Debates of March 18, 2004 (day 3)

I would like to recognize the clock that time has lapsed for question period, but I will allow the Member to finish her questions. Minister of Finance.

Further Return To Question 36-15(3): Formal Process For Receiving The Public’s Suggestions For Fiscal Restraint

Thank you, Mr. Speaker. In the interim, before setting up a formal process, I will commit to starting a process from within my office. If the Members are aware and have suggestions themselves or know of constituents who have some suggestions, they can contact my office directly. I will start a log as to what suggestions are being put forward, and respond to those that would send in their suggestions. So I'll start from my office and we'll work forward from there. Thank you.

Thank you. At this time, I would like to recognize the people in the gallery and thank them for coming today. It's nice to see our gallery filled with students who show interest in the political process. To the other people who are in the gallery, welcome.

---Applause

Thank you, Mr. Speaker.

WHEREAS there is requirement for the naming of two Members to hold the positions of deputy chairpersons of Committee of the Whole;

AND WHEREAS it is desirable to appoint two Members;

NOW THEREFORE I MOVE, seconded by the honourable Member for Frame Lake, the honourable Member for Nunakput, Mr. Calvin Pokiak, and the honourable Member for Kam Lake, Mr. David Ramsay, be appointed as deputy chairpersons of the Committee of the Whole.

Thank you, Mr. Speaker.

The motion is in order. To the motion.

Question.

Question has been called. All those in favour? All those opposed? The motion is carried.

---Carried

Thank you, Mr. Speaker.

I MOVE, seconded by the honourable Member for Kam Lake, that the Speaker be authorized to set such sitting days and hours as the Speaker, after consultation, deems fit to assist with the business before the House.

Thank you, Mr. Speaker.

The motion is in order. To the motion.

Question.

Question has been called. All those in favour? All those opposed? The motion is carried.

---Carried

I will call Committee of the Whole to order. Before us today we have Bill 1, Appropriation Act, 2004-2005; Committee Report 1-15(3): Standing Committee on Accountability and Oversight Report on the Review of the Draft 2004-2005 Main Estimates; and, Committee Report 2-15(3): Standing Committee on Social Programs Report on the Review of the Draft 2004-2005 Main Estimates. What is the wish of the committee? Mr. Allen.

Thank you, Madam Chairperson. I would suggest that the committee consider Bill 1, Appropriation Act, 2004-2005, and Committee Report 1-15(3). Perhaps we can begin with general comments on the Appropriation Act to be followed by consideration of this from the Department of Finance and should we conclude that, then commence the Financial Management Board Secretariat. Thank you, Madam Chairperson.

Does the committee agree that we will commence with that order after a short break?

Agreed.

Thank you.

---SHORT RECESS

I will call the committee back to order. We are on Bill 1, Appropriation Act, 2004-2005. Are there any general comments with respect to the appropriation act? Does the committee agree then that we proceed with the Department of Finance?

Agreed.

Would the Minister provide us then with his opening comments?

Madam Chair, I am pleased to introduce the main estimates for the Department of Finance for the 2004-2005 fiscal year.

The 2004-2005 main estimates for the Department of Finance request a total expenditure budget of $7.354 million. The department’s 2004-05 expenditure requirements are 30.1 percent, or $3.167 million less than in 2003-2004. The net decrease is a result of:

1)

reduced insurance premium costs of $1.624 million resulting from the government’s self-insurance initiative, implemented last year;

2)

implementation of the loss prevention and risk control program associated with the self-insurance program, requiring a reinvestment of $330,000 of the premium reduction;

3)

a sunset of $175,000 to reflect the completion of the data collection activities of the 2004 community survey;

4)

increases of $116,000 resulting from changes to the collective agreement with the Union of Northern Workers;

5)

an $80,000 negative target adjustment reflecting government expenditure reduction measures; and,

6)

a decrease to our short-term interest cost estimates of $1.734 million as a result of changing estimates of the government’s cash requirements.

