- Fiscal Monitor 2004 -

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Highlights of financial results for June 2004

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Highlights

June 2004: budgetary surplus of $1.1 billion

There was a budgetary surplus of $1.1 billion in June 2004, $0.6 billion lower than the surplus of $1.7 billion reported in June 2003. This year-over-year decline in the budgetary surplus primarily reflects the timing of revenue collections over the first three months of this year compared to the same period last year. On a year-over-year basis, budgetary revenues were down $0.3 billion, while program expenses increased by $0.4 billion, primarily reflecting higher transfer payments to the provinces and territories. Public debt charges were $0.1 billion lower.

April to June 2004: budgetary surplus of $2.9 billion

For the first three months of the 2004–05 fiscal year (April to June), the budgetary surplus is estimated at $2.9 billion, down $0.7  billion from the surplus reported in the same period last year. Budgetary revenues were up $0.5 billion, or 1.0 per cent, as increases in personal income tax and goods and services tax (GST) revenues were dampened by declines in corporate income tax revenues, employment insurance (EI) premiums and other revenues. Program expenses were up $1.3 billion, or 4.1 per cent, primarily due to higher transfers to the provinces for health and equalization. Public debt charges were $0.1 billion lower.

June 2004: budgetary results

The June 2004 budgetary surplus of $1.1 billion was $0.6 billion lower than that reported in June 2003.

On a year-over-year basis, budgetary revenues, at $15.1 billion, were down $0.3 billion, or 1.8 per cent. This decline primarily reflects timing factors with respect to the receipt of revenues over the first three months of 2004–05 compared to the same period last year.

  • Personal income tax revenues were down $0.5 billion, or 6.2 per cent, offsetting about half of the year-over-year increase reported in May 2004. This primarily reflects the timing of receipts between May and June of this year compared to May and June of last year.
  • Corporate income tax revenues increased by $0.3 billion on a year-over-year basis, reflecting both strong growth in gross receipts and lower refunds related to reassessments of tax liabilities in previous years.
  • Excise taxes and duties declined by $90 million, or 2.7 per cent. GST revenues were down $147 million, or 6.4 per cent, reversing some of the year-over-year increase reported in May 2004. Customs import duties were unchanged, while sales and excise taxes increased by 7.6 per cent, offsetting some of the year-over-year decline reported last month.
  • EI premiums were down 6.1 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 $0.1  billion, or 8.0 per cent. This component is extremely volatile on a monthly basis.

On a year-over-year basis, program expenses in June 2004 were $11.2 billion, up $0.4 billion, or 4.1 per cent, from June 2003 due entirely to higher transfer payments, as other program expenses were marginally 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 $19 million, or 0.6 per cent, on a year-over-year basis. Elderly benefits increased 2.9 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 declined 4.3 per cent, reflecting the timing of payments between May and June. As noted in the May 2004 Fiscal Monitor, the large year-over-year increase reported in May 2004 was attributable to the inclusion of one more payment cycle in May 2004 compared to last year.
  • Major transfers to other levels of government, consisting of federal transfers in support of health and other social programs (Canada Health Transfer, Canada Social Transfer and Health Reform Transfer), fiscal transfers and Alternative Payments for Standing Programs, were up $0.3  billion, or 11.0 per cent. The increase in federal transfers in support of health and other social programs reflects 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 19.8 per cent from June 2003.
  • Subsidies and other transfers increased by 17.6 per cent. 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 defence. On a year-over-year basis, these expenses were marginally lower, as increases in Crown corporation expenses were offset by lower defence and all other departmental and agency expenses. This component is also quite volatile over the first few months of the fiscal year, reflecting the timing of payments and the coming into force of budget measures.

Public debt charges were down 4.1 per cent, as a smaller stock of interest-bearing debt more than offset the impact of an increase in the average effective interest rate on that debt.

April to June 2004: budgetary results

In the first three months of the fiscal year, there was a budgetary surplus of $2.9 billion, down $0.7 billion from the surplus of $3.7 billion reported in the same period of 2003–04.

Budgetary revenues, at $45.5 billion, were up $0.5 billion, or 1.0 per cent, as increases in personal income tax and GST revenues were dampened by declines in corporate income tax revenues, EI premiums and other revenues.

