GN conserves energy to stave off deficit

To reduce a growing deficit driven by rising fuel costs, the Government of Nunavut will impose a 1 per cent spending cut across all government operations for the remaining six months of the current fiscal year.

The GN will try to achieve most of those savings by conserving energy and cutting back on employee travel.

“We have to look at ways to conserve. Where there’s any sign of wastage, we have to focus on getting rid of it,” Premier Paul Okalik said.

That includes vehicle use, energy conservation within government facilities, and cutting out unnecessary employee travel, he said.

Over the past two fiscal years, rising fuel prices have cost the GN an extra $70 million. “Increases have put the Nunavut government under tremendous fiscal strain,” says a document produced earlier this year by the territorial Department of Finance.

In his budget speech this past February, Finance Minister David Simailak projected a $7.6 million deficit by March 31, 2007, when the 2006-07 fiscal year closes.

But the 1 per cent spending cut announced last week is aimed at saving about $10 million, which suggests the GN’s projected deficit is now much larger than predicted six months ago.

Okalik said, however, that it will be several weeks before GN officials are able to figure out how much extra money the government must spend on fuel this year.

That’s because ships are still delivering fuel to Nunavut communities, and GN officials won’t know the exact cost until those deliveries are finished.

That’s also why the GN’s Department of Community and Government Services isn’t ready to announce new fuel prices this year.

“We need to get a better picture of how much it will cost this year for us to set the price,” Okalik said.

And when those prices are set, Nunavut residents can expect to pay more for gasoline.

Okalik, suggesting that gasoline prices might have been set too low last year, said the GN wants to be “realistic” and “set a price that will help us in operating the government.”

For most of the past year, Nunavut’s gasoline prices have been lower than most other places in Canada.

For example, this past June, the retail price of gasoline, including taxes, stood at about $1.08 per litre in Iqaluit and $1.06 in Rankin Inlet.

That compares favourably with a prices that month of $1.20 in St. John’s, $1.15 in Quebec City, and $1.24 in Yellowknife.

“We set the price early on without realizing the overall cost for the current year, so that is something that we want to avoid this year,” Okalik said.

The GN is the only government in Canada that buys and delivers all fuel products needed by its population. The GN sells its purchased fuel to residents through a variety of contracted distributors, but at a subsidized price.

But it’s the GN, and GN-funded organizations that consumes about 80 per cent of that fuel, at a cost that eats up about 20 per cent of the government’s budget.

So this year, the GN will likely extract a greater proportion of that cost from consumers, even though prices will remain highly subsidized.

“We don’t want to end up the way we were in prior years when we set the price too low, and then have to increase the price,” Okalik said.

But GN grants and contributions will not be affected by the new cost-saving measures.

“We don’t want to affect our overall services to our constituents. We realize that grants and contributions affect people’s lives in terms of water and sewage treatment, daily services that our constituents rely on. We want to focus on areas that are internal to government and won’t affect our constituents in any way,” Okalik said.

And Okalik said the government is not contemplating staff layoffs.

“We’re doing this exercise so we don’t have to get there,” he said.

But the GN will take a second look at some capital projects, and pledges a more “conservative” approach to capital spending.

Meanwhile, GN officials hope that a new funding arrangement with Ottawa will help bail them out of their financial woes.

The current funding scheme, negotiated in 2004 with Paul Martin’s erstwhile government, is called the “New Framework.” Under it, Nunavut’s big annual grant from Ottawa increases by only 3.5 per cent each year.

That’s not enought to keep up with Nunavut’s difficult social needs and Nunavut’s rapidly growing population.

“The situation is likely to get worse as the GN moves to provide full public services, facing potentially significant deficits in it fight to fill the widest gaps between social challenges and outcomes in Canada,” the Department of Finance said last February.

Okalik’s cabinet approved the 1 per cent savings drive at a cabinet meeting last week in Chesterfield Inlet, where the GN announced a $300,000 grant to the hamlet so it can crush rock to make gravel.

Like any astute politican, Okalik made sure to recognize his host community in an interview with Nunatsiaq News.
“I want to thank the people of Chesterfield Inlet. They were just wonderful folks. They made our stay very relaxing and enjoyable,” Okalik said.