BP-440E

TABLE OF CONTENTS

INTRODUCTION

GOVERNMENT OF CANADA

   A. Fiscal Data
   B. Fiscal Initiatives
   C. Economic Developments and Planning Assumptions

CENTRAL CANADA

   A. Ontario
      1. Fiscal Data
      2. Fiscal Initiatives
      3. Economic Developments and Planning Assumptions
      4. Other Issues
   B. Quebec
      1. Fiscal Data
      2. Fiscal Initiatives
      3. Economic Developments and Planning Assumptions

THE WESTERN PROVINCES

   A. British Columbia
      1. Fiscal Data
      2. Fiscal Initiatives
      3. Economic Developments and Planning Assumptions
   B. Saskatchewan
      1. Fiscal Data
      2. Fiscal Initiatives
      3. Economic Developments and Planning Assumptions
   C. Alberta
      1. Fiscal Data
      2. Fiscal Initiatives
      3. Economic Developments and Planning Assumptions
   D. Manitoba
      1. Fiscal Data
      2. Fiscal Initiatives
      3. Economic Developments and Planning Assumptions

THE ATLANTIC PROVINCES

   A. Prince Edward Island
      1. Fiscal Data
      2. Fiscal Initiatives
      3. Economic Developments and Planning Assumptions
   B. Nova Scotia
      1. Fiscal Data
      2. Fiscal Initiatives
      3. Economic Developments and Planning Assumptions
   C. New Brunswick
      1. Fiscal Data
      2. Fiscal Initiatives
      3. Economic Developments and Planning Assumptions
   D. Newfoundland and Labrador
      1. Fiscal Data
      2. Fiscal Initiatives
      3. Economic Developments and Planning Assumptions

THE TERRITORIES

   A. Yukon
      1. Fiscal Data
      2. Fiscal Initiatives
      3. Economic Developments and Planning Assumptions
   B. Northwest Territories
      1. Fiscal Data
      2. Fiscal Initiatives
      3. Economic Developments and Planning Assumptions

SUMMARY OF TRENDS

BUDGETS 1997:  EVER CLOSER TO BALANCE AT THE
FEDERAL, PROVINCIAL AND TERRITORIAL LEVELS

The economy performed exceptionally well in 1994, enabling virtually all Canadian governments to reduce their deficits and set the stage for improved fiscal performance in the future. Only the rapid rise in interest rates in that year put a damper on even better results. By contrast, the economy performed poorly in 1995. Nevertheless, Canadian governments continued their deficit-cutting policies. The economy performed better in 1996 and 1997 promises to be a year of strong growth, bringing the public sector ever closer to a budgetary balance. The federal government is surpassing its targets by a substantial margin -- it now seems to be about a year ahead of them. Many provinces have committed themselves to achieving balanced budgets or have actually done so and are implementing measures to reduce the level of debt outstanding. Ontario and Quebec are, however, still furthest away from balanced budgets, while several smaller jurisdictions have suffered temporary setbacks in this quest.

This paper examines 13 budgets tabled this year, the federal government's and those of the provinces and territories. The paper is designed to enable the reader to identify at a glance the broad fiscal trends and to compare and contrast the fiscal policies being conducted in Canada by the various governments. It is not meant to be a detailed summary of each budget. Readers interested in a more historical view may refer to the following background papers: BP-367, BP-400, and BP-425.

Material is taken from various budgets, which do not always use the same terminology or accounting conventions, especially with respect to the deficit and the debt. When these accounting conventions diverge from common usage, an attempt is made to note their impact on the published figures.

All references here are to fiscal years ending 31 March. The year ending 31 March 1997, often cited as 1996-97, is here referred to as 1997.

The 1997 federal budget was tabled in the House of Commons on 18 February 1997. It followed the Finance Minister's Economic and Fiscal Update, released four months earlier, and the pre-budget consultations of the House of Commons Standing Committee on Finance. The Minister’s update document announced a deficit target for 1999 at 1% of GDP.

Unlike past practice, this budget did not continue to insist that the 1997 deficit target would be met. Rather, it indicated that the deficit would be no more than $19 billion, well below the $24.3 billion target. Recent Department of Finance data suggest that the deficit would likely be less than $16 billion, one-third less than the 1997 target and just under the 1998 target.

