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Financement Quebec (81QJ)

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Wednesday 17 June, 2009

Financement Quebec

Annual Report(Guarantor's)-Ex

RNS Number : 0209U
Financement Quebec
17 June 2009
 



Regulatory Announcement





Re: Financement-Québec - U.S.$2,000,000,000 EMTN Programme



Exhibit 99.13, 99.14, 99.15 and 99.16 of the Guarantor's Annual Report (on Form 18-K/A) dated March 19, 2009 for the fiscal year ended March 31, 2008



Exhibit (99.13)


Excerpts from Section B of « 2009-2010 Budget - Budget Plan », March 19, 2009.

TABLE B.3

Detailed economic outlook for Québec 

(percentage change, except where otherwise indicated)


2008

2009

2010

Outlook




Real gross domestic product

0.8

 1.2

1.9

2008-2009 Budget

1.5

2.0

2.2

Gross domestic product

2.4

 0.1

3.9

2008-2009 Budget

3.2

3.5

3.9

Components of GDP (in real terms)




Consumption

3.8

1.2

2.2

2008-2009 Budget

3.1

2.2

1.9

Business nonresidential investment

2.6

 8.4

6.4

2008-2009 Budget

7.4

5.5

3.1

International exports

 3.4

 8.3

2.3

2008-2009 Budget

 0.6

3.3

4.8

International imports

1.7

 2.3

4.1

2008-2009 Budget

5.4

3.9

4.0

Other economic indicators




Nominal consumption

5.1

1.6

3.9

2008-2009 Budget

4.3

3.8

3.4

Housing starts (thousands)

47.9

38.8

37.3

2008-2009 Budget

44.6

38.5

38.5

Personal income

3.5

1.1

2.6

2008-2009 Budget

3.1

3.2

3.3

Wages and salaries

2.9

0.5

3.0

2008-2009 Budget

2.9

3.2

3.3

Corporate profits

4.4

 15.3

9.7

2008-2009 Budget

2.6

2.8

6,6

Consumer prices

2.1

0.4

2.0

2008-2009 Budget

1.4

1.8

1.7

Labour market




Job creation (thousands)

30.0

 62.9

29.5

2008-2009 Budget

45.0

34.2

35.8

Unemployment rate (%)

7.2

8.9

9.1

2008-2009 Budget

7.0

6.9

6.7

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


TABLE B.5    

Canadian financial markets

(percent, except where otherwise indicated)


2008

2009

2010

Benchmark overnight lending rate

3.0

0.6

1.0

2008-2009 Budget

3.6

4.1

4.3

3-month Treasury bills

2.4

0.6

1.2

2008-2009 Budget

3.5

4.2

4.2

Government of Canada 10-year bonds

3.6

2.9

3.7

2008-2009 Budget

4.1

4.6

4.9

Canadian dollar (in cents U.S.)

93.3

82.4

91.6

2008-2009 Budget

99.0

95.5

95.0

Sources:    Bank of Canada and ministère des Finances du Québec.



Exhibit (99.14)

Section C


The Government's Financial Framework

    

1.    The economic slowdown: major repercussions on public finances    

2.    Updating of the financial framework    

2.1    Budgetary revenue    

2.1.1    Own-source revenue excluding government enterprises    

2.1.2    Revenue from government enterprises    

2.1.3    Revenues from federal transfers    

2.2    Budgetary expenditure    

2.2.1    Adjustments to program spending in 2008-2009    

2.2.2    Maintaining spending in 2009-2010 to support the economy    

2.2.3    The government's priorities in 2009-2010    

2.2.4    Importance of government spending in the economy    

2.2.5    Debt service    

2.3    Boosting investment to modernize infrastructures    

2.4    Accelerating investment to support the economy and employment in Québec    

2.5    Consolidated entities    

2.5.1    Non-budget-funded bodies and special funds    

2.5.2    Generations Fund    

2.5.3    Health and education networks    

2.5.4    Statement of consolidated operations    

  

3.    Non-budgetary transactions    

3.1    Summary of non-budgetary transactions    

4.    Consolidated net financial requirements    

Appendix 1:     Investments of $50.6 billion in the Québec Infrastructures Plan    

Appendix 2:    Investment projects by government enterprises    

Introduction

This section of the Budget Plan presents the preliminary results for fiscal 2008-2009 and the government's budgetary and financial stance for 2009-2010 and 2010-2011.

The information provided concerns:

consolidated financial and budgetary transactions for the period from 2008-2009 to 2010-2011, including the impact of the various 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, non-budgetary transactions and net financial requirements.

All of the financial results presented incorporate the measures announced in the November 4, 2008 Update on Québec's Economic and Financial Situation and the January 14, 2009 Economic Statement. Section A also contains five-year financial forecasts, up to 2013-2014.



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The economic slowdown: major repercussions on public finances

The financial crisis that has prevailed for over a year now and the repercussions it is having on Québec's economic growth pose major challenges in the realm of public finances. The rapid downturn in economic conditions in late 2008 and early 2009 has caused the government's financial framework to deteriorate significantly.

Therefore, the 2009-2010 Budget forecasts that a balanced budget will be achieved in 2008-2009 by using $2 billion from the $2.3-billion budgetary reserve.

A budgetary deficit of $3.9 billion is forecast for 2009-2010 and of $3.8 billion for 2010-2011. 

In 2009-2010, the deficit stems essentially from the impact of the deterioration of the economic situation on own-source revenue, the increase in the program spending objective and the cost of economic support measures. 

In 2010-2011, the deficit arises from, among other things, changes made by the federal government to the equalization program, for which the estimated shortfall is $695 million. It also takes into account the $1 065-million impact of the plan to restore fiscal balance. 



TABLE .    

Summary of consolidated budgetary transactions - 2009-2010 Budget

(millions of dollars)


Actual results


Preliminary


Forecast


2007-2008


2008-2009


2009-2010

2010-2011

Budgetary revenue

63 093


62 479


62 212

64 017

    % change

4.0


 1.0


 0.4

2.9

Budgetary expenditure

 61 847


 63 989


 66 093

 68 525

    % change

5.2


3.5


3.3

3.7

Net results of consolidated entities

404


205


355

563

SURPLUS (DEFICIT) FOR THE PURPOSES OF THE PUBLIC ACCOUNTS

1 650


 1 305


 3 526

 3 945

Deposit of dedicated revenues in the Generations Fund

 449


 569


 715

 880

BUDGETARY BALANCE BEFORE BUDGETARY RESERVE AND IMPACT OF THE PLAN TO RESTORE FISCAL BALANCE 

1 201


 1 874


 4 241

 4 825

Deposit in the Generations Fund from the budgetary reserve

 200


 132


-

-

Use of the budgetary reserve

 1 001


2 006


295

-

Impact of the plan to restore fiscal balance





-

1 065

BUDGETARY BALANCE FOR THE PURPOSES OF THE BALANCED BUDGET ACT

0


0


 3 946

 3 760

  Budgetary reserve

Substantial budget surpluses were generated in 2006-2007 and 2007-2008, making it possible to accumulate $2.3 billion in the budgetary reserve. Use of this reserve is now making it possible to achieve a balanced budget in 2008-2009.

In 2008-2009, the government will use $2 billion of the sums accumulated in the budgetary reserve, or $636 million more than forecast in the last Budget, to counter the impact of the economic slowdown and maintain a balanced budget. 

The balance of the reserve, i.e. $295 million, will be used in 2009-2010 to reduce the anticipated budgetary deficit.


TABLE .    

Use of budgetary reserve1

(millions of dollars)


2006-2007

2007-2008

2008-2009P

2009-2010P

2008-2009 Budget

1 300

5172

 1 370

 447

Change

-

484

 6363

152

2009-2010 Budget

1 300

1 001

 2 006

 295

BALANCE OF THE BUDGETARY RESERVE, END OF YEAR

1 300

2 301

295

0

P:     Preliminary results for 2008-2009 and forecasts for 2009-2010.

1    Except in the case of the balance of the budgetary reserve, a positive entry indicates an allocation to the reserve and a negative entry, a use of the reserve.

2    Including an amount of $200 million deposited in the Generations Fund from the budgetary reserve.

3    Including an amount of $132 million deposited in the Generations Fund from the budgetary reserve.



  A balanced budget in 2008-2009

The present Budget confirms that a balanced budget will be achieved in 2008-2009. 

Overall, the pressure exerted on the financial framework as a result of the greater-than-anticipated deterioration of the economic situation requires, among other things, increased use of the budgetary reserve as well as use of the contingency reserve1 in order to maintain a balanced budget.


TABLE .    

Summary of consolidated budgetary transactions in 2008-2009

(millions of dollars)


March 2008 Budget 

Adjustments

March 2009

BudgetP

Budgetary revenue




Own-source revenue excluding government enterprises

44 292

 471

43 821

Revenue from government enterprises

4 625

109

4 734

Total own-source revenue

48 917

 362

48 555

Federal transfers

14 063

 139

13 924

Total

62 980

 501

62 479

Budgetary expenditure




Program spending

 56 948

 452

 57 400

Debt service

 6 907

318

 6 589

Total

 63 855

 134

 63 989

Net results of consolidated entities

447

 242

205

Contingency reserve

 200

200

-

SURPLUS (DEFICIT) FOR THE PURPOSES OF THE PUBLIC ACCOUNTS

 628

 677

 1 305

Deposit of dedicated revenues in the Generations Fund

 742

173

 569

BUDGETARY BALANCE BEFORE BUDGETARY RESERVE

 1 370

 504

 1 874

Deposit in the Generations Fund from the budgetary reserve

-

 132

 132

Use of the budgetary reserve

1 370

636

2 006

BUDGETARY BALANCE FOR THE PURPOSES OF THE BALANCED BUDGET ACT

0

0

0

P:     Preliminary results for 2008-2009.


  Since the March 2008 Budget, a number of factors have enabled the government to offset the shortfall stemming from the economic slowdown. These factors are:

savings of $318 million on debt service due to lower-than-expected interest rates;

an increase of $109 million in revenue from government enterprises, mainly on account of Hydro-Québec's higher-than-anticipated profits;

use of the $200-million contingency reserve;

increased use, in the amount of $636 million, of the budgetary reserve.

These positive contributions have made it possible for the government to:

offset losses of $471 million in own-source revenue caused by the effects of the economic slowdown, which reduced revenue from corporate taxes by almost 18%; 

increase program spending by $452 million, including $115 million for the allowance for doubtful accounts of Revenu Québec;

finance the additional deficits of certain consolidated entities for $242 million, including $56 million for La Financière agricole du Québec, whose deficit should reach $371 million in 2008-2009, and $39 million for institutions of the health2 and education networks;

offset a $139-million downward revision in federal transfers;

deposit $132 million in the Generations Fund, an amount equal to the gain made on sales of Société immobilière du Québec assets in 2008.

Taking into account the aforementioned program spending increase, program spending growth in 2008-2009 amounts to 4.7%.


  Budgetary deficit in 2009-2010 and 2010-2011

In 2009-2010, the budgetary deficit will amount to $3.9 billion following the use of the reserve's $295-million balance. In 2010-2011, the deficit is expected to be $3.8 billion.


TABLE .    

Total adjustments since the 2008-2009 BudgetF

(millions of dollars)


2009-2010

2010-2011

BALANCE IN THE 2008-2009 BUDGET

0

-  143

Decrease in revenue



Economic slowdown

 2 507

 2 422

Equalization

 75

 695


 2 582

 3 117

Increase in spending



Increase in program spending objective

 1 051

 1 151

Economic support measures1

 826

 607

Debt service savings

915

336


 962

 1 422

Use of the reserve

 152

-

Impact of the plan to restore balance

-

1 065

Other factors

 250

 143

BUDGETARY BALANCE FOR THE PURPOSES OF THE BALANCED BUDGET ACT 

 3 946

 3 760

F:    Forecasts.

1    Including tax expenditures.


  2009-2010: deficit of $3.9 billion

Compared with the March 2008 Budget, the deficit can be explained primarily by:

the decline in revenue caused by the economic slowdown, which lowers own-source revenue by $2.5 billion;

the $1-billion increase in the program spending objective, which brings the spending growth rate to 4.5%;

the cost of new measures taken to support the economy and maintain employment, which represents $826 million.

These factors are partly offset by the $915-million downward adjustment in debt service.

2010-2011: deficit of $3.8 billion

Apart from the recurrence of the factors identified in 2009-2010, the deficit in 2010-2011 is due to changes made by the federal government to the equalization program that lower revenue by an estimated $695 million.

Furthermore, the $1 065-million impact of the plan to restore fiscal balance reduces the deficit.




Updating of the financial framework

This section explains the adjustments made to the financial framework for 2008-2009 since the last Budget and presents the main factors affecting growth in the government's revenue and expenditure for subsequent years.

Budgetary revenue

The government's budgetary revenue should total $62.2 billion in 2009-2010, i.e. $47.4 billion in own-source revenue and $14.8 billion in federal transfers. Budgetary revenue should fall by 0.4% in 2009-2010 and climb by 2.9% in 2010-2011.


TABLE .    

Consolidated Revenue Fund 
Change in budgetary revenue

(millions of dollars)


March 2008 Budget




March 2009 BudgetP


2008-2009


Adjustments


2008-2009

2009-2010

2010-2011

Own-source revenue








Own-source revenue excluding government enterprises

44 292


 471


43 821

42 612

44 314

    % change

0.1




 1.4

 2.8

4.0

Government enterprises

4 625


109


4 734

4 759

4 813

    % change

 8.5




 5.8

0.5

1.1

Total

48 917


 362


48 555

47 371

49 127

    % change

 0.8




 1.8

 2.4

3.7

Federal transfers

14 063


 139


13 924

14 841

14 890

    % change

3.2




2.2

6.6

0.3

Budgetary revenue

62 980


 501


62 479

62 212

64 017

    % change

0.1




 1.0

 0.4

2.9

P:     Preliminary results for 2008-2009 and forecasts for subsequent years.



  Own-source revenue excluding government enterprises

Downward adjustments in 2008-2009

Preliminary results for fiscal 2008-2009 show that own-source revenue, excluding the profits of government enterprises, is adjusted downward by $471 million compared with the March 2008 Budget and posts a decline of 1.4% compared with the previous year.

As for tax receipts, a major trend shift was observed in 2008-2009. During the first half of the year, such receipts were higher than forecast in the last Budget. However, this trend was reversed in late 2008 and even accentuated in early 2009, reflecting a sudden deterioration in the economic situation, particularly with regard to corporate taxes. 


TABLE .    

Consolidated Revenue Fund
Summary of adjustments 
in own-source revenue excluding government enterprises 
in 2008-2009

(millions of dollars)


Adjustments

announced on

November 4, 20081


Adjustments since November 4, 2008


Adjustments since March 2008 Budget



November and December

January to March

Total


Economic slowdown

123


 240

 433

 673


 550

Economic support measures affecting revenue

 32


0

 34

 34


 66

Other adjustment factors

115


0

30

30


145

TOTAL

206


 240

 437

 677


 471

1    Update on Québec's Economic and Financial Situation, November 2008.

  Adjustments in own-source revenue by source

Revenue from corporate taxes is revised downward by $619 million in 2008-2009, leading to a 17.6% drop in revenue from this source compared with the previous year. This substantial adjustment is due essentially to the economic slowdown.

First, the downward revision of corporate profits as of the last quarter of 2008 has resulted in lower-than-expected tax receipts.

Second, businesses are claiming more refunds than anticipated owing to the fact that they are incurring losses or are reporting lower-than-expected taxable income, which requires that they be refunded instalment overpayments.

Overall, revenue from personal income tax is revised upward by $23 million. Essentially, the downward adjustment in employment and wages in late 2008-2009 was more than offset by higher tax receipts early in the fiscal year.

Contributions to the Health Services Fund are adjusted downward by $18 million, in accordance with the negative adjustment of salaries and wages late in the year.


TABLE .    

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

(millions of dollars)


March 2008 Budget 




March 2009 BudgetP


2008-2009


Adjustments


2008-2009

2009-2010

2010-2011

Corporate taxes

4 591


 619


3 972

3 266

3 268

    % change

 4.4




 17.6

 17.8

0.1

Personal income tax

18 200


23


18 223

18 203

19 256

    % change

 0.4




 2.3

 0.1

5.8

Health Services Fund

5 594


 18


5 576

5 597

5 808

    % change

3.2




3.2

0.4

3.8

Consumption taxes

13 544


 52


13 492

13 184

13 569

    % change

2.3




4.1

 2.3

2.9

Other revenues

2 363


195


2 558

2 362

2 413

    % change

 5.4




 1.8

 7.7

2.2

Own-source revenue excluding government enterprises

44 292


 471


43 821

42 612

44 314

    % change

0.1




 1.4

 2.8

4.0

P:     Preliminary results for 2008-2009 and forecasts for subsequent years.


