Annex 2: Some Evidence of Expenditure Needs and the Costs of Providing Public Services in the Territories

What are some indicators of expenditure needs and costs in key expenditure areas in the territories?

In considering the issue of expenditure needs in the territories, the Panel reviewed a number of indicators of expenditure needs in the territories. The following discussion explains some of these demand and cost issues in the key expenditure areas of education, health, social assistance and services, housing, and infrastructure.

Education

The percentage of people without a high school education is markedly different in both the Northwest Territories and Nunavut compared with the rest of Canada. In 2001, 25 percent of adults in the Northwest Territories and 38 percent of adults in Nunavut did not have a high school certificate, compared with 22 per cent in Canada as a whole. The situation is better in Yukon than in other parts of Canada, where only 17 percent of adults did not have a high school education. Progress is being made in education in the territories, but it is slow. For example, in Yukon, there was a seven percent reduction in the number of people with less than a high school education from 1991–2001.¹²

Table 4 – Comparison of Level of Educational Attainment, Population Aged 25 to 64, by Territory and Canada, 2001

Source: Statistics Canada, 2001 Census

The percentage of adults with postsecondary education in the Northwest Territories is similar to the rest of Canada – 55 percent compared with 53 percent. Nunavut has the lowest percentage of adults with post-secondary education in Canada at 42 percent.¹³

High school graduation rates are increasing in all three territories, including among Aboriginal and Inuit students. Forty-five percent of adults in the Northwest Territories and 69 percent in Yukon have at least some high school or a high school diploma. These rates are well below the rest of Canada at 76 percent. The situation is much worse in Nunavut, where high school graduation rates are the lowest in Canada at 30 percent.¹⁴

A number of factors contribute to higher spending on education in the territories, including lack of economies of scale (some schools in small communities have less than 60 children), higher salaries for teachers, a higher proportion of special-needs children, and high costs of building operations.

Since there are few economies of scale in providing K-12 education in small communities, the student-to-teacher ratio is often lower than in the rest of Canada. For example, in 1999-00, there was, on average, one teacher for every 16 students in Canada, 18 students in the Northwest Territories and 12 students in the Yukon.¹⁵

Expenditures per student for K-12 education are higher in the territories than the Canadian average. In 2004–05, the average expenditure per student in Canada was $6,400 compared with $9,300 in the Northwest Territories, $11,427 in Yukon and $12,183 in Nunavut.¹⁶ It is estimated that 31 percent of students in the Northwest Territories, 40 percent in Yukon and over 50 percent in Nunavut require remedial education compared with 20 percent in Manitoba and Nova Scotia.¹⁷

In recognition of the higher cost of living in the territories and the difficulty in recruiting and retaining qualified teachers in isolated communities, teachers’ salaries are higher in the territories than in other parts of Canada. In 2003–04, with a four-year Bachelor of Education, teachers earned a maximum of $77,279 in Yukon, $81,714 in the Northwest Territories and $83,766 in Nunavut. In the same year, teachers with equivalent qualifications earned between $46,871 in Prince Edward Island and $68,967 in Alberta.¹⁸

In further recognition of the higher cost of living, each of the territorial governments pays a Northern Allowance to its employees, including teachers. In 2005 it varied from a low of $2,302 in Yellowknife to a high of $17,543 in Colville Lake. In Nunavut, the Northern Allowance for government employees varied from a low of $12,109 in Iqaluit to a high of $26,538 in Grise Fiord in 2005.¹⁹

Health

All governments in Canada have challenges delivering health care. The territories have additional challenges in part due to lower health outcomes compared with the rest of Canada. Although there has been some progress in recent years in the health status of the people in the territories, there are still significant differences with the rest of Canada. In the territories, a young population has resulted in increased demand for education-related services, health care, and social services. Demand and costs for special education and health care are higher for the young population in the territories since there are a higher proportion of special-needs children (in part due to higher rates of Fetal Alcohol Syndrome and low birth weight babies). Similarly, the higher portion of older people and Aboriginal and Inuit peoples in the territories, as compared with the rest of Canada, puts extra pressure of health care and other services in the territories.

Life expectancy is a reasonable indicator of population health status. Life expectancy for both males and females is less in the territories than for Canada; for men in Nunavut, life expectancy is ten years lower than the Canadian average.

