GN deficit gets worse despite extra cash from Ottawa

The Nunavut government’s operating deficit will get worse this year, despite the extra cash it will receive from the federal government, Finance Minister Leona Aglukkaq said in her mid-year fiscal update last week.

The GN now needs $51.2 million more than finance officials projected last May, when Aglukkaq tabled the territorial government’s 2004-05 operating budget.

That will eat up all of the $45.6 million in extra cash the GN expects to get this year through new funding deals with Ottawa on health care and the formula financing agreement.

“Although this new funding offered by the prime minister is welcome and needed to continue the day-to-day operations of our territory, we are faced with significant pressures on our government’s budget,” Aglukkaq said.

Last May, Aglukkaq predicted a $13.4 million deficit this year. Now, she says that figure will likely rise by $5.6 million to $19 million by March 31, 2005.

Now, the GN’s basic financial picture looks like this:

Revenues: $922.1 million
Expenditures: $941.1 million
Deficit: $19 million
Aglukkaq said the GN needs to spend more than expected this fiscal year because of the following needs:

more money to cover a new wage-and-benefit deal between the GN and the Nunavut Employees Union signed last summer. The agreement gives employees a 10.5 per cent wage hike over 42 months, plus hefty increases in the northern allowance for workers in the smaller communities;
more money to cover a deficit built up by the Qulliq Energy Corp. (Nunavut Power Corp.’s parent company.) In its first two years, the NPC posted a deficit of $13 million. The final figure that the GN will pay will be known after the NPC’s 2003-04 financial statements are finished;
more money to cover a new policing agreement with the RCMP;
more money to cover an increased budget for the Department of Health and Social Services, to pay the rising cost of sending patients to southern hospitals;
more money for the health department, and the Department of Community and Government Services, to pay for expanded telehealth services;
more money to cover an increased budget for the Department of Education to pay for school operations;
more money for the Nunavut Housing Corp. and the Department of Community and Government Services to pay for higher utility costs.
Aglukkaq said she will ask MLAs to approve the new spending by next February through a supplementary appropriation bill.

At the same time, Aglukkaq unveiled a $102-million capital budget for 2005-06. That’s down $6 million from the current year’s $108-million capital budget.

The “capital” budget pays for building projects, equipment, and supplies. The legislature always votes on the capital budget ahead of time to give contractors enough time to prepare for the summer sealift. The operating budget for the same period won’t likely be introduced until March.

Most of next year’s capital money will be spent on projects related to health, education, public housing, and municipal works.

Highlights include:

$19.5 million for the 2005-06 portion of the Qikiqtani General Hospital project, expected to be finished by the fall of 2006;
$4.5 million for a replacement health centre in Panniqtuuq;
$3 million for sprinkler upgrades in schools;
$10 million for public housing – combined with a $10 million grant from Ottawa, that will produce 80 public housing units;
$7.9 million for the new justice centre in Iqaluit
$16.4 million for capital projects for municipalities, including sewage lagoon repairs in Cape Dorset, a sewage treatment plant for Rankin Inlet, a water line for Gjoa Haven, and sewage lagoon work in Kugluktuk.