Quebec "Debt Clock"

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Our Quebec "Debt Clock" shows the growth of the public sector debt in real time. Public sector debt includes the government's gross debt as well as the debt of the health and social services and education networks, municipalities and other public corporations for which the government is ultimately responsible.

Quebec Debt 

 

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Click here to send a message to Quebec's Minister of Finance

Dear Minister of Finance,

I am writing to let you know about my deep concern regarding the state of Quebec's public finances. As you know, the public sector debt has now reached over 264 billion dollars. This is the equivalent of more than $129,000 of debt per family of four, or $66,000 per taxpayer.

The Quebec government has to stop continually increasing the debt. Since the tax burden is already very high, the solution must involve a reduction in government expenditures so that we can eliminate the deficit and then start paying down the debt.

Thank you in advance for your time and attention.

Sincerely,

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Watch our short video "The Story of Quebec's Debt"

We released this video in 2011. Updated data are available on this page. Because of heavy website traffic, you will be redirected to YouTube in order to view the video.

 

Quebec's public sector debt

Our Quebec "Debt Clock" shows the growth of the public sector debt in real time. Public sector debt includes the government's gross debt as well as the debt of the health and social services and education networks, municipalities and other public corporations for which the government is ultimately responsible.

Based on data provided by the Quebec Department of Finance in its 2014-2015 Budget Plan (which does not take into account Quebec’s share of the federal debt), we estimate that the debt increases by: $9.3 billion from now to March 31, 2015, the equivalent of $25 million per day, $17 670 per minute, or $294 per second. 

Questions & Answers about Quebec's Debt

1. Why use public sector debt?

When analyzing a government’s indebtedness, it is necessary to go beyond what it manages directly and include the health and education networks, municipalities and other entities under the government’s ultimate responsibility, since the government guarantees their debt. Public sector debt is, as explained by the Auditor General, a more complete portrait of the debt that will be repaid directly or indirectly by the Quebec government.

2. Why not take government assets into account?

The only “liquid” assets of the government, those that could be sold quickly to pay off debt, are net financial assets. These assets came to $16.3 billion as of March 31, 2014. It is hard to assess the market value of government-owned fixed assets and infrastructure (roads, bridges, schools, national parks, etc.) since there are no relevant markets. Moreover, it is highly unlikely that the government would sell schools or bridges at some point to pay off the debt. This is why neither the government nor the auditor general takes these assets into account in attempting to paint a realistic picture of the debt that Quebecers will eventually have to repay. These assets are certainly part of Quebecers’ financial heritage, but they do not reduce the overall bill – or the growing interest – that Quebecers will have to pay. The Quebec government could sell crown corporations such as Hydro-Québec (as proposed by Claude Garcia in a Research Paper published by the MEI) to restore its finances. However, the same people that insist on including government assets in its debt generally reject that option.

3. How much does debt service cost the government every year?

In 2014-2015, $8.6 billion, the third largest budget category after health care and education.

4. Should we worry about the government’s debt?

A great risk is hidden in another form of government indebtedness: its commitments to pay benefits under a vast array of social programs. Examples include payments under the Quebec Pension Plan, motor vehicle insurance (SAAQ), parental insurance (RQAP) or even subsidized spaces in childcare centres. Although social programs do not represent debt as such, since the government can always modify their nature, maintaining them is likely to require Quebec to raise employees’ and employers’ contributions or to reduce benefits.

Also, certain cyclical factors could, in coming years, quickly worsen the province’s debt problem. Among other factors, there is the aging of the population (more pronounced in Quebec than elsewhere in Canada), which will put added pressure on our health care system, the fact that economic recovery is still quite weak, and the likelihood of higher interest rates in the near future, which will have the effect of raising the cost of debt service.

5. How is the growth of the public sector debt estimated for the coming year?

The Quebec Department of Finance does not provide an estimate of the growth of the public sector debt for the coming year. It does, however, provide an estimate of the increase in the government’s gross debt in its budget each year, which is the largest component of the public sector debt (the gross debt accounts for 75% of the public sector debt).

Here is the method used by the MEI to estimate the increase in the public sector debt as of March 31, 2013:

  • For the “government’s gross debt” component, the MEI simply takes the Quebec Department of Finance’s predictions;
  • For “Hydro-Québec’s debt,” “municipalities’ debt” and “universities’ debt,” the estimates come from their average annual growth rates over the past four years;
  • For the “other government enterprises’ debt” component, we presume that it will remain stable because of its high volatility.
Components of the public sector debt (millions of dollars)
  March 31, 2012 March 31, 2013 Variation
-Government’s gross debt 183,384 191,756 4,6%
-Hydro-Québec’s debt 38,514 39,631 2,9%
-Municipalities’ debt 20,719 21,82 5,3%
-Universities’ debt (other than the Université du
Québec and its constituent universities)
1,797 1,739 -3,2%
-Other government enterprises’ debt 1,363 1,479 8,5%
Total (Public sector debt): 245,777 256,425 4,3%
Source: Quebec Department of Finance, Budget Plan 2014-2015, p. E.16.

