Budget Address 2013 - 2014 NORTHWEST TERRITORIES BUDGET PAPERS A ? Economic Review B ? Fiscal Review February 7, 2013 ? Economic Review 2013-2014 A1 ECONOMIC REVIEW Outlook The economy of the Northwest Territories (NWT) continues its struggle to recover from the global economic recession of 2008 and 2009. From 2007 to 2012 real gross domestic product (GDP) declined by 25 per cent and is forecast to increase by 0.2 per cent from 2012 to 2013. Employment has not returned to its pre-recession level and is not expected to do so in 2013. The NWT economy depends heavily on international trade - in 2011, international exports were nearly one-third of NWT GDP, despite having declined 32 per cent from 2007 to 2011. Decreasing international exports is one of the main reasons for the decrease in real GDP. International trade is expected to remain well below pre-recession levels in 2013 and remains subject to downside risks. These risks include the ongoing economic malaise in Europe, and the volatility of global financial markets and commodity prices. As demonstrated in 2008, when NWT diamond production fell dramatically as a consequence of the financial crisis, distant events can have large impacts on the NWT economy. The economic recovery is taking longer in the NWT than in any other Canadian province or territory, and it is likely that the NWT"s real GDP will remain below its pre-recession level for some time. Real GDP is expected to increase in the short term as new mineral resource projects are constructed and become operational. Pending regulatory approval, several significant mineral resource projects are expected to be developed and become operational over the next five to ten years, and 2012 saw a substantial increase in petroleum exploration in the Sahtu region. ? Economic Review 2013-2014 A2 Economic Outlook Indicator 2008 2009 2010 2011 2012e 2013f Gross Domestic Product, Chained (2007$) millions 4,280 3,637 3,711 3,521 3,529 3,535 -9.0 -15.0 2.0 -5.1 0.2 0.2 Total Investment, Chained (2007$) millions 1,572 1,093 1,206 1,087 1,183 1,367 Per cent change -20.4 -30.5 10.3 -9.9 8.9 15.5 Household Expenditure, Chained (2007$) millions 1,298 1,288 1,307 1,323 1,302 1,308 2.4 -0.8 1.5 1.2 -1.6 0.5 1,536 1,638 1,751 1,768 1,798 1,805 0.4 6.6 6.9 1.0 1.7 0.4 Exports, Chained (2007$) millions 2,742 2,458 2,663 2,470 2,480 2,453 Per cent change -12.4 -10.4 8.3 -7.2 0.4 -1.1 Imports, Chained (2007$) millions 2,949 2,902 3,277 3,222 3,308 3,465 -8.0 -1.6 12.9 -1.7 2.7 4.7 22,700 21,300 21,500 22,700 22,600 22,600 -3.0 -6.2 0.9 5.6 -0.4 0.0 1,090 1,145 1,191 1,245 1,295 1,332 4.0 5.0 4.1 4.5 4.0 2.9 115.2 115.9 117.9 121.6 124.4 127.0 4.0 0.6 1.7 3.1 2.3 2.1 Per cent change Per cent change Government Expenditure, Chained (2007$) millions Per cent change Per cent change Employment (resident), number of persons Per cent change Average Weekly Earnings, Dollars Per cent change CPI (All Items), Yellowknife, 2002=100 Per cent change e: estimate f: forecast Source: Statistics Canada and the NWT Bureau of Statistics ? Economic Review 2013-2014 A3 2011 Economic Performance Recovering from the global financial and economic crisis has been an ongoing challenge for the NWT economy. Real GDP (the inflation-adjusted value of all goods and services produced) is estimated to have fallen by 25.2 per cent from its pre-recession level in 2007 to 2011. Real GDP decreased by 5.1 per cent in 2011 and recent estimates indicate a modest increase of 0.2 per cent in 2012. Real Gross Domestic Product, Annual Change, NWT and Canada 10% 5% 0% -5% -10% -15% -20% 2008 2009 2010 Northwest Territories 2011 2012e 2013f Canada e: estimate f: forecast Source: NWT Bureau of Statistics and Statistics Canada The economic decline was led by a 40.7 per cent decline in carat production in the diamond industry from 2007 to 2011. The reduction reflects a number of factors including the move to underground operations, accessing lower grade ore consistent with mine plans, and mine management decisions, including planned and unplanned slow-downs and temporary shut-downs. A new diamond mine, Gahcho Ku?, could begin production as early as 2015 or 2016. Industries linked to the diamond mines, such as transportation and wholesale industries, had large declines in their growth rates between 2007 and 2009 before stabilizing in 2010. Growth rates for service industries moderated after 2007 but continued to post small increases. The NWT economy is integrated with the national and global economies. The largest private sector component of the territorial economy is the non-renewable resource sector where prices are established on world markets and NWT resources are shipped to global markets. The United States economy grew by an estimated 2.1 per cent in 2012 and modest growth is anticipated for 2013. Economic hardships continue in Europe, with Euro area economies having contracted by an estimated 0.5 per cent in 2012 and growth of less than 1.0 per cent anticipated for 2013. In China and India, growth has slowed somewhat more than expected in 2012, but Asia is expected to remain the growth leader, expanding over 2 percentage points faster than the rest of the world in 2013. ? Economic Review 2013-2014 A4 The Bank of Canada is projecting Canadian real GDP growth of 2.2 per cent in 2012, followed by growth of 2.3 and 2.4 per cent in 2013 and 2014, respectively. Household spending is expected to remain moderate to strong over 2012 and 2013, due in part to favourable interest rates, and Canadians will continue to carry high levels of household debt. Therefore, changes in economic variables such as increasing interest rates or a weakening housing sector could result in negative impacts on the Canadian economy. Business investment is expected to remain strong. The strong Canadian dollar will continue to dampen the balance of trade. Personal Income Personal disposable income is the after-tax income earned by NWT residents from all sources. It supports consumer expenditures which account for about 30 per cent of the territory"s GDP. Disposable income received by residents increased 5.4 per cent from 2009 to 2010, after a 6.7 per cent decrease from 2008 to 2009. Labour income, a large component of personal income, increased 5.4 per cent in the first nine months of 2012 over the same period of 2011, indicating that personal income likely also grew in 2012. At the national level, where consumer expenditures account for over 55 over cent of GDP, personal disposable income increased 3.8 per cent in 2011. Annual Percentage Change in Personal Disposable Income, NWT and Canada 8% 6% 4% 2% 0% 2008 2009 2010 2011 2012e -2% -4% -6% -8% Northwest Territories Canada e: estimate Source: Statistics Canada and NWT Finance Trade The NWT economy depends on trade with other countries and with the rest of Canada. The NWT exports natural resources to international markets and imports goods and services, mainly from southern Canada, to support industry and personal consumption. The trade surplus with other countries, relative to real GDP, has been declining since 2007. Over the same time the NWT"s trade deficit with the rest of Canada has been growing, resulting in an increasing trade deficit. In 2007, the NWT"s trade deficit was 1.6 per cent of GDP; the trade surplus to other countries was 22.7 per cent of GDP and the trade deficit with the rest of Canada was 24.3 per cent of GDP. In 2011 NWT"s trade surplus with other countries had decreased by 51.9 per cent from 2007, while the NWT trade deficit with the rest of Canada had risen 5.8 per cent. The NWT"s declining trade ? Economic Review 2013-2014 A5 surplus with other countries and increasing trade deficit with other Canadian provinces and territories resulted in the NWT having a net trade deficit equal to 16.9 per cent of GDP in 2011. NWT Trade Balance, per cent of GDP Source: Statistics Canada and NWT Finance Exchange Rate The value of the Canadian dollar in international exchange markets has a direct effect on the health of the NWT economy. A strengthening Canadian dollar means that territorial