Debates of February 14, 2005 (day 35)

Thank you, Ms. Lee, for squeezing that question in. A reply, Mr. Minister.

Thank you, Mr. Chair. Mr. Chair, the capital planning process falls within the responsibility of the Financial Management Board Secretariat. I can commit to the Member that we will, as we go through that secretariat’s budget, be able to get into more detail around that area, the process and so on. Just for the record at this point, there are a number of areas, if it is building maintenance and so on, that will fall into other areas of the budget on the O and M side more than it would the capital planning process. I understand where the Member is coming from and I am to be prepared to sort of give more information on the capital planning process as we deal with the FMBS budget. Thank you.

Thank you for that, Mr. Minister. I have got Mr. Menicoche next. Mr. Menicoche.

Thank you very much, Mr. Chair. I just want to follow up on the capital planning process. The Minister did mention that it is under FMBS, but, at the same time, the Department of Finance has some of the purse strings in terms of the funding that flows over what is tied to definitions and a certain amount of goals, like green infrastructure. I am sure that our Department of Finance does have some leeway in defining what green infrastructure is. Late last week, I said -- well, it will actually come to me in a dream, Mr. Chair -- that I wasn’t too far off when I said there is nothing greener than building a gymnasium for the community of Nahanni Butte. I think it is green infrastructure. If you really think about it, it is an appropriate definition for it. So if the Minister can reflect on that.

I, too, am concerned about the capital planning process. Yes, it is community driven, but, in this case, particularly of the Nahanni Butte gymnasium, the community has been screaming for over a year now and it hasn’t even advanced one year in the capital planning process. That concerns me, too, about the validity of our process. What is really going on? If we have a process here, why isn’t anything moving or anything being heard? That kind of concerns me, Mr. Minister. I think I will just end there for now, Mr. Chair.

Thank you, Mr. Menicoche. Mr. Minister.

Thank you, Mr. Chair. Mr. Chair, again, the Department of Finance’s main function is to try and ensure that we have enough revenues for the government to operate. Within the FMBS, that is where a lot of the spending decisions, the policy of government becomes formulated and also that of Cabinet. Our main goal within the Department of Finance is to try to ensure that we have as much revenue as possible to run the programs and services we have at the same time as the Department of Finance would try to see some of our other critical areas, as I have highlighted, on the insurance area and so on. I don’t disagree with the Member’s concerns. Again, when we look at the capital planning process, since it has been asked here -- and I will probably end up having to respond to it anyway through FMB -- there were a lot of other projects that have been put on hold or have been put off from year to year; schools, and things of that nature, health centres that have been delayed.

I think, as a government, we have been coming around to addressing the issue of community shortfall in the area of an infrastructure, and the Municipal and Community Affairs department has worked with the communities in coming up with a new deal for community governments. There might offer an opportunity of our government working closer with the communities to try and see some of their projects that they see as critical, having the opportunity to move faster than they had through our typical process. Thank you.

Thank you, Mr. Minister. Mr. Menicoche.

Thank you very much, Mr. Chair. I thank the Minister for those answers. I just wanted to indicate to the Minister, it says there is a process there and it concerns me that it doesn’t appear to be working, I guess not at this stage. Maybe I have to be here a little bit longer to see something moving, I guess, Mr. Chair. In terms of that, I just want to make the government aware that that is something that is concerning me. I don’t know if it needs reviewing or anything like that, but I know that the government does have a heart. They do see that need that I have been addressing for quite some time now.

If I can just switch gears for a little bit here and talk about devolution and resource revenue sharing, I just want to get the Minister’s thoughts on that. For me, what is happening in Newfoundland, there is a $2 billion plus windfall, but that is over eight years and if you divide that out, it is around $250 million a year. Of course, it is not being clawed back. What type of resource revenue sharing does the Minister see for our government? I keep telling people that it sounds good when you say it, and you build big headlines around it, but in actual money, I think somebody was saying it is less than $200 million a year for our coffers. It is not very much because, in order to be self-sustaining, we need, at the minimum, $1 billion a year just to run our government. I was wondering what the Minister’s view on resource revenue sharing is. What will we actually get? I really think it is a myth that we will be getting $1 billion to run our government. The people really think that is going to happen. I just want to, for the record, set it straight, that I don’t think that is what we are talking about here. If I can get the Minister’s comment on that, Mr. Chair.

Thank you, Mr. Menicoche. Mr. Minister.