Table 5 – Comparison of Selected Health Indicators in the Territories and Canada

Source: Statistics Canada, Census 2001, unless otherwise noted

Infant mortality (the death of babies less than one year old) is higher in the territories than the rest of Canada, particularly in Nunavut where the infant mortality rate is over three times Canada’s rate. Low birth weight is an indicator of newborn babies’ general health and a determinant of infant mortality. Low birth weight babies are at a higher risk of dying during the first year of life and suffering from disabilities or challenges in learning. In Nunavut, 38 percent more infants have low birth weight compared with the rest of Canada.²⁰

The number of potential years of life lost due to unintentional injury is significantly higher in the three territories than in Canada, particularly in Nunavut where the rate is more than three times higher than Canada’s.

The suicide rate in the territories is much higher than in Canada, particularly in Nunavut, where the rate is seven times higher.

Even though the population of the territories is younger, lung cancer mortality is more than four times higher than the rest of Canada. Smoking tobacco is a risk factor for many forms of cancer, heart disease, and respiratory disorders. The smoking rate for youth in the North is much higher than in Canada generally. A recent survey by Health Canada revealed that in 2004, 18 percent of Canadians aged 15-19 years smoked, compared with 43 percent in the Northwest Territories and 56 percent (of 12-19 year olds) in Nunavut.²¹

Tuberculosis is generally associated with risk factors such as overcrowded housing, smoking and chronic disease. Tuberculosis rates are higher in the territories than elsewhere in Canada. In 2000, the Canadian rate was 0.6 cases for every 100,000 people, compared with 1.9 in the Northwest Territories and 93 (based on 2002 data) in Nunavut.²²

As illustrated above, the health status and well-being of people in the territories is much less favourable than in southern Canada, in particular in Nunavut. Due to the higher proportion of Aboriginal and Inuit people who have lower health status and a higher birth rate, there are both greater needs and demands for health care in the territories. Costs of providing health care are also higher in the territories for a number of reasons, including loss of economies of scale in providing services, lack of hospital and physician services, and higher medical transportation costs.

Health care spending is much higher per capita in the territories than in the provinces in part due to the way in which health care services are delivered. Nurses in nursing stations or small health care centres provide the majority of primary health care. In order to improve the quality and timeliness of health care services, both the Northwest Territories and Nunavut use tele-health, which may result in reductions in cost in the long run. There are limited hospital services in the territories. For example, in the Northwest Territories there are four hospitals, nine clinics and 26 health centres or nursing stations. These are distributed among 30 communities and provide a range of primary and tertiary health care services. The entire population of the territory, and the Kitikmeot region of Nunavut, is served by an acute care hospital in Yellowknife. In all but five communities, nurses and lay dispensers deliver primary health care.²³ In Nunavut, health services are delivered on a primary health care model. There is only one hospital in Iqaluit with two new health centres in Rankin Inlet and Cambridge Bay. There is a local health care centre in each of the remaining communities staffed by nurses.²⁴ In Yukon, there is a tertiary care hospital in Whitehorse and a hospital in Watson Lake, with health centres or nursing stations serving the rest of the population.²⁵

The Canadian Institute for Health Information provides one of the few sources of comparative health expenditure data across Canada as a whole. The following table shows health care expenditure statistics for the territories and Canada. Similar to other jurisdictions in Canada, government health expenditures have been growing. Health care spending per capita is higher than the Canadian average in all three territories – 1.4 times higher in Yukon, 1.8 times higher in the Northwest Territories, and three times higher in Nunavut. Although health expenditures as a share of territorial program expenditures are lower than elsewhere in Canada, as a percent of Gross Domestic Product (GDP), they are close to four times higher in Nunavut.

Due to a combination of remoteness, dependence on air transportation, and limited hospital and physician services, each territory must pay for both in-territory and out-of-territory physician and hospital services. For example, in 2003–04, the Northwest Territories spent about $22 million on these out-of-territory services, with Alberta and British Columbia providing the majority of the services. In addition to these expenditures, the Government of the Northwest Territories spent $14 million on medical travel costs.²⁶ In 2004–05, Nunavut spent $22 million on out-of-territory hospital and physician services and an additional $35 million on medical travel costs.²⁷ In 2004–05, Yukon spent $10 million on out-of-territory hospital and physician services and $5 million on medical travel, significantly less than the other two territories.²⁸

Table 6 – Comparison of Various Health Expenditure Statistics, Territories and Canada, 2003 to 2005

Source: Canadian Institute for Health Information, National Health Expenditure Trends, 1975 to 2005, December 2005
Note: 2004 and 2005 are forecasts

Social Assistance and Services

High participation rates in the labour force have resulted in high average family incomes, except for Nunavut where the average family income is 20 percent lower than the Canadian average. The unemployment rate in Nunavut is also more than double Canada’s.

