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Quebec tables fifth consecutive balanced budget using billions left over from Liberals

Quebec continues to swim in cash, and the Coalition Avenir Quebec government found itself in the enviable position Thursday of being able to spend lavishly in its first budget, using billions left over by its Liberal predecessors.

After a $5.6 billion-surplus in the previous fiscal year, Finance Minister Eric Girard’s 2019-20 budget increases overall spending by 5 per cent, pays down debt and begins phasing out an unpopular daycare fee increase imposed by the Liberals.

Girard projects that Quebec will end the fiscal year with a $2.5-billion surplus, the province’s fifth consecutive year without a deficit. The budget contains a pessimistic note, however, as the province’s economic outlook is set to darken with lower growth and a labour shortage that risks being aggravated by the new government’s immigration policy.

Economic growth is forecast at 1.8 per cent in 2019 and 1.5 per cent in 2020, down from 2.3 per cent in 2018.

“This is the last budget with room to manoeuvre,” said Liberal finance critic Carlos Leitao, whose four preceding years as finance minister helped the province balance its books.

Even Girard began his remarks to reporters Thursday acknowledging that the Liberals left the province’s books in good shape, though he credited “generous” federal transfers and the strong global economy instead of his predecessor.

Leitao said “federal transfers helped, but the biggest component was indeed, our own revenues that were much higher than expected because the economy was functioning well and employment was high.” Total revenues for the coming fiscal year are forecast at $115.6 billion, incuding $24.9 billion in federal transfers.

Leitao said the current government is going to have budget troubles after this fiscal year if it doesn’t get spending under control.

Despite widespread labour shortages across the province and an aging population, Premier Francois Legault is moving ahead with a 20-per-cent reduction in immigration in 2019. Girard’s budget includes measures to soften the blow, such as tax credits to encourage seniors to stay in the workforce and money for immigrants to find jobs that meet their skills.

The Legault government has justified the immigration cuts by saying too many newcomers are failing to integrate into Quebec society and find work that matches their skills. Girard told reporters Thursday the reduction in annual immigration will help solve the problem of labour shortages across the province, not make it worse.

He said any reduction is “temporary” and will serve to “improve all our programs.” When the programs improve, he argued, Quebec will increase the number of annual immigrants and they will be better integrated into the workforce.

The budget includes $730 million over five years to “promote better integration” of immigrants. Girard said that cash envelope includes $146 million for “a personalized program for every immigrant in this province.” Details about the personalized services will be announced at a later date, he said.

Girard’s budget follows through on election promises to invest more in education and health, portfolios that will benefit from spending increases of 5.1 per cent and 5.4 per cent, respectively, in 2019-20.

There are no income tax reductions, but roughly 140,000 families will pay less beginning this year for childcare. The Liberals introduced additional fees for daycare spots tied to family income. Households making less than $50,000 a year currently pay $8.25 a day, per child, while a family making $200,000 pays more than $22 a day, per child.

The Coalition’s new plan reduces all additional contributions for middle-class and wealthier families and by 2022, every Quebec family, regardless of income, will pay roughly $9 a day.

The budget also allocates $200 million in 2019-20 toward reducing school tax rates, part of a three-year initiative to establish a single rate across the province.

Quebec’s economic health has led to its debt burden being the lowest in 20 years. The province’s gross debt in 2019 stands at roughly $200 billion, or 46.1 per cent of gross domestic product. That is still the second-highest percentage in Canada, after Newfoundland and Labrador.

The budget also addresses Legault’s policy on corporate head offices, a sensitive issue in a province that has seen many company headquarters leave Montreal over the decades. The government plans to spend $1 billion to help “strategic businesses” and to retain head offices.

Girard said “the program wasn’t designed for SNC-Lavalin,” but it could be used to keep the embattled company in Montreal. Observers say the engineering and construction giant could be at risk of takeover, in part because of an upcoming criminal trial on corruption charges.

Girard said Quebec needs to give itself the means to buy shares in companies the province considers important to the economy.

“I have been the treasurer of the National Bank of Canada,” Girard told reporters, about his former employer with its headquarters in Montreal. “When you have a head office on your territory this is where the decisions are made. It’s important and we want to support that.”

Giuseppe Valiante, The Canadian Press