  Consumption tax revenue is adjusted downward by $52 million on account of two main factors.

High fuel prices, primarily during the first two quarters of 2008-2009, helped to reduce consumption as well as revenue from the tax applicable to fuel products. Revenue from fuel was down $75 million.

However, this adjustment is partly offset by revenue from the Québec sales tax, which is up $27 million. Higher-than-forecast tax revenue early in the year was only partly offset by the decrease in Québec sales tax revenue stemming from weaker household consumption in the last two quarters of 2008-2009.

Other revenues have been adjusted upward by $195 million compared with the forecast in the last Budget owing essentially to the recording of an amount of $115 million in regard to the payment of compensation by tobacco manufacturers following the settlement of lawsuits pertaining to tobacco smuggling activities that took place in the early 1990s.


  A decline in own-source revenue in 2009-2010 because of the recession

Own-source revenue, excluding that from government enterprises, will fall by 2.8% in 2009-2010 because of the impact of the economic recession anticipated that year and the additional cost of the fiscal measures announced in this and previous budgets.

It is anticipated that nominal GDP, which reflects the change in the government's main tax bases, will decrease by 0.1%. In addition, revenue growth will be reduced by over 2.0% that year on account of the economic support measures.

In 2010-2011, own-source revenue, excluding that of government enterprises, will grow by 4.0%, a rate similar to the increase in nominal GDP, i.e. 3.9%.

Change in revenue by source

Revenue from corporate taxes will continue to fall in 2009-2010. Essentially, three factors explain the anticipated decline of 17.8%.

First, corporate profits are expected to decrease by 15.3% in 2009.

In addition, the accumulation of losses by corporations will allow them to continue claiming larger refunds in 2009-2010. Indeed, businesses can clain refunds, particularly by applying losses for the current year against their tax payable for the three previous years. This is one of the factors that contributes to the volatility of revenue from this source during a recession.

Lastly, the decline in revenue in 2009-2010 also stems from the additional reductions in the tax burden of businesses announced in this and previous budgets, particularly through:

  • the gradual elimination of the tax on capital;

  • the introduction of an investment tax credit in all regions of Québec;

  • the increase from $400 000 to $500 000 in the limit for the application of the reduced tax rate for small businesses.

  In 2010-2011, revenue from corporate taxes will rise slightly, i.e. by 0.1%. Indeed, growth in profits as of 2010 will lead to a gradual increase in taxable income and revenue from this source. However, losses accumulated by businesses will continue to curb growth in revenue from this source.

Personal income tax, the principal source of government revenue, will fall by a slight 0.1% in 2009-2010, to $18.2 billion.

This reflects first and foremost the impact of the measures announced since the last Budget in order to stimulate the economy. Indeed, the $250 million granted to individuals for the refundable tax credit for home improvement and renovation is applicable to the 2009 taxation year and will reduce by an equivalent amount revenue from this source in 2009-2010.

Considering the impact of this measure, the change in personal income tax is compatible with the weak growth of 0.5% in salaries and wages

In 2010-2011, growth in revenue from personal income tax should be 5.8%, while the progression in salaries and wages will amount to 3.0%.

Excluding the impact of the refundable tax credit for home improvement and renovation, which ends on December 31, 2009, revenue from personal income tax would instead climb by 4.4%, an increase compatible with the growth in salaries and wages, taking into account the progressive nature of the tax system.

Contributions to the Health Services Fund should rise by only 0.4% in 2009-2010 and 3.8% in 2010-2011, in accordance with the anticipated growth in salaries and wages.

In 2009-2010, consumption taxes will decline by 2.3% owing basically to an expected 2.8% drop in revenue from the Québec sales tax. This decrease reflects the anticipated slowing of growth in household spending in 2009, as well as the reduction in the number of housing starts, whose value accounts for a large share of the QST tax base.

In 2010-2011, consumption taxes are expected to climb by 2.9%. This growth rate, which is less than that of household consumption, reflects in particular the drop in housing starts in 2010.

  Change in revenue compatible with that of the economy

Overall, growth in own-source revenue, excluding government enterprises, is expected to be similar to nominal economic growth for the next two years, once the financial impact of fiscal measures is eliminated. For example, in 2009-2010, fiscal measures will curtail revenue growth by more than 2.0 percentage points which explains, for the most part, the difference between the change in revenue and the change in nominal GDP.


TABLE .    

Consolidated Revenue Fund
Change in own-source revenue on a comparable basis
P

(millions of dollars)


2008-2009

2009-2010

2010-2011

Own-source revenue excluding government enterprises

43 821

42 612

44 314

% change

 1.4

 2.8

4.0

Less:




2009-2010 Budget measures




Personal income tax reduction


 61

 84

Corporate tax reduction


 35

 63

Other fiscal measures


74

72

Measures announced since the 2008-2009 Budget




Economic Statement of January 14, 2009 

0

 260

 20

Measures announced on December 19, 20081

 40

0

0

Update on Québec's Economic and Financial Situation of 
November 4, 20082

 26

 176

 179

Measures announced in previous budgets




Personal income tax reduction

 1 366

 1 380

 1 457

Corporate tax reduction

 405

 770

 1 055

Other fiscal measures3

2

45

42

Other factors4

 52

 508

 462

Subtotal

 1 887

 3 071

 3 206

Revenue before measures

45 708

45 683

47 520

% change


 0.1

4.0

Growth rate of nominal GDP in %5


 0.1

3.9

Elasticity6


1.0

1.0

P:    Preliminary results for 2008-2009 and forecasts for subsequent years.

1    Corresponds to the impact of the 25% reduction in minimum withdrawals from Registered Retirement Income Funds (RRIFs) in 2008, the cost of which is applied against the 2008-2009 fiscal year.

2    Excluding the cost of Québec proposals that had to be harmonized with the federal tax system but were not adopted by the federal government.

3    Including the impact on the revenue of the following funds: Fonds du patrimoine minier, Fonds pour le développement des enfants de moins de 5 ans en situation de pauvreté and Fonds pour le développement de services de répit et d'accompagnement des aidants naturels.

4    Includes, notably, the agreement concluded with tobacco manufacturers and the agreement on a new fiscal and financial partnership with the municipalities.

5    For the calendar year ending three months before the end of the fiscal year.

6    Elasticity between growth in revenue on a comparable basis and growth in gross domestic product. For example, an elasticity rate of 1.0 means that 1% growth in GDP results in 1% growth in own-source revenue.

  

Sensitivity of own-source revenue to economic fluctuations

Generally speaking, a downward adjustment of 1% in nominal GDP leads to a decrease of about $500 million in own-source revenue, with a margin of error of roughly $50 million. This sensitivity rule implies that there is an adjustment of each of the tax bases that is proportional to the adjustment in nominal GDP, which is defined as the market value of all goods and services produced in a particular geographic area over a given period of time.

In actual fact, a change in nominal GDP rarely entails a proportional adjustment of each of the tax bases. However, the sensitivity rule provides a good estimate of the significance and extent of the adjustment in own-source revenue.

For example, the forecast in this Budget revises own-source revenue in 2009-2010 by more than $3.1 billion compared with last year's Budget.

Essentially, this revision is due to the downward adjustment of nominal GDP in 2009, compared with what was originally announced. Indeed, the adjustment to the economic outlook reduces the forecast for own-source revenue in 2009-2010 by $2.5 billion.

  • Accordingly, nominal GDP in 2009 will be 4.4% less than anticipated last year if the impact of the adjustment in nominal GDP in 2008 and 2009 is taken into account.

  • Based on the sensitivity rule, a $2.2-billion downward adjustment should be expected. Therefore, the adjustment of own-source revenue corresponds, for the most part, to the impact measured by the sensitivity rule.

The balance of the adjustment results from the cost of new measures to support the economy and from other factors.


Illustration of the impact of the revised economic scenario on own-source revenue 

(millions of dollars)


2008-2009

2009-2010

Cumulative adjustment of nominal GDP growth1 since the March 2008 Budget

 0.8%

 4.4%2

Anticipated impact of the revised economic scenario on own-source revenue 

 400

 2 200

Projected impact of the economic slowdown on own-source revenue 

 550

 2 507

1    For the calendar year ending three months before the end of the fiscal year.

2    Includes adjustments of  0.8% and  3.6% in nominal GDP in 2008 and 2009 respectively.





  Revenue from government enterprises

Upward adjustment in 2008-2009

The profits of government enterprises are adjusted upward by $109 million for 2008-2009. This adjustment is due mainly to a $363-million increase in Hydro-Québec's profits, generated for the most part by growth in net sales of electricity outside Québec. This increase is offset by a $291-million decline in the profits of other government enterprises compared with the forecast in the 2008-2009 Budget, of which a difference of $260 million can be attributed to allowances for losses at the Société générale de financement du Québec.


TABLE .    

Consolidated Revenue Fund
Change in revenue from government enterprises

(millions of dollars)


March 2008 Budget




March 2009 BudgetP


2008-2009


Adjustments


2008-2009

2009-2010

2010-2011

Hydro-Québec

2 500


363


2 863

2 700

2 700

Loto-Québec

1 295


25


1 320

1 295

1 295

Société des alcools du Québec

785


12


797

800

830

Other

45


 291


 246

 36

 12

Revenue from government enterprises

4 625


109


4 734

4 759

4 813

    % change

 8.5




 5.8

0.5

1.1

P:     Preliminary results for 2008-2009 and forecasts for subsequent years.


  Outlook for 2009-2010 and 2010-2011

Revenue from government enterprises for 2009-2010 is estimated at nearly $4.8 billion. Such revenue will remain at roughly the same level in 2010-2011.

The profits of government enterprises over the next two years will be fairly stable compared with those of 2008-2009. It should be noted, however, that Hydro-Québec forecasts a decline of $163 million in its profits in 2009-2010 and 2010-2011 compared with those anticipated for 2008-2009.



  Revenues from federal transfers

In 2008-2009, federal transfer revenues should reach $13.9 billion, or $139 million less than forecast in the March 2008 Budget. This adjustment can be explained by two main factors.

First, the value of the special Québec abatement was revised upward because of the taking into account of the most recent fiscal data. It should be noted that the value of the special Québec abatement (16.5% of basic federal personal income tax collected in Québec) reduces by an equivalent amount Québec's revenues from federal transfers.

Second, the taking into account of the population data of the 2006 census, which have been final since last fall, reduced federal transfers to Québec for health, post-secondary education and other social programs, since these transfers are allocated among the provinces on a per capita basis.

For 2009-2010 and 2010-2011, federal transfer revenues are expected to amount to $14.8 billion and $14.9 billion respectively.


TABLE .    

Consolidated Revenue Fund
Change in federal transfer revenues
1

(millions of dollars)


March 2008 Budget




March 2009 BudgetP


2008-2009


Adjustments


2008-2009

2009-2010

2010-2011

Equalization

8 028


0


8 028

8 355

8 469

% change

12.1




12.1

4.1

1.4

Health transfers

3 833


 92


3 741

4 137

4 253

% change

 2.3




 4.7

10.6

2.8

Transfers for post-secondary education and other social programs

1 320


 53


1 267

1 413

1 406

% change

 12.9




 16.4

11.5

 0.5

Other programs

882


6


888

936

762

% change

 14.0




 13.6

5.4

 18.6

Federal transfers

14 063


 139


13 924

14 841

14 890

% change

3.2




2.2

6.6

0.3

P:    Preliminary results for 2008-2009 and forecasts for subsequent years.

1    These results concern the federal transfer revenues of the Consolidated Revenue Fund. The federal transfer revenues of non-budget-funded bodies and special funds are presented in section 2.5.1. Section 2.5.4 presents federal transfer revenues in respect of specified purpose accounts for 2008-2009.

  On November 3, 2008, the federal government announced that it was changing the equalization program, in particular so as to limit its growth to that of Canada's nominal GDP. At the same time, the federal government announced that Québec's equalization entitlements for 2009-2010 would be $8 355 million, which is $75 million less than the equalization revenue anticipated in the March 2008 Budget.

For 2010-2011 and subsequent years, the federal government has not provided the provinces with any information on the effects of the changes to the equalization program. However, Québec estimates that these changes will have major impacts. Compared with the March 2008 Budget, the negative impacts of the changes are estimated at $695 million in 2010-2011 and over $1 billion per year thereafter.

In 2009-2010, health transfers and transfers for post-secondary education and other social programs are expected to grow by 10.6% and 11.5%, respectively, notably because of the tax relief announced in the 2009 federal budget and the economic slowdown that will reduce the value of the special Québec abatement, which is subtracted in part from these transfers. A reduction in the value of the special Québec abatement increases federal transfer revenues by an equivalent amount.


  Budgetary expenditure

In 2009-2010, budgetary expenditure will reach $66.1 billion, an increase of 3.3% compared with 2008-2009. 

Program spending will total $60 billion and show an increase of 4.5%. Debt service, for its part, will amount to $6.1 billion.

The government plans to limit program spending growth for 2010-2011 to 3.2%. Taking into account the forecast for the change in debt service, total growth in budgetary expenditure will be 3.7%.


TABLE .    

Consolidated Revenue Fund
Change in budgetary expenditure

(millions of dollars)


March 2008 Budget




March 2009 BudgetP


2008-2009


Adjustments


2008-2009

2009-2010

2010-2011

Program spending

56 948


452


57 400

59 989

61 879

    % change

4.2




4.7

4.5

3.2

Debt service

6 907


 318


6 589

6 104

6 646

    % change

 1.4




 6.2

 7.4

8.9

Budgetary expenditure

63 855


134


63 989

66 093

68 525

    % change

3.6




3.5

3.3

3.7

Nominal GDP growth rate in %1

3.2




2.4

 0.1

3.9

Inflation rate in Québec in %1

1.4




2.1

0.4

2.0

P:     Preliminary results for 2008-2009 and forecasts for subsequent years.

1    For the calendar year ending three months before the end of the fiscal year.


  Adjustments to program spending in 2008-2009

Program spending in 2008-2009 stands at $57.4 billion, an increase of 4.7% compared with 2007-2008. This represents an upward revision of $452 million relative to the target of $56.9 billion set in the last Budget.

This adjustment can be explained mainly by:

the increase in the allowance for doubtful accounts, because of the rise in assessments made by Revenu Québec in recent years;

costs associated with the harmonization of the accounting method for capital expenditures of the health and education networks;

the cost of the elections held in December 2008;

additional financing of $1 billion for businesses, mainly small- and medium-sized enterprises (SMEs) (Renfort program);

full indexing of last resort assistance benefits.


TABLE .    

Program spending adjustments in 2008-2009

(millions of dollars)

PROGRAM SPENDING OBJECTIVE PRESENTED IN THE 2008-2009 BUDGET

56 948

Adjustments


Increase in the allowance for doubtful accounts

115

Harmonization of the accounting method for capital expenditures of the health and education networks

100

2008 Québec elections

77

Renfort program

41

Full indexing of last resort assistance benefits

8

Other factors

111

Subtotal

452

REVISED PROGRAM SPENDING

57 400

Source:    Secrétariat du Conseil du trésor.



  Maintaining spending in 2009-2010 to support the economy

The current economic slowdown requires that the government take concrete steps to support the economy and employment.

To mitigate the effects of the slowdown, program spending growth for 2009-2010 is being revised and raised from 3.0% to 4.5% compared with the previous Budget, including the cost of the measures contained in the present Budget.

The government will inject additional funds of over $900 million into Québec's economy in 2009-2010, i.e. $752 million for budget-funded public services and $192 million for the measures announced in this Budget.

Other spending increases were announced in the Update on Québec's Economic and Financial Situation, for a total of $416 million in 2009-2010.

In all, program spending will be raised by $1.4 billion in 2009-2010 and 2010-2011 compared with the data presented in March 2008.

In 2010-2011, when the economy recovers, program spending growth will be rolled back to 3.2%, or the same rate as that forecast in last year's Budget.

  

TABLE .    

Change in program spending

(millions of dollars)


2009-2010

2010-2011

PROGRAM SPENDING OBJECTIVE IN THE 2008-2009 BUDGET

58 629

60 478

    % change

3.0

3.2

ADJUSTMENTS



2009-2010 Budget



Increase in program spending to mitigate the effects of the economic slowdown

752

810

2009-2010 Budget measures



Additional immediate actions to support businesses and workers 

128

58

Preparing Québec for economic recovery

12

19

Additional support for Quebecers

30

35

New initiatives to fight tax evasion

22

22

Subtotal

192

134

Total increases in the 2009-2010 Budget

944

944

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



Support measures for individuals and businesses

117

116

Recurrence of 2008-2009 increases

299

341

Subtotal

416

457

TOTAL ADJUSTMENTS

1 360

1 401

PROGRAM SPENDING OBJECTIVE IN THE 2009-2010 BUDGET 

59 989

61 879

    % change

4.5

3.2

  The government's priorities in 2009-2010

Program spending will climb from $57 400 million in 2008-2009 to $59 989 million in 2009-2010, an increase of $2 589 million, or 4.5%.

