Expenditure Monitor 2019-20: Q3

Highlights

• This report provides information on spending by the Province over the first nine months of the 2019-20 fiscal year, including changes to the 2019 budget spending plan, actual spending results compared to planned spending and an updated budget deficit projection.
• Since the tabling of the 2019 Ontario Budget, the Province has increased its spending plan by a net $2.5 billion, by requesting new spending authority through Supplementary Estimates and program budget reallocations.
  • The budgets for health, education, children’s and social services, and electricity price mitigation programs all received funding increases.
• The FAO reviewed the Province’s revised spending plan against actual spending through the first three quarters of 2019-20 and found that actual spending, at $112.4 billion, was $2.0 billion lower than planned.[1]
  • Every sector spent less than planned over the first nine months of 2019-20, except for the education sector, which spent $576 million more than planned.
• If the pace of actual-to-planned spending continues, the FAO projects a 2019-20 budget deficit of $6.1 billion, compared to the government’s budget deficit forecast of $9.0 billion in the Third Quarter Finances.[2]
  • Compared to the Province’s $9.0 billion budget deficit outlook, the FAO projects $2.0 billion in net spending savings and $1.0 billion in savings from the budget reserve.

Introduction

This report provides information on spending by the government of Ontario (the Province) over the first nine months of the 2019-20 fiscal year (as of December 31, 2019). The report:

• Identifies changes to the Province’s 2019-20 budget spending plan;
• Reviews actual spending for the first nine months of the 2019-20 fiscal year against planned spending over the same time period; and
• Projects the Province’s 2019-20 budget deficit and compares it to the budget deficit outlook in the Ministry of Finance’s 2019-20 Third Quarter Finances.

Changes to the Budget Spending Plan

In the 2019 Ontario Budget, the Province tabled a 2019-20 spending plan of $156.2 billion.[3] As of December 31, 2019, the 2019-20 spending plan has increased by $2.5 billion, for a revised budget spending plan of $158.8 billion.

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

• The tabling of Supplementary Estimates, on December 11, 2019, which requests from the legislature $2.7 billion in additional spending authority; and
• Internal program budget reallocations, which, net of Contingency Fund savings, results in an overall program spending reduction of $139 million.[4]

The revised 2019-20 health sector budget is $0.4 billion higher than originally planned:

• Supplementary Estimates account for $0.3 billion of this increase, with additional spending for payments to physicians, drug programs and payments to Local Health Integration Networks (LHINs), which fund hospitals, long-term care homes and community programs service providers.
• Budget reallocations account for $0.1 billion of this increase, with additional spending for Official Local Health Agencies and municipal ambulance and emergency services.

The revised 2019-20 education sector budget is $0.2 billion higher than originally planned:

• Supplementary Estimates account for $0.1 billion of this increase, with additional spending for school board operating grants.
• Budget reallocations account for $0.1 billion of this increase, with additional spending for the Child Care and Early Years program.

The revised 2019-20 children’s and social services sector budget is $0.6 billion higher than originally planned:

• Supplementary Estimates account for $0.4 billion of this increase, with additional spending of $0.3 billion for the Autism program and $0.1 billion for Ontario Works and the Ontario Disability Support Program (ODSP).
• Budget reallocations account for $0.2 billion of this increase, with additional spending for a variety of programs, including Residential Services, Child Protection Services and Youth Justice Services.

The revised 2019-20 other programs sector budget is $1.3 billion higher than originally planned:

• Supplementary Estimates account for $1.9 billion of this increase, with additional spending of $1.6 billion for Electricity Price Mitigation Programs and $0.3 billion for the Contingency Fund.
• Budget reallocations account for a $0.6 billion spending decrease, largely through the use of the Contingency Fund to support various program budget increases.

For information on budget spending plan changes by program, see appendix B, Table 4.

Spending by Budget Sector

Over the first three quarters of the 2019-20 fiscal year, the Province spent $112.4 billion. Overall, this is $1,989 million or 1.7 per cent lower than planned, based on the revised budget of $158.8 billion.[5] This implies that if the “pace” of actual spending compared to planned spending recorded through the first three quarters of 2019-20 continues in the fourth quarter, then there could be significant program savings at year-end (see next section for more analysis).

The remainder of this section reviews the major programs in each sector that are spending above and below plan through the first three quarters of the 2019-20 fiscal year (as of December 31, 2019).

Health sector spending, at $43.8 billion, was $400 million or 0.9 per cent lower than planned through the first three quarters of the fiscal year.[6]

• Ontario Health Insurance Program – Ontario Health Insurance (Vote-Item 1405-1), which administers payments to physicians, was $336 million or 2.9 per cent above planned spending.
• Provincial Programs and Stewardship – Provincial Programs (Vote-Item 1412-1), which funds Cancer Care Ontario and other programs, was $158 million or 6.6 per cent above planned spending.
• Local Health Integration Networks and Related Health Service Providers (Vote-Item 1411-1), which funds hospitals, long-term care homes and community programs service providers, was $102 million or 0.5 per cent below planned spending.
• Ontario Health Insurance Program – Drug Programs (Vote-Item 1405-2), which administers provincial drug programs, was $283 million or 7.9 per cent below planned spending.  
• Health Capital Program (Vote-Item 1407-1), which funds hospital infrastructure projects, was $465 million or 37.4 per cent below planned spending.[7]

Education sector spending, at $23.0 billion, was $576 million or 2.6 per cent higher than planned through the first three quarters of the fiscal year.[8]

• Elementary and Secondary Education Program – Policy and Program Delivery (Vote-Item 1002-1), which mainly funds school boards, was $595 million or 3.2 per cent above planned spending.
• Elementary and Secondary Education Program – Support for Elementary and Secondary Education (Vote-Item 1002-3), which mainly funds capital projects for schools, was $106 million or 10.5 per cent below planned spending.[9]  

Postsecondary education and training sector spending, at $5.7 billion, was $219 million or 3.7 per cent lower than planned through the first three quarters of the fiscal year.

