The end of red-ink budgets: health and education to feel the strain

OTTAWA, March 27, 2015 /CNW/ - Quebec will balance its budget in 2015-16, but at a considerable cost, with tight control of health and education spending central to the government's strategy. However, spending could still be higher than what was announced in the 2015 budget without endangering the goal of a balanced budget. The Conference Board of Canada says it expects the Quebec government's own-source revenues to exceed what is forecast in the budget, starting next year.

HIGHLIGHTS

• Based on The Conference Board of Canada's simulations, own-source revenue should exceed expectations, surpassing the government's 2016-17 fiscal year forecast by $500 million.
• Controlling spending in 2015-16 will pose a considerable challenge for the government, which is counting on being able to hold program spending growth to 1.2 per cent in order to balance its 2015-16 budget.
• Spending on health care will be limited to 1.4 per cent growth in 2015-16. The Conference Board of Canada's analyses show that it would have to surpass 5 per cent to maintain services at current levels.

Fiscal balance cannot be achieved or maintained by simply increasing government revenue-spending also needs to be tightly managed. The government has increasingly tightened its control of program spending since 2010-11. In 2015-16, program spending will increase by just 1.2 per cent-a considerable challenge for Quebec, especially given the aging of its population. Nonetheless, judging by its 2014-15 results, the government does appear to be holding spending growth in check.

Health and education in particular will feel the strain. Together, these two sectors account for nearly 84 per cent of program spending. The government forecasts growth in health care spending at just 1.4 per cent in 2015-16. With the budget balanced, that number will rise to 1.9 per cent in 2016-17 and 2.9 per cent in 2017-18.

"Our research on the impacts of the aging population indicates that annual health spending growth should surpass 5 per cent. Not only would this ensure a level of service that meets the needs of Quebecers, it also takes into account rising costs related to technological advances and compensation," said Marie-Christine Bernard, associate director at The Conference Board of Canada.

"As underscored in the Institut du Québec's most recent study on public finances, the only way to reduce health spending in the long term is to streamline the current system by focusing on competition and patient-based compensation," added Mia Homsy, the Institut du Québec's business director.

On the revenue side, The Conference Board of Canada used its budgetary simulation model to assess Quebec's financial situation. The simulation took into account both the spending plan presented in the 2015 budget and The Conference Board of Canada's revenue forecasts based on its economic growth assumptions.

The results suggest that total government revenues could significantly outstrip the 2015 budget estimates. While the discrepancy is not considerable this year, there is a marked difference in 2016-17 and subsequent years. "Robust economic growth should allow the government to generate total revenues of $74.5 billion in 2015-16 and $77.5 billion in 2016-17, exceeding the government's 2016-17 forecast by $500 million," said Bernard.

According to Conference Board of Canada projections for economic growth, own-source revenue should exceed Quebec government forecasts for the entire forecast period.

The report, Fin des budgets écrits à l'encre rouge : la santé et l'éducation sous pression, is available in our e-Library.

The Conference Board of Canada will host a webinar entitled Portrait budgétaire du Québec : vers un budget équilibré (in French only) on April 13, 2015, at 2 p.m. (EDT). 

About the Conference Board of Canada

The Conference Board of Canada is the foremost independent, not-for-profit, applied research organization in Canada. For the past 60 years, we have been generating innovative ideas across research disciplines and bringing together people across all sectors of our society in order to address the complex issues that matter most to Canada's future.

About the Institut du Québec

Born out of a partnership between The Conference Board of Canada and HEC Montréal, the Institut du Québec focuses its research and studies on the socioeconomic issues facing Quebec. It strives to provide public and private sector authorities with the tools needed to make more informed decisions, and thus help build a more productive, competitive, and prosperous society.

SOURCE Conference Board of Canada

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