Despite the current economic slowdown, the government will continue to invest in its fundamental missions, including health and education.

Spending on health and education accounts for 75% of the rise in program spending in 2009-2010.


TABLE .    

Growth in program spending in 2009-2010P

(millions of dollars)





Growth


2008-2009

2009-2010


$M

%

Santé et Services sociaux

25 417.1

26 872.4


1 455.3

5.7

Éducation, Loisir et Sport

13 940.8

14 431.0


490.2

3.5

Transports

2 347.0

2 770.9


423.9

18.1

Famille et Aînés

1 947.2

2 066.5


119.3

6.1

Other departments

13 747.7

13 848.1


100.4

0.7

TOTAL

57 399.8

59 988.9


589.1

4.5

P:     Preliminary results for 2008-2009 and forecasts for 2009-2010.

Source:     Secrétariat du Conseil du trésor.

Health: 5.7% increase in 2009-2010

The budget allocated to health and social services is being raised by $1 455 million, or 5.7%, in 2009-2010. This increase, which accounts for 56.2% of the total growth in program spending, will make it possible to cover needs related to health services aimed at dealing with, among other things, population ageing and certain widespread social problems.

Education: 3.5% budget increase

The budget of the ministère de l'Éducation, du Loisir et du Sport is also being increased by a substantial 3.5%, or an additional $490 million. This increase accounts for 18.9% of total program spending growth. Overall, the education budget will make it possible to maintain the quality of educational services and to pursue actions undertaken in recent years, particularly in regard to disabled students or students with adjustment or learning difficulties.

  Other departments

The program spending budget of other departments is being raised by 3.6%, or $644 million, in 2009-2010. This increase will make it possible to continue supporting the government's other priorities, particularly:

$424 million for the ministère des Transports, a climb of 18.1% generated notably by the rise in costs associated with investment in public infrastructures;

$119 million for the ministère de la Famille et des Aînés, an increase of 6.1% reflecting, among other things, the growth in the number of daycare spaces;

$100 million for other departments, whose expenditure budget shows a 0.7% increase compared with the previous year.


CHART .    

Breakdown of program spending growth in 2009-2010F

(millions of dollars and percent)

F    Forecasts.

Source:     Secrétariat du Conseil du trésor.


  Importance of government spending in the economy

The forecast for program spending in 2009-2010 reflects the government's determination to do everything possible to get through the economic slowdown. 

Because of the increase in program spending and the weak growth of GDP in 2009, the weight of program spending in the economy will climb to 19.8% in 2009-2010, the highest level since 1995-1996.

When the economy recovers, the government plans to stay the course of disciplined spending management and, between now and 2013-2014, gradually bring the weight of spending in the economy down to a rate equal to that observed prior to the economic recession.

In 2010-2011, the rate will fall 0.2 percentage points, to 19.6%.


CHART .    

Program spending

(as a percentage of GDP)

Note: Preliminary results for 2008-2009 and forecasts for subsequent years.


  Debt service

In 2008-2009, debt service should amount to nearly $6.6 billion, i.e. $4.4 billion for direct debt service, $2.1 billion for interest ascribed to the retirement plans and $19 million for employee future benefits.

Overall, debt service is revised downward by $318 million compared with the March 2008 Budget. This adjustment is due mainly to the fact that interest rates were lower than anticipated. 

Debt service should fall by 6.2% in 2008-2009 and 7.4% in 2009-2010. It is expected to climb by 8.9% in 2010-2011. This variance can be attributed esssentially to the change in interest rates.


TABLE .    

Consolidated Revenue Fund
Change in debt service

(millions of dollars)


March 2008 Budget




March 2009 BudgetP


2008-2009


Adjustments


2008-2009

2009-2010

2010-2011

Direct debt service

 4 718


297


 4 421

 3 760

 4 016

Interest ascribed to the retirement plans

 2 171


22


 2 149

 2 344

 2 636

Employee future benefits1

 18


 1


 19

0

6

Debt service

 6 907


318


 6 589

 6 104

 6 646

% change

 1.4




 6.2

 7.4

8.9

P:     Preliminary results for 2008-2009 and forecasts for subsequent years.

1    Including interest on the survivor's pension plan and interest on the obligation relating to accumulated sick leave.



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

The share of budgetary revenue devoted to debt service, which includes the debt service of the Consolidated Revenue Fund and that of consolidated entities, should stand at 11.4% in 2010-2011, compared with 17.7% in 1997-1998.


CHART .    

Consolidated debt service

(as a percentage of budgetary revenue)

Note: Preliminary results for 2008-2009 and forecasts for subsequent years.


  Boosting investment to modernize infrastructures 

The economic and financial difficulties currently affecting industrialized countries as a whole require immediate action to support businesses and workers that are hardest hit.

To that end, the government is injecting $8.3 billion over two years in order to renovate, modernize and develop Québec's public infrastructures. These additional investments will help to revitalize the economy, support numerous jobs and build a stronger, more modern Québec.


TABLE .    

Plan to support jobs and economic recovery - Infrastructures

(millions of dollars)


Investments as of 2009 to support jobs and the economy


Subsequent years

Total


2009-2010

2010-2011

Subtotal


2009-2010 Budget







2009-2010 Budget measures

81

92

173


951

1 124

Additional investments 
by government corporation
s

50

140

190


156

346

Subtotal

131

232

363


1 107

1 470

Québec Infrastructures Plan







Acceleration announced on January 14, 2009

1 0341

407

1 441


2 643

4 084

2007-2012 Québec Infrastructures Plan2

3 404

3 045

6 449


3 477

9 926

Subtotal

4 438

3 452

7 890


6 120

14 010

INJECTION OF LIQUID ASSETS INTO THE ECONOMY

4 569

3 684

8 253


7 227

15 480

1    Acceleration of investments under the 2008-2013 Québec Infrastructures Plan. The acceleration for 2008-2009 will be realized as of the first quarter of 2009.

2    Amount of additional investments compared with 2007-2008.

In addition to the investments already announced, the 2009-2010 Budget provides for new projects totalling $1.billionof which $363 million will be disbursed in 2009-2010 and 2010-2011.

Furthermore, additional investments of $7.9 billion will be made over the next two years under the Québec Infrastructures Plan:

$1.4 billion because of the acceleration announced last January 14;

$6.4 billion in additional investments compared with 2007-2008, following the implementation of the plan adopted in fall 2007.

  2009-2010 Budget: $1.5 billion in new public investments to support the economy and employment

To further support the economy and employment, the government is announcing new intiatives totalling almost $1.5 billion:

$670 million for developing Québec's North:

  • $438 million for improvement work on Highway 389 between Baie-Comeau and the Labrador border;

  • $130 million for extending Highway 167 to the Otish Mountains;

  • $102 million for launching an airport infrastructure repair program for northern Québec;

$254 million for fostering sustainable development:

  • $204 million for accelerating implementation of the plan to modernize the management of public dams;

  • $50 million for expanding the national park network in southern Québec;

$200 million for building 3 000 social housing units under the AccèsLogis Québec program;

$346 million for modernizing the assets of Loto-Québec and the Société de l'assurance automobile du Québec:

  • $306 million for renovating the Casino de Montréal;

  • $40 million for expanding the head office of the Société de l'assurance automobile du Québec.


TABLE .17    

New investment projects for supporting the economy and employment

(millions of dollars)

Plan Nord infrastructures

670

Measures to foster sustainable development

254

Social housing units

200

New initiatives of the Société de l'assurance automobile du Québec and Loto-Québec

346

TOTAL NEW INVESTMENTS ANNOUNCED IN THE 2009-2010 BUDGET

1 470


Added to these measures are investments under the financial assistance program for infrastructures for biological conversion of organic material, aimed at developing green energy.

Accelerating investment to support the economy and employment in Québec

The Québec government is stepping up the pace of its investments in order to support the economy and employment in Québec during the economic crisis.

In 2009-2010 and 2010-2011, infrastructure investments will reach an average of nearly $billion per year, a level not seen since the early 1980s.


CHART .    

Investments by the Québec government1

(billions of dollars)

1    Excluding investments made by departments and budget-funded bodies and by special funds other than the Fonds de conservation et d'amélioration du réseau routier.

The 2008-2013 Québec Infrastructures Plan and the investment projects of government enterprises are described in the appendices to this section.

  Consolidated entities

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

Accordingly, in addition to the financial transactions of departments, budget-funded bodies and government enterprises, which are included in the financial transactions of the Consolidated Revenue Fund, the government's reporting entity also encompasses consolidated entities whose financial transactions must also 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 Generations Fund;

the health and education networks.

The financial forecasts for the health and education networks are presented in the Budget for the second year in a row, following the government's adoption of the recommendations of the Task Force on Government Accounting in December 2007. 

At that time, the government changed its accounting policies, in accordance with generally accepted accounting principles (GAAP), in order to include public health and social services institutions, school boards and CEGEPs as well as the Université du Québec and its branches in its reporting entity.

  Non-budget-funded bodies and special funds

Non-budget-funded bodies and special funds include more than 100 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 finances investments for maintaining and developing Québec roads;

La Financière agricole du Québec is responsible for administering farm insurance programs and other financial support programs for agricultural producers.

For fiscal 2008-2009, the net results of non-budget-funded bodies and special funds show a deficit of $175 million, a deterioration of $30 million compared with the results forecast in the March 2008 Budget.

For 2009-2010 and 2010-2011, the net results of non-budget-funded bodies and special funds are expected to show deficits of $240 million and $111 million respectively. These deficits can be attributed mainly to La Financière agricole du Québec, whose deficit is expected to be more than $350 million in 2009-2010.


TABLE .18    

Non-budget-funded bodies and special funds
Summary of budgetary transactions

(millions of dollars)


March 2008 Budget




March 2009 BudgetP


2008-2009


Adjustments


2008-2009

2009-2010

2010-2011

Own-source revenue

4 319


 702


3 617

3 819

3 911

Federal transfers

1 115


 144


971

1 315

997

Subtotal

5 434


 846


4 588

5 134

4 908

Expenditure excluding debt service

 3 749


 16


 3 765

 4 196

 3 634

Debt service

 1 830


832


 998

 1 178

 1 385

Subtotal

 5 579


816


 4 763

 5 374

 5 019

NET RESULTS

 145


 30


 175

 240

 111

P:     Preliminary results for 2008-2009 and forecasts for subsequent years.

  Generations Fund

Deposits in the Generations Fund should reach $701 million for 2008-2009. This amount includes the additional deposit of $132 million from the budgetary reserve, which corresponds to profits made on the sale of immovables by the Société immobilière du Québec in March 2008. 

For 2009-2010 and 2010-2011, total deposits in the Generations Fund are expected to amount to $715 million and $880 million respectively. As a result, $3.5 billion will have been accumulated in the Generations Fund as at March 31, 2011. Section I presents the results of and change in the Generations Fund in greater detail.


TABLE .19    

Deposits in the Generations Fund

(millions of dollars)


March 2008 Budget




March 2009 BudgetP


2008-2009


Adjustments


2008-2009

2009-2010

2010-2011

Dedicated revenues








Water-power royalties

625


-


625

647

678

Unclaimed property

15


 15


0

-

-

Investment income

102


 158


 56

68

202

Subtotal

742


 173


569

715

880

Deposit from the budgetary reserve1

-


132


132

-

-

TOTAL

742


 41


701

715

880

P:     Preliminary results for 2008-2009 and forecasts for subsequent years.

    An amount of $132 million stemming from the sale of Société immobilière du Québec assets was deposited in the Generations Fund from the budgetary reserve.



  Health and education networks

With the implementation of the recommendations of the Task Force on Government Accounting in December 2007, the government added 210 entities of the health and social services network and 130 entities of the education network to its financial forecasts.

These entities consist of 18 health and social services agencies, 192 public health and social services institutions, 72 school boards and 48 CEGEPs, as well as the Université du Québec and its nine branches.

In the 2008-2009 Budget, the government provided for an amount of $150 million to cover any deficits incurred by institutions in the two networks in 2008-2009. The present Budget is revising this amount upward by $39 million, to $189 million.

For 2009-2010 and 2010-2011, the government is providing for amounts of $120 million and $206 million respectively to cover any overruns that might be incurred in the networks, particularly because of the effects of harmonizing their accounting policies with generally accepted accounting principles

In addition, work is still ongoing with the ministère de la Santé et des Services sociaux and the ministère de l'Éducation, du Loisir et du Sport to finalize the implementation of a monitoring and budgetary control process for the networks. Once this work is complete, it will be possible to rigorously monitor the results of all network entities with a view to making them subject, in the near future, to a budgetary process similar to that applied for non-budget-funded bodies and special funds. In particular, this process provides for:

tabling of detailed financial forecasts for preparing the government's financial framework;

monitoring of actual data for the government's Monthly Report on Financial Transactions.

Lastly, the government is taking advantage of this Budget to reiterate its determination to eliminate operating deficits in the health network. For this purpose, steps will be taken with the ministère de la Santé et des Services sociaux to introduce a plan aimed at restoring fiscal balance to the annual results of all health network institutions between now and the end of 2011-2012.

  Statement of consolidated operations

For the purposes of the Budget documents, the results of consolidated entities are presented on a net basis.3 However, to reconcile the Budget documents and the Public Accounts, the revenue and expenditure of consolidated entities4 and the specified purpose accounts must be added to the revenue and expenditure of the Consolidated Revenue Fund.

The following table shows, for fiscal 2008-2009, the statement of consolidated operations harmonizing the Budget data with those of the Public Accounts. The deficit for the purposes of the Public Accounts will amount to $1 305 million in 2008-2009.


TABLE .20    

Consolidated financial framework

(millions of dollars)


2007-2008 Public Accounts


2008-2009P


Consolidated levels


Consolidated Revenue Fund

Consolidated entities

Specified purpose accounts

Consolidated levels

Revenue







Own-source revenue

54 011


48 555

4 186

245

52 986

Federal transfers

14 733


13 924

971

316

15 211

Total revenue

68 744


62 479

5 157

561

68 197

Expenditure







Expenditure excluding debt service

 59 030


 57 400

 3 954

 561

 61 915

Debt service

 8 064


 6 589

 998

-

 7 587

Total expenditure

 67 094


 63 989

 4 952

 561

 69 502

TOTAL

1 650


 1 510

205

0

 1 3051

P:     Preliminary.

1    Deficit for the purposes of the Public Accounts.




[ This page intentionally left blank. ]

Non-budgetary transactions

The government's consolidated net financial requirements stem from its budgetary and non-budgetary transactions. They represent the amount of liquid assets needed for the government's operating and investment activities for a given fiscal year. 

Non-budgetary transactions are aimed at presenting budgetary transactions on a cash basis and investments made by the government. For example, an increase in capital expenditures requires an outflow of funds but does not have an immediate impact on budgetary transactions. In addition, an increase in the retirement plans liability caused by, among other things, the government's expenditure as an employer does not entail an outflow of funds in the short term, but has an impact on the government's budgetary transactions

Non-budgetary transactions are presented by agregates: 

investments, loans and advances;

capital expenditures;

net investments in the networks;

retirement plans;5

other accounts.



  Summary of non-budgetary transactions

Consolidated non-budgetary transactions consist of the non-budgetary transactions of the Consolidated Revenue Fund and those of consolidated entities. For 2008-2009, consolidated non-budgetary requirements amount to $695 million, or $779 million less than forecast in the March 2008 Budget. 

For 2009-2010 and 2010-2011, consolidated non-budgetary requirements amount to $3.0 billion and $4.7 billion respectively.


TABLE .21    

Summary of consolidated non-budgetary transactions1

(millions of dollars)


March 2008 Budget




March 2009 BudgetP


2008-2009


Adjustments


2008-2009

2009-2010

2010-2011

Consolidated Revenue Fund








Investments, loans and advances

 18


147


129

 1 119

 1 161

Capital expenditures

 140


13


 127

 179

 164

Retirement plans

2 398


 98


2 300

2 490

2 205

Other accounts

 935


569


 366

 406

 137

Total 

1 305


631


936

786

743

Consolidated entities








Investments, loans and advances

 382


236


 146

 226

 409

Capital expenditures

 1 794


 484


 2 278

 3 125

 3 193

Net investments in the networks

 1 030


215


 815

 1 004

 2 291

Other accounts

427


181


608

526

440

Total

 2 779


148


 2 631

 3 829

 5 453

Consolidated non-budgetary transactions








Investments, loans and advances

 400


383


 17

 1 345

 1 570

Capital expenditures

 1 934


 471


 2 405

 3 304

 3 357

Net investments in the networks

 1 030


215


 815

 1 004

 2 291

Retirement plans

2 398


 98


2 300

2 490

2 205

Other accounts

 508


750


242

120

303

TOTAL CONSOLIDATED NON-BUDGETARY REQUIREMENTS

 1 474


779


 695

 3 043

 4 710

P:     Preliminary results for 2008-2009 and forecasts for subsequent years.

