Alberta Tops the Budget Performance Index

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Joel Emes

The Fraser Institute Budget Performance Index provides Canadians with information about how their local and provincial governments tax, spend, and manage debt relative to other Canadian jurisdictions.1 It measures the recent fiscal conduct of the provinces and the federal government in terms of 17 variables in 3 subindices calculating spending, tax rates, tax revenues, and deficits as well as changes in debt.

Alberta out-performed all the other provinces and the federal government to end up with a score of 74.3 out of a possible 100 on the Budget Performance Index for 2000. Table 1 shows the jurisdictions' Budget Performance Index score and rank as well as their scores and ranks on each of the sub-indices. Figure 1 presents the Budget Performance Index scores ranked from highest to lowest.

Table 1: Budget Performance Index, 2000
	Spend-ing Score	Spend-ing Rank	Tax Rates & Revenue Score	Tax Rates & Revenue Rank	Debt & Deficit Score	Debt & Deficit Rank	Budget Performance Index Score	Budget Performance Index Rank
AB	44.9	4	77.9	1	100.0	1	74.3	1
NB	52.3	3	62.3	3	54.2	7	56.3	2
Fed	100.0	1	31.8	11	29.8	9	53.9	3
MB	31.4	7	57.8	6	67.9	3	52.4	4
SK	22.3	9	60.6	4	70.5	2	51.2	5
PE	38.7	6	44.0	9	63.7	4	48.8	6
ON	54.1	2	71.5	2	17.1	10	47.6	7
BC	28.2	8	58.9	5	38.0	8	41.7	8
NS	12.1	11	55.2	7	57.8	5	41.7	9
NF	12.6	10	50.6	8	54.7	6	39.3	10
QC	40.7	5	38.6	10	3.1	11	27.5	11
Sources: Statistics Canada, Public Institutions Division, FMS data; federal and provincial public accounts, budgets and updates; calculations by the author.

Figure 1

Two items that stand out in table 1 are that Alberta received a perfect score on the debt and deficit subindex, and that the federal government received a perfect score on the spending subindex. Alberta holds or shares top position on every variable in the debt and deficit subindex because it did not have a single deficit year over the period of the study, it decreased its debt by almost $3,000 per person, and all but eliminated its net debt. Alberta has announced that it had eliminated its net debt as of 1999/00 (but this study doesn't reflect that as its debt data ends in 1998/99). The federal government holds the top spot on every one of the spending variables. This may seem strange since The Fraser Institute has frequently reminded Canadians that the federal deficit was eliminated mainly because of increased tax revenue, and that narrowly defined federal spending actually increased rather than decreased over the deficit elimination period (see Andrew Kosnaski's article in the February 2000 Fraser Forum). Although the federal government did eliminate its deficit mainly through increased revenue, and its low score on the Tax Rates and Revenue subindex certainly bears this out, it did cut spending between 1994/95 and 1999/00, while the provinces as a whole increased spending. Federal spending cuts coupled with steady population growth and strong GDP and personal income growth explain why the federal government scores so well on the Spending subindex.

Spending

Table 2 summarizes the Spending sub-index and includes each jurisdictions' values for the four variables as well as their score and rank. As mentioned above, the federal government holds top spot on every one of these variables and received the top score on this sub-index.

Sources: Statistics Canada, Public Institutions Division, FMS data; federal and provincial public accounts, budgets and updates; calculations by the authors.
*Provincial data excludes federal transfers, federal data includes them; Quebec's figures are adjusted for the federal tax abatement.

Table 2: Spending Subindex
	Average annual change in real spending less transfers* per capita (percent)	Average annual change in spending less transfers* as a percentage of GDP (percent)	Average annual change in spending *less transfers per $1,000 of personal income (percent)**	Spending less transfers* as a percentage of GDP, 1999/00	Score	Rank
Fed.	(3.0)	(4.4)	(3.8)	18.0	100.0	1
ON	(0.7)	(2.8)	(1.6)	21.7	54.1	2
NB	(0.8)	(2.5)	(1.7)	22.1	52.3	3
AB	0.1	(1.0)	(1.6)	19.9	44.9	4
QC	(0.9)	(2.4)	(1.8)	26.0	40.7	5
PE	0.3	(1.3)	(0.4)	20.0	38.7	6
MB	0.2	(1.1)	(1.0)	23.3	31.4	7
BC	(1.6)	(0.5)	(0.9)	25.6	28.2	8
SK	0.4	(0.8)	(0.8)	25.0	22.3	9
NF	2.1	(1.0)	0.5	23.3	12.6	10
NS	1.5	(0.3)	0.4	23.4	12.1	11

Tax rates and revenue

Table 3: Tax Rates and Revenue Subindex
Percentage change in top personal* income tax rate (provincial or federal portion only) Percentage change in sales tax rate (provincial or federal portion only) Percentage change in general business income tax rate (provincial or federal portion only) Top personal* income tax rate (provincial or federal portion only), 1999 Sales tax rate (provincial or federal portion only), 1999 Top corporate income tax rate (General business rate), 1999 Tax revenue* as a percentage of GDP (provincial-local or federal portion only), 1999/00 Federal transfers*, as a percent of total provincial revenue, 1999/
2000** Average annual change in tax revenue* as a percentage of GDP Score Rank

