Debates of March 24, 2004 (day 7)

Thank you, Mr. Speaker. Mr. Speaker, my questions today are for the Minister of Finance. During the course of discussion and debate about our budget over the last few days, and the days that will be ahead I am sure, we keep talking about the sustainability of our programs and services given our sources of revenue and our transfer from Canada. Mr. Speaker, if the Minister could be so succinct, what is it exactly that he sees at the end of the tunnel here? Where is the light at the end of the tunnel for us? We have been grinding on Ottawa now for so long for a better deal, I am starting to lose faith in that concept. Is the answer ultimately resource revenue sharing, that being the new deal? If so, realistically how far away is it? Thank you.

Minister of Finance, Mr. Roland.

Return To Question 72-15(3): Formula Financing And Revenue Sharing

Thank you, Mr. Speaker. Mr. Speaker, the sustainability we have moved forward is something we have to deal with as a government, and have to deal with it within our existing envelope. There are ongoing discussions and will be ongoing discussions with the federal government around the adequacies of our formula tax effort, re-establishing our base. There are also discussions about royalty revenue sharing. That is an important picture, it is an important item, but right now as our strategy is laid out that is outside of what we can count on for funds in the Northwest Territories. We see it as definitely an asset.

If we can get a fair royal revenue sharing deal with Ottawa, then we can start dealing with our own issues and enhance our programs. Right now, operating with what we have as a budget, we don’t have enough, and the numbers that are laid out now are built into our budget, built in for years forward, and we still don’t have enough, we are still going to have some deficits going forward. So we have to deal with our structural problem. That is why our reduction scenarios are there for the future years of $20 million and $20 million, and our increased revenues. As we set out our fiscal strategy when we first got together in December we needed, just to get to our position of a $50 million deficit, we were counting on $10 million of our own source revenues, $10 million in reductions, and $30 million from the federal government. Through the process, the federal government hasn’t put $30 million into the basket. So we were planning on coming back with a negative supp to just maintain what we put forward as a plan, another $10 million negative. With what has happened now in the formula, this $50 million break that we have means that we won’t have to come back with a negative supp, we will have a balanced budget, but our ongoing structural problem remains. We still are spending more money than we have in revenues, and right now, as I stated in my budget address, if we could see revenue flowing by 2007 that would be very optimistic. Thank you.

Supplementary, Mrs. Groenewegen.

Supplementary To Question 72-15(3): Formula Financing And Revenue Sharing

Thank you, Mr. Speaker. So, Mr. Speaker, when we talk about resource royalties comprising a part of our revenues, is the Minister saying that when we get those that those are going to be on top of what we already get from Ottawa, or isn’t that just going to diminish what we get in the form of other revenue from the federal transfer? Thank you.

Minister of Finance, Mr. Roland.

Further Return To Question 72-15(3): Formula Financing And Revenue Sharing

Thank you, Mr. Speaker. Mr. Speaker, the Member is correct in a sense of how those royalty revenues would impact on transfers. The federal government would use that as an opportunity to drop the transfer payments, but at the same time, what we are trying to negotiate is a better deal where we would get to keep a larger portion before the federal government takes back from our transfers. So an actual incentive. Right now there is very little incentive to do any development in the Northwest Territories for, number one, any new revenues we get, we get a drop in transfer payments. That already exists today. So if we get more corporate taxes and so on we are going to drop down on our transfers. That happens today.

On the royalty revenue side, if we can negotiate a more positive deal we get to keep more of that. Today, existing in the formula, for every dollar we raise in additional revenue from the Northwest Territories we get to keep 20 cents of that dollar, 80 cents goes back to Ottawa. That is the way we lose it in the transfer. So we are hoping to increase that incentive, instead of 20 cents more where we can really start beginning to see a net revenue and result coming to the Northwest Territories where then we can really enhance the programs that we have. Right now the way it is there is no real incentive for us as a government to see big development because we get to deal with the impacts of development, we don’t have the payback after development happens and companies start making profits, and we don’t get to see the royalty revenues side of it. So that is the negotiations side, but optimistically we would be lucky to see that by 2007. So we have to, as I have set out in a fiscal strategy, live with what we have and try to operate and fix our structural problems around our debt situations going forward. Thank you.

