Northern Economist 2.0

Tuesday, 27 June 2017

A Tale of Two Revenue Sources: The LCBO & OLG

With the aversion of a strike by Ontario’s LCBO workers, most of us will probably turn our thoughts to immersion in our favorite beverage as we move into the Canada Day long weekend.  What the recent dispute should also spark is some introspection regarding the special importance of Ontario’s crown corporations – namely the Liquor Control Board of Ontario (LCBO) and the Ontario Lottery and Gaming Corporation (OLG) – as sources of Ontario government revenue.
The accompanying figure plots data for revenues obtained from selected Ontario budgets for four fiscal years: 2000, 2006, 2011 and 2016. Both agencies are multi-billion dollar enterprises and bring in substantial revenues for Ontario’s government.  In 2016, the OLG brought in $2.2 billion in revenues for Ontario while the LCBO slightly less at just under $2 billion.  With total revenues of about $128 billion in 2016, these two items accounted for about 3.3 percent of Ontario government revenue.

What is more interesting is the performance over time of these two items as government revenue sources.  Essentially, lottery and gaming revenues have been quite flat while government revenues from the sale of alcohol have been growing quite robustly. Between 2000 and 2016, revenues from the OLG grew from approximately  $1.9 to $2.2 billion dollars, an increase of 16 percent. 

Meanwhile, over the same period, revenues from the LCBO (which incidentally do not include revenues from liquor licenses/beer and wine taxes that in 2016 came in a $0.582 billion) rose from approximately  $0.8 to $2 billion – an increase of about 132 percent.  While OLG revenues have essentially exhibited stagnant growth, the opposite is the case for the LCBO.  Indeed, to help keep things in perspective, total government revenue over the period 2000 to 2016 grew 104 percent.  Thus, LCBO revenues to the government have been growing faster than its total revenues.

I am not surprised that a strike was averted.  The LCBO has been doing very well.  In a world of rising provincial government spending, the alcohol (and its revenues) must flow!