Now we’re dealing with a number all of us can understand. So we’ve got a $38 million problem. This $38 million problem is being dealt with in this fiscal budget and the next fiscal budget, from what we hear. We’ve heard from both the deputy minister and the Minister that this is a fluid problem. We don’t have a good understanding. We’re at the mercy of the federal government. Things change, seven years forward, seven years backward, if anyone does CRA type of initiatives knows that.
We’re dealing with a problem where we’re really at the mercy of a lot of unknown variables. We’ve heard from the department here that we’re going to be doing a rolling five-year average to try to mitigate and try to take a dart and a dart board to try figure out what our taxation is.
I want to shed a little light for the Department of Finance. They’re not alone. They’re not alone. The Auditor General of Canada has written a nice little report for the federal government on their own books on how they collect their own taxes, so we’re not unique here. I wish we were, but we’re not.
The federal government has also been given a little bit of a heads-up that they’ve got to clean up their backyard in terms of how to do predictability better with their federal forecasting. So I’m glad we’re doing this exercise, Mr. Chair.
The question I still have remaining is we’re still looking at being very aggressive in the 2014-15 Main Estimates given what we know today. What key indicator do we have now that would tell us that we are going to see the lifts that we’re seeing, especially in personal income tax from I’m going to call them the revised-revised 2013-14 estimates? How do we know that?
It’s currently by looking back and looking forward and hoping we’re not going to move into a 2008 type of year that’s going to catch everybody by surprise.
The other big issue is while we look at our revenues, which is an important issue, we have expenditure issues, as well, where we’re spending almost every cent we make. We’re working hard to manage that. So one way to deal with it is, of course, to keep looking for more money. The other side is to try to control our expenditures and the growth of government and size of government and program creep and all these things. Between the two is where we’re trying to seek that balance. Clearly, for 42,000 people, we have not only revenue concerns but we have expenditure challenges. Thank you.
I’m not going to disagree with the Minister on some of those comments, but he brought up the 2008 subprime mortgage issue. I’m not sure how that fit into the response, but anyway.
I think Members on this side of the House have made things perfectly clear. We are very concerned going into this budget on this shortfall. I believe, personally, that this shortfall has caused a tethering, if you will, in the fiscal strategy of this government. It’s unfortunate that we weren’t able to calculate that properly and I think that has put a real kink in the cogwheel in terms of what our forecasting will be for the initiatives that this government has so boldly wanted to go forward with. I am very much in concern how we’re dealing with this personal and corporate income tax, so much so that I believe that the five-year rolling average, in my humble opinion, is not going to work.
Historically, if you look at public accounts, if you look at main estimates for the last 10 years, this personal income tax and corporate income tax has been a yo-yo. It’s been all over the map. It’s been the highs and the lows. Unfortunately, when it’s on the high, government gets really excited because they have a high year personal income tax and corporate income tax and we hit the ground running and we have all these great ideas to spend it, which is fine if you have the money. But when you build a financial forecast on a high and it turns into a low, as we have I believe this year, we’re scrambling.
The tools have been before us for many years. I don’t believe we’ve used all the tools at our disposal or in our tool box, Mr. Chair. I would like to move a motion.
Go ahead, Mr. Dolynny.
Thank you, Mr. Chair. I move that this committee strongly recommends the Department of Finance take the steps necessary to create a stabilization fund for taxation revenues to counter the uncertainty of tax revenue forecasting and subsequent impacts on fiscal planning. Thank you, Mr. Chair.
Thank you, Mr. Dolynny. The motion is being distributed. The motion is in order. To the motion. Mr. Dolynny.
Thank you, Mr. Chair. The rationale for this motion is quite simple. This is simply a tool. This is a tool that will help government create a better and more promising forecasting predictability in the wake…
Sorry, Mr. Dolynny. I need you to read the motion into the record.
Okay. Mr. Chair, I move that this committee strongly recommends that the Department of Finance take the steps necessary to create a stabilization fund for taxation revenues to counter the uncertainty of tax revenue forecasting and subsequent impacts on fiscal planning.
Thank you, Mr. Dolynny. Motion is in order. To the motion. Sorry, Mr. Dolynny. Complete your comments.
Thank you, Mr. Chair. I forgot where I left off. As I said earlier, this is simply a tool to help mitigate the uncertainty that this government and a lot of past governments have faced in dealing with, really, a lot of unknown variables. I do not hold the department in any way, shape or form liable because they don’t know, and they’re doing their best effort to predict what they have at their disposal. However, a five-year rolling average will do nothing more than create the same mess that we are in this fiscal year.
The motion speaks to a stabilization fund, which means that that threshold is picked that would make it the most effective possible for this government to function. On years of high, you put it in the bank, on years of low, you take it out of the bank, but for predictability and for the ability of this government collectively, as a consensus, that we do our forecasting, we are going forward with solid numbers. We are not guessing and a five-year rolling average just won’t cut the mustard in my books.
This will offer the right tool. This is a public accounting standard of best practice that’s used in a lot of jurisdictions all over the world, not just in Canada, and I know the Auditor General of Canada has approved such standards. So I will let my colleagues dial in if they want to comment on it as well. Thank you.
