Finance minister promises creativity, not austerity for NWT

Approaching her first budget, the NWT’s finance minister says she’ll look for “creative and effective solutions” to address poor growth forecasts and a revenue shortfall

The territory expects an $80-million shortfall and “tepid growth” in the near future, but finance minister Caroline Wawzonek told Cabin Radio she sees no cause for alarm as she works to jumpstart the NWT’s stable but stagnant economy.

Since 2014, real GDP growth has been less than one percent per year – less than half the growth rate of Canada as a whole. Without the Gahcho Kué mine’s recent introduction, the economy would have shrunk.

“Looking into the not-too-distant future, we are really reliant on the diamond mines in terms of having any kind of growth in our GDP,” said Wawzonek.

“With those mines having an end date on them, we want to make sure we have enough interest in our economy, and growth and diversity in the economy, that we have a story to tell 10 years from now.”

Despite emphasizing the NWT’s reliance on diamond mining, Wawzonek noted the the 22 priorities released by MLAs shortly after the October election included pledges to support “growth in non-extractive sectors” and set “regional diversification targets.” Another priority is increasing food security through “locally produced, harvested, and affordable food.”

Wawzonek said she was hesitant to yet identify where the NWT’s new government saw the greatest potential for diversification. The finance minister said much of that responsibility lay with cabinet colleague Katrina Nokleby, who leads the Department of Industry, Tourism, and Investment, while ministerial mandates have not yet been finalized.

In a December address at the legislature, Wawzonek said more than half of the NWT’s $80-million revenue shortfall came from corporate income tax – $46 million lower than expectations in the 2019-20 budget – alongside a $26-million hole in federal transfers, attributed to “changes in cash flows for federal programs,” and an $8-million reduction in resource revenues.

Attempting to explain the corporate tax shortfall, Wawzonek said that was “not necessarily” an indicator of how business in the NWT is faring. Instead, she said, it could represent a time lag in tax revenue calculation or a reflection of different ways companies are filing with the Canada Revenue Agency.

Some expenses were also not projected accurately, Wawzonek said, promising more accurate forecasting and monitoring in future. A new position at the Department of Finance will focused on monitoring cash flows and revenues into the government, she added.

Borrowing limit

This financial year, if nothing changes, the existing revenue shortfall would bring the NWT government closer to its federally imposed borrowing limit. As of March 31, 2019, $304 million remained before that borrowing limit is reached.

Wawzonek expects to soon discuss that limit with the federal government.

“I think sometimes people get concerned that this is a sign of us being in some sort of financial or fiscal trouble. It doesn’t need to be,” she said. “Government borrowing is standard and part of running a government budget. You need to be able to make sure that you’re maintaining the payments on your debt and that you’re maintaining responsible borrowing, and that’s always been the GNWT’s approach.”

The finance minister expects no major cuts to programs or services in her opening budget, and says it will not be an “austerity budget” in nature. (Generally, budgets immediately following an election tend to be unveiled several months later than is ordinarily the case. Then-finance minister Robert C McLeod’s 2016 budget address, following the late 2015 election, was delivered in June.)

“The sky is certainly not by any means falling,” Wawzonek continued, saying she would be “looking at the programs and services we have, comparing that to what we have in the mandate, and ensuring that our programs and services match up to what’s in our current mandate.”

Wawzonek said how the Department of Health and Social Services spends its money will be closely analyzed, as will financial arrangements for staff coming to the NWT from the south, in a bid to reduce overtime costs.

Asked to demonstrate what kind of creative solutions she has in mind, Wawzonek gave an example from her other portfolio leading the Department of Justice. Wawzonek said corrections staff are moving to modular delivery of some programs – meaning programs can start when inmates need them, rather than running to a rigid schedule that may not help people get the right programming at the right time.

“When people stop and start these types of programs, it’s more costly than having someone run through them – and, obviously, probably less beneficial for this person,” she said.

Wawzonek is meanwhile attempting to convince Ottawa to adopt a more flexible approach to the way some of the territory’s bigger projects are financed.

Relaxing the rules on infrastructure dollars – where the NWT government is ordinarily expected to foot 25 percent of the bill if the federal government provides the rest – could help the territory, she said, for example by allowing the NWT’s portion to be paid over longer periods or through other partnerships.

The finance minister said she was also working with federal colleagues to develop better solutions for housing and communications.