Debates of August 23, 2011 (day 16)

Thank you, Mr. Hawkins. To the motion.

Question.

Question has been called.

---Carried

Does committee agree that we’ve concluded Committee Report 6-16(6)?

Agreed.

Committee Report 6-16(6) has been concluded. Next on our list is dealing with Bill 10, Northwest Territories Heritage Fund Act. At this time I would like to ask the Minister responsible for the bill to make any comments. Mr. Miltenberger.

Thank you, Mr. Chairman. I am here to present Bill 10, Northwest Territories Heritage Fund Act. The purpose of this act is to establish a trust fund for the future benefit and use of the people of the Northwest Territories.

This bill responds to our commitment to introduce legislation to establish a Northwest Territories Heritage Fund before the end of the 16th Legislative Assembly. During the October 2009 revenue options consultation and roundtable undertaken by the Department of Finance, we heard from many respondents that the NWT needs such a fund in anticipation of achieving control over our non-renewable natural resources. In response, in March 2010 we launched public discussions specifically on the concept of a Heritage Fund. The support received then for the creation of a fund, as well as the numerous indications of support from Members of the Legislative Assembly, has resulted in the bill that you have before you right now.

A Heritage Fund is a way to save for future generations. This legislation will establish a trust fund as a long-term investment fund into which surplus funds may be transferred at the discretion of the Legislative Assembly. Once transferred, these monies become part of the principal of the fund. For the first 20 years of the fund both the principal and income generated in the fund will be retained within the fund. After 20 years have passed transfers out of the fund into the Consolidated Revenue Fund may be made through a special act, although these transfers would still have to go through the regular budget process. The legislation will limit the transfer out of the fund to an annual withdrawal of 5 percent of the year-end balance of the fund, provided that the principal of the fund is not removed. Even after the 20-year period is complete annual deposits may continue to be made and will become part of the principal of the fund.

The Financial Management Board will be the fund’s trustee under the proposed legislation and will monitor the performance of the Heritage Fund, appoint the auditor, and direct and supervise the secretary of the board in exercising the duties of investing and disposing of assets of the fund. This is in keeping with the structure used for other public agencies. This will not prevent the establishment of an arm’s length investment management body to oversee the administrative and investment functions of the fund. However, in the first years while the fund is building principal there is no need to incur the cost of additional administration. The bill includes a requirement for the Legislative Assembly to conduct a review after 10 years of the provisions and operations of the Heritage Fund Act, including recommendations on how to seek public input and advice on expenditures from the fund and whether independent oversight and management of the fund is required.

The Legislative Assembly will receive an annual report on the performance of the Heritage Fund. While financial results will be disclosed separately from other accounts, the Heritage Fund’s investment income, including any capital gains or losses, will be consolidated into the government’s general accounts just as investment income from other government accounts is treated. Similarly, on the statement of financial position the Heritage Fund’s assets will be included along with the government’s other financial assets.

As reflected in this proposed legislation, the single objective of the Heritage Fund’s investment policy is to maximize the long-term growth in the Heritage Fund while avoiding undue risk. The investment management will be guided by accepted investment principles.

We recognize that we are unlikely to be in a position to contribute to the Heritage Fund until we are in a surplus cash position. However, the recently concluded devolution agreement-in-principle is a first step to ensuring that NWT residents receive the fiscal benefits from the development of our territory’s non-renewable resources. We will be prepared, when the day comes, to contribute toward a legacy for future generations of Northerners.

Thank you, Mr. Miltenberger. I believe that the Standing Committee on Government Operations already commented on the bill, so at this time I would like to ask the Minister if he will be bringing in any witnesses.

Yes, Mr. Chairman.

Does committee agree that the Minister can bring in his witnesses?

Agreed.

Sergeant-at-Arms, escort the witnesses in.

Mr. Miltenberger, for the record, could you introduce your witnesses.

Thank you, Mr. Chairman. I have with me Sandy Kalgutkar, acting deputy minister of Finance, Kelly Bluck from Finance, and Ian Rennie from Justice.

Thank you, Mr. Miltenberger. Welcome, witnesses. Just to get clarification on general comments, do you want to do it all at once or do you want a response from the Minister after every general comment? Let’s agree to the rules up front.

All at once.