Compared with the Canadian average, rates of violent crime are four times greater in Yukon, seven times greater in the Northwest Territories, and eight times greater in Nunavut. Rates of property crime are about 1.8 times higher in the territories than in the rest of Canada.

Table 7 – Comparison of Selected Indicators of Social Well-Being in the Territories and Canada

Source: Statistics Canada, Census 2001, unless otherwise noted

Social service caseloads are higher in the territories due to high unemployment in small communities. Territorial governments provide most income support since most people are either unemployed on a long-term basis or participate in the non-traditional economy making them ineligible for federally funded Employment Insurance benefits. In 2005, close to 2,000 people (just over four percent of the population in the Northwest Territories) accessed income support at a cost of $7.2 million to the territorial government (2003–04 data).²⁹ In 2004, about 5,000 (60 percent) households in Nunavut received some form of income support.³⁰ In Yukon, close to four percent of people received social assistance in 2004, costing about $9 million.³¹

Housing

It is widely recognized that adequate housing improves school performance, health status, and social well-being.

In the Northwest Territories and Nunavut, housing is the most overcrowded in Canada. There are, on average, 2.4 persons per dwelling in Canada compared with 2.1 in Yukon, 2.9 in the Northwest Territories and 3.3 in Nunavut. Overcrowding is particularly evident in Nunavut, where more than four people per dwelling in 52 percent of dwellings and more than five people per dwelling in 32 percent of dwellings.³²

In 2001, 34 percent of the housing stock in Canada required major or minor repairs compared with 43 percent in Yukon, and 48 percent in the Northwest Territories and Nunavut.³³

There is a significant shortage of housing units in the territories, particularly in Nunavut. In 2001, the shortfall was estimated at 1,830 units in Yukon, 2,220 units in the Northwest Territories and 2,735 units in Nunavut.³⁴ The situation has not improved significantly since then. The Nunavut Housing Corporation estimates that population growth will create a need for an additional 273 housing units every year over the next ten years and to bring the number of occupants per dwelling to the Canadian average.³⁵ About 54 percent of the population in Nunavut lives in public or government housing, compared with 23 percent in the Northwest Territories and six percent in the rest of Canada.³⁶

The costs of public housing construction, repair, and maintenance are much higher in the territories than in southern Canada due to the cost of shipping, labour, and land development and climate. For example, in 2004, it cost $330 per square foot to construct a new home in Nunavut, $19,800 for annual repair and maintenance, and $11,370 for annual utility costs. The cost of housing construction varies considerably within the territories, depending in large part on access to transportation routes. In 2004, in the Northwest Territories, the cost of constructing public housing varied from $132 per square foot in Kakisa, to $244 in Inuvik and $219 in Yellowknife. These compare to an average cost of $103 per square foot in southern Canada.³⁷

Infrastructure

Similar to other jurisdictions in Canada, the existing infrastructure in the territories is aging and in need of repair (transportation, hospitals, schools, bridges). Over the next five years, the capital investment needed to address this problem is estimated at $485 million for Yukon, $650 million for Nunavut, and $636 million for the Northwest Territories.³⁸ The largest infrastructure needs are in highways, schools, social housing, and airports.³⁹ Territorial government expenditures are expected to grow faster in justice, transportation and health and social services.

