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'Revenue shocks' dampen budget: minister

Sidney Cohen/NNSL photo
Finance Minister Robert McLeod answers questions on the government's 2018-19 fiscal plan before addressing legislative assembly on Thursday.

Government revenues are expected to sink to a five-year low in 2018-19.

The Government of Northwest Territories expects to bring in $1.75 billion in the upcoming fiscal year, about $53 million less than the year before, and $84 million less than it generated in 2015, the last year of the previous government.

In his speech on the 2018-19 budget, Finance Minister Robert C. McLeod said “revenue shocks” are beyond his government's control. As a result, the government isn't where it wants to be in its fiscal plan, he said.

“We remain committed to reducing our level of expenditures so that we can ensure ongoing operating surpluses that are, in addition to prudent borrowing, critical to supporting investments for the benefit of Northwest Territories residents,” McLeod told the legislative assembly on Thursday.

The finance minister presented a $1.71-billion budget with a $23-million operating surplus, the smallest surplus in seven years.

Apart from a bump upward in 2016-17 that was largely due to investments in the Inuvik-to-Tuktoyuktuk Highway, territorial revenues have been on the decline for the last five years.

The GNWT anticipates losing money on a number of fronts in the upcoming year: certain federal transfers are ending, such as the $200-million that came in over four years to fund the Inuvik-to-Tuktoyuktuk Highway; corporate tax revenues are expected to decrease by $9 million; and mining royalties are set to drop 54 per cent, from $35 million in 2017-18, to $16 million.

Finance officials said Thursday that mineral royalties are projected to drop because mining companies are choosing to recoup a significant portion of their expenditures early.

McLeod said the government expects royalty revenues to rise in 2019-2020.

“We expect that number to go up next year because (mining companies) used this year as an opportunity to write off their infrastructure investment, as they're allowed to do, so that affected their royalty payments to the government this year.”

Overall, revenues are forecast to rise modestly in the three years following the 2018-19 slump.

No changes to tax rates are proposed in the 2018-19 budget.

The minister said the government is still at work on a sugary drink tax and a land transfer tax.

The 2018-19 budget does not account for the legalization of marijuana.

“We haven't worked those numbers out yet ... it depends on consumption,” said the finance minister.

“I don't think for the first couple years it will be as high as people think.”

The GNWT will get 75 per cent of revenues generated through taxes on the sale of cannabis in the territory.

Carbon tax not in budget

Potential revenues from the impending national carbon tax are also absent from this budget.

The finance minister said the government is still crunching those numbers.

“We've heard from folks across the territory about the effect (the carbon tax) might have on them, and if we can make it as close to neutral as possible, then that would be our goal,” said McLeod.

Government officials said it's unlikely the carbon tax will be implemented this fiscal year. ,

This year's budget proposes spending $57 million more than last year's, with the largest proposed increase in Health and Social Services (up nine per cent from 2017-18).

Among the proposed health expenditures is $1.5 million for mental health services for children, youth and their families that will pay for nine counsellors in schools in the Tlicho and Deh Cho regions.

Additionally, $848,000 has been earmarked for new programs to assess Autism Spectrum Disorder and Fetal Alcohol Spectrum Disorder in adults.

The new fiscal year will also see the government put a proposed $6.7 million toward the Stanton Territorial Hospital, and $6.8 million into ongoing funding for long-term care, home care and community health care and mental health services.

Other budget highlights include a proposed $4.3 million for French and Indigenous language training in schools, and $1.6 million to expand the Northern Distance Learning program, which brings students and teachers together via video, to 20 small schools.

The finance minister said the government is waiting on the results of a foundational review of Aurora College before it decides whether to reopen the social work program or cut its funding.

The GNWT is also looking to spend $1.3 million on a new agriculture strategy and $412,000 on a country food strategy that would support hunting, trapping, fishing and gathering.

To address the growing need for income, rent and utility cost support, the budget proposes investing $2.4 million in income assistance.

The budget earmarks $595,000 to advance and finalize self-government agreements with Indigenous governments.

“When we set our fiscal objectives we knew that achieving them would require difficult choices,” said McLeod.

“We believe that in the medium term we will start to see modest revenue increases but we will need to continue to manage our financial resources very carefully so that we do not compromise our ability to deliver quality programs and services and our ability to take steps to address the issues we face as a territory.”