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.
“In building a solid foundation for our future, we would need to double, even triple, our annual capital plan,” he said in his speech. “We cannot do this within our current budget.”
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, Mr. Peterson says 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 reductions in capital budgets.
Mr. 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 said. “Until then, however, we must remain vigilant about our financial situation.”
Nunavut gets no direct revenue, or royalties, from its natural resources – it goes to Ottawa.
Other unknowns include public-sector wages. The Nunavut Employees Union has been without a contract for nearly three years and will be in a legal strike position on March 14.
Financing capital spending remains a major problem for the territory. Federal legislation limits the amount of debt it can accumulate to $200-million, and Nunavut has already committed about $140-million of that to three Crown corporations.
That leaves little room for investment, Mr. Peterson said.
“Just one project, the Iqaluit airport upgrade, would punch right through that debt ceiling.”
He 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.
“We look forward to discussing investment partnerships with the federal government and the private sector,” Mr. Peterson said. “We are discussing with the federal government an increase in our debt limit.”
Health spending got the biggest boost in the budget, rising six per cent to nearly $317-million. Mr. 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.