3

GOVERNMENT SPENDING ON TRANSPORTATION

This chapter describes the transportation expenditures and revenues of all levels of government, by mode as much as possible and within the limitations of available information. The chapter first summarizes all transportation expenditures and revenues by level of government. It then gives a synopsis of federal and provincial revenues from transportation users, followed by a detailed examination of expenditures by level of government. Finally, it presents consolidated expenditures by mode.

This chapter gives an overview of the extent of resources provided at public expense to the transportation sector. When related to the information on facilities and services in other sections of this report, this gives a clear picture of the public sector involvement in transportation. An analysis of the extent of cost recovery in transportation is beyond the mandate of this annual report, however, and it would involve the cumbersome task of accounting for all the costs and revenues - direct and indirect - of the different levels of government that can be tied to transportation activities.

For instance, with respect to indirect costs associated with transportation activities, information would be needed to determine what portion of health-related costs are associated with transportation accidents and/or transportation emissions. It would also require information to measure precisely the revenues generated by levies resulting from the enforcement of transportation's rules and regulations.

Government Transportation Expenditures

This section covers spending on transportation by all levels of governments and their agencies. Expenditures are, first, netted of federal government revenues (other than fuel taxes) attributable to transportation users and government transfers received from other levels of government. Although the federal and provincial governments do not earmark tax revenues from transport users to fund transportation initiatives, their transportation revenues are compared with their transportation expenditures to illustrate the trends in the net fiscal pressure from the transport sector. Table 3-1 shows that government expenditures on transportation for the past five years have ranged from $17 billion to $18 billion. While federal expenditures have trended downward, provincial/territorial and local government transportation expenditures have shown an average increase of 5.5 per cent a year since 1996/97.

Transportation expenditures by all levels of government increased in 1999/2000 by $324 million, or 1.8 per cent, from 1998/99. Expenditures by local and provincial governments actually showed an increase of 4.1 per cent. Federal transport expenses fell by 13 per cent in 1999-2000 and are forecasted to drop further in 2000/01 by 3.3 per cent from the previous fiscal year. When tax revenues from transport users are applied against transport expenditures, net expenditures reached an estimated $4.7 billion in 1999/2000, up $646 million from the previous year. In the mid-1990s, this figure was around $7 billion.

Federal Expenses Related to Transport Facilities and Services

The federal government provides transportation facilities and services in all modes. As shown in Table 3-2, these include airports and harbour/port operations, modal policy and safety services, and services rendered by the Canadian Coast Guard. Transport Canada also performs several multimodal activities, ranging from emergency preparedness services to the regulation and monitoring of the transport of dangerous goods.

From 1996/97 to 1999/2000, direct federal transport expenses have fallen from $2.2 billion to $1.35 billion. In 2000/01, the operating and capital expenses of the federal government in transport are forecast to drop by 2.3 per cent after several years of decline.

The Canadian Coast Guard represents the federal government's largest single expense in transport, with $428 million forecast for 2000/01. The federal costs of operating federal ports and airports is forecast to reach $213 million by 2000/01, $116 million less than expenditures on safety and policy. This reflects Transport Canada's lesser role in operations and increased role in policy and safety.

Federal Subsidies to Transportation

In 2000/01, total federal direct subsidies, grants and contributions are projected to be $604 million, 5.5 per cent less than in 1999/2000. During 2000/01, subsidies to VIA Rail increased and highway transfers continued to decline, as transition and infrastructure programs wound down. The variations in marine subsidies shown in Table 3-3 are related to the purchase of ships for Marine Atlantic Ltd. and the transfer of harbours and wharves to Quebec. Since 1996/97, total subsidies and transfers have fallen by half. This major reduction is a result of the elimination of payments to NAV Canada, lower subsidies to Marine Atlantic Ltd., and reduced highway transfers. Table 3-3 presents more details.

Distribution of Provincial/Territorial and Local Expenditures by Province

In 1999/2000, provincial, territorial and local governments spent $16 billion on transportation. This was a $630 million increase, or 4.1 per cent more than in 1998/99. Local expenditures rose by $128 million (1.7 per cent). Expenditures by the provinces increased by $502 million (6.4 per cent). However, in Ontario, provincial expenditures dropped by $1.2 billion, or 44 per cent, mainly as a result of reduced transfers to local governments and transit authorities. A major increase of $1.2 billion was reported in British Columbia to account for the transfer of the BC Ferry debt to the provincial government. In Alberta, the Premier's Task Force on Infrastructure resulted in transportation funding rising by 60 per cent. In the rest of the country, provincial transport expenditures grew by 5.1 per cent. Figure 3-1 illustrates the trends in provincial and local expenses on transport by province/territory.

