in Confederation, Ontario will be giving up its lifelong membership as it faces a dark, uncertain future as the country's newest have-not province.
For the first time in its history, Ontario is expected to collect $347 million in federal equalization payments in 2009 -- for some, the ultimate symbol of its transformation from the country's economic engine to one of its poor cousins.
Hard hit by massive job losses in its key manufacturing sector and dwindling provincial revenues, Ontario's once booming economy has fallen victim to the global economic crisis. The province is staring down a $500-million deficit this year -- which could balloon if it helps bail out troubled automakers -- while resource-rich provinces like Newfoundland are bucking the economic trend with billion-dollar surpluses.
It's almost like something out of a movie, where the two provinces have magically swapped their traditional roles as prince and pauper.
Ontario's Liberal government is hoping for a fairy tale ending, and that the spell will wear off at the stroke of midnight.
Tumbling oil prices could keep Ontario off the list of have-not provinces in the coming year, but it may not be able to dodge the bullet in 2010, said Finance Minister Dwight Duncan.
"The numbers are so wild and all over the board right now, I wouldn't say that's necessarily going to happen next year," he said.
Ontario qualified for equalization between 1977 and 1982 when oil prices were high, but it has never received payments under the federal wealth-sharing program since it was introduced in 1957.
Temporary or not, Ontario's new have-not status doesn't tell the whole story, experts say.
"At a high enough energy price, Ontario has got to become a have-not province," said Thomas Courchene, a Queen's University economics professor and expert on equalization.
"It's not that it's falling down so much, it's that the energy provinces are just getting unbelievable amounts of revenue. This raises the average of the system, and Ontario falls below the average."
The decline of manufacturing has shifted the balance of economic power in Canada and exacerbated the divisions between East and West playing out on the national political stage, Courchene said.
For years, Ontario was the "fat cat" of the country and didn't flex its political muscles very often. But that's about to change, he predicts.
"The intriguing fact is that when the West's power rises economically, there is a great tendency or ability of Ontario to exercise its political or electoral power," Courchene said.
When Ontario qualified for equalization in the past, the federal government granted the province a last-minute reprieve by changing the rules of the program to keep it from collecting any money. Some believe that could happen again.
Still, the possibility that Canada's most populous province could soon join the ranks of those on the federal dole has angered opposition parties, which blame Liberal mismanagement and steep spending increases for Ontario's rapid descent to have-not status.
But that's not what taxpayers should be outraged about, said equalization expert David MacKinnon.
Ontario is contributing about $20 billion more than it receives from Ottawa each year, while getting less out of many federal programs -- like employment insurance -- which tend to favour other provinces, he said.
The $347 million that Ontario is expected to collect in equalization -- about $29 for each man, woman and child in the province -- won't come close to closing that gap, said MacKinnon, a native of P.E.I. who worked for both the Nova Scotia and Ontario governments.
Equalization may not have a significant impact on Ontario financially, but it does send a message that the province's days as a "cash cow for the rest of Confederation" are over, he said.
"The province really faces a fairly dark future while it's carrying the burden to fund government programming elsewhere -- and a burden that our competing jurisdictions in the United States and around the world don't have," MacKinnon added.
"So this has a very direct impact on our ability to compete in the world, and has a huge impact on the lives of every citizen in Ontario."
It's still unclear how long Ontario will be a have-not province. Federal Finance Minister Jim Flaherty has said Ontario could be taking payments for "some time," although his Ontario counterpart disagrees.
Equalization aside, next year will be a "difficult" one for Ontario, Duncan said.
"The world economy is challenged, the downturn is deeper than most people expected. It's going to be a challenging 12 months for everybody."
