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Financement Quebec (81QJ)

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Tuesday 06 April, 2010

Financement Quebec

Annual Information Update

RNS Number : 6988J
Financement Quebec
01 April 2010
 

Regulatory Announcement

 

 

 

Re: Financement-Québec (the "Issuer")

U.S.$2,000,000,000 Euro Medium Term Note Programme

(unconditionally and irrevocably guaranteed by Québec (the "Guarantor"))

 

Exhibits 99.15, 99.16, 99.17 and 99.18 of the Amendment dated April 1, 2010 to the Guarantor's Annual Report (on Form 18‑K/A) for the fiscal year ended March 31, 2009

 

Copies of Exhibits 99.15, 99.16, 99.17 and 99.18 of the Amendment dated April 1, 2010 to the Guarantor's Annual Report (on Form 18‑K/A) for the fiscal year ended March 31, 2009 (containing excerpts from the Guarantor's 2010-2011 Budget - Budget Speech and Budget Plan) and filed with the United States Securities and Exchange Commission on April 1, 2010 have been lodged with, and are available for inspection at, the Document Viewing Facility at the Financial Services Authority, 25 The North Colonnade, London E14.



EXHIBIT 99.15

 

Excerpt from 2010-2011 Budget Plan 30 mars 2010

 

Section B

The Québec Economy:
Recent Developments and
Outlook for 2010 and 2011

TABLE B.1                        
         Economic outlook for Québec

(percentage change, except where otherwise indicated)


2009

2010

2011

Output




Nominal GDP ($ billion)

300.9

313.0

327.1

Nominal GDP

- 0.4

4.0

4.5

Real GDP

- 1.4

2.3

2.6

Components of GDP (in real terms)




Consumption

0.6

2.3

1.8

Current government expenditures

3.0

2.2

2.0

Residential investment

- 1.5

2.2

- 0.5

Non-residential investment

- 5.5

3.9

6.4

Exports

- 11.4

4.0

4.5

Imports

- 8.6

5.2

3.7

Population and labour market




Population (thousands)

7 829

7 905

7 971

Population 15 years and over (thousands)

6 595

6 647

6 709

Jobs (thousands)

3 844

3 883

3 924

Job creation (thousands)

- 37.5

38.7

41.6

Unemployment rate (%)

8.5

8.5

8.4

Employment rate (%)

59.7

59.7

59.8

Other economic indicators




Nominal consumption

1.0

4.0

4.2

Housing starts (thousands of units)

43.4

44.6

42.7

Personal income

1.2

3.1

3.5

Wages and salaries

1.4

3.0

3.4

Corporate profits

- 23.8

14.5

8.0

Consumer prices

0.6

2.0

2.9

Per capita nominal GDP ($)

38 431

39 597

41 039

Par capita disposable personal income ($)

25 730

26 223

26 882

Sources:  Institut de la statistique du Québec, Statistics Canada and ministère des Finances du Québec.

 

TABLE B.2 

Canadian financial markets

(percentage rate)


2009

2010

2011

Overnight target rate

0.4

0.5

1.4

Treasury bills - 3 months

0.4

0.6

1.7

Bonds - 10 years

3.3

3.8

4.5

Sources:  Statistics Canada and ministère des Finances du Québec.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

EXHIBIT 99.16

 

Section C

 

The Government's Financial Framework

 

Introduction............................................................................... C.3

1.   Taking advantage of the recovery to begin restoring fiscal balance         C.5

2.   Updating of the financial framework................................... C.11

2.1    Budgetary revenue........................................................................... C.11

2.1.1   Own-source revenue excluding government  enterprises... C.12

2.1.2   Revenue from government enterprises............................... C.16

2.1.3   Revenues from federal transfers......................................... C.18

2.2    Budgetary expenditure.................................................................... C.21

2.2.1   Adjustments to program spending...................................... C.22

2.2.2   Action plan to reduce spending growth so as to achieve fiscal balance   C.24

2.2.3   Efforts on the part of all government departments............. C.25

2.2.4   Weight of government spending in the economy................ C.28

2.2.5   Debt service......................................................................... C.29

2.3    Government investments................................................................ C.31

2.3.1   The Québec Infrastructures Plan......................................... C.31

2.3.2   Investments by Québec government departments and organizations       C.33

2.3.3   Investments by government enterprises............................. C.33

2.3.4   Public investments in the economy..................................... C.34



3.   Budgetary forecasts for revenue and consolidated expenditure C.35

3.1    Line-by-line consolidation................................................................ C.37

3.2    Consolidated entities...................................................................... C.42

3.2.1   Non-budget-funded bodies and special funds..................... C.43

3.2.2   Health and social services and education networks........... C.47

3.2.3   Generations Fund................................................................ C.49

4.   Consolidated net financial requirements.............................. C.51

5.   Consolidated non-budgetary transactions........................... C.55

Appendix 1: investments............................................................ C.61

Appendix 2: investment projects by government enterprises........ C.65

Appendix 3: Presentation of consolidated financial requirements before line-by-line consolidation of the health and social services and education networks                                                      Erreur ! Signet non défini.

 


Introduction

This section of the Budget Plan presents the preliminary results for fiscal 2009‑2010 and the government's budgetary and financial stance for 2010‑2011 and 2011‑2012.

The information provided concerns:

consolidated financial and budgetary transactions for the period from 2009‑2010 to 2011‑2012, including the impact of the measures announced in the present budget;

the change in revenue and expenditure, as well as adjustments made since last year's budget;

the government's main expenditure items, capital expenditures, net financial requirements and non-budgetary transactions.

Section A also contains five-year financial forecasts, up to 2014‑2015.

 

 


 

[THIS PAGE INTENTIONALLY LEFT BLANK I]


1.  Taking advantage of the recovery to begin restoring fiscal balance

Québec has been hit less hard than its main partners by the economic downturn. The $15-billion economic action plan over two years has played a major role in this regard, both economically and financially.

Despite a significant decrease in its revenues, the government has launched a vigorous action plan to support jobs and maintain the funding of public services, even at the price of budgetary deficits. The budgetary balance within the meaning of the Balanced Budget Act will be in deficit by $4.3 billion for the current year and $4.5 billion in 2010‑2011. The measures arising from the plan to restore fiscal balance will help to bring the shortfall down to $2.9 billion in 2011‑2012.

The government intends to take advantage of the economic recovery to start restoring fiscal balance.

 

TABLE C.1        

Summary of adjusted budgetary transactions - Budget 2010‑2011P

(millions of dollars)


2009‑2010

2010‑2011

2011‑2012

BUDGETARY TRANSACTIONS




Budgetary revenue

62 650

64 489

65 936

% change

- 0.4

2.9

2.2

Program spending

- 60 769

- 62 561

- 63 907

% change

3.8

2.9

2.2

Debt service

- 6 154

- 6 990

- 7 841

Total budgetary expenditure

- 66 923

- 69 551

- 71 748

% change

2.9

3.9

3.2

Net results of consolidated entities

598

697

848

Contingency reserve

- 300

- 300

¾

Impact of the plan to restore fiscal balance


1 051

3 036

DEFICIT

- 3 975

- 3 614

- 1 928

BALANCED BUDGET ACT




Deposit of dedicated revenues in the Generations Fund

- 715

- 892

- 972

Stabilization reserve

433

¾

¾

BUDGETARY BALANCE WITHIN THE MEANING OF THE BALANCED BUDGET ACT

- 4 257

- 4 506

- 2 900

As a % of GDP

- 1.4

- 1.4

- 0.9

P: Preliminary results for 2009-2010 and forecasts for subsequent years.



 

As of 2010‑2011, the government plans, on the one hand, to continue its rigorous management of program spending by limiting growth in such spending to 2.9% and, on the other hand, to implement other measures totalling $1.1 billion. In 2011‑2012, growth in program spending will stand at 2.2% and the total for other measures will be $3.0 billion.

In addition, the government is incorporating a contingency reserve of $300 million into its financial framework for 2009‑2010 and 2010‑2011 respectively to provide for any shortfalls.

 

 



 

q Adjustments to the budgetary balance in 2009‑2010

The budgetary balance within the meaning of the Balanced Budget Act for 2009‑2010 is in deficit by $4.3 billion, an upward adjustment of $311 million compared with the March 2009 Budget. The increase in spending is largely offset by the upward revisions in revenue. In addition, a $300-million contingency reserve, included in the financial framework last fall, is being maintained to deal with any additional shortfalls that could result from the change in revenue and expenditure late in the year.

 

TABLE C.2        

Summary of budgetary transactions in 2009‑2010P

(millions of dollars)


2009‑2010
Budget

Adjustments

 2010‑2011Budget

BUDGETARY TRANSACTIONS




Own-source revenue

42 612

207

42 819

Government enterprises

4 759

- 157

4 602

Federal transfers

14 841

388

15 229

Total budgetary revenue

62 212

438

62 650

Program spending

- 59 989

- 780

- 60 769

Debt service

- 6 104

- 50

- 6 154

Total budgetary expenditure

- 66 093

- 830

- 66 923

Net results of consolidated entities

355

243

598

Contingency reserve

¾

- 300

- 300

DEFICIT

- 3 526

- 449

- 3 975

BALANCED BUDGET ACT




Deposit of dedicated revenues in the Generations Fund

- 715

¾

- 715

Stabilization reserve

295

138

433

BUDGETARY BALANCE WITHIN THE MEANING OF THE BALANCED BUDGET ACT

- 3 946

- 311

- 4 257

As a % of GDP

- 1.3

- 0.1

- 1.4

P: Preliminary results.

 



Since the March 2009 Budget, a number of factors have enabled the government to offset the shortfall stemming from growth in spending. These factors are:

a $388-million increase in federal transfers;

a $207-million rise in own-source revenue excluding government enterprise.

These positive contributions have made it possible to reduce the impact of:

the $780-million upward adjustment of the program spending objective, including:

$380 million for the increase in the government's contribution to La Financière agricole du Québec. This expenditure offset the anticipated deficit of La Financière agricole du Québec accounted for in consolidated entities. This also explains in part the upward revision of $243 million in respect of consolidated entities;

$150 million for enhancing the Renfort program to assist Québec companies facing liquidity problems;

$126 million attributable to spending in respect of the A (H1N1) flu pandemic;

a decline of $157 million in revenue from government enterprises, including losses of $226 million at the Société générale de financement du Québec;

a $50-million rise in debt service.

Once the $300-million contingency reserve and the $433-million balance of the stabilization reserve are taken into account, the budgetary balance is in deficit by $4.3 billion.

 



 

q Budgetary balance in 2010‑2011 and 2011‑2012

The budgetary balance for 2010‑2011 is in deficit by $4.5 billion, up $746 million compared with the March 2009 Budget. This budgetary deficit is less than that of $4.7 billion presented last October.

For 2011‑2012, the budgetary balance is in deficit by $2.9 billion, an upward adjustment of $261 million.

 

TABLE C.3        

Total adjustments since the 2009‑2010 BudgetF

(millions of dollars)


2010-2011

2011-2012

BALANCE IN THE 2009-2010 BUDGET

- 3 760

- 2 639

Budgetary revenue



Own-source revenue excluding government enterprises

385

73

Government enterprises

- 348

- 305

Federal transfers

435

- 21


472

- 253

Budgetary expenditure



Program spending

- 682

- 78

Debt service

- 344

- 178


- 1 026

- 256

Consolidated entities1

122

145

Contingency reserve

- 300


Impact of the plan to restore fiscal balance

- 14

103

Total adjustments to the budgetary balance

- 746

- 261

BUDGETARY BALANCE WITHIN THE MEANING OF THE
BALANCED BUDGET ACT

- 4 506

- 2 900

F:   Forecasts.

1    Excluding the adjustments relating to revenues dedicated to the Generations Fund.

 



 

¡ 2010‑2011: a budgetary balance of - $4.5 billion

The $746-million upward adjustment to the budgetary deficit compared with the March 2009 Budget is explained primarily by:

the $682-million upward revision of the program spending objective, including  $325 million stemming from an increase in the government contribution to La Financière agricole du Québec and $195 million for the cost of the new measures announced in this budget;

the $348-million reduction in revenue from government enterprises,  attributable for the most part to a decline of $300 million in Hydro-Québec's net profits;

the $344-million rise in debt service;

the inclusion of a $300-million contingency reserve in the government's financial framework.

The $385-million upward adjustment in own-source revenue excluding government enterprises and the positive adjustments of $435 million in federal transfers improve the budgetary balance accordingly.

¡ 2011‑2012: a budgetary balance of - $2.9 billion

The $261-million upward revision of the budgetary deficit compared with the March 2009 Budget can be attributed mainly to:

the $300-million decline in Hydro‑Québec's profits and the $178-million increase in debt service;

the fact that these adjustments are partially offset by a $103-million increase in respect of the measures taken under the plan to restore fiscal balance.

 

 

 

 


2.  Updating of the financial framework

This section explains the adjustments made since the last budget to the financial framework for 2009‑2010 and presents the main factors affecting growth in the government's revenue and expenditure for subsequent years.

2.1       Budgetary revenue

The government's budgetary revenue is expected to total $64.5 billion in 2010‑2011, i.e. $49.2 billion in own-source revenue and $15.3 billion in federal transfers. Budgetary revenue should grow by 2.9% in 2010‑2011 and 2.2% in 2011‑2012.

For comparison purposes, the change in budgetary revenue does not include the measures provided for in the plan to restore fiscal balance.

 

TABLE C.4        

Consolidated Revenue Fund
Change in budgetary revenue1

 

(millions of dollars)

 


2009‑2010
Budget




2010‑2011 BudgetP


2009-2010


Adjustments


2009‑2010

2010‑2011

2011‑2012

Own-source revenue








Own-source revenue excluding government enterprises

42 612


207


42 819

44 699

46 660

% change

- 2.8




- 2.4

4.4

4.4

Government enterprises

4 759


- 157


4 602

4 465

4 595

% change

0.5




- 8.2

- 3.0

2.9

Total

47 371


50


47 421

49 164

51 255

% change

- 2.4




- 3.0

3.7

4.3

Federal transfers

14 841


388


15 229

15 325

14 681

% change

6.6




8.6

0.6

- 4.2

Budgetary revenue

62 212


438


62 650

64 489

65 936

% change

- 0.4




- 0.4

2.9

2.2

P:    Preliminary results for 2009-2010 and forecasts for subsequent years.

1     Excluding the measures provided for in the plan to restore fiscal balance (See Appendix 3 for the impact of the measures on the government's financial framework).

 

 



 

2.1.1     Own-source revenue excluding government
enterprises

q Upward adjustments in 2009‑2010

Preliminary results for fiscal 2009‑2010 show that own-source revenue, excluding the profits of government enterprises, is adjusted upward by $207 million compared with the March 2009 Budget and posts a decline of 2.4% compared with the previous year.

¡ Adjustments to own-source revenue by source

Revenue from personal income tax is revised downward by $705 million, despite the progression of salaries and wages in 2009. This revision reflects essentially the change in income tax payable, which was much lower than expected. In particular, the financial crisis and the recession led to a significant decline in capital gains realized in respect of 2008. This result had recurrent effects in 2009‑2010. In addition, tax instalments in respect of 2009, which are based on income tax paid in 2008, have been revised downward.

Contributions to the Health Services Fund are adjusted upward slightly by $50 million, in accordance with the positive adjustment of salaries and wages in 2009.

Revenue from corporate taxes is revised upward by $496 million in 2009‑2010. Nevertheless, it showed a decrease of close to 10% compared with the previous year.

Since the beginning of the year, tax receipts have declined less than was expected.

The refunds requested by enterprises have continued to put a strain on corporate tax revenue. The accumulation of losses by corporations during the financial crisis and the economic recession enabled them to continue claiming larger refunds in 2009‑2010. It should be noted that businesses can claim refunds, particularly by applying losses for the current year against their tax payable for the three previous years. This mechanism contributes to the volatility of this revenue source during a recession.

 



Consumption tax revenue is adjusted upward by $379 million on account of two main factors.

Revenue from the Québec sales tax is $302 million higher than forecast in the last budget and reflects, in particular, stronger household consumption in the last two quarters of 2009‑2010 and the higher-than-anticipated number of housing starts in 2009. Input tax rebates to businesses were also lower than expected.

Revenue from the specific tax on tobacco products is revised upward by $65 million owing to the increase in the number of cigarettes sold legally. Better control at the border and deployment of a new Sûreté du Québec team in the Valleyfield region interfered with smugglers' tobacco supply. The reduced supply of illegal products led to an increase in legal sales of tobacco products. In 2009‑2010, tobacco tax revenue paid into the Consolidated Revenue Fund will amount to $658 million compared with $594 million in 2008‑2009.

 

TABLE C.5        

Consolidated Revenue Fund
Change in own-source revenue excluding government enterprises

 

(millions of dollars)

 


2009‑2010 Budget




2010-2011 BudgetP


2009-2010


Adjustments


2009-2010

2010-2011

2011-2012

Personal income tax

18 203


- 705


17 498

18 551

19 485

% change

- 0.1




- 2.5

6.0

5.0

Health Services Fund

5 597


50


5 647

5 843

6 022

% change

0.4




0.3

3.5

3.1

Corporate taxes

3 266


496


3 762

3 849

4 104

% change

- 17.8




- 9.9

2.3

6.6

Consumption taxes

13 184


379


13 563

14 081

14 637

% change

- 2.3




1.2

3.8

3.9

Other revenue

2 362


- 13


2 349

2 375

2 412

% change

- 7.7




- 13.7

- 1.1

1.6

Own-source revenue excluding government enterprises

42 612


207


42 819

44 699

46 660

% change

- 2.8




- 2.4

4.4

4.4

P:    Preliminary results for 2009-2010 and forecasts for subsequent years.