  • Personal income tax revenues increased by $1.1 billion, or 5.6 per cent. The year-over-year increase is primarily due to the strong growth in source deductions from employment income, reflecting, in part, strong gains in employment over the past 12 months.
  • Corporate income tax revenues were down 2.2 per cent. Although monthly installments were higher on a year-over-year basis, the increase was not sufficient to offset higher refunds related to reassessments of tax liabilities in previous years.
  • Excise taxes and duties increased $0.1 billion, or 1.3 per cent. GST revenues increased $0.2 billion, or 3.0 per cent, due to higher gross receipts from domestic sales and lower refunds. Sales and excise taxes declined by 2.3 per cent, primarily due to lower energy taxes.
  • EI premiums were down 5.2 per cent, reflecting the reduction in premium rates.
  • Other revenues declined 16.1 per cent.

On a year-over-year basis, program expenses in the April to June 2004 period, at $33.9 billion, were up $1.3 billion, or 4.1 per cent, over the same period of 2003–04, with most of the increase attributable to higher transfers to the provinces for health care and equalization. Public debt charges declined by $0.1 billion.

Revenues and expenses (April-June 2004)

Transfer payments, which accounted for nearly two-thirds of total program expenses, increased by $1.3 billion, or 6.1 per cent.

  • Transfers to persons advanced by 2.6 per cent. Elderly benefits were up 3.3 per cent while EI benefits increased 1.2 per cent. Within EI benefits, regular benefit payments were lower, reflecting the improved labour market situation, while special benefits, such as sickness, maternity and paternal benefits, were higher.
  • Transfers to other levels of government were up $0.8 billion, or 11.2  per cent, reflecting higher transfers in support of health and other social programs and increased fiscal transfers. The latter primarily reflects the impact on the 2003–04 results of recoveries related to overpayments in previous years under the equalization program.
  • Subsidies and other transfers increased by 5.9 per cent.

Other program expenses increased by 0.5 per cent, as lower year-over-year defence expenses largely offset increases in the two other components.

Public debt charges were down 1.6 per cent, as the impact of a decline in the stock of interest-bearing debt more than offset an increase in the average effective interest rate on that debt.

Financial requirement of $7.2 billion for April to June 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 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.

Budgetary balance

Non-budgetary transactions resulted in a net requirement of $10.1 billion in the April to June period, down $3.1 billion from the requirement in the same period of 2003–04. The decline is primarily attributable to the cash transfers to trust funds established in the 2003 budget for the Canada Health and Social Transfer cash supplement ($2.5 billion) and the Diagnostic/Medical Equipment Fund ($1.5 billion).

With a budgetary surplus of $2.9 billion and a net requirement of $10.1 billion from non-budgetary transactions, there was a financial requirement of $7.2 billion in the first three months of 2004–05, down $2.4 billion from the same period last year.

Net financing activities down $7.8 billion

The Government lowered its holdings of market debt by $7.8 billion by the end of June 2004. As a result, to finance the financial requirement of $7.2 billion, it lowered its cash balances. 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 June stood at $2.3 billion.

Federal debt (accumulated deficit)

Table 1
Summary statement of transactions


  June April to June
     
  2003 2004 2003–04 2004–05

  ($ millions)
Budgetary transactions        
Revenues 15,431 15,147 45,075 45,535
Expenses        
  Program expenses -10,755 -11,201 -32,614 -33,946
  Public debt charges -2,965 -2,842 -8,806 -8,666
 
Budgetary balance
(deficit/surplus)
1,711 1,104 3,655 2,923
Non-budgetary
transactions
-8,882 -5,596 -13,207 -10,126
Financial source/requirement -7,171 -4,492 -9,552 -7,198
Net change in financing
activities
-3,201 -8,917 -530 -7,789
Net change in cash balances -10,372 -13,409 -10,082 -14,987
Cash balance at end of period     4,621 2,264

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

Table 2
Budgetary revenues


  June   April to June  
 
 
 
  2003 2004 Change 2003–04 2004–05 Change

  ($ millions) (%) ($ millions) (%)
Tax revenue            
Income taxes            
  Personal income tax 7,348 6,894 -6.2 19,699 20,810 5.6
  Corporate income tax 1,778 2,125 19.5 5,831 5,702 -2.2
  Other income tax revenue 165 267 61.8 665 835 25.6
 

  Total income tax 9,291 9,286 -0.1 26,195 27,347 4.4
Excise taxes and duties            
  Goods and services tax 2,312 2,165 -6.4 7,073 7,285 3.0
  Customs import duties 216 216 0.0 669 677 1.2
  Sales and excise taxes 819 881 7.6 2,345 2,290 -2.3
  Air Travellers Security Charge 36 31 -13.9 132 96 -27.3
 

