Budget Address, 2019 – 2020
The Honourable Robert C. McLeod
Minister of Finance
Third Session of the Eighteenth Legislative Assembly
Mr. Speaker, I rise today to present the 2019-20 Budget for the Government of the Northwest Territories. This Budget continues to invest in our people and our territory to achieve, as set out in the very first sentence of the 18th Legislative Assembly mandate, our vision of a territory where all our people, communities and regions share in the benefits of a healthy, just, sustainable and prosperous society.
In presenting the final budget of the 18th Legislative Assembly, I want to thank Members for their collective efforts over the last four years to address the mandate priorities within a less than ideal fiscal situation. Our choices haven’t always been easy, and we haven’t always agreed, but together we are all trying to do what is in the best interest of the residents.
At the start of this Assembly, we knew we had an unsustainable fiscal situation. Our revenue growth was slowing, our operating expenditures were continuing to grow at a high rate, and our short-term debt was accumulating rapidly. It was clear that if we wanted to invest in our priorities we would have to do a better job managing our existing expenditures. We rose to this challenge with a fiscal plan that required accepting difficult, but necessary, steps to manage expenditures and find savings while also protecting our existing programs and services so that we could invest in our other priorities in support of this Assembly’s Mandate.
The fiscal plan we have followed over the past three budgets has allowed us to achieve substantial progress on the Assembly’s priorities and make inroads into our long list of infrastructure needs. Our measures to re-allocate resources and find savings have let us build for the future, even with the $81 million decline in our revenue over the last two years.
Each budget talks about our fiscal strategy, which simply put, is to not spend beyond what we can afford. Today’s programs and services must be paid for by the revenues that we have today and we should borrow responsibly for infrastructure that delivers benefits for our residents today and tomorrow, with a clear plan to repay that debt.
Aligning our revenue growth with expenditure growth has been particularly challenging over the past two years where revenue has declined by $81 million. Managing this type of decline required taking a longer term view of our fiscal plan because if we were to have taken more drastic steps it would have compromised our ability to maintain existing programs and services. However, even careful expenditure management was not enough to prevent the decline in our operating surpluses and increases in our short-term debt over the life of the 18th Legislative Assembly.
This Assembly has met our Fiscal Responsibility Policy’s guidelines to ensure that we are borrowing wisely while we start to address our infrastructure gap. We have the oldest infrastructure in the country and a significant infrastructure deficit that creates challenges for economic growth and contributes to our high cost of living. Our careful financial management has provided the means to partner with the federal government on cost-shared opportunities. By the end of this Assembly we will have invested $1.1 billion in the territory’s infrastructure to help deliver government programs and services, support the economy and leave a legacy for future generations.
Mr. Speaker, in 2019-20 we propose to invest $70 million for new initiatives and $17 million to enhance or maintain existing programs. The new spending will be offset through $20 million in savings and $30 million in new revenue from federal sources and the new carbon tax.
We propose in this Budget to spend a total of $1.873 billion in 2019-20, of which
$1.1 billion is directly invested in our people through education, health care, social services, housing, policing and corrections. We will pay for our operating budget with an estimated $1.933 billion in revenues, leaving a projected $60 million operating surplus to directly fund a portion of the 2019-20 infrastructure budget approved last October.
In the first three years of this Assembly we have invested almost $64 million in the health of our residents and to enhance safety in our communities.
We have to do better to support children and families and this Budget proposes to accelerate plans already in place to improve the Child and Family Services program by investing an additional $3.3 million to add 21 new positions. This investment will improve our children and family services program’s ability to meet our responsibilities by reducing caseloads and improving capacity to provide better support for children and their families.
We propose to continue our efforts to reduce poverty and address its consequences by adding $4.9 million targeted for our people that need help. This includes $2.6 million to establish a day shelter and sobering program, to hire more support personnel, and to increase emergency shelter funding across the territory. We propose to strengthen Income Assistance with an additional $1.7 million and to provide $615,000 in additional support for low-cost housing.
Non-governmental organizations are important partners in the delivery of services to residents of the Northwest Territories. Funding of $350,000 proposed in this Budget will double this Assembly’s support for the NGO Stabilization Fund and will bolster non-governmental organizations’ ability to serve our communities.
