NWT reveals budget, and ideological chasm, amid strike threat

The Northwest Territories placed infrastructure at the centre of its 2019-20 budget, illustrating stark differences in vision between government and union leaders as a strike is threatened.

The territorial government believes big infrastructure projects are vital to the NWT’s economic future. The new budget duly uses an expected $60 million operational surplus to help fund them – not, in itself, an unusual move.

However, the Union of Northern Workers (UNW) has called for money to be diverted from infrastructure to give GNWT staff improved pay.

Up to 4,000 GNWT workers will walk off the job on Monday unless a collective bargaining deal is reached in the interim.

Using an operating surplus to fund new construction is by no means a new tactic – the territory has done so before – but Wednesday’s budget underscores the territory’s determination that this is the right approach, in the face of a protracted labour dispute partly fuelled by this exact type of spending.

“We should borrow responsibly for infrastructure that delivers benefits for our residents today and tomorrow, with a clear plan to repay that debt,” the NWT’s finance minister, Robert C McLeod, told the legislature on Wednesday afternoon as he presented the 2019-20 budget.

“We have the oldest infrastructure in the country and a significant infrastructure deficit that creates challenges for economic growth and contributes to our high cost of living,” McLeod continued.

In this story: Scroll down for the basic numbers

In this story: Scroll down for point-by-point budget highlights

McLeod’s speech, and the budget, make clear the conflicting approaches of the territorial government and union to winning the hearts and minds of workers and residents, at what increasingly appears to be a defining moment for the territory.

McLeod said spending on key projects would “leave a legacy for future generations,” appealing to a long-crafted vision of delayed gratification: a transformed NWT – eventually – with cheaper power, more mines, more tourism, and more money for everyone.

The union, by contrast, says money should be going to staff now, not later. The UNW talks of future generations in terms of union members’ families and children as the cost of living increases.

Against this deeply uncertain background, the NWT still projected 2.1 percent growth in its economy in 2019, up from an estimated 0.3 percent in 2018.

The territory says that growth will come from diamond production (said by some analysts to be at its global peak this year), a resumption in oil extraction, and government cash flowing to companies from projects like building the Tłı̨chǫ all-season road.

For the first time in three years, overall revenue is expected to increase.

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The basic numbers

Here are headline figures from the 2019-20 budget. Our full report continues below.

The GNWT says it will spend $1.873 billion and receive $1.933 billion in 2019-20, for a projected surplus of $60 million over the year – but wait, don’t get excited, because we’re about to spend that money somewhere else.

That $60 million will help to pay for infrastructure costs, totally $199 million, already outlined in a separate budget approved last October, the territory said.

Adding operations and infrastructure together after all that, the NWT is expected to lose $7 million in the coming fiscal year.

The territory is already in debt. That $7 million is added to the short-term debt pile, which will now total $325 million.

Overall, the NWT’s total debt – in all forms – is expected to reach $1.1 billion, which remains below the territory’s federally imposed cap of $1.3 billion.

(The NWT says its federal borrowing cap may increase, in time, to ensure big-ticket infrastructure projects can be completed. Talks with the federal government have begun.)

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Key infrastructure projects identified by the territorial government include the Taltson hydro expansion, Mackenzie Valley Highway, and Slave Geological Province road past the diamond mines to Nunavut.

All three are designed to spark investment in the NWT, which the territory hopes will turn around relatively gloomy long-term economic prospects as presently operating mines begin to close in the next decade.

However, the UNW has long maintained the territorial government cannot say it has no money to meet the union’s pay demands, while continuing to invest hundreds of millions of dollars in such projects.

The territory’s financial calculations include pay increases for staff based on its latest offer to the UNW, and that figure is included in its projected level of short-term debt. Any increases in salary beyond that would result in extra debt, Department of Finance officials said.

‘Fiscal reality can’t be ignored’

Robert C McLeod’s speech on Wednesday, unlike an address from the premier a day earlier, directly tackled the issue of collective bargaining and the looming strike.

McLeod said the territory has been trying to cover escalating costs of existing programs with what amounts to a 0.7 percent annual increase in revenue.

“We value the public service that delivers our government programs and services,” he said. All of us … have friends and family that are part of our public service and no one wants to see job action.

“However, our fiscal reality can’t be ignored. Increasing spending beyond our revenue growth would mean we would need to reduce spending in other areas, increase our revenues through additional taxes, or increase our debt that future generations will have to pay.

“There are no other choices,” said McLeod.

“To our residents, I commit to you that this government will do everything within our power to reach a fair collective agreement without abandoning the needs of our residents or compromising the future of the Northwest Territories. This is a difficult balance, but one we must achieve.”

Closing his speech, McLeod said infrastructure projects will help the government use its money to support local economies.

He also warned MLAs to plan “a frank evaluation of our various economic strategies,” admitting the NWT has struggled to diversify its economy and remains reliant on mining and similar heavy industries.

McLeod urged: “We need mineral exploration now if we want to have replacements for the maturing diamond mines.