Thank you, Mr. Chair. Mr. Chair, as a government, we have looked at the requirements that we are going to need as we go forward in coming up with the funding levels that are required by departments to either continue with their level of services or try to enhance them, especially when we look at the economy that we have. A heated economy is one that is good, that helps with employment and business and so on. There is also the other side of it where there is an increased cost to provide services, whether it is just normal day-to-day services in the community or the negative side when communities and individuals would have more cash on hand. We see sometimes the negative side of that. We are impacted on the social program side. What we have tried to do as a government, and specifically to resource revenue sharing, is to ensure that the package we have worked on with our partners in the North is to ensure that we have a net fiscal benefit or a gain of dollars from Ottawa through the development of our non-renewable resources.

Right now, Ottawa receives approximately 96 percent of every dollar that is gained through the extraction of non-renewable resources in the Northwest Territories. We look at that avenue and say that a fair share of that should remain in the North so that we, as governments in the North, can fund our programs and services. What we have talked about net fiscal benefit, when you look at our formula financing arrangement, is that for every dollar we raise in the North, we also lose a bit of our transfer payments. For every dollar, we lose approximately 80 cents in transfers. What we are talking about through this royalty revenue sharing process is to ensure that a portion of that remains in the North without a clawback criteria, then the rest of the money there would fall into the normal formula financing arrangements.

Now, I say this based on our old formula financing. We also are aware that at this time there is work ongoing through the equalization panel and formula financing table that the federal government has set up, and we are not sure what the treatment of own-source revenues will be treated like, or the impact of tax effort. For example, right now, in our existing formula, tax effort and own-source revenues and population are just a couple of the things that are taken into account.

With that in place we worked on the revenue sharing side, again based on the development of non-renewable resources in the Northwest Territories, taking a percentage of that, having the money remain in the North so that we can deal with the costs of development impact here in the North and better deal with those impacts, as well as better planning in the sense of knowing what the future may hold on the fiscal side as we develop our budgets. We are aware of other jurisdictions of provinces, what they receive as a part of their development of the non-renewable resources in their jurisdictions, and we use that as a comparison and try to ensure that we get some of that, but our goal is to ensure that there is a net fiscal benefit attached to this; that any new money we receive through any changes in how the royalties are dealt with, we do not lose through a clawback factor within a formula. Thank you.

Thank you, Mr. Minister. Mr. Menicoche.

That’s okay.

Ms. Lee.

Thank you, Mr. Chairman. On the Minister’s opening statement, I have another question on the topic of insurance. The Minister’s statement speaks of increased funding of $530,000 for increased insurance cost. My question is not specific to that issue, but insurance in general. The AOC committee report spoke about the collaborative effort going on between the AOC members and the Minister to try to look at the rising cost of insurance and the whole general topic that I think we will be discussing more. My question to the Minister is whether or not there are any programs in the government that try to help NGOs in dealing with the insurance costs.

I think this item here is insurance cost for health boards, but we know that there are a lot of groups in the Territories that deliver public programs or public service programs on behalf of the government, or that otherwise would be provided by the government. A lot of those have huge liability insurance implications. I am thinking of shelters, where there is more than usual potential for liability issues to arise. I would like to know the current state of government policy, if there is any, about liability insurance for those NGO groups. Thank you.

Thank you, Ms. Lee. Mr. Minister

Thank you, Mr. Chairman. Mr. Chairman, what I have laid out in my opening remarks is the transfer of liability coverage from the health board authorities to the government policy. That is a change that would see an overall savings for the boards. In the other matter of insurance and liability for non-government organizations, for the most part our policy doesn’t include non-government organizations. There may be a couple of exceptions, but I am aware…For example, the example that Ms. Lee has used in the area of shelters; the government funds, through it’s contribution agreements to non-government organizations, that cost of covering insurance to a certain degree. I am aware that some of the shelters were finding it rather difficult to get insurance a couple of years ago. I know that the Department of Health and Social Services was working with them in that area. Thank you.

Thank you, Mr. Minister. Ms. Lee

Thank you. I’m glad that the Minister does understand what I am trying to say here, because I do believe that we were in the House when these questions came up. I can’t remember exactly when -- probably in the last two years and I don’t know exactly which group had applied for it -- but I do believe that the Minister of Health and Social Services, then and now, made an exception to those NGOs who are engaged in activities that makes it really hard to obtain insurance and if they did then their insurance costs are just exorbitantly high.