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

  Investments, loans and advances

Consolidated financial requirements for investments, loans and advances for 2008-2009 amount to $17 million. The forecasts for 2009-2010 and 2010-2011 stand at $1.3 billion and $1.6 billion respectively.

For 2008-2009, investments, loans and advances of the Consolidated Revenue Fund show a financial surplus of $129 million, or $147 million more than forecast in last year's Budget. Furthermore, in 2009-2010 and 2010-2011, financial requirements will amount to roughly $1.1 billion per year. This increase is due to, among other things, capital funding of $625 million that will be granted to the Société générale de financement du Québec in 2009-2010 for implementing the assistance program for high-performance industries that are experiencing financial difficulties because of the economic situation.

With regard to consolidated entities, the financial requirements of $146 million for 2008-2009 arise mainly from investments, loans and advances attributable to Investissement Québec and the Green Fund. 


TABLE .22    

Consolidated non-budgetary transactions for investments, loans and advances1

(millions of dollars)


March 2008 Budget




March 2009 BudgetP


2008-2009


Adjustments


2008-2009

2009-2010

2010-2011

Consolidated Revenue Fund

 18


147


129

 1 119

 1 161

Consolidated entities

 382


236


 146

 226

 409

CONSOLIDATED NON-BUDGETARY TRANSACTIONS

 400


383


 17

 1 345

 1 570

P:     Preliminary results for 2008-2009 and forecasts for subsequent years.

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



  Capital expenditures

For 2008-2009, consolidated investments in fixed assets amount to $3.8 billion. Taking into account a depreciation expense of $1.4 billion for these capital expenditures, the financial requirements associated with them total $2.4 billion.


TABLE .23    

Reconciliation of 2008-2009 capital investments and financial requirementsP, 1

(millions of dollars)


Level of investment

Depreciation

Financial requirements (capital expenditures)

Departments and organizations

 382

255

 127

Non-budget-funded bodies and special funds

 3 460

1 182

 2 278

TOTAL

 3 842

1 437

 2 405

P:     Preliminary results.

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

These financial requirements are explained largely by investments of $2.8 billion in road infrastructures financed by the Fonds de conservation et d'amélioration du réseau routier, which take into account the investment acceleration provided for in the 2008-2013 Québec Infrastructures Plan and presented in the Economic Statement  of January 14, 2009. These additional investments in the road network also explain the increase in financial requirements for 2009-2010 and 2010-2011.

Net investments in the networks

The financial requirements related to net investments in the networks amount to $815 million for 2008-2009, $1 billion for 2009-2010 and $2.3 billion for 2010-2011.

Network funding comes for the most part from Financement-Québec and the Corporation d'hébergement du Québec.

  Retirement plans 

For 2008-2009, the balance of non-budgetary transactions in regard to the retirement plans is $2.3 billion, which reduces the government's financing needs. 

In 2009-2010 and 2010-2011, the retirement plans should help to reduce financing needs by $2.5 billion and $2.2 billion respectively.

Other accounts

Financial requirements of other accounts consist of a series of changes in assets and liabilities such as accounts receivable and accounts payable.

Consolidated financial surpluses for other accounts amount to $242 million in 2008-2009. In 2009-2010 and 2010-2011, they will total $120 million and $303 million respectively.



[ This page intentionally left blank. ]

Consolidated net financial requirements

Overall, net financial requirements represent the liquid assets the government needs in a given fiscal year to finance the budgetary balance and non-budgetary transactions. 

As a whole, consolidated net financial requirements stand at $126 million in 2008-2009, $6.3 billion in 2009-2010 and $7.6 billion in 2010-2011.

The net financial surpluses of the Consolidated Revenue Fund amount to $2.3 billion in 2008-2009. Net financial requirements of $2.8 billion and $3.0 billion are expected for 2009-2010 and 2010-2011 respectively. These variations mainly reflect the change in the deficits forecast for the coming years and the depletion of the budgetary reserve.

The net financial requirements of non-budget-funded bodies and special funds will total $3.1 billion in 2008-2009, $4.2 billion in 2009-2010 and $5.5 billion in 2010-2011. These requirements stem primarily from two sources:

  • investments by the Fonds de conservation et d'amélioration du réseau routier;

  • investments by Financement-Québec and the Corporation d'hébergement du Québec in the health and education networks.

Deposits in the Generations Fund will amount to $701 million in 2008-2009, $715 million in 2009-2010 and $880 million in 2010-2011.

  

TABLE .24    

Consolidated net financial requirements1

(millions of dollars)


March 2008 Budget




March 2009 BudgetP


2008-2009


Adjustments


2008-2009

2009-2010

2010-2011

Budgetary balance for the purposes of the Balanced Budget Act

0


0


0

 3 946

 3 760

Deposits of dedicated revenues in the Generations Fund

742


 173


569

715

880

Consolidated budgetary balance

742


 173


569

 3 231

 2 880

Consolidated non-budgetary requirements

 1 474


779


 695

 3 043

 4 710

Consolidated net financial requirements

 732


606


 126

 6 274

 7 590

Including: 








Consolidated Revenue Fund

1 600


700


2 300

 2 800

 3 000

Non-budget-funded bodies and special funds

 3 074


 53


 3 127

 4 189

 5 470

Deposit in the Generations Fund

742


 41


7012

715

880

P:     Preliminary results for 2008-2009 and forecasts for subsequent years.

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

2    Including the deposit of $132 million from the budgetary reserve.


Appendix 1:     Investments of $50.6 billion
in the Québec Infrastructures Plan

The government acted swiftly to support the economy and employment in Québec by raising public infrastructure investments by $4.1 billion on January 14, 2009. This measure brings the budget for the Québec Infrastructures Plan to $41.8 billion for the 2008-2013 period.

The federal government and the municipalities are also taking part in implementing some of the projects under this plan. In this regard, the Québec government and the federal government signed the Canada-Québec Infrastructure Framework Agreement on September 3, 2008. Further investments of close to $4 billion will be added to those of the Québec Infrastructures Plan between now and 2014.

Thanks to the Québec Infrastructures Plan, investments of $50.6 billion will be injected into the economy, including the contribution of $4.6 billion from the federal government and that of $4.2 billion from the municipalities.


TABLE .25    

Infrastructure investments

(billions of dollars)

2007-2012 Québec Infrastructures Plan announced on October 11, 2007

37.7

Intensification of public investments to counter the economic slowdown, announced on January 14, 2009

4.1

2008-2013 QUÉBEC INFRASTRUCTURES PLAN 

41.8

Contribution of partners in projects planned under the Québec Infrastructures Plan


Federal government's share further, notably, to the Canada-Québec Infrastructure Framework Agreement 

4.6

Municipalities' share

4.2

TOTAL INVESTMENTS 2008-2013

50.6



  Average annual investments under the Québec Infrastructures Plan

Average annual investments under the Québec Infrastructures Plan will reach almost $8.4 billion over the period from 2008-2009 to 2012-2013. 

This is $4 billion more on average than the level of the previous five years and more than three times that of 10 years ago.


CHART .    

Change in average annual investments under the Québec 
Infrastructures Plan

(millions of dollars)



  Major investments in all sectors 

Major investments will be made in the coming years to maintain, improve and develop infrastructures:

$19.2 billion for transportation infrastructures, including roads, public transit and ferries;

$8.8 billion for health infrastructures, including in particular hopitals and residential and long-term care centres; 

$6 billion for education infrastuctures including universities, CEGEPSs and school boards;

$3.6 billion for municipal infrastructures, including those financed by the Société de financement des infrastructures locales du Québec;

$4.2 billion for other sectors, including cultural facilities, public housing, research infrastructures, court houses and public security facilities.


CHART .    

2008-2013 Québec Infrastructures Plan Investments by sector

(billions of dollars and percent)

1    Including the road network ($16.2 MM), public transit ($2.6 MM) and maritime infrastructures ($0.4 MM).

2    Including cultural facilities, public housing, research infrastructures, court houses and public security facilities.


  Road network

The road network is one of the government's priorities in regard to infrastructures. Owing to the ageing of road infrastructures, the government was obliged to adopt an ambitious rehabilitation and modernization plan starting in 2007. 

The government has set itself the objective of bringing the road network into line with the best road infrastructures in the United States. 

With the contribution of partners, this plan will make it possible to accelerate the repair of Québec's road network so that by 2022, 83% of its roads and 80% of its structures will have been brought up to par and will thus comply with the highest quality standards in North America. 

In 2009-2010, the government will step up the pace of its investments, bringing the sums invested that year to nearly $3.3 billion. 

Coupled with the $450-million contribution of the partners involved in implementing major road projects, road network investments will total $3.7 billion.


CHART .    

Breakdown road work in 2009-2010

(millions of dollars)

1    Federal, municipal and other partners.

2    Projects carried out under public-private partnerships for highways 25 and 30.


  Public transit

The Québec Infrastructures Plan, made public on January 14, 2009, provides for investments of $2.6 billion in public transit for the period from 2008-2009 to 2012-2013.

Added to these investments are those of the Société de financement des infrastructures locales du Québec and the Green Fund for implementing programs to improve public transit services.

Health

Investments of $8.8 billion will be made in health over the period from 2008-2009 to 2012-2013. In addition to carrying out maintenance work on assets for health and social services institutions, the government will implement upgrading and replacement projects. 

The investments in health also target the renovation of emergency wards and radiation oncology and cardiology units as well as the addition of 1 000 beds in residential and long-term care centres (CHSLDs).

Education

Investments of $6 billion will be made in education over the period from 2008-2009 to 2012-2013. Initiatives are aimed at carrying out work to maintain assets, renovate buildings and purchase equipment.

  Culture

Investments in culture will amount to close to $1.2 billion for the period from 2008-2009 to 2012-2013.

These investments are aimed at undertaking the construction of the Montréal Symphony Orchestra's new concert hall, to be carried out by a public-private partnership, the expansion of the Musée national des beaux-arts du Québec and the Montréal Museum of Fine Arts as well as the completion of the Quartier des spectacles de Montréal.

The investments allocated under the reading and book policy will remain at the level of $15 million per year.

Municipal infrastructures 

Investments in municipal infrastructures will reach more than $3.6 billion for the the 2008-2013 period. The government plans to invest an average of $725 million per year. 

These investments are intended to help municipalities complete the bringing of their drinking water treatment and waste water purification facilities up to standard. They include $600 million to carry out work on facilities in Baie-Comeau, Laval, Montréal, Shawinigan and Thetford Mines.

The Société de financement des infrastructures locales du Québec will contribute $371 million to finance these investments in 2009-2010.

Public housing

The government will allocate over $1.2 billion to public housing for the 2008-2009 to 2012-2013 period. Close to $675 million is being set aside to complete the delivery of the 24 000 housing units6 provided for under the AccèsLogis Québec and Affordable Housing Québec programs.

Over $90 million per year is being provided to modernize and carry out major renovation work on low-rental housing units.

  Research infrastructures

In the framework of the Québec Research and Innovation Strategy,7 the government plans to support research infrastructure investments in order to ensure that Québec remains competitive internationally.

Investments of $920 million are provided for research infrastructures under the 2008-2013 Québec Infrastructures Plan. These investments are aimed at supporting the research assistance program and projects co-funded with the Canada Foundation for Innovation.

Justice and public security

The Société immobilière du Québec will make investments of nearly $1 billion in the justice and public security sector.


TABLE .26    

Investments under the 2008-2013 Québec Infrastructures Plan by type of investment and by sector

(Contribution of Québec, millions of dollars)


Asset maintenance





Sector

Regular budget

Absorption of maintenance deficit over 15 years

Subtotal

Improvement and replacement

Subtotal

Project completion

2008-2013 Québec Infrastructures Plan

Road network

8 378.0

2 070.0

10 448.0

1 336.8

11 784.8

4 366.5

16 151.3

Public transit

973.7

514.0

1 487.7

665.6

2 153.3

485.5

2 638.8

Maritime infrastructures

-

-

-

350.0

350.0

-

350.0

Health

4 325.4

1 051.8

5 377.2

2 127.2

7 504.4

1 277.5

8 781.9

Education

4 345.5

1 167.9

5 513.4

471.7

5 985.1

56.0

6 041.1

Culture

629.6

234.2

863.8

148.0

1 011.8

170.2

1 182.0

Municipal infrastructures

1 785.6

1 603.9

3 389.51

40.0

3 429.5

200.0

3 629.5

Public housing

260.1

223.0

483.1

115.4

598.5

559.2

1 157.7

Research

17.4

-

17.4

100.0

117.4

802.2

919.6

Justice and public security

291.1

-

291.1

665.1

956.2

-

956.2

TOTAL

21 006.4

6 864.8

27 871.2

6 019.8

33 891.0

7 917.1

41 808.1

1    Including an envelope of $1.2 MM to bring drinking water purification and sewage treatment facilities of municipalities included under the 'Improvement and replacement' heading of the 2007-2012 Québec Infrastructures Plan up to standard.

  

TABLE .27    

Investments under the 2008-2013 Québec Infrastructures Plan by sector

(Contribution of Québec, millions of dollars)

Sector

2008-2009

2009-2010

2010-2011

2011-2012

2012-2013

Total

Road network

2 002.9

2 257.2

2 396.3

2 593.1

2 535.3

11 784.8

Public transit

542.3

567.9

537.0

343.6

162.5

2 153.3

Maritime infrastructures

-

15.4

24.0

148.5

162.1

350.0

Health

1 378.3

1 475.3

1 350.1

1 583.3

1 717.4

7 504.4

Education

1 300.7

1 278.6

1 119.3

1 133.4

1 153.1

5 985.1

Culture

191.5

235.9

259.1

155.8

169.5

1 011.8

Municipal infrastructures

542.1

738.6

647.7

748.8

752.3

3 429.5

Public housing

92.8

94.7

128.9

143.7

138.4

598.5

Research

4.0

3.7

3.6

3.0

103.1

117.4

Justice and public security

165.4

265.6

218.3

225.2

81.7

956.2

Subtotal

6 220.0

6 932.9

6 684.3

7 078.4

6 975.4

33 891.0

Project completion

2 035.5

2 004.4

1 782.3

1 338.3

756.6

7 917.1

2008-2013 QUÉBEC INFRASTRUCTURES PLAN

8 255.5

8 937.3

8 466.6

8 416.7

7 732.0

41 808.1



TABLE .28    

2008-2013 Québec Infrastructures Plan

(Contribution of Québec, millions of dollars)


2008-2009

2009-2010

2010-2011

2011-2012

2012-2013

Total

2007-2012 Québec Infrastructures Plan

7 740.4

8 418.9

8 059.5

7 447.9

6 057.0

37 723.7

Acceleration announced on January 14, 2009

515.11

518.4

407.1

968.8

1 675.0

4 084.42

2008-2013 Québec Infrastructures Plan

8 255.5

8 937.3

8 466.6

8 416.7

7 732.0

41 808.1

1    This amount will be realized as of the first quarter of 2009.

2    Acceleration announced on January 14, 2009.

Note: Compared with the 2007-2008 level of investment under the 2007-2012 Québec Infrastructures Plan, the additional investments amount to $3 404.6 M in 2009-2010, $3 045.2 M in 2010-2011, $2 433.6 M in 2011-2012 and $1 042.7 M in 2012-2013, for a total of $9 926.1 M.



Appendix 2:    Investment projects by government enterprises

Certain government enterprises will make substantial investments in the coming years that will contribute to Québec's economic recovery. In 2009-2010, investments by these corporations will increase by over $1 billion compared with 2008-2009. They will rise again in 2010-2011 to the unprecedented level of $5.5 billion, or $1.3 billion more than in fiscal 2008-2009. 

Hydro-Québec

Hydro-Québec alone will boost its investments by $1 billion in 2009-2010 and $1.3 billion in 2010-2011 compared with 2008-2009. 

For example, the La Romaine hydroelectric project, which will begin in 2009 and continue until 2020, and the Eastmain-1-A/Rupert and La Sarcelle project, which will be completed in 2012, rank first and third respectively among the largest infrastructure projects in Canada and will help to secure Québec's energy wealth over the long term. 

The Eastmain-1-A/Rupert and La Sarcelle project alone will generate investments of $1.3 billion in 2009 and $921 million in 2010. As for the la Romaine project, it will really get underway in 2010 with expenditures estimated at $0.5 billion.

At the same time, renovation work on the Gentilly power station will generate economic spinoffs of $352 million and $414 million in 2009 and 2010 respectively.

