BUDGET DIALOGUE 2016

The Government of the Northwest Territories is committed to living within its means and making sure we can continue to put money aside to pay for unexpected emergencies, but we have a budget problem. Over the next five years, revenues are projected to decline, while our spending is expected to rise. We need to find a way to lower spending and increase revenues over the next two years so we can get our budget back on track.

Are all GNWT programs and services needed, or can some programs be cut or scaled down?

In a time of restraint, stop creating initiatives that don’t provide a clear benefit to the economy or the people of the NWT. The Labour Market Forecast and Needs Assessment, as part ECE’s Skills 4 Success initiative, indicates that we will need 28,000 new workers to replace those who leave the workforce over the next 15 years. That’s an extraordinary figure considering we only have 21,000 workers right now. We appreciate the research, but what are we going to do with it? What are the expected outcomes and how much will they cost?

We’re a small jurisdiction and don’t really have the money or expertise to implement programs where the business case is not clear and where the outcomes and the path to outcomes is not clearly defined within a properly defined economic context. Aspirational goals do not exist or their own sake and have no business being funded unless they deliver on tangible, demonstrable benefits for the economy and the community.

Cut back on the scale of government oil and gas operations. As the Premier has said publicly, many times, we can’t expect to see any activity in the NWT for at least 10 years. Yet we still have a unit dedicated to it. Ask yourself, for what purpose?

We recommend that you shift those resources to mining development.

According to recent report by Ernst & Young, the global resource sector is increasingly distressed. The resource investment world is not remotely focussed on the NWT…there is too much other low hanging fruit elsewhere.

Many companies are looking inward, not outward; focussing on their balance sheets and their cost of production and being pressured by shareholders to keep their credit ratings high.

We recommend that you define what makes the NWT distinctive or create a distinction and market it to resource developers globally. We need to cause investors to take a second look at the NWT. We have discussed the issues many times. We need to discuss and aggressively pursue a distinct advantage that will help investors look beyond the issues. 

The GNWT should step back and seriously assess everything through a filter of purpose. If a program or service doesn’t serve an outcome-based purpose then stop doing it and start focussing on core programs and services. This will reduce overheads and enable you to reprofile dollars.

You have just dismissed the Board of the NTPC. It’s time to do the same with the plethora of Boards we have in the NWT. They all cost money, but are they accomplishing anything or adding any value?

You must enshrine a sense of common purpose in the government and the bureaucracy. As an example, ITI implemented a small incentive program for mineral exploration while ENR announced its Conservation Strategy, proposing that as much as 40% of land in the territory be set aside for conservation.

By comparison, Canada’s commitment internationally is for 17% of the national land mass to be designated as conservation areas. ENR’s strategy is counter-productive, sending the wrong signal to investors, by creating the impression of a government and a bureaucracy that has no integrated plan for growing and sustaining the economy in a way that properly balances all needs.

For the sake of our economy now and in the future we hope this strategy is not being contemplated. We have not heard anything since it was announced. We have the same concern with recent decisions from land and water boards, particularly the Wek'eezhii Land and Water Board. Earlier in May 2016, the Board recommended denial of a Diavik request to allow an increase in total suspended solids in the lake at its A21 pit.

Last summer, during construction of the dike that will enclose the pit, the malfunction of a silt curtain caused the level of total suspended solids (TSS) in one area of the lake to go over the regulated limit of 25 milligrams per litre.

This is a $456 million project to extend mine life and keep people working. The company is requesting a temporary increase in TSS limits from 25-30 milligrams per litre. Are you going to reject a temporary increase in the limit while the dyke is under construction for the sake of a few extra milligrams of dirt?

Now the NWT Department of Lands is threatening to terminate dredging and other A21 related in-water construction activities. This is despite the fact that the diamond mining companies have consistently demonstrated world’s best environmental stewardship and have been almost solely responsible for creating the advanced state of water quality science in the North. You say we’re open for business. The bureaucracy says something totally different.

In 2015 the Wek'eezhii Land and Water Board recommended a full-blown Environmental Assessment on a benign project proposed by Husky Oil. The project was in the exploration stage. The company proposed to scoop and bag sand at Whitebeach Point to test the integrity of the silica. 

Environmental Assessments are never undertaken at the exploration stage, particularly for such a benign project. EA’s cost millions of dollars. Husky needed test samples to determine if the body of silica would support the cost of going forward. The company withdrew its application and left the NWT.

Again these are entirely the wrong signals. Resource investors around the world hear these signals and they are staying away in droves.

