OTTAWA
After the financial fright the Government of Nunavut received around Christmas time, an announcement by federal Finance Minister Bill Morneau Feb. 16 that Ottawa was restoring, at least partially, a $34-million cut in federal-territorial financing came as a great relief last week.

"We're very happy that all levels of government, the territorial officials, the ministers, all worked together in collaborative partnership to address the issue and find a solution. That bodes well for the future, I think," said territorial Finance Minister Keith Peterson in an interview Feb. 18. "They could have just said 'no.'"

Peterson and his staff have been revising the territory's budget once again to accommodate the new numbers, and that is to be presented at the budget address Feb. 25.

"We're fine-tuning it now. After the announcement, we had to get our calculators out and start crunching the numbers. It was pleasant to do that, instead of sticking with the previous draft."

Federal Territorial Formula Financing (TFF) payments remain the lifeblood of the territory's budget.

"It represents 85 per cent of our total revenues. We have a very small economy up here, very small private sector, so collecting taxes is not something that's really available to us. The TFF is our single greatest source of revenue," said Peterson.

The TFF is not an "exact science," Peterson said. The amount is based on a formula that compares a proxy of a territory's expenditure requirements to its ability to raise revenues, according to a Department of Finance news release. Payments change from one year to the next as new and updated information is incorporated into the program's legislated formula.

"The Government of Canada has their formula, and then all the territories have our formulas. They don't give us all the data. So our calculations were about $1.5 billion. When Canada ran their numbers with the revised numbers from Statistics Canada, that kicked out a number of $1 billion and $454 million - so we were a bit shorter than that $1.5 billion that we were calculating," said Peterson.

That news was a shock. Peterson and his staff have spent six months, from June to December, preparing the 2016-2017 budget.

"We were just getting ready to go to a finance ministers' meeting in Ottawa. It threw our budget process out of whack," he said.

Peterson says he immediately phoned Morneau, and spoke about the numbers. The three territorial finance ministers gathered twice in Ottawa with Morneau.

"His exact words to us were that this was unintended and unfortunate and it was because Stats Canada had gone back to 1981 to revise some statistical data and, when they input it, it significantly reduced the territories' numbers. The numbers they used were based on national data from provincial and territorial population figures and infrastructure investment," said Peterson.

"It was a substantial kick in the teeth, I would say."

The situation has been temporarily rectified by restoring $26 million of the $34 million cut for the 2016-2017 fiscal year.

"Working with the three governments, and thanks to the tireless advocacy of the Members of Parliament for all three territories, I am pleased to bring forward a solution that will not only help mitigate the effects of this data revision in the immediate term; it will also improve and strengthen the program over the long term by making Territorial Formula Financing payments more stable and predictable going forward," stated Morneau in a news release.

For the situation to be rectified permanently, Morneau must work to change existing legislation that guides the TFF, which could take months moving through cabinet and the House of Commons.

Regarding the future and other big-picture territorial needs, Peterson presented two business cases to Morneau in December.

"One of them is for housing - $525 million. We're taking a different tack. Instead of asking to give us all the money at once, we're asking for an investment over a five-year period so the Housing Corporation can build houses ... depending on what they give us."

The second business case is for $250 million to upgrade failing power plants.

"Most of them are 30 to 45 years old. Fairly ancient."

Peterson hopes there will be an announcement in the federal budget, which reports indicate will take place the week of March 21.

"We'll find out when Minister Morneau stands up and starts talking," he said.

"We do have Hunter (Nunavut MP Tootoo) out there working and we haven't received word that there are any concerns but they're going to be getting demands for infrastructure investment right across Canada."

The federal government will provide over $3.5 billion in funding to the three territories in 2016-17 through the TFF.