ANALYSIS: Finances in Canada’s Northwest Territories leave little wiggle room ahead of budget

The N.W.T. cabinet at their announcement last year, Finance Minister Caroline Wawzonek, far right, delivers the government’s first budget on Tuesday. (Emily Blake/CBC)
Caroline Wawzonek has promised to be creative as numbers paint a grim picture

Finance Minister Caroline Wawzonek has a challenge ahead of her as she prepares to deliver her first budget for the Northwest Territories.

There’s a laundry list of issues — housing, infrastructure, education and justice reform — a new crop of MLAs working to have their priorities addressed, and limited money to spend to get it done.

In Tuesday’s budget address, Wawzonek will lay out the government’s spending on its day-to-day operations and reveal the government’s overall fiscal strategy for the next four years.

It’s the latest chance for a new government looking to differentiate itself from its predecessor to put its own stamp on things.

Since last fall’s election, it’s sketched out a broad vision with its priorities and mandate. Tuesday’s budget and subsequent spending bills will show how it will spend the money to make that vision a reality.

But Wawzonek and the government don’t have much room to manoeuvre and public accounts from 2019 explain why.

Take a look at the numbers

If the budget lays out what a government plans to do, the public accounts spell out what’s actually happened. It’s year-end analysis uses three measures to determine how healthy the government’s finances are: sustainability, flexibility and vulnerability.

In all three measures the government is failing.

The economic math is the same from the kitchen table right to the cabinet table-Michael Miltenberger, former N.W.T. finance minister 

The government is running out of room to take on debt and doesn’t have many options to bring in new sources of money, according to the accounts.

Nearly 75 per cent of the government’s money comes from the federal government. Taxes, which make up the rest, aren’t reliable since the biggest corporate taxpayers are the territory’s diamond mines.

Their taxes fluctuate every year based on production and global prices and demand. Last year corporate tax from non-renewable resources dropped by $42.8 million compared to what was brought in during 2018.

Contrast that with government expenses, which came in just over $2 billion last year, mostly split between the operations and management budget and compensation and benefits for employees.

“The economic math is the same from the kitchen table right to the cabinet table,” explained Michael Miltenberger, former territorial finance minister from 2007-2015.

“You have that discussion about what we can afford? How much debt can we take on? Can we manage our credit card debt?” he said.

“Governments do that too, it’s just a bigger order of magnitude.”

These questions are often the hardest right after an election, when newly-elected MLAs all vie to deliver on their election promises but find there isn’t any more money to do that, Miltenberger said.

As government borrowing creeps closer to the territory’s $1.3 billion debt cap, it’s becoming increasingly difficult to spend without cutting.

“They have the imperatives that they got elected on, that they want to move on,” Miltenberger said. “If you want to add, you have to cut and control your costs, control the size of your bureaucracy.”

Tamping down expectations

In December, Finance Minister Wawzonek tamped down expectations of bold changes early on, describing the territory’s economy as “stabilized but stagnant.”

She noted revenues dropped $80 million in the past year and that the government has taken on more short-term debt with its banks to make up the shortfall.

As to her upcoming budget, she’s promised to be “creative” and collaborate with regular MLAs, though she’s yet to elaborate on what it will look like.

In a briefing earlier this month, Wawzonek repeated that promise but remained cagey and declined to give out details ahead of the budget speech.

Finance Minister Caroline Wawzonek is delivering her first budget Tuesday, it’ll be another step forward for this government as it attempts to put its own stamp on things. (Randall McKenzie/CBC)

“It’s an ongoing process to be creative, we have discussions going on,” she said, noting much of the work on this budget happened as she was settling into the role after last fall’s election.

“There’s an opportunity to do more in the spring, after the budget address,” she said.

The debt limit does hem in her ability to be creative though, with about $300 million left before the government reaches its debt limit. It usually uses debt to pay for infrastructure projects that can’t be paid through the government’s surplus at the end of the year.

$300 million is about enough to pay for another highway, a new hospital, or run a government department for a year.

“You could spend that in a heartbeat,” Miltenberger said. “We have infrastructure deficits in the billions of dollars, housing [deficits] in the billions of dollars … $300 million is chump change.”

This all adds up to a difficult task for any finance minister, especially one who’s brand new to the role. With Tuesday’s budget address, Wawzonek will show how her government plans to take that challenge on.

Write to Eilís Quinn at eilis.quinn(at)cbc.ca

Related stories from around the North:

Canada: Canada’s Northwest Territories releases plan to hit 22 priorities in 4 years, CBC News

Finland: Finnish Parliament debates Rinne govt’s first budget proposal, Yle News

Norway: Political earthquake shakes up Northern Norway, The Independent Barents Observer

Russia: Career diplomat to represent Murmansk region in Russian senate, The Independent Barents Observer

Sweden: What the budget says about Sweden’s minority government, Radio Sweden

United States: Alaska losing $102M in military construction for wall on U.S.-Mexico border, Alaska Public Media

Alex Brockman, CBC News

Alex Brockman, CBC News

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