• Employment Ontario Program – Employment Ontario System (Vote-Item 3003-7), which largely funds employment and training programs, was $132 million or 15.5 per cent below planned spending.

Children’s and social services sector spending, at $13.0 billion, was $129 million or 1.0 per cent lower than planned through the first three quarters of the fiscal year.

• Children and Adult Services Program – Financial and Employment Supports (Vote-Item 702-3), which includes the Ontario Disability Support Program, Ontario Works and the Ontario Drug Benefit Plan, was $279 million or 3.8 per cent above planned spending.
• Children and Adult Services Program – Supports to Individuals and Families (Vote-Item 702-21), which administers various supportive services such as Residential Services, Autism, and Children and Youth Community Supports, was $336 million or 10.6 per cent below planned spending.  

Justice sector spending, at $3.5 billion, was $27 million or 0.8 per cent lower than planned through the first three quarters of the fiscal year.

Other programs sector spending, at $14.6 billion, was $1,117 million or 7.1 per cent lower than planned through the first three quarters of the fiscal year.

• Electricity Price Mitigation Programs (Vote-Item 2206-1), which subsidizes electricity costs, was $736 million or 18.5 per cent below planned spending.[10]
• Infrastructure Policy and Planning – Infrastructure Programs (Vote-Item 4003-2), which funds infrastructure projects, was $217 million or 58.6 per cent below planned spending.

Interest on debt spending, at $8.7 billion, was $673 million or 7.1 per cent lower than planned through the first three quarters of the fiscal year.

Budget Deficit Projection

In the Ministry of Finance’s 2019-20 Third Quarter Finances, the Province projected a budget deficit of $9.0 billion in 2019-20. This budget deficit projection includes a “current outlook” for spending that largely reflects the revised spending budget reviewed in the first section of this report; it does not account for the pace of actual spending through the first three quarters of 2019-20.[11]

As previously discussed, the FAO estimates that actual government spending was 1.7 per cent lower than planned over the first three quarters of the fiscal year. If this pace of actual-to-planned spending continues through the fourth quarter, the FAO expects $2.0 billion in savings (or underspending) by year-end compared to the forecast in the 2019-20 Third Quarter Finances. This spending savings estimate is consistent with historical patterns, which has averaged an even larger $3.3 billion in annual savings over the past 10 years (see appendix A for more information).

In addition, in the Third Quarter Finances, the government maintained a reserve of $1 billion for 2019-20, which is used to “protect the fiscal outlook against unforeseen adverse changes in the Province’s revenue and expense” forecasts.[12] Absent further decisions by the Province or changes to the revenue outlook,[13] the $1 billion reserve will not be required.

In summary, based on government decisions and spending patterns up to December 31, 2019, the FAO estimates that spending savings and the unused reserve would combine to reduce the deficit by $3.0 billion compared to the budget deficit projection in the Third Quarter Finances. This results in a 2019-20 budget deficit projection of $6.1 billion, compared to the $9.0 billion deficit projected in the government’s Third Quarter Finances.

Appendices

Appendix A: Average Spending Savings, 2009-10 to 2018-19

The FAO compared the Province’s budgeted spending against actual spending[14] for the last 10 years, from 2009-10 to 2018-19, and found that actual spending was, on average, $3.3 billion lower than budgeted. The savings each year ranged from $6.4 billion in 2010-11 to $0.3 billion in 2017-18. 

Figure 1Average spending savings, 2009-10 to 2018-19, $ billions

Note: “Budgeted spending” represents total consolidated spending presented in each year’s Expenditure Estimates (Volumes 1 and 2, and Supplementary Estimates, if applicable). “Actual spending” represents total consolidated spending as reported in each year’s Public Accounts of Ontario. The FAO has adjusted some totals to reflect in-year accounting changes so that “budgeted spending” is reported on the same basis as “actual spending.”

Source: FAO analysis of the Public Accounts of Ontario and the Expenditure Estimates.

Accessible version

Appendix B: Spending by Program

As noted in Table 1, as of December 31, 2019, the Province has increased the 2019-20 spending plan by a net $2.5 billion. The net $2.5 billion in changes has been allocated to 43 transfer payment programs and 69 other programs (see Table 4 below). In addition, the table below compares actual spending as of December 31, 2019 against each program’s revised budget.[15] Key findings include:

• Through three-quarters (75 per cent) of 2019-20, five major programs had spent more than 80 per cent of their revised budgets:
  • Ontario Works (82%)
  • Ontario Drug Benefit Plan (Ministry of Children, Community and Social Services) (89%)
  • Electricity Rate Mitigation (85%)
  • Community and Priority Services (87%)
  • Student Financial Assistance (89%)
• Through three-quarters (75 per cent) of 2019-20, 11 major programs had spent less than 70 per cent of their revised budgets:
  • Residential Services (68%)
  • Supportive Services (68%)
  • Autism (50%)
  • School Board Capital Grants (56%)
  • Ontario Rebate for Electricity Consumers (59%)
  • Ontario Electricity Rebate (12%)
  • Ontario Drug Programs (Ministry of Health) (69%)
  • Major Hospital Projects (51%)
  • Grants for College Operating Costs (64%)
  • Employment and Training (57%)
  • Public Transit (63%)

Appendix C: Spending by Ministry

In Table 5, spending of $112.4 billion over the first three quarters of 2019-20 is presented by ministry.

Alt Text

Footnotes