Form 18-K/A QUEBEC For: Feb 28

FORM 18-K/A
For Foreign Governments and Political Subdivisions Thereof

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

AMENDMENT NO. 1

to

ANNUAL REPORT

of

QUÉBEC
(Name of Registrant)

Date of end of last fiscal year: March 31, 2022

SECURITIES REGISTERED*
(As of close of fiscal year)

Name and address of person authorized to receive notices and communications from the Securities and Exchange Commission:

Martine Hébert
Délégation générale du Québec
One Rockefeller Plaza
26^th Floor
New York, N.Y. 10020-2102

Copies to:

* The Registrant is filing this Annual Report on a voluntary basis.

The undersigned registrant hereby amends its Annual Report on Form 18-K for the fiscal year ended March 31, 2022 (the “Annual Report”) as follows:

The following additional exhibit is hereby added to the Annual Report:

Exhibit:

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Amendment no. 1 to be signed on its behalf by its authorized agent.

QUÉBEC

Date: May 24, 2022

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Exhibit 99.2

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CHANGE IN THE BUDGETARY BALANCE IN 2021-2022

According to the data presented in the Québec Budget Plan – March 2022, a budgetary deficit of $7.4 billion was expected for 2021-2022, before use of the stabilization reserve.

Based on available information, a one-time upward revision of $2.8 billion in the budgetary balance is expected for 2021-2022, bringing the deficit to $4.6 billion.

This revision is due to the increase in own-source revenues excluding those of government enterprises, primarily personal and corporate income taxes.

• In particular, the situation of Québec businesses was more favourable than expected when the March 2022 budget was prepared. Similarly, payroll deductions paid by employers were higher than expected.

• In addition, the sharp increase in inflation since the beginning of 2022 has had an upward impact on overall tax revenues.

• The $2.8-billion increase is a preliminary estimate. Additional information on tax revenues is forthcoming, particularly with respect to the processing of personal income tax returns.

Preliminary results for the year 2021-2022 will be presented in the Monthly Report on Financial Transactions at March 31, 2022.

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Other own-source revenue increased by $1.7 billion (12.9%) to $15.1 billion, due to:

• a $1.3-billion increase (32.1%) in duties and permits, owing mainly to the increase in mining revenues resulting from sustained metal prices in markets since 2020 and to the increase in revenues collected under Québec’s cap-and-trade system for greenhouse gas emission allowances;

• a $428-million increase (4.6%) in miscellaneous revenue, owing in particular to higher revenues from the sale of goods and services due to the easing of lockdown measures related to the COVID-19 pandemic compared to the same period in 2020-2021.

Revenue from government enterprises increased by $1.5 billion (41.9%) to $5.2 billion. This increase is mainly attributable to the impact of COVID-19 on the results of government enterprises in 2020-2021, particularly those of Hydro-Québec and Loto-Québec.

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Revenue from other programs decreased by $1.5 billion (23.6%) to $5.0 billion.

• This decrease is due in part to one-time transfers in 2020-2021 related to the Safe Restart Agreement, of which $2.3 billion had been recorded as at February 28, 2021.

• It is partially offset by the transfer resulting from the Asymmetrical Agreement on Childcare that will total $660 million as at March 31, 2022, of which $605 million has been recorded as at February 28, 2022.

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Expenditure in the Éducation portfolio increased by $986 million (6.6%) to $15.8 billion. This increase is explained, in particular, by the reopening of educational institutions, which were temporarily closed in the spring of 2020 due to the COVID-19 pandemic.

Expenditure in the Enseignement supérieur portfolio increased by $368 million (4.8%) to $8.0 billion. This growth is due in part to the resumption of some activities that were limited in 2020-2021 in higher education institutions.

