Quarterly Ontario Finances: Third Quarter 2000-2001

ONTARIO FINANCES
2000-01 THIRD QUARTER QUARTERLY UPDATE - DECEMBER 31, 2000 Ministry of Finance


Fiscal Summary
($ Millions)
  2000-01
  Actual 
1999-00		 Budget
Plan  		 Current
Outlook		 In-Year
Change
Revenue 62,931 62,060 64,218 2,158
Expenditure
    Programs 46,649 49,525 50,289 764
    Restructuring and Other Charges 211 -- -- --
    Accounting Changes from 1999-00 Public Accounts* 720 -- 606 606
  Total Program Expenditure 47,580 49,525 50,895 1,370
  Capital* 4,832 2,075 2,212 137
  Public Debt Interest
    Provincial 8,977 8,940 8,910 (30)
    Electricity Sector 520 520 520 --
Total Expenditure* 61,909 61,060 62,537 1,477
Reserve -- 1,000 -- (1,000)
Net Impact of Electricity Restructuring to be Recovered from Ratepayers** 354 -- 270 270
SURPLUS / (DEFICIT) 668 0 1,411 1,411

*  Accounting changes introduced in the 1999-00 Public Accounts increased total 2000-01 expenditure in-year by $746 million, representing more than 50 per cent of the in-year change from Budget Plan.
**  Reflects the estimated excess of expenditure over revenue of the Ontario Electricity Financial Corporation (OEFC). Consistent with the principles of electricity restructuring, OEFC debt is to be recovered from ratepayers, not taxpayers.

HIGHLIGHTS

2000-01 IN-YEAR PERFORMANCE

SURPLUS AT $1.4 BILLION

  • The 2000-01 surplus is projected at $1,411 million, as compared to a balanced budget outlook in the 2000 Ontario Budget, an improvement of $45 million from the $1,366 million surplus reported in the Second Quarter Ontario Finances.

REVENUE AT $64.2 BILLION

  • The revenue outlook, at $64,218 million, is up $2,158 million from the Budget Plan, and up $165 million from the Second Quarter Ontario Finances outlook, mainly due to higher Personal Income Tax revenue.

IN-YEAR EXPENDITURE UP $0.7 BILLION

  • In-year decisions have increased total expenditure $731 million from the 2000 Budget Plan and increased expenditure by $120 million from the Second Quarter Ontario Finances outlook, mainly due to Provincial financial support for transition costs in the cities of Hamilton, Ottawa and Greater Sudbury, and the counties of Haldimand and Norfolk.

ACCOUNTING CHANGES INCREASED TOTAL EXPENDITURE BY $0.7 BILLION AT SECOND QUARTER

  • Accounting changes introduced in the 1999-00 Public Accounts increased 2000-01 total expenditure by $746 million at second quarter due to an increase in the Provision for the Electricity Sector and the expenditure impact of consolidating the Independent Electricity Market Operator and the Metro Toronto Convention Centre as government organizations. Revenue increased by $358 million in 2000-01 as a result of these accounting changes.

RESERVE APPLIED TO REDUCE NET PROVINCIAL DEBT

  • Based on improvements in the economic and revenue outlook, the $1 billion reserve was eliminated and applied to Net Provincial Debt reduction in the Second Quarter Ontario Finances.

For further information contact
Communications and Corporate Affairs Branch (416)325-0333
Frost Building North, Queen´s Park
Toronto M7A 1Z1 		Ce rapport est disponible en français.
Renseignements: Direction des communications et des
affaires ministérielles,(416) 325-0333
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This document is available on the Internet at: http://www.fin.gov.on.ca/en/engdoc.htm


DETAILS OF IN-YEAR CHANGES



FISCAL PERFORMANCE

REVENUE

  • Total revenue is projected to be $64,218 million, up $2,158 million from the 2000 Ontario Budget Plan, and $165 million above the Second Quarter Ontario Finances outlook. Major changes this quarter are:

    • Personal Income Tax revenue is increased by $150 million due to the pace of employment and income growth in Ontario.

