Thank you, Mr. Speaker. Mr. Speaker, in accordance with its terms and reference, the Standing Committee on Finance is pleased to report on the review of the 1994-95 Capital Estimates of the Government of the Northwest Territories. The Committee consists of myself as chairman, Mrs. Marie-Jewell as deputy chairperson and, Members are
: Mr. James Arvaluk; Mr. Charles Dent; Mr. Dennis Patterson; Mr. Henry Zoe; the Management and Services Board assignment, Mr. Kelvin Ng; and alternate Member, Silas Arngna'naaq.
Introduction
Mr. Speaker, the "accumulated surplus" position of the Government of the Northwest Territories has declined in recent years. If the current level of operations and capital spending continues, the government will soon find itself in a situation of accumulated deficit. Borrowing money to finance a deficit is an option that is simply not available to the Government of the Northwest Territories. The current level of revenues raised through taxes and otherwise, adds up to a small fraction of the funding required to meet the real needs of our citizens.
Members of the Standing Committee on Finance strongly believe that this government must pursue the objective of maintaining an accumulated surplus position. The review of capital forecasts impressed upon committee Members the growing difficulty the government faces in attempting to respond, in a fiscally responsible way, to the fundamental needs of all our citizens.
We must all work towards solutions but, clearly, the Minister of Finance and Cabinet must provide the leadership to achieve a consensus on the strategies that are required to limit spending and maintain a strong financial position.
Capital Planning Process
Capital Planning Strategy
In its report on the 1993-94 capital estimates, the committee made the following recommendation: The committee recommends that Cabinet develop, and report in the 1994-95 capital estimates, a strategic approach to the capital program identifying, among other things: i) the purpose and goals; ii) rationale for the allocation of budget resources between capital and operations; iii) rationale for the allocation of budget resources between programs and communities; iv) rationale for the specification, construction, acquisition and disposal of capital assets; v) and information requirements of departments and agencies to ensure that the capital program is being allocated fairly and equitably, and is being currently operated with due regard to efficiency, economy and effectiveness.
The Financial Management Board responded to this recommendation in its presentation to the standing committee. The government's capital planning strategy was presented under the following headings: capital planning objectives; allocation of capital to meet capital needs assessment; additional factors in determining capital requirements; balancing needs within the funds allocated; meeting government's priorities through allocations; multi-year planning targets; and capital planning consultation process.
With respect to addressing the information requirements, the Financial Management Board noted that the development of a comprehensive government wide "informatics strategy" has been initiated.
Capital Spending Priorities
The chairman of the Financial Management Board, in his opening remarks to the committee, identified the following capital spending priorities: 1) housing programs; 2) education programs; 3) health, social and cultural programs; 4) municipal and recreational programs; 5) transportation and tourism programs; and 6) other government programs.
He noted that these capital priorities have been established based on Legislative Assembly and community consultation. Generally, the committee is supportive of the government's focus, however some qualifying comments are in order.
Committee Members feel that the number one priority assigned to capital spending on housing is due more to the withdrawal of federal funding than a balanced assessment of real need. The federal government should live up to its fiduciary responsibility to provide housing to aboriginal people. The Government of the Northwest Territories could, then, shift its priorities for capital spending. The standing committee feels that, if housing programs were supported by the federal government, education programs could and should become the number one priority for capital expenditures of the Government of the Northwest Territories.
The committee recognizes that the funding cuts to social housing programs are an immediate crisis. However, Members believe that education should be established as the number one priority over the long term. The committee's rationale for this suggestion is based on a number of considerations.
The committee believes that it is through an investment in education that we may become more independent of the federal government. By educating young people, we will be able to build a stronger economic base. With an educated population, there should be less reliance on other programs such as housing and social services.
Further, the committee feels that the allocation of capital resources for 1994-95 and the plans for future years do not reflect the priorities established by the government. For example, while social programs are ranked as number three priority, the capital budget for the Department of Social Services is $4.6 million out of a total capital budget of approximately $180 million.
Consultation Process
The committee notes that there have been improvements to the capital planning process over the last few years. A consultation process has been initiated. The government consults with communities through their local governments and Members of the Legislative Assembly. These enhancements are designed to ensure that this government's capital budget is reflective of the real capital needs of the citizens and their communities.
