Finance Minister Ralph Goodale had so much money left over for the fiscal year ending March 31, 2005, that he was able to put $6.4 billion toward future initiatives and still have $3 billion in unneeded contingency reserves to put toward debt reduction.

This helped Ottawa forecast balanced budgets for the next five years, all of which include $3 billion in contingency reserves as well as an amount for economic prudence. The latter rises from $1 billion in the first year to $4 billion in year five.

The result is a projected federal debt-to-GDP ratio of 30.6% as of March. 31, 2010, down from 38.8% as of March. 31, 2005, and puts the government’s target of 25% by 2015 well within reach. Indeed, if all the contingency reserves are unused and put toward debt reduction, it will hit 25% one year early.

(The contingency reserves are to be used for expenditures caused by unexpected events such as disasters. The economic prudence is to guard against lower-than-expected revenue.)

The budget assumes economic growth of 2.9% this year and 2.7% in 2006, with inflation of 2% and three-month treasury bill rates averaging 5% in both years. It assumes 10-year bond rates at 4.6% this year and 5.1% in 2006. These numbers are the average of about 20 private-sector forecasters surveyed.

The next two years could have been difficult if surpluses of only $500-million and $900-million had materialized in 2005 and 2006, respectively, as projected in last November’s update. But pre-spending and initiatives in which the big bucks aren’t needed until further out allowed Goodale to address most of his election promises — such as the early learning/childcare initiative and sharing gasoline tax revenues with the cities — and deal with important issues such as defence and Kyoto while still balancing the budget.

The biggest pre-spending allocation is $3.6 billion of the $4.25 billion that goes into a third-party trust, which will be used to reduce the wait-times in priority health-care areas such as cancer, heart, diagnostic imaging, joint replacements and sight restoration. Originally, this spending was staggered over five years; now it is all being booked for fiscal 2005. This frees up $600 million in 2006, $1.2 billion in 2007 and 2008, and $600 million in 2009.

Spending on early learning and childcare — to the tune of $700 million for 2006 — has also been booked for this year, as is almost $500 million for Canada’s “commitment to Africa.”

One item that is not being assigned to this year is $2 billion that will go to Newfoundland and $830 million to Nova Scotia as a result of the recent offshore agreements that exclude offshore revenue from the calculation of these provinces’ equalization entitlements.

With the pre-spending, program spending is rising by a huge 11.8% with this budget. It then rises just 2% in 2006 and back to almost 5% in 2007 and 2008.

Finance is assuming its expenditure review committee, charged with reallocating funds to priority areas, will achieve savings that rise from $460 million in 2006 to $2.2 billion in 2010.