Politics
Chris Windeyer

The Coming Budget Battle

Parsing Robert C. McLeod's fiscal update isn't easy, but one thing is clear: there's precious little room to maneuvre.

 On EDGE | ANALYSIS

It’s often been said in Canadian politics that if you’re a Prime Minister or premier looking to hamstring a potential challenger to your leadership, your best bet is to make that person the finance minister, where they’re sure to become your government’s routine bearer of bad news.

Former finance minister Michael Miltenberger, a two-time candidate for the premier’s job,  did eventually take to his role of proclaiming the territory’s state of pending fiscal crisis with a certain blunt verve. His fiscal updates got progressively more morose as the last assembly wore on, culminating in last year’s infamous remark: “We are approaching the edge of a cliff and our challenge is to ensure that we do not go over.”

Say what you will about his tenure at finance, but give him credit for one thing: That’s not exactly spin.

Fast-forward a year: Miltenberger’s gone, having been unceremoniously dumped by Thebacha voters in last November’s territorial election. And so it falls to new finance minister Robert C. McLeod to deliver largely the same dire fiscal warning — minus the deadpan rhetorical flourishes — as his predecessor.

Thus McLeod’s fiscal update Friday was full of the familiar: government revenues are falling, expenses are rising, the economic outlook is bleak and something is going to have to give before the GNWT starts running deficits just to maintain existing programs and services.

Revenues are down $36 million this year alone, thanks to the slowdown in resource activity. The last budget set aside $30 million for supplementary appropriations; forest fires and increased diesel use by the Northwest Territories Power Corporation ran the total cost of those appropriations up to a cool $76 million, two-and-a-half times the original budget. The forecast surplus of $147 million is now less than half that: $69 million.

Even the good news is still kind of bad news. The NWT won’t be losing $34 million in annual financing from the federal government, it will only be losing $10 million.

McLeod can expect a bruising fight if he attempts to drop the axe with an austerity budget.

All this would seem to indicate that a harsh blend of austerity and tax hikes might be on the horizon to ensure the territory’s budget stays balanced. McLeod did announce the territory will be freezing high-level, non-union salaries in the civil service for two years amid hints at other future belt-tightening. All told, McLeod says the government will need to find $150 million over the next five years, in a combination of spending cuts and new revenue.

But tax hikes are out, McLeod says, and while he probably overstates the damage to the economy that would result from an increase (“Increasing taxes will take money out of the local economy.” Not necessarily true), he is correct that any politically palatable tax hike wouldn’t come close to helping balance the budget, so small are the territory’s own-source revenues.

Also apparently off the table are some of the big-ticket infrastructure projects which date back to past assemblies: the new highways planned for the Mackenzie Valley, Wha-Ti and the Slave geological province. McLeod also wants to maintain wiggle room so the GNWT can get in on cost-shared programs in the event that the federal government, as expected, opens the taps on infrastructure spending in a bid to prop up an increasingly troubled national economy.

Then, there’s the mandate: “The priorities of the 18th Assembly include addressing the cost of living, supporting education, training, and youth development, fostering community wellness and safety, and investing in the economy, environment and climate change.  In short, we are seeking to foster the environment that allows NWT residents to create a future of prosperity.  This goal requires investments that we cannot make without addressing the expenditure side of the budget.”

This passage is a tough one to parse. McLeod warns of cuts, but out of that list of priorities, which one do you pick? And considering that regular MLAs are already peeved that the salary freeze wasn’t run by them first, McLeod can expect a bruising fight if he attempts to drop the axe with an austerity budget.

Meanwhile, the petroleum sector is effectively dead, at least for the life of this assembly. Commodity prices mostly remain in the toilet. Diamond mine closures still loom. Economic diversification efforts cost money and take time to gain traction, if they even work at all.

Yellowknife Centre MLA Julie Green is already calling for “evidence-based” budgeting and wide public consultation before the full budget drops in June. Doubtless McLeod will be the locus for reams of advice from bean counters in the Finance Department and plenty of hectoring from every conceivable interest group and ideological corner. Both circumstance and politics have left the minister with precious little room to maneuver.