---Interjection

Okay. Okey-dokey. General comments. Mr. Abernethy.

Thank you, Mr. Chairman. I’d like to thank the Minister for bringing forward the Heritage Act. There certainly has been a lot of talk about the Heritage Act over the last four years and I think it’s good that it finally came through. For me, as the purpose indicates, the Heritage Fund is to ensure that the future generations of people in the Northwest Territories benefit from ongoing economic development, including the development of non-renewable resources. Ultimately what this comes down to is this is for the people. This is for the people of the Northwest Territories both today, but more importantly in the future.

As we develop resources in the Northwest Territories and pull diamonds out of the ground, we need to ensure a legacy for the individuals who are going to come after us: our children, our children’s children, and their grandchildren. I think an act like the Heritage Act will put some money in place so that when renewable resources are gone, there will be something for future generations.

Just for the record, I just have to go on the record and basically say to my colleague Mr. Ramsay that I do disagree with him on the concept of dividends. Dividends, in my mind, would only be a reasonable utilization of the Heritage Fund should the Heritage Fund grow to significant proportions. Otherwise, I think we should ensure that it’s there to protect programs and services that are available to the people.

I did have an opportunity recently of talking to a number of state legislators of Alaska and we did have a conversation about their Heritage Fund, and the ones I was talking to encouraged extreme caution with respect to dividends. There have been some benefits but it has also caused significant numbers of problems. So future generations of this Legislature, future Legislatures should be very cautious about dividends and if they are going to explore them, they should be something that’s only used should the Heritage Fund grow to mega proportions.

In the meantime we’ve got this thing in front of us and it’s something that we do need to start thinking about, putting some money in, and there are some areas where there might be money available. There might be revenues generated out of the Opportunities Fund. That might be a reasonable allocation for this as a starting point. With devolution, should it be finalized, should we get to a final agreement and move forward, there may be money available to put into this thing in the future.

It is important. It is timely. No point waiting. I think the time is now and I’m happy to see this thing before us. There are lots of questions. There are lots of things that need to be done and decided with this thing, and hopefully, when the future government, the 17th Assembly starts developing some regulations, they will share the regulations with the Regular Members, because this is a big picture item. This is about the future of the Northwest Territories and I think all Members should be involved in its design and future.

That’s about it. Basically, I support the piece of legislation. I’m looking forward to its passage and I will look forward to the future of this fund. Thank you, Mr. Chair.

I’ll allow the Minister to respond to the comments. Mr. Minister.

Thank you, Mr. Chairman. I appreciate the Member’s comments of support. Clearly, it is a starting point. The fund is structured to remain untouched for the first 20 years so it can build some critical mass, and then there will be ongoing debates, I’m sure, among citizens of the Northwest Territories and future legislators as to the best way to touch this money. You just have to look around the world at some of the other funds besides Alaska. You could look at Norway. You can look at other funds, as well, to see what may be in the best interests of the residents of the Northwest Territories, but clearly, we’re contemplating a 20-year growth and building period. Thank you.

Thank you. Next, I have Mr. Beaulieu.

Thank you, Mr. Chairman. I think that the government should have this Heritage Act, as I see it, like a savings account but only use this fund or put money into this fund when all of the communities have what is required for them to function as a community.

Right now I have mixed feelings about a fund such as the Heritage Fund, a fund such as this, when we know that there are still communities in the Northwest Territories that don’t have basic essentials. The basic essentials that are afforded to larger communities in the Northwest Territories, that’s not a problem. They can save, put money aside and put it away for the future. However, for us MLAs that represent small communities, we don’t have the basic essentials needed in small communities. We don’t have youth centres for all of the communities for the youth. I have many youth in Lutselk'e and there is no youth centre there. They’re looking at using old buildings here and there that would be handed them by the government. We don’t have youth workers. We need people, youth officers and so on in these communities. We don’t have environment officers in the communities that could go there and work in the communities to protect the land. We don’t have our land cleaned up from past explorations and so on.

