Tory budget rescues GN

Jim Flaherty gave Nunavut what Nunavut officials hoped for this week: a life-line.

The Conservative finance minister’s 2007-08 budget, unveiled March 19, contains a package of announcements that will pour tens of millions of new dollars into the Government of Nunavut’s coffers, enough to at least keep the GN’s head above water for the foreseeable future.

The biggest change is in the way that Ottawa calculates its annual grant to Nunavut: the territorial financing formula, or “TFF.”

Under those changes, the Nunavut government will get $28 million more through its annual grant this year than earlier estimated. That grant, which supplies about 80 per cent of the GN’s revenue, will rise to $893 million from about $865 million.

In response, David Simailak, the Nunavut finance minister, told MLAs March 20 that he’s pleased with the new formula, but also warned that it barely meets Nunavut’s needs.

“This TFF is an excellent start but we are not there yet,” Simailak said.

That’s because the formula’s base is still not high enough. In addition, other federal contributions to Nunavut outside of the TFF are mostly calculated per capita. For Nunavut, with its small population, that’s a big disadvantage.

“Any new funding should be needs-based rather than per capita,” Simailak said.

In addition, Nunavut residents will get a big new training opportunity: an accounting program. Simailak told MLAs that it will likely be modelled after the Akitsiraq law school, the widely-praised program that trained Inuit law students in Nunavut.

To help pay for the accounting school, and to help fix the financial management problems that Sheila Fraser, the Auditor General of Canada, described in her 2005 audit of the GN’s books, the federal government will give Nunavut $23 million.

In that report, Fraser said the GN suffers from “myriad financial management problems,” exposing the GN to the risk of fraud, theft and error.

She said a big reason for this is the GN does not have enough qualified accountants, and that its financial workers need more training.

And she said the GN doesn’t have a hope of fixing the mess unless it recentralizes its widely scattered, overworked financial employees and that the GN must do more to train and recruit more of them.

In response, Simailak last week gave the first clear indication that the GN will follow the auditor general’s advice.

“In her last report to the assembly, the Auditor General made a strong case for centralizing accounting positions. Our government has taken this advice seriously and now we are acting,” Simailak said March 7.

He then announced that the GN will move financial jobs that now sit within two departments, Executive and Intergovernmental Affairs, and Health and Social Services, into the Department of Finance in Iqaluit.

It now appears as if the GN will also make a big effort to train its own accountants, using the $23 million from Ottawa.

As for the new TFF arrangements, the Conservative government has said yes to recommendations contained in an expert panel study that looked at new ways for the federal government to distribute money to provinces and territories.

Called the O’Brien report, that study recommended that Nunavut get special treatment because of its serious social problems and infrastructure shortages.

To fix this, each of the three territories will get its own tailor-made funding system in the future.

The bean-counter’s jargon for this is “gap-filling formula.” Federal finance department documents say this will include a measure of each territory’s total needs and a measure of each territory’s revenue-raising abilities.

“While the situation in all three territories is vastly different from the challenges faced by provinces, nowhere is this more evident than in Nunavut. There exist significant disparities between Nunavut and the rest of the country in key areas such as health, education and social well-being,” federal finance documents say.

The new TFF means that Nunavut’s annual transfer from Ottawa will grow fast enough each year to keep up with the territory’s rapidly growing needs.

Under the old formula, worked out with Paul Martin’s Liberal government in 2004, the formula grew by only 3.5 per cent a year while Nunavut’s forced spending needs grew by more than 7 per cent.

Ottawa will also give Nunavut and the other two territories a minimum of $25 million each for infrastructure. On top of that guaranteed base, they’ll distribute more infrastructure money to the territories on a per capita basis.

Finally, Nunavut will likely benefit from beefed-up federal payments to the provinces and territories for health care, post-secondary education, and the environment.

The Harper government will shovel billions of new money into provincial and territorial treasuries over the next seven years, but most of that cash will be divided up on a per capita basis, to Nunavut’s disadvantage.

They include:

* • a $5 million contribution to the GN from the Canada Ecotrust fund, to pay for energy efficient lighting, energy efficiency help for homeowners, and expansion of residual heat schemes;
* • Gas tax revenue for infrastructure: extended to 2014;
* •  The Canada Social Transfer, which pays for post-secondary education, social assistance and social services, will be paid out on a strictly per capita basis;
* • The Canada Health Transfer will be per capita only after 2014.

The budget also includes big tax credits for lower-income working people, especially those with families.