Ng: Nunavut stands at a fiscal turning point

IQALUIT — Finance Minister Kelvin Ng said this week that Nunavummiut now stand at “an important turning point in Nunavut’s history,” where the Nunavut government is now exceeding its financial limits.

Shod in a pair of fur kamiks made by Uqummiut MLA David Iqaqrialu’s wife Inga, Ng this week tabled the Nunavut government’s financial estimates for the 2001-2002 fiscal year after delivering a 16-page budget speech.

In his speech, Ng said that without more financial help from Ottawa, Nunavut may not be able to provide basic services in the future.

“Over the past two years, we have not only maintained the programs that we inherited but enhanced them for the benefit of our people,” Ng said.

“In light of growing demands, we must assess whether we can realistically continue on this path without additional support.”

The numbers that Ng tabled this week this week reveal that by March 2002, Nunavut will not be able to use past surpluses to cover its growing year-to-year deficits.

“During our first two years we have been fortunate to have a strong fiscal position due largely to savings in the salary expenditures. This year’s budget represents a more realistic picture of the fiscal situation that we face in the long term,” Ng said.

Projected $12 million deficit

By the end of the 2001-2002 fiscal year, the Nunavut government estimates that they will have run up a projected $12 million accumulated operating deficit.

That’s because, after various factors are added and subtracted, Nunavut will spend $34.8 million more than it will receive over the 2001-2002 fiscal year.

At the same time, Nunavut will begin the year with an accumulated operating surplus of only $22.8 million to help defray that projected deficit.

Those surpluses, which have piled up over the past two years, are made up mostly of unspent salary money for numerous staff positions that the government has been unable to fill.

Nunavut began its 2000-2001 fiscal year with a hefty surplus of $61.2 million. But finance officials have applied $38.4 million of that to cover its projected operating deficit for the outgoing year, with only $22.8 million left for the upcoming year.

That’s expected to leave the government $12 million short by the end of March, 2002.

A Nunavut finance official told reporters in a budget lock-up Feb. 27 that this situation is “not something that is sustainable.”

In comments to reporters, Ng later said the Nunavut government’s greatest challenge in coming years will be to meet the basic needs of the population.

“If Nunavut cannot provide basic services to the people of Nunavut, then the crediblity of the elected people will be called into question,” Ng told reporters.

Martin reviewing Nunavut’s finances

In his speech, Ng suggested two ways in which Nunavut can deal with the upcoming fiscal crunch.

One strategy is to re-negotiate Nunavut’s formula financing agreement.

“Given the serious and growing social and economic challenges that we face, it is critical that we maximize our benefits from and seek more favourable treatment through the formula financing agreement,” Ng told MLAs.

To that end, federal Finance Minister Paul Martin has agreed to “review” Nunavut’s fiscal situation, Ng said.

On the spending side, Ng said that Nunavut will conduct a “major program review exercise” over the coming year.

“We will have to find ways to be more resourceful and change programs and services to better meet our needs,” Ng said.

But Ng did not say if this might mean future cuts in programs and services.

The government is planning to spend $679.5 million this year. In addition they’ll set aside $10 million in a contingency reserve, spend another $8 million on capital projects carried over from last year, and spend another $22.3 million on “supplementary requirements.”

But the Nunavut finance department is predicting that in the upcoming fiscal year, Nunavut will take in only $670 million in revenues.

Nunavut’s largest single source of revenue, as always, is its formula financing agreement with Ottawa. In 2001-2002, the federal government’s annual grant is projected at $563 million. Ottawa will give Nunavut another $52.4 million in other transfers.

Meanwhile, Nunavut is expected to raise only $54.6 million on its own — mostly through personal and corporate income tax, the payroll tax, tobacco and fuel taxes, staff housing rentals and other sources.