OTTAWA — The federal government barely recorded a surplus for January, as steep falls in corporate tax and GST revenue were offset by a 3% reduction in program spending.

With two months left in the 2008-09 fiscal year, Ottawa has a budget surplus of $496-million, or 95% down from the same year-ago period, according the Department of Finance’s monthly Fiscal Monitor publication. The recent budget projected a small deficit for this fiscal year, ending on Tuesday, of $1.1-billion.

For January, Ottawa posted a $37-million surplus, or a 97% drop from the same month a year ago. This was based on revenue of $19.6-billion, down nearly 10% from year ago. The fall was spearheaded by a whopping 44.4% plunge in corporate tax receipts, and a 26.5% decline in GST revenue. Also, personal income tax declined by 1%, which the department said was a result of measures incorporated in the Jan. 27 budget. Revenue from the air travel security fee dropped 7%, based on fewer Canadians travelling.

Expenses for the month, however, dropped slightly, by 3%, to $17.1-billion, based on decreases in spending at certain departments and agencies – in particular at Agriculture Canada. Transfers to individuals and other levels of government, meanwhile, both increased, by 4.7% and 4.9% respectively.

For the 10-month period up to Jan. 31, there is a budget surplus of $496-million, well below the $9.6-billion Ottawa recorded for the year-ago timeframe. Revenue is down 1.7%, powered by a 21% fall in corporate tax receipts and 14.6% less GST cash. Program spending, however, is up 4.7%, on higher transfers to households and other levels of government.

Parliament’s independent budget watchdog suggested this week the economy would contract 8.5% in the first quarter – which could translate into further drops in revenue for the last two months of this fiscal year, and a year-end deficit that is close to the budget projection.

Meanwhile, the Fiscal Monitor noted that in January, Ottawa issued $19-billion of government debt, mainly bonds and treasury bills, to help finance activities, such as efforts to improve credit conditions in financial markets in the midst of a global credit crisis. For the fiscal year up to Jan. 31, Ottawa has issued $89-billion of market debt – whereas in the year-ago period, Finance had removed nearly $30-billion of bonds and treasury bills from the marketplace. The increase also reflects a recent move in which the department took over responsibility for debt issues on behalf of Canada Mortgage and Housing Corp., Business Development Bank of Canada and Farm Credit Canada.