6. To whom is the Quebec government’s debt owed?

The Quebec government’s debt is owed to holders of the bonds it has issued, most of whom are either Quebec citizens or Quebec institutions (financial institutions, retirement plans, mutual funds, etc.). For example, the advertising campaigns of Épargne Placements Québec encourage individual investors to buy Quebec government bonds.

A portion of the government’s debt is held outside of the province of Quebec. However, there are no real data on holders of Quebec debt or on their countries of residence. Still, in the public accounts (the consolidated financial statements of the Quebec government), we find that of the 175.6 billion dollars of bonds issued, 83.6% are issued in Canadian dollars, with the remainder being issued mainly in American dollars, in yen and in euros. As for the Canadian debt, 85% of it is owed to institutions and individuals in Canada, according to the federal Department of Finance. It is likely that the Quebec situation is fairly similar.

The Quebec government’s debt is also made up in part of a retirement plan liability, which is to say what the government has promised in retirement benefits to its civil servants without having accumulated sufficient funds to fulfil those promises. This government debt is not negotiated on the bond markets. It is instead a debt calculated by actuaries, but it is very real nonetheless. This portion of the debt being owed to public sector retirees, they are the ones who “hold” it, so to speak.

7. If Quebec’s debt is mainly owed to Quebecers, who therefore owe it “to themselves,” couldn’t it simply be cancelled?

Even though the Quebec government’s debt is mainly owed to Quebecers, it creates a public finance problem. We cannot say that it is money that Quebecers owe “to themselves,” as though it could just be cancelled tomorrow morning. In a payment default scenario (if the Quebec government stopped redeeming its bonds), all investors who bought those bonds would lose their money. Of course, Quebec taxpayers as a whole would “benefit,” since they would not have to pay back this money with their taxes, but this operation would constitute a kind of theft of investors’ money (many of whom are retirees). It is as if we cancelled a family’s mortgage: the family would benefit, but the bank would lose its money (which comes from other clients’ accounts) and would be very reluctant to lend again in the future! If we want to reduce the debt, which is growing rapidly, the only fair way to do so is to encourage the government to stop going further and further into debt and to pay down the debt by buying back its bonds.

8. What is the Quebec government’s credit rating?

The Quebec government’s credit rating basically has an effect on the interest rate that it pays on its debt. Various rating agencies assign a credit rating to the Quebec government. These ratings are indicated in the Quebec Finance Minister’s budget each year. Currently, the two main rating agencies assign ratings of Aa2 (Moody’s) and A+ (Standard & Poor’s) to Quebec. In both cases, the Quebec government’s credit rating is comparable to that of the Atlantic provinces and lower than the ratings of the other provinces.

9. What effect would an increase in the interest rate applicable to the debt have on the Quebec government’s finances?

In fact, there is not one single interest rate applicable to the debt, but rather several rates according to when the bonds mature. It is nonetheless possible to find the average interest rate applicable to the Quebec government’s debt, which was 4.22% in 2012. This rate applies to the 159 billion dollars of direct debt.

In addition to new loans, each time a part of the government’s debt comes due, money must be borrowed again if the government lacks the means to pay down the debt. An increase in the cost of borrowing would not be felt immediately since it would be applied only to the “borrowed again” part of the debt. For example, from January 2014 to December 2018, about one-third of bonds mature. In time, of course, a larger and larger proportion of the Quebec debt would be at a higher rate of interest.

In a Viewpoint addressing this question, Lenka Martinek estimates that a rise of 2 percentage points in interest rates would require $1.3 billion in additional spending on debt service after five years. If this amount is not dramatic in itself, it is still equivalent to the combined budgets of the Environment, Culture and International Relations departments.

Interviews and reports about Quebec’s Debt

Discussion (in French) with Youri Chassin, Economist at the MEI, broadcast during Calcul électoral (April 3, 2014, RDI).
www.iedm.org/48478-iedm-la-dette-vous-preoccupe-youri-chassin

Debate (in French) with Youri Chassin, Economist at the MEI, broadcast during À la une (September 26, 2013, ARGENT business news network).
www.iedm.org/46000-iedm-le-deficit-zero

Interview (in French) with Michel Kelly-Gagnon, President and CEO of the MEI, broadcast during Argent maintenant (March 26, 2013, ARGENT business news network).
www.iedm.org/43663-iedm-gauche-droite-des-termes-trompeurs-michel-kelly-gagnon

Interview with Lenka Martinek, Associate Researcher at the MEI, broadcast during CTV News Montreal (March 6, 2013, CTV).
www.iedm.org/43137-mei-interest-rates-lenka-martinek

