Archived - The Fiscal Monitor A publication of the Department of Finance: 2017-04

April and May 2017: budgetary surplus of $0.1 billion

For the first two months of the 2017-18 fiscal year (April and May), there was a budgetary surplus of $0.1 billion, compared to a surplus of $0.1 billion reported in the same period last year. By month, there was a deficit of $0.3 billion in April and a surplus of $0.4 billion in May.

For the two months combined, revenues increased by $2.3 billion, or 4.7 per cent, as increases in tax revenues and other revenues were partially offset by a decrease in Employment Insurance (EI) premium revenues. Program expenses were up $2.6 billion, or 6.0 per cent, reflecting increases in major transfers to persons and other levels of government and direct program expenses. Public debt charges decreased by $0.3 billion, or 7.1 per cent, largely reflecting lower Consumer Price Index adjustments on Real Return Bonds.

There was a budgetary surplus of $0.1 billion in the April to May 2017 period, compared to a $0.1-billion surplus for the same period in the previous year.

Revenues increased by $2.3 billion, or 4.7 per cent, to $50.3 billion.

• Personal income tax revenues were up $0.8 billion, or 3.3 per cent.
• Corporate income tax revenues were up $0.5 billion, or 7.1 per cent.
• Non-resident income tax revenues were up $0.2 billion, or 15.9 per cent.
• Excise taxes and duties were up $1.2 billion, or 14.9 per cent. Within this component, Goods and Services Tax (GST) revenues were up $1.1 billion, or 20.5 per cent. Energy taxes were up $17 million, customs import duties were up $0.1 billion and other excise taxes and duties were down $5 million.
• EI premium revenues were down $0.5 billion, or 11.0 per cent.
• 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 up $0.2 billion, or 4.3 per cent, due mainly to an increase in Crown corporation revenues.

Program expenses increased by $2.6 billion, or 6.0 per cent, to $46.1 billion.

• Major transfers to persons, consisting of elderly benefits, EI benefits and children’s benefits, increased by $1.3 billion, or 9.1 per cent. Elderly benefits increased by $0.5 billion, or 6.0 per cent, due to growth in the elderly population and changes in consumer prices, to which benefits are fully indexed. EI benefit payments decreased by $9 million, or 0.2 per cent. Children’s benefits increased by $0.9 billion, or 28.3 per cent, reflecting the new Canada Child Benefit, which replaced the Canada Child Tax Benefit and the Universal Child Care Benefit as of July 2016.
• 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 $0.3 billion, or 2.8 per cent, primarily 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 departments and agencies, and expenses of Crown corporations. Direct program expenses were up $1.0 billion, or 5.5 per cent.
  • Transfer payments increased by $0.2 billion, or 4.1 per cent.
  • Other direct program expenses increased by $0.7 billion, or 6.1 per cent, reflecting an increase in Crown corporation expenses and an increase in pension and benefit costs based on the Government’s latest actuarial valuations.

Public debt charges decreased by $0.3 billion, or 7.1 per cent, largely reflecting lower Consumer Price Index adjustments on Real Return Bonds.

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 $0.1 billion and a requirement of $14.2 billion from non-budgetary transactions, there was a financial requirement of $14.1 billion for the April to May 2017 period, compared to a financial requirement of $8.5 billion from the same period the previous year.

The government financed this financial requirement of $14.1 billion and increased cash balances by $8.7 billion by increasing unmatured debt by $22.8 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 May 2017 stood at $45.6 billion, down $7.0 billion from their level at the end of May 2016.

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

For inquiries about this publication, contact Bradley Recker at 613-369-5667.

July 2017