UNITED VOICES FOR FAIR TREATMENT IN CHILD CARE
ENERGY PROBE RESEARCH FOUNDATION
ONTARIO NON-PROFIT HOUSING ASSOCIATION
CONTENTS
Tuesday 11 February 1992
Pre-budget consultations
Daily Bread Food Bank
Gerard Kennedy, executive director
Children's Aid Society of Metropolitan Toronto; Ontario Association of Children's Aid Societies; Ontario and Metropolitan Toronto Foster Parents Association
Bob Witterick, president, CASMT
Bruce Rivers, executive director, CASMT
Mary McConville, executive director, OACAS
Wilma Wrabko, president, OMTFPA
United Voices for Fair Treatment in Child Care
Jackie Cousins, chair
Janet Hodgkinson, member
Amina Bhaloo, member
Ontario Home Sharing Program
Cindy Bowlby, coordinator, Victorian Order of Nurses Home Sharing Program
Edna Beange, chair, Share
Ruth Lerner, chair, advisory committee, Scarborough Housing Help Centre
Susan Bacque, housing department worker, city of Toronto
Jose Valle, witness
Carmen Muir, witness
Dorothy Ohl, witness
Christine Chan, member
Ontario Trucking Association
David Bradley, president
Energy Probe Research Foundation
Lawrence Solomon, representative
Ontario Non-Profit Housing Association
Roger Maloney, president
Saul Marmor, acting executive director
Project Economic Growth
Laurie Harley, representative
Barbara Caldwell, representative
STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS
Chair / Président(e): Hanson, Ron (Lincoln ND)
Vice-Chair / Vice-Président(e): Sutherland, Kimble (Oxford ND)
Carr, Gary (Oakville South/-Sud PC)
Christopherson, David (Hamilton Centre ND)
Jamison, Norm (Norfolk ND)
Johnson, Paul R. (Prince Edward-Lennox-South Hastings/Prince Edward-Lennox-Hastings-Sud ND)
Kwinter, Monte (Wilson Heights L)
MacKinnon, Ellen (Lambton ND)
Mahoney, Steven W. (Mississauga West/-Ouest L)
Phillips, Gerry (Scarborough-Agincourt L)
Sterling, Norman W. (Carleton PC)
Ward, Brad (Brantford NDP)
Substitution(s) / Membre(s) remplaçant(s):
Drainville, Dennis (Victoria-Haliburton ND) for Mrs MacKinnon
Fletcher, Derek (Guelph ND) for Mr Jamison
Mammoliti, George (Yorkview ND) for Mrs MacKinnon
Villeneuve, Noble (S-D-G & East Grenville/S-D-G & Grenville-Est PC) for Mr Sterling
White, Drummond (Durham Centre ND) for Mr Christopherson
Also taking part / Autres participants et participantes: Jackson, Cameron (Burlington South/-Sud PC)
Clerk / Greffier: Decker, Todd
Staff / Personnel: Campbell, Elaine, Research Officer, Legislative Research Service
The committee met at 1011 in room 230.
PRE-BUDGET CONSULTATIONS
The Chair: The standing committee on finance and economic affairs will resume its pre-budget consultations. Our first witness is from the Daily Bread Food Bank. Mr Kennedy, welcome to the committee.
DAILY BREAD FOOD BANK
Mr Kennedy: It is with a bit of reluctance that I appear before the committee. The food bank has no connection with any financial institution or expertise in the macro matters we have heard so much about. The context in which you will be advising the minister on the budget is, from every news report, well set: You have no money to spend, and there is nothing you can do about the circumstances we see on a day-to-day basis. We need to learn from the government at the earliest date whether that is true.
What makes it worthwhile for me to come down from the activities our organization takes part in is that sense of possibility out there. I would like to share some of that, as well as some of the reasons to substantiate an emphasis that should take place in this budget, an emphasis that should include or aim at the people who are partly reflected in the numbers of food bank organizations across the province.
There is more hunger in Toronto and Ontario than at any time in the last 20 years. In December there were 151,000 people attending food banks. From a survey in October last year, I would like to share with you some aspects of who those people are. The people who were coming to food banks in 1987 had an average education where only 13% had graduated from high school. In October 1991, 43% had graduated from high school, 10% were graduates of university or college and a full 20% had college or university experience.
There has been a dramatic shift in terms of who is marginalized in this province. The people who are turning to food banks are unfortunately now a majority of families with children, about 64%. Children are perhaps the most prominent group. Of people attending food banks, 44% are children under the age of 18. They are only 26% of the population and they are only 27% of the low-income population.
There is a risk group that developed so fast and so quickly after the recession that it really brings into question the whole effect of what government has been doing in response to the recession, since the figure of 151,000 represents an increase of almost 60,0000 persons since the year before. In the intervening 12 months food banks have been trying to respond, and last year we did respond to the best of our ability. We gave out $25 million worth of food through our 225 programs.
The Daily Bread Food Bank acts as a central food bank. In a way, we are acting more and more like a central watchdog on exactly what is happening. We find people in states of utter desperation, people whose rapid change from participation in the job force has them psychologically stunned and has them -- this is a point I would like to ensure you take away -- in a position of deterioration of their life circumstances. This is what we are seeing more and more. People are tremendously confused.
The work experience of people attending food banks shows that we are not dealing with an ever-present marginalized population. The educational backgrounds themselves say that we do not have people here who need a tremendous amount of training, in the sense that they have been in the workforce. They have, in some instances at least, the highest education we can offer. Our economy is not fitting them in, but they are made very strongly to feel that there is a price they have to pay for that and that it is their fault. If you look at a situation I will turn to in a moment, which is the matter of government expenditure in respect of people in dire need, I think you can understand why they would take that view.
The duration of the last paying job varies. The duration of the last job in the workforce for 14% of the people, the heads of households, was for eight years or longer; six to eight years was 6.5%; three to five years, 16%, and one to two years, 26%. Only 12% of the people who attended food banks and picked up food for themselves and their families had never had a job. The combination of being in the job market and educational attainment reinforces the need for some legitimate level of government support to exist.
I think all of you have heard, if not directly then certainly through the media, of issues or alleged issues such as welfare abuse and of that tremendous amount of money that is going to be very tempting for legislatures and for people responding to some aspects of the population to trim and contain. There is something in the order of $6 billion that will be spent in the direction of social assistance, which is the only thing these people generally have to rely on. Unfortunately in the last six months we have gone from 18% of people who are working in February of last year to only 11% in October. People do not have access to earning income. They are finding themselves in the strangest situation imaginable, because those 61,000 people are added on top of those coming to the food banks, and that underscores the newness of the situation for people.
Out of the 151,000 people, over 90,000 are new. In other words, the last 12 months has been the first time these Ontario residents have had to turn to food banks. When they have turned to food banks they have found more often than not that those food banks are not available or that they do not have the food. There are members around this committee table who have heard some of the food bank travails before, but in the context of your responsibility as members of this present government and of the previous government, there has not been adequate provision. There has not even been adequate, and what many people would see as honest, energy put towards dealing with the outcropping of the recession. We do not have just the recession to deal with; we have the hangover from the boom times and how well or how not well we made provisions for the future following those times. It is that double effect that the people who are coming to food banks are finding themselves in.
Their situations are evenly divided between those who are preparing for work; about 14% are taking some kind of training or some type of education. What their prospects can be is doubtful, when they have to turn to food banks all across the city because their individual neighbourhood food bank may be able to help them for three days once a month. There are 22% looking for work. Faced by the minute types of assistance that they are getting, They are also not going to be in an enabling position. We still have 10% and 11% who are working, but we have a second group that is about half, a group we are sad to report has already increased somewhat, we think due to the cutbacks that have been allowed to take place at Metro. The disabled have gone up in the last six months, from 13% to 18% of the people going to food banks. These are people in circumstantial disadvantages because of a physical or mental illness, temporary or long term, and they are finding themselves similarly left out almost beyond the margins. Keeping house or looking after children is 22%. Retired is 5%, which is also a 1.5% increase, several thousands more people who have found it necessary to come to food banks.
The punch line is the fact that hunger exists, that 80% of these people report they go without food involuntarily -- that is hunger -- and 90% of the people say there are foods they cannot buy because they cannot afford them -- that is hunger. Previous surveys have said that as many as 60% have gone without food for a day or more. They do so for very understandable reasons. You do not give them enough money. You do not. All of you have heard, and I know many members here have been part of the various efforts, the SARC reform, Back on Track.
The reality for the people out there is that their after-rent situation, after all that work and all that energy, is that they have only 3% more money than they did when that whole effort started. The fact remains that people on social assistance have less money left over after the rent is paid than they did in 1975. That has not changed, and yet the circumstances facing people who are marginalized today, the over one million people in Ontario who are depending on some form of social assistance, is a situation that has immeasurably worsened.
1020
There is actually a situation today where people are worse off, despite all the apparent feelings to the contrary. Of the average of 13% more income that was put towards assisting people in the circumstances of using social assistance, almost all of that went for rent. Almost all the increase, all the assistance that has been paid for went to help pay landlords. The funny thing is that the landlords are collecting more money than ever before. For four years in a row, that portion of the people for whom the government and this Legislature have responsibility, the ones coming to the food bank, have less money left over to buy food. After all the kerfuffle, after all the studies, after all the energy, the rates are only up by 3%. The reality is that people's incomes, the money they have to buy food -- the first clue, the first obvious reason they might go hungry in a country and a province like this, is that their money is down by 13%. They have less money to deal with a recession that serves up much more difficult circumstances.
The difficult circumstances do not come from the food bank figures. They come from your figures. They come from the figures of the Ontario government and come from the figures of the federal government. Looking at the reports coming out of the Ministry of Community and Social Services, we see that the number of people who are at risk for having to pay more rent than welfare provides has gone up by 50% in the last six months. The government knows this. You know this. Anyone who has that social responsibility better know this. The people who have lost their jobs have been unable to find cheaper accommodation. They cannot fit within what you are providing through the social assistance structure, through the fiscal structure, which has decided not to fully protect them from the decisions of the federal government in respect of the Canada assistance plan reduction.
These people are finding themselves in a doubly difficult situation. For them, welfare reform did not happen. The $6 billion is not what they are talking about. What they are talking about or what they are experiencing is a single person starting off with what you intend to give him. You intend to give the person $246. That assumes they could find something they can afford. According to a Canada Mortgage and Housing survey, rents went up in Toronto and most parts of Ontario. They did not go down. When you look, it has actually been harder in the last year to find rents at the rates welfare offers than it was the year before, because so many more people are trying to find cheaper accommodation.
For example, if the rate for that one person for food and everything else is supposed to be $246, it is not really, because what they have to spend, according to Agriculture Canada's Pricing Guide for December, is $156 on food, but they do not have that. They have to pay an average of $90 more just to find accommodation. It leaves them, if they are able to buy their food, with $8 left over for everything else. There is no way they can sustain themselves on that kind of money. The situation is worse for every category of person on assistance.
The basic situation people are facing is not one that can be remedied by money alone. I have to tell you that in the community out there, many of the churches, the agencies, the social groups and so on are reluctant to get involved, are reluctant to do things, simply because of the uncertainty that has been created at the government level. If you cannot count on something happening with some level of support emanating from the government side, if there is not going to be at least enough money to give people a crack, people are not interested in backfilling a hole created by government.
I am not trying to assign the blame loosely, but when the federal government can make the kind of decision it makes and when that flows through, as it did when the welfare increases were kept below the rate of inflation, taking away even some of the very marginal gains people have had through all this hullabaloo of the last several years, then it is the government. It should be the government's problem, but it is the people's problem. They are dealing and contending with very small amounts of money. When they go out there and look for accommodation they cannot find it. Sixty per cent of the people have found some accommodation but they cannot find it cheap enough. That rent cost structure is a hangover from the recession.
When you are dealing with the social consideration of the financial implications, it is not the $6 billion I would like you to concentrate on; it is the $3.57 more you are giving to a family after five years of welfare reform, and that is if it can find that cheaper apartment; it is the $2.40 less somebody who is disabled gets on welfare -- this is according to the rate structure -- than he or she did five years ago; it is the $7.96 for the single person per month; it is the $8.05 for two adults and two children. That money is being eroded even as we speak. Inflation is eating it away. Their inability in attempting to find work is eating it away.
There needs to be some focus, some reference within the next budget offering that factors people in and justifies the other expenditures against those tiny sums of money to say we are unable to provide more for people to prevent them from going hungry, even though we recognize they have enough money. Every decision and every scrutiny you make around your priorities and around what you decide to do in context of the deficit and what you decide to do in terms of government taxes has to stand up to that kind of scrutiny.
I would like you to come to our facility -- I have invitations here to an open house taking place February 23 -- to see the food bank in Toronto. Dennis Drainville used to run an operation out of a storefront that was probably 400 square feet. We have 140,000 square feet. We are shipping close to 800,000 pounds, some months one million pounds, of food relief within five minutes of this building. We are doing it because of these numbers. We are doing it mainly because of people who are already on assistance: 74% of the people who are coming to food banks. They are people who are supposed to be the government's responsibility. They are people who are not getting enough money to feed themselves and their families. To compound it, they are getting what looks to be official indifference by way of their special circumstances, the fact that they are the people who are the victims of the recession. This is what people who have worked and paid taxes have to look forward to.
They have to contend with a public context, not a majority public context but a whining, visceral context coming off the business pages and so on. People on welfare at this time of all times, when it should be understandable that there is job loss and so on, are being victimized and scapegoated as people who are supposed to be presumed guilty until proven innocent. I know your colleagues at the municipal level are affected by that. At the municipal level those disabled people are already worse off, even in anticipation of the cut in benefits that is coming because it could not be negotiated.
There are no simple answers to these kinds of things. There is a very strong need from the street level to see a stronger amount of imagination, a better amount of focus. The numbers have to be thrown around -- the dimes and dollars people have to depend on -- the context for trying to muster Ontario into making the federal government rescind its decision on CAP, something to change the overall framework these people are dealing with. You are serving up to them a very bleak kind of thing. We are finding people much more confused, much more emotionally deflated than we ever have before from their recent experience and from what they have to look forward to.
I would like to stop there and ask if you have any questions about the food bank situation.
Mr White: I hope you do not feel this government is in any way scapegoating the victims of the recession. I believe that was certainly our target from the outset: fighting that and fighting the effects of it.
I was very struck when you talked about the rent issue. Basically what you are saying is that while upper-level rents in the area of $800, $900, $1,200 or whatever are staying the same, the rents of working people who do not have that kind of money, people on welfare etc, have been increasing during the recession when every other commodity has stayed flat.
1030
Mr Kennedy: The availability of rents in line with what welfare offers has gone down. What that means is that at the bottom end of the market there is a sense that the rents have gone up. All the rents have gone up. There is only a market available for two-bedroom apartments; one-bedroom apartments have gone up. In the Canada Mortgage and Housing Corp survey they are up 6% across the board, in terms of the accommodations people are living in. The market rents, which as you know are immensely higher, have gone up in most categories as well.
At the bottom end of the market, where welfare forces people to look, there is a 12% chance you will find a $400 bachelor apartment. That is what the market provides. If you are a disabled person and you need something special that requires a one-bedroom, you have a 2.1% chance of finding it at the rate welfare offers. If you are one adult with two children and are looking for a two-bedroom, you have a 12.5% chance of finding one that is under $680. Two adults, two children: It is ludicrous for them to even consider finding a three-bedroom apartment, but they have about a 20% chance of being able to afford a two-bedroom apartment for their $740. All those chances were greater last year.
Mr White: So ironically what we have been doing is subsidizing landlords.
Mr Phillips: I am looking for some solutions and they are not easy to find. I know the Ministry of Community and Social Services budget has gone up quite a bit over the last five years. I think it used to be maybe 10% of the budget; it is almost 20% of the budget now. Yet rather than making progress, we seem to be somehow or other moving back. I do not have the solutions. I wish I did. I think part of it is probably trying to get the economy going so some of the people you are having to deal with would not have to be dealing with you. I think sometimes we put our money in the wrong places; I do not know. I think we put $150 million into 10,000 co-op units last year. That is $150 million, I gather, almost for ever; every year we spend that on the co-ops. Have you any suggestions for us in terms of things you think would make a real difference if we were able to do them over the next 12 months?
Mr Kennedy: Whatever impact can be had on that rent structure in terms of controlling costs. Frankly I do not think that at the marginal end of the scale the government understands enough about the factors that are at work. For example, we have proposed to the Ministry of Community and Social Services to get to some kind of fact-based resolution.
We are going to do a survey in a couple of days. It is going to have 70 questions on it. We know just about everything it is possible to get at, but we cannot find an audience for that. More important, we cannot find a place to focus on the solutions that are appropriate for this community. What is missing from the piece right now is any kind of recession response. If you look at what happened in 1981-82, there were unemployment action centres funded largely by federal make-work funds. Those have not emerged. The social service community is traumatized: the part that is blue chip, that has government funds and so on. The voluntary community does not have a place to locus around. Unemployed people do not even have places to go to maintain a good level of psychological experience in dealing with other people. We are starting to organize things called recession sessions and so on.
I think there should be a very specific fund geared to the recession, geared to bringing across community solutions and geared also to bringing government to the table, and binding in some way, starting to develop at this time some level of community standard for what should happen. Ironically, when we surveyed the people who donate to food banks, 70% said governments should make sure people have enough money to buy food and 65% said they would pay more taxes to make that happen.
Mr Carr: I think Gerry hit the nail on the head. In 1985 when the government came in, it pumped more money into it, and the waiting lists and the number of people on social assistance got longer. It is the same with this government. It came in, pumped more money into it and the waiting list got longer and the number of people on social assistance --
The Chair: Mr Carr, could you speak up? They cannot pick it up on Hansard.
Mr Carr: In terms of a couple of the studies we have, the SARC report and Back on Track, which you mentioned, what are your comments on what you like and what you do not like about them? Also, there will not be enough money to build non-profit housing for the number of people who need it. Do you have any thoughts on what we can do in the housing sector specifically? That is a big factor.
Mr Kennedy: Basically in terms of the housing market I think you have some elasticity out there, so what you should do is provide some incentive for people to find cheaper housing and let them keep some of the difference. That does not necessarily even cost the government money. You could use the balance of that money to make shelter subsidies available where markets are proving to be less elastic. Those are the kinds of innovations that could come out of a community focus.
There are different structures happening in different communities, but if you do not attack the cost structure -- everything that the Liberal government did, and that the NDP government purports to be doing in terms of Back on Track, is still backfilling from a situation created in the early 1980s when there was 11% and 13% inflation. I know there are a lot of good intentions, but we have not progressed. We have not made things better for people and we had better get rid of that illusion. I think there is some sense that we have built up some goodwill, built up some priority. That massive expenditure is people; it is more people who are using up the funds that are available.
In terms of the SARC report, we are at an average of 22% less than what SARC said people should have at stage four, which would be right about now, had it been implemented. That is far enough below that it is almost not a reference point for people. SARC was about moving on several fronts at once: minimum wage, a market basket of goods that actually priced what it cost people, some protection for the rent structure, and creating opportunities. Well, 65% of the people going to the food banks still do not know about the supports to employment program that was the central feature of the SARC report.
It just yells the need for more coordination and cooperation between the government and community groups in making those kinds of things known and available and for some kind of focused energy taking place directly against the human costs that are coming out of the recession. Yet that does not seem to be taking place. Everybody is acting as if, "We'll just hope it'll go away, because we don't have the dollars." Some of it does not take dollars; some of it just takes better focus, and some of it, if it is well-enough explained, may take dollars the taxpayers might support, whether it comes from the deficit side or from the side of paying more taxes.
The Chair: I would like to thank you, Mr Kennedy, for coming before this committee. The clerk told me you are going to have a written brief to hand to all committee members at a later date.
Mr Kennedy: Yes.
CHILDREN'S AID SOCIETY OF METROPOLITAN TORONTO
ONTARIO
ASSOCIATION OF CHILDREN'S AID SOCIETIES ONTARIO
METROPOLITAN TORONTO FOSTER PARENTS ASSOCIATION
The Chair: Would the next group come forward please, the Children's Aid Society of Metropolitan Toronto. Would you mind taking a seat by the microphones. I would like to welcome you to the standing committee on finance and economic affairs. Before we get started, would you identify yourselves and your positions for the purposes of Hansard. Then you may begin.
Mr Witterick: I would like to thank you for this opportunity to speak to you. Off the top, I would also like to say we endorse the comments of Mr Kennedy and remind members that the poverty of which he spoke strikes most grievously at children.
I will introduce the members of our delegation. My name is Bob Witterick. In everyday life I am a lawyer with the law firm in Toronto called Smith, Lyons, but more important for our purpose this morning I am presently president of the Children's Aid Society of Metropolitan Toronto and chairman of the board of governors. I am very much involved in the children's aid society, having been a volunteer for a number of years. My wife and daughter also are volunteers and have been for a number of years. Also with me is Bruce Rivers. Bruce is the executive director of the Metro children's aid society.
As well, there is Mary McConville who is the executive director of the Ontario Association of Children's Aid Societies. Mary will be giving a broader provincial perspective. There is a very special person, Wilma Wrabko, who is a foster parent and is president of the Ontario and Metropolitan Toronto Foster Parents Association.
Each of us will speak very briefly. We would like to keep moving along in order to allow time for your questions.
1040
As I say, we are pleased to be here. We do understand that the province is facing major financial problems and these problems of course affect, us as a transfer agency, as well. Mr Phillips was originally looking for some solutions. We are here to speak to solutions, not for the whole province of course or for the economy in general, but in terms of our agency and children's aid societies across the province.
The solutions we will talk about are solutions that do not focus on more money. I think perhaps your committee will find that, at least, refreshing in our comments. The solutions are simple; they are not complicated and we could actually begin tomorrow on these solutions if we could only implement them. As the Premier said in his TV address, really what we need is for people to get into a room and talk about creative solutions. With the nature of our agency, we are not free to simply make a decision and then implement it. We must be governed in some respects by Comsoc, and so therefore these solutions have to be endorsed by Comsoc as well. We are going to speak of those solutions this morning. I am merely setting the stage and indicating that we are not talking about more money; we are just talking about decision-making. We are talking about abandoning some of the systems, some of the funding concepts that we have been locked into up to this point in time.
Before doing that, perhaps I could establish our credentials. The Metro CAS is the largest child welfare organization in North America. We have more than 600 staff, almost 400 foster parents and approximately 1,000 volunteers. We are recognized provincially, as well as nationally and internationally, as a leader and an expert in the field of child welfare. We are a non-profit organization, as you probably realize. We have an independent board of governors made up of private citizens from all walks of life, as well as four municipal appointees on our board. But as I mentioned, that does not mean we can simply make decisions and implement them as a normal private enterprise or business organization could do.
There are two parameters that govern us that in a sense restrict our ability simply to make decisions like the ones we are talking about this morning. First of all we are mandated, and I am sure that members appreciate this, by provincial legislation to carry out our function and obligations under the Child and Family Services Act, so we do not have the liberty of simply downsizing our operations because by law we must carry out those operations. On the other hand, and sometimes in conflict with this mandate, we receive our funding 80% from the province and 20% from the municipality. So we must carry out this mandate, which does not expand and shrink. It is there in the legislation with funding that does expand, but more normally shrinks.
I will just touch on the subject which Bruce will deal with in more detail. Of $66 million in 1991 which was expended -- I am talking about the expenditure side -- for children, $48 million was expended for children in paid institutions, even though this $48 million, representing 73% of the whole, covered or serviced only 14% of the kids. Here you have a very large amount of money going to paid institutions representing 73% of our expenditures and covering 14% of the kids. On the other hand, the left-over amount, the balance of $18 million or 27%, which is the funds expended on children at home with foster parents etc, is 86% of the kids served. You can see that a large percentage of funds is spent on a small percentage of kids, and the converse is also the case.
