Ontario Budget 2009: Glossary

Note:   The descriptions of the terms in the glossary are solely intended for the assistance of readers of the 2009 Budget. The glossary and the descriptions of the terms in the glossary are not intended to affect or alter the meaning of any terms under law.

Accounting Period:

the time covered by financial statements, which can be for any length of time but is usually a fiscal year (April to March for the Province), a quarter or a month.

Accumulated Deficit:

the difference between liabilities and assets. It represents the total of all past annual deficits minus all past annual surpluses, including prior-period adjustments.

Amortize:

to allocate an asset’s cost to different accounting periods according to the estimated useful life of the asset.

Asset-Backed Commercial Paper (ABCP):

a short-term investment vehicle, typically with a maturity of 90 to 180 days. The security itself is generally sponsored by a bank or other financial institution. The notes are backed either directly or indirectly by financial assets such as trade receivables, and are generally used for short-term financing needs.

Bond Auction:

a process in which participants can submit a bid to purchase a given amount of a security at a specific price.

Broader Public Sector (BPS):

organizations receiving government transfer payments to provide services to the public. Such organizations include universities, colleges, school boards, hospitals, long-term care facilities, community care access centres and children’s aid societies.

Business Inputs:

current and capital expenditures that businesses acquire to run their operations and to provide goods and services, such as vehicles and fuel, building materials, computers, office furniture and equipment, and telecommunications services.

Canada Health Transfer (CHT):

a federal transfer provided to each province and territory in support of health care.

Canada Pension Plan Investment Board (CPPIB) Borrowing:

the Province’s option of borrowing from the CPPIB as a source of long-term borrowing.

Canada Social Transfer (CST):

a federal transfer provided to each province and territory in support of postsecondary education, social assistance and social services, including child care.

Capital Cost Allowance:

the portion of the capital cost of an asset (e.g., a building, automobile or machine) that may be deducted for income tax purposes each year. 

Capital Expenditure:

expenditures to acquire or upgrade physical assets including transportation infrastructure, land and buildings, information technology infrastructure and systems, vehicles, marine fleet and aircraft.

Capital Gain:

the net profit arising from the sale or transfer of capital assets or investments; i.e., the proceeds or market value received less the net book value of the capital asset or investment.

Capital Tax:

a tax levied on a corporation’s taxable capital comprising capital stock, surpluses, indebtedness and reserves.

Cash and Cash Equivalents:

cash or other short-term liquid low-risk instruments that are readily convertible to cash, typically within three months or less.

Change in Net Debt:

the annual change in net debt is equal to the surplus/deficit of the Province plus the change in tangible capital assets and the change in net assets of hospitals, school boards and colleges.

Consolidation:

the inclusion of the financial results of government-controlled organizations in the Province’s consolidated financial statements.

Consumer Price Index (CPI):

a measure of consumer prices, the Canadian CPI is produced by Statistics Canada on a monthly basis. The CPI measures the retail prices of a shopping basket of about 300 goods and services including food, housing, transportation, clothing and recreation. The index is weighted to reflect typical household spending patterns. The change in a price index such as the CPI is a measure of inflation. Increases in the CPI are also referred to as increases in the cost of living.

Contingency Fund:

an amount of expense available to address unanticipated spending pressures; for example, disaster assistance.

Debt:

an obligation resulting from the borrowing of money.

Debt Maturities:

the total forecast amount of debt due for repayment on specific dates.

Debt Redemptions:

the total forecast amount of bond issues expected to be redeemed prior to maturity. Debt redemptions primarily relate to Ontario Savings Bonds.

Debt Term:

the remaining term to maturity of long-term debt.

Debt-to-GDP Ratio:

a measurement of the government’s debt as a percentage of gross domestic product (GDP). It is a measure of the debt in relation to the economy and its capacity to carry and repay debt.

Deficit:

the amount by which government expenses exceed revenues in any given year.

Derivatives:

financial contracts that derive their value from other underlying instruments. The Province uses derivatives including swaps, forward foreign exchange contracts, forward rate agreements, futures and options to hedge currency exposure and minimize interest costs.

Domestic Medium-Term Notes:

debt instruments issued domestically, offered under a program and structured to meet specific investor needs.

Employment Insurance (EI):

a federal program funded by premium contributions from workers and employers that provides temporary earnings replacement for unemployed workers through EI regular benefits. The EI program also provides maternity, parental, adoption, sickness, compassionate care, work-sharing and fishing benefits. Employment Insurance Part II provides funding for training programs and income support while training. The federal government provides EI Part II funds through Labour Market Development Agreements with each province and territory. In 2008, the federal government established an arm’s-length Crown corporation to manage future EI surpluses.

