2013 Ontario Budget


Note: The descriptions of the terms in the glossary are solely intended for the assistance of readers of the 2013 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 sum total of all past annual deficits and surpluses, including prior-period adjustments.

Actuarial Valuation Report: a valuation of the assets and liabilities of a pension plan that determines the funded status of the plan and the amount of contributions required to be set aside annually to fund the benefits provided by the plan. Values are calculated using accepted actuarial practice. The Pension Benefits Act requires all defined benefit pension plans to file an actuarial valuation report with the Superintendent of Financial Services at least once every three years. Plans with solvency concerns must file an actuarial valuation report annually.

Amortization: to allocate expenses or revenues to different accounting periods based on when they are incurred or earned, such as amortizing asset expense over its useful service life.

Appropriation: an authority to pay money out of the Consolidated Revenue Fund or to recognize a non-cash expense or non-cash investment.

Associated Employers: employers that are subject to common control and common ownership of shares by a person or a related group of persons. For example, a parent company is associated with its subsidiary. The concept of association in the Employer Health Tax Act parallels that in the Income Tax Act (Canada) and is extended to cover employers who are individuals, partnerships and trusts.

Broader Public Sector (BPS): organizations receiving government transfer payments to provide services to the public, including universities, colleges, school boards, hospitals, long-term care facilities, Community Care Access Centres and children’s aid societies.

Canada Health Transfer (CHT): a federal transfer provided to each province and territory in support of health care.

Canada Pension Plan (CPP): a mandatory, publicly administered, defined benefit pension plan that provides a basic level of earnings replacement for all workers in all provinces and territories, other than Quebec. The CPP is funded by employer and employee contributions and investment earnings.

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: an expenditure to acquire, construct 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. For accounting purposes, 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, such as 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.

Centralized Collections: a project led by the Ministry of Finance to “consolidate and collect all provincial debts owed to the Crown and review the use of tax collection tools on non-tax debt” that was outlined in the 2012 Budget.

Classified Agencies: Provincial government entities that are not part of a ministry, but are accountable to ministers for fulfilling their legislative obligations, managing their resources and providing a wide range of public services to Ontarians.

Compensation of Employees: a new concept introduced in the Canadian System of National Accounts (CSNA 2012) that replaces “Wages, salaries and supplementary labour income.” The concept measures total remuneration payable by an enterprise to employees.

Consolidated Organization: a government-controlled organization such as an agency, hospital or school board whose financial results are included in the Province’s financial statements.

Consumer Price Index (CPI): a measure calculated each month of the cost of a basket of over 600 goods and services typically purchased by Canadian consumers. The CPI compares, in percentage terms, prices in any given time period to prices in the base period, which is currently 2002=100.

Contingency Fund: an amount of unallocated expense authority used for planning that is available to address unanticipated spending pressures; for example, disaster assistance.

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

Debt Redemptions: the amount of bonds expected to be redeemed before maturity. Debt redemptions primarily relate to Ontario Savings Bonds.

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: a negative fiscal balance.             

Derivatives: financial contracts that derive their value from other underlying instruments, such as bonds. The Province uses derivatives including swaps, forward foreign exchange contracts, forward rate agreements, futures and options to reduce the risks associated with issuing bonds in different currencies and minimize interest costs.

Earnings Exemptions: provide a financial incentive for social assistance recipients to work. A flat rate exemption is a fixed amount of earnings that a recipient can earn before social assistance benefits are reduced.  

Employment Insurance (EI): a federal program that provides temporary income benefits as earnings replacement for unemployed workers funded by premium contributions from workers and employers. It also provides maternity, parental, adoption and sickness benefits. Employment Insurance also provides funding for training programs and income support while on training. The federal government provides training funds through Labour Market Development Agreements with each province and territory.

Employment Ontario: the Province’s integrated employment and training network, providing programs such as apprenticeship, literacy, technical training, wage subsidies, summer jobs, laid-off worker assistance and employment counselling 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. These notes are issued for terms ranging from two to 12 years.

European Union (EU): an economic and political union of the European Community and since expanded to include numerous Central and Eastern European nations. Member countries include Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom.

Financial Assets: assets that could be used to discharge existing liabilities or finance future operations and are not for use 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 Balance: total revenue minus total expense and the reserve.

Fiscal Plan: an outline of the government’s revenue and expense projections for a given year.

Fiscal Year: the time period used for budgeting and financial reporting. The Province of Ontario’s fiscal year runs from April 1 to March 31.

Floating Rate Notes: debt instruments with a variable rate of interest.

Global Bonds: debt securities issued simultaneously in the international and domestic markets, settling through various worldwide clearing systems. These bonds 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 Eight (G8): a grouping of eight of the world’s largest economies. Member countries include Canada, France, Germany, Italy, Japan, Russia, the United Kingdom and the United States.

Group of Twenty (G20): a grouping of 20 major economies: 19 countries plus the European Union. Member countries include Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom and the United States.

Interest on Debt Expense: the cost of borrowing money, excluding any amount of interest capitalized during the construction of capital assets.

International Financial Reporting Standards (IFRS): a set of accounting standards, based on a global framework, established by the International Accounting Standards Board (IASB).

Investment in Capital Assets: the cost of acquiring, constructing 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 unemployed non-EI-eligible Ontarians and employed low-skilled workers.

Labour Market Development Agreement (LMDA): the Canada–Ontario Labour Market Development Agreement, signed in November 2005, provides funding to Ontario annually from the Employment Insurance Act — Part II (Employment Benefits and Support Measures) to address Ontario’s labour-market priorities. Funding supports training and employment services.

