First Girard budget: Run... And start on the right foot

The budget at a glance

• Revenues: $115.6B
• Expenses: $113B
• Payment to Generations Fund: $2.5B
• Net debt: $174B or 40% of GDP
• Economic growth: 1.8% in 2019 and 1.5% in 2020
• Growth in program expenses: 5.8%
• Infrastructure investments: $15.4B more in the 2019-2028 QIP (Quebec Infrastructure Plan), raising its total from $100B to $115.4B

The finance minister revealed his position when he chose to don hi-tech running shoes for the traditional pre-budget photo-shoot. Today, we can see why. It wasn’t to close Quebec's productivity gap with Ontario, but to show his eagerness to fulfill the CAQ’s commitments. The budget is a carbon copy of its electoral program.

Less than six months after taking power, the Legault government has comfortably taken charge of Quebec. This budget establishes milestones and lays out the plan on how it intends to govern Quebec.

Gradual removal of daycare service fees; money for the early detection of learning disabilities; major investments to address the infrastructure maintenance deficit; funding for an informal care policy; seniors home; reduction of the tax burden on the middle class; a third link between Quebec City and Lévis: one might wonder if the budget is simply a reprint of the Coalition Avenir Québec's electoral program. The budgetary measures are that faithful, even identical, to the election promises.

Many will see this as an antidote to cynicism. Others will feel that the new government has inherited considerable room to manoeuvre from the surpluses left behind by the Liberals.

The priorities are clear: early childhood, students, seniors, support for businesses. This “government of managers” is adopting a private sector approach to economic development: pragmatism, streamlining, shortened timeframes to gain environmental authorizations. In other words, being alert enough to grab business opportunities at lightning speed, in today’s digital age!

While the budget may be faithful to the electoral promises, it does stray somewhat from the philosophy behind the birth of the Coalition Avenir Québec and its merger with the defunct Action démocratique du Québec. At the time, François Legault’s party wanted to clean up expenses and pleaded for a far smaller government state intervention. However, with its 5.8% increase in program expenses and a proliferation of interventions, the Coalition Avenir Québec, which was considered centre-right, is revealing a new facet of its personality.

The Premier and his Finance Minister are betting that it is easier to finance their promises now when the State coffers are brimming rather than when the storm clouds potentially burst and hit Quebec with an economic downturn. After the 2.8% peak reached in 2017, economic growth is forecast to slow down (1.8% in 2019 and 1.5% in 2020). That could eventually thwart the Legault government’s ambitions.

There’s a clear desire behind the myriad measures: to satisfy the greatest number. It’s a normal reaction for any government enjoying the current state of public finances and wishing to extend its honeymoon with the electorate.

The environment, long considered the CAQ’s Achilles heel, was given surprising amount of attention in the Girard Budget. Its recent conversion allowed the government to gild its image and rehabilitate itself on the issue by announcing several initiatives. Clearly, the Premier heard Quebeckers’ expectations and sought to address them.

We have analyzed the core elements of this budget which we can characterize as interesting in many ways and sprinkled with nice surprises. To continue the discussion and find opportunities behind these measures, we invite you to contact your NATIONAL consultant.

Happy reading!

Principal measures

Education: a $2.4B increase in spending over 5 years

• Deployment of a universal prekindergarten network for four-year olds
• Development of extracurricular high school sporting and cultural activities and homework assistance
• Additional specialized classes to support academic achievement and perseverance
• The 2019-2029 QIP provides $20.3B for the construction and renovation of education and collegial infrastructures

Health: a $4.9B increase in spending over 5 years

• $2.6B allocated through 2023 for home healthcare
• Establishment of seniors’ homes and increased support for informal caregivers as of 2021
• Support for the early detection of childhood learning disabilities
• Additional staff and improved conditions for healthcare personnel
• Expanded vision care reimbursement for youths aged 17 and under
• Additional investments for professional social services for intellectual and physical disabilities and autism
• The 2019-2029 QIP provides $20.2B to build new and rehabilitate existing healthcare infrastructures

Digital and AI: $329M over 5 years

• The budget provides for $329M to accelerate the development and adoption of artificial intelligence. The main measures include: expanding AI training; making the field more attractive for researchers, adoption by companies ($65M), increasing computing power ($34M), supporting technology and research activities ($100M)
• $79.3M is allocated to the financing of research chairs affiliated with the Université de Sherbrooke and to give companies access to world class infrastructures.

