October 28, 2010 - Minister of Finance, J. Michael Miltenberger says fiscal arrangements included in the proposed draft Devolution Agreement-in-Principle (AiP) are consistent with what Canadian provinces receive in transfer payments from the federal government.

“No province receiving Equalization payments receives better treatment for their (onshore) resources than is proposed in the draft Devolution AiP,” the Minister advised Members of the 16th Legislative Assembly today.

The draft Devolution AiP provides for a net fiscal benefit of 50 per cent of resource revenues, up to a cap.

Based on the royalties actually collected by Canada from the NWT over the last 10 years – and a Devolution agreement finalized on currently proposed terms – the cap would have only been reached twice. In all the other years, the NWT would have received its full 50 per cent share of resource revenues in addition to regular transfer payments from the federal government.

“Since we cannot know how the world might change in the future, the net fiscal benefit provisions will not be written in stone,” he added. “The AiP contemplates periodic reviews of the net fiscal benefit.”

Over the last five years, Minister Miltenberger estimates the NWT has lost $208.6 million in potential net fiscal benefit.

Click here for the Minister’s full statement.

For more information, contact:

Press Secretary
Office of the Premier/Cabinet
Government of the Northwest Territories
Phone: (867) 669-2302

Background:

• Once Devolution is achieved, 100 per cent of the resource royalties, currently paid to the federal government, will stay in the NWT. However transfer payments to the GNWT under Canada’s Territorial Formula Financing arrangements will also be reduced - but not dollar for dollar. The difference represents the net fiscal benefit.
• Based on the royalties actually collected by Canada from the NWT over the last 10 years, the NWT would have reached the cap only twice. In all other years – had a Devolution agreement been finalized based on the terms we have currently negotiated – the NWT would have received its full 50 per cent share of resource revenues in addition to regular transfer payments from the federal government.
• The arrangements contemplated in the AiP are completely consistent with what the provinces receive under the Federal-Provincial Equalization program. Under Equalization, 50 per cent of a province’s resource revenues are excluded from the equalization calculation, and the net fiscal benefit is subject to a cap.
• Equalization payments are cash transfers from the federal government to eligible provincial governments to help offset differences in available revenues. No province receiving Equalization receives better treatment for their onshore resources than is contemplated in the draft Devolution AiP.
• Some provinces, like Alberta, keep 100 per cent of their resource revenues, but this is because Alberta’s revenues are high enough that the province is not entitled to Equalization payments. If, in the future, the royalties received by the GNWT are high enough that we don’t qualify for Formula Financing, we would also get to keep 100 per cent of the royalties.
• Every year that passes without a Devolution agreement means that the NWT forgoes another year’s net fiscal benefit. Over the last five years, the NWT has lost $208.6 million in potential net fiscal benefit.
• The AiP contemplates periodic reviews of the net fiscal benefit.