businesses that export their production get paid less after currency conversion. This is offset to the extent that equipment and other capital goods are imported from outside Canada. The effects are reversed when the Canadian dollar declines: businesses get paid more for their products after currency conversion while foreign imports cost more. The Canadian dollar averaged US$1.00 in 2012, a 1.1 per cent decrease from the 2011 average of US$1.01. US/Canada Exchange Rate Source: Bank of Canada ? Economic Review 2013-2014 A6 Population The NWT population was estimated to be 43,349 persons on July 1, 2012, a decrease of 863 persons, or 2.0 per cent, from July 1, 2011. Three factors account for population change: natural change, interprovincial migration and international migration. Between July 1, 2011 and July 1, 2012 natural population change consisted of 706 births and 199 deaths, resulting in a net increase of 507 persons. Inter-provincial migration accounted for 1,501 persons moving into the NWT from the rest of Canada, while 2,992 persons moved out, leaving a net loss of 1,491 persons. Internationally, there was a net in-migration of 121 persons. Change in the NWT Population Number of Persons 1000 500 0 -500 -1000 -1500 2007 2008 2009 Natural 2010 2011 2012 Net Migration Source: NWT Bureau of Statistics Labour NWT employment in 2012 was 22,700 persons, unchanged from 2011, and 800 persons below the 2007 pre-recession maximum. Employment is forecast to remain unchanged in 2013. The labour force participation rate is the share of the population 15 years of age and older currently employed or actively seeking employment. In 2012 the participation rate was 76.9 per cent, an increase from 76.3 per cent in 2011 but below the 2007 participation rate of 73.8 per cent. The increase in the participation rate from 2011 to 2012 led to a corresponding increase in the unemployment rate from 7.3 per cent in 2011 to 8.1 per cent in 2012 as more people entered the labour market than were able to secure employment. The average 2007 unemployment rate was 5.6 per cent. ? Economic Review 2013-2014 A7 NWT Labour Force Characteristics Source: Statistics Canada Investment Total capital expenditure intentions for 2012 are 21 per cent above estimated 2011 capital expenditures. Private sector capital expenditures are expected to increase from $849 million in 2011 to $1,080 million in 2012, an increase of 27.3 per cent. The main reason for the increase in private sector capital expenditures is the expected 34.4 per cent increase in mining and oil & gas extraction industries expenditures from $587 million in 2011 to $789 million in 2012. Capital expenditures by the public sector, having ramped up during the recession as an element of the GNWT"s economic stimulus program, are estimated to have stabilized at $299 million in 2012, an increase of 1.9 per cent from $293 million in 2011, but below the 2010 peak of $333 million. Annual Percentage Change in NWT Public and Private Capital Expenditures i: intentions Source: NWT Bureau of Statistics and Statistics Canada ? Economic Review 2013-2014 A8 Economic Performance by Sector Real Growth Rates of Selected NWT Industries Source: Statistics Canada and NWT Finance The structure of the NWT economy changed between 2008 and 2009, shifting towards the production of services. In 2008, goods-producing industries accounted for 54 per cent of the NWT economy; by 2009 that share had fallen to 41 per cent. This reflects the slow-down in goods-producing industries, which occurred in the NWT as a result of the global economic downturn. Structure of the NWT Economy, 2009 Other Mining, Oil & Gas 11% Other Service 33% Service Industries 59% Diamond Mining 19% Government Services 26% Source: Statistics Canada. The latest available data is 2009. Other Goods 10% Goods Industries 41% ? Economic Review 2013-2014 A9 Goods-Producing Industries The goods-producing sector accounted for 41 per cent of NWT GDP in 2009, compared to about 28 per cent of Canada"s economy. Resource extraction industries dominate the goods-producing sector in the NWT. Diamond mining was responsible for 19 per cent of 2009 GDP, while other mining, oil and gas accounted for 11 per cent. The remainder is comprised of renewable resources, construction, utilities and manufacturing activities. Fur Harvest Trapping remains an important source of income for many people in the NWT, especially in smaller communities. For the year ended June 30, 2012, nearly 25 thousand NWT pelts were sold, a decline of 20.4 per cent from previous year; however, the value of fur sales was $1.51 million, an increase of 26.5 per cent from the previous year, reflecting higher prices per pelt. Annual Percentage Change in the Number and Value of NWT Pelts Source: NWT Bureau of Statistics Commercial Fishing The commercial fishery in the territory is a small but valued part of the economy. Fish exported from the NWT are marketed through the Freshwater Fish Marketing Corporation, a federal Crown corporation mandated to market fish harvested in Northwestern Ontario, the three Prairie provinces and the NWT. Initial payments to NWT fishers - on a delivery-point, net-of-freight basis - declined 12 per cent from $496,000 in 2010 to $435,000 in 2011, while the weight delivered declined 6 per cent from 385,000 kilograms in 2010 to 360,000 kilograms in 2011. ? Economic Review 2013-2014 A10 NWT Export Fishery: Sales and Number of Fishers 500 50 400 40 300 30 200 20 10 0 Number of Fishers 60 100 Thousands of Dollars 600 0 2007 2008 2009 Initial Payment 2010 2011 Number of Fishers Source: Freshwater Fish Marketing Corporation Exploration and Deposit Appraisal Exploration expenditures include a range of mineral exploration activities, including field work, overhead costs, engineering, economic and pre-construction feasibility studies, and environmental and land access costs. Revised spending intentions for 2012 indicate that exploration and deposit appraisal expenditures increased to an estimated $135.5 million, up 44.5 per cent from 2011. NWT 2012 exploration and deposit appraisal expenditures are estimated to have been 3.3 per cent of the Canadian total, up from 2.2 per cent in 2011. Based on revised 2012 intentions, NWT mineral exploration and deposit appraisal expenditures have nearly recovered to 2008 levels. NWT Mineral Exploration Expenditures 12% 200 150 6% 100 50 0 0% 2007 2008 2009 Expenditures i: revised intentions Source: Natural Resources Canada 2010 2011 Share of Canada 2012i Share of Canada Millions of Dollars 250 ? Economic Review 2013-2014 A11 Precious Metals and Rare Earths Precious metals include gold and silver. Rare earths are a group of 17 elements used in the high-tech sector, from advanced military technology to mobile phones and hybrid cars. After many decades of gold mining in the territory, the last gold mine shut down in 2004. However, increasing prices have led to new exploration activity. The global demand for rare earths has resulted in considerable new exploration activity in the NWT, including Avalon Rare Metals Inc."s Nechalacho rare earths deposit at Thor Lake. Diamond Mining The main driver of the NWT economy is the diamond mining industry, with three producing diamond mines: Ekati opened in 1998; Diavik opened in 2003; and Snap Lake opened in 2008. A fourth proposed mine, Gahcho Ku?, could begin production as early as 2015 or 2016. Ownership of the NWT"s diamond mines changed significantly during 2012. Anglo American finalized its acquisition of De Beers, which includes the Snap Lake mine and the proposed Gahcho Ku? mine. Harry Winston announced its planned purchase of BHP Billiton"s majority interest in the Ekati diamond mine and Rio Tinto, the majority owner of Diavik, continues to search for a potential buyer of Diavik. It is unclear how the changing ownership of the NWT"s diamond mines may affect future operations. Polished Diamond Price Index Source: PolishedPrices.com In 2011, carat production at NWT diamond mines declined by 9.6 per cent from 2010. During the same period, the volume of ore