Mr. Chairman, over the last 10 years, the GNWT faced rising property insurance costs, despite a declining trend in our losses over this period. Last year, the government faced a 20 percent increase in premiums to maintain existing levels of coverage. The Department of Finance undertook a review of alternative ways to address property risk, which concluded that raising the government’s deductible amounts, and self-insuring losses below those amounts, was a more cost-effective approach. Adopting this approach has significantly reduced premium costs and this is reflected in the reduced requirements of the department. However, because the GNWT is bearing more of the risk associated with property loss, a more active loss prevention and risk control program is required. A portion of the premium savings will be reinvested in strengthening this program.

The department also expects much lower short-term interest costs in the upcoming fiscal year. The timing of prior year adjustments to formula financing adjustments and income tax collections means that our overall cash position is much better than was forecast this time last year.

The expenditure budget in the main estimates is accompanied by a departmental revenue budget of $820.097 million; an increase of 4.72 percent over the 2003-2004 main estimates amount. This amount includes the taxation measures I announced in the budget address.

The key priorities of the department in 2004-05 will include finalizing discussions with Finance Canada on changes to the post-2004 formula financing agreement; implementing any tax changes approved by the Legislative Assembly; providing taxation and formula financing input to resource revenue sharing discussions with Canada and aboriginal governments; continuing fiscal and taxation input to self-government negotiations; reviewing the government’s medium to long-term borrowing requirements, and developing a strategy to meet these needs; implementing the loss prevention and risk control program to reduce the risk of property loss to the government; finalizing the results of the community survey and making the results widely available to communities; updating the information needed to assess the impacts of development on the NWT; identifying the issues to be considered in a possible review of the Liquor Act; and continuing to administer the liquor system in accordance with the Liquor Act and with community standards and preferences.

Madam Chair, I would be pleased to respond to any questions the committee may have.

Thank you, Minister Roland. At this time, I would like to ask the committee that oversees the Department of Finance if they have any comments. Mr. Allen.

Thank you, Madam Chair. Briefly, yes. The committee met with the Finance Minister on February 18, 2004, to review the draft 2004-05 main estimates for the Department of Finance.

The department is proposing a $3.167 million decrease in operations expenses from the 2003-04 main estimates. This is primarily due to savings realized from its new self-insurance program and an anticipated reduction in interest expenses for short-term borrowing.

4. Regulating the insurance industry and liquor sales, distribution and consumption to contribute to the well-being of communities and residents.

Members believe the reference to the distribution and consumption of liquor and the wellbeing of communities and residents in the same sentence is highly inappropriate. The committee recommends this statement be reworded in the 2005-2008 business plans. Madam Chair, this concludes the review of the Department of Finance. Thank you.

Thank you, Mr. Allen. At this time, I will ask if the Minister would like to bring witnesses in.

Yes, Madam Chair.

Does the committee agree?

Agreed.

All right. Then I will ask the Sergeant-at-Arms if she will bring the witnesses in to the witness table.

For the record, Mr. Minister, would you please introduce your witnesses?

Madam Chair, to my right is the deputy minister of the Department of Finance, Ms. Margaret Melhorn, and to my left is Mr. Mel Enge, director, finance and administration.

Thank you. At this time, I will ask the committee if they have any general comments on the Department of Finance estimates. Mr. Braden.

Thank you, Madam Chair. There are a couple of things I would like to follow through on, starting with a few things that Minister Roland told us about in his opening remarks. Specifically to the information he provided saying among the priorities for the coming year are going to be identifying the issues to be considered in a possible review of the Liquor Act. This is something that this government should be looking at as a fairly high priority, Madam Chair. The Liquor Act has been around for some time now and I have a sense from amongst people who are clients, if you will -- Liquor Act vendors and outlets -- that there are a number of things that they would like to see modernized in there.

