- Fiscal Monitor 2004 -

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Highlights of financial results for
May 2004

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Highlights

May 2004: budgetary surplus of $1.0 billion

There was a budgetary surplus of $1.0 billion in May 2004, up $79 million from the surplus reported in the same period last year, as higher budgetary revenues more than offset the increase in total expenses. On a year-over-year basis, budgetary revenues were up $0.5 billion as strong gains in personal income tax revenues and goods and services taxes more than offset declines in most other revenue components. Program expenses increased by $0.4 billion, primarily reflecting higher transfer payments, while public debt charges were virtually unchanged.

April 2004 to May 2004: budgetary surplus of $1.8 billion

For the first two months of the 2004-05 fiscal year (April and May), the budgetary surplus is estimated at $1.8 billion, down $125 million from the surplus reported in the same period a year ago. Budgetary revenues were up $0.7 billion or 2.5 per cent, due largely to the strength of personal income taxes. Program expenses were up $0.9 billion, or 4.0 per cent, primarily due to new spending initiatives announced in recent budgets. Public debt charges were down marginally.

May 2004: budgetary results

The May 2004 budgetary surplus of $1.0 billion was slightly higher than that reported in May 2003.

On a year-over-year basis, budgetary revenues, at $15.2 billion, were up $0.5 billion, or 3.4 per cent. Strong year-over-year increases in personal income tax and the goods and services tax (GST) revenues more than offset declines in corporate income tax revenues, sales and excise taxes, employment insurance premiums and other revenues.

  • Personal income tax revenues were up $0.9 billion or 15.1 per cent, primarily due to strong year-over-year growth in source deductions from employment income, reflecting, in part, strong gains in employment over the past twelve months.
  • Corporate income tax revenues declined by $0.1 billion on a year-over-year basis, primarily reflecting higher refunds related to reassessments of tax liabilities in previous years.
  • Excise taxes and duties increased by $0.1 billion, or 4.5 per cent. Goods and Services Tax (GST) advanced by $0.3 billion, or 14.7 per cent. The higher GST revenues reflected higher gross receipts from both domestic sales and imports. Customs import duties were up 8.6 per cent, while sales and excise taxes declined by 20.1 per cent, primarily attributable to lower energy excise taxes.
  • Employment insurance (EI) premiums were down 5.2 per cent, as the reduction in premium rates (the employee rate for 2004 is $1.98 per $100 of insurable earnings compared to $2.10 in 2003) more than offset the increase in employment and thus the number of people paying premiums.
  • Other revenues, consisting of revenues from Crown corporations, sales of goods and services and foreign exchange revenues, were down $0.5 billion, or 33.1 per cent. This component is extremely volatile on a monthly basis.

On a year-over-year basis, program expenses in May 2004 were $11.2 billion, up $0.4 billion, or 4.1 per cent, from May 2003, due to higher transfer payments, as other program expenses were lower.

Transfer payments were $0.5 billion higher, with increases in the three major components.

  • Major transfers to persons, consisting of elderly and EI benefits, were up $0.2 billion, or 6.3 per cent, on a year-over-year basis. Elderly benefits increased 3.5 per cent due to both higher average benefits, which have risen because of higher inflation in early 2003, and an increase in the number of individuals eligible for benefits. EI benefit payments were up 12.0 per cent, mainly because of one more payment cycle in May 2004 compared to last year.
  • Major transfers to other levels of government, consisting of the federal transfers in support of health and other social programs (Canada Health Transfer, Canada Social Transfer and Medical Reform Transfer), fiscal transfers and Alternative Payments for Standing Programs were up $0.3 billion, or 10.3 per cent. The increase in federal transfers in support of health and other social transfers reflected increased funding under the February 2003 Health Accord. Fiscal transfers consist of Equalization, payments to the territorial governments, statutory subsidies and recoveries under the Youth Allowance Recovery Program. In aggregate, these transfers were up 17.0 per cent from May 2003.
  • Subsidies and other transfers increased marginally. This component is extremely volatile over the first few months of the fiscal year, reflecting the timing of payments.

