DEFICIT FOR 2012-13 COULD BE SLIGHTLY LOWER THAN ESTIMATED IN BUDGET 2013
For the period April to March of fiscal year 2012-13, the federal government posted a deficit of $18.3 billion, down $3.2 billion from the deficit of $21.6 billion reported in the same period in 2011-12. Based on the results to date, budgetary revenues appear to be somewhat weaker than forecast in Budget 2013, primarily reflecting a decline in personal income tax revenues in March 2013 compared to March 2012. This decline appears to be attributable to final adjustments with respect to taxation year 2011 for employment insurance premiums, Canada Pension Plan premiums and tax transfers to the provinces. These adjustments were larger than in 2011-12, thereby dampening personal imcome tax revenues. However, this shortfall is expected to be more than offset by lower-than-expected program expenses. On balance, the final deficit outcome for 2012-13, which will not be known until the audited results are released in the fall of 2013, could be slightly lower than the Budget 2013 estimate of $25.9 billion.
Of the $3.2 billion year-over-year improvement, budgetary revenues were up by $3.9 billion, primarily due to higher personal income tax revenues (up $3.4 billion, reflecting increases in employment and average wages) and employment insurance premiums (up $1.6 billion reflecting higher premium rates and an increase in maximum insurable earnings). Corporate income tax revenues were down $0.4 billion, due to the reduction in the general corporate income tax rate, largely offset by a decrease in refunds, while “other revenues” declined by $1.4 billion. Public debt charges declined by $2.0 billion, reflecting the impact of lower effective interest rates, as the stock of interest-bearing debt increased. Program expenses were up by $2.7 billion, with higher expenses recorded in all major components, with the exception of employment insurance benefits (down $0.5 billion) and direct program expenses (down $0.7 billion, reflecting the impact of the restraint measures and the ending of the stimulus measures under the Economic Action Plan). .
These are not the final results for fiscal year 2012-13 as a whole. Still to come are the end-of-year accrual adjustments, including the final estimates for tax revenues and valuation adjustments for assets and liabilities. For example, the results to date do not include the $2.4 billion, identified in Budget 2013, for AECL environmental liabilities. For 2011-12, the accrual adjustments increased the deficit reported for the period April 2011 to March 2012 by $4.6 billion, resulting in a deficit of $26.2 billion for the year as a whole.
In Budget 2013, the Minister of Finance revised down the forecast for the deficit in 2012-13 marginally, from $26 billion to $25.9 billion. To not exceed this revised deficit target, the end-of-year accounting adjustments cannot increase the year-to-date deficit of $18.3 billion by more than $7.6 billion. Excluding the $2.4 billion for AECL environmental liabilities, this would imply an end-of-year accounting deficit of $5.2 billion, marginally higher than that recorded in 2011-12. On balance, this would suggest that the final outcome for 2012-13 will not be greater than the Budget 2013 estimate of $25.9 billion but could come in slightly lower.