“Ultimately, we need economic diversification to strengthen the sustainability of our economy. We compete in a global market, whether it is exporting resources or
attracting tourists.

“Changes in the global economy are directly transmitted to ours through resource prices and the demand for our products. To be clear, just because overall things are not so bad, does not mean that there are not cracks in the foundation.”

Carbon tax

Carbon tax appears in the NWT’s budget as a significant line item for the first time.

The territory said it expects to earn $16.2 million from carbon tax, give back $12 million in rebates, and use the remainder to help build wind turbines in Inuvik.

In his budget statement, McLeod more-or-less acknowledged the NWT’s carbon tax regime is designed to satisfy a federal requirement and, in present form, does not do much.

“Carbon pricing is not expected to significantly reduce greenhouse gas emissions in the NWT over the short to medium term,” he said, “because the incentive to limit fuel use already exists due to high energy costs.

“As the carbon tax rate increases over time, further reductions will be increasingly difficult without considerable technological improvements that allow economically viable reductions in fuel use.”

That being said, the territory says income from the carbon tax will help to return the NWT to a revenue increase this coming year, following two years of revenue decline.

More federal transfers for infrastructure projects also helped boost revenue.

Elsewhere, the budget acknowledges the territory has serially underfunded its municipalities, a concern ever since a 2014 report part-funded by the GNWT highlighted a $40 million gap between what municipalities need, and what they are receiving.

Last week, Yellowknife’s mayor said she hoped the budget would see the territory commit to closing that gap and begin to hand over additional funding in earnest.

The budget adds $1.9 million “for operations, maintenance, water, and sewer expenses.”

“We recognize the funding gap,” said McLeod, “and over four years … we will have added a total of $8.2 million in additional community government funding.”

Budget highlights

Despite the focus on infrastructure in McLeod’s opening remarks, almost the entirety of the budget he presented – aside from diversion of the surplus to fund infrastructure – deals with how to fund the territory’s day-to-day operations.

Here are some examples of changes this budget makes. (Note that this is not an exhaustive list. If a subject does not appear, it doesn’t mean it was not funded or no changes were made.)

Health

• Child and Family Services, heavily criticized in a recent report, will receive an additional $3.3 million. The territory says this will pay for 21 new positions. (As of April last year, the division had 77 staff.)
• There is $2.6 million for a day shelter and sobering program, including more staff and funding for NWT-wide emergency shelters.
• Operating the new Stanton Hospital takes up $15.2 million of the budget, with another $5.9 million providing better services for children, a bigger midwifery program, and better chemotherapy at Stanton.
• Part of a $1 million budget line will help fund Indigenous governments to offer mobile addictions and substance abuse treatment and aftercare.

Education

• $2.1 million will help to pay for more school counsellors and youth mental health services in the Beaufort Delta and Sahtu, with extra money to support students with autism or fetal alcohol spectrum disorder.
• Student Financial Assistance course reimbursement rate increases from $500 to $800, lifetime limit on course reimbursements increases from $5,000 to $8,800.

Public Safety

• Rollout of long-awaited 9-1-1 service across the Northwest Territories, expected to be completed this year, will cost $1.3 million.
• $1.4 million to the RCMP for “mandatory training and to cover unavoidable administrative cost increases.”

Economy

• $14 million overall “to support the economy, labour, and land management,” which includes $1.7 million for work to spark life in the mineral exploration and oil and gas sectors.
• $375,000 “will help develop a knowledge economy strategy and explore the feasibility of building a centre of excellence for northern research and development.”
• $800,000 for “large-scale tourism marketing” and support for the NWT’s film industry to “to market and promote our territory’s stunning scenery to film and video producers.”
• An extra $2.1 million designed to help the NWT maintain all the new infrastructure it is building. This line item also includes money for better highway maintenance and funding for ferries on the Mackenzie, Peel, and Liard rivers.

Environment

• $21 million overall “to support our efforts to transition to a low-carbon economy.”
• The NWT expects $16.2 million in carbon tax revenue. $7 million will go back in rebates to residents and businesses, $5 million goes in rebates to “large emitters” (believed to be mines), and $600,000 is needed for administration, leaving $3.7 million in remaining revenue – which will go to help build wind turbines in Inuvik.
• $8.7 million, most of it channelling federal funding, to help residents and businesses lower emissions.

Governance

• Part of a $2.1 million line item will set up the NWT’s new Ombud’s office, which allows people access to an independent office when they believe they are unfairly treated by the territorial government.
• $288,000 to “support self-government implementation negotiations and to continue promoting women in politics.”
• $5.1 million for GNWT staff, including an additional $2 million for medical travel and dental programs, plus $3.1 million to cover collective bargaining increases for
  teachers and pay increases for non-unionized GNWT employees set in 2018-19.

Other

• There are no increases to existing tax rates in this budget.
• The GNWT expects $747,000 in revenue from its share of the federal tax on cannabis
  this coming year, alongside additional revenue from sales, but says supply shortages are impacting its income.