processed declined by 1.9 per cent, reflecting a decline in ore grade consistent with the projected mine life cycles. As a result of higher prices in 2011, diamond production by value rose to $2.07 billion from $2.03 billion in 2010, an increase of 2.0 per cent. ? Economic Review 2013-2014 A12 NWT Diamond Shipments: Weight and Value 18 2,500 2,000 14 12 1,500 10 8 1,000 6 4 Millions of Dollars Millions of Carats 16 500 2 0 0 2007 2008 2009 Carats 2010 2011 Value Source: NWT Bureau of Statistics and NWT Finance Oil and Gas Oil and gas production in the NWT is in decline due to the depletion of active reserves. Growth in production requires new discoveries and new field development. Expenditures on oil and gas activities in the NWT decreased from $351 million in 2010 to $210 million in 2011, a decline of 40 per cent. Despite the recent declines in expenditures on oil and gas production, exploration activity in the NWT is expected to increase in the near-term. The Canol shale formation, in the Sahtu region, is currently under exploration by multiple energy companies and is estimated to hold more than two billion barrels of oil. This exploration is expected to be worth more than $600 million over the next five years. Net Cash Expenditures by the Petroleum Industry: NWT and the Arctic Islands Source: Canadian Association of Petroleum Producers ? Economic Review 2013-2014 A13 Crude oil prices peaked on July 3, 2008 at US$145 per barrel before collapsing to US$40 at the beginning of 2009 but have since recovered. Oil prices were relatively stable in 2012, with the average price declining only 0.9 per cent from 2011 to 2012. Price of Oil: US Dollars per Barrel Cushing West Texas Intermediate Spot Price Source: U.S. Energy Information Administration Construction The construction industry includes residential construction, non-residential construction, and engineering services. The construction sector accounted for 8.3 per cent of the territory"s 2009 GDP, the latest year for which data are available. Construction activity decreased 10.9 per cent from 2010 to 2011; it remains 44.7 per cent below 2007 levels. From 2010 to 2011 residential construction declined 13.6 per cent, non-residential construction decreased 36.8 per cent and oil and gas engineering construction fell by 49.9 per cent. Annual Percentage Change in the Value of Construction Activity, chained (2007) dollars Source: NWT Bureau of Statistics and Statistics Canada ? Economic Review 2013-2014 A14 Manufacturing The NWT manufacturing sector includes businesses such as food processors, cement and concrete producers, and jewellery artisans. The value of sales, in chained (2007) dollars, by manufacturers decreased 9.1 per cent from 2010 to 2011. Value of NWT Shipments by Manufacturers, chained (2007) dollars 14 Millions of Dollars 12 10 8 6 4 2 0 2007 2008 2009 2010 2011 Source: NWT Bureau of Statistics Service Industries Service industries accounted for 59.1 per cent of NWT GDP in 2009, compared to 72.4 per cent nationally. The service sector includes industries such as wholesalers, banks, retailers, hotels and the public sector (schools, hospitals, police and fire services, federal and territorial governments, and local and Aboriginal governments). Retail Trade NWT retail trade sales increased by an estimated 4.0 per cent from 2011 to 2012 and estimated 2012 sales were 7.2 per cent above the 2008 pre-recession high. National retail sales increased by an estimated 3.2 per cent from 2011 to 2012 and have fully recovered from the recession, with a gain of 10.1 per cent from 2008 to 2012. Annual Percentage Change in the Nominal Value of Retail Trade, NWT and Canada e: 2012 estimate based on January - September 2012 Source: NWT Bureau of Statistics and Statistics Canada ? Economic Review 2013-2014 A15 Wholesale Trade Wholesalers distribute merchandise to retailers, businesses, and institutional customers, including the supply of equipment and capital goods. The sector is strongly influenced by capital investment and business activity. Wholesale trade in the NWT increased by an estimated 23.4 per cent from 2011 to 2012 and surpassed its 2007 pre-recession peak by 15.6 per cent. By comparison, wholesale trade in Canada increased by 5.2 per cent from 2011 to 2012. Annual Percentage Change in the Nominal Value of Wholesale Trade, NWT and Canada e: 2012 estimate based on January - September 2012 Source: NWT Bureau of Statistics and Statistics Canada Tourism Tourism is an important part of the territory"s economy with large untapped potential. Total spending by visitors reached $99.5 million during the fiscal year ended March 31, 2012, an increase of 1.3 per cent from the previous year, despite a 1.2 per cent decrease in the number of visitors. This increase follows four consecutive years of declining visitor spending, and was driven by increases in spending by hunters, anglers, those visiting for general touring, aurora viewing and those visiting family and friends. These increases were partially offset by declines in spending by visitors seeking other outdoor adventures and business travellers. Over the period 2007-08 to 2011-12 there was a 19.1 per cent decline in the total number of visitors to the NWT, including notable declines in those visiting to hunt, fish, general touring and for business travel. However, over the same period the NWT saw increased visits by those participating in other outdoor adventures and aurora viewing and those visiting family and friends. The total effect was a decline of 27.8 per cent in visitor expenditures. A16 ? Economic Review 2013-2014 Annual Percentage Change in Total Expenditures by All Travellers to the NWT Source: NWT Industry, Tourism and Investment Public Administration Public administration includes all levels of government in the NWT: federal; territorial; local; and Aboriginal. This includes the courts, policing and correction services, fire protection, defence and public administration but excludes the health, social services and education sectors. From 2010 to 2011 public administration expenditures increased by 0.8 per cent. From 2007 to 2011 public sector expenditures increased by 6.5 per cent. Annual Percentage Change in Public Sector Expenditures, chained (2007) dollars Source: Statistics Canada ? Economic Review 2013-2014 A17 Macroeconomic Performance Indicators The Government of the Northwest Territories" Macroeconomic Policy Framework, designed to guide its investment and policy decisions, includes performance indicators that monitor the health of the economy over time. These indicators were designed to go beyond typical measurements of economic performance or growth by capturing broader measures of economic well-being such as improvements in the quality of life, the capacity of communities, and the protection of the environment. The performance indicators are intended to be measured against a baseline value, which is the average value of the indicator from 2005 to 2007. However, due to revisions made to Statistics Canada data, some pre-2007 data is not currently available; therefore, the majority of performance indicators are being measured against 2007 rather than baseline average for the years 2005 to 2007. These differences are noted. After the development of the framework, the global economy underwent the most intense financial and economic shock since the Great Depression. The NWT economy, with its critical linkages to the world trade system, was particularly vulnerable to the global economic downturn. The NWT economic recovery has been unbalanced and sluggish, as measured by the performance indicators. Indicator 1 - The size and growth of the total economy Real GDP is the most comprehensive measure of the economy. However, it does not measure the non-money economy and cannot measure social well-being. In 2011 NWT real GDP was 25.2 per cent below its 2007 level. Indicator 2 - Productivity Productivity is a key performance measure. It is related to increased profitability, lower costs and sustained competitiveness. Increasing productivity can promote