Thank you, Mr. Chair. Mr. Chair, the Heritage Fund Act was enacted on August 1, 2012, and the legislation establishes a trust fund as a long-term investment in which surplus funds typically received from resource royalties may be transferred at the discretion of a Legislative Assembly. Once transferred, these funds become part of the principal of the Heritage Fund. Under the Act, for the first 20 years once first contribution is made, both the principal and the interest, or the income generated by the fund, are retained in the fund. After 20 years have passed, transfers out of the fund for use by the GNWT may be made through the creation of a special act, in addition to going through the standard budget appropriation processes. The current act limits the transfers out of the fund to an annual withdrawal of five per cent of the year-end balance of the fund, provided that the principal of the fund is not removed. In other words, all contributions to the fund can never be removed and moved by the Legislative Assembly for any purpose. Only the interest income can ever be withdrawn and appropriated by the Legislative Assembly.
Because resource revenues are volatile and unpredictable, the 17th Legislative Assembly decided not to include these revenues to fund operations and maintenance or ongoing programs and services from net fiscal benefit from devolution. The 17th Legislative Assembly instead decided through the budget review process to invest 25 per cent of the GNWT's net fiscal benefit from devolution into the Heritage Fund and the remaining 75 per cent in infrastructure. Because the NWT has been in a cash deficit program for the last number of years, the GNWT had to incur short-term borrowing costs to meet this obligation. Since the start of the fund in 2012-2013, we have paid over $41,000 in interest costs related to these payments. I would agree that discussion of how much of any further contributions to the Heritage Fund the GNWT should continue while the GNWT is in a cash deficit position would be worthwhile. We have heard in the Assembly that investment in infrastructure such as Mackenzie Valley Highway, the road to the Slave Geological Province, and an all-weather road to Whati. Our priorities are needed to grow our economy and reduce the cost of living. We also need to invest in infrastructure to provide required services to our residents, such as schools, health facilities, public and seniors' housing, airports, parks to support tourism, and maintenance of our existing highways. If we want to undertake these investments in a reasonable time frame, we need to have the financial resources to pay for 50 per cent of these investments from within our own revenues, under our Fiscal Responsibility Policy. Again, discussion on how much of the NWT fiscal benefit from devolution should be invested into the Heritage Fund and how much should be invested in infrastructure is something we should engage on. Should we enshrine a certain level of investment in legislation or should we let each Assembly decide based on its own objectives the fiscal situation it finds itself? These are all things we should discuss.
With respect to the independent or arm’s-length management and administration of the NWT Heritage Fund, the current act does not prevent this from happening. But while the fund is new and still in a modest balance of $5.5 million, the value of benefit would outweigh the cost of such third-party management and administration. Although the interest earned by the fund could be used to pay these costs, the estimated interest earned for 2015-2016 is only $37,000, and likely not sufficient to pay for costs of third-party management. Initial feedback from fund managers indicates that fees on a $6 million fund would range from $45,000 to $75,000 per year, depending on the level of monitoring we want them to do. Having said this, the Legislative Assembly does receive an annual report on the performance of the fund as part of the GNWT Public Accounts. I tabled the 2014-2015 Public Accounts in this Assembly yesterday. The annual financial statements of the fund are included in section 3. The current act includes a requirement for the Legislative Assembly to conduct a review, after 10 years of the provisions and operations of the act, including recommendations on how to seek public input and advice on expenditures for the Fund and whether independent oversight and management of the fund is required. I would encourage the Standing Committee on Priorities and Planning to entertain a detailed briefing on the act to ensure it fully understands the act's provisions and to engage in a detailed discussion on what is the best path forward, given there is legislative requirement for a comprehensive review of the act in 2022. Thank you, Mr. Chair.