Prince Edward Island Tops the Provinces and Federal Government Budget Performance
CONTACT: Michael Walker
Executive Director, The Fraser Institute (604) 688-0221, ext. 545
EMBARGO DATE: June 19, 1995
MEDIA RELEASE
Vancouver, British Columbia>>> The Fraser Institute today released the results of the first federal and provincial government budget performance ranking. The Canadian Budget Performance Index measures the behaviour of federal and provincial governments with respect to budgetary spending, revenue, deficits, and tax-supported debt. The Index is a composite of three sub-indices: "spending," "revenue," and "deficit and tax-supported debt."
"We have constructed this index as a supplement to The Fraser Institute Tax Freedom Day index released on June 15, in order to give a broader perspective on the fiscal affairs of the provinces and the federal government," said Institute Executive Director Dr. Michael Walker. "Tax policy is important, but it is not the only aspect of government finances which should be considered. Some provinces, such as Saskatchewan, with very late Tax Freedom Days, have, comparatively speaking, controlled their spending and their deficits in recent years and on an overall basis are showing greater improvement than some other provinces, like Newfoundland, which has one of the earliest Tax Freedom Days but ranks in the middle on overall fiscal performance," said Walker.
The top three overall budgetary performers are Prince Edward Island, Saskatchewan, and Alberta with overall scores out of 100 of 68, 61, and 58 respectively. The worst performance, by far, was turned in by the Federal government with a score of only 18.8 out of 100. Alberta scored lower than might be expected on the basis of its past performance because it expects to incur a budgetary deficit in the current fiscal year. Prince Edward Island did not score at the top level in any category but was a consistent performer overall and without a "flashy" performance topped the other ten contenders. The same was true for Saskatchewan which did better than average in all categories except spending control but achieved the second highest grade overall.
"The federal government's very low score underlines the need for strong action on the taxation and deficit control front," according to Michael Walker, "and shows clearly, if any other evidence was necessary, that it is now primarily the federal government's fiscal performance that is lacking."
"As far as we know," Walker stated,"this is the only ranking of the federal government and the provinces on a consistent basis that has ever been compiled. In addition, we have included all of the spending of the provinces, so that those provinces that have pushed some of their spending into off-budget accounts get fully tagged for all of their spending."
With the exception of the tax-supported debt figures, the data are taken from the federal and provincial government budgets The Ontario data for the fiscal year 1995/96 are taken from the 1995 Ontario Budget Plan.Note for 1994 and 1995. The tax-supported debt figures are obtained from the Dominion Bond Rating Service for the 1993/94 and 1994/95 fiscal years. Spending and revenue cover both current and capital accounts.
The Budget Performance Index contains three sub indices: spending, taxation and deficits and tax-supported debt.
The first index examines the extent to which the governments are controlling budgetary spending between 1994/95 and 1995/96. Both total spending and self-financed spending, that is spending net of federal government transfers to the provinces, Whenever provincial spending net of transfer payments from the federal government are analysed, federal spending net of transfer payments to the provinced are examined.Note are analyzed.
The second index looks at how each province's taxes and own-source revenues (revenue net of federal government transfer payments to the province) are being managed over 1994/95 and 1995/96.
The third index measures how deficits and tax-supported debt are being controlled.
The Spending Index is composed of six variables
1.Spending per capita in 1995/96 (dollars)
2.The change in real spending between 1994/95 and 1995/96 (percent)
3.The change in real spending net of federal government transfer payments between 1994/95 and 1995/96 (percent)
4.The change in spending net of federal government transfer payments as a percentage of Gross Domestic (Provincial) Product (GDP) between 1994/95 and 1995/96 (percentage points)
5.The change in real spending net of federal government transfers per capita between 1994/95 and 1995/96 (dollars, where 1986 = 100)
6.Provincial government: The difference (between 1994/95 and 1995/96) in the ratio of a province's spending per capita to the Canadian provincial government average spending per capita.
Federal government: The difference in the ratio of spending per capita to the average spending per capita by the other G-7 countries' central governments The data for this calculation are taken from the International Monetary Fund's publication--Government Finance Statistics Yearbook, 1993--and from Statistics Canada's Public Institutions division. Since the IMF Yearbook only gives data for Canada up to fiscal year 1989/90, we use data from Statistics Canada for 1990/91 and 1991/92. The spending series for Canada from both sources prior to 1990/91 are nearly identical.Note (between 1990 and 1991).
The Revenue Index consists of six variables
1.The change in real tax Tax includes, in addition to ordinary taxes such as income and sales taxes, natural resource levies, liquor board profits, motor vehicle licences and permits, health premiums and other licences, fees and permits.Note per capita between 1994/95 and 1995/96 (dollars, where 1986 = 100)
2.The change in own-source revenue as a percentage of GDP between 1994/95 and 1995/96 (percentage points)
3.The change in gasoline tax rates (cents per litre)
4.The change in the general sales tax rate (percent)
5.The combined top marginal personal income tax rate (including surtaxes and flat taxes) and corporate income tax rate (percent)
6.The change in the combined top marginal personal income tax rate and the corporate income tax rates (percentage points)
The Deficit and Tax-Supported Debt Index is composed of four variables
1.The deficit per capita in 1995/96 (dollars)
2.The change in the deficit as a percentage of GDP between 1994/95 and 1995/96 (percentage points)
3.The change in tax-supported debt per capita between 1993/94 and 1994/95 (dollars)
4.The change in tax supported debt as a percentage of GDP between 1993/94 and 1994/95
Each variable is standardized such that the lowest score is zero and the highest score is 100. The variables are then assigned a weight of one and summed across their respective categories. The index showing the overall budget performance is obtained by averaging the "spending," "revenue," and the "deficit and tax-supported debt" indices.