ST. JOHN'S, N.L — A disagreement between provinces over the knotty issue of the fiscal imbalance could reach an apex this week as Canada's premiers gather in Newfoundland for their annual meeting.

Newfoundland's Danny Williams and Ontario Premier Dalton McGuinty -- at the end of a cross-country tour on the issue -- both indicated after meeting last week that they are willing to compromise.

But doubts remain that the premiers will agree on how the equalization formula -- which ultimately funds hospitals, schools and road repairs to a minimum national standard -- should be calculated.

As premiers tread carefully to protect the interests of their respective regions, pressure to resolve the squabble is mounting. With or without an agreement, Finance Minister Jim Flaherty has promised to propose a plan by the fall that would revamp the $11-billion program.

Every premier will have to budge from their current position, said Williams, the meeting's host who has made a political career of standing firm at the negotiating table with Ottawa and big oil companies.

"Consensus is not going to be easy," Williams said in an interview.

Williams said he would have preferred to have known Ottawa's position before the summer meeting of the Council of the Federation.

"It would be nice if we had an indication from the federal government as to where they will see this going," he said. "They're sort of sending out some signals, but there's no real, definitive direction."

The release of a federally commissioned report recommending that half of every province's resource revenues be included in the formula for calculating equalization payments ignited waves of dissent last month.

Williams denounced it as "a bad dream." Alberta Premier Ralph Klein vowed to fight it "tooth and nail."

That led to a breakdown at a meeting of the premiers in Edmonton earlier this year. There was so little movement that the traditional post-meeting news conference was cancelled.

McGuinty, who has been firm in his stance against enriching equalization payments, risked entering the lion's den last week when he wrapped up a cross-country tour in Newfoundland to explain his position.

While he declined to reveal where he was willing to compromise, he hinted boosting the national equalization program would likely be one aspect of a solution that satisfies everyone.

"I think that's ultimately where the consensus will emerge," McGuinty said after his meeting with Williams.

But Stephen Clarkson, a University of Toronto political scientist, said it will be difficult for some provinces, namely oil-rich Alberta, to give.

"It's pretty hard to have a consensus when there's rich versus poor built into the system," Clarkson said.

The federal government's pledge to iron out the differences for them if they can't themselves is a hollow threat, he added, because ultimately Ottawa needs the support of all premiers before imposing any plan.

Most of the so-called have-not provinces want equalization boosted, but Ontario and Alberta, the only two provinces that do not receive payments from the program, are opposed to any increases.

McGuinty has been the loudest in his push for increased federal transfer payments on a per capita basis, arguing that would be the fairest way to rectify the fiscal imbalance.

But other leaders including Quebec Premier Jean Charest contend Ontario has been the biggest beneficiary of increased per capita transfers from the federal government since 1999.