Supplementary, Mrs. Groenewegen.

Supplementary To Question 72-15(3): Formula Financing And Revenue Sharing

Thank you, Mr. Speaker. I would like to thank the Minister for that explanation because I believe there is a perception out there in the public in the Northwest Territories that there is, not quite the way the Minister describes it, but there is some utopia coming here to our fiscal situation as a result of these negotiations taking place on resource royalties. One of the questions that was posed to me by a constituent was with respect to the tax initiatives the Minister has proposed. They were wondering when we get this deal, and when we start to see the kind of revenue we need to sustain ourselves here in the Northwest Territories, would the Minister consider including in the legislation a sunset on those kinds of revenue raising initiatives. So that is why I am trying to put this question into context so that people can understand that it is not going to be a magic one-time bullet, it is a transitional ongoing negotiated thing. To the question of my constituent, is it possible that on some of the either reductions or revenue raising initiatives such as additional personal income tax, is it possible to build some kind of a sunset in those, just like what the Conservatives did with the GST that we are still waiting for? Thank you.

Minister of Finance, Mr. Roland.

Further Return To Question 72-15(3): Formula Financing And Revenue Sharing

Thank you, Mr. Speaker. Mr. Speaker, part of what we are putting forward in this strategy that we have and balancing our budget is increasing our own revenues, taking into the scenario that there is going to be a growth and demand of services. As we argue right now, we are not able to keep up with what we have, we are not able to keep up with the level of capital infrastructure that we should be putting into our communities and replacing existing facilities. We are not able to keep up with that because of our fiscal situation. So we have a long way to go before we can look at sunsetting some of our programs or our tax initiatives. What we put forward, again, based on what we discussed as all new Members when we got here, was $10 million of our own source revenues, $10 million reductions and $30 million from the federal government. We haven’t gotten that $30 million from the federal government. What we did was get a one-year break in trying to work out our tax effort. So we still have a problem that is going to hit us in 2005-06 with our expenditure side of the picture versus our revenue side. So we still have to fix that. Future governments, if things get so good that we become a have-territory, then future governments can as they have in the past reduce some of the tax effort that we have to put in place right now. Thank you.

Final supplementary, Mrs. Groenewegen.

Supplementary To Question 72-15(3): Formula Financing And Revenue Sharing

Thank you, Mr. Speaker. Mr. Speaker, the tax initiatives that were referred to in the budget address by the Minister have sort of grabbed the attention of the public here, and that is why we are getting questioned about it and it will be necessary to talk to people about this. So thank you for that explanation and I think that definitely does put it in context that this is probably not a short-term thing. I think it will generate a lot of response from the public and I am hoping that the Minister will make himself or his officials available when we return to our constituencies to get out and about and talk to people about these fiscal realities because it is difficult to understand. Does he have a plan or program to consult, communicate even after the fact on some of these revenue raising initiatives that he is proposing? Thank you.

Minister of Finance, Mr. Roland.

Further Return To Question 72-15(3): Formula Financing And Revenue Sharing

Thank you, Mr. Speaker. Mr. Speaker, I would be glad to arrange with Members of this House meetings and trips into their communities to try to lay out what we have put in place, to explain the reasons why. There is a lot happening in this area and we need to get that across to Members and their constituents. When we took office and I took on this responsibility, it wasn’t my intention and a target that I would automatically go after taxes of our own people in the Northwest Territories.

The unfortunate reality is we have to come up with some new revenue to maintain the existing level of programs and services. We have already heard from Members in this House of the need to try to continue some of the programs that are being sunsetted, that were already planned to be sunsetted. When we come forward with reduction scenarios in the future years there is going to be a request to have some more of these programs in place, and we are just unable to do that at this time. We have to come up with our program to match our situation. So that is why it has come forward. I will gladly arrange to go into communities with Members to try to explain through our process. Thank you.