PQ made ‘unreasonable’ forecasts in projecting balanced budget, auditor says

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On the eve of the Quebec Liberals' first budget, the province's auditor-general says $4-billion in projected spending would have to be slashed to meet an "unreasonable" forecast by the former Parti Québécois minority government.

Michel Samson, who described as "ambitious" the projection made by the PQ before it was ousted in the worst electoral performance in the party's 45-year history, said the time had come to set realistic debt reduction targets and do everything possible to achieve them.

The auditor was asked by the newly elected Liberals to examine the last budget tabled in February by the former PQ minority government and he uncovered several problems. The PQ estimated that it would need to recover $150-million in the current fiscal year to maintain its zero-deficit target. But the auditor found that the real effort needed during the current fiscal to achieve the balanced budget by 2015-16 was closer to $4-billion.

The warning to set a more realistic debt target presents the Liberals with a challenge, as Premier Philippe Couillard is also promising to balance the budget within two years – all the while grappling with a grim economic picture that has seen Quebec's gross debt grow to an estimated $198.6-billion, or 54.4 per cent of the province's GDP.

The PQ budget projected a $1.75-billion deficit in 2014-15 on the road to a balanced budget at the end of the following fiscal year. However revenues, especially corporate taxes, dropped significantly and program costs continued to grow. If nothing was done, the $1.75-billion projected deficit would have ballooned to an astonishing $5.483-billion in 2014-15 fiscal year, the auditor concluded.

Given that backdrop, Mr. Samson warned the government has a responsibility to offer accurate information in the wake of the difficult budgetary decisions that lie ahead.

"Difficult choices lie ahead and I believe the information must be communicated to the population as well as the parliamentarians so that the right choices can be made," he said. "For too long decisions have been put off and now they are catching up to us."

"We aren't talking here about a small margin of error," Mr. Samson said. "What we realized is that the documents produced for the November, 2013, economic update and the 2014 budget did not reveal all the information that it should have."

Liberal Finance Minister Carlos Leitao, who will be tabling a budget on Wednesday, is proposing a major fiscal review of the province's tax system as well as a revision of all government programs. His government will need to deal with an economy that grew moderately as real gross domestic product grew by 1.2. per cent in 2013 and the average unemployment rate steadied at 7.6. per cent.

Last February, Mr. Samson completed a similar exercise after the opposition parties voted to demand a review of Quebec's public finances from the PQ minority government. But the PQ refused to fully co-operate with the auditor-general, who tabled an incomplete report just before the election was called.

"This was unacceptable and it limited the scope of my work," Mr. Samson said. "Obviously we tabled an incomplete picture."

But after the April 7 vote the Liberals ordered another audit and co-operated fully with Mr. Samson, who produced a damaging evaluation of the PQ's performance.

The former PQ finance minister Nicolas Marceau said there was nothing abnormal about playing down the cost of renewing government programs. It was all part of an annual exercise where various departments establish budget needs and then choices are made internally to determine how much each ministry receives.

"The important thing is not what road we will take to achieve the spending estimates but that we maintain the spending amounts needed over the course of the year," Mr. Marceau said during a news conference on Tuesday insisting that what is important was "the final amount of spending" that was achieved.