Thank you, Mr. Chairman. The Department of Finance is responsible for obtaining the financial resources to carry on the functions of government for intergovernmental fiscal negotiation and arrangements, for regulating the insurance industry, and for controlling the sale of liquor in the Northwest Territories.

The Standing Committee on Governance and Economic Development met with the Minister of Finance and his staff on Wednesday, January 15, 2003, to review the Department of Finance's 2003-2004 draft main estimates. The department reported a net $1.844 million increase to its operations expense from the 2003-2006 business plans. This increment comes from an additional $1.734 million for short-term interest expense due to an increase in the government's projected cash deficit, and $110,000 required for the development of evaluation capacity throughout the government and northern communities as part of the social agenda action plan.

The Department of Finance did not have any capital expenditure.

In an effort to reduce the size of its projected cash deficit, the government proposed a number of revenue initiatives. These revenue initiatives include the increase of $6.80 per carton for cigarettes, effective April 1, 2003; and a 10 percent increase on the mark-up for liquor, also effective April 1, 2003. In 2003-2004, these proposed increases are forecast to raise $2.5 million and $1 million, respectively, for a total of $3.5 million for 2003-2004, and further $3.5 million in 2004-2005.

Committee members were very concerned about the impact of proposed revenue initiatives upon the already high cost of living for residents. Some members were of the position that tobacco and alcohol consumption is not discretionary, but rather an addiction. This would most negatively impact the cost of living for fixed or low income earners and their dependents. These proposed initiatives may also result in increased social cost for the government.

Furthermore, the committee emphasized that while the government invited public consultation as part of its other tax initiatives, they did not do so in this case. In light of the significant impact of the government's proposed revenue initiatives, the committee referred to the matter to AOC for further consideration by all Regular Members.

During the review of the Department of Finance's draft main estimates for 2003-2004, the committee asked the Minister for an overview of the government's fiscal position. The department replied that the government would start off the 2003-2004 fiscal year with a $30 million cash surplus. However, at the end of the 2003-2004 fiscal year, the cash deficit is forecast to be $93 million. The government's maximum borrowing limit is $300 million. At the end of the next fiscal year, taking into account debt guaranteed by the government, the borrowing capacity is estimated to be $83 million. Interest expense to pay for increase cash deficit is forecast to be $2.2 million by the end of 2003-2004.

The committee remarked when the government received large corporate tax windfalls in the past two fiscal years, its priority was to spend the money rather than establish a reserve for future years. Committee members suggested that better financial planning may have reduced the forecast deficit and resulted in additional funding for programs and services from a decrease in interest expense.

Thank you, Mr. Chairman. That concludes the Standing Committee on Governance and Economic Development's report. Thank you.