It’s a very tough act for me to support. I think it’s a good idea if the government is not running a deficit, if the government is not approaching the debt wall, and if the government doesn’t have to borrow money to increase the debt wall in order to provide infrastructure. Those are good ideas. This I see as kind of like saving money on one hand while you have people that are hungry on the other hand, and that’s the reality here. Instead of putting $10 million into a Heritage Fund, why not put $10 million into creating employment in small communities so that people don’t have to go back to the government and ask the government for support to fix a doorknob or change their window or have to always rely on the government to provide income? They should be able to take the same money and put it into those programs or put it into something, because we need help now, not 20 years from now.

Small communities are finally getting an opportunity to turn around and get some of the things that are needed like having highways into our communities that are chipsealed, good highways into the community that lower the costs and a highway, not when you’re leaving your community because you have to go to the neighbouring larger community to buy groceries to keep your grocery bill down, but you beat your car up. Communities that have no access. Communities that have only barge access. Communities that have winter road access only and the only opportunity to lower costs is driving out on winter roads and so on. Then, when all of those things are dealt with, then we should think about saving money.

But right now this is a hard bill for me as I represent the people of Tu Nedhe. It’s a difficult bill for me to go to even the youth of Lutselk'e, the youth in Fort Resolution and say this government doesn’t have any money to be able to provide a good, qualified youth worker that could help you in your future and so on, but at the same time we’re going to save and put some money away, like, millions of dollars away that could be used immediately in small communities. Thank you, Mr. Chairman.

General comments, Bill 10. Mr. Ramsay.

Thanks, Mr. Chairman. Just to reiterate some of my earlier comments on Bill 10, and I appreciate my colleague Mr. Abernethy’s take on the dividend and what it means to people, but from the way I look at it, I was looking for an opportunity for the government to set aside money that would eventually end up in the pockets of our residents so that they could help offset the high cost of living, it would help attract potential employees, and it would give the residents across the territory a sense of us all being in this together. Instead of the government hiving off 5 percent as it sees fit after the initial 20-year period to do with what they want with the 5 percent share to go to programs and services, but it just evaporates into government largess and it doesn’t end up, like I said, in the pockets of our residents where I think we should have been going with this bill. But, again, it’s a step in the right direction.

The regulations and everything that is associated with that will be worked out. There might come a day where that actually does happen. It’s a ways off, but again, it’s like we’re opening a savings account but we don’t have any money. It’s a weird situation for us to be looking at this legislation, although I think the vehicle is right, it’s just the fact of the matter is right now we have no money to put aside into this savings account, and Mr. Beaulieu has some very good observations on the needs that are out there in the small communities and the fact that it would be kind of strange for the government to take $10 million, if we had it, and put it into this fund when we all know there are pressing social needs out there in almost all of the communities across the Northwest Territories. So, again, this is going to be good when we’re flushed with cash, but right now we’re not.

Again, I’m going to have to support it because I think it has to be the vehicle that is there that gets us started on saving some money for the future, which I think is a prudent thing to do and the right thing to do. With that, thank you, Mr. Chairman.

At this time I’ll allow the Minister to respond to the comments and also at the same time you can respond to the comments by Mr. Beaulieu.

In regard to Mr. Beaulieu’s comments and some of the MLA for Kam Lake, Mr. Ramsay, I think, yes, we have far more needs than we have resources from now as far into the future as we could plan we will need every cent we have. If we just want to keep spending everything we have, our capital demands everybody knows are far in excess of the capital budget for next year. Something like half a billion a year versus $75 million, not to mention our program needs. So I would suggest that we have to do both; that we plan for our employees, we plan for pension funds, superannuation, we plan for the future and we encourage people to put money aside to be as self-sufficient as possible.

As a government we have to take something of a similar view, I would suggest, in planning for the future; that the resources that are here today may not be here tomorrow, that if we don’t take the time to consciously put money aside, it will never be the right time. When it’s too late and we look back on what we could have done, all we’ll be able to do is look back with regret.

So I would suggest that as difficult as it may be, we’re starting the process to set up the instruments and make those types of necessary decisions as we try to do both things.

The next Legislature will decide if they want to contribute anything to this fund, but I know that all of us, for example, in our pensions and pensions of all our constituents that work are very important for them because it allows them to plan for the time in the future when they will have some needs they have to put aside today during their earning years.

So, Mr. Chairman, I appreciate the concerns. I think this is a good first step, as Mr. Ramsay indicated, and will be challenged moving forward on how do we make this work, along with meeting the day-to-day program needs. Thank you.

