The N.W.T. government says it will freeze the salaries of deputy ministers, senior managers and other employees for two years starting this year.

It's the first tangible step the government has taken to curb spending after months of doom-and-gloom pronouncements about the territory's economic situation, with the N.W.T. potentially posting a small operating deficit by the year 2019-2020.

Robert C McLeod

Finance Minister Robert C. McLeod says tax increases to alleviate the territorial government's financial situation are not an option. (Handout)

The recent cost of fighting forest fires and burning extra diesel to offset weakened hydro power generation means an initially projected operating surplus of $147-million for 2015-2016 could shrink to $69 million, said Robert C. McLeod, the minister of Finance.

"We cannot take the position of an ostrich and bury our heads in the sand and pretend and hope to escape reality," said McLeod.

The salary freeze does not affect the nearly 4,000 unionized employees with whom the government is currently negotiating a new collective agreement. It does affect non-unionized, non-management employees such as executive secretaries to cabinet ministers and employees at the Departments of Finance and Human Resources and the Department of the Executive.

McLeod said the government will soon table a paper on other ways to generate much needed revenue and savings, but that paper is not likely to include new taxes on residents.

"The paper does not provide any new information or alternatives [to] those provided to previous assemblies," said McLeod.

"Quite simply, our tax base is too small to make increasing taxes the answer to our declining revenue problem. If we increase the tax burden on businesses and individuals we risk damaging the economy further."

Yellowknife Centre MLA Julie Green said the salary freeze announced today wasn't discussed with regular MLAs.

"Regular MLAs are concerned that government has decided on a course of action, a concern that's exacerbated when we hear the finance minister say he is not looking at any new taxes, $150 million cuts and a freeze on senior government salaries — none of which were agreed with this side of the house."