It is the largest source of income for the NWT government this year, as it was last year and the previous year: Federal Transfer payments.
“Financing of the territorial formula is the largest source of government income and the main driver of the general growth of income,” said NWT finance minister Caroline Wawzonek, Mlas last week, during a committee meeting to help them understand how the financing works.
In 2025-26, the NWT is receiving around $ 1.8 billion Through territorial formula financing, a large part of the income for its Budget of $ 2.5 billion to administer the territory this year. Financing is also especially useful because it is unconditional and can be spent, however, the territory wants.
Why the NWT obtains this financing
Officials of the NWT Finance Department said the formula for this transfer payment takes into account several factors, including the population growth of the territory and spending on public services in other parts of Canada.
This year, the Federal Government has calculated that the NWT will need $ 2.2 billion to provide public services such as health, infrastructure and education, which are comparable to what is available in the provinces.
But it is only expected that the territorial government can raise $ 386 million in revenues through taxes, less than a fifth of those $ 2.2 billion. The $ 386 million would include taxes on personal income taxes, commercial income taxes, property taxes and other sources.
“That gap is so great in relation to what we see elsewhere, that we need a special type of transfer,” Trevor Tombe, Economics professor at the University of Calgary, told CBC.
Tombe says that the financing of the territorial formula of Canada unites this gap, so the NWT can offer public services similar to the provinces.
He added that it is unlikely that the territory can overcome this support, noting that the financing of this year’s territorial formula is approximately five times more money that the NWT could obtain from taxes during the same period.
He says that additional money is necessary to execute a vast territory scarcely populated.
“NWT is not unique,” said Tombe. “Yukon and Nunavut also depend a lot on the financing of the territorial formula for the simple reason that the expense must be much higher to provide comparable levels of public services compared to the tax base that really exists in the territories.”
Population effect
In the informative session, several MLA told the officials of the Finance Department that the majority of NWT residents believe that the financing is calculated only depending on the population number, so that increasing the population of the territory would result in obtaining more money in total, but the department staff said that this is not completely precise.
Tombe explained that the payment is based on how much public services has increased throughout the country, as well as the population of the NWT.
He said that around $ 820 billion in the provinces were spent in the most recent added figure to provide public services. That increased from approximately $ 767 billion the previous year, a seven percent increase in provincial and local total expenditure in other places.
He said that part of that increase in spending throughout Canada is due to population growth in other parts of the country.
Tombe says that the growth of the NWT population is approximately 1.6 percent slower than other places in the country, and this number is used to calculate how different the increase in the financing of NWT services that this national average.
“If the population in NWT is growing more slowly than we observe elsewhere, then we want to deflate, you know, how much increase would you get a NWT increase,” said Tombe?
The Financing of Territorial Formula of the NWT of $ 1.8 billion has increased from approximately $ 1.7 billion last year, less than the seven percent number to reflect the growth of the slowest population of the NWT.
Currently, the NWT receives approximately $ 42,000 of territorial formula financing per person.
“There are many things under the hood,” Tombe said.
