Thank you, Mr. Chairman. I move that consideration of Tabled Document 1-17(2), Interim Appropriation 2012-2013, be now concluded and that Tabled Document 1-17(2) be reported and recommended as ready for further consideration in formal session through the form of an appropriation bill. Thank you, Mr. Chairman.
Thank you, Mr. Menicoche. The motion is on the floor. It is being distributed now. The motion is in order. To the motion.
Question.
Question has been called.
---Carried
As agreed, we will turn to Bill 1-17(2). Does the committee agree to turn to Bill 1?
Agreed.
Committee, we have agreed to consider Bill 1, An Act to Amend the Borrowing Authorization Act. I will allow the Minister responsible for Bill 1, the Honourable Michael Miltenberger, to introduce the bill.
Thank you, Mr. Chairman. I am here to present Bill 1, An Act to Amend the Borrowing Authorization Act. The purpose of this act is to increase the short-term authority to borrow provided in Section 1(2) of the act from $175 million to $275 million.
The amendment is being proposed in order to provide the short-term borrowing authority needed to make a $65 million corporate income repayment on March 31, 2012. On April 1, 2012, the GNWT will once again be within the current limit when the GNWT receives the first Territorial Formula Financing payment for 2012-13.
The proposed amendment also recognizes the growth in government operations since 1995 when the limit was last increased. The current limit represented about 24 percent of revenues at division. Over the last 13 years, government operations and revenues have increased while the limit has remained the same and now represents only 13 percent of revenues. The proposed limit will make it easier to manage cash, especially if new infrastructure programs are announced by the federal government in the next three or four years.
Although this proposal increases the short-term borrowing limit, the GNWT will, under its current Fiscal Strategy, start to recoup cash resources over the next few years and actual short-term borrowing requirements will therefore start to decrease. Thank you, Mr. Chairman.
Thank you, Mr. Miltenberger. I would like to ask the Minister responsible for the bill if he would like to bring witnesses into the House. Does the committee agree?
Agreed.
Thank you, committee. I will ask the Sergeant-at-Arms to escort witnesses into the Chamber.
Would the Minister please introduce his witnesses?
Thank you, Mr. Chairman. From Finance I have with me Mr. Michael Aumond and Mr. Sandy Kalgutkar.
Thank you, Minister Miltenberger. I will now open the floor to general comments on Bill 1. Mr. Yakeleya.
Thank you, Mr. Chairman. I want to ask the Minister several questions. However, first I would like to make my comments to the bill right now.
This bill here, as the Minister indicated, hasn’t been increased for awhile. The Minister has said that this bill here, looking at an increase of $100 million from $175 to $275 million, it is increased to a short-term borrowing authority and that this money is needed to pay a $65 million bill that we need to honour to the federal government. The repayment is within a couple of months from now, March 31, 2012. I really don’t know what the financial impact will be on the federal government transfers. This money will be taken off the transfers. I am wondering, we have a $65 million bill and we are borrowing $100 million to bring it up to $275 million.
I am not too sure how this arrangement or the details or the numbers come out to state why we need to have this huge increase. We have always recognized growth in the government. Every budget that comes before us, we always account for forced growth, growth in the operations, growth in human resources. Somehow we seem to make it okay. Maybe I need a little more explanation on that.
Our revenues have been fluctuating up and down. The Minister states that we have only 13 percent of revenues. Our needs are great. It makes it, as the Minister states, easier for government to manage cash for new infrastructure programs. That will be announced by the federal government in the next three or four years.
Mr. Chairman, I want to raise these concerns with the government and how do we start recouping these cash resources in the next couple of years. Is that assumption on the fact that we have a couple of months to come to a devolution final agreement and then implement the final agreement? We are on a timetable with the devolution. We are going to receive a huge amount of cash if this government or Cabinet here says we are going to sign the final agreement. We already know there are a number of positions going to be coming to the territorial government. We don’t know where those positions will be located yet. We haven’t had those serious discussions. I wonder where the Minister is getting this magic pot that we are going to have some of this cash recouped. We haven’t been told yet or I haven’t been told yet. I may have missed some meetings.
