SOMBA K'E/YELLOWKNIFE - Mine shutdowns and dwindling mineral, oil and gas exploration will drive the territorial government deeper into debt next year, according to Finance Minister Michael Miltenberger.

On May 28, the minister told the legislative assembly that corporate tax revenues will potentially be $40 million lower than anticipated in this year's budget.

Finance Minister Michael Miltenberger said the government is prepared to go further into debt next year in order to stabilize the territory and act as a counter-balance to the economic downturn. Miltenberger said decreases in diamond production and mineral and gas exploration could translate into $40 million less in tax revenue than anticipated. "If our corporate tax revenues are lower than forecast, we may need to borrow more than planned," he said. - Herb Mathisen/NNSL photo

Total capital investment in the NWT may be down as much as 30 per cent from last year. He said to counter-balance that, the government is prepared to go further into debt next year.

"If the NWT's resource-based corporations are hit harder than the national average, GNWT revenues could fall even more," Miltenberger said in an interview yesterday.

"In the North," he added, "diamond production is down at least 25 per cent, exploration in mining and oil and gas is down 80 per cent. And our other costs are still there. Our health care costs are still driving our budgets."

"I want people to be aware. I want to give a realistic reflection of the challenges that are facing us," he said, referring to the pending temporary diamond mine shutdowns and the continued lull in exploration.

"The horizon out there hasn't lightened appreciably. We are still going to be set on all sides by storm clouds."

Miltenberger said the government will continue to play a stabilizing role in the economy and will not immediately change its course due to decreasing revenues. He said the government currently has the biggest capital plan in the history of the NWT.

"We are going to maintain program levels," the minister said.

"We are going to have almost no job losses as a government. We are going to be a significant counter-balance to the downturn in the economy and on the private sector side. But that comes at a cost," he said.

"So we're going to have to start carrying a little more debt than we would like."

Miltenberger said he did not yet know how much the government may need to borrow next year, adding the government has a $500 million limit on borrowing as dictated by the federal government, of which $156 million has already been used.

"There's a reluctance on everybody's part to start going into debt," he said.

"When you borrow to finance (operations and maintenance) is when trouble starts."

The government borrowed $80 million this year to help pay for infrastructure, which Miltenberger said he expected to pay back early in the next fiscal year.

"We're borrowing money on the short-term to finance capital and infrastructure development. But the plan is also to have to borrow again this following year, so we have to manage those circumstances," he said.

Miltenberger said the government will have a better idea of how far the drop in corporate revenues will be this fall. Once known, the GNWT will plan a course of action.

When the 2009-2010 budget deliberations began a year ago, Miltenberger said the world was a much different place. Since then, the global economy has suffered through the sub-prime market collapse, the demise of "more banks than you can shake a stick at" and the recent bankruptcy of "blue-chip icons of industry like General Motors," said Miltenberger.

"While we are somewhat protected from that, we are not immune," he said.

Miltenberger said he does not think the world has seen the bottom of this recession yet, adding he doesn't put much stock in some predictions that the economy will begin to recover in the third or fourth quarter of this year.

"I'm not anywhere near that optimistic. I think for the life of this assembly, we are going to be working our way through this.

"The Americans have printed so much money. Now that they've stabilized their banks and some of those other things, they have to worry about having money that can lose its value," he said.

He added that Canada's national debt has grown in three months to nearly $60 billion from $34 billion.

"And that has to be paid for by Canadians," he said.

"We have to be aware that we are in very difficult circumstances."