 



 

q Resumption of growth in own-source revenue in 2010‑2011

After posting a decrease of 2.4% in 2009‑2010, own-source revenue, excluding that from government enterprises, will increase by 4.4% in 2010‑2011, a rate equivalent to economic growth.

The change in the government's main tax bases is expected to reflect the growth of 4% in nominal GDP.

In 2011‑2012, own-source revenue, excluding that from government enterprises, will grow by 4.4%, a rate equivalent to the increase in nominal GDP, i.e. 4.5%.

¡ Change in revenue by source

Personal income tax, the main source of government revenue, will increase by 6.0% in 2010‑2011 to $18.6 billion.

Excluding the impact of the refundable tax credit for home improvement and renovation, which ended on December 31, 2009, revenue from personal income tax would instead climb by 4.5%, an increase compatible with the growth in personal income, taking into account the progressive nature of the tax system.

In 2011‑2012, revenue from personal income tax should increase by 5.0%, while personal income is expected to grow by 3.5%.

This slightly stronger growth may be attributed, in particular, to the contribution from retirement income. From now on, income subject to tax will increase more rapidly than personal income given the growing share of income from private retirement plans.

Contributions to the Health Services Fund should rise by 3.5% in 2010‑2011 and 3.1% in 2011‑2012, in accordance with the aniticipated growth in salaries and wages.

After the decline observed in 2008‑2009 and 2009‑2010, revenue from corporate taxes will show an increase of 2.3% in 2010‑2011 and 6.6% in 2011‑2012. Essentially, this anticipated growth is due to two factors.

First, the fact that profits are expected to rise by 14.5% and 8.0% in 2010 and 2011 respectively will lead to a gradual increase in taxable income and corporate tax revenue.

 



 

In addition, use of the losses accumulated by businesses during the economic slowdown of the past two years and the gradual elimination of the tax on capital, a component of corporate taxes, by January 1, 2011 will continue to offset the growth in revenue from this source.

In 2010‑2011 and 2011‑2012, revenue from consumption taxes should show an increase of 3.8% and 3.9% respectively, a growth rate comparable with that of household consumption.

q Change in revenue compatible with that of the economy

Overall, growth in own-source revenue, excluding government enterprises, is expected to be compatible with nominal economic growth for the next two years, leaving aside the financial impact of fiscal measures. As indicated earlier, the measures provided for in the plan to restore fiscal balance have not been incorporated into own-source revenue in this section.

 

 



 

2.1.2     Revenue from government enterprises

q Results for 2009‑2010

Revenue from government enterprises is adjusted downward by $157 million for 2009‑2010. Hydro-Québec and the Société des alcools du Québec raised their forecast by $100 million and $47 million respectively, while the forecast for Loto‑Québec and the Société générale de financement du Québec was revised downward.

Loto-Québec reduced its revenue by $79 million. This revision can be explained for the most part by lower-than-anticipated results for casinos and the Lotto Max lottery, coupled with the impact of the economic slowdown on gaming spending and certain one-time items.

Revenue from other government enterprises was affected mainly by a $226-million downward adjustment of the results of the Société générale de financement du Québec. This decrease is due, in particular, to losses and allowances for losses attributable to the petrochemical and forest product sectors.

 

TABLE C.6        

Consolidated Revenue Fund
Change in revenue from government enterprises

(millions of dollars)


2009-2010 Budget


2010‑2011 BudgetP


2009-2010

Adjustments

2009‑2010

2010‑2011

2011‑2012

Hydro-Québec

2 700

100

2 800

2 400

2 400

Loto-Québec

1 295

- 79

1 216

1 287

1 287

Société des alcools du Québec

800

47

847

877

915

Other

- 36

- 225

- 261

- 99

- 7

Revenue from government enterprises

4 759

- 157

4 602

4 465

4 595

% change

0.5


- 8.2

- 3.0

2.9

P:   Preliminary results for 2009‑2010 and forecasts for subsequent years.

 

 



 

q Outlook for 2010‑2011 and 2011‑2012

Revenue from government enterprises for 2010‑2011 and 2011‑2012 will amount to $4.5 billion and $4.6 billion respectively.

The anticipated $2.4-billion reduction in Hydro‑Québec revenues over the next two years, in accordance with its strategic plan tabled in summer 2009, will be partly offset by growth in the revenue of the Société des alcools du Québec and Loto‑Québec.

 

Application of new capital expenditure accounting standards by Hydro‑Québec

As of January 1, 2011, entities subject to public accountability and government enterprises will have to apply the new International Financial Reporting Standards (IFRS).

To prepare for the compulsory replacement of generally accepted accounting principles with IFRS in 2011, Hydro‑Québec has employed the straight-line method of depreciation since January 1, 2010, because the compound interest method of depreciation at a rate of 3% is not a recognized method under IFRS. Hydro‑Québec has applied this new depreciation method retrospectively with restatement of prior fiscal years for assets related to unregulated activities, including those of Hydro‑Québec Production.

This accounting change has had an impact on Hydro-Québec's financial position as at January 1, 2010, in the form of a roughly $3.8-billion decrease in tangible fixed assets and retained earnings. It has also substantially increased the annual amortization expense. In 2010, this expense will climb by close to $150 million for Hydro-Québec Production.


 

 

 

 

 



 

2.1.3     Revenues from federal transfers

In 2009‑2010, federal transfer revenues should reach $15.2 billion, or $388 million more than forecast in the March 2009 Budget. This revision stems essentially from the signing of new agreements between the federal government and the Québec government, particularly:

the Canada‑Québec Labour Market Agreement, announced on April 30, 2009, which results in a roughly $700-million increase in transfer revenues over six years, i.e. $116 million per year as of 2008‑2009;

the Canada‑Québec Base Fund Agreement on infrastructure (Building Canada) announced on May 22, 2009, which generates additional revenues of $175 million over two years, i.e. $100 million in 2009‑2010 and $75 million in 2010‑2011.

For 2010‑2011 and 2011‑2012, federal transfer revenues are expected to amount to $15.3 billion and $14.7 billion.

 

TABLE C.7        

Consolidated Revenue Fund

Change in federal transfers

(millions of dollars)


2009‑2010 Budget


2010‑2011 BudgetP


2009-2010

Adjustments

2009‑2010

2010‑2011

2011‑2012

Equalization

8 355

¾

8 355

8 552

7 888

% change

4.1


4.1

2.4

- 7.8

Health transfers

4 137

11

4 148

4 264

4 504

% change

10.6


10.9

2.8

5.6

Transfers for post-secondary education and other social programs

1 413

48

1 461

1 432

1 452

% change

11.5


15.3

- 2.0

1.4

Other programs

936

329

1 265

1 077

837

% change

5.4


28.0

- 14.9

- 22.3

Federal transfers

14 841

388

15 229

15 325

14 681

% change

6.6


8.6

0.6

- 4.2

P:   Preliminary results for 2009‑2010 and forecasts for subsequent years.

 



The equalization amounts for 2009‑2010 and 2010‑2011 are definitive.

Equalization revenues are expected to fall by 7.8% in 2011-2012 due to Québec's relatively good performance during the 2009 recession. This delay results from the smoothing mechanism used by the federal government to determine equalization payments (three-year moving average delayed by two years).

 

TABLE C.8        

Smoothing mechanism used by the federal government to determine equalization payments

2007-2008


2008-2009


2009-2010


2010-2011


2011-2012


2012-2013


2013-2014

 














 














 

25%


25%


50%




Payments





 














 



25%


25%


50%




Payments



 














 





25%


25%


50%




Payments

 














 

In 2009-2010, health transfers and transfers for post-secondary education and other social programs are expected to grow by 10.9% and 15.3% respectively. This growth stems, in particular, from the impacts of the recession and the tax relief announced in the 2009 federal budget, which reduce the value of the special Québec abatement that is subtracted from these transfers.

As for revenues from other programs, the 14.9% decrease anticipated in 2010‑2011 can be explained partly by the end of two trusts created by the federal government in 2008, namely, the Public Transit Capital Trust and the Community Development Trust. The decline of 22.3% expected in 2011‑2012 is due, in particular, to the end of the Canada‑Québec Base Fund Agreement on infrastructure (Building Canada) and of federal compensation in respect of the elimination of the tax on capital.



 

Canada Student Grants Program

Since 1964, Québec has exercised the right to opt out with financial compensation in regard to federal student assistance.

In the 2008 Budget, the federal government announced the end of the Canada Millennium Scholarship Foundation and, on August 1, 2009, created the Canada Student Grants Program (CSGP).

On February 3, 2010, the federal government announced that Québec's compensation in regard to the CSGP for the 2009‑2010 loan year will be approximately $115 million. The exact amount should be known and paid in January 2011.

This compensation of $115 million includes both the $80 million stemming previously from the Canada Millennium Scholarship Foundation and the roughly $30 million in respect of grants included until just recently in the Canada Student Grants Program (CSGP).

As of 2009‑2010, $80 million in respect of the Millennium Scholarships, formerly accounted for in a specified purpose account, will be included in the appropriations of the Ministère de l'Éducation, du Loisir et du Sport.

It should be noted that the "loans" component of the CSGP is being maintained by the federal government. This component generates roughly $90 million to $100 million in compensation per year.

The total compensation expected from the federal government with regard to loans and grants for 2009‑2010 is thus comparable to that for previous years, i.e. approximately $205 million.

However, the adjustment to federal transfer revenues takes into account the fact that the fiscal year of the federal program does not coincide with the fiscal year of the Québec government.

These adjustments to revenue and expenditure lead to a $40-million increase in the deficit in 2009‑2010. The government has therefore decided to maintain a comparable level of service for students.

 

Compensation for Québec's opting out of federal loans and grants programs

(millions of dollars)


2009-2010

2010-2011

2011-2012

Adjustment to federal transfer revenues1

40

77

82

Less: Increase in program spending

80

80

80

Impact on the deficit

- 40

- 3

2

1        The adjustment takes into account the government's fiscal year (April 1 to March 31 ), which is different from that of the federal program (school year from August 1 to July 31).



 

2.2       Budgetary expenditure

The government's budgetary expenditure, which includes program spending and debt service, is expected to reach $69.6 billion in 2010-2011, i.e. $62.6 billion for program spending and $7.0 billion for debt service. Program spending should increase by 2.9% in 2010‑2011 and 2.2% in 2011‑2012.

 

TABLE C.9        

Consolidated Revenue Fund
Change in budgetary expenditure

(millions of dollars)


2009‑2010 Budget




2010‑2011 BudgetP


2009-2010


Adjustments


2009‑2010

2010‑2011

2011‑2012

Program spending

59 989


780


60 769

62 561

63 907

% change

4.5




3.8

2.9

2.2

Debt service

6 104


50


6 154

6 990

7 841

% change

- 7.4




- 5.4

13.6

12.2

Budgetary expenditure

66 093


830


66 923

69 551

71 748

% change

3.3




2.9

3.9

3.2

P:    Preliminary results for 2009-2010 and forecasts for subsequent years.

 

 

 

 



 

2.2.1     Adjustments to program spending

q 2009‑2010

Program spending in 2009‑2010 stands at $60.8 billion, an increase of 3.8% compared with 2008‑2009. This represents an upward revision of $780 million relative to the target of $60.0 billion.

This adjustment can be explained mainly by:

the $380-million increase in the government's contribution for La Financière agricole du Québec;

the cost of $126 million attributable to spending in respect of the A (H1N1) flu pandemic;

the $150-million impact of the enhancement of the Renfort program from $1.2 billion to $2.0 billion in order to assist Québec companies facing liquidity problems;

the $80 million in compensation from the federal government under its student loans and grants programs, in place of the Millennium Scholarship Program.

q 2010‑2011 and subsequent years

Growth in program spending for 2010‑2011 will be 2.9%, or less than the rate of 3.2% initially defined in the plan to restore fiscal balance.

The program spending objective for 2010-2011 is raised by $682 million and incorporates, in particular:

$317 million associated mainly with the recurrence of the 2009‑2010 adjustments, including $325 million for the increase in the government's contribution to La Financière agricole du Québec;

$195 million for all the spending measures announced in this budget;

$170 million for the recurrence of the Renfort program and the additional resources to fight tax evasion and avoidance announced in the Update on Québec's Economic and Financial Situation.

As of 2011‑2012, program spending growth will be rolled back to 2.2% so as to restore fiscal balance.

 



 

TABLE C.10      

Change in program spendingP

(millions of dollars)


2009-2010

2010-2011

2011-2012

PROGRAM SPENDING OBJECTIVE IN THE
2009-2010 BUDGET

59 989

61 879

63 829

% change

4.5

3.2

3.2

ADJUSTMENTS




Measures in the 2010-2011 Budget




Solidifying recovery

¾

67

16

Balancing public finances to protect our values

¾

43

53

Liberating the ambitions of Quebecers

¾

85

150

Subtotal

¾

195

219

2010-2011 Budget: other adjustments




Government contribution to La Financière agricole du Québec

380

3401

3451

Cost attributable to the A (H1N1) flu pandemic

126

¾

¾

Compensation for Québec's opting out of federal loans and grants programs2

80

80

80

Other adjustments

44

- 103

- 606

Subtotal

630

317

- 181

Total adjustments in the 2010‑2011 Budget

630

512

38

Adjustments announced in the Update on Québec's Economic and Financial Situation




Financing measures for businesses: increase in the Renfort program from $1.2 billion to $2.0 billion

150

150

¾

Additional resources to fight tax evasion and avoidance

¾

20

40

Total adjustments in the Update on Québec's Economic and Financial Situation

150

170

40

TOTAL ADJUSTMENTS SINCE THE 2009-2010 BUDGET

780

682

78

PROGRAM SPENDING OBJECTIVE IN THE
2010-2011 BUDGET

60 769

62 561

63 907

% change

3.8

2.9

2.2

P :   Preliminary results for 2009‑2010 and forecasts for subsequent years.

1      These amounts include $15 million in 2010‑2011 and $20 million in 2011‑2012 within the budget of the Ministère de l'Agriculture, des Pêcheries et de l'Alimentation for the measures to support the adaptation and multifunctionality of agriculture.

2      For more information on this adjustment, see the box in section 2.1.3.

 

 



 

2.2.2     Action plan to reduce spending growth so as to achieve fiscal balance

Reducing spending growth to 2.9% in 2010‑2011 and 2.2% thereafter will help to achieve the goal of restoring fiscal balance. To that end, the Chair of the Conseil du trésor is introducing a spending control action plan.

The plan aims to:

demonstrate the government's will to exert firm control over spending in the government as a whole;

introduce means to:

comply with the rate set for spending growth in the coming years;

review certain programs, particularly as part of the review mandates already being carried out;

find leeway in the budgets provided in order to take new initiatives.

Between now and 2013‑2014, the government's action plan will focus on the following three components:

fair and responsible remuneration of employees, through control over labour costs;

a well-organized government, through ongoing restructuring of government bodies and continued staff reductions;

continuous improvement of efficiency, through systematic assessment of program delivery and of administrative efficiency.

 

 

 



 

2.2.3     Efforts on the part of all government departments

Program spending will climb from $60 769 million in 2009‑2010 to $62 561 million in 2010‑2011, an increase of $1 792 million, or 2.9%.

Over the coming years, all government departments will have to take part in the collective effort to restore fiscal balance.

 

TABLE C.11      

Growth in program spending in 2010‑2011P

(millions of dollars)





Growth


2009-2010

2010-2011


$ million

%

Santé et Services sociaux

26 979.5

27 967.2


987.7

3.7

Éducation, Loisir et Sport

14 489.2

14 805.0


315.9

2.2

Transports

2 547.5

2 787.5


240.0

9.4

Famille et Aînés

2 066.6

2 178.6


112.1

5.4

Other departments

14 686.1

14 822.7


136.4

0.9

TOTAL

60 768.9

62 561.0


1 792.1

2.9

P:   Preliminary results for 2009‑2010 and forecasts for 2010‑2011.

Source: Secrétariat du Conseil du trésor.

Note:    Since figures are rounded, the sum of the amounts entered for each portfolio may not correspond to the total.

q Health: 3.7% increase in 2010‑2011

The budget allocated to health and social services is being raised by $988 million, or 3.7%, in 2010‑2011. This increase, which accounts for 55.1% of the total growth in program spending, will make it possible to maintain public services.

Excluding the non-recurring cost of $126 million attributable to expenditures in respect of the A (H1N1) flu pandemic in 2009‑2010, spending is expected to grow by 4.1% in 2010‑2011.

 

 



 

q Education: 2.2% budget increase

The budget of the Ministère de l'Éducation, du Loisir et du Sport is being increased by 2.2%, or an additional $316 million. This increase accounts for 17.6% of total program spending growth. In addition, the education budget will make it possible to implement the action strategy on student retention and student success.

q Other departments

The program spending budget of the other departments is being raised by 2.5%, or $489 million, in 2010‑2011. This increase will make it possible to continue supporting the government's other priorities, particularly:

$240 million for the Ministère des Transports, an increase of 9.4%, in order to fund the investments announced in the road network and the public transit system;

$112 million for the Ministère de la Famille et des Aînés, an increase of 5.4%, which will make it possible to fund the new reduced-contribution child-care spaces developed in 2009‑2010 and to continue developing new spaces in 2010‑2011;

$136 million for the other departments. Excluding the $282 million provided in the Contingency Fund, the budgets of the other departments are reduced by 1.0% overall.

 

CHART C.1       

Breakdown of program spending growth in 2010‑2011F

(millions of dollars and per cent)


F:   Forecasts.

Source:    Secrétariat du Conseil du trésor.



 

q The government's action in its essential missions

The government continues to invest in its essential missions, including health and education. From 2003‑2004 to 2010‑2011, average annual spending in health and education will rise by 5.8% and 3.6% respectively.

In all, since 2003, the government has added $13.7 billion to the health and education budgets, i.e. $10.1 billion and $3.6 billion respectively.

