You know the moment: it’s Friday night and you’re on the dance floor at Whitehorse’s hottest tavern, sweating your best moves … when the music suddenly stops and the fluorescent lights blink on.
It’s time to find your shirt and stumble home to the inevitable epic hangover.
The fiscal policy equivalent of that moment happened on Feb. 12 in Yellowknife.
The people yanking the stereo cord out of the wall were newly installed Premier R.J. Simpson and Finance Minister Caroline Wawzonek. Their report, entitled Restoring Balance: A Fiscal Sustainability Strategy, included the astonishing news that the number of Northwest Territories territorial public sector employees grew by 1,391 positions from 2019-20 to today.
That hardcore hiring bender brought the total employee base to 6,482, an increase of 27 per cent. That’s a fiscally punishing 45 times faster than population growth over the period.
Restoring Balance is a four-year plan that makes for shocking reading for those used to steadily rising territorial budgets in the Canadian North.
First, capital projects will need to be funded by operating surpluses not debt.
Second, next year operating expenditure will go down – despite inflation – $118 million or 4.5 per cent. Then it will go down the next year too, before ticking up slightly in Years 3 and 4 of the plan.
Kudos to Simpson and Wawzonek for grabbing the husky by the collar here. Most politicians would have used the time-honoured “hockey stick” approach, saving the cuts for the future.
The result is that territorial operating spending rises only 0.11 per cent per year on average, before inflation, for the next four years.
Third, not only do they plan to clamp down on spending growth, they actually intend to pay back some of the NWT’s debt. This will total $150 million spread over the last three years of the plan.
Despite some public surprise over the announcement — there is always someone on the dance floor apparently unaware that liquor laws require the tavern to close at 2 a.m. — this has been a long time coming.
The NWT’s federal debt limit is $1.8 billion. After a stonking rise in debt of $340 million over the current fiscal year, the territory’s debt will be $1.665 billion by the end of March.
At that burn rate, the NWT would hit the end of its fiscal leash in just five more months.
The problem is made worse by the planned 2025 closure of the Diavik diamond mine. With 1,200 jobs, it is one of the NWT’s cash cows. Furthermore, the Gahcho Kue and Ekati mines are due to close by the end of the decade, unless uncertain mine-life extensions get approved.
The new NWT plan includes many of the moves provincial and state governments such as Alaska’s have needed to make in recent years. Simpson and Wawzonek will look for new revenues, which could include increased fees and taxes. They will reduce the capital budget to $170 million by the last year of the plan, down from $217 million in 2022-23. Supplemental budget requests must be mitigated by other internal budget reductions or deferrals. No department will be able to expand a program or create new positions without offsets in the same department.
There will also be a program review. Typically these studies look for programs being delivered inefficiently, as well as older programs that can be downsized since they are no longer worth the money given current priorities.
Simpson and Wawzonek told a press conference that they will also launch an online survey for territorial workers to alert them to ideas for cuts in their own or other departments.
Wawzonek also said there would be no cuts to the public service. This kind of attrition strategy is politically the easiest, but private companies usually avoid it if they can. They prefer to keep hiring young people and to take the opportunity to layoff underperformers, rather than having the entire workforce age in place under a de facto hiring freeze.
The plan is not yet a done deal. The NWT legislature will debate it in May. We shall see if MLAs are convinced by the new plan, or if they decide to keep spending right up to the federal debt limit. Or even ask Ottawa for a bigger one.
Simpson and Wawzonek have some tough work ahead, making the NWT’s core public services financially sustainable. Despite the importance of the task, there are many voters and public employees who will not thank them for it.
Meanwhile, the fiscal rager continues here. Every edition of Yukon News seems to contain some transfer-payment-funded shenanigan that would cause blood pressures to spike among suburban Toronto taxpayers if the Mississauga papers had better Yukon coverage.
—Keith Halliday is a Yukon economist, author of the Aurore of the Yukon youth adventure novels and co-host of the Klondike Gold Rush History podcast. He won the 2022 Canadian Community Newspaper Award for Outstanding Columnist.