Debates of February 2, 2006 (day 21)

Thank you, Mr. Speaker. My questions are for the Minister of Finance and they relate to the introduction of the budget, the 2006-2007 budget. I’m trying to focus on one area, Mr. Speaker, and that’s the area of long-term debt. As the Minister described, one of our priority initiatives with Ottawa is to get a new fiscal financing deal, and part of that is a modernized way of handling our debt. But we need to work with what we know right now, which is that $300 million limit, Mr. Speaker. With the forecast that is provided in the budget document, we see that we are going to be pushing our debt limit to about three-quarters of our credit line this year, Mr. Speaker. It’ll be almost totally used up by the end of the coming fiscal year if we don’t turn this around. So my question was, what is our plan for managing this medium-term debt situation, Mr. Speaker? Thank you.

Thank you, Mr. Braden. The honourable Minister of Finance, Mr. Roland.

Return To Question 320-15(4): Reflections On Budget Address

Thank you, Mr. Speaker. Mr. Speaker, the debt situation that we face is a serious one and a critical one for the Northwest Territories. It’s an issue that we’ve raised before. The reason why we developed our fiscal responsibility policy is to show our counterparts in Ottawa, with federal Finance, that we can deal with the issues given the right tools. So we need to continue to work with the federal government and push it, and push hard, to have them remove that debt limit because, ultimately, when you look at what’s before us, the repayment of the 2002 corporate tax overpayment from the federal government is going to push us very close to the debt limit that we are facing through the federal government. It’s a fairly straightforward deal, as we see it. We’ve shown that we can live with what we have, and need the federal government to recognize it has to be changed. If the federal government is not willing to change that, then trying to invest in the future and infrastructure and enhancing our programs, dealing with development that’s already happening around us, we won’t be able to put the necessary resources to it. We’ll instead have to continue to work with a shrinking budget as things around us continue to, I guess, boom. Thank you.

Thank you, Mr. Roland. Supplementary, Mr. Braden.

Supplementary To Question 320-15(4): Reflections On Budget Address

Mr. Speaker, I thank the Minister for that context, but we’re looking to a situation where we may be handing off to the 16th Assembly, after the election in the fall of 2007, a situation where there will be no credit line, a big debt or cost of servicing that debt, and in fact the fiscal situation they inherit for the coming year will be that they’re over $460 million in debt. Way over the line. So I guess let’s ask this another way. Is there a plan B? How can we avoid passing on this kind of a gloomy situation? Thank you.

Thank you, Mr. Braden. Mr. Roland.

Further Return To Question 320-15(4): Reflections On Budget Address

Thank you, Mr. Speaker. Mr. Speaker, I think our goal, first and foremost, is to have the federal government remove the debt limit that they have placed on us. That would be the first goal and we would have to work hard to achieve that. We have one year to make that happen, because we’ll still be in government and still be in control of the purse strings as we start into the year 2007. As things sit right now, if we look that far down the road, we’ll have no room for a borrowing limit at that point. So we have to make some decisions and this is what’s going to change our approach, is how aggressively are we going to pursue the federal government to have that recognized and changed that they have to remove that debt limit. Because we have the fiscal responsibility policy in place and we can manage with the revenues that will come in to invest in the things that are critical for the Northwest Territories. Going beyond that and saying that the picture doesn’t change and to live within the means that we have there will be a significant change in our fiscal strategy, and we’ll have to sit down as to what we see the passing off to the next Assembly. So it’s something we have to do, is focus on the federal government, get the debt limit removed. Thank you.

Thank you, Mr. Speaker. Mr. Speaker, my questions today, after having listened to the Premier take on Mr. Braden yesterday, I think I’m going to keep my questions to the Finance Minister today.

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I learned something yesterday, Mr. Speaker.

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A touchy subject, and that is the government’s participation in the Mackenzie gas project. I know the Finance Minister spoke of the project on page 6 of his budget address today and I wanted to ask him a few specific questions on one sentence in particular, Mr. Speaker. That sentence was, “We will participate fully and actively in the Mackenzie gas project to ensure that if the project proceeds, the needs and concerns of our residents will be addressed.” With the proposed $500 million socio-economic fund that was announced and is pending, it’s for the communities along the pipeline route. I’m just wondering if the Finance Minister can let me know, and the rest of the residents in the Northwest Territories, how the Government of the Northwest Territories proposes to address the needs and concerns of all the residents of the Northwest Territories? We call ourselves a public government. How are we going to address all the needs in all the communities? Thank you, Mr. Speaker.