In our presentation we are going to use that situation, that circumstance, to show you what the solution is for our agency and for children's aid agencies. We are trying to focus on both the local with Metro and on the provincial with the children's aid societies throughout the province. I would like now to ask Bruce to make his presentation and to follow up on some of these points that I have just alluded to.
Mr Rivers: What I would like to do before I discuss the solutions with you is to discuss some basic information about the work of the society. Bob has already mentioned to you that last year we serviced about 19,000 children across Metropolitan Toronto, and of those children over 16,800 were served in their own home. This in and of itself I think will help to dispel a myth that the children who come to our attention are snatched in some way. In fact, most of our efforts are expended in maintaining children in their own homes. Last year we served about 2,700 children out of their own homes. They were wards of the society.
Last year we investigated about 2,500 cases of abuse, both sexual and physical. I mention this to you because that number is growing and will continue to grow. As well, we are open 365 days a year, 24 hours a day. After hours is when most of our activity occurs because that is often when families go into crisis and kids need to be protected. Last year we served about 12,000 cases after hours and we admitted close to 50 children throughout the night.
Finally, you have already heard that we have about 340 foster homes across Metropolitan Toronto, but what is interesting is that a decade ago we had 750. There has been a dramatic loss of foster parents across this city, as well as across the province.
The 1,000 volunteers, by the way, really bring the heart of a community to bear on the work we do, and these people are special friends to our children as well as tutors, as well as helping out in the office.
1050
Some 83% of the children we work with live at or below the poverty line. The connection between child abuse and poverty is quite compelling; not that it is the root or the cause, but poverty in and of itself is a stressor. As well, 57% of the families we work with are single parents. Most of them are young moms and they are very isolated.
Last year we admitted -- and this ties in with the previous presentation -- 150 children to our care for reasons of homelessness only. It had nothing to do with child protection. These kids were not being abused. The basic necessity of a roof over their head was not being met.
As well, one of the complexities that is facing us in Metro Toronto is the mix of our client group; in particular, a considerable influx of new Canadians. One in four children in our care is of a visible minority at this point and that means we have to make every effort to deal culturally in a sensitive manner as well as match the resources that child needs with his or her community.
Another point of interest is that we are increasingly needed to deliver our service in various languages; 668 families last year required an interpreter, a third party in the investigation. We had 370 cases last year that came to our attention because of crack and cocaine addiction. This is an incredible phenomenon and we anticipate it will continue to grow. Five years ago it was almost a non-issue. The other issue that is having a dramatic impact on us right now is the whole issue of AIDS and babies and small children who are HIV positive.
A decade ago we had 110 more staff to do what we are doing today, and we are servicing over 1,000 more cases a year. I believe we are experts in doing more for less and we have some good suggestions for you today. Finally, on top of the 110 positions that have been reduced, we are also sitting with a vacancy rate to address our growing deficit of 65 to 70 positions.
Now I would like to draw your attention to this overhead which highlights the costs for children in care. If you go back to 1987, we serviced about 2,687 children and we expended $31 million. What is striking about this chart is that we continue to serve about the same number of children in care, but the costs have grown dramatically; $48 million last year in our agency alone. The picture is even more profound as you go province-wide.
The reason I am showing you this particular information is because herein lies not only the problem, but the solution as well. It is our belief that we can use the money that is currently expended in this particular area to do a better job for kids. Specifically what I am referring to is a defunct funding mechanism that exists within the Ministry of Community and Social Services. It is called ECR, exceptional circumstance review. Essentially it funds an agency retroactively after it has spent the money, but just on kids in care and only when they are placed in institutional placements. I want you to remember that information because when we get into the solutions, we are going to be addressing how that could change.
This year we are anticipating expenditures in the neighbourhood of $66 million in Metropolitan Toronto alone. As Bob has indicated, 73% of that budget is expended on children in care; 27% of the budget is expended on the vast majority of kids who we service in the community.
What we are suggesting is that the money currently expended for children in care be shifted to two areas. The first is supporting all efforts we could muster to prevent children from coming into care in the first place. The bottom line here is that we have learned over time that if we address the smoke, we are more likely to put out the fire. I draw that analogy for you because oft-times by the time a child comes to our attention and is admitted to care, we are performing triage, but we know of these families and unfortunately we are not able, because of the way we are funded, to intervene at an earlier point.
We are just embarking on a delightful program called Family Builders, and I just want to tell you about it very briefly. Essentially, instead of admitting the child into care, we put the worker into the family. It is elegant. The worker only has two families at any given time and they are able to do the work that is required on a crisis basis. It is very expensive to have a worker with only two cases at any given time, but when you compare the cost of admitting the kids as the alternative, it is cost effective.
As well, we have programs throughout Toronto that intervene at an earlier stage with families. One of them is called the community work program and they help to develop various things like parent drop-in centres that support these isolated single moms so they do not face the kind of desperate situation that might result in their children being admitted to care. What we are suggesting is that a portion of the money that is currently going into institutional care be shifted to prevent those admissions in the first place.
We have research that supports this effort and we have already started to implement it. However, the funding rules that currently exist within the Ministry of Community and Social Services mitigate against our front-ending service.
The third area of concern is the loss of foster homes and the fact that we need to be able to recruit and retain foster homes in Metropolitan Toronto. Currently 35% of the children whom we work with are placed throughout Ontario, far from the communities from which they come. That has a tremendous impact on these children. Not only are they separated from their own families, they also have to leave their communities and their schools, and the reason why is that we cannot recruit and retain foster parents in Toronto. We cannot compete.
To give you a vivid example of why we are in the situation we are in, we are paying essentially $39 a day in total for foster care in Toronto, and that is 24 hours a day with very difficult kids. If you compare that to the day care centre, for eight hours a day they are paid the same amount, $39. If you compare it to what we are spending outside Toronto in a for-profit sector, we are spending on average $75 a day per kid.
The crazy thing is that the funding mechanism that is in place right now allows us to increase the rate for for-profit organizations charge, related to numbers of kids, but it does not allow us to increase the rate for our own foster parents. What we are suggesting is that we increase the foster care rates. The way we can do that is by moving some of the money out of the outside institutional market into our own families and potential foster families in Toronto. Wilma Wrabko will speak to that very briefly in more detail.
What we are suggesting then is that we change the way we do business, that in fact we start to support the intent of the legislation, which is to utilize the least intrusive approach, that we keep kids out of care wherever possible, and that when they come into care, that we place them in foster care as opposed to the more costly outside institutions.
Now to give a provincial perspective to the issues I have highlighted, Mary McConville will speak to you.
Ms McConville: Good morning Mr Chairman and members of the committee. I am really intruding on Metro children's aid society's presentation today, so I am going to be extremely brief.
The Ontario Association of Children's Aid Societies has presented on two occasions fairly recently to this committee about the provincial matter of child welfare funding and I appreciate the opportunity to take just a few minutes with you today for two reasons. One, I think it is extremely useful to this committee to have a very clear local picture of how this provincial problem plays itself out. I am also glad you have an opportunity to see that the service providers throughout the province do have some solutions in mind, not only in terms of making for more efficient use of our resources, but also clearly providing better service for our children and families in our communities.
What I want to say to you today is that throughout the estimates process and the striking of this budget for 1992-93, children's aid societies in the province, even though they are classified as a mandatory service, are in trouble. They have been in trouble for some time. It is extremely important to us that you understand that this safety valve called the exceptional circumstance review does not take care of the financial requirements of societies, even though it is an administrative tool that appears to cause the Treasury a good deal of frustration, because it allows this ministry to go back for more dollars.
One has to understand that the funding mechanisms for children's aid societies are quite irrational and out of date and drive us to spend money in inefficient ways -- Bruce has just spoken to that -- especially in terms of outside paid resources. There is not a good deal we can do to change this system around without the support of government.
1100
In addition to the exceptional circumstance review, which is extremely restrictive in terms of what it pays for, there is another financial mechanism that is in place by way of legislation, by the way, called the child welfare review, which allows all parties involved in child welfare funding to bring the matter of a children's aid society's budget under review. A municipality can ask for a review and the provincial government can ask for a review if it is concerned about a budget that is submitted by a local children's aid society.
This is the mechanism that is supposed to attend to the base budget requirements of your local children's aid society in carrying out its mandatory responsibilities. Although the mechanism is still in use, it is virtually being ignored by the minister not just with this government, but also by ministers under previous governments, because it has been the intent of government for some time to examine the mechanisms by which we receive our funding and to change them. Unfortunately we are not getting far very fast, and it is extremely important that you understand the gap that exists between that safety valve and what it does for us and what our actual requirements are.
In your 1991-92 estimates process last year, you determined the needs of societies at about $346 million for the entire province. Actual spending was more in the neighbourhood of $370 million. You estimated that our exceptional circumstance requirements -- money that pays for actual volume increases, children in care and the increase in cost to outside paid resources, a big-budget item with the Children's Aid Society of Metropolitan Toronto -- were covered and that increases in the cost of conducting investigations for families that come to our attention were also covered.
There are all kinds of real costs to societies that are not met by the exceptional circumstance review. You estimated last year that you would require $13 million province-wide to meet just the ECR requirements of child welfare. In fact, submissions to the government were well over $20 million.
As we approach the 1992-93 budget year -- our budget year of course is 1992; we go January to December -- we are looking at a growing gap between base funding and actual spending of children's aid societies. This government has, especially in the last year and a half, tried to attend to the gap in a couple of ways. Some deficits have been attended to. ECR took care of approximately $15 million of our overexpenditures and they have been cash-flowing the rest of the gap. The problem is that we are extremely concerned that the ECR estimate that will be put before the Treasurer for 1992-93 will not meet real needs, and in addition we are having to cope with the announcement of a 1% economic adjustment along with everybody else.
As we speak, societies, having no more than that in terms of information with which to plan and heading for one quarter into the fiscal year, are beginning to cut. I would like to give you just a sample of what is happening to the so-called protected mandatory services out there.
The Kawartha-Haliburton society in Peterborough has just announced it is cutting 17% of its staff. The Ottawa society alone is looking at an accumulated deficit of $330,000 at the end of 1991, and requires $1.5 million in ECR money for 1992 alone. They do not know if they are going to get it. The York county society is looking at laying off approximately 40 to 45 staff. The people being laid off provide the very kinds of services Mr Rivers described to you that are absolutely essential to control child welfare expenditures, but also to protect children and to ensure they receive quality care when they are in care.
I am going to end there. The last thing I would like to ask you to do, because I know the counties you represent, is that each of you take a look at your own local society. I can assure you that each and every one of you has a society that is in trouble. If you take a look at what they are struggling with in terms of budgets, you will better understand (1) how insensitive the funding mechanisms are, and (2) what the present decisions that have already been made are going to do in terms of impact on service.
Mrs Wrabko: My husband, Joe, and I have been fostering for the Children's Aid Society of Metropolitan Toronto for 25 years. We have raised four children of our own, one of whom is adopted. In 25 years we have cared for 96 children of all ages and at the present time we have four boys aged 10 to 15 years and one autistic girl aged 14. I was a foster child myself and then an adopted child at the age of three. I grew up with one sister in a home that fostered children for many years.
I always had the feeling growing up that some day I would like to pay back Metro children's aid society for the care I received. In 1966, after Joe and I had been married eight years and had three kids of our own, seven, five and three years old, I decided the time had come to approach Metro CAS and with Joe's support we applied to be foster parents. In December 1966 we had our first foster child, that three-year-old boy, and we have not looked back since. Fostering in those days gave me the opportunity to be home with my family and to help others less fortunate.
Family life today is changing, however. Women can no longer stay home to raise families. In 1958, 58% of women were in the working force and today they say that by 1996, 80% of the women will be outside their homes working. The high cost of living and single parenting are some of the reasons women cannot stay home. People tell me that fostering is not economically possible for many families today. If we could make fostering an attractive alternative for people who have shown an interest in the past, more children could receive the care they so desperately need. In today's recession, with 78,000 people unemployed in Metro alone, more families might be prepared to consider fostering if it were made more attractive.
The children of today come to us more disturbed because of sexual and physical abuse, drugs and violence. One example of the kinds of children coming into our care is a little fellow who had been sexually abused from the age of three by his mother and her boyfriends. At one point he was left in bed for two weeks, sexually and physically abused by mom and her boyfriend and taken out of bed after two weeks, when the mother proceeded to burn a ring around his head to chase away the devils, she said. I am not sure who needed the devils chased. He had been so badly abused that even at the age of 10 he could not let anyone touch him. Even after much help that abuse lives with him every day.
We need warm, caring and sensitive people to look after children like the one I have just described. We also need to provide adequate supports for foster parents to be able to do their job. We need good social work support. We need to be treated as part of the team. We need to receive relief on a regular basis and training on an ongoing basis and of course an adequate rate for financial reimbursement.
Metro children's aid society does a very good job of caring for children. Given the financial opportunity they need, I believe that will maintain their status as leaders in their field. Let's bring back the kids from private outside placements into our less expensive foster homes. The kids placed outside our system often cost close to double what it costs to maintain kids in foster homes. We all support keeping children in their own homes when it is possible, but we also recognize that a number of children cannot be maintained at home for many reasons.
I am not here asking for new dollars. I ask you to support our request to allow us to spend current dollars in a way that makes more sense for the kids we care for. If you believe in children and you want to look at ways to better spend the resources we already have, you must be prepared to examine creative solutions with us.
1110
Mr Witterick: I believe Wilma has said it all, but I want to add a moment's postscript. We would like to challenge you with a very blunt statement. Basically we believe that children must have the first call on this province's resources. We recognize that economic times are tough and that the social costs of a poor economy are extreme and that children often carry the brunt of that.
Our government in the province is facing difficult choices. We are suggesting that the government, in considering its options, must be mindful of the basic entitlement of children to protection from abuse and neglect. Child welfare is essential and it is mandatory under the legislation. It deserves special consideration. I would like to thank you all for listening to us. To the extent that time permits, we would be more than pleased to entertain questions.
Mrs Y. O'Neill: Wilma, I want to thank you publicly. I am a parliamentarian whose life has taken me in a different direction. You are what I would consider to be a silent hero. I am glad you broke your silence and hopefully you will be inspirational, as you must be, among your community and continue with that.
Mary, I would like you to say a little bit, if you may. I am from Ottawa-Carleton and I am sure it is the same thing in Metro and all over the province. You have one statistic here about Ottawa: "36 staffed residential spaces with 42 staff have already been cut in the past 10 months." Could you say a little bit more about that and what that means to the pressures you are describing.
Ms McConville: Ottawa, like Metro, is one of the societies that has a heavy residential component of its own, and by "residential" I mean it runs group home types of facilities in addition to having its own foster homes that take care of large numbers of children. By the way, a significant number of children in the care of the Ottawa society are developmentally handicapped children and some young adults. It is the local ministry office that has encouraged the society to provide for the care of these young people, even though they are not traditional child welfare problems, because there has been no other resource in the area.
I suggest to you that if the society has already cut back to this extent on the residential program, it is reaching the point where it really has no more flexibility to find dollars within that residential budget. They have been unable to take the developmentally handicapped population and transfer it to another community service because the resources are not there, and those youngsters have to be taken care of. What they are likely doing -- by the way, the Kawartha society is doing the same with some of the children in these staffed residential settings -- is sometimes placing them in foster homes within the society, that is, they are approved by the society and run by the society. Those foster homes will need additional support. Those are the kinds of dollars ECR does not pay for.
In some instances they will be placing children in outside paid resources and unfortunately that is something ECR does pay for. It is likely that those children will not be placed in their own home communities. We also feel strongly that in some instances they are not getting the kind of care they could receive if they were cared for by their own local society, because the level of attention from social work staff and so on is not the same. Those are some of the implications.
Mr Carr: I will try to be quick. One of the problems the transfer people have is that with so many, such as school boards and hospitals, so much of their expenditure is salaries. For school boards it is 80%. Inflation is running at 2%. One of the creative suggestions has been putting salary caps at one, two and two, the same as has happened with the transfers. What percentage of your expenditures would be salaries? Would any type of restraining of the salaries help?
Mr Rivers: If I could speak to that, 45% of our expenditures are salaries. About 48% of our expenditures are related to the cost of children in care, the per diems for these various institutions. Less than 10% is overhead. Your point around capping is well taken. In fact, we are in the middle of negotiations with our own bargaining unit. Let me tell you that across the province the approach that is being taken at the table with children's aid societies is that we have nothing to give.
Mr Carr: If the province was to dictate and take that out of your hands, you would not need to be doing the bargaining. Would you like that, where the province says you will only be able to give your workers 1%, 2%, 2%? In that way it frees you up and the bad buys are provincial politicians.
Mr Rivers: That does not free us up at all. The one, two and two does not free us up. Looking at the kinds of costs children's aid societies have absorbed, I want to give you a couple of examples. In Metro the health insurance tax cost us $250,000 to implement. The implication there is that you either cut programs or create a deficit. Another example is the GST, $140,000; pay equity, $374,000. All those legislated programs have been implemented and we have created deficits as opposed to cutting programs. Currently we are faced with the crisis of needing to maintain that. I just want to make it clear at this point that people working in the area are clearly bearing the brunt and they are looking at 0% or close to 1%.
The Chair: Mr White -- we have three actually -- Mr Drainville and Mr Ward. I do not think you will all get in.
Mr White: I have a couple of questions. First of all, I want to commend you all. I worked with your agency as a social worker quite some time ago. That was at a time when there was actual preventive work being done. You have mentioned a lot of problems with the ECR. I have spoken with the director of our local society in Durham around those problems. He also says that the ECR is not added into base budget for increases for the following year.
Your suggestion, Mr Rivers, that a large proportion of the families where the child will come into care may already be on the ongoing case load; that is, past the intake. Would you have a proportion, or is that anecdotal?
Mr Rivers: Sorry; I do not understand your question.
Mr White: You suggested that many of the families where the child comes into care are families your agencies already know.
Mr Rivers: Yes, they are.
Mr White: They would be families that are ongoing case load, past intake.
Mr Rivers: Yes.
Mr White: Would you have any idea what the proportion is of those kids coming into care?
Mr Rivers: One hundred per cent of the kids in care come from families that were screened through our intake department.
Mr White: Of course.
Mr Rivers: The issue at intake is what alternative to admission we can offer this family if the situation has deteriorated so badly that we feel the child is in need of protection. What we are suggesting is that we offer a preventive service that will keep the child in his or her own home instead of admitting that child into care. In order to do so, we need to shift the dollars out of the in-care budget to the front end to provide that prevention. Does that make sense?
Mr White: Absolutely, but what I am concerned about --
The Chair: Mr White, I am going to have to cut you down here.
Mr White: You always do that.
The Chair: We have two more members who did not even get a chance to ask a question. There are quite a few members here who had questions to ask.
I would like to thank you for taking your time and coming before this committee. I can tell you as Chairman of this committee that I will take these back to my riding so I can have an information package and answer a lot of questions that people have in this particular area. Do not think these pamphlets go into unused drawers. They are used, because we have problems all over the province in this particular area. I think your recommendations here can be used in our ridings also, so I would like to thank you again for your presentation before this committee.
1120
Mr Drainville: On a point of order, Mr Chair: Is it possible to limit the presentations to 20 minutes and ensure that the members of the committee have opportunities to ask questions? I must say it is rather frustrating to receive very good deputations but end up in a situation of not being able to ask a question.
The Chair: The one thing I have signified to the different parties is that three people are going to ask a question. But what has happened, even with 15 or 20 minutes, is that one member has preambled for five minutes and the respondents only had a minute to respond.
Mr Drainville: That is not what has happened today.
The Chair: No, but I am just saying that has happened. With the 20 minutes, that gives us six minutes.
Mr Drainville: I guess what I am suggesting, and I do this with great respect, is this: there is no question you are offering the groups opportunities to deal with as many matters as they feel they need to. The difficulty I am having is that the Kawartha-Haliburton Children's Aid Society is in my area. There were questions I would have liked to have put, and I could not. I accept that is the reality, the nature of the beast here, but it would be helpful if we had more time. In fact, rather than immediately going to someone who has asked a question before, you might tend to get somebody else on the particular side that person represents.
The Chair: If you talk to the party whip, maybe that could be resolved. The thing is that with some of these submissions, these people are here to get their point across for their particular areas. As they run on, it leaves less time for questions, but there is information that maybe they want to get across to this committee. It is hard to say, "I have to cut you off."
Mr Drainville: Absolutely. You have to make whatever decisions you have to make, Mr Chair. I am not assuming this is an easy situation.
Mr Villeneuve: His middle name is Solomon.
The Chair: What I do is I ask the question first of the critics from the two opposition parties. No one puts their hand up on that side unless they want to ask, other than the critic. So I take a look on this side and I see your hand go up second. I have gone along. It is up to the members over there to decide whether -- someone can say, "I'll answer the question this time if you don't mind."
UNITED VOICES FOR FAIR TREATMENT IN CHILD CARE
The Chair: The next group we have coming forward is United Voices for Fair Treatment in Child Care. Would you mind taking a seat before one of the microphones? As I have only one name here, perhaps you would not mind identifying yourselves for the purposes of Hansard. You may begin. We have until 12 o'clock. I would like to welcome you here this morning.
Mrs Cousins: My name is Jackie Cousins, chairperson of United Voices for Fair Treatment in Child Care and I am a parent with two children in the private child care system. With me today are Carolyn Koff, an owner of a private day care centre, Janet Hodgkinson, a child care worker in a private centre, and Amina Bhaloo, also an owner of a private child care centre. On behalf of our organization, I would like to thank the members of the standing committee on finance and economic affairs for allowing us to comment on the NDP's current child care fiscal priorities and their impact on the people of this province.
United Voices for Fair Treatment in Child Care is an organization of parents, child care staff, owner-operators and taxpayers who share a vision of an affordable, accessible, flexible system of quality child care in Ontario, a system which recognizes parents as deciding who should look after the responsibility of caring for their children and a system which treats all participants in an equal and non-discriminatory manner.
I am sure you are most aware of the NDP's recent decision to spend all new child care funding with a view to eliminating the private or commercial sector. They hope to transform child care from its current user-pay system, with fee assistance available for needy parents, to a fully publicly funded, universally free extension of the public education system.
A total of $225 million has been specifically earmarked over the next five years to directly and indirectly eliminate existing, viable, quality private services wanted and needed by the community. This $225 million is made up of $30 million in wage enhancement funding for child care staff -- in non-profit centres only -- over the next five years and a $75 million infusion into the non-profit system.
However, this $225 million does not increase access for parents to day care for their children. It does not improve the quality of the system, discriminates against women and children, will significantly increase the cost of delivering child care while reducing tax revenues currently generated by 650 businesses, and does not address the problem of poor financial management inherent in the non-profit sector except by doling out more money to temporarily bail them out. How shameful that not one single dollar of this $225 million in new funding has gone to parents on subsidy waiting lists who so desperately need day care today. Not one more child has received access through the subsidy system.
You may be interested to know that the Honourable Marion Boyd recently told our organization in a private meeting that her cabinet considered using these funds to provide fee assistance for the thousands of children on subsidy waiting lists, but decided instead to invest in converting private services to non-profit. Our fear, which is shared by thousands of parents waiting for subsidy, is that the Treasurer will be unable to find any additional funding for child care subsidies and that those who need it most will be left out in the cold. The NDP call this an investment in Ontario's future; we call it a sacrifice of the children and parents needing help right now. There is no sound, logical basis for the NDP's expensive, discriminatory pursuit of a sector providing child care services to only 5% of this province's children in day care.