The following table presents a summary of the major fiscal statistics found in the federal budget. All dollar amounts are in billions. In this and subsequent tables, numbers may not add up, due to rounding.

As the table demonstrates, federal revenues are continuing to grow, largely as a result of economic growth. Tax rates have generally been held constant with some minor exceptions. The partial indexation of the income tax system does, however, benefit government coffers as inflation reduces the real value of certain credits and pushes taxpayers into higher tax brackets. The 4% revenue growth in 1997 is enhanced by two one-time factors, the change in the timing of EI premium collections and the sale of the air navigation system to NavCan. The high rate of revenue growth is also enhanced by the fact that the EI Account surplus continues to grow rapidly -- past government practice would have reduced premiums under such circumstances.

Total spending is falling in absolute terms, due to lower interest rates and an absolute decline in program spending. By 1999, program spending is expected to equal 12% of GDP, down from 16% in 1995. This is due to a $15-billion cut in program spending over the same period.

The 1997 budget maintains the fiscal course set out in earlier budgets. Deficit targets continue to decline annually by an amount equal to 1% of GDP. This budget does, however, introduce a number of new spending and tax reduction initiatives under the broad headings "investing in jobs and growth" and "investing in a stronger society."

The first category includes $2.4-billion worth of initiatives, spread over four years. Of this total, $800 million funds the Canada Foundation for Innovation, $360 million funds enhanced tax support for higher education, $345 million provides support for small business and tourism, $425 million represents the federal share of the extended infrastructure program while $250 million goes to the extension of the Residential Rehabilitation Assistance Program. These last two initiatives were actually announced before the tabling of the budget.

Another $1.9 billion in initiatives is contained in the "investing in a stronger society" category. Over $1.1 billion of this amount goes to a reformed and enhanced Working Income Supplement under the Child Tax Benefit. It is the intention of the government to offer a revised program jointly with the provinces, so the new mechanism detailed in the budget could change in the future. If an agreement is reached with the provinces to start up the national program before 1 July 1998, total federal spending could be as much as $300 million higher.

Other initiatives in this broad category include $230 million in enhanced tax incentives for charitable giving, $230 million in tax measures and direct spending to help those with disabilities, and $300 million to fund health-related programs.

The government's approach to economic forecasting has been described facetiously as a liberal dose of conservative assumptions. Deficit targets include a $3-billion contingency reserve. The budget adds 80 basis points to the private sector average forecast for short-term interest rates and 50 basis points to the average private sector forecast for long-term interest rates. Not only does this increase budgetary projections for interest charges, it causes the budget to assume a slower rate of growth for the economy. As a result, the economic forecasts used in the budget are more pessimistic than are those of private sector economists. The budget assumes, for example, that growth in 1997 will be 3.2%, whereas the private sector average is 3.3%. First quarter results for 1997 indicate that these are reasonable forecasts.

The budget does not make any forecasts about the unemployment rate, although it does present the forecasts made by the private sector. These now average about 9.3% for 1997, based on an employment growth rate of about 2%.

Ontario and Quebec constitute the economic heartland of Canada. These are the two largest economies in Canada and it is here that Canadian manufacturing activity is concentrated. It is also here that the recent recession had been hardest felt, and these two currently have the biggest deficit problems of the provinces. The Ontario economy has recently performed better than that of Quebec and the same is expected for 1997.

The Ontario budget was tabled on 6 May 1997. The figures contained in this budget are based on the standards of the Public Sector Accounting and Auditing Board (PSAAB), rather than the modified cash basis used previously. Budgetary deficit figures now give a better picture of the true deficit than they did in the past.

The following table presents a summary of the major fiscal statistics found in the Ontario budget. All dollar amounts are in billions.

In 1996, the province of Ontario enjoyed strong revenue growth. After that, revenues are expected to decline, not because of poor economic performance but because of the deliberate policy of the government to cut personal income tax rates by 30% over three years, in addition to the decline in cash transfers from the federal government, amounting to $2.5 billion over two years. Spending is being cut significantly to finance this tax reduction, as the table illustrates. Behind the table’s statistics is a 6.7% drop in program spending from 1996 to 1998, a 25% drop in capital spending over the same period, plus $4.3 billion in restructuring charges spent over three years. These restructuring charges pay for employee severance packages, one-time payments to municipalities in exchange for the devolution of certain services, and costs for hospital restructuring.