On their own, these expenditures account for over 73 % of the increase in program spending since 2003‑2004.

 

CHART C.2       

Increase in program spending from
2003‑2004 to 2010‑2011

(dollars and average annual growth in per cent)


Note:   Forecasts for 2010‑2011.

 

 



 

2.2.4     Weight of government spending in the economy

The forecast for program spending in 2010‑2011 is in line with the government's overall objective to restore fiscal balance by 2013‑2014.

The weight of spending in the economy should be 20% in 2010-2011.

Thereafter, the government plans to stay the course of disciplined program spending management and, between now and 2013‑2014, gradually bring the weight of spending in the economy down to a proportion equal to that observed prior to the economic recession.

 

CHART C.3       

Program spending

(as a percentage of GDP)


Note:  Preliminary results for 2009‑2010 and forecasts for subsequent years.

 

 



 

2.2.5     Debt service

In 2009‑2010, debt service should amount to $6.2 billion, i.e. $3.8 billion for direct debt service and $2.4 billion for interest ascribed to the retirement plans.

Overall, debt service is revised upward by $50 million compared with the March 2009 Budget.

Debt service fell by 5.4% in 2009‑2010 essentially because of the decline in interest rates. In 2010‑2011 and 2011‑2012, debt service is expected to climb by 13.6% and 12.2% respectively. This variance can be attributed to higher interest rates, the increase in the debt and the impact of the returns of the Caisse de dépôt et placement du Québec on the income of the Retirement Plans Sinking Fund  (which is applied against the interest on the retirement plans account).

 

TABLE C.12      

Consolidated Revenue Fund
Change in debt service

(millions of dollars)


2009‑2010
Budget


2010‑2011 BudgetP


2009-2010

Adjustments

2009‑2010

2010‑2011

2011‑2012

Direct debt service

3 760

29

3 789

4 408

4 925

Interest ascribed to the retirement plans

2 344

31

2 375

2 597

2 937

Employee future benefits1

0

- 10

- 10

- 15

- 21

Debt service

6 104

50

6 154

6 990

7 841

% change

- 7.4


- 5.4

13.6

12.2

P:   Preliminary results for 2009‑2010 and forecasts for subsequent years.

1    Including the interest on the obligation relating to the survivor's pension plan minus the investment income of the Survivor's Pension Plan Fund and the interest on the obligation relating to accumulated sick leave minus the investment income of the Accumulated Sick Leave Fund.

 



 

q A smaller proportion of revenue is being devoted to servicing the debt

The share of budgetary revenue devoted to the debt service of the Consolidated Revenue Fund should stand at 11.4% in 2011‑2012, compared with 17.2% in 1997‑1998.

 

CHART C.4       

Consolidated Revenue Fund debt service

(as a percentage of budgetary revenue)


Note: Preliminary results for 2009-2010 and forecasts for subsequent years.

 

 

 



 

2.3       Government investments

2.3.1     The Québec Infrastructures Plan

Over the coming years, the government will continue to invest in Québec's public infrastructures. As prescribed by the Act to promote the maintenance and renewal of public infrastructures, a substantial portion of these investments will be allocated to maintaining the quality of existing infrastructures and eliminating the maintenance deficit accumulated during the years prior to the adoption of the Act.

Under the 2009‑2014 Québec Infrastructures Plan, the government will invest $42.6 billion over five years, which represents an increase of $831.3 million, or 2.0%, compared with the previous plan. If the impact of the addition of new sectors is excluded, the increase amounts to 1.5%.

Coupled with the contribution of the Québec government's various partners in the projects included in the five-year plan, investments under the 2009‑2014 Québec Infrastructures Plan will reach $56.2 billion over five years.

 

TABLE C.13      

Infrastructure investments in 2009‑2014

(millions of dollars)

2008-2013 Québec Infrastructures Plan

41 808.1

Increase in the five-year budget: 2%

831.3

2009‑2014 Québec Infrastructures Plan

42 639.4

Contribution from partners1

13 512.2

Total infrastructure investments in 2009‑2014

56 151.6

1      Federal government, municipalities and other partners.



 

q Substantial acceleration of investment to support the economy

Since the first five-year investment plan was adopted in 2007, government investments have risen substantially, from $4.2 billion in 2006‑2007 to $5.0 billion in 2007‑2008 and to $6.6 billion in 2008‑2009. They will stand at $8.9 billion in 2009‑2010 and reach $9.1 billion in 2010‑2011.

This acceleration of infrastructure investment was undertaken to eliminate the maintenance deficit and support the Québec economy during an economic slowdown.

After 2010-2011, the annual level of investment will gradually be rolled back to a level compatible with the Act to promote the maintenance and renewal of public infrastructures, which makes provision for an asset maintenance budget and the elimination of the maintenance deficit over 15 years.

 

CHART C.5       

Change in infrastructure investment

(contribution from the Québec government, billions of dollars)


(1)    The difference between total annual investments and total investments of $42.6 billion under the 2009‑2014 Québec Infrastructures Plan is related to the rounding off of annual amounts. Annual investments are detailed in an appendix to this section.



 

2.3.2     Investments by Québec government departments and organizations

In addition to investments of roughly $9.1 billion under the 2010‑2011 Québec Infrastructures Plan, the Québec government will invest $1.4 billion through its various departments, agencies and special funds. These investments will include capital expenditures required for government functions and for maintaining the quality of public services.

 

TABLE C.14      

Investments by government departments, agencies and special funds

(millions of dollars)


2010-2011

Departments and budget-funded bodies

399.6

Non-budget-funded bodies

669.8

Special funds

315.4

TOTAL

1 384.8

Note:   These investments exclude those made under the Québec Infrastructures Plan.

2.3.3     Investments by government enterprises

Government enterprises will also make major investments in the coming years. In 2010-2011, investments by Hydro‑Québec, Loto-Québec and the Société des alcools du Québec will reach $5.2 billion. Over the period from 2009-2010 to 2011-2012, investments by these corporations will total $15.0 billion.

 

TABLE C.15      

Investments by government enterprises

(millions of dollars)


2009-2010

2010-2011

2011-2012

Total

Hydro-Québec

4 340.0

4 847.0

4 997.0

14 184.0

Loto-Québec

154.9

251.0

239.3

645.2

Société des alcools du Québec

45.9

63.9

53.1

162.9

TOTAL

4 540.8

5 161.9

5 289.4

14 992.1


 



 

2.3.4     Public investments in the economy

Public investments in Québec, including those by the Québec Infrastructures Plan, Hydro-Québec, the municipalities and the federal government reached 6.3% of GDP in 2009, a level not seen for over 25 years.

 

CHART C.6       

Investments by governments1 and Hydro-Québec in Québec

(as a percentage of GDP)


Sources:  Statistics Canada and Ministère des Finances du Québec.

1    Québec government, federal government and municipalities.

In fact, the forecast average investment of $13.6 billion in 2009‑2010 and 2010‑2011 by the government under its Québec Infrastructures Plan and by Hydro‑Québec will create or support close to 100 000 jobs in Québec, i.e. 2.5%  of all jobs.

The increase in public investments by the Québec government and Hydro-Québec will sustain 35 000 more jobs than five years ago.

 

 

TABLE C.16      

Jobs supported by the Québec Infrastructures Plan1 and Hydro-Québec


Average annual value of investments
($ billion)

Average annual number
of jobs2

(units)

2003-2004 to 2008-2009

7.8

63 000

Increase between the two periods

5.8

35 000

2009-2010 and 2010-2011

13.6

98 000

1      Ministère des Finances du Québec estimates based on the intersectoral model of the ISQ.

2      Québec government contributions only.

 


3.  Budgetary forecasts for revenue and consolidated expenditure

Starting with the 2010‑2011 Budget, the government will present consolidated financial forecasts for revenue and expenditure. Accordingly, the budgetary revenue and expenditure of all the entities in the government's reporting entity, including the entities in the health and social services and education networks and other government organizations, are being added to the budgetary revenue and expenditure of the Consolidated Revenue Fund. The results for the budgetary balance differ in no way from those shown in the preceding tables. This presentation makes it possible, among other things, to isolate the own-source revenues of consolidated entities and their attendant expenditures.

Consolidated budgetary transactions provide more complete information on the government's financial projections.

The following table presents the government's consolidated financial framework for fiscal 2009‑2010 to 2011‑2012.

Within the meaning of the Balanced Budget Act, the budgetary balance is in deficit by $4.3 billion for 2009‑2010. Thereafter, it will be in deficit by $4.5 billion in 2010‑2011 and $2.9 billion in 2011‑2012.



 

TABLE C.17                  

Consolidated financial framework for revenue and expenditure
Consolidated results by entity

(millions of dollars)


2010‑2011 BudgetP


2009‑2010

2010‑2011

2011‑2012

Revenue1




Consolidated Revenue Fund

62 650

64 489

65 936

Consolidated entities2

10 762

11 212

11 639

Specified purpose accounts2

665

1 647

842

Consolidated revenue

74 077

77 348

78 417

Expenditure




Consolidated Revenue Fund

- 66 923

- 69 551

- 71 748

Consolidated entities2

- 10 164

- 10 515

- 10 791

Specified purpose accounts2

- 665

- 1 647

- 842

Contingency reserve

- 300

- 300

¾

Consolidated expenditure

- 78 052

- 82 013

- 83 381

Impact of the plan to restore fiscal balance


1 051

3 036

DEFICIT

- 3 975

- 3 614

- 1 928

Deposit of dedicated revenues in the Generations Fund

- 715

- 892

- 972

Stabilization reserve

433

¾

¾

BUDGETARY BALANCE WITHIN THE MEANING OF THE BALANCED BUDGET ACT

- 4 257

- 4 506

- 2 900

P:   Preliminary results for 2009‑2010 and forecasts for subsequent years.

1    For the purpose of presenting the Budget Plan, revenue of the government as employer that is contributed to the Health Services Fund is deducted from the revenue of consolidated entities.

2    Amounts from entities in the reporting entity are deducted from revenue and expenditure.

 



 

3.1       Line-by-line consolidation

To ensure the information in the budget documents is better aligned with the presentation in the public accounts, the budget plan will henceforth present all of the consolidated revenues and expenditures of the entities included in the government's reporting entity.

Until 2007‑2008, the budget plan presented the net results of consolidated organizations, as well as certain summary information on the revenue and expenditure of non-budget-funded bodies and special funds. Those of the Generations Fund and the health and social services and education networks were added in 2008-2009.

From now on, the revenue and expenditure of all these entities and the  specified purpose accounts will be presented separately and added to those of the Consolidated Revenue Fund. This approach, which is called line-by-line consolidation, also requires eliminating transactions between related entities, particularly transfer expenditures from the government that are paid to consolidated entities and the corresponding revenues received by these entities. These transactions are carried out within the government and have no impact on its deficit or annual surplus.

The presentation of the budget documents will thus correspond to that of the public accounts. Starting in fiscal 2009‑2010, governments have been asked by the Public Sector Accounting Board (PSAB) of the Canadian Institute of Chartered Accountants (CICA) to consolidate line by line, in their financial statements, all the entities included in their reporting entity, including the transactions of their networks.

This will improve the quality and transparency of the information produced as part of the governent's budget planning.

Table C.18 presents the main revenue and expenditure categories of the government's consolidated financial framework for 2009‑2010 and 2010‑2011.

 

 

 

 

 

 



 

TABLE C.18      

Consolidated financial framework for revenue and expenditure

Consolidated results by activity

(millions of dollars)


2010-2011 BudgetP


2009‑2010

2010‑2011

Revenue



Income and property taxes

26 881

28 410

Consumption taxes

13 773

14 287

School property taxes

1 453

1 467

Duties and permits

1 886

1 969

Miscellaneous

7 226

7 465

Government enterprises

4 602

4 465

Revenues dedicated to the Generations Fund

715

892

Own-source revenue

56 536

58 955

Federal transfers

17 541

18 393

Total revenue

74 077

77 348

Expenditure



Expenditure

- 69 824

- 72 712

Contingency reserve

- 300

- 300

Debt service

- 7 928

- 9 001

Total expenditure

- 78 052

- 82 013

DEFICIT BEFORE PLAN TO RESTORE FISCAL BALANCE

- 3 975

- 4 665

Plan to restore fiscal balance


1 051

DEFICIT

- 3 975

- 3 614

Deposit of dedicated revenues in the Generations Fund

- 715

- 892

Stabilization reserve

433

¾

BUDGETARY BALANCE WITHIN THE MEANING OF THE BALANCED BUDGET ACT

- 4 257

- 4 506

P:   Preliminary results for 2009‑2010 and forecasts for 2010‑2011.

 

 



Tables C.19 and C.20 detail the consolidated budgetary forecasts for 2009‑2010 and 2010‑2011. The consolidation takes into account transactions carried out in consolidated entities and in specified purpose accounts and eliminates financial transactions between entities in the government's reporting entity. The latter transactions are carried out within the government and have no impact on the budgetary balance.

 

 

 



 

TABLE C.19      

Detailed consolidated financial framework
Consolidated results by activity

 

(millions of dollars)

 


2009-2010P

 



Consolidated entities


Consolidation



Consolidated Revenue Fund

Non-budget-funded

bodies and

special

funds1

Health and social

services and

education

networks1

Generations Fund


Specified purpose accounts

Consolidation adjustments

Consolidated results

Revenue









Income and property taxes

26 907

749





- 775

26 881

Consumption taxes

13 563

210






13 773

School property taxes



1 453





1 453

Duties and permits

950

752

184





1 886

Miscellaneous

1 399

2 133

3 418



283

- 7

7 226

Government enterprises

4 602







4 602

Generations Fund




715




715

Own-source revenue

47 421

3 844

5 055

715


283

- 782

56 536

Revenue from entities in the reporting entity


16 002

28 189



460

- 44 651

¾

Federal transfers

15 229

1 670

260



557

- 175

17 541

Total revenue

62 650

21 516

33 504

715


1 300

- 45 608

74 077

Expenditure









Expenditure

- 60 769

- 19 623

- 33 120



- 1 300

44 988

- 69 824

Contingency reserve

- 300







- 300

Debt service

- 6 154

- 1 608

- 786




620

- 7 928

Total expenditure

- 67 223

- 21 231

- 33 906



- 1 300

45 608

- 78 052

(DEFICIT)  SURPLUS

- 4 573

285

- 402

715


¾

¾

- 3 975

Deposit of dedicated revenues in the Generations Fund




- 715




- 715

Stabilization reserve

433







433

BUDGETARY BALANCE WITHIN THE MEANING OF THE BALANCED BUDGET ACT

- 4 140

285

- 402

¾


                     ¾

¾

- 4 257

P:   Preliminary results.

1    These data present transactions carried out within the government's reporting entity, while the data given in Table C.17 do not take these transactions into account. This has no impact on consolidated results.

 

 



 

TABLE C.20      

Detailed consolidated financial framework
Consolidated results by activity

(millions of dollars)


2010-2011P



Consolidated entities


Consolidation



Consolidated Revenue Fund

Non-budget-funded bodies

and special

funds1

Health and

social services

and education

networks1

Generations Fund


Specified purpose accounts

Consolidation adjustments

Consolidated results

Revenue









Income and property taxes

28 243

973





- 806

28 410

Consumption taxes

14 081

206






14 287

School property taxes



1 467





1 467

Duties and permits

972

803

194





1 969

Miscellaneous

1 403

2 240

3 544



285

- 7

7 465

Government enterprises

4 465







4 465

Generations Fund




892




892

Own-source revenue

49 164

4 222

5 205

892


285

- 813

58 955

Revenue from entities in the reporting entity


16 330

29 345



464

- 46 139

¾

Federal transfers

15 325

1 424

282



1 548

- 186

18 393

Total revenue

64 489

21 976

34 832

892


2 297

- 47 138

77 348

Expenditure









Expenditure

- 62 561

- 20 144

- 34 173



- 2 297

46 463

- 72 712

Contingency reserve

- 300







- 300

Debt service

- 6 990

- 1 828

- 858




675

- 9 001

Total expenditure

- 69 851

- 21 972

- 35 031



- 2 297

47 138

- 82 013

(DEFICIT)  SURPLUS BEFORE PLAN TO RESTORE FISCAL BALANCE

- 5 362

4

- 199

892


¾

¾

- 4 665

Plan to restore fiscal balance

998

28

25





1 051

(DEFICIT) SURPLUS

- 4 364

32

- 174

892


¾

¾

- 3 614

Deposit of dedicated revenues in the Generations Fund




- 892




- 892

BUDGETARY BALANCE WITHIN THE MEANING OF THE BALANCED BUDGET ACT

- 4 364

32

- 174

¾


¾

¾

- 4 506

P:   Preliminary results.

1    These data present transactions carried out within the government's reporting entity, while the data given in Table C.17 do not take these transactions into account. This has no impact on consolidated results.

 



 

3.2       Consolidated entities

The government's budgetary forecasts must take into account all financial transactions related to activities under its control.

They include the financial transactions of departments, budget‑funded bodies and government enterprises, as well as consolidated entities, whose financial transactions must be taken into account in the government's financial forecasts.

These consolidated entities are grouped as follows:

non-budget-funded bodies and special funds;

the health and social services and education networks;

the Generations Fund.

The following table shows the net results of each group of consolidated entities.

 

TABLE C.9        

Net results of consolidated entities

(millions of dollars)


2010‑2011 BudgetP


2009-2010

2010-2011

2011-2012

Non-budget-funded bodies and special funds

285

4

59

Health and social services and education networks

- 402

- 199

- 183

Generations Fund (dedicated revenues)

715

892

972

NET RESULTS BEFORE PLAN TO RESTORE FISCAL BALANCE

598

697

848

Plan to restore fiscal balance


53

131

NET RESULTS

598

750

979

P:   Preliminary results for 2009-2010 and forecasts for subsequent years.