Expenditure in other portfolios increased by $407 million (1.2%) to $33.5 billion, due in particular to:

• a $680-million increase in expenditure in the Travail, Emploi et Solidarité sociale portfolio, mainly due to the implementation of the extraordinary cost of living allowance announced in the Update on Québec’s Economic and Financial Situation – Fall 2021;

• a $332-million increase in expenditure in the Famille portfolio, mainly due to the increase in the refundable tax credit for childcare expenses announced in the Update on Québec’s Economic and Financial Situation – Fall 2021;

• a $584-million decrease in expenditure in the Affaires municipales et Habitation portfolio, mainly due to one-time financial assistance in 2020-2021 under the Safe Restart Agreement to support municipalities in the context of the pandemic.

Debt service expenditure increased by $990 million (14.5%) to $7.8 billion. This increase is mainly due to the rise in interest rates.

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NET FINANCIAL SURPLUSES OR REQUIREMENTS

For the period of April 2021 to February 2022, net financial requirements amount to $6.3 billion and are due to:

• the $7.0-billion surplus resulting from the difference between government revenue and expenditure;

• the $8.3-billion financial requirements for investments, loans and advances, due primarily to an increase in short-term investments of $3.4 billion as part of overall cash management, as well as the growth in the consolidation value of government enterprises;⁽⁸⁾

• the $3.9-billion financial requirements related to government capital investments, mainly due to investments of $7.9 billion, offset by amortization expenses of $4.1 billion;⁽⁸⁾

• the $2.7-billion financial requirements related to retirement plans and other employee future benefits liabilities, resulting from the payment of government employee benefits of $6.1 billion, partially offset by the net cost of plans of $3.4 billion;⁽⁸⁾

• the $4.7-billion financial surplus from other accounts;⁽⁹⁾

• the $3.1-billion financial requirements generated by deposits in the Generations Fund.

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APPENDIX 1: BUDGET FORECASTS – CHANGE SINCE THE MARCH 2021 BUDGET

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APPENDIX 2: EXPENDITURES BY MISSION

Government expenditures are broken down into five public service missions. This breakdown of the government’s expenditures into its main areas of activity is a stable indicator over time because it is usually not influenced by Cabinet shuffles. Moreover, since this breakdown is also used in public accounts, its presentation in the Monthly Report on Financial Transactions allows for a better monitoring of actual results over the course of the year.

The public service missions are:

• Health and Social Services, which consists primarily of the activities of the health and social services network and the programs administered by the Régie de l’assurance maladie du Québec;

• Education and Culture, which consists primarily of the activities of the education networks, student financial assistance, programs in the culture sector and immigration-related programs;

• Economy and Environment, which primarily includes programs related to economic development, employment assistance measures, international relations, the environment and infrastructure support;

• Support for Individuals and Families, which includes, in particular, last-resort financial assistance, assistance measures for families and seniors, and certain legal aid measures;

• Administration and Justice, which consists mainly of the activities of legislature, central bodies and public security, as well as administrative programs.

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Consolidated financial information

Consolidated results include the results of all entities that are part of the government’s reporting entity, i.e., that are under its control. To determine consolidated results, the government eliminates transactions carried out between entities in the reporting entity. Additional information on the government’s financial organization and the funding of public services can be found on pages 13 to 18 of the document titled “Budgetary Process and Documents: Public Financial Accountability” (in French only).

Change in the application of the accounting standard respecting transfer payments

The Québec government contributes to the funding of public infrastructure owned by third parties. In most cases, funding is provided through annual transfers paid according to a schedule that corresponds to the rate of repayment of the loans contracted by the recipients to carry out the projects.

For these infrastructure projects, the government changed the application of PS 3410, Transfer payments, to account for transfer expenditures based on the period of completion of eligible work by transfer recipients. Previously, transfer expenditures were recorded at the rate of disbursements authorized by Parliament and the balance of funded work was reported in contractual obligations. This change results in more timely recognition of transfer expenditures in the government’s consolidated financial statements.

In this monthly report, the estimated impact of this change has been accounted for retroactively and is included in the consolidated expenditures. The Public Accounts 2020-2021 present the final impact of the application of the accounting standard, including on the government’s accumulated deficit as at March 31, 2021.

Notes

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