Robert C. McLeod: Fiscal Update, October 2016

Mr. Speaker, I want to take this opportunity to update the Members and residents on our fiscal situation.

The passage of the first budget of the 18th Legislative Assembly in June, just four short months ago, was the start of our commitment to three objectives in our fiscal strategy. First, we need to ensure we demonstrate discipline in our spending so that our expenditure growth is aligned with revenue growth. Currently this is particularly challenging as most of our revenues are based on federal transfers that are expected to have little growth in the medium term.

Secondly, we need to lower our operating expenditures or increase our revenues to increase our fiscal capacity. This requires us to make difficult decisions on what programs and services are no longer needed or that can be funded at reduced level or making decisions on increasing revenues, knowing that these decisions impact cost of living and doing business in the Northwest Territories. However, these decisions also allow us to have the fiscal capacity needed to invest in infrastructure, to invest in actions outlined in the mandate of the 18th Assembly, and to ensure we are addressing our overall debt.

Finally, we need to start reducing our reliance on our line of credit to finance operations and return to a more manageable level of short-term borrowing position by the end of the 18th Assembly. Our large cash deficit is the most obvious sign that we are continuing to live beyond our means and impacting our fiscal capacity by using a significant portion of the GNWT’s authorized borrowing limit. Reversing and eliminating this will be no small feat and requires the strength of determination to stick to the fiscal strategy outlined in our latest Budget.

Budget 2016‑17 was the first step in achieving these objectives by finding $68 million in savings and new revenue over four years. The actions outlined in Budget 2016‑17 improved the fiscal outlook that was presented at the start of the 18th Assembly but do not prevent the operating surplus from falling later in our term and do little to reduce short-term debt. The work leading up to the 2017-18 Budget will be critical to accomplishing our fiscal strategy objectives and putting us on a fiscally sustainable path going forward.

We continue to see no signs that the NWT economy will be able to rescue us from making the fiscal choices we need to make. While we have had some positive news with the Gahcho Kué diamond mine starting to process ore and recover diamonds and the Ekati mine reopening after recovering from a fire that halted production for three months. This, however, does not change the longer-term outlook.

Exploration investments are positive, but are not expected to grow this year. Current mine plans are projecting the closure of one major mine by 2023 and for the remaining mines by 2033. New mines take many years from discovery to beginning production. Moreover, potential mines that we are aware may be developed, though positive, are not large enough to replace the economic activity of today’s mines when they close.

We need to create the environment that supports a vibrant economy and provides our residents with good economic opportunities. This means we need the fiscal resources to invest in infrastructure to support economic development, our communities and deliver government programs and services. Examples of this include:

  1. The Inuvik-to-Tuktoyaktuk Highway. Work on the highway has progressed well and is expected to be completed by fall 2017. This project has involved more than fifty local businesses, disbursing close to $120 million directly into the local and NWT economy. It has provided training opportunities to over 120 NWT residents and over 70 per cent its 530-person workforce at the peak of construction have been NWT residents.
  2. The Mackenzie Valley Fibre Link. This project is scheduled to be completed by June 2017. To-date the project has employed about 160 NWT residents, involved sixty local businesses and organizations across the territory and contributed $32 million to the local and NWT economy.
  3. The Stanton Territorial Hospital Renewal Project. As Members can see, the progress on the new hospital is going well, with a target completion set for the end of November 2018. Although it is still early in construction, the project has involved fifty local companies and invested over $13 million in the local economy.

We are continuing to make critical infrastructure investments. Later today, I will be tabling the 2017-18 Capital Estimates. These Estimates will propose the continued investment to our transportation corridors, housing stock, key education and health facilities and stable funding to our community governments.

Mr. Speaker, we would not be able to table this ambitious capital plan if the 18th Assembly had not endorsed the fiscal strategy and started making the tough decisions to get our fiscal house in order. The first steps we took with the 2016-17 Budget must not be our last steps. The upcoming budget will need to include additional actions.

I am frequently asked why we have to take these steps. The answer is simple: to do otherwise is not sustainable and would be irresponsible. We need money to invest in our priorities, our people and communities that we simply do not have today. In recent years, the GNWT’s expenditures have been growing more rapidly than our revenues. Our cash deficit was large and projected to grow. We were adding short-term debt with no plan on how to repay it, and it was adding to our overall total debt. Our borrowing has a limit imposed on us by the federal government and we need the borrowing room to have fiscal flexibility to take advantage of federal cost-sharing opportunities, to make strategic investments, and to have a cushion for the unexpected fiscal shocks.

Our fiscal strategy is working. The current fiscal projections have revenues expected to grow 1.7 per cent annually while expenditure management results in an average annual spending growth of 1.1 per cent over the same the period. This reverses the trend in the February 2016 Fiscal Update, where spending was projected to outpace revenue.

As reflected in the Mandate of the 18th Assembly, we have many issues that need to be addressed within our communities and we have identified actions that will help to create a better future for our residents. I look forward to working with Members to continue to advance the items in our mandate but we must be realistic that many of the items in our mandate will require investment. This investment will be on top of the fiscal resources needed to address the forced growth pressures that increase the costs to deliver our current programs and services and to maintain our existing infrastructure stock. We need to adhere to this fiscal strategy and achieve its objectives or we simply will not be in a financial position to address any of the challenges and priorities we have identified in our mandate.

I need to be clear with the people of the Northwest Territories and the Members of the Assembly in saying that there are still hard decisions that need to be made to ensure the future prosperity of the people of the NWT and the on-going fiscal sustainability of the GNWT.  We all like to talk about how special and unique consensus government is – where 19 members can work together on course of action that is in the best interests of the residents of the NWT – where reason and common sense plays a greater role than party doctrine or election promises.  We all need to take a hard look at what legacy we will leave for the people of the NWT. Simply delaying tough choices for future Assemblies to make is not an option in my view.

Mr. Speaker, we are on the right fiscal track and with the support of our residents and this Assembly we will remain fiscally sustainable and yet still have the funds to invest in individuals, families and communities to ensure the NWT is a place where our people can thrive and be healthy, where a well-managed environment contributes to our economic wellbeing and quality of life, and where a strong economy provides jobs and opportunities for our communities.

Thank you, Mr. Speaker