We are including $15.2 million in this Budget to operate the new Stanton Territorial Hospital that will open in May of this year. This new hospital will better serve today’s residents with modern, state-of-the-art health care and diagnostic services and it is intended to meet the demands of our health care needs for the next thirty years.
We propose to invest a further $5.9 million for other health services to support NWT residents and their families. These new investments will further enhance rehabilitation services for children, enhance support for children with autism, expand the midwifery program, and improve chemotherapy service delivery at the Stanton Territorial Hospital. This investment will also provide increased funding for benefit programs, diagnostic laboratory services, and medical supplies and will cover increases in the standard physician contract for 2016 to 2021.
Strong communities look after their elders and disabled residents. This Budget includes $2 million to better fund long-term care facilities and to increase income support for disabled and aged residents, including $1 million to operate the new health centre and long-term care facility in Norman Wells. Following the first review of maximum allowances since 2002, the Budget provides for increasing the allowance rates for disabled and aged residents from $300 to $405.
Addressing mental health issues is one of our territory’s biggest public health tasks. To better meet this challenge, we propose investing $1 million to continue implementation of the Mental Health Act and provide increased contribution funding to Indigenous governments for mobile addictions and substance abuse treatment and aftercare for individuals and families through the On-The-Land Healing Fund. This collaborative effort helps support Indigenous governments to deliver culturally relevant and safe healing programs to their residents.
Work to support our children’s mental health is more effective when tied to education programs and services. The $2.1 million proposed in this Budget to implement the second phase of the NWT School and Community Child and Youth Care Counsellors initiative will add more counsellors and mental health support services to support mental wellness for children, youth and their families in the Beaufort Delta and Sahtu regions. A further $379,000 is recommended in this Budget to establish a Specialized Territorial Support Team to help teachers and school administrators use clinical assessment information to create learning supports for students with complex needs from conditions such as autism and fetal alcohol spectrum disorder.
This Budget proposes to continue investing in initiatives that have demonstrated their effectiveness, including $432,000 to further expand the Northern Distance Learning Program, which has proven successful in helping students to gain more credits and achieve academic success. The Budget also enhances the Northern Studies program with a $315,000 investment in a made-in-the-NWT curriculum to broaden grade 10 studies and develop the program for grades 11 and 12.
Building on work started in 2017-18 to implement a territory-wide 911 service, this Budget proposes a $1.3 million investment to complete its rollout in 2019.
The Budget proposes to shore up its support to the RCMP to continue to deliver quality protection services to our communities with an additional $1.4 million for mandatory training and to cover unavoidable administrative cost increases.
Over the last three years, in order to develop the economy in an environmentally sustainable way, the 18th Legislative Assembly has made diversifying our economy and supporting new industry that provide good jobs a priority with over $29 million in new investments. This Assembly has also made labour development a key long- term mandate priority with $22 million in new investments over the last three years towards early childhood development, post-secondary opportunities, cultural and Indigenous languages programming, and skills capacity building in our youth. Over the past three years of this Assembly we have protected our economy by investing $21 million to reduce the cost of living and avoiding major tax increases.
Budget 2019 looks to continue this investment with another $14 million to support the economy, labour, and land management.
Recognizing that resource development leads to opportunities for well-paying employment and supports local businesses, we will be investing $1.7 million in new funds to encourage increased investment by the resource sector. This investment includes $1.2 million to increase our knowledge of the mineral potential in the Slave Geological Province through new high-resolution airborne magnetic data and funding geophysical studies. These funds also include $375,000 to take action under the NWT Petroleum Resources Strategy to sustainably revitalize the petroleum sector. The Mining Recorder’s Office will receive more support to help mining prospectors and developers with information on mineral rights, maps, and legislation and regulations.
We are continuing our efforts to diversify the economy and reduce our reliance on the non-renewable resource sector by proposing an additional $375,000 to support activities related to the knowledge economy. We must make better use of the incredible amount of knowledge and expertise that resides in the Northwest Territories to transform our economy into one that relies on its people, rather than non-renewable resources, to provide a good quality of life and healthy communities. Funds in this Budget will help develop a knowledge economy strategy and explore the feasibility of building a centre of excellence for northern research and development that generates revenue and jobs through production, distribution and use of knowledge and information.
