Expenditure Monitor 2019-20: Q4

Highlights

• This report provides information on spending by the Province through the end of the 2019-20 fiscal year (March 31, 2020), including changes to the 2019-20 spending plan, actual spending results compared to planned spending and an updated budget deficit projection for 2019-20.
• Since the tabling of the 2019 Ontario Budget, the Province increased its 2019-20 spending plan by a net $2.6 billion, through Supplementary Estimates (tabled in December 2019) and program budget reallocations.
  • The budgets for electricity subsidy programs (up $1.6 billion) and children’s and social services (up $0.8 billion) received the largest increases.
• Although the Province increased its 2019-20 spending plan by $2.6 billion, by the end of 2019-20 actual spending was $3.5 billion below plan.
  • The most significant underspending was achieved in interest on debt ($1.0 billion under budget), health ($0.5 billion under budget), investments in public transit ($0.4 billion under budget), electricity subsidy programs ($0.2 billion under budget) and the Contingency Fund ($0.4 billion in lapsed spending). 
  • Spending information for all of the Province’s programs by ministry is available on the FAO’s website at: https://bit.ly/2OJG7x0.
• In the March 2020 Economic and Fiscal Update (March 2020 Update), the Province projected an interim budget deficit for 2019-20 of $9.2 billion. Using updated revenue and spending information, the FAO projects a 2019-20 budget deficit of $8.7 billion, an improvement of $0.5 billion.
  • The FAO estimates that 2019-20 total revenue will be $2.0 billion lower than forecast in the March 2020 Update, which reflects the evolving 2020 economic outlook due to the COVID-19 pandemic.
  • On the other hand, the FAO’s projection for 2019-20 total expense is $2.3 billion lower compared to the forecast in the March 2020 Update. The FAO’s lower total expense forecast is based on the latest available information on provincial spending.

Introduction

This report provides information on spending by the Government of Ontario (the Province) through the end of the 2019-20 fiscal year. The report:

• Identifies changes to the Province’s 2019-20 budget plan;
• Reviews 2019-20 actual spending against planned spending;
• Highlights the programs with the largest budget changes during 2019-20;
• Notes the programs that ended the year over and under budget; and
• Projects a revised 2019-20 interim budget deficit compared to the budget deficit forecast in the March 2020 Economic and Fiscal Update (March 2020 Update).

The information in this report is based on the FAO’s analysis of the 2019 Ontario Budget, the 2019-20 Expenditure Estimates, the Supplementary Estimates, 2019-20, and spending recorded in the Province’s integrated financial information system (IFIS) as of May 14, 2020.

The closing date for spending transactions related to the 2019-20 fiscal year, which ended on March 31, 2020, was May 14, 2020. However, there will still be 2019-20 spending transactions that are recorded between May 14, 2020 and when the 2019-20 Public Accounts of Ontario are released (typically in September). Depending on the nature of these transactions, there may be material changes from the information presented in this report and the 2019-20 Public Accounts of Ontario.[1]   

Changes to the 2019 Budget Spending Plan

In the 2019 Ontario Budget, the Province tabled a 2019-20 spending plan of $156.2 billion.[2] By the end of the fiscal year, the 2019-20 spending plan had increased by a net $2.6 billion, for a revised spending plan of $158.8 billion.

The increase in the 2019-20 spending plan was the result of:

• The tabling of Supplementary Estimates, on December 11, 2019, which requested from the legislature $2.7 billion in additional spending authority;
• Internal program budget reallocations[3] through the first three quarters of the fiscal year, from April 1, 2019 to December 31, 2019, which resulted in a net program spending reduction of $101 million; and
• Internal program budget reallocations in the fourth quarter, from January 1, 2020 to March 31, 2020, which resulted in a net program spending increase of $24 million.

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In the fourth quarter, the Province increased the 2019-20 spending plan by a net $24 million. The rest of this section discusses fourth-quarter spending plan changes by sector.[4]

Health: $54 million increase, including:

• $234 million increase for Provincial Programs (Vote-Item 1412-1), which funds a variety of specialized programs, such as Cancer Care Ontario, Canadian Blood Services, and Community and Priority Services.
• $66 million decrease for Ontario Health Insurance (Vote-Item 1405-1), which administers payments to physicians.
• $115 million decrease for Local Health Integration Networks (LHINs) and Related Health Service Providers (Vote-Item 1411-1), which funds hospitals, long-term care homes and community programs.