The Northwest Territories also faces significant expenditure pressures due to the impact of resource development. These expenditure pressures can be categorized into forced growth (incremental costs related to maintaining existing service levels) and strategic impacts (investments required to maximize benefits or mitigate negative impacts from development). Over the period 2005–06 to 2014–15, the Government of the Northwest Territories estimates that forced growth from resource development will increase expenditures by $351-$475 million (depending on the inflation assumption).⁴⁰

12. Government of Canada, Statistics Canada. (2001). Census of Canada, 2001.
13. Ibid. Government of Yukon, Department of Education. (2004). Public Schools Branch, Annual Report 2003-04 School Year, 2004.
14. Ibid. Government of the Northwest Territories, Department of Education, Culture and Employment. (2004)., Towards Excellence: A Report on Education in the NWT, November 2004.
15. Government of the Northwest Territories, Department of Education, Culture and Employment. (2004). Towards Excellence: A Report on Education in the NWT, November 2004.
16. Ibid.
17. Ibid.
18. Government of Alberta, Alberta Learning. (2005). Facts on Teachers Salaries in Alberta. Data provided by the Government of the Northwest Territories, 2005.
19. Data provided by Government of Nunavut, Department of Personnel, 2005.
20. Government of Nunavut, Department of Health and Social Services. (2005). Nunavut Report on Comparable Health Indicators, 2004.
21. Ibid; Government of Canada, Statistics Canada and Health Canada. (2004). Canadian Tobacco Use Monitoring Survey, 2004. Government of the Northwest Territories, Department of Health and Social Services. (2005). Northern Tobacco Use Monitoring Survey, 2004.
22. Government of the Northwest Territories, Department of Health and Social Services. (2005). NWT Health Status Report 2005, December 2005; Government of Nunavut, Department of Health and Social Services. (2005). Nunavut Report on Comparable Health Indicators, 2004.
23. Data provided by the Government of the Northwest Territories, Department of Health and Social Services, 2005.
24. Information provided by the Government of Nunavut, Department of Health and Social Services, 2005.
25. Date provided by the Government of Yukon, Department of Health and Social Services, 2005.
26. Data provided by the Government of the Northwest Territories, Department of Health and Social Services, 2005; Government of the Northwest Territories, Department of Finance. (2005). Budget and Main Estimates, 2005–06.
27. Data provided by the Government of Nunavut, Department of Health and Social Services, 2005.
28. Data provided by the Government of Yukon, Department of Health and Social Services and Department of Finance, 2005.
29. Data provided by the Government of the Northwest Territories, Department of Health and Social Services, 2005; Government of the Northwest Territories, Department of Finance. (2004). Main Estimates, 2004-05.
    
30. Data provided by the Government of Nunavut, Department of Health and Social Services, 2005.
    
31. Data provided by the Government of Yukon, Department of Health and Social Services, 2005.
    
32. Government of Nunavut, Nunavut Housing Corporation (2005). Business Plan, 2005–06, p.  11.
    
33. Government of Canada, Statistics Canada. (2001). Census of Canada, 2001; Government of the Northwest Territories, Northwest Territories Bureau of Statistics, 2004.
    
34. Government of Canada, Canada Mortgage and Housing Corporation. (2001). Canadian Housing Observer, 2001; Government of Canada, Statistics Canada. (2001). Census of Canada, 2001.
    
35. Government of Nunavut, Nunavut Housing Corporation and Nunavut Tunngavik Incorporated. (2004). Nunavut Ten-Year Inuit Housing Action Plan, September 2004.
    
36. Government of Nunavut, Nunavut Housing Corporation. (2005). Business Plan, 2005–06, p. 15.
    
37. Government of the Northwest Territories, Northwest Territories Housing Corporation. (2005). 2005-2008 Business Plan. Data provided by the Northwest Territories Housing Corporation, 2005.
    
38. The estimate of infrastructure needs in the Northwest Territories is for the next five years, as part of the Government of the Northwest Territories’ 20-year Capital Needs Assessment. Government of the Northwest Territories. (2003). Opportunities for Infrastructure Partnerships, Discussion Paper, RT Associates Ltd., June 2003; Government of the Northwest Territories, Department of Transportation. (2005). Corridors for Canada II: Building on Our Success, September 2005. Yukon data provided by the Government of Yukon, Financial Management Board and Department of Finance, Capital Planning, February 2006; Nunavut data provided by the Government of Nunavut and Nunavut Association of Municipalities, 2005.
    
39. Government of the Northwest Territories. (2003). Opportunities for Infrastructure Partnerships, Discussion Paper, RT Associate Ltd., June 2003; Government of the Northwest Territories, Department of Transportation. (2005). Corridors for Canada II: Building on Our Success, September 2005.
    
40. Government of the Northwest Territories. (2006). Resource Development Impacts, January 2006. Inflation assumptions range from 1 to 2 percent.

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