Building our economy also requires a strong commitment to developing our workforce and this Budget includes $3.6 million in investment for labour market development. This includes the support related to the Canada-Northwest Territories Workforce Development Agreement, including improving literacy and work-related skills, providing a suite of needs-based services to maximize the effect of training, working with employers and other stakeholders to promote job opportunities, and tailoring skills development programs to employer demands.
We are continuing our support for our post-secondary students by increasing the Student Financial Assistance course reimbursement rate from $500 to $800 and increasing the lifetime limit on course reimbursements from $5,000 to $8,800.
The growth in the number of visitors to our spectacular territory over the past five years has been an outstanding testament to the efforts of our tour operators, tourism associations and local governments. Building on these efforts, we propose to add $1.2 million to support our tourism industry, including an $800,000 increase for large-scale tourism marketing and resources for the Northwest Territories Film Commission to market and promote our territory’s stunning scenery to film and video producers and $208,000 to maintain the quality of our territorial parks.
We propose to continue our support for the arts and culture sector with $689,000 in maintenance funding for the Prince of Wales Heritage Centre and $200,000 in ongoing funding for the NWT Arts Council to promote creative artistic projects.
A total of $1.3 million in operating expenditures is proposed to support the Investing in Canada Infrastructure Plan in 2019-20. The GNWT has a long list of capital projects of all sizes across the territory and this additional funding will ensure that we have the right information to put our infrastructure dollars where they will provide the most benefit and will also help expedite the opportunities to take advantage of federal funding.
We have to ensure that we have the resources to maintain our new infrastructure so it lasts as long as possible. To that end, this Budget includes an additional $2.1 million to protect new capital projects that are coming into service this year, to increase maintenance and dust control measures for roads, and to add funding for ferries on the Mackenzie, Peel, and Liard rivers.
Uncertainty over land use rules is a major obstacle to getting anything done and is hindering economic development. We propose to support land management with a further investment of $2.6 million. This investment includes $753,000 to support a government-to-government Wek’èezhìi Land Use Planning Committee that will lay the groundwork for a land use planning process for public lands in Wek’èezhìi. This investment will also support other land use planning, including increased geomatics analysis, and increased capacity to manage equity leases and address untenured and unauthorized occupancy.
Mr. Speaker, we are seeking to turn the rapid changes to our environment caused by climate change into economic development opportunities as we help guide the territory to a high-tech, low-carbon future with a diversified economy and healthy environment. Budget 2019 provides $21 million in spending to support our efforts to transition to a low-carbon economy. This support reflects our commitments under the Pan-Canadian Framework on Clean Growth and Climate Change and continues the work of this Assembly to address our Mandate obligations.
Last July, we released our proposal to participate in national carbon pricing with a carbon tax starting July 1, 2019 on all petroleum and natural gas fuels except aviation fuel. This carbon tax is intended to provide a price incentive to reduce the use of carbon-based fuels and not necessarily to raise revenues for government programs. Therefore, our carbon tax proposal includes returning most of the carbon tax revenue into the economy in an approach that attempts to encourage carbon conservation and substitution to reduce greenhouse gas emissions while minimizing the effect on the local cost of living or creating additional barriers to economic development.
Of the $16.2 million in carbon tax revenue expected in 2019-20, this Budget proposes to return almost $7 million to residents and business through a 100 per cent rebate of the tax paid on heating fuel and fuel used to generate electricity and Cost of Living Offsets for individuals and families. Large emitters will receive about $5 million in carbon tax rebates and through individualized trusts that can be used to make investments that reduce greenhouse gas emissions. Administration of the tax and benefits will cost about $600,000, leaving $3.7 million for greenhouse gas emission reduction investments, which in 2019-20 is proposed to be used to support the Inuvik Wind project.
Carbon pricing is not expected to significantly reduce greenhouse gas emissions in the NWT over the short to medium term because the incentive to limit fuel use already exists due to high energy costs. As the carbon tax rate increases over time, further reductions will be increasingly difficult without considerable technological improvements that allow economically viable reductions in fuel use. Through the 2030 Energy Strategy, the GNWT will continue to make investments in alternative energy options for territorial residents and businesses a priority. The 2019-20 Capital Estimates includes more than $40 million in funding for energy-related capital projects.
