IQALUIT - Nunavut will run a $29.1 million deficit in its 2009-2010 budget, the second year in a row the government has been in the red.

Minister of Finance Keith Peterson said the $1.25 billion budget would defend against the global market slump and the resulting decrease in mining activity.

Minister of Finance Keith Peterson said the $1.25 billion budget would defend against the global market slump and the resulting decrease in mining activity. - NNSL file photo

"We're keeping folks working," he said.

The focus of the budget is on construction of infrastructure, in part due to federal investment in that area. The territorial government is putting cash into housing construction in light of the chronic shortage across Nunavut. At the same time, that money will create jobs in construction.

Peterson said Nunavut has been "insulated" from the global recession because most of the money the territorial government spends in Nunavut comes from the federal government, which has increased funding to Nunavut as the territory's population has increased.

"We're very stable," said Peterson. "The TFF (territorial funding formula) provides a lot of stability.

Since the government isn't dependent on taxes from the mining industry, the main effect of mining slowing down is the unemployment it will create. Peter Ma, deputy minister of Finance, said he anticipates there will be more people needing income support and/or employment insurance once the summer mining season starts.

This is the second deficit budget in a row for the government of Nunavut. Last year's budget was supposed to be a surplus but became a deficit due to unexpected expenditures relating to the flash flood and loss of a bridge in Pangnirtung, the power outage in Rankin Inlet and the increased cost of fuel.

Peterson said he anticipates next year's budget would be a small deficit or surplus.

"Obviously, you don't want to be running deficits long term," said Peter Ma, deputy minister of finance. "That is not a good thing."

A side effect of the global recession and unemployment is that the government of Nunavut is paying less for construction.

Skilled tradespeople are usually hard to come by because Nunavut has to compete with the private sector and other governments, but since the private sector isn't providing as many jobs as it used to, construction bids have been coming in cheaper than usual.

"We are able to award projects we weren't able to award in the past," said Chris D'Arcy, assistant deputy minister of finance.

This includes the coming cultural centre in Clyde River, which is going to start construction once the sealift arrives this summer.