2009-10 First Quarter
Quarterly Update - June 30, 2009
Ministry of Finance
|Interest on Debt||8,854||9,301||9,406||105|
|Surplus / (Deficit)||(3,890)||(14,100)||(18,500)||(4,400)|
In the 2009 Ontario Budget, the government projected a $14.1 billion deficit for 2009–10. Since then, a weaker-than-expected economy and further steps to support the automotive industry have increased the deficit projection to $18.5 billion in 2009–10.
This $4.4 billion increase to the deficit for 2009–10 is primarily due to an approximately $2.8 billion deterioration in the Province’s revenue outlook as a result of a weaker economy, combined with an increase in total expense of $1.5 billion to support the automotive sector and $0.1 billion in higher interest on debt expense.
Given that the auto industry in North America is highly integrated, a collaborative effort to sustain the auto industry by the governments of the U.S., Canada and Ontario was necessary to ensure the long-term viability of an important part of Ontario’s diversified economy. The 2009 Ontario Budget set aside $2.5 billion of the contingency funds in recognition of the challenges facing the auto sector. This put Ontario in a position to partially mitigate the estimated $4.0 billion fiscal impact of the auto sector support.
While economic challenges persist, the government will continue to be prudent in its management of the Province’s finances – the full reserve and the remaining contingency funds are still available to protect against additional adverse changes in the 2009–10 fiscal outlook. The government remains committed to meeting its fiscal targets by finding efficiencies and by ensuring that the average annual program expense growth is lower than growth in revenue.
Final results for 2008–09 will be presented in the Public Accounts later this summer. Further details on the Province’s fiscal and economic outlook will be provided in the 2009 Ontario Economic Outlook and Fiscal Review later this fall.
The global economic crisis required the Ontario government to join the federal and the U.S. governments to support North America’s integrated automotive industry as 2008 sales collapsed to 25-year lows. Similar support has also been provided by foreign governments with significant automotive manufacturing bases, e.g., Sweden, Germany, Italy and France.
The Ontario government is investing in General Motors and Chrysler to achieve long-term viability and competitiveness, while also supporting workers and communities through investments in manufacturing, research and development, and capital expenditure.
As a result of Ontario’s support to General Motors and Chrysler, Ontario is in a position to help reinvent the automotive industry and to continue pressing forward on the government’s commitment for a greener Ontario. An innovative and competitive auto industry in Ontario will lead to the creation of high-value jobs in a new global marketplace for green auto-parts manufacturing.
Ontario’s total support will be about $4.8 billion to General Motors and Chrysler. These loans and investments will be accounted for in accordance with generally accepted accounting principles for governments in Canada. This will be done when the 2009–10 financial statements are prepared in the summer of 2010.
To be prudent, the government is estimating a fiscal impact of $4.0 billion in 2009–10 to account for these adjustments and is partially offsetting this impact with $2.5 billion from the Operating Contingency Fund. As a result, the net impact of the auto sector support on the Province’s deficit is $1.5 billion.
The 2009–10 revenue outlook, at $93,230 million, is $2,750 million or 2.9 per cent below the 2009 Budget forecast. This deterioration reflects new information on 2008 tax processing and economic performance in 2009, as the sharp decline in the global economy continues to affect Ontario. Changes to the revenue outlook in the first quarter include:
The 2009–10 total expense outlook, at $110,530 million, is $1,650 million higher than forecast in the 2009 Budget, mainly due to the estimated net fiscal impact of the provincial share of support to the automotive industry, and an increase of $105 million in interest on debt expense. Ministry program expense changes this quarter include:
Interest on debt expense for the year is forecast to increase by $105.0 million due to the impact of the $4.4 billion increase in the 2009–10 projected deficit.
