The Northwest Territories won’t cut programs or services when this week’s budget is revealed, despite millions of dollars in unexpected losses.
The territory has decided it would rather borrow money to cover any shortfall than ask departments to find cost savings for a third consecutive year.
Finance minister Robert C McLeod outlined those plans to Cabin Radio in an interview leading up to the presentation of his budget on Thursday, without offering specific details.
McLeod said the territory’s stagnant financial climate had been further hit by a bleaker-than-expected update on forecast revenues, provided to him just before Christmas.
“It’s been difficult,” said McLeod. “The update on revenues wasn’t good, but we’ll adjust.”
‘In the millions’
Without naming anyone involved, McLeod said at least one large corporation had exercised a legal financial mechanism allowing it to write off tax obligations relating to infrastructure investments for one year.
“That’s caused our corporate taxes this year to be down quite a bit,” he continued. “It’s in the millions.”
Some revenues from the federal government associated with major projects have also decreased. The result is that the territory’s income for 2017-18 won’t match its expectations, and there is an anticipated knock-on effect in 2018-19.
McLeod says a program to reduce expenses by $100 million over the past two years means the territory can handle the setback without a new round of cuts. But he suggested the NWT’s reliance on short-term borrowing could increase.
“There will be no new reductions, based on the news on the revenue,” said McLeod.
“We had planned an operating surplus and we use that operating surplus to invest in our capital without having to touch our short-term borrowing.
“With news like this, we’re not quite sure of the actual effect it’ll have – but there is a chance we will have to do some short-term borrowing. But not as much as it would have been had we not made some of the corrections we did in the past couple of years.”
While no fresh measures to reduce spending are planned, residual effects from the past two years of cuts to programs and services will be felt in the budget. At the same time, the territory says it’s finding money for new initiatives.
The secrecy surrounding the budget process means no details have been released prior to Thursday, but the territorial government alluded in a briefing note to “steps that support resource development … and economic diversification” to promote job growth in the NWT.
There will be an announcement on “strengthening the education system” alongside renewed investment in “programs that support our most vulnerable,” including low-income residents. Funding to improve management of caribou, develop protected areas, and work on relations with Indigenous governments and land use will also be included.
McLeod said the territory was “waiting on the federal government” before deciding how carbon pricing will impact its budget. Similarly, the legalization of cannabis is not immediately factored into Thursday’s budget while the details of this summer’s implementation are finalized.
The proposed budget will be revealed to a backdrop of union leaders corralling support for a strike, as collective bargaining drags on into a third year. McLeod said the territory would adopt a “status quo” approach to budgeting for its staffing costs until a deal is reached.