Beautiful truth from La Palice. Prime Minister François Legault announces that his government will have to revise the deficit upwards in the next budget.
• Also read: It is expensive to put an end to the union follies of the past
• Also read: The deficits are not the teachers' fault
It was actually in the air that Treasury Secretary Eric Girard would have to present us with a next budget that was significantly more in the red than what he had forecast as a deficit for the 2024-25 fiscal year in the economic update last November.
Why? Simply because of the huge gap between the cost of salary increases granted to public and parastatal workers and the original forecast.
In its 2023-24 budget presented a year ago, the Legault government included in its budget projections a total of $4.6 billion to cover salary increases to be given to public servants over five years.
These increases of 11.5% over five years included salary parameters of 9% as well as targeted increases of 2.5% based on government priorities.
Last December, the Legault government returned with a new global offer that it valued at $9 billion, with salary parameters rising to 12.7% over five years, plus a targeted 4% increase.
And at the end of negotiations last January, Quebec reached an agreement in principle that ultimately saw salary parameters increase to 17.4% over five years. Assuming the targeted 4% increases remain on the table, that suggests the final bill for negotiations with state officials would be $11.6 billion.
We are talking about a bill that is 2.5 times higher than the $4.6 billion that Treasury Secretary Eric Girard had budgeted in March 2023 to cover the pay increases that the government would give to public and public sector workers' unions parastatal sector.
So that means the government now faces an additional $7 billion over five years to cover civil servant salaries compared to its March 2023 budget projections.
- Listen to the economy part with Michel Girard above QUB :
Deficits
The finance minister had planned to close the next budget in 2024-25 with an activity-based deficit of $678 million. And if we take into account the payment of revenue for the Generation Fund, the “budget balance as defined by the Balanced Budget Act” for the next fiscal year 2024-25 would turn into a $3 billion hole.
Given the Prime Minister's message, we should expect the said business-related deficit (revenue less portfolio expenses and debt burdens) to rise significantly.
And the return to a balanced budget planned for the 2027/28 financial year would be postponed.
- Listen to the economy part with Michel Girard above QUB :
NO BUDGET CUTS
Given the Legault government's sharp decline in popularity, it is no surprise that the prime minister is abandoning the implementation of fiscal austerity measures.
A return to a balanced budget is all well and good, but not at the price of losing his chances of re-election, he has to tell himself.
Didn't his predecessor Philippe Couillard lose his elections after masterfully restoring the state's finances with a series of austerity measures? Which ultimately obviously displeased a large part of the electorate.
However, we will now have to wait for the 2026-27 budget for the Legault government to once again become “generous” to taxpayers by giving them a new series of tax giveaways.
Why will he wait until Budget 2026-27? Because elections will take place in autumn 2026!