Thank you, Mr. Ramsay. The honourable Minister of Finance, Mr. Roland.

Return To Question 321-15(4): Mackenzie Gas Project

Thank you, Mr. Speaker. Mr. Speaker, as we proceed the next few weeks through the budget process, we’ll be able to show how already the money that we received from Canada and our own sources, that we are spending it across the board to deal with all individuals in the Northwest Territories. More importantly, on the work that’s going ahead now on the Mackenzie gas project, our involvement from the broad perspective of all the residents of the Northwest Territories is going to go through our representations of the JRP, or Joint Review Panel, as well as NEB, the National Energy Board, and what we feel we can achieve through a socio-economic agreement with the proponent to the project. That’s going to be where we will look at all pieces and how we fit from the Northwest Territories in taking advantage of this type of development. Thank you.

Thank you, Mr. Roland. Supplementary, Mr. Ramsay.

Supplementary To Question 321-15(4): Mackenzie Gas Project

Yes, thank you, Mr. Speaker. Mr. Speaker, I just wanted to state, for the record, that I am a big proponent of the Mackenzie gas project and I wish the communities well along the pipeline route that are hopefully going to be able to access this $500 million socio-economic fund. My concern, Mr. Speaker, is the fact that 80 percent, 75 to 80 percent of our residents live in communities that aren’t going to be able to access any of this $500 million. I want to ask the Minister of Finance what evidence there is that the Government of the Northwest Territories has the wherewithal and the ability to address socio-economic concerns in a community like Yellowknife, in a community like Hay River, or in a community like Fort Smith. What evidence is there? Thank you, Mr. Speaker.

Thank you, Mr. Ramsay. Mr. Roland.

Further Return To Question 321-15(4): Mackenzie Gas Project

Thank you, Mr. Speaker. Mr. Speaker, I think again as we go through the budget process and lay out the details of that budget in each department, we’ll be able to show what we can deal with with the tools we have right now. That is one of our concerns, we need more resources to be able to deal with those things and ultimately that will be through a better fiscal arrangement with Ottawa and a royalty revenue sharing agreement that would see a net fiscal benefit to the Northwest Territories, which then we can take those funds and share with the rest of the people in the territory. If this project is to proceed, the corporate tax, the payroll tax, and the property taxes from that development will come to this government and we’ll be able to, through that process, distribute it through all parts of the territory. Thank you.

Thank you, Mr. Speaker. Mr. Speaker, I’d like to ask some questions on the budget to the Minister of Finance as well. It’s in regards to the tax rate, corporate tax rate reduction that he’s announcing in the budget, Mr. Speaker. One of the perverse elements of our funding formula with the federal government is that when we have windfalls in our corporate tax revenue, we get penalized. The Minister of Finance has sat with me in committees where we’ve been dealing with this for the last four or five years. We also know, and those in the know, and one of the good things today about having a reception is that we have very well-educated people among our public telling us all sorts of things and the ideas for questions. Too bad we don’t have them every day. But anyway, one of the questions is with respect to extra money we hope to get by reducing the corporate tax rate and whether or not most of it, if not all of it, will be taken back by the federal government by their claw-back arrangement. I believe the Minister has told us about how this might work differently and I’m wondering if the Minister could explain that for us for the benefit of the public. Thank you.

Thank you, Ms. Lee. The honourable Minister of Finance, Mr. Roland.