Thank you. Next I have Mr. Jacobson.

Thank you, Mr. Chair. I’m in favour of it, but the same lines as Mr. Beaulieu. Some of our communities there’s so much that has to be done before some money is put aside. There’s schools, there’s roads, there’s just basic youth facilities that are needed in the smaller communities and stuff that I’ll probably never see in my lifetime, but at the end of the day we’ve got to try to keep providing services to our youth and giving them what’s needed.

If the devolution deal goes through, within three years we’ll have some money to do some good for all of the Northwest Territories, but the money that we’re planning to set aside if we were in the upcoming 17th Legislative Assembly, I mean, we have people on income support that can’t even provide for their children and that has to be looked at. We either look at almost increasing on income support per household and per client.

We have to create jobs in the communities, not just quick fixes, but long-term employment such as roads. If we’re able to get the Tuk-Inuvik highway done, that opens up the North. In the Western Arctic, if we become a deep sea port, there’s so much potential there. An LNG plant possibly going in to Tuk, a lot of jobs. The cost of living is going to go down regarding fuel oil for your private homeowners for your home and gasoline for your vehicle or your boat to go hunting. I’m in favour, but we’re not in a position to do this and if we were to do this, it’s going to be really minimal monies that are set aside until devolution is signed.

When the 17th Legislative Assembly comes in they really have to look at this on a go-forward basis, but the priority one is we’ve got to take care of the people we represent and make sure they’ve got a roof over their heads, they’ve got jobs and can provide for their families. I will be supporting it and we’ll leave it to the 17th Assembly. Thank you, Mr. Chair.

General comments in regard to Bill 10. Mr. Bromley.

Thank you, Mr. Chair. I’m in favour of this bill in general. I don’t think it’s the best thing we could have done, but I think it’s a very good start.

Really the issue at hand is our non-renewable resources in particular are being shipped out of the Northwest Territories typically with very little value added despite our best efforts, and at really an incredible rate, and these are some of our most finite resources. We’ve learned from others that if we’re going to ensure intergenerational benefits, it must be done explicitly and with much forethought, and a Heritage Fund seems like a really appropriate way to make this happen.

Essentially what we are doing here is as we transform these assets, which are in the ground or on the land, into a financial form or some value that gets shipped immediately out we take some proportion of that value and nail it down, put it into this account and let it build in value for future residents who will not have the benefits that we do earlier in the process of extracting our renewable resources.

I think obviously filling the fund, getting some dollars in there is a key consideration, and I have not heard much clear thinking on that or consideration of how we’re going to do that. I and others have made suggestions of such things as resource tax or a proportion of our corporate tax and so on. Wherever non-renewable revenues exist and flow, we should be somehow tapping into those to start putting dollars into these funds. Now we certainly will always need every cent, as the Minister says, and hard decisions do need to be made. So, really, my first question for the Minister is: how does this bill provide guidance for the development of regulations concerning the management of the fund and all of the decisions that must go into that?

Mr. Minister, do you want to respond to the comments?

Thank you, Mr. Chairman. We lay out some of the basic principles and approaches that we’re going to take in terms of how the money is to be invested. There’s no decision made in here or direction in terms of limiting future Assemblies as to how much money and where they want to take the money from to put into this fund. We’ll be running it through the processes and policies that currently exist. Under clause 11 on regulations we lay out some of the basic points and processes to be followed. Thank you.

Mr. Bromley.

Thank you, Mr. Chair. Thanks to the Minister for that response. I believe the Minister’s response reflects my general observation as we reviewed the bill, that it’s a fairly unformed bill. It provides the basics but only the basics. A lot will need to be developed beyond, obviously, basic principles and running it through processes and policies. Many of these policies and processes don’t exist at this time for a bill of this nature. I suppose the implication of the Minister was that this would be done through regulations, and certainly highlights the thinking of committee as to why those regulations would need to come to committee and possibly through them to the public for some input and guidance in that development.

Committee has certainly spoken clearly on policy mechanisms for encouraging participation of the public in management of the fund. I’m wondering if the Minister could tell me what provisions are actually provided in the act to ensure public input on the management and use of these public funds which are being preserved, or proposed to be preserved, for future generations.

Mr. Miltenberger.

