2014 Ontario Budget
Chapter II: Ontario's Economic Outlook and Fiscal Plan

Section B: 2013–14 Interim Fiscal Performance

Ontario’s deficit for 2013–14 is now projected to be $11.3 billion. Despite lower-than-projected revenue, the government continues to beat its fiscal targets as a result of its approach to managing growth in spending. This marks the fifth year in a row that Ontario is reporting both lower-than-projected program expense and a deficit lower than forecast.

TABLE 2.2 2013–14 In-Year Fiscal Performance
($ Millions)
  Budget
Plan
Interim In-Year Change
Revenue      
Taxation Revenue 81,975 80,454 (1,521)
Government of Canada 22,475 22,240 (235)
Income from Government Business Enterprises 4,479 4,751 272
Other Non-Tax Revenue 7,916 8,208 292
Total Revenue 116,845 115,653 (1,192)
Expense      
Programs 116,983 116,396 (587)
Interest on Debt 10,605 10,556 (49)
Total Expense 127,588 126,952 (636)
Reserve 1,000 (1,000)
Surplus/(Deficit) (11,743) (11,300) 443
Note: Numbers may not add due to rounding.
  • Total revenue in 2013–14 is projected to be $1,192 million below the 2013 Budget Plan, primarily due to lower taxation revenue.
  • Ontario’s program expense is projected to be $587 million lower than outlined in the 2013 Budget, the fifth year in a row that spending is projected to be lower than forecast. Managing growth in spending is the primary contributor to the Province being on track to beat its deficit target this year, despite experiencing lower-than-forecast revenue.
  • Total expense in 2013–14 is projected to be $636 million lower than forecast in the 2013 Budget. This includes the impact of a slightly lower interest on debt expense projection, primarily reflecting Ontario’s lower-than-forecast cost of borrowing relative to Canada in the 2013 Budget and cost-effective debt management.

The 2013 Budget included a $1.0 billion reserve for 2013–14 in recognition of the potential impact of continued global economic uncertainty on the Province’s fiscal outlook. Consistent with this, the reserve is being used to partially mitigate the impact of the $1.2 billion decline in the revenue outlook on the Province’s fiscal performance.

Given the preliminary nature of these estimates, the interim forecast is subject to change as actual Provincial revenue and expense are finalized in the Public Accounts of Ontario 2013–2014 this summer.

In-Year Revenue Performance

Total revenue in 2013–14 is estimated to be $115,653 million. This is $1,192 million below the amount projected in the 2013 Budget. The decrease is largely due to lower taxation revenues.

TABLE 2.3 Summary of Revenue Changes since the 2013 Budget
($ Millions)
    Interim
2013–14
Taxation Revenue    
Sales Tax (1,475)  
Land Transfer Tax 222  
Corporations Tax 100  
All Other Taxes (368)  
    (1,521)
Government of Canada    
Canada Health Transfer and Canada Social Transfer (175)  
Other (60)  
    (235)
Income from Government Business Enterprises    
Ontario Power Generation Inc./Hydro One Inc. 256  
Other Government Business Enterprises 16  
    272
Other Non-Tax Revenue    
Gain on Sale of GM Shares 249  
All Other Non-Tax Revenue 43  
    292
Total Revenue Changes since 2013 Budget   (1,192)
Note: Numbers may not add due to rounding.

Revenue Changes

Highlights of key 2013–14 revenue changes from the 2013 Budget forecast are as follows:

  • Sales Tax revenues are estimated to be $1,475 million lower, largely reflecting lower estimates of Ontario’s Harmonized Sales Tax entitlements for 2012 and 2013. About one-half of the decrease is a one-time adjustment due to an overestimation of Sales Tax revenues in the Public Accounts of Ontario 2012–2013.
  • Land Transfer Tax revenues are estimated to be $222 million higher, reflecting continued strength in the Ontario housing market.
  • Corporations Tax revenues are estimated to increase by $100 million as a higher tax base and one-time amounts more than offset the impact of lower growth in net operating surplus of corporations.
  • All Other Tax revenues combined are estimated to decrease by $368 million, mostly due to lower-than-expected Mining Tax and Education Property Tax revenues. Mining Tax revenue is $122 million below the 2013 Budget forecast because of large prior-year refunds and weaker-than-expected commodity prices. Education Property Tax is $163 million lower mostly because of in-year tax reductions due to a number of factors including slower-than-projected assessment growth from newly constructed or renovated properties and property assessment appeals.
  • Government of Canada transfers under the Canada Health Transfer and Canada Social Transfer programs are $175 million lower, mainly due to downward revisions by Statistics Canada to historic population estimates that lowered Ontario’s share of Canada-wide population. As historic population estimates were revised, the 2013–14 change also includes one-time adjustments for prior years.
  • All Other Government of Canada transfers are $60 million below the 2013 Budget forecast, mainly due to lower transfers to consolidated government agencies and revised timelines for capital projects. These reductions are largely offset by corresponding lower spending.
  • The combined net incomes of Ontario Power Generation Inc. (OPG) and Hydro One Inc. (Hydro One) are estimated to be $256 million higher, largely due to lower operating costs and higher generation revenues at OPG and higher transmission and distribution revenues at Hydro One.
  • For 2013–14, net income from the Ontario Lottery and Gaming Corporation and the Liquor Control Board of Ontario is projected to be largely in line with the 2013 Budget projection.
  • Other Non-Tax Revenue is projected to be $292 million higher, largely reflecting:
    • A $249 million gain on the sale of the Province’s interest in 10 million shares of General Motors Company, announced on September 10, 2013; and
    • Higher recoveries from power supply contracts, which are fully offset by power supply contract costs, and higher sales and rentals revenues from consolidated government agencies.