 



In December 2007, further to the recommendations of the Task Force on Government Accounting, the government adopted a reform of its accounting policies to bring them into full conformity with generally accepted accounting principles (GAAP). Accordingly, since 2006‑2007, its reporting entity has included agencies and institutions in the health and social services network, school boards, CEGEPs, and the Université du Québec and its branches.

This year, in addition to presenting the net results of the health and social services and education networks, the budget presents a projection of the networks' revenue and expenditure and their non-budgetary transactions.

3.2.1     Non-budget-funded bodies and special funds

Non-budget-funded bodies and special funds include 104 government entities whose mission is to sell goods and services or fund government programs. For instance:

the Fonds de conservation et d'amélioration du réseau routier du Québec funds investments for maintaining and developing roads and structures;

the Fonds de l'assurance médicaments pays the cost of medications and pharmaceutical services for people insured by the Régie de l'assurance maladie du Québec.

For fiscal 2009‑2010, the net results of non-budget-funded bodies and special funds show a surplus of $285 million. For 2010‑2011 and 2011‑2012, the net results of non-budget-funded bodies and special funds are expected to show surpluses of $32 million and $140 million respectively.

These surpluses are attributable mainly to an increase in the government's  contribution to La Financière agricole du Québec, up $380 million in 2009-2010 and $325 million as of 2010‑2011.

These net results take into account the measures in the plan to restore fiscal balance, which amount to $28 million in 2010-2011 and $81 million in 2011-2012. These measures should total $165 million in 2013-2014.



 

TABLE C.22      

Non-budget-funded bodies and special funds
Net results

(millions of dollars)


2010‑2011 BudgetP

2009-2010

2010-2011

2011-2012

Revenue




Income and property taxes

749

973

1 414

Consumption taxes

210

206

207

Duties and permits

752

803

850

Miscellaneous

2 133

2 240

2 267

Own-source revenue

3 844

4 222

4 738

Revenue from entities in the reporting entity

16 002

16 330

17 423

Federal transfers

1 670

1 424

1 060

Total revenue

21 516

21 976

23 221





Expenditure




Remuneration

- 2 138

- 2 185

- 2 188

Operating

- 17 485

- 17 959

- 18 752

Debt service

- 1 608

- 1 828

- 2 222

Total expenditure

- 21 231

- 21 972

- 23 162

NET RESULTS BEFORE PLAN TO RESTORE FISCAL BALANCE

285

4

59

Plan to restore fiscal balance


28

81

NET RESULTS

285

32

140

P:   Preliminary results for 2009-2010 and forecasts for subsequent years.

 



 

List of non-budget-funded bodies and special funds

 

Non-budget-funded bodies

Agence de l'efficacité énergétique

Musée d'Art contemporain de Montréal

Agence métropolitaine de transport

Musée de la Civilisation

Autorité des marchés financiers

Musée national des beaux-arts du Québec

Bibliothèque et Archives nationales du Québec

Office de la sécurité du revenu des chasseurs et piégeurs cris

Bureau de décision et de révision en valeurs mobilières

Office des professions du Québec

Centre de la francophonie des Amériques

Office Québec-Amériques pour la jeunesse

Centre de recherche industrielle du Québec

Office Québec-Monde pour la jeunesse

Centre de services partagés du Québec

Régie de l'assurance maladie du Québec

Commission de la capitale nationale du Québec

Régie de l'énergie

Commission des lésions professionnelles

Régie des installations olympiques

Commission des normes du travail

Régie du bâtiment du Québec

Commission des relations du travail

Régie du cinéma

Commission des services juridiques

Services Québec

Conseil des arts et des lettres du Québec

Société de développement de la Baie-James

Conservatoire de musique et d'art dramatique du Québec

Société de développement des entreprises culturelles

Corporation d'hébergement du Québec

Société de financement des infrastructures locales du Québec

Corporation d'urgences-santé

Société de la Place des Arts de Montréal

École nationale de police du Québec

Société de l'assurance automobile du Québec

École nationale des pompiers du Québec

Société de télédiffusion du Québec

Financement-Québec

Société des établissements de plein air du Québec

Fondation de la faune du Québec

Société des parcs de sciences naturelles du Québec

Fonds d'aide aux recours collectifs

Société des traversiers du Québec

Fonds d'assurance-prêts agricoles et forestiers

Société d'habitation du Québec

Fonds de la recherche en santé du Québec

Société du Centre des congrès de Québec

Fonds québécois de la recherche sur la nature et les technologies

Société du Grand Théâtre de Québec

Fonds québécois de la recherche sur la société et la culture

Société du Palais des congrès de Montréal

Héma-Québec

Société du parc industriel et portuaire de Bécancour

Immobilière SHQ

Société immobilière du Québec

Infrastructure Québec

Société nationale de l'amiante

Institut de la statistique du Québec

Société québécoise d'assainissement des eaux

Institut de tourisme et d'hôtellerie du Québec

Société québécoise de récupération et de recyclage

Institut national de santé publique du Québec

Société québécoise d'information juridique

Investissement Québec

Tribunal administratif du Québec

La Financière agricole du Québec




 

List of non-budget-funded bodies and special funds (cont.)

 

Special funds

Fonds d'aide à l'action communautaire autonome

Fonds pour le développement des jeunes enfants

Fonds d'aide aux victimes d'actes criminels

Fonds pour le développement du sport et de l'activité physique

Fonds d'assistance financière pour certaines régions sinistrées

Fonds québécois d'initiatives sociales

Fonds de conservation et d'amélioration du réseau routier

Fonds relatif à la tempête de verglas

Fonds de développement du marché du travail

Fonds vert (Green Fund)

Fonds de développement régional


Fonds de financement


Fonds de fourniture de biens ou de services du ministère de l'Emploi et de la Solidarité sociale


Fonds de fourniture de biens ou de services du ministère du Revenu


Fonds de gestion de l'équipement roulant


Fonds de la sécurité routière


Fonds de l'assurance médicaments


Fonds de l'industrie des courses de chevaux


Fonds de partenariat touristique


Fonds de perception


Fonds de soutien aux proches aidants


Fonds des contributions des automobilistes au transport en commun


Fonds des pensions alimentaires


Fonds des registres du ministère de la Justice


Fonds des services de police


Fonds des technologies de l'information du Conseil du trésor


Fonds des technologies de l'information du ministère de l'Emploi et de la Solidarité sociale


Fonds des technologies de l'information du ministère du Revenu


Fonds d'information foncière


Fonds d'information géographique


Fonds du centre financier de Montréal


Fonds du patrimoine culturel québécois


Fonds du patrimoine minier


Fonds du service aérien gouvernemental


Fonds forestier


Fonds pour la promotion des saines habitudes de vie


Fonds pour la vente de biens et services du ministère des Transports




 

3.2.2     Health and social services and education networks

The health and social services network is made up of 209 entities. These entities comprise 15 agencies and three regional authorities in the health and social services, as well as 191 public health and social services institutions.

The education network is made of up 131 entities, including 73 school boards, 48 CEGEPs and the Université du Québec and its nine branches.

As of fiscal 2009‑2010, the public accounts have presented the revenue and expenditure of the networks and the assets and liabilities of their balance sheet line by line, whereas the previous budget essentially took into account the projected net financial results of the networks for the purpose of preparing the government's financial framework.

In the interests of improving consistency between the financial data published in the budget and those disseminated in the public accounts, this budget presents, for the first time, detailed prospective financial information on the networks.

In the March 2009 Budget, the government provided $120 million for 2009‑2010 to cover any overruns that might be incurred. The present budget is adjusting this amount upward by $282 million to $402 million. This adjustment is due to, in particular, the effects of harmonizing the network's accounting policies with those of the government.

The deficits of the health and social services and education networks for 2010‑2011 and 2011‑2012 amount to $174 million and $133 million respectively after the measures under the plan to restore fiscal balance.

In cooperation with the Ministère de la Santé et des Services sociaux and the Ministère de l'Éducation, du Loisir et du Sport, the monitoring and budgetary control process for the networks has been improved. Other efforts will be deployed over the coming year to enhance the monitoring and budgetary control process for the entities that make up the networks.



Lastly, the government is taking advantage of this budget to reiterate its determination to substantially reduce operating deficits in the health and social services network. The government is thus asking this network to introduce a budget management framework focused on achieving greater efficiency in order to gradually eliminate the network's annual operating deficits. In exchange for attaining the fiscal balance targets, the goverment promises to gradually assume and repay the accumulated operating deficits of $1.6 billion as at March 31, 2008.

 

TABLE C.10      

Health and social services and education networks
Net results

(millions of dollars)


2010‑2011 BudgetP


2009‑2010

2010‑2011

2011‑2012

Revenue




School property taxes

1 453

1 467

1 483

Revenue from users

1 594

1 657

1 724

Fees

184

194

204

Other

1 824

1 887

2 013

Own-source revenue

5 055

5 205

5 424

Revenue from entities in the reporting entity

28 189

29 345

30 613

Federal transfers

260

282

286

Total revenue

33 504

34 832

36 323





Expenditure




Remuneration and operating expenses

- 32 920

- 34 173

- 35 585

Debt service

- 786

- 858

- 921

Accounting harmonization

- 200

¾

¾

Total expenditure

- 33 906

- 35 031

- 36 506

NET RESULTS BEFORE PLAN TO RESTORE FISCAL BALANCE

- 402

- 199

- 183

Impact of the plan to restore fiscal balance


25

50

NET RESULTS

- 402

- 174

- 133

P:   Preliminary results for 2009-2010 and forecasts for subsequent years.

 

 



 

3.2.3     Generations Fund

The amount deposited in the Generations Fund is expected to reach $715 million for 2009‑2010.

For 2010‑2011 and 2011‑2012, total deposits in the Generations Fund are expected to amount to $892 million and $972 million respectively. As a result, the book value of the Generations Fund will reach $4.5 billion as at March 31, 2012. Section G presents the results of and change in the Generations Fund in greater detail.

 

TABLE C.24      

Deposits in the Generations Fund

(millions of dollars)


2009‑2010
Budget




2010‑2011 BudgetP


2009-2010


Adjustments


2009-2010

2010-2011

2011-2012

Dedicated revenues








Water-power royalties

647


11


658

687

706

Unclaimed property

¾


2


2

2

2

Investment income

68


- 13


55

203

264

TOTAL

715


¾


715

892

972

P:   Preliminary results for 2009‑2010 and forecasts for subsequent years.

 

 

 

 

 



[THIS PAGE INTENTIONALLY LEFT BLANK I]


4.  Consolidated net financial requirements

The budgetary balance is presented on an accrual basis, with assets and liabilities being recognized, respectively, when they are acquired or incurred, regardless of when the corresponding funds are disbursed or received. Conversely, net surpluses or financial requirements represent the difference between the government's cash inflow and disbursements. This measure thus takes into account not only changes in the budgetary balance but also resources or requirements arising from the government's investments through the acquisition of fixed assets, through loans investments and advances, and through other activities such as paying accounts payable and collecting accounts receivable. The difference between the budgetary balance and net financial resources or requirements is recognized in non-budgetary transactions.

Moreover, for the first time, the government is presenting the non-budgetary transactions of the health and social services and education networks in detail. Previously, the government's investments in the networks were presented on a net basis whereas, from now on, the networks' non-budgetary transactions will be detailed like those of the Consolidated Revenue Fund.

As a whole, consolidated net financial requirements stand at $7.0 billion in 2009‑2010 and 2010‑2011, and at $6.9 billion in 2011‑2012.

 



 

TABLE C.25      

Consolidated net financial requirements1

(millions of dollars)


2009‑2010 Budget




2010‑2011 BudgetP


2009-2010


Adjustments


2009-2010

2010-2011

2011-2012

Budgetary balance within the meaning of the Balanced Budget Act

- 3 946


- 311


- 4 257

- 4 506

- 2 900

Deposit of dedicated revenues in the Generations Fund

715


¾


715

892

972

Total consolidated budgetary
transactions

- 3 231


- 311


- 3 542

- 3 614

- 1 928

Consolidated non-budgetary transactions








Activities relating to investments, loans and advances

- 1 345


849


- 496

- 1 281

- 1 205

Activities relating to investment in fixed assets

- 3 304


- 1 295


- 4 599

- 4 653

- 4 917

Net investment in the networks3

- 1 004


1 004


¾

¾

¾

Transactions relating to retirement plans and employee future benefits

2 490


- 80


2 410

2 667

2 323

Change in other accounts (accounts payable, accounts receivable, reserves, etc.)4

120


- 923


- 803

- 98

- 1 169

Total consolidated non-budgetary transactions

- 3 043


- 445


- 3 488

- 3 365

- 4 968

CONSOLIDATED NET FINANCIAL REQUIREMENTS

- 6 274


- 756


- 7 030

- 6 979

- 6 896

               

P:   Preliminary results for 2009‑2010 and forecasts for subsequent years.

1    A negative entry indicates a financial requirement and a positive entry, a source of financing.

2    The net financial requirements in the 2010‑2011 Budget take into account the budgetary and non-budgetary transactions of the health and social services and education networks.

3    With line-by-line consolidation of the health and social services and education networks, the item "net investment in the networks" no longer exists because it is now part of transactions between related entities.

4    Including obligations stemming from public-private partnership agreements that have no effect on financial requirements.

 

The consolidated net financial requirements shown in the above table come from the following sources:

The net financial requirements of the Consolidated Revenue Fund amount to $2.2 billion for 2009‑2010, $3.0 billion for 2010‑2011 and $2.1 billion for 2011‑2012. These variations mainly reflect the change in the deficits forecast for the coming years and the capital funding granted to the Société générale de financement du Québec to provide assistance to businesses.



 

The net financial requirements of non-budget-funded bodies and special funds amount to $3.6 billion for 2009‑2010, $2.9 billion for 2010‑2011 and $4.4 billion for 2011‑2012. They have been calculated after eliminating transactions with the health and social services and education networks. These net financial requirements stem largely from infrastructure investments provided for by the Fonds de conservation et d'amélioration du réseau routier.

The net financial requirements of the health and social services and education networks stand at $2.0 billion for 2009‑2010 and 2010-2011, and at $1.4 billion for 2011‑2012. These net financial requirements stem essentially from capital investments.

Deposits in the Generations Fund amount to $715 million for 2009‑2010, $892 million for 2010‑2011 and $972 million for 2011‑2012.

 

TABLE C.26      

Consolidated net financial requirements by entity1

(millions of dollars)


2009‑2010 Budget




2010‑2011 BudgetP


2009-2010


Adjustments


2009-2010

2010-2011

2011-2012

Consolidated Revenue Fund

- 2 800


600


- 2 200

- 3 000

- 2 100

Non-budget-funded bodies and special funds

- 4 189


630


- 3 559

- 2 864

- 4 359

Health and social services and education networks

¾


- 1 986


- 1 986

- 2 007

- 1 409

Deposits in the Generations Fund

715


¾


715

892

972

CONSOLIDATED NET FINANCIAL REQUIREMENTS

- 6 274


- 756


- 7 030

- 6 979

- 6 896

P:   Preliminary results for 2009‑2010 and forecasts for subsequent years.

1    A negative entry indicates a financial requirement and a positive entry, a source of financing.

 

 

 

 



[THIS PAGE INTENTIONALLY LEFT BLANK I]


5.  Consolidated non-budgetary transactions

Consolidated non-budgetary transactions consist of the non-budgetary transactions of the Consolidated Revenue Fund and those of consolidated entities. They are presented by activity:

investments, loans and advances;

capital expenditures;

retirement plans and employee future benefits;

other accounts.

Non-budgetary transactions related to the health and social services and education networks are being consolidated in these activities for the first time. Over the past two years, they have been shown separately under the item "net investment in the networks." The line-by-line consolidation of the networks' transactions takes into account changes in asset and liability items, including capital expenditures and debts. Therefore, network assets funded directly through financial institutions are added to the government's net financial requirements.

For 2009‑2010, consolidated non-budgetary requirements stand at $3.5 billion, or $445 million less than forecast in the March 2009 Budget.

For 2010‑2011 and 2011‑2012, consolidated non-budgetary requirements stand at $3.4 billion and $5.0 billion respectively.

 

 



 

TABLE C.27

Summary of consolidated non-budgetary transactions1

(millions of dollars)


2009‑2010 Budget




2010-2011 BudgetP,2


2009-2010


Adjustments


2009-2010

2010-2011

2011-2012

Consolidated Revenue Fund








Investments, loans and advances

- 1 119


785


- 334

- 1 103

- 856

Capital expenditures

- 179


- 65


- 244

- 266

- 247

Retirement plans and employee future benefits

2 490


- 80


2 410

2 667

2 323

Other accounts

- 406


514


108

66

- 413

Total

786


1 154


1 940

1 364

807

Consolidated entities








Investments, loans and advances

- 226


64


- 162

- 178

- 349

Capital expenditures

- 3 125


- 1 230


- 4 355

- 4 387

- 4 670

Net investment in the networks3

- 1 004


1 004


¾

¾

¾

Other accounts4

526


- 1 437


- 911

- 164

- 756

Total

- 3 829


- 1 599


- 5 428

- 4 729

- 5 775

Consolidated non-budgetary transactions








Investments, loans and advances

- 1 345


849


- 496

- 1 281

- 1 205

Capital expenditures

- 3 304


- 1 295


- 4 599

- 4 653

- 4 917

Net investment in the networks3

- 1 004


1 004


¾

¾

¾

Retirement plans and employee future benefits

2 490


- 80


2 410

2 667

2 323

Other accounts

120


- 923


- 803

- 98

- 1 169

TOTAL CONSOLIDATED NON-BUDGETARY REQUIREMENTS

- 3 043


- 445


- 3 488

- 3 365

- 4 968

Preliminary results for 2009‑2010 and forecasts for subsequent years.