I think another example I could think of -- maybe not quite exactly the same -- would be the midwifery program in Fort Smith. I think that is one of the examples where the government has to step in and take some extraordinary or unusual process put in place so that these programs, that the government supports, that the government is behind, that the government believes in, go ahead. My question is, knowing that we know that the government does do this, and seems like on a case-per-case basis, on an extraordinary case basis, I am wondering if there is any intention on the part of the government to set up any kind of policy on that or to get some more consistency. Or is it the plan of the government to keep on doing the status quo and look at a different case on its own merit and on a case-by-case basis? Thank you, Mr. Chairman.

Thank you, Ms. Lee. Mr. Minister.

Thank you, Mr. Chairman. Mr. Chairman, we are prepared to work with the other departments if they find that the non-government organizations -- or NGOs, as we call them -- are finding difficulties in those areas and their contributions are continuing to go up for coverage in those areas. We are willing to work with, for example, Health and Social Services, to see what areas we may be able to assist them with. But we haven’t, at this point, come up with a plan to change the way we do things. Our first goal is to ensure that we are able to insure both from a properties side and cover our premiums, as well as a liability side, for the GNWT. Once we have stabilized that, then we can work with departments to see what other areas we may have to look at. We are willing to work with other departments; they are aware of that. We haven’t set up a plan right now to deal with NGOs as a group altogether. Thank you.

Thank you, Mr. Minister. Ms. Lee.

Mr. Chairman, thank you. I thank the Minister for that answer. Staying on the same topic of insurance, but not exactly the same as I have been asking about. The committee's report on the insurance speaks about the fact that the government has changed its deductible amount to $10 million to decrease the premium cost, but at the same time accepting more risks. For the record, could I ask the Minister whether the government has undertaken an analysis of the cost and benefit picture, of changing this risk versus cost and what their findings are so far? Thank you.

Thank you, Ms. Lee. Mr. Minister.

Thank you, Mr. Chairman. Mr. Chairman as the Department of Finance looked at the cost for insurance and providing the level of coverage that we initially put in place, in 2003 an actuarial report was done to look at the cost-benefit analysis of providing the existing level of services that was there. It was felt at that time and the numbers that we had run through, affirmed that, in fact, changing the way we did our insurance and increasing the deductible would make sense. A part of that was also developing the risk loss management side of things and to ensure that while we were making this step we weren’t going to be taking big losses on the other side when we looked at that deductible amount. So, yes, we did do some work in that area. Thank you.

Thank you, Mr. Minister. Ms. Lee.

Sorry; I didn’t hear there from the Minister, on balance, if the government is ahead or not. I think our findings are that the insurance premium did still go up. It’s just probably not as much as it could of if the change in the policy did come about. But is it possible for the government, or is the government engaged in doing a cost-benefit analysis where we say okay we take this much on premiums, these things happen over the years that cost us this much, and if we had a different kind of insurance package there’s X amount being covered? So now that we have this new kind of package we only have parts of X covered, but in the end…I guess I'm just doing a skeleton cost-benefit analysis here. So could the Minister give us any idea for the year ending March 31, 2005, where we are on that cost-benefit analysis?

Thank you, Ms. Lee. Mr. Minister.

Thank you, Mr. Chairman. Mr. Chairman, since changing over -- it’s only been two years since we’ve done this change -- we’ve already noted there are considerable changes. For example, if we had not made the change from our previous policy for 2003-04, we would have been paying approximately over $5 million for our insurance, and to date it would have been in the area…I’ll get Ms. Melhorn to get into the detail.

Thank you, Mr. Minister. Ms. Melhorn.

Thank you, Mr. Chairman. For the 2003-04 insurance year, our losses plus our insurance premiums were slightly more than $4.3 million. Under the old insurance coverage approach, we would have paid much higher premiums and our losses plus premiums would have exceeded $5 million. So we actually benefited from the change in the policy by $700,000. For 2004-05 our current losses to date are about $823,000 -- losses plus premiums -- and if we had continued with the previous approach on the lower deductible, our losses plus premiums would have been $2.2 million. So in both years the change has been a cost benefit.

Thank you, Ms. Melhorn. Ms. Lee, your time has expired. Do you have another short question you would like to get in? Ms. Lee.

Thank you. That gives us a $1.5 million savings. Will the Minister consider using that money to build an indoor gym in Nahanni Butte?

---Laughter

Thank you, Ms. Lee. Mr. Minister.

Thank you, Mr. Chairman. Mr. Chairman, as part of our program when you go through reduction scenarios, these savings are taken into consideration as we lower our budget numbers. For the 2003-04 year into the 2004-05 there was a reduction target set, as well as in this budget exercise we’re going through. So we don’t hang onto the money. What money we don’t use goes back into the consolidated revenue fund. Thank you.

