N.W.T. gov't braces for $34M federal transfer shortfall

The Northwest Territories government says it could start running a deficit by the fiscal year 2018-2019 if the federal government makes cuts to transfer payments.

The territory's Department of Finance released a new medium-term forecast for the territory on Monday. The forecast spells out two scenarios, both of which underline the dicey financial situation of the government, which faces a decline in revenues and flat population growth in the years to come.

In the first scenario — in which the federal government does proceed with cutting the N.W.T.'s annual transfer payments by $34 million — the territory would have an operating deficit of $27 million and the government's debt would total $884 million by 2018-2019. By the following year, the deficit would grow to $32 million and the debt to $1.03 billion — less than $300 million shy of the government's $1.3-billion debt cap.

In the second scenario — in which the transfer payments would be cut by only $6 million a year — the government's budget would be balanced in 2018-2019 but then run into a deficit of $4 million in 2019-2020.   

Transfer payments account for more than two thirds of the N.W.T. government's budget.

Sandy Kalgutkar, the deputy secretary of the government's Financial Management Board, said the territorial government's talks with the federal government about keeping the N.W.T.'s transfer payments at the current amount remain "ongoing."

"I would think that, by mid-March, we should have some certainty of what restoration, if any, would look like," said Kalgutkar.

Kelly Bluck, the N.W.T.'s director of fiscal policy, said she's "fairly confident" the transfer payments won't be reduced.

The government's forecast shows a $100-million bump in capital spending for 2016-17. Kalgutkar attributed that bump to the final year of construction for the Mackenzie Valley Fibre Optic Link.