    • Other Federal Revenue is up $9 million due to reimbursements under the federal Firearms Act.

    • Sales and Rentals are up $5 million reflecting the transfer of industrial parks from the Ontario Development Corporation, a government business enterprise, to Management Board Secretariat.

    • Miscellaneous Revenue is up $1 million for policing services provided to the Towns of Arnprior, Renfrew and Kingsville.

OPERATING EXPENDITURE

  • Net operating expenditure, at $60,325 million, is up $1,340 million from the Budget Plan and up $117 million from the Second Quarter Ontario Finances outlook. Major changes this quarter are as follows:

    • Ministry of the Attorney General: An additional $1 million to provide funding for public electronic access to Ontario's legislation and regulations, fully offset from the Contingency Fund.

    • Ministry of Community and Social Services: An additional $123 million to address higher volume and transitional costs in the Child Welfare Services program, fully offset from the Contingency Fund.

    • Ministry of Energy, Science and Technology: A reduction of $50 million due to re-profiling into future years of the funding to establish the Ontario Cancer Research Network.

    • Ministry of Environment: An additional $2 million to identify best health and safety practices for the protection of the environment and for consultations on how to ensure drinking water protection for small waterworks, and $1 million to establish a database system to support a public website to report and track emission of air pollutants.

    • Ministry of Health and Long-Term Care: An expenditure decrease of $1 million due the transfer of funds to the Ministry of Training, Colleges and Universities to provide 40 additional spaces in medical schools.

    • Management Board Secretariat: An additional $5 million for operating costs associated with industrial parks transferred from the Ontario Development Corporation, offset by revenue.

    • Ministry of Municipal Affairs and Housing: An additional $165 million to provide Provincial financial support for transition costs in the cities of Hamilton, Ottawa and Greater Sudbury, and the counties of Haldimand and Norfolk, partially offset by $18 million from the Contingency Fund.

    • Ministry of the Solicitor General: An increase of $7 million for the Chief Firearms Office for the licensing component of the federal Firearms Act, fully offset by federal transfers, and an additional $1 million for OPP municipal policing services contracts for the Towns of Arnprior, Renfrew, and Kingsville, offset by revenue.

    • Ministry of Training, Colleges and Universities: An expenditure increase of $1 million, due to the transfer from the Ministry of Health and Long-Term Care of funds to provide 40 additional spaces in medical schools.

    • Ministry of Transportation: An additional $4 million to upgrade and modernize the driver and vehicle information management systems.

PUBLIC DEBT INTEREST

  • The Public Debt Interest forecast of $9,430 million, consists of $8,910 million related to the Province's borrowing on its own behalf and $520 million related to the interest on debt issued for investment in the Electricity Sector. This forecast is down $30 million from the Budget Plan due to lower-than-expected interest rates, but unchanged from the Second Quarter Ontario Finances outlook.

CAPITAL EXPENDITURE

  • Capital expenditure at $2,212 million is up $137 million from the Budget Plan and up $3 million from the Second Quarter Ontario Finances outlook. The major changes this quarter are as follows:

    • Management Board Secretariat: An additional $2 million for environmental assessment and remediation efforts associated with industrial parks transferred from the Ontario Development Corporation.

    • Ministry of Natural Resources: An additional $1 million for the Natural Areas Protection Program.

    • Ministry of Northern Development and Mines: An expenditure increase of $18 million as a result of the transfer of funds from the Ministry of Transportation for highway rehabilitation projects in northern Ontario.

    • Ministry of Transportation: An expenditure decrease of $18 million as a result of the transfer of funding to the Ministry of Northern Development and Mines for northern highway rehabilitation.



