Quebec Balances 2015-2016 Budget, Ontario Obviously No

We won't know the Ontario numbers for 2015-2016 until the budget is released, but I wanted to note that Quebec has plans to balance their budget in 2015-2016. Ontario's certainly won't be balanced, although the Liberals have been planning for many years to do it in 2017-2018.

Quebec's 2014-2015 deficit was only $2.35 billion, way less than Ontario's $10.9 billion deficit adjusting for population and GDP. Ontario's 2014-2015 is also significantly higher than the federal deficit.

Obviously Quebec has controlled expenses to a much greater extent over the past few years (Ontario's 2014-2015 is actually bigger than the 2013-2014 deficit which in turn was bigger than the 2012-2013 deficit).

Quebec's debt to GDP ratio will peak at 54.9% this March and start to decline with this budget. Ontario's will continue to rise although I'm skeptical it will ever match Quebec's. According to Wikipedia, Ontario's debt to GDP ratio was 37.4% in 2013, although that's obviously higher now.

Has the 2014-2015 Ontario Deficit Increased from the Previous Year? Media Silent

The 2014-2015 Ontario fiscal year ends tonight. The deficit was originally sort of predicted at $12.5 billion. What I mean by sort of is that the province makes a prediction for revenues and expenses and now tacks a couple of billion on to the expenses as a contingency fund. To be fair the feds have being doing that since the Chretien days so it isn't too weird.

However what it often allows the province to do is as the numbers firm up and the deficit is closer to their original prediction rather than the original prediction plus the extra couple of billion, is say the province beat their prediction. Which obviously really isn't the case.

Now the Sousaphone, minister of finance Charles Sousa has said that the deficit is more likely to be $10.9 billion as quoted in this Toronto Star article. So fantastic, they beat their watered down prediction. Makes for good news.

But hold on. Anyone can make a prediction they know they will likely beat. What about say, how the deficit for fiscal 2014-2015 compares to the previous year? That's not mentioned anywhere in the article. Thanks Robert Benzie, Queen's Park Bureau chief for the Star.

I'm going to a more careful search of what exactly the 2013-2014 number was, but this Studio 2 article mentions that it was only $10.5 billion:

"For the most recently concluded fiscal year, 2013-2014, the province got the deficit down to $10.5 billon, but it's projected to go back up to $12.5 billion this year." 

So it was commonly known that the deficit would probably increase, but nobody would mention in the articles about this year's deficit that it increased. Considering that the Liberal government is claiming that the deficit will be eliminated by the 2017-2018 budget, one would think the trend is important. What about the 2012-2013 number? That might be interesting too.

When the more up to date numbers come out it will be interesting to see how the expenses and revenues differed from the previous fiscal year.

 

Livio di Matteo: "Ontario Can't Balance Its Budget"

Lakehead University's Livio di Matteo has a great article on the Ontario deficit which is well worth reading. Considering the claim by the Liberal Ontario government that the provincial budge will be balanced by 2017-2018, Matteo goes through what the latest Ontario budget numbers are:

"According to the review, between 2013-14 and 2017-18, total expenditures (including the reserve) are expected to rise from $126.4 to $134.5 billion - an increase of 6.4 per cent. Meanwhile, revenues are expected to rise from $115.9 to $134.5 billion - an increase of 16 per cent.

For Ontario, the heavy lifting needed to balance the budget was obviously expected to come from the revenue side, with expenditure restraint playing a minor role. Over a four-year period, this translates into average annual expenditure and revenue growth of about 1.6 and 4 per cent respectively. These figures can also help us assess the performance to date. Between the actual results for 2013-14 and the current outlook for 2014-15, are expenditures up by 1.6 per cent or less? Are revenues up by 4 per cent or more?"

Those are some interesting numbers and considering recent government actions and economic numbers it is good that someone has taken the trouble to look at the up to date numbers:

"Let’s look at the spending picture first. Despite some savings that have apparently been found in terms of program review and year-end savings totalling about $1.3 billion, total expenditures are still up by 3 per cent - rising from $126.4 to $130.2 billion. If spending continues to grow at 3 per cent, it will reach $142 billion dollars by 2017-18, substantially above the current budget plan.

Spending has grown at about double the rate needed for Ontario to be on track to meet its deficit target. Across the vast pantheon of ministry expenditure categories, only three have seen a decline - Tourism, Culture and Sport (-7.6 per cent), Natural Resources (-0.9 per cent) and the Attorney General (-2.1 per cent). The remainder all grew, with rates ranging from a low of 0.6 per cent for Citizenship and Immigration to a high of 83.9 per cent for Infrastructure. Even the Ministry of Government Services will see an increase from $728 million to just over $1 billion in spending — an increase of 31 per cent!

Of course, the key categories are the big-ticket items of Health, Education and Social Services, which together account for two-thirds of provincial government spending. Over the course of a year, Health grew at 2.3 per cent, Education at 5.1 per cent and Social Services at 7.9 per cent. On the expenditure side, it would appear the first year of moving towards a balanced budget by 2017-18 has missed the expenditure growth target by a fair amount."

I think the most salient information here is that the big ticket Health and Education budgets have increased a lot compared to what is required to balance the budget. Although I am impressed that Health only increased by 2.3%. I think it is a little odd that Education increased by so much. Perhaps that has something to do with the rollout of full day junior kindergarten. On the revenue side things aren't looking great either:

"How about revenues? Between 2013-14 and 2014-15, total revenues rose from $115.9 billion to $118.4 billion - an increase of only 2.1 per cent. Overall, revenues have grown at about half the average rate Ontario needs to meets its goal of a balanced budget by 2017-18."