The deficit is well below its peak of $12.4 billion in 1993 and the balanced budget goal for 2001 does not appear to be in jeopardy. The relatively slow pace is deficit reduction painted by the above table is in part due to the overachievement of deficit targets in 1996 and 1997. Also, spending should fall at a faster pace after 1998 as there will no longer be a need for high restructuring charges.

In addition, one should be careful about reading too much into the fact that interest charges are growing substantially as a proportion of total revenues. This is mostly due to the decision of the government to downsize and reduce revenues.

The approach to economic and fiscal policy employed by the Harris government is far different from that of the previous government. The present government believes that a supply-side approach is the most effective in stimulating the economy; hence it has promised a 30% cut in personal income taxes over three years. To pay for these cuts, which are forecast to cost $4.8 billion per year when fully implemented, the government will have to cut program spending significantly. This budget does not diverge from that plan.

By the time the personal income tax reduction is fully in place, the Ontario tax rate will be 40.5% of basic federal tax -- when the government took office, the rate was 58%. On 1 January 1998, it will be 45% of basic federal tax, three-quarters of the way to the eventual goal.

The budget contains a variety of tax and expenditure policy measures, none of which are particularly expensive. The most expensive of these are the commitment to join in the extended infrastructure program and a $500-million, ten-year commitment to the R&D Challenge Fund. Also set aside is an additional $1.4 billion for restructuring. All fiscal initiatives are governed by the balanced budget goal and the need to finance the tax cut.

Ontario, like the federal government, uses prudent economic assumptions as the basis for its budgeting. It also makes use of a contingency reserve.

The Ontario government is forecasting economic growth of about 3.2% for each of the next three years. The private sector is forecasting growth at closer to 3.5% per year. Next to Alberta, Ontario is expected to lead Canada in economic growth in 1997. With regard to interest rates, the Ontario government is somewhat more cautious than the federal government, adding a full 100 basis points to the private sector average short and long-term rates for 1998.

The budget complains about the inflexibility of the Ontario-Canada tax collection agreement. Ontario will study the possibility of collecting its own personal income tax, as does Quebec. While there are clearly additional administrative and compliance costs associated with a separate tax, the Ontario government believes the existing system hinders its ability to design the tax system that it would prefer. It also argues that the federal government’s delay in remitting taxes to Ontario and its retention of fines, interest and penalties on Ontario tax owing costs the province well over $100 million per year.

The Quebec budget was tabled in the National Assembly on 25 March 1997.

The following table presents a summary of the major fiscal statistics found in the Quebec budget. All dollar amounts are in billions.

Quebec fiscal policy is guided by its balanced budget legislation, which sets an interim deficit target of $2.2 billion in 1998. The above table indicates that to accomplish this, total spending will fall by almost $2 billion over two years, to be accomplished mostly by program spending cuts. Revenues in 1998 are forecast to recover most of what was lost since 1996, resulting largely from the drop in federal cash transfers.

The Quebec government plans to meet its $2.2 billion deficit target in 1998, a $1 billion drop from the previous year. To achieve this, the government has cut payroll costs by $800 million, cut transfers to municipalities and reduced spending on health, education and welfare; $800 million in additional revenues are also planned. Despite this, the government has announced some new initiatives, totalling $500 million in additional spending. These measures include an integration of all family benefits into a new integrated child allowance. This measure would cost $314 million in 1998 and double in cost the next year.

The most significant fiscal initiative is a major reduction and simplification of the Quebec personal income tax. This tax is to be made flatter by reducing the number of brackets; new credits and exemptions will be introduced to reduce the tax liability of low-income families. To pay for this reform, the retail sales tax rate is to increase from 6.5% to 7.5%. In addition, business input credits for larger companies will not be available for at least another three years. The budget is also providing a $1,200 reduction in payroll taxes for companies that create new jobs.

The Quebec government is assuming 1.5% growth in the provincial economy in 1997, growing to 2.5% in 1998. The unemployment rate is expected to be above 11% for the foreseeable future. Forecasts for interest rates are also more cautious than private sector forecasts.

Growth forecasts for 1997 exhibit quite a wide range, from a low of about 1.7% by the Conference Board to a high of 3% for the Bank of Montreal. The average is 2.5% growth.