The current fiscal outlook maintains the $1.2 billion reserve included in the 2009 Budget to help protect the fiscal plan against further adverse changes in the Province’s revenue and expense, including those resulting from changes in Ontario’s economic performance.
|Statement of Financial Transactions||2005–06||2006–07||2007–08||Interim
|Interest on Debt||9,019||8,831||8,914||8,854||9,406|
|Surplus / (Deficit)||298||2,269||600||(3,890)||(18,500)|
|1 Net Debt is calculated as the difference between liabilities and financial assets. The annual change in Net Debt is equal to the surplus/deficit of the Province plus the change in tangible capital assets, the change in net assets of hospitals, school boards and colleges and, effective April 1, 2007, the change in the fair value of the Ontario Nuclear Funds.|
|2 Net Debt is restated in 2005–06 to reflect the value of hydro corridor lands transferred to the Province from Hydro One Inc.|
|3 Accumulated Deficit is calculated as the difference between liabilities and total assets, including tangible capital assets and net assets of hospitals, school boards and colleges. The annual change in the Accumulated Deficit is equal to the surplus/deficit plus, effective April 1, 2007, the change in the fair value of the Ontario Nuclear Funds. Accumulated Deficit may also be adjusted from time to time for accounting changes, e.g., the consolidation of the Broader Public Sector entities in fiscal 2005–06.|
|Selected Economic and Fiscal Statistics|
|Gross Domestic Product (GDP) at Market Prices
|Ontario Population (000s) – July 1||12,528||12,665||12,794||12,929||13,051|
|Personal Income ($ Millions)||419,325||442,166||464,217||482,008||484,900|
|Personal Income per Capita (dollars)||33,471||34,912||36,284||37,281||37,155|
|Ontario Revenue as a per cent of GDP||15.7||16.2||16.6||15.9||16.3|
|Ontario Total Expense as a per cent of GDP||15.6||15.8||16.5||16.6||19.3|
|Ontario Total Program Expense as a per cent of GDP||13.9||14.2||15.0||15.0||17.6|
|Ontario Interest on Debt as a per cent of Total Expense||10.7||10.0||9.2||9.1||8.5|
|Ontario Interest on Debt as a per cent of GDP||1.7||1.6||1.5||1.5||1.6|
|Ontario Surplus / (Deficit) as a per cent of GDP||0.1||0.4||0.1||(0.7)||(3.2)|
|Net Debt as a per cent of GDP||26.4||25.2||24.4||25.4||30.4|
|Accumulated Deficit as a per cent of GDP||20.3||19.1||18.1||18.6||22.3|
|Sources: Ontario Ministry of Finance and Statistics Canada.|
Ontario’s economy is facing a challenging environment including the global economic downturn, a sharp recession in the U.S., uncertainty in financial markets and restructuring in the auto sector. The outlook for 2009 has deteriorated since the March Budget, largely reflecting weaker-than-expected U.S. demand for Ontario’s exports. As of July 22, private-sector forecasters, on average, project Ontario real GDP to decline by 3.3 per cent in 2009, down from a 2.4 per cent decrease at the time of the 2009 Budget. The Ministry of Finance’s assumption for real GDP growth in the 2009 Budget (a 2.5 per cent decline) was below the average private-sector forecast at that time. Private-sector forecasters expect economic growth to resume in the second half of the year due to a recovery in the U.S. economy, government efforts to preserve and create jobs, low interest rates, and stable financial markets.
Private-sector forecasters, on average, expect nominal GDP (measured in current dollars) to decrease by 3.7 per cent in 2009, down from a 2.3 per cent decline at the time of the 2009 Ontario Budget.
|Key Economic Indicators|
|(Per cent change from previous period, unless indicated otherwise)|
|Output (Seasonally Adjusted)|
|Other Indicators (Seasonally Adjusted)|
|Labour Force (Change in 000s)||116.2||111.0||21.3||(17.2)||(2.1)||(10.2)||16.1|
|Employment (Change in 000s)||101.1||93.5||(35.3)||(10.8)||(3.0)||(59.7)||1.2|
|Unemployment Rate (%)||6.4||6.5||8.7||8.7||8.7||9.4||9.6|
|Housing Starts (000s)1||68.1||75.1||47.1||62.6||37.4||44.5||45.8|
|MLS Home Resales2||9.5||(15.2)||(29.2)||(9.1)||(9.2)||(3.7)||15.7|
|Consumer Price Index2||1.8||2.3||1.5||1.8||0.6||0.4||0.0|
|1 Monthly housing starts are expressed at a seasonally adjusted annual rate.|
|2 Per cent change from a year earlier.
