Budget Dialogue 2014: Taking Stock

Sponsored by GNWT Department of Finance

What advice would you give to the Legislative Assembly? The 2014 Budget Dialogue is an opportunity for NWT residents to share their views on spending priorities and their ideas for making the GNWT more efficient with the Finance Minister as the 17th Legislative Assembly enters its last budget cycle. The feedback received from NWT residents will also be shared and help to inform the transition planning document for the 18th Assembly.

Since 2012, Finance Minister Michael Miltenberger has been holding annual budget consultation meetings, and the results of the meetings have helped guide government spending.

The GNWT has a balanced agenda focused on people, the environment and the economy. To ensure that NWT residents can take advantage of economic opportunities as they arise, the GNWT has provided support with initiatives like Early Childhood Development, the Anti-Poverty Strategy, the Mental Health and Addictions Framework and Education Reform. The GNWT has managed and protected the environment according to Northern priorities and values through the Land Use and Sustainability Framework, Water Strategy, and energy conservation and alternative energy initiatives. Long-term growth and stability of the NWT economy has been supported with investments in transportation and communications infrastructure and initiatives under the Economic Opportunities Strategy, NWT Power System Plan and Mineral Development Strategy.

Even though the GNWT has been successful in managing expenditure growth, it still faces many challenges. Each year programs and services cost millions more because of increased costs, especially energy prices. The Government has to be careful that it does not spend so much that it has to borrow to pay for programs and services. But, it needs cash surpluses so that it can build roads, fix schools and invest in other important public infrastructure.

By carefully managing the growth in program and service spending and using resource revenues to fund strategic infrastructure or pay down debt, the GNWT will be able maintain a $75 million annual capital budget from 2016-17 on and fund the Inuvik-to-Tuktoyaktuk Highway, the Stanton Territorial Hospital retrofit, and the Mackenzie Valley Fibre Link while keeping within the federally imposed borrowing limit of $800 million.

However, under current revenue projections and capital investment plans, the GNWT will not be able to sustain the $100 million cushion below the $800 million borrowing limit every year. This reality stems from the fact that forecasted revenue growth over the next five years is less than the predicted inflation rate and small operating surpluses will mean more short-term borrowing.

Increasing our revenues is going to be challenging. The NWT economic activity is only three-quarters of what it was eight years ago because resource production is declining and business capital investment is significantly lower. The lower levels of economic activity are one important reason why the NWT population growth is declining.

The majority of our revenues come from the Territorial Formula Financing Grant, which is outside the ability of the GNWT to influence. Over the next five years the Grant is projected to grow about two per cent annually. This is because Territorial Formula Financing largely depends on provincial-local government spending and NWT population growth rates to determine its growth. Both the provinces’ attempts to return to balanced budgets through reduced spending, and a stagnant, or declining, NWT population will slow the growth in Territorial Formula Financing and therefore total revenues.

We need to grow the economy to increase revenues to meet expenditure demands and infrastructure investment needs. The GNWT has put in place a number of strategies to help create the environment for a more robust, vibrant and sustainable economy and has set a target to increase the NWT population by 2,000 people by the year 2019.

Part of the plan is to invest in public infrastructure – from roads and airports, to communications networks, to quality remote community housing to attract and retain skilled people and a $75 million per year capital budget is not enough. Under the 2015-16 to 2019-20 capital plan, $3.8 billion in infrastructure needs will still be unfunded at the end of 2019-20.

To invest in more infrastructure while still keeping to the Fiscal Responsibility Policy will require larger operating surpluses to fund capital investment, as well as further expenditure restraint given current revenue projections.

We want to hear from you

What are your top priorities for investment?

What could we be doing better, especially since slower revenue growth will require more careful management of expenditure growth in the future?

 Here are some ways to let us know what you think

1) Leave a Facebook comment at the bottom of this post.

2) Send an email to: budgetdialogue@gov.nt.ca

3 ) Send a letter to:

Budget Dialogue

Department of Finance

GNWT

P.O. Box 1320

Yellowknife, NT

X1A 2L9

Or come to one of seven Budget Dialogue Meetings taking place across the NWT

Fort Smith – Wednesday, November 12, Pelican Rapids Inn Blue Room

Behchokö – Thursday, November 13, Cultural Centre, Hall Area

Fort Simpson – Monday, November 17, Nahanni Inn Large Boardroom

Inuvik – Tuesday, November 18, Mackenzie Hotel, Permafrost Room

Norman Wells – Wednesday, November 19, Heritage Hotel Boardroom

Yellowknife – Thursday, November 20, Explorer Hotel, Janvier Room

Hay River – Wednesday, November 26, Ptarmigan Inn, Louis Alexandra Falls Room

All meetings start at 7:30 pm.

For more details please visit: www.fin.gov.nt.ca

Si vous souhaitez vous exprimer en l’une ou l’autre des langues officielles des Territoires du Nord-Ouest (autre que l’anglais), veuillez nous écrire à l’adresse budgetdialogue@gov.nt.ca

If you wish to use an NWT official language other than English, please email the address above.

Background

The 16th Legislative Assembly spent over $1 billion on capital projects such as schools, highways, housing and community infrastructure to help support the NWT economy during the recession that started in 2008. However, it was always recognized that the GNWT’s decision to borrow over the short term for infrastructure investments was not sustainable.

The first 17th Legislative Assembly Budget (2012-13) started the process to restore the balance between revenues and expenditures to repay the short-term borrowing used to pay for the infrastructure investments since 2008 and start to build up cash reserves so that the GNWT could start re-investing in growing infrastructure needs by 2014-15.

The GNWT has followed the same fiscal strategy since the 2010-11 Budget, which is to manage expenditure growth below revenue growth in order to gradually increase the operating surpluses available to invest in infrastructure. An operating surplus of $163 million was achieved in 2012-13, followed by $96 million in 2013-14 and a revised estimate of $148 million for 2014-15.

While protecting existing programs and services, the GNWT has managed to fund over $75 million in new initiatives and enhancements to existing programs and services. This was accomplished through increased revenue and program efficiencies.

Careful management of additional spending for programs and services allowed the capital budget to be increased in 2014-15 and 2015-16 by a total of $100 million.

Capital investment is the building of roads, airports, schools, health facilities and other public buildings.

The Government borrows to make capital investments using the guidelines described in the Fiscal Responsibility Policy, which means that at least half of the annual capital investment made in a year must be funded with cash operating surpluses. This is why the capital budget is so small relative to the $1.8 billion operating budget.

On April 1, 2014, the GNWT started collecting all resource revenues on NWT public lands through the transfer of NWT lands, waters and non-renewable resources management from the federal government to the GNWT. The current medium-term forecast includes gross resource revenues averaging $113 million per year over the five years from 2014-19; however these revenues are very volatile and the forecast ranges from a low of $84 million to a high of $141 million.

The new resource revenues will not change the GNWT’s fiscal strategy, mainly because the GNWT’s “net fiscal benefit” from the resource revenue sharing agreement with Canada is 50 per cent of all resource revenues. The GNWT will split the net fiscal benefit in the following ways:

25 per cent will be shared with Aboriginal governments;

18.5 per cent (25 per cent of the remainder) will be deposited into the Heritage Fund; and

The remaining 56.5 per cent will be used to fund strategic infrastructure and/or debt repayment.

The GNWT has committed to not use resource revenues to pay for programs and services.

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