Education: $15 million increase, including:

• $112 million increase for Child Care and Early Years – Policy Development and Program Delivery (Vote-Item 1004-1), which includes transfer payments to support child care and the Childcare Access and Relief from Expenses (CARE) tax credit.
• $43 million increase for Elementary and Secondary Education – Policy and Program Delivery (Vote-Item 1002-1), which mainly funds school boards.  
• $138 million decrease for Support for Elementary and Secondary Education (Vote-Item 1002-3), which provides grants to school boards for capital investments.

Postsecondary Education and Training: $147 million decrease, including:

• $60 million decrease for Employment Ontario Program (Vote-Item 3003-7), which provides employment and training programs and services.
• $102 million decrease for Colleges, Universities and Student Support (Vote-Item 3002-1), which includes funding for operating colleges and universities, and student financial assistance programs.

Children’s and Social Services: $167 million increase, including:

• $222 million increase for Financial and Employment Supports (Vote-Item 702-3), which includes the Ontario Disability Support Program, Ontario Works and the Ontario Drug Benefit Program.
• $60 million increase for Children and Youth at Risk (Vote-Item 702-20), which includes child protection, youth justice, and other services for children and youth.
• $95 million decrease for Supports to Individuals and Families (Vote-Item 702-21), which administers a variety of programs such as Residential Services, Autism, and Children and Youth Community Supports.

Justice: $177 million increase, including:

• $80 million increase for Institutional Services (Vote-Item 2605-3), which funds the operation and maintenance of Ontario’s adult correctional institutions.
• $36 million increase for Court Services – Administration of Justice (Vote-Item 305-1), which funds court administration.
• $34 million increase for Legal Aid Ontario (Vote-Item 303-2), which provides funding to Legal Aid Ontario, a provincial agency that provides legal assistance for financially eligible low-income Ontarians.

Other Programs: $84 million increase, including:

• $137 million increase for Agriculture and Rural Affairs Capital (Vote-Item 108-7), which includes transfer payments for infrastructure investments.
• $122 million increase for Ontario Cultural Media Tax Credits (Vote-Item 3808-1), which provides tax credits for companies producing films, television programs, interactive digital media products or books in Ontario.
• $73 million increase for Urban and Regional Transportation (Operating) (Vote-Item 2702-2), which provides operating subsidies to Metrolinx.
• $47 million increase for ServiceOntario (Vote-Item 1814-1), which funds the operation of ServiceOntario.
• $135 million decrease for Urban and Regional Transportation (Capital) (Vote-Item 2702-3), which funds infrastructure investments in public transit.
• $137 million decrease for Infrastructure Programs (Vote-Item 4003-2), which funds infrastructure projects, such as Toronto Waterfront Revitalization, Broadband and Cellular Infrastructure, and Federal-Provincial Infrastructure Programs.

Contingency Fund: $326 million net decrease.

2019-20 Actual Spending

Although the Province increased the 2019-20 spending plan during the year by $2.6 billion, to $158.8 billion, actual spending in 2019-20 was $3.5 billion below plan at $155.3 billion. Actual spending reflects transactions recorded in the Province’s integrated financial information system (IFIS) as of May 14, 2020.

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Health sector spending: $466 million below revised budget, including:

• $49 million under budget in Population and Public Health (Vote-Item 1406-4), which supports the Chief Medical Officer of Health and aims to promote and protect the public health of Ontario.
• $65 million under budget in LHINs and Related Health Service Providers (Vote-Item 1411-1), which funds hospitals, long-term care homes and community programs (see next section for more details).
• $314 million under budget in the Health Capital Program (Vote-Item 1407-1), which funds hospital infrastructure projects.

Education sector spending: $59 million below revised budget, including:

• $132 million over budget for Elementary and Secondary Education – Policy and Program Delivery (Vote-Item 1002-1), which mainly funds school boards.
• $162 million under budget in the Ontario Teachers’ Pension Plan.

Postsecondary education and training sector spending: $71 million below revised budget, including:

• $36 million under budget in Employment Ontario (Vote-Item 3003-7), which provides employment and training programs and services.
• $38 million under budget in Colleges, Universities and Student Support (Vote-Item 3002-1), which includes funding for operating colleges and universities, and student financial assistance programs.

Children’s and social services sector spending: $98 million below revised budget, including:

• $13 million under budget in Ontario Child Benefit (Vote-Item 702-22), which provides direct financial support for low to moderate income families with children.
• $14 million under budget in Supports to Individuals and Families (Vote-Item 702-21), which administers a variety of programs such as Residential Services, Autism, and Children and Youth Community Supports.
• $52 million under budget in Financial and Employment Supports (Vote-Item 702-3), which includes the Ontario Disability Support Program, Ontario Works and the Ontario Drug Benefit Program.

Justice sector spending: $19 million below revised budget, including:

• $6 million under budget in Facilities Renewal (Vote-Item 301-2), which funds capital investments.

