A 'new economy' for Quebec, for better and worse, with first of several deficit budgets
MONTREAL -- A lot has happened, to say the least, since Quebec’s last budget. A year later, the province is already well into “a new economy,” a phrase repeated several times in this year’s budget, unveiled Thursday by Finance Minister Éric Girard.
A new economy can be a bad and a good thing, depending on what exactly you mean by it.
“I used to have a boss who would say ‘each crisis is an opportunity,’” Girard said Thursday in response to a reporter’s question.
The province has made strides in areas like telemedicine and bolstering senior care, he said, and it will continue some of those transformations.
However, despite those sunny tones, Quebec’s new economy is also gloomier than last year’s. After hitting nearly 18 per cent unemployment in 2020, it has projected deficits for the next six years, requiring it to suspend a law requiring budgets to be balanced within five years.
It’s the first time in seven years Quebec hasn’t balanced the budget. Girard estimated that COVID-19 will end up costing Quebec a total of $30 billion.
While the province expects the economy to bounce back in 2022, with full employment by the end of that year, this is still “a pandemic budget,” he said bluntly.
“We’re in a pandemic; we’re in the worst recession since World War II,” he said.
The budget is full of fix-it measures meant to help repair some of the damage, including help to students and a tax break for businesses, as well as other spending meant to stimulate, including infrastructure projects.
Where the money will all come from is somewhat uncertain—the government has, as it promised earlier this week, not raised taxes.
Instead, its estimates rest largely on the economy bouncing back. It also has a new plan to collect taxes on foreign goods sitting in Quebec warehouses, and a much bigger wish for increased federal health transfers.
But these measures both depend on Ottawa’s decisions, and there’s little sign Ottawa will agree to the health transfer bump.
THE NEW HEALTH CARE
On top of the massive spending of the last year, Quebec health care is set for another mammoth boost of cash: $10.3 billion over five years.
Much of that will go towards improving care for seniors in a more permanent way.
This was needed anyway, the province noted in its budget documents—COVID-19 just highlighted it. By 2030, a quarter of Quebec’s population will be over 65.
Spending in this area includes:
- $2.2 billion to hire more orderlies and nurses for public care homes
- $534 million to hire a manager for each public long-term care home
- $750 million over four years to increase public home-support services
- A major renovation effort for private seniors’ residences
- An extra $95 million over four years for informal caregivers
Overall health-care staffing is also getting a lot of attention, with the province trying to retain its workers.
That includes the thousands of new orderlies trained during the pandemic, in three big cohorts, who were promised bonuses and will now see them gradually reduced, rather than suddenly cut off.
- $1.8 billion to pay 10,000 new orderlies
- $1.2 billion to convert the part-time orderlies to full-time
Quebec is also spending half a billion to improve access to front-line services, including “accelerating the digital shift,” and $288 million on mental health services.
CASH BREAKS, AND ACADEMIC HELP, FOR STUDENTS
Post-secondary students will get a break on their loans, getting one year interest-free, as well as a gift of $100 per semester for the current year.
It’s part of another massive spending plan of $1.5 billion for education to allow “every young person [to] reach his or her potential,” said Girard.
Enticing students to hit the books again isn’t just about fixing the damage of the last year, but about Quebec’s bigger hopes pinned to the economic recovery, Girard said.
“Education is part of increasing the economic potential of Quebec, and it’s very important,” he said.
There is also spending for younger students:
- $170 million for tutoring
- $125 to increase access to sports
- $93 million on special needs classes
- $80 million on school infrastructure
BUSINESSES AND WORKERS, INCLUDING THOSE OUT OF WORK
Quebec’s business sectors have all shifted, and for some of them the shifts will be permanent.
“Telework is here to stay,” said Treasury Board President Sonia LeBel on Thursday, adding that this will open “new horizons,” including the ability to spread work over a bigger variety of regions.
The province is putting $1.3 billion into high-speed internet, part of the provincial-federal program announced earlier this week, and part of its 2018 campaign platform.
Another half a billion is going into economic development across the regions.
There have been many less promising changes, too, including a mass movement of people dropping out of the workforce. The province will need to step in to reverse this, said Girard.
Overall, $404 million is going towards the effort, including an injection of $246 million to integrate immigrants into the workforce.
Some of the biggest news for the owners of small- and medium-sized businesses, however, came in the form of an old-fashioned tax break: their tax rate will drop from 4 per cent to 3.2 per cent for their first half-million in annual income, bringing the rate in line with Ontario's.
Other sectors are also getting a boost:
- $200 million to help “innovative” businesses including battery-makers and cybersecurity firms
- More traditional industries, including restaurants are getting nearly the same amount over the next two years in aid.
WHERE’S THE MONEY COMING FROM?
Girard said earlier this week that he wouldn’t hike taxes, and he stuck to that plan—at least when it comes to Canadians.
But the province has another plan up its sleeve, to collect sales tax from foreign goods supplied through “fulfillment warehouses,” it explained.
In other words, companies like Amazon that store goods in Canada will be charged Quebec sales tax on the final purchases of products, as opposed to import taxes.
This would raise $1.8 billion of revenue over the next five years, the province said.
The program, however, is a federal one and relies on Ottawa to push it through. It was first announced in fall 2020 and it's still unclear when it might come to pass.
The province is hoping for a much bigger lifeline from Ottawa in the form of increased federal health transfers, which would add up to $6 billion per year at the level Quebec proposes: 35 per cent of expenditures, up from 22 per cent.
However, the federal government won’t table its budget until April 19, and there’s no real indication it plans to make this wish come true.
Unlike Ontario, which also tabled its budget this week, Quebec even wrote that possibility into its budget plan, though Girard was careful to point out to reporters that he doesn’t have a line item for it.
“There’s no number attached to federal transfers,” Girard said. “There’s a request.”
Overall, many “elements will be pertinent” in deciding how much revenue Quebec can bring in, including how fast the economy gets back to speed, he said.
“It will depend. If the economy is stronger, if it [catches up], we’ll have less need of the other elements.”
NOTABLE QUESTIONS: DOMESTIC VIOLENCE, AFFORDABLE HOUSING
Girard and LeBel faced several questions over funding to stop the spate of domestic violence Quebec has recently seen, including seven murders of women in the last seven weeks.
Thursday’s budget included only $22.5 million over five years to add shelter space for women facing violence at home.
The move drew criticism from some opposition politicians, including Manon Massé, a co-leader of Quebec Solidaire.
“We're talking half the population," she said. "If the government [can] put a billion dollars to connect to the internet, I'm sure it could have put more than that for women."
Facing questioning by reporters, Girard said several times that more cash may be provided if needed.
“Listen, it’s a situation that’s extremely serious,” he said. “And if there are more sums necessary, we’ll allocate them.”
Social housing also got some money: $408 million, meant to fund 5,500 new units. However, some of it was already earmarked, and the new amount is $250 million.
Quebec’s major cities have said the need is much greater. In Montreal alone, the municipal government plans to build 12,000 units over the course of its mandate, and the city has 150,000 households waiting for affordable housing.