Thank you, Mr. Chairman. If I could refer the Member to clause 4, that lays out some of the processes that are going to be available to deal with and interact with the public, get public feedback to provide direction and feedback on performance. The topic of holding public meetings to review investment activities in the performance of the fund. The monitoring of the performance. There will be an opportunity through that process to have public input. Of course, there’s always the opportunity through MLAs and through committees as well.

I think it’s good that the public be aware of clause 4 and be prepared to take advantage of the opportunities that presents, as well as the policies that committee is recommending.

I just would like to comment on the discussion that has taken place about the various existing heritage funds. There are three that I know have been thrown out in public consultation and that many of us have referred to all of us. The first one, of course, is the Norway Pension Fund. It’s essentially the same thing referred to as a heritage fund. Its purpose is to invest parts of the large surplus generated by the Norwegian petroleum sector. I recognize that there’s an obvious difference before devolution for us in this regard. It’s to counter the effects of the future decline in income as their petroleum resources decline and to smooth out the disrupting effects of highly fluctuating oil prices, a phenomenon that we suffer from tremendously. That fund is at about $473 billion last time I looked. It could be a bit more or less now. Obviously, it’s very considerable and offers that country a security that we can only dream of. I think it’s inspiring for us to be considering that sort of goal in mind.

Which brings me to the second one, which is the Alaska Permanent Fund. It’s very similar. Also running around $35 billion. Quite a bit substantially less by more than an order of magnitude from Norway. Despite the fact that they had almost completely tapped out their North Slope oil and the pipeline is running half empty now. The reason it’s so low is because, as my colleague has noted, Alaska gives out those dollars on a regular annual basis to every man, woman, and child in Alaska. As a result they do not have that for future generations.

Of course, the Alberta Heritage Savings Trust Fund is the third example that we all refer to and we know that has not got rave reviews from just about anybody. It’s the lowest of all. I believe the last I heard it was about $11 billion. It could be less now as they’re running a deficit. They’ve clearly been unsuccessful at achieving the sorts of goals that we have in mind with the Heritage Fund Act.

My druthers would be that we focus on the Norway Pension Fund sort of model. That will become more viable, I think, as devolution transpires and we have the opportunity to nail down additional funds. It needs to be possibly discussed before then so that those funds can actually be directed, some proportion of those funds, into such a mechanism as our Heritage Fund. I know we did have early discussions on that but we didn’t come to resolution. I wonder if I could ask the Minister, will he be taking that discussion forward as the next step. Will he be recommending to the 17th Assembly, for example, that we begin the process in those discussions? I grant that there’s no emergency on that, but I would like to know if this government will be providing some encouragement in that direction.

Firstly, as we talk about the non-renewable resources sector, we have to as well not only put savings aside because of the depletion rate and the fact that there is not going to be any more once it’s gone, but we also have to focus on opportunities like the fibre optic line up to Inuvik that would create a whole industry that’s not based on the non-renewable resources sector that would allow us to have other forms of income, which I believe is what Norway has done as well. They’ve kept the money out of circulation so that it doesn’t skew the economy so you don’t have that sort of false economy tied strictly to the influx of oil dollars.

This is, as the Member has indicated, an instrument that starts the process. As it develops, there will be accompanying development of policy and more on the regulations, how things get managed, if there’s money put aside. We have 21 years that the fund will be sitting there. I would suggest into that 21-year period there will be a review of where to next, so that we have this type of full discussion. I would suggest that myself for sure probably won’t be around the table 10 years from now, but that discussion will have to take place by legislators of the day.

I will be, if we get this act passed -- which I’m assuming we will -- it will be on the table for the incoming government along with the all the fiscal information we have and all the work that’s been done in relation to this act. I, as well, am partial to the Norwegian model and think it has great merit.

Next I have Mr. Hawkins.

