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Quebec too optimistic about finances

Quebec too optimistic about financesQuebec's Auditor General Michel Samson responds to reporters questions at a news conference to explain his report, Wednesday, February 19, 2014 at the legislature in Quebec City. THE CANADIAN PRESS/Jacques Boissinot

QUEBEC - Quebec's interim auditor general says the provincial government is being very optimistic if it thinks it can post a balanced budget within a few years.

Michel Samson issued a report Wednesday on an economic update brought down last November by Finance Minister Nicolas Marceau.

Marceau's forecast called for deficits this year and next, but a balanced budget in 2015-2016.

Samson did not say Marceau's objective is impossible to achieve but called it "ambitious, to say the least."

He also said the government had underestimated the 2012-2013 deficit by $626 million.

His comments came a day before Marceau delivers the 2014-15 budget, which is expected to include a deficit of $1.7 billion.

Samson noted that Marceau has ruled out tax hikes and that the finance minister has provided for increases of only two per cent in government spending in 2014-2015 and 2015-2016.

The return to financial equilibrium could come at the cost of increased fees, such as higher hydroelectricity rates, as well as spending cuts, Samson noted.

Marceau acknowledged last November he would be unable to balance the budget this year and announced a $2.5-billion deficit for 2013-2014, which ends this March 31.

The zero deficit was postponed two years until the 2015-2016 budget.

The hike of two per cent in government spending in 2014-2015 and 2015-2016 doesn't take into account the needs of the government departments, the auditor general said.

The spending target is actually lower than average growth, he said, pointing out the Health Department alone sees an increase in its annual spending by five per cent.

He also pointed there is a "major shift" in expenditure control and that the government often postpones certain expenses to the following year so they won't show up on current-year accounts.

Samson cited the new Quebec City arena, which will siphon off $200 million in public funds. Although the building is now under construction, that money hasn't yet appeared on the books.

Overall, the auditor general described the government's fiscal forecast as "reasonable" but criticized it for not providing a financial cushion for emergencies.

Premier Pauline Marois was undeterred by Samson's evaluation when pressed on it in the legislature by Liberal Leader Philippe Couillard.

"Of course we're ambitious," Marois said.

Marceau said the budget will give a good indication where the government is going to achieve its goals.

"I recognize the context in which we find ourselves is demanding," he said later at a news conference. "We must constantly be making the effort to get spending under control."

He added that the auditor general found "no errors" and that the financial framework is "credible, solid and realistic."

Opposition parties insisted the report was bad news for the Quebec economy.

Couillard said the underestimating of government spending does not bode well in terms of cuts to come, while Francois Legault, leader of the Coalition for Quebec's Future, argued the government has lost control.

Quebec solidaire spokeswoman Francoise David said the report "confirms the worst fears."

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