Mr. Speaker, yesterday the Premier spoke about the challenges faced by the 13th Legislative Assembly and about how this Legislature intends to meet these challenges. My purpose in speaking today is to elaborate on some of the fiscal challenges outlined by the Premier.
I have just returned from the Finance Ministers' conference in Ottawa. It was obvious during our discussions that the federal deficit reduction agenda is once again coming to the forefront. The federal Minister was quite clear that the federal government intends to meet its deficit reduction targets. Unfortunately, we have little clarity concerning federal plans and their potential impact on the NWT until the federal budget comes down in February.
What these national developments emphasize is the need to address our current financial problems and achieve a balanced budget as early in our term as possible. Although there are no quick fixes to our fiscal situation, the problem is manageable and our goal of a balanced budget can and will be reached. However, to do this we must take the time to develop a comprehensive recovery plan based on fair and quality decisions.
Mr. Speaker, later today I will be tabling the Interim Financial Report for the year ended March 31, 1995. The report will show that we closed the last fiscal year with a $26 million deficit. This represents two per cent of our total revenues of just over $1.2 billion. This took us to an accumulated deficit of $12 million. For the current fiscal year, our revised forecast is for a deficit of $30 million, due in large part to higher social program costs than budgeted for. This will increase our accumulated deficit to $42 million. Under normal circumstances, this level of deficit could be eliminated with only moderate spending reductions.
However, in the last federal budget a five per cent reduction to our 1996-97 formula funding revenue was announced. This translates into a $60 million decline in our revenues for next year. When coupled with the increased spending required to meet the relentless growth in our social programs, the financial shortfall for next year could climb to over $100 million, Mr. Speaker. Unchecked, the deficit would soon compromise our ability to respond to the needs of our residents. But, Mr. Speaker, we will manage the looming deficit; we will not let it manage us.
Avoiding a major deficit next year will not be easy. There are no quick and easy solutions. As our social spending indicates, many of our residents depend on government support. As our unemployment statistics show, the jobs are simply not there in the smaller communities to allow people to become more self-sufficient overnight. Although we must improve education and training levels and support job creation, these are long-term solutions. In the meantime, we cannot abandon support to those most in need.
Our new Legislative Assembly has taken major steps to prepare itself, to plan for and make the difficult choices that will be necessary. The new standing committee structure, the significant measures to improve communication and cooperation between ordinary Members and Cabinet, the adoption of a multi-year planning process and the commitment to a more open and consultative approach with the public will position us to develop and implement a quality plan that will have the support of the large majority of NWT residents. But we must take the time to allow these new approaches to work to find opportunities to do things in better ways and to develop this plan.
Let me, Mr. Speaker, give you an example. In the Premier's statement, he talked about empowering communities to have more control over decisions that affect them. With this goal in mind, we need to discuss, among many other ideas, whether title to all government infrastructure used to deliver community-based programs should be transferred to each community.
We need to discuss whether the community should take over full operating and maintenance authority for this infrastructure, whether all communities should have access to block funding for construction and maintenance, and whether communities need more authority and flexibility to raise revenues and finance new infrastructure. And we must consult with the communities on these options.
If we are going to make government more responsive and more efficient, we will need to address these questions and many more. We need to balance the urgency of dealing with the financial situation with the time needed to make good, quality decisions. Today I will be tabling the results of the public consultation on eliminating the deficit. This report shows the value of seeking public input. We must continue to explore new and innovative ways of getting public views on options and approaches. An achievable timetable for developing a multi-year plan was identified by the Premier yesterday. And let there be no doubt, this will be a plan for managing the looming deficit. We will make the hard choices and the changes necessary to achieve a balanced budget as soon as we can.
Mr. Speaker, in the short time before this plan is fully developed, we must still provide for the ongoing operation of the government. Even the relatively small deficits of the past few years have meant that a former accumulated surplus is now a small accumulated debt. This has reduced our cash position to a point where we must, during the lean months, borrow money for cash-flow purposes. This cash-flow requirement has been rising and has meant that we must seek increased borrowing authority this year.
Mr. Speaker, it is important to note, increasing this borrowing authority does not allow the government to increase spending. Spending can only be increased with the authority of an appropriation act. But we must ensure that we always have the actual cash in the bank to honour the cheques we write. Later today, I will be speaking on this issue in more detail during consideration of the Borrowing Authorization Act.
Mr. Speaker, while there is an urgent need to deal with the current fiscal difficulties and plan for the future, we must also move quickly and decisively to ensure that the NWT is not set up for an even larger fiscal and political disaster with respect to division. The most immediate issue related to division is the incremental costs of funding two new territories. Recently, the federal government has been evasive about the nature and the timing for the provision of incremental funding.
Without this funding, training cannot proceed, infrastructure cannot be built and the GNWT planning is being done in a vacuum. Now that the question of the capital has been decided by the people of Nunavut, there is no reason why a decision on funding should be delayed.
The federal Finance Minister is committed to discussing this issue with me early in the new year. It is our intention to aggressively pursue a federal commitment to fund incremental costs so that we can adequately fund two new territories on April 1999.
As we develop our long-range plans, we must also look down the road at our financial ability to meet the needs of our population. Once we manage our way out of our current financial situation, how will we ensure that we have the resources needed to address the structural, social and economic problems we face? How will we ensure that future generations will have access to a healthy future, to get a good education and to get a decent job?
Mr. Speaker, we will all be called upon to make hard choices over the next few months. Changes must be made on how we do business and to what people can expect from government. Our financial problem must be solved. But we cannot abandon support to those most in need. We must ensure that our actions are fair and equitable to all. This will require a comprehensive recovery plan for managing the deficit based on quality decisions.
We have taken the first important steps to prepare this plan. Through the process we have started, through the leadership we will show and through ongoing consultations with our constituents, I am confident that we will solve our financial problems.
---Applause