Despite running a historic deficit this year, Quebec Finance Minister Eric Girard has announced more than $2 billion in new spending, crediting a slightly stronger than expected economy and some newly found government savings.
The new spending measures are part of the government’s fall economic update, which Girard unveiled in Quebec City on Thursday. Wearing a smile, Girard said the government’s coffers may be in bad shape now, but things are looking up.
“The return of inflation to a low and predictable level and the drop in interest rates favourises Quebec’s economic recovery in 2024-2025,” Girard said at a news conference.
“The government continues to respond to priority issues and we’re committed to returning to a balanced budget.”
The spending measures target four “priority” areas. There is money for the forestry sector, housing, public safety and public transit.
Quebec can afford the spending, in part, Girard said, because the economic outlook is better than expected. When the government presented its budget in March, it forecast a 0.6 per cent growth in GDP in 2024. Now, it looks like the economy will actually grow 1.2 per cent.
The government is also re-jigging its tax system and saving $3.4 billion over five years by “optimizing” some tax credits. For example: Quebec used to provide a tax credit to people who continued to work past 60. Now, they’re only going to give that credit to people 65 and over.
That means fewer people are going to get that tax credit now and the government will save some money.
But they’re also giving some tax relief. The government is indexing personal income taxes and social assistance payments by 2.85 per cent. What does that mean? People on social assistance will see their payments increase and the Basic Personal Amount — the amount of money you can earn on which you pay no taxes — is increasing by approximately $450.
A lot has changed for the Legault government. With two years to go before the next provincial election, the premier has faced departures from his caucus and discontent from party members.
A big deficit, for now
Despite the favourable economic conditions and the new government savings, Quebec is still running an $11-billion deficit in 2024-25 because the cost of some things, including healthcare, have increased.
But Girard says Quebec still plans to achieve a balanced budget by 2029-30. He says that’s possible in part because the spending increases of the past few years, spurred by the pandemic, were exceptional.
Government spending will continue to increase, but at a much lower rate in coming years, Girard said.
He pointed to what he called his “favourite page” of the economic update: a page that shows Quebec’s structural deficit — the amount of money that the government spends each year that outpaces its annual income — was going down. It was four per cent in March when the government announced its last budget. Now, it’s 3.2 per cent.
“For us, it’s a responsible management of public finances,” he said. “We want to return to a balanced budget. But for this year, we’re asking institutions in the health-care sector, in the education network, we’re asking everyone to respect their budgets.”
Girard insisted that Quebec can achieve a balanced budget without resorting to austerity measures. He said the Coalition Avenir Québec (CAQ) government has managed to strike a balance during its six years in power between increasing government spending while still lowing taxes and finding efficiencies.
The government has already asked Crown corporations and the health-care network to find ways to save money this year, specifically by slashing administrative costs. He took aim at critics who have accused the government of implementing austerity measures.
What’s in the new spending?
The new spending items, which are spread over four or five years, aren’t huge, by government standards — and some of them come paired with new federal money as well.
The government announced $184 million in new money for housing projects, but half of that money is coming from the federal government.
Some of the spending is devoted to recovering from the natural disasters that affected the province over the past year.
A $252-million boost for the forestry sector, for instance, is meant to help the industry recover from a bad forest fire season and invest in reforestation. It is also a response to an ongoing trade dispute with the United States — one that the Quebec government acknowledges could worsen when Donald Trump ascends to the presidency.
The government is also announcing some new money for “public safety.” Much of that is earmarked to assist victims of post-tropical storm Debby and rebuild damaged infrastructure.
But that budget item also includes money to increase police coverage in the autonomous northern territory of Nunavik.
The biggest ticket item from this year’s economic update is a $1.2-billion cash injection to Quebec’s two largest cities: Montreal and Quebec City.
Much of that money, $880 million over five years, is for a public transit assistance plan. Municipal officials in Montreal have long urged the provincial government to boost spending on public transit to maintain service levels and avoid cuts.