  Total excise taxes and duties 3,383 3,293 -2.7 10,219 10,348 1.3
 

Total tax revenues 12,674 12,579 -0.7 36,414 37,695 3.5
Employment insurance premiums 1,708 1,603 -6.1 5,241 4,971 -5.2
Other revenues 1,049 965 -8.0 3,420 2,869 -16.1
Total budgetary revenues 15,431 15,147 -1.8 45,075 45,535 1.0

Table 3
Budgetary expenses


  June   April to June  
 
 
 
  2003 2004 Change 2003–04 2004–05 Change

  ($ millions) (%) ($ millions) (%)
Transfer payments            
Transfers to persons            
Elderly benefits 2,224 2,288 2.9 6,633 6,855 3.3
Employment insurance benefits 1,058 1,013 -4.3 3,571 3,615 1.2
 

Total 3,282 3,301 0.6 10,204 10,470 2.6
Transfers to other levels
of government
           
Support for health and
other social programs
           
  Canada Health Transfer   1,054     3,163  
  Canada Social Transfer   652     1,956  
  Health Reform Transfer   125     375  
  Canada Health and
   Social Transfer
1,691 8   5,075 25  
 

  Total 1,691 1,839 8.8 5,075 5,519 8.7
Fiscal transfers 893 1,070 19.8 2,677 3,221 20.3
Alternative Payments for
Standing Programs
-191 -253 32.5 -573 -759 32.5
 

Total 2,393 2,656 11.0 7,179 7,981 11.2
Subsidies and other transfers            
Agriculture 12 65 441.7 19 124 552.6
Foreign Affairs 137 241 75.9 435 576 32.4
Health 80 89 11.3 326 375 15.0
Human Resources Development 110 100 -9.1 341 404 18.5
Indian and Northern Development 343 283 -17.5 1,252 1,212 -3.2
Industry and Regional Development 148 152 2.7 329 384 16.7
Other 226 312 38.1 645 471 -27.0
Total 1,056 1,242 17.6 3,347 3,546 5.9
Total transfer payments 6,731 7,199 7.0 20,730 21,997 6.1
Other program expenses            
Crown corporation expenses            
  Canadian Broadcasting Corporation 102 71 -30.4 366 372 1.6
  Canada Mortgage and
HousingCorporation
152 195 28.3 570 555 -2.6
 

  Other 120 180 50.0 546 572 4.8
 

  Total 374 446 19.3 1,482 1,499 1.1
Defence 901 856 -5.0 2,552 2,499 -2.1
All other departments and agencies 2,749 2,700 -1.8 7,850 7,951 1.3
 

Total other program expenses 4,024 4,002 -0.5 11,884 11,949 0.5
Total program expenses 10,755 11,201 4.1 32,614 33,946 4.1
Public debt charges 2,965 2,842 -4.1 8,806 8,666 -1.6
Total budgetary expenses 13,720 14,043 2.4 41,420 42,612 2.9

Table 4
Budgetary balance and financial source/requirement


  June April to June
 

  2003 2004 2003–04 2004–05

  ($ millions)
Budgetary balance
(deficit/surplus)
1,711 1,104 3,655 2,923
Non-budgetary transactions        
Capital investing activities -170 -134 -420 -373
Other investing activities -121 -275 -445 -122
Pension and other accounts -24 -80 791 105
Other activities        
  Accounts payable, receivables,
  accruals and allowances
-9,253 -6,004 -14,106 -10,649
  Foreign exchange activities 420 671 207 175
  Amortization of tangible capital
  assets
266 226 766 743
 

  Total other activities -8,567 -5,107 -13,133 -9,731
Total non-budgetary transactions -8,882 -5,596 -13,207 -10,121
Net financial source/requirement -7,171 -4,492 -9,552 -7,198

Table 5
Financial source/requirement and net financing activities


  June April to June
 

  2003 2004 2003–04 2004–05

  ($ millions)
Net financial source/requirement -7,171 -4,492 -9,552 -7,198
Net increase (+)/decrease (-)
in financing activities
       
Unmatured debt transactions        
  Canadian currency borrowings        
    Marketable bonds -3,705 -9,867 -3,065 -7,710
    Treasury bills 400 800 2,900 800
    Canada Savings Bonds -158 -75 -390 -122
    Other 182 -6 177 -14
 

    Total -3,281 -9,148 -378 -7,046
  Foreign currency borrowings 80 231 -152 -743
 

Net change in financing
activities
-3,201 -8,917 -530 -7,789
Change in cash balance -10,372 -13,409 -10,082 -14,987