N/A = Data not available.
Sources: Statistics Canada, Ontario Ministry of Finance, Canada Mortgage and Housing Corporation and Canadian Real Estate Association.
|Personal Income Tax||25,574||25,170||24,110||(1,060)|
|Retail Sales Tax||17,453||17,600||17,290||(310)|
|Employer Health Tax||4,664||4,687||4,637||(50)|
|Ontario Health Premium||2,799||2,829||2,794||(35)|
|Land Transfer Tax||1,051||895||895||–|
|Electricity Payments-In-Lieu of Taxes||816||685||685||–|
|Government of Canada|
|Canada Health Transfer (CHT)||8,881||9,722||9,722||–|
|Canada Social Transfer (CST)||4,081||4,213||4,213||–|
|Labour Market Programs||863||1,193||1,193||–|
|Wait Times Reduction Fund||235||97||97||–|
|Other Federal Payments||1,823||1,419||1,419||–|
|Income from Investment in Government Business Enterprises|
|Ontario Lottery and Gaming Corporation||1,895||1,966||1,966||–|
|Liquor Control Board of Ontario||1,410||1,326||1,326||–|
|Ontario Power Generation Inc. and Hydro One Inc.||615||983||983||–|
|Other Government Enterprises||(11)||(8)||(8)||–|
|Other Non-Tax Revenue|
|Vehicle and Driver Registration Fees||1,044||1,065||1,065||–|
|Electricity Debt Retirement Charge||968||955||955||–|
|Sales and Rentals||609||619||619||–|
|Other Fees and Licences||656||815||815||–|
|Liquor Licence Revenue||458||457||457||–|
|Net Reduction of Power Purchase Contract Liability||373||348||348||–|
|Miscellaneous Other Non-Tax Revenue||904||880||880||–|
|Agriculture, Food and Rural Affairs1||899.9||1,116.1||1,116.1||–|
|Board of Internal Economy||198.3||173.3||173.3||–|
|Children and Youth Services||4,102.3||4,406.5||4,406.5||–|
|Citizenship and Immigration||88.5||106.7||106.7||–|
|Community and Social Services||8,003.1||8,327.3||8,327.3||–|
|Community Safety and Correctional Services||2,146.6||2,260.0||2,260.0||–|
|School Boards' Net Expense||12,839.9||13,693.5||13,693.5||–|
|Energy and Infrastructure1||343.1||764.7||764.7||–|
|Francophone Affairs, Office of||5.5||5.1||5.1||–|
|Health and Long-Term Care||21,776.0||22,955.4||22,955.4||–|
|Hospitals' Net Expense||18,567.4||19,214.4||19,214.4||–|
|International Trade and Investment2||67.2||72.2||72.2||–|
|Municipal Affairs and Housing1||751.7||703.9||703.9||–|
|Northern Development and Mines2||349.9||378.4||378.4||–|
|Research and Innovation1||313.5||482.7||482.7||–|
|Small Business and Consumer Services2||47.1||48.8||48.8||–|
|Training, Colleges and Universities1||4,657.6||4,736.7||4,736.7||–|
|Colleges' Net Expense1||1,445.7||1,549.5||1,549.5||–|
|Interest on Debt3||8,854.0||9,301.0||9,406.0||105.0|
|1 Details on other ministry expense can be found in the Other Expense table.|
|2 Recently announced changes in ministry structure not reflected; future updates will reflect adjusted ministry expense.|
|3 Interest on Debt is net of interest capitalized during construction of tangible capital assets of $78 million in 2009–10.|
|4 As in past years, the Year-End Savings provision reflects anticipated underspending that has historically arisen at year-end due to factors such as program efficiencies, and changes in project start-ups and implementation plans.|
|Note: Numbers may not add due to rounding.|
|Agriculture, Food and Rural Affairs|
|Teachers' Pension Plan1||49.0||259.0||259.0||–|
|Energy and Infrastructure|
|Capital Contingency Fund||–||200.0||200.0||–|
|Time-Limited Investments in Infrastructure||–||2,647.3||2,399.4||(247.9)|
|One-Time Automotive Sector Support||–||–||4,000.0||4,000.0|
