In CS Lewis’ mythical land of Narnia, it was always winter but never Christmas. Thanks to our generous and ever-increasing transfer payments, if Lewis were a financial analyst for the Yukon government, he would say that in Yukon it was always Christmas, but only winter half the time.

This year, federal money will bring in $30,976 per Yukoner. For a beleaguered provincial finance minister, this must sound like a fantasy novel. New Brunswick only receives $5,037 per person. In fact, Yukon transfer payments are equivalent per person to more than half of New Brunswick’s total economic output.

This allowed territorial leaders to build a large government apparatus in Whitehorse.

Local killjoys like this columnist often wondered how much longer these happy times could last.

Well, now we have a financial problem. And it’s not because Ottawa has become less generous. No, it’s because the Minto and Eagle mine bankruptcies occurred without any major new mines about to open to replace them.

The fall supplemental budget indicated the territory’s net financial assets would decrease by $86 million this fiscal year. That’s almost double the $44 million figure in the spring budget. This additional cash burn will bring net financial assets – territorial debt, in simple terms – to a record level of -$530 million.

This is more than our previous federal borrowing limit, before it was increased in 2020 at the request of the Yukon government to $800 million.

This year is not unique. The Yukon government has for years been spending more than it receives from Ottawa or its own tax base. At the start of fiscal 2017, net financial assets were $93 million. A decline to -$530 million represents a deterioration of $623 million over the past eight years.

When the government recently published the final public accounts for the previous financial year 2023-24, they showed an explosion of unplanned spending. As the Yukon News reports, a projected surplus of $48 million turned into a deficit of $43 million by the time the books were finalized. Unexpected expenses related to the Minto mine cleanup played a role.

Today, Minto and Eagle have set their 1,500 lumen headlamps on an unsustainable budget path. The Yukon government has already advanced $50 million to the Eagle receivers, and public estimates for the entire remediation work are at $150 million.

If you think there won’t be any cost overruns on top of that, I have a uranium lease within the city limits that I would like to sell you.

Thanks to our transfer payments, Yukoners are not accustomed to austerity programs. So what would austerity look like?

We don’t know what decisions the Yukon government will make, but the experiences of the last 15 years, from Ireland to Great Britain to various states and provinces, give us an idea.

The first thing finance ministers do is cut the investment budget. Large projects not yet launched, whose financial benefits are limited or which only benefit small groups, are the first to be launched. Think about things like the $75 million convention center project.

Next come projects in which a lot of planning money has been invested, but which face a lot of opposition or have questionable cost/benefit ratios.

But the budget cuts must not be too Visigothic. If you heard the UK’s new finance minister, Rachel Reeves, present her recent budget, you will understand how not investing enough in public infrastructure in the past can lead to many problems for today.

This means you need to look at revenue and operating costs.

Tax increases are almost always part of these programs. Indeed, if we have to ask the federal government for emergency fiscal support, they will wonder why our tax rates are lower than those of most provinces and why we do not have a sales tax. Of course, this would be very difficult to achieve politically when voters are already feeling the effects of inflation. Tax increases are therefore probably a last resort in this case.

Which brings us to operating costs.

There are two main options here for finance ministers.

One of them is a large, publicly announced program, similar to what Jean Chrétien and Paul Martin carried out at the federal level in the 1990s. Set a bold goal to reduce operating costs, organize a rational process to review programs across government and report on progress as they are rolled out.

While political analysts appreciate the transparency and rationality of this type of process, politicians often shy away from it. Transparency helps the opposition mobilize against it. And rationality prompts officials to suggest ending programs that have outlived their usefulness but are extremely popular with voters.

This takes you to the stealth option. Simply freeze each department’s budget in nominal terms. You can pretend you’re not cutting anything, but then you’ll see a few years of inflation eating away at the real value of each department’s budget. Pain spreads into thousands of small decisions. Position X in department Y is not filled after retirement. Charity Z receives a 10 percent lower grant. And so on.

Meanwhile, transfer payments and taxes continue to rise with inflation. This gradually creates a surplus for the treasury.

There are variations. For example, you can decide not to freeze the health budget, or choose a few unpopular departments and actually reduce their budgets.

The problem with this approach is that it forces managers to do things like freezing hiring and cutting the maintenance budget to zero, which spells trouble for the future.

None of these operating cost options are palatable to politicians.

Which brings us to another option: continue spending and borrowing until after the next election.

Keith Halliday is a Yukon economist and winner of the 2022 Canadian Community Newspaper Award for Outstanding Columnist. His most recent book Moonshadows, a Yukon-noir thriller, is available in Yukon bookstores.