Other program expenses consist of transfers to Crown corporations and operating expenses for departments and agencies, including defense. All major components were lower than in May 2003, reflecting the timing of payments.

Public debt charges were down marginally, as a lower stock of interest-bearing debt offset the impact of an increase in the average effective interest rate on that debt.

April and May 2004: budgetary results

In the first two months of the fiscal year, there was a budgetary surplus of $1.8 billion, slightly less than the $1.9 billion surplus reported in the same period of 2003–04, as higher program expenses offset an increase in budgetary revenues. On a year-over-year basis, budgetary revenues, at $30.4 billion, were up $0.7 billion, or 2.5 per cent, as higher personal income tax and GST revenues more than offset declines in most of the other major revenue components. On a year-over-year basis, program expenses in the April and May 2004 period, at $22.7 billion, were up $0.9 billion, or 4.0 per cent, over the same period of 2003–04, with most of the increase attributable to higher transfers, especially for health care. Public debt charges were marginally lower.

Revenues and expenses (April - May 2004)

Financial requirement of $2.7 billion for April and May 2004

The budgetary balance is presented on a full accrual basis of accounting, recording government assets and liabilities when they are receivable 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, its loans, financial investments and advances, and pensions and other accounts, 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.

Non-budgetary transactions resulted in a net requirement of $4.5 billion in April and May, up $0.2 billion from the requirement in the same period of 2003–04, primarily reflecting a lower net source of funds from pensions and other accounts.

With a budgetary surplus of $1.8 billion and a net requirement of $4.5 billion from non-budgetary transactions, there was a financial requirement of $2.7 billion in the first two months of 2004-05, up slightly from the same period last year.

Net financing activities up $1.1 billion

To finance this net financial requirement, the Government increased its net financing activities by $1.1 billion and reduced its cash balances by $1.6 billion. 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 stood at $15.7 billion.

Budgetary balance

Federal debt (accumulated deficit)

Table 1
Summary statement of transactions


May April to May


2003 2004 2003–04 2004–05

($ millions)
Budgetary transactions
Revenues 14,691 15,197 29,644 30,388
Expenses
  Program expenses -10,754 -11,198 -21,860 -22,745
  Public debt charges -2,985 -2,968 -5,840 -5,824


Budgetary balance (deficit/surplus) 952 1,031 1,944 1,819
Non-budgetary transactions 1,127 343 -4,324 -4,525
Financial source/requirement 2,079 1,374 -2,380 -2,706
Net change in financing activities 7,369 9,028 2,672 1,127
Net change in cash balances 9,448 10,402 292 -1,579
Cash balance at end of period     14,994 15,747

Note: Positive numbers indicate net source of funds. Negative numbers indicate net requirement for funds.

Table 2
Budgetary revenues


May April to May


2003 2004 Change 2003–04 2004–05 Change

($ millions) (%) ($ millions) (%)
Tax revenue
Income taxe
  Personal income tax 6,015 6,925 15.1 12,351 13,916 12.7
  Corporate income tax 2,180 2,095 -3.9 4,053 3,577 -11.7
  Other income tax revenue 212 321 51.4 500 568 13.6


  Total income tax 8,407 9,341 11.1 16,904 18,061 6.8
Excise taxes and duties
  Goods and services tax 2,033 2,332 14.7 4,761 5,120 7.5
  Customs import duties 209 227 8.6 453 462 2.0
  Sales and excise taxes 793 634 -20.1 1,526 1,410 -7.6
  Air Travellers Security Charge 50 31 -38.0 95 65 -31.6


  Total excise taxes and duties 3,085 3,224 4.5 6,835 7,057 3.2


Total tax revenues 11,492 12,565 9.3 23,739 25,118 5.8
Employment insurance
premiums
1,762 1,671 -5.2 3,533 3,368 -4.7
Other revenues 1,437 961 -33.1 2,372 1,902 -19.8
Total budgetary revenues 14,691 15,197 3.4 29,644 30,388 2.5