I'll be curious to see what the final numbers are on the 2014-2015 deficit. The province has a pretty big reserve baked in, so perhaps they can claim that they made their numbers, but with these big spending increases things aren't looking good. Maybe they will include the recent GM share sale proceeds into the budget as revenue.

The 2015-2016 budget isn't looking great either. Don't expect the Toronto Star or Martin Regg Cohn to point out these numbers

Quebec's 2014-2015 Budget Deficit Versus Ontario's, Some Numbers

One aspect of Ontario's rather large structural deficit is how it compares with other provinces. If the Wynne Ontario budget passed for $12.5 billion versus a population of 13.54 million (Wikipedia), that's a budget deficit of $923.19 per person. Ontario's GDP at the end of 2013 was 692.4 billion according to Ontario's ministry of finance or $51,137.37 per person.

Quebec's 2014-2015 budget deficit is $3.7 billion according to this National Post article, although I'm not positive that refers to the 2014-2015 year. Quebec's population is 8.155 billion according to Wikipedia which produces a budget deficit of only $453.71, considerably lower than Ontario's. I'm trying to get an up to date GDP number for Quebec, but even adjusting for GDP, I still think that Ontario's is considerably higher. Not adjusting for GDP it is more than twice as high per person.  

Ontario Budget 2014-2015, Predicted Revenue Down $3.5 Billion, 2013-2014 Deficit Down, Sort Of

It took me a while, but I've finally got around to some info Finance Minister Charles Sousa gave about Ontario's budgets. The media reported the fact the 2013-2014 budget that just finished is coming in at $400 million under the original $11.7 billion prediction. However there's some caveats with this. For the first time ever, the ministry added a reserve of $1 billion to the deficit prediction (similar to the feds). So the actual deficit prediction was $10.7 billion, so coming in at $11.3 billion isn't actually good in my opinion and means either the revenue or expenses were off. Less reported was that the revenue prediction for 2014-2015 was going to be off by $3.5 billion. Originally the prediction was $120.5 billion, so being off $3.5 billion isn't good and can't be good for the 2014-2015 deficit. It was predicted at at 8.9 billion with a 1.2 billion reserve to get 10.1 billion. So revenue will hurt it and I'm wondering if there will be problems with program expenses as well.

Ontario Finance Minister Sousa: Ontario's GDP Growth Next 20 Years Sucky, Deficit Slightly Down?

Ontario Finance minsiter Charles Sousa (any relation to John Philip?) spoke today about Ontario's finances. The Star has a recount of the event here. Noteworthy was this:

"It cites an aging population and slower expansion of the workforce, which “may restrain future economic growth in the absence of significant productivity improvements.”

“The report indicates the need for consistency, predictability and steady hands,” said Sousa, who is to table a budget in May that could trigger a June election.

The economic outlook calls for an average of 2.1 per cent annual growth in real GDP through 2035."

As I've previously posted, I'm shocked that anyone is shocked that Ontario is going to have low GDP growth in the future. Historically, Ontario hasn't had good GDP growth since the Harris years and this prediction is more of the same. I was a little surprised by this quote:

"Despite a growth prediction that barely exceeds inflation, Sousa maintained that the provincial budget will be balanced by 2017-18.

He is to deliver a revised deficit figure on Thursday that will be slightly lower than the $11.7 billion forecast."

Getting to zero deficit by 2017-2018 to me seems very difficult at this point in time, with stagnant GDP growth and rising health costs. Sousa most likely isn't going to be around for that budget so I guess he can say what he wants. I'm assuming that the $11.7 deficit figure refers to the fiscal year that just finished a couple of days ago. I'm a little surprised it doesn't come in higher than predicted, although lately the provincial government has been giving worse predictions for the budget and then beating them slightly, which would appear to be the case here. 

This finance ministry document has some relevant data which shouldn't disappear into the memory hole. The 2012-2013 interim deficit was 9.8 billion, with the 2013-2014 deficit estimated at 11.7 billion, with further predictions of 10.1 for the 2014-1015 fiscal year and then predicted deficits of7.2, 3.5 in future years and a surplus of 0.5 billion in the 2017-2018 fiscal year.

One interesting thing about those deficit predictions is that a reserve was introduced in the 2013-2014 fiscal year prediction. For 2013-2014 year the reserve was 1.0 billion with reserves of 1.2, 1.2, 1.5,  and 1.5 in future years. So in actuality the predicted deficit for 2013-2014 is really 10.7 billion. So if the 2013-2014 deficit is announced at more than 10.7 billion it is actually worse than predicted. For 2014-2015 the actual predicted deficit is 8.9 billion, followed by 6.0 billion, 2.0 billion and then a surplus of 2 billion in 2017-2018.

Other data is provided in the finance ministry document. Program spending interim for 2012-2013 is 113 billion, and estimated at 117.0 billion for 2013-2014. Future years have program spending estimates of 118.3, 118.8, 118.8 and 118 billion in 2017-2018. You'll notice that for four years in a row spending is predicted to be flat. That seems incredibly unlikely, especially considering recent spending increases like the OPP's 8.5% pay increase effective January 1st 2014.

Income information is also specified. For 2012-2013 the income was 114.2 billion and then estimated at 116.8 billion for 2013-2014. For following years the income estimates are 120.5, 124.9, 130.1 and 134.4 billion in 2017-2018.  It should be interesting to see what program spending ends up coming in at for 2013-2014 and what the prediction is for 2014-2015.