economic growth. Productivity can be increased through labour force training, technological change and changing the labour/capital mix. Higher levels of productivity can provide higher wages and salaries and higher profits. In 2011 productivity was 24.0 per cent below its 2007 value. Indicator 3 - New investment New investment is a leading indicator of economic growth that measures how well the economy can be expected to do in the future. New investment undertaken by the private sector focuses on direct spending on buildings, equipment and machinery with the expectation of a positive return on the investment. Public sector investment largely focuses on health, education and infrastructure; these investments seek to achieve beneficial social and economic outcomes. In 2011 new investment was 45.0 per cent below its 2007 value. A18 ? Economic Review 2013-2014 Indicator 4 - Income Income growth provides evidence that people are benefitting from economic growth and is an important element in realizing the vision of self-reliant people in the NWT. Two similar, but distinct measures of income are identified for measurement: Indicator 4a - Employment income Employment income measures the sum of all income earned through employment by NWT residents and is directly tied to jobs. In 2011 employment income was 9.7 per cent above its 2007 value. Indicator 4b - Average household income Average household income provides information about the quality and distribution of jobs among Northerners. In 2009, average household income was 5.5 per cent above its 2005-2007 average value. Indicator 5 - Employment rate The employment rate measures the extent to which NWT residents are directly participating and benefiting from economic growth. It measures the share of people 15 years of age and older who are employed. In 2012 the employment rate, at 70.7 per cent, was below its 2005-2007 average value of 73.5 per cent. Indicator 6 - Population growth Population growth measures a response to economic growth and provides a base for further growth through diversification. Population changes reflect the health of the population, the robustness of the medical support system, and the economic or lifestyle incentives for people to immigrate to the NWT or to emigrate from the NWT. A growing population serves as a growing consumer market for local businesses. The NWT"s 2012 population was 0.7 per cent below its 2007 value. Indicator 7 - Economic Linkages Developing linkages between different industries contributes to economic growth and diversification. Four measures of strength of economic linkages are considered. Indicator 7a - Level of imports Imports of goods and services reflect the size of existing NWT markets for inputs that already exist based on the established economic base. In 2011 the inflation-adjusted value of imports was 0.5 per cent above its 2007 value. ? Economic Review 2013-2014 A19 Indicator 7b - Wholesale and retail sales Wholesale sales are an indicator of linkages at the production level, where producers purchase inputs from NWT suppliers or where they purchase post-production services such as transportation and communication services from NWT companies. Higher retail sales can support linkages to higher construction and transportation activity and create opportunities for more retail businesses. The estimated value of 2012 wholesale sales, in nominal dollars, was 32.9 per cent above its 2005-2007 average value. The estimated value of 2012 retail sales, in nominal dollars, was 22.5 per cent above its 2005-2007 average value. Indicator 7c - Fly-in/Fly-out labour Measuring the dependence on fly-in labour highlights the capacity of the NWT resident labour force to meet the demand for workers. It depends on whether there are sufficient workers with the required skills available at the employment location. It also represents a leakage of potential consumer expenditures from the NWT economy. In 2010 non-resident NWT labour earnings rose from an average of $319 million from 2005 to 2007 to $362 million, which represents an increased loss to the NWT economy of $43 million, less the $860,000 retained in payroll tax. Indicator 7d - Growth of resource sector service industries Specialized service sectors providing support to NWT resource industries are a principal engine of growth and diversification for the economy. Two service industries are measured. Support activities for agriculture and forestry: in 2011 the value of support activities for agriculture and forestry was 33.9 per cent above its 2007 value. Oil & gas engineering construction: in 2011 the value of oil & gas engineering construction was 42.7 per cent below its 2008 value (2007 data are suppressed by Statistics Canada to meet the confidentiality requirements of the Statistics Act). Indicator 8 - Diversification Diversification of the economy can be measured by GDP by industry, growth by sector and employment by industry. Data to support this measure are collected through the Census of Population. The most recently available employment data from the 2006 Census is for 2005. This indicator will be calculated when the full results of the 2011 census are released in 2013. Indicator 9 - Environmental status and trends See the NWT State of the Environment Report. A20 ? Economic Review 2013-2014 Summary of Findings The NWT economy has been particularly hit hard by the financial and economic downturn of 2008 and 2009. Of the thirteen primary and sub-indicators measured currently, seven indicators increased in value, while the remaining six have decreased. Separating the effects of the 2008 global recession from general trends in the overall NWT economy is impossible. However, the NWT economy has demonstrated a low level of resiliency in responding to the recession given that many indicators have not yet returned to their pre-recession levels and the pace of recovery has been slower than in other provinces and territories. One contributing factor to the low level of resiliency is the composition and openness of the NWT economy, with people and capital free to move to more favourable provinces when faced with economic challenges at home. The challenge for the GNWT is to identify and advance investment opportunities that will generate sustainable benefits in the context of the global economic environment in which NWT businesses compete. Macroeconomic Indicators of Progress, per cent change from 2007 to most recent year e: estimated Source: Statistics Canada, NWT Bureau of Statistics and NWT Finance ? Fiscal Review 2013-2014 B1 FISCAL REVIEW An operating surplus in 2011-12, and projected surpluses for 2012-13 and 2013-14, have created room for the GNWT to make some infrastructure investments. However, slow revenue growth forecasts, combined with ever-increasing pressures for social program spending and a huge infrastructure deficit, mean that the fiscal situation is still fragile. Although revenues are expected to grow modestly in 2013-14, future growth in revenues is projected to be a third of its historical average. With a small tax base and heavy reliance on federal transfers, the GNWT is committed to living within its means by ensuring expenditure growth does not exceed revenue growth. A fiscal strategy centred on restraining expenditure growth within what is affordable is necessary to ensure the GNWT avoids borrowing to finance day-to-day operations and continues to adhere to its Fiscal Responsibility Policy. 2011-12 Final Results The small operating surplus of $1.3 million in 2011-12 was a strong improvement from the $23 million deficit of the previous year, and the first surplus since 2007-08. Year over year growth of 3.5 per cent in operating expenditures to $1.399 billion was more than offset by 5.6 per cent growth in revenues to $1.401 billion. Revenues were $42 million higher than 2011-12 Revised Estimates largely due to higher than forecast corporate income tax, fuel tax, recoveries of prior years" expenses, and other general revenues. Actual expenditures were $31 million higher than 2011-12 Revised Estimates. 