Fiscal and budgetary measures for businesses

• $95M over 5 years to improve government economic intervention, in particular through $4B to $5B in added capital for Investissement Québec
• $1B for headquarter growth and maintenance
• Expansion of the Capital Mining Hydrocarbon Fund. The fund will be expanded to include all natural resources and energy development and be renamed Capital Natural Resources and Energy.
• An enhanced investment package for shipyards. $200M could serve for government equity investments in shipyard projects
• The government revisited tax measures already announced during the economic update, particularly accelerated and enhanced depreciation, and contributions to the Health Services Fund
• $34M to hire more staff to reduce the time required to process environmental files and help conduct wilderness impact studies
• Increased entrepreneurial training and encouragement for youth entrepreneurship (nearly $75M over 5 years)

Fiscal and budgetary measures for individuals

• Beginning of standardization of school tax rates in July 2019
• Enhancement of tax credit for career extension for people aged 60 and over
• Increase in exemption for support payments
• Gradual elimination of additional contribution for childcare

Remote regions, Natural resources and Energy

• Following on the government’s call for projects, $25M over 3 years is planned for constructing re-gasification and storage infrastructures. Also, the Ecoperformance Program gets a new component to help convert the major consumers’ equipment to natural gas.
• $50M to increase the capacity of the Société ferroviaire et portuaire Pointe-Noire facilities
• $7.5M for a feasibility study on extension of the Dolbeau-Mistassini and Baie-Comeau rail network
• Support of the implementation of multiuser infrastructures in Northern regions ($10M)
• Enhanced tax holiday for investment projects in remote regions by reducing the eligibility threshold from $75M to $50M
• The budget contains several measures to support the tourism industry in remote regions

Labour

• The budget looks to prolong careers to partially offset the labour shortage. The non-refundable tax credit for experienced workers aged 61 and up will henceforth apply to workers aged 60 and up. Employer tax burdens for this category will be reduced.
• The budget provides for $730M to better integrate immigrant workers and provide measures to integrate the disabled into employment

High speed internet and broadband cellular network

• $400M in investments that, in collaboration with the federal government and municipalities, will accelerate the deployment of digital infrastructure in areas with inadequate or no service

Environment: $1.3B over 6 years

• $1B added to the Action Plan to Combat Climate Change
• Over the coming year, the government will introduce an enhanced approach to the Plan that will target more effective methods of combat and make it possible to seize economic and technological development opportunities
• Extension of the Roulez vert program
• Expansion of Techno-Climat program to take into account major industrial projects, particularly those launching pilot projects
• $100M to improve the management of residual materials management like plastic and glass, and to modernize sorting centres
• $320M to decontaminate strategic sites for innovative businesses
• Development of Residual Forest Biomass program
• Encouragement of better environmental and social practices in mining exploration
• Intensification of protective measures for the woodland caribou

Roads and transport: $37B for the QIP

• The 2019-2029 QIP will include a $24.6B investment for the road network. The lion’s share of the remaining $12B will go to public transit.
• Financing for a feasibility study for the third Quebec City – Lévis link including its plans and specifications

Culture

• $295M in investments to encourage cultural creativity, enrich the community cultures and to enhance the cultural and religious heritage
• A one-time $3M grant to RecycleMédias

Next steps

• Budget debate (25 hours)
• Examination of budgetary appropriations in parliamentary committees (200 hours)
• Adoption (sometime in May)