FISCAL PERFORMANCE



Statement of Financial Transactions
($ Millions)
  Actual  
1996-97		 Actual  
1997-98		 Actual  
1998-99		 Actual  
1999-00		 Q3     
2000-01
Revenue 49,450 52,518 55,786 62,931 64,218
Expenditure
    Programs* 42,956 43,709 46,509 47,369 50,895
    Restructuring and Other Charges 2,180 1,595 76 211 --
  Total Program Expenditure 45,136 45,304 46,585 47,580 50,895
  Capital* 2,612 2,451 2,187 4,832 2,212
  Public Debt Interest
    Provincial 8,607 8,729 9,016 8,977 8,910
    Electricity Sector -- -- -- 520 520
Total Expenditure 56,355 56,484 57,788 61,909 62,537
Reserve -- -- -- -- --
Net Impact of Electricity Restructuring to be
    Recovered from Ratepayers**		 -- -- -- 354 270
SURPLUS / (DEFICIT) (6,905) (3,966) (2,002) 668 1,411
NET PROVINCIAL DEBT+ 108,769 112,735 114,737 113,715 112,034

*  1996-97 to 1998-99 restated to reflect reclassification of leases from capital to operating. Program expenditure totals in 1999-00 and 2000 01 reflect the impact of accounting changes introduced in the 1999-00 Public Accounts.
**  Reflects the estimated excess of expenditure over revenue of the Ontario Electricity Financial Corporation (OEFC). Consistent with the principles of electricity restructuring, OEFC debt is to be recovered from ratepayers, not taxpayers.
+  Net Provincial Debt represents total Liabilities less Financial Assets.




Selected Economic and Fiscal Statistics
  Actual  
1996-97		 Actual  
1997-98		 Actual  
1998-99		 Actual  
1999-00		 Q3     
2000-01
Gross Domestic Product (GDP) at Market Prices ($ Millions) 335,843 357,300 372,630 396,775 426,755
Ontario Population (000s) - July 1

 11,101

 11,249

 11,386

 11,517

 11,669
Ontario Revenue as a per cent of GDP 14.7 14.7 15.0 15.9 15.0
Ontario Revenue Growth (%)

 0.0

 6.2

 6.2

 12.8

 2.0
Ontario Total Spending as a per cent of GDP 16.8 15.8 15.5 15.6 14.7
Ontario Total Spending Growth (%)

 (3.3)

 0.2

 2.3

 7.1

 1.0
Ontario PDI as a Share of Revenue (%) 17.4 16.6 16.2 15.1 14.7
Ontario PDI as a Share of Total Spending (%) 15.3 15.5 15.6 15.3 15.1
Ontario PDI as a per cent of GDP

 2.6

 2.4

 2.4

 2.4

 2.2
Ontario Surplus / (Deficit) as a per cent of GDP

 (2.1)

 (1.1)

 (0.5)

 0.2

 0.3
Net Provincial Debt per capita 9,798 10,022 10,077 9,874 9,601
Net Provincial Debt as a per cent of GDP 32.4 31.6 30.8 28.7 26.3

Sources: Ontario Ministry of Finance and Statistics Canada.

ECONOMIC PERFORMANCE



VIBRANT ONTARIO ECONOMY IN 2000

  • The Ontario economy continued to grow strongly in the third quarter of the calendar year (July-September period), with real GDP up 5.5 per cent at annual rates. This followed growth of 5.2 per cent in the second quarter.

STRONG JOB GROWTH IN 2000

  • For the year 2000, Ontario employment increased 184,000 following record job growth in 1999 of 198,000.

  • Ontario's average annual unemployment rate fell from 6.3 per cent in 1999 to 5.7 per cent in 2000.

JOB GROWTH CONTINUES IN 2001

  • In January, Ontario Employment rose 16,000.

  • The Ontario unemployment rate was 5.7 per cent in January.

STRONG CONSUMER SPENDING GROWTH IN 2000

  • Over the first eleven months of 2000, Ontario retail sales were up 7.6 per cent from a year ago and unit auto sales rose 3.8 per cent.

