Thank you, Mr. Speaker. Mr. Speaker, I would like to take this opportunity to update Members and NWT residents on this government’s fiscal position and outlook.

When I presented the budget in February, we were looking at a fairly positive fiscal situation, both in the short and long term. At that time, we forecast a 2004-05 year-end operating surplus of about $44 million, primarily the result of the increases to our formula funding grant and federal health transfers arising from last fall’s First Ministers meetings.

Despite receiving these additional funds, our interim public accounts will show an $18 million deficit for the year 2004-05, as a result of retroactive changes to corporate income tax entitlements, along with booking a liability for the Giant Mine remediation.

The corporate tax changes relate to a refund to a company filing an amended corporate tax return for the 2000 tax year, claiming subsequent offsetting capital losses against previous income. This claim is expected to reduce GNWT corporate taxes by $36 million. Given that the federal government has been the primary beneficiary of previous large corporate income tax windfalls, we believe it is incumbent on Canada to compensate the GNWT for this lost revenue. If we receive a positive response to our claim to Canada, we will reflect this in an upward revenue adjustment on the grant side. At this time, however, our accounts must reflect the lower tax revenue.

The second issue relates to the conclusion of a cooperation agreement with Canada respecting the Giant Mine remediation project. This agreement means that we will be accruing a liability of $23 million to reflect the

GNWT’s share of the liability of this remediation. Approval for this expenditure will be sought in a supplementary appropriation.

These are both one-time events which will not affect future fiscal years’ revenues or expenditures, although the reduction in CIT will have a temporary effect on tax revenues in the next few years as it works through the federal process of tax estimates and adjustments.

Mr. Speaker, on the positive side, our current outlook for the present fiscal year is only marginally lower than the February forecast.

We continue to face the same uncertainty, however, regarding our fiscal arrangements with Canada that I outlined in the budget. New rules for formula financing after 2005-06 will not be established until after the federal Expert Panel on Equalization and Territorial Formula Financing provides its recommendations. The panel is scheduled to report in late 2005. In addition, we are still discussing the terms of a resource revenue sharing arrangement with Canada and the Aboriginal Summit. Until these issues are resolved, we cannot predict with certainty our revenue levels or how economic growth will affect our fiscal situation.

There are many outstanding federal-territorial issues, in addition to formula financing and resource revenue sharing, which will affect our fiscal situation and our ability to pursue our goals. These include the need to deal with the social and economic impacts of development on our residents and our communities, the need to change the borrowing limit, the negotiation of federal gas tax funding for communities, and many more.

Mr. Speaker, our fiscal relationship with Canada is at a critical point. Canada must recognize that if we can make progress on these issues in ways that reflect the unique circumstances in which the Northwest Territories finds itself, we can make lasting changes that can permanently improve the quality of life for NWT residents and benefit Canada as a whole.

The revenue and expenditure changes I have just discussed today do not warrant change to our basic fiscal strategy. We will continue to pursue the fiscal responsibility policy I outlined in the budget in February. Our territory’s economic prospects remain strong. The recent decision by De Beers to proceed with the Snap Lake diamond mine will support strong economic growth in 2005 and 2006. We remain optimistic that the Mackenzie gas project will proceed on schedule.

Mr. Speaker, we will continue to follow the path outlined in the budget. Thank you, Mr. Speaker.

---Applause