So these are some of my comments here, Mr. Chair. The assumption is we’re going to spend. I know any time you borrow money, sometimes it’s good debt, sometimes it’s bad debt. There is such a phrase as bad debt. Sometimes there is good debt. But we’re borrowing on some type of promises that may not come to fruition. Is it on some assumption that we’re going to get money? I know the federal government has promised some infrastructure money on transportation for the Mackenzie Valley Highway. It’s stated in their budget. I read their budget. There was some transfer money being looked at. I’m not too sure how much in total to the Government of the Northwest Territories, health and some other programs. I don’t have it at my fingertips right now.
So this borrowing idea, this act, means that we have...and the government probably responded to our needs. We said we can’t do this, we have to borrow it. We have to pay a bill here, $65 million. We have to pay that or we’ll be penalized by the federal government. Besides, we’re growing. We’ve been growing since 1995. Why all of a sudden now do we need to bring in this act? We could have brought it in four years ago or eight years ago. Is it programs and pressure that we need to consider?
These are the types of things that make me think about some of the infrastructure in our communities. I hope we get some infrastructure in our communities if we are borrowing this short-term cash. That’s what it is. I’m not too sure what the government is banking this on. I’m just making the assumption, Mr. Chair, that when I read this, start to recoup cash resources over the next few years, I want to know what. How do you start recouping?
Right now the biggest thing on our ticket right now is devolution. We know how much money is coming to the North. Maybe there are some bigger things at play here that I’m not aware of or people of the Northwest Territories aren’t aware of. I’m going on the assumption that the government has a lot to respond to and this is what they’re trying to figure out. They’re saying hey, we’ve got to increase our borrowing limit. We’ve got to do this. Is there a hiring freeze on our people within the government? Why do they sometimes come to our communities and say we’ve got no money, we’ve got no money?
So tell me and tell my people. If you can’t put an RCMP detachment in Colville Lake, tell me. But you’ve got lots of money here you want us to borrow. What the heck is going on? If that is there, then certainly you can put a detachment in Colville Lake.
I’m confused. Thank you.
Thank you, Mr. Yakeleya. Minister Miltenberger.
Thank you, Mr. Chairman. This borrowing limit is, in effect, an operational line of credit. It’s up $75 million. We have a very specific need in this particular instance. As the Member has noted, it hasn’t been touched since 1995. The government has grown significantly as has our budget. The short-term borrowing cycles in and out, literally tens of millions of dollars a week moving in and out of government coffers and bank accounts as we manage the complex business of government.
I want to as well speak briefly that there are no hiring freezes. If folks are saying there’s no money, then it probably means whatever the circumstance, they’ve expended their budget allotments for that year and they have to manage their money to get to the end of the fiscal year. We’ve made every effort and have been successful at protecting programs and services and we’re going to continue to do that.
There is not going to be a huge windfall with devolution. We are going to get money for positions moving north to our A base. We have three hundred and some positions. We are going to get some resource royalties; about $60 million roughly a year and growing, tied to our gross expenditure base. That money will be split between ourselves and the Aboriginal governments.
As the Member well knows, we are constantly beset on all sides by forced growth pressures or pressures for additional programs. So that $60 million in our share will go partway to help bear some of the cost pressures and deal with some of the cost pressures. But this particular request is for an operational line of credit. I will ask Mr. Kalgutkar if he will lay it out for us a bit the way the money moves and why we need this type of capacity to manage the complex government operations. Thank you.
Thank you, Minister Miltenberger. Mr. Kalgutkar.
Thank you, Mr. Chair. As the Minister referred to this, the purpose of this amendment is twofold. The primary purpose is to address immediate need to make the $65 million on March 31st, and on April 1st the GNWT will be back under even the current limit when we get our first payment from the Government of Canada on our territorial financing grant.
The second element of this increase is just to recognize the growth in our operations since 1995. They’ve essentially doubled since then. The volume of cash that flows in and out of our Consolidated Revenue Fund is quite significant and it’s become harder and harder to project what our year-end cash flow needs are going to be. So all this amendment is doing is providing the authority to manage that cash more efficiently. We’re certainly not planning to utilize that full amount.
