The territorial government has earmarked a $160 million financial cushion for the next legislative assembly – an increase of $60 million.
The cushion refers to how much of the territory’s borrowing limit is left unused at any given time, in case of emergency expenditure – last year’s forest fires being a prime example.
Most recently, the territory had aimed to reserve $100 million of its borrowing limit to tackle that kind of urgent issue, or any sudden “revenue shock”.
However, 2014’s wildfires – and $20 million spent covering additional fuel costs over the winter – cut into that $100 million figure.
Now, following the federal government’s decision to increase the NWT’s borrowing limit from $800 million to $1.3 billion, finance minister Michael Miltenberger says the cushion can go up.
“The government will continue to face flat revenue growth and expenditures pressures due to low water levels, health and forest firefighting costs during the 18th assembly [following this fall’s territorial election],” said Miltenberger.
“To ensure we maintain the fiscal discipline required to be able to respond to these issues, even with the added borrowing room, the fiscal strategy will be revised to ensure that at least $160 million in borrowing authority is retained going into the 18th assembly.
“This will provide sufficient flexibility to allow the 18th assembly to undertake targeted projects, and participate in the Build Canada Plan and other critical projects like Stanton Territorial Hospital renewal, while also providing the financial capacity to respond to any further one-time revenue or expenditure shocks.”
However, Miltenberger also warned that the territorial government may be forced to cut back in the years to come.
“Over the next five years, revenues are forecast to be flat, growing by only 0.44 percent over the next four years,” he said.
“There are limited options available to raise revenues from own sources in the short term, without impacting the cost of living or curtailing our economic growth potential.”
Miltenberger said one option is to link some government expenditure to the growth of the Territorial Formula Financing Grant, which is the annual, partly population-based, federal payment to the NWT.
“This will likely require the government to undertake reductions to operating expenditures,” he cautioned, “to ensure we can continue to finance at least 50 percent of our capital expenditures with operating surpluses, and start to return the government to a cash surplus position.”