2013 Ontario Budget
Chapter II: Ontario's Economic Outlook and Fiscal Plan

Section B: 2012–13 Interim Fiscal Performance

Ontario's deficit for 2012–13 is now projected to be $9.8 billion — a $5.0 billion improvement compared with the 2012 Budget forecast. Ontario continually showed improvement in the fiscal outlook throughout 2012–13, and is currently one of only two governments in Canada that is forecasting to outperform its target for the fiscal year just ended. As a result of both higher‐than‐projected revenue and lower‐than‐projected expense, the Ontario government continues to uphold the Province's track record of beating its fiscal targets.

Chart 2.1 Evolution of 2012-13 Deficit Projection. Click for an accessible full description.

This marks the fourth year in a row Ontario is reporting a deficit lower than forecast — an accomplishment unmatched by any other Canadian government over the same period. The current projection represents an improvement of over 60 per cent from the 2009–10 deficit of $24.7 billion forecast in the fall of 2009, and maintains Ontario's commitment to halve its deficit by 2013, as agreed to by the G20 Leaders at their Summit in Toronto in June 2010. The action taken by the government has resulted in an accumulated deficit that is almost $22 billion lower (or 3.2 per cent of GDP) than it would have been had the government not beaten its fiscal targets in each of the last four years.

TABLE 2.2 2012-13 In-Year Fiscal Performance
($ Millions)
  Budget Plan1 Interim In-Year Change
Revenue 112,573 114,223 1,650
Expense      
Programs 115,774 113,633 (2,140)
Interest on Debt 10,619 10,372 (247)
Total Expense 126,393 124,005 (2,387)
Reserve 1,000 (1,000)
Surplus/(Deficit) (14,820) (9,782) 5,037
1 Reflects the 2012 Budget Plan as outlined in the April 25, 2012 fiscal update.
Note: Numbers may not add due to rounding.

Revenue in 2012–13 is projected to be $1,650 million above the Budget Plan, primarily due to higher one-time taxation revenues.

Total expense in 2012–13 is projected to be $2,387 million lower than forecast in the 2012 Budget, primarily due to the government's commitment to manage growth in program spending — projected to be held to less than 1 per cent for the second year in a row — along with lower-than-forecast interest on debt expense.

Program expense is $2,140 million lower than projected in the 2012 Budget. This change is a result of the one-time savings in the education sector from the elimination of banked sick days for teachers and educational support workers, as well as efforts across all ministries to contain growth in spending and manage within their budgets. In fact, 16 of 25 ministries (or over 60 per cent) are projected to spend below their 2012 Budget allocation this year, helping to hold growth in program spending to less than 1 per cent for the second year in a row.

The $1.0 billion reserve was reduced by $500 million as part of the 2012–13 Third Quarter Ontario Finances, as the full amount was not expected to be needed by year-end. The 2012–13 interim outlook uses the remaining $500 million reserve to further improve the Province's fiscal forecast and reduce the 2012–13 projected deficit.

The interim results for 2012–13 are based on information available at the end of March 2013. This interim forecast is subject to change as actual Provincial revenue and expense are finalized in the 2012–13 Public Accounts this summer.

In–Year Revenue Performance

Total revenue in 2012–13 is estimated to be $114,223 million. This is $1,650 million above the amount projected in the 2012 Budget. The increase is due to higher taxation revenues, higher net income from government business enterprises as well as higher other non-tax revenues. Lower Government of Canada transfers partially offset the overall increase.

  • Taxation revenues are $1,159 million higher, largely due to a one-time boost to Corporations Tax revenues from tax assessments during 2012 for years prior to 2011 and a higher 2011 tax base.
  • Income from Government Business Enterprises is $407 million higher, largely as a result of higher combined net incomes of Ontario Power Generation Inc. and Hydro One Inc.
  • Other non-tax revenues are $150 million higher, mainly due to higher-than-projected recoveries of prior-year expenditure by government ministries.
  • Government of Canada transfers are $66 million lower, mainly reflecting lower federal government infrastructure payments as a result of revised timelines for capital projects and lower transfers to consolidated government agencies. These reductions are largely offset by corresponding lower spending.
TABLE 2.3 Summary of Revenue Changes Since 2012 Budget1
($ Millions)
    Interim 2012-13
Taxation Revenue    
Corporations Tax 1,195  
Electricity Payments-In-Lieu of Taxes (193)  
Land Transfer Tax 85  
Personal Income Tax 61  
All Other Taxes 11  
    1,159
Government of Canada   (66)
     
Income from Government Business Enterprises    
Ontario Power Generation Inc./Hydro One Inc. 313  
Ontario Lottery and Gaming Corporation 61  
Liquor Control Board of Ontario 33  
    407
Other Non-Tax Revenue   150
Total Revenue Changes Since 2012 Budget   1,650
1 Reflects the 2012 Budget Plan as outlined in the April 25, 2012 fiscal update.
Note: Numbers may not add due to rounding.