As the Minister also referenced, our current fiscal strategy does start to recoup our cash balances by the third or fourth year of that strategy. We won’t be anywhere near this limit. Thank you.
Thank you, Mr. Kalgutkar. Ms. Bisaro.
Thank you, Mr. Chair. I just have a couple of questions with regard to clarifying some of the intent of this particular motion or bill. I understand that it is for short-term debt, short-term borrowing, but I would like to know from the Minister, I have some concerns and I’m sure from the previous questions that the Minister has heard from Members that there will probably be some lack of understanding on the part of our residents with regard to this particular bill.
We talk a great deal about our borrowing limit and our debt, the government’s debt, and the fact that we’re close to our borrowing limit and the impact it has on us as we go about our business and spend our money and so on. I would like to know from the Minister and basically to provide some education and information to those of our residents who are listening or who are reading Hansard, will this change to the Borrowing Authorization Act have any impact on our long-term debt.
The other question I have in sort of a larger picture is relative to our fiscal strategy. The Minister has talked often about our fiscal strategy. Will the fact that we are increasing our Borrowing Authorization Act have any impact on our fiscal strategy? Is it going to require that we make some change to our current fiscal strategy? Will it make it easier, will it make it harder for us as we go forward?
Thank you, Ms. Bisaro. Mr. Miltenberger.
Thank you, Mr. Chairman. No, this will not affect our long-term borrowing or debt. Our current fiscal strategy will remain in place. All this gives us basically is a tool that allows us to manage the $1.4 billion that flows in and out of government in its very many different ways through the Consolidated Revenue Fund, as Mr. Kalgutkar pointed out. Recognizing how long it’s been since the last increase with the growth in government and the amount of money that now flows through there and some of the pressures that we’ve been managing as of late just with the economic downturn and a lot of the other projects and unanticipated events that we’ve been managing. I hope that clarifies it for the Member.
I think so. Thanks to the Minister. The other concern that’s been expressed is that we are making a very large repayment of our corporate income taxes. I think it’s $65 million that is coming due. It is, though, a corporate income tax overpayment on the part on the federal government from quite a number of years ago. I think I’ve lost the actual year in my brain. I’d like to know from the Minister why we are making this balloon payment at this point. Is the fact that we’re having to make this income tax payment the reason that we have to change our borrowing act or is there another reason why we’re making the change?
People looking at this from the outside, it’s a simple amendment, I think, is the way it’s been described, but we’re increasing borrowing from $175 million to $275 million. One hundred million dollars is a lot of money. Why is this balloon corporate income tax repayment happening now? Has it been to our benefit to have had this money for this long or is it an oversight on somebody’s part? All of those questions, if I could get them clarified that would be great.
It was not an oversight, but I will let Mr. Aumond lay out the plan as we’ve dealt with this particular issue.
Thank you, Mr. Miltenberger. Mr. Aumond.
Thank you, Mr. Chairman. As part of our fiscal arrangements with the federal government, any overpayment gets repaid with respect to a formula. The overpayment in 2007 was approximately $82.5 million. We have repaid that in smaller payments over the previous three years and the requirement is to pay the balance off at the end of this fiscal year, which is how we got to the $65 million that we have to repay. It’s not so much that it was an oversight, it was that given other things going on with our budgets and our money coming in and out that we did repay some $22.5 million and we’re just repaying the balance of that $82.5 million that was required.
Thank you, Mr. Aumond. Ms. Bisaro.
Thank you, Mr. Chairman. Thanks to Mr. Aumond for that explanation. I guess, I asked whether or not this has been to our benefit or whether it’s to our detriment. Maybe I can get a comment on that. I forget what my other question was so I guess it wasn’t all that important.
Thank you, Ms. Bisaro. Mr. Miltenberger.
Thank you, Mr. Chairman. How the estimates are done on taxes and why these things happen is a separate discussion, but in effect what we had here over the last number of years is an interest-free loan on which we’re now repaying the balance of the principle.
