Yellowknife (Oct 22/03) - The federal government's reluctance to renegotiate funding agreements with the territorial governments will likely perpetuate a welfare state North of 60.

Joe Handley

As the potential for tax revenue increases throughout the territories, and in the Northwest Territories in particular, the federal government continues to claw back funding based on territorial taxation.

Northwest Territories Finance Minister Joe Handley told Yellowknifer last Friday the territorial ministers are looking to set up a meeting with federal Finance Minister John Manley to discuss the drawbacks to the current funding arrangement.

A commitment was made during the finance ministers meeting in Ottawa, Oct. 10, that territorial finance ministers and federal Finance Minister John Manley would meet separately to discuss changes to the funding formula.

The meeting could happen near the middle of November, possibly in Toronto, Handley said.

Recently, the territorial government worked with Statistics Canada after a dispute involving their methodology. New figures recently released have resulted in a $35-million increase in per capita funding for the government of the Northwest Territories.

When territorial ministers stood together for an increase in health funding near the end of March, Prime Minister Jean Chretien made a commitment to supply an additional $60 million in health care funding to the territories over the next three years.

At that time Chretien also committed himself to addressing the adequacy of overall funding to the territories, Handley said.

A number of issues are at stake, some of which, such as population figures, have already been settled, while others remain unresolved.

One of those unresolved issues is the federal claw back on funding. As territorial governments increase their taxation efforts, funding levels are drawn back, Handley said.

"In the mid-90s we had five per cent cut off our base and now we need to have some adjustment on it. The other factor that needs to be talked about is the prime minister's commitment to look at (funding) adequacy," Handley said.

An eight to 10 per cent increase in funding is what Handley is looking for during the upcoming meeting with Manley.

Federal Department of Finance spokeswoman Andree Houde and other senior finance officials said there has been no date or location set for the meeting between Manley and the territorial ministers.

Finance officials did confirm Manley had, on Oct. 10, agreed to meet at a later date to discuss territorial finance ministers' concerns.

Finance officials also spoke about the difficulty in establishing one funding formula for all three territories.

This difficulty revolves around the differing stages of development among the three territories, and how one funding formula could equitably address the separate challenges each territory faces.

The $1.7 billion in annual federal transfers to the territories still accounts for 60 to 80 per cent of territorial funding, senior finance officials said.

"While there is potential for resource revenue within the territories, it still pales in comparison to the transfers from the federal government," said one senior finance official.

Federal finance officials defended the funding formula and the manner within which it declines with rising revenues.

At the same time, despite territorial deficits, they defended share-cost agreements on infrastructure development.

"The qualifier is that it has to be matched. We can't say if the government of the Northwest Territories does or does not have some money. That's getting into an area out of our particular expertise," finance officials said.

The current federal funding formula for the territories expires March 31, 2004.