AB (3.2) 0.0 0.00 14.28 0.0 15.50 14.2 7.9 2.7 77.9 1

ON (18.3) 0.0 0.00 17.87 8.0 15.50 17.6 9.8 (0.3) 71.5 2

NB (6.3) (27.3) 0.00 18.79 8.0 17.00 15.5 37.4 (1.6) 62.3 3

SK (3.5) (33.3) 0.00 19.90 6.0 17.00 18.0 19.3 0.7 60.6 4

BC (6.3) 0.0 0.00 21.39 7.0 16.50 17.4 11.1 0.0 58.9 5

MB (5.3) 0.0 0.00 18.07 7.0 17.00 17.2 27.8 (0.8) 57.8 6

NS (3.4) (27.3) 0.00 18.34 8.0 16.00 16.7 39.3 0.2 55.2 7

NF 10.0 (33.3) 0.00 22.01 8.0 14.00 15.9 38.4 (2.7) 50.6 8

PE (1.7) 0.0 6.67 18.66 10.0 16.00 16.1 38.3 (0.1) 44.0 9

QC (1.9) 15.4 0.00 21.22 7.5 16.25 22.7 22.7 1.4 38.6 10

Fed. (1.4) 0.0 0.00 30.89 7.0 28.00 17.4 n/a 1.1 31.8 11

Sources: Statistics Canada, Public Institutions Division, FMS data; federal and provincial public accounts, budgets and updates; calculations by the author.
*Quebec's figure adjusted for the federal tax abatement.
**The federal government could not be ranked for this variable; its score is based on the other eight variables.

Debt and deficit

Table 4 summarizes the Debt and Deficit subindex and includes each jurisdiction's values for the four variables, as well as their score and rank. There are six columns of data because "Average annual surplus (deficit) per capita" and "Average annual surplus (deficit) as a percentage of GDP" are shown in their

Table 4: Debt and Deficit Subindex
	Average annual surplus (deficit) per capita (dollars)	Average annual surplus (deficit) per capita (adjusted) (dollars)	Average annual surplus (deficit) as a percentage of GDP	Average annual surplus (deficit) as a percentage of GDP (adjusted)	Change in debt per capita, 1994/95 to 1998/99 (dollars)	Percentage point change in debt as a percentage of GDP, 1994/95 to 1998/99	Score	Rank
AB	717	0	2.0	0.0	(2,986)	(95.4)	100.0	1
SK	73	0	0.3	0.0	(1,031)	(21.9)	70.5	2
MB	218	0	0.9	0.0	(663)	(19.5)	67.9	3
PE	197	0	0.9	0.0	(212)	(12.8)	63.7	4
NS	(31)	(31)	(0.1)	(0.1)	(134)	(10.2)	57.8	5
NF	21	0	0.1	0.0	1,110	(6.9)	54.7	6
NB	(40)	(40)	(0.2)	(0.2)	192	(9.0)	54.2	7
BC	(141)	(141)	(0.5)	(0.5)	132	4.1	38.0	8
Fed.	(216)	(216)	(0.8)	(0.8)	230	(9.5)	29.8	9
ON	(248)	(248)	(0.8)	(0.8)	1,461	3.7	17.1	10
QC	(342)	(342)	(1.4)	(1.4)	1,130	(0.9)	3.1	11
Sources: Statistics Canada, Public Institutions Division, FMS data; federal and provincial public accounts, budgets and updates; calculations by the authors.

adjusted and unadjusted forms. The adjusted value is the only one that is used in the calculation of the subindex. Actual surpluses for these two variables are set to zero because, by definition, surplus money is either spent or reduces net debt. As spending and changes in debt are measured elsewhere in the Budget Performance Index, leaving these two variables unadjusted would result in a bias favouring provinces that had large surpluses. Alberta dominated this subindex with a surplus in every year, a $2,986 decrease in debt per capita, and the almost total elimination of net debt, reflected in the large decrease in the debt-to-GDP ratio. Five jurisdictions (Newfoundland, Prince Edward Island, Manitoba, Saskatchewan, and Alberta) had an annual average surplus for the period of study; the debt-to-GDP ratio fell in nine jurisdictions, the exceptions being Ontario and British Columbia.

The Budget Performance Index has been substantially improved since its last release. Two of the main improvements are a switch to consolidated data and the extension of the period of analysis. Consolidated provincial-local data is used to ensure that those provinces with a high concentration of spending responsibility and taxation authority at the provincial level do not get penalized simply because of this difference. The period of analysis for most variables is fiscal year 1995/96 through fiscal year 1999/00. The exceptions are tax rates, which are measured in calendar years (1995 and 1999) and debt per capita and as a percent of GDP (which is measured from fiscal year 1994/95 through fiscal year 1998/99). Previous versions of the Budget Performance Index had a short, two-year focus. The new standard is five years so the influence of revisions to budget figures is reduced.

Notes

As this study uses consolidated provincial-local data, all references to an individual province include the activities of both the provincial and local governments.

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