We expect to continue to work closely with the federal government in efforts to provide reliable, affordable alternatives to carbon-intensive fuels for communities and businesses. The majority of the $8.7 million proposed in this Budget for lowering emissions comes from the federal Low Carbon Economy Leadership Fund. Of this, the Budget proposes to further support the Arctic Energy Alliance with an additional $2.5 million for new and enhanced programs and services to improve energy conservation in commercial and residential buildings. Another $3.8 million is allocated in this Budget for large-scale commercial, industrial and government organizations to support larger energy efficiency retrofits. Other investments support actively trapping carbon in our trees through forest regeneration actions and improving energy efficiency and substituting heating fuel in public housing through retrofit upgrades.
This Budget proposes an additional $555,000 to implement the 2030 NWT Climate Change Strategic Framework. These funds will be used to support data management, reporting and outreach so that the GNWT can build its understanding of climate change within the territory, build resilience and adaptation, and transition to a low- carbon economy by 2030. This Budget also provides $381,000 for an environmental assessment of the Inuvik Tuktoyaktuk Highway that will provide further information to improve our knowledge of the effect of climate change occurring in the Northwest Territories.
Mr. Speaker, over the past three years, members of this Assembly have worked hard to strengthen our consensus government and we have actively pursued fostering collaborative government-to-government relations with Indigenous and community governments including much work to support the negotiation of self-government agreements and settle land claims. In the first three budgets of this Assembly we have invested $22 million in new funding for governance priorities as we strive for better transparency and accountability and strengthened communication.
Budget 2019 proposes to continue this work by investing a further $2.1 million to improve overall service delivery. These funds will be used to strengthen on-line service delivery, establish the Ombudsman Office, create an Access to Information and Protection of Privacy unit, and strengthen the Legal Aid Commission.
This Budget continues to close the funding gap for community government with an additional $1.9 million for their operations, maintenance, water, and sewer expenses. This investment is in addition to $2 million in incremental infrastructure contributions. We recognize the funding gap and over the four years of the 18th Assembly we will have added a total of $8.2 million in additional community government funding.
The GNWT and Indigenous governments work closely together to support human resource development and build capacity in their organizations by providing temporary work opportunities for each other’s employees. To support and enhance this capacity-building through temporary work assignments, this Budget proposes a $400,000 investment to directly offset expenses, such as travel, accommodation and compensation.
Our Mandate calls for advancing self-government agreements and promoting women in politics. Budget 2019 proposes $288,000 to support self-government implementation negotiations and to continue promoting women in politics through continued development of a communications campaign by the Women’s Advisory Unit.
We are committed to our public servants and propose to invest $5.1 million, including an additional $2.0 million for medical travel and dental programs, for GNWT employees and $3.1 million to pay for the collective bargaining increases for teachers and for pay increases for non-unionized GNWT employees that were set in 2018-19.
Mr. Speaker, we are all aware that we are continuing to negotiate with the Union of Northern Workers for a new collective agreement that will cover the majority of our employees. These negotiations are being undertaken with a backdrop of a particularly challenging fiscal environment. Total revenues, once we adjust for increases in federal funding for targeted projects and the new NWT Carbon Tax, have increased by 2.7 per cent over the four years of the 18th Assembly, for an annual average of 0.7 per cent to pay for all our expenditure increases. Every year sees new fiscal pressures as program costs increase for reasons beyond our control, such as rising health care costs caused by an aging population. This 0.7 per cent annual increase must pay for these pressures, as well as support investment in the Assembly’s priorities, and resources to maintain our existing programs and services, including Collective Agreements.
The balance between these various demands can’t be ignored. We value the public service that delivers our government programs and services. All of us in this Assembly have friends and family that are part of our public service and no one wants to see job action. However, our fiscal reality can’t be ignored.
Increasing spending beyond our revenue growth would mean we would need to reduce spending in other areas, increase our revenues through additional taxes, or increase our debt that future generations will have to pay. There are no other choices.