Thank you, Mr. Minister. Thanks, Ms. Lee, I’ll come back to you. I’ve got Mr. Braden. Mr. Braden.

Thank you, Mr. Chairman. I’ve got a couple of areas that I would like to explore. One of them is the ongoing challenge that we have to manage our debt and the plan that’s been outlined in some detail on restructuring our whole financial management situation. The other area concerns the Department of Finance’s jurisdiction over our liquor system.

Mr. Chairman, the business plans for 2005-08 and the budget document that the Minister presented last Thursday outlined a little bit of a scary situation for us on our overall debt situation. Everyone, of course, Mr. Chairman, is familiar with the $300 million debt wall that was set by Ottawa several years ago and that we have to try to live with. Now due to the taxation and clawback scenarios -- I won’t go into the detail -- we’re going to be pushing a debt of $295 million in 2006-07, if I read this correctly, Mr. Chairman, leaving us about $5 million free board, which is not very much even for our government. So I wanted to ask the Minister, given that there are negotiations, discussions, hopefully a framework coming together for a new fiscal relationship with Ottawa, are we going to be able to see this through before we do virtually hit this debt wall in the coming fiscal year? Thank you, Mr. Chairman.

Thank you, Mr. Braden. Mr. Roland.

Thank you, Mr. Chairman. Mr. Chairman, I guess just for the record as laid out in the budget address in the attached document and information to that, we’re looking at 2007-08 as going up to the $295 million total debt that we would have in place. It’s our goal as we follow through this process and as Members have endorsed their fiscal responsibility policy, to approach the federal Finance department and work with them on dismantling the debt wall and remove that arbitrary figure of $300 million and deal with our fiscal situation as a percentage of our revenues as lined out in that fiscal responsibility policy. I think that before we get to the time when we get that close to the debt wall, hopefully we’ll have a couple of things happen. One; that we will have agreement by the federal Finance department that they will work with us on the fiscal responsibility policy and establish a new debt equation, I guess is the way to call it. Two; with the ongoing work with the Premier and the Prime Minister, and the Prime Minister’s commitment around devolution and revenue sharing, that we would, in fact, be able to establish a new stream of dollars that would help us again in that area and stabilize our funding situation.

So there are a couple of things there. I think the first and most critical part is to work with our federal counterparts in ensuring that they see that what we’re putting together in our fiscal plan is that we’ve developed it, it is a sound one, and that they would agree that the fiscal responsibility policy is an adequate process to allow us to develop our budgets for the Government of the Northwest Territories. Thank you.

Thank you, Mr. Minister. Mr. Braden.

Mr. Chairman, I see this as all quite doable. I’m already on record as being a strong supporter of the new finance program as outlined so far by the Minister, and I certainly hope we do get Ottawa to see us through this. In the event that we don’t, has the department got a plan B? This debt wall is a serious matter. There’s no real question in my mind that it is going to be something that we will have to pay back. The rules are very straightforward, but I do like to know that we do have some backstop, if you will, if things don’t go the way we would like them to go at the right time. So is there a plan B that we’re looking at? Thank you, Mr. Chairman.

Thank you, Mr. Braden. Mr. Roland.

Thank you, Mr. Chairman. I guess, number one, we’re hopeful and fairly confident that federal Finance will see what we are putting together as an appropriate one and they would endorse and work with us on that avenue. Looking at the picture, if things don’t change, then, yes, we are going to have to look at our fiscal strategy once again in how we would go forward to ensure we don’t go over our debt that we’re aware of and have to make some adjustments necessary. There are a couple options in that. One is working with federal Finance again about that repayment plan that they do have set up in all jurisdictions and work on that issue, as well as looking at our fiscal picture as a Government of Northwest Territories, once again, and trying to do whatever necessary to ensure we don’t hit the debt wall. We’ve taken a fairly strong stand on our fiscal picture to date. We’ve managed it very well, I believe, as we’ve come together as Members of the 15th Assembly and hopefully that will account for some good work with the federal Finance people to see what we’re putting together is actually a viable way of doing business in the Government of the Northwest Territories. But there are a couple of other options that we could work on. Our goal though, ultimately, is have the fiscal responsibility policy accepted and adopted by the federal government. Two is that we have a devolution revenue sharing agreement in place and new revenue flowing to the government, and go on that basis. But you’re correct; if those things are not happening as quickly as we’ve planned, then we’re going to have to look at a couple of other options that I’ve just mentioned. Thank you.

