The Nunavut government estimates it will incur a $50-million deficit in the upcoming fiscal year, despite an increase in revenue, says Finance Minister Keith Peterson.

Tabling the territory's 2011-2012 budget on Tuesday, Peterson said even with the projected deficit, there will be no program cuts and the budget actually proposes more spending for departments.

The budget projects $1.35 billion in revenues — up seven per cent from the 2010-2011 fiscal year — and $1.32 billion in spending, which is down 2½ per cent from the previous year.

Expenditures will include $1.19 billion in program spending and $122 million for capital investments.

Must make careful spending choices

The actual amount of the deficit will depend on how much the government uses from its contingency fund.

The budget sets aside $89 million for contingencies and other supplementary requirements, in view of a contract settlement with the Nunavut Employees Union, the possibility of rising fuel costs, and a potential power rate hike.

Peterson said Nunavut's overall fiscal position is stable, but the government will have to make careful spending choices in the coming years.

For example, Peterson said the government will have to look at whether some capital projects should be deferred, and departments will be asked to stay within their budgets.

"We're going to have to look at, you know, program reviews. We're going to have to look at maybe rejigging some departments," Peterson told reporters.

"It's too early to say how it's going to happen, but the plan is to look at how we do business."

Peterson said he will ask the federal government to raise the territory's borrowing limit, which is currently set at $200 million.

He would not say what kind of increase the territorial government will ask for, but he said he will ask Ottawa for a significant increase in order to give the territory more flexibility.

Spending increases for departments

Peterson's budget calls for spending increases for all departments, including a $32-million increase for the Health and Social Services Department and $18 million more for the Education Department.

The proposed spending boost for the Education Department includes $13 million to improve the student-educator ratio in Nunavut schools, which is currently estimated to be 15 students per educator.

The government wants to improve that ratio to 14-to-1 in elementary schools and 13-to-1 in high schools, according to the budget. Officials say that would require hiring about 50 to 60 educators.

The budget even calls for an $11-million spending boost for the Nunavut Housing Corp., which reported a total of $110 million in cost overruns over the past year.

Peterson said the Nunavut government plans to pass legislation to create an office of an independent child's representative — the equivalent of a children's advocate — by next year.

With files from the CBC's Patricia Bell