Employment Ontario:

the Province’s training and employment services program of over $1 billion annually. Services such as apprenticeship, literacy, technical training, wage subsidies, summer jobs, laid-off worker assistance and employment counselling are provided through an integrated network in communities across the province.

Equalization:

a federal government program that provides unconditional transfer payments to provinces whose revenue-raising capacity falls below a federally determined standard.

Euro Medium-Term Notes (EMTNs):

debt issued outside the United States and Canada and structured to meet individual investor requirements.

Financial Assets:

assets that could be used to discharge existing liabilities or finance future operations and are not for consumption in the normal course of operations. Financial assets include cash; an asset that is convertible to cash; a contractual right to receive cash or another financial asset from another party; a temporary or portfolio investment; a financial claim on an outside organization or individual; and inventory.

Fiscal Plan:

an outline of the government’s consolidated revenue and expense plan, which must address the fiscal year of the Budget and the following two years, although it may address a longer period.

Fiscal Year:

the Province of Ontario’s fiscal year runs from April 1 to March 31.

Floating Rate Notes (FRNs):

debt instruments that bear a variable rate of interest.

Fund:

a fiscal and accounting entity segregated for the purpose of carrying on specific activities, or attaining certain objectives in accordance with special regulations, restrictions or limitations.

Futures:

an exchange-traded contract that confers on both parties an obligation to buy or sell on a future date a physical or financial commodity at a price and amount specified when the contract is entered into.

Global Bonds:

debt securities issued simultaneously in the international and domestic markets, settling through various worldwide clearing systems. These can be issued in a variety of currencies, including Canadian and U.S. dollars.

Gross Domestic Product (GDP):

the total unduplicated value of the goods and services produced in the economy of a country or region during a given period of time such as a quarter or a year. Gross domestic product can be measured three ways: as total income earned in current production, as total final expenditures, or as total net value added in current production.
See Real GDP.

Group of Seven (G7):

a grouping of seven of the world’s largest industrial market economies: United States, Japan, Germany, France, Britain, Italy and Canada.

Infrastructure:

the facilities, systems and equipment required to provide public services and support private-sector economic activity, including network infrastructure (e.g., roads, bridges, water and wastewater systems, large information technology systems), buildings (e.g., hospitals, schools, courts), and machinery and equipment (e.g., medical equipment, research equipment).

Input Tax Credit (ITCs):

a credit of single sales tax that registrants could claim to recover the tax they paid or owe on their supplies for goods or services they acquired to provide taxable goods and services.

Interest on Debt Expense:

the amount reported as an expense for borrowed money. Interest is calculated as a percentage of the amount of debt for each period of time and excludes the amount of interest capitalized during construction of capital assets.

Investment in Capital Assets:

the cost of acquiring or upgrading tangible capital assets owned by the Province and its consolidated organizations during the year, including land, buildings, highways and bridges, information technology infrastructure and systems, vehicles, marine fleet and aircraft.

Labour Market Agreement (LMA):

the Canada–Ontario Labour Market Agreement, signed in February 2008, provides funding for six years to Ontario for training and employment services for Ontarians ineligible for EI, including immigrants, persons with disabilities and the long-term unemployed.

Labour Market Development Agreement (LMDA):

the Canada–Ontario Labour Market Development Agreement, signed in November 2005, provides funding to Ontario annually from EI Part II to address Ontario’s labour-market priorities. Funding supports training and employment services.

Locked-In Accounts:

a prescribed retirement savings arrangement under the Pension Benefits Act to which members of registered pension plans may transfer funds when they terminate employment or cease membership in a pension plan. Ontario locked-in accounts include locked-in retirement accounts (LIRAs), life income funds (LIFs) and locked-in retirement income funds (LRIFs).

Marginal Effective Tax Rate (METR):

the tax rate that applies to an incremental dollar of income from new capital investment.  It takes into account federal and provincial corporate income taxes, capital and sales taxes.

Medium-Term Notes (MTNs):

debt instruments offered under a program and structured to meet specific investor needs.

Net Debt:

the difference between the Province’s total liabilities and financial assets.

Net Loans/Investments:

the total funds paid by the Province towards loans/investments netted against loan repayments.

Nominal:

an amount expressed in dollar terms without adjusting for changes in prices due to, for example, inflation or deflation.

Non-Cash Adjustments:

adjustments required to determine the cash inflows from operations and cash outflows for capital expenditures. Non-cash adjustments include changes in balances of accounts receivable; accounts payable; accrued pension and construction liabilities; and investments in government business enterprises. Amortization and imputed interest during construction on capital assets are also non-cash adjustments.

Non-Tax Revenue:

the revenue received by the government from external sources. This also includes revenues from the sale of goods and services; fines and penalties associated with the enforcement of government regulations and laws; fees and licences; royalties; profits from a self-sustaining Crown agency; and asset sales.

