Archived - The Fiscal Monitor A publication of the Department of Finance: 2015-08

August 2015: budgetary deficit of $2.3 billion

There was a budgetary deficit of $2.3 billion in August 2015, compared to a deficit of $0.3 billion in August 2014. Revenues increased by $2.8 billion, or 14.6 per cent, reflecting increases in all revenue streams, except other revenues. Program expenses increased by $4.4 billion, or 24.8 per cent, due mainly to adjustments recorded in August 2014 and August 2015 to reflect updated accrual estimates of pension and other employee and veteran future benefit costs based on the Government’s latest actuarial valuations. Public debt charges increased by $0.5 billion, or 23.5 per cent, reflecting in part charges from an August 2015 bond buyback operation.

April to August 2015: budgetary surplus of $2.8 billion

For the April to August 2015 period of the 2015–16 fiscal year, the Government posted a budgetary surplus of $2.8 billion, compared to a deficit of $1.1 billion reported in the same period of 2014–15. Revenues were up $11.1 billion, or 10.3 per cent, reflecting increases in all revenue streams. Program expenses were up $7.4 billion, or 7.6 per cent, reflecting increases in major transfers to persons and other levels of government and direct program expenses. Public debt charges were down $0.3 billion, or 2.1 per cent, largely reflecting a lower average effective interest rate on the stock of interest-bearing debt.

There was a budgetary deficit of $2.3 billion in August 2015, compared to a deficit of $0.3 billion in August 2014.

Revenues totalled $22.2 billion in August 2015, up $2.8 billion from August 2014.

• Personal income tax revenues were up $0.8 billion, or 6.9 per cent.
• Corporate income tax revenues were up $1.6 billion, or 334.3 per cent, reflecting assessments and reassessments for prior tax years as well as timing issues which lowered August 2014 revenues.
• Non-resident income tax revenues were up $0.1 billion, or 23.3 per cent.
• Excise taxes and duties were up $0.3 billion, or 8.0 per cent. This increase is mostly due to a $0.2-billion, or 7.8-per-cent, increase in Goods and Services Tax (GST) revenues. Energy taxes were up $20 million, customs import duties were up $0.1 billion, and other excise taxes and duties were up $8 million.
• Employment Insurance (EI) premium revenues were up $0.1 billion, or 3.8 per cent, reflecting growth in earnings.
• Other revenues, consisting of net profits from enterprise Crown corporations, revenues of consolidated Crown corporations, revenues from sales of goods and services, returns on investments, net foreign exchange revenues and miscellaneous revenues, were down $11 million.

Program expenses were $22.0 billion in August 2015, up $4.4 billion, or 24.8 per cent, from August 2014.

• Major transfers to persons, consisting of elderly, EI and children’s benefits, increased by $0.9 billion, or 15.4 per cent. Elderly benefits increased by $0.1 billion, or 3.4 per cent, due to growth in the elderly population and changes in consumer prices, to which benefits are fully indexed. EI benefit payments increased by $0.4 billion, or 29.1 per cent, primarily reflecting timing issues. Children’s benefits, which consist of the Canada Child Tax Benefit and the Universal Child Care Benefit (UCCB), increased by $0.4 billion, or 36.4 per cent, due mainly to the enhancement and expansion of the UCCB effective January 2015.
• Major transfers to other levels of government consist of federal transfers in support of health and other social programs (primarily the Canada Health Transfer and the Canada Social Transfer), fiscal arrangements and other transfers (Equalization, transfers to the territories, as well as a number of smaller transfer programs), transfers to provinces on behalf of Canada’s cities and communities, and the Quebec Abatement. Major transfers to other levels of government increased by $0.2 billion, or 4.0 per cent, reflecting legislated growth in the Canada Health Transfer, the Canada Social Transfer, Equalization transfers and transfers to the territories.
• Direct program expenses include transfer payments to individuals and other organizations not included in major transfers to persons and other levels of government, and other direct program expenses, which consist of operating expenses of National Defence, other departments and agencies, and expenses of Crown corporations. Direct program expenses were up $3.2 billion, or 49.6 per cent. Within direct program expenses:
  • Transfer payments increased by $0.1 billion, or 7.2 per cent.
  • Other direct program expenses increased by $3.1 billion, or 68.7 per cent, due mainly to adjustments recorded in August 2014 and August 2015 to reflect updated accrual estimates of pension and other employee and veteran future benefit costs based on the Government’s latest actuarial valuations. In August 2014, the Government recorded a year-to-date downward adjustment in pension and other future benefit costs, while in August 2015 the Government recorded a year-to-date upward adjustment. The adjustments recorded in each year were driven largely by changes in interest rates, which are used in calculating the present value of the Government’s future benefit obligations.