If you want new revenues then stop scaring investors away. At the moment any economic progress seems improbable. Get some alignment of purpose within your departments. Protectionism and wrong-minded decisions do nothing but create uncertainty and erosion of confidence in the NWT as an investment destination. We need the tax revenues and the jobs concurrent with resource projects. It’s time to correct things.

To paraphrase Samuel Johnson: “There’s nothing like a noose around a man’s neck to clarify his thinking.”

If we want new programs but have limited resources, what do we stop doing or what taxes can we increase?

Tax increases are a non-starter. You cannot make decisions that will increase the cost of living or operating in the NWT.

Between 2011 and 2015 we lost 750 small and medium-sized businesses in the NWT. 

 

 

Business confidence has already eroded. The NWT Chamber has surveyed its membership

  • Over the next 12 months 65.3% of respondents indicate the economy will decline while only 3% feel it will improve;
  • Over the next 36 months 52.8% feel it will continue to decline and only 21% feel it will improve;
  • Hiring intentions have flat-lined for the last three years in a row. 

The business community and business people can’t afford to pay more taxes. If foisted on them they’ll choose to move to lower-cost jurisdictions or simply close their doors. Both are already happening at an alarming rate.

The gov’t needs to practice zero-net spending. If a department wants new programs, it has to take it from somewhere else in its budget. This will induce the sort of serious assessment of programs and services discussed earlier.

If the program is necessary, how can it be delivered more efficiently?

Streamline, streamline, streamline. Stop focusing on process and the mountain of paperwork and endless checks and balances that goes with it and start focusing on results. A process is not a result.

Mike Kalnay at the Program Review Office has moved some services to a more efficient platform over the past few years and while doing so has improved service delivery within existing budgets or, where there are costs, has built a business case to support the investment. Do the same with other programs and services.

Get with the digital age! How many officers at ECE are responsible for entering hand-written forms when this could be done by the end-users? E-service delivery is essential if the gov’t wants to create efficiency in its workforce.

It’s not enough to keep everything as it has been. Streamlining is about examination for improvement and creating a results driven approach. Process which exists for its own sake is wasteful of scarce resources. Results matter.

There are also many ways to get the job done without owning all the jobs. Government might give more consideration to privatizing some of its work so as to have the private sector deliver it. This would also reduce the loaded costs affiliated with compensation packages and help the private sector succeed which translates into sustainable employment and more tax revenue.

Stop hiring skills that are available in the private sector already, thus taking work internally that can and should be done by local companies; examples are graphic designers, web developers, engineers and accountants.

Frankly, the private sector is already driven by results and that’s what’s needed right now. 

What is the right balance between investment in infrastructure and supporting residents and businesses with programs and services?

The notion that you should borrow up to the debt ceiling to support spending on programs and services is a recipe for insolvency. Businesses spend operating revenue to support operations and set some aside to enable capital borrowing that will improve their operations. That some MLA’s have articulated a “borrow and spend” point of view is short-sighted, worrisome and unsustainable.

Residents don’t need more services. It’s not about more. It’s about quality of the ones we have. Get better at the services you do deliver instead of doing more things not as well. Expertise begets demand and user loyalty.

In our members’ surveys we’ve asked the question: Would you be willing to accept fewer business services from the GNWT if it would help reduce business taxes? Two-thirds (65.38%) said ‘YES’. If two-thirds believe we can do with fewer programs and services it speaks to the notion of quality in the previous paragraph.

We also asked: Would you be willing to accept fewer services in general from the GNWT if it would help reduce personal income taxes? Again, nearly two-thirds responded in the affirmative (62.26%).

We don’t need more programs and services; we probably need fewer. If you want to find a new source of tax revenues get focussed on core services and outsource some programs and services to the private sector.

Frankly, we have an infrastructure deficit that must be addressed.

We accept that government does not have the resources to do everything, but governments at all levels need to be aggressively pursuing the private sector to share the costs and invest by providing every possible incentive.

The construction of at least two major all-weather roads into the Mackenzie Valley and the Slave Geological Province should be at the top of the list. It’s not a case of “if you build it they will come”…it’s more certainly a case of if you don’t build it they will never come.

We need to support economic growth and key capital investments will do that and put people to work at the same time. Still, we must live with our means. To that end we support the GNWT’s Fiscal Responsibility Policy and recommend that you continue prudent borrowing and debt management practices.

We also support the notion of the GNWT aggressively pursuing capital funding from Ottawa through the development of a Nation Building business case to get infrastructure projects underway. 

 

 

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