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|Public sector statistics
Financial Management System
Rising revenues in the wake of strong economic growth pushed, in the 2004/2005 fiscal year, the consolidated surplus for all Canadian governments to its highest level in four years.
Canada’s federal, provincial, territorial, and local governments – as well as the two major pension plans – recorded a combined surplus of $12.1 billion.
This was $9.7 billion higher than the consolidated surplus in 2003/2004. Even so, the 2004/2005 surplus was well below the most recent high of $28.6 billion in 2000/2001.
Consolidated revenues rose 5.8% in 2004/2005 to $530.5 billion, with 58% of the gain coming from income taxes. Consumption taxes accounted for 18% of the increase, the second largest contributors to growth in revenue.
At the same time, overall government spending hit $518.4 billion, up 3.9% from 2003/2004.
Of the $19.6 billion increase in spending, health and social services combined accounted for over one-half (56%). Debt charges, which were equal to 8.8 cents out of every dollar of government revenues, declined for the fourth consecutive year.
Federal government, pension plans account for entire surplus
The federal government and the Canada and Quebec pension plans accounted for the entire consolidated government surplus in 2004/2005. Their total far more than offset a deficit recorded by the provinces, territories and local governments combined.
The biggest surplus was recorded by the Canada Pension Plan at $8.0 billion. Close behind was the federal government with $7.8 billion, its eighth surplus in a row. The Quebec Pension Plan had a surplus of $1.6 billion.
On the other hand, provincial governments collectively were still in a deficit position of $2.3 billion in 2004/2005, despite an improvement of $6.1 billion in their fiscal balance from the previous year. Local governments had a deficit of $3.0 billion.
Provincially, the largest surplus, about $3.5 billion, occurred in Alberta in 2004/2005, with its neighbour British Columbia a distant second with a surplus of about $1.3 billion.
Ontario had the largest deficit, $4.7 billion, followed by Quebec at $3.0 billion.
Government finance over the years: Huge deficits to big surpluses
Over the past 15 years, Canada’s governments have struggled with new economic and fiscal challenges. After posting huge deficits in the late 1980s, the federal and provincial governments acted to correct the situation through a system of fiscal restraints in the early and mid-1990s.
In 1989/1990, the federal government had a $28 billion deficit, while the provinces and territories were in a somewhat better situation with a combined deficit of $3.1 billion. Local governments were in a relatively neutral position.
In 2004/2005, while the situation has improved at the federal level, provincial and territorial governments are still collectively in a deficit position. During the same period, the fiscal position of local governments deteriorated.
In 1989/1990, federal government revenues were equal to 18.7% of gross domestic product, while expenditures (including transfers to other governments) were equal to 22.9% of GDP.
Fifteen years later, federal revenues corresponded to 16.8% of GDP, down only slightly. However, federal expenditures corresponded to only 16.2% of GDP, a more substantial 6.7-percentage-point decline.
During the same 15 year-period, the share of both revenues and expenditures of provincial/territorial governments fell slightly. But in 2004/2005, their expenditures were equivalent to 21% of GDP, still five percentage points higher than the federal government.
During the past 15 years, provincial and territorial governments captured a much larger share proportionally of public spending.
In absolute terms, expenditures of the provincial/territorial governments rose 84.5% during the past 15 years, more than twice the rate of growth of 38.5% in federal government expenditures.
Income taxes top revenue earner
Income taxes are the top revenue earner for federal, provincial, and territorial governments. But it is only within the federal government that they have captured a bigger share of total revenue.
In 2004/2005, income taxes accounted for 61.2% of all federal revenues, up from 56.5% in 1989/1990. In contrast, they accounted for 26.6% of provincial/territorial revenues in 2004/2005, down from 28.5%.
On the other hand, the share of consumption and other taxes fell at the federal level and rose slightly at the provincial/territorial level. Part of the gain at the provincial/territorial level occurred as the result of general sales taxes, which contributed almost 45% of the total increase in consumption and other taxes.
Transfer payments, the third largest source of income for provincial and territorial governments, have also declined relative to total revenues. However, the ratio of transfer payments to total revenues has been rising steadily since 2000/2001. This reflects increased federal contributions through health and social transfer payments.
At the local level, property taxes accounted for 40.4% of total revenues in 2004/2005, the largest share. This share has remained virtually constant during the last 15 years, peaking at 43.4% in 1997/1998.
In terms of expenditures, the combined share of health and social services spending has increased for all levels of government, reflecting the increased demand for these services during the past 15 years.
In 2004/2005, these expenditures alone accounted for more than 50% of all spending of provincial and territorial governments. Spending on education, another big part of public spending, has increased at the provincial/territorial level, but declined for both federal and local governments.
Text table 1
The provinces: Spending on health and social services and education
Spending among the provinces and territories has also evolved in the last 15 years. Because the structure of government spending between the provincial and local governments varies from province to province and over time, consolidated provincial/local data will be used here for purposes of comparison.
Fifteen years ago, at the Canada level, spending on health and social services represented 37.9% of all expenditures of provincial, territorial, and local governments. By 2004/2005, they accounted for 42.7%. Only two provinces were above the national average in 2004/2005: Quebec and Ontario.
During the same period, the proportion of total spending on education remained constant at 22.2% nationally. Six provinces were above the national average: Newfoundland and Labrador, Prince Edward Island, Nova Scotia, Ontario, Saskatchewan and Alberta.
The share of spending on health and social services increased in all provinces and territories during the 15-year period. The biggest proportional increase occurred in Saskatchewan, where it rose from 27.9% to 38.0%.
With respect to education, the largest proportional increase in spending during the 15-year period occurred in Alberta, where it went from 20.9% to 25.4%. The largest proportional decline in spending on education occurred in Ontario, where it fell from 24.9% to 22.6%.
For provincial-local governments, debt charges represented only 7.9 cents of each dollar spent, down from 10.4 cents in 1989/1990. While their debts have increased, falling interest rates and growth in other expenditures have driven down the relative size of debt charges.
Debt charges declined in all provinces except Nova Scotia and New Brunswick. However, this has to be interpreted with caution, as some provinces borrow on behalf of their government business enterprises.
Text table 2
Evolution of employment in the government
The government’s presence in the Canadian economy has noticeably dropped in the past 15 years.
In 1990, there were just over 96 civil servants per 1,000 inhabitants. This number dropped to a little more than 82 in 2001. It then rose slightly to just under 84 in 2004.
In 1990, civil servants comprised just over 20% of the total employment in the economy. After rising to over 21% in 1992, this proportion started to decrease and ended up below 17% in 2004.
The evolution has been more or less the same for all levels of government. However, the magnitude of the decreases differed by level. The result is that the share of the federal government dropped from 15.4% to 13.7% of the total employment of governments between 1990 and 2004, the share of provincial and territorial governments remained the same, and the share of local governments rose from 32.6% to 34.3%.
All the governments, including public services related to education and health care, paid a little more than 25% of the total wages and salaries in 1990. This proportion was 22% in 2004.
Wages and salaries comprised nearly 25% of government expenses in 1990. This percentage was practically the same in 2004, with wages and salaries reaching close to $126 billion.
The share of wages and salaries in expenses varies by level of government. In 2004, the proportions were 10%, 23% and 43%, respectively, for the federal, provincial and territorial, and local governments. These proportions were almost the same 15 years before, except the proportion for local governments, which was just over 51%. The differences between the proportion of wages and salaries in expenses are partially compensated for by the proportion of transfers between levels of government in expenses. The federal government redistributes a larger part of its revenues to other levels than provincial and territorial or local governments. The same applies to provincial and territorial governments with regard to local governments.