1     A negative entry indicates a financial requirement and a positive entry, a source of financing.

2     Line-by-line consolidation of network transactions requires taking into account the change in the various balance sheet items, including capital expenditures and debts. Therefore, assets funded through organizations outside the government's reporting entity are added to the government's net financial requirements.

3     With line-by-line consolidation of the transactions of the health and social services and education networks, the activity "net investment in the networks" was allocated to the other non-budgetary transaction activities.

4     Including obligations stemming from public-private partnership agreements that have no effect on financial requirements.

 

 

 



 

q Investments, loans and advances

Consolidated financial requirements for investments, loans and advances for 2009‑2010 amount to $496 million. The forecasts for 2010‑2011 and 2011‑2012 stand at $1.3 billion and $1.2 billion respectively.

For 2009‑2010, the investments, loans and advances of the Consolidated Revenue Fund show financial requirements of $334 million, or $785 million less than forecast in last year's budget. This change is due to, among other things, the downward adjustment from $625 million to $250 million in the capital funding granted to the Société générale de financement du Québec for implementing the assistance program for high-performance industries that are experiencing financial difficulties because of the economic situation. The Société générale de financement du Québec will be granted additional capital funding of $500 million in 2010‑2011 and $50 million in 2011‑2012. As a result, annual financial requirements for 2010‑2011 and 2011‑2012 will amount to $1.1 billion and $856 million respectively.

As regards non-budget-funded bodies and special funds, the financial requirements of $173 million for 2009‑2010 arise essentially from investments, loans and advances attributable to Investissement Québec and the Green Fund.

 

TABLE C.28      

Consolidated non-budgetary transactions for investments, loans and advances1

(millions of dollars)


2009‑2010  Budget




2010‑2011 BudgetP


2009-2010


Adjustments


2009-2010

2010-2011

2011-2012

Consolidated Revenue Fund

- 1 119


785


- 334

- 1 103

- 856

Non-budget-funded bodies and special funds2

- 226


53


- 173

- 175

- 346

Health and social services and education networks

¾


11


11

- 3

- 3

CONSOLIDATED NON-BUDGETARY TRANSACTIONS

- 1 345


849


- 496

- 1 281

- 1 205

P:   Preliminary results for 2009‑2010 and forecasts for subsequent years.

1    A negative entry indicates a financial requirement and a positive entry, a source of financing.

2    The revised data for 2009‑2010 and those for subsequent years take into account adjustments arising from the line-by-line consolidation of the transactions of the health and social services and education networks.

 

 



 

q Capital expenditures

For 2009‑2010, consolidated investments in fixed assets amount to $7.5 billion. Taking into account a depreciation expense of $2.9 billion for these capital expenditures, the financial requirements associated with them total $4.6 billion. The forecasts for 2010‑2011 and 2011‑2012 stand at $4.7 billion and $4.9 billion respectively.

 

TABLE C.29      

Capital investments and financial requirements1

 

(millions of dollars)

 


2009‑2010
Budget




2010‑2011 BudgetP


2009‑2010


Adjustments


2009-2010

2010-2011

2011-2012

Consolidated Revenue Fund








Level of investment

- 436


- 62


- 498

- 518

- 510

Depreciation

257


- 3


254

252

263

Financial requirements (capital expenditures)

- 179


- 65


- 244

- 266

- 247

Non-budget-funded bodies and special funds2








Level of investment

- 4 462


- 356


- 4 818

- 4 928

- 5 459

Depreciation

1 337


105


1 442

1 601

1 846

Financial requirements (capital expenditures)

- 3 125


- 251


- 3 376

- 3 327

- 3 613

Health and social services and education networks








Level of investment

¾


- 2 231


- 2 231

- 2 392

- 2 497

Depreciation

¾


1 252


1 252

1 332

1 440

Financial requirements (capital expenditures)

¾


- 979


- 979

- 1 060

- 1 057

CONSOLIDED








Level of investment

- 4 898


- 2 649


- 7 547

- 7 838

- 8 466

Depreciation

1 594


1 354


2 948

3 185

3 549

Financial requirements (capital expenditures)

- 3 304


- 1 295


- 4 599

- 4 653

- 4 917

P:  Preliminary results for 2009‑2010 and forecasts for subsequent years.

1   A negative entry indicates a financial requirement and a positive entry, a source of financing.

2   The revised data for 2009‑2010 and those for subsequent years take into account adjustments arising from the line-by-line consolidation of the transactions of the health and social services and education networks.

 

 

 

The net financial requirements in respect of non-budget-funded bodies and special funds for 2009‑2010 can be attributed mainly to road infrastructure investments of $3.6 billion financed by the Fonds de conservation et d'amélioration du réseau routier. These investments also explain the increase in financial requirements for 2010‑2011 and 2011‑2012.

In addition, investments of $2.2 billion are forecast for the networks' fixed assets in 2009‑2010. Of this amount, $1.2 billion is for the health and social services network and $1.0 billion for the education network. Network funding comes for the most part from Financement-Québec, the Corporation d'hébergement du Québec and financial institutions.

q Retirement plans

For 2009‑2010, the balance of non-budgetary transactions in regard to the retirement plans and employee future benefits is $2.4 billion, which reduces the government's financing needs.

For 2010‑2011 and 2011‑2012, the retirement plans and employee future benefits should help to reduce financing needs by $2.7 billion and $2.3 billion respectively.

q Other accounts

Net financial requirements for other accounts consist of a series of changes in assets and liabilities such as accounts receivable, accounts payable and deferred revenue.

Consolidated financial requirements for other accounts amount to $803 million in 2009‑2010. For 2010‑2011, other accounts require additional funding of $98 million and of $1.2 billion for 2011‑2012.

 

 

 



[THIS PAGE INTENTIONALLY LEFT BLANK I]


Appendix 1: investments

q 2009‑2014 Québec Infrastructures Plan

Investments of $42.6 billion from 2009‑2010 to 2014‑2015 under the Québec Infrastructures Plan are distributed among the various sectors of government intervention:

$19.6 billion in transportation infrastructures (road network, public transit and maritime infrastructures);

$8.8 billion in health infrastructures;

$6.0 billion in education infrastructures;

$3.7 billion in municipal infrastructures;

$4.5 billion in other sectors (culture, social housing, research, justice and public security, public dams, biomethanization and forest roads).

 

CHART C.7       

Breakdown of investments under the 2009‑2014 Québec Infrastructures Plan by intervention sector

(contribution from the Québec government, billions of dollars and per cent)


1    Includes investments in social housing, culture, justice and public security, research, public dams, biomethanization and forest roads.

 

 



 

TABLE C.30      

Breakdown of investments under the 2009‑2014 Québec Infrastructures Plan by intervention sector

(Contribution from the Québec government, millions of dollars)


2009-10

2010-11

2011-12

2012-13

2013-14

Total

Road network

3 082.6

3 467.3

3 371.9

3 181.5

3 152.2

16 255.5

Public transit

839.2

734.6

588.3

352.7

257.3

2 772.1

Maritime infrastructures

7.4

119.1

142.9

123.4

133.4

526.2

Health and social services

1 818.1

1 804.5

1 894.1

1 685.2

1 644.7

8 846.6

Education

1 286.0

1 298.4

1 140.2

1 137.1

1 131.0

5 992.7

Culture

380.7

288.1

187.0

170.1

159.1

1 185.0

Municipal infrastructures

733.1

716.7

925.9

785.2

558.9

3 719.8

Social housing

236.7

240.4

302.5

253.8

130.5

1 163.9

Research

363.6

234.4

85.1

185.1

83.8

952.0

Justice and public security

157.9

193.6

241.8

230.7

206.6

1 030.6

Other1

26.0

44.5

30.5

26.0

68.0

195.0

TOTAL

8 931.3

9 141.6

8 910.2

8 130.8

7 525.5

42 639.4

1      Public dams, biomethanization and forest roads.



 

¡ Breakdown by type of investment

These investments include funds allocated to maintaining assets and improving and replacing infrastructures, as well as completing projects started before the first five-year plan came into effect.

The investment budget for maintaining assets comprises the regular budget needed to meet recognized asset maintenance standards (ranging from 1% to 3% of assets' replacement value, depending on the sector) and investments allocated to eliminating the infrastructure maintenance deficit over 15 years as prescribed by the Act to promote the maintenance and renewal of public infrastructures.

 

CHART C.8

 
Breakdown of investments under the 2009‑2014 Québec Infrastructures Plan by type of investment

(contribution from the Québec government, billions of dollars and per cent)



 

 



 

TABLE C.31      

Breakdown of investments under the 2009‑2014 Québec Infrastructures Plan by intervention sector and type of investment

(contribution from the Québec government, millions of dollars)


Asset maintenance





Regular budget

Elimination of maintenance deficit

Improvement and replacement

Project completion

Total

Road network

9 186.4

1 501.4

2 001.7

3 566.0

16 255.5

Public transit

1 353.7

557.2

335.1

526.1

2 772.1

Maritime infrastructures



526.2


526.2

Health and social services

4 350.3

1 270.6

2 316.5

909.2

8 846.6

Education

4 339.5

1 167.5

451.3

34.4

5 992.7

Culture

623.3

259.1

148.0

154.6

1 185.0

Municipal infrastructures

1 194.8

1 654.8

288.0

582.2

3 719.8

Social housing

261.8

286.6

331.3

284.2

1 163.9

Research

18.9


933.1


952.0

Justice and public security

320.4


710.2


1 030.6

Other1

150.0


45.0


195.0

TOTAL

21 799.1

6 697.2

8 086.4

6 056.7

42 639.4

1      Public dams, biomethanization and forest roads.

 

 


Appendix 2: investment projects by government enterprises

Certain government enterprises will continue to make substantial investments that will contribute to Québec's economic recovery. In 2010‑2011, investments by these corporations will increase by over $620 million compared with 2009‑2010  and reach nearly $5.2 billion. They will climb again in 2011‑2012, to nearly $5.3 billion.

q Hydro-Québec

Hydro‑Québec alone will boost its investments by over $500 million in 2010 compared with 2009, to which will be added $150 million in 2011.

The pace of the La Romaine project, launched in 2009, will be doubled, and the funding allocated to this project will reach over $400 million in 2010 and $515 million in 2011. As well, close to $1 billion will be allocated in 2010 to the Eastmain-1-A/Rupert and La Sarcelle project, which will be completed in 2012. In addition to making a significant contribution to Québec's economy, these two projects will play an important role in securing Québec's energy future.

Renovation work on the Gentilly power station will also generate major economic spinoffs, as more than $400 million will be devoted to this project in 2010 and 2011.

Substantial amounts will also be allocated to boost Québec's energy efficiency, with spending in this regard amounting to nearly $300 million in 2010 and  $325 million in 2011.

Hydro-Québec's other projects will also have significant spinoffs in Québec. Overall, the investments devoted to these projects will reach $2.6 billion in 2010 and over $2.7 billion in 2011.

q Loto‑Québec and Société des alcools du Québec

Loto-Québec and the Société des alcools du Québec will also increase their investments through various projects.

Loto-Québec's investments will reach $251 million in 2010‑2011 and slightly more than $239 million in 2011‑2012. Of these amounts, close to $102 million will be allocated to the Casino de Montréal renovation project in 2010‑2011 and nearly $95 million will be invested in the project in 2011‑2012.



The Société des alcools du Québec will increase its investments by nearly $64 million in 2010‑2011, compared with nearly $46 million in 2009‑2010. These investments will be devoted mainly to developing or expanding its outlets, to expanding the Québec City distribution centre and to the Société's computer ressources. The Société plans to invest slightly over $53 million in 2011‑2012.

 

TABLE C.32      

Projected investment by government enterprises

(millions of dollars)


2009‑2010

2010-2011

2011-2012

HYDRO-QUÉBEC1




Major projects




Eastmain 1-A/Rupert and La Sarcelle

1 161.0

940.0

518.0

Gentilly-2 - repair project

271.0

422.0

420.0

La Romaine complex

201.0

407.0

515.0

Transmission integration - Wind turbines (990 MW and 2 000 MW)

102.0

115.0

477.0

Interconnection with Ontario (Phases 1 and 2)

184.0

55.0

¾

Global Energy Efficiency Plan

257.0

299.0

324.0

Subtotal - Major projects

2 176.0

2 238.0

2 254.0

Other projects

2 164.0

2 609.0

2 743.0

Total - Hydro-Québec

4 340.0

4 847.0

4 997.0

LOTO-QUÉBEC




Casino de Montréal

27.6

101.9

94.8

Other projects

127.3

149.1

144.5

Total - Loto-Québec

154.9

251.0

239.3

SOCIÉTÉ DES ALCOOLS DU QUÉBEC




Outlet network

16.0

15.4

15.5

Other projects

29.9

48.52

37.6

Total - Société des alcools du Québec

45.9

63.9

53.1

TOTAL INVESTMENTS

4 540.8

5 161.9

5 289.4

1      For the fiscal year ending December 31.

2      Amount including the expansion of the Québec City distribution centre ($14 million).

 



 

Appendix 3: Presentation of consolidated financial requirements before line-by-line consolidation of the health and social services and education networks

 

TABLE C.33      

Consolidated net financial requirements1

(millions of dollars)


2009‑2010 Budget




2010‑2011 BudgetP


2009-2010


Adjustments


2009-2010

2010-2011

2011-2012

Budgetary balance within the meaning of the Balanced Budget Act

- 3 946


- 311


- 4 257

- 4 506

- 2 900

Deposit of dedicated revenues in the Generations Fund

715


¾


715

892

972

Total consolidated budgetary transactions

- 3 231


- 311


- 3 542

- 3 614

- 1 928

Consolidated non-budgetary transactions








Activities relating to investments, loans and advances

- 1 345


838


- 507

- 1 278

- 1 202

Activities relating to investment in fixed assets

- 3 304


- 316


- 3 620

- 3 593

- 3 860

Net investment in the networks2

- 1 004


- 828


- 1 832

- 2 402

- 1 305

Transactions relating to retirement plans and employee future benefits

2 490


- 80


2 410

2 667

2 323

Change in other accounts (accounts payable, accounts receivable, reserves, etc.)3

120


- 307


- 187

672

- 953

Total consolidated non-budgetary transactions

- 3 043


- 693


- 3 736

- 3 934

- 4 997

CONSOLIDATED NET FINANCIAL REQUIREMENTS

- 6 274


- 1 004


- 7 278

- 7 548

- 6 925

P:   Preliminary results for 2009‑2010 and forecasts for subsequent years.

1    A negative entry indicates a financial requirement and a positive entry, a source of financing.

2    The item "net investment in the networks" has not been allocated to other items such as investments, loans and advances, capital expenditures, and other accounts since line-by-line consolidation has not been done for the networks.

3    Including obligations stemming from public-private partnership agreements that have no effect on financial requirements.



EXHIBIT 99.17

Section D

 

Debt, Financing
and Debt Management

1.   Debt................................................................................... D.71

1.1    Debt representing accumulated deficits......................................... D.72

1.2    Gross debt....................................................................................... D.74

1.2.1   Net retirement plans liability............................................... D.75

1.2.2   Net employee future benefits liability................................. D.76

1.2.3   Change in gross debt in 2009-2010................................... D.77

1.2.4   Debt burden......................................................................... D.80

1.2.5   New debt reduction objectives............................................ D.81

1.3    Public sector debt........................................................................... D.84

1.4    Comparison of the debt of Canadian provinces.............................. D.85

1.5    Retirement plans............................................................................. D.87

1.6    Retirement Plans Sinking Fund...................................................... D.91

1.7    Employee future benefits................................................................ D.96

1.8    Generations Fund............................................................................ D.97

1.9    Returns of the Caisse de dépôt et placement du Québec on funds deposited by the Ministère des Finances................................................................... D.99

1.9.1   Retirement Plans Sinking Fund.......................................... D.99

1.9.2   Generations Fund.............................................................. D.101

1.9.3   Accumulated Sick Leave Fund.......................................... D.102

1.10  Impact of the returns of the Retirement Plans Sinking Fund on Debt Service     D.104

2.   Financing.......................................................................... D.107

2.1    Financing strategy......................................................................... D.107

2.1.1   Diversification by market.................................................. D.107

2.1.2   Diversification by instrument............................................ D.108

2.1.3   Diversification by maturity................................................ D.109

 


2.2    Financing program........................................................................ D.110

2.2.1   Yield................................................................................... D.112

3.   Debt Management.............................................................. D.115

3.1    Structure of the debt by currency.................................................. D.115

3.2    Structure of the debt by interest rate........................................... D.117

4.   Credit Ratings.................................................................. D.119

4.1    The Québec government's credit ratings...................................... D.119

4.2    Comparison of the credit ratings of Canadian provinces............. D.124

5.   Additional Information......................................................... 127

 


1.  Debt

This section presents data on the Québec government's debt and compares the indebtedness of the Canadian provinces.

Several concepts of debt can be used to measure a government's indebtedness. The following table presents data on the Québec government's debt according to the two main concepts the government employs.

 

TABLE D.1

Debt of the Québec government as at March 31

(millions of dollars)


2009

2010P

2011P

2012P

2013P

2014P

2015P

 

GROSS DEBT1

151 385

160 117

170 599

180 084

186 490

189 428

192 169

 

As a % of GDP

50.1

53.2

54.5

55.1

54.6

53.3

52.0

 

Less:    Financial assets, net of other   liabilities

- 22 1592

- 17 2703

- 18 143

- 20 535

- 22 453

- 22 787

- 26 247

 

Less:    Non-financial assets

- 30 767

- 36 219

- 42 214

- 47 379

- 51 728

- 55 455

- 56 278

 

DEBT REPRESENTING ACCUMULATED DEFICITS

98 4594

106 6283

110 242

112 170

112 309

111 186

109 644

 

As a % of GDP

32.6

35.4

35.2

34.3

32.9

31.3

29.7

 

P:   Preliminary results for 2010 and forecasts for subsequent years.