To our residents, I commit to you that this government will do everything within our power to reach a fair Collective Agreement without abandoning the needs of our residents or compromising the future of the Northwest Territories. This is a difficult balance, but one we must achieve.
Mr. Speaker, total revenue is forecast to increase to $1.933 billion in 2019-20 following a two-year revenue decline of $81 million. The 2019-20 increase is largely driven by federal transfers for infrastructure projects and targeted programs and by the introduction of the NWT Carbon Tax. Excluding the impact of this revenue, the government is left with $50 million in increased revenue over the four year period, or an average of $12.5 million per year.
As announced last July, we are honouring our commitments to carbon pricing under the Pan-Canadian Framework on Clean Growth and Climate Change by proposing a made-in-the NWT carbon tax at $20 per tonne starting July 1 of this year. The legislation to levy the carbon tax and provide offsets to mitigate its effects on the cost of living and doing business will be introduced in this Session. The NWT Carbon Tax is expected to come into effect on July 1, 2019 and will generate $16.2 million in revenue in 2019-20.
With cannabis legalization in October of last year, we are projecting $747,000 in additional revenues from the Northwest Territories share of the federal cannabis excise tax in 2019-20 and expect some revenue from cannabis sales. Supply shortages are impacting cannabis sales and revenues, and we are hopeful that the national supply issues get resolved over the next few months.
This Budget does not contain any increases in our existing tax rates.
Mr. Speaker, our overall economy held its own in 2018 and we expect economic activity to increase 2.1 per cent in 2019 because of good news last year such as the restart of oil extraction in Norman Wells and steady diamond production.
In recent years, the NWT economy has been supported by diamond mine construction and over $786 million in public infrastructure investments, including large projects such as building the Inuvik Tuktoyaktuk Highway and Stanton Territorial Hospital. We are continuing to build the territory with $343 million in infrastructure investments, including new projects such as construction of the Tłı̨chǫ All-Season Road, public infrastructure to support program delivery to NWT residents, and low-carbon economy capital projects.
We are continuing to use public investment to support local economies and to set the foundation for future economic development. At the same time we also need to have a frank evaluation of our various economic strategies to pave the way to a more sustainable and robust economy. Despite years of trying to diversify, we remain dependent on the non-renewable resource industry for its high-paying jobs and local business opportunities.
We expect the resource sector to continue to perform reasonably well over the next five to ten years. However, there remains no oil and gas activity in the Beaufort Delta and 2019 mineral exploration is expected to be lower than 2018, adding uncertainty for developing the next generation of mines. None of our existing diamond mines plan production past 2034 and one mine is scheduled to close in six years. The lead time for a deposit discovery to become an active mine is measured in decades and we need mineral exploration now if we want to have replacements for the maturing diamond mines.
Ultimately, we need economic diversification to strengthen the sustainability of our economy. We compete in a global market, whether it is exporting resources or attracting tourists. Changes in the global economy are directly transmitted to ours through resource prices and the demand for our products. To be clear, just because overall things are not so bad, does not mean that there are not cracks in the foundation.
Mr. Speaker, our final Budget puts the finishing touches on a Mandate that has built a solid platform for the next Assembly and a legacy that will provide positive returns to the people of the Northwest Territories for generations.
The 19th Assembly will have a new territorial hospital and improved long-term health facilities to provide better quality health care for residents. We have expanded transportation infrastructure by connecting Tuktoyaktuk to the rest of Canada by road and are furthering this expansion by building an all-season road to Whatì. These new roads open up these regions to new economic opportunities. We have started to close the gap between what community governments need to provide community services and their ability to fund these services. The next Assembly will be able to build on our investments in new and innovative programs in education, including junior kindergarten and Northern Distance Learning, which are already helping more children achieve academic success.
I believe that we have provided the foundation that will allow a transition to even more quality public services for Northwest Territories residents while revenues recover sufficiently to start to reduce our short-term borrowing.
I believe Members of this Assembly should be proud of the work we have done to invest in our priorities in a fiscally responsible manner. The choices and decisions of this Assembly will be our legacy in support of a vision for this territory where people can thrive in a strong economy that provides jobs and opportunities in safe and vibrant communities.
Thank you, Mr. Speaker.