2012-13 Revised Estimates The operating surplus for 2012-13 is projected to be $99 million after adjustments, $25 million higher than projected in the 2012-13 Main Estimates. Higher than forecast expenditures, due mostly to extraordinary expenses, were offset by higher revenues, particularly taxes. B2 ? Fiscal Review 2013-2014 The revised 2012-13 revenue forecast is $45 million higher than the 2012-13 Main Estimates, having increased from $1.524 billion to $1.569 billion. The increase is due primarily to an extra $31 million in prior year adjustments for corporate income tax. Operating expenditure estimates are $20 million higher than budgeted in the 2012-13 Main Estimates, having increased to $1.47 billion. Increased expenditures resulted mainly from a severe fire suppression season and an emergency anthrax response. Capital investment expenditures in 2012-13 are expected to be $240 million, nearly double what was projected in the 2012-13 Main Estimates. Most of the increase was due to capital carry-overs from 2011-12. Total debt at March 31, 2013 is estimated to be $561 million. Taking into account other borrowing instruments for purposes of the federally imposed borrowing limit, total GNWT borrowing at March 31, 2013 is projected to be $609 million, leaving $191 million in borrowing room. 2013-14 Budget The 2013-14 Budget continues the work of the first Budget of the 17th Legislative Assembly to restore and maintain fiscal balance while protecting existing programs and services. The Budget ensures operating expenditures are affordable within existing revenues, generating a surplus to repay some short-term borrowing and funding at least half of capital expenditures. The 2013-14 Budget proposes operating expenditures of $1.467 billion and forecasts revenues of $1.609 billion. After taking into account infrastructure contributions and supplementary reserve requirements, an operating surplus of $113 million is projected. Infrastructure investments for 2013-14, approved in November 2012, are budgeted to be $123 million. The cash generated from operations will more than cover the capital investments planned for 2013-14, resulting in a slight decrease in GNWT short-term debt to $143 million at March 31, 2014. Direct long-term debt is estimated to be $182 million, while debt of public agencies such as the NWT Power Corporation, the NWT Housing Corporation, and the Yellowknife Catholic Schools will total $211 million. After adding the projected $51 million in other instruments included under the definition of borrowing for the purposes of the territorial borrowing limit such as capital lease obligations and loan guarantees, net of $7 million in sinking funds, available borrowing room is expected to be $219 million at March 31, 2014. Revenues Total revenues are forecast to increase by $40 million to $1.609 billion in 2013-14. This represents growth of 2.6 per cent over 2012-13 estimated revenues of $1.569 billion. The majority of the growth is attributable to the Territorial Formula Financing Grant, which will grow by $51 million from 2012-13 to 2013-14. The growth in the Grant will be partly offset by lower corporate income tax revenues in 2013-14 due to a large prior year adjustment increasing revenues in 2012-13. ? Fiscal Review 2013-2014 B3 The Territorial Formula Financing Grant continues to make up the majority of GNWT revenues, forecasted to be 70 per cent in 2013-14. GNWT own-source revenues are expected to account for 24 per cent of total revenues in 2013-14. The 2013-14 Budget does not include any new taxes. Effective April 1, 2013, property tax mill rates and a number of fees will be adjusted for inflation. This is in line with the commitment made in the 2010-11 Budget that, where practicable, tobacco and property tax rates, liquor mark-ups, and fees would be adjusted each year by the rate of inflation. 2013-14 GNWT Revenues by Source Recoveries 2% Capital Recoveries/Asset Disposals 1% Taxation Revenue 18% General Revenues 3% Other Transfers 6% Territorial Formula Financing Grant 70% Operating Expenditures The 2013-14 Budget proposes $1.467 billion in operating expenditures, of which $848 million is budgeted for social programs such as education, health care, social services, housing, policing and corrections. Operating expenditures are forecast to increase $56 million from 2012-13 Main Estimates. This growth primarily consists of increasing costs of existing programs and services, amounting to $42 million, as well as $22 million in strategic and corporate initiatives. Amortization and other adjustments contribute another $19 million. These increases are partly offset by $27 million in sunsetted programs. ? Fiscal Review 2013-2014 B4 2013-14 Operations Expenditures by Department Legislative Assembly 1% Environment and Executive Natural Resources 1% 5% Industry, Tourism and Investment 3% Transportation 8% Human Resources 3% Aboriginal Affairs and Intergovernmental Relations 1% Finance NWT Housing 6% Corporation 5% Municipal and Community Affairs 7% Public Works and Services 7% Education, Culture and Employment 20% Justice 8% Health and Social Services 25% Initiatives In the fall of 2012, the Minister of Finance travelled to seven regional centres to explain the fiscal choices facing the GNWT, emphasizing the importance of maintaining expenditure growth below revenue growth. The 2013-14 Budget invests in initiatives that address some of the shortfalls and priorities that Northerners voiced in the Budget Dialogue 2012 process. Prevention and Well-Being Investments in prevention not only improve the health and well-being of Northerners, they can yield efficiencies through decreased program demand and costs in the future. The 2013-14 Budget provides $3.3 million in funding for actions that support prevention and improve well-being. These investments span a wide spectrum of programming such as mental health and addictions, midwifery services, and long-term care. ? $1.15 million funding for mental health and addictions prevention and promotion initiatives, focusing on youth, on-the-land programs, and improvements in case management for people dealing with mental health issues. ? $449,000 to expand the Midwifery Program to improve client access throughout the NWT to midwifery care. ? Fiscal Review 2013-2014 B5 ? $142,000 to deliver routine vaccination programs for children in the NWT, in line with recommendations made by national expert bodies on pediatric immunization programs. ? $1.13 million to increase staffing levels at three existing long-term care facilities, to provide effective, safe and culturally-appropriate care. ? $229,000 to ensure dialysis services continue to be provided in the NWT with support from the Northern Alberta Renal Program. ? $157,000 to fund the GNWT"s share of costs for one RCMP constable to serve in Tulita. ? $90,000 to establish a Victim Services program in Tulita. ______________________________________________________________________ 2013-14 Investments in Prevention and Well-Being (thousands of dollars) Investing in Prevention Mental Health and Addictions Prevention and Promotion Midwifery Program Expansion Vaccination Program for Children $ 1,145 449 142 $ 1,736 Investing in Well-Being Long-term Care Facility Staffing Increase Dialysis Services - Northern Alberta Renal Program RCMP and Victims Services Program Funding in Tulita $ 1,129 229 247 $ 1,605 $ 3,341 ______________________________________________________________________ Sustainable Economic Development Strengthening and diversifying the NWT economy is one of the GNWT"s five key priorities. In 2013-14, over $16 million in investments will be made to enable the growth of a strong and diversified economy. These investments are focused on creating the right environment for economic growth and at reducing reliance on non-renewable sources of energy. ? $6.1 million for costs associated with implementing the Devolution Final Agreement. ? $7.0 million to continue advancing the Mackenzie Valley Fibre Optic Link project, a high-speed data link that will dramatically improve