Hydro-Québec's other projects will also have significant spinoffs in Québec. Overall, they are estimated at close to $3.2 billion in 2010 and almost $3.5 billion in 2011.

Loto-Québec and the Société des alcools du Québec

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

Loto-Québec's investments will reach $184 million in 2009-2010 compared with $166 million in 2008-2009. Of that amount, $41.5 million will be devoted to renovating the Casino de Montréal. In 2010-2011, Loto-Québec will invest an additional $110 million in this renovation project, out of total investments of $155 million

  The Société des alcools du Québec, for its part, will also increase its investments in 2009-2010 through expenditures of $56 million, allocated mainly to deploying its network of outlets and to implementing computer resource projects, compared with total investments of $37 million in 2008-2009. The Société plans to invest $45 million in 2010-2011.




TABLE .29    

Projected investment by government enterprises

(millions of dollars)


2008-2009

2009-2010

2010-2011

Hydro-Québec1




Major projects




Eastmain-1-A/Rupert and La Sarcelle

997.0

1 331.0

921.0

Gentilly-2 - repair project

127.0

352.0

414.0

La Romaine complex

59.0

121.0

496.0

Chute-Allard and Rapides-des-Cœurs

228.0

53.0

Transmission integration - Wind turbines (990 MW and 2000 MW)

95.0

166.0

235.0

Interconnection with Ontario

249.0

251.0

46.0

Global Energy Efficiency Plan (GEEP)

236.0

303.0

342.0

Subtotal major projects

1 990.0

2 577.0

2 454.0

Other projects

2 002.0

2 419.0

2 840.0

Total Hydro-Québec

3 992.0

4 996.0

5 294.0

LOTO-QUÉBEC




Casino de Montréal

41.5

110.0

Other projects

166.22

142.3

45.0

Total Loto-Québec

166.2

183.8

155.0

SOCIÉTÉ DES ALCOOLS DU QUÉBEC




Outlet network

11.0

17.0

Other projects

26.3

39.0

45.03

Total Société des alcools du Québec

37.3

56.0

45.0

TOTAL INVESTMENTS

4 195.5

5 235.8

5 494.0

1    For the fiscal year ending December 31.

2    This amount includes $47 million for improvement work on casinos as a whole, including nearly $8 million for expanding the Casino de Charlevoix and $13 million for building the casino in Mont-Tremblant.

3    The breakdown between outlet deployment and other projects remains to be determined for fiscal 2010-2011.



Exhibit (99.15)


Section D


Debt, Financing
and Debt Management

    Debt    

1.1    Gross debt    

1.1.1    Change in gross debt in 2008-2009    

1.2    Total debt under the Act to reduce the debt and establish the Generations Fund    

1.3    Debt representing accumulated deficits    

1.4    Public sector debt    

1.5    Comparison of the debt of Canadian provinces    

1.6    Retirement plans    

1.7    Retirement Plans Sinking Fund    

1.8    Employee future benefits    

1.9    Generations Fund    

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

1.10.1    Retirement Plans Sinking Fund    

1.10.2    Generations Fund    

1.10.3    Accumulated Sick Leave Fund    

1.10.4    Budgetary Reserve Fund    

1.11    Impact of the return of the Retirement Plans Sinking Fund in 2008 on debt service    

2.    Financing    

2.1    Financing strategy    

2.1.1    Diversification by market    

2.1.2    Diversification by instrument    

2.1.3    Diversification by maturity    

2.2    Financing program    

2.2.1    Yield    

3.    Debt management    D.39

3.1    Structure of the debt by currency    

3.2    Structure of the debt by interest rate    

4.    credit ratings    D.43

4.1    The Québec government's credit rating    

4.2    Comparison of the credit ratings of Canadian provinces    

5.    Additional information    D.51

Debt

Several concepts of debt can be used to measure a government's indebtedness.

This section details the components of the debt concepts used by the Québec government and compares the indebtedness of the Canadian provinces.

The following table shows the Québec government's debt according to the main debt concepts used.


TABLE .    

Debt of the Québec government as at March 31

(millions of dollars)


2008

2009P

2010P

2011P

GROSS DEBT

148 015

151 447

160 273

170 180

As a % of GDP

49.9

49.9

52.8

54.0

Less: Financial assets, net of other liabilities

 23 697

 22 415

 23 287

 24 610

Less: Non-financial assets

 30 147

 33 556

 37 984

 43 688

DEBT REPRESENTING ACCUMULATED DEFICITS IN ACCORDANCE WITH THE PUBLIC ACCOUNTS1, 2

94 171

95 476

99 002

101 882

As a % of GDP

31.7

31.4

32.6

32.3

Plus: Balance of the budgetary reserve

2 301

295

-

-

DEBT REPRESENTING ACCUMULATED DEFICITS AFTER TAKING INTO ACCOUNT THE BUDGETARY RESERVE2

96 472

95 771

99 002

101 882

As a % of GDP

32.5

31.5

32.6

32.3

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

  • Before taking into account the budgetary reserve.

  • Including the impact of the plan to restore fiscal balance.




  Gross debt

The government's gross debt is the sum of the consolidated direct debt, the net retirement plans liability and the net employee future benefits liability, minus the balance of the Generations Fund.

Preliminary results show that, as at March 31, 2009, the gross debt should amount to $151 447 million, or 49.9% of GDP. As at March 31, 2011, the gross debt is expected to be $170 180 million, or 54% of GDP.


TABLE .    

Gross debt as at March 31

(millions of dollars)


2008

2009P

2010P

2011P

Direct debt of the Consolidated Revenue Fund1

82 315

86 941

92 020

97 172

Debt of consolidated entities

35 774

37 924

42 113

47 583

Consolidated direct debt2

118 089

124 865

134 133

144 755

Plus: Net retirement plans liability

30 426

28 391

28 720

28 941

Plus: Net employee future benefits liability

733

125

69

13

Less: Generations Fund

 1 233

 1 934

 2 649

 3 529

GROSS DEBT

148 015

151 447

160 273

170 180

As a % of GDP

49.9

49.9

52.8

54.0

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

1    Excluding pre-financing.

2    The consolidated direct debt reflects all of the government's financial requirements that give rise to borrowings 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, Immobilière SHQ, the Agence métropolitaine de transport and the Société du Palais des congrès de Montréal. As at March 31, 2009, the consolidated direct debt is expected to total $124 865 million.

The net retirement plans liability represents the gross retirement plans liability minus the balance of the Retirement Plans Sinking Fund (RPSF), an asset established to pay the retirement benefits of public and parapublic sector employees. As at March 31, 2009, the net retirement plans liability should amount to $28 391 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, 2009, the net employee future benefits liability should stand at $125 million.

As at March 31, 2009, the sums accumulated in the Generations Fund are expected to amount to $1 934 million. 

Change in gross debt in 2008-2009

In 2008-2009, the government's gross debt should increase by $3 432 million. Even though the budget will be balanced this year, the gross debt continues to rise for the following reasons: 

First of all, the government invests in its corporations. It makes such investments through advances and direct capital outlays or by allowing these corporations to keep part of their profits to finance their own investments.

For example, Hydro-Québec pays 75% of its net profits as dividends to the government and keeps 25% to fund its investments, particularly hydroelectric dams. The portion of profits that the government is leaving Hydro-Québec in 2008-2009 ($611 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 $17-million increase in the gross debt in 2008-2009. This amount includes the withdrawal of $805 million from the $1 100 million deposited with the Caisse de dépôt et placement du Québec in 2007-2008 under the Act to establish a budgetary surplus reserve fund.

In addition, 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 $815 million in 2008-2009.

  Secondly, 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 2008-2009, net capital expenditures should cause the gross debt to increase by $2 405 million.

Lastly, changes in some of the government's other asset and liability items, such as accounts payable and accounts receivable, should raise the gross debt by $896 million in 2008-2009. 


TABLE .

Main factors responsible for growth in the Québec government's debt

(millions of dollars)


Debt, beginning of year

Budgetary deficit (surplus)

Investments, loans and advances

Net 
investment in the networks

Net capital expenditures1

Other factors2

Generations Fund

Debt, end of year3

Before accounting reform



Total debt



1998-1999

98 385

 126

1 402


217

1 235


101 113

1999-2000

101 113

 7

2 006


359

 1 351


102 120

2000-2001

102 120

 427

1 632


473

1 050


104 848

2001-2002

104 848

 22

1 142


995

212


107 175

2002-2003

107 175

728

1 651


1 482

306


111 342

2003-2004

111 342

358

1 125


1 019

881


114 725

2004-2005

114 725

664

979


1 083

 855


116 596

2005-2006

116 596

 37

1 182


1 166

 605


118 302

2006-2007

118 302

 20

1 977


1 117

1 641

 576

122 441

After accounting reform



Gross debt



2007-2008

143 449

-

2 410

487

1 457

861

 649

148 015

2008-2009P

148 015

-

17

815

2 405

896

 701

151 447

2009-2010P

151 447

3 946

1 345

1 004

3 304

 58

 715

160 273

2010-2011P

160 273

3 760

1 570

2 291

3 357

 191

 880

170 180

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

P:    Preliminary results for 2008-2009 and forecasts for subsequent years.

1    Capital expenditures made during the year minus the yearly depreciation expenditure.

2    Includes notably 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.

3    Excluding pre-financing.


  Total debt under the Act to reduce the debt and establish the Generations Fund

When the government created the Generations Fund in June 2006, the concept of total debt was used to set the debt/GDP ratio targets in the Act to reduce the debt and establish the Generations Fund.

Total debt corresponds to the sum of the following elements:

debt issued on financial markets by the government and entities consolidated line by line;

the net retirement plans liability of public and parapublic sector employees;

minus the balance of the Generations Fund.

When the Generations Fund was created, line-by-line consolidated entities corresponded to those entities that were included in the government's reporting entity at the time. However, the reporting entity has been broadened since the fund's creation. With the reform of government accounting in December 2007, entities in the health and social services and education networks were consolidated. The concept of debt was broadened to include the debt of entities that make loans to the networks, namely, Financement-Québec and the Corporation d'hébergement du Québec (CHQ), and to reclassify the debt of the Société québécoise d'assainissement des eaux (SQAE) and the net employee future benefits liability. In addition, since the 2007-2008 fiscal year, the results of Immobilière SHQ have also been consolidated line by line with those of the government. This broader concept of direct debt corresponds to gross debt as described above. 

For the purpose of monitoring the targets incorporated in the Act to reduce the debt and establish the Generations Fund, the concept of total debt corresponds to the reporting entity that was in effect when the Generations Fund was created. 

Preliminary results show that the total debt should amount to $129 916 million as at March 31, 2009, or 42.8% of GDP. Under the Act to reduce the debt and establish the Generations Fund, the total debt will have to represent 38% of GDP as at March 31, 2013, 32% of GDP as at March 31, 2020 and 25% of GDP as at March 31, 2026.

  On account of the deficits anticipated for the coming fiscal years, the weight of the total debt as a percentage of GDP is expected to rise temporarily even though deposits continue to be made in the Generations Fund.

Therefore, until the tabling of the 2011-2012 Budget, that is, when the economic recovery will be well under way, the government will review the targets provided for in the Act to reduce the debt and establish the Generations Fund.


TABLE .    

Total debt and gross debt of the Québec government

(millions of dollars)


2008

2009P

2010P

2011P

TOTAL DEBT UNDER THE ACT TO REDUCE THE DEBT AND ESTABLISH THE GENERATIONS FUND

125 915

129 916

138 015

145 913

As a % of GDP

42.4

42.8

45.5

46.3






Plus:    Debt of Financement-Québec

14 274

14 361

15 223

17 573

Debt of the CHQ and other entities

2 806

2 809

2 701

2 660

Debt of the SQAE

2 416

2 359

2 231

1 889

Debt of Immobilière SHQ

1 871

1 877

2 034

2 132

Net employee future benefits liability

733

125

69

13

GROSS DEBT

148 015

151 447

160 273

170 180

As a % of GDP

49.9

49.9

52.8

54.0

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



  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, 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 $95 771 million as at March 31, 2009, or 31.5% of GDP.


TABLE .    

Debt representing accumulated deficits as at March 31

(millions of dollars)


2008

2009P

2010P

2011P

Gross debt

148 015

151 447

160 273

170 180

Less: Financial assets, net of other liabilities

 23 697

 22 415

 23 287

 24 610

Less: Non-financial assets

 30 147

 33 556

 37 984

 43 688

DEBT REPRESENTING ACCUMULATED DEFICITS IN ACCORDANCE WITH THE PUBLIC ACCOUNTS 1, 2

94 171

95 476

99 002

101 882

As a % of GDP

31.7

31.4

32.6

32.3

Plus: Balance of the budgetary reserve

2 301

295

-

-

DEBT REPRESENTING ACCUMULATED DEFICITS AFTER TAKING INTO ACCOUNT THE BUDGETARY RESERVE2

96 472

95 771

99 002

101 882

As a % of GDP

32.5

31.5

32.6

32.3

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

1    Before taking into account the budgetary reserve.

2    Including the impact of the plan to restore fiscal balance.


  

Net financial assets and non-financial assets 
of the Québec government

Net financial assets correspond to the difference between financial assets and financial liabilities. Financial assets consist primarily of the value of the government's investments in its corporations, accounts receivable and long-term investments. 

Financial liabilities include mainly accounts payable.

Net financial assets as at March 31, 2008

(millions of dollars)

FINANCIAL ASSETS



Investments in government enterprises1

24 608


Accounts receivable

14 389


Long-term investments

5 384


Other

989


Subtotal


45 370

FINANCIAL LIABILITIES



Accounts payable

14 254


Deferred revenue

2 821


Federal transfers to be repaid

1 903


Deferred foreign exchange gains

1 146


Other

1 549


Subtotal


21 673

Total financial assets, net of liabilities


23 697

1    Corresponds for the most part to net profits of Hydro-Québec not paid to the government as dividends and investments in the Société générale de financement du Québec.

Non-financial assets consist of government capital assets, loans made to the health and social services and education networks to fund their capital expenditures, as well as inventories and prepaid expenses.

Non-financial assets as at March 31, 2008


(millions of dollars)


Capital assets



19 483

Net investment in the health and social services and education networks




Health and social services network 


4 596


Education network


5 876

10 472

Inventories and prepaid expenses



192

Total non-financial assets



30 147



  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, 2009, the public sector debt should be $208 362 million, or 68.6% of GDP.



TABLE .

Public sector debt as at March 31 

(millions of dollars)


Before accounting reform

After accounting reform


2005

2006

2007

2008

2009

P

Government debt1, 2

116 596

118 302

143 449

148 015

151 447


Health and social services and education networks3

12 301

13 078

2 023

1 552

911


Hydro-Québec

33 032

32 367

32 674

32 399

36 572


Other government enterprises4

3 726

3 540

31

25

171


Municipalities5

17 053

18 347

16 409

17 321

19 261


TOTAL

182 708

185 634

194 586

199 312

208 362


As a % of GDP

69.5

68.5

69.1

67.2

68.6


P:    Preliminary results.

  • Excluding pre-financing. 

  • Before the accounting reform the data correspond to the concept of total debt under the Act to reduce the debt and establish the Generations Fund, while after the accounting reform they correspond to the concept of gross debt.

  • Corresponds to the long-term debt for which the government subsidizes debt service through transfers for repaying the principal and paying the interest on borrowings.

  • Excluding debt guaranteed by a third party or secured by assets such as inventories and accounts receivable. 

5    Includes the long-term debt for which the government subsidizes debt service through transfers for repaying the principal and paying the interest on borrowings. The government-subsidized long-term debt should amount to $2 700 million as at March 31, 2009.

  

Information provided to regulatory authorities
and data on Québec's debt

To borrow on foreign financial markets, the Québec government must satisfy the requirements of the regulatory authorities of those markets. Accordingly, Québec must file a variety of information with the Securities and Exchange Commission (SEC) in the United States, the Financial Services Authority (FSA) in the United Kingdom, the Australian Stock Exchange and the regulatory authority in Japan.

Each year, Québec files an information document (Form 18-K) with the SEC that contains all the information required under the Securities Act of 1933. The annual filing of Form 18-K avoids having to file a prospectus for each borrowing, which would entail additional time and costs. The information in Form 18-K must reflect the borrower's financial position as faithfully as possible. This requirement provides investors with the relevant information to make informed investment decisions.

Concerning the debt, the SEC legislation requires the inclusion of 'funded debt', i.e. the debt with a term exceeding one year that was contracted on financial markets, and the 'floating debt', i.e. the short-term debt that is continually rolled over to fund operations. Québec also provides information concerning the liability for the retirement plans of the public and parapublic sectors.