Liquid Asset Limits: no applicant for social assistance is eligible for the program if their assets exceed the allowable limits. Liquid assets considered when assessing eligibility include cash, as well as bonds, debentures, stocks, certificates, and other property that can be easily converted to cash. Some assets are exempted from consideration of eligibility (e.g., locked-in RRSPs, primary residency, RDSPs and RESPs).

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/state corporate income taxes, capital taxes and sales taxes.

My Benefits Account: a proposed approach to providing simplified, online access for individuals to multiple income-based benefit programs.

Net Debt: the difference between total liabilities and financial assets.

Net Loans/Investments: the total amount of loans and investments made by the Province minus loan repayments received.

Net Operating Surplus: a new concept introduced in the Canadian System of National Accounts (CSNA 2012) that replaces “Corporations profits before taxes.” The concept measures the surplus accruing to corporations from production before deducting any interest charges.

Nominal: an amount expressed in dollar terms without adjusting for changes in prices (inflation or deflation).

Non-Cash Adjustments: adjustments that relate to expenses recorded on the income statement for which no cash was paid. The adjustments are required to determine the actual cash flows from operations and capital expenses. 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 capitalization of imputed interest costs during construction on capital assets are typical non-cash adjustments.

Non-Cash Expense: expense incurred during the period for which there is no cash outflow. The related cash outflow may have occurred in a prior period, or will occur in a future period or has been offset against a potential cash inflow.

Non-Tax Revenue (NTR): all revenues reported by the Province in its financial statements other than revenues from taxation. The three main categories of NTR are (i) Government of Canada transfer payments, such as Canada Health Transfers and Canada Social Transfers; (ii) Income from Government Business Enterprises, such as Ontario Power Generation Inc. and the Liquor Control Board of Ontario; and (iii) various Other Non-Tax Revenues, such as vehicle and driver registration fees, revenues from the sale of goods and services, and reimbursements of provincial expenditures in delivering certain services and royalties for use of Crown resources.

Ontario Child Benefit (OCB): an income-tested, non-taxable monthly benefit that is provided to low- to moderate-income families with children under age 18. The OCB is paid to eligible families, whether they are working or not.

Ontario Disability Support Program (ODSP): a program that provides income and employment assistance to people with substantial disabilities. Ontarians aged 65 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 to retail and institutional investors through financial institutions, credit unions, caisses populaires and investment dealers.

Ontario Works: a program that provides income and employment supports to eligible Ontarians in temporary financial need. All Ontario Works recipients are required to participate in one or more employment assistance or community placement activities as a condition of eligibility for financial assistance.

Pooled Registered Pension Plans (PRPPs): a new type of tax-advantaged individual retirement savings account. Participation in a PRPP would be optional for employers or self-employed individuals. Pooled registered pension plans would be professionally managed by licensed third-party administrators, such as regulated financial institutions, and investments would be pooled to reduce costs and improve returns.

Primary Household Income: a new concept introduced in the Canadian System of National Accounts (CSNA 2012). The concept is the sum of all income received by households including compensation of employees, net income of unincorporated businesses including rental services, and net property income such as interest, dividends, royalties or rent.

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. Excludes interest on debt expense.

Public Accounts: the Annual Report and Consolidated Financial Statements of the Province along with supporting statements and schedules as required by the Financial Administration Act.

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

Public Sector Accounting Board (PSAB): the Public Sector Accounting Board of the Canadian Institute of Chartered Accountants (CICA) sets standards and provides guidance on reporting of financial information, for use by the public sector in Canada.

Rate Regulation: the rates an enterprise may charge its customers are established by, or subject to approval by, a rate regulator.

Real GDP: gross domestic product (GDP) measured to exclude the impact of changing prices.

Real Return Bonds (RRBs): debt securities that pay investors a rate of return that is adjusted for inflation using the Consumer Price Index (CPI).

Registered Disability Savings Plans (RDSPs): savings plans to help parents and others save for the long-term financial security of a person with a disability who is eligible for the Disability Tax Credit. Contributions to an RDSP are not tax deductible and can be made until the beneficiary turns 59. Contributions that are withdrawn are not included in taxable income for the beneficiary when they are paid out of an RDSP.

Reserve: an amount included in the fiscal plan to protect the plan against adverse changes in the economic outlook, Provincial revenue or Provincial expense.

Social Assistance: largely comprised of two income support programs to help people in financial need. Ontario Works is for people in temporary financial need. The Ontario Disability Support Program (ODSP) helps people with disabilities and their families. Both programs provide opportunities for recipients to participate in employment supports and services.

Surplus: a positive fiscal balance.

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 that have been acquired, developed or constructed with expected service potential extending beyond one year and are not held for sale in the ordinary course of operations. Excludes historic treasures, art and assets inherited by right of the Crown.

Target Benefit Plans: employer pension plans with fixed contributions that are intended to provide a specified pension. Pension benefits of retirees and active members are reduced to ensure the plan remains sustainable if experience demonstrates the contributions are insufficient to fund the target benefit.

Total Debt: the Province’s total borrowings outstanding.

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.

Underground Economy: generally refers to commercial activities undertaken by an individual or business, often involving cash payments that are unreported for tax purposes.

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: the average cost of debt, taking into account the amount of debt at each rate of interest.

Working Income Tax Benefit (WITB): a federal refundable tax credit intended to improve incomes for eligible individuals and families with low employment or self-employment earnings. It is meant to encourage low-income Canadians to enter the workforce.

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.