Iqaluit (Nov 27/06) - Finance Minister David Simailak delivered a gloomy financial forecast for Nunavut to the legislature on Nov. 21.

It includes $28.9 million in new spending, a deficit of $8.7 million, a hiring freeze for the government and a new tax for smokers.

"Anyone who runs a household knows that you have to have enough money coming in to cover off all the money going out to pay the bills. Unless you have sufficient funds, you end up paying for groceries, furnace oil or the phone and power bills on your credit card, and that simply isn't sustainable," said Simailak.

He likened Nunavut to just such an over-extended family, saying, "This is essentially the situation the Government of Nunavut finds itself in today."

The $28 million in new spending covers three departments. Health and Social Services needs $3,797,000 to cover over-spending. Another $17,535,000 is mostly for energy related maintenance. The final $7,596,000 covers new housing and health equipment.

The overspending prompted new taxes. Simailak raised the payroll tax from one per cent to two per cent.

To offset the increase, the cost-of-living credit has been raised from $700 to $900. That means the increase should not affect people who live in the territory. Instead, short-term imports will pay extra. You need to be a Nunavut resident for at least six months to claim the cost-of-living credit.

Smokers are the target of the second tax hike, with the price of a pack of 25 smokes going up by $1.35 on Dec. 15. Loose tobacco taxes are also increasing.

Nunavut is now tied with the NWT for the highest cigarette tax in the country.

"Given the high rate of smoking among our population, it is not surprising that health care costs in Nunavut keep rising each year," said Simailak.

Up next for a tax hike will be booze.

"Liquor margins have also not been increased since the creation of Nunavut in 1999. We will be increasing margins shortly," said Simailak.

Amidst deficits, tax hikes and over-spending, Simailak added another measure designed to save money in the short term, a hiring freeze for the Government of Nunavut.

"We have asked all government departments to identify and freeze all currently vacant positions that do not negatively impact the delivery of necessary programs and services," the finance minister said.

Iqaluit MLA Hunter Tootoo wanted to know how Health and Social Service could spend so much money.

"A disturbing revelation in there was the fact that there was an over-expenditure of close to $4 million for the Department of Health and Social Services.... how come they didn't know about that after year-end," asked Tootoo.

Simailak replied, "We were not advised of it until May. I'm sure the minister of Health and Social Services will make detailed information on what that over-expenditure was about available to the house."

Cambridge Bay MLA Keith Peterson wanted to know how long it will take for the new cost-cutting and tax-generating measures to eliminate the deficit.

"The end is not in sight yet as to how much we would do, but I cannot respond to you how long it will be," said Simailak.