Return To Question 322-15(4): Reflections On Budget Address

Thank you, Mr. Speaker. Mr. Speaker, I guess we should provide a little bit of background because as we sat down initially as Members of the 15th Legislative Assembly, our fiscal picture was significantly different, as well as our arrangement with Ottawa on the formula financing, which had attached to it the tax effort adjustment factor. In that case, we would be penalized. As we look at transfer payments across Canada, there’s a measurement done on tax across jurisdictions. We were deemed to not be taxing our residents and businesses comparable to the rest of Canada in some areas. If we had set a low tax rate, we would take a penalty on any income and transfer payments from Ottawa. Since then, Mr. Speaker, the feel that we have put together our fiscal strategy on has changed significantly. Ottawa has put that all in abeyance. An expert panel has been established and a three-year agreement with the potential for expansion to future years was put in place. What happens in this case, and what we are feeling the effects of in this fiscal year, is the fact that if we were to gain more money in revenues, we wouldn’t be able to keep 100 percent of it. If we lose revenues, we lose 100 percent. That’s what we found ourselves in, and I had to make an announcement in October that our corporate income tax revenue had dropped because we are now under this new fiscal arrangement that allows us to take all the risk or all the rewards. Unfortunately, because of our corporate tax rate, we took the risk and we’ve lost out on that end.

So we’ve had to look at our fiscal picture and say in this environment we are operating now, it is better to start being competitive with other jurisdictions and we will be able to keep, in the interim, all of the revenue that’s filed in the North. Part of our problem is because our rate was so much higher than our neighbours to the South, that large companies were starting to look at moving tax filings to other jurisdictions. We all know when our revenues drop, so we had to take some decisive action in some area and move to be competitive.

Thank you, Mr. Roland. Supplementary, Ms. Lee.

Supplementary To Question 322-15(4): Reflections On Budget Address

Thank you, Mr. Speaker. There are a number of questions that arise out of that answer. The first thing might be why didn’t we know about this arrangement, but I am not going to ask that question. The Minister mentioned that the regime is in abeyance for the three years. I think that’s the time limit he mentioned. Could the Minister assure us that the abeyance is something that he knows to be permanent in that we are not going to be told a year or two later that we made a mistake? It was in abeyance temporarily, but you are going to have to pay back whatever you have gained. What kind of assurance can the Minister give that he knows, with certainty, that we can do this now without any concern for penalty in the years to come? Thank you.

Thank you, Ms. Lee. Mr. Roland.

Further Return To Question 322-15(4): Reflections On Budget Address

Thank you, Mr. Speaker. We know that in the upcoming fiscal year, the year we’ve announced, July 1st, in that fiscal year, it is in abeyance. It’s a three-year agreement that could go to five years, as some of the indications that we’ve received. Ultimately, if a new arrangement is made with Ottawa and federal Finance about the fiscal arrangements in place or that will be put in place as a result of the expert panel report and the Council of Federation work, we’ll have some discussions about that risk and reward sides. Right now it is punitive. If it were to come back with the existing arrangement, we would then have to look again at our fiscal strategy and decide if we are going to still proceed to try to win on the other side of having more revenues filed in the North. Thank you.

Thank you, Mr. Roland. Supplementary, Ms. Lee.

Supplementary To Question 322-15(4): Reflections On Budget Address

Thank you, Mr. Speaker. I am no tax expert, but just the very topic of this could risk us losing everybody. Minister Floyd is very sufficient in this area. Mr. Speaker, I want to ask why, then, the Minister mentioned that we get to keep 100 percent risk and 100 percent reward, the decision on the 11.5 percent? Why don’t we go down lower? Where is the formula that tells him that this is the best number to be at in order to encourage or at least not lose the corporate tax filings that we have lost? I am sure there is a consideration for him to make about any penalty about what we might get if we go too out of sight. Thank you, Mr. Speaker.

Thank you, Ms. Lee. Mr. Roland.

Further Return To Question 322-15(4): Reflections On Budget Address

Thank you, Mr. Speaker. First and foremost, the message today being sent to the companies doing business in the Northwest Territories is, don’t shift your payments out of our jurisdictions. Keep them in the Northwest Territories and continue to look at filing in the Northwest Territories for those companies who do business in the North. The tax arrangements in Canada allow flexibility for where they can file their income. Ultimately the message today is being sent to companies in the Northwest Territories to file their tax in the Northwest Territories because we will be as competitive with our southern neighbours and that will be, at this time, Alberta having the lowest corporate tax rate. We will match them.

The other side of the equation we will have to sit down and review after we get some indication from federal Finance as to what portions of the panel report they will adopt. Thank you.

Thank you, Mr. Roland. Final supplementary, Ms. Lee.

