The March 2012 Fiscal Monitor reports an increase in the year-over-year deficit of $2.8 billion, from $6.2 billion in March 2011 to $9.0 billion in March 2012.  However, more than all of this increase was attributable to the recording of liabilities of $2.2 billion in federal assistance to Quebec for sales tax harmonization and $0.9 billion for the estimated workforce adjustment costs associated with the 2012 Budget employee reductions.

For the period April 2011 to March 2012, the deficit was estimated at $23.5 billion, $10.9 billion lower than that report in the same period in 2010-11.  Of the year-over-year improvement, budgetary revenues were up by $11.4 billion, primarily due to higher personal and corporate income tax revenues, while program expenses were up by $0.4 billion, as lower other transfer payments and employment insurance benefits were more than offset by higher transfers to provinces/territories, elderly benefits and other direct program expenses. Public debt charges were up marginally.

These are not the final results for the fiscal year as a whole. Still to come are the end-of-year accrual adjustments, including the final estimates for tax revenues and valuations adjustments for assets and liabilities. For 2010-11, these accrual adjustments reduced the deficit reported for the period April 2010 to March 2011 by $1.1 billion.

A positive adjustment of a larger amount is expected for 2011-12, based on the results to date. Although the forecast for budgetary revenues appears to be on track, with higher-than-expected personal income tax revenues more than offsetting lower-than-expected Goods and Service Tax revenues, the Budget 2012 estimate for other transfer payments appears to be significantly overstated.  Budget 2012 estimated that other transfer payments would be $2.8 billion lower than in 2010-11.  To the end of March 2012, however, they are $6.1 billion lower.  In 2010-11, there were no major year-end accrual adjustments affecting this component.

Some of the other components of program expenses could come in higher-than-estimated in Budget 2012.  Expenses for other direct program expenses (excluding other transfer payments) could be $2 billion higher than estimated in Budget 2012, especially if the Government decides to book the shortfall in the environmental liability as identified by the Commissioner for the Environment and Sustainable Development.

On balance, the final deficit outcome for 2011-12 could be between $21 billion and $23 billion.