HOUSING MARKET REMAINS STRONG

  • For the year 2000, housing starts in Ontario rose 6.4 per cent from the previous year.

  • Over the year 2000, Toronto new home sales increased 14.4 per cent from a year earlier.

BUSINESS GROWING

  • Over the first eleven months of 2000, Ontario manufacturing shipments rose 7.6 per cent from a year earlier.

  • Ontario international merchandise exports increased 6.2 per cent over the same period.

ONTARIO INFLATION RISES IN 2000

  • Ontario's inflation rate as measured by the Consumer Price Index (CPI) was 2.9 per cent in 2000.

RECENT ECONOMIC DEVELOPMENTS



KEY ECONOMIC INDICATORS
(% Change from previous period, unless indicated otherwise)
  Annual Annual Quarterly
  1999 2000 99:3 99:4 00:1 00:2 00:3
Output (Seasonally Adjusted at Annual Rates)
  Real GDP Ontario 6.1 N/A 8.0 5.5 5.4 5.2 5.5
  Nominal GDP Ontario 6.5 N/A 7.2 3.9 11.9 9.4 8.0
  Annual Annual Monthly 2000-2001
  1999 2000 Sept Oct Nov Dec Jan
Other Indicators (Seasonally Adjusted)  
Labour Markets
  Labour Force (Change in 000s) Ontario 157 157 7 33 44 2 (5)
  Employment (Change in 000s) Ontario 198 184 18 27 35 (1) 16
  Unemployment Rate (%) Ontario 6.3 5.7 5.8 5.9 6.0 6.0 5.7
Household Sector
  Retail Sales Ontario 7.3 N/A 0.7 (0.7) 0.1 N/A N/A
  Urban Housing Starts (000s) Ontario 62.9 67.4 67.4 73.5 67.2 65.9 79.6
  New Home Sales* Toronto 29.4 14.4 34.7 6.2 (15.7) (25.2) N/A
  MLS Home Resales* Ontario 7.4 (1.1) (3.6) 2.1 6.3 (7.7) N/A
Manufacturing Shipments Ontario 11.7 N/A 0.1 0.4 0.4 N/A N/A
  Transportation Equipment Ontario 21.3 N/A 0.0 (0.2) (1.1) N/A N/A
Consumer Price Index* Ontario 1.9 2.9 2.8 2.9 3.7 3.5 N/A

Statistics Canada, Ontario Ministry of Finance, Canada Mortgage and Housing Corporation, Greater Toronto Home Builders Association, Canadian Real Estate Association and Ward's Automotive.

*  % change from a year earlier
N/A = Data not available



FINANCIAL TABLES



REVENUE



($ Millions) 2000-01
  Actual
1999-00		 Budget
Plan		 Current
Outlook		 In-Year
Change
TAXATION REVENUE
  Personal Income Tax 17,617 17,530 18,880 1,350
  Retail Sales Tax 12,879 13,400 13,600 200
  Corporations Tax 8,095 8,765 8,765 --
  Employer Health Tax 3,118 3,320 3,380 60
  Gasoline Tax 2,154 2,260 2,260 --
  Fuel Tax 665 665 665 --
  Tobacco Tax 481 510 510 --
  Land Transfer Tax 565 580 580 --
  Mining Profits Tax 50 55 55 --
  Race Tracks Tax 6 5 5 --
  Preferred Share Dividends Tax 33 40 40 --
  Other Taxation 218 193 193 --
  TOTAL 45,881 47,323 48,933 1,610
GOVERNMENT OF CANADA
  Canada Health and Social Transfer 3,777 3,548 3,548 --
  Increase in CHST Allocation 190 552 552 --
  CHST Supplements 755 757 757 --
  Social Housing 466 533 533 --
  Student Assistance 170 171 171 --
  Indian Welfare Services 85 114 114 --
  Bilingualism Development 65 64 64 --
  Employability Assistance for People with Disabilities 65 66 66 --
  Canada-Ontario Infrastructure Works 19 -- -- --
  Other 293 227 236 9
  TOTAL 5,885 6,032 6,041 9
INCOME FROM GOVERNMENT ENTERPRISES
  Ontario Lottery and Gaming Corporation* 1,924 1,695 1,865 170
  Liquor Control Board of Ontario 845 915 915 --
  Ontario Power Generation Inc. and Hydro One Inc. 903 795 795 --
  Other 36 18 23 5
  TOTAL 3,708 3,423 3,598 175
OTHER REVENUE
  Vehicle and Driver Registration Fees 911 920 920 --
  Other Fees and Licences 667 670 670 --
  Liquor Licence Revenue 539 530 530 --
  Royalties 345 240 240 --
  Sales and Rentals 2,133 790 840 50
  Fines and Penalties 41 35 35 --
  Local Services Realignment - Reimbursement
     of Expenditure		 1,678 1,572 1,572 --
  Miscellaneous 1,143 525 839 314
  TOTAL 7,457 5,282 5,646 364
TOTAL REVENUE 62,931 62,060 64,218 2,158

