Bill 2 is now ready for third reading, as amended. I would like to thank the Minister and his witnesses for appearing.

We have a number of other items in Committee of the Whole. What is the wish of the committee? Mr. Nitah.

The motion on the floor is non-debatable. All those in favour? All those opposed? The motion is defeated.

---Defeated

What is the wish of the committee? Mr. Dent.

Mr. Chairman, I recommend that we move to opening comments for the Department of Finance.

Thank you, Mr. Dent. Does the committee agree?

Does the Minister have any opening comments? Minister of Finance, Mr. Handley.

Minister's Opening Comments

Yes, Mr. Chairman. I am pleased to introduce the main estimates of the Department of Finance for 2003-2004 fiscal year. For 2003-2004, the Department of Finance is requesting a total expenditure budget of $10.521 million, or 35 percent more than the 2002-2003 main estimates amount.

The increases are:

1. a one-time increase of $175,000 to conduct the 2004 community labour force survey;
2. an increase of $242,000 resulting from changes to the collective agreement of the Union of Northern Workers;
3. an increase of $110,000 to improve the government's capacity for evaluating and monitoring social conditions as part of the response to the social agenda recommendations;
4. an increase to our short-term interest cost estimate of $1.734 million, driven by forecasted higher 2003-2004 borrowing costs; and,
5. increased insurance costs of $494,000 resulting from industry-wide premium increases.

Mr. Chairman, the GNWT has been facing rising property insurance costs over the last 10 years, despite a declining trend in our losses over this period. The government is facing an additional 20 percent increase in premiums in 2003-2004 to maintain existing levels of coverage. The Department of Finance, therefore, undertook a review of alternate ways to address property risk. We have concluded that raising the government's deductible amounts at self-insuring losses below these higher deductible amounts is a cost-effective approach. This will reduce our insurance premiums considerably, but it will also require us to introduce mechanisms to prevent and mitigate property loss risks. We will also have to recognize the potential for uninsured property losses in our financial accounts.

When we have finalized the details of this new approach, we will brief standing committees. Once the department has finalized property premiums for 2003-2004, we expect to return with a negative supplementary appropriation for approximately $1.5 million in the June session. This would bring the department's overall requirements to approximately $9 million for 2003-2004, an increase of 17 percent over the 2002-2003 main estimates.

The expenditure budget in the main estimates is accompanied by a departmental revenue budget of $781.385 million, virtually unchanged from the 2002-2003 main estimates amount, but 11 percent higher than the revised main estimates for 2002-2003.

Total 2003-2004 Department of Finance revenues represents about 91 percent of the total forecast government revenues of $854.135 million. The Department of Finance, through its responsibilities for revenue generation management and information gathering distribution plays an important role in ensuring the government is able to deliver its programs and make informed decisions.

The department is focusing its outcomes and strategies for 2003-2004 on the priorities and strategies set by the Legislative Assembly and Cabinet, with particular emphasis because of its mandate on those related to the NWT's fiscal and economic circumstances.

The first goal of the department is to achieve a fiscal regime for the NWT that supports a stable political environment and a strong economy.

Key strategies of the department towards achieving this goal include:

• • continuing discussions with Finance Canada on changes to the post 2004 formula financing agreement;
• • providing taxation and formula financing input to resource revenue-sharing discussions with Canada and aboriginal governments;
• • continuing fiscal and taxation input on self-government negotiations; and,
• • initiating facility appraisal and risk assessment processes to improve the government's insurance protection.

The second goal of the department is to ensure the government has the fiscal and statistical information analysis needed to support policy development and decision making, particularly for key social and economic initiatives. Key strategies the department has identified towards achieving this goal include continuing work to ensure that the population numbers produced by Statistics Canada are as accurate as possible, undertaking the 2004 labour force survey and continuing to improve the range and quality of statistical information available, particularly in the area of social agenda indicators.

Finally, the department seeks to be more responsive to client needs. Key supportive strategies include, among others, improving awareness of the responsible use of liquor and improving liquor licensees' knowledge of their responsibilities.

Mr. Chairman, I'd be pleased to respond to any questions the committee may have. Thank you.

Thank you, Mr. Handley. The Chair will call on the chairman of the Standing Committee on Governance and Economic Development for comments. Mr. Roland.

Standing Committee On Governance And Economic Development Comments

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.

Thank you, Mr. Roland. Mr. Bell.

Thank you, Mr. Chairman. I move we report progress, and hopefully my colleagues across the floor don't defeat this one.

The Chair does not recognize a quorum.

There is a motion on the floor to report progress. The motion is non-debatable. All those in favour? All those opposed? The motion is carried.

---Carried

The Chair will rise and report progress.

Can I have the report of Committee of the Whole? Mr. Delorey.

Is there a seconder to the motion? Ms. Lee. The motion is in order.

Question has been called. All those in favour? All those opposed? The motion is carried.

---Carried

Item 21, third reading of bills. Mr. Clerk, item 22, orders of the day.

Thank you, Mr. Clerk. This House stands adjourned until 10:00 a.m., Friday, March 7, 2003.

---ADJOURNMENT

The House adjourned at 6:00 p.m.