March 11, 2014
MONTREAL, QC—Quebec has the largest government debt relative to the size of its economy of any Canadian province, and a series of essays released today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank, breaks down how Quebec got to this point and where it might go from here.Quebec’s net direct debt (the accumulated borrowing by the government and its agencies), notes the first essay The State of Quebec Indebtedness, grew in nominal terms (without adjusting for inflation) from $37.6 billion in 1990-91 to $175.5 billion in 2012-13, and now represents 49 per cent of Quebec’s Gross Domestic Product (GDP)—the highest percentage among the provinces. On a per person basis, each Quebecer’s share of the debt in 2012/13 was $21,708 or, based on 2011/12 tax data, $43,804 per income taxpayer. Furthermore, interest payments on the debt (also known as debt service costs) were $9.8 billion in 2012-13, more than 11 per cent of government revenue.“During this provincial election, it’s worth noting that both Parti Québécois and Liberal governments have contributed to the debt since the early 1990s. The failure of successive Quebec governments to control spending has added significantly to the province’s debt load and today saddles Quebec taxpayers with more than $9 billion in interest payments. That’s money unavailable for health care, education or other social services,” said Filip Palda, Fraser Institute senior fellow and professor at the École nationale d'administration publique.The second essay, Comparing the Indebtedness of Quebec and Its Neighbours, compares Quebec to jurisdictions in the United States and Canada including Ontario, which has a lower debt as a share of GDP (37.5 per cent) than Quebec (49 per cent).“Although Ontario’s debt receives considerably more media and political attention, Quebec’s indebtedness is the most significant among Canada’s provinces,” said Sean Speer, essay series editor and associate director of fiscal studies at the Fraser Institute.The essay compares Quebec with 24 U.S. states by measuring bonded debt (the part of government indebtedness represented by bonds).Quebec’s bonded debt for 2011 (the last year data was available) was $160.8 billion, which represents roughly 47 per cent of the province’s GDP, for a debt-to-GDP ratio two and a half times higher than most indebted U.S. states. Vermont comes closest, with a bonded debt-to-GDP ratio of 17.1 per cent. New York’s bonded debt (the highest in dollar terms among U.S. states) represents 12.3 per cent of that state’s GDP. Quebec’s 47 per cent debt-to-GDP ratio, by comparison, is almost four times higher.“Comparisons with other North American jurisdictions including New York, a state known for its debt issues, might prompt Quebecers to insist that their government take action to curb its debt problem,” Speer said.The final essay, The Past and Future of Quebec’s Public Debt, notes that Quebec’s net debt may reach more than 57 per cent of GDP by 2022-23 if the status quo, which includes current market conditions and patterns of taxation and spending, is maintained.“Quebecers deserve a robust public debate about Quebec’s debt and any potential government reforms, because ultimately government debt rests on the backs of taxpayers—they’re the ones that pay,” Palda said.