Later today I will be tabling the public accounts for the 2005-06 fiscal year. I am pleased to report that the government ended the previous fiscal year with an operating surplus of $36 million, $18 million higher than the amount projected in last February’s budget. This is good news as a sufficient operating surplus is critical to the funding of our infrastructure plan.

The current interim territorial formula financing arrangements with Canada are scheduled to end on March 31, 2007. There has been considerable discussion of potential changes to the federal government’s approach to formula financing, including the release this past spring of two important reports on the matter by the federally appointed Expert Panel on Equalization and Territorial Formula Financing and the Council of the Federation Advisory Panel on Fiscal Imbalance. These reports have received careful consideration by the provinces and territories since their release. We are pleased both reports support the joint recommendations of the three territories with respect to TFF.

Following the release of the reports, the Government of Canada indicated that it would be considering the recommendations it had received and would be developing proposals both for TFF and for equalization for discussion with the provinces and territories. I had the opportunity to privately discuss TFF with the federal Finance Minister, the Honourable Jim Flaherty, and my provincial/territorial colleagues at a meeting of Finance Ministers in Niagara-on-the-Lake in late June. Canada’s message was to expect measures to restore fiscal balance to the federation in the 2007 federal budget.

It has become clear that consensus regarding some critical aspects of equalization, such as the treatment of resource revenues, will be difficult to reach. However, both the Premier and I were able to secure the support of our provincial counterparts in calling for Canada to proceed with the development of TFF arrangements that would serve as the basis for federal transfers to Nunavut, Yukon and the NWT.

In addition to the review of TFF and equalization, Canada has been pursing the consultation process laid out in the federal budget for other intergovernmental fiscal issues, such as the federal spending power, the allocation of unplanned federal surpluses, infrastructure and transfers for programs such as training and post-secondary education. These issues are also expected to be addressed in the 2007 federal budget.

We have requested Canada to lift the current $300 million limit on our government’s authority to borrow. Our intention in pursuing this change is to permit borrowing for careful investment in infrastructure across the NWT in accordance with the GNWT’s fiscal responsibility policy. Infrastructure investment is vital if the government is to effectively support economic and social development in the NWT.

An increased borrowing limit will provide flexibility to meet our cash requirements in a fiscally sound manner. Minister Flaherty has advised me a response to our proposal on the borrowing limit will be provided later this year.

Mr. Speaker, in his speech in the Great Hall in August, Prime Minister Harper stated that he is committed to renewing and strengthening TFF. In September, Minister Flaherty stated the federal government is determined to be a government of practical progress on the crucial economic, geopolitical and social infrastructure priorities that reflect the values and principles of Canadians, including the restoration of fiscal balance. We are encouraged by these statements and look forward to renewed and strengthened TFF arrangements to help us achieve practical progress towards the priorities of NWT residents.

Until our future fiscal arrangements with the federal government are known, the GNWT must continue to exercise caution in spending. This means we must carefully consider all information, including input from legislative committees, before we confirm incremental growth to government spending.

Mr. Speaker, I would like to note the GNWT’s intention, subject to anticipated federal increases to increase the dividend tax credit for NWT residents investing in Canadian corporations. The change to the NWT Income Tax Act will parallel measures announced in the May 2006 federal budget designed to minimize the incidence of double taxation of dividends. The higher dividend tax credit will reduce the personal income taxes NWT residents pay on taxable dividends. In addition, a more comparable treatment of dividends, interest and flow-through disbursement will encourage NWT businesses to base their legal structures on solid business reasons rather than tax considerations.

This government remains committed to doing its part to manage GNWT fiscal resources wisely and to invest in the needs and economic future of NWT residents. We look forward to Canada moving forward on key fiscal issues, so that we can plan with certainty for the challenges we face. Thank you, Mr. Speaker.

---Applause