Mr. Speaker, I want to take this opportunity to update Members and the public on our fiscal situation and discuss the ways we are addressing our challenges during the remaining life of this Assembly.
To date, 2014-15 has included a number of fiscal challenges. The most severe fire season in NWT history has cost $55 million, or 3 percent of this year’s budget. A record 64-year low water levels at Snare Hydro required the government to intervene with a $20 million contribution to the NWT Power Corporation to ensure higher electricity costs of 13 percent are not passed on to NWT residents and businesses. On the revenue side, total gross revenues forecast for the next number of years are expected to grow at less than 1 percent annually. Resource revenues are expected to be slightly lower than originally estimated last December, averaging approximately $113 million annually over the next five years, down from $120 million annually, and they are extremely volatile in that the expected revenue stream could fluctuate by as much $30 million from the expected annual average. Resource revenues are also finite in the sense that we cannot rely on receiving them from the same sources forever. These two facts are the reason why this government has decided to not include resource revenues in our operations and maintenance budget to fund programs and services.
The Government of the Northwest Territories (GNWT) will only use resource revenues to fund infrastructure, pay down debt and invest in the NWT Heritage Fund.
As a government we will remain fiscally vigilant because average annual revenue growth over the next five years is expected to be significantly lower than historical growth rates. The fiscal reality is that we depend on the Territorial Formula Financing Grant to provide the majority of our revenues. Over the next five years, the grant is projected to grow about 2 percent annually due to a declining NWT population and reduced provincial and local government spending as provinces attempt to balance their budgets.
Next week I will be tabling the GNWT Public Accounts for the 2013-2014 fiscal year. The annual report from the Office of the Auditor General (OAG) on the Public Accounts is positive overall, a clean opinion, noting significant progress by GNWT over prior years. One such indicator of progress is the OAG cost of the audit has decreased approximately 20 percent from the prior year, which is a decrease from $929,000 to $756,000. This is mainly due to the fact that there were fewer errors and audit issues noted during the course of the audit, which resulted in improved efficiencies on the part of both GNWT management and the OAG audit team. Additionally, the GNWT has managed to shorten the public account time frames by continuously improving reporting and quality over the last three fiscal years. As the 17th Assembly prepares its final
budget, the fiscal objective remains the same: hold the line on expenditure growth to allow us to make the investments necessary to protect our infrastructure and grow the economy. The achievements of this objective are reflected in the 2015-16 Capital Estimates tabled in the Legislative Assembly yesterday. Including the proposed housing investment, the total planned infrastructure investment in 2015-16 will be $314 million.
Being fiscally vigilant also means returning to a reduced capital plan after the 2015-16 Capital Estimates. This reduction will be difficult given the government’s current infrastructure deficit, the contribution public infrastructure spending makes to local economies and the fact that we need critical infrastructure to grow our economy.
NWT economic activity is only three-quarters of what it was eight years ago because resource production is declining and business capital investment is significantly lower. The lower levels of
economic activity are one important reason why the NWT population is declining.
We are attempting to grow the NWT economy through a number of strategies that complement each other. As announced in this year’s budget, our target is to increase the NWT population by 2,000 people over the next five years, and we are taking steps to grow the NWT economy through important initiatives such as Industry, Tourism and Investment’s Economic Opportunities Strategy and Mineral Development Strategy and Education and Culture and Employment’s work to attract skilled immigrant workers along with providing training opportunities for NWT residents to take the jobs here in the NWT.
A robust economy combined with an increased population is key to our fiscal sustainability. The NWT population has not increased significantly since 2004 when the NWT was experiencing very strong economic growth while the rest of Canada was not. The NWT is competing with booming economies, especially in Western Canada. The Department of Human Resources is continuing to take steps to improve our internal recruitment and retention actions, and through Industry, Tourism and Investment’s Come Make Your Mark program, we are working with the private sector to support their recruitment and retention efforts. On October 8, 2014, I met the senior management of NWT’s three operating diamond mines, the NWT Chamber of Mines and the NWT Chamber of Commerce to continue our discussion on labour market challenges faced by the private sector, particularly the mining industry, and in doing so we are gaining a better understanding about what companies are doing to encourage more NWT resident labour and how the GNWT can work with the companies to make their actions in this regard more successful.
These economic development strategies will depend on transformational investments such as the Mackenzie Valley Fibre Optic Link, the Mackenzie Valley Highway and addressing our energy challenges. We need to focus on these strategic investments, and other investments, to lower costs for residents and businesses and open corridors to previously inaccessible markets and resources.
Funding these strategic investments require operating surpluses. Given the medium-term revenue outlook, these operating surpluses will only be achieved through making choices about what programs we fund and how much we fund them.
With respect to energy costs, we know that the GNWT cannot sustain its investment in subsidizing power rates. Since the beginning of the 17th Assembly, our government has provided $58 million in subsidies in order to shield NWT residents and businesses from ever-increasing electrical costs.
As you heard from the Premier yesterday, this level of subsidy cannot continue and the GNWT will be holding a second Energy Charrette November 3rd and 4th in Yellowknife where people from across the
NWT will be invited to discuss their ideas on how best to address our energy challenges.
Going forward, the next Assembly will face the same difficult challenges we are currently addressing. That is why we will use the last annual public budget tour for the 17th Legislative Assembly
this fall to discuss the GNWT fiscal situation, fiscal objectives and strategy with NWT residents. The information and feedback we collect will be a key piece in the transition to the 18th Legislative
Assembly.
Since the first budget of this Assembly, we have successfully worked to maintain a stable fiscal environment while managing the fiscal risks of the many things outside of our control. Our prudent management of expenditure growth has meant that we have achieved the fiscal targets that permitted increased infrastructure investments for 2014-15 and 2015-16. Our commitment to fiscal discipline gives us the assurance that we will have the fiscal flexibility to address our challenges as they arise. Thank you, Mr. Speaker.