Thank you, Mr. Aumond. Mr. Dolynny.
Thank you. I’ll return to the firefighting expenditure at a point in time, but for now I’ll leave it. The Minister and I have differing views in terms of what an appropriation for supplementation is and what a full cost accounting is. I think the two are two different animals of two different entities. So we’ll get back to that in due course.
It looks like $60 million did affect the bottom line with respect to short-term borrowing, which has a definite impact on the $275 million of room that we have. Interesting when I was listening in earlier to Mr. Bromley’s response and we heard from the deputy minister that as of April 1st we’re back in a surplus position. I found that comment to be a bit of a concern because really I don’t necessarily see it as surplus, but really that we’re back into an operating room or short-term borrowing. It’s as if we’ve got extra money to spend or that we have money to spend for operating. So maybe it’s a culture thing, but surplus is not necessarily the word I’m looking for. More of a comment.
To the issue of the low rider offset that was promised by the government back in the fall of 2014, this was a $20 million promise that later was discussed in the House. What impact did that $20 million low rider offset at the Snare River have on this situation we have before the House?
Thank you, Mr. Dolynny. Minister Miltenberger.
Thank you, Madam Chair. There are two things. I’m assured that the 13 percent rate increase wasn’t put onto the backs of the ratepayers and cost about $20,000. Thank you.
Sorry, I heard $20,000. Can I get a clarification? Was that $20,000?
Thank you. I’ll get the deputy to be more specific. Thank you.
Thank you, Minister Miltenberger. Mr. Aumond.
Thank you, Madam Chair. For this fiscal year where we provided $20 million, a contribution agreement to NTPC for low water, which $15 million was to be used this year, it’s contribution to short-term interest expense between October when it was approved until the end of March 31st will probably be in around $16,000. Thank you.
Thank you, Mr. Aumond. Mr. Dolynny.
Thanks for the clarification. I would assume that a government is doing its due diligence when their times are tough, as we’re finding ourselves near this fiscal cliff and wall of worry and debt wall. I’m assuming the government has gone to every one of its cupboards, department cupboards, and looked at any lapsed spending, any sunsets that weren’t used, any re-profiled funds that may or could be used to help mitigate short-term cash position.
Maybe the department can explain what was done in order to really do a sweeping effect across departments in terms of trying to find that type of money that could be lying dormant in other areas that is not being profiled or used today.
Thank you, Mr. Dolynny. Minister Miltenberger.
Thank you, Madam Chair. We’ve been practicing fiscal discipline, the use of passive restraint. We’ve capped forced growth at very low levels, and those levels might, in fact, be required to drop further as we move forward. With the passive restraint targets, we’ve done things like Finance has done, which is gone through its own operation to make sure our house was in order and things like the Territorial Power Support Program. We’ve laid it all out in the main estimates and all the other documents that are going to be coming out of public accounts.
Thank you, Minister Miltenberger. Mr. Dolynny, your time has expired. I will ask committee, are there any other general comments on Bill 43? Mr. Bromley.
Thank you, Madam Chair. The discussion has raised one other question I have. When we pay off this short-term debt on the 1st of April, it puts us into a surplus positon, and I saw in the Minister’s budget address we’re in a surplus position for the next fiscal year. It’s predicted to be a surplus of I forget the amount. But just for clarity there, does that mean we will have a surplus until we take advantage of our short-term borrowing capacity at which time our net position will be debt of some amount? Is that correct?
Thank you, Mr. Bromley. Mr. Aumond.
Thank you, Madam Chair. On April 1st when we get our first tranche of our grant from Canada, we will have cash in the bank. We will not be in a deficit position. As we go through the fiscal year, depending on the cash burden, because it’s not evenly spread out throughout the month, some months are more intense than others, we will find ourselves incurring short-term debt to do that. That’s laid out in the budget papers and we’ve explained that to standing committee. What we are trying to do is set ourselves on a path of expenditure growth which is more sustainable whereby we mitigate our exposure to that in the future, but by the time we get into the third quarter we usually find ourselves in a cash deficit position to finance the operations of the government over the short term.