A letter written by Zanana Akande, former Minister of Community and Social Services, to one of our members in Stroud states that "quality programs exist in private centres and meet parental expectations."
The 1986 SPR Associates Inc study concluded that discriminatory policies based on auspice are ill-founded, that they "cannot be justified on the basis of the information available; that auspice is a clumsy concept for policy manipulations of quality; and would have uncertain or potentially even negative impacts on the quality of care."
Metropolitan Toronto day care planning's 1986 Blueprint for Child Care Services states, "In Metro's experience, the provision of quality care has no direct relationship to whether the program is a commercial or not-for-profit operation."
Our message is simple: It does not matter under what auspice child care takes place as long as it is regulated and of high quality. What does matter is that quality is ensured by the province fulfilling its mandate to properly enforce the appropriate legislation. If the government wants to reform child care, it already has the power to do so. It does not have to take over the system in order to make changes. Scarce tax dollars would be put to much better use if they added more subsidies to the system and helped parents become self-sufficient.
Independent research clearly shows that Ontarians want to keep their current child care options. A 1991 Decima Research survey found that an overwhelming 92% of all parents using or having used child care would choose the same arrangements again. A December 1991 Gallup poll found that 68% of respondents preferred the current mix of child care options. Even the Ministry of Community and Social Services, combined with the Association of Municipalities of Ontario and the Ontario Municipal Social Services Association, in its Provincial-Municipal Social Services Review Committee review completed in 1990, states in recommendation 17 that municipalities should maintain the current mix of day care service providers. United Voices has collected tens of thousands of petitions from parents in support of their chosen private child care centre.
We also question the ability of the non-profit sector to keep its own house in order. The 1989 Provincial Auditor's report cites a severe problem in the handling of finances in the non-profit sector.
1130
A May 1990 edition of York magazine states that a survey of non-profit centres in Metropolitan Toronto found "45% were in debt; many of these survive by putting up parents' personal assets as collateral for loans. They scrimp by spending less on part-time staff, food and toys. Janet Davis is cited as saying that: `Another Metro problem is board burnout. In two recent Metro cases, board members could no longer cope with the strain of losing money and of not being able to meet provincial day care standards.'"
The current building of luxurious non-profit centres in areas where vacancies exist is a terrible misuse of taxpayers' dollars. For example, one Sudbury non-profit centre built last year cost $1.1 million for 36 spaces. They imported their custom lighting from Germany and had laid in ceramic tile.
Why does the taxpayer have to pay for day care services that already exist? This February 1991 edition of Community Action reveals that taxpayers paid a total of $1.2 million to buy out two commercial day care centres that converted to non-profit. Not one more space was added.
Even the Metro Day Care Coalition admits to the problem of handling finances within its own sector. They have stated in their response to the Ontario coalition's paper on universal day care: "We recognize that many non-profit centres have difficulty with financial planning. How do we ensure good business practices in the non-profit sector?"
What about the staff, many of them members of United Voices, who are owed for months of direct operating grants and never receive them?
Even the NDP government has admitted that non-profit centres cannot handle their finances properly, by allocating $11 million of the $75 million as bailout funds. The fact is that most non-profit boards of directors lack the expertise to run complex businesses, a sentiment echoed by the Ontario coalition in its 1990 brief to the select committee on education.
Yet the private sector has stood up to the test of accountability. The 1990 Levy Coughlin study of direct operating grant distribution found 99.5% of all direct operating grants in private centres flowed right through into the staff's pockets. However, despite significant subsidization, non-profits could only do as well as 86% and municipally run centres as well as 81%.
Clearly there is no justification for this government's attack on the users and providers of private day care. In fact, evidence points out there is a severe accountability problem in the non-profit sector. There is no guarantee that pouring millions more into the non-profit system will be an effective use of taxpayers' dollars.
I would like to examine for a moment the impact on the cost of delivering child care if child care were to become a publicly funded essential service. At minimum, the 12,000 children on subsidy waiting lists would have to be accommodated. Add these children to the 108,000 existing licensed spaces and the minimum operating costs per year are $780 million, using an average cost per child of $6,500.
This leaves 1.6 million children who could potentially access a universally free day care system. Of these, 700,000 are under the age of 5 and would therefore require full-time care. If we assume that half the families with children under 5 use the free child care system, another 230,000 children would have to be accommodated. Total annual operating costs for accommodating 350,000 children under the age of 5 would be $2.3 billion per year. This does not include allowances for pay equity, a significant factor since salaries comprise 75% of total operating costs.
Additionally there are another one million children from ages 6 to 12 who could potentially use day care on an off-school basis, before and after school, PA days and summer holidays. If we estimate that half of these children use the free system, at an average cost of $3,000 per spot, the operating costs to accommodate these children would be $1.5 billion, for a total operating cost of nearly $4 billion to accommodate only half of this province's children.
Capital costs to build an additional 235,000 full-time spaces and 500,000 part-time spaces are another $8.7 billion, using the ministry figure of $18,000 for one full-time space and an estimated $9,000 for each part-time space. Annual administration costs at 5% of operating costs would be another $200 million.
Clearly, in light of today's deficits, economic difficulties and the serious problems inherent in our established universal systems such as health care and education, a free child care system, which in reality would cost over $4 billion annually to run and $8.7 billion to build, is not possible or probable.
Therefore, spending $75 million on fee assistance instead of on bricks and mortar would mean the disappearance of this province's entire waiting list. Vacancies in existing child care centres would be filled. Social assistance costs would decrease and 12,000 children on waiting lists would be given an opportunity for an enriched start in life, an opportunity this government is systematically denying them.
Without a carefully thought-out plan, our child care system will be in a crisis. Marion Boyd's analysis of the situation as stated during the January 22 lockup was, "We are fortunate that so many people have lost their jobs and are therefore looking after their children at home, allowing us a respite while we shift our priorities." This is simply not acceptable.
We are real people, with real kids needing child care, or who are committed to providing quality child care for our children. Who knows, perhaps Marion Boyd plans to open up a day care here at Queen's Park, because that is exactly where we will have to bring our children if our centres close -- right here on your doorstep.
We must therefore act accordingly with our child care spending and be realistic in our planning. To say that our goal is a universally free child care system is simply an ideologically driven statement and an ignorance of the facts. It is our submission to the standing committee on finance and economics that we need to act responsibly. We must identify those families who need assistance and provide the funds to give them the ability to continue to work, to get off social assistance and become self-sufficient or to enter retraining programs. We must encourage the development of child care programs where there is a valid, substantiated need. We must improve quality by hiring more consultants to better enforce our Day Nurseries Act. All wage enhancement funding must be distributed evenly to all child care educators so that no one segment of our population is systematically discriminated against.
I thank you for your time and I would like to pass the floor over to Janet Hodgkinson.
Mrs Hodgkinson: I should like to thank the chairperson and the members of this committee for allowing me this opportunity to bring my concerns and my feelings before you today. Being the optimist that I am, I hope that this time someone on this committee will listen.
My name is Janet Hodgkinson and I have worked for 21 years at Central Day Care Centre in Hamilton. Central Day Care is a commercial centre. This government has told me that I am inferior to a person with the same years of experience who is working in a non-profit centre. According to the government, I have therefore contributed nothing to the welfare of those children who have been under my care. Is it any wonder I and others like me are angry at this government's policy?
We are fortunate, however, in that the parents we serve in our commercial day care centres trust us to provide them with high-quality day care services, respect us as professionals committed to excellence in our field and support us in our struggles with this government 100%. These parents have taken the time to educate themselves on the issue and are obviously more knowledgeable than the government. This is very sad.
If this policy is passed, I shall lose my seniority and everything that goes with it. I am very hurt to think that for years I have attended meetings, striving for better quality day care, and for all that, all I get is discrimination and punishment because I chose to work in a commercial centre.
1140
If this government feels the system is in such bad shape, then you are saying to me that parents who use the commercial centre are bad parents. You are also telling me that early childhood educators are not doing their job and do not care. If this is the case, who is responsible for putting them there? The colleges, the screening process for applicants, the field placement supervisors who assess the students? If the boss does not give the right instructions to the fellow digging the foundation of a building, you and I both know the building is likely to collapse. So let's change the system. Start there instead of getting rid of commercial centres. They are not your problem.
I think the ECEs are doing a fantastic job. These girls in the commercial sector are every bit as good as the girls in the non-profit, maybe even more so, because for sure the money factor does not enter into it. They obviously care about their job and the children, since ECEs in the commercial sector only receive up to $3,000 in government grants while their colleagues in the non-profit and government centres receive up to $8,000 in government grants.
As for the parents, do you really think they do not care? Do you think they throw their children into a centre and leave them for eight hours and just walk away? I do not think so. In my experience, the majority of parents spend weeks and sometimes months deciding on a centre which suits them. Do not tell me that parents should not have that choice.
The government sets the regulations. The government regulates the system. Are the consultants doing their jobs? Do we even hire enough consultants to do the job? Don't tell me that commercial centres are your problem. If the builder does not put up the walls, you are still going to have the house falling down.
We feel that the system works, though it could stand some improvements. So why is this government disrupting the whole system instead of improving what is already in place? I am not naïve. I realize governments cannot please everyone. But let's use common sense and logic before we make bad decisions and completely disrupt and destroy people's lives when there is no sound reason for it. Listen to what the people are saying. We all have feelings for the way some things should go, but if government feels universality is the way to go, tell us the logic of this decision. Listen to what we have to say. Let us decide together and work together, not against each other. Let's build on what we already have instead of tearing it apart. The whole house has to be strongly built, and if the walls and the foundations are strong, it should not matter what kind of rooms are inside it.
I want to tell you that I have had many consultations here in the past year. I am still none the wiser or any further ahead. I am consulted to death and I am sick of it. Nobody is listening to what we are saying. Even most of the NDP MPPs do not listen in their own ridings. We feel as if we have the plague; that is how bad it is. They do not even care how it affects their own area. These are the people who are supposed to be fighting for us.
Where does the little guy go? We do not have financial backing. If it was not so bad and so very serious, it would be laughable. I sit in a room in consultations. I have the opportunity to speak. As far as I can see, when it is all over, they have not listened to a word I have said and all that has been accomplished is that I have wasted my time and the taxpayers' dollars. My time is very precious and very valuable, and my tax dollars too. All I did was give them the opportunity to stand up in the House or anywhere else and say they had consulted.
I was very happy when the NDP government was elected, because I thought here was a government who would be willing to listen to the people, who thought about and cared about the little guy in the street. How naïve I was. I found out last January that we had elected a government that does not listen and really does not care what happens to the people of this province. My own feeling is they are like horses in a race. Their blinkers prevent them from seeing what is going on around them. The race they are in is going to cripple this province and day care.
In closing, and in case you have forgotten the children, how will they be affected? Who speaks for them and just where do they fit in in this mess?
Mrs Koff: I am Carolyn Koff. I have a day care centre in Richmond Hill. I have had this school for 12 years. Before that I taught primary school for the Toronto Board of Education. I have been asked to talk today about how the NDP's policies will affect our parents, our children and our staff in our schools, and I have decided instead to talk about how it has already affected us, because it is already happening. In Richmond Hill between 1990 and 1991, 11 non-profit day cares were built. One day care has five children in it; another day care has 14 children in it. I guess the NDP expected the parents would be swarming to its day cares, and I am not being sarcastic. The non-profits are in trouble. They are experiencing serious financial difficulty. So our provincial government is bringing in legislation to force a certain segment of parents, the subsidized parents, to go to its day cares.
These people who are on subsidy are now fighting the NDP government. I received a fax on my machine yesterday from a parent who is not in our school. This parent has contacted the ministry and is asking why she cannot choose the school that she has made her decision is the best school for her. They are forcing the parents who are choosing subsidy -- and subsidy is our tax dollars -- to go into their non-profit day cares. These parents who are fighting it are saying that our tax dollars pay for subsidy and that they should be allowed a choice of day care. Just because they are on subsidy does not mean they should not be allowed the same choices that parents who are on fee assistance should be given.
Your and my tax dollars are being used to allow this government to go into competition with private enterprise. It is causing a destruction of choice for parents. My fee-paying parents and my subsidized parents chose my day care, and they also chose the 650 private day cares that are in Ontario. They were not forced to choose our day care; they chose us. They are fighting to keep their children where they are, where they are getting quality, affordable, accessible care.
If our children are removed from our centres, there will be disruption. There are about 30,000 children in private centres in Ontario. There will be disruption for the children when they are being removed and when they are being placed. But you know what? Children are resilient. They will settle into the choice of day care that the parents are forced into by the elimination of private day care.
How is my staff affected? I am going to be handing this out to you afterwards. It is excerpts from 13 letters I received from my staff when I presented a pretty radical -- at a staff meeting I had. I offered conversion to my staff for a number of reasons, and if any one of you would like to hear the background on it, I put my phone number at the bottom of it, and I will discuss it with you. You will be able to read it and you will see what the responses were.
My staff, all 13 of them, voted not to convert. I was not biased when I presented this. I had three staff -- one who has been with me seven years, one five years and one four years -- come to me the next day and say, "We would just like to know where you stand on this, because last night you seemed to be leaning towards conversion." I said, "Give me your response," and they gave me their response. Then I said to them: "I want to continue the battle. I don't want to give up. But I also want to do what's best for you people because not one of my staff has left my day care." There are 11 new day cares they can choose from. I feel committed to them.
1150
One quote from one of my staff, I think, pretty well says it all: "I feel very good about the family system we provide. It allows the children to learn in a relaxed, loving environment. The parents are welcome to come in and sit with us and give their input, and the teachers have a good support system with each other. The school works as one unit, just like that of a family, with the love, caring and respect for each other. I feel that's why the teachers have chosen to work here and the parents have chosen to put their children in our care. The quality is still the number one reason to stay as we are and not convert."
Speaking on behalf of all the private day care operators who, effective tomorrow, February 12, begin this battle, how has this attack on private day care affected us? It has taken away our choice too: a choice of jobs, a choice of a business we decided to start using our own money. I had this great dream 12 years ago that I would start up a day care. It was not so much the money; it was the time all of us have put into it. It was worth it and I love it. I am still there 12 years later, except now I am here defending myself on behalf of my staff and parents and on behalf of owners as to why we should be not only allowed but encouraged to be able to continue. I do not think we have done anything wrong.
Day care owners are mostly women. The battle has strained our marriages. It has put our husbands under pressure. It has created financial stress.
I want to finish. I do not want to get emotional.
We need to do the right thing as owners of day cares for our staff, like Janet, who has been in day care 21 years. We have to do the right thing to keep our marriages together. We want to keep our jobs. We need to continue this fight for the parents, the staff and the children. We also need to continue the fight for the taxpayers. I think $225 million during a recession to destroy something that is as valuable as what we are providing is terrible.
As important as all of that is, I also feel we have to fight for freedom of choice. We have to take a stand against an assault that has not come from some external thing; it has come from within our own country by our own government. We have to fight to not allow this provincial government to use tax dollars to create a system that takes away these choices.
I have this bulletin board in my school and the staff and parents put stuff on it. It is all political and it is pretty interesting. Several parents and staff have said, "You know, we have a right to fight this." My response is that we not only have a right to fight this, we also have an obligation to fight this for the future of our children.
The Chair: Mr Carr, we have about five minutes altogether between the three parties, so make it quick.
Mr Jackson: If I may, on behalf of Mr Carr, I want to thank you for an excellent presentation. Janet, you will lose all your seniority rights. This discriminatory move is a hard hit against women, who are the predominant workers. How do you feel about losing all your seniority rights and all opportunities for employment?
Mrs Hodgkinson: Actually, it is just anger. I have been through them all. I am angry; I am emotionally upset; I am everything. I feel that I am being put out to dry -- those are the only words I can use -- that they are saying to me that I have not given care to these children, that 21 years are just no good to the system. I really feel angry that they are doing this to me. I really feel angry that I work in such a very good day care centre, it is extremely well run and they get good care, and now they are saying: "Forget it, Janet. You're out."
Mr Jackson: Briefly, Carolyn, one question: You mentioned this issue of the proliferation of non-profit centres. You meant to say with government funding, but that is a given, an understood. Do you not feel that it is the responsibility of a committee such as this to look at the number of day care centres that are closing in this province? We are walking away from an investment on the part of any government, whether it was started by the Liberals or by the NDP. Those are closing and public moneys were used. They are closing and somehow this committee should be looking at, "Are we getting value for our dollar?" or, "How many of these centres are closing?" versus the doors that are being shut artificially in the private sector, which is willing to continue. Should not a finance committee of the Legislature be looking at this critical issue? It is not an ideological question. It is just a dollars-and-cents question about, where are the priorities of dollars to improve access for children to any form of day care?
Could you comment about that, because I have been unable to get the statistics. Perhaps through this Chair we will be able to get those statistics from the ministry as to the number of non-profit centres that are closing.
Mrs Koff: We would like to get the statistics on that. At this point we do not have any statistics. The only things we have are things that are passed through ministry news releases, but they never talk about the closures; they always talk about the opening of day cares. They even use the term "anti-recession" at the top of their news releases when they open up non-profit day cares, while day cares in Richmond Hill are closing.
The Chair: Mr Jackson, maybe I can ask the researcher here if we can wind up getting some of this information for the committee members.
Mrs Koff: That would be great.
Mr Sutherland: Thank you for your presentation. My sense is that I do not think you should be under the impression we have not valued your contribution and the fact that you have provided good care. I think the reality of the situation is that there is good care being provided in private day care, that there is good care being provided in non-profit and that there is probably bad being provided in both. That is just going to be a simple reality of the system. It is not a question that we do not value your contribution. I am sure you have provided very good care, that you have provided a very good contribution and that your centres have been run effectively.
You also mentioned the issue that people will not have a choice. I have not seen where the government has said, "You're going to have to go to this non-profit day care versus that non-profit day care." People will still have the choice to decide which non-profit day care.
On the issue of seniority, I suspect if you were converting to a non-profit from the profit one, you would still be able to keep your seniority through that conversion.
I guess my sense of what is going on here is similar to what has gone on in education. We do not fund private education; we have one public system here. It is not to say that what you have done has not been valuable. It is a question of whether in the human services field, when we are providing those types of services, we still should have a profit motive in that in terms of delivering those services, and when the government is providing a subsidy, whether that should be going into a profit area in terms of the human services field. That is what it comes down to, in my sense anyway, not that you have not made a valuable contribution or have not provided good service.
1200
Mrs Cousins: I would like to comment on the first two parts of that statement, one being the choice. Yes, there is choice being taken away through parents obtaining subsidies. They are now being directed into the non-profit centres, despite wanting to choose a private centre. That is a fact. Second, choice is being taken away from full-fee-paying parents, which are over half the parents in the system right now, simply by their centres being threatened with closing or on the border of closing because of the unfair subsidization of non-profit centres, deliberate subsidization in order to threaten the viability of private centres. If my centre were to close because of these policies, my choice would be taken away, because I chose that centre.
Second, with respect to seniority through conversion, you are assuming that all centres convert. The reality is that many centres will not convert. I do not think the ministry has any idea how many will convert and what will happen. What will happen if the private centres in my area do not convert and all of a sudden all these spaces are lost to the system? Where will those children go? There is no guarantee these children will have alternative spaces.
Mrs Y. O'Neill: You ask whether have you done anything wrong. I think you have all done a lot right. You have at least half a century of experience among you. Choice is being taken away by this decision and that is what bothers me the most. I also find it very difficult to accept the statements being made that parents do not have any interaction with the commercial day care, that it is only by having a board that parents interact. I am sorry; I have seen much different.
I am very concerned about the attack on small businesses, and small businesses run mostly by women, as you indicate. What I find so confusing are the reasons. The NDP government has made decisions in reverse, the colloquial word being flip-flop. I have said in the House a couple of times that I hoped this is going to be one of its flip-flops, because it would be a flip-flop in the right direction.
Your relationships with the individual municipalities, I understand, have changed because the municipalities of course are partly responsible for the funding of day care, and they are now being directed, I understand -- I would like you to verify this -- not to direct any of their subsidized spaces to your centres. Is that correct? Can you say a little about your relationship with the municipalities?
Mrs Koff: We met with Peter Crichton two weeks ago and he assured us that even though the minister has made a request that no new subsidies be granted, that no parents be allowed to choose the private sector, he will not abide by that. He has given us his word.
Mrs Y. O'Neill: I am sorry; I do not know the person you are speaking of. Could you identify his position?
Mrs Koff: He is the commissioner of community services, of purchase of service for children's services division with the Ministry of Community and Social Services. Jackie and I met with him and asked him that question. What is happening is that Marion Boyd has requested in writing, and we read the paper it was written on, that she would like to see all the municipalities direct any new fundings, any new subsidized parents, into the non-profit.
I thank you for your comments. We need the support. I wanted to respond to -- is it Kimble? There was one point that Kimble made. What he is saying is true because this is what the public is seeing, and I think it has to be clarified. It is an issue of public dollars going into the private sector. It is; this is true. Public moneys go into the private sector all the time; that is also true. There are publishing companies; Karen Haslam was in the newspaper just last week stating that 30 publishing companies will be receiving public moneys. It goes into the private sector all the time; that cannot be argued. I think the point is how the money is spent once it gets in there. If we have proven historically that of the direct operating grant, where we only get 50%, 99.5% of it went into staff salaries, I think it should be a different issue.
Mrs Bhaloo: I would like to make a comment here. You said there are probably very good day care centres that are commercial, as well as non-profit, and then there are centres that have poorer quality in both sectors. We are suggesting that, yes, the system needs help. The children of this province need help, because there are a lot of them out there waiting to get in. There are a lot of parents out there waiting to put their children into day care so that they can go for training, can go for gainful jobs and create more taxes and self-esteem for themselves.
What we are suggesting is that this government, instead of disrupting and destroying the system which exists, start from scratch and correct the weaknesses in the centres in the system, and that would be by regulating and helping the centres that are not providing up-to-quality care. If they are not able to provide quality care at the end of it, then close them. But do not destroy the whole system and turn around and say, "Okay, we're going to put about $4 billion to $8 billion in to create the whole system again," which in itself has a lot of weaknesses.
The opposition and the coalition call this solution I am mentioning a Band-Aid. I would like to use the analogy of children, because all my life I have dealt with children, their welfare and what their future is going to be. This would be like saying a child falls down and hurts his knee and we suggest: "Let's treat it. Let's put a Band-Aid on it, if that is the need for it." But the opposition and the coalition and this government are suggesting, "No, amputate that leg and we'll provide an artificial leg for him when we can afford it." Is this what we want to do? Is this what we are doing out there with other businesses that are losing jobs and so on, and the government is putting public dollars into it?
The Chair: Thank you for appearing this morning. We ran short on question period, which was a discussion in the last group, but your telephone number is there and any members will feel free to call you to get more information.
Mrs Cousins: Thank you for giving us the few additional minutes.
The Chair: We are recessed until 2 o'clock.
The committee recessed at 1207.
AFTERNOON SITTING
The committee resumed at 1406.
ONTARIO HOME SHARING PROGRAM
The Chair: We will resume our pre-budget consultation. I would like to welcome the next group, which is the Victorian Order of Nurses Home Sharing Program. I would like to welcome you to this committee. We have until 2:40. If you can, leave some time at the end for questions from the three parties. You may begin.
Ms Bowlby: Good afternoon, Mr Hansen, Chair of the standing committee on finance and economic affairs, Mr Sutherland, Vice-Chair, honourable members and interested participants. We wish to thank you for the opportunity to meet with you. Today we would like to advise you of the ongoing success of the 17 home sharing programs across Ontario. This meeting will enable home sharing advisory committee members, co-ordinators and consumers to highlight the value of this innovative community-based program.
