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Chances are, you have come into contact with government today. Perhaps you went to public school, studied at the public library or swam in a public pool. Perhaps you were sick and went to the public hospital for a checkup. You almost certainly watched television or surfed the Internet, which are guided by standards set by government. And you likely travelled on roads or highways regulated by transportation authorities.
Providing these and other programs that Canadians have come to expect cost all three levels of government $472 billion in current dollars in 2004. That's about $14,820 annually for every man, woman and child in Canada. Costs-particularly for health services, safety and security, education and social assistance-rose by about 22% from 1999 to 2004.
The spending patterns of each level of government reflect their areas of responsibility. Nearly half of the $193 billion federal budget is spent on social services like social security payments and employment insurance, or transferred to the provinces to support other social programs.
The remainder is spent on national defence, policing and prisons, interest on the debt, culture, environmental protection, foreign affairs and international assistance. Since 1999, spending on social security and transfer payments has increased considerably.
The provinces and territories spend more on health care than anything else, about one-third of their collective $233 billion budget in 2004. These costs in particular have spiralled by 33% from 1999 to 2004.
Education is also a big-ticket item for the provinces, absorbing another one-fifth of expenditures. The rest is spent on social services, paying interest on public debt, and resource conservation and development.
Major costs at the local level include education, transportation, local infrastructure, policing and firefighting. Canada's cities, towns and villages spent $55 billion in 2004, an increase of 28% since 1999. Spending on courts, policing and firefighting, and rising environmental costs accounted for much of this increase.
To provide these programs and services, the three levels of government raised total revenues of $464 billion in 2004. About three-quarters was raised through taxes.
Canadians pay taxes in many forms-personal and corporate income tax, sales, alcohol and tobacco taxes, and property tax. In 2004, we paid $349 billion in taxes to various government levels, an average of $10,950 for every Canadian. Although total taxes increased 19% from 1999 to 2004, federal taxes have grown more quickly than those at the provincial/territorial and local levels.
A significant portion of provincial/territorial and local government revenue comes from transfer payments, in support of programs such as health care. In 2004, the provincial/territorial governments received $40.8 billion in transfer payments from the federal government, an increase of one-third from 1999.
Meanwhile, in 2004, the provinces and territories transferred almost $8 billion to local governments, slightly less than in 2003. From 2000 to 2003, these transfers increased from $7 billion to $8 billion. Local governments have responded by increasing property taxes and by charging more for goods and services.
In addition to taxes and transfer payments, other sources of government revenue include investment income, the sale of goods and services, health insurance premiums and contributions to social security plans.
Taken together, in 2004, Canada's three levels of government collected more than they spent. Except for a small deficit in 2003, a surplus has been posted each year since 2000. Including surplus funds in the Canada and Quebec pension plans, their total surplus was $2.5 billion, or about 0.5% of total revenue.
The federal government recorded a surplus of $2.1 billion, while the Canada and Quebec pension plans took in $9.7 billion more in revenues than they spent on pension payments. On the other hand, the provinces and territories had a total deficit-the amount by which spending exceeded their revenues in one year-of $6.2 billion. Local governments recorded a total deficit of $2.2 billion.
Despite their much smaller revenues, local general governments accounted for 56% of infrastructure investment by all three levels of government in 2003. The federal general government accounted for 21% and the provincial and territorial general governments 23%. Local general governments spent just over $12.6 billion on infrastructure, the federal general government spent $4.6 billion and the provincial/territorial general governments $5.1 billion.
All three levels of government increased the value of infrastructure spending from 1988 to 2003. However, local general governments have not only invested the most in infrastructure, they have also made the largest gains relative to other levels of government.
The consecutive surpluses of the three levels of government reverse the trend seen in the late 1980s and early 1990s, when deficits were common. However, overall net debt-largely the product of the cumulative total of all previous deficits-remains a challenge for government. Government debt at all levels in 2003 totalled $795 billion, or over $25,000 for every man, woman and child in Canada.
Lower spending by the federal government from 1988 to 2003 helped to sustain a string of surpluses at this level of government that began in 1998. These surpluses were also due in part to growing income and consumption tax revenue during this time.
Spending by the provincial/territorial and local governments grew at a faster pace, however, putting greater pressure on their budgets. From 2001 to 2004, only Nova Scotia, Manitoba and Alberta experienced net surpluses in three out of four years.
Lower interest rates have helped to somewhat ease the challenge of achieving balanced budgets, by lowering the amount of money needed to service the debt. In 2003, 9.6 cents of every dollar of government revenue was used to pay debt charges, down from 10.3 cents in 2002 and from 17.6 cents in 1995.