Just for my clarity, that means we are no longer in a surplus position at some point to the three-quarters of the way through the year or whatever. Is that correct?
Yes. We will be in a deficit position, which means we won’t have any cash available in the bank to fund operations.
So our Fiscal Responsibility Policy and the infrastructure principle of having 50 percent surplus available doesn’t happen. It’s not true at the end of the year until midnight on the 31st. A second later then we have that 50 percent available. Is my understanding of that correct?
The Fiscal Responsibility Policy says that we must have no more than 50 percent debt to finance any given year’s operations, so the debt that’s accumulated in short-term debt is infrastructure, some of it. A lot of it is based around, most of it is related to O and M expenditures of government, so from a fiscal responsibility standpoint, as long as we don’t exceed that 50 percent threshold for any capital expenditures in the given year, we’re okay, and we’ve been able to keep to that in any given year.
Then there’s the understanding that we would have surplus. Perhaps it’s not in the Fiscal Responsibility Policy. Fifty percent of our infrastructure budget would be based on surplus. If I could just get the deputy minister or the Minister to fill in that part of the equation for me.
The government, every year when it tables its budgets, projects an operating surplus to fund its infrastructure, and we’ve always been able to do that, so while a portion of the short-term debt would be infrastructure, as I said earlier, the majority of it is related to operational or day-to-day requirements to fund government operations. The operating surplus, by and large, for the most part, alleviates most of the cash burden related to an infrastructure spend in any given year, and again, the Fiscal Responsibility Policy limits that debt, whether it be long-term or short-term, to 50 percent.
Thank you, Mr. Aumond. Next on the list I had Mr. Dolynny, but could I go to Ms. Bisaro who hasn’t made general comments yet. Ms. Bisaro.
Thank you, Madam Chair. I just have a couple of comments and questions here. I appreciate the need for this bill to come before us, but it is somewhat concerning for me. We have encountered a number of expenditures which have been unforeseen. The fire season expenditure is the biggest one and the one that we were most unable to control. The $20 million for the low water surcharge, that was a conscious decision to undertake that payment, which put us into this situation, partly put us into this situation. The other one that was a conscious decision was accelerating the payments of the Inuvik-Tuk highway, because that project was moving faster, I guess, than we had anticipated. But at the time when FMB discusses these expenditures and discusses these payments that we will enter into, is consideration given to the impact that it’s going to have on our finances in terms of short-term borrowing?
For instance, with the Inuvik-Tuk highway, at the time that the decision was made to advance the payments, in that discussion, was part of that discussion the impact that advancing those payments would have on our short-term borrowing and did you look forward to this point of the year knowing that this bill was going to have to be amended because we were going to be over our borrowing limit?
Thank you, Ms. Bisaro. Mr. Miltenberger.
Thank you, Madam Chair. Yes. The impact on the borrowing limit at the time was considered along with what would be the longer term cost if we shut the project down and didn’t start it up again or try to start it up later in the season or lose half of a building season. It was determined that it would make far more sense for us to advance the money, keep the project going, keep the 400 people or 500 people employed, and have that benefit up in the Beaufort-Delta plus keep the project on target and on time.
At the time as well, that predated what we knew later to be the worst fire season in our history as well as an accompanying consequential effect of the fourth year of the drought, which was the low water.
Thanks to the Minister for that. It gives me some comfort, but I am concerned that we are seemingly taking on more and more expenditures and basically just saying, well, that’s fine, we can borrow the money. I can say that I’m not sure if you’re considering everything and, you know, do we really have to go this much into short-term debt. But I do have faith in the Department of Finance and I do have faith in the Minister, so to ask that question, I’m going to get a rhetorical answer. So I will say it out loud but not expect an answer.
If we pass this bill it will then increase our limit to $300 million for short-term borrowing. I would hope that we are going to be reducing our short-term borrowing over the next number of years as we hopefully manage our finances and reduce these extraordinary expenditures that we have been incurring. So is it conceivable that this bill would be amended to reduce our borrowing limit to try and get us back to a situation where we are potentially, it’s all in the eye of the beholder, but potentially better off by having a lower borrowing limit? Something that would kind of keep us down to spending the money we have as opposed to borrowing to pay our bills. Thank you.
As I indicated as clearly as I could in the budget address – I thank the Member for raising the issue – on a go-forward basis it’s going to be absolutely imperative that our expenditures don’t exceed our revenues and that we are putting in place the pieces that we need to have to ensure that everything we do keeps us under that operational ceiling. The short-term borrowing limit is something we want to free up as well. Three hundred million, $275 million, I mean, if we are able to hit our fiscal plan, we’ll have it, but we won’t be necessarily required to use it, barring more catastrophic events that cost us money that no one could have anticipated.
Like the borrowing limit on a credit card that I have, I have a ceiling on it, a borrowing limit. I very rarely get there, but it’s nice to know that I have it if I need it. Very similar in this case, but we’re going to take the steps and we are taking the steps to in fact do the things that the Members talked about. It’s going to be not without some challenge to do that, but I think everybody recognizes the need that we are at that point where we need to do those things to ensure that our expenditures and our revenues don’t exceed each other. Thank you.
Thanks to the Minister. I have no further questions.
Thank you. General comments. Next I have Mr. Dolynny.
Thank you, Madam Chair. I would like to continue my questions regarding looking at every possibility of re-profiling some of the money that is currently in our departments. Can the department indicate to me, when I use the term “vacant, unfilled positions,” these are jobs that we’ve put money aside for. These are jobs where the government has said, you know what, thank you very much for allowing us to fill these positions. We’re going to set aside money for these positions and these are vacant, unfilled positions.
Can the department indicate to us what happens to that money during the course of the year? Thank you.
Thank you, Mr. Dolynny. Minister Miltenberger.
Thank you, Madam Chair. It’s all accounted through the variance process. There’s ability to move money between activities in a department, so the money is always all accounted for at year-end. Some cases, like in capital, will have carry-overs. I will ask the deputy if he wants to add anything further on that particular issue. Thank you.
Thank you, Minister Miltenberger. Mr. Aumond.
Thank you, Madam Chair. In ’14-15 there is a passive restraint target for each department that they have to lapse a certain amount of their budget and the total of that is almost $10 million. So there already is a corporate process in place to try to make sure that we don’t exceed the appropriation and, in fact, try to help out dealing with our cash position. You know, so in terms of re-profiling to try to deal with this, as I said, there’s already an exercise in place to do that.
With respect to what happens to any unspent or appropriated money in the department’s budget, the Minister provided an answer to that question.
Thank you, Mr. Aumond. Mr. Dolynny.
Thank you, Madam Chair. Over the course of the last year or so the issue of job vacancy has been talked about in the House. It’s been literally quizzed to death, you know, for the lack of a better use of the terminology and statistics. We have about 1,000 jobs that are vacant – I’m using whole numbers here – in which at any given time there’s a number of them that are being listed to fill.
So for basic math, let’s say 500 of those jobs perpetually are not being filled during the course of the year. Now, it might be high or it might be low, that’s not the point, at an average wage rate of $100,000. So if we have 500 jobs at any given time, rolling average for the course of the whole year where we appropriate and set aside, on average, $100,000 for each one of those jobs, that’s $50 million.
Can the department indicate to me, what happens to those so-called 400 or 500 jobs per year where they’re still left vacant, they’re unfilled and we’re hearing there’s a passive restraint of $10 million? I’m talking almost five times that amount of money, given the statistics that we have been given in the House. Can I get some rationalization as to are we talking about a bigger sum of money out there that we could be re-profiling and we’re not? Thank you.
Thank you, Mr. Dolynny. Minister Miltenberger.
Thank you, Madam Chair. When it comes to the vacancies there’s any number, a host of things that could affect those particular jobs and you’d have to go over them almost position by position. Is it maternity leave issues? Is it a transfer assignment issue? Is it one where it’s difficult to fill and we’re doing a contract arrangement? As a government we haven’t fully funded the benefits for departments. We fund $17 million and it’s actually $23 million, so there’s a 6 percent spread and departments have been told to fund that from within. So what departments have done historically is looked at their vacancy rate to free up that money, which can be a significant amount of money if you have a very large staff complement and you’re short 6 percent on pay and benefits. You have to also be able to absorb, in some cases, retirement costs, which is an issue we’ve been making efforts, as a government, to in fact now start to fully fund departments so that we can get away from that and have, as the Member’s pointed out, a clear accounting of what money is being used and where it’s being spent. So, Madam Chair, those are some of the issues that would eat up some of that money that is there in vacant positions. Thank you.
I’ll leave that question as is. I’m still a bit perplexed doing the math. Given the vacancy rate that we have, the number of positions we have and still, at the end of the day, it appears that there’s money being tied up into vacant, unfilled positions to which, I believe, would have a huge benefit of accessibility should that money be profiled, or re-profiled for cases such as this where we need short-term money, especially near the end of the year when we’re really hitting the odometer reset in less than a month for April 1st. So again, it’s an accounting exercise of large proportion, but I did have to ask that.
Changing gears, Madam Chair, I want to talk about the corporate and personal income tax, or the collection of them. Last year at this time, if I recall, we were dealing with a collection mishap, or a collection faux pas, where we missed the mark, so to speak, on both the collection of corporate and personal income tax to the potential tune of about $38 million. That number is very slightly in some of the narratives in the House in the past year, but for the sake of argument, this was a $38 million miscalculation.
Can the department indicate, you know, we fast forward to today, what circumstances today have affected our short-term borrowing with potentially the miscalculation again with the short-term borrowing in relation to personal and corporate income tax collection? Thank you.
I’d just like to comment on Mr. Dolynny’s final comments about vacancies. I want to acknowledge that it is an area, as we move forward and as we hew to that very tough line of not having our expenditures exceed our revenues, that there is going to be, I would suggest, ongoing scrutiny of the whole area of staffing vacancies. We have over 5,000 employees. We fund a veritable army of casuals and relief workers and it’s roughly an $800 million part of our budget, which is a very, very significant amount of money.
Clearly, as we move forward and look at how we’re doing things and how we account for things, that is an area, as the Member pointed out, that’s going to require continued scrutiny. I just wanted to acknowledge that to the Member.
In regards to our estimates on income tax, we’ve been relying on federal projections. We’ve indicated that we’re going to move to our own five-year rolling average. The federal projections are based on a snapshot in time and they look forward through that lens of that snapshot and they give us numbers. It also points to the vagaries and the fluidness of how you file corporate income tax, the latitude that corporations have. When they file, how they file, how much they file, where they file are some of the things that we have to stand and wait to see what’s going to happen. In the case of this particular circumstance where we have to repay a payment because we were overpaid because of the calculations and projections that were off, we have to manage all of those things and it’s not, clearly, an exact science.
I’ll ask the deputy to provide some more detail in regards to that particular issue for Mr. Dolynny.
Thank you, Mr. Miltenberger. Mr. Aumond.
Thank you, Madam Chair. With respect to short-term interest rates, the amount of corporate income tax collected doesn’t really have an impact, given that the federal government gives us the payments based on their own projections and there’s a reconciliation process that takes place and we also try to estimate what we think what we will be getting. But when there is an overpayment…so the overpayment that the Minister spoke about in his opening address is really from the 2012 year. The overpayment is almost like an interest-free loan for the GNWT and the fact that we pay it back in installments over three years, there’s no interest and then we make a payment for what’s left over at the end of year three.
So, from a short-term interest perspective, other than the fact that we have to pay it back, there’s no real impact on interest. There is an impact, though, as the Member stated, on total revenue which the government uses to operate. Again, as the Minister stated, there’s a challenge in that as experienced not only by ourselves but by every other jurisdiction in the country. Thank you.
Thank you, Mr. Aumond. Mr. Dolynny, your time has expired again. Any other Members for general comments on Bill 43? Mr. Dolynny.
Thank you, Madam Chair. Thank you, colleagues, for allowing me a third round here. I’ll try to be brief.
I appreciate the analogy that the Minister indicated earlier about a credit card. Typically how I look and view the short-term borrowing is very close to a credit card ability where we’re having some revolving money, we make payments and hopefully at the end of the year we get a lump sum so we can pay off our full credit card and we can start the process off again.
I’d like to backtrack to about two years ago when this issue of borrowing increase hit the floor of the House here, where had a $175 million borrowing capacity in our short-term line of credit. At that moment in time, discussion ensued around increasing that to the current $275 million that we have before us now and we are looking at an extra $25 million with this bill.
I guess the question is, we had a credit card that was working fine with the government for, literally, I think it was close to 16 years. Clearly, there have been some fundamental changes vis-à-vis. Again, I understand there are issues of acts of God, little water and fire that basically have caused some issues. But fundamentally something has changed in the way we do business, where this $275 million, this extra $100 million that we increased in our short-term borrowing no less than two years ago has definitely dealt with how we deal with our revolving ins and outs on short-term money revolving in our government.
Can I get some explanation of what are some of those very large, unforeseen, outside of the bigger issues that we talked about here? What were some of those big issues that really have eaten that so-called $100 million of extra grace, so to speak, that we’ve given under this short-term borrowing? There has to be something fundamentally that has changed in the way we do our books. Thank you.
Thank you, Mr. Dolynny. Minister Miltenberger.
Thank you, Madam Chair. In this Assembly and the previous Assembly, for sure, have had very ambitious agendas. We’ve had very significant commitment to trying to beef up our infrastructure. During the life of this government, as I pointed out in the budget address, we have delivered or will have committed to deliver about 1.2 or 1.5 billion dollars of infrastructure. The last government was in the same circumstance.
We made a conscious decision. If I could point out, when we went down, when we hit the big economic crisis in 2008, we made a conscious decision to spend money, like every other government, to do everything we can, and could at the time, to prop up and put money into the economy. As businesses retreated, retrenched, cut expenditures, laid people off, limited their capital and suffered the consequences of the big market downturn, we spent money and we consciously did that as a Legislature to do our part. The federal government did theirs. We took advantage of every cent of the Building Canada programs. We’ve made investments because we know ideally… If we were just going to say we don’t have the money, we wouldn’t be doing Stanton. We’re not going to take any risk. We’re not going to have any sense of vision of making long-term investments. We wouldn’t be doing the Tuk-Inuvik highway. We wouldn’t be doing any of these things.
This is an operational issue. We have almost a $2 billion budget. We have an $800 million borrowing limit. Half of that borrowing limit is taken up on us by things that we don’t drive personally as a government out of our operational money. It’s paid for; NTPC debt, housing, most of the bridge. So in actual fact, for a $2 billion corporation we have roughly a $400 million borrowing room which, in my mind, when we look at the $3.8 billion infrastructure we have, when we look at the things we want to do and we know we need to do with infrastructure is very, very modest.
I would also point out that as we focus on this, when you look at the big picture, we have an Aa1 credit rating, we have one of the best debt to GDP ratios in the country, our interest charges versus our revenue which is maxed out at 5 percent under our fiscal borrowing limit is 1 percent. So we’re a very big, complex operation and this is an operational requirement and things have happened.
We have been dealing with the aftermath and the need to actually continue a lot of those investments because the economy, as we know, hasn’t recovered. Our economy is only 75 percent of what it was back in 2008.
A government’s responsibility is to manage risk, take risk, have enough vision to see when it’s time to make investments, and manage the money and still have things like the Aa1 credit rating. All those things have contributed to what the circumstance is we have today, layered on top with the fire season from last summer, fourth year of a drought that has dropped water levels, and this conscious decision, this wise decision by this Legislature to say we’re not going to sit here and add 13 percent to power rates and then say we’re concerned about the cost of living in the next breath.
So all those factors, Madam Chair, contributed to the circumstance we are in today.
I see the passion and I hear the passion with the department on this. I applaud the work that the department is doing. I want to say that, for the record, but I also want to say what’s modest for some may be seen as extremely high risk for others. As a Member of this House, I need to make sure that all voices are thought of when we’re doing these large, monumental and paradigm shifts in thinking when it comes to expenditure control and borrowing limits. I do appreciate what I’ve heard, but I’m doing my due diligence, Madam Chair.
As we heard from the Minister – and again this is before committee, but because it was brought up, I’ll speak to it – that there’s a borrowing plan within the new Financial Administration Act that would help with these types of processes in the future. Unfortunately, we don’t have that plan before us today. This is a tool that I’m assuming, because I haven’t seen the matrix and the analytics behind it that would definitely help us understand cash flow and help us better understand our spending and our spending habits. Because it’s not before the House, it’s almost moot to be discussing it at this point. I’m enthused that we will see it, but it’s not here.
I want to leave this with this last issue here. That’s going back to the issue of firefighting expenditures for the 2014 season. It makes it very difficult, extremely difficult for a Member on this side of the House to look at borrowing more money or allowing the increase of a borrowing limit when we haven’t done the full cost accounting, that full exercise which was promised by the Minister at least half a dozen times publicly. I’m enthused we are getting there. But this sounds like an exercise that’s not going to take place until way into March or April, which is way after the time period in which we’ve got to make a decision for this bill, which is problematic in my books. That’s the cart before the horse. Unless we can do a full cost accounting, it makes it extremely difficult for me to understand the rigours of where our costs were for that fire season. How did we spend our money? How was our MARS agreement? How did it work? What was our overtime position? How did we use our contractors? The list goes on and on. I still haven’t had answers to my questions and I have a lot of questions. I have $60 million worth of questions that still need to be asked and answered.
I’m going to leave it at that. Again, I’m a bit disappointed that there’s a lot of faith that’s coming to the floor of the House here and bringing substantiation of this magnitude. We need to increase $25 million more to our short-term borrowing because this is what we need. We need the vision. We need to take the risk. Clearly, this was granted two years ago. We granted this government $100 million of leeway to do exactly what we’re talking about. For us to come back two years later to top it up another $25 million is extremely problematic for me to wrap my head around.
With that, Madam Chair, I would like to thank you and thank the department and committee for allowing me the opportunity to speak to this. Thank you.
We have come up with a final supplementary request for the cost of fire season, which is roughly $60 million when you look at all the money including the money we had in the budget. We can account for that. What is being done, the full cost accounting, since the end of fire season is an operational review of how we are structured, how we’ve done business, the final accounting of what our expenditures were, communication issues. We’ve heard any number of suggestions from the communities on the issue of fire smarting, the command and control structure of firefighting, all those types of things.
The actual money piece is there and I appreciate the Member saying he has $60 million worth of questions. I have to say if that’s the case, then we would be providing $60 million worth of answers, which I believe we can do. I take the Member’s point, but I want to reassure him the money issue has already been decided for fire season. The operational review isn’t going to change that bottom line. It will help us with our planning as we go forward, which is what we intend to do and we’re going to get in front of committee as soon as we can. Thank you, Madam Chair.
Thank you, Mr. Miltenberger. Any further general comments? If committee is agreed that there are no further general comments, can we now proceed to clause-by-clause review of the bill? Agreed?