*  Effective April 1, 2000, the Ontario Lottery Corporation and Ontario Casino Corporation merged to form the Ontario Lottery and Gaming Corporation.



OPERATING EXPENDITURE



($ Millions) 2000-01
MINISTRY Actual
1999-00		 Budget
Plan		 Current
Outlook		 In-Year
Change
Agriculture, Food and Rural Affairs 347 446 446 --
Attorney General 844 882 884 2
Board of Internal Economy 154 121 121 --
Citizenship, Culture and Recreation 337 398 398 --
Community and Social Services 7,512 7,504 7,627 123
Consumer and Commercial Relations 134 146 146 --
Correctional Services 563 591 591 --
Economic Development and Trade 94 99 99 --
Education 7,702 8,026 8,124 98
  School Board Phase-in Funding 268 -- -- --
  Teachers' Pension Plan (TPP) (363) (711) (735) (24)
Energy, Science and Technology 126 241 191 (50)
Environment 174 158 187 29
Executive Offices 19 22 22 --
Finance - Own Account 548 787 787 --
  Public Debt Interest        
    Provincial 8,977 8,940 8,910 (30)
    Electricity Sector 520 520 520 --
  Community Reinvestment Fund 521 537 537 --
Health and Long-Term Care 20,378 21,988 22,503 515
  Major One-Time Operating Costs 286 -- -- --
Intergovernmental Affairs 4 5 5 --
Labour 101 100 100 --
Management Board Secretariat 170 298 315 17
  Public Service/OPSEU Pension Plan (165) (248) (110) 138
  Contingency Fund -- 1,165 858 (307)
  OPS Employee Severance (Net) 88 -- -- --
Municipal Affairs and Housing 1,665 1,644 1,810 166
Native Affairs Secretariat 13 16 15 (1)
Natural Resources 460 376 414 38
Northern Development and Mines 122 274 274 --
Office of Francophone Affairs 3 4 4 --
Solicitor General 814 856 871 15
Tourism 70 76 76 --
Training, Colleges and Universities 3,284 3,387 3,388 1
Transportation 587 537 541 4
Year-End Savings -- (200) (200) --
Accounting Changes*        
  Energy, Science and Technology -
    Independent Electricity Market Operator		 303 -- 283 283
  Finance - Provision for Electricity Sector 383 -- 275 275
  Tourism - Metro Toronto Convention Centre 34 -- 48 48
TOTAL OPERATING EXPENDITURE 57,077 58,985 60,325 1,340

*  Accounting changes introduced in the 1999-00 Public Accounts increased 2000-01 operating expenditure in-year by $606 million.
Note: Does not reflect new ministry structure announced on February 8, 2001.



