The curtain falls on another fiscal year

Sometimes I wonder if I am going to miss Stephen Harper and Jim Flaherty when they are gone. It goes away pretty quickly, but I was reminded of their clever conservatism when I opened up the 2007 federal budget just now. Like the 2008 Budget, named “Responsible Leadership” the 2007 budget also had a name: ASPIRE to a Stronger, Safer, Better Canada. And oh did we ever aspire: the tax cuts were bigger and tastier than we could have imagined; the torch-carrying to further enrich US entertainment companies made us laugh and cry; the barbs thrown at Dalton (the boy can’t take a joke); the raid on Conservative Party headquarters. Let’s face it, a dose of tough love from Steve and Jim has made us all just a little stronger, safer and yes, better.

OK, I’ve run out of sarcasm. The reason I went to budget 2007 was to do a numbers check, since the Fiscal Monitor just came out with the final tallies for the 2007/08 fiscal year. These will be fully accrued and audited, and later presented as the Annual Financial Report this summer, but in the meantime this is a pretty accurate look at the fiscal year that was. Here’s the skinny:

April 2007 to March 2008: budgetary surplus of $10.2 billion after cost of measures

For the April 2007 to March 2008 period, the budgetary surplus is estimated at $11.7 billion, down $1.2 billion from the $12.9-billion surplus reported in the same period of 2006–07. Budgetary revenues increased by $10.6 billion, or 4.6 per cent, driven by gains in income tax revenues and other revenues. The results to date reflect the impact of tax relief measures introduced in the October 2007 Economic Statement. These measures consist of the 1-percentage-point reduction in the goods and services tax (GST) rate effective January 1, 2008, and the reduction in the lowest personal income tax rate from 15.5 per cent to 15 per cent and the increase in the basic personal amount to $9,600, both retroactive to January 1, 2007. Program expenses were up $12.5 billion, or 6.8 per cent, due to higher transfer payments and operating expenses of departments and agencies. Public debt charges were down $0.6 billion, reflecting reductions in market debt.

The April 2007 to March 2008 monthly results are not the final results for the year as a whole. They do not reflect $1.5 billion in 2007–08 measures announced earlier this year, including the Public Transit Capital Trust 2008 and the Police Officers Recruitment Fund. The cost of these measures will be reflected in the end-of-year supplementary period. Deducting the cost of these measures from the $11.7-billion year-to-date surplus would yield a surplus of $10.2 billion. In addition, the year-to-date results do not reflect the regular end-of-year adjustments, which include final tax accrual adjustments as well as estimates of the cost of liabilities incurred during the fiscal year but for which no payment has yet been made.

So depending on what standard you want to hold them to, a $10-12 billion surplus. That will go into debt repayment, no one’s top priority for action by the federal government. Again.

As tabled, the budget had only planned $3 billion in debt reduction, plus another $300 million in “remaining surplus”. Budgetary revenues closed at $241.9 billion, compared to $236.7 in the budget, with corporate income tax up 12% (don’t worry about corporations paying too much, we’re giving them tax cuts). True to form of 2006/07, program expenditures came in under budget, at $197.1 billion compared to $199.6 billion in the budget – thereby preventing the Canadian Taxpayers Federation from issuing a press release decrying more than $200 billion in socialist waste. That said, program expenditures were up almost 7%, which is better than one would realistically expect from the Tories, and clearly the fruit of a minority government.

Looking forward, what is largely missing is the impact of the Fall 2007 tax cuts, which will gain strength in terms of fiscal impact starting in 2008/09. So I’m more pessimistic about hidden surpluses this year than in years past, especially in light of economic conditions (though Canada seems to be defying gravity, the US situation continues to be a concern). Keep your eyes peeled for some spending restraint this year as the feds look to keep the budget in balance if not surplus.