Thank you, Mr. Minister. Mr. Braden.

Thank you, Mr. Chairman. I believe it’s in the Minister’s opening remarks that he addressed the review of the NWT Liquor Act, which we’re now engaged in over a two-year program, which will have a budget of $160,000 attached to it. Again, I would reiterate my support and my approval of reviewing this really critical piece of legislation. From my perspective, Mr. Chairman, it is far more important that we delve into this from the perspective of liquor’s impact on our society and the social consequences of it more so than the fiscal business side of it. But to the review that we’re engaging in here, the Minister indicated that the department is heeding cautions that it should not be a large expensive process. I certainly don’t advocate anything being any larger or more expensive than it needs to be, but could the Minister give us a bit of an outline based on this description here? Just what kind of parameters are being placed, what kind of criteria are envisioned for the scope and the scale of this review? Thank you.

Thank you, Mr. Braden. Mr. Minister.

Thank you, Mr. Chairman. Mr. Chairman, I guess a bit of history is our goal to try to make sure this gets done and get a legislative proposal back to Cabinet for April 2006. As laid out in the information we supplied, we hope to have this next review phase completed by 2005 for further review. Some of the things we are aware of and know that there’s significant work for impacts to people in the Northwest Territories around this area and the terms of reference as we’re going forward doesn’t necessarily just deal with the issue of finances or dollars and cents, in a sense, of what we do. But we have a fair bit of work in how things would go down.

We discussed liquor sales, liquor licensing, local options, and those are things that, for example, what should the community’s role be. Should it be more than it is now? Should the Minister be deciding if a community would have a special prohibition, as we call it, or a time period where they didn’t want any alcohol at all, or should that decision be made at a community level? We are also touching on the societal problems, the social problems as part of it, and also looking at the liquor regulations in comparison to other jurisdictions across Canada.

As well, again, another area is the eligibility to consume and illegal sales aspect of where we’re going. Then another key, sort of critical area, as a Government of the Northwest Territories is dealing with the emerging self-governments that are happening, dealing with aboriginal self-governments in that area. So those are some of the key areas we’re looking to touch on as we go forward.

It’s not going to be an easy job. We’re trying to contain those costs and we’re very aware, once we get to the next process, that it’s going to take on a new life in a sense, because as we prepare for legislative proposal and meet with committee members on this and then discuss the work we’ve done and if we get to the draft legislation process, that, as well, Members will be taking that out to the public review. So there are a number of options that could come out of this as we go forward. Thank you.

Thank you, Mr. Minister. General comments, Ms. Lee.

Thank you, Mr. Chairman. I have a question on the collection of payroll taxes and other taxes that the department is responsible for in just general terms. Can the Minister tell us about what sort of mechanisms are in place to make sure that those who are supposed to pay taxes pay, and those employers who are supposed to hand in those taxes do? What mechanisms do we have to know that if somebody is not doing it, that they are notified in an expeditious manner? Last fall I had two calls; I can’t give names of the employers or the companies because they don’t want to be revealed. In one case a business that employs a lot of aboriginal people -- it’s a business that’s been around for a long, long time -- kept getting notices asking if they wanted to be registered to pay payroll tax. One is a lot younger than the other, but in two instances two different businesses were called upon by telephone by a government employee asking them if they want to register to pay, or to submit payroll taxes when they’ve been around for a long time, and they had been paying taxes and such. So that just raises questions about what sort of system is in place to make sure that we keep tabs on businesses to make sure we know who is out there, we know who is supposed to pay taxes, we know when they are not paying taxes. So I’d like to know how many people work in this section and how do we ensure there are as few errors as possible? Thank you, Mr. Chairman.

Thank you, Ms. Lee. Mr. Minister.

Thank you, Mr. Chairman. Mr. Chairman, in the area of the payroll tax, we work with at least one other organization and that is the one that would register companies. We work with the WCB to see how many employers there are in the Northwest Territories, because that is who registers companies.

The Member has also touched on a couple of cases. We have had a number of scenarios that have developed in the North around the collection of taxes overall. There was a case that was going before the courts around the jurisdiction of taxation with governments in general; not just the Government of the Northwest Territories, but governments in general. A number of groups had decided that they were going to wait for the outcome of those cases before they would participate within our taxation initiatives. So that may be one of the areas the Member has referred to.

We try to work with groups voluntarily initially, but if that doesn’t happen then we go down other avenues. For further detail on that, I will have Ms. Melhorn respond to some of that as we follow through the process of collecting payroll tax.