Since 1995/96, transport spending by provincial and local governments has increased annually by three per cent. The largest increases were in Newfoundland, British Columbia, Prince Edward Island and Alberta. Manitoba and the Northwest Territories had the largest relative declines.

Federal transfers are equivalent to 1.3 per cent of transport spending by local and provincial/territorial governments in 1999/2000. This ratio peaked at 5.4 per cent in 1997/98. In 1999/2000, Newfoundland and the Yukon were the most dependent on federal transfers, which accounted for more than 20 per cent of their spending on transport.

Spending on roads and highways is the most important category of transport-related expenditures for all provinces, although other modes are also significant for some provinces. The proportion for road and highway spending ranged from almost 100 per cent in Prince Edward Island to 66 per cent in the Northwest Territories. Remoteness makes spending on air transportation more significant for the Northwest Territories, where it accounted for 19 per cent of transport spending in 1999/2000. This relative importance of air has varied from one year to another, reaching as high as 45 per cent in 1996/97.

Although transit spending fell by almost $1 billion in Ontario in 1999/2000, its 21 per cent share of total transport expenditures by all levels of government in the provinces is the largest in Canada. Local governments have replaced provincial governments as the main source of transit system expenditures, accounting for 92 per cent. In the early 1990s, their share of transit spending was 22 per cent. Expenditures on transit are also significant in Quebec, Alberta and British Columbia.

Total Transportation Revenues by Level of Government

The federal government generates revenues from the use of transportation facilities and services. Revenues from cost recovery initiatives are credited to the federal department's budget, while revenues from other sources are credited to the government's Consolidated Revenue Fund. Both are included in this analysis. Excise fuel taxes collected by the federal and provincial governments, as well as provincial licence and other fees, constitute tax revenues collected from transport users. Table 3-4 details government revenues from transport users from 1996/97 to 2000/01.

In 1999/2000, the most recent year for which budget information is available for all government levels, government revenues collected from transport users through fuel taxes and permit and licence fees generated by the federal and provincial/territorial governments, totalled $13.4 billion, a slight decline from the previous year. By far, road fuel taxes make up the largest component of tax revenues from transportation, averaging $9.8 billion or 78 per cent from 1995/96 to 1999/2000. Over that period, road fuel tax revenues showed the highest growth rate (3.5 per cent), whereas other fuel taxes advanced by 0.1 per cent, and licences and fees declined by 1.4 per cent.

In 2000/01, federal government transportation revenues other than fuel taxes are expected to total $378 million, down $46 million from 1999/2000. Airport revenues and leases, at $239 million, are to account for most of this total, while marine fees are to bring in an additional $77 million. Other federal revenues not credited to transport, such as the revenues from the leases of hopper cars or the sale of port assets, are also reported in Table 3-4.

Overview of Expenditures and Revenues by Mode

This section summarizes consolidated federal expenses and revenues by mode from 1996/97 to 2000/01. In addition, Table 3-5 shows expenditures by the provincial/territorial and local governments, netted of transfers received from other levels of government, from 1996/97 to 2000/2001.

Total government spending on roads has risen at 2.5 per cent a year to reach $12.5 billion in 1999/2000. Road expenditures now account for 69 per cent of overall spending on transportation. From 1996/97 to 1999/2000, the provincial and federal governments collected more money from road users than all levels of government spent on highways and local streets. A surplus of $85 million was generated over the period reviewed.

In 1998/99, the strong increase in transit funding came from the Ontario government's large capital subsidies to transit systems. In 1999/2000, spending on transit systems accounted for 12 per cent of all government expenditures on transportation. With the $1 billion reduction in 1999/2000, spending on transit systems by Ontario is back to its mid-1980s level.

In 1999/2000, the air mode accounted for 2.3 per cent of gross government spending on transportation. This spending has declined by 73 per cent since 1996/97. About 11 per cent of government annual transport spending has been apportioned to the marine mode in 1999/2000. In previous years, total government expenditures in the marine mode have averaged five per cent of total government spending on transportation. The increase is due to the transfer of the BCFerry debt to the provincial government.

Spending on the rail mode has fallen by 23 per cent since 1996/97, accounting for 1.3 per cent of gross government spending on transportation in 1999/2000. Close to 80 per cent of this spending is related to subsidies to rail passenger services.

In 1999/2000 the federal and provincial governments spent $2.6 billion on the air, marine and rail modes combined while generating $0.9 billion in fees and tax revenues from transport users. The remaining $0.7 billion accounted for 36 per cent of total net expenses by governments on transportation.

The category "Other" in Table 3-5 includes overhead expenses by all levels of government and expenditures related to multimodal activities. Less than four per cent of government transportation spending falls under this category.