Public debt charges increased by $0.5 billion, or 23.5 per cent, reflecting in part charges from an August 2015 bond buyback operation.

For the April to August 2015 period of the 2015–16 fiscal year, there was a budgetary surplus of $2.8 billion, compared to a deficit of $1.1 billion reported in the same period of 2014–15.

Revenues increased by $11.1 billion, or 10.3 per cent, to $119.4 billion.

• Personal income tax revenues were up $2.8 billion, or 5.3 per cent.
• Corporate income tax revenues were up $2.9 billion, or 23.6 per cent, reflecting assessments and reassessments for prior tax years.
• Non-resident income tax revenues were up $0.2 billion, or 10.3 per cent.
• Excise taxes and duties were up $1.9 billion, or 9.5 per cent. GST revenues were up $1.5 billion, or 10.8 per cent. Energy taxes were up $0.1 billion, customs import duties were up $0.3 billion, and other excise taxes and duties were up $0.1 billion.
• EI premium revenues were up $0.4 billion, or 3.7 per cent, reflecting growth in earnings.
• Other revenues were up $2.9 billion, or 27.6 per cent, primarily reflecting the gain realized on the sale of the Government’s remaining holdings of General Motors common shares in April 2015.

For the April to August 2015 period, program expenses were $104.7 billion, up $7.4 billion, or 7.6 per cent, from the same period the previous year.

• Major transfers to persons were up $3.6 billion, or 11.9 per cent. Elderly benefits increased by $0.8 billion, or 4.6 per cent, reflecting growth in the elderly population and changes in consumer prices, to which benefits are fully indexed. EI benefit payments increased by $0.7 billion, or 9.8 per cent. Children’s benefits were up $2.1 billion, or 38.9 per cent, largely reflecting increased benefits related to the expansion and enhancement of the UCCB.
• Major transfers to other levels of government were up $1.2 billion, or 4.5 per cent, largely reflecting legislated growth in the Canada Health Transfer, the Canada Social Transfer, Equalization transfers and transfers to the territories.
• Direct program expenses were up $2.6 billion, or 6.5 per cent. Within direct program expenses:
  • Transfer payments increased by $0.2 billion, or 1.9 per cent.
  • Other direct program expenses increased by $2.4 billion, or 8.4 per cent, largely reflecting an increase in pension and other employee and veteran future benefit expenses.

Public debt charges decreased by $0.3 billion, or 2.1 per cent, largely reflecting a lower average effective interest rate on the stock of interest-bearing debt.

The budgetary balance is presented on an accrual basis of accounting, recording government revenues and expenses when they are earned or incurred, regardless of when the cash is received or paid. In contrast, the financial source/requirement measures the difference between cash coming in to the Government and cash going out. This measure is affected not only by changes in the budgetary balance but also by the cash source/requirement resulting from the Government’s investing activities through its acquisition of capital assets and its loans, financial investments and advances, as well as from other activities, including payment of accounts payable and collection of accounts receivable, foreign exchange activities, and the amortization of its tangible capital assets. The difference between the budgetary balance and financial source/requirement is recorded in non-budgetary transactions.

With a budgetary surplus of $2.8 billion and a requirement of $16.4 billion from non-budgetary transactions, there was a financial requirement of $13.5 billion for the April to August 2015 period, compared to a financial requirement of $3.9 billion for the same period the previous year.

The Government financed this financial requirement of $13.5 billion and increased cash balances by $8.8 billion by increasing unmatured debt by $22.4 billion. The increase in unmatured debt was achieved primarily through the issuance of marketable bonds and treasury bills.

The level of cash balances varies from month to month based on a number of factors including periodic large debt maturities, which can be quite volatile on a monthly basis. Cash balances at the end of August 2015 stood at $36.8 billion, up $6.8 billion from their level at the end of August 2014.

Note: Unless otherwise noted, changes in financial results are presented on a year-over-year basis.

For inquiries about this publication, contact Glenn Purves at 613-369-5655.

October 2015