Ontario tops provincial fiscal performance rankings and comes in third place in North America

Contact:

Jason Clemens, Director of Fiscal Studies
The Fraser Institute
Telephone: 604) 714-4544
Email: jasonc@fraserinstitute.ca

Release Date: 12 February 2001

VANCOUVER, BC — Strong spending control and income tax cuts helped give Ontario the first-place ranking among the provinces, and third place overall among fifty-four North American jurisdictions examined in the 2001 Fiscal Performance Index [.pdf file, 345K], a ranking of the Canadian provinces and forty-seven American states, released today by The Fraser Institute.

"The purpose of the Index is to provide Canadians with information about how their provincial government taxes and spends their money relative to how other North American jurisdictions spend and tax," says Jason Clemens, director of fiscal studies at The Fraser Institute.

Methodology

Published every two years, the Institute's Fiscal Performance Index measures the performance of the Canadian provinces and the U.S. states using fifteen variables that reflect changes in spending, changes in government revenue, and changes in the structure of taxation. The Washington-based Cato Institute publishes a companion study on the fiscal performance of forty-seven governors.

The Index consists of two sub-indices. The first sub-index examines to what extent governments have controlled spending during their term of office. The second sub-index looks at how tax rates and revenues have changed over the same period.

Performance of the Provinces

"The Index is based on objective measures of fiscal performance. The jurisdictions which cut taxes and spending received the highest scores. Those who raised taxes and increased spending received the lowest scores," says Clemens.

Income tax rate cuts, holding the line on other tax rate hikes, and decreases in revenue relative to personal income give Ontario eighth place on the tax rate and revenue ranking. Deficit elimination and spending restraint place the province fourth on the spending ranking.

Alberta scored the second highest provincial ranking, and ninth place on the Index overall.

On the other end of the spectrum, British Columbia has the distinction of holding the 32nd spot on the spending ranking, and the second-to-last spot on the tax rate and revenue ranking, giving it the worst fiscal performance among the provinces and the third-worst fiscal performance in North America.

Ontario, Alberta, Quebec, Newfoundland and Labrador, Prince Edward Island, and Saskatchewan received scores of over 50 out of 100 (fifty is a passing score) in the overall index. Only British Columbia failed.

"The provinces that have had the most success in eliminating and even reversing large deficits—Alberta, Ontario, and Saskatchewan—performed the best on the spending index. In general, the majority of the provinces performed well on the spending index; six of the seven are in the top half of the rankings; the exception is British Columbia," says Clemens. This is due to the general spending restraint in Canada in the late 1990s, while at the same time the U.S. states have been more likely to use surpluses to increase spending rather than return excess revenue to taxpayers.

However, the provinces did not perform as well (relative to the U.S. states) on the tax rate and revenue rankings because the states were more likely than the provinces to have no change, or a decrease, in tax rates. In general, the states also had larger decreases, or smaller increases, than the provinces on the revenue variables.

Manitoba, Nova Scotia, and New Brunswick could not be ranked as part of this Index because recent elections in these provinces resulted in changes in government, and therefore insufficient data was available.

Massachusetts out-performed all the provinces and the forty-six other states ranked on the Fiscal Performance Index to end up in top place overall for 2001.

Later this year, The Fraser Institute will publish the Budget Performance Index a purely Canadian comparison, including an examination of federal and provincial debt. The most recent Budget Performance Index was published in 2000.

Established in 1974, The Fraser Institute is an independent public policy organization based in Vancouver, with offices in Calgary and Toronto.

For further information or for an electronic copy of Fiscal Performance Index 2001, contact:

Suzanne Walters, Director of Communications,
The Fraser Institute, (604) 714-4582,
Email suzannew@fraserinstitute.ca.

The media release and a .pdf file of the study can be viewed on the Institute's web site at www.fraserinstitute.ca.

For the U.S. data visit the Cato Institute's web site at www.cato.org.

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