Thank you, Mr. Speaker. Yesterday the Minister of Finance for Canada, the Honourable Ralph Goodale, tabled the 2004 federal budget. I am pleased to report that this budget contained some good new for the Northwest Territories.
Among the issues addressed in the budget were the territorial formula financing agreement, a northern strategy for economic development, northern oil and gas development and health care. Also, there are provisions in the budget for environmental cleanup of contaminated sites and seabed mapping of the continental shelf. Although more detail is required on some of these initiatives, I believe that they will contribute positively to the overall situation in the NWT and we can be pleased with these initial positive signals from the federal government.
Mr. Speaker, the territorial formula financing agreement is the largest single source of GNWT revenues, and its adequacy is critical to our ability to provide health care, education and other essential services. I met with Mr. Goodale last month to discuss renewal of this agreement. At that time, he indicated he was prepared to increase funding under our formula financing agreement by $7.6 million in 2004-05. This amount would increase to $17 million in 2006-07 as the funding currently provided by Canada under the three-year territorial health fund is made permanent. These amounts were included in the revenue forecast I provided last Wednesday in my budget address.
In the budget address last Wednesday, I outlined a number of concerns with the federal proposal. The first was the need for additional funding to restore the adequacy of our formula to meet our expenditure needs. I noted that the federal proposal to address adequacy, while welcome, still fell short of the full restoration of the cut to our expenditure base made in 1996.
The second concern related to the calculation of the GNWT's tax effort in the formula, more commonly referred to as rebasing. The tax effort factor measures the GNWT's revenue raising capacity compared to the provincial average. Although Mr. Goodale's budget does not meet all our concerns, it does go part way and provides an important opportunity for us to continue to make our case on tax effort.
During our discussions about the renewal of the formula, we argued strenuously that initial calculations to rebase our formula made no sense to us. We have been unable to reconcile the numbers we were seeing with what we have observed about our own tax increases over the past 10 years compared with the provinces. Furthermore, rebasing would have a very large negative effect on our revenues. It would have offset any federal initiatives on adequacy, and would reintroduce perversity into the formula.
During discussions with Mr. Goodale, I proposed postponing rebasing for at least a year, to allow our officials to review the calculations, methodology and concept behind the tax effort adjustment factor.
Mr. Speaker, I am very pleased that the federal Minister has responded positively, and has agreed to postpone rebasing for one year, to 2005-06. More importantly, he has also agreed that officials should review the tax effort adjustment factor and report back to us so that a decision can be made for 2005-06.
The delay of one year in rebasing our formula will have a significant positive, one-time impact on our fiscal situation. The revenue forecast I provided last week for 2004-05 has now improved by approximately $50 million.
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This money will be used to eliminate the deficit for 2004-05.
Welcome as this news is, Mr. Speaker, I must insert a note of caution. This is a one-time improvement that affects only the upcoming fiscal year, 2004-05. The long-term fiscal outlook does not change. In order to meet our target of a balanced budget by 2006-07, it is critical we maintain the fiscal strategy laid out in my budget address last week. We still need to identify an additional $20 million in expenditure savings and cost avoidance in each of 2005-06 and 2006-07 and we must increase our own-source revenues.
Mr. Speaker, the federal budget also announced a number of other measures for the North. These measures will not directly impact the GNWT's revenues, as they will be delivered through federal programs. We will need to get more specifics about how this money will be allocated, and how the Northwest Territories will be affected.
The budget contained an announcement of $90 million in funding over the next five years to implement a northern development strategy for the three northern territories. I understand that the Parliamentary Secretary to the Minister of Indian and Northern Affairs, Mr. Bagnell, will have responsibility for developing this strategy in conjunction with Minister Mitchell. We are anxious to learn how this funding will be allocated across the North,
and what the criteria will be for its investment. It is important that this money be invested directly in the North, in areas that reflect northern priorities. My colleague, the Honourable Brendan Bell, Minister of Resources, Wildlife and Economic Development, will be following up on this issue.
The $75 million over three years that the federal government is allocating internally to northern oil and gas development will increase federal and regional environmental assessment capacity and streamline the regulatory process.
The budget also set aside $3.5 billion over 10 years for the cleanup of contamination on federal lands. It is estimated that 60 percent of this funding will be spent in the North. This funding will be used to clean up contaminated sites such as Port Radium, Giant Mine and the DEW Line sites.
Mr. Speaker, an important part of our fiscal strategy is a better deal from Canada. The changes to the formula will also help us meet our short-term needs, but do not address our longer-term requirements. We must continue to work with the federal government to address the adequacy of our fiscal arrangements on a long-term basis in order to ensure a solid fiscal foundation for the NWT. Thank you, Mr. Speaker.
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