Personally, Madam Chair, I am coming from more of a social orientation where I see so much evidence of the abuse of liquor in our society. Yet, I don’t see much evidence, at least from this government, of where the mandate is to really take on the duty of promotion and awareness and prevention. I believe our government is falling far short of what we should be doing in this area. I believe that revisions to the Liquor Act would be something that we could use to address both the issues, as I say, of vendors and merchants in the way it’s administered on their part. They need this, Madam Chair, to be able to run their businesses efficiently and profitably. Also our society, I believe, desperately needs this government to adopt a far more aggressive attitude towards prevention and awareness in general. So I would like to ask the Minister, on that point, to identify the issues to be considered in a review of the Liquor Act. Thank you, Madam Chair.

Thank you, Mr. Braden. Minister Roland.

Thank you, Madam Chair. The review of the Liquor Act is something we are in agreement with. It is a high priority for us. It is in need of a revision and review. That’s why we have highlighted it and are going to be moving forward with the process we established as Cabinet and committee in the Legislative Assembly. The Liquor Act itself will require work and some of the areas Mr. Braden has just touched on are areas we have to deal with as a government as a whole. I don't want to say another part of our government needs to take direction. As a government, we need to set that direction. That direction will be very limited in what we can do in the Liquor Act.

We can, for example, in the Liquor Act give more control to communities who can set direction in their communities as to what they would like to see. But for running establishments and things of that nature, that is more of a business orientation. We can establish penalties and how they are monitored. For the social side of things, overall as a government, we need to take, as the Member stated, a more proactive role in how we would deal with some of those social impacts. The room for it in the Liquor Act would be very limited in the sense of giving power and authority to those closer to the ground. We need to see if it would be best dealt with by giving control to communities and regions. That’s something we can look at.

We do set limits on what can be done such as hours of operation, special occasion permits, setting up a monitoring system. The enforcement side of it is there. The Liquor Board acts as the judge with those companies that would find themselves being before them if they have not followed the rules that were established. So we are fairly limited to those areas. Thank you, Madam Chair.

Thank you, Mr. Roland. Mr. Braden.

Thank you, Madam Chair. I appreciate that within the bounds of the Liquor Act, as we know it, it is set up as a piece of business, administration law and, to some degree, covers control and enforcement. But in the course of reviewing a number of the departments in the social envelope leading up to this budget, Madam Chair, it just gets reinforced that liquor plays such a large part in the damage and the violence, abuse, and the unnecessary hurt and death that occurs in the NWT. We hear indications from our medical professionals, from our justice professionals, from our mental health and education people.

I don’t see any evidence, Madam Chair, of our departments really taking this on, from a proactive and a preventative point of view. So many of our measures are reactive in the sense of trying to enforce, control or punish, rather than prevent. This is where I would like to see a review of the Liquor Act go, Madam Chair.

I would like to encourage the Minister and his Cabinet colleagues to broaden the review so that we can take a look in a much more holistic way at how we, as a government, administer liquor both as a legal substance -- it’s been around for a long time and we are not going to shake it -- but the way we deal with it, manage it and help young people make decisions about this stuff. We just aren’t doing enough. I would encourage the Minister to take up this as part of the mandate. Please do not just restrict it to a piece of business and tax legislation. Please go further. That’s my plea and comment for now. Thank you, Madam Chair.

Thank you, Mr. Braden. Would the Minister like to respond?

Thank you, Madam Chair. Again, the Member stated a number of correct and obvious things that we, as a government, face on a daily basis as a result of liquor in the Northwest Territories. Even though we do have the ability to restrict liquor in communities -- there are some communities that are dry and don’t allow any alcohol -- that still doesn’t prevent individuals from finding a way to bring the product in to the communities and sometimes at great risk. They will travel many miles by boat or snow machine to find the product and bring it back into their communities, so they can have access as they want it. They will face the wrath of law by breaking the rules in their community, even those set by their own leaders. So it’s a difficult place and it’s difficult to try to incorporate those areas within this type of legislation. I understand where the Member is coming from though. As a government, we need to take a very serious look at what we will do as a government to try to encourage younger generations and even the older generations to be more proactive in how they take and treat alcohol in their communities and how it impacts the residents.

