Yesterday, Quebec Finance Minister, Carlos Leitao, tabled the Quebec Liberal government’s budget entitled “Economic Action”. This was the government’s second consecutive balanced budget, and it totaled $102.6 billion, with $82.4 billion in revenue (up 3.2%), 89.7 billion in expenses (up 2.5%) and $20.2 billion in federal transfers. As of March 31, 2016, the debt burden will be 55% of GDP, which represents a 0.1-percentage-point decrease relative to the previous fiscal year. This decrease will accelerate over the coming years. In 2016-2017, consolidated debt service is expected to stand at $10.4 billion. The Quebec budget comes just five days before the Federal budget, which is expected to include massive new spending initiatives in areas of public infrastructure and clean and green energy related funds.
The government projects reinvesting a $2 billion surplus in the Generations Fund. What this budget delivered was no increases in income tax, some relief for parents with more than one child - stung by the indexing of subsidized child care, a two per cent increase in health spending and 3 per cent more for education.
The Economic Plan is positioned as enabling Québec to seize opportunities related to the transformation of society into a more open, more innovative, lower-carbon knowledge-based economy. The new initiatives unveiled today represent support that will total over $3.6 billion in the coming years.
Budget highlights:
Education:
The government is reaffirming the importance of education and higher education for the economic and social development of Québec. Under the Plan for Success in Education and Higher Education, new investments of $500 million over the next three years will serve to:
provide a stimulating learning environment and guide young people to prevent drop outs;
promote excellence and achievement among students, in particular through physical activity and strengthening links with various civic partners and;
Strengthen links between the education and higher education networks and businesses in order to better meet labour market requirements.
It also provides for an additional $700 million for continued investment in the renovation and upgrading of educational establishments.
Health
By the end of 2017, the health tax, introduced in 2010, will no longer exist. The gradual elimination was announced by the Liberal government in the previous budget, but will now move on more quickly. For those who make less than $41,265 a year, the health tax contribution will drop from $100 to $50 this year. Anyone whose income falls between that plateau and $134,000 will only see a $25 difference this year.
On the larger health spending front, a portfolio that comprises 38 per cent of government spending, the government is launching no major new initiatives.
The effects of the massive reform in health care that Health Minister Gaetan Barrette emphasized, are long-term and yet to be fully realized. A significant portion of the $735 million earmarked for increases in health and social services spending will go to increases in doctors' compensation previously negotiated and other salary increases.
Increases amounting to $88 million will go to in-home services, services for children and adults with autism and increased access to surgery and drug treatment centres.
Innovation:
The Economic Plan includes initiatives totalling nearly $850 million over the next five years to support manufacturing businesses in their efforts to innovate, including:
introduction of a reduced electricity rate to spur manufacturing investment and natural resource processing;
implementation of a tax cut for innovative Québec businesses to support the marketing of their innovations and;
creation of the RénoVert refundable tax credit.
The Québec Economic Plan provides for initiatives totalling $162 million over five years as part of the digital strategy’s implementation.
It also provides for additional initiatives totalling more than $600 million over the next five years to support innovation in key sectors of the economy.
Other highlights include:
$2 billion for improvements to Quebec's road network in 2016-2017.
Enhancements to the so-called tax shield, increasing the annual eligible maximum to $3,000 per worker.
50% reduction in the additional contribution in respect of the second child using childcare services.
A new strategy and more investment in Quebec's aerospace industry, totalling $70 million over five years.
Lowering the eligible age for the tax credit for experienced workers to 62 by 2018.
$4.9 million for new initiatives to combat sexual violence and support gender equality.
$30 million over five years to support Quebec's wine producers and oversight of its alcoholic beverage industry.
$5 million annual increase to the budget allocation of the Conseil des arts et des lettres du Quebec.
Conclusion:
After two years of intense work and sacrifice getting the fiscal house in order, Quebec's government has delivered a second surplus budget that opens up new spending, albeit cautiously. We see it as a prudent budget that will set the table for the next two years and which will bring us to the next election.
Sadly, what should have been a good day for the Quebec Liberal government was tossed on its head when it was announced that the former Deputy Premier of Quebec, Nathalie Normandeau, was arrested on corruption charges stemming from investigations related to the Charbonneau Commission. Also charged are: Marc-Yvan Cote, former Bourassa-era Liberal Cabinet Minister; Bruno Lortie, Normandeau's former Chief of Staff; Mario W. Martel and France Michaud, two former executives with engineering firm Roche; Ernest Murray, a former political aide to ex-PQ Leader Pauline Marois; and Francois Roussy, the former Mayor of Gaspe. The arrests and charges were seemingly timed for maximum exposure and side swiped what was to be an exciting budget day.