1    Excludes pre-financing.

2    Includes the balance of the stabilization reserve.

3    Includes the restatement of $3 758 million stemming from a change made in Hydro‑Québec's accounting policies in 2010 for the purpose of complying with IFRS. This change reduces the value of the government's participation in Hydro‑Québec and increases the debt representing accumulated deficits. Also includes the restatement of $869 million arising from the implementation of line-by-line recording of the results of institutions in the health and social services and education networks, as required by the new CICA accounting standards established in 2009-2010.

4    After taking the stabilization reserve into account.

 

 

 



 

1.1       Debt representing accumulated deficits

Debt representing accumulated deficits is a simple concept that reflects the financial position of a government well, since it takes all of its liabilities and assets into account. The federal government and the governments of Ontario and Alberta use debt representing accumulated deficits as a measure of indebtedness in their budget documents.

The debt representing accumulated deficits corresponds to the difference between the government's liabilities and its financial and non-financial assets as a whole. The debt representing accumulated deficits is calculated by subtracting financial assets, net of other liabilities, as well as non-financial assets from the gross debt.

Preliminary results show that the debt representing accumulated deficits should amount to $106 628 million as at March 31, 2010, or 35.4% of gross domestic product (GDP).

The debt representing accumulated deficits as at March 31, 2010 has been adjusted to take into account a change made by Hydro-Québec in its accounting policies in early 2010 for the purpose of complying with International Financial Reporting Standards (IFRS). All entities subject to public accountability and government enterprises will have to apply IFRS as of January 1, 2011. These standards differ significantly from those currently in effect, particularly with regard to the accounting method for capital expenditures. This change in accounting policies reduces Hydro-Québec's retained earnings balance by $3 758 million. Therefore, the value of the government's participation in Hydro‑Québec is reduced by the same amount. This change thus increases the debt representing accumulated deficits by $3 758 million as at March 31, 2010, but does not affect the government's gross debt.

The debt representing accumulated deficits as at March 31, 2010 has also been restated by $869 million. This restatement arises from the implementation of line by line recording of the results of institutions in the health and social services and education networks, as required by the new CICA accounting standards established in 2009-2010.



Over the coming years, the debt representing accumulated deficits is expected to increase by $3.0 billion. This increase is due to the deficits of $8.6 billion that will be posted from 2010‑2011 to 2012‑2013 but that will be offset in part by the $5.6-billion increase in the Generations Fund. Note that the debt representing accumulated deficits will stop rising once the budget is balanced in 2013‑2014. It will then decline year after year at the rate of increase of the Generations Fund.

 

TABLE D.2


Factors responsible for growth in the debt representing accumulated deficits

 

(millions of dollars)

 


Debt, beginning of year

Budgetary deficit

Generations Fund

Restatements

Total change

Debt, end of year

As a %
of GDP

 

2009-2010P

98 459

4 257

- 715

4 6271

8 169

106 628

35.4

 

2010-2011P

106 628

4 506

- 892

¾

3 614

110 242

35.2

 

2011-2012P

110 242

2 900

- 972

¾

1 928

112 170

34.3

 

2012-2013P

112 170

1 200

- 1 061

¾

139

112 309

32.9

 

2013-2014P

112 309

¾

- 1 123

¾

- 1 123

111 186

31.3

 

2014-2015P

111 186

¾

- 1 542

¾

- 1 542

109 644

29.7

 

P:   Preliminary results for 2009-2010 and forecasts for subsequent years.

1    Includes the restatement stemming from the change made in Hydro-Québec's accounting policies in 2010 for the purpose of complying with IFRS and the restatement arising from the implementation of line-by-line recording of the results of institutions in the health and social services and education networks, as required by the new CICA accounting standards established in 2009-2010.

 



 

1.2       Gross debt

The government's gross debt corresponds to the sum of the debt contracted on financial markets and the net liability for the retirement plans and for employee future benefits of public and parapublic sector employees, minus the balance of the Generations Fund.

Preliminary results show that, as at March 31, 2010, the gross debt should stand at $160 117 million, or 53.2% of GDP. As at March 31, 2015, the gross debt is expected to be $192 169 million, or 52.0% of GDP.

 

TABLE D.3

Gross debt as at March 31

(millions of dollars)


2009

2010P

2011P

2012P

2013P

2014P

2015P

 

Direct debt of the Consolidated Revenue Fund1

87 043

90 065

95 292

99 399

101 375

100 922

101 121

 

Debt of consolidated entities2

37 586

43 956

49 569

55 546

60 685

64 543

68 255

 

Consolidated direct debt3

124 629

134 021

144 861

154 945

162 060

165 465

169 376

 

Plus: Net retirement plans liability

28 649

28 763

29 297

29 670

30 022

30 678

31 050

 

Plus: Net employee future benefits liability

59

¾

¾

¾

¾

¾

¾

 

Less: Generations Fund

- 1 952

- 2 667

- 3 559

- 4 531

- 5 592

- 6 715

- 8 257

 

GROSS DEBT

151 385

160 117

170 599

180 084

186 490

189 428

192 169

 

As a % of GDP

50.1

53.2

54.5

55.1

54.6

53.3

52.0

 

P:   Preliminary results for 2010 and forecasts for subsequent years.

1    Excludes pre-financing.

2    Does not take into account the debt of institutions in the health and social services and education networks contracted in their own name.

3    The consolidated direct debt represents the debt that has been contracted on financial markets.

The consolidated direct debt consists of the direct debt of the Consolidated Revenue Fund and the direct debt of entities whose results are consolidated line by line with those of the government. The main consolidated entities are Financement‑Québec, the Fonds de conservation et d'amélioration du réseau routier, the Corporation d'hébergement du Québec, the Société québécoise d'assainissement des eaux, the Société immobilière du Québec, Investissement Québec, the Immobilière SHQ, the Agence métropolitaine de transport and the Société du Palais des congrès de Montréal. As at March 31, 2010, the consolidated direct debt is expected to total $134 021 million.



The net retirement plans liability represents the retirement plans liability minus the balance of the Retirement Plans Sinking Fund (RPSF), an asset established that can be used to pay the retirement benefits of public and parapublic sector employees. As at March 31, 2010, the net retirement plans liability should amount to $28 763 million.

The net liability for employee future benefits consists of the government's commitments for accumulated sick leave and the survivor's pension plan, minus assets constituted in regard to these commitments. As at March 31, 2010, the net employee future benefits liability should be nil, since assets will be equal to liabilities.

As at March 31, 2010, the sums accumulated in the Generations Fund are expected to amount to $2 667 million.

1.2.1     Net retirement plans liability

The net retirement plans liability is calculated by subtracting the balance of the RPSF from the retirement plans liability.

The liability for the retirement plans represents the present value of the retirement benefits that the government will pay to public and parapublic sector employees, taking into account the conditions of their plans and their years of service. This liability should stand at $66 961 million as at March 31, 2010.

The government created the RPSF in 1993. As at March 31, 2010, the book value of the RPSF is expected to be $38 198 million.



The net liability for the retirement plans should total $28 763 million as at March 31, 2010.

 

TABLE D.4

Net retirement plans liability as at March 31, 2010P

(millions of dollars)

Retirement plans liability:





Government and Public Employees Retirement Plan (RREGOP)




37 332

Pension Plan of Management Personnel (PPMP)




8 458

Other plans




21 171

Subtotal




66 961

Less: Retirement Plans Sinking Fund




- 38 198

NET RETIREMENT PLANS LIABILITY




28 763

P:   Preliminary results.

1.2.2     Net employee future benefits liability

The government records under its debt the value of its commitments regarding future benefits programs for its employees, namely, accumulated sick leave, which is payable notably when an employee retires, and pensions paid to the survivors of a government employee. These programs give rise to long-term obligations whose costs are covered in full by the government.

Since the December 2007 accounting reform, an actuarial valuation is done of future employee benefits and, like the liability for the retirement plans, these benefits are included in the government's gross debt. Previously, employee future benefits were entered in the government's accounts payable and the Survivor's Pension Plan Fund was entered under long-term investments.

In addition, as part of the December 2007 accounting reform, the government undertook to create the Accumulated Sick Leave Fund. This fund was created in October 2008. The sums accumulated in this new fund are subtracted from the liability for employee future benefits.



The balance of the net employee future benefits liability is expected to be nil as at March 31, 2010.

 

TABLE D.5

Net employee future benefits liability as at March 31, 2010P

(millions of dollars)

Accumulated sick leave




703

Survivor's pension plan




405

Less:  Accumulated Sick Leave Fund




- 657

           Survivor's Pension Plan Fund




- 451

NET EMPLOYEE FUTURE BENEFITS LIABILITY




¾

P:   Preliminary results.

1.2.3    Change in gross debt in 2009-2010

In 2009-2010, the government's gross debt should increase by $8 732 million. 

 

CHART D.1

Factors responsible for growth in the gross debt in 2009-2010

(millions of dollars)



 

 



The gross debt continues to rise for the following reasons:

The deficit amounts to $4 257 million.

The government makes investments in fixed assets (e.g. roads) that require borrowings. When these capital expenditures are made, they are posted to the government's balance sheet. Subsequently, they are gradually recorded as expenditures based on the useful life of the assets concerned. In 2009‑2010, net capital expenditures should cause the gross debt to increase by $3 620 million.

Net investments in the health and social services and education networks, which include loans made by Financement-Québec and the Corporation d'hébergement du Québec to network institutions to fund their capital expenditures, should raise the gross debt by $1 832 million in 2009‑2010.

The government makes investments in its corporations through advances and direct capital outlays or by allowing these corporations to keep part of their earnings to finance their own investments.

For example, Hydro-Québec pays 75% of its net earnings as dividends to the government and keeps 25% to fund its own investments, particularly hydroelectric dams. The portion of earnings that the government is leaving Hydro‑Québec in 2009‑2010 ($632 million) constitutes an investment by the government in Hydro-Québec, which creates a financial requirement for the government and thus leads to an increase in the gross debt.

In addition, the government invested $250 million in the Société générale de financement. This investment is part of the $1 000-million contribution announced in the January 2009 Economic Statement in order to stimulate investment in Québec businesses.

Overall, the government's investments, loans and advances should lead to a $507-million increase in the gross debt in 2009-2010. This amount includes the withdrawal of the balance of the stabilization reserve that was deposited with the Caisse de dépôt et placement du Québec ($295 million).

Changes in some of the government's other asset and liability items, such as accounts payable and accounts receivable, should lower the gross debt by $769 million in 2009‑2010.

Lastly, deposits in the Generations Fund should reduce the debt by $715 million in 2009-2010.

The following table shows how the government's gross debt has changed since March 31, 1998. The data for years prior to the 2007 accounting reform have been restated to make them comparable with those following the reform, i.e. for 2006‑2007 and subsequent years.

TABLE D.6

Growth factors of the Québec government's gross debt

(millions of dollars)


Debt, beginning
of year

Budgetary
deficit

(surplus)1

Investments, loans and advances

Net
investment in

the networks2

Net capital

expenditures3

Other

factors4

Generations

Fund5

Total change

Debt, end

of year6

As a
% of GDP

1998-1999

110 900

- 126

1 312

761

396

1 476


3 819

114 719

58.5

1999-2000

114 719

- 7

1 989

122

200

- 1 014


1 290

116 009

55.0

2000-2001

116 009

- 427

1 701

841

578

1 029


3 722

119 731

53.2

2001-2002

119 731

- 22

1 248

934

1 199

- 25


3 334

123 065

53.1

2002-2003

123 065

728

1 921

631

1 706

183


5 169

128 234

53.1

2003-2004

128 234

358

1 367

560

1 186

597


4 068

132 302

52.8

2004-2005

132 302

664

1 303

1 486

1 006

- 882


3 577

135 879

51.7

2005-2006

135 879

- 37

1 488

1 013

1 179

- 815


2 828

138 707

51.0

2006-2007

138 707

- 109

2 213

1 002

1 177

1 018

- 584

4 717

143 424

50.8

2007-2008

143 424

¾

2 658

487

1 457

774

- 649

4 727

148 151

49.8

2008-2009

148 151

¾

1 086

622

2 297

- 52

- 719

3 234

151 385

50.1

2009-2010P

151 385

4 257

507

1 832

3 620

- 769

- 715

8 732

160 117

53.2

2010-2011P

160 117

4 506

1 278

2 402

3 593

- 405

- 892

10 482

170 599

54.5

2011-2012P

170 599

2 900

1 202

1 305

3 860

1 190

- 972

9 485

180 084

55.1

2012-2013P

180 084

1 200

970

1 202

3 147

948

- 1 061

6 406

186 490

54.6

2013-2014P

186 490

¾

630

909

2 818

- 296

- 1 123

2 938

189 428

53.3

2014-2015P

189 428

¾

1 024

823

2 502

- 66

- 1 542

2 741

192 169

52.0

Note: Gross debt figures prior to 2006-2007 have been restated to reflect the impacts of the government's accounting reform in December 2007. The purpose of this restatement was to obtain comparable debt levels over a long period. Moreover, once line-by-line recording of the results of institutions in the health and social services and education networks is completed, gross debt data will be restated. A positive entry indicates an increase in the debt and a negative entry, a decrease.

P:   Preliminary results for 2009-2010 and forecasts for subsequent years.

1    The budgetary balance prior to 2006-2007 could not be restated to reflect the impacts of the December 2007 government accounting reform because information on a comparable basis is not available.

2    Includes mainly loans by Financement-Québec and the Corporation d'hébergement du Québec to institutions in the health and social services and education networks. As of 2006-2007, the net investment in the networks also includes the change in the accumulated deficits of network institutions.

3    Corresponds to investments in fixed assets made during the year less the yearly depreciation expenditure. Includes investments made in the course of private-public partnership agreements.

4    Includes in particular the change in "Other accounts," such as accounts receivable and accounts payable, as well as the change in the value of the debt in foreign currency.

5    Represents the increase in the balance of the Generations Fund during the fiscal year stemming from deposits in the fund and investment income.

6    Excludes pre-financing.

 

1.1.1    


1.2.4    Debt burden

One way to measure the extent of the government's indebtedness is to compare its debt to the size of the economy, i.e. gross domestic product (GDP). The debt/GDP ratio is then calculated. GDP represents the total value of goods and services produced in an economy during a given period. It is the source of the revenue the government collects to fund its activities, including payment of debt service. The comparison of the government's debt to GDP is similar, for example, to the case of a person who wants to borrow to buy a house. The amount of the person's debt (mortgage, car loan, etc.) is compared to his or her income to assess his or her level of indebtedness.

Since March 31, 1998, the Québec government's gross debt/GDP ratio has fallen significantly. While gross debt was equivalent to 58.9% of GDP as at March 31, 1998, this percentage stood at 50.1% as at March 31, 2009. The ratio is expected to rise to 55.1% as at March 31, 2012, in particular because of the forecast deficits and the economic situation. The gross debt/GDP ratio should then decline to 52.0% as at March 31, 2015.

 

CHART D.2       

Gross debt1 as at March 31

(as a percentage of GDP)


P:   Preliminary results for 2010 and forecasts for subsequent years.

1    Excludes pre-financing.

 

 

 



 

1.2.5     New debt reduction objectives

The Minister of Finance announced the creation of the Generations Fund in the March 23, 2006 Budget Speech. The government deposits certain revenues in the fund, which will be used later to pay down the debt.

The goal in establishing the fund was to ensure that the government's total debt would represent 25% of GDP in 2025-2026. This objective was enshrined in the Act to reduce the debt and establish the Generations Fund, adopted on June 15, 2006. The objectives set in the Act concern the government's total debt, the debt concept used for the purposes of the government reporting entity in effect at the time the Act was passed.

In December 2007, the government carried out a major accounting reform. In particular, this reform broadened the reporting entity to include institutions in the health and social services networks and most institutions in the education network. A new debt concept, gross debt, was created at the time to reflect the changes made to the reporting entity. The accounting reform added $21 billion in debt, or the equivalent of 7 percentage points of GDP. Previously, this additional amount of debt was included almost in its entirety in the debt of the other components of Québec's public sector.

 

TABLE D.7

Total debt and gross debt of the Québec government as at
March 31, 2007

(millions of dollars)

TOTAL DEBT FOR THE PURPOSES OF THE ACT TO REDUCE THE DEBT AND ESTABLISH THE GENERATIONS FUND1

122 575

As a % of GDP

43.4

Plus:   Debt of Financement-Québec

12 073

           Debt of the Corporation d'hébergement du Québec and other entities

3 560

           Debt of the Société québécoise d'assainissement des eaux

2 522

           Debt of Immobilière SHQ

1 942

           Net employee future benefits liability

752

Subtotal

20 849

GROSS DEBT1

143 424

As a % of GDP

50.8

1    Excludes pre-financing.

 



In addition, the recession will have left budgetary deficits totalling $12 863 million from 2009-2010 to 2012-2013, causing the debt to rise.

Accordingly, as provided for in last year's budget, the Generations Fund legislation will be amended to revise the debt reduction objectives.

The government is determined to reduce Québec's indebtedness so as to ensure greater intergenerational fairness. To that end, additional deposits will be made in the Generations Fund starting in fiscal 2014-2015, that is, once fiscal balance has been restored. Revenue generated by the increase in the price of heritage pool electricity will be paid into the Generations Fund.

In recent years, discussions on the debt have highlighted the distinction between "good debt" and "bad debt".

Good debt is debt that is contracted to acquire an asset: for example, to build a road, a school or a hospital. Bad debt is debt that does not correspond to any asset. This is the debt that needs to be addressed first.