The four provinces of western Canada are economically and financially quite diverse. Alberta and British Columbia do not receive equalization payments from the federal government, whereas Saskatchewan and Manitoba are part of the group of "have not" provinces. Saskatchewan receives the lowest amount for per capita equalization payments of any government.

Alberta’s economy is booming, while British Columbia’s has been sluggish of late, although it is expected to recover strongly this year. Manitoba and Saskatchewan should also see healthy growth this year.

The British Columbia budget was tabled in the Legislative Assembly on 25 March 1997.

The following table presents a summary of the major fiscal statistics found in the British Columbia budget. All dollar amounts are in billions.

The data in the above table differ significantly from those presented in the British Columbia budget. That government, unlike that of the other provinces and like the federal government, essentially removes all capital spending from its budgetary numbers, assigning them to various agencies instead. In this table they have been re-instated in expenditures and included in the calculation of the deficit. Thus, unlike the contention in the budget, despite the restraint measures implemented, expenditures continue to grow, as does the deficit. This stands in sharp contrast to the other provinces and the federal government. The deficit numbers presented here are calculated from annual changes in the level of net taxpayer-supported debt. This approach is consistent with that used by other budget analyses.

The budget cuts the personal income tax rate by two percentage points. Despite the fact that current program spending is falling, spending on health and education is increased, as is the BC Family Bonus. Hydro rates, university tuition and premiums of the provincial auto insurance corporation are frozen. Spending on capital projects, which is an off-budget item, is increased to $1.1 billion.

The budget bases its revenue projections on growth of 1.6%, whereas the Ministry is predicting 2.2% growth. Growth in 1998 is expected to be even higher at 2.5%. The budget notes that British Columbia forecasters were generally less optimistic about the economy than were forecasters from central Canada. The unemployment rate is not expected to change much from the 1996 figure.

The Saskatchewan budget was tabled in the Legislature on 20 March 1997.

The following table presents a summary of the major fiscal statistics found in the Saskatchewan budget. All dollar amounts are in billions.

-- indicates negligible amount

The large surplus for 1997 was largely due to proceeds of a dividend from the Crown Investment Corporation of Saskatchewan, financed by the sale of Cameco Corporation, a provincial uranium company. These proceeds are also reflected in the jump in revenues for that year. On the other hand, expenditures for that year also include a $108-million debt paydown of the Crop Re-insurance Fund.

The major budgetary initiative was a reduction in the Education and Health Tax (i.e. the retail sales tax) from 9% to 7%, at a revenue cost of $180 million per year. The cut took effect immediately. The budget also included some new spending initiatives in transportation, education and health. Nevertheless, total spending and total program spending continue to decline.

The Saskatchewan economy is expected to grow by close to 2.5% per year over the next few years. The budget forecasts essentially are the private sector forecasts, although the growth figure used for 1997 is slightly more cautious. The unemployment rate in the province is expected to stay at about 6.5%.

The Alberta budget was tabled in the Legislative Assembly on 12 February 1997. The government subsequently called a general election. The budget was updated on 21 April 1997, after the government was returned to power.

The following table presents a summary of the major fiscal statistics found in the Alberta budget. All dollar amounts are in billions.

The Alberta government has run large surpluses in the past two years, largely as a result of a strong economy and a booming natural resources sector. The surplus for 1998 is small by comparison, only because of the very prudent revenue projections used in the budget. The above table has added to revenues the cushion contained in the budget, but it still likely understates expected revenues.

Alberta legislation requires that the net debt be wiped out by 2010. Based on the projections in this budget, that will likely take place by 2006.

The government stated its intention to eliminate the flat tax and surtax on personal income. In addition, some property taxes were reduced and a low-income credit on family employment and self-employment was announced.

Spending on health and education is to rise somewhat. As well, about $100 million is to be spent on labour training programs that were devolved to the province by the federal government.

Alberta uses prudent economic and planning assumptions for the purposes of budgeting. For 1998 and beyond, the budget assumes economic growth of 2% per year whereas growth is actually forecast to be closer to 4% per year. Oil prices are also very cautious. The unemployment rate is expected to fall gradually to 6% by 2000.

The 1997 Manitoba budget was tabled in the Legislative Assembly on 14 March 1997.

The following table presents a summary of the major fiscal statistics found in the Manitoba budget. All dollar amounts are in billions.

