For the first eight months of fiscal year 2013-14, the federal government posted a deficit of $13.8 billion, an increase of $0.2 billion from that the deficit of $13.6 billion reported in the same period in 2012-13. The year-over-year increase was affected by the “booking” of a $2.8 billion liability for disaster assistance for the 2013 flood in Alberta.  In the absence of this one-time liability, the deficit would have been $2.6 billion lower.

Total budgetary revenues were up by $5.8 billion for the first eight months of 2013-14 on a year-over-year basis, compared to an increase of $8.6 billion expected in the November 2013 Update for the year as a whole.  The increases in GST and other revenues to date are somewhat larger than those expected in the November 2013 Update, while personal and corporate income tax revenues are somewhat lower.  As a result, the overall revenue target set out in the November 2013 Update appears to remain on track.  However, this implies that all of the $1.5 billion “risk adjustment factor” included in the November 2013 Update will be required.

For the first eight months of 2012-13, program expenses are up $6.1 billion, compared to the same period in 2012-13. In the November 2013 Update, an increase of $7.2 billion is expected for the year as a whole. However, year-over-year comparisons are currently distorted by the timing of bookings for various liabilities.  In 2012-13, such bookings amounted to over $3 billion, but were largely recorded at the end of the fiscal year. This year, bookings of about a similar amount have already been recorded. After adjusting for the timing of the bookings for “one-time extraordinary” liabilities, the year-over-year increase in total program expenses to date is somewhat lower than that expected for the year as a whole. If this materializes, the deficit outcome for 2013-14 could be lower than estimated in the November 2013 Update.

In the November 2013 Update, the Minister of Finance revised his deficit forecast for 2013-14 to $17.9 billion, down only $1.0 billion from the final audited outcome for 2012-13. This is significantly less than the improvement of $7.4 billion recorded between 2011-12 and 2012-13. With the ending of the stimulus spending announced in the Economic Action Plan, coupled with the incremental impacts of the various restraint measures announced in previous budgets, one would have expected a much larger improvement in the deficit for 2013-14. The financial results to date appear to suggest little improvement in the deficit outlook for 2013-14, consistent with the November 2013 Update.  However, the Fiscal Monitor results for 2012-13 were not a good indicator of the final outcome for 2012-13, as the deficit came in well below expectations.

As we noted in our article entitled “What are the Chances of a Balanced Budget in 2014-15 (www.3dpolicy.ca), the probability of eliminating the deficit in 2014-15 depends largely on how much better the deficit outcome will be for 2013-14.  If the deficit for 2013-14 is as currently projected, the probability of a balanced budget in 2014-15 is low or nil.  A much better than expected outcome for 2013-14 would likely result in a balanced budget for 2014-15, all other things remaining equal.

The Minister of Finance will be presenting a new set of budgetary projections in his upcoming budget, scheduled for February 11, 2014. However, Canadians will have to wait until October next year before the final audited results for 2013-14 are released.