Quebec could delay balancing its budget — but will that spare any cuts?

Quebec Finance Minister Eric Girard will present the 2024-25 budget tomorrow as the province braces itself for greater debt while growth is stalling.

Stopping short of saying the latest budget would be his most challenging one, the finance minister pointed to fewer revenues, increased spending and fewer federal transfers than hoped for as obstacles to paying off Quebec's deficit.

Health and education are the government's stated priorities, with Girard saying he expects to see improved services in those fields since Quebec finalized salary deals with public sector workers. They're also typically the most expensive items in the budget — followed by interest on the debt.

But even before reaching a deal with the public sector, the government was aware its revenue growth would slow, which makes returning to a balanced budget ever more critical, according to a pre-budget report by the Comité des politiques publiques de l'Association des économistes québécois.

"It is an economic and financial issue, but it is even more an intergenerational equity issue given the significant challenges awaiting Quebec in the next decades," the report reads.

Excluding the first year of the COVID-19 pandemic, government spending relative to Quebec's GDP — a measure of an economy's health — reached a more than 30-year high in 2022-23.

And as that spending grows, it's unclear if the economy can keep up.

That same pre-budget report forecasted consolidated revenue to rise annually by an average of 2.9 per cent from 2023 to 2027, compared to 6.1 per cent from 2018 to 2022. 

Tomorrow's budget speech will be the latest test of the Legault government's coherence.

On top of a legal obligation to eliminate the deficit, the province is facing major infrastructure maintenance and repair projects, climate change and the energy transition, a worsening housing crisis and a persistent labour shortage, namely, in construction.

In March 2023, Girard said that to repay the debt, the government plans to withdraw $2.5 billion annually from the Generations Fund (which is mainly financed by Hydro-Québec royalties) over the next two years.

The government estimated last November that the fund — created to reduce the debt burden on future generations — would be worth $18.7 billion by the end of March 2024. That's roughly equivalent to 8.6 per cent of the province's net debt.

Premier François Legault hinted last month that his government may have to postpone balancing the budget by 2027-28 — a move that runs counter to Girard's values as a financier, says Philippe Gougeon, the AppEco director and former chief of staff to Girard.

Contrasting Girard with federal Finance Minister Chrystia Freeland, Gougeon said eliminating the deficit isn't a strongly held priority for all finance ministers.