Mr. Speaker, I would like to provide Members with a brief update of the government's fiscal situation.
Later today, I will table the 2002-03 public accounts. I am pleased to note that this is the earliest the accounts have been completed meeting the target date recommended by the Auditor General. The accounts show a final operating deficit of $32.7 million, a significantly improved position compared to the forecast in February.
When I updated Members on our fiscal position in June, I noted that we faced considerable uncertainty with respect to population counts. Last week, Statistics Canada released revised population numbers for the period 1996 to 2003 which incorporate the 2001 census results and coverage studies. The numbers held some relatively good news for the Northwest Territories. The final NWT census net under-coverage rate was estimated at 8.11 percent. This final coverage estimate reflects a substantial improvement from the preliminary estimates released by Statistics Canada but is still below what we believe the actual undercount was.
The final coverage estimate of 8.11 percent was the result of considerable work between the GNWT Bureau of Statistics Canada and incorporated significant revisions to the Statistics Canada approach. While the result is still lower than our own estimate of 10 percent, and we continue to have concerns about some aspects of their approach, we are pleased that they did make some substantive changes to their coverage estimates. The Bureau of Statistics will now begin work with the federal agency on the 2006 census, to ensure that the same sorts of coverage problems are not repeated.
These new estimates will be used to calculate funding entitlements under the formula funding agreement with Canada. It is expected that the new estimates will result in a cumulative one-time positive adjustment to 2003-04 revenues of $35 million, which has lowered our deficit forecast.
In addition, Mr. Speaker, we have resolved, to our benefit, the issue of the calculation of our "tax effort factor" in the current formula funding agreement which expires in March 2004. This removes a major element of uncertainty from our short-term fiscal situation. However, the treatment of tax effort in the new formula financing agreement remains under negotiation and adds to our longer-term fiscal uncertainty.
The revenue gains we have achieved in 2003-04 have been partially offset by lower than expected corporate income tax revenues. We are undertaking research to determine the reasons for this as we expected better results given the level of economic activity and the anticipated profitability of corporate operations in the NWT.
On the expenditure side, we have achieved the $15 million short-term savings we targeted for 2003-04 without seriously impacting services to the public. Unfortunately, we were not able to constrain supplementary appropriation requirements as much as we wanted due to factors such as the severity of the forest fire season and the compensation increases to physicians. With our somewhat higher revenues, however, we are able to maintain our 2003-04 deficit forecast at $77 million.
Despite our improved short-term fiscal situation, Mr. Speaker, our medium to long-term fiscal outlook has not changed. Our revenue growth is being quickly outstripped by spending demands. Without significant spending reform, we are still looking at reaching the federally imposed debt limit of $300 million by the end of 2006-07.
As we said in the June session, there is no short-term or easy fix to this problem. We need to find creative solutions. The task teams we struck last winter to develop these solutions have continued their work over the course of the summer and will have options ready for consideration when the new government takes office in December. This will allow the 15th Legislative Assembly to factor some of these options into its agenda.
With appropriate funding from the federal government, I am confident that we can meet our fiscal challenges and still protect our ability to achieve critical objectives. The current negotiations for renewal of our formula financing agreement provide one of our best opportunities to secure adequate federal funding levels.
In May, I met with finance Minister John Manley to discuss the Prime Minister's commitment that the adequacy of our funding would be addressed. Over the summer, GNWT officials laid out our case in great detail with Finance Canada. I will be meeting with Minister Manley at the end of next week to review progress on these discussions.
Another key piece of our fiscal picture is the devolution of resource revenues along with a fair net fiscal benefit. It is essential that we make progress in these discussions and finalize a devolution arrangement as soon as possible. We cannot continue to hear the costs of development without access to the fiscal benefits.
Mr. Speaker, we all know the Northwest Territories' economy is vibrant and strong. The Premier's recent trip to North American business centres to promote the NWT has once again brought international recognition of our vast potential to the fore. NWT leaders are working together to promote and manage sustainable and responsible resource development. The federal government is starting to recognize the legitimacy of our issues and the quality of our plans and strategies. Although we still face many challenges, opportunities abound. If we continue to work together for the betterment of all NWT residents, we will make the NWT a success story politically, culturally, economically and socially. Thank you, Mr. Speaker.