Mr. Chairman, that’s all I have.
Thank you, Ms. Bisaro. We’ll be going back to Mr. Yakeleya.
Thank you, Mr. Chairman. With this Borrowing Authorization Act we are going to the federal government and we are going to increase our borrowing limit to $100 million. What I know is that from personal banking when you go to the bank and you have enough good credit, you have some concrete, what you call it, assets that the banker says you have good credit. It’s taken you awhile to live comfortably and that you have enough assets that you could borrow more money off us, why don’t you borrow $10,000. You have a good job. You have a good income. I want to ask the Minister what is the arrangement with the federal government if we’re going to borrow short-term cash on interest payments or fees? What is our risk here?
I know the bank has risk when you don’t pay back. I know sometimes when I lend out money I certainly don’t get it back. That’s the risk. We’re doing this on behalf of the government. I want to ask the Minister what the risks are.
He’s telling us this is what we need to do. Same as if I borrow money for the operational costs for my house. There’s growth. There are other things that come into play, but I have to know what I can afford. The government has $65 million; we just found $65 million to pay it back. I guess that’s what I’m thinking about.
I need some of these things to be answered on this bill here, because we’re borrowing on behalf of the people of the Northwest Territories. Cabinet is administrating the money on behalf of the people. We are the government of the people, so maybe you could help me out here and I’ll have something to think about over the weekend.
Thank you, Mr. Yakeleya. Mr. Miltenberger.
Thank you, Mr. Chairman. This bill that’s before the House is before the House because this Borrowing Limit Authorization Act is a piece of territorial legislation that is controlled by this Legislature. It’s to deal with, as I’ve indicated before, short-term borrowing. It’s a type of line of credit. This has nothing to do with the federal government. We are having our discussions on our borrowing limit with the federal government which will be concluded, our long-term borrowing limit with the federal government that will be hopefully concluded here by the end of March.
The Member also had a question about what type of credit do we have. We have an Aa2 credit rating, second highest that’s available, up there with many other well run jurisdictions, businesses and corporations. We have audits done. How do we police this? How do we make sure we manage ourselves? That’s our job collectively. That’s my job as Finance Minister. That’s the Cabinet’s job, the Premier’s job to provide the daily operations. We have our budgets passed every year. We have a significant number of checks and balances built into how we spend money and how we manage our interest costs and all the other pressures. Which is why even as we sit here today, one of the reasons we’re getting a good hearing on the borrowing limit with the federal government is because they know that we are very well run fiscally. We have almost no long-term debt. We have some short-term debt. We’re managing ourselves effectively. We’re doing all the things we should be doing. We have the lowest GDP-to-debt ratio. We have some of the lowest debt servicing costs in the country, second only I believe to Alberta maybe, and maybe the Yukon. Some jurisdictions are paying eight and 10 percent of their budget just to service debt costs. We are not in that situation at all. This just allows us to manage our money more effectively to be more responsive to the concerns and needs of MLAs to better manage programs and services that we deliver across the land.
So this is just a tool to allow us to borrow up to $275 million on a short-term basis should it be required, always under the scrutiny of myself as Finance Minister and this House, the various committees. We have to go to Cabinet to get Cabinet approval for a lot of the decisions that are made through the Financial Management Board. We have built in all the checks and balances. This allows us just to be more, I believe, effective, efficient and responsive.
Thank you, Mr. Miltenberger. Is committee agreed that there are no further comments?
Agreed.
Can we proceed to a clause-by-clause review of the bill?
Agreed.
We will defer bill and title. Turn to page 1, clause 1.
Agreed.
Bill 1, An Act to Amend the Borrowing Authorization Act.
Agreed.
Clause 1.
---Clauses 1 and 2 inclusive approved
To the bill as a whole.
Agreed.
Does committee agree that Bill 1, An Act to Amend the Borrowing Authorization Act, is now ready for third reading?
---Bill 1 as a whole approved for third reading
I’d like to thank the Minister today. I’d like to thank the witnesses. If I can get the Sergeant-at-Arms to escort them out of the Chamber, please. Thank you very much. I will now rise and report progress.
