Quebec Budget 2024-2025: The CAQ faces up to its choices

Facts and figures

• Priorities: Investments of more than $8.8 billion over five years, including $4.9 billion in the two priorities targeted by the government: health and education.
• Infrastructure: Plan québécois des infrastructures (PQI) increased by $3 billion over 10 years to $153 billion.
• Expenses: Up 4.4% next year to $157.6 billion. The projected increase is 2.9% in 2025–2026.
• Revenues: Will reach $150.3 billion in 2024–2025, up 2.4%. Growth should increase to 4.2% the following year.
• Deficit and balanced budget: The Minister of Finance forecasts a deficit of $11 billion for the current fiscal year, after payment to the Generations Fund, including a $4.4 billion structural deficit. The return to balanced budgets has been postponed by two years, to 2029–2030 at the latest. The government will table a plan to return to balance in the next budget (2025–2026).
• Provisions: $1.5 billion per year is earmarked for contingencies during the five-year financial framework.
• GDP: Economic growth forecast for 2024 remains low at 0.6%, but is expected to reach 1.6% in 2025 in Quebec, compared to 1.9% across Canada.
• Optimization: Comprehensive review of government and tax spending to generate savings of $2.9 billion over five years.
• Debt: The net debt burden will stand at 39% of GDP on March 31, 2024. The government maintains its objective of 30% of GDP by 2037–2038.

Analysis

Gone are the days when a budget could be drafted using the surpluses inherited from the previous government. Gone are the days when a pandemic made it possible to spend lavishly, while running cyclical deficits. For the first time since the Coalition Avenir Québec came to power, Finance Minister Éric Girard faces up to his government’s choices.

While the deficit is considerable (rising from $4 to $11 billion)—and among the largest ever recorded in Quebec—it nonetheless reflects choices made by the CAQ government since its re-election. Yes, the latest negotiations with government employees were more laborious and costlier than expected, but the CAQ government must now deal with the choices it made in recent months.

By handing out cheques to Quebecers, cutting personal income taxes, forgoing any increase in government revenues and suspending payments to the Generations Fund, the Legault government had fully exhausted its margin of manoeuvre.

Having been ordered not to rationalize government spending or tax more, the finance minister found himself faced with a mission impossible in accounting terms. It’s hard to churn out columns of figures unless you’re shovelling money forward, once again postponing balanced budgets and tough decisions. In fact, this is the strategy adopted by the Trudeau government in our other capital.

From cyclical deficits, we are moving to structural deficits. The plan for returning to a balanced budget, and the path to get there, will be known during the 2025–2026 budget, one year before the electoral deadline. Politically, this new dynamic in public finances comes at a very bad time. As the popularity of the CAQ rapidly wanes, this government could have really used a less “demanding” budget to relaunch itself and win back the electorate.

Many will be left wanting more after reading this budget. True, as promised, the health and education networks get the lion’s share ($4.9 billion over five years) of the $8.8 billion in investments to fund services in health and social services, education and higher education, but in reality, most of the money goes to cover wage increases for government workers. Few new measures relate to the energy transition, decarbonization, the fight against climate change or tackling the housing crisis.

Operation: belt-tightening

After having accustomed us to fireworks, candy-like measures and massive investments, Minister Girard had to temper his generosity. While semantically rejecting any form of austerity, this budget contains belt-tightening measures that are akin to the hated term. There are numerous turns of phrase to prepare our minds for the impending compression effort: “optimizing the action of the state,” “reviewing interventions to improve their efficiency,” “examining government spending,” “reviewing all expenses” covering the tax regimes for individuals and companies… The Legault government is returning to its fundamentals, the efficiency of the state, which was at the heart of the founding of the Coalition Avenir Québec in 2011.

Main fiscal and budget measures

• Initiatives of $443.1 million over five years to stimulate strategic sectors and economic growth.
• Review of all spending on personal and corporate tax systems.
• The government's major crown corporations (Hydro-Québec, Loto-Québec, Société des alcools du Québec, Société québécoise du cannabis and Investissement Québec) will be required to carry out optimization and efficiency efforts totalling $1 billion from 2025-2026 to 2028-2029.

Economic development ($443.1 million over 5 years)

• Setting up industrial laboratories in innovation zones ($125 million).
• Support for the aerospace sector ($74.5 million).
• Development of the aluminum sector ($31 million).
• Adoption of new technologies and research ($203.5 million).
• Support for entrepreneurship ($9 million).
• Downward revision of tax credits (harmonization, refocusing or modification) for IT-intensive sectors.

