Speaking to reporters on Thursday, Finance Minister Michael Miltenberger said capital spending will be scaled down starting in the 2012-13 fiscal year. (Donna Lee/CBC)

The Northwest Territories government is continuing to weather the global recession with record infrastructure spending, but Finance Minister Michael Miltenberger warns that the stimulus money will not last forever.

In tabling his 2010-11 budget on Thursday, Miltenberger reiterated the government's $222-million economic stimulus plan to build, repair and upgrade schools, roads, airports, community and government buildings.

The 2010-11 infrastructure plan was approved by the legislative assembly in October. It is part of the government's record $744-million two-year capital investment, about $485 million of which was budgeted in 2009-10.

The government has also earmarked $37 million for housing, as part of the N.W.T. Housing Corp.'s capital plan for the coming year.

However, Miltenberger warned that starting in the 2012-13 fiscal year, once the infrastructure projects are completed, capital investment will be scaled back to $75 million a year.

Miltenberger told reporters in Yellowknife that the reduction will be a "significant shock," but said it will be a necessary step.

'The storm has hit'

The N.W.T.'s economy took some hits last year, as the territorial gross domestic product had fallen by 17 per cent and and mineral exploration fell by 80 per cent compared to 2008, according to the budget.

The government estimates that private-sector investment will be 46 per cent lower in 2009 than it was in 2007.

However, Miltenberger said things are looking up for the N.W.T.'s diamond mining industry, and the government is hopeful that a natural gas pipeline will eventually be built through the Mackenzie Valley.

The budget estimates the territory's GDP will grow by 9.5 per cent this year.

"The skies are slowly brightening, and we are seeing some positive changes in the global economy, although significant risks and challenges remain," he said during his budget speech Thursday.

"The storm has hit, the worst recession since World War II, and the cleanup will take time."

At the same time, the budget raised concerns about a one per cent drop in the territory's population in 2009. Miltenberger said the government acknowledges that the high cost of living is a "major deterrent" to attracting people to live there.

"We need to stop the outflow and let people know what a great place the N.W.T. is to live and work," he said. "We also need to let people know this is a wonderful place to visit."

Spending, revenue up

Thursday's budget contains a total $1.29 billion in operational expenditures, which is up 7.6 per cent, or $92 million, from the current fiscal year.

Revenues are expected to be up five per cent to $1.30 billion in 2010-11, thanks in large part to the federal government's territorial financing formula grant and the N.W.T.'s own taxation revenues.

The budget comes with a $35-million operating surplus, but Miltenberger said the government expects to borrow $89 million in short-term debt by the end of the 2010-11 fiscal year to finance the infrastructure plan.

"The size of our current capital investment plan means that the [N.W.T. government] will carry some short-term debt over the next few years," Miltenberger said.

"With fiscal discipline, we project we will generate ongoing operating surpluses needed to reduce debt levels over time."

No new taxes

The budget has no new taxes, although it proposes adjusting property tax rates, tobacco taxes and liquor mark-ups to keep up with inflation.

Some government service fees will also be adjusted by the end of the 2010-11 fiscal year.

"We have not laid anybody off, we're not cutting any programs, and we're not raising any taxes," Miltenberger said.

The budget proposes $17 million on a variety of initiatives, including:

• About $1 million to set up service centres in 10 small communities, where residents can get answers about territorial government services.
• $1.3 million to improve academic achievement among aboriginal students.
• $1.1 million for water conservation-related projects, such as implementing the N.W.T. Water Strategy.
• $1.1 million to improve police services, including money to support RCMP detachments in smaller communities.
• $450,000 to boost commercial harvesting of most local foods, except caribou, for local consumers.

Also in the budget is $19 million for energy initiatives — such as hydroelectric and geothermal projects, as well as energy conservation programs — aimed at reducing the N.W.T.'s reliance on fossil fuels such as diesel.

Looking ahead, Miltenberger said he would like to see the current legislative assembly to create a heritage fund with monies the government would collect from non-renewable resource industries such as the diamond mines.

As well, he said the territory can eventually look forward to three "extraordinary projects" that are priorities for the government:

• The Deh Cho Bridge over the Mackenzie River at Fort Providence, N.W.T. Currently halfway through construction, the bridge is expected to be done in late 2011, according to the budget.
• A $500-million expansion of the Taltson hydroelectric facility, which could provide a greener alternative to diesel energy.
• The eventual creation of a Mackenzie Valley Highway, a year-round road that would link a number of remote communities between Wrigley and Tuktoyaktuk, N.W.T., if built. The highway, currently in the early planning stages, is estimated to cost $1.8 billion.