Thank you, Mr. Chairman. Just a few observations here. I really am concerned with the purpose not being sharp enough. I disagree with my colleague who thinks or believes strongly -- and I say that respectfully -- that dividends should be paid, but I think the purpose really needs to be narrowed down over the long haul. Although I don’t necessarily think it needs to be done today, but one of the issues being is that if the purpose is truly for the people of the Northwest Territories, then it needs to be directed as such. I think this money needs to be targeted directly to our revenues that we need. Because ultimately this will be for hospitals, education, or even maybe general repairs of who knows what type of infrastructure. I mean, the demand is so long we’d be here all day talking about ideas of where to spend it long before we’d make any revenue on it. So I wouldn’t support any ways of chopping it up because I think if our real goal is to make sure that it’s for a communal sense for the people of the Northwest Territories, then what better way than to put it into a general revenue. I just would have hoped that it would have been sharper, as I pointed out. In my view this could respond to changes in corporate revenues.

One thing that I would say, it’s almost as if we have to caution the public on potential expectations and what this can deliver. This is an important vehicle that’s being developed and I think that can’t be stated clear enough. It also isn’t pennies from heaven where it will be endless. We have to know that this will probably start out very small and take quite a few years to grow and quite a few years to get large enough to have any really effective difference on the wishes or direction that the people of the Northwest Territories want at that time. Keeping in mind, as well, that it’s 20 years from now and those expectations and beliefs may change as to the particular focus.

I think it’s critical. It’s a lesson that I hope in some form or manner every parent teaches their own children, which is start saving as quickly as possible, and those are lessons I think anyone can learn and teach their kids. I think here is a clear demonstration that we’re living good values. I always think that some of the economics that we deal with here are really kitchen table economics, which is we have to make sure that we don’t spend more money than we make and we have to also keep a keen eye as to what’s important from a value sense. Putting away money as soon as possible in whatever increments is possible is important. That’s what has brought us here today, which I think is very important.

One of the issues that we see here today is that it is an investment vehicle. Of course it has to be set up before we’re able to direct revenues. This is the first step that is going to be probably one of several others. The challenge, of course, is deciding early as to where and what type of rate will investment revenues be pouring into this long-term bank account. It’s been suggested, as well, how they should be managed and those are problems that are going to have to be reviewed through the regulations, and certainly I look forward to whoever is here at the day 10 years from now when they do a general direction of where the fund is going in 10 years, as is cited in the bill under a 10-year review.

I think the Minister agreeing to switch it from 10 years to 20 years really gives us a chance to do something with the savings. I’m very hopeful that the savings will become true opportunities for the future. I have fully supported the position that FMB should manage the fund, at least until the review has decided or dictated that there’s a better way of doing this. Because I don’t see that if it’s just a fund sitting in a bank account, we have very smart money managers in our territorial government and they manage our money quite well. I have often said, and I strongly believe, that the Northwest Territories has a government that has money problems or investment problems, it’s only based on political direction or decisions. It really doesn’t come down to the fault of the staff. It’s politics that always seem to play a role.

Just on the note of politics, although I was unsuccessful on trying to get into the bill the suggestion that a two-thirds majority should be involved in any change provided to this act whether it’s an amendment to how the money should be spent or an amendment to make an amendment within the bill, I feel still today fundamentally strong that we must protect the bill at any cost. By suggesting a two-thirds majority of the House, as I believe was stated by Professor Hogg, I believe that is a valid position that could be taken. As we all know, it could be somewhat constitutionally controversial on the type of position if two-thirds majority is right or even legal, but it’s been noted various times throughout the committee process as we’ve been moving forward on the review of this bill that it’s not uncommon but not seen and used in the wrong way. In other words, it could be done. I was hoping we could have gotten that into the bill but it’s not here today.

Just a last piece I do want to highlight on. In reviewing the bill I noticed a couple of typos and I’ve already brought it to the attention of staff and as I understand it, they don’t get changed, but the one worth particularly noting is I caught under Summary and it points out to 20-year review -- sorry, 20-year transfer -- that the money is not allowed to be tapped into. In speaking with the officials who obviously know their jobs very well, said you can’t change the summary. So there will have what I would call an appearance of a contradiction. Even if the summary says 10 years the money can’t be tapped into under the summary, it really has no effect on the mechanism and mechanics of the bill, as I think I understand it. That error has been carried through under headings, but as I’ve been informed, the headings can be adjusted and is certainly within the full purview of those who come up with the final draft. That was obviously from taking a very keen look and reading the bill word for word, very keen, with those hawkish eyes I’ve got.

