Quebec Doubles Debt in Six Years

Does Quebec eat up its capital and rely upon liquor revenue to stave off deficits?

GEORGE WRIGHT March 15 1924

Quebec Doubles Debt in Six Years

Does Quebec eat up its capital and rely upon liquor revenue to stave off deficits?

GEORGE WRIGHT March 15 1924

Quebec Doubles Debt in Six Years

GEORGE WRIGHT

"Orgy of Extravagance” is not merely an epithet which applies to the federal government

"QUEBEC has kept her head. Quebec’s finances are managed by sane and sober business men. by sane men. Other provinces may be spendthrift to the point of financial folly but Quebec stands as a shining example, a beacon for the guidance of her sisters, to guide them past the shoals of debt and the rocks of financial disaster.”

With variations these sentiments are .repeated by the politicians and echoed by a press that is peculiarly loyal to its home province and, hence, perhaps blind to some of the shortcomings of its administrators, until they have come to be re-

garded as truisms. “Sane old Quebec,” is a catch phrase that has been etched deeply into the minds of thousands of citizens of the oldest province of the

Dominion and of countless Canadians, from Sydney to Victoria. '

Perhaps the eulogy was too strong to stand the test for saneness and sobriety—too rosy colored.

To-day there is a growing suspicion that things are not quite so satisfactory. Doubt is cast upon the genuineness of Quebec’s recurring surpluses. There is suspicion abroad that Quebec’s efficient methods have been over-rated, that her yearly bank balances are “merely matters of book-keeping.”

* The acid test of the expert accountant is being applied to the annual budgets and tables of expenditures and the suave, apologetic explanations of the politicians, as to mounting debts and increased expenditures, somehow fail to convince, as they once did.

Are the people of Quebec awakening to the realization that there is something rotten in the financial state of their much lauded province? If they are, here, perhaps, are some of the reasons:

IS QUIETING FACT No. 1—The total public debt of the province to-day is $87,921,132. Less than six years ago, June 30,1918, the public debt was $42,891,544.

The public debt has more than doubled in the last five years; has actually increased by $45,029,588, or at the rate of nine million dollars each year.

Quebec’s debt is now made up* as follows:

Liabilities, as at June 30, 1923........$69,661,632

Loan to Banque d’Hochelaga (purchase price of Banque Nationale) 15,000,000 Guarantees by the government for

technical schools, etc................... 3,259,500

The story of the progression of the public debt is as follows:

1900-01........................... ..... $25,072,419 1905-06........................................... 25,526,706 1910-11............................................ 25,117,324 1915-16........................................... 37,371,005 1918 .............................................. 42,891,544 1919 ................................................ 43,965,512 1920 ........................................ 48,756,763 1921 ............................................... 58,336,436 1922 ................................................. 62,115,061 1923 (December 31)...... 87,661,632

Against this formidable array of liabilities, the public accounts show assets amounting to $21,990,829. Some of the items included in this total are tangible assets, such as $3,408,945 for sinking fund, $2,699,571 cash banks and $4,391,616 loaned to various municipalities under the federal statute regarding workmen’s dwellings. The difference between the total of these items and the gross amount of nearly twenty millions is,made up of such items as the Montreal jail, valued $3,620,362, the new court house at Montreal, which, in uncompleted form, is valued at $1,514,557, and hydraulic developments which form an impossible item to assess.

A fair estimate, therefore, of the actual liquid assets which offset the $87,921,132 liabilities would not be more than $10,000,000.

lTNISQUIETING FACT No. 2—Capital spendings are being used for current revenue.

During the five-year period (end of 1918 to end 1923) the revenues of the province increased from $12,666,352 to $21,634,541. The total of the annual increases amounted to $26,213,969. Expenditures on all accounts during the same period amounted $52,984,057.

The revenues of the Province of Quebec are not easily determined. During 1923 the provincial income

from ordinary sources amounted to $21,634,641. But some of this income in reality represented capital, expenditures and should not be classed as current revenue.

Two of the largest items of income are derived from

Does Quebec eat up its capital and rely upon liquor revenue to stave off deficits?

the sale or lease of lands, forests, and mining royalties. These actually constitute the capital of the province. They should be regarded, to some extent, as resources held in trust for generations to come. If they are spent, year after year, in liquidating the pressing debts of

extravagant politicians there must come a day of reckoning when this source of wealth can no longer be tapped. That day is approaching more rapidly than most of Quebec’s citizens realize. The rich forests of Quebec are yearly being depleted of their wealth and no sufficiently comprehensive provincial effort is being made by reforestation to replace the amount used, year by year, for current revenue.

This is true also to a lesser degree of the income from the sale of crown lands and to the revenue from fish and game licenses. Much of the crown lands thrown open for settlement is valueless, until improved by settlement, but the best of these lands is being rapidly combed over and it is costing the Government more and more each year to build roads and bridges and to colonize the more distant settlements.