CAPITAL EXPENDITURE



($ Millions) 2000-01
MINISTRY Actual
1999-00		 Budget
Plan		 Current
Outlook		 In-Year
Change
Agriculture, Food and Rural Affairs 1 80 80 --
Attorney General 62 64 64 --
Citizenship, Culture and Recreation 75 71 71 --
Community and Social Services 20 20 20 --
Correctional Services 124 156 156 --
Education 52 5 5 --
Energy, Science and Technology 500 -- -- --
Environment 1 14 14 --
  Water Protection Fund 160 51 51 --
Finance 7 3 3 --
  SuperBuild Millennium Partnerships -- 200 200 --
Health and Long-Term Care 338 291 291 --
  Major One-Time Capital Costs 1,004 -- -- --
Management Board Secretariat 13 12 14 2
Municipal Affairs and Housing (10) 2 2 --
Native Affairs Secretariat 5 8 10 2
Natural Resources 96 83 76 (7)
Northern Development and Mines 212 273 291 18
Solicitor General -- 8 8 --
Tourism 2 11 11 --
Training, Colleges and Universities 1,028 44 44 --
Transportation 830 799 781 (18)
Year-End Savings -- (120) (120) --
Accounting Changes*        
  Energy, Science and Technology - Independent
    Electricity Market Operator		 156 -- 140 140
  Tourism - Metro Toronto Convention Centre 156 -- -- --
TOTAL CAPITAL EXPENDITURE 4,832 2,075 2,212 137

*  Accounting changes introduced in the 1999-00 Public Accounts increased 2000-01 capital expenditure in-year by $140 million.
Note: Does not reflect new ministry structure announced on February 8, 2001.



ONTARIO'S 2000-01 FINANCING PROGRAM



($ Millions) 2000-01
  Actual
1999-00		 Budget
Plan		 Current
Outlook		 Change
from
Budget
Surplus / (Deficit) (668) -- 1,411 1,411
Accruals and Consolidations 623 5,205 (5,456) (251)
Maturities* (7,895) (8,425) (8,239) 186
Provision for Early Redemptions (1,246) (500) (1,064) (564)
Other Sources / (Uses) 295 -- (270) (270)
Net Repayments from / (Loans to) Agencies 2,758 -- (83) (83)
Decrease / (Increase) in Liquid Reserves (4,102) 4,500 4,500 --
Increase / (Decrease) in Short-Term Borrowing 608 -- -- --
Canada Pension Plan Borrowing 870 1,038 611 (427)
Long-Term Borrowing 8,667 8,592 8,590 (2)
  of which:        
     Completed     7,501  
     Remaining     1,089  

*  Maturing debt is lower than Budget Plan due to the Province exercising its options on extendible bonds.


  • Long-term financing undertaken in the third quarter totalled $1,576 million as follows:

  ($ Millions)
Domestic Issues 1,501
Medium Term Notes 75
Total 1,576
  • In addition to the borrowing and redemptions shown in the table, the Province has bought back $844 million of previously issued debt, financing the purchases with similar amounts of debt issued at more favourable rates.

  • Long-term public market borrowing requirements are virtually unchanged from the 2000-01 Budget plan. This is because the increase in the surplus is almost fully offset by $564 million higher-than-forecasted redemptions of Ontario Savings Bonds, $83 million lent to agencies, $270 million in net withdrawals from POSO, and $427 million less borrowing from the Canada Pension Plan.

  • In early December 2000, the Province of Ontario held its first bond auction, a reopening of a 4.875% issue due June 2, 2004, raising $250 million for the Ontario Electricity Financial Corporation (OEFC).

  • As of December 31, 2000, the Province had completed $1,459 million of the required refinancing of $1,843 million on behalf of the OEFC. The OEFC's refinancing requirements are down $618 million from the forecasted $2,461 million requirement at the time of the Budget.

  • Net Provincial Debt is forecast to be $112.0 billion at March 31, 2001, $2.0 billion lower than the Budget Plan due to higher-than-forecasted surpluses in both 1999-00 and 2000-01.

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