Mr. Chairman, I think it would be understated that today is a good day. I think today is actually a brilliant day for some of the things we’ve done in government. It’s a shame for most of us, and I’d dare to say probably none of us will be here in 20-plus years, but I’m hoping that in 20 years they’ll look back and think the decisions made to move forward on this Heritage Fund were an extremely wise move. It may have caused some controversial issues as to how we should spend money on present-day problems, and I recognize that those are very important, as mentioned by my colleague Mr. Beaulieu, and I think in many cases he’s right about emergency need versus trying to save money for the future. The balance of that is really a political decision and it’s a challenging one. But I certainly hope that the generation that comes after us looks back and says we were a wise Assembly and we did things that really made a difference. I believe strongly today the Heritage Fund Act is one of those types of decisions that people will be grateful that we did. Thank you.

Thank you, Mr. Hawkins. Next on my list, Mr. Krutko.

Thank you, Mr. Chair. Again I think we’ve got the cart before the horse on this one, especially with the comments from the Minister with the recent conclusion of the Devolution Agreement-in-Principle. It’s the first step but I don’t think we’re even close to concluding the devolution agreement without all the parties at the table. I think, for myself, that is a total miscarriage of justice in regard to how Aboriginal people are being treated especially up and down the valley when it comes to devolution. Now we’re here in the House talking about a Heritage Fund to put all this cash, supposedly, that’s going to flow to the Government of the Northwest Territories and spend it every which way it feels fit.

I have to agree with my colleagues from the smaller communities that we have some varying demands on issues that people just take for granted such as the delivery of programs, regardless if it’s health care, education, infrastructure, capacity challenges, regardless if it’s human resource capacity, or even the simple means to have the financial ability to build infrastructure in a lot of our communities.

I think it’s this type of legislation that makes people wonder exactly what is the priority of this government, knowing that we have more demands than resources but we are considering having a piggybank that we can put money away for a rainy day, but yet in most cases we don’t have money for mental health and addiction workers in all our communities, we don’t have police in 10 communities, we don’t have nursing services in 10 communities. I think, as government, before we start having these elaborate dream of exactly all this cash falling from the sky, that we should solve today’s problems and make sure that we have the means to take care of ourselves today and realize that the only way you’re going to move ahead is to have a healthy, vibrant Northwest Territories which includes 33 communities.

Again, I also think that I have to note that we are getting ripped off from the mining companies and the oil and gas companies in regard to our royalty systems, our way of basically allowing for diamonds to leave the Northwest Territories with a simple payroll tax, which is the only revenue that we have flowing from that industry, but yet in other parts of the world they basically have mineral taxes so that we retain a portion of the resources in the North or in the jurisdiction it comes from, in some cases up to 35 percent taxes on those products that leave the country, regardless if it’s South Africa or looking at other countries where the same types of businesses are taken care of.

I’d just like to ask the Minister exactly have we considered those other types of taxes, regardless if it’s by way of mineral leases, rentals, royalties, like a mineral tax, a sales tax of some sort so when the diamond or precious metals leave the Northwest Territories there’s going to be a tax attached to it so we retain our tax and it can go wherever it wants in the world, but at least that tax will be paid before it leaves the Northwest Territories. That was one of the options that had been thrown around, and I’d just like to know how are we going to be able to collect enough resources and revenues to make this idea work, and more importantly, have the revenue flowing to ensure that we have enough revenues to make this thing do what everybody is hoping it will do.

I have to agree the Alaska model is great. People don’t pay taxes in Alaska, but they definitely pay their share of royalties and basically mineral taxes that flow in that jurisdiction. I think that it’s that type of an idea that’s out there, but, again, we have to be conscious that we have to have the resources and we can’t simply consider taking money out of existing programs and services and having the means to do that.

With that, I’d like to ask the Minister exactly what are we going to do to ensure that wherever those resources come from and wherever the impact’s taking place, can you guarantee those communities and those regions that are going to be impacted by these developments will retain a portion of those royalties in those regions where those resources are being exploited. Thank you.

Thank you, Mr. Krutko. Minister Miltenberger.

Thank you, Mr. Chairman. The Member has been in this Assembly 16 budgets, as have I, and we’ve talked since that time about taxes, resource royalty taxes, mining taxes, ways to raise revenue. We’ve tried hotel taxes and road tolls. We contemplated other taxes, as well, increases to the payroll tax. We’ve lived through the worst economic downturn since the Great Depression in the 1930s where we had to be very careful in terms of further negatively impacting the business community at a time when they were suffering significant loss.

