40:1 Bill 101, Balanced Budget and Debt Limit Act, 2012

Leone, Rob

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Bill 101                                                       2012

An Act to enact the Balanced Budget Act, 2012 and to amend the Financial Administration Act

Note: This Act amends or repeals more than one Act.  For the legislative history of these Acts, see the Table of Consolidated Public Statutes – Detailed Legislative History at www.e-Laws.gov.on.ca.

Her Majesty, by and with the advice and consent of the Legislative Assembly of the Province of Ontario, enacts as follows:

Contents of this Act

   1.  This Act consists of this section, sections 2 and 3 and the Schedules to this Act.

Commencement

   2.  (1)  Subject to subsection (2), this Act comes into force on the day it receives Royal Assent.

Same

   (2)  The Schedules to this Act come into force as provided in each Schedule.

Short title

   3.  The short title of this Act is the Balanced Budget and Debt Limit Act, 2012.

 

Schedule 1
Balanced Budget Act, 2012

Interpretation

Definitions

   1.  (1)  In this Act,

“comprehensive integrated tax coordination agreement” means the agreement dated November 9, 2009, between the Minister of Finance on behalf of the Crown in right of Ontario and the Minister of Finance for Canada on behalf of the Government of Canada; (“Entente intégrée globale de coordination fiscale”)

“designated tax statute” means any of the following statutes:

    1.  Education Act.

    2.  Employer Health Tax Act.

    3.  Fuel Tax Act.

    4.  Gasoline Tax Act.

    5.  Provincial Land Tax Act, 2006.

    6.  Retail Sales Tax Act.

    7.  Taxation Act, 2007; (“loi fiscale désignée”)

“expenditures” means, for a fiscal year of the Province, the expenditures shown in the financial statements for the Province as set out in the Public Accounts for the year; (“dépenses”)

“PVAT rate” has the same meaning as in the comprehensive integrated tax coordination agreement; (“taux de la TVAP”)

“revenues” means, for a fiscal year of the Province, the revenues shown in the financial statements for the Province as set out in the Public Accounts for the year. (“revenus”)

Deficit

   (2)  For the purposes of this Act, the Province has a deficit in a fiscal year if “A” is greater than “B”,

where,

  “A”  is the amount of the expenditures for the year less the sum of,

         (a)  any expenditure described in paragraph 1 or 2 of subsection 2 (2) in the year, and

         (b)  the amount, if any, by which the revenues in the year have declined since the previous fiscal year for a reason other than a reduction in a tax rate under a designated tax statute or the PVAT rate under the comprehensive integrated tax coordination agreement, if the decline is at least 5 per cent of the previous year’s revenues, and

  “B”  is the sum of the revenues and the accumulated net surplus, if any, for the year.

Accumulated net surplus

   (3)  The amount of the accumulated net surplus for a fiscal year is the amount by which the sum of the revenues for the previous three fiscal years exceeds the sum of the expenditures for the previous three fiscal years.

Same, 2018-2019 fiscal year

   (4)  Despite subsection (3), the amount of the accumulated net surplus for the fiscal year beginning on April 1, 2018 is the amount by which the revenues for the previous fiscal year exceed the expenditures for the previous fiscal year.

Same, 2019-2020 fiscal year

   (5)  Despite subsection (3), the amount of the accumulated net surplus for the fiscal year beginning on April 1, 2019 is the amount by which the sum of the revenues for the previous two fiscal years exceeds the sum of the expenditures for the previous two fiscal years. 

Balanced Budget

Requirement for balanced budget

   2.  (1)  For each fiscal year beginning on or after April 1, 2018, the Executive Council shall plan for a balanced budget (in which the expenditures of the Province for a fiscal year do not exceed the sum of the revenues and the accumulated net surplus for the year) and the Minister of Finance shall present a balanced budget.

Exceptions

   (2)  The expenditures may exceed the level described in subsection (1) to the extent that, in the opinion of the Minister of Finance, one or more of the following occurs:

    1.  An expenditure is required in the fiscal year because of a natural or other disaster in Ontario that could not have been anticipated and that affects the Province or a region of the Province in a manner that is of urgent public concern.

    2.  An expenditure is required in the fiscal year because Canada is at war or is under apprehension of war.

    3.  Revenues have declined since the previous fiscal year, for a reason other than a reduction in a tax rate under a designated tax statute or the PVAT rate under the comprehensive integrated tax coordination agreement.  However, this paragraph applies only if the decline is at least 5 per cent of the previous year’s revenues.

Public notice

   (3)  If, in the opinion of the Minister of Finance, there is an occurrence described in subsection (2) in a fiscal year, the Minister shall prepare a statement to that effect and shall lay the statement before the Assembly not later than 30 days after the Public Accounts for the year are given to the Clerk of the Assembly or laid before the Assembly, whichever occurs first.

Change in accounting policies

   (4)  A change in the accounting policies or practices governing the Public Accounts that is adopted after the beginning of a fiscal year shall not be considered in determining whether any deficit exists in that fiscal year.

Recovery plan

   3.  (1)  If the Executive Council plans for a deficit for a fiscal year, the Executive Council shall develop a recovery plan for achieving a balanced budget in the future and the recovery plan must specify the manner in which and the period within which the balanced budget will be achieved.

Same

   (2)  The recovery plan must be consistent with the principles governing Ontario’s fiscal policy described in section 2 of the Fiscal Transparency and Accountability Act, 2004.

Multi-year fiscal plan

   (3)  The details of the recovery plan must be included in the multi-year fiscal plan described in section 5 of the Fiscal Transparency and Accountability Act, 2004.