The information on the public sector debt in Form 18-K is divided into four categories:

the debt contracted by the government to meet its financial requirements and fund government enterprises;

the debt of public sector entities (mainly Hydro-Québec) for which the government guarantees the payment of the interest and the repayment of the principal in the event of the entity's default of payment;

the debt of the municipalities;

the debt of other institutions of the public sector issued in their own name (educational institutions, health and social services institutions and other government enterprises).

Moreover, Québec provides other regulatory authorities around the world with the same information supplied to the SEC.

As regards the public sector debt shown on the preceding page, the data on the debt of the health and social services and education networks, Hydro-Québec, government enterprises and municipalities reflect the requirements of the SEC for the purposes of the presentation of information in the annual Form 18-K and those of the other regulatory authorities with which the government must file information.



  Comparison of the debt of Canadian provinces

It is worthwhile to compare 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 reference to 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. 

On the basis of the concept of debt representing accumulated deficits, Québec is the most indebted province. Indeed, as at March 31, 2008, its debt/GDP ratio was 32.5%.


CHART .1    

Debt representing accumulated deficits1 as at March 31, 2008

(as a percentage of GDP)

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

  • After taking the budgetary reserve into account.

Sources:    Ministère des Finances du Québec, the 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, 2008. Figures surrounded by boxes indicate the concept of debt used by each government in its budget documents to measure its level of debt. 


TABLE .

Debt as at March 31, 2008 according to the various concepts

(millions of dollars)


QC

Fed.

ON

BC

AB

NB

NL

MB

SK

NS

PEI









 




Consolidated direct debt

118 089

390 697

162 056

34 185

2 522

5 300

6 825

11 786

7 156

9 292

1 044

Net retirement plans liability

30 426

137 371

 3 714

2

7 883

 245

1 459

2 300

5 088

328

 43

Net employee future benefits liability

733

47 901

4 738

1 648

219

641

1 513

-

387

1 293

82

Generations Fund

 1 233

-

-

-

-

-

-

-

-

-

-













Gross debt1

148 015

575 969

163 080

35 835

10 624

5 696

9 797

14 086

12 631

10 913

1 083

As a % of GDP

49.9

37.5

27.9

18.6

4.1

21.1

33.2

29.0

24.5

33.1

23.8













Less: 












Net financial assets2

 21 396

 59 688

 20 662

 13 552

 45 670

1 247

391

 3 898

 6 866

1 202

264













Net debt3

126 6194

516 281

142 418

22 283

 35 046

6 943

10 188

10 188

5 765

12 115

1 347

As a % of GDP

42.7

33.6

24.3

11.6

 13.5

25.8

34.5

21.0

11.2

36.7

29.6













Less: 












Non-financial assets

 30 147

 58 644

 36 801

 29 734

 14 140

 5 538

 2 436

 5 995

 4 547

 3 928

 587













Debt representing accumulated deficits3

96 4724

457 637

105 617

 7 451

 49 186

1 405

7 752

4 193

1 218

8 187

760

As a % of GDP

32.5

29.8

18.1

 3.9

 19.0

5.2

26.3

8.6

2.4

24.8

16.7













Note:    The boxes indicate the debt concept used in the government's budget documents.

1    Gross debt is not disclosed in most of the governments' public accounts. However, the components of gross debt, i.e. consolidated direct debt, the net retirement plans liability and the net employee future benefits liability, are disclosed.

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 budgetary reserve into account.

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


  Retirement plans

The Québec government participates financially in the retirement plans of its employees. As at December 31, 2007, these plans had 531 451 participants and 257 426 beneficiaries.


TABLE .

Retirement plans of public and parapublic sector employees as at December 31, 2007


Active participants

Beneficiaries

Government and Public Employees Retirement Plan (RREGOP)

495 000

159 509

Pension Plan of Management Personnel (PPMP)

26 550

18 965

Other plans: 



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

510

48 694

Civil Service Superannuation Plan (CSSP)1

460

23 744

Superannuation Plan for the Members of the Sûreté du Québec (SPMSQ)

5 200

4 393

Pension Plan of Peace Officers in Correctional Services (PPPOCS)

3 100

1 377

Pension Plan of the Judges of the Court of Québec (PPJCQ)

270

312

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

240

108

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

121

324

Total for other plans

9 901

78 952

TOTAL

531 451

257 426

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 2008-2009, the government should pay $4 132 million to cover its share of the benefits paid to its retired employees.

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, 2009, the government's retirement plans liability should be $64 471 million, an amount that is recognized in the government's gross debt.


TABLE .    

Retirement plans liability

(millions of dollars)


March 31, 2009P

Government and Public Employees Retirement Plan (RREGOP)

32 946

Pension Plan of Management Personnel (PPMP)

6 380

Other plans: 


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

15 438

Civil Service Superannuation Plan (CSSP)

5 025

Superannuation Plan for the Members of the Sûreté du Québec (SPMSQ)

3 217

Pension Plan of Peace Officers in Correctional Services (PPPOCS)

830

Pension Plan of the Judges of the Court of Québec (PPJCQ)

467

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

168

Total for other plans

25 145

RETIREMENT PLANS LIABILITY

64 471

P:    Preliminary results.

  Annual retirement plans expenditure

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

In 2008-2009, this expenditure should total $1 979 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. $1 503 million;

the amortization of revisions to the government's actuarial obligations that arise from the updating of actuarial valuations, for a cost of $476 million.


TABLE .

Retirement plans expenditure

(millions of dollars)




2008-2009P

Net cost of vested benefits



1 503

Amortization of revisions arising from actuarial valuations



476

RETIREMENT PLANS EXPENDITURE



1 979

P:    Preliminary results.

  Retirement Plans Sinking Fund

The Retirement Plans Sinking Fund (RPSF) 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, 2009, the book value of the RPSF should amount to $36 080 million. 



TABLE .

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

-


850

4

854

1994-1995

854


-

 5

849

1995-1996

849


-

74

923

1996-1997

923


-

91

1 014

1997-1998

1 095

1

-

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

2008-2009P

31 764


2 100

2 216

36 080

P:    Preliminary results.

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


  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 following the reform of government accounting in 2007. The government is obliged to apply its accounting policies in the same way, year after year, in presenting its financial statements. 

On the basis of the strict and consistent application of the government's accounting policies, the book value of the RPSF as at March 31, 2009 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 in the government's financial framework over the entire planning horizon. Section 1.11 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 15 years.



TABLE .    

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

36 080

26 1011

9 979

1    Market value as at December 31, 2008.

  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 .13

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

123 865

124 865

1 000


Retirement plans liability

64 471

64 471

-


Less: Book value of the RPSF 

 35 080

 36 080

 1 000

(B)

Net retirement plans liability

29 391

28 391

 1 000

(C)

Net employee future benefits liability

125

125

-

(D)

Less: Generations Fund

 1 934

 1 934

-

(E)

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

151 447

151 447

-

1    Illustration based on preliminary results as at March 31, 2009.


  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 11 years out of 15.


TABLE .14    

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

(percent)


Return of the 
RPSF  

1

Cost of new borrowings

2

Difference

1994-1995

 6.0


5.9


 11.9

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

  • On a calendar year basis.

  • On a fiscal year basis.

  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 represent roughly 50% of the government's actuarial obligations in regard to the retirement plans of public and parapublic sector employees. The target of 70% should be attained three years earlier than anticipated, i.e. in 2016-2017.


CHART .2

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

(percent)

  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.

As planned, the government created the Accumulated Sick Leave Fund in 2008-2009, in which were deposited sums that will be used to make the necessary payments. Therefore, the balance of the net employee future benefits liability should be $125 million as at March 31, 2009.


TABLE .15

Net employee future benefits liability

(millions of dollars)


March 31, 2009P

Accumulated sick leave

781

Survivor's pension plan

404

Accumulated Sick Leave Fund

 616

Survivor's Pension Plan Fund

 444

NET EMPLOYEE FUTURE BENEFITS LIABILITY

125

P:    Preliminary results.



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

As at March 31, 2009, the book value of the Generations Fund should amount to $1 934 million. The following table shows the book and market values of the Generations Fund for the past three years.


TABLE .16    

Book value and market value of the Generations Fund 
as at March 31

(millions of dollars)


Book value

Market value

Difference

2006-2007

584

586

 2

2007-2008

1 233

1 199

34

2008-2009

1 934

1 6601

274

1    Market value of $1 297 million as at December 31, 2008 plus the amounts that will be allocated to the Generations Fund from January 1 to March 31, 2009.


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

In 2008, the return on the net assets of all depositors with the Caisse de dépôt et placement du Québec was  25.0%. This section describes in greater detail the returns on four funds deposited with the Caisse by the ministère des Finances.


TABLE .17    

Market value and return in 2008 of funds deposited with the
Caisse de dépôt et placement by the ministère des Finances

(millions of dollars and percent)

Name

Acronym

Return

Market value 
as at December 31, 2008



%

$M

Retirement Plans Sinking Fund

RPSF

 25.58

26 101

Generations Fund

GF

 22.35

1 297

Accumulated Sick Leave Fund

ASLF

0.57

602

Budgetary Reserve Fund

BRF

2.46

337

Retirement Plans Sinking Fund

The Retirement Plans Sinking Fund (RPSF) showed a return of  25.58% in 2008. Its market value was $26 101 million as at December 31, 2008.

The assets of the RPSF are managed by the Caisse de dépôt et placement du Québec in accordance with an investment policy established by the ministère des Finances. This investment policy was established taking several factors into account, including the return, standard deviation and correlation forecasts for various categories of assets prepared by the Caisse de dépôt et placement du Québec, as well as opportunities for investing in these assets.

  The investment policy of the RPSF consists of 30% fixed-income securities (bonds, etc.), 35.5% stock markets and 34.5% other investments (real estate, private equity, etc.). These weightings are similar to those used on average by all depositors with the Caisse. 


TABLE .18    

Investment policy of the RPSF as at January 1, 20091

(percent)


Reference 
portfolio of the RPSF 

Average reference portfolio of depositors as a whole 

2

Fixed-income securities

30.0

32.0


Stock markets

35.5

34.3


Other investments

34.5

33.7


TOTAL

100.0

100.0


  • The detailed investment policy, which shows the percentages invested in each of the various asset categories offered by the Caisse, is presented in the additional information section.

  • Data for 2007. Source: Caisse de dépôt et placement du Québec, Annual Report 2007. The annual report for 2008 has not been published yet.

With its investment policy, the RPSF should generate a long-term 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,8 the anticipated 
long-term return on assets of two retirement plans out of three in Canada is equal to or above 7%.

It is important to note that the RPSF's investment policy is based on a long-term horizon and constitutes the reference portfolio for the Caisse. However, through active management, the Caisse adjusts the allocation of RPSF's assets, particularly to take fluctuations in the economic and financial situation into account. The RPSF's reference portfolio would have generated a return of  19.15% in 2008. The spread between this return and that realized, i.e.  25.58%, reflects the Caisse's active management. 

  Generations Fund 

The Generations Fund posted a return of  22.35% in 2008. As at December 31, 2008, its market value was $1 297 million.

The assets of the Generations Fund are managed by the Caisse de dépôt et placement du Québec in keeping with an investment policy established by the ministère des Finances. This investment policy was established taking several factors into account, including the return, standard deviation and correlation forecasts for various categories of assets prepared by the Caisse de dépôt et placement du Québec, as well as opportunities for investing in these assets.

The investment policy of the Generations Fund consists of 37% fixed-income securities (bonds, etc.), 35% stock markets and 28% other investments (real estate, private equity, etc.). 


TABLE .19    

Investment policy of the Generations Fund as at January 1, 20091

(percent)


Reference 
portfolio of the 

Generations Fund

Average reference portfolio of depositors as a whole

2

Fixed-income securities

37.0

32.0


Stock markets

35.0

34.3


Other investments

28.0

33.7


TOTAL

100.0

100.0


  • The detailed investment policy, which shows the percentages invested in each of the various asset categories offered by the Caisse, is presented in the additional information section.

  • Data for 2007. Source: Caisse de dépôt et placement du Québec, Annual Report 2007. The annual report for 2008 has not been published yet.


The investment policy of the Generations Fund aims to achieve an annual long-term 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 reference 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 reference portfolio of the Generations Fund would have generated a return of  17.64% in 2008. The spread between this return and that realized, i.e.  22.35%, reflects the Caisse's active management.





Accumulated Sick Leave Fund

The Accumulated Sick Leave Fund (ASLF) was created in the fall of 2008 following the adoption of Bill 80 by the National Assembly last June. Deposits totalling $600 million were subsequently made and initially placed in short-term investments, which explains the return of 0.57% posted by the ASLF in 2008. Its market value was $602 million as at December 31, 2008. 

The assets of the ASLF are managed by the Caisse de dépôt et placement du Québec in keeping with an investment policy established by the ministère des Finances. As of January 1, 2009, the ASLF's investment policy has been identical to that of the RPSF, since 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 reference 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.

Budgetary Reserve Fund

The Budgetary Reserve Fund (BRF) consists of budgetary surpluses realized by the government. 

The BRF posted a return of 2.46% in 2008. Its market value was $337 million as at December 31, 2008.


Contrary to the three other funds which fall under the responsibility of the ministère des Finances, the BRF by definition has a short-term investment horizon. Consequently, its investment policy consists of 100% short-term investments, whose principal is guaranteed and whose liquidity is high. 


  Impact of the return of the Retirement Plans Sinking Fund in 2008 on debt service 

As indicated in section 1.7, the income of the RPSF is applied against the government's debt service. The losses of the Caisse in 2008 will affect the RPSF's income and therefore debt service as of 2009-2010.

The impact of the losses of 2008 on the RPSF's income will be 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 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.9

  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 14 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.10 

Income imputed to the RPSF is calculated based on the adjusted market value. Therefore, it will begin to reflect, as of 2009-2010, the losses incurred by the Caisse in 2008. This will reduce the income credited to the RPSF because the adjusted market value on which this income is calculated will be lower than if there had not been any losses at the Caisse in 2008.

Overall, the losses of the Caisse in 2008 will cause debt service to rise by $285 million in 2009-2010 and $595 million in 2010-2011.


TABLE .20    

Impact of the return of the RPSF in 2008 on debt service

(millions of dollars)



2009-2010F


2010-2011F


Increase in debt service


285


595


F:    Forecasts.


Financing

Borrowings in fiscal 2008-2009 should total $12 941 million, i.e. $9 227 million for the Consolidated Revenue Fund, $1 039 million for the Financing Fund and $2 675 million for Financement-Québec. 

It should be noted that pre-financing of $5 984 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 2009-2010.

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.

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, one quarter of borrowings, on average, has been contracted in foreign currency.

In 2008-2009, the government contracted 32.6% of its borrowings on foreign markets in five different currencies: 

one borrowing for 1 250 million euros (CAN$1 975 million) in April 2008;

one borrowing for 1 000 million US dollars (CAN$996 million) in May 2008;

five borrowings in Swiss francs totalling 1 050 million Swiss francs (CAN$1 091 million), one of which was contracted in May 2008, another in November 2008 and three in February 2009;

one borrowing for 5 000 million yen (CAN$48 million) in August 2008;

two borrowings totalling 712 million Hong-Kong dollars, one of which was contracted in January 2009 (CAN$38 million) and the other in February 2009 (CAN$76 million).

  

CHART .3    

History of borrowings by currency1

(billions)

P:    Preliminary results.

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

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 2008-2009 consisted mainly of public issues (62.2%) and private issues (29.4%).

  

CHART .4    

Borrowings in 2008-2009P by instrument

P:    Preliminary results.

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

Diversification by maturity

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

In 2008-2009, 65.3% of borrowings contracted had a maturity of 6 to 10 years; 22.5%, 11 to 39 years; and 2.5%, over 40 years.

 

CHART .5    

Borrowings in 2008-2009P 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, 2009, the average maturity of the debt should be 10.9 years.


CHART .6    

Maturity of the debt as at March 31, 2009P

(millions of dollars)

P:    Preliminary results.

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

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 organizations (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 2008-2009, the government contracted borrowings totalling $12 941 million, including $5 984 million in pre-financing conducted over the last few months of the year.

In 2009-2010, the financing program is expected to amount to $9 778 million. It would have amounted to $15 762 million had there not been any pre-financing in 2008-2009. In 2010-2011, the financing program will total $15 353 million.


TABLE .21

The government's financing program

(millions of dollars)


2008-2009P

2009-2010P

2010-2011P

CONSOLIDATED REVENUE FUND




Net financial requirements (surplus)1, 2

 57

5 017

5 040

Repayment of borrowings

4 571

5 245

3 813

Change in cash position

 2 413

 5 984

-

Retirement Plans Sinking Fund and funds dedicated to employee future benefits - Deposits

2 700

-

-

Transactions under the credit policy3

 1 558

-

-

Pre-financing

5 984

-

-

TOTAL - Consolidated Revenue Fund

9 227

4 278

8 853

FINANCING FUND

1 039

2 750

3 750

FINANCEMENT-QUÉBEC

2 675

2 750

2 750

TOTAL

12 941

9 778

15 353

P:    Preliminary results for 2008-2009 and forecasts for subsequent years.

