Today, the Future Fund Act will receive second reading in the House of Assembly. If passed, this Act will require government to invest revenue from one-time sources and non-renewable resources to strengthen finances, pay down expensive debt and lower the cost of borrowing. These actions are important for all Newfoundlanders and Labradorians, as they will benefit us now and into the future.
The intention of the Future Fund is to have a positive impact on the province’s financial position through increased savings and income from long-term investments. A longer-term impact of this legislation, if passed, is to strengthen the financial standing of the province to relieve the debt burden.
Required contributions to the Future Fund would include:
- Net proceeds of tangible and intangible assets sold for greater than $5 million; and,
- A portion of non-renewable resource royalties received in the previous fiscal year.
An investment policy will guide the investment of funds in accordance with the Financial Administration Act. The Future Fund will be managed by the Department of Finance, with a Board of Trustees to provide oversight.
The performance of the Future Fund will be transparent to the public, as the trustees will prepare three-year activity plans and annual reports as required by the Transparency and Accountability Act. These reports will include annual financial statements of the Future Fund, audited by the Auditor General, and would be tabled in the House of Assembly.
Under the proposed legislation, money may be withdrawn from the Future Fund to service the public debt or pay an amount required due to an extraordinary circumstance, as described in the backgrounder below.
Through responsible financial management strategies such as the Future Fund, the Government of Newfoundland and Labrador is addressing the province’s financial challenges:
- By fixing Muskrat Falls with a $5.2 billion deal, government is taking major steps forward in providing secure and clean electricity to the province, while minimizing the financial burden on ratepayers;
- Through prudent fiscal governance, we are keeping government’s expenditures responsible, continuing transformational initiatives, and ensuring that we maximize the value of every provincial dollar spent on public services; and
- Through responsible debt management, we will continue to reduce our debt load, lower the cost of debt servicing, and enhance government’s treasury management expertise.
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“Our plans for savings and debt management through the Future Fund will work together to ensure we are investing our money prudently on behalf of the people of the province – to strengthen finances, pay down expensive debt and lower the cost of borrowing, all of which will benefit us now and into the future.”
Honourable Siobhan Coady
Deputy Premier and Minister of Finance
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Victoria Barbour
Finance
709-729-4087, 327-6152
victoriabarbour@gov.nl.ca
Backgrounder
Key Elements of the Future Fund
New legislation is being proposed, called the Future Fund Act. This Act if passed will establish the Newfoundland and Labrador Future Fund.
In addition, the Act would amend the Financial Administration Act to allow for the transfer of money between the Future Fund and the Consolidated Revenue Fund.
The Future Fund provides a mechanism for investing resource revenues and proceeds from major asset sales.
More specifically, required contributions to the Future Fund will include:
- Net proceeds of tangible and intangible assets sold for greater than $5 million; and,
- A portion of non-renewable resource royalties received in the previous fiscal year.
Money may be withdrawn from the Future Fund to service the public debt or pay an amount required due to an extraordinary circumstance.
An extraordinary circumstance means a circumstance that, in the opinion of the Lieutenant-Governor in Council, has materially impacted or is projected to materially impact the Province’s fiscal position. The Canadian Auditing Standards define materiality as an amount that could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
An investment policy will guide the investment of funds in accordance with the Financial Administration Act. The Future Fund will be managed by the Department of Finance, with a Board of Trustees to provide oversight.
Money in the Future Fund will be processed through the Consolidated Revenue Fund or Newfoundland and Labrador Government Sinking Fund.
The performance of the Future Fund will be transparent to the public, as the trustees will prepare three-year activity plans and annual reports as required by the Transparency and Accountability Act. These reports will include annual financial statements of the Future Fund, audited by the Auditor General, and would be tabled in the House of Assembly.
