Comparing Ontario’s Fiscal Performance with Other Provinces

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Based on Statistics Canada’s latest release of ‘Government Finance Statistics’ (GFS), the fiscal position of the provincial and local governments in Ontario has deteriorated compared to other provinces since the global recession in 2008-2009.[1]

The net financial debt[2] of the provincial and local governments in Ontario increased from $146.3 billion in 2008-09 to $296.8 billion in 2014-15. On a per capita basis, Ontario’s net financial debt was approximately $21,700 in 2014-15, the second highest in the country and nearly 40 per cent higher than the provincial average. This represents a significant deterioration from 2008-09 when Ontario’s net financial debt was approximately $11,400 per capita and 26 per cent higher than the provincial average.

High operating deficits since 2008-09 led to the sharp rise in Ontario’s net financial debt. In 2014-15, Ontario’s net operating deficit based on the GFS data was $9.6 billion or $703 per person. On a per capita basis, Ontario’s deficit in 2014-15 was third highest among provinces, below only Newfoundland and Labrador, and New Brunswick.

Net Financial Debt and Operating Balance by Province, 2014-15

Note: Figures represent consolidated provincial and local government data.
Source: Statistics Canada’s Government Finance Statistics

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Ontario’s relatively high deficit in 2014-15 was largely a reflection of Ontario’s low per capita revenues, partially offset by its similarly low program spending per capita.

Revenues and Spending by Province, 2014-15

Note: Figures represent consolidated provincial and local government data. Provinces are ordered by total revenue per capita.
Source: Statistics Canada’s Government Finance Statistics

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Ontario had the lowest per capita revenues of all provinces in 2014-15 at $12,619, nine per cent below average.

According to the GFS data, Ontario provincial and local governments collected tax revenue of $8,272 per person in 2014-15, the third highest level of taxes per person in the country, behind only Quebec and Saskatchewan. However, Ontario’s relatively elevated level of taxation per capita is a reflection of the province’s robust and diverse business sector and high household incomes that generate more tax revenue. As a share of nominal GDP (the broadest measure of the tax base), Ontario’s tax revenue was close to the provincial average, suggesting the tax burden imposed by the provincial and local governments in Ontario is in-line with other provinces.

However, Ontario’s high per capita tax revenues are offset by lower levels of non-tax revenue than other provinces. Specifically, Ontario received $1,768 in ‘grants’ (federal government transfers) per person in 2014-15, the third lowest among provinces, behind only British Columbia and Alberta.

Ontario also had the second lowest amount of ‘other revenues’[3] at $2,578 per person. Resource-rich provinces benefited from significant royalties that resulted in much higher ‘other revenues’. Newfoundland and Labrador, Saskatchewan and Alberta received an average of $5,425 per person in ‘other revenues’ in 2014-15, more than double the level in Ontario.

Comparing Revenue by Source Across Provinces, 2014-15

Note: Figures represent consolidated provincial and local government data. Provinces are ordered by total revenue per capita.
Source: Statistics Canada’s Government Finance Statistics

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Ontario partially offsets its relatively low per capita revenues by maintaining relatively low per capita program spending. Program spending per capita by the provincial and local governments in Ontario, at $12,403, was second lowest among provinces and about six per cent below the provincial average. In nearly every spending category, Ontario’s spending per capita was lower than the provincial average. One exception is education where Ontario’s spending per capita was four per cent higher than the average in 2014-15.

Comparing Major Program Spending Categories Across Provinces, 2014-15

Note: Figures represent consolidated provincial and local government data. Spending figures exclude consumption of fixed capital expense. Provinces are ordered by total program spending per capita.
Source: Statistics Canada’s Government Finance Statistics

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Ontario’s relatively low program spending is a reflection of a combination factors. As the most populous province, Ontario benefits from economies of scale[4] that contribute to the more efficient delivery of public services. It may also be the case that Ontario provides fewer or less generous public services compared to other provinces in select areas.[5]

Luan Ngo
lngo@fao-on.org
Senior Economist

David West
dwest@fao-on.org
Chief Economist

Financial Accountability Office of Ontario
2 Bloor Street West, Suite 900
Toronto, Ontario M4W 3E2

Media queries, contact: Kismet Baun, 416.254.9232 or email kbaun@fao-on.org.

 

[1] Statistics Canada’s ‘Government Finance Statistics’ measure public sector financial performance including operating results and net worth or debt. The GFS data provide a consistent basis for provincial comparisons, adjusting for differences in organizational structure and accounting practices across jurisdictions. This commentary focuses on consolidated data for provincial–territorial and local governments, which includes provincial governments, health and social service institutions, universities and colleges, municipalities and other local public administrations, and school boards. The latest available data cover the fiscal year 2014-15, prior to the sharp decline in oil prices that affected the fiscal position of oil-producing provinces. (Consolidated Canadian Government Finance Statistics, 2014, Statistics Canada, March 23, 2016).

[2] Net financial debt refers to the difference between total liabilities and financial assets. 

[3] Other revenue includes resource royalties, sales of goods and services, and social contributions (e.g. Workplace Safety and Insurance Board contributions). 

[4] ‘Economies of scale’ refers to lower unit costs as a result of a larger scale of operations. For example, the number of administrative staff required to manage the health or education sectors does not rise proportionally with the number of students or patients in the system.

[5] For example, Ontario has fewer regulated child-care spaces, a higher elementary student to educator ratio, higher university tuition, and fewer residential-care beds per capita than other provinces. (Frontier Centre for Public Policy, The Real Have-Nots in Confederation: Ontario, Alberta and British Columbia, 2010)

Net Financial Debt and Operating Balance by Province, 2014-15
This chart compares the provinces’ Net Financial Debt per capita and Net Operating Balance per capita in 2014-15. Ontario has the second highest debt per capita at $21,702, only Quebec’s debt per capita is larger. Ontario also has the third lowest operating balance per capita, a deficit of $703, only New Brunswick and Newfoundland had lower operating balances per capita.

Revenues and Spending by Province, 2014-15
This chart compares the provinces’ Total Revenue per capita and Expenses per capita (broken out into program spending and debt interest) in 2014-15. Ontario has the lowest per capita revenue at $12,619. Ontario also has the second lowest expenditures per capita with program spending of $12,403 (second lowest – BC is lower) and an average level of interest on debt expense per capita at $919.

Comparing Revenue by Source Across Provinces, 2014-15
This chart compares the provinces’ revenue sources per capita in 2014-15, separated into Taxes, Grants and Other. Ontario has the third highest tax revenue with $8,272 per capita, however it also has one of the lowest grants revenue per capita and other revenue per capita, at $1,768 and $2,578, respectively.

Comparing Major Program Spending Categories Across Provinces, 2014-15
This chart compares the provinces’ spending categories per capita in 2014-15, separated into health, education and social protection. Ontario has the second lowest health spending per capita at $3,937, the third highest social protection per capita at $1,608 and an average level education spending per capita at $2,508.

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