In-Year Expense Performance

Total expense in 2013–14 is currently projected to be $635.7 million lower than the 2013 Budget forecast. The revised projection is primarily the result of the government’s ongoing efforts to make responsible spending choices and lower-than-projected interest on debt expense.

Program expense in 2013–14 is projected to be $586.7 million lower compared with the 2013 Budget forecast due to managing growth in spending and actions related to recommendations by the government’s expenditure review. As a result of the government’s commitment to strong fiscal management, provincial program spending has been lower than forecast every year since the 2009 Ontario Economic Outlook and Fiscal Review.

Growth in program spending between 2012–13 and 2013–14 is projected to be 3.7 per cent. This program spending growth is partly the result of investments for a prosperous and fair Ontario that began with the 2013 Budget, including funding for the Youth Jobs Strategy and for transforming social assistance. It is also partly the result of one-time savings of $1.3 billion in 2012–13 within the education sector from the elimination of banked sick days for teachers. Program spending was lower in 2012–13 than in the previous year — the first time this has happened in Ontario in more than a decade.

Interest on debt expense is forecasted to be $49.0 million lower than projected in the 2013 Budget, primarily reflecting Ontario’s lower-than-forecast cost of borrowing relative to Canada in the 2013 Budget and cost-effective debt management.

Expense Changes

As in previous years, the 2013 Budget included a $1.0 billion year-end savings target. The table below shows that the actions taken by the government have produced results. The government is on track to exceed the year-end savings target by $586.7 million, or more than 50 per cent. As part of this, 16 out of 25 ministries are projected to spend below their total expense allocation.

TABLE 2.4 Summary of Expense Changes since the 2013 Budget
($ Millions)
  2013–14
Year-End Savings Target included in 2013 Budget 1,000.00
Increase/(Decrease) since 2013 Budget1  
Health Sector (72.3)
Education Sector2 (400.0)
Postsecondary and Training Sector (128.2)
Children's and Social Services Sector (165.6)
Justice Sector 106.1
Other Programs (926.7)
Total Increase/(Decrease) since 2013 Budget (1,586.7)
Net Program Expense Increase/(Decrease) after Applying Savings to Meet $1.0 Billion Year-End Savings Target (586.7)
Interest on Debt (49.0)
Total Expense Changes since 2013 Budget (635.7)
1 Expense change by sector, restated for fiscally neutral transfers of programs between sectors.
2 Excludes Teachers' Pension Plan. Teachers' Pension Plan expense is included in Other Programs.
Note: Numbers may not add due to rounding.

Actions recommended by the government’s expenditure review that was announced in the 2013 Ontario Economic Outlook and Fiscal Review last fall contributed to managing down growth in program spending in 2013–14. These included immediate steps to freeze non-essential spending for the last quarter of the 2013–14 fiscal year.

Key expense changes since the 2013 Budget, including those resulting from government actions that contributed to lower-than-forecast spending, include the following:

  • Health sector expense is projected to decrease by $72.3 million, primarily due to savings in the Ontario Drug Program as a result of negotiating reduced pricing for six generic drugs; savings in the public health immunization program due to enhanced inventory management of vaccines; lower spending in various programs, such as clinical education; and lower-than-projected amortization expense for hospitals due to minor construction delays for major hospital projects.
  • Education sector expense is projected to decrease by $400.0 million, primarily due to lower-than-expected school board expense and savings in ministry administration. School board expense savings are mainly due to lower-than-projected growth in total student enrolment, construction delays on school projects, and measures taken by school boards to balance budgets while protecting the gains in student achievement. Ministry efficiencies are being realized through lower costs associated with information and information technology, and managing staff vacancies, without affecting the ministry’s ability to deliver programs and fulfil commitments.
  • Postsecondary and training sector expense is projected to decrease by $128.2 million, mainly due to lower-than-forecast spending on employment and training programs as a result of improving job opportunities, and lower-than-expected spending on student financial assistance due to lower program demand.
  • Children’s and social services sector expense is projected to decrease by $165.6 million, due in part to overall improvements in the economy, resulting in lower-than-expected take-up of Ontario Works and low-income benefits, such as the Ontario Child Benefit. In addition, lower expense requirements in the Ontario Drug Benefit program for social assistance recipients resulted from the government’s efforts to negotiate reduced pricing for drugs.
  • Justice sector expense is expected to increase by $106.1 million, primarily as a result of settlement agreements to provide compensation to the former residents of the Huronia, Rideau and Southwestern Regional Centres, compensation funding for victims of an international investment fraud case — fully offset from revenue recovered through Ontario’s civil forfeiture law — and the decision to keep the Sarnia Jail facility open following an evaluation of operational needs.
  • Other programs expense is projected to decrease by $926.7 million, as a result of additional restraint measures to align public-service retiree benefits with those in the private sector and other jurisdictions; pension savings due to managing compensation costs through the last round of collective agreements, a lower-than-projected increase in active members, and continued improvement in investment returns and market performance since 2010. The decrease also reflects a number of constraint measures implemented across ministries to manage spending responsibly while protecting core public services.

Interest on debt expense is projected to be $49.0 million lower than forecast in the 2013 Budget, primarily reflecting Ontario’s lower-than-forecast cost of borrowing relative to Canada in the 2013 Budget and cost-effective debt management.

The 2013–14 interim expense projection maintains a total balance in the contingency funds of $250.0 million in recognition of expense changes that could materialize as the Public Accounts of Ontario 2013–2014 are finalized, including up to $190.0 million for planned financial assistance to municipalities and conservation authorities impacted by the December 2013 ice storm.