We would like to share with you three essential points that exemplify the importance of this program for communities across Ontario: (1) that home sharing is cost-effective; (2) that home sharing offers a broad range of innovative community services tailored to the needs of a wide variety of clients within each of the communities throughout the province, and (3) that home sharing facilitates housing intensification by making better use of existing housing stock.
Finally, it is important to point out that the principles, priorities and broad public goals of the Ontario home sharing programs are consistent with the recent A Housing Framework for Ontario: Issues for Consultation, a June 1991 publication, as outlined in the response submitted by the Coalition of Home Sharing Program Coordinators in the fall of 1991.
I would like to introduce myself. My name is Christine Bowlby. I am the home sharing coordinator for the VON program in Hamilton. I would like to invite the other presenters and the members here who are representing the home sharing programs to introduce themselves. I believe you have a list of these members in the package that was circulated today for your information.
Mrs Beange: My name is Edna Beange. I am the chair of Sharing, shared housing for seniors serving Metro Toronto. I met a number of you last year when I made a presentation on our behalf.
Ms Lerner: Good afternoon. My name is Ruth Lerner. I am a Scarborough Board of Education social worker and I am the chair of the advisory committee for the Scarborough Housing Help Centre.
Ms Bacque: I am Susan Bacque. I work for the housing department at the city of Toronto. I supervise several housing programs, one of which is the home share program.
Ms Bowlby: In the interest of time, we might leave the introductions of our other members until the end of the presentation simply because we want to get through this presentation in a timely fashion. I will leave it to Edna to get us started.
Mrs Beange: I am going to start with a history of home sharing. The home sharing programs have been formal organizations in North America for over 20 years. Home sharing has had a national profile in Canada for the past 11 years. In Ontario, Niagara region was the pioneer in 1980. In 1985, the Ontario Ministry of Housing began to co-fund programs with regional governments through cost-sharing arrangements. In the past seven years this partnership has worked very well. Presently there are 17 programs growing and meeting the social, economic and housing needs of a wide variety of Ontarians. In fact, the Ontario model of home sharing is internationally recognized for its effectiveness, cost-efficiency and innovation.
Home sharing programs have been established to screen and match those individuals who are interested in shared accommodation as a safe, affordable housing alternative. Many of the programs focus on the needs of seniors, that is, persons 55 years or older, and concentrate on intergenerational matches providing support to the older person to remain independent in his or her own home.
Home sharing also assists special-needs clients in terms of facilitating affordable housing arrangements. Some of these special-needs clients include: visible minorities, new immigrants, individuals experiencing family violence, residents of second-level lodging homes seeking more independent living, adult disabled, single-parent families, healthy seniors, and frail elderly awaiting institutional placement both from hospital and from home. Alternative living arrangements for these special-needs populations would require extensive government and subsidized housing. Home sharing is a creative community initiative that enables the development of a healthy, caring community across the province.
Home sharing programs have four main objectives: to provide an alternative for individuals seeking safe and affordable housing; to enable seniors to continue living independently within their own homes and neighbourhoods; to reduce social isolation experienced by both sets of clients by creating opportunities for increased companionship and security, and to intensify and preserve the existing housing stock in a unique way. In short, home sharing is a means of fostering independence, self-determination and autonomy in the lives of many who have been forced to live in socially and economically restrictive circumstances.
The cost-effectiveness of this is apparent. It has been abundantly clear that the provincial government is in a very difficult situation financially. Following the Premier's televised speech in January and the concern that the $9.7-billion deficit could expand, the Treasurer and the ministries are working diligently to cut back on government expenses. We applaud your government's efforts to control this deficit in spite of a recession. As supporters of this cost-effective and innovative housing program, it is our responsibility to ensure that you are aware of all the cost-saving initiatives facilitated by home sharing.
Although the actual dollar contribution is small, the Ministry of Housing's share of $40,000 per program has a large multiplier effect in other ministries such as the Ministry of Health, the Ministry of Community and Social Services, the Ministry of Citizenship, and in human rights, and for the disabled, seniors and race relations, the new division of community health and support services, and throughout each of the regions and municipalities across the province.
A sample of such a cost saving is outlined in the following case study. One of the VON matches involved home seekers, a couple with a 17-year-old daughter, and a home provider, a 91-year-old frail elderly gentleman. Prior to the home sharing match he had frequented the emergency room and occupied a hospital bed on several occasions because of dehydration and malnutrition. Over a period of one year, the elderly man singlehandedly ran up a hospital bill of over $102,000 actual cost to the Ministry of Health during two admissions within a year. Following his second admission, the placement coordination services had recommended nursing home placement. Had he been admitted to a nursing home, the annual estimated government contribution would then have been approximately $13,939 based on 1990-91 dollars.
At home the elderly man required the maximum of home care services: a VON nurse twice a week, 40 hours a month of government homemaking services, frequent visits, almost weekly, by a home care social worker. He was using most of his limited pensions on another 40 hours a month of private homemaking services. He also had a power of attorney, a volunteer from his church and a lawyer trying to sort out his affairs. The social worker and the lawyer referred him to the VON Home Sharing Program. A suitable home sharing family was found for the frail man. The new home sharers helped to maintain the health status of the elderly man. They ensured that the elderly man ate regularly and took his medications, and they provided companionship for him.
Since the home sharing match in January 1990, the elderly man has broken his pattern of frequent hospitalization for dehydration and malnutrition. Home sharing has prevented institutionalization for this elderly man and has saved provincial government contributions on his behalf.
Home sharing has also helped this young family, which was in need of safe, affordable housing. With minimal income, the family was limited in what they could afford to rent. As the recession continued, the young family found themselves without financial resources. Through the support of general welfare assistance, the family was able to access the needed support. Their shelter costs, through home sharing, were reduced, a saving to the social assistance system totalling $5,640 over a one-year period.
Home sharing offers ongoing savings to both the health and social service system in this single home sharing match. This is just a sample of one match out of the required 35 matches a year that each of the 17 home sharing programs facilitates throughout the year across the province. The cost savings provided by this program throughout the province must not be overlooked.
Home sharing offers a supportive housing alternative to marginalized individuals in the community. The program allows for creative solutions to assist in housing persons with special needs.
In many other home sharing matches, the support of a home sharer assisting a frail, elderly person reduces the stress upon family care givers, neighbourhoods and other informal support systems.
The cost to the government to build one non-profit housing unit is $10,000. A hospital bed costs approximately $745 a day. A bed in a nursing home or home for the aged ranges from $745 to $1,441 a month. A bed in a hostel costs $24 a day in subsidies. Beds in women's shelters and second-level lodging houses are up to $31 a day. Through the continued matching service for special-needs populations, the 17 home sharing offices across the province save millions of provincial government dollars. For approximately $900,000 a year, the Ministry of Housing must continue to fund this cost-effective, community-based, innovative housing program.
Mrs Lerner: Thank you for the opportunity to speak with you today. I will be speaking to items 4 through 7 on the agenda.
Home sharing offers a screening and matching service for those interest in shared accommodation. Home sharing programs link closely with a wide variety of social agencies, including access to permanent housing programs, community health and counselling services, battered women's shelters, multicultural services and community legal clinics. For matched home sharing clients, the program offers mediation services for difficult issues that may arise. Life-skills counselling and support is provided to special-needs clients. A follow-up service maintains contact with matched clients to ensure the continuation of a successful match. Information is also provided on the Landlord and Tenant Act and on income tax implications for individuals on fixed incomes.
Home sharing assists low-income and homeless persons who do not have the language or the life skills to work through the bureaucracy of the social housing system or the private rental market. Homeless clients matched through home sharing benefit through reintegrating into their communities where they may have previously been marginalized through extended and expensive stays in hostels or hospitals. Many low-income individuals are eager to use the services of home sharing programs as they are not seen to have the stigma of a social assistance program.
Home sharing is very much in line with the goals of the provincial government's public consultation paper entitled Redirection of Long-Term Care and Support Services in Ontario. An objective we both share is maintaining people in their own communities through supportive housing initiatives.
1420
Home sharing facilitates housing intensification. We would like to define housing intensification as the utilization of existing housing stock to maximum effectiveness.
Originally the home sharing program appealed to the Ministry of Housing as it promotes the better use of existing housing stock. As of 1981, the Ministry of Housing estimated that 28% of residential units in the province were underutilized. This amounts to over 850,000 dwellings. These dwellings were thought to lend themselves to intensification programs such as home sharing.
Through home sharing, additional units of affordable rental housing can be created at very little cost to home owners and to governments since these units already exist and are ready for use. Ministry of Housing statistics of 1988 show that 53% of home sharing cases in Ontario involved accommodation on the market for the first time. In Scarborough, 41% are units being provided for the first time and 79% are units not advertised elsewhere.
One important fact behind these figures is that 54% of our providers are single females or single-parent females who use the service exclusively because of risks entailed in advertising in newspapers or through other public means. Much of this housing stock would disappear without the home sharing program. This is quality housing stock for the clients we serve, not just affordable housing but supportive housing. In many situations, landlords have become like second families to their tenants.
As a Scarborough Board of Education social worker, I can say that a majority of older adolescents I refer for home sharing are victims of family violence or incest. The supportive environment is crucial to their remaining in school and to their psychosocial functioning. The fact that the Scarborough housing registry is utilized by over 90% of secondary school counsellors adds further evidence of this need.
We again want to emphasize that home sharing results in better housing and better communities. In addition, many of the providers are now part of a permanent roster of landlords who have been renting through the programs for several years. In this sense the home sharing programs have developed a new type of permanent accommodation previously not accessible.
We have also found that our community education initiatives provide a soft, non-threatening way of introducing the ideas of housing intensification to communities. This lessens the effect of the not-in-my-backyard syndrome.
Let's now turn to concerns about future funding. The ongoing publicity about the provincial government's deficit and the Treasurer's concern to keep the deficit under control has necessitated concerns among Ontario home sharing programs. The Treasurer has requested each of the ministries to cut base-funded programs in order to control government spending. As home sharing has been funded by the Ministry of Housing through surplus dollars, we are extremely concerned about the future funding for this program. Surplus-funded programs are always vulnerable during budget cuts.
It is for this reason we have come to speak to you today. If these proposed cuts become reality, what will happen to this innovative, cost-effective, community-based program? We are not questioning the necessity of cuts or tough decisions. However, given the present government's grass-roots style and philosophy of helping the most needy, we are greatly distressed by the potential elimination of a program which effectively serves special-needs populations, including the working poor seeking safe, affordable accommodation, and the providers at risk of losing their homes due to the recession.
This kind of uncertainty affects the essence of our matching service, which is built on the trusting relationship established between the agencies and their clients. At the moment we cannot maintain that trust with any degree of certainty or confidence. The demand for service is for ever rising as news of our successful matches become public. As a result, there is great concern on the part of the needy in the community and their referral agencies about the threatened cuts. With only 49 days left before the new fiscal year begins, it is critical that we know when a final decision will be forthcoming.
The Coalition of Ontario Homesharing Program Coordinators can run an effective service within the present ministry guidelines. We are asking to be saved from the budget-trimming. We would like to offer two specific recommendations for your consideration at this time, (1) that the Ministry of Housing continue to work in partnership with the Ontario home sharing program, and (2) that the Ministry of Housing provide base funding for the Ontario home sharing program for a minimum of five years, at a cost of approximately $900,000 per year, including cost-of-living factors, in support of the 17 home sharing programs across the province. I would like to thank you for the opportunity of allowing us to present our concerns to you today.
Ms Bowlby: In the next segment of our presentation today I guess we wanted to share with you the input from community members. You will note that both of these individuals are members of advisory committees of various home sharing programs across the province. As well, we would like to invite some consumers of the program who have had personal experience to share with you their concerns about the program and their own personal experiences of the program. I would like to invite Carmen Muir, Dorothy Ohl and Jose Valle to come up, please.
The Chair: Before you start speaking, could you identify yourself, please, for the purposes of Hansard?
Mrs Muir: My name is Carmen Muir. I live in Scarborough. I am renting to a 16-year-old girl. Her mother died and she wanted a home to live in. She is staying with her grandmother now and her grandmother is unable to look after her, so I am asking you please to continue the home sharing because it is very useful to me and also the girl.
Mr Valle: My name is Jose Valle and I am a newcomer here in Canada. I get a place through the home sharing program in Scarborough and I am going to talk about this later.
Mrs Ohl: I am Dorothy Ohl from Scarborough. Sharing has been wonderful for me. For two and a half years I have had a lady staying with me and it has meant that it is easy for me to keep my own home. In 1990 I was sick off and on for nearly a year, but because she was there, I could come directly home from the hospital and we managed. Also, my house has grown old with me. We are at the stage where the roof and the plumbing and the appliances all need attention or replacement. The income I thought was more than adequate when I retired has shrunk with inflation. Now it will shrink more with lower interest rates, and with the rent coming in, I do not have to worry. I might have been able to find someone myself, but it would have been risky. It is not safe for seniors to advertise living space. We should not let strangers into the house and we should not let the world know we are living alone. Also, it has been wonderful to have the company. We get along fine, play bridge, belong to the same clubs, and I am very thankful to Sharing.
1430
Mr Valle: I an a newcomer here. I am a refugee from El Salvador and I came here to Canada over a year ago. When I came here, I found myself in a very difficult situation. I was on welfare, but welfare was not giving me enough money to rent self-contained accommodation. I did not have any place to go, so I found out about the home sharing program and I went to the Scarborough Housing Help Centre. They helped me out to find a place to live. I went to the place and I am still living there and I have to say it is a great place. I have learned many things about the Canadian customs with them. Also I have improved my English with them because they are a Canadian family.
I became a volunteer at the home sharing office because I would like to help as well as they helped me before. So right now I am helping out the community and I am trying to give them peer support in all the things I can do for them. Let me tell you that working there has been a great experience for me.
I can say that the problem of the community is the affordability of housing, mostly for the persons who are on welfare and do not have enough money to pay for self-contained accommodation. They have to go through the home sharing, as the lady says, and also for their safety.
I recommend it because of my own experience with home sharing. Because I am leaving that, I have to say the home sharing is great and there has to be funding in order to help all the newcomers who are here. They need our help. I recommend that the home sharing program must continue, because they are helping us to integrate into the Canadian society. This is the other part of home sharing, the integration into Canadian customs and a Canadian family and Canadian society and there is someone who is teaching us how to take the TTC, because when we come here we do not know anything about that, and it is great to live with a Canadian family.
The Chair: Thank you. Many of us are quite familiar with your appearance before the committee last year, but there are some members of the three caucuses who would like to have some questions, and the first one is Mr White.
Mr White: I am of course very impressed with your presentation. It is marvellous to see so many people and working so well in unison, which I am sure speaks of your program as well. It is a very innovative and sensitive program and I think, as you are suggesting, on a dollar level very effective. Do you have any idea of the total number in the province who have been served through this?
Ms Bowlby: In terms of the total number for 1991, the statistics have not been completed yet. I was speaking with the Ministry of Housing office and it does not have all our figures in at this point, or does not have it all collated, but in the previous year I believe we made over 850 matches collectively in all of the 17 programs. That 850 is just the match; we are not counting the number of people involved in the match, which can double or sometimes be a much larger number than that, simply because we are often matching single moms or young families in homes.
Mr Kwinter: I want to commend you on your program. I think it is an excellent program and I hope you continue to get funded. I just have a question that bothers me, as a former real estate person. How does zoning affect the home sharing program? If you are in an R1 zoning, do you have any problems with municipal authorities on that?
Ms Bowlby: I might have to refer your question to a Toronto coordinator, simply because zoning has not appeared to be an issue in Hamilton-Wentworth, which is the program I operate.
Ms Chan: My name is Christine Chan and I am from the Scarborough Housing Help Centre. Zoning usually has not been an issue because most municipalities allow for two unrelated persons to be living in a home and usually we do not get into matches that are people renting out more than two rooms. Most municipalities are very supportive of the program. A number of the municipalities have written the home sharing program into their municipal housing statements. My experience in Scarborough has been that the municipality is very supportive of the program. Zoning has not been an issue because we are not in the business of rooming houses or lodging houses or anything like that.
The Chair: One short one, Mr Phillips.
Mr Phillips: I know first hand of the good stuff you do in Scarborough, but I am actually surprised there are not more. From the phone calls we get to our constituency office, there are just thousands of people looking for space. Is the challenge finding people who are prepared to share their accommodation? Is that where the need is, to find more people who are prepared to share, as opposed to people who are looking for accommodation?
Ms Bowlby: I believe, according to the global statistics from our program last year, the provincial program, we actually had more seekers than home providers. Our numbers maybe reflect the fact that what we are doing is a unique service in matching individuals. It is not a strict rental situation where you pay your money and you get your space, but rather we are trying to match people for compatibility issues and lifestyles, so that takes a little bit longer.
Mrs Beange: I would like to speak to that too, if I might. For some time we have been saying that it is the role for a senior level of government to promote the issue of home sharing in the same way that McDonald's promotes hamburgers, just so that it becomes a household word.
A lot of people have not thought about home sharing. They still have reservations. If there were a very effective province-wide program developed -- not the kind of static advertising that you see in the newspaper from time to time that is paid for at great expense by the province. It did not happen last year, but there has been an ongoing one. If the province would recognize that there is a role for this and really develop it in an effective way, I think the home sharing program would grow by leaps and bounds. More people would be accepting of it. It would be something they could do.
Mr Phillips: Can I just make a suggestion? Most of us send out what we call householders. In mine I try to inform the community of services that are available. I have your phone number in there but I am not sure I have a description of the service. You might consider letting each of the MPPs know about the service. That is a service we can do for you and for the community. Sorry, Mr Chairman, that is a side issue, a suggestion to your group.
Mrs Beange: It is a concept that needs to be sold, though.
Ms Bowlby: Thank you, Mr Phillips. We will pass that message along to our colleagues in the program.
Mr Jackson: I had the opportunity to raise this issue on two separate occasions in the House when we were coming to the end of the annual funding for this program. I would like to underscore for the committee members consideration of their second recommendation, which talks about a five-year program, because they are going to be here every year trying to justify their existence unless we respectfully recommend in our report that this is a program of long duration with a future in this province. It is on that point, Christine, that I want to raise a concern.
When I raised this with the Minister of Housing, I also asked the minister responsible for seniors' issues and the Minister of Community and Social Services for their response and their support because of the social nature of the matching and because of the benefits to taxpayers and relief from other programs.
I want you to comment on the new directions for long-term care, because it is almost silent -- not completely silent -- on the issue of housing and affordability. It is built on the presumption that our seniors are going to be able to have less dependence on institutions, therefore it works on this great presumption that they will be cared for in their homes and that they will be able to live in their homes and afford to be in their homes.
In my view this program fits so perfectly as a foundation stone in that vision -- which all three political parties support, incidentally -- and it is wrong that we have to wait three years for long-term care funding. You are left here, cap in hand, literally begging that we do not close down your program when in fact we rely on your program to meet our needs, as politicians, to change the direction of long-term care.
I would like you to comment on that because I think your concerns are unaddressed in the long-term debate. There is a gap in planning and funding until 1993. Could you comment specifically on that?
Ms Bowlby: The Ontario home sharing program is currently funded by the Ministry of Housing, and so it is through the Ministry of Housing that we want to continue our partnership until such time as the long-term care redirection program gets itself up and running and functioning.
Certainly the segment in that public consultation paper regarding supportive housing, home sharing can provide a supportive living situation for individuals to help them maintain their independence in the community. I think a number of home sharing programs provide feedback to the new division of community health and support services, regarding home sharing as a housing option for seniors and disabled. But at this time, again, our funding comes through Ministry of Housing and we need to confirm that funding and that is what we are asking for today. We are looking for support in that direction today.
Mr Jackson: Thank you. I wish we had more time, Mr Chair.
The Chair: The clock has run out. I know this home sharing was developed in the Niagara area, where I am from, and I am well aware of your program as are I think a lot of my other colleagues in this room. I would like to thank you for appearing before this committee, for your ideas and your thoughts, and requests will be put in the brief that we will be preparing.
Ms Bowlby: Thank you very much for the opportunity.
1440
ONTARIO TRUCKING ASSOCIATION
The Chair: I would like to call on the next group, the Ontario Trucking Association. I would like to welcome you to the committee. Would you identify yourself for the purposes of Hansard and then begin your presentation. We will have until 20 after 3.
Mr Bradley: Thank you. I am David Bradley, president of the Ontario Trucking Association. I have an uncanny ability to clear a room and it seems that I have not lost my touch.
I would just like to say before I start that today I am representing the Ontario Trucking Association, but I am also supported by a number of other groups within the trucking industry, including the major associations of independent owner-operators and the unions. I will deposit with you, at the end of my remarks, letters of support for our submission from the Com Car Owner Operators' Association, from the Canadian Conference of Teamsters, the Canadian Brotherhood of Railway, Transport and General Workers and from the Transportation and Commercial Workers' Union.
OTA is pleased to have this opportunity to participate in the consultation process established for the 1992 Ontario budget. This will be an extremely important budget in terms of establishing the economic path for Ontario. Domestic, global, economic and social forces are contributing to a major restructuring of economic activity in the province. How we adapt to changing trading relationships and patterns and embrace technological innovation, foster human capital investment and restore the confidence of investors and consumers will determine whether we will compete and succeed into the next century.
Ensuring economic revitalization and renewal in Ontario depends on how well all stakeholders -- industry, government and labour -- respond to the challenges posed by the irreversible forces of change that confront us.
OTA is fully aware of the gravity of the fiscal situation that currently grips the province. While we may not be comfortable with the present state of the provincial finances and while we may not always agree with other stakeholders on some of the specific actions that have either contributed to or attempted to address the fiscal imbalance, including the 31% increase in the provincial tax on diesel fuel introduced in last year's budget, we recognize the pressures on government and we also recognize that difficult choices must be made. As a province we must demonstrate fiscal responsibility, but we must also respond positively to the economic malaise that confronts us. Balancing these two concerns obviously can be difficult. However, we do not feel that it is an either/or situation. We cannot place ourselves in a fiscal straitjacket while the economy continues to stagnate.
We must find ways to spend more wisely. That might mean spending more on some things and less on others. Also, we do not feel that there is any scope left for further tax increases. Consumers and businesses quite simply have had enough. Instead, governments should be attempting to provide incentive and encouragement to stimulate consumer spending, business investment in plant and equipment and taxable income. The tax base is already broad enough and tax rates high enough or too high.
Our recommendations for the 1992 budget have their basis in two principles. First, the prospects for renewal of the Ontario trucking industry are indelibly linked to the prospects of the Ontario economy as a whole. Trucking is a derived demand industry. Consequently, the level of trucking activity in the province is a reflection of overall economic activity. Second, it is also true that economic revitalization and renewal in Ontario requires the existence of a stable, viable, productive and efficient transportation industry, particularly a healthy and viable domestic trucking industry.
The Ontario economy depends on the trucking industry to get goods to market not only within Ontario but also within Canada, and to export markets, particularly in the United States. Trucking is the dominant mode of freight transportation for goods movement into, out of and within Ontario. The industry employs about 4% of the provincial labour force. Trucks haul about 70% of total freight in the province, including 80% to 90% of all consumer products and foodstuffs. In addition, trucks haul about 75% of the province's exports to the US and 80% of imports from the US.