As we go through this process looking at the Liquor Act, we will look at the structures and how we operate right now under the existing program. I will have discussions with my Cabinet colleagues on whether there is another avenue we can take on the social side of things. I think it would be very difficult in trying to incorporate this without creating a really confusing piece of legislation, but we need to address that as a government and go forward. I am looking for how we can deal with that issue. Thank you.

Thank you, Mr. Roland. We are on general comments on the departmental estimates for the Department of Finance. Ms. Lee.

Thank you, Madam Chair. I have a question on his opening statement, Madam Chair. Perhaps I should begin by commenting and congratulating the Minister for putting a very positive face on some parts of what was not the good-news budget he delivered yesterday. I do believe though it is a good budget in that the Minister has made his best efforts to grapple with our current financial situation.

There is no question that we have to work together to address some of these difficult issues, so that if some good news were to happen from the federal government or in any other areas, we will find ourselves in a position where we could do more things. It is always good to be in a position of having that room to work with, rather than being overly optimistic and having spent on the assumption of getting something and then end up not getting it.

One of his key objectives for the department on page 2 of his statement is to finalize the discussions with Finance Canada on the formula financing. We do know that this agreement expires in a couple of weeks, and I am assuming that the existing agreement will operate until such time as the new one comes into place. I know that the Minister was quite optimistic when he first went down to meet with his federal counterpart to work out this agreement, but he wasn’t as happy when he came back with it. So I am wondering, for the record, what it was that this government was hoping to get from the federal government under this new formula, and what is the stumbling block that is getting in the way of us achieving the kind of agreement that the Minister was looking for. Thank you, Madam Chair.

Thank you, Ms. Lee. Mr. Roland.

Thank you, Madam Chair. There were a number of areas that we’ve built the business case on for meeting with our federal counterpart, and there were areas that we also worked with our other northern jurisdictions, the Yukon and Nunavut. One of the critical areas was the adequacy argument, as we call it. That term adequacy can be defined by any number of groups to meet their definition but, in our case, it was to deal with the five percent cut to our base that happened in 1996 and to have that restored. We feel that it has been restored in all of the other jurisdictions through the CHST transfers. In our case, because CHST transfers didn’t affect us the same way, the federal government came in and said we’ll take it out of your base to be treating you the same as every other province. By doing that, they impacted us in a couple of ways; one, when all the reductions across Canada were happening, that further impacted us because part of our formula is based on provincial and local spending patterns. So we had that to deal with on top of the five percent reduction to us. We feel that since then, the provinces have been brought back up to the number of 1996 CHST transfers, but that hasn’t had the same effect on our expenditure base, and we’ve put that as our argument and one of the critical areas.

One of the other arguments and one that we continue to have is on the rebasing exercise of the formula. We feel that we are not getting the appropriate response out of the federal government and just the system itself isn’t working as it was designed we feel, and the rebasing measures, our tax effort on residents. The federal government takes a measurement of all of the provinces and territories and comes up with an average in a number of areas. They measure us to that and they say that they feel that we can raise so much revenue here in the Northwest Territories based on those measurements they take across the other jurisdictions and we fall short of it and we take a penalty because of it.

The last rebasing exercise happened in 1992-93. It is supposed to happen every five years, but because of the creation of Nunavut, that threw out the numbers that we had as the Government of the Northwest Territories and Nunavut didn’t have any numbers to go on. So it was agreed to by all parties that we would forego the rebasing exercise and redo that, and we are now up to that stage where we will be rebased. We accept that rebasing has to happen, but when you look at the numbers of 1992-93 to the rebasing year that we have solid numbers on, I believe 2001, 2001 is the final year of that exercise where they are using the figures. Let me be correct here, 2000-2001 figures, compared to '92-93 figures. We can show that in fact the Government of the Northwest Territories over those years has increased its tax effort by increasing rates and bringing in more revenue, and in fact over that time provinces have reduced their tax efforts. So we feel that, in taking that into consideration, we should actually have closed the gap between what the federal government considers is our tax effort and what we actually bring in for revenue. We feel that we should have closed that, and by closing that gap we should see a positive outcome to the rebasing exercise but, unfortunately, that is not the case. So we continue to put our business case forward and our arguments forward and are hoping for resolution to that area.