Revenue Changes

Highlights of key 2012–13 revenue changes from the 2012 Budget forecast are as follows:

  • Corporations Tax revenues are estimated to be $1,195 million above the 2012 Budget Plan, mainly due to a one-time boost from tax assessments for years prior to 2011 and a higher 2011 tax base.
  • Electricity Payments-In-Lieu of Taxes (PILs) are projected to be $193 million lower, primarily due to lower PILs for Ontario Power Generation Inc. (OPG) than were projected at the time of the 2012 Budget, as well as lower projected PILs from municipal electrical utilities.
  • Land Transfer Tax revenues are estimated to be $85 million higher than the 2012 Budget Plan as the Ontario housing market was stronger than expected.
  • Personal Income Tax revenues are estimated to be $61 million higher, mainly due to stronger revenues from processing 2011 tax returns. This is partially offset by lower projected growth in wages and salaries for 2012 and 2013.
  • All Other Taxes revenues combined are estimated to be $11 million higher on a net basis, largely because of higher-than-forecast Education Property Tax, Employer Health Tax and Mining Tax, partially offset by lower-than-forecast Tobacco Tax, Sales Tax, Fuel Tax and Gasoline Tax. Sales Tax revenue was a modest $28 million below forecast.
  • Government of Canada transfers are $66  million lower, mainly due to lower infrastructure revenue as a result of revised timelines for capital projects and lower transfers to consolidated government agencies. These reductions are largely offset by corresponding lower spending.
  • The combined net incomes of Ontario Power Generation Inc. and Hydro One Inc. are estimated to be $313 million higher than the 2012 Budget forecast, mainly reflecting lower operating costs at OPG and Hydro One, lower projected PILs and higher transmission revenues at Hydro One.
  • Net income from the Ontario Lottery and Gaming Corporation is projected to be $61 million higher, largely due to lower operating costs including administrative efficiencies.
  • Net income from the Liquor Control Board of Ontario is $33 million higher than projected, reflecting strong expense control and strong sales at newly opened stores.
  • Other Non-Tax Revenue is projected to be $150 million higher, mainly reflecting higher-than-projected recoveries of prior-year expenditure by government ministries in 2012–13.

In-Year Expense Performance

Total expense in 2012–13 is currently projected to be $2,387  million lower than the 2012 Budget forecast. The revised projection is a result of the government's efforts to manage growth in program expense, and lower-than-projected interest on debt expense.

Growth in program spending between 2011–12 and 2012–13 is now projected to be only 0.9 per cent. This marks the second consecutive year that program spending growth has been held below 1 per cent.

Interest on debt expense is $247 million lower than projected in the 2012 Budget, primarily reflecting the impact of lower-than-forecast interest rates and the lower deficits for 2011–12 and 2012–13.

TABLE 2.4 Summary of Expense Changes Since 2012 Budget1
($ Millions)
  Interim
2012-13
Program Expense Changes2  
Health Sector (560.1)
Education Sector3 (1,490.8)
Postsecondary and Training Sector (137.7)
Children's and Social Services Sector (81.5)
Justice Sector (57.0)
Other Programs 186.9
Total Program Expense Changes (2,140.3)
Interest on Debt (247.0)
Total Expense Changes Since 2012 Budget (2,387.3)
1 Reflects the 2012 Budget Plan as outlined in the April 25, 2012 fiscal update.
2 Excludes fiscally neutral transfers between ministries.
3 Excludes Teachers' Pension Plan. Teachers' Pension Plan expense is included in Other Programs.
Note: Numbers may not add due to rounding.

Expense Changes

Highlights of key expense changes since the 2012 Budget include the following:

  • Health sector expense is projected to decrease by $560.1 million, primarily due to lower-than-projected spending by hospitals through effective management of their budgets, savings in the Ontario Drug Program, lower-than-planned spending in various ministry programs, such as clinical education, and lower-than-expected capital expense mainly due to revised amortization expense projections for hospitals.
  • Education sector expense is projected to decrease by $1,490.8 million, primarily due to $1,133 million in one-time savings associated with reducing liabilities carried by school boards for sick-day banking and retirement gratuities, and for grandfathering retiree health benefits for education sector workers; and other lower-than-expected school board expense.
  • Postsecondary and training sector expense is projected to decrease by $137.7 million, mainly due to underspending in student financial assistance and employment and training programs, due to lower-than-expected client demand and program uptake.
  • Children's and social services sector expense is projected to decrease by $81.5 million, primarily due to lower-than-projected expenditures on the Children's Activity Tax Credit and the Ontario Child Benefit, and lower-than-forecast caseloads and expenditures in Ontario Works.
  • Justice sector expense is expected to decrease by $57.0 million, primarily as a result of lower-than-expected costs related to municipal policing, lower overtime costs and other internal efficiencies, as well as lower-than-expected capital expense, primarily due to delays in the purchase of furniture and equipment for courthouse projects.
  • Other programs expense is projected to increase by $186.9 million, mainly due to the impact of providing additional resources for emergency forest firefighting services, as well as updated pension expense and tax credit forecasts.
  • Interest on debt expense for 2012–13 is projected to be $247.0 million lower than forecast in the 2012 Budget, primarily reflecting the impact of lower-than-forecast interest rates and lower deficits for 2011–12 and 2012–13.

Chart Descriptions

Chart 2.1: Evolution of 2012–13 Deficit Projection

The deficit projection has changed over the course of the fiscal year just ended, 2012–13. Each of the following is in regard to the 2012–13 deficit projection. The 2012 Budget plan as outlined in the April 25, 2012 fiscal update projected a deficit of $14.8 billion. The 2012 Economic Outlook and Fiscal Review projected a deficit of $14.4 billion. The 2012–13 Third Quarter Ontario Finances projected a deficit of $11.9 billion. This 2013 Budget projects an interim deficit of $9.8 billion.

Return to Chart 2.1