Supplementary To Question 322-15(4): Reflections On Budget Address

Thank you, Mr. Speaker. Mr. Speaker, on page 8, in talking about revenue from corporate income tax, the Minister stated that the GNWT received $3.5 million. I am assuming that that constitutes rather a lower amount than what was expected, hence the change in corporate tax rate. So could the Minister indicate what he’s projected to have lost by the high rate prior to the reduction? Thank you.

Thank you, Ms. Lee. Mr. Roland.

Further Return To Question 322-15(4): Reflections On Budget Address

Thank you, Mr. Speaker. Mr. Speaker, as I announced back in our last sitting, the corporate tax situation we faced, we went from projecting a surplus of about $40 million down to where we are identifying now…In fact, at one time we predicted we would go into a slight deficit position. But because of adjusting our budget, we’ve managed to stay out of that area. But the immediate impact of our higher tax rates and the fiscal arrangements we have in Ottawa right now is that companies have started to move their file to other jurisdictions. In fact, as well, our estimates of companies paying some new tax in the North did not occur. I announced back in October that we were hit by almost, when you look at the combination of past companies refiling against profits to losses, and then other companies filing out of the North, we were hit by almost $30 million to the negative. Thank you.

Thank you, Mr. Speaker. Mr. Speaker, my question is also for Minister Floyd Roland on the budget address. On page 8 and 9, he listed four key points in terms of the second condition necessary to achieve…(inaudible)..in the Northwest Territories. I wanted to ask for some clarification. In his address, he talked about the reports by the expert panel and we are in the hands of the federal government in terms of how we control the finances we are going to have. How will the Minister make our position in the Government of the Northwest Territories well known to the federal government in terms of having them listen and pay attention to our position? How will he do it?

Thank you, Mr. Yakeleya. The honourable Minister responsible for Finance, Mr. Roland.

Return To Question 323-15(4): Reflections On Budget Address

Thank you, Mr. Speaker. I guess there are all types of avenues one can consider to the point of taking our tents and setting them up on the front lawns of Parliament, but, more realistically, what we need to do and we have been doing, but we are going to have to enhance it more, is how we have got the message out there. We have a business case. We believe our business case is an adequate one and it’s clear that we have delivered the message to Ottawa about our fiscal situation in the Northwest Territories in the unique situations we encounter being this far north and the conditions that we live in. We need to look at our strategies of how we have tried to do it. We have tried to do it within an environment being much more cooperative, working with the existing tools we had in place and trying to get them to understand our position. Well, we are going to have to take this up a notch. We are going to have to work with our other jurisdictions, with the provinces and territories and have them look at our situation in the business case and support us as we go to Ottawa. They have supported us on a number of fronts in the past and I believe a lot of them understand our positioning.

Ultimately, as well, we can say as much as we want on our own from the Northwest Territories, but if we don’t get the rest of Canada -- the experts, as Ottawa would call them -- echoing our concerns and saying that our numbers are adequate and legitimate, then it’s a difficult battle. So what we need to do is take a different approach in how we get that message to Ottawa; a unified one from the Northwest Territories, but now we are going to have to reach outside of the envelope we normally operate with and start getting the message down in Ottawa, not only from northerners but from those in Ottawa as well. Thank you.

Thank you, Mr. Roland. Supplementary, Mr. Yakeleya.

Supplementary To Question 323-15(4): Reflections On Budget Address

Thank you, Mr. Speaker. Mr. Speaker, I support the Minister in terms of his process to getting the attention of the federal Minister or the federal government. However, business case after business case, doing things very politely and that's good. Northerners, that what we tend to do. I think enough is enough and we can get the attention of the federal government that needs to pay attention. So I think there has to be some more radical steps considered in terms of getting the attention of Ottawa. So in that sense, I want to ask the Minister how or what type of measures is he going to use in terms of his strategy in terms of pressing for immediate action? We've got two years left in this government, so are we going to put pressure on the government to force some immediate action? Thank you.

Thank you, Mr. Yakeleya. Mr. Roland.

