QUEBEC - A stagnant economy, a historic forest fire season and billions of dollars in public sector wage increases are what Quebec鈥檚 finance minister says have led to one of the biggest budget deficits in the province鈥檚 history.
After hinting for weeks that Quebec鈥檚 financial situation was weak, Eric Girard tabled a $158-billion budget on Tuesday with an $11-billion deficit and a delay of his timeline to balance the books.
Quebec鈥檚 economy is so bad that the budget for the 2024-25 fiscal year doesn鈥檛 include details about how and when the province鈥檚 finances will return to balance 鈥 that will only come next year, he said. Girard would only commit on Tuesday to balancing the budget by the 2029-30 fiscal year 鈥 two years later than he had forecast 12 months ago.
Quebecers will have to wait for the government鈥檚 plan to erase the deficit, he said, because 鈥渨e think the economic conditions will be better next year.鈥
The province鈥檚 real GDP 鈥 adjusted for inflation 鈥 grew by 0.2 per cent in 2023, and the budget predicts it will increase by 0.6 per cent in 2024 and by 1.6 per cent in 2025.
鈥淭he economy is currently stopped,鈥 Girard told reporters in Quebec City, adding that if the Bank of Canada cuts interest rates 鈥 something he said he expects in the second half of 2024 鈥 then growth will accelerate. 鈥淚f there鈥檚 rain this summer, if there鈥檚 water in Hydro-Qu茅bec鈥檚 reservoirs, if (electricity) exports restart,鈥 he said, he鈥檒l be in a better position to figure out when and how the books will eventually be balanced.
Aside from the sluggish economy, Girard says the province鈥檚 revenues took a hit from dry weather conditions last summer, which led to a historic fire season and reduced water levels in the electric utility鈥檚 reservoirs, leaving the provincially run corporation with less power to sell. In its annual report earlier this year, Hydro-Qu茅bec said its annual dividend to the provincial government dropped to $2.5 billion in 2023, from $3.3 billion the year before.
As well, Girard said, strikes in the public sector 鈥 which for weeks last year shut down schools and delayed surgeries 鈥 resulted in salary increases that added $3 billion in annual expenses.
Eleven billion dollars, he admitted, could be the largest deficit ever recorded in Quebec. However, he said, governments in the 1990s recorded bigger deficits as a percentage of the province鈥檚 GDP. In the 2020-21 fiscal year, at the height of the COVID-19 pandemic, government spending exceeded revenues by $10.7 billion, he said.
鈥淗ere, we鈥檙e at $11 billion, but obviously it鈥檚 a forecast,鈥 he said about Tuesday鈥檚 budget, adding: 鈥淚t could be the highest deficit in terms of dollars.鈥
The $11-billion figure includes a $1.5-billion contingency reserve and a $2.2-billion, legally required transfer into a fund dedicated to reducing debt.
Quebec will collect $150.3 billion in revenue, an increase of 2.4 per cent, and it plans to spend $157.6 billion in the 2024-25 fiscal year, an increase of 4.4 per cent. The budget includes $8.8 billion in new spending, with almost $5 billion going to health and education, sectors that Girard described as priorities for the government.
And while the province plans to spend billions of dollars more than it will take in this fiscal year, Girard has released a plan to find $2.9 billion in savings over the next five years.
That plan includes savings of $1 billion by reducing corporate subsidies, including by changing the wage-based tax credit for jobs in the IT and video game sectors. The new rules lift caps on the amount of salary eligible for the tax credits, which will be targeted more toward 鈥渉ighly specialized well-paying jobs鈥 in those industries, the budget says.
Girard said the government will also require provincially owned companies 鈥 such as Hydro-Qu茅bec and the liquor board 鈥 to find hundreds of millions in savings. The province also plans to hike the tobacco tax and collect more money from tax cheats.
The Liberal Opposition was quick to describe Tuesday鈥檚 budget deficit as a 鈥渞ecord.鈥
When the Liberals left office in 2018, Quebec had a roughly $7-billion surplus, boasted Fr茅d茅ric Beauchemin, the party's finance critic. 鈥淣ow we have a deficit of $11 billion 鈥 that鈥檚 an $18-billion gap in six years,鈥 he told reporters. 鈥淚t鈥檚 a terrible management of resources.鈥
The Coalition Avenir Qu茅bec government, he said, 鈥渉as lost control of public finances. The CAQ doesn鈥檛 know how to create wealth. The CAQ is hurting the productivity of our companies. There is no plan to return to a balanced budget.鈥
Quebec鈥檚 net debt is projected to rise from $221.1 billion to $237.8 billion, an increase of $16.64 billion, when capital investments are included. That would make the debt the second highest among provinces as a percentage of GDP, after Newfoundland and Labrador.
This report by 好色tvwas first published March 12, 2024.