Regional development ($889 million over five years)

• Support for Quebec's forestry sector ($347.5 million).
• Promote the development of the bio-food sector through sustainable investments ($50 million) and alcoholic beverage producers ($57.5 million).
• Continue to revitalize the tourism sector ($30 million).
• Strengthen partnerships with First Nations for the development of Indigenous territories ($25 million).
• Continue and enhance the Nunavik home ownership program ($16.6 million in 2024-2025).

Education ($818.7 million over five years) and Higher education ($420 million over five years)

• 6.6% and 6.3% expenditure growth rates, respectively.
• PQI: $22.7 billion for the education network, of which 69% is devoted to maintaining current infrastructure and 31% to improving or building new infrastructure.
• Measures to support student success ($544.5 million), including $301 million for students in special needs classes.
• Measures to attract and retain school staff ($113.6 M) by making part-time positions more attractive ($39.6 M), retaining retired education employees ($37.0 M) and supporting teaching staff ($37.0 M).
• Maintenance of school buildings ($100.0 million).
• Success and retention of university students ($370 million).
• Support for training in priority areas and digital transformation ($43.0 million).

Health and Social Services (3.7 billion over five years)

• Annual spending growth of 7.3%.
• The Plan québécois des infrastructures (PQI) 2024-2025 earmarks $23.8 billion for Health and Social Services, of which 43% is for maintaining existing infrastructure in good condition and 57% for new infrastructure.
• Continuation of the digital shift in the healthcare network ($902.5 million).
• Maintain and develop alternatives to hospitalization ($457 million).
• Added beds to meet the needs of the population ($306.5 million).
• Continued deployment of the Guichet d'accès à la première ligne (Front line access) ($113.5 million).
• Increased investment in prevention and innovation to better respond to pandemics ($20.5 million).
• Enhanced home support services ($581.0 million).
• Increased supply of private seniors' residences ($121.8 million).
• Support for the deployment of seniors' homes and alternative housing ($253.5 million).
• Continued contracting of residential and long-term care centres ($182.0 million).
• Consolidation of services in mental health, general social services, disabilities, community organizations, Agir tôt, and addictions ($195.0 million).

Energy and natural resources

• Recapitalization of the Capital ressources naturelles et énergie fund with an additional $500 million.

Environment ($125.7 million over five years)

• Safety in the context of climate change ($101.9 million), for the safety and upgrading of public and private dams.
• Enhancement of Quebec's environmental assets ($25.6 million).
• Upcoming update of the Plan for a Green Economy 2030.

Transport

• Support and enhance regional air service ($27 million).
• Improved safety of school transportation services ($13 million).
• Roulez vert program rebates for the purchase of electric vehicles cut in half.
• PQI: road network ($34.5 B), public transit ($13.8 B), sea, air and rail transport ($4.7 B).
• 82% of the funds earmarked for road transport are allocated to fleet maintenance.
• Allocation of $672 million over 10 years to improve mobility and electrify public transit, notably for Société de transport de Saguenay, Société de transport de Montréal, exo and ARTM.

Digital and Information Technologies ($203.6 million over five years)

• Continued acceleration of the government's digital transformation ($188.6 million over five years).
• Support emerging technologies, including artificial intelligence ($15.0 million over three years).
• Modernization of property taxes to encourage robotization.

Workforce

• Francization of immigrants ($320 million).
• Abolition of the tax credit for companies that encourage experienced workers to remain on the job.

Construction ($126 million over five years)

• $111 million to continue the Construction Training Offensive.
• $15 million to encourage innovation and productivity in the construction industry.
• Modernization of the regulatory framework for public procurement to encourage innovation.
• Administrative and regulatory streamlining to improve performance in awarding public contracts.

Culture, French language and media

• Support, promotion, and enhancement of the French language ($40 million), including $9 million for the Office québécois de la langue française.
• Renewal of the media assistance plan ($30 million).
• Enhanced tax credit for Quebec film and television production ($3.9 million over two years).

Social housing and childcare

• Promoting access to housing ($482.5 million over five years).
• Conversion of 1,000 unsubsidized childcare spaces ($68.6 million over five years).

Next steps

• Budget debate (25 hours).
• Examination of the estimates of expenditure by parliamentary committees (100 hours).
• Adoption (in May).