Form 18-K/A QUEBEC For: Mar 31

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

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

AMENDMENT NO. 2

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. 2 to be signed on its behalf by its authorized agent.

QUÉBEC

Date: July 5, 2022

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Exhibit 99.3

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REVISION OF THE BUDGET BALANCE IN 2021-2022 SINCE THE MARCH 2022 BUDGET

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

Preliminary results as at March 31, 2022 show a deficit of $294 million. This $7.1 billion upward revision to the budget balance comes primarily from:

• a $3.9-billion increase in own-source revenue excluding those of government enterprises, including:

• $2.2 billion in personal income tax, an increase due in particular to the level of source deductions and capital gains reported on tax returns for the 2021 taxation year being higher than expected,

• $943 million in corporate taxes due to higher net operating surplus of corporations in 2021;

• a $473-million increase in revenues from government enterprises, mainly due to Hydro-Québec’s results;

• a $406-million decrease in revenues from federal transfers, mainly due to the slower pace of completion of federally funded infrastructure projects;

• lower-than-expected portfolio expenditures of $3.5 billion, including:

• $490 million in the Santé et Services sociaux portfolio, mainly due to lower-than-expected compensation costs projected in the 2022-2023 budget,

• $428 million in the Éducation portfolio, mainly due to lower-than-expected expenditures in school service centres,

• $385 million in the Enseignement supérieur portfolio, due in part to lower-than-anticipated CEGEP spending and cost of the loans and grants program,

• $459 million in the Économie et Innovation portfolio, in particular due to lower-than-expected spending by the Economic Development Fund,

• $401 million in the Travail, Emploi et Solidarité sociale portfolio, mainly due to a decrease in the number of people receiving social assistance and the lower-than-expected costs of certain refundable tax credits;

• a $178-million increase in debt service expenses due to higher interest rates;

• a $160-million increase in deposits of dedicated revenues to the Generations Fund.

The detailed revisions are presented in Appendix 1.

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Expenditure in the Éducation portfolio increased by $991 million (5.9%) to $17.8 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 $227 million (2.7%) to $8.7 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 $4.2 billion (10.9%) to $43.1 billion, due in particular to:

• a $3.8-billion increase in expenditure in the Travail, Emploi et Solidarité sociale portfolio, mainly due to the one-time cost of living allowance announced in the Québec Budget Plan - March 2022 and the extraordinary cost of living allowance announced in the
  Update on Québec’s Economic and Financial Situation - Fall 2021;

• a $640-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 $379-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 $930 million (12.1%) to $8.6 billion. This increase is mainly due to the rise in interest rates.

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NET FINANCIAL SURPLUSES OR REQUIREMENTS

As of March 31, 2022, net financial requirements amount to $9.8 billion and are due to:

• the $3.3-billion surplus resulting from the difference between government revenue and expenditure;

• the $4.6-billion financial requirements for investments, loans and advances, due primarily to an increase in short-term investments of $1.3 billion as part of overall cash management, increased investments by the Economic Development Fund and Financement Québec, as well as growth in the consolidation value of government enterprises;⁽⁹⁾

• the $5.1-billion financial requirements related to government capital investments, mainly due to investments of $9.7 billion, offset by amortization expenses of $4.6 billion;⁽⁹⁾

• the $2.9-billion financial requirements related to retirement plans and other employee future benefits liabilities, resulting from the payment of government employee benefits of $6.7 billion, partially offset by the net cost of plans of $3.8 billion;⁽⁹⁾

• the $3.1-billion financial surplus from other accounts;⁽¹⁰⁾

• the $3.6-billion financial requirements generated by deposits in the Generations Fund.

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APPENDIX 1: BUDGET FORECASTS – CHANGE SINCE THE MARCH 2022 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 14 to 19 of the document titled “Processus et documentation budgétaires : une reddition de comptes sur les finances publiques de l’État” (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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