By brochure, by pamphlet and by advertisement the provincial authorities are advocating the advantages of Quebec as a sportsman’s paradise. The result of this intense propaganda is to be found in an increasing number of incoming fishermen and hunters. By the extension of open seasons to the utmost limit and by the issue of permits and licenses, the province is gathering in an enormous revenue from their visits. But the streams are becoming “fished out” and game is harder to find each year. There will come a day when Quebec will no longer be the paradise of the sportspian, Then this revenue will diminish, if not cease..

Forests, mines, fisheries and crown lands in 1923 gave Quebec a revenue of $4,383,927. The estimated yield for 1924

is $4,511,000. Four and a half millions of resources spent!

~\ISQUIETING FACT No. 3—The cost of the civil ^ service is increasing rapidly. The increase here is perhaps best shown by a glance at the table of the cost of government, which may be summarized as follows (year ending June 30):

1917 ............. $671,915 1918 .................. 705,400 1919 .........*.........725,931 1920 ..................... 809,097 1921 ....... ................ 877,985 1922 ......................;................ 979,564 1923 ................. 1,150,959

The numerical increase is difficult to determine. Several pertinent questions are on the order paper of present session of the legislature but whether or not information will be made public depends upon the humor the Government.

J^ISQUIETING FACT No. 4.—The surplus of province would be entirely wiped out and a deficit created if it were not for the fat profits made out of government’s liquor monopoly.

The net profit in 1923 from the sale of liquor, including both the trading profit and the revenue derived from other sources, fines, duties, permits and seizures, enforcement expenses) was $4,314,755.

Now, the government sale and control of liquor may regarded either as a great social experiment—an honest desire of the government to eliminate some of the abuses which, for years, surrounded the retail sale of alcohol—or it may be regarded as a clever business scheme to squeeze the maximum revenue from a business, which, from immemorial, has returned substantial profits.

The trouble in the province of Quebec is that those control persist in emphasizing the moral side, talking the boon government control has been to temperance.

If the stores were operated and controlled by individuals and by private corporations instead of by Government, they could be managed with just as much order, and just as efficiently as they are at present under governmental administration. There is no virtue in fact that the Government takes control instead of individual.

The improvement in sobriety, if there is any, is due the fact that the saloon has been abolished, and quality of the liquor sold materially improved. This might have been brought about by a strict inspection,-if the trade had been left in control of men who had to show their fitness for the responsibility of selling liquor.

The government of the province of Quebec is in liquor business primarily because it can net a profit nearly four and a half million dollars by reason of monopoly. The system is the home of patronage appointees. Its transactions, even to the renting of premises, matters of politics. It has all the defects of state ownership, save the glaring one that it never shows a deficit. Instead of deficits it makes the provincial surplus possible.

How seriously the province needs the revenue is manifest from the latest published statement of the Liquor Commission. This shows that among current liabilities the Commission, in its third year, is still burdened with bank loans and overdrafts to the extent of $3,108,373. Upon this the Commission pays bank interest to amount of $228,477. The province has swallowed every available dollar of the profits, only a small proportion being retained to create a sinking fund for the capital which was borrowed to start operations.

But the fact remains that after two and a half years operation the Quebec Liquor Commission has noi been able to create a fund sufficient to carry on without bank borrowing. Profits are paid into the government hopper as fast as they are made, in order to create a provincial surplus.

DISQUIETING FACT NO. 5.—The Government lately given $15,000,000 of provincial bonds bolster up a banking corporation.

The complete story of the merger of the Banque d’Hochelaga and the Banque Nationale has yet to be told. Early in the present year the provincial authorities considerably startled all those taxpayers of the province who are disposed toward sound economics, by announcing that the Banque d’Hochelaga had entered into a contract purchase the assets of the Banque Nationale, provided that the province of Quebec, “in order to facilitate

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transaction and to provide liquid assets for the purchaser,” would hand over $15,000,000 of its bonds to the Banque d’Hochelaga.

. It was at first assumed that the Province intended to guarantee merely the interest on a loan which the Banque d Hochelaga might raise. This proved erroneous. When the bill, embodying the contract and the transfer, was made public it was found that the province had agreed “to issue and transfer in full ownership, and without reserve,” to the purchaser $15,000,000 of its bonds.

Not a figure relating to the unprececedented transaction was tabled in the provincial legislature. . _ The premier merely vouchsafed the comment that there was “a huge national emergency for thousands óf French-Canadian bank depositors.” How great the emergency or why its creation was permitted will never be disclosed-; unless by a Royal Commission.

Premier _ Taschereau gave a list of church dignitaries, and ecclesiastical corporations, depositors in the Banque Nationale, and he plaintively asked the House if such men and women were to suffer by the failure of the bank. The issue made an immediate, sentimental appeal to the French members. The public purse must meet the exigencies of a private situation. Coming so soon after vastly different treatment of the depositors in the ill-fated Home Bank, the Quebec legislature’s action stimulates a feeling of unrest and resentment.