The province's shippers and manufacturers, many operating with just-in-time operating systems, depend on trucking to provide the flexible, efficient and safe service they need and at a price which enhances their ability to compete in the global marketplace. The ongoing plight of the Ontario trucking industry should by now be well known. The industry has been wracked by deregulation, recession and higher taxes. This has led to a deterioration in the industry's financial performance reflected by record levels of bankruptcies, thin or non-existent profit margins and thousands of job losses. It has been estimated by a government of Ontario study that Ontario-based transborder motor carriers face a cost disadvantage that can run in excess of 20% compared to their US competition.
In recognizing the interdependence of prospects for renewal of both the economy and the trucking industry, we believe the specific budget measures should have the following objectives:
They must build confidence. Economic recovery requires the participation of investors and consumers. To date, recovery has been hampered by a lack of confidence.
Budget measures must improve competitiveness. The Ontario economy and the Ontario trucking industry now, as never before, operate in a global marketplace. We must be competitive if we are to maintain and create jobs and maintain and improve our standard of living. We are a trading province. We must ensure that we have the resources, the skills and the technology needed to compete. Governments must work with industry in getting there.
Being competitive also means being as productive as we can be. In industry we need to close the productivity gap we may have with some of our competitors. We need to invest in human capital and technology. We need to provide the appropriate incentives to our managers and workers. We need to cooperate. We need to embrace new technologies and systems. We know this in business. As truckers we are very aware of the need to continually improve our productivity or be left behind. Again, government can work with us to assist in becoming more productive. Budget measures must promote social responsibility. Government policies and business strategies have to be socially responsible, and we recognize that.
We believe that by introducing measures consistent with meeting these objectives, the 1992 budget would create the basis for expectations of increased job creation and economic circumstances that would better enable the province to meet its financial obligations and provide the services that Ontarians need and have come to expect. Here is what we recommend:
We ask that the provincial government roll back the 31% increase in the provincial tax on diesel fuel introduced in two stages since last spring's budget. Ontario's provincial diesel fuel tax rate of 14.3 cents a litre is the third-highest rate in all of North America. It is visiting severe hardship on trucking companies and individual owner-operators by adding about $2,000 a year to the cost of operating a truck, without any recognition that profits in the industry are thin or non-existent.
Trucking services are not a luxury. They are not discretionary. Shippers and manufacturers cannot decide to walk or bicycle their products to market. We have never understood why diesel fuel taxes should be lumped in with other sin taxes. We do not understand, further, why trucking does not qualify for the rebates from fuel tax granted to other industrial, commercial and institutional purchases. It should not be a convenient cash cow for propping up government revenues. The Treasurer's recently released fiscal outlook highlights the fact that the provincial diesel fuel tax rate has increased by over 44% over the last six years, with most of that increase coming in last year's budget alone. At the time of its announcement, the diesel fuel tax increase was justified on fuel efficiency and environmental grounds. Over the last year, OTA has gone to great lengths to demonstrate that the fuel tax increase actually impedes environmental enhancement. The fuel tax increase simply makes it that much harder and postpones further the re-equipping of the Ontario truck fleet. So Ontario is not benefiting from currently available truck technology that would, in addition to improving productivity and efficiency, impact positively on the environment.
In 1991, the Ontario trucking competitiveness study conducted by the Ministry of Transportation, in conjunction with the Ministry of Treasury and Economics and the Ministry of Industry, Trade and Technology, concluded that Ontario-based trucking companies are at a significant disadvantage in terms of fuel costs. Nevertheless, some will still argue that the fuel tax increase does not have a negative impact on the competitiveness of the Ontario trucking industry because US carriers pay the same tax when operating in Ontario. This is somewhat naïve.
1450
The assertion does not take account of the differential in fuel taxes paid by Ontario versus US carriers on their domestic operations. Fuel taxes are about one half to one third the Ontario rates in many states which are competitors of Ontario, and the base price of fuel is also cheaper. Overall, it can be argued that lower fuel costs in taxes in the US contribute to higher profitability in US companies, better enabling them to purchase newer equipment more frequently. At the same time, the Ontario fleet is aging, leading to relatively greater maintenance costs and lower efficiency.
Moreover, commercial fuel taxes are a tax on distance. Manufacturers, shippers and consumers from those communities situated furthest from major markets are hit the hardest. We recommend that Ontario revisit its decisions to increase the diesel fuel tax and roll back the tax to its pre-1991 budget level of 10.9 cents per litre. At this rate, the tax would still make a sizeable contribution to provincial revenues while providing a much-needed boost to the trucking community.
As I have mentioned, the Ontario truck fleet is generally of about mid-1980s vintage. The Ontario trucking competitiveness study challenged our industry to become more efficient and more productive. It also recommended three approaches that the government should consider taking to encourage and assist the industry in using more modern equipment and reducing the relatively high cost of repairs and maintenance in Ontario as compared to the US.
It suggested that the government could do three things. First, it could provide an incentive such as an investment tax credit to reduce the effective cost of new equipment.
Second, it could match or surpass the accelerated depreciation rate allowances available to US carriers on tractors and trailers. Recently, the federal government did accelerate the depreciation rates for tractors to a point where the rate is now approximately halfway between where we were and where the Americans are. Ontario is compelled to at least match the federal initiative. However, it would be in Ontario's interest to accelerate the depreciation rates on both tractors and trailers provincially so that they are at least equal with the rates existing in the United States and that the new rates for 1992 and beyond be applied to both presently owned and new equipment.
Third, it was suggested that the provincial sales tax on trucking equipment, as well as the sales tax on repair and maintenance labour, be reduced or eliminated. A temporary sales tax has been used as a way to stimulate demand for automotive and trucking equipment in Ontario during previous periods of recession. Moreover, about one half of all individual US states provide exemptions from state sales taxes for heavy trucks and trailers, and most exempt labour for repairs and maintenance from sales tax. In addition, in the United States trucking companies can base-plate their equipment in jurisdictions that are sales tax exempt. Now that Quebec is moving to a harmonized sales tax/GST system, sales tax on trucking equipment purchased in that province will be eligible for credit.
We are also recommending that the government of Ontario increase investment in roads and highways. At one time Ontario had a competitive advantage over most of its competitor jurisdictions with respect to its highway infrastructure. However, after years of neglect and inadequate expansion, that is no longer the case. Major initiatives, such as the much-needed Highway 407, are proceeding at an extremely slow pace.
An investment in the highway infrastructure will help to improve Ontario's competitive position and accommodate future population growth. In his recent $1.2-million study for the Business Council on National Issues and the federal government on the competitiveness of the Canadian economy, Harvard professor Michael Porter pointed to the need for an improved infrastructure in Canada, including highways.
Last month in his address on the Ontario economy, the Premier said he intended to tell the Prime Minister that investment in capital projects is needed now and that Ontario would match any federal contribution dollar for dollar. It is true that the federal government presently spends virtually none of the money it raises from road-related taxes, such as the four-cents-per-litre federal excise tax on diesel fuel, on roads and highways. This is a vastly different situation from that which exists in the United States, where the US federal government puts most of what it raises from federal fuel taxes back into the highway system.
However, the Premier was silent on whether he was prepared to invest in infrastructure if the federal government did not agree to joint funding. We think he should and that the money should be raised from current revenues without further tax increases. Ontario already raises more from road-related taxes than it spends on roads and highways.
In the 1989 Ontario budget, a new tax of $5 was introduced on the purchase of each new pneumatic tire in the province. Revenues from this tax were specifically earmarked to be spent on resolving the tire disposal problem. This has not happened. The Ontario Scrap Tire Task Force, of which OTA was a member, was a dismal failure. It is reported that only $5 million of the $80 million raised so far from the tax has been spent on tire recycling or disposal. OTA members find it absolutely offensive to have to pay the tax and then to have to pay an addition $5 to $12 per tire to have scrap tires taken away to dump sites. We recommend that the Ontario tire tax be eliminated or, at the very least, that the commercial truck tires be exempted, as are tires for commercial airplanes, production machinery and farm equipment. Eliminating the tax would assist in stimulating the purchase of new tires, which would also have a positive economic and safety impact.
We have said that there is no scope for further tax increases by the provincial government. This includes increases in payroll taxes or the introduction of new payroll taxes. We note that the federal government, following a meeting in December of last year of federal and provincial finance ministers, agreed to delay the implementation of the 1991 federal budget proposals to limit the deductibility of provincial capital and payroll taxes by one year. This was a welcome announcement and we certainly appreciated the efforts of the provincial ministers. We encourage the Ontario government to continue to resist the federal budget proposals beyond this year.
Many of the trucking-specific measures we are proposing are, sadly, unfinished business. Over the past year, OTA has worked closely with a number of ministries in developing an assistance package for truckers. To date, no announcement has been forthcoming from the government of Ontario, despite the fact that all the necessary studies are complete. The federal government has announced its assistance package, and the industry has been assured that something is in the offing. OTA, which has represented the industry's views, we think in a thoughtful, reasonable and cooperative way compared to some others, feels that an answer is long overdue and that the industry deserves to know what the results of these cooperative efforts will be.
Ontario faces enormous challenges, but we believe that we have the people, the resources and the will to enter into a new age of prosperity. It will take a lot of effort, a lot of cooperation and many initiatives that fall outside the budget process. For example, a revitalization program for the trucking industry should include joint cooperation in the development of training programs, amendments to the Truck Transportation Act to ensure that the legislation meets its stated objectives and the introduction of new equipment standards in Ontario to allow for a 25-metre overall tractor-trailer length and the controlled use of longer combination vehicles, which would enhance further the productivity, efficiency, safety and environmental performance of the industry and dismantle a major barrier to interprovincial trade. However, the measures we are proposing form the basis, we think, for stimulating economic activity in this province, and from which the trucking industry can rise again to play its essential role in the restructuring and revitalization of the Ontario economy. We simply have to get Ontario moving again.
I thank you and I would welcome any questions that you might have.
Mr Phillips: In terms of the actual job losses in the sector, the last time I looked, transportation probably had the largest job loss, as a percentage, of any sector. Is that starting to turn around at all now or are we still seeing it?
Mr Bradley: I think it has been overtaken perhaps by the retail sector, but it has not slowed down, so far as I can see at least, in the trucking industry. I guess about six months ago we thought perhaps we had hit bottom and that things were going to start to turn around. But I can tell you today in talking to members, if there was any question of a double dip, certainly our industry, which is often a good leading indicator, would suggest to us that in fact we have taken a downturn again. We are seeing further rationalization in the existing companies, and I can tell you that there are a number of major employers right now that are hanging by a thread. While we certainly hope it does not happen, it would not surprise us to see further bankruptcies over the course of the next several months.
As well, the spate of mergers and acquisitions that have been happening within the industry, which also contribute to further rationalization, has been continuing. Just last week again there was another major announcement of a selloff of major portions of Canada Transport out of Belleville, so, really, the trend has not changed significantly enough for us to say that we are now coming out of this.
1500
Mr Phillips: How much of that is attributable to a downturn of the economy and how much is attributable to competition from outside Ontario?
Mr Bradley: It is hard to separate the two. I guess the best way I can answer it is, as we have been telling this committee and others for the last couple of years, we started down this road before the recession hit. We started to see the incursion of US-based carriers. We started to see the bloodletting with deregulation prior to the onset of the economic downturn, so we had a supply-side shock first. With the recession, we have now had the demand side and we are getting a double whammy.
But in order to separate the two, it is difficult to say. Certainly, though, there have been significant job losses strictly as a result of the impact of deregulation, exposing our competitive disadvantage to US competition.
Mr Kwinter: Last year, we had groups appearing before this committee complaining about the effects on cross-border shopping and your industry because of the increase in tax last year, and instead of reducing it, with the same calls for a rollback, the government increased it. My prediction is that the same thing is going to happen this year. The Treasurer has already announced that he has lots of problems, that he needs to raise revenue. What impact would that have? You are complaining now that it is dealing you a body blow. What would be the impact of a further increase?
Mr Bradley: Well, it would have a disastrous impact. People are already just waiting to see what the impact of the second round of fuel tax increases that came in on January 1 is going to be. Any further increases would be disastrous.
It literally boggled our mind last April when the first round of increases were announced. As you say, we had been warning people and we thought everyone knew the problem our industry was in, but I guess it comes down to how one views commercial fuel. Is it an input into the production process or is it a sin tax? I am afraid that governments at both levels have viewed it as a handy way to pick the pocket of motorists and try to maintain their expenditures. I would say that it just does not work with an industry like trucking.
Fuel tax bears no relationship to profitability. Shudder the thought, but at least for an increased corporate tax there has to be something to tax. Here they can just tax it, and we have no ability whatsoever to pass those costs along to our customers.
Mrs Y. O'Neill: I was very interested in the bankruptcies. I presume these are basically the smaller companies that have consolidated. Can you say a little bit about your notes?
Mr Bradley: Yes. The lion's share of the bankruptcies, which have been at record levels in the last two years, have been among owner-operators, single operators: one person, one truck. There is no doubt about it. But further down on the page, if you move to note 3, I do highlight some of the major, larger-sized employers that have gone bankrupt within the last 18 months and the job losses associated with those. So while most of the bankruptcies themselves have been among the one-man, one-truck operations, you can see that the bankruptcies in the Ontario industry have had an enormous impact on employment. The rule of thumb that we use in the industry is that for every trucking job, there are three jobs in the supplier industries, the people who sell us fuel or the hardboards for the trailers and those kinds of things.
Mrs Y. O'Neill: I think what is so difficult is what you say, that there was an opportunity, when things were really changing and you were getting the double whammy, not to implement the second stage of the 1991 budget on January 1. But all the requests have gone unanswered and that is very discouraging for those of us who, I think, have some appreciation of what you are saying.
The Vice-Chair: I am sorry, Mrs O'Neill. I have to move on. Mr Carr.
Mr Carr: I appreciate your coming here. I know a little about the industry; I worked for TNT Alltrans for at least a couple of years. I fortunately got out before they went down. They were one of the victims.
Mr Bradley: One of the earliest ones.
Mr Carr: One of the earliest victims. As a matter of fact, it was after I had just left that they went down -- no relation, I hope. I know the industry very well. All the pressures are out there. As you know, there is the WCB, because that is an industry which has historically has had a high number of WCB claims as well.
I just want to find out from you what your sense is now, because you have been very active in trying to make your views known to the government. Do you see any changes coming? Do you think you are being listened to? Again, in the last budget obviously you did not. Do you see any movement on the government's behalf of starting to recognize it, or is it still the same old story?
Mr Bradley: There has been a lot of concern demonstrated, a lot of what I would consider fruitful and productive meetings since last spring, but as yet there has not been an announcement. Our expectations on several occasions were that something was going to happen, and I do not think our expectations were ever unrealistic in terms of what might or might not happen. As yet, the province, for whatever reason, has not come forward and come clean with the industry: "Look, we've been working cooperatively now for over a year. We've put a lot of time, effort, money, blood, sweat and tears into defining the problem and coming up with solutions. We've done all the studies one could possibly do on the industry. You have been dissected, cut every which way, and yet we do not have any answers."
That is really troubling to people who are making decisions as to whether they want to be around in another 30 days, and right now you might as well put your money in Canada savings bonds, in many instances, as opposed to in the trucking industry. But it is more than a job to most; it is their livelihood and what they want to do. They want to get a signal from people and some recognition that: "Yes. We've heard. We care. This is a vital industry and we're going to make some moves to keep you here." To date, there has not been anything specific.
Mr Carr: I will let Noble ask, and if there is any time I will --
Mr Villeneuve: Mr Bradley, thank you very much. Coming from Glengarry county, I know all about the GTL bankruptcy. You quote 600 jobs. I was led to believe it was considerably more than that.
Mr Bradley: The 600 are in Ontario. There are actually 1,300 if you include the Quebec operations.
Mr Villeneuve: Right. That is more like the figure I was familiar with.
How close are we to reaching the area of diminishing return by increasing taxation? I come from an area where some of my trucking friends with the big saddle tanks tell me they bobtail over to Akwesasne and save about $250 on one fill-up, on just one fill-up. Whether it is legal, I do not know. People go and do it. I am trying to tell the government, "If you continue to chip away and put on higher taxes, how close are we to the point of inflection, of diminishing returns really setting in?" We may be there now.
Mr Bradley: We are past that. Anybody operating in the transborder market who is not now buying as much of his fuel as he can in the US is not going to be able to compete. Sadly, that is part of the motivation with the higher taxes and the cheaper fuel costs down there, to try and run as many of your miles as possible in the US and take advantage of the lower costs there.
It cuts several ways, not just on the fuel tax. If you look at the cost situation across the board, the government's own study said transborder carriers were at a disadvantage up to in excess of 20%. There are a lot of factors right now, unfortunately, motivating companies to look to the US if they are going to remain in business. They do not want to do that, but that is the reality of it. There have been lots of examples. One of the examples I have noted is Bill Thompson Transport in St Thomas, which at one point employed over 500 people in that community and is now operating wholly out of Pontiac, Michigan. Time will tell how successful they will be down there, but these are the kinds of things they are being confronted with.
Mr Villeneuve: Another noteworthy fact in your presentation is that the trucking stock in Ontario basically dates back to the mid-1980s. Would that have any association with the removal or partial removal of the provincial sales tax at a particular point in time? I recall speaking to truckers at that time. A lot of trucks were on back order and that really stimulated the economy. I think we are going in the wrong direction here by continuing. Maybe you could expand on that a bit.
1510
Mr Bradley: Yes, back in 1981 or 1982 the government of the day did introduce a sales tax exemption on heavy trucks and trailers, and there was pent-up demand at that point. It did spur increased activity, increased purchases at that time, which was good not only for the trucking industry but maybe more so for the domestic manufacturers and distributors of trucking equipment. Unfortunately, in the last couple of years, when you look at the trailer side, for instance, there are now only two Canadian trailer manufacturers left in Canada whereas at one point there were a significant number. The barn door is almost closed now, but not quite. I think it would be a significant stimulative effect right now. It was brought in then as part of a broader measure on the whole automotive side, and maybe that should be explored again, but I can only speak to the trucking side.
The Chair: One more question.
Mr Villeneuve: Okay. If you were at the controls and were advising the Treasurer as he gets ready to prepare his budget, what would be number one? Is it fuel or a combination of things? It is going to be hard to convince this Treasurer that we have reached the point of inflection, where we are at a diminishing return. What is the first and foremost, most important thing in your mind?
Mr Bradley: Fuel would have the most immediate impact on the bottom line of trucking companies. No doubt about it. The sales tax exemption for those who were able to get into a position to purchase new equipment would be enormously helpful and would have a broader impact across the economy. But in terms of the trucking industry, fuel goes right to the bottom line.
Mr Johnson: I want to continue with regard to the liability of taxation. Fairly, I am sure you would agree, there are many factors that have contributed to a less than good, I guess --
Mr Bradley: It is terrible.
Mr Johnson: Okay. Well, let's just say that I am left with the impression -- I want you to correct me; very seriously, I want you to correct me where I am wrong here -- when I talk to people from the Ministry of Revenue that Ontario-based companies are not at a disadvantage when they operate in Ontario. They all pay the same tax. In fact, out-of-province carriers apparently have to stop and fill out a card, and there is an expectation that if enforcement is taking place as it should, they too pay that premium for doing their business in Ontario. That suggests to me that indeed the playing field is level. Is that not the case?
Mr Bradley: Only on one level. Let's even assume right now that the enforcement net is strong enough that it catches everybody; I do not even want to get into that. Very few companies have purely transborder operations where you can make that argument and say, "When I'm operating in their jurisdiction I pay their tax, and when they're operating here they pay my tax." But yes, those are the rules when an American carrier, anybody, is operating here. They are supposed to pay the tax on a prorated basis, based on their mileage. But again, remember this: When that US carrier goes home, he goes home to New York or Michigan, or Mississippi or Arkansas, down in the panhandle. We come home to Mississauga and places like that where the tax differentials are significantly higher.
Let's take the fuel tax. I list some numbers in the back, but you can see that the fuel tax in Ontario is double or triple what it would be in the neighbouring US states. What that does is allow US carriers on their domestic operations to earn a higher rate of return and higher profits, which they are then able to plow back into newer, more efficient equipment, which they can then use on those transborder routes where they are now using 1990, 1991 equipment and competing with the poor Ontario trucker who is using 1984, 1985, 1986 type of equipment. That is where it has an impact. It is not as easy as saying, "Hey, when they're here they're supposed to pay our tax." That does not really get at the competitive issue, and it is sometimes difficult for people to understand.
Mr Johnson: The market is very competitive. I have no doubt about that. Certainly during difficult economic times the strongest survive and the weakest unfortunately do not. I think that in the United States the market is as competitive as it is in Ontario, and while they may have some advantages in the bottom line, you say, because of lower taxes that they pay on fuel, they are all paying those same lower taxes, so they are all fighting for that same profit.
You said something about not having the ability to pass on to your customers any increases whatsoever. That strikes me as being peculiar. I think that if everyone's costs went up equally, then they would pass on any increases equally to their customers.
Mr Bradley: Yes, they could. However, we are in a situation now of hyper-competition in the trucking industry. We have 25% to 30% excess capacity in the marketplace now. When you have that kind of hyper-competition, unfortunately there is always somebody out there who is on the brink of bankruptcy who wants to generate whatever revenue he can to try to partially cover some of his variable costs, and unfortunately he will do it. As a result, you cannot pass those costs along because there is someone waiting out there to say, "Oh, I'll cut the rate," or "I'll do it for X." That is the reality of the marketplace in trucking right now.
If we could simply take fuel taxes and pass them along to the customer, that might make everybody happy for the short term, but I tell you, it would not do anything for the competitiveness of the Ontario manufacturer and shipper who are trying to ship to the United States and compete in the global marketplace. I think that even in the short term that is really not a solution.
The kind of thing we are trying to do is to look for measures that will help us to lower our costs so that we can continue to offer the kinds of competitive rates we have been to manufacturers, because we recognize that they are having to compete with the Americans, the Japanese, the Germans and everybody else. Adding taxes and saying, "Pass them along," simply moves up the cost structure and makes us more and more uncompetitive.
Mr Johnson: You would leave me believing that --
The Chair: Paul, there are other members who --
Mr Johnson: Sorry.
Mr White: Thank you, Mr Bradley, for your excellent presentation. I certainly agree with you about the problems you have cited with the American truckers coming across the border, of course already loaded up with American fuel.
I understand from some truckers I know that deregulation in the province of Ontario is a bit of a one-sided effort. I think the idea was to have a level playing field with many of our exports across the border to the United States, but deregulation seems to be occurring here, creating a level playing field for Americans here in Ontario but not in Michigan or New York. I am wondering if you could comment on those problems.
Mr Bradley: It is true that at the time of deregulation in Canada, or at least in Ontario, we took deregulation one step further. In the US they have only deregulated their transborder marketplace. The individual US states remain regulated. It is very difficult for a Canadian operator or anyone to get a licence to operate within Michigan, New York and places like that.
We did take it one step further. We thought it was unbalanced at the time and still do, but again, we can try to address that. We now have a moratorium in Ontario, which means we have at least closed the barn door for now. The impact of that is questionable in terms of the damage that has already been done, but it was a significant gesture.
What we said at the time of deregulation, when it became clear to us that deregulation was going to fly, that we were not going to stop it, that the political trends at the time were blowing in that direction, was, "Before you expose us to this competition, you've got to recognize that our costs are higher here and that we have to have a level playing field," which I recognize has become an overused expression. But the fact of the matter is that we did not get a level playing field, and measures since, sadly more often than not, have moved even to tilt that further to our disadvantage.
Deregulation is more or less just the door opening. We can compete if we can get our costs down. The prospect of deregulation does not really concern us so much any more -- that is done -- but we have to try to find that level playing field somehow. That is going to take a change in direction and a change in view in terms of how one taxes commercial diesel fuel, how one puts sales tax on maintenance and things like that here compared to our competition.
