IQALUIT, Nunavut – The government of Nunavut says it will reverse two years of deficit budgets to post a small surplus in the coming fiscal year.
But that surplus will result from lower capital spending plans, meaning no new social housing will be built in the territory next year despite the desperate need.
In delivering his 2012-13 budget to the territorial legislature Wednesday, Finance Minister Keith Peterson admitted that bringing Nunavut’s houses, schools and public facilities up to snuff is simply not within the territory’s financial capacity.
“We would need to double, even triple, our annual capital plan,” he said in his speech. “We cannot do this within our current budget.”
In an interview with The Canadian Press, Peterson said Nunavut is hoping the federal government will increase the territory’s borrowing limit, allowing it to start private-public partnerships to help build everything from housing to health centres to harbours.
“We need to get an indication from Ottawa that they will increase the borrowing limit,” Peterson said. “If we can pull it off, P3s would be an opportunity for big projects.”
Those talks are ongoing, Peterson said.
Budget documents show this year’s books will close with a $34-million deficit. That’s a lingering hangover from 2010, when the Nunavut Housing Corporation underestimated the costs of building 750 homes by about $60 million.
For the coming year, however, Peterson said Nunavut will have a $38-million surplus after $1.3 billion in spending. That’s about $110 million less spending than in 2011-12, mostly due to lower capital budgets.
Peterson warned that Nunavut’s mining-dependent economy is vulnerable to swings in the global economy and that surplus could change.
“Ultimately, mining investment will probably accelerate, producing jobs and revenue,” he told the legislature. “Until then, however, we must remain vigilant about our financial situation.”
Nunavut gets no royalties from its natural resources. They go to Ottawa.
Capital spending remains a major problem. Federal legislation limits the amount of debt Nunavut can accumulate to $200 million, and $140 million of that is already committed in Crown corporations loan guarantees.
However, Peterson pointed to government surveys suggesting the territory needs 3,600 housing units just to catch up, with another 90 added to that total every year. Other government estimates say Nunavut communities need a total of $6 billion in infrastructure spending over the next 20 years.
Peterson said the government is currently negotiating a public-private partnership to upgrade the Iqaluit airport. That one project would push Nunavut past its current limit.
“We need to increase our borrowing limit,” Peterson said. “We’re waiting on word from Ottawa.”
He said the limit Nunavut wants is “significantly higher.”
Peterson said the fact the territory has significantly improved its financial practices argues in favour of higher borrowing. He said the territory’s public accounts have now been filed on time – a first in Nunavut’s history.
“That sends a pretty strong message to people that we’re getting our fiscal management under control,” Peterson said.
Health spending got the biggest boost in the budget, rising six per cent to nearly $317 million.
Peterson said Nunavut will open a pilot program for residential treatment for addictions – a first in a territory that has some of the worst substance abuse problems in Canada.
Mining remains Nunavut’s strongest private-sector economic driver, contributing about $213 million to the territory’s 2011 GDP. That’s about 23 per cent higher than 2010, reflecting the ramping up of Agnico-Eagles Meadowbank gold mine.
However, Nunavut still relies on the federal government for 92 per cent of its revenue.
– By Bob Weber in Edmonton
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