Interview with Michel Kelly-Gagnon, President and CEO of the MEI, broadcast during The Source (August 21, 2012, Sun TV).
www.iedm.org/40343-mei-equalization-and-quebecs-debt-michel-kelly-gagnon

Report (in French) that mentions the Montreal Economic Institute debt clock broadcast during Les Coulisses du pouvoir (August 12, 2012, SRC & RDI).
www.iedm.org/40052-iedm-compteur-de-la-dette-de-liedm-aux-coulisses-du-pouvoir

Interview (in French) with Youri Chassin, Economist at the MEI, broadcast during Dumont Le midi (May 4, 2012, V Télé).
www.iedm.org/40041-iedm-redevances-minieres-youri-chassin

Report with Jasmin Guénette, Vice-President of the MEI, broadcast during CTV News Montreal (March 21, 2012, CTV).
www.iedm.org/40501-mei-debt-clock-jasmin-guenette

Interview with Vincent Geloso, Economist at the MEI, broadcast during CTV News Montreal (March 21, 2011, CTV).
www.iedm.org/40393-mei-vincent-geloso-quebecs-debt-clock

Mention (in French) of the MEI's debt clock by host Jean-Luc Mongrain broadcast on the LCN netywork (March 17, 2011, LCN).
www.iedm.org/40055-iedm-jean-luc-mongrain-compteur-de-la-dette-quebecoise

Comment (in French) by Jasmin Guénette, Vice President of the MEI, broadcast during RDI en direct (March 14, 2011, RDI).
www.iedm.org/40056-iedm-jasmin-guenette-endettement

Report (in French) with Claude Garcia, former president of Standard Life's operations and Associate Researcher at the MEI, broadcast on the TVA network (January 31, 2011, TVA).
www.iedm.org/40040-iedm-claude-garcia-gestion-hydro-quebec

Interview (in French) with Jasmin Guénette, Vice President of the MEI, broadcast during RDI Économie (August 4, 2010, RDI).
www.iedm.org/40458-gerald-fillion-budget-2010-2011

Selection of publications on the issue of Quebec's public finances

We recommend a special selection of publications that closely examine the issue of Quebec's public finances. These publications explore ideas for improving the organization and the management of the resources within the Quebec government apparatus in order to modernize it and reform its financing methods.

Viewpoint: The $15-Billion Quebec Surplus That Might Have Been
Youri Chassin - June 1, 2014
Viewpoint explaining how the Quebec government could have recorded a $15-billion surplus by controlling its spending

Viewpoint - Quebec government debt in 2014
Youri Chassin - February 20, 2014
Overview of the size of the Quebec government's debt on 2014-2015 Budget Day

Who Spends More: Left or Right?
Michel Kelly-Gagnon, Vincent Geloso - March 26, 2013
Economic Note showing the absence of correlation between the governing party's ideology and the evolution of public spending as a share of GDP

Viewpoint - How would higher interest rates affect Quebec's debt service costs?
Lenka Martinek, Youri Chassin - March 6, 2013
Publication estimating at 1.3 billion dollars the additional debt service costs incurred by the Quebec government in the case of a 2% increase in interest rates

Viewpoint - The debt of the Quebec government
Youri Chassin - November 20, 2012
Overview of the size of the Quebec government's debt

Equalization: Towards a Formula that Promotes Further Resource Development
Youri Chassin - May 29, 2012
Economic Note on the equalization formula and its impact on the development of natural resources

Viewpoint - The debt of the Quebec government
Youri Chassin - March 20, 2012
Overview of the size of the Quebec government's debt

The private sector within a public health care system: the German example
Frederik Cyrus Roeder, Yanick Labrie - February 21, 2012
Economic Note on the benefits of for-profit private hospitals in Germany

Can We Pay Down the Deficit by Further Taxing the "Rich"?
Michel Kelly-Gagnon - December 6, 2011
Economic Note on the taxation of high-income earners and government deficits

Canada Post: Opening Up to Competition
Vincent Geloso, Youri Chassin - April 26, 2011
Economic Note on the liberalization of the Canadian postal sector

Viewpoint on the debt of the Quebec government
Youri Chassin - March 17, 2011
Overview of the size of the Quebec government's debt and of its dangers

Viewpoint on the debt of the Quebec government
David Descôteaux - March 31, 2010
Overview of the size of the Quebec government's debt and of its dangers

Viewpoint on measures for raising productivity in the public service
Germain Belzile - March 9, 2010
Suggestions to make the public service more efficient

Are public sector pension plans too generous?
Pierre Girardin, Michel Kelly-Gagnon - March 2, 2010
Economic Note measuring the value of public sector pension plans

Is government control of the liquor trade still justified?
Valentin Petkantchin - October 5, 2005
Research Paper on the justifications for preserving a government monopoly on liquor sales in Quebec and the economic consequences of this policy

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