The Chair: Mr Bradley, I am glad you were able to put this submission in to our committee here. We will have it included in our submission to the Treasurer. Thank you for coming.
1520
ENERGY PROBE RESEARCH FOUNDATION
The Chair: The next group to come forward is Energy Probe. Sir, if you do not mind, identify yourself for the purposes of Hansard. We have 40 minutes, and in that period of time could you leave some time at the end for questions of the members of the committee here? You may start, and I would like to welcome you to this committee.
Mr Solomon: Thank you. I am Lawrence Solomon, with Energy Probe Research Foundation. I am grateful for the opportunity to take part in the committee's pre-budget consultation hearings, because this next budget is sure to be one of the most widely watched events in Ontario history.
This province, as all parties will acknowledge, is in economic difficulty, and no easy answers appear to be in the offing. I am coming here with some easy answers. I do not claim to have all the answers, but in one dominant area I do claim to have some easy answers.
My answers will help protect social programs while furthering economic needs. My answers will raise government tax revenues while lowering the deficit. They are sure to instil business confidence and promote domestic and foreign investment. They are so compelling that they have become commonplace around the world, in developed countries and underdeveloped ones, by socialist governments and by capitalist ones, by progressive-minded, pragmatic governments of all political stripes.
I have brought several Energy Probe studies with me which you should have before you. I ask you to turn to the largest one, the one entitled The Worldwide Phenomenon of Electricity Sector Privatizations. As you will see, these privatizations are occurring in varying degrees almost everywhere. I have brought a map to show you the change over time.
The area that you see in green shows decentralizing jurisdictions around the world. The area in red is the centralized jurisdictions; this is in the electricity sector. As you can see, in 1970 there is only one decentralizing spot, and that is West Germany. The rest of the western world was centralized. That is 1970.
By 1980 the United States had joined the trend, but still most of the western world remained centralized in the electricity sector: most of Europe, Australasia and Canada.
To turn to 1990, the situation is almost the reverse of 20 years earlier. Now most of the western world is decentralizing its electricity sectors. In Europe, only Ireland is maintaining the centralized system. Australasia is moving towards decentralized systems. In North America, it is starting to occur in Canada as well as in the United States from the west coast, and also now with the Nova Scotia privatization, from the east coast.
In some cases privatization has occurred because of ideology, and that certainly was a dominant factor in the case of Great Britain under Maggie Thatcher. In other cases, socialist parties such as the Spanish Workers' Party or the Australian or New Zealand Labour parties were the agents of change. In the US, President Jimmy Carter, a Democrat, was the progressive.
Electricity sector privatizations have one thing in common: They make sense regardless of your political orientation. They are happening around the world for the same reasons they should happen here: Governments need money for social programs; governments need money to reduce deficits or pay down their debts; governments want to restore their credit ratings; governments want to promote liquidity and equity markets; governments want to greatly expand and democratize the ownership of equity to broader segments of the public. There are two other reasons electricity sector privatizations should happen here: It would help protect the Ontario environment and it would lower the cost of power, which would promote jobs.
To give you an idea of what has been happening with Ontario electricity rates, I would like you to refer to another study before you, entitled Cross-Border Electricity Rates: Ontario's Loss of Competitiveness. I would ask you to turn to the first graph, which compares Toronto electricity rates to the US average.
Until 1978 the US and Ontario had very similar electricity structures, both being monopolized sectors. Some parts of the US, those with abundant hydro electricity, had lower-cost electricity than Ontario, but most US utilities charged more for their power than did Ontario Hydro because most did not have significant water resources. Overall, the US charged much more for power than did Ontario Hydro.
In 1978 the US federal government passed anti-monopoly legislation that affected all 50 US states. The monopoly utilities challenged this legislation in the courts and eventually lost when in the mid-1980s the United States Supreme Court ruled that the federal anti-monopoly legislation was constitutional. As a result, the utilities were forced to allow competition. The graph we are looking at shows the results. With competition now allowed, vast amounts of cheap and clean power began to flood the US market. Coal and nuclear power expansion from the utilities were stopped dead in their tracks. Replacing these expensive and environmentally damaging technologies were safer and more economic technologies: renewable technologies such as windmills, but most of all high-efficiency gas technologies. The economy was ahead and the environment was ahead.
Now let us look at that same graph to see what happened in Ontario over that same period, during which Ontario Hydro's monopoly powers remained intact. As you can see, Hydro's rates increased dramatically. They will need to continue their dramatic increase if the utility is to avoid taxpayer bailouts. If hydro rates are capped, as the Energy minister said he might do, the result can only be more debt, a rapid decline of the electricity system's reliability, or both.
Capping rates is not a responsible alternative, but doing what governments everywhere are doing, privatizing some of the electricity sector, would be highly responsible and would simultaneously solve numerous problems. I propose that Ontario Hydro, at least for the foreseeable future, maintain ownership of its very valuable transmission system, which is a natural monopoly, and that the transmission system maintain the debt incurred to build it. I would like Hydro to continue to manage the grid -- no change there.
I also propose that the nuclear division of Ontario Hydro be segregated into a subsidiary called Ontario Nuclear, which would continue to be owned by Ontario Hydro. The debt incurred to build the nuclear plants would remain associated with the nuclear plants. The nuclear plants would be operated by the very same personnel who run them today; again, no real change here.
The change comes with Hydro's non-nuclear plants, which I propose be sold off to companies in the private sector. The plants could be organized into several electricity generating companies if sold through a public offering, as the Nova Scotia government is doing with its privatization of Nova Scotia Power Corp and as many other governments around the world have done. These plants would be sold with their associated debt and would fetch for Ontario taxpayers something in the area of $15 billion to $20 billion.
The $15 billion need not come in all at once, either. Many governments are selling off their utilities in several tranches, and even then on the instalment plan. For example, in the UK only 60% of the government stake was sold, and then it was payable in two instalments over the course of two years. Spreading out the revenue is desirable because it does not overload the equity markets, and so keeps the value of the government's asset high while producing a continuing revenue stream for the government. The revenue stream does not end even after all the instalments are paid, because the new private sector companies have become taxpaying members of society.
1530
If just the non-nuclear stations were in the private sector, annual provincial income tax could come to $500 million per year, quite apart from the economic growth and increased tax revenues that would flow from lower electricity rates. If all electricity were subject to the same taxes as any other business or commodity, billions in additional revenues would come into the provincial purse. Those revenues could be used to lower taxes for the rest of society, creating a more level playing field. They could be used to lower the deficit or the debt, reducing future interest payments. They could be used to finance our social safety net or they could be used for all three purposes.
How you choose to allocate those funds among those purposes is an area for legitimate disagreement, and I would be disappointed if the members around this room did not disagree strongly about what this province's spending priorities should be. But whether you choose to privatize some of the hydro system to give yourself the freedom to choose among those options should not be a matter of serious controversy for most fairminded people. Privatizing Hydro helps socialists be socialists and helps capitalists be capitalists. Be yourselves, honourable members, and privatize Hydro.
Mr Carr: Thank you very much. I really enjoyed that very much. We obviously agree in a lot of areas with that. The problem is, however, that we also heard from a group earlier this morning, the day care workers, that instead of privatizing are going to non-profit and more government involvement. Also, you should know that Ontario Hydro is getting more involved in social policy with the Spruce Falls buyout and so on.
One thing that may -- I hate to use this word -- shock the Treasurer is if you could give us some idea of the numbers that you would be looking at, this revenue that he is desperately longing for in so many areas to avoid hospitals closing and so on. If Ontario Hydro were to be privatized -- again, I know you have talked about phasing in -- what would be the total income that we could get for the province? Any ballpark figure?
Mr Solomon: For the entire system?
Mr Carr: Yes.
Mr Solomon: Part of the problem is that the nuclear part of the system may not --
Mr Carr: The way you talked about doing it. The way you see it.
Mr Solomon: The way we talk about doing it, in the area of $15 billion to $20 billion would be available to the provincial purse.
Mr Carr: That is $15 million to $20 million?
Mr Solomon: Billion. That could come all at once. It probably would be preferable to spread it out over several years.
Mr Carr: Because you know what we are looking at is a total spending of $53 billion, so basically, you would have one year's spending; again, depending how you spread it out.
Let me ask you this. The way Nova Scotia did it, did you like that? Do you see us using that model? Is there anything you would do differently for Ontario, as you suggest, for our way of doing things?
Mr Solomon: It is not clear exactly what Nova Scotia has done. I do not think we will know until the prospectus is out. But it appears they are maintaining the monopoly. They are converting a public monopoly into a private monopoly. There is very little benefit in that. That is not our goal. I think the Nova Scotia government was hamstrung because without the monopoly, there might have been no value at all in the Nova Scotia power system. So to get any value at all, they probably had to give those monopoly powers to the new owners. What I would hope the Nova Scotia government will do is put a subset on those monopoly powers, so that after five years perhaps the monopoly powers end.
Mr Carr: What companies do you see as being some that would jump in? Which ones come to mind that would be interested in looking at something like this? Are there any energy-related companies you think would like to jump in and purchase it? Would it be oil companies? What do you envision it being?
Mr Solomon: Well, I can tell you that Texaco is going to the UK to build private power plants since they have totally deregulated the UK system. Canadian Utilities Ltd from Alberta is also going to the UK. TransAlta is trying to build in Ontario. I think there will be no shortage of companies that will be interested in building. One of the main sources of new generation under a totally deregulated system will be from existing companies, from companies like Stelco Inc, Dow Chemical Canada Inc, Union Carbide Canada Ltd, companies that have existing operations but do not have the incentive to create as much power as they could for the entire system. If they did have that incentive, they would have a lucrative source of side revenue to support their main operation, so it could help keep those steel mills going and the other businesses going. As it is, they are hamstrung because they do not have the same opportunities that their competitors in the United States have to produce a product at an economical price.
Mr Carr: Just knowing the government like you do -- because I agree -- I think you have really come up with some good solutions. You have pointed out the fact that it does not matter about ideology. You have socialists doing it. What is your best guess of this government's intention with that? Notwithstanding the fact that I suspect if Floyd hears about $53 billion, he may pick up and listen, do you think there is any chance of it happening during this government's mandate?
Mr Solomon: I certainly do. The government has in fact privatized SkyDome. The government has adopted our position in the case of British Gas, allowing the British Gas takeover of Consumers' Gas. I think this government is actually a very pragmatic government. In the past they have been interested in Energy Probe's proposals. I know they are interested this time. They do not agree just yet, but I hope they will.
Mr Carr: Keep working on it.
Mr Villeneuve: Cogeneration is very much in vogue right now and Ontario Hydro is very much involved, in that it would be purchasing. I gather you would suggest at this stage of the game that the cogenerator of non-utility power be the marketing agent of its own product through the Hydro grid. Would that be something you are looking at?
Mr Solomon: Exactly. We do not need generating utilities any more. In the United Kingdom there are no utilities generating power. Companies produce power for the system; they sell it to consumers. The consumers and producers get together. It is actually the very same system that has now been adopted in Ontario for the natural gas sector, where if you are a company or, in fact, even if you are a home owner, you can buy your gas directly from a Saskatchewan well.
Mr Villeneuve: I had occasion last summer to visit somewhere in the States where they were actually incinerating garbage, producing electricity rather efficiently. The tipping fee for garbage was somewhere in the area of $40 per ton. Do you see that as a possible alternative? We were told by the generating agency that indeed there are no toxic effects, and we have been told by the present Minister of the Environment that it will never happen under the auspices of this government. Could you give us your thoughts on that particular mode of generation?
Mr Solomon: There certainly are toxic effects. I do not see that being a major source of new generation because there is so much available power that is clean from other sources. But as the technology is improved, that certainly will be a sensible way of disposing of some forms of garbage.
Mr Sutherland: I do not know whether it is a good analogy or not, but one of the other monopolies that certainly exists is telephone and telecommunications in terms of long distance with Bell Canada, and there are some pushes on deregulation. For those of us who represent a rural riding like mine, there is a great deal of concern about that in terms of those that have had local calls free. Can you comment in terms of what are the costs for smaller users? For example, independent farmers: How do you view them fitting into this, and how would they be assured a continuous supply?
Mr Solomon: One of the ironies is that under a deregulated system farmers are among the main beneficiaries. In the UK for example, as soon as their Hydro went out of business and all kinds of small producers started to produce power for the marketplace, farmers turned out to be very large players, and they were large players for two reasons. One is that they often had available land in windy regimes which was not good for farming; it might have been up on a windy knoll -- strong wind, underused. Those farmers are now doing one of two things. They are either putting up their own windmills, starting their own companies, or they are selling the rights to others to put up windmills on those sites. The very same thing has happened in California where farmers were among the big winners because of the wind regimes they had. Also happening in the UK is that a lot of farm wastes turned out to be valuable fuels and farmers are using those fuels to generate power for the grid. The most recent example in the UK is a chicken farmer who has a huge amount of chicken manure and is using that manure to produce gas to run generators. He is getting something like 15 megawatts out. So there is a lot of power at the farm level. It should not be surprising, really, to us because we are talking about moving away from a centralized electricity production system to a decentralized electricity production system. We are going to find that in forest communities there is wood waste that could be used in the same way that in agricultural communities there are agricultural wastes.
Mr Sutherland: Outside of the Ontario Hydro proposal which you have focused on a great deal, do you have any other advice to the Treasurer on what measures he may take in the budget from an energy policy standpoint, overall?
1540
Mr Solomon: We would like to see a level playing field in the energy area. Electricity and natural gas have been exempted from provincial sales tax. We think fuels should be treated as a commodity the same as any other commodity. There should be provincial sales tax on those fuels. If the Treasurer wants to keep it revenue-neutral he can lower the provincial sales tax rate, but there is no reason from an energy standpoint, an economic standpoint, or from an environmental standpoint to give a tax holiday to a commodity like energy.
Mr Sutherland: What about any proposals for alternative fuels, ethanol for example, or more use of propane, whether that be through tax incentives or financing through projects?
Mr Solomon: We do not like that approach because as a rule we have been very successful at picking the wrong technologies. Ten years ago we picked solar technologies when it was premature. Before that we picked nuclear. Before that we picked coal. Very often we make the wrong choices, whereas in a deregulated system the right choices are made. When they are wrong, they get squelched very early on before they have a chance to do a lot of damage.
Mr Johnson: Ontario has an updated plan now that shows us a different expectation for power generation and power demand over the next 25 years or so. Something they have advocated is the use of non-utility generation of electricity; that would be in a sense a component of hydro generation and yet maintain the grid -- I am sure I heard you say that. But it sounds to me like you want them just to holus-bolus turn the whole thing over, except for the grid, to private concerns. Is that right? Do you not agree that this new plan leads in that direction?
Mr Solomon: No. This plan, I believe, is a continuation of the status quo and in some ways centralizes power even more strongly within Ontario Hydro. The independent power producers issue you raise is a very good issue because they have been the main losers from Ontario Hydro's update, because Ontario Hydro at any time was able to say: "This is how much power we need. This is how much power we are going to buy. The rest of you can go jump in the lake." We are going to end up in a situation where investors are insecure. Many of the independent power producers are at their wits' end. They have invested millions. They thought they had a deal with Hydro; they do not have a deal with Hydro. They are going to think twice before continuing to invest in this province. This is one of the very serious problems we have.
Mr Johnson: I just wanted to add that most of the non-utility generation that we expect in the future will be from cogeneration, which Mr Villeneuve talked about. This is one of those kinds of generation that can be brought on as demand requires it. Is this the sort of generation you are talking about when you say that people are concerned, that they do not want to invest in these cogeneration units because they may not be able to sell as much as they might expect because of the monopoly Ontario Hydro has?
Mr Solomon: Yes, it is cogeneration, it is small hydro and it is really all the forms of independent power that are out there. They all feel insecure. They are all threatened by the fact that Ontario Hydro is at any point able to just dictate terms. It is a very hard way to do business. They have only one buyer for their power: that is Ontario Hydro. They are in a very tough situation because they cannot offend that one buyer either. They have no one to turn to under our monopoly system.
Mr White: Mr Solomon, you obviously enjoy the kind of gadfly effort you do. The chat you have given us is tremendously stimulating. I am wondering a little about the same question Mr Johnson brought up, which was the non-utility generation. You are suggesting that many of these companies would feel threatened because they are unsure of where Ontario Hydro stands.
But if we are talking about a total privatization, they should feel equally threatened and equally concerned about meeting the needs of an entire population in Ontario. They are competing with many other providers of power and they are doing so at present at a cost of four to six times the cost of the utility. You suggested a few moments ago that in the past we looked at solar power and this government said, "Gee, that didn't work," or coal or nuclear. But is it not also clear at this moment that we should perhaps look at non-utility generation where it is costing four to six times what Ontario Hydro's power is costing and say: "Maybe there are some problems too. Maybe that also is a fad"?
Mr Solomon: I do not know where you got your four to six times figure, but it is not correct. Non-utility generation produces power at a lower rate than Ontario Hydro.
Mr White: Then why does Ontario buy it at a higher cost?
Mr Villeneuve: I am not sure they are.
Mr Solomon: Ontario Hydro is squeezing out the non-utility generators. The situation in Windsor is a very good example. Windsor would like to build a major non-utility generating plant. Hydro has said no. The reason Windsor likes it is because its power costs are going to drop by having a non-utility generator produce electricity for it instead of Ontario Hydro producing electricity for it; it is going to have substantially lower electricity rates. In other words, a NUG is more efficient than Ontario Hydro, but Ontario Hydro has another problem because it has a lot of fixed costs. It does not like competition. If it loses the market in the Windsor area, that means it is going to have to raise rates for everybody else. If it was a privatized system, the shareholders would take a bath, but because it is a monopolized system there are not shareholders to take a bath. Ontario Hydro is just keeping everyone in place.
Mr Carr: And taxpayers take a bath.
Mr Solomon: The taxpayers will take a bath sooner or later, but we are putting our heads in the sand and not facing up to reality. We have in the case of Windsor one of the most depressed parts of the province that is not allowed to have the investment it wants; it cannot have cheaper power that it would like; it is not going to have the jobs it would like, and all to protect the Ontario Hydro monopoly.
Mr Kwinter: Mr Solomon, first I want to thank you for keeping me informed as to your activities. It seems I get a fax about every day from you and it has got to the point where I look forward to them.
I am curious to know whether or not your projections for average residential rates would be the same for industrial rates.
Mr Solomon: We have not done that study yet, but certainly average industrial rates have been climbing dramatically as well. The Association of Major Power Consumers in Ontario has members in 40 jurisdictions and says that in 38 of those jurisdictions power is cheaper than in Ontario. In other words, if you are a business that is looking for cheap electricity, you are not going to come to Ontario; you are going to move to a lower-cost jurisdiction; and business, as we know, is mobile.
Mr Kwinter: Ontario has always prided itself on its competitive advantage of cheap hydro. That is why I am very interested in what you have to say, that this particular advantage has disappeared or is disappearing. Is that correct?
1550
Mr Solomon: That is correct. In Canada it has disappeared. There we have looked at the figures. In Ontario large industries pay 60% more than large industries outside Ontario. If you compare Ontario with our two neighbours, Manitoba and Quebec, large industries are paying 70% to 80% more for their power in Ontario.
Mr Kwinter: Do you think if the system were privatized that would improve?
Mr Solomon: Yes. If we had a fully competitive system, the power rates would gravitate down to about half of current rates.
Mr Kwinter: When you talk about a monopoly, you said if you should suddenly privatize the Windsor area, Ontario Hydro as a public utility would have to raise its rates to compensate for its loss. One of the reasons for having a public monopoly is so that areas that are not economically viable can be serviced, whereas if you had to be in a competitive situation, nobody would touch it because they would never recover their investment. Under your scenario, what happens to those remote areas that do not have the ability for wind generation, for cogeneration, but just need a line down there to keep them energy sufficient, and that is something the system absorbs? How do you deal with that in a privatized system?
Mr Solomon: First of all, the entire system would be much more cost-efficient and in many remote areas it would be a boon, not a loss. When those situations you described arise, if as a matter of social policy the government wants to make sure consumers are compensated, the most efficient way to compensate consumers is through a direct grant that is outside the electricity system. In other words, they would build the most efficient system for themselves given the economic reality of the jurisdiction they live in and, if necessary, they would get a subsidy somehow through the tax system in those few instances where it would be required.
Mr Kwinter: Given the importance of energy and electricity and power, would you envision that under a privatized system there would still be an energy board that would set rates, or would it be a free market system?
Mr Solomon: We would need the energy board probably to control the grid system. I think it would be prudent for a few years to have a regulator to watch the system as it settles down. Electricity is so naturally competitive with so many sources and so many different fuels, with generation able to be accomplished virtually anywhere in the province, that we would end up having market rates and very fair rates. I do not believe we will need in the long term regulation of electricity rates.
Mr Johnson: Would a private corporation or a series of corporations, if Ontario Hydro were privatized, endorse conservation or would they promote more electrical use?
Mr Solomon: They would not care less about conservation. They would be trying to promote their product as much as they could. I think the example in the United Kingdom is a very good example: Their Hydro was broken up into really three parts, two large companies that were private generators, one nuclear division that stayed under state ownership because the private sector did not want it, and then there was a grid throughout it. The reason Thatcher decided to privatize the electricity system, above all, was that everyone agreed there was a need for a lot more expansion but she did not want the government to have to come up with the money or with the loan guarantees for that expansion. She said: "We'll privatize the whole thing. We'll let the private sector worry about finding the capital." There was no debate in the UK over whether that additional power was needed, but as soon as the system was privatized, overnight 75% of the expansion which was thought to be necessary turned out to be unnecessary.
The nuclear expansion program ended, of course, because the private sector realized that it was not economic. The coal expansion plants all ended as well, because coal expansion was not desirable.
But more happened. As soon as the private sector took control over the existing plants, it realized it could run those plants more efficiently than they had been run by the Hydro-like company. The output became higher from those plants, their availability became higher -- so much so that they soon started to prematurely retire their existing coal-fired capacity. First 4,000 megawatts were retired, then 16,000 megawatts of coal-fired capacity. Now they are talking about retiring some of their oil-fired capacity too, and possibly some of their existing nuclear capacity.
This is virtually all because of market forces. The best thing for the economy is retiring all these plants, and of course that is not bad for the environment either, but it has not all been a case of shutting down the plants. At the same time that the private sector has been shutting down these plants at a remarkable clip, it has begun the greatest building boom since the days of the Organization of Petroleum Exporting Countries in the electricity sector in the UK. All the power that is now being brought on stream in the UK is high-efficiency gas technologies or renewable technologies. It is mainly high-efficiency gas, but there is biogas and wind as well.
So we are seeing a dramatic change in the nature of the electricity system, and what is going are all the polluting technologies -- nuclear and coal and oil -- and what is coming in are all the high-efficiency technologies: renewable technologies and high-efficiency gas. So although the private sector could not care less about conservation and the interests of environmentalists, those who care about conservation certainly have been very pleased with the results.
The Chair: Mr Ward, you had one?
Mr B. Ward: In a free market system that is unregulated, eventually -- I think it always happens -- you have two or three big players that end up controlling the majority of the market. I am trying to read in the background. How do other countries prevent that from happening, where in essence a cartel is formed and rates are artificially set?
Mr Solomon: In the history of those cartels, what you are describing does happen, but the reason it tends to happen is because of governments setting rules to make it happen. The only reason we have a monopoly in Ontario is because there is provincial legislation keeping out those independent generators. It is against the law for you to sell power to somebody else.