There is still room for improvement in the consultation process. The committee noted, during its review, several examples where there were problems with the community input in the capital planning process. In some instances, capital projects were not scheduled in accordance with community priorities. In other cases, consultations with communities did not result in changes to the capital plans to reflect identified community needs.
Five Year Capital Plans
In its report on the 1992-93 capital estimates, the Standing Committee on Finance recommended that the government present the 1993-94 capital estimates to the Legislative Assembly in the form of a five year capital plan. The government provided the 1993-94 capital forecast to the Standing Committee on Finance in the form of a five year plan. However, the five year plan format was not carried forward to the capital estimates document provided to the Legislative Assembly.
The 1994-95 capital forecast documents provide a second opportunity for the committee to review the capital estimates in the context of a five year plan. As a result, the committee was able, this year, to compare current year plans with those put forward for the fiscal year 1994-95.
Committee Review Process
The primary focus of the committee's review of the 1994-95 capital forecast was projects planned for that fiscal year. However, consideration was also given to the following: prior and current year expenditures, particularly where these departed significantly from what was reported in the 1993-94 capital forecast; major new projects planned for the five year period following 1994-95 and beyond; and any significant changes to departments' and communities' capital plans.
A comprehensive review was conducted by using the committee's guiding principles while, at the same time, focusing on maintaining a balanced budget.
Capital Overview
Capital Spending By Constituency
Committee Members are guided by the principle that their job is to ensure equity, fairness and universality of benefit to all residents of the Northwest Territories. In assessing adherence to that principle, the committee reviewed planned capital spending in each constituency in the Northwest Territories for 1993-94 and 1994-95. This information is displayed in Appendix B of this document. Expenditures by constituency have been adjusted from those reported in the capital forecasts. Expenditures reported by region and headquarters have been divided among the communities in all constituencies.
Implications Of The Capital Forecast For Operations And Maintenance Spending
The Financial Management Board provided the standing committee with two tables regarding the O and M implications of the 1994-95 capital projects. These tables are attached to this report as Appendix C. One table presents a summary of the direct O and M implications, while the second table shows a summary of indirect O and M incremental costs for maintenance and utilities.
Reporting Changes In Capital Plans And Expenditures
Committee Members raised concerns about the presentation and accuracy of the information provided in the Five Year Capital Forecast 1994-95 - 1998-99 document. In particular, the committee noted that, in many instances the reporting of prior and current year capital expenditures vary considerably over those reported a year earlier; and the "total" amount reported does not appear to represent the total expenditures for a particular project.
Further, the committee noted that the documents do not distinguish between situations where previous years' funds have lapsed, been transferred between capital projects, or carried forward to the following year. Therefore, the committee recommends the following:
Recommendation 1
The committee recommends that the Financial Management Board clarify and ensure consistency in the reporting of prior year, current year and "total" expenditures in the five year capital forecast documents. The committee further recommends that the modifications, which address the difficulties identified, be contained in the five year capital forecast 1995-96 to 1999-2000 document.
While recognizing that capital forecasts are a planning tool and, by definition, subject to change, the committee was concerned by the many projects where there was a significant change in proposed expenditures from fiscal year to fiscal year. These changes were not always accompanied by an explanation. Substantiation is provided only for projects incurring costs in the target fiscal year, which in this case is 1994-95. Therefore, the committee recommends the following:
Recommendation 2
The committee recommends that the Financial Management Board provide substantiation for any changes over $100,000 in planned expenditures. The committee further recommends that these substantiations be contained in the five year capital forecast 1995-96 to 1999-2000 document.
Mr. Speaker, that concludes the report of the Standing Committee on Finance on its review of the 1994-95 capital estimates.
Motion That Committee Report 3-12(4) Be Received And Moved To Committee Of The Whole, Carried
Therefore I move, seconded by the honourable Member for Thebacha, that the report of the Standing Committee on Finance on its Review of the 1994-95 Capital Estimates be received by the Assembly and moved into committee of the whole. Mahsi.