Salary reduction for Executive Council

   4.  (1)  This section applies if the Province has a deficit.

Immediate salary reduction

   (2)  The salary of each member of the Executive Council shall be reduced in accordance with subsection (3) if the deficit for a fiscal year (the “first year”) is greater than 1 per cent of the revenues for the year, and if there was no deficit in the preceding fiscal year.

Same, amount and duration

   (3)  In the circumstances described in subsection (2), the salary is reduced by 25 per cent for a period of 12 months beginning on the 31st day after the Public Accounts that show the deficit for the first year are given to the Clerk of the Assembly or laid before the Assembly, whichever occurs first.

Delayed salary reduction

   (4)  The salary of each member of the Executive Council shall be reduced in accordance with subsection (5),

  (a)  if the deficit for a fiscal year (the “first year”) is less than or equal to 1 per cent of the revenues for the year, and if there was no deficit in the fiscal year preceding the first year; and

  (b)  if, in the following fiscal year (the “second year”), there is no deficit but the revenues do not exceed the expenditures by at least the amount of the deficit in the first year.

Same, amount and duration

   (5)  In the circumstances described in subsection (4), the salary is reduced by 25 per cent for a period of 12 months beginning on the 31st day after the Public Accounts for the second year are given to the Clerk of the Assembly or laid before the Assembly, whichever occurs first. 

Reduction for further deficit

   (6)  In either of the following circumstances, the salary of each member of the Executive Council shall be reduced by 50 per cent for the period specified in subsection (7):

    1.  If there is a deficit in the fiscal year (the “second year”) following the first year described in subsection (2).

    2.  If there is a deficit in the second year described in subsection (4).

Same, duration

   (7)  The salary is reduced for a period of 12 months beginning on the 31st day after the Public Accounts for the second year are given to the Clerk of the Assembly or laid before the Assembly, whichever occurs first.

Same

   (8)  Subsection (7) applies, with necessary modifications, with respect to each consecutive fiscal year in which there is a deficit after the second year.

Exception, change in government

   (9)  If the party that forms the government is replaced, the fiscal year in which the new government takes office shall be deemed, for the purposes of this section, to be a year in which there is no deficit.  Subsection (4) does not apply until the following fiscal year.

Definition

   (10)  In this section,

“salary” means the salary payable to a member of the Executive Council under section 3 of the Executive Council Act.

Fiscal Transparency and Accountability Act, 2004

   5.  (1)  Section 4 of the Fiscal Transparency and Accountability Act, 2004 is repealed.

   (2)  Paragraph 8 of subsection 5 (3) of the Act is repealed.

Commencement

   6.  The Act set out in this Schedule comes into force on April 1, 2018.

Short title

   7.  The short title of the Act set out in this Schedule is the Balanced Budget Act, 2012.

 

Schedule 2
Financial Administration act

   1.  Section 18 of the Financial Administration Act is amended by adding the following subsections:

Debt limit

   (2)  Despite any other provision in this Act or any other Act, the Crown is not authorized to raise money by way of loan or to receive money through the issue and sale of securities at any time if the effect of doing so at that time would cause Ontario’s net debt to exceed 50 per cent of Ontario’s gross domestic product.

Gross domestic product

   (3)  For the purposes of subsection (2), Ontario’s gross domestic product at any particular time is Ontario’s gross domestic product at market prices (seasonally adjusted and at annual rates) as published in the Minister of Finance’s most recent quarterly Ontario economic accounts.

Definition

   (4)  In this section,

“net debt” means the difference between the Province’s total liabilities and its financial assets.

Commencement

   2.  This Schedule comes into force on the day the Balanced Budget and Debt Limit Act, 2012 receives Royal Assent.

 

EXPLANATORY NOTE

The Bill enacts the Balanced Budget Act, 2012 and amends the Financial Administration Act.

Balanced Budget Act, 2012

Beginning with the 2018-2019 fiscal year, the Executive Council must plan for a balanced budget and the Minister of Finance must present a balanced budget to the Assembly.  Special provision is made with respect to expenditures arising from such extraordinary circumstances as a natural disaster or the declaration of war.  Special provision is also made for a decline in revenues of 5 per cent or more that does not result from a decrease in taxes.

If a deficit is planned, the Executive Council is required to develop a recovery plan for achieving a balanced budget in the future.  Details of the recovery plan must be included in the multi-year fiscal plan in the Budget papers.

If there is a deficit, the salary payable to members of the Executive Council under the Executive Council Act is reduced.  Different rules are established when an initial deficit is more than 1 per cent of revenues and when an initial deficit is lower.  When there is a lower deficit, provision is made for it to be offset by an equivalent surplus of revenues in the following year to avoid the initial salary reduction.

For an initial deficit, the salary reduction for the members of the Executive Council is 25 per cent of the salary payable under the Executive Council Act, and lasts for one year.  If there is a deficit in the following year, the reduction is increased to 50 per cent, and lasts a year for each consecutive year in which there is a deficit.

Section 4 of the Fiscal Transparency and Accountability Act, 2004, which currently requires the Executive Council to plan for a balanced budget and specifies when a deficit is permitted, is repealed.  A consequential amendment is made to subsection 5 (3) of that Act.

Financial Administration Act

The Financial Administration Act is amended to provide that the Crown is not authorized to raise money by way of loan or to receive money through the issue and sale of securities if the effect of doing so would cause Ontario’s net debt to exceed 50 per cent of its gross domestic product.

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