Thank you, Mr. Dolynny. I have Mr. Bromley.
Thank you, Mr. Chair. I want to start by expressing appreciation to my colleague Mr. Dolynny for bringing this motion forward.
Frankly, I’ve found the discussion so far refreshing. A lot of this information is being presented with the clarity that we haven’t had before because of the interviewing, questioning skills of Members. So I’m learning and I appreciate that. I will be supporting this motion because I think it’s something we’ve talked about without doing. I know that the Department of Finance, the Minister has been interested in that from time to time and probably has done a little bit of work on it. So perhaps the Minister will take this. I would expect the Minister would take this as the opportunity to complete that research. I would appreciate an interim step in achieving this and that’s a comparison of the two techniques, their five-year rolling average versus this approach of knocking the tops off the highs and adding them to the lows.
One thing is clear, it needs to be addressed, and again, I appreciate Mr. Dolynny trying to actually get it addressed. Many of us have tried before and were clearly unsuccessful, but maybe this will do it. I’ll be supporting. Mahsi.
Thank you, Mr. Bromley. Next I have Ms. Bisaro.
Thank you, Mr. Chair. I, too, want to thank Mr. Dolynny for bringing the motion forward. I am fully in support of this and as Mr. Bromley said, this is not a new idea, it has been discussed a number of times over the years and certainly before my time as well.
Annually, when we look at the budget, we stress over the highs and lows of our revenues and particularly around corporate income tax and then this year, as well, around personal income tax, so this idea would certainly allow us to have a much easier time when we discuss fiscal planning and fiscal strategy. It would certainly allow us to have a much easier time when we discuss fiscal planning and fiscal strategy. It would certainly allow us to better plan budgets and to know that we have a stabilization fund that we can pull money out of if we need to.
One of the things that I do want to mention is that if people are wondering where the money could come from, there are many, many countries in this world that take money from their resource revenues and put it into a stabilization fund, and I certainly think that that’s something that we should strongly consider. I know that as far as the government is concerned, our resource revenues are spent and they’re already allotted, and they’re aligned and there’s nothing more to be had, but I think, as part of this motion, where the money is going to come from should certainly be considered, and I believe that resource revenues are a perfect source to build… Part of our revenues are used to fund the stabilization fund.
Thank you, Ms. Bisaro. To the motion. Mr. Hawkins.
Mr. Chairman, I certainly support this. I’ve been raising this particular matter for a lot of years, and I’m kind of glad to see it finally get a bit of traction on this side of the House. For many years I had heard at the time Finance Minister Roland say, oh no, don’t worry. That’s why we’ll have a Heritage Fund, and don’t worry; we’ll use the Heritage Fund to take care of any ups and downs. Then along came, following him, Finance Minister Miltenberger, the eldered Miltenberger, that is, and in his wise way he, too, said much the same way, don’t worry, there will be a Heritage Fund one day, and you know, you guys are talking about the Heritage Fund.
I always tried to remind everyone that this is not what the Heritage Fund was intended for, and I’ve always been shooting for a five-year average suggesting that we could predict through our finance folks somewhere in a modest five-year number and we use that one, and again, money achieved over above that five-year average rolls into this little savings account and it’s there, accessible, because, as highlighted by other Members, and certainly not just by me but certainly over many years, when something goes awry, we just have no way to respond, and it seems as if it’s murder when we call out and say we have to do something. People shriek as if, like, please don’t touch our departments and don’t cut here, don’t cut there. In a lot of ways I also say it’s kind of difficult, too, because it’s a really stressful time to look at program departments to say, well, we have to find, what is it, $10 million, $20 million, $30 million, $40 million. Who knows? It does become a difficult challenge.
To be looking at this literally just weeks before the new budget is supposed to roll in and we have to point out a particular department or section and say we’re going to have to make some changes and guess what, you’re it, is not a good way to do budgeting.
This would certainly help stabilize it. As a matter of fact, to provide some interesting examples here, I’m going to go back a couple years. Again, I know the wise and eldered Finance Minister would remember these days, but there was a time when we had received almost $300 million of overpayment, and I came in the following year, and the first thing they said was, well, you’re broke, and don’t worry, we’re going to have to figure out how to pay it, and the good thing about… The only good news about how broke we were was the fact that in the 2003-2004 budget was, well, the federal government was going to give us a couple years to come up with the $300 million, but we still owed it, and everybody knew it was an overpayment back from the Stephen Kawfwi government. But boy oh boy, I think as Mr. Dolynny just pointed out, they saw the money and they thought, my goodness, it was almost like arenas for everybody. They just turned around and said let’s spend money, community halls, whatever you want. Don’t worry. It’s the next government’s problem, and that’s what it was.
In other subsequent years, I’ve done some research on this one and, quite frankly, some years we do receive overpayments and yet how do we respond? Well, in 2004 we had a $42 million overpayment. In 2005, we had a $33 million overpayment. In 2006, we had a $26 million payment. Fortunately, we started gaining ground again by underestimating our corporate revenues at almost $40 million. I’ve got a chart here that spans 14 years, 15 counting this budget year, and I mean, my goodness, it looks like we’re 50 percent. I mean, maybe if you’re a baseball player a 50 percent average is good, but when you’re in the finance business, 50 percent is pretty poor.