internet connectivity and provide opportunities for entry into other knowledge-based industries. ? Fiscal Review 2013-2014 B6 ? $600,000 to increase tourism marketing to protect the NWT"s share of the aurora viewing market and to take advantage of new markets and opportunities. ? $200,000 to continue support to NWT businesses in implementing energy conservation and efficiency measures that address the high cost of energy through the Commercial Energy Conservation and Efficiency Program. ? $700,000 to fund NT Energy Corp."s development of NWT hydroelectric resources and analysis of alternative energy opportunities such as biomass, geothermal and solar. ? $100,000 to support communities, businesses and residents in converting to renewable energy sources through the Alternative Energy Technologies Program. ? $100,000 to assist homeowners and consumers in purchasing new energy efficient models of home appliances and other equipment through the Energy Efficiency Incentive Program. ______________________________________________________________________ 2013-14 Investments in Sustainable Economic Development (thousands of dollars) Supporting Economic Diversification & Growth Devolution Implementation Activities Mackenzie Valley Fibre Optic Link Project (Capital Contribution) Increased Tourism Industry Marketing Contribution $ 6,071 7,000 600 $ 13,671 Energy Conservation and Diversification NT Energy Core Funding Alternative Energy Technology Program Commercial Energy Conservation and Efficiency Program Energy Efficiency Incentive Program Regional Energy Advisors Greenhouse Gas Strategy Liquid Natural Gas Solutions for Inuvik Whati Connection to Hydro: Completion of Regulatory Application Water Monitoring for Hydro Potential NWT Biomass Energy Strategy Initiatives Expansion of Solar Electricity Systems Community Scale Wind Demonstration Project Smart Microgrid Project $ 700 100 200 100 125 200 100 250 50 400 250 100 125 $ 2,700 $ 16,371 ______________________________________________________________________ ? Fiscal Review 2013-2014 B7 ? $125,000 to support the work of Arctic Energy Alliance in promoting energy efficiency and conservation throughout the NWT, including conducting home energy audits. ? $200,000 to support the delivery of the Greenhouse Gas Strategy and to maintain and report emission inventories to the Climate Registry. ? $100,000 for the examination of liquid natural gas solutions for electricity and heating supply in Inuvik. ? $50,000 for water monitoring on the Kakisa River to increase understanding of the NWT"s hydro potential in support of the NWT Hydro Strategy. ? $250,000 towards the development of a regulatory application for the proposed 65 km transmission line that would connect What? to the Snare hydro system. ? $400,000 for initiatives in support of the NWT Biomass Energy Strategy. ? $250,000 to add solar electricity systems to two diesel community grids, adding up to 40kW of installed capacity. ? $100,000 to advance work on a small-scale community wind energy project through community consultation and site selection. ? $125,000 to establish a remote smart microgrid community project in collaboration with Natural Resources Canada, which has the potential to reduce diesel consumption. Government Efficiency and Effectiveness In a fiscal environment of slow revenue growth and increasing cost pressures, the impetus for increased government efficiency is greater than ever. A total of $2.3 million will be invested in initiatives that will yield internal efficiencies or improve the effectiveness of existing programs and services. ? $489,000 to fund human resources required for a phased roll out of the Electronic Medical Records system. ? $700,000 to install high energy-efficient wood pellet boilers in multi-unit public housing complexes. ? $550,000 to build capacity in clinical governance, including resources to provide needed medical clinical leadership and developing, monitoring and auditing clinical practice guidelines, standards and protocols. ? $472,000 to fund the first step in the establishment of a full Territorial Support Network to improve medevac services, ensuring all Northerners receive similar high standard levels of care. ? $100,000 to develop an Investment Decision Framework that will incorporate decision-making best practices into the energy planning budget process. ? Fiscal Review 2013-2014 B8 ______________________________________________________________________ 2013-14 Investments in Efficient and Effective Government (thousands of dollars) Improvements in Efficiency Electronic Medical Records Implementation Energy Efficiency in Public Housing Units $ 489 700 $ 1,189 Improvements in Effectiveness Building Clinical Governance Capacity Territorial Support Network for Medical Evacuations and Travel Development of Energy Investment Decision Framework $ 550 472 100 $ 1,122 $ 2,311 ______________________________________________________________________ Infrastructure The 2013-14 capital budget, approved November 6, 2012, provides for investments of $93 million in infrastructure and $30 million in infrastructure contributions, including: ? $28 million in Formula Funding for community infrastructure; ? $35.4 million for health facility replacements and renovations, including $18.3 million for the H.H. Williams Memorial Hospital in Hay River and $5.2 million for the replacement of the Jimmy Erasmus Seniors Centre in Behchok? with a larger facility; ? $23.5 million for highways and winter roads across the NWT; ? $2.1 million for school replacements and renovations, including $1.1 million for the construction of the Children"s First Centre in Inuvik; ? $2.1 million for capital improvements in NWT trails and parks; ? $12 million for small capital projects across all departments; ? $5 million for the deferred maintenance program; and ? $1.2 million to continue the Capital Asset Retrofit Fund Program for energy efficiency upgrades to existing GNWT buildings. Included in the 2013-14 Main Estimates is $15 million in housing investments to be delivered through the 2013-14 Capital Plan of the NWT Housing Corporation. Including the proposed NWT Housing Corporation investment, total planned infrastructure investment in 2013-14 is $138.6 million. ? Fiscal Review 2013-2014 B9 Fiscal Strategy The GNWT"s fiscal strategy takes a medium-term view of revenue and expenditure trends and plans for continued surpluses to help fund at least half of infrastructure investment and ensures resources are available to respond to economic shocks and to support economic development. Fiscal Environment and Outlook The GNWT operates in a fiscal environment characterized by heavy reliance on federal transfers, a limited tax base to raise revenues, and expenditure challenges associated with geographic remoteness and small and dispersed population centres. Approximately three-quarters of GNWT revenues come from federal transfers, and total revenues are heavily influenced by changes in transfers. The Territorial Formula Financing Grant is the largest of the federal transfers, making up 70 per cent of total GNWT revenues. The GNWT has been working collaboratively with the federal government and the other territories on the technical work supporting the legislative renewal of Territorial Formula Financing on April 1, 2014. At the December 2012 Finance Ministers Meeting, federal Finance Minister Flaherty announced that the current gap-filling formula of the Grant will continue until at least 2018-19. Nevertheless, certainty in the Territorial Formula Financing formula does not change the fact that the NWT"s slow population growth, and the curbing of spending by other governments, will mean slower growth in entitlements over the next few years because the Grant calculation uses these variables to derive its escalator. Following 4.8 per cent growth in 2013-14, the Territorial Formula Financing Grant is forecast to remain flat in 2014-15 and 2015-16. As a result, growth in total revenues will slow to less than 1 per cent in each of 2014-15 and 2015-16, compared to 2.6 per cent in 