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

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

He said that, in real dollars, 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 related to new spending and managing the province’s debt. He attributed increased spending to expenses that were considered temporary during the pandemic, but have since become permanent. 

New collective agreements with the public sector will also lead to a hike in expenses 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 production because of water shortage and we still managed to grow 0.2 per cent. That’s a testament to the resiliency of the Quebec economy.”

As expected, the government is postponing its deadline 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 prioritizes health care and education.

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

Education spending is increasing 9.3 per cent for a total 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.

‘Comprehensive review’ of spending

Girard said the government will soon start a “comprehensive review” of its spending with the aim of returning to a balanced budget on schedule.

The province is also counting on finding $2.9 billion in savings in five years’ time through “optimization” measures.

Part of its strategy is asking its Crown corporations — Hydro-Québec, Loto-Québec, the Société des alcools du Québec, the Société québécoise du cannabis and Investissement Québec — to find an extra $1 billion in net revenue over five years. 

It will also seek to “simplify” its tax credits for businesses 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 asking Ottawa for an “unconditional opt-out” with full financial compensation from the Canadian Dental Care Plan and any future Canadian pharmacare plan. 

Part of the CAQ goverment’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 projecting 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 November.

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 consequences 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 health-care technology, is driving up expenses.

To keep the health-care network functioning, the goverment will spend an additional $1.8 billion to improve access to care over the next year.

The majority of that sum — $902.5 million — will go toward 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 currently 2.3 beds and stretchers per 1,000 people in the province. 

The province is also increasing 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 increase tax revenue and discourage smoking.