The challenge for the 17th Assembly is going to be we are going to create an instrument, and this fund is not tied to devolution, this fund is not tied to a resource royalty sharing agreement. It was initially in there for discussion but it ended up after everything was said and done to be just a savings fund, a heritage fund that would be controlled by the Legislative Assembly and they will have to determine, looking at their budgets, revenues and expenditures, if there’s an ability or a willingness to put any funds into this program. I would suggest to the Member that there will be significant attention being paid to the concern that the Member has raised that there won’t be much support if we’re going to be cutting programs to put money into this savings program, so it will have to be done carefully with good thought and consideration. But I’m not in a position to give any guarantees about what developments may happen in any particular region or constituency and whether they will be able to keep a percentage of the royalties in the region for whatever use may be deemed necessary.

I would point out that with the pipeline we do have a $500 million socio-economic agreement that’s contingent upon the pipeline going ahead, and that was negotiated as part of that project. It has nothing to do, necessarily, with this Heritage Fund, but it addressed some of the issues that the Member made reference to. Thank you.

Thank you, Minister Miltenberger.

General comments. Mr. Bromley.

Thank you, Mr. Chair. I want to follow up on a few points, actually. The first one is people have made reference to the amount of time that the funds will remain in a sealed account gathering value, assuming we get some dollars in there. When this idea was first put forward, I know we had lots of discussions and I think there was general agreement that this would be an intergenerational fund and should be set aside for at least 30 years. Yet when the bill came back to us, Mr. Chair, I was startled to see that funds were put aside for only 10 years. I see committee has bumped that up to 20 years, still shy of a generation. I’m wondering what was the Minister’s thinking when he dropped that period down to 10 years.

Minister of Finance.

Thank you, Mr. Chairman. When it initially was looked at and the discussion was held, 10 years, a decade, was thought to be a good starting point. Then we got the recommendation from committee to go to 20 years and we’ve concurred with that because we think it’s a substantial time frame and will give the fund a chance to build up some principle and some interest. So we concurred with that and I was under the impression that 20 to 21 years was pretty close to what was deemed to be a generation, I may be 10 years off, the Member said 30 years for a generation. But the point being that we’ve agreed to a substantial increase in the time to 20 years. Thank you.

I’m not an expert on what’s a generation. My understanding is that there’s 25 years to a generation, but I think we did have that sort of longer period in mind and I was very curious, I still am, about why that was reduced.

Moving on, I’d like to just briefly discuss this cart before the horse concept that my colleague Mr. Krutko raised. I think it stresses the point that we need to review how we are spending existing funds and we need to recognize that our most lucrative resources are rapidly being extracted and exported with little lasting benefit. I agree with Mr. Krutko that we have not acted responsibly to nail down full benefits and appropriate levels of benefits, and everybody knows right now that these precious metals are exponentially... It’s quite the phenomenon in today’s economic globalized world. These minerals are exponentially increasing in value. Gold is something around $1,800 an ounce. Diamonds are at an all-time high and, of course, we know that our fossil fuels are going up every time the economy ramps up.

I’m curious, the Minister mentioned we had considered or discussed resource taxes and I don’t recall that at all. I remember raising it a number of times, but I don’t recall a serious consideration of a resource tax. I guess I’d like to get his take on where we’ve been with resource taxes and why we couldn’t contemplate, or the 17th Assembly contemplate a resource tax that would immediately start to put some real dollars into these funds, into the Heritage Fund. Thank you, Mr. Chair.

Going back to 1995 in the last century pre division, since that time of the four Assemblies I’ve been in there’s always, during the course of the Assemblies, the issue of resource tax and mineral tax has come up. It’s been discussed, it’s been sort of like looking at a new car. You kick the tires, you examine it, but at the end of the day the decision has always been not to proceed. So the 17th Assembly will have the same authorities and rights that every other Assembly has had before it to look at how it wants to set up its budget, how it wants to deal with the revenue side. So they will be able to look at whatever they deem is appropriate in terms of how they want to generate further revenue, including, I would suggest, a revenue tax or any other type of instrument that they may think is appropriate. Thank you.