-- indicates negligible amount

The above table contains entries for the Manitoba surplus that do not correspond to the figures found in the budget. It attempts to present data in a way that is more consistent with that of the other provinces. The Manitoba government maintains a number of accounts, into which and from which assets are transferred. It treats such transfers as expenditures and receipts, which alters the pattern of deficits/surpluses over time. For example, the government previously did not treat lottery earnings as revenue, although it does so now. In 1996 a $145-million transfer from the lotteries fund was used to reduce the deficit. While it is appropriate to treat that $145 million as income, it would make more economic sense to treat it as income when earned, not when shifted from one account to another.

Similarly, the province treats the money deposited to the Debt Retirement Fund as an expenditure and treats money withdrawn from the Fiscal Stabilization Fund as income. The deficit figure also ignores the interest income of these funds, as well as the gain associated with the sale of the Manitoba Telephone System.

As a result, the above table shows a substantially larger surplus for 1997 than is cited in the budget, because of the gain on the sale of the telephone company; a surplus very close to zero is expected in 1998.

Any new fiscal initiatives must be guided by the government’s balanced budget and debt repayment legislation. Within this framework, a number of tax measures, costing $31 million per year, have been announced. The most costly is the three-year extension of the manufacturing investment tax credit. Measures to promote film and video production, encourage employment growth through reduced payroll taxation, help students and make it easier for first time home buyers were also announced. The budget is also using $150 million from the sale of the Manitoba Telephone System to reduce the debt of hospitals and personal care homes. This is in addition to the $260 million transferred to the Fiscal Stabilization Fund.

The Manitoba economy grew faster than the national average in 1996, and growth is expected to improve in 1997 to 2.7%, although its relative performance should decline. Real growth in 1998 is expected to be 2.5%, with the unemployment rate falling to 6.5%. The budget uses private sector average economic forecasts.

The four provinces of Atlantic Canada constitute the poorest region of the country. These provinces have the highest unemployment rates and the lowest per capita incomes in Canada. They also rely heavily on transfers from the federal government.

The PEI budget was tabled on 8 April 1997.

The following table presents a summary of the major fiscal statistics found in the Prince Edward Island budget. All dollar amounts are in billions.

Prince Edward Island has moved from a surplus in 1996 to a deficit. The government claims that the spending trends of the previous administration would have produced a deficit twice that reported in the budget. It plans to have a balanced budget in 1999 and 2000.

PEI is part of a small group of jurisdictions with growing spending and growing deficits, but it is unique in trying to solve its deficit problem with higher taxes. This budget contains a number of new tax measures. The gasoline tax was raised by one cent per litre. The sales tax on private sales of cars was raised by 2.5 percentage points. The threshold at which the high income surtax starts to apply was lowered substantially. The corporate income tax rate was increased by one percentage point. Vehicle licensing fees were increased, as was the tax on video lottery revenues.

The construction of the Confederation Bridge has fuelled growth in PEI since 1994. With its completion, the provincial economy is expected to contract slightly in 1997; however, the bridge should lead to a 20% growth in tourism, resulting to further growth in 1998 and a diversification of the economy.

The Nova Scotia budget was tabled in the House of Assembly on 15 April 1997.

The following table presents a summary of the major fiscal statistics found in the Nova Scotia budget. All dollar amounts are in billions.

-- indicates negligible amount

The Nova Scotia government recorded a $200-million deficit in 1996 which was changed the next year into a slight surplus, due to a drop in total spending. The growth in federal transfer payments in 1998 is due to the federal compensation for harmonizing its sales tax.

An across-the-board personal income tax cut was announced in last year’s budget. This year’s budget announces a 30% investment tax credit, and the elimination of the corporate capital tax after five years. $150 million is being redirected to key areas, mainly health, while the province is spending $14 million on public infrastructure as part of the federal plan.

Economic growth was not strong in 1996, and the next two years are expected to be only slightly better. The unemployment rate is expected to increase.

The province maintains a small reserve fund of $39 million to meet revenue shortfalls.

The 1997 New Brunswick budget was tabled in the Legislature on 10 December 1996.

The following table presents a summary of the major fiscal statistics found in the New Brunswick budget. All dollar amounts are in billions.

