2010 Ontario Budget: Chapter II: Ontario’s Economic Outlook and Fiscal Plan
Section B: 2009–10 Interim Fiscal Performance

As outlined in the Fall 2009 Ontario Economic Outlook and Fiscal Review, lower 2008–09 results and a weaker economy in 2009 led to a significant reduction in projected revenues for 2009–10. Total expense increased as the Province invested to support job creation and lessen the impact of the economic downturn on Ontarians.

Since the fall of 2009, Ontario’s economy has stabilized and begun to recover while the Province’s finances have improved and strengthened. There are clear signs that Ontario’s economic recovery is taking shape. Jobs, gross domestic product (GDP), merchandise exports and manufacturing sales have all improved from lows posted during the recession. However, the pace of recovery has been moderate and these key indicators remain below pre-recession levels (see Section C of this chapter). The economic recovery has improved the Province’s finances through a modest increase in taxation revenues.

In addition, as the global recession took hold, the government took immediate action to manage spending while protecting the quality and sustainability of public services. Building on its track record of fiscal responsibility, the government tasked the Treasury Board Working Group with leading the 2009 expenditure management review to ensure taxpayers’ dollars are spent effectively. Going forward, the Province will continue implementing expenditure management measures to support its commitment to return to fiscal balance (see Chapter I, Section B).

The government’s plan is producing results. The Province is now projecting a $21.3 billion deficit in 2009–10, an improvement of $3.4 billion from the $24.7 billion deficit forecast published in the Fall 2009 Ontario Economic Outlook and Fiscal Review.

The improved fiscal projection is mainly due to a $1.9 billion reduction in program expense resulting from the government’s prudent management of expense, as well as lower costs associated with the Provincial response to the H1N1 flu virus. In addition, the Province’s interest on debt expense projection is $0.5 billion below the fall forecast.

Improved Transparency in Financial Reporting – Impacts on Ontario’s Fiscal Plan

Starting with this Budget, a number of items will be presented differently for improved transparency in reporting. These changes are being made to comply with recently revised Public Sector Accounting Board standards. These presentation changes do not impact the Province’s annual surplus/deficit results or underlying revenues and expenses.

The principal change is the treatment of Education Property Tax. Previously, Education Property Taxes collected by municipalities for local school boards were netted against (i.e., subtracted from) Education expense. Under the new presentation, Education Property Taxes are included in Provincial revenue and are no longer netted against Education expense.

To facilitate comparisons, the Province’s historical revenues and expenses have been restated to account for this reporting change. The following table illustrates how this change affects the Province’s 2008–09 financial results.

Presentation in the Fall 2009 Economic Outlook and Fiscal Review   New Presentation in the 2010 Budget
($ Billions) Actual 2008–09   ($ Billions) Actual 2008–09
Revenue   Revenue
Taxation Revenue 62.4 $6.5 B Taxation Revenue 68.9
 
Total Revenue 90.5   Total Revenue 96.9
Expense     Expense  
Health Sector 40.7   Health Sector 40.7
Education Sector 13.2 $6.5 B Education Sector 19.6
 
Total Expense 96.9   Total Expense 103.3
Reserve   Reserve
Surplus / (Deficit) (6.4)   Surplus / (Deficit) (6.4)

Note that while the surplus/deficit of the Province as well as the accumulated deficit are unaffected by this change in presentation, there has been a change in the calculation of net debt. See Addendum to the 2010 Ontario Budget: Ontario’s Plan to Enhance Accountability, Transparency and Financial Management for more information.

Table 2
2009–10 In-Year Fiscal Performance
($ Millions)
  Fall
Outlook1
Interim Change from
Fall Outlook
Revenue 96,648 96,409 (239)
Expense      
Programs 110,757 108,809 (1,949)
Interest on Debt 9,406 8,930 (476)
Total Expense 120,163 117,739 (2,425)
Reserve 1,200 (1,200)
Surplus/(Deficit) (24,716) (21,330) 3,386
  • 1 Both revenue and expense have been restated to reflect fiscally neutral accounting changes from incorporating the education property tax.
  • Note: Numbers may not add due to rounding.

The interim outlook for 2009–10 projects that revenue will be 0.2 per cent below the forecast in the Fall 2009 Ontario Economic Outlook and Fiscal Review. Total expense for 2009–10 is projected to decrease by 2.0 per cent from the fall forecast.

The reserve has been drawn down to help offset the impact of slower economic growth on the Province’s fiscal performance.

The 2009–10 interim results are based on the best information available as of early March 2010. Given the preliminary nature of the interim forecast, these projections are subject to change as actual Provincial revenue and expense are finalized in the 2009–10 Public Accounts.

In-Year Revenue Performance

Total revenue in 2009–10 is estimated to be $96,409 million. This is $239 million or 0.2 per cent below the Fall 2009 Ontario Economic Outlook and Fiscal Review forecast.