Other programs sector spending: $1,330 million below revised budget, including:

• $74 million under budget in Urban and Regional Transportation (Operating) (Vote-Item 2702-2), which provides operating subsidies to Metrolinx.
• $375 million under budget in Urban and Regional Transportation (Capital) (Vote-Item 2702-3), which funds capital investments in public transit.
• $233 million under budget in Electricity Price Mitigation (Vote-Item 2206-1), which includes programs that subsidize electricity costs for Ontarians (see next section for more details).
• $328 million under budget in Ontario Electricity Financial Corporation Dedicated Electricity Earnings (Vote-Item 1203-12), which is a transfer of dedicated electricity earnings from the Province to the Ontario Electricity Financial Corporation.

Interest on debt spending: $1,020 million below revised budget.

2019-20 Spending by Program

This section provides information on spending for a selection of transfer payment programs. For information on all of the Province’s programs, visit the FAO’s website at: https://bit.ly/2OJG7x0.

Table 3 reviews the Electricity Price Mitigation (Vote-Item 2206-1) programs. At the start of 2019-20, the Province planned to spend $4.0 billion on electricity subsidy programs. During the year, the Province added $1.6 billion to the Electricity Price Mitigation spending plan (including adding a new transfer payment program called the Ontario Electricity Rebate)[5] to reach $5.6 billion in planned spending. However, by the end of the year only $5.3 billion was spent, which was $233 million below the revised 2019-20 budget.

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Table 4 reviews the LHINs and Related Health Service Providers (Vote-Item 1411-1) programs. At the start of the year, the Province planned to spend $29.5 billion on hospitals, long-term care homes, community programs, and child and youth mental health. Through the Supplementary Estimates, 2019-20, the Province added $110 million to the LHINs – Supplementary Investments transfer payment but in the fourth quarter, $115 million was reallocated to another vote-item for a net 2019-20 budget reduction of $5 million. Interestingly, the Province ended 2019-20 without recording any spending in the LHINs – Supplementary Investments transfer payment and instead spent over budget on the LHINs[6] ($1.4 billion over budget) and Child and Youth Mental Health ($21 million over budget) transfer payments. In total, the LHINs and Related Health Service Providers vote-item finished the year $65 million under its revised 2019-20 budget.

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Table 5 identifies transfer payment programs with budgets over $200 million that experienced budget changes of 10 per cent or more.[7]

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Table 6 identifies transfer payment programs with budgets over $200 million that spent 98 per cent or less of their 2019-20 revised budget.[12]

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Table 7 identifies transfer payment programs with budgets of $200 million or more that spent more than their revised 2019-20 budget.[13] Transfer payment programs are legally allowed to spend over budget if total spending for the applicable vote-item does not exceed the vote-item’s revised budget.

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2019-20 Budget Deficit Projection

In the March 2020 Update, the Province projected an interim budget deficit for 2019-20 of $9.2 billion. The FAO updated the Province’s deficit projection using the FAO’s more recent revenue forecast[14] and the 2019-20 spending results reviewed above.[15] Based on this updated information, the FAO projects a 2019-20 budget deficit of $8.7 billion, an improvement of $0.5 billion compared to the deficit projection in the March 2020 Update.

The $0.5 billion improvement in the budget deficit projection reflects significant changes in the revenue and spending forecasts between the March 2020 Update and the FAO’s projection. The FAO estimates that 2019-20 total revenue will be $2.0 billion lower than forecast by the Province in the March 2020 Update, which reflects the evolving economic outlook for 2020 due to the COVID-19 pandemic. At the time of the March 2020 Update, the Province forecast nominal GDP growth for 2020 of positive 2.0 per cent. In the Economic and Budget Outlook, published in May 2020, the FAO forecast a decline in 2020 nominal GDP of 8.8 per cent.   

In terms of spending, the FAO projection for total expense is $2.3 billion lower than the expense forecast in the March 2020 Update. The difference in the spending forecasts reflects the more up-to-date information available to the FAO (as of May 14, 2020) compared to the forecast used by the Province in the March 2020 Update.    

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About this Document

Established by the Financial Accountability Officer Act, 2013, the Financial Accountability Office (FAO) provides independent analysis on the state of the Province’s finances, trends in the provincial economy and related matters important to the Legislative Assembly of Ontario.

This report has been prepared with the benefit of publicly available information and information provided by Treasury Board Secretariat.

All dollar amounts are in Canadian, current dollars (i.e., not adjusted for inflation) unless otherwise noted.

Prepared by:
Jacob Kim (Financial Analyst), under the direction of Jeffrey Novak (Chief Financial Analyst).

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Footnotes