Quebec Budget 2016: $2B surplus, but little spending wiggle room

After two years of clamping down under the mantra of getting the fiscal house in order, Quebec's government has delivered a surplus budget that opens the spending taps, albeit cautiously.

"We have laid a solid foundation on which to build our prosperity," said Finance Minister Carlos Leitaoin the opening remarks of his budget speech on the floor of the National Assembly.

"Achieving these results was a collective effort Now all Quebecers will reap the rewards."

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The $102.5 billion budget is the third for Premier Philippe Couillard's Liberals, and the second to post a modest surplus. The government projects reinvesting a $2 billion surplus in the Generations Fund, a trust fund created in 2006 to reduce Quebec's public debt.

We have laid a solid foundation on which to build our prosperity.- Carlos Leitao, QuebecFinance Minister

What this budget delivered was no increases in income tax, some relief for parents with more than one child stung by the indexing of subsidized child care, a two per cent increase in health spending and threeper cent more for education.

But if Quebecers were hoping for the restoration of all they've said they've lost to belt-tightening in the first two years of the Couillard government's mandate, they'll be disappointed.

"There is no room to make choices," Treasury Board President Sam Hamad said, making clear the government will not compromise on its commitment to stay in the black.

Parti Qubcois finance critic Nicholas Marceau said the budget addressed small measures, but demonstrated the government's lack of economic vision.

"In education, the money is not sufficient to cover all the damages that have been caused by this government," he said.

"In health, the future is very, very, worrying. With an increase of overall expenditures in health of two per cent, it's never been done in the last 15 years. It's never been considered to go as low as two per cent."

In education, a sector so strapped by fiscal belt-tightening that parents, students and teachers regularly circle schools, hand in hand, in protest, spending will increase by three per cent this year.

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After subtracting inflation and increases in demographics, that amounts to a total of $164 million more for 2016-2017 in the $21.6 billion education envelope.

The government says it will focus that spending on "providing a stimulating learning environment," curbing dropout rates and increasing physical activity in schools.

Over the next three years, $700 million will go to upgrading and renovating aging school infrastructure. The government's figures show fully a third of all schools, including CEGEPS, are in need of major repairs.

Healthspending

By the end of 2017, the health tax, introduced in 2010, will be no more. The gradual demise was announced by the Liberal government in the previous budget, but will now move on more quickly.

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For those who make less than $41,265 a year, the health tax contribution will drop from $100 to $50 this year. Anyone whose income falls between that plateau and $134,000will only see a $25 difference this year.

On the larger health spending front, a portfolio that comprises 38 per cent of government spending, the government is taking no major new initiatives.

The effects of the massive reform in health care that Health Minister Gatan Barrette emphasized was long-term are still to be fully realized.

A significant portion of the $735 million earmarked for increases in health and social services spending will go to increases in doctors' compensation previously negotiated and other salary increases.

Increases amounting to $88 million will go to in-home services, services for children and adults with autism and increased access to surgery and drug treatment centres.

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The relatively small amount of new money dedicated to patient services is concerning especially in a society that is greying rapidly, according to patient advocates.

"I think the reforms are there, we will see in perhaps five years the results. But for now, we need to have results right now for patients," said Pierre Blain, the head the RPCU, an umbrella group representing patient committees across the province.

Child care cushion

Also in the budget: a retroactive break for some parents anxiously anticipating a hit on their tax bill after the government moved to index childcare subsidies based on income last year.

As sticker shock mounted among parents facing their first tax bill post-indexing, the government decided to soften the blow with a break for parents with more than one child in subsidized care.

Parents will get a 50 per cent break on their contribution for their second child. That reduces the maximum daily rate for a second child to $14.13 in 2016.

The measure is retroactive to 2015. The Finance Ministry anticipates it will benefit 30,000 families.

The government is also bringing back a popular eco-focused renovation tax credit program that will give homeowners a 20 per cent credit on eligible home renovation projects up to $10,000.

Other highlights include:

• $2 billion for improvements to Quebec's road network in 2016-2017.
• Enhancements to the so-called tax shield, a refundable tax credit aimed to encourage people to stay in the workforce. The new changesincrease the annual eligible maximum to $3,000 per worker.
• A new strategy and more investment in Quebec's aerospace industry, totalling $70 million over five years.
• Lowering the eligible age for the tax credit for experienced workers to 62 by 2018.
• $4.9 million for new initiatives to combat sexual violence and support gender equality.
• $30 million over five years to support Quebec's wine producers and oversight of its alcoholic beverage industry.
• $5 million annual increase to the budget allocation of the Conseil des arts et des lettres du Quebec.