Debt representing accumulated deficits, i.e. bad debt, is expected to amount to $106 628 million, or 35.4% of GDP, as at March 31, 2010.

The government's first objective is to reduce this ratio by half to 17% in 2025‑2026. This is a maximum level.

 

TABLE D.8

New debt reduction objectives

(as a percentage of GDP)



March 31, 2026

Debt representing accumulated deficits


17

Gross debt


45


 



In addition, another objective will be set for the gross debt. As at March 31, 2010, this debt should stand at $160 117 million, or 53.2% of GDP. This ratio is forecast to reach a maximum of 55.1% of GDP in 2011‑2012 and to begin falling thereafter. The government's objective is to bring the gross debt/GDP ratio down to 45% in 2025-2026. Once again, this is a maximum level.

 

CHART D.3             

Debt representing accumulated deficits


CHART D.4

Gross debt1

(as a percentage of GDP)

(as a percentage of GDP )



P:   Preliminary results for 2010, forecasts for 2011 to 2015 and projections for subsequent years.

P:   Preliminary results for 2010, forecasts for 2011 to 2015 and projections for subsequent years.

1    Excludes pre-financing.

 



 

1.3       Public sector debt

Public sector debt includes the government's gross debt as well as the debt of the health and social services and education networks, Hydro-Québec, municipalities and other government enterprises. This debt has served notably to finance public infrastructures, such as roads, schools, hospitals, hydroelectric dams and water treatment plants.

Preliminary results show that, as at March 31, 2010, Québec's public sector debt should stand at $218 489 million, or 72.6% of GDP. These figures must be put into perspective for they do not take into account the economic value of certain assets held by the government, such as Hydro‑Québec, the Société des alcools and Loto-Québec. 

 

TABLE D.9

Public sector debt as at March 31

(millions of dollars)


2007

2008

2009

2010P

Government's gross debt1

143 424

148 151

151 385

160 117

Hydro-Québec

32 674

32 399

36 668

36 803

Municipalities2

16 409

17 321

18 639

19 897

Health and social services and education networks3

2 023

1 552

931

974

Other government enterprises4

56

82

434

698

PUBLIC SECTOR DEBT

194 586

199 505

208 057

218 489

As a % of GDP

68.9

67.1

68.8

72.6

P:   Preliminary results.

1    Excludes pre-financing.

2    Corresponds to the long-term debt contracted by municipalities in their own name. Part of this debt is subsidized by the government ($2 846 million as at March 31, 2010).

3    Corresponds to the long-term debt contracted by network institutions in their own name, for which the government subsidizes the debt service through transfers for repaying the principal and paying the interest on borrowings.

4    Excludes the debt of enterprises that is guaranteed by a third party or secured by assets such as inventories and accounts receivable.



 

1.4       Comparison of the debt of Canadian
provinces

It is worthwhile comparing the concepts of debt used by the Québec government with those used by other governments in Canada.

An analysis of the budget documents of the federal and provincial governments shows that the concepts of debt used to assess financial position vary widely from province to province.

The preferred concept of debt in British Columbia and Saskatchewan is direct debt. Alberta, New Brunswick, Newfoundland and Labrador, Manitoba and Nova Scotia use the concept of net debt. As for Prince Edward Island, its recent budget documents make no mention of its debt.

Four governments use the concept of debt representing accumulated deficits as a measure of indebtedness in their budget documents. They are the government of Québec, the federal government and the governments of Ontario and Alberta.

Be it on the basis of the gross debt or the debt representing accumulated deficits, Québec is the most heavily indebted province.

 

CHART D.5       

Gross debt and debt representing accumulated deficits as at
March 31, 2009

(as a percentage of GDP)


1    A negative entry means that the government has an accumulated surplus.

Sources: Ministère des Finances du Québec, governments' public accounts and Statistics Canada.

 



The following table shows the debt of the federal government and each of the provinces as at March 31, 2009. The figures in boxes refer to the concept of debt used by the government concerned in its budget documents to measure its level of debt. Some governments use more than one concept.

 

TABLE D.10

Debt as at March 31, 2009 according to various concepts

(millions of dollars)


QC

FED

ON

BC

AB

NB

NL

MB

SK

NS

PEI













Consolidated direct debt

124 629

514 020

176 825

37 562

2 064

6 755

6 595

12 446

4 796

10 225

1 092

Net retirement plans liability

28 649

139 909

- 4 819

3

10 081

- 210

1 704

2 003

5 475

1 788

34

Net employee future benefits liability

59

50 311

5 223

1 908

241

718

1 630

¾

418

¾

23

Generations Fund

- 1 952























Gross debt1

151 385

704 240

177 229

39 473

12 386

7 263

9 929

14 449

10 689

12 013

1 149

As a % of GDP

50.1

44.0

30.1

19.9

4.3

26.5

31.7

28.4

16.8

35.1

24.8













Less:












Net financial assets2

- 22 159

- 179 027

- 23 904

- 14 933

- 42 812

125

- 1 961

- 2 951

- 7 165

311

260













Net debt3

129 2264

525 213

153 325

24 540

  - 30 426

7 388

7 968

11 498

3 524

12 324

1 409

As a % of GDP

42.8

32.8

26.1

12.4

- 10.4

27.0

25.5

22.6

5.5

36.0

30.5













Less:












Non-financial assets

- 30 767

- 61 503

- 40 087

- 31 459

- 15 848

- 5 679

- 2 466

- 6 594

- 4 921

- 4 157

- 616













Debt representing accumulated deficits3

98 4594

463 710

113 238

- 6 919

- 46 274

1 709

5 502

4 904

- 1 397

8 167

793

As a % of GDP

32.6

29.0

19.3

- 3.5

- 15.9

6.2

17.6

9.6

- 2.2

23.9

17.2













Note: The boxes show the debt concept(s) used in the government's budget documents.

1    Gross debt is not shown in most government public accounts. However, the public accounts do show the components of gross debt, i.e. the consolidated direct debt, the net retirement plans liability and the net employee future benefits liability. It is therefore possible to deduce the amount of the gross debt.

2    Financial assets, net of other liabilities.

3    A negative entry indicates that the government has net assets or an accumulated surplus.

4    After taking the stabilization reserve into account.

Sources: Ministère des Finances du Québec, governments' public accounts and Statistics Canada.

 



 

1.5       Retirement plans

The Québec government participates financially in the retirement plans of its employees. As at December 31, 2008, these plans had 541 930 participants and 270 934 beneficiaries.

 

TABLE D.11

Retirement plans of public and parapublic sector employees as at December 31, 2008


Active participants

Beneficiaries

Government and Public Employees Retirement Plan (RREGOP)

505 000

172 294

Pension Plan of Management Personnel (PPMP)

27 400

20 408

Other plans:



Teachers Pension Plan (TPP) and Pension Plan of Certain Teachers (PPCT)1

330

48 160

Civil Service Superannuation Plan (CSSP)1

175

23 354

Pension Plan for the Members of the Sûreté du Québec (PPMSQ)

5 300

4 507

Pension Plan of Peace Officers in Correctional Services (PPPOCS)

3 100

1 452

Pension Plan of the Judges of the Court of Québec and of Certain Municipal Courts (PPJCQM)

270

324

Pension Plan for Federal Employees Transferred to Employment with the Gouvernement du Québec (PPFEQ)

230

112

Pension Plan of the Members of the National Assembly (PPMNA)

125

323

Total for other plans

9 530

78 232

TOTAL

541 930

270 934

1    These plans have not accepted any new participants since July 1, 1973.

Source: Commission administrative des régimes de retraite et d'assurances.

 



These plans are defined benefit retirement plans, which means that they guarantee participants a certain level of income upon retirement. Benefits are calculated on the basis of participants' average income for the best paid years (generally five) and their number of years of service. The pension usually represents 2% of an employee's average income per year of service, for a maximum of 70%. Benefits are partially indexed to inflation.

The Commission administrative des régimes de retraite et d'assurances (CARRA) is responsible for administering the retirement plans. In 2009-2010, the government should pay $4 108 million to cover its share of the benefits paid to its retired employees.

q Retirement plans liability

In its financial statements, the government discloses the present value of the retirement benefits it will pay to its employees, taking into account the conditions governing their plans, as well as their years of service. This value is called the retirement plans liability.

CARRA performs actuarial valuations of the liability for each retirement plan in conformity with the rules set for the public sector by the Canadian Institute of Actuaries (CIA) and the Canadian Institute of Chartered Accountants (CICA).

 



As at March 31, 2010, the government's retirement plans liability should stand at $66 961 million, an amount that is recognized in the government's gross debt.

 

TABLE D.12                         

Retirement plans liability

(millions of dollars)


31 mars 2010P

Government and Public Employees Retirement Plan (RREGOP)

37 332

Pension Plan of Management Personnel (PPMP)

8 458

Other plans:


Teachers Pension Plan (TPP) and Pension Plan of Certain Teachers (PPCT)

12 374

Civil Service Superannuation Plan (CSSP)

4 242

Pension Plan for the Members of the Sûreté du Québec (PPMSQ)

3 260

Pension Plan of Peace Officers in Correctional Services (PPPOCS)

791

Pension Plan of the Judges of the Court of Québec and of Certain Municipal Courts (PPJCQM)

481

Pension credits under supplemental pension plans

376

Supplemental pension plan arising from the transfer of the pension plan for non-teaching personnel of the Commission des écoles catholiques de Montréal (SPP of the CECM) to RREGOP

282

Pension Plan of the Members of the National Assembly (PPMNA)

171

Pension Plan for Federal Employees Transferred to Employment with the Gouvernement du Québec (PPFEQ)

106

Supplemental pension plan arising from the transfer of the pension plan for certain employees of the Commission scolaire de la Capitale (SPP of the CSC) to RREGOP

46

Plans assets

- 958

Total for other plans

21 171

RETIREMENT PLANS LIABILITY

66 961

P:   Preliminary results.

 


 

Annual retirement plans expenditure

Every year, the government records its expenditure as an employer with regard to the retirement plans.

In 2009-2010, this expenditure should total $2 015 million. It comprises two components:

the net cost of vested benefits, that is, the present value of retirement benefits that employees have accumulated for work performed during the year, i.e. $1 529 million;

the amortization of revisions to the government's actuarial obligations that arise from the updating of actuarial valuations, for a cost of $486 million.

 

TABLE D.13

Retirement plans expenditure

(millions of dollars)




2009-2010P

Net cost of vested benefits



1 529

Amortization of revisions arising from actuarial valuations



486

RETIREMENT PLANS EXPENDITURE



2 015

P:   Preliminary results.

 



 

1.6       Retirement Plans Sinking Fund

The Retirement Plans Sinking Fund was created in 1993. The RPSF is an asset that can be used to pay the retirement benefits of public and parapublic sector employees.

As at March 31, 2010, the book value of the RPSF should amount to $38 198 million.

 

TABLE D.14

Change in the Retirement Plans Sinking Fund  (RPSF)

(millions of dollars)


Book value, beginning of year


Deposits

Investment
income
imputed

Book value,
end of
year

1993-1994

¾


850

4

854

1994-1995

854


¾

- 5

849

1995-1996

849


¾

74

923

1996-1997

923


¾

91

1 014

1997-1998

1 095

1

¾

84

1 179

1998-1999

1 179


944

86

2 209

1999-2000

2 209


2 612

219

5 040

2000-2001

5 040


1 607

412

7 059

2001-2002

7 059


2 535

605

10 199

2002-2003

10 199


900

741

11 840

2003-2004

11 840


1 502

862

14 204

2004-2005

14 204


3 202

927

18 333

2005-2006

18 333


3 000

1 230

22 563

2006-2007

22 437

1

3 000

1 440

26 877

2007-2008

26 877

 

3 000

1 887

31 764

2008-2009

31 749

2

2 100

2 176

36 025

2009-2010P

36 025

 

¾

2 173

38 198

P:   Preliminary results.

1    Taking into account restatements arising from the government accounting reforms of 1997-1998 and 2006‑2007.

2    Taking into account an adjustment arising from consideration of the expected average remaining service life (EARSL) of participants under the PPMP (9 years instead of 14 years).

 



The information on the RPSF shown in the preceding table was established on the basis of the government's accounting policies, which are in full compliance with generally accepted accounting principles (GAAP) for Canada's public sector.

The book value of the RPSF as at March 31, 2010 is higher than its market value. As a result of the accounting policies, the difference between these two items will be fully amortized in the coming years. In addition, the financial impact of gradually amortizing the difference is fully incorporated into the government's financial framework over the entire planning horizon. Section 1.10 describes these items in greater detail.

The government's accounting policies apply when the RPSF's book value is higher than its market value as well as when it is lower. As shown by the following table, the book value of the RPSF has been lower than its market value 8 times in the past 16 years.

 

TABLE D.15       

Book value and market value of the Retirement Plans Sinking Fund as at March 31

(millions of dollars)


Book value

Market value

Difference

1994-1995

849

831

18

1995-1996

923

954

- 31

1996-1997

1 014

1 095

- 81

1997-1998

1 179

1 321

- 142

1998-1999

2 209

2 356

- 147

1999-2000

5 040

5 703

- 663

2000-2001

7 059

7 052

7

2001-2002

10 199

9 522

677

2002-2003

11 840

9 240

2 600

2003-2004

14 204

12 886

1 318

2004-2005

18 333

17 362

971

2005-2006

22 563

23 042

- 479

2006-2007

26 877

28 859

- 1 982

2007-2008

31 764

32 024

- 260

2008-2009

36 025

25 535

10 490

2009-2010P

38 198

28 8351

9 363

P:   Preliminary results.

1    Market value as at December 31, 2009.



 

Amounts deposited in the RPSF have no impact on gross debt

The government issues bonds on financial markets in order to make deposits in the RPSF. However, the amounts deposited in the RPSF do not affect the government's gross debt.

Indeed, the amount of borrowings contracted to make deposits in the RPSF increases the direct debt. At the same time, however, these deposits reduce the net retirement plans liability by the same amount. Therefore, the net impact on the gross debt is nil.

 

 

TABLE D.16

Illustration of the impact on the government's gross debt of borrowing  $1 billion on financial markets and depositing it in the RPSF1

(millions of dollars)



Before deposit

After
deposit

Change

(A)

Consolidated direct debt

134 021

135 021

1 000


Retirement plans liability

66 961

66 961

¾


Less: Book value of the RPSF

- 38 198

- 39 198

- 1 000

(B)

Net retirement plans liability

28 763

27 763

- 1 000

(C)

Net employee future benefits liability

¾

¾

¾

(D)

Less: Generations Fund

- 2 667

- 2 667

¾

(E)

GROSS DEBT (E=A+B+C+D)

160 117

160 117

¾

1    Illustration based on preliminary results as at March 31, 2010.

 


 

A decline in debt service

Deposits in the RPSF entail a reduction in the government's debt service. The rates of return on funds managed by the Caisse de dépôt et placement du Québec are generally higher than interest rates on Québec government bonds issued to finance deposits in the RPSF. Therefore, the income of the RPSF, which is applied against the government's debt service, is usually higher than the additional interest charges that arise from new borrowings. This leads to a net decrease in the government's debt service.

Since the RPSF was created, its return has been higher than the cost of new long‑term borrowings by the government 12 years out of 16.

 

TABLE D.17       

Comparison of the RPSF's annual return and the Québec government's borrowing costs

(per cent)


Return of the
RPSF

1

Cost of
new borrowings

2

Difference

1994-1995

- 3.3

3

5.9


- 9.2

1995-1996

17.0


5.3


11.7

1996-1997

16.1


6.3


9.8

1997-1998

13.4


5.7


7.7

1998-1999

10.4


5.8


4.6

1999-2000

15.3


7.2


8.1

2000-2001

7.2


6.2


1.0

2001-2002

- 4.7


5.5


- 10.2

2002-2003

- 8.5


4.7


- 13.2

2003-2004

14.9


4.6


10.3

2004-2005

11.4


4.4


7.0

2005-2006

13.5


4.4


9.1

2006-2007

13.5


4.4


9.1

2007-2008

5.2


4.8


0.4

2008-2009

- 25.6


4.2


- 29.8

2009-2010

10.7


4.4


6.3

1      On a calendar year basis.

2      On a fiscal year basis.

3      From February to December 1994.



 

A flexible deposit policy

In December 1999, as part of an agreement concluded for the renewal of its employees' collective agreements, the government set the objective that the funds accumulated in the RPSF would be equal, in 2020, to 70% of its actuarial obligations in regard to the retirement plans of public and parapublic sector employees.

However, the government has all the flexibility needed to apply this policy. Deposits in the RPSF are made only when market conditions are favourable, particularly with respect to interest rates and market receptiveness to bond issues.

The RPSF's assets are expected to represent roughly 54% of the government's actuarial obligations in regard to the retirement plans of public and parapublic sector employees in 2009-2010. The target of 70% should be attained three years earlier than anticipated, i.e. in 2016‑2017.

 

CHART D.6

The RPSF in proportion to the government's actuarial obligations regarding the retirement plans of public and parapublic sector employees

(per cent)




 

1.7       Employee future benefits

In addition to the retirement plans, the government records under its debt the value of its commitments regarding two future benefits programs for its employees, namely, accumulated sick leave, which is payable notably when an employee retires, and pensions paid to the survivors of a government employee. These programs give rise to long-term obligations whose costs are covered in full by the government.

The balance of the net liability for employee future benefits should be nil as at March 31, 2010.

 

TABLE D.18

Net employee future benefits liability

(millions of dollars)


March 31, 2010P

Accumulated sick leave

703

Survivor's pension plan

405

Less: Accumulated Sick Leave Fund

- 657

         Survivor's Pension Plan Fund

- 451

NET EMPLOYEE FUTURE BENEFITS LIABILITY

¾

P:   Preliminary results.