Table 3
Summary of Revenue Changes since the Fall
2009 Ontario Economic Outlook and Fiscal Review
($ Millions)
    Interim 2009–10
Taxation Revenue   257
Gouvernement du Canada    
Infrastructure (777)  
Other 96  
    (681)
Income from Government Business Enterprises    
Ontario Power Generation Inc. and Hydro One Inc. (186)  
Ontario Lottery and Gaming Corporation (83)  
Liquor Control Board of Ontario 93  
All Other Government Business Enterprises 7  
    (169)
Other Non-Tax Revenue    
Power Sales 472  
Other Non-Tax Revenue (118)  
    354
Total Revenue Changes   (239)
  • Note: The Fall 2009 Ontario Economic Outlook and Fiscal Review forecast is restated to reflect accounting changes due to the implementation of line-by-line consolidation of controlled broader public-sector organizations. For a restated version of the 2009 Budget and Fall 2009 Ontario Economic Outlook and Fiscal Review revenue outlook, see Section D of this chapter.

Revenue Changes

Highlights of key 2009–10 revenue changes from the Fall 2009 Ontario Economic Outlook and Fiscal Review forecast are as follows:

  • Taxation Revenues are slightly higher (0.4 per cent) than projected due to favourable changes in the composition of economic growth.
  • Transfers from the Government of Canada for infrastructure are $777 million lower due to revised timelines for capital projects and changes in federal funding. A significant portion of the expenditure planned for 2009–10 will occur in 2010–11 or later years.
  • Other Government of Canada transfers are $96 million higher, largely due to Labour Market program funding re-profiled to 2009–10.
  • The combined net income of Hydro One Inc. and Ontario Power Generation Inc. (OPG) is estimated to be $186 million lower, largely due to lower electricity market prices received by OPG for its unregulated and non-contracted electricity output.
  • Ontario Lottery and Gaming Corporation net income is $83 million lower, mainly due to lower gaming revenue from slot machines and casinos.
  • Net income from the Liquor Control Board of Ontario is $93 million higher due to stronger-than-expected sales, including better-than-expected sales of higher-margin products.
  • All Other Government Business Enterprises are $7 million higher, largely due to an accounting change in reporting financial results for the Ontario Northland Transportation Commission (ONTC). The impact of the reporting change is fiscally neutral.
  • Revenues recorded under Power Sales are $472 million higher due to the Lambton and Nanticoke support contract between the Ontario Electricity Financial Corporation and OPG. The increase in "Power Purchase" expense for the Lambton and Nanticoke contract is fully offset by the increase in revenues recovered from electricity ratepayers under Power Sales.
  • Other Non-Tax Revenue is $118 million lower, largely due to lower Electricity Debt Retirement Charge revenue, lower Vehicle and Driver Registration Fees, lower Royalties, and lower Other Fees, Licences and Permits. These decreases are partially offset by higher Reimbursements and Sales and Rentals revenues.

In-Year Expense Performance

Total expense in 2009–10 is currently projected to be $117,739 million, a decrease of $2,424.7 million, or 2.0 per cent, from the Fall 2009 Ontario Economic Outlook and Fiscal Review forecast.

Table 4
Summary of Expense Changes since the Fall
2009 Ontario Economic Outlook and Fiscal Review
($ Millions)
  Interim
2009–10
Program Expense Changes  
Health Sector (599.6)
Education Sector1 (47.5)
Postsecondary and Training Sector (237.9)
Children's and Social Services Sector 141.0
Justice Sector (62.4)
Other Program Expense Changes (1,142.3)
Total Program Expense Changes (1,948.7)
Interest on Debt (476.0)
Total Expense Changes (2,424.7)
  • 1 Excludes Teachers' Pension Plan.

Expense Changes

Highlights of key 2009–10 expense changes from the Fall 2009 Ontario Economic Outlook and Fiscal Review forecast are as follows:

  • Health sector expense decreased by $599.6 million, primarily due to lower-than-anticipated costs to respond to the H1N1 flu virus and revised timelines for capital projects related to the Recreational Infrastructure Canada Program in Ontario and the Ontario Recreation Program that will now be implemented in 2010–11.
  • Education sector expense decreased by $47.5 million, due to lower Ministry of Education spending on administration and other programs.
  • Postsecondary and Training sector expense decreased by $237.9 million, primarily due to revised implementation timelines for various capital projects.
  • Children’s and Social Services sector expense increased by $141.0 million, mainly to support the delivery of programs for the vulnerable, including social assistance and child protection services. This increase also includes $18.3 million for community projects to support the renewal of social services facilities used by low-income and vulnerable Ontarians.
  • Justice sector expense decreased by $62.4 million, primarily due to revised schedules for courthouse and correctional facility construction projects.
  • Other program expense decreased by $1,142.3 million in 2009–10, reflecting the balance of changes in program expense. These include ministries’ savings as a result of expenditure management measures, revised schedules for infrastructure projects to be completed in 2010–11, as well as a decrease in expenses of various consolidated organizations. The Operating Contingency Fund has been maintained at $50.0 million in recognition of expense changes that could materialize as the 2009–10 Public Accounts are finalized.
  • Interest on Debt expense is $476.0 million lower than forecast in the Fall 2009 Ontario Economic Outlook and Fiscal Review. This amount reflects the impact of lower-than-forecast interest rates on floating rate debt, more financing at shorter-term maturities, and a lower deficit than forecast in the Fall 2009 Ontario Economic Outlook and Fiscal Review.