The major fiscal initiative contained in the budget dealt with the harmonization of the provincial sales tax with the federal GST. This results in an effective 3.77 percentage point drop in the total sales tax rate, albeit applied to a broader base. As part of the package, New Brunswick enhanced its Child Tax Benefit and Working Income Supplement to offset some of the negative effects on lower income families. It also included an 8% point of sale rebate on purchases of books as well as rebates for tourists, municipalities, charities and non-profit organizations.

The budget also announced a 10% drop in provincial personal income taxes, phased in over three years. The rate will eventually fall to 57.5% of basic federal tax, from the current 64%.

The budget forecasts economic growth at 2.5% in 1997. According to the budget documents, the New Brunswick economy performed better than the Canadian average in 1995 and the same is predicted for 1996.

The 1997 Newfoundland budget was tabled in the House of Assembly on 20 March 1997.

The following table presents a summary of the major fiscal statistics found in the Newfoundland budget. All dollar amounts are in billions.

-- indicates negligible amount

Newfoundland, having achieved a surplus in 1996 has again reverted to deficits, which the government expects to eliminate by the end of the decade. The above table shows an underlying surplus of $10 million for 1998, on account of the contingency reserve.

To meet the deficit reduction targets, the government is conducting program review. It is introducing a sales tax credit as part of its harmonized sales tax. It is also seeking to resolve the problem of unfunded pension liabilities for employees.

The Newfoundland government includes a $30-million contingency reserve in its deficit targets.

This economy contracted in 1996 and is expected to do so again in 1997. The closing of the cod fishery and the end of the TAGS program, plus the winding down of Hibernia construction all contributed to this contraction. The unemployment rate is expected to grow to 20%.

The territories are unique entities in the sense that the bulk of their total revenues comes from the federal government.

   A. Yukon

The 1997 Yukon budget was tabled in the Legislative Assembly on 24 March 1997.

The following table presents a summary of the major fiscal statistics found in the Yukon budget. All dollar amounts are in billions.

-- indicates negligible amount

After 1996, the budget moved into deficit, although that deficit is expected to be reduced substantially in 1998. By the end of that fiscal year, the Yukon government expects to have a cumulative surplus of $15 million. The increase in total spending for 1998 is due entirely to the cost of two programs recently devolved to the territory by the federal government.

The budget contains a number of small initiatives in the social and economic development area.

The budget contains no economic information or forecasts, with the exception of some employment data. It indicates strong employment growth over the past three years.

A $5-million contingency reserve is included in the 1998 data.

The 1997 NWT budget was tabled in the Legislative Assembly on 27 January 1997. As of 1 April 1999, the NWT will be divided into two territories.

The following table presents a summary of the major fiscal statistics found in the Northwest Territories budget. All dollar amounts are in billions.

The projected surplus for 1998 reverses four years of deficits. By the end of that fiscal year, the cumulative net debt should be about $56 million. The bulk of revenues comes from the Formula Financing Agreement with the federal government which ties grants to provincial and local spending growth in Canada. As provinces exercise restraint, the NWT’s Gross Expenditure Base, upon which financing is based, declines.

The government has been preoccupied with getting its fiscal house in order by the time of division of NWT, as well as planning for the implementation of that division. New initiatives are few therefore. These initiatives include additional spending on early childhood development, income support, community empowerment and training for those who supervise offenders.

Economic development initiatives such as a $5-million equity investment in the mortgage and loan fund were also announced. Despite these announcements, current and capital program spending continues to decline.

The economy of the territory is highly dependent upon the government, as over 45% of final domestic demand is accounted for by government spending. Using this measure, the economy contracted in 1996 and is expected to do so again in 1997.

Canadian governments have generally come to the realization that their deficits and accumulated debts are too high. The extent to which they are coming to grips with this problem differs enormously from government to government.

Although governments are generally increasing their efforts to balance budgets and even repay outstanding debt, several have now come to the conclusion that excessive taxation also poses a significant threat to economic prosperity and job creation. The government of Ontario stands out in this regard; not only is it implementing the most substantial of the tax cuts, it is doing so at the same time as it is reducing the deficit, rather than waiting, like some others, for the budget to be balanced.

Newfoundland, Prince Edward Island and the two territorial governments also stand out to the extent that their fiscal positions are deteriorating in the short term. In the case of PEI, it is also unique in resorting to tax increases as a way of solving this problem. The deficit in British Columbia is also deteriorating, but that is not evident because of the way in which capital expenditures are treated in the provincial budget.