 



 

1.8       Generations Fund

The Generations Fund was created in June 2006 by the adoption of the Act to reduce the debt and establish the Generations Fund. The sums accumulated in the fund are dedicated exclusively to repaying the debt.

Section G presents the results of the Generations Fund in accordance with the requirements of the Act.

As at March 31, 2010, the book value of the Generations Fund is expected to stand at $2 667 million. The following table shows the book and market values of the Generations Fund since its creation.

 

TABLE D.19       

Book value and market value of the Generations Fund

as at March 31

(millions of dollars)


Book value

Market value

Difference

2006-20071

584

576

8

2007-2008

1 233

1 147

86

2008-2009

1 952

1 598

354

2009-2010P

2 667

2 5122

155

P:   Preliminary results.

1    The first payment was made to the Generations Fund on January 31, 2007.

2    Market value of $2 304 million as at December 31, 2009 plus the revenues dedicated to the Generations Fund from January 1 to March 31, 2010.

1.1      


q Faster reduction of the debt

Financing for the Generations Fund comes from Québec government revenues dedicated exclusively to repaying the debt.

If the Generations Fund did not exist, these revenues would reduce the Québec government's financial requirements every year. They would also make it possible to reduce Québec's indebtedness. However, it would not be easy for Quebecers to see, over time, how the debt is being brought down thanks to the revenues dedicated to that end.

The Generations Fund makes it possible to follow the change in the funds the government sets aside to repay the debt. These funds, which are administered by the Caisse de dépôt et placement du Québec (the Caisse), are subtracted from the government's debt. The impact on the debt is thus clear and transparent.

In addition, the returns obtained by the Caisse are usually higher than the cost of new borrowings by the Québec government, which helps to accelerate debt burden reduction.

Since the first deposit was made in the Generations Fund in January 2007, the return has been higher than the cost of new borrowings by the government two years out of three. It should be noted that in the case of the RPSF, which has existed since 1993, this has occurred 12 years out of 16.

 

TABLE D.20       

Comparison of the Generations Fund's annual return and the Québec government's borrowing costs

(per cent)


Return of the

Generations Fund1

Cost of new

borrowings2

Difference

2007-2008

5.63

4.8

0.8

2008-2009

- 22.4

4.2

- 26.6

2009-2010

11.3

4.4

6.9

1      On a calendar year basis.

2      On a fiscal year basis.

3      Return realized from February to December 2007, since the first deposit was made in the Generations Fund on January 31, 2007.

 

 



 

1.9       Returns of the Caisse de dépôt et placement du Québec on funds deposited by the Ministère des Finances

In 2009, the return on funds deposited by the Ministère des Finances with the Caisse was 10.74% for the Retirement Plans Sinking Fund, 11.25% for the Generations Fund and 10.14% for the Accumulated Sick Leave Fund. These results exceeded the average return for Caisse depositors as a whole (10.04%). The details of the investment policy are presented in the box on page D.35.

 

TABLE D.21

Market value and return in 2009 of funds deposited with the
Caisse de dépôt et placement du Québec by the Ministère des Finances

(millions of dollars and per cent)

Fund

Return

Market value as at December 31, 2009


%

$ million

Retirement Plans Sinking Fund

10.74

28 835

Generations Fund

11.25

2 304

Accumulated Sick Leave Fund

10.14

661

1.9.1     Retirement Plans Sinking Fund

The Retirement Plans Sinking Fund showed a return of 10.74% in 2009. Its market value was $28 835 million as at December 31, 2009.

The assets of the RPSF are managed by the Caisse in accordance with an investment policy established by the Ministère des Finances. This investment policy was established taking several factors into account, including the 10-year return, standard deviation and correlation forecasts for various categories of assets prepared by the Caisse, as well as opportunities for investing in these assets.

 



The investment policy of the RPSF consists of 30.75% fixed-income securities (bonds, etc.), 36.25% equities and 33.0% other investments (real estate, private equity, etc.). These weightings are similar to those used on average by all depositors with the Caisse.

 

TABLE D.22       

Investment policy of the RPSF as at January 1, 2010

(per cent)


Benchmark
portfolio of the RPSF

Average benchmark portfolio of all depositors

1

Fixed-income securities

30.75

31.1


Equities

36.25

34.5


Other investments

33.00

34.4


TOTAL

100.0

100.0


1   Data for 2008. Source: Caisse de dépôt et placement du Québec, Annual Report 2008. The annual report for 2009 is not available yet.

With its investment policy, the RPSF should generate a long-term (10-year or longer) annual return of 7.0%. This return is comparable to that forecast by most retirement plans in Canada. According to a recent survey by Morneau Sobeco, the anticipated long-term return on assets of two retirement plans out of three in Canada is equal to or above 7.0%.

It is important to note that the RPSF's investment policy is based on a long-term horizon and constitutes the benchmark portfolio for the Caisse. However, through active management, the Caisse adjusts the allocation of the RPSF's assets, particularly to take fluctuations in the economic and financial situation into account. The RPSF's benchmark portfolio would have generated a return of 15.27% in 2009.


1.9.2     Generations Fund

The Generations Fund posted a return of 11.25% in 2009. Its market value was $2 304 million as at December 31, 2009.

The assets of the Generations Fund are managed by the Caisse in accordance with an investment policy established by the Ministère des Finances. This investment policy was established taking several factors into account, including the 10-year return, standard deviation and correlation forecasts for various categories of assets prepared by the Caisse, as well as opportunities for investing in these assets.

The investment policy of the Generations Fund consists of 37.0% fixed-income securities (bonds, etc.), 35.0% equities and 28.0% other investments (real estate, private equity, etc.).

 

TABLE D.23       

Investment policy of the Generations Fund as at January 1, 2010

(per cent)


Benchmark portfolio of the Generations Fund

Average benchmark portfolio of all depositors

1

Fixed-income securities

37.0

31.1


Equities

35.0

34.5


Other investments

28.0

34.4


TOTAL

100.0

100.0


1    Data for 2008. Source: Caisse de dépôt et placement du Québec, Annual Report 2008. The annual report for 2009 is not available yet.

The investment policy of the Generations Fund aims to achieve a long-term (10‑year or longer) annual return of 6.8%. It is important to note that the investment policy of the Generations Fund is based on a long-term horizon and constitutes the benchmark portfolio for the Caisse. However, through active management, the Caisse adjusts the allocation of the Generations Fund's assets, particularly to take fluctuations in the economic and financial situation into account. The benchmark portfolio of the Generations Fund would have generated a return of 15.04% in 2009.



 

1.9.3     Accumulated Sick Leave Fund

The Accumulated Sick Leave Fund (ASLF) showed a return of 10.14% in 2009. Its market value was $661 million as at December 31, 2009.

The assets of the ASLF are managed by the Caisse in accordance with an investment policy established by the Ministère des Finances. Since January 1, 2009, the ASLF's investment policy has been identical to that of the RPSF, as the creation of the ASLF stems from a long-term commitment made by the government in regard to employee future benefits, which is similar to the commitment regarding the retirement plans.

It is important to note that the ASLF's investment policy constitutes the benchmark portfolio for the Caisse. However, through active management, the Caisse adjusts the allocation of the ASLF's assets, particularly to take fluctuations in the economic and financial situation into account. The ASLF's benchmark portfolio would have generated a return of 15.27% in 2009.



 

Comparison of investment policies

Investment policies as at January 1, 2010

(per cent)

Specialized portfolio

RPSF and ASLF

Generations Fund

Average benchmark portfolio of all depositors

1

Short-term investments

1.0

1.0

1.1

 

Bonds

29.75

36.0

26.9

 

Real return bonds

0.0

0.0

0.6

 

Long-term bonds

0.0

0.0

2.5

 

Total - Fixed income

30.75

37.0

31.1

 

Canadian equity

13.75

10.0

12.2

 

US equity - hedged

0.5

0.5

3.4

 

US equity - unhedged

2.0

1.5

 

Foreign equity - hedged

2.5

2.0

5.5

 

Foreign equity - unhedged

4.0

2.0

 

Emerging market equity

4.0

4.0

3.2

 

Québec International

9.5

15.0

10.2

 

Total - Equity markets

36.25

35.0

34.5

 

Investments and infrastructures

6.0

5.0

5.5

 

Private equity

8.0

6.0

8.0

 

Real estate debt

7.0

7.0

6.5

 

Real estate

8.5

7.0

9.8

 

Commodities

0.0

0.0

1.6

 

Hedge funds

3.5

3.0

3.0

 

Total - Other investments

33.0

28.0

34.4

 

TOTAL

100.0

100.0

100.0

 

RPSF: Retirement Plans Sinking Fund.

ASLF: Accumulated Sick Leave Fund.

1       Source: Caisse de dépôt et placement du Québec, Annual Report 2008. The annual report for 2009 is not available yet.

 



 

1.10     Impact of the returns of the Retirement Plans Sinking Fund on Debt Service

As indicated in section 1.6, the income of the RPSF is applied against the government's debt service. The returns of the Caisse affect RPSF income and therefore debt service.

The returns realized by the Caisse on RPSF income are taken into account in the government's balance sheet and results by applying the accounting policy adopted in the wake of the December 2007 reform of government accounting in accordance with generally accepted accounting principles (GAAP).

"When determining a government's retirement benefit liability and expense, plan assets would be valued at market-related values. Under this method, plan assets are recorded at market value or they are adjusted to market value over a period not to exceed five years. Values adjusted to market closely approximate current economic value in a manner that can minimize short-term fluctuations. Market-related values would be used because they are objective and verifiable. Once a basis of valuation is chosen it would be applied consistently." (Canadian Institute of Chartered Accountants (CICA), Public Sector Accounting Handbook, section 3250, paragraph .035)

Under the accounting policy, the "adjusted market value" of the RPSF is adjusted every year based on the returns realized by the fund. If, for a given year, the realized return differs from the anticipated long-term return, the difference between the two is spread over five years. All other things being equal, this means that the adjusted market value and the market value will converge over a five-year period. It is important to note that this method is applied when returns are higher than expected as well as when they are lower.



In addition, the differences between actual and expected return, which are spread over five years, are taken into account in RPSF income by amortizing them over a period of about 13 years, that is, the expected average remaining service life (EARSL) of retirement plan participants. This amortization mechanism and the period used are prescribed by GAAP.

Therefore, the returns realized by the Caisse in 2008-2009, which were lower than expected, reduce the income of the RPSF as of 2009-2010. The higher‑than‑anticipated returns realized by the Caisse in 2009-2010 will lead to an increase in the RPSF's income as of 2010-2011.

 

TABLE D.24             

Impact of the returns of the Caisse de dépôt et placement du Québec on debt service1

(millions of dollars)


2009-2010P

2010-2011P

2011-2012P

Before 2008-2009

- 48

- 80

- 58

From 2008-2009

307

635

985

From 2009-2010


- 24

- 49

Increase in debt service

259

531

878

Note: A positive entry indicates an increase in debt service and a negative entry, a decrease.

P:   Preliminary results for 2009-2010 and forecasts for subsequent years.

1    Represents the impact on RPSF income, and therefore on debt service, of returns of the Caisse that are lower or higher than the anticipated long-term return (6.75%) and that are amortized.

 



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2.  Financing

Borrowings in fiscal 2009-2010 should total $15 475 million, i.e. $9 742 million for the Consolidated Revenue Fund, $2 415 million for the Financing Fund and $3 318 million for Financement-Québec.

It should be noted that pre-financing of $3 855 million was carried out in the last few months of the fiscal year. It will be used to cover part of the borrowing program in 2010-2011.

2.1       Financing strategy

The government aims to borrow at the lowest possible cost. To that end, it applies a strategy for diversifying sources of funding by market, financial instrument and maturity.

2.1.1     Diversification by market

Financing transactions are conducted regularly on most markets, i.e. in Canada, the United States, Europe and Asia.

Over the past 10 years, nearly one quarter of borrowings, on average, has been contracted in foreign currency. Nonetheless, the government has only a very low exposure to foreign currencies (see section 3.1).

In 2009-2010, the government contracted 18.7% of its borrowings on foreign markets in three different currencies:

two borrowings totalling 1 575 million euros (CAN$2 496 million) in April 2009 and March 2010;

two borrowings totalling 16 000 million yen (CAN$197 million) in April 2009;

one borrowing for 200 million Swiss francs (CAN$206 million) in December 2009.



 

CHART D.7

Borrowings by currency1

(per cent)


P:   Preliminary results.

1    Borrowings of the Consolidated Revenue Fund, borrowings for the Financing Fund and borrowings of Financement-Québec.

2.1.2     Diversification by instrument

To satisfy investors' needs, an extensive array of financial products is used in the course of financing transactions.

Long-term instruments consist primarily of public bond issues, private borrowings and savings products.

The long-term instruments used in 2009-2010 consisted mainly of public issues (76.0%) and private borrowings (15.4%).

 



 

CHART D.8       

Borrowings in 2009-2010P by instrument


P:   Preliminary results.

1    Includes the Business Assistance ─ Immigrant Investor Program and borrowings from the Canada Pension Plan Investment Fund.

2.1.3     Diversification by maturity

Maturities of new borrowings are distributed over time to obtain a stable refinancing profile and ensure the government's regular presence on capital markets.

In 2009-2010, 56.7% of borrowings contracted had a maturity of 6 to 10 years; 23.5%, 11 to 39 years; 18.5%, 5 years or less; and 1.3%, over 40 years.

 

CHART D.9       

Borrowings in 2009-2010P by maturity


P:   Preliminary results.

 



This diversification by maturity has an impact on the maturity of the debt shown in the following chart. As at March 31, 2010, the average maturity of the debt should be 11 years.

 

CHART D.10    

Maturity of the long-term debt as at March 31, 2010P

(millions of dollars)


Note: Direct debt of the Consolidated Revenue Fund, debt contracted to make advances to the Financing Fund and debt of Financement-Québec.

P:   Preliminary results.

2.2       Financing program

The financing program of the Consolidated Revenue Fund makes it possible to refinance maturing borrowings, contribute to the Retirement Plans Sinking Fund and meet new financial requirements, particularly for capital investments and investments in government corporations.

The Financing Fund makes loans to consolidated entities (e.g. Fonds de conservation et d'amélioration du réseau routier, Investissement Québec, Société immobilière du Québec, Corporation d'hébergement du Québec) and to certain government enterprises.

Financement-Québec makes borrowings on financial markets to meet the needs of institutions in the health and social services and education networks.



In 2009‑2010, the government contracted borrowings totalling $15 475 million, including $3 855 million in pre-financing conducted over the last few months of the year.

In 2010‑2011, the financing program is expected to amount to $12 936 million. It would have amounted to $16 791 million had there not been any pre-financing in 2009‑2010. In 2011‑2012, the financing program should total $17 857 million.

 

TABLE D.25

The government's financing program

(millions of dollars)


2008-2009

2009-2010P

2010-2011P

2011-2012P

CONSOLIDATED REVENUE FUND





Net financial requirements1, 2

117

4 443

5 133

4 050

Repayment of borrowings

4 549

6 205

3 658

6 307

Change in cash position

- 2 413

- 8 161

- 3 855

¾

Retirement Plans Sinking Fund, other retirement plan assets and funds dedicated to employee future benefits - Deposits

2 678

112

¾

¾

Transactions under the credit policy3

- 3 792

3 288

¾

¾

Pre-financing

8 161

3 855

¾

¾

TOTAL - Consolidated Revenue Fund

9 300

9 742

4 936

10 357

FINANCING FUND

1 439

2 415

4 500

4 000

FINANCEMENT-QUÉBEC

2 675

3 318

3 500

3 500

TOTAL

13 414

15 475

12 936

17 857

Note: A negative entry indicates a source of financing and a positive entry, a financial requirement.

P:  Preliminary results for 2009-2010 and forecasts for subsequent years.

1    Excludes consolidated entities.

2    Net financial requirements are adjusted to take into account the non-receipt of RPSF and ASLF income.

3    Under its credit policy, which is designed to limit financial risk with respect to counterparties, the government disbursed $3 288 million in 2009-2010 following the change in foreign exchange rates. These disbursements do not affect the debt. In 2008-2009, the government received $3 792 million.

 

 



 

Pre-financing

The government makes advance borrowings, or borrowings that would normally be made in the following fiscal year. The government obtains pre-financing to take advantage of favourable market conditions.

Over the past 10 years, the government has obtained an average of $3 445 million in pre‑financing per year.

Pre-financing

(millions of dollars)


P:      Preliminary results.

2.2.1     Yield

Over the past two years, the yield on long-term Québec securities has been fairly stable. However, short-term interest rates have fallen considerably, reflecting the monetary policy pursued by the Bank of Canada during the financial crisis.



 

CHART D.11    

Yield on Québec securities

(per cent)


Sources: PC-Bond and Ministère des Finances du Québec.

In addition, the substantial increase in the spread between the yield on Québec and federal government securities, observed starting in summer 2008, has been reduced, with the spread returning to normal levels. The same situation has been observed in the other provinces.

 

 

CHART D.12

Yield spread on long-term (10-year) securities

(per cent)


Source: PC-Bond.

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Debt Management

The government's debt management strategy aims to minimize the cost of the debt and limit the risk related to fluctuations in foreign exchange and interest rates.

The government uses a range of financial instruments, particularly interest rate and currency swap agreements, to achieve desired debt proportions by currency and interest rate.

Debt management enables the government to save money on debt service.

2.3       Structure of the debt by currency

As at March 31, 2010, the proportion of the government's gross debt in Canadian dollars should amount to 96.3% and the proportion in foreign currency, 3.7%.

 

TABLE D.26

Structure of the gross debt as at March 31, 2010P

(millions of dollars)


Consolidated direct debt





Currency

Consolidated Revenue Fund

%

Consolidated entities

Total

%

Net retirement plans liability

Net employee future benefits liabil