Beautiful truth from La Palice. Prime Minister François Legault announces that his government will have to revise upwards the deficit of its next budget.
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It was indeed written in the sky that Finance Minister Eric Girard was going to have to present us with a next budget that was significantly more in the red than what he had projected as a deficit for the 2024-25 fiscal year during the update. economy last November.
Because of what? Quite simply because of the enormous gap between the cost of salary increases granted to employees in the public and parapublic sectors and its initial forecast.
In its 2023-24 budget tabled a year ago, the Legault government included in its budget forecasts a total sum of $4.6 billion to cover the salary increases it planned to be granted over five years to state employees. .
These increases of 11.5% over five years included salary parameters of 9%, plus targeted increases of 2.5% based on government priorities.
Last December, the Legault government returned to the table with a new global offer that it estimated at $9 billion and whose salary parameters rose to 12.7% over five years, plus a 4% targeted increase.
And at the end of the negotiations last January, Quebec concluded an agreement in principle where salary parameters ultimately jumped to 17.4% over five years. Assuming that the targeted increases of 4% remained on the table, this suggests that the final bill for negotiations with state employees would reach $11.6 billion.
We are talking here about a bill 2.5 times higher than the $4.6 billion that Finance Minister Eric Girard had projected in March 2023 to cover the compensation increases offered by the government to the unions of employees in the public and parapublic sectors.
This means that the government, compared to its March 2023 budget projections, must now assume an additional expense of $7 billion over five years to cover the remuneration of state employees.
- Listen to the economy segment with Michel Girard via QUB :
DEFICITS
The Minister of Finance had planned to close the next 2024-25 budget with a deficit linked to activities of $678 million. And when we take into account the payment of revenues dedicated to the Generations Fund, the “Budgetary balance within the meaning of the balanced budget law” would turn into a hole of $3 billion for the next fiscal year 2024-25.
In light of the Prime Minister’s message, we should expect the said deficit linked to activities (revenues less portfolio expenses and debt charges) to jump significantly.
And the return to balanced budget which was planned for the 2027-28 financial year would be postponed.
- Listen to the economy segment with Michel Girard via QUB :
NO BUDGET CUTS
Given the sharp drop in popularity of the Legault government, it is also no surprise that the Prime Minister is giving up on the implementation of austerity budgetary measures.
A return to a balanced budget is all well and good, but not at the cost of losing his chances of re-election, he must say to himself.
Didn’t his predecessor Philippe Couillard lose his elections after masterfully straightening out the government’s finances by opting for a series of austerity measures? Which, in the end, clearly displeased a large part of the electorate.
That said, we will now have to wait for the 2026-27 budget to see the Legault government once again become “generous” towards taxpayers by granting them a new series of tax gifts.
Why will he wait until the 2026-27 budget? Because there will be elections in the fall of 2026!