|Ontario Municipal Partnership Fund||905.4||782.9||782.9||–|
|Operating Contingency Fund||250.0||3,210.0||752.0||(2,458.0)|
|Pension and Other Employee Future Benefits||685.0||932.0||932.0||–|
|Municipal Affairs and Housing|
|Time-Limited Investments – Social and Affordable Housing||–||352.2||585.3||233.1|
|Research and Innovation|
|Training, Colleges and Universities|
|Time-Limited Investments – Training, Colleges and Universities||–||212.4||212.4||–|
|Time-Limited Investments – Colleges' Net Expense||–||77.3||77.3||–|
|Total Other Expense||2,909.6||9,821.1||11,363.1||1,542.0|
|1 Numbers reflect PSAB pension expense. Ontario's matching contributions to the plan are $1,070 million in 2008–09 and $1,249 million in 2009–10.|
|Note: Numbers may not add due to rounding.|
|($ Millions)||2009–10 Current Outlook|
|Municipal and Local Infrastructure3||267.9||19.5||459.0||478.5|
|New Short-Term Stimulus Investments||0.0||702.0||2,728.6||3,430.6|
|Less: Other Partner Funding4||706.5||501.0||0.0||501.0|
|Total Excluding Partner Funding||7,829.8||10,112.5||4,982.2||15,094.7|
|Total Provincial Expenditure||7,614.4||9,499.2||3,205.5||12,704.7|
|1 Mainly consists of transfers for capital purposes to municipalities and universities, and expenditures for capital repairs. These expenditures are included in the Province's total expense.|
|2 Other Transportation includes planning activities, property acquisition, and other infrastructure programs (e.g., municipal/local roads, remote airports).|
|3 Municipal and local water and wastewater infrastructure investments are included in the Water/Environment sector.|
|4 Third-party contributions to capital investment in the consolidated sectors (schools, colleges and hospitals).|
|5 Mostly federal government transfers for capital investments.|
|Note: Numbers may not add due to rounding.|
|Province and Ontario Electricity Financial Corporation|
|Deficit / (Surplus)||3,890||14,100||18,500||4,400|
|Investment in Capital Assets||4,343||9,499||9,499||–|
|Net Loans / Investments||946||1,862||1,733||(129)|
|Total Funding Requirement||31,885||38,532||42,915||4,383|
|Canada Pension Plan Borrowing||(477)||(651)||(1,087)||(436)|
|Decrease / (Increase) in Short-Term Borrowing||(5,500)||(3,035)||(3,035)||–|
|Increase / (Decrease) in Cash and Cash Equivalents||2,815||–||417||417|
|Total Long-Term Public Borrowing Requirement||28,723||34,846||39,210||4,364|
|Note: Numbers may not add due to rounding.|
|Borrowing Program Status (as at June 30, 2009)
|Ontario Electricity Financial Corporation||0.8||1.2||2.0|
|Ontario Savings Bonds||1.1|
|Global/US Dollar/Other Issues||9.2|
The current long-term borrowing for 2009–10 is estimated at $39.2 billion, an increase of $4.4 billion from $34.8 billion in the 2009 Ontario Budget, reflecting the projected increase in the deficit.
The $129 million decrease in Net Loans/Investments is due to a decrease in the non-deficit portion of industrial support loans, partially offset by the Province’s loans to Infrastructure Ontario.
The increase of $436 million in Canada Pension Plan (CPP) borrowing reflects additional CPP funding available to the Province.
The $112 million increase in Debt Maturities reflects the impact of foreign exchange rate movements on the Province’s debt. While the foreign exchange rate is different, there is no fiscal impact.
The Province has elected to increase Cash and Cash Equivalents to guard against continued uncertain conditions in financial markets.