Quebec budget: students to pay more, workers discouraged from early retirement

QUEBEC - Quebec's provincial budget has introduced reforms that will affect both students and seniors -- and the changes are sure to be controversial.

Universities will receive a drastic boost in funding -- with a nearly 25 per cent increase in their operating revenues over six years.

Many of those improvements will be paid for by an even more drastic hike in tuition fees -- 75 per cent over five years, to almost $3,800. That would still leave Quebec with some of the lowest tuition rates in Canada, but it is sure to draw vigorous opposition from Quebec's well-organized and vocal student lobby.

There are also significant pension changes: larger penalties for workers who retire under age 65, but more generous pensions and tax breaks for those who continue working past that age.

There is also, for the first time ever in Canada, a new private pension plan that would be run by financial institutions and offered to workers who don't currently have company pensions. Quebec hopes that the rest of Canada will follow with a similar plan -- perhaps as early as next week's federal budget.

The provincial government says it's still on track to balance the books by 2013 -- but critics note that the $3.8 billion deficit is larger than forecast a year ago, and call this a buy-now-pay-later budget.

Experts comment

Economics analyst Paul Bilodeau assessed the budget as a flat affair.

"There's no significant tax increases but also no tax cuts," he noted. "The only increase for individuals and corporations is with the Quebec Pension Plan, plus tuition."

The province will be hoping to collect from tax evaders. It has hired 1,000 more employees to crack down on such chronically problematic fields as illegal tobacco sales and the construction industry.

"The government was thinking that by 2039 the Quebec Pension Plan would run out of money, so they increased funding and now think they'll have a significant surplus by 2039," said Bilodeau.

The QPP penalty for retiring before 65 will increase from 6 percent to 7.2 per year depending on how long before 65 you retire and those who work past 65 will be rewarded.

"The government's objective is to get more seniors working to fill the labor shortage in the coming years, they're giving a credit to those who earn than $5,000 of up to$1,500 a year," said Bilodeau.

"The provincial government has a large deficit of $4.2 billion this year. We are spending more than we're taking in. There's no room for further cuts," said Bilodeau.

Another analyst urged a large scale rethink of the health care system.

"We have to look beyond fiddling with the system, we must ask more questions about the coverage of the health system and ask if still has the resources to pay for everything," Carlos Leitao Chief Economist Laurentian Bank.

Gazette political columnist Don MacPherson said that there is little in the budget to help the Liberals out of their low political ratings.

"I don't see anything that's big enough to grab people's attention and get them to reconsider this government," said MacPherson.

"People seem to have stopped paying attention to the Liberals. They don't even get credit for their good moves. For example they phased-in intensive teaching of English in French schools. It is very popular but it hasn't translated into increased popularity for the Liberals."

Highlights of the 2011-2012 Quebec budget tabled Thursday:

-- $3.8 billion deficit for 2011-12, worse than the $2.9 billion forecast a year ago but projection remains unchanged for a balanced budget in 2013-14.

-- Government expenditures, including program spending and debt service, to reach $69.1 billion.

-- Gross debt will reach $173.4 billion, or 54.7 per cent of Quebec's GDP, by the end of 2011-12.

-- A university tuition hike of nearly 75 per cent over five years, a $325-a-year increase that will still leave Quebec's tuition among the lowest in Canada, at $3,793, in 2016-17.

-- An $850 million funding boost for universities over six years, which will increase their operating revenues by 25 per cent.

-- Creation of new Pooled Registered Pension Plans, a potential model for a new Canada-wide system that will be managed by financial institutions and offered to workers at businesses that do not have private pensions.

-- A 0.9 per cent increase, over six years, in Quebec Pension Plan premiums.

-- Workers who retire after age 65 will receive a new tax credit of up to $1,504 while they work and an 8.4 per cent bonus in pension payments once they retire, up from the current 6 per cent bonus. Workers who retire under age 65, however, will be hit by a 7.2 per cent penalty in their pensions, up from the current 6 per cent.

-- A drastic hike in royalties from future shale-gas development, increasing the current rate that maxes out at 12.5 per cent of the value of a well, to a new rate as high as 35 per cent.

-- $1.6 billion for northern infrastructure and up to $500 million to fund private businesses in the region.

New pension rules explained

Bilodeau provided CTV Montreal with a point form explanation of the new pension rules:

The key point is that the rules are based on the age when you apply for a QPP benefit rather than when you retire.

Reductions in benefits announced in the budget

-          New rules for reduced QPP payments if claim benefits prior to age 65 do not take effect until January 1, 2014

-          Therefore can still apply early and existing reductions of .5% per month will apply until December 31, 2013

-          Starting January 1, 2014 will phase in an increased penalty from current  amount of 0.5% per month to 0.6% per month

Increase in benefits announced in the budget

-          New rules will apply if you defer claiming QPP benefits after turning age 65

-          Starting January 1, 2013 the monthly increase for deferring claiming a pension after age 65 will go from 0.5% per month to 0.7% per month

 With files from the Canadian Press