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

1    Excluding consolidated entities.

2    Net financial requirements are adjusted to take into account the non-receipt of RPSF income and of funds dedicated to employee future benefits.

3    Under its credit policy, which is designed to limit financial risk with respect to counterparties, the government received $1 558 million in 2008-2009 following exchange rate movements. These receipts reduce financial requirements that have to be met through new borrowings.



  

Pre-financing

The government makes advance borrowings, or borrowings that would normally be made in the following fiscal year.

Over the past 10 years, the government has obtained an average of nearly $2.9 billion in pre-financing per year.

Pre-financing

(millions of dollars)

P:    Preliminary results.


Yield

The following charts show the change in yield on 10-year bonds and 3-month Treasury bills, as well as the yield spread on long-term securities.

Over the past year, the spread between Québec long-term and short-term yields has increased substantially, reflecting the change in market conditions observed on financial markets. In addition, since the early 2000s, the yield on long-term Québec securities has dropped from 6.9% to 4.5%, making it possible to refinance borrowings at better interest rates.

  

CHART .7    

Yield on Québec securities

(percent)

Sources:    PC-Bond, a business unit of TSX Inc., and ministère des Finances du Québec.


CHART .8

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

(percent)

Source:    PC-Bond, a business unit of TSX Inc.


[ This page intentionally left blank. ]

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.

Structure of the debt by currency

As at March 31, 2009, the proportion of the government's gross debt in Canadian dollars should amount to 93.1% and the proportion in foreign currency, 6.9%.


TABLE .22

 
Structure of the gross debt as at March 31, 2009P

(millions of dollars)


Consolidated direct debt





Currency

Consolidated Revenue Fund

%

Consolidated entities

Total

%

Net retirement plans liability 

Net employee future benefits liability 

Less: Generations Fund

Gross debt

%

Canadian dollar

82 083

88.3

37 924

120 007

91.7

28 391

125

 1 934

146 589

93.1

US dollar

2 315

2.5

-

2 315

1.7

-

-

-

2 315

1.4

Euro

3 226

3.5

-

3 226

2.5

-

-

-

3 226

2.1

Swiss franc

3 226

3.5

-

3 226

2.5

-

-

-

3 226

2.1

Yen 

2 075

2.2

-

2 075

1.6

-

-

-

2 075

1.3

Subtotal

92 925

100.0

37 924

130 849

100.0

28 391

125

 1 934

157 431

100.0

Pre-financing

 5 984


-

 5 984


-

-

-

 5 984


TOTAL

86 941


37 924

124 865


28 391

125

 1 934

151 447


P:    Preliminary results.

Note:    The debt in foreign currency is expressed in the Canadian equivalent based on the exchange rates in effect on March 12, 2009.


  Before interest rate and currency swap agreements are taken into account, the proportion of the debt in foreign currency as at March 31, 2009 should be 24.1%. After interest rate and currency swap agreements are taken into account, the proportion should be 6.9%. 


CHART .9

Structure of the gross debt by currency as at March 31, 2009P

P:     Preliminary results.


  Structure of the debt by interest rate

The government keeps part of its debt at variable rates and part at fixed rates. Since short-term interest rates are generally lower than long-term rates, keeping part of the debt at variable rates makes it possible to achieve substantial savings on debt service.

Before interest rate and currency swap agreements are taken into account, the proportion of the gross debt at variable rates should be 13.1% as at March 31, 2009. After interest rate and currency swap agreements are taken into account, the proportion should be 35.0%.


CHART .10

Structure of the gross debt by interest rate as at March 31, 2009P

P:    Preliminary results.


[ This page intentionally left blank. ]

credit ratings

The Québec government's credit rating

A borrower's credit rating measures its capacity to pay the interest on its debt and repay the principal at maturity. To establish the credit rating of a borrower like the Québec government, credit rating agencies analyze several economic, fiscal and financial factors. Among the main factors are the size, structure and vitality of the economy, the situation on the labour market, fiscal competitiveness, public finance situation and indebtedness.

To express the quality of a borrower's credit, credit rating agencies use rating scales, namely, a scale for short-term debt and a scale for long-term debt. 

The following table shows the rating scales used by agencies for short-term debt. Québec's credit rating is in the upper category of all of the agencies' rating scales.


TABLE .23    

Rating scales for short-term debt

Definition

Moody's

Standard & Poor's

Fitch

Ratings

DBRS

Very strong capacity to pay interest and repay principal over the short term.

P-1

A-1+

F1+

R-1high


A-1

F1

R-1middle




R-1low

Very adequate capacity to pay interest and repay principal over the short term, despite greater sensitivity to economic conditions than the upper level.

P-2

A-2

F2

R-2high









Adequate capacity to pay interest and repay principal over the short term. Difficult economic conditions may reduce this capacity.

P-3

A-3

F3

R-2middle




R-2low




R-3

Uncertain capacity to pay interest and repay principal over the short-term. Securities in this category are considered speculative securities.

Not Prime1

B-1

B

R-4


B-2

C

R-5


B-3




C



Incapacity to pay interest and repay principal over the short-term. Securities in this category are considered default securities.

Not Prime1

D

D

D

Note:    The credit ratings for Québec's short-term debt are identified in bold. 

1    Moody's uses the 'Not Prime' category for all securities not shown in the upper categories.


  Credit rating agencies also use standard rating scales to assess the long-term debt of borrowers. For example, an 'AA' credit rating means that the borrower has a very strong capacity to pay the interest and repay the principal on its long-term debt.


TABLE .24


Rating scales for long-term debt

Definition

Moody's

Standard & Poor's

Fitch Ratings

DBRS

Japan Credit Rating Agency

Extremely strong capacity to pay interest and repay principal.

Aaa

    AAA

    AAA

AAA

    AAA

Very strong capacity to pay interest and repay principal.

Aa1

    AA+

    AA+

    AA (high)

    AA+

Aa2

    AA

    AA

AA

    AA

Aa3

    AA-

    AA-

    AA (low)

    AA-

Strong capacity to pay interest and repay principal, despite greater sensitivity to economic conditions than levels AAA and AA.

A1

    A+

    A+

    A (high)

    A+

A2

    A

    A

A

    A

A3

    A-

    A-

    A (low)

    A-

Adequate capacity to pay interest and repay principal. Difficult economic conditions may reduce this capacity.

Baa1

    BBB+

    BBB+

    BBB (high)

    BBB+

Baa2

    BBB

    BBB

BBB

    BBB

Baa3

    BBB-

    BBB-

    BBB (low)

    BBB-

Uncertain capacity to pay interest and repay principal, particularly under difficult economic conditions.

Ba1

    BB+

    BB+

BB (high)

    BB+

Ba2

    BB

    BB

BB

    BB

Ba3

    BB-

    BB-

    BB (low)

    BB-

Very uncertain capacity to pay interest and repay principal, particularly under difficult economic conditions.

B1

    B+

    B+

B (high)

    B+

B2

    B

    B

B

    B

B3

    B-

    B-

    B (low)

    B-

Note:    The credit ratings for Québec's long-term debt are identified in bold.

Agencies add an 'outlook' to the rating that indicates the trend the credit rating may follow in the future. The outlook may be positive, stable or negative.


  The Québec government's credit rating

The Québec government is rated by five credit rating agencies.



TABLE .25 

The Québec government's current credit ratings

Agency

Rating

Outlook

Moody's

Aa2

Stable

Standard & Poor's (S&P)

A+

Positive

Dominion Bond Rating Service (DBRS)

A (high)

Stable

Fitch Ratings (Fitch)

AA-

Positive

Japan Credit Rating Agency (JCR)

AA+

Stable


Change in Québec's credit rating

The following charts show the change in the Québec government's credit rating in the last six years. 


CHART .11


Credit rating assigned to Québec by Moody's



CHART .12


Credit rating assigned to Québec by Standard & Poor's

1    A positive outlook has been assigned since July 5, 2007. 



CHART .13


Credit rating assigned to Québec by DBRS



CHART .14


Credit rating assigned to Québec by Fitch

1    A positive outlook has been assigned since January 9, 2008. 


CHART .15


Credit rating assigned to Québec by JCR



  Comparison of the credit ratings of Canadian provinces 

The following charts show the credit ratings of Canadian provinces in early March 2009. No chart is given for JCR since Québec is the only province that receives a credit rating from that agency.


CHART .16    

Credit ratings of Canadian provinces ─ Moody's

1    Positive outlook.


CHART .17    

Credit ratings of Canadian provinces ─ Standard & Poor's

1    Positive outlook.


CHART .18    

Credit ratings of Canadian provinces ─ DBRS

1    Positive outlook.


CHART .19    

Credit ratings of Canadian provinces ─ Fitch

Note:    British Columbia, Ontario, Saskatchewan and Québec are the only provinces rated by this agency.

1    Positive outlook.



[ This page intentionally left blank. ]

Additional information

TABLE .26

Summary of consolidated financing transactions

(millions of dollars)


2008-2009 P



March 2008 Budget

Preliminary results


Change


2009-2010

P


2010-2011

P

CHANGE IN CASH POSITION











Consolidated Revenue Fund

1 987

 3 571


 5 558


5 984



-


Consolidated entities

-

977

   

977


-



-


TOTAL - Change in cash position

1 987

 2 594


 4 581


5 984



-


Net borrowings











Consolidated Revenue Fund











New borrowings

6 612

10 075

1

3 463


4 278



8 853


Repayment of borrowings

 4 316

 3 861

1

455


 5 245



 3 813



2 296

6 214


3 918


 967



5 040


Consolidated entities2











New borrowings

5 339

4 802

3

 537


7 082



7 614


Repayment of borrowings

 2 265

 2 652


 387


 2 893



 2 144



3 074

2 150


 924


4 189



5 470


TOTAL - Net borrowings

5 370

8 364


2 994


3 222



10 510


Retirement Plans Sinking Fund and funds dedicated to employee future benefits 

 5 883

 4 943


940


 2 217



 2 040


Generations Fund

 742

 701


41


 715



 880


TOTAL CONSOLIDATED FINANCING TRANSACTIONS

732

126


 606


6 274



7 590


P:    Preliminary results for 2008-2009 and forecasts for subsequent years.

Note:    A negative entry indicates a financial requirement and a positive entry, a source of financing. For the change in cash position, a negative entry indicates an increase and a positive entry, a decrease.

1    Receipts totalling $1 558 million related to transactions carried out under the credit policy increase new borrowings by $848 million and reduce the repayment of borrowings by $710 million.

2    The data forecast in the March 2008 Budget have been adjusted to include the forecast for the net borrowings of Immobilière SHQ which was consolidated in 2007-2008.

3    Includes a $1 088-million increase in temporary borrowings.

  

TABLE .27

Gouvernement du Québec
Summary of long-term borrowings in 2008-2009
P

(millions of dollars)

Currency

Consolidated Revenue Fund


Consolidated entities

1

Total

%

CANADIAN DOLLAR 







Public issues

1 939


2 047


3 986

45.7

Private issues

1 971


1 667


3 638

41.7

Savings products

548


-


548

6.3

Immigrant Investor Program

540


-


540

6.2

Canada Pension Plan Investment Fund

5


-


5

0.1

Subtotal

5 003


3 714


8 717

67.4

OTHER CURRENCIES







Euro

1 975


-


1 975

46.8

Swiss franc

1 091


-


1 091

25.8

US dollar

996


-


996

23.6

Hong-Kong dollar

114


-


114

2.7

Yen

48


-


48

1.1

Subtotal

4 224


-


4 224

32.6

TOTAL

9 227


3 714


12 941

100.0

P:    Preliminary results.

1    Includes borrowings for the Financing Fund and borrowings of Financement-Québec.

  

TABLE .28

Gouvernement du Québec
Borrowings for the Consolidated Revenue Fund in 2008-2009
P

Amount in 
Canadian dollars

1

Face value in foreign currency


Interest rate

2

Date of 
issue

Date of maturity

Price to 
investor

Yield to 
investor

3

(millions)

%




$

%


511


-


5.00


April 7

2038-12-01

102.117

4.866


1 975


€1 250 


4.75

4

April 29

2018-04-29

99.922

4.760


338


-


4.50


May 1

2018-12-01

98.680

4.659


996


US$1 000 


4.625


May 14

2018-05-14

99.399

4.701


237


250 SF 


3.375

4

May 19

2018-01-19

99.351

3.457


452


-


5.00


June 16

2038-12-01

101.301

4.917


529

5

-


1.797

6

June 20

2028-01-01

100.000

1.797


48

5

5 000 yen


1.80


August 20

2018-08-20

100.000

1.800


30

5

-


6.35


October 15

2065-09-21

120.022

5.242


118

5

-


4.50


November 4

2026-12-01

114.877

3.392


118

5

-


4.25


November 4

2031-12-01

115.258

3.300


160

5

-


3.25


November 4

2036-12-01

99.182

3.295


89

5

-


4.50


November 19

2026-12-01

114.848

3.394


84

5

-


4.25


November 19

2031-12-01

115.223

3.302


160

5

-


3.25


November 19

2036-12-01

99.145

3.297


263


250 SF


3.50

4

November 21

2014-11-21

99.930

3.513


3

5

-


5.10


December 1

2049-09-21

99.025

5.157


12

5

-


5.10


December 1

2053-09-21

99.416

5.133


10

5

-


5.10


December 1

2057-09-21

99.831

5.109


8

5

-


5.10


December 1

2058-09-21

99.938

5.103


6

5

-


5.10


December 1

2059-09-21

100.047

5.097


100

5

-


3.25


December 15

2036-12-01

96.915

3.422


117

5

-


4.50


December 16

2021-12-01

109.037

3.620


173

5

-


4.25


December 16

2031-12-01

111.952

3.489


492


-


4.50


December 19

2018-12-01

98.313

4.714


38

5

HK$240


3.35

4

January 13

2014-01-13

100.000

3.350


146


-


4.50


February 3 

2018-12-01

99.664

4.542


76

5

HK$472


3.00

4

February 11

2014-02-11

100.000

3.000


293


275 SF


3.125

4

February 11

2015-12-11

99.414

3.223


215


200 SF


3.875

4

February 11

2018-12-11

100.265

3.843


25

5

-


5.00


February 11

2061-09-21

100.609

4.967


83


75 SF


3.125

4

February 27

2015-12-11

101.883

2.817


229

5

-


Various


March 2

2065-06-01

97.408

4.513


548

7

-


Various


Various

Various

Various

Various


5

8

-


Various


Various

Various

Various

Various


540

9

-


Various


Various

Various

Various

Various


9 227












P:    Preliminary results.

1    Borrowings in foreign currency given in Canadian equivalent of their value on the date of borrowing.

2    Interest payable semi-annually except if another frequency is indicated in a note.

3    Yield to investor is determined on the basis of interest payable semi-annually.

4    Interest payable annually.

5    Private borrowings.

6    Interest payable quarterly.

7    Savings products issued by Épargne Placements Québec.

8    Borrowings from the Canada Pension Plan Investment Fund.

9    Immigrant investor Program.



  

TABLE .29

Gouvernement du Québec
Borrowings for the Financing Fund in 2008-2009
P 

Amount in Canadian 
dollars


Face value in foreign currency


Interest rate

1

Date of 
issue

Date of maturity

Price to investor

Yield to investor

2

(millions)

%




$

%


BORROWINGS FOR CONSOLIDATED ENTITIES


155


-


4.50


May 1

2018-12-01

98.680

4.659



55


-


5.00


June 16

2038-12-01

101.301

4.917



477


-


4.50


October 31 

2018-12-01

95.379

5.091



352


-


4.50


February 3

2018-12-01

99.664

4.542



1 039










P:    Preliminary results.

1    Interest payable semi-annually except if another frequency is indicated in a note.

2    Yield to investor is determined on the basis of interest payable semi-annually.



  

TABLE .30

Borrowings by Financement-Québec in 2008-2009P 

Amount in Canadian 
dollars 


Face value in foreign currency


Interest 
rate

1

Date of 
issue

Date of maturity

Price to investor

Yield to investor

2

(millions)

%




$

%


63

3

-


5.25


May 5 

2034-06-01

103.706

4.994


42

3

-


5.25


May 22

2034-06-01

105.464

4.877


505


-


4.25


May 26 

2015-12-01

100.871

4.114


600

3

-


4.09


October 6

2013-09-23

100.001

4.090


95

3

-


5.25


October 20

2034-06-01

95.223

5.603


38

3

-


5.25


October 28

2034-06-01

95.526

5.580


59

3

-


Variable

4

November 20

2014-12-01

94.227

Variable


503


-


4.25


December 15

2015-12-01

100.670

4.138


23

3

-


Variable

4

January 20

2014-12-01

92.052

Variable


498

3

-


3.25


February 17

2014-06-01

99.660

3.320


115

3

-


Variable

4

February 18

2014-12-01

92.046

Variable


69

3

-


Variable

4

February 25

2014-12-01

92.045

Variable


65

3

-


Variable

4

March 2 

2014-12-01

92.039

Variable


2 675











P:    Preliminary results.

