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

Quebec Finance Minister Eric Girard will present the 2024-25 budget onTuesday 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 andfewer federal transfers than hoped for asobstacles 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 withthe public sector, the government was aware its revenue growth would slow, which makes returningto a balanced budget ever more critical, according to a pre-budget report by theComit des politiques publiques de l'Association des conomistes qubcois.

"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 relativeto Quebec's GDP a measure of an economy's health reached a more than 30-year high in 2022-23.

WATCH | Why is Quebec running a deficit?:

What Quebec's deficit means for you

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Since the pandemic, Quebec has been spending more money than it takes in. A larger deficit adds to the province's debt, which is now worth more than $200 billion.

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

That same pre-budget report forecasted consolidated revenue torise annually by an average of2.9 per cent from 2023 to 2027, compared to 6.1 per cent from 2018 to 2022.

A question of values

Tuesday'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 majorinfrastructure 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-Qubec royalties) over the next twoyears.

The government estimated last Novemberthat 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 Franois Legault hinted last month that his government mayhave to postpone balancing the budget by 2027-28 a move that runs counter toGirard'svalues as a financier, says Philippe Gougeon, theAppEcodirector 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.

There is no one way of managing public finances, but achieving a balanced budget is "part of Girard's DNA," Gougeon added.

Legault has also repeatedly promised that the upcoming budget will not include cuts to services or tax increases.

The budget will signal how serious those promises really are.

Setting lowexpectations

Budget day is as much a ritualized media event as it is an announcement on government spending.

That opportunity won't be lost on Girard who will strive to make the Coalition Avenir Qubec (CAQ) government appear in control despite tough economic times ahead.

After presenting a grim economic update last fall, it took only a week for the Legault government to miss another beat: Girard proudly announced that Quebec would subsidize two Los Angeles Kings exhibition hockey games in Quebec City for a cool $7 million, drawing ire from opposition parties and the public.

"It's a decision that may appear elitist," said Mireille Lalancette, a professor in political communication at Universit du Qubec Trois-Rivires. "Saying we lack money, but at the same time, giving millions of dollars for an exhibition gamelooks bad."

Rather than indulging while the economy stagnates, Girard tookan understated approach to the Canadian tradition of finance ministers buying new shoes on the eveof budget day.

Finance ministers often reuse a pair of shoes or resole them and discuss "tightening their belt" to signal the difficulties that lie ahead, said Alex Marland, the Jarislowsky chair in trust and political leadership at Acadia University.

Last year, Girard broke with tradition by donating $5,000to a community centre. This year, he again opted to make a donation to a community education organization in lieu of buying new shoes.

He also announced $34 million in additional funding over five years for two food aid organizations: Club des petits djeunersand Cantine pour tous.Girard said he does not plan to continue the shoe tradition going forward.

The middle of a term is also a convenient time for governments to set low expectations of their performance among voters.

"It positions them to have a really good budget when the next election comes," Marland said.

The economy could improve before the CAQ is up for re-election. But the current forecast is less than rosy, and the government will need a long-termplan for a return to fiscal discipline.