Table 3
Budgetary expenses


May April to May


2003 2004 Change 2003–04 2004–05 Change

($ millions) (%) ($ millions) (%)
Transfer payments
Transfers to persons
  Elderly benefits 2,208 2,286 3.5 4,409 4,567 3.6
  Employment insurance benefits 1,083 1,213 12.0 2,514 2,602 3.5


  Total 3,291 3,499 6.3 6,923 7,169 3.6
Transfers to other levels of
government
  Support for health and
  other social programs
    Canada Health Transfer 1,054 2,108
    Canada Social Transfer 652 1,304
    Health Reform Transfer 125 250
    Canada Health and Social
    Transfer
1,691 8   3,384 16


    Total 1,691 1,839 8.8 3,384 3,678 8.7
  Fiscal transfers 1,036 1,212 17.0 1,784 2,152 20.6
  Alternative Payments for
  Standing Programs
-191 -253 32.5 -382 -506 32.5


  Total 2,536 2,798 10.3 4,786 5,324 11.2
Subsidies and other transfers
  Agriculture 3 47 1,466.7 8 59 637.5
  Foreign Affairs 98 164 67.3 297 335 12.8
  Health 151 159 5.3 246 286 16.3
  Human Resources Development 100 155 55.0 232 303 30.6
  Indian and Northern Development 309 299 -3.2 909 929 2.2
  Industry and Regional Development 91 115 26.4 181 232 28.2
  Other 220 64 -70.9 420 155 -63.1


  Total 972 1,003 3.2 2,293 2,299 0.3


Total transfer payments 6,799 7,300 7.4 14,002 14,792 5.6
Other program expenses
Crown corporation expenses
  Canadian Broadcasting Corporation 87 87 0.0 265 301 13.6
  Canada Mortgage and
  Housing Corporation
213 216 1.4 418 360 -13.9
  Other 166 108 -34.9 426 390 -8.5


  Total 466 411 -11.8 1,109 1,051 -5.2
Defence 866 891 2.9 1,652 1,641 -0.7
All other departments and agencies 2,623 2,596 -1.0 5,097 5,261 3.2


Total other program expenses 3,955 3,898 -1.4 7,858 7,953 1.2
Total program expenses 10,754 11,198 4.1 21,860 22,745 4.0
Public debt charges 2,985 2,968 -0.6 5,840 5,824 -0.3
Total budgetary expenses 13,739 14,166 3.1 27,700 28,569 3.1

Table 4
Budgetary balance and financial source/requirement


May April to May


2003 2004 2003–04 2004–05

($ millions)
Budgetary balance (deficit/surplus) 952 1,031 1,944 1,819
Non-budgetary transactions
  Capital investing activities -203 -90 -249 -238
  Other investing activities -11 8 -324 153
  Pension and other accounts 412 764 813 184
  Other activities
    Accounts payable, receivables,
    accruals and allowances
883 518 -4,853 -4,651
    Foreign exchange activities -106 -1,106 -212 -495
    Amortization of tangible capital assets 152 249 501 522


    Total other activities 929 -339 -4,564 -4,624
  Total non-budgetary transactions 1,127 343 -4,324 -4,525
Net financial source/requirement 2,079 1,374 -2,380 -2,706

Table 5
Financial source/requirement and net financing activities


May April to May


2003 2004 2003–04 2004–05

($ millions)
Net financial source/requirement 2,079 1,374 -2,380 -2,706
Net increase (+)/decrease (-) in financing
activities
  Unmatured debt transaction
    Canadian currency borrowings
      Marketable bonds 1,693 4,974 641 2,156
      Treasury bills 6,000 3,800 2,500 0
      Canada Savings Bonds -138 -38 -232 -47
      Other -5 17 -5 -8


      Total 7,550 8,753 2,904 2,101
    Foreign currency borrowings -181 275 -232 -974


Net change in financing activities 7,369 9,028 2,672 1,127
Change in cash balance 9,448 10,402 292 -1,579