The other factor was on the GDP ceiling. Again, that was instituted back in 1990. What that did was if there were large spending patterns in jurisdictions, that would have meant a higher increase for us, that capped us, and that significantly impacted us in past years. That is the one area we can say we have got a positive result on. The federal government has agreed to remove that ceiling in other jurisdictions through the equalization formula the provinces get, so they have treated us in the same manner there.

One of the other areas we are working on is trying to enhance the economic incentive within our formula. Right now, for every dollar we earn in the Northwest Territories through our own source revenues, we get to keep 20 cents of that dollar. We are trying to bring that number up and work with the federal government. As we see it right now, with any new revenues we are getting we are losing a lot of those revenues through the formula back to the federal government. So that was one of the other key areas we were working on with the federal Finance department. Thank you.

Thank you, Mr. Roland. Ms. Lee.

Thank you, Madam Chair. Further to that, I believe in his budget statement, Madam Chair, the Minister stated that under the proposal being put forward by the federal government on our financing formula, we would only see an increase in the base in the amount of $7.6 million, which is about one-third of what I believe this government is hoping to be able to achieve; about $18 million more annually than what the federal government is proposing. So I would like to ask the Minister whether or not that $7.6 million to the base that the federal government is proposing is for every year going back to 1996.

Also, further to that, somewhat of a separate question, what is the time frame that we are looking at in terms of obtaining this new formula financing with the federal government? Are we looking at the next three months, six months, or does the Minister foresee this going for a long period of time due to many of the disputed points that the two governments have? Thank you, Madam Chair.

Thank you, Ms. Lee. Mr. Roland.

Thank you, Madam Chair. The $7.6 million mentioned in my budget address is starting in 2004-05 and moving forward from there, slightly escalated going forward. If we are to meet the target that we had hoped to get, you would have to add another $18 million to that. That is what we feel would have been the number based on our adequacy arguments. That is why we say we are $18 million short of that. We worked, again, with the federal Finance and meeting with the federal Minister, Mr. Goodale. We are hoping to have an agreement by the end of March, and there was some commitment to try to achieve that. With our disagreement on what was put forward initially in the meeting in Ottawa, there was a commitment to go back and discuss the options further. If we don’t get an agreement by the end of March, there is an option to carry on with the existing agreement on an annual basis and that is one of the options. We are hopeful that we would get some news from Ottawa in the very next few days or within a week or so. We know the federal budget comes out on the 23rd of this month, and we know that will have an impact on what we can expect. Thank you.

Thank you, Mr. Roland. Under general comments, next I have Mr. Menicoche.

Thank you very much, Madam Chair. In regard to the opening remarks and the budget address, the Minister speaks about reallocating $15 million from low priority spending to invest in higher priority areas. If I can ask the Minister, what specifically is referenced with that?

Thank you, Mr. Menicoche. Mr. Roland.

Thank you, Madam Chair. The area the Member is speaking about, reallocations are from within all the departments. They would find money from within areas that they felt they could give up. In our effort to reduce our expenditures as well as knowing that there is demand for increased expenditures, instead of just taking that right out of the budget a lot of that was refocused to what is considered to be higher priority items. So within our Department of Finance, there is little of that because ours is focused on revenues and managing that end of it, but within each department there has been different amounts given up by the departments to reinvest in other areas they felt were critical, but there were also sunsets to programs. Within this department, as I stated in my opening remarks, we have reduced our expenditures from previous years by 30 percent.