Mr B. Ward: But totally unregulated, eventually what happens?
Mr Solomon: Eventually what happens is that the system becomes highly decentralized. It stays there.
Mr B. Ward: Yes, but eventually, down the road, you are going to get two or three big players that snap up all the little ones.
Mr Solomon: I do not believe that would be case.
Mr B. Ward: No? Why?
Mr Solomon: Someone earlier referred to cogeneration as a new technology. In fact it was the very first.
Mr B. Ward: It has happened in telecommunications. It has happened in cable. Why would it not happen in energy?
Mr Solomon: The very first electricity plant to be built was a cogeneration plant; it was installed in J. P. Morgan's house by Edison. Every furnace that is in every home and every apartment building and every shopping centre that right now is just producing fuel for heat could at the same time be generating power. For the same reason that you cannot monopolize all the producers of heat, of natural gas heating and oil heating and electric heating, we are all running these plants in our homes. For that reason, we would not be able to monopolize electricity except with the government's assistance.
The Chair: Mr Solomon, I would like to thank you for coming before this committee and for your presentation.
Mr Solomon: Thank you.
1600
ONTARIO NON-PROFIT HOUSING ASSOCIATION
The Chair: The next group we have coming forward is the Ontario Non-Profit Housing Association. I would like to welcome you to the standing committee on finance and economic affairs. If you and your colleague could identify yourselves for the purposes of Hansard, then you may begin.
Mr Maloney: I am Roger Maloney. I am the commissioner of housing for the region of Peel and I am the president of the Ontario Non-Profit Housing Association.
Mr Marmor: Good afternoon. I feel like I am being asked to do something a little bit more than just make a presentation this morning. My name is Saul Marmor. I am the acting executive director of the Ontario Non-Profit Housing Association. The clerk of the committee, Mr Decker, is now handing out copies of our presentation.
The Chair: We have a total of 40 minutes, if you can start now.
Mr Marmor: We can start.
The Chair: If there are books for reference, you can hand them out while you are speaking there.
Mr Marmor: Okay. The Ontario Non-Profit Housing Association, or ONPHA, as we are more commonly known, was established in 1988 by municipal and community-based non-profit housing corporations to build a strong non-profit housing sector and to promote the production and management of high-quality affordable housing across Ontario. We believe that access to decent, appropriate and affordable housing is a basic human right and ONPHA is committed to ensuring that this right becomes a reality for all people in Ontario.
Currently ONPHA represents more than 400 members, including 104 municipal non-profit housing corporations, 191 community-based non-profit housing corporations and 148 associate members. Our members are providing and managing over 52,000 non-profit homes in Ontario serving a wide range of people in need. The non-profit housing sector is the major producer of housing for people with low and moderate incomes. Our members are providing housing for families, single people, senior citizens and people with special needs. The success of government programs for non-profit housing is greatly due to the commitment and hard work of community leaders and volunteers determined to help people in need in their communities. The vast majority of our members are non-profit housing corporations with fewer than 100 units under management in urban and rural areas throughout Ontario. ONPHA also represents larger community-based non-profit housing corporations as well as the large municipal non-profit housing corporations in the major urban centres. A list of our members as well as our board of directors is attached to your copies of today's presentation.
The purpose of our presentation today is to express ONPHA's viewpoints to the standing committee on finance and economic affairs on the continuing need to provide for the development of non-profit housing in the 1992-93 Ontario budget and on the impact of the government's recent decision to limit non-profit housing program expenditures in 1992-93 to only 1% more than in the current fiscal period.
Mr Maloney: In 1992, Ontario's economy finds itself in the grip of a long and difficult recession. Job losses have been high and continue to persist and welfare rolls continue to escalate, especially as unemployment benefits expire. Waiting lists for non-profit housing corporations continue growing. In a time of major recession, the need for government programs to create employment and to stimulate economic activity is greater than ever.
In its 1991-92 budget, the government took the right approach in responding to the downturn in the economy. Rather than fighting the recession with cutbacks to services and programs, the 1991-92 budget supported those in need and gave priority to spending to stimulate employment and economic activity. By announcing a program to create an additional 10,000 units of non-profit housing in 1991-92, the government recognized the urgent need for more affordable housing. ONPHA believes that the 1991-92 approach was the right approach at the right time. The combined efforts of government and the non-profit housing sector over the past year will stimulate the economy in 1992 by creating work in the construction and home building sectors. This is known to also have a multiplier effect on other sectors in the economy. In turn, creating employment through residential construction should help to reduce the costs for unemployment and welfare by putting people back to work.
Overall, almost one third of all housing starts in Ontario in 1991 resulted from the non-profit housing initiatives. Building on the success of its efforts in 1991-92, ONPHA is strongly recommending that the government continue in its 1992-93 budget to provide the resources and funding required to develop more non-profit housing in communities across Ontario.
The need for non-profit housing continues to grow. The lack of an adequate supply of non-profit housing is a major factor contributing to poverty. In every region of Ontario, waiting lists are higher than ever before, with over 100,000 households now seeking non-profit housing. Furthermore, people are becoming increasingly dependent on food banks to help them survive. The average food bank user spends 70% of his or her income on shelter.
In its report entitled The State of Housing in Ontario, which was released in April 1991, ONPHA estimated the need for 14,000 to 16,000 rental units per year. ONPHA recommends that this number serve as a target for the annual production of non-profit housing in Ontario.
Building non-profit housing has proven to be a very effective tool for fighting the recession and we are urging the government to continue with this approach in the 1992-93 budget. In 1991, the production of non-profit housing has generated more than 35,000 person-years of employment. The building of each new home, with its associated economic spin-off and multiplier effects, creates approximately 2.5 person-years of employment. Furthermore, housing is a product made in Ontario which stimulates the economic activity throughout the manufacturing sector as well as in the construction industry.
The government should continue spending on capital investments in 1992-93 to fight the recession. Non-profit housing is a capital investment, producing a substantial long-term asset and a public benefit. Furthermore, every dollar spent on non-profit housing achieves a greater degree of employment creation and economic stimulation in fighting the recession.
Because non-profit housing is financed through mortgage loans made by a non-profit housing corporation, the debt service costs of the loan are reduced by rental revenues. This produces a greater bang for the buck in fighting the recession than direct capital investments by the province. Rather than payments towards public debt interest, the government provides a carefully monitored and closely scrutinized operating subsidy. Furthermore, Ontario is currently spending only 1.7% of its budget on housing.
The Treasurer has decided to limit the total amount of operating expenditures for non-profit housing in the 1992-93 budget to only 1% more than in 1991-92. The impact of the 1% limit on non-profit housing program expenditures will be devastating, in our view. Non-profit housing programs are already tightly controlled, with sparse operating budgets for both maintenance and staffing. Further cuts to these areas will decrease service to an unacceptable level. Quality of life for tenants and communities will suffer, as staffing and service levels will be greatly curtailed. Neighbourhood opposition to non-profit housing projects will increase as properties deteriorate due to the lack of sufficient maintenance.
ONPHA recommends that the government's objective in reviewing non-profit housing program expenditures be to save money by restructuring the delivery and design of the program while maintaining or improving existing levels of service.
A major goal for the government in restructuring its programs is to eliminate duplication of service between ministries and transfer payment recipients. Furthermore, there is a tremendous need for ministries to coordinate and cooperate with each other in the delivery of programs.
I will turn it back to Saul to finish our presentation.
Mr Marmor: During the past year, ONPHA consulted extensively with its members and with others in the non-profit housing sector on current and future non-profit housing policy and programs for Ontario. This consultation was centred around two discussion papers released by this government in June 1991 entitled Government Land for Housing, and A Housing Framework for Ontario.
In September 1991, ONPHA responded to both these discussion papers with close to 200 recommendations and a goal of seeing the new non-profit housing program announced at the time of the 1992-93 budget. ONPHA believes that its reports on the government's two discussion papers are worth presenting to the committee, especially in light of the Treasurer's decision to contain non-profit housing program expenditures in 1992-93. We have provided you with copies of these two reports.
1610
In summary, we at ONPHA believe that building non-profit housing translates into good economic and social policy for Ontario. It will create jobs today and provide a supply of affordable homes tomorrow. To conclude, let me say that ONPHA appreciates this valuable opportunity to present its points of view and recommendations to the committee. We know that this year the committee has only enough time to hear from a very few groups, yet we believe that our remarks today represent the opinions and general direction supported by advocacy groups, tenant associations, housing organizations and the building industry in Ontario.
Mr Sutherland: When you talk about the increase the Treasurer announced in terms of operating costs, 1%, and the concerns about that, I am just wondering if you could explain a little bit about how mortgages are operated here? We had the Ontario Federation of Agriculture in yesterday. One of the proposals they are starting to work on possibly for farmers is the idea of the government covering the cost of the renegotiation fee of their mortgage. Bringing it down to lower interest rates would save farmers a great deal of money over the long term. Is there any potential there to look at something that way in the non-profit housing sector as well?
Mr Maloney: I think there is excellent potential because as it stands now each individual project has its own mortgage that is negotiated individually. The province has centralized some of the projects coming up for renewal. What would make a lot more sense, as an example, is that Sun Life has 50 mortgages out there. There may be an approach to that company to say: "We'd like to renegotiate all those mortgages. In exchange for doing that, we'd extend your term an extra five years, because they come up for renewal in five years." I think there is a lot of potential for that type of initiative. I know the ministry staff are now looking at that because ONPHA was involved in a brainstorming session with the ministry staff asking, "How can we save dollars in the program?" That is one where a lot of money could be saved.
Mr Sutherland: Just on that, do you have a rough idea of what the average mortgage rate would be right now? I know they are all over the map.
Mr Maloney: I can tell you from Peel's perspective right now. I would say the average is probably about 12%. We have seven coming up for renewal this year and they are dropping to 8.5% so we are going to see significant savings. Now is the time to look at that initiative.
Mr Mammoliti: First of all, let me just say that I have been an advocate for non-profit housing for years and co-ops as well. I believe you are doing a good job. I think we should continue sponsoring.
I thought it important for me to mention that. I know that during our hearings and meetings with our rent control committee, the standing committee on general government, we talked a lot about this. There are a lot of mixed feelings within the Legislature, perhaps even in this room, in terms of policy. Some people do not believe that government should be sponsoring, giving out money to non-profit housing and co-ops, for the simple reason that it is a lot of government money -- there may be some logic to that -- and that we should perhaps be subsidizing the tenants who live in a profit-making building. What would you have to say to those critics who would argue that point? What benefit is this to government and what benefit is it to the community?
Mr Marmor: Thank you for that question. I think often the definition of the problem and the policy question is, how do we provide affordable housing, how do we provide housing or how do we provide people with the resources to find affordable housing? There are at least two components to the definition of that problem: One is the price component, or the cost, and the other component is the supply.
On the price side of course there are different options available for providing people with enough income to be able to purchase housing. I think this is the point you are referring to, that through social assistance programs today and through general welfare people do receive a shelter allowance. In fact, non-profit housing programs are structured to provide a direct shelter allowance to those living in non-profit housing who cannot afford to pay the market rent. That is known as the rent-geared-to-income subsidy, the RGI subsidy.
The second part of the problem is a little more difficult and that is the supply side. Non-profit housing programs develop particular types of housing to serve the unique and special needs of local communities. The strength of the non-profit housing program supply system is that non-profit housing is outside the marketplace, so it provides a form of rental housing on a non-profit basis, which remains affordable or remains non-profit for ever or in perpetuity. That is an advantage over the supply of rental housing by the private sector.
The other great advantage is that housing is developed with the users in mind so that volunteers, local people in their local communities -- and that is the strength of the program -- commit their efforts. They volunteer their time, their experience and their knowledge. People from all sectors of life, people familiar with real estate, people familiar with development, are the people who constitute the community-based boards of directors of non-profit housing corporations and through their volunteer efforts create a supply of housing specifically suited to the needs of people they identify. I think that is very different than what the private market provides in rental housing.
Just to sum up, we all know that the costs of housing are not any different for the non-profit housing programs than they are for anybody building housing. Non-profit housing is built by the private sector. Non-profit housing corporations use private sector labour. They use private sector developers and construction firms and so the costs are normally the costs in the marketplace. There is a need for a supply subsidy because the costs to actually build the housing are much greater than even the market-level rents that people are willing to pay.
Mrs Y. O'Neill: We had some presentations this morning that I think would tie in very much with your presentation in that we find that the affordability of housing is still one of the most difficult crosses the low-income people in this province have to face. I wonder if you could give us any idea how many people your projects in each community service, how many of those people are on social assistance? Is there a general average across the province? I know most of these are mixed, but could you tell us how many people on average would be served in any of these projects?
1620
Mr Maloney: I could give you an example from Peel, where I am from. We have about 4,000 units in operation with people living in them. Our recent studies show that we have I think about 15% of our clients on family benefits, about 10% are on unemployment insurance. We have a great many who are low-income earners earning $25,000 or less, so they are getting a deep subsidy or a shallow subsidy. The remainder of the individuals are working. We see a lot of movement within that too from month to month, based on what is happening in the economy.
Mrs Y. O'Neill: Right. I have a lot of subsidized housing in my riding and I think I also have a very healthy representation of co-op housing. I really strongly support what you have just been saying about the kinds of volunteers involved on these boards and even some of the professionals offering some of their services at very reduced rates. At least in my community that is the experience.
Can you tell me anything about the lot levy legislation and how it may be affecting you?
Mr Maloney: Certainly at this stage, as a municipal non-profit, we pay full levies. If education levies do come in, I think we are going to be subject to them.
Mrs Y. O'Neill: You do not have them in Peel yet?
Mr Maloney: No, we do not have them in place yet in Peel although I think Peel is waiting for the first test case to go forward, actually, and did not want to be the municipality to be the first case.
Mrs Y. O'Neill: I would imagine Peel would have been the first one in with its fee. Carleton is part of my riding and Peel and Carleton, being fast-growing -- that seems to be the reason that people want to go into this kind of taxation.
Gentlemen, I have no further questions. Perhaps my colleague has something to add.
Mr Phillips: In terms of what I recall from last year's budget and conversation, the government planned to provide roughly 10,000 more non-profit units per year. Is that what I remember as its plan?
Mr Maloney: Certainly they agreed to provide 10,000 last year. We encouraged them to provide more than that on an ongoing basis. We said there was a need for 14,000 to 16,000. I do not think there was a long-term commitment for more beyond that.
Mr Phillips: I just remember the Agenda for People was 10,000 a year, as I recall it.
Mr Carr: I think it was 10,000 and 10,000, so it was 20,000.
Mr Phillips: What is your feeling right now about what is likely to be in the budget in terms of the number of new units?
Mr Maloney: What we have been told so far is not a lot. We have been told just recently that the Premier's announcement about the 1% is applicable to us. We have also been told there is a program review under way that I believe is going to go at least to a committee of cabinet or else to cabinet. Within that there are a lot of features that are being looked at.
I said we had a brainstorming session. We were asking, should replacement reserves be considered to be on hold for a year or two for new projects, should we look at remortgaging, the question we had earlier, should we look at how we can save within a sector, should we be looking at utility costs and so on? Our understanding, and there is nothing in writing and it has not been clarified yet, is that the program is contingent upon what savings we are able to achieve as well. So if we are able to put some savings into place in a sector there should be a program, but it is not very clear at this point in time. Nothing formal has come out and we are told that we should have some sort of answer on this program review by the end of February.
Mr Phillips: What is your organization's recommendation in terms of the number of units? Is it the 10,000 that you feel is a minimal number?
Mr Maloney: Yes. We were saying 14,000 to 16,000, but we would be quite happy with 10,000.
Mr Phillips: How much additional money do you think would be required for that?
Mr Marmor: We do not have those details with us here. The Ministry of Housing has published the average costs of both the supply-side subsidy and the RGI subsidy on each additional unit. There is an appendix in the government discussion paper, A Housing Framework for Ontario, which is very detailed in terms of the cost. I could refer you directly there and you could find those figures. We just do not have them here with us right now.
Mr Phillips: I remember -- sorry, Mr Chairman.
The Chair: You still have time.
Mr Phillips: Last year's budget talked about the need to provide, for each 10,000 units, $150 million. I think that was the number. Yes, it is. Is that still the number that is required for 10,000 units?
Mr Maloney: I would think it should be reduced, because any projects that have been approved in the last I would say six to eight months -- there is a MUP, which is a maximum unit price. Most projects are being approved around 92% or 93% of MUP. In fact we had one that was approved at about 88% of MUP. Land prices have fallen and construction prices are down somewhat as well. I think the cost would be reduced. I cannot say exactly how much, but I would think down anywhere from 5% to 7% or 8%.
Mr Phillips: So maybe only about $135 million now instead of $150 million, right?
Mr Maloney: Maybe $125 million. I am guessing. That is a lot of money anyway.
Mr Marmor: It is hard to put a number on it.
Mr Maloney: Yes, it is hard to put a number on it.
Mr Phillips: Then that is the number that has to be put in the budget each year, I gather, for the units? That is an ongoing cost?
Mr Maloney: What happens is, once the capital budget is put in place, as I mentioned earlier, each property has a mortgage. The subsidy really depends on how much rental revenue is collected, first of all. So the cost may be less than that, depending on how many people are paying market rent and how many people are employed in the project and are paying shallow-subsidy rents. Again, you really have to do some gyrations to come out with actually what the subsidy would be in each project and do some projections across the whole 10,000. Part of it looks at what the average person who is getting a subsidy is now paying in rent and projecting what is going to happen in the next year.
The Chair: You have about two minutes.
Mr Phillips: I am just trying to get an idea of what the government is likely to do here, based on its, I guess, feeling that capital projects are awfully good things right now. You would speculate that they would have a priority in this area, I would think.
Mr Maloney: I would hope so, given the fact of the employment creation and so on too, and the multiplier effect and all the subindustries that benefit from the building of housing.
Mrs Y. O'Neill: You feel that if there is money placed on your line of the budget, the social assistance line is less. Have you got data to show the direct relationship of moneys going into assisted housing and keeping people off social assistance?
Mr Maloney: Within our own corporation we work very closely with the social services department. We can see the difference, because individuals are probably in the private sector and they are getting a supplement, as well as basic welfare, up to whatever they are actually paying. So they came in to us. They are paying a subsidized rent, so that also falls off. But I have not seen studies like that across Ontario, other than maybe the SARC report, which was done a few years ago. But within our own corporation we look at that and see how much it would save both the provincial government and the region, in our instance, because it pays 20% of the welfare costs.
The Chair: We will have to carry on to Mr Carr.
Mr Carr: I was interested in the cost as well. We put together a bit of a study on the per-unit cost. We got the information through the freedom of information. Notwithstanding what you said on the per-unit cost, it is substantially higher when you look at non-profit. You used the $1,500 figure. You said there are controls, and, right, you use the same architects. The problem is that the percentage the architects take is higher with the non-profit; you look at the consultants' fee. The fact of the matter is that there is a lot of profit in non-profit. If you take the per-unit cost, when you people do it non-profit, it is substantially higher. How do you handle that allegation that when we build something through the non-profit, there is a lot of profit in there for whomever, and that in fact when the government gets involved in building them, the figure I have heard is that they are twice as expensive on a per-unit basis. How would you handle that?
Mr Maloney: First of all, I would like to see your figures and see where they come from, because twice the cost I would say is just not correct.
Mr Carr: What was your figure? How much higher would it be, 20%, 30%?
Mr Maloney: First of all, what is it being compared to?
Mr Carr: Your cost on a per-unit basis, versus what it would be if I went out, say, to Halton. You put up a non-profit and I go out to rent for the next door neighbour that has been built by the private sector and they are charging $800 or whatever per unit on a monthly basis. How much higher is your cost?
1630
Mr Maloney: I would say it is not that much higher, because if you look at our costs, 80% of the costs are hard costs you really cannot control, being mortgages, taxes --
Mr Carr: The same as the private sector.
Mr Maloney: Exactly. So what you are getting down to is 20%, which talks about things such as the standards of your building, how to maintain your building and what staffing levels you have. When you are talking about only 20%, I cannot see how the costs of ours could be twice as high as anyone else's. I have never seen a study like that and I would like to see it, if it exists.
Mr Carr: The other question I would like to ask is this. The reason for the 20,000 figure was that it was the waiting list, and the government, through the Agenda for People, said: "We're to eliminate the waiting list for non-profit housing. We're going to build them all." The fact of the matter is that there is not enough money in the budget to end that. We pump more money into non-profit, and every year you people come in and ask for more money. Each government has done that successively, going way back. Each year we pump more money in; the waiting lists get longer. If you look at it, we are up 87% in two years in housing. The Premier goes on TV and says, "Any government that comes in would have a deficit." When you look at housing, that is not the case. Where the money is going to, the graph goes like this, like a rocket taking off, because of non-profit housing.
How do you see the private sector fitting in with you? George mentioned it earlier. What the government has done is drive the private sector out, and you people are the only ones, because obviously if you do not do it, we have no place to put the people. How do you see the interreaction with the profit people? Quite frankly, the feeling is that if we leave it up to non-profit, the waiting lists will continue to get longer. Do you have any suggestions on how you would like to work with the people who are in the private sector, the so-called profit, if you will? How do you see that working?
Mr Maloney: The first thing I can say is that you are right: With the rent control situation, the private sector is not building affordable housing. If it is building anything it is building condominiums, and right now it is not even building condominiums. It is building non-profit housing and that is about all it is building.
Just as a direct impact of that, our corporation, when it started out 10 years ago, was very small and it was never intended to become as large as it has. We are now the largest landlord in the region of Peel, and it is not because we have been tremendously successful; it is because the private sector stopped building. The Bramalea Ltds and so on do not build any more.
Mr Carr: Government incentive pushed them out, I would submit. But go ahead, sorry.
Mr Maloney: Well, they just found that they wanted to build private sector homes too, because there is more financial incentive in doing that, or there certainly was until recently.
Mr Carr: You know what the Premier has said, that the way you get more non-profit housing is to drive the private sector out, and he basically has followed that plan. What I hoped is that at least he would come clean with people and say: "Hey, look, this is what we believe. We don't believe in the private sector. It should be all non-profit." I am saying that through the rent bill that is what happened; the rent control bills drive it out.
Mr B. Ward: That is not true.
Mr Carr: Then how they justify it is they say: "We have to build it. Obviously, we've got these waiting lists, so it has to be non-profit." The private sector is not jumping in because it cannot make a profit doing it, and that is why, when we get back to the cost -- and we can debate about how much higher it is -- I submit to you that it is higher with non-profit. We can debate about 10%, 12%, 20%, 30% or whatever. That is my feeling.
But going on a little bit further, with regard to upgrading -- you are talking about building from scratch. As you know, we could also be employing people through upgrading the existing ones. Do you have any suggestions in that regard, in terms of upgrading? You talked about the money you would like to spend on new units. How about the upgrading? Where are we at with that? I understand, and you would know at first hand, that we are looking at some deterioration where we need to put some more money in there. How much would you like to see in that area?
Mr Maloney: Certainly one issue is that the program could allow acquisitions of certain projects too, particularly ones that have the opportunity to allow expansion as well. You could pick up a small site with 30 units. The site would allow another 30 units, so you could renovate the units that were there if they were in need of it and intensify the site as well. Hopefully any new program will include that, certainly as an option.
Mr Marmor: I think in our mind, when we say a number of units in terms of a new supply, we are targeting new units, because I think our estimates from the State of Housing in Ontario report were also largely based on projections about population growth and immigration to Ontario, but the non-profit housing programs have provided in the past for acquisition and rehabilitation of existing rental property, property that has deteriorated or property that for whatever reason becomes available. The non-profit programs have usually provided for a percentage of the units to be done under that basis.
