Quebec budget has seniors working longer and students protesting louder

As part of its plan to return to a balanced budget by 2014, the Government of Quebec released a modest budget on Thursday, March 17, demanding a reduction in government spending in all departments other than health, education and senior care.

Spending in most departments will drop by 0.2 per cent and government employees will be subject to a wage freeze that went into effect last year, as a means to save the province $530 million.

The budget's overall growth has been limited to 2.4 per cent and administrative operating expenditures were reduced by 10 percent.

The cuts come as a result of a continued deficit that is leading to a significant provincial debt. If the province returns to a balanced budget by 2014, as is hoped, it would be able to begin increasing payments to reduce the accumulated debt.

Deficits this year were $300 million lower than expected and Quebec is on a healthy start to reaching financial equilibrium, according to MNA d'Argenteuil David Whissell.

"Overspending started two years ago when we were hit with the biggest economic crisis in 60 years," he said. "We had to spend money to stimulate the economy and avert the crisis. Last year we had a budget with a deficit and, in order to return to balance, we built a reduced budget that intends to return us to fiscal balance by 2013-2014."

Seniors and students will be impacted by the budget, which calls on Quebec's workers to delay their retirement in order to remain in the labour market for a longer period of time. It further demands that university students begin to pay a "fair share" of the cost of their education, in the amount of a 75-per-cent tuition hike over the next five years.

The province's universities will receive $850 million with the goal of increasing their teaching and research budget by nearly 25 per cent over the next six years. The provincial budget accounts for $320 million of this increase, with the remaining money charged to the student population through the tuition hike.

"It's not a budget where we are spending money everywhere, but health care and education remain our priorities, and the money had to be spent," said Whissell. "The increase in tuition is a question of equity. Students will pay more, but it will be for their benefit."

That message was rejected by Quebec's student unions, which gathered 50,000 students in Montreal to protest the hike over the weekend before the budget became official. Student union representatives also argued the hike will limit access to higher education and put an unfair financial burden on students.

The day after the budget was announced, many of these same students returned to gather outside of the hotel where Quebec Finance Minister Raymond Bachand was defending the budget.

"The tuition fees payable by Quebec students were frozen for 33 of the last 43 years," he said, in a statement to the press. "They will be raised gradually to the level they would have been at today had they been indexed at the rate of inflation since 1968."

Despite the increase, the cost of post-secondary education in Quebec is among the lowest tuition fees in the country. After the tuition fees are adjusted in 2017 to reflect the increase, Quebec students will pay $3,793 per year, a rate 30 per cent lower than the average 2010 cost in the rest of Canada.

One-third of the revenue from the increase, or $118 million, will be returned to students in the form of bursaries. Enrolment in Quebec's universities needs to remain high if the government wants to continue to fill the 740,000 jobs that will be left vacant over the coming years, as Quebecers continue to retire in large numbers.

To encourage employees to continue working after the age of 65, Minister Bachand said the government will be implementing a gradual tax credit applicable to all Quebec employees over the age of 65.

The credit will benefit over 100,000 workers and represents a tax reduction of up to $1,504 when fully implemented. For an employee that earns $15 per hour, this represents a net hourly increase of $2.25.

The budget also increases contributions to the Quebec Pension Plan by 0.15 percentage points per year, over six years, beginning on January 1, 2012. For an employee who earns $40,000 a year, this increase will represent about $0.50 per week.

The government said the measure will protect the long-term viability of the Quebec pension plan.

"Retirement plans everywhere are under financial strain," according to Bachand. "Several countries, particularly in Europe, have raised the minimum retirement age in response to this situation. We have not reached that point yet in Quebec, but we must intervene to ensure the sustainability of the Quebec Pension Plan."

To further encourage seniors to work longer, employees who continue to work after they become eligible for retirement at the age of 60 will receive more compensation than employees who choose to stop.

Workers who retire after the age of 65 will have their monthly pensions increased from 0.5 per cent to 0.7 per cent, while employees who choose to retire before the age of 65 will see an increase of only 0.6 per cent.

For employees and self-employed workers without access to individual retirement savings plans, Pooled Registration Pension Plans were introduced as a way to collectively manage individual plans at a low cost. They are expected to be offered by financial institutions, such as insurance companies.