I’m not blaming anyone. It’s just the fact is it’s too hard to plan. You can’t predict somebody who refiles. It’s wrong to put the finger on any one person. This is just wise planning.
Of course, I could go on into further details, but time is ticking away on my time to be able to speak, but the point is, this is really built around small, sound budgeting. You don’t need big, fancy calculations, whatever sort of rings towards your attention, but what I would say is that this is just bread and butter, kitchen table economics. Save money because not every day is going to be a great day. So I support the motion and I certainly look forward to Cabinet supporting it as well. Thank you.
Thank you, Mr. Hawkins. Next I have Mrs. Groenewegen.
Thank you, Mr. Chairman. On the surface this sounds like a good idea, but it almost sounds too simple to be possible, because I’ve sat through enough briefings on fiscal forecasts and negotiations with Canada on our formula and how that transfer is calculated, perversity factors, own efforts factors, so many different things that it’s hard to believe. We have a unique relationship with Canada in terms of how we obtain the majority of our revenues and this is one piece of it. These tax revenues that this motion speaks to, this is just one part of it and I think it is a complex equation. I don’t think it’s as simple as this and I think that if this were possible that somebody would have thought of doing it sooner than now.
I have a lot of questions. I can’t accept this proposal, this idea, on face value because, as I said, I just think it is more complicated than what this motion portrays. So on those grounds, I would have to know a lot more about the implications of this before I could support this motion. Thank you.
Thank you, Mrs. Groenewegen. To the motion. Minister Miltenberger.
Thank you, Mr. Chairman. As we do this budget and we look at the fluid nature of the revenue projections, I don’t think it should blind us to the fact that we have, over the years, evolved what I think is a budgeting system, although some people may think it has a lot of shortcomings. It does what it is supposed to do.
We are, by any national standard, one of the best run jurisdictions in the country. We have managed our way through the worst economic downturn since the great depression. We protected programs, services, prevented staff layoffs, negotiated agreements with all our employees, we have worked our way through devolution, we have come up with an agreement to put a significant amount of money in the bank for the Heritage Fund and, at the same time, we are still managing to do a major amount of work.
Let’s be clear about some of the things that are putting pressure on our budget. We have some big capital items. We have a road from Inuvik to Tuk that we are building, but even bigger and totally our cost is going to be the Stanton Hospital, $350 million, and we are committed to doing that. We are squeezed for cash over a few years.
We have looked at this in the past. It came up last government as well. The reality is, we are not in a position to put more money into another fund when we have been in ongoing restraint, passive restraint, which I would suggest is a way for us to cushion and manage our way through some of the cost pressures, and we have some of the best finance people and the most conservative working for us, that always plan and err on the side of caution. We have learned to live and prosper under the circumstances we now have, so at this point I don’t see the value of this, spending a lot of time looking at this fund. I, as well, don’t think that this is a panacea that folks are making it out to be. Thank you.
Thank you, Minister Miltenberger. To the motion.
Question.
Question is being called. Motion is defeated.
---Defeated
Committee, we are on page 5-9, information item, revenue summary. Any questions? Mr. Hawkins.
Mr. Chairman, after hearing that, it inspired me. I move that we report progress.
---Carried
Good evening. Can I have the report of Committee of the Whole, Mr. Bouchard.
Thank you, Mr. Speaker. Your committee has been considering Tabled Document 22-17(5), Northwest Territories Main Estimates 2014-2015, and would like to report progress. Mr. Speaker, I move that the report of Committee of the Whole be concurred with. Thank you.
Thank you, Mr. Bouchard. Do I have a seconder? Mr. Nadli.
---Carried
Orders of the day for Wednesday, February 26, 2014, at 1:30 p.m.:
Prayer
Ministers’ Statements
Members’ Statements
Returns to Oral Questions
Recognition of Visitors in the Gallery
Acknowledgements
Oral Questions
Written Questions
Returns to Written Questions
Replies to Opening Address
Petitions
Reports of Standing and Special Committees
Reports of Committees on the Review of Bills
Tabling of Documents
Notices of Motion
Notices of Motion for First Reading of Bills
Motions
First Reading of Bills
Bill 12, Northern Employee Benefits Services Pension Plan Act
Second Reading of Bills
Consideration in Committee of the Whole of Bills and Other Matters
Tabled Document 4-17(5), Northwest Territories Electoral Boundaries Commission 2013 Final Report
Tabled Document 22-17(5), Northwest Territories Main Estimates 2014-2015
Bill 5, An Act to Amend the Motor Vehicles Act
Bill 10, Northwest Territories Lands Act
Bill 11, Petroleum Resources Act
Report of Committee of the Whole
Third Reading of Bills
Orders of the Day
Thank you, Mr. Clerk. Accordingly, this House stands adjourned until Wednesday, February 26th, at 1:30 p.m.
---ADJOURNMENT
The House adjourned at 8:47 p.m.