► Nor was this the sole outcome of the bank merger. The contract drawn between the two banks and incorporated in the act of parliament expressly stipulated “that the principal and interest of this issue shall be repaid in forty years at the rate of $124,172.40 per year.”

Yet this payment was not made a prior lien upon the bank’s profits. In fact

it was expressly stipulated that the Banque d’Hochelaga may pay to its shareholders—and presumably upon the enlarged capital of the amalgamation— a dividend of ten per cent., before making the amortization payment or before paying the interest due the Government.

Lastly, it was expressly set forth that the Banque d’Hochelaga should assume and discharge all the liabilities and obligations of the Banque Nationale. These include the bonds of an industrial company, La Machine Agricole Nationale of Montmagny, which defaulted payments and was indebted to the Banque Nationale for $680,000. This provision was certain to make friends for the Government in the riding in which this unsuccessful enterprise was situated. But it is difficult to reconcile the Government’s action with sound business principles.

The Government, in effect, has endorsed the principle of taking the moneys of the sore-distressed taxpayers to pay the debts of a private corporation.

rySQUIETING FACT NO. 6.—Ex-

rJ penditures show a general increase, with an ominous jump in those departments where the “pork barrel” has its best chances.

Apart from the sum of nearly nine million dollars obtained from the combined profits of the liquor monopoly and the forests. _ mines, fisheries, and crown lands, which, as stated before, should be regarded almost wholly as capital expenditure, rather than current revenue, what are the sources of the provincial revenues?

There is the revenue obtained from the federal government, based upon population and amounting to $2,315,643; commercial corporations pay provincial taxes totalling $2,213,232; succession duties (naturally a variable amount) last year amounted to $2,620,336; motor vehicles returned $2,217,578. In addition there were other small sums.

Against this it is estimated that for the present year, the people of the province will have to pay $4,008,941 as interest on the public debt. This enlarged item compares with $1,956,056 at the end of 1917 and $1,983,990 at the end of 1918.

Comparison of the expenditures for 1923 with those of five years previous gives the clearest indication of the rapid increase in Quebec’s spendings:

1918 1923 Increase Legislation . . .S. 444,769 $ 723,811 $ 279,042 Administration of Justice . . . 1,275,291 1,715,199 439,908 Public Instruction 1,581,454 2,382,422 800,968 Asylums .... 1,017,055 1,195,140 178,086 Public Health . 58,500 292.617 234,117 Public Works . 1,057,239 1,168,653 111,414 Agriculture . . 724,244 1,252,000 527,756 Lands & Forests 411,163 870,544 459,381 Roads ....... 622,858 3,100,000 2,477,142

The last item in the above tabulation refers only to “maintenance of roads’’ which is paid for out of ordinary revenue. Strictly out of capital account, for good roads, the government has spent $35,473,477 of the $40,000,000 authorized by the Legislature in 1912. Of this amount the Government has lent to the municipalities more than $23,000,000.

Some of the items of expenditure will repay a searching study. Of the sum devoted to public health, for example, the chief items are, $96,750 to purchase radium for the University of Montreal (Laval); $47,388 for the fight against venereal diseases; and $14,977 for the tuberculosis campaign.

For the coming year the province has set aside a sum of $100,000, the first of five equal payments, for the battle against tuberculosis. One hundred thousand dollars from a government which derives $4,500,000 from its liquor monopoly!

Three million dollars for good roads’ maintenance and one hundred thousand dollars for tuberculosis, wrung from a reluctant government after a campaign extending over a year and sponsored by the leading newspapers and institutions of Montreal! Roads are built in all sorts of inaccessible corners of the province.

Quebec is spending her resources with a lavish hand. She takes no thought of the morrow, provided that she can shovel more and more dollars into that insatiable hopper, which extravagant administrators have persisted in erecting for their own undoing or at least for the undoing of their unborn children.

The day will come when there will be no more timber leases to sell, even at any price which the Government may think it can get. The asbestos for which Quebec is noted, because eighty per cent, of the world’s supply is here, can never be replaced by human hand, once it is mined. Yet the Government spends the royalties thus obtained, lavishly, unmindful of the future, to meet the demands of those “pork barrel” claimants for public works, for roads, for bridges, for “aids” to agriculture.

Quebec’s rivers are being depleted. A few years ago where there was an abundance; there are fish no longer. The elk, the moose, the deer, go further and further into the hinterland. The rich harvest from hunters’ licenses will soon pass.

Meanwhile Quebec’s capital debt is mounting. This year it will require $4,000,000 solely to retire the interest charges.

The Government—from cabinet minister to the least of the patronage seekers —is flushed with the fever of spending public money, as are federal, provincial and municipal spending authorities throughout the length .and breadth of Canada.