Quebec runs historic $11B deficit in budget that prioritizes health, education

Quebec Finance Minister Eric Girard delivered Tues‐ day the most challenging budget of his mandate with a projected $11-billion deficit for the next fiscal year.

He said that, in real dol‐ lars, it could be the highest in the province's history.

The deficit for 2024-25 is more than three times higher than what the government had forecast for 2023-24.

Of the latest projected deficit, $4 billion is structural, Girard said, and the rest is re‐ lated to new spending and managing the province's de‐ bt. He attributed increased spending to expenses that were considered temporary during the pandemic, but have since become perma‐ nent.

New collective agreemen‐ ts with the public sector will also lead to a hike in ex‐ penses over the next five years.

"Right now, we have no growth," Girard said, noting a hike in interest rates over the last year and other difficult economic conditions.

"We had forest fires, we had reduced electricity pro‐ duction because of water shortage and we still man‐ aged to grow 0.2 per cent. That's a testament to the re‐ siliency of the Quebec economy."

As expected, the govern‐ ment is postponing its dead‐ line for paying off Quebec's debt. It hopes to achieve a balanced budget by 2029-30 two years later than it had planned last spring.

The province's economy will be far from keeping up with government spending for the foreseeable future. For the next five years, the province predicts spending will outpace revenue.

Girard said next year he will present his plan to get Quebec out of the red. But this year, his budget priori‐ tizes health care and educa‐ tion.

For 2024-25, health and social services spending stands to increase by 4.2 per cent, to a total of $61.9 bil‐ lion - the largest slice of the $157.8 billion budget pie.

Education spending is in‐ creasing 9.3 per cent for a to‐ tal of $22.4 billion over the next year. Higher education spending will rise 3.5 per cent in 2024-25 for a total of $11 billion.

Interest on the province's existing debt is expected to cost Quebec $9.7 billion over the next year.

WATCH | What the Que‐ bec budget means for your wallet:

'Comprehensive review' of spending

Girard said the government will soon start a "comprehen‐ sive review" of its spending with the aim of returning to a balanced budget on schedule.

The province is also counting on finding $2.9 bil‐ lion in savings in five years' time through "optimization" measures.

Part of its strategy is ask‐ ing its Crown corporations Hydro-Québec, Loto-Québec, the Société des alcools du Québec, the Société québé‐ coise du cannabis and In‐ vestissement Québec - to find an extra $1 billion in net revenue over five years.

It will also seek to "sim‐ plify" its tax credits for busi‐ nesses and "strengthen" its audit and tax collection mechanisms.

The Quebec government is also counting on receiving its "fair share" of federal transfers to cover the costs of services to asylum seekers and expenses related to health care, infrastructure and workforce development.

Girard said Quebec is ask‐ ing Ottawa for an "uncondi‐ tional opt-out" with full finan‐ cial compensation from the Canadian Dental Care Plan and any future Canadian pharmacare plan.

Part of the CAQ gover‐ ment's bet is that the economy will improve by 2025. That's when Quebec's Balanced Budget Act requires Girard to submit his five-year plan to balance the budget.

The government is pro‐ jecting that the Quebec's gross domestic product will grow by 0.6 per cent in 2024, a slight decrease from what they were projecting in No‐ vember.

They are more optimistic for 2025, where they forecast a 1.6 increase in GDP.

Keeping the health-care network running

Quebec's accounts are still reeling from the conse‐ quences of the pandemic, with hospitals struggling to catch up on a backlog of surgeries accumulated since 2020.

That, along with the province's aging population and costly updates in healthcare technology, is driving up expenses.

To keep the health-care network functioning, the gov‐ erment will spend an addi‐ tional $1.8 billion to improve access to care over the next year.

The majority of that sum $902.5 million - will go to‐ ward speeding up the digital transition of the health-care system, a longstanding issue that health-care workers have raised.

Quebec will also spend $306.5 million for additional hospital beds. There are cur‐ rently 2.3 beds and stretchers per 1,000 people in the province.

The province is also in‐ creasing taxes for cigarettes by 25 cents per pack as of midnight, and another 25 cents per pack in January, a move Girard says will both in‐ crease tax revenue and dis‐ courage smoking.

Increases in education spending

In this year's budget, the government is setting aside about $8.8 million for the Higher Education Ministry to boost graduation rates and "promote accessibility to col‐ leges and universities" - an increase of roughly four per cent.

Spending increases in ed‐ ucation are largely due to the rising costs related to deliver‐ ing preschool, elementary and high school education services and attempts to draw students to vocational streams.

Penalty for retirees with disabilities axed

Quebec's retirement pension reduction, which imposed steep penalties on seniors with disabilities, will be elimi‐ nated, starting January 2025.

The Tribunal administratif du Québec, which allows people to challenge decisions made by provincial ministries and agencies as well as mu‐ nicipalities, ruled in 2020 that the measure was discrimina‐ tory.

After the Legault govern‐ ment appealed the decision to Quebec's Superior Court, a disability advocacy group filed a complaint with the United Nations about the measure. The group argued that it violated the Conven‐ tion on the Rights of Persons with Disabilities.

On Tuesday, Girard said he was proud that this budget would remove those pension reductions.

All opposition parties were in favour of removing the clawbacks.

WATCH | Why is Quebec running a deficit?: