Releasing 2023-24 budget, GNWT says it has stabilized debt

The NWT government said it is on a stable debt footing for the first time in years as finance minister Caroline Wawzonek published the territory’s 2023-24 operating budget.

Much of the budget is status-quo, with some spending increases on specific projects but no major cuts to programs and services. There is more money for childcare thanks to federal funding and an increase in money for healthcare recruitment.

In a speech to MLAs, Wawzonek sought to shift the prevailing conversation from one about economic challenges to one about how things could go right.

“The future can or should be bright,” she earlier told reporters.

“A lot of numbers suggest that things are good. We have very strong employment indicators, we have high wages in the NWT, we are able to achieve an operational surplus that then goes to pay for our capital plan – not to be mistaken for the idea that we’re completely awash in cash.

“I’m extremely alive to the fact that we have growth in the public sector and we are not seeing a commensurate level of growth in the private sector. That is not long-term sustainable. [But] we have lots of opportunity. A lot of things will see growth in the NWT.”

She pointed to initiatives related to tourism, agriculture, exploration, and Hay River’s new fish plant as examples of areas in which the economy can grow, if not suddenly, then by allowing local job growth in various regions.

Wawzonek said there was no real philosophical difference between this year’s budget and the last one, yet one big change accompanying the budget is the territory’s projected debt outlook.

This time last year, the GNWT forecast it would break through its federally imposed debt ceiling of $1.8 billion in the next half a decade. Now, the NWT expects to remain $300 million below that ceiling for the foreseeable future.

The shift that created the new outlook, however, happened in last year’s capital budget and not this year’s operating budget.

In October 2022, the GNWT completely revamped its annual capital – or infrastructure – budget, making a spending pledge for the year ahead that was much lower than usual.

From a high of more than half a billion dollars a year, the NWT said it would try to stick to a cap of $260 million annually. The rationale? No matter how much the GNWT tried to spend in previous years, only so much ever got built. The territory thinks $260 million is the sweet spot.

One of the main ramifications of that October decision became clear on Wednesday.

Because the GNWT is no longer estimating spending of half a billion dollars a year on infrastructure, it has less need to borrow money. And as a result, more of the operating surplus the territory tries to generate each year – at least half of which has to be spent on infrastructure – can be spent on other things like paying down existing debt.

“We have now accomplished some stability in borrowing,” Terence Courtoreille, deputy secretary to the GNWT’s financial management board, told reporters on Wednesday.

“I am confident we are leaving the next assembly with a solid fiscal foundation on which to build,” Wawzonek told reporters, referring to October’s territorial election.

“I think we have a much better handle on debt than we did. The benefits of the capital planning change in the fall are now starting to show fruition.”

NWT forecasts $178M surplus

In general, the proposed 2023-24 operating budget contains no big shocks or large departures from years past.

The projected operating surplus for the NWT will be $178 million, with revenues up $182 million year-on-year and expenses up $135 million. Much of the new revenue comes from an increase in territorial formula financing, the federal payment made to the territory to help even out the gap between its own revenue without federal help (around $492 million) and its forecast expenses ($2.2 billion).

Not that projections always pan out.

Last year, for example, the NWT forecast an operating surplus of $131 million that is likely to become just $3 million by the time all accounting is complete. Devastating floods in communities like Hay River led to some $104 million in extra spending last year on flooding alone. Flood rehabilitation spending worth another $62 million is in this year’s budget.

The territorial government’s forecast expenses in 2023-24 are up 7.3 percent on 2022-23, roughly in line with local and national inflation, which officials said is accounted for in the budget. As ever, more than a quarter of territorial spending will be on health.

Alongside $10.3 million in federal funding for cheaper, easier-to-find childcare – a work in progress – other new spending in the budget includes around $10 million on “actions to make it easier to recruit and retain front-line workers” and $1.46 million to improve Student Financial Assistance.

There is also $922,000 in community government funding, which the territorial government said was the last payment in its plan to reduce the municipal funding gap by $5 million, a commitment Premier Caroline Cochrane’s government made three years ago. (Arguments remain about how the size of that gap is changing, and how effectively recent contributions from the GNWT have closed it.)

Spending highlights

Overall, the GNWT said there is new spending worth $82 million in this budget on “mandate priorities and enhancements to existing programs,” plus an extra $21 million “to address higher demand or higher costs for current programming.” Around $22 million extra shows up as an expenditure due to changes in accounting practices and amortization, the territory said.

Meanwhile, around $2.5 million is being saved through a reduction in contracting out across departments.

The territory picked out 49 separate spending highlights. A few from that list include:

• $4 million extra for Housing NWT’s core programming;
• $8.6 million to begin operating the Stanton Legacy extended care facility;
• $1.7 million to support a barren-ground caribou calving survey;
• $611,000 for “RCMP detachment resources in Behchokǫ̀ and Fort Providence;”
• $500,000 more “to support heritage centres across the territory;”
• $273,000 extra that will in part establish a permanent coroner position; and
• $50,000 “to make a business case for local production of cement.”

Wawzonek also highlighted a change in the territory’s approach to funding non-profits and efforts to increase spending capacity for emergency management, following two years of severe flooding and the ever-present threat of wildfires.

There remains little sign yet of Government Renewal’s impact on the operating budget, though the GNWT’s large shift in capital budgeting is in part attributed to that process. The finance minister launched Government Renewal, billed as a thorough inventory of how each department derives its budget and spends its money, in 2020.

“Substantive results are not ready to help with this year’s budget,” Wawzonek said of Government Renewal according to a written copy of her budget address prepared for the legislature, “but will start being produced in time for transition to the next Assembly.”

She told reporters that Government Renewal’s results may so far be “hard to see from the outside” but were resulting in meaningful culture change and “a system where we actually think about the value” of programs.

Budget ‘not crafted by community’

Wawzonek and cabinet colleagues have about another seven months in government before this fall’s territorial election. Wawzonek, who represents Yellowknife South, said on Wednesday she will seek re-election to a second term but said it was too early to address any aspirations beyond that.

In the coming weeks, regular MLAs will scrutinize the budget and ultimately vote on whether or not to approve it. Voting down a budget is usually the equivalent of a vote of no confidence in a government. A few elements of this year’s budget also hang on whether MLAs pass new legislation on carbon tax, designed to meet changing federal rules, that some MLAs have said they will oppose.

Wawzonek’s last budget, in 2022, passed by 11 votes to six after being voted against by an unusually high number of regular MLAs. Some of those in opposition said that budget offered too little for smaller communities.

“The budget isn’t crafted for this community or that community,” Wawzonek told reporters on Wednesday, saying discussions with MLAs had already begun.

“We’ve tried to be mindful of doing things for the government and the Northwest Territories and not by community.

“Do I think some MLAs will raise it? Yes, probably. Do I think what’s in the budget can answer it? I do.”