Further Return To Question 323-15(4): Reflections On Budget Address

Thank you, Mr. Speaker. Mr. Speaker, before we get to radical solutions or options that may be out there, there's a new government in Ottawa. We have to take a different stance, we have to get the message to them, and I'm looking for the opportunity I get to sit down with the new Finance Minister to see if he thinks the arguments, the business case that we put forward is adequate or not adequate to go with what we're asking for. That will then entail what we'll need to do as a jurisdiction. But ultimately, the message that is initially sent out about fiscal imbalance is a good one. Hopefully with the new Finance Minister in place, we'll be able to sit down and have a good discussion and hopefully walk away from that with some positive results in the very near future. Thank you.

Thank you, Mr. Roland. Supplementary, Mr. Yakeleya.

Supplementary To Question 323-15(4): Reflections On Budget Address

Thank you, Mr. Speaker. Mr. Speaker, I think it's time, enough is enough. We have a new government. Some of the old bureaucrats are still in Ottawa. You can change the face in the kitchen table here, but you still have the same cooks brewing up the same kind of recipe for provinces and territories. So I think this government's got to come up with a backup plan. You know, we have to hope the federal government will listen to us, and hope that we…We need a backup plan. We need to get serious and get really down to the brass knuckles of…Our resources are leaving us everyday; millions and millions of dollars. We're asking for things that are being legal. So I want to ask again, does the Minister have a backup plan if things don't go…(inaudible)…as well as we think. What is the backup plan for us to take charge of our own destiny? Thank you.

Thank you, Mr. Yakeleya. Mr. Roland.

Further Return To Question 323-15(4): Reflections On Budget Address

Thank you, Mr. Speaker. Mr. Speaker, the Member has referenced cooking and so on and so forth. I guess one could say there's a new chef in the kitchen now when it comes to the new government in place. We need to get an understanding from where they may come from initially. From that, we will know how much we'll have to push and how much harder.

Mr. Speaker, clearly, as Minister of Finance for the Northwest Territories, and I look down in our fiscal forecast, if we do not get the changes that were requested, and ultimately those changes can be made and should be made in Ottawa because they have that authority and the ability. If we do not get that changed in a way that is on a cooperative approach, at some point, as Finance Minister, I end up ultimately responsible for our fiscal situation. If we, for example, go beyond the borrowing limit that is being imposed on us, those are some of the scenarios I have to face and how we would approach that. So, Mr. Speaker, first goal is, number one, let's get in the door with the new Finance Minister, see where he's coming from and see if he's willing to listen to our arguments on the political front. Never mind the briefings he may get from his new staff or the staff that is already there. Ultimately we need to sit down with him on the political front, get an understanding of where he may stand or she may stand. Thank you.

Thank you, Mr. Roland. Your final supplementary, Mr. Yakeleya.

Supplementary To Question 323-15(4): Reflections On Budget Address

Thank you, Mr. Speaker. Mr. Speaker, there may be a new chef in the kitchen, but the same old recipe is being cooked up and it's just a different means of cooking up that recipe. I want to ask the Finance Minister in terms of his opening address and on one of the points, his last point was point four in terms of the arbitrating of the $300 million borrowing limit. Our government stated saying we need a territorial political autonomy. How do we get that? You know, Alberta won't stand for that. Other governments won't stand for it. You know, the Territories shouldn't stand for it. So how do we get territorial political autonomy and not be beggars in our own land in terms of getting some of these resources that are meant to stay in the North and to provide programs and services for our people? So what messages can we give to the government in terms of receiving that statement? Thank you.

Right on.

Thank you, Mr. Yakeleya. Mr. Roland.

Further Return To Question 323-15(4): Reflections On Budget Address

Thank you, Mr. Speaker. Mr. Speaker, we've not only in the Northwest Territories, Nunavut and the Yukon and provinces across Canada have raised the issue of fiscal imbalance with Ottawa on a regular basis; in fact, to the point where Finance Ministers have pushed on it so that the Premiers have now become involved and directed through the Council of the Federation that another panel be established. The federal government has recognized it by establishing an expert panel. We need to see what their reports will come out as, and then what will the federal government do with those reports, what will they enact as some of the recommendations that may come out of it. I believe that we've presented our arguments on a solid basis, and I believe that both panels will endorse a number of the things that we've raised and it will be from that point on what our relationship will be with the new federal finance. Thank you.