2013-14. Slower revenue growth will make it increasingly challenging to generate surpluses going forward. Expenditure pressures due to price increases, such as rising fuel prices, or increased demands for programs and services driven by such factors as an aging population, continue to strain the sustainability of the GNWT"s fiscal plan. The GNWT, restrained by a small tax base and a federally imposed borrowing limit, must be vigilant in ensuring expenditure growth is affordable within revenue growth. If revenues do not keep pace with the cost of government operations, capital investment will have to be reduced; otherwise, the GNWT would be in violation of its Fiscal Responsibility Policy. Fiscal Responsibility Policy The GNWT WILL borrow for capital infrastructure; self-liquidating investments; and repayable loan programs. The GNWT will NOT borrow for operating expenses. Investment in infrastructure will be financed with minimum 50% from cash generated from operating surpluses. "Affordable debt" is debt where annual debt servicing payments do not exceed 5% of total annual revenues. The GNWT"s Fiscal Responsibility Policy, together with its relatively low level of debt, contribute to its success in maintaining an Aa1 credit rating from Moody"s Investors Service for the past seven years. ? Fiscal Review 2013-2014 B10 Fiscal Strategy The GNWT remains committed to a fiscal strategy of managing expenditure growth in line with revenue growth and adhering to the Fiscal Responsibility Policy. The fiscal strategy calls for surpluses that can be used to pay down short-term borrowing, while providing the necessary funds to invest in future infrastructure projects. To ensure these operating surpluses, the fiscal strategy going forward will be to restrain the growth of existing programs and services to $25 million in 2014-15, and 1.5 per cent growth thereafter. This will allow the GNWT to start addressing the growing infrastructure deficit by increasing infrastructure investment by $50 million in 2014-15 and 2015-16 and make additional investments such as the Inuvik to Tuktoyaktuk highway and the Mackenzie Valley Fibre Optic Link. The fiscal strategy ensures that these infrastructure investments can be made while keeping the GNWT within the federally legislated borrowing limit of $800 million. The following table shows the GNWT"s medium-term outlook given current fiscal projections. The outlook includes all components of the fiscal strategy, including the rebuilding of cash through operating surpluses in the short-term and additional strategic infrastructure investment in 2014-15 and 2015-16. The outlook does not take into account any resource revenues that may accrue to the GNWT following the implementation of a Final Devolution Agreement. The signing of a Final Devolution Agreement will not change the fiscal strategy targets for operating expenditures. Resource revenues accruing from devolution will be used to fund strategic infrastructure, pay down debt and be saved in the Heritage Fund. The GNWT is committed to responsibly managing its share of revenues from non-renewable resources by not spending such revenues on the day-to-day operations of government. Medium-Term Outlook ($ millions) 2011-12 Actuals Revenues Expenditures Operating Surplus (Deficit) 2012-13 Revised Estimates 2013-14 Main Estimates 2014-15 Forecast 2015-16 Forecast 2016-17 Forecast 1,401 (1,400) 1,569 (1,470) 1,609 (1,496) 1,619 (1,536) 1,635 (1,566) 1,665 (1,607) 1 99 113 83 69 58 145 132 134 168 161 140 (164) (250) (187) (601) (164) (258) (188) (609) (143) (251) (187) (581) (191) (239) (187) (617) (209) (241) (187) (637) (219) (245) (228) (692) Total Borrowing Authority 800 800 800 800 800 800 Available Borrowing Authority 199 191 219 183 163 108 Capital Investment Requirements Accumulated Cash Surplus (Deficit) as of March 31st Total Guaranteed Debt 1 Other Debt 2 Total Debt 1 Includes debt of the NWT Power Corp., NWT Energy Corp. and NWT Housing Corp. 2 Includes debt to finance the construction of the Deh Cho Bridge, and debt of the Yellowknife Public Denominational District Educational Authority. Total may not equal sum of individual figures due to rounding. ? Fiscal Review 2013-2014 B11 Beyond 2015-16, the enhanced infrastructure plan is not sustainable without increased revenues. At March 31, 2014 the GNWT is forecast to have $219 million in borrowing room under the territorial borrowing limit. With the increased infrastructure investment in the following two years, that room will be reduced to $163 million by March 31, 2016. Infrastructure investment will have to be reduced in 2016-17 in order to ensure $108 million in borrowing authority by the end of 2016-17. Total Debt and Borrowing Authority ($ millions) 900 800 800 Forecast 800 800 800 $108 million 575 600 $ millions 800 $ 219 million 700 500 800 500 500 Total Debt 400 Borrowing Authority 300 200 Debt accumulation due to infrastructure spending during the economic downturn 100 0 2008-09 2009-10 2010-11 2011-12 2012-13 Rev Est 2013-14 Main Est 2014-15 Fcst 2015-16 Fcst 2016-17 Fcst Note: Some of the debt increase from 2010-11 to 2011-12 reflects the change in the definition of borrowing that was part of the increase in the NWT borrowing limit to $800 million on March 8, 2012. Risks to Outlook There are risks to the medium-term outlook on both the revenue and expenditure sides. Since the Territorial Formula Financing represents about 70 per cent of total GNWT revenues, its responsiveness to changes in the GNWT"s fiscal circumstances is crucial to overall revenue stability. A further 6 per cent of GNWT revenues are composed of other federal transfers, which do not vary significantly. However, own-source revenues, which represent about 24 per cent of total revenues, are subject to differing degrees of variability. Revenues from personal income tax, payroll tax and fuel tax tend to decrease during an economic downturn; however, corporate income tax can fluctuate significantly, with little connection to the underlying economic situation. Although Territorial Formula Financing does respond in time to changes in own-source revenues, the response is not immediate and does not cover the entire change in own-source revenues. B12 ? Fiscal Review 2013-2014 Over the longer term, continued stagnant growth in NWT population or reductions in provincial and local government spending pose risks to the growth in the Territorial Formula Financing Grant, which is forecast to increase slightly in 2016-17. Short-term expenditure shocks are usually caused by natural disasters, such as flooding or fire, or shocks to prices of inputs such as diesel. The GNWT monitors historical trends in expenditures and adjusts allocations where appropriate in order to improve expenditure planning. For example, $2.5 million was added to the fire suppression budget beginning in 2013-14 following a review of historical fire suppression expenditures against the budget amounts, which revealed consistent budget shortfalls. Upward pressures on expenditures over the long term are primarily associated with an aging population, reliance on non-renewable resources for energy and heating, and expectations of enhanced program and service standards. ? Fiscal Review 2013-2014 B13 Summary of Operations (thousands of dollars) 2013/2014 Main Estimates 2012/2013 Revised Estimates 2012/2013 Main Estimates 2011/2012 Actuals 1,609,354 1,569,067 1,524,382 1,401,411 306,660 703,743 374,896 81,525 301,318 689,211 381,505 74,107 294,183 682,561 361,761 72,676 295,300 640,109 363,201 66,976 1,466,824 1,446,141 1,411,181 1,365,586 OPERATING SURPLUS (DEFICIT) PRIOR TO ADJUSTMENTS 142,530 122,926 113,201 35,825 INFRASTRUCTURE CONTRIBUTIONS (29,931) (38,866) (28,852) (34,226) REVENUES OPERATIONS EXPENSE Compensation and Benefits Grants and Contributions Other Expenses Amortization TOTAL OPERATIONS EXPENSE TO BE VOTED Petroleum Products Stabilization Fund net profit SUPPLEMENTARY RESERVE ESTIMATED APPROPRIATION LAPSES (20,000) - - (281) (20,000) - 20,000 15,000 10,000 - 60,025 65,310 58,839 67,825 (60,025) (65,310) (58,839) (67,825) OPERATING SURPLUS (DEFICIT) FOR THE YEAR 112,599 99,060 74,349 1,318 ACCUMULATED SURPLUS AT THE BEGINNING OF THE YEAR 877,342 778,282 743,280 776,964 ACCUMULATED SURPLUS AT THE END OF THE YEAR 989,941 877,342 817,629 778,282 WORK PERFORMED ON BEHALF OF OTHERS Recoveries Expenditures ? Fiscal Review 2013-2014 B14 Summary of Revenues (thousands of dollars) 2013/2014 Main Estimates 2012/2013 Revised Estimates 2012/2013 Main Estimates 2011/2012 Actuals GRANT FROM CANADA 1,121,244 1,070,023 1,070,023 996,143 TRANSFER PAYMENTS 101,000 95,128 96,854 101,952 98,107 88,034 16,591 18,456 43,180 25,953 4,445 294,766 100,812 105,868 16,686 18,348 41,345 25,476 4,400 312,935 90,441 74,976 17,326 16,586 41,488 25,440 4,400 270,657 72,505 22,660 17,108 18,851 39,662 24,738 4,505 200,029 25,226 20,583 1,123 46,932 25,082 17,272 2,183 44,537 24,896 15,976 2,219 43,091 24,626 16,401 2,536 43,563 3,724 256 21,591 589 3,000 29,160 3,599 443 22,549 610 3,000 30,201 3,599 443 19,911 610 3,000 27,563 4,046 633 29,508 2,323 7,483 43,993 593 635 635 762 15,659 15,608 15,559 14,969 1,609,354 1,569,067 1,524,382 1,401,411 TAXATION REVENUE Personal Income Tax Corporate Income Tax Tobacco Tax Fuel Tax Payroll Tax Property Tax and School Levies Insurance Taxes GENERAL REVENUES Revolving Funds Net Revenue Regulatory Revenues Investment Income OTHER RECOVERIES Lease Service Program Commodity, asset sales and other Recovery of Prior Years' Expenditures GRANTS IN KIND AMORTIZATION OF CAPITAL CONTRIBUTIONS TOTAL REVENUES ? Fiscal Review 2013-2014 B15 Summary of Operations Expenditures by Department (thousands of dollars) 2013/2014 Main Estimates Legislative Assembly Executive Human Resources Aboriginal Affairs and Intergovernmental Relations Finance Municipal and Community Affairs Public Works and Services Health and Social Services Justice Education, Culture and Employment Transportation Industry, Tourism and Investment Environment and Natural Resources TOTAL OPERATIONS EXPENDITURES 2012/2013 Revised Estimates 2012/2013 Main Estimates 2011/2012 Actuals 18,239 20,464 42,099 7,416 156,278 98,786 104,505 363,856 116,759 299,611 117,011 50,235 71,565 18,549 22,961 42,994 7,354 143,988 95,826 97,767 355,794 114,534 290,209 120,641 50,134 85,390 18,508 22,862 42,796 7,304 142,121 95,533 93,682 349,926 113,674 289,107 120,415 49,560 65,693 19,265 14,578 42,123 7,395 107,218 91,842 93,531 360,217 106,736 288,409 111,922 50,308 72,042 1,466,824 1,446,141 1,411,181 1,365,586 Summary of Infrastructure Investment by Department (thousands of dollars) 2013/2014 Main Estimates 2012/2013 Revised Estimates 2012/2013 Main Estimates 2011/2012 Actuals Tangible Capital Assets Legislative Assembly Human Resources Finance Municipal and Community Affairs Public Works and Services Health and Social Services Justice Education, Culture and Employment Transportation Industry, Tourism and Investment Environment and Natural Resources 300 24,536 36,381 799 1,276 26,250 2,060 1,861 728 300 1,674 17,870 48,313 1,679 24,750 101,728 1,305 2,763 640 300 1,008 11,241 36,189 702 12,895 29,625 1,241 1,524 109 923 542 13,032 15,947 991 43,424 87,429 1,033 1,608 Total Tangible Capital Assets 93,463 201,110 95,365 165,038 Infrastructure Contributions Municipal and Community Affairs Health and Social Services Education, Culture and Employment Transportation 28,002 1,929 - 37,869 997 - 28,002 850 - 33,513 713 - Infrastructure Contributions 29,931 38,866 28,852 34,226 123,394 239,976 124,217 199,264 TOTAL INFRASTRUCTURE INVESTMENT ? Fiscal Review 2013-2014 B16 Summary of Cash Flows (thousands of dollars) 2013/2014 Main Estimates 2012/2013 Revised Estimates 2012/2013 Main Estimates 2011/2012 Actuals 1,213,273 366,040 1,159,280 387,651 1,163,056 326,982 1,098,095 303,316 1,579,313 1,546,931 1,490,038 1,401,411 (1,414,420) (2,000) (1,393,258) (13,000) (1,376,467) (13,000) (1,432,562) 81,684 OPERATING TRANSACTIONS Cash Received From: Canada Other Revenues Cash Paid For: Operations Expenses Projects Performed for Others Cash Provided By (Used for) Operating Transactions 162,893 140,673 100,572 50,533 CAPITAL TRANSACTIONS Capital Investment (current year) Capital Investment (prior year) Proceeds from Disposal of Capital Assets Capital Contributions Received and Deferred (128,829) (5,483) - (125,367) (7,006) - (125,861) (7,050) - (165,261) 17,316 Cash Provided By (Used for) Capital Transactions (134,312) (132,373) (132,911) (147,945) INVESTING TRANSACTIONS (4,200) (4,200) (4,200) (506) FINANCING TRANSACTIONS (3,547) (3,390) (1,000) 63 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 20,834 Cash and Cash Equivalents, Beginning of Year (163,625) CASH AND CASH EQUIVALENTS, END OF YEAR (142,791) 710 (37,539) (97,855) (164,335) (178,237) (66,480) (163,625) (215,776) (164,335) ? Fiscal Review 2013-2014 B17 Summary of Debt and Estimated Borrowing Capacity (thousands of dollars) 2013/2014 Main Estimates 2012/2013 Revised Estimates 2012/2013 Main Estimates 2011/2012 Actuals 142,791 8,000 150,791 163,625 9,000 172,625 215,776 3,000 218,776 164,335 16,351 180,686 GNWT LONG TERM DEBT Deh Cho Bridge - Real Return Bonds Canada Mortgage and Housing Corporation 181,600 802 180,556 867 179,129 867 179,613 930 PUBLIC AGENCY DEBT NWT Hydro Corporation NWT Housing Corporation Yellowknife Catholic Schools 188,821 11,525 2,979 191,135 12,245 3,609 191,434 12,358 4,992 189,305 12,875 4,230 TOTAL DEBT 536,518 561,037 607,556 567,639 OBLIGATIONS UNDER CAPITAL LEASES GNWT NWT Housing Corporation NWT Hydro Corporation 1,915 2,755 19,226 2,238 3,729 19,631 2,119 3,729 19,472 2,815 4,667 20,003 LOAN GUARANTEES NWT Housing Corporation 27,550 29,406 28,321 31,105 587,964 616,041 661,197 626,229 SHORT TERM DEBT GNWT NWT Hydro Corporation TOTAL GROSS BORROWING PER BORROWING REGULATIONS LESS: EXTERNALLY RESTRICTED SINKING FUNDS NWT Power Corporation (7,199) (6,592) (6,592) (25,052) TERRITORIAL BORROWING 580,765 609,449 654,605 601,177 TERRITORIAL BORROWING LIMIT 800,000 800,000 800,000 800,000 AVAILABLE BORROWING AUTHORITY FOR FISCAL PLANNING PURPOSES 219,235 190,551 145,395 198,823 ? Fiscal Review 2013-2014 B18 PROVINCIAL/TERRITORIAL TAX RATES AS OF JANUARY 1, 2013 Combined Top Marginal Personal Income Tax Rate (%) (a) Corporate Retail Fuel tax (b) Sales Tax (%) Gasoline (?/litre) Diesel (?/litre) Tobacco (c) Tax ($/carton) Payroll Tax (%) (d) Capital Tax on Income Tax Financial Small (%) Large (%) Institutions (%) Northwest Territories 43.05 - 10.70 9.10 57.20 2.00 4.0 11.5 - Nunavut 40.50 - 6.40 9.10 50.00 2.00 4.0 12.0 - Yukon 42.40 - 6.20 7.20 42.00 - 4.0 15.0 - British Columbia 43.70 7.0 21.17 22.67 37.00 - 2.5 10.0 - Alberta 39.00 0.0 9.00 9.00 40.00 - 3.0 10.0 - Saskatchewan 44.00 5.0 15.00 15.00 42.00 - 2.0 12.0 3.25 Manitoba 46.40 7.0 14.00 14.00 50.00 2.15 0.0 12.0 3.0 Ontario 49.53 8.0 14.70 14.30 24.70 1.95 4.5 11.5 - Quebec 48.22 9.5 18.20 19.20 25.80 4.26 8.0 11.9 - New Brunswick 43.30 8.0 13.60 19.20 34.00 - 4.5 10.0 4.0 Nova Scotia 50.00 10.0 15.50 15.40 43.04 - 3.5 16.0 4.0 Prince Edward Island 47.37 10.0 15.80 20.20 50.80 - 1.0 16.0 5.0 Newfoundland & Labrador 42.30 8.0 16.50 16.50 38.00 2.00 4.0 14.0 4.0 46.74 7.2 15.72 16.14 30.83 1.85 4.6 11.4 0.5 Weighted average (e) Notes: (a) Combined federal-provincial/ territorial highest 2013 personal income tax rates and surtaxes. (b) The NWT"s off-highway gasoline tax rate is 6.4 cents/litre. British Columbia fuel tax rates include carbon tax, and are applicable in regions outside Victoria and the Lower Mainland. In British Columbia, carbon tax rates are uniform across the province; however, there are different fuel tax rates for different regions. Quebec fuel tax rates also vary regionally. (c) British Columbia, Manitoba, New Brunswick, Newfoundland, Nova Scotia, Ontario and Saskatchewan apply sales tax to sales of tobacco. (d) NWT and Nunavut levy payroll taxes on employees. Other provinces that levy payroll taxes provide exemptions for small business and/or rates vary depending on payroll size. (e) Average weighted by provincial/ territorial populations at July 1, 2012.