OntarioBuys:

a program of the Ontario Ministry of Finance that provides funding and advice to the Province’s broader public sector (BPS) partners, such as hospitals, school boards, colleges and universities, to help them modernize their supply chains and other back-office processes.

Ontario Child Benefit (OCB):

an income-tested, non-taxable benefit announced in the 2007 Budget that is provided to low-income families with children in Ontario. In July 2008, OCB benefits started to flow monthly. The OCB consolidates social assistance benefits for children and the Ontario Child Care Supplement for Working Families (OCCS) into one benefit that is paid to all low-income families with children, regardless of the source of their income.

Ontario Child Care Supplement for Working Families (OCCS):

an income-tested, non-taxable earnings supplement provided to low-income working families with children under age seven. It is intended to enhance labour-force attachment. In July 2008, OCCS payments were consolidated with the OCB. If a family’s OCCS entitlement is larger than its OCB payment, the family still receives the extra OCCS benefit.

Ontario Disability Support Program (ODSP):

a program that provides income and employment assistance to people with substantial disabilities. Ontarians aged 65 years or older who are ineligible for Old Age Security may also qualify for ODSP if they are in financial need.

Ontario Savings Bonds (OSBs):

an investment that is backed 100 per cent by the Province of Ontario, including both principal and interest. They are available from financial institutions, credit unions, caisses populaires or investment dealers.

Ontario Works:

a program that provides income and employment assistance to eligible Ontarians in need. All Ontario Works recipients are required to participate in one or more employment assistance activities as a condition of eligibility for financial assistance. This helps people become self-reliant as quickly as possible. 

Option:

a contract that gives the purchaser the right, but not the obligation, to buy or sell a specific amount of a commodity, currency or security at a specific price, on a certain future date.

Procurement:

the process of acquiring goods and services.

Productivity Growth:

the increase in output per unit of a factor of production.

Program Expense:

the expense related to operating and capital programs including amortization.

Public Accounts:

the Consolidated Financial Statements of the Province along with supporting statements and schedules as required by the Financial Administration Act, Treasury Board Act and Management Board of Cabinet Act.

Public Service Body:

a qualifying non-profit organization, a charity, a municipality, a school authority, a hospital authority, a public college, or a university.

Qualifying Non-Profit Organization:

a non-profit organization with government funding that amounts to at least 40 per cent of its total revenue.

Real GDP:

gross domestic product measured to exclude the impact of changing prices.

Reserve:

an amount included in the fiscal plan to protect the plan against adverse changes in the economic outlook, or in Provincial revenue and expense. Any portion of the reserve not required at year-end is used to improve the surplus/deficit.

Scientific Research and Experimental Development (SR&ED):

a systematic investigation or search that is carried out in a field of science or technology by means of experiment or analysis.  SR&ED includes basic research — work undertaken to advance scientific knowledge without a specific practical application in view; applied research — work undertaken for the advancement of scientific knowledge with a practical application in view; and experimental development — work undertaken for the purpose of achieving technological advancement for purposes of creating new, or improving existing, materials, devices, products or processes.

Surplus:

the amount by which revenues exceed government expenses in any given year.

Surtax:

a tax levied on another tax, or a second tax levied on an amount that is already subject to tax.

Syndicated Bond Issues:

debt securities that are underwritten by a group of investment dealers.

Tangible Capital Assets:

physical assets including land, buildings, transportation infrastructure, information technology infrastructure and systems, vehicles, marine fleet and aircraft.

Total Debt:

the Province’s total borrowings outstanding without taking into consideration any of the Province’s assets.

Total Expense:

the sum of program expense and interest on debt expense.

Treasury Bills:

short-term debt instruments issued by governments on a discount basis.

U.S. Commercial Paper:

short-term debt typically issued in the United States by a government or corporation on a discount basis. U.S. Commercial Paper is limited to terms of one to 270 days.

Value-Added Tax:

a multi-stage tax on consumption that applies throughout the supply chain regardless of whether the purchase is for use by a business or consumer, but that allows most businesses to be reimbursed for the tax paid on their business inputs through the use of input tax credits.

Weighted-Average Interest Rate:

takes into account the proportion of debt at each level of interest rate in the debt portfolio.

Yield:

the effective rate of interest paid on an investment. Yield is the annual rate of return on any investment or debt and is expressed as a percentage.

Zero-Rated Supplies:

supplies of goods or services that would be tax free under the single sales tax (i.e. taxed at a rate of zero). Examples of zero-rated supplies would include basic groceries, prescription drugs and medical devices. Providers of zero-rated supplies would be able to claim input tax credits on inputs to be used for zero-rated supplies.