1    Interest payable semi-annually except if another frequency is indicated in a note.

2    Yield to investor is determined on the basis of interest payable semi-annually.

3    Private borrowings.

4    Interest payable quarterly.



  

TABLE .31

Borrowings by Hydro-Québec in 20081

Amount in Canadian 
dollars


Face value in foreign currency 


Interest 
rate

2

Date of 
issue

Date of maturity

Price to investor

Yield to investor

3

(millions)

%




$

%


503


-


5.00


February 19

2045-02-15

100.691

4.959


500


-


5.00


April 25

2045-02-15

99.926

5.004


515


-


5.00


May 16

2045-02-15

102.903

4.830


513


-


5.00


September 2

2045-02-15

102.586

4.848


2 031











1    Borrowings contracted from January 1 to December 31, 2008.

2    Interest payable semi-annually except if another frequency is indicated in a note.

3    Yield to investor is determined on the basis of interest payable semi-annually.


  

TABLE .32    

Investment policies as at January 1, 2009

(percent)

Specialized portfolio


RPSF


Generations Fund

Average reference portfolio of depositors as a whole

1

Short-term securities


1.0


1.0

1.4


Bonds


29.0


36.0

27.4


Real return bonds


0.0


0.0

0.8


Long-term bonds


0.0


0.0

2.4


Total - Fixed income


30.0


37.0

32.0


Canadian equity


13.0


10.0

12.2


US equity - hedged


0.5


0.5

3.7


US equity - unhedged


2.0


1.5


Foreign equity - hedged


2.5


2.0

5.8


Foreign equity - unhedged


4.0


2.0


Emerging market equity


4.0


4.0

3.1


Québec International


9.5


15.0

9.5


Total - Stock markets


35.5


35.0

34.3


Investments and infrastructures


6.0


5.0

5.4


Private equity


8.0


6.0

7.9


Real estate debt


7.0


7.0

6.5


Real estate


8.5


7.0

9.1


Commodities


1.5


0.0

1.9


Hedge funds


3.5


3.0

2.9


Total - Other investments


34.5


28.0

33.7


TOTAL


100.0


100.0

100.0


1    Source: Caisse de dépôt et placement du Québec, Annual Report 2007. The annual report for 2008 has not been published yet.



Exhibit (99.16)



Excerpts from « 2009-2010 Budget - Budget Speech », March 19, 2009.



Gouvernement du Québec
Summary of consolidated budgetary transactions

2008-2009 fiscal year

(millions of dollars)


March 2008 Budget

Preliminary results

BUDGETARY REVENUE



Own-source revenue

48 917

48 555

Federal transfers

14 063

13 924

Total

62 980

62 479

BUDGETARY EXPENDITURE



Program spending

 56 948

 57 400

Debt service

 6 907

 6 589

Total

 63 855

 63 989

NET RESULTS OF CONSOLIDATED ENTITIES

447

205

Contingency reserve

 200

-

SURPLUS (DEFICIT) FOR THE PURPOSES OF THE PUBLIC ACCOUNTS

 628

 1 305

Deposit of dedicated revenues in the Generations Fund

 742

 569

BUDGETARY BALANCE BEFORE BUDGETARY RESERVE

 1 370

 1 874

Deposit in the Generations Fund from the budgetary reserve

-

 132

Use of the budgetary reserve

1 370

2 006

BUDGETARY BALANCE FOR THE PURPOSES OF THE BALANCED BUDGET ACT

0

0





Gouvernement du Québec
Summary of consolidated budgetary transactions

2009-2010 forecast

(millions of dollars)

BUDGETARY REVENUE


Own-source revenue

47 371

Federal transfers

14 841

Total

62 212

BUDGETARY EXPENDITURE


Program spending

 59 989

Debt service

 6 104

Total

 66 093

NET RESULTS OF CONSOLIDATED ENTITIES

355

SURPLUS (DEFICIT) FOR THE PURPOSES OF THE PUBLIC ACCOUNTS

 3 526

Deposit of dedicated revenues in the Generations Fund

 715

BUDGETARY BALANCE BEFORE BUDGETARY RESERVE

 4 241

Use of the budgetary reserve

295

BUDGETARY BALANCE FOR THE PURPOSES OF THE BALANCED BUDGET ACT

 3 946





Gouvernement du Québec
Budgetary revenue of the Consolidated Revenue Fund

2009-2010 forecast

(millions of dollars)

OWN-SOURCE REVENUE


Income and property taxes


Personal income tax

18 203

Health Services Fund

5 597

Corporate taxes1

3 266


27 066

Consumption taxes


Retail sales

10 498

Fuel

1 653

Tobacco

593

Alcoholic beverages

440


13 184

Duties and permits


Motor vehicles

755

Natural resources

 74

Other

188


869

Miscellaneous


Sales of goods and services

396

Interest

588

Fines, forfeitures and recoveries

509


1 493

Revenue from government enterprises


Hydro-Québec

2 700

Loto-Québec

1 295

Société des alcools du Québec

800

Other

 36


4 759

Total

47 371

FEDERAL TRANSFERS


Equalization

8 355

Health transfers

4 137

Transfers for post-secondary education and other social programs

1 413

Other programs

936

Total

14 841

TOTAL BUDGETARY REVENUE

62 212

1    Includes tax on corporate profits, tax on capital and tax on premiums in lieu of the tax on capital for insurance companies, as well as the tax on public services.



Gouvernement du Québec
Budgetary expenditure of the Consolidated Revenue Fund

2009-2010 forecast

(millions of dollars)

PROGRAM SPENDING


Affaires municipales, Régions et Occupation du territoire

1 827.1

Agriculture, Pêcheries et Alimentation

720.3

Assemblée nationale

116.2

Conseil du trésor et Administration gouvernementale

672.6

Conseil exécutif

343.8

Culture, Communications et Condition féminine

668.0

Développement durable, Environnement et Parcs

211.2

Développement économique, Innovation et Exportation

914.9

Éducation, Loisir et Sport

14 431.0

Emploi et Solidarité sociale

4 228.4

Famille et Aînés

2 066.5

Finances (excluding debt service)

177.8

Immigration et Communautés culturelles

296.4

Justice

680.4

Personnes désignées par l'Assemblée nationale

70.6

Relations internationales

115.9

Ressources naturelles et Faune

576.7

Revenu

1 050.0

Santé et Services sociaux

26 872.4

Sécurité publique

1 081.8

Services gouvernementaux

171.3

Tourisme

138.9

Transports 

2 770.9

Travail

32.1

Subtotal

60 235.2

Anticipated lapsed appropriations

 150.0

Deferred appropriations in 2010-2011

 96.3

Total

59 988.9

DEBT SERVICE


Direct debt service

3 760.0

Interest ascribed to the retirement plans

2 344.0

Total

6 104.0

TOTAL BUDGETARY EXPENDITURE

66 092.9



Gouvernement du Québec
Consolidated non-budgetary transactions

2009-2010 forecast

(millions of dollars)

INVESTMENTS, LOANS AND ADVANCES 


Consolidated Revenue Fund

 1 119

Consolidated entities

 226

Total

 1 345

CAPITAL EXPENDITURES


Consolidated Revenue Fund


Net investments

 436

Depreciation

257

Subtotal

 179

Consolidated entities

 3 125

Total

 3 304

NET INVESTMENTS IN THE NETWORKS

 1 004

RETIREMENT PLANS AND EMPLOYEE FUTURE BENEFITS

2 490

OTHER ACCOUNTS


Consolidated Revenue Fund

 406

Consolidated entities

526

Total

120

TOTAL CONSOLIDATED NON-BUDGETARY TRANSACTIONS

 3 043

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





Gouvernement du Québec
Summary of consolidated budgetary transactions

2008-2009 fiscal year

(millions of dollars)


March 2008 Budget

Preliminary results

BUDGETARY REVENUE



Own-source revenue

48 917

48 555

Federal transfers

14 063

13 924

Total

62 980

62 479

BUDGETARY EXPENDITURE



Program spending

 56 948

 57 400

Debt service

 6 907

 6 589

Total

 63 855

 63 989

NET RESULTS OF CONSOLIDATED ENTITIES

447

205

Contingency reserve

 200

-

SURPLUS (DEFICIT) FOR THE PURPOSES OF THE PUBLIC ACCOUNTS

 628

 1 305

Deposit of dedicated revenues in the Generations Fund

 742

 569

BUDGETARY BALANCE BEFORE BUDGETARY RESERVE

 1 370

 1 874

Deposit in the Generations Fund from the budgetary reserve

-

 132

Use of the budgetary reserve

1 370

2 006

BUDGETARY BALANCE FOR THE PURPOSES OF THE BALANCED BUDGET ACT

0

0





Gouvernement du Québec
Summary of consolidated budgetary transactions

2009-2010 forecast

(millions of dollars)

BUDGETARY REVENUE


Own-source revenue

47 371

Federal transfers

14 841

Total

62 212

BUDGETARY EXPENDITURE


Program spending

 59 989

Debt service

 6 104

Total

 66 093

NET RESULTS OF CONSOLIDATED ENTITIES

355

SURPLUS (DEFICIT) FOR THE PURPOSES OF THE PUBLIC ACCOUNTS

 3 526

Deposit of dedicated revenues in the Generations Fund

 715

BUDGETARY BALANCE BEFORE BUDGETARY RESERVE

 4 241

Use of the budgetary reserve

295

BUDGETARY BALANCE FOR THE PURPOSES OF THE BALANCED BUDGET ACT

 3 946





Gouvernement du Québec
Budgetary revenue of the Consolidated Revenue Fund

2009-2010 forecast

(millions of dollars)

OWN-SOURCE REVENUE


Income and property taxes


Personal income tax

18 203

Health Services Fund

5 597

Corporate taxes1

3 266


27 066

Consumption taxes


Retail sales

10 498

Fuel

1 653

Tobacco

593

Alcoholic beverages

440


13 184

Duties and permits


Motor vehicles

755

Natural resources

 74

Other

188


869

Miscellaneous


Sales of goods and services

396

Interest

588

Fines, forfeitures and recoveries

509


1 493

Revenue from government enterprises


Hydro-Québec

2 700

Loto-Québec

1 295

Société des alcools du Québec

800

Other

 36


4 759

Total

47 371

FEDERAL TRANSFERS


Equalization

8 355

Health transfers

4 137

Transfers for post-secondary education and other social programs

1 413

Other programs

936

Total

14 841

TOTAL BUDGETARY REVENUE

62 212

1    Includes tax on corporate profits, tax on capital and tax on premiums in lieu of the tax on capital for insurance companies, as well as the tax on public services.



Gouvernement du Québec
Budgetary expenditure of the Consolidated Revenue Fund

2009-2010 forecast

(millions of dollars)

PROGRAM SPENDING


Affaires municipales, Régions et Occupation du territoire

1 827.1

Agriculture, Pêcheries et Alimentation

720.3

Assemblée nationale

116.2

Conseil du trésor et Administration gouvernementale

672.6

Conseil exécutif

343.8

Culture, Communications et Condition féminine

668.0

Développement durable, Environnement et Parcs

211.2

Développement économique, Innovation et Exportation

914.9

Éducation, Loisir et Sport

14 431.0

Emploi et Solidarité sociale

4 228.4

Famille et Aînés

2 066.5

Finances (excluding debt service)

177.8

Immigration et Communautés culturelles

296.4

Justice

680.4

Personnes désignées par l'Assemblée nationale

70.6

Relations internationales

115.9

Ressources naturelles et Faune

576.7

Revenu

1 050.0

Santé et Services sociaux

26 872.4

Sécurité publique

1 081.8

Services gouvernementaux

171.3

Tourisme

138.9

Transports 

2 770.9

Travail

32.1

Subtotal

60 235.2

Anticipated lapsed appropriations

 150.0

Deferred appropriations in 2010-2011

 96.3

Total

59 988.9

DEBT SERVICE


Direct debt service

3 760.0

Interest ascribed to the retirement plans

2 344.0

Total

6 104.0

TOTAL BUDGETARY EXPENDITURE

66 092.9



Gouvernement du Québec
Consolidated non-budgetary transactions

2009-2010 forecast

(millions of dollars)

INVESTMENTS, LOANS AND ADVANCES 


Consolidated Revenue Fund

 1 119

Consolidated entities

 226

Total

 1 345

CAPITAL EXPENDITURES


Consolidated Revenue Fund


Net investments

 436

Depreciation

257

Subtotal

 179

Consolidated entities

 3 125

Total

 3 304

NET INVESTMENTS IN THE NETWORKS

 1 004

RETIREMENT PLANS AND EMPLOYEE FUTURE BENEFITS

2 490

OTHER ACCOUNTS


Consolidated Revenue Fund

 406

Consolidated entities

526

Total

120

TOTAL CONSOLIDATED NON-BUDGETARY TRANSACTIONS

 3 043

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




Gouvernement du Québec
Consolidated financing transactions 

2009-2010 forecast

(millions of dollars)

CHANGE IN CASH POSITION


Consolidated Revenue Fund

5 984

Consolidated entities

-

Total

5 984

NET BORROWINGS


Consolidated Revenue Fund


New borrowings

4 278

Repayment of borrowings

 5 245

Subtotal

 967

Consolidated entities


New borrowings

7 082

Repayment of borrowings

 2 893

Subtotal

4 189

Total

3 222

RETIREMENT PLANS SINKING FUND AND FUNDS DEDICATED TO EMPLOYEE FUTURE BENEFITS

 2 217

GENERATIONS FUND

 715

TOTAL CONSOLIDATED FINANCING TRANSACTIONS

6 274

Note:    A negative entry indicates a financial requirement and a positive entry, a source of financing. For the change in cash position, a negative entry indicates an increase and a positive entry, a decrease.





Copies of Exhibit 99.13, 99.14, 99.15 and 99.16 of the Guarantor's Annual Report (on Form 18-K/A) for the fiscal year ended March 31, 2008 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.


A copy of the full document can also be accessed on the link below or, alternatively, by pasting the following URL into the address bar of your internet browser:


Exhibit 99.13, 99.14, 99.15 and 99.16 of the Guarantor's Annual Report (on Form 18-K/A) dated March 19, 2009 for the fiscal year ended March 31, 2008.

 

http://www.rns-pdf.londonstockexchange.com/rns/0209U_2-2009-6-17.pdf

http://www.rns-pdf.londonstockexchange.com/rns/0209U_3-2009-6-17.pdf

http://www.rns-pdf.londonstockexchange.com/rns/0209U_4-2009-6-17.pdf

http://www.rns-pdf.londonstockexchange.com/rns/0209U_1-2009-6-17.pdf

For further information, please contact:

Nathalie Parenteau
Executive Vice President and Secretary
Financement-Québec
T
elephone Number:  1-418-691-2203
Fax Number:  1-418-643-4700

Email:  
[email protected]



This information is provided by RNS

The company news service from the London Stock Exchange



END


1     When the Economic Statement was published on January 14, 2009, the government was planning to use the contingency reserve in 2009-2010 to finance new economic support measures. Because of the rapid deterioration of the economy in early 2009, the government is obliged to use the contingency reserve as of this year in order to achieve a balanced budget.

2     The expression 'health network' always refers to the health and social services network.

3     Net results represent the difference between the revenue and expenditure of consolidated entities.

4     After eliminating transactions between related entities.

5     Including employee future benefits.

6     Added to this are the 3 000 housing units announced in this BudgetInvestments of $200 million will be included when the next Québec Infrastructures Plan is updated.

7     An Innovative, Prosperous Québec, 2008.

8     Morneau Sobeco (2008), 2008 Survey of Economic Assumptions in Accounting for Pensions and Other Post-Retirement Benefits.

9     Before the accounting reform of 2007, the value of the RPSF was adjusted only once every three years, that is, when actuarial valuations were carried out. Since the reform, it has been adjusted every year. 

10     '…actuarial gains and losses should be amortized to the liability or asset and the related expense in a systematic and rational manner over the expected average remaining service life of the related employee group.' Canadian Institute of Chartered Accountants (CICA), Public Sector Accounting Handbook, section 3250, paragraph .062. For the purposes of retirement assets, the CICA defines actuarial gains (losses) as changes in the value of plan assets that are caused notably by variances between actual results and expected results.


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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