Mr Carr: Again, just so I am clear, the total amount you would like to see the Treasurer increase this year would be what?
Mr Marmor: We are recommending that the annual production target for non-profit housing in Ontario be 14,000 to 16,000 units per year.
Mr Carr: At what total ballpark cost?
Mr Marmor: Again, we do not have the per-unit cost at our fingertips. The appendix in the government's --
Mr Carr: You deal with it. You must know what the per-unit cost is on an average basis. That is going to be different depending on the circumstances, but even if you took a low average, surely being in that industry you know what your per-unit cost is.
Mr Maloney: It depends on the location, too.
Mr Carr: Let's take Peel, next door to me in Halton. You surely must know what your per-unit cost is.
Mr Maloney: On average it is probably $130,000 a unit.
Mr Carr: There you go: $130,000 times 1,400.
Mr Maloney: In Ottawa it might be $100,000. Up north it might be less than that. I do not know. Even if you said on average it was $120,000 a unit, period, multiply it by whatever the number of units are and that will give you your number.
Mr Carr: Let's talk about Peel specifically rather than going all over. How much do you need to eliminate your problem of waiting lists? You mentioned the per-unit cost. How much would you need for Peel alone, which I admit is the biggest-growing area?
Mr Maloney: Today we have 7,300 households on our waiting list. You are right, Peel is growing. We are still growing by close to 20,000 a year. We also have the refugee problem in Peel that we see in the social assistance. With the airport there we get a lot of people coming into Peel. We cannot see that growth changing over the next few years with the immigration policies the way they are. Also, there is enough space still for us to be able to build in the area. From our corporation's point of view we have asked for 800 units a year as a base for us for Peel non-profit. We got that over maybe the last couple of years. Before that we never achieved that. As well, there are the private non-profits and the co-ops in Peel which also build.
Mr Carr: But do you see what we are looking at? You need 7,300; you are asking for 800. We will never be able to solve the waiting list in Peel for non-profit housing without some other means of doing it. Basically you are saying that. That is what I am saying. George went out of the room. I did not mean it to be partisan, but what I am saying is you have people in the non-profit saying we cannot solve the problem just by the numbers there in Peel without some other type -- what I am saying is that it has to be the private sector.
In closing, if you drive the private sector out, these people are saying they cannot solve it and so we are going to continue to have an increase in waiting lists. Even if we pump 800 new ones into Peel like you request, the waiting lists are going to get longer. I am not making judgement. I am just saying we are going to be in crisis a year from now because you are going to have a longer waiting list even though we have pumped more money into it. That is just food for thought.
The Chair: Mr Carr, let him answer the question. I know you made a statement; it was not a question.
Mr Maloney: We have never seen ourselves as the full answer for Peel. We are one of the answers. The co-ops are another answer; the private sector is another. There is a lot of building going on in Peel for low-end home ownership too, which is another answer. In our corporation about half the people who leave us each year buy some sort of accommodation. We see that as a positive stepping stone. We have never seen ourselves as a full answer. I do not think we ever will be.
The Chair: I would like to thank you on behalf of this committee for appearing here. Your brief and your comments will be put into the pre-budget consultation report given to the Treasurer.
Mrs Y. O'Neill: In connection with this presentation, would we be able to ask research to find from the Ministry of Housing its updated figure on the per-unit cost and the annual upkeep on that, once established? Those figures should be available. It would give us a little bit of an idea what kind of recommendations are realistic.
Interjections.
Mrs Y. O'Neill: I am sorry. These gentlemen said they could not give it to us. I thought if we got something from the Ministry of Housing, it would likely be an average across the province, which I think would be helpful.
The Chair: Okay, fine.
1640
PROJECT ECONOMIC GROWTH
The Chair: The next group we have is Project Economic Growth. Would they come forward, please. I would like to welcome you here to the standing committee on finance and economic affairs. I do not think that sun is bothering you sitting there, is it? You can see? Okay.
Mrs Harley: It is all right. Once I get my glasses on I will be fine, anyway.
The Chair: Okay. We have 40 minutes for the presentation, and if you would identify yourselves for the purposes of Hansard, you may begin. Please leave some time at the end of that 40 minutes for questions from the committee.
Mrs Harley: My name is Laurie Harley, and I have with me Barbara Caldwell, and we are here representing Project Economic Growth. What I would like to do is just say a couple of very brief introductory remarks on the project, who we are, and then we do have some prepared remarks. I am going to ask Barbara to go first and then I am going to basically conclude with some additional written remarks. We fully recognize we are at the end of the day. We stand between you and whatever is on your evening agenda, so I guarantee we will try to get our messages across as briefly as we can and certainly leave room for questions.
Interjection: We can't leave until 5 anyway.
Mrs Harley: Oh, is that right? Well, 15 minutes; that will be an effort, but we might make it.
Let me first make a few comments. Project Economic Growth is a non-partisan organization that has been in effect now since September of last year. We represent approximately 500 small, medium, and large-sized businesses across the province, and we really came together with the prime objective of making economic growth and the kinds of factors we need to have economic growth and recovery in the province Ontario's number one priority. We are probably best known for some of our comments on labour law reform, because that has been one of our focus issues, but we clearly also recognize that there are lot of other policy initiatives that are under way, many of which are very supportive of economic growth, others that I guess we still have to see how they will unfold. But clearly we are here today to talk on a much broader basis and we welcome the opportunity to participate in these discussions. Let me turn the microphone over to Barbara.
Ms Caldwell: First, I think we would like to praise the government for the approach it is taking in opening up the pre-budget process to these consultations. We think it is important that all Ontarians have the opportunity both to understand and comment upon the options the government faces in setting its budget for the year. All of us are painfully aware -- all of us in business, as Laurie and I both are -- of the severe impact of the economic downturn in Ontario. As a result, all of us -- individuals, businesses and governments -- are facing tough budgetary questions. That is just to make you feel better, that you are not alone in this process. These decisions are critical, because of course they have impact on jobs, economic growth and people's lives.
On January 21 the Premier and Treasurer outlined the challenges the province of Ontario faces in managing its budget. In simple terms, it was explained that Ontario is caught in a revenue squeeze. We were told that the province has a $5-billion revenue problem and a $1-billion expenditure problem. We would suggest that it may be more straightforward to begin by stating that what the province has is a $6-billion gap just to maintain its current deficit levels. We think that is perhaps a more realistic way to put the issue.
The province has already begun to address the challenge from the expenditure side. We have been told of the cost-cutting reviews taking place through the new treasury board and we are seeing the government acting with restraint in its contract negotiations with employees and with its transfer payments. You will doubtless hear many representations with respect to the types of cuts the Treasurer should make and the types he should not make. There will be much focus on the issue of how one controls expenditures to get at the problem. We realize that these are extremely difficult decisions for a government that is deeply committed to a social agenda.
Our purpose today is not to provide detailed recommendations. Instead, we would like to provide some examples of the way in which Ontario businesses have addressed their expenditure problems in tough times and then focus on the other side of the government's balance sheet, which is the revenues, which are generated through taxes placed upon business and working individuals in an economy that is on a growth curve.
The budgetary challenges of this government are clearly rooted in the state of the Ontario economy, but also in the United States and global economies beyond. Much has been said about why we find ourselves in a period of economic anxiety and uncertainty. The Treasurer has pointed to the recession and federal cutbacks as the major causes for Ontario's sudden fall in revenues in 1991-92.
It is important to keep a sharp eye upon the major trends in our economy. There is no question that we are in unparalleled times. We are witnessing a significant transition from an industrial and resource-based economy to an economy based on the primary resource of information, and we need only to look at our manufacturing sector to know that is a fact. This transition requires a dramatic restructuring in our workplaces.
History tells us that periods of economic adjustment bring both good news and bad news. We find opportunities to grow and to enhance the quality of our lives, but at the same time our lives can be profoundly affected when we face painful readjustments. History also tells us that we cannot place our heads in the sand and ignore the major trends that face us. Whether it was the transition from a feudal economy to a commercial economy or the transition from an industrial economy to the one that we are now facing, the one based on information, those who survive and thrive are those who understand and respond to the trends rather than rest on their track records of old.
Today, Ontario's businesses are facing a new set of customers and a new set of competitors. It is now impossible to avoid the impacts of the new global economy. The tools of business are different; the workplace is now using microchips, lasers and sound transmission, and their applications are different. Workers are now requiring much higher skills and must increasingly work as empowered decision-makers rather than supervised wage earners. I think this is a very fundamental change that we are seeing.
The keys to success in this changing economy are, we think, three. Quality is the first, brand loyalty. Loyalty to Canadian-made is disappearing; in fact, it might even be fair to say it is gone. Value and value added are what sell products or services.
Speed is second, and it does not matter, really, whether you are providing a service or producing cars or computers or delivering pizza. Today, you have to produce just in time, deliver on time and keep inventory low. Suppliers have linked together with producers in a rapid new form of efficient productivity.
The third element is flexibility. To compete you must be ready to adjust, change and respond to the market, to changes in technology, to changes in customer demand. That requires a new kind of workplace where employees are highly skilled, willing to change, working as a part of a workplace team and empowered to make decisions to enhance quality and speed.
What does this have to do with this year's budget? Our overall economic context is important for two reasons. First, we can all learn how to better manage our resources by understanding the broad forces of the new economy and by thinking long and hard about how we manage our resources within it. Government, like the rest of us, must adjust to change if we are to meet the challenges ahead.
Second, government, by its policies, can have an enormous impact on investment and job creation in the private sector. This does not mean creating a low-wage strategy or providing massive handouts. Much of this influence is derived from trust, communication and partnership. If we meet this challenge head-on, we will have the revenue side of the government balance sheet go much further.
We believe the government is taking important steps in managing its resources more effectively. The establishment of the treasury board, as I mentioned earlier, to review expenditures was an important step. The opening up of this budgetary process is another. Ministries are themselves making tough decisions, and we do see encouraging signs of change. It is particularly encouraging in the Ministry of Health to hear a focus on Ontarians as customers. That, I think, is a very interesting change of approach. Much, obviously, remains to be done.
Businesses have tried to squeeze more value out of their Ontario investments, and to do so they have followed a number of important strategies. We think some of them may apply also to the government's plans to better control expenditures.
I guess the first thing that government looks at whenever it is considering any kind of new product or promotion is whether there is a need, and I think we would ask the government, as an initial step, to begin to look at all its programs to see if indeed there is a need. Is it a perceived need? Is it a need that there used to be? Is there still a need and will there be a need in the future for some of those programs?
We would then suggest that, as business does, you make a tough assessment of the capabilities you have. Can you respond quickly with new innovations? Are you using the most efficient technology? We might talk about a couple of examples of that later if we have time. Are you using your assets effectively? These are all things that business looks at. Are your costs competitive? Is your service of high quality?
1650
Business recognizes that people are the greatest assets. Are you assisting them to attain the skills they require? Do they have incentives to be more productive? Do they feel empowered? Is the decision-making process being moved out? Do you have too few or too many people for the work required? Do they understand the vision, or does the government have a vision, and is it clearly communicated? This is an issue that we all deal with in business. We have to know, first, where we are going and then we have to find ways to communicate that to the people who are going to get us there.
Do you understand your competition and are there ways to learn from it? Have you considered what has worked in other jurisdictions? Would the taxpayer, the customer, benefit from competition between government and private sector providers of certain services in terms of quality of service or product? How do the tax laws and incentives for economic growth compare in other jurisdictions?
The government will doubtless consider many of these questions as it plans its upcoming budget. There certainly are no magic solutions which we can offer today, except to suggest that we have in Ontario a tremendous resource in those businesses that are themselves looking for creative solutions to these problems. We would encourage the government to establish an ongoing forum in which this type of advice can be applied to the open and effective management of government expenditures.
Laurie will now speak a little bit about IBM and some of the challenges that it is facing.
Mrs Harley: One of the approaches we wanted to take was just to say the value is to share information. So what we decided to do is to take a typical Project Economic Growth member -- and we have very large companies; the one I am most familiar with is the one I work with, IBM Canada -- and just share with you some of our experiences and what we have been doing. Then we will sort of come back at the end and try to tie that back to the broader level.
Just a bit of background: IBM has 12,000 employees in Canada, 8,000 in Ontario. Our business really is in two flavours; we have a marketing and service side to the business and we have a manufacturing and development side. We have two technology plants; one in Toronto, one in Bromont, Quebec. We have a software development lab also here in Toronto, which is the third-largest private sector lab in Canada.
The year 1991 was the worst in our history on the marketing and service side, and it was the best year in our history on the manufacturing and development side, so we understand both sides of the equation. The plant had a record year, with close to $4 billion in exports, and $2 billion of those came from Toronto, the plant and the lab.
Just to put that in perspective, last year Ontario exported $74 billion, and that represents fully half of Canada's exports. Ontario is the engine that drives the Canadian economy, and Ontario cannot afford to have that engine sidetracked and losing steam; nor, indeed, can Canada afford that.
I would like to talk to you and describe very briefly the story of the Toronto plant. It employs about 1,000 people, accounting for $1.3 billion of those exports last year. If you were to rank it, it would be one of the top 25 manufacturers in Canada and it would be among the top dozen exporters in the country. We are high-wage, we are high-technology. We compete with Mexico, the Far East, Singapore, Taiwan, Europe and the United States. Our win rate on bids out of the Toronto plant right now is running at 85% to 90%, so we can compete, and we do it very effectively.
We have been manufacturing in Toronto and in Ontario for 75 years. Since the late 1960s, we have what we call rationalized manufacturing, which means, on a worldwide basis, each IBM plant competes for a mission. It is a sealed-bid process, and we compete not just with our sister plants but with outside suppliers. To get new missions in Ontario you have to be able to compete with the best in the world.
I would like to take you back to 1986. Our Toronto plant at that point assembled printers and computer terminals, and we did an excellent job of it. We had good quality, we met our deadlines, and we felt we were doing an excellent job. We were very confident that next year we were going to keep improving and so on, and that was because that was just the way it had always been.
The reality was, though, that we had lost sight of our market, to come back to some of Barbara's comments, and that market was changing. The costs and quality that we were so proud of no longer compared with the low labour rates and the outsourcing of the Far East, so the reality was that there were not only companies but indeed whole nations which were out there dedicated to displacing the work that we did in Canada. So we really saw the writing on the wall that said either we had to change things or the Toronto plant would probably close.
You could probably guess what the first reaction was: We wanted to blame the problem on somebody else. To be honest, government is used to that, so you were probably one of the first targets. However, very quickly you come to realize that you cannot do that. The problem is ours; it is our responsibility, and management, along with all the employees in our plant, had to take a very long and a very self-critical look at what we had to do to survive.
We set out to find a new, high-tech mission and to benchmark against the best in the world. The result was that we moved from that mechanical assembly of what we call boxes or completed products to under-the-cover technology, the things that you do not see but the things that are the strategic missions. Today, we make electronic technology of memory, logic and power supplies. The power supplies that we make in the Toronto plant now go into basically all of IBM's midrange and personal computers around the world.
There was just one problem in our strategy, and that was that all those things were already being provided to IBM on a worldwide basis by outside suppliers in the Far East. So if we wanted to do that, we had to win back the business for Ontario, and to do that, we had to leapfrog the competition to better cost and better-quality design. We had to refocus all of our plant operation and people on reducing defects and dramatically improving cycle time and, above all, to meeting customer satisfaction. We not only saved the operation in Toronto -- it is a success story -- but we made it one of the most productive plants in the world.
Our survival strategy depended on employee participation, and that was always our strength. We focused on education and training, and through redeployment of employees to growth areas such as our lab and by offering voluntary incentive programs for retirees, we basically were able to sustain our no-layoff policy.
Here are some of the things the Toronto plant did to survive, just to give you some ideas. In 1986, we had two indirect people -- and "indirect" is our term for anyone who is not directly involved in the production process -- for every one person on the production floor. Today, that ratio is 0.4 to 1. We moved most of our activities that had been supporting production back to the floor by empowering our production people. We had too many experts telling production what it could not do, and the reality is that today the people on the plant floor manage their own workstations.
Administration helped out too. They consolidated to reduce overhead. For example, by using some electronic technology like internal office systems and electronic mail, we reduced administrative expense. Today, we have three secretaries who support a 1,000-person plant, and that is quite satisfactory. It moves along very well.
Our information systems area is now operated by 15 people. Our accounts payable went from two levels of management and 50 people to one manager and 16 people, and they are processing more and have improved cycle time. We reduced the number of managers by 50%. Today, there are only four levels of management between the employee and the plant general manager, and by the end of this year there will only be three levels of management. Our plant manager is on record as saying if he could get rid of everybody and talk just directly to his 1,000 people, that would be good news for him.
There was an old paradigm that we had to get used to, that we used to judge management's success by how many people we have and how we control things. That paradigm is gone. We no longer need or have time for layers of management that simply filter and control. Managers have to justify their existence by being leaders and being part of the team.
The quality of our products has improved significantly. The power supplies that we produce in the Toronto plant now have a mean time to failure of 250 years. That means, in theory, they should keep going for 250 years. By year-end we expect to improve that performance to 1,000 years between failures. If you are wondering how we are going to do that, well, we even have to find a new way to measure it with some new product testing, because we obviously cannot wait around till 2992 to find out if we were right.
This obsession with quality does not just benefit our customer; it means significant cost saving to the company. For IBM, operating virtually in what we call six sigma, or a defect-free environment, would produce a 30% cost differential across our entire business. These savings come from more efficient manufacturing, right through to reduced warranty costs. That quality standard applies not just to the production floor, but down to how people answer the telephones.
1700
Finally, we continue to drive change throughout our company by investing in education and training. Even in difficult times we know we must maintain investment in people. In 1991, IBM Canada invested $35 million in employee education, and that figure would grow to $70 million if you included the salaries of the people who actually did the training in the classroom.
In the Toronto plant that translates into education courses which are offered across three shifts. For some of our employees who want to actually get community college credits for that, we have arrangements with local community colleges so that they can take the courses and upgrade their own formal education standing at the same time.
Not only are people flexible, but so are the plant fixtures. Nothing on our production floor is tied down. That means that we can create a mini-plant and mini-environment on very short notice, if that is what the environment demands.
To reduce expenses, we decided simply to just stop doing things. For example, we decided to stop changing the endless process of building and relocating offices. The result was that our design engineers now focus on the business of the business, not on the constant process of who wants to move on to what floor, into what office and change colour combinations. By the way, we all travel economy class or whatever we can find that is cheaper, and that includes our chief executive officer. We set a new guideline which says that only one person goes to a meeting that is out of town. We used to send parades of people to the same meeting. The reality now is that if one person goes and it is important, he can bring it back and share it with his colleagues in the office.
We have reduced authority in signing levels, again trying to get decision-making down to the people who actually do the work. Today, that means our plant manager does not even sign off on expenses over $1 million.
We are trying to throw out the old rule books and replace them with employee judgement based on sound principles of risk management.
Just to quickly summarize, we have learned the following lessons: There is no magic answer, there is no cookbook. You have to learn what others do. We very openly go and see what everybody else does, and then we borrow and steal whatever ideas we can and implement them in our plant. You have to develop a passion for quality and customer satisfaction, and you have to invest in your people and their innovation and creativity, and you can never look back, because a proven track record is absolutely no guarantee of future success any more.
We believe our experiences, along with those of many other of PEG's members, may be useful to government. If we have one message, it is that we think government itself must continue to restructure for the 21st century. In fact, we would like to see a vision for the Ontario government that says we will provide the highest-quality government services and the best policy environment that supports economic growth and our cherished quality of life, and we want to do that better than any other jurisdiction in North America.
The environment government creates can be a major positive factor in our competitiveness. Quality government services in support of policy environments go a very long way to help business prosper and create the revenue we are talking about generating in this province to support the quality-of-life programs we all want.
Many of the fixes I think you are going to hear in these hearings are very difficult ones, and a lot of them are really not within government control. There are many jurisdictions involved. The one area you do control is your own operations. We encourage you to make the most of that leverage, because we believe it is significant.
Let me leave that example and just come very quickly to some final comments on, not the expense side, but the revenue side. We submit that there is really only one way out of the Treasurer's revenue squeeze, and that is a policy program that encourages business to invest, create jobs and grow in Ontario. Government can and should take a direct role in stimulating the economy, but large as it is, it can only do so much. Investing in infrastructures is one excellent way for the government to provide support to economic activity, while creating needed jobs at the same time. We praise the government for its past initiatives in this area, but we would like to underline the fact that, while important, government capital programs can have only limited impact on stimulating the economy.
The most important lever the government can pull in stimulating the economy is its policy agenda. Ontario's primary investors, both foreign and domestic, watch the Ontario government's policy agenda with a very keen interest. The policy agenda of the government and the reaction of the business community to that agenda have a direct impact on the capital which becomes available for the creation of new businesses and the growing of the ones that are here. It is also critical to recognize that our policy, taxation and regulatory environment is every day being compared to that of other provinces, states and countries.
How does the government respond to this reality? Surely not by abandoning social policies and objectives, nor by focusing entirely on the needs of business or investors. We have suggested that the government should respond by recognizing that any policy which has an economic impact is now an economic policy and has to be judged by the people who invest and create jobs, by measuring potential new initiatives against that same economic growth criterion, by assessing the overall investment climate in Ontario against that of other jurisdictions and taking action to ensure that Ontario remains competitive and finally by bringing together the economic partners of the province to consider the need for the economic impacts of policies before they are introduced. We commend the government for some of the initiatives it has undertaken. We see the environmental bill of rights and the Ontario Training and Adjustment Board as very positive collaborative efforts.
I do not want to spend a lot of time on labour law, but we would certainly just like to add our comments. We believe these proposals do have an economic impact and we encourage the government to follow a process which will bring the economic partners together to discuss those in the sense of economic impact and then, if there are changes, to take a look at what changes we can bring about, whether we need legislation for them or whether indeed there are other mechanisms that would fulfil the need.
In conclusion, I want to thank you for this opportunity to express our views. We almost made the 15 minutes, but we are a little over. We would also encourage the Premier to work with all of Ontario's economic partners to set policies and programs that will generate the wealth we need, because we all believe very strongly that we want to protect the quality of life we have in this province. We can compete. There are lots of champions around the province being successful today. We just have to learn what they are doing and we have to share that information. Thank you very much.
The Chair: Thank you for your presentation part. We are running out of time, but how about if we extend it a little and have one question from each of the parties, starting off with the Liberal Party.
Interjections.
Mrs Harley: This must be women's day or something.
Mrs Y. O'Neill: I have to say that because I think you are the first two women who have come together, certainly the first all-woman delegation. I want to congratulate you on that.
I think every deputy minister in this government could get some good advice from your presentation. You have it right down. The budget is the main policy document of any government; we hope some of your ideas will be seen in our budget document. I will turn to Monte.
Mr Kwinter: I have had the privilege of visiting IBM and seeing its operation and how it retrains its people, the whole process. It really is a miracle what the company has done. Without really trying to get too controversial, the thing that really stands out is, would you have been able to have done this if you had been unionized?
Mrs Harley: We are a non-union environment. We have a model that works very well for us. We are not anti-union. We have many members in PEG that have very effective unionized workplaces. I believe companies have personalities and traditions that they believe make them effective. Communications and education and training are things we believe in very strongly. I cannot comment because I can only say this is what works for us, but I believe I could bring to these hearings PEG representatives who would talk about equal success stories in their environments.
The key is that all the workplace partners, whether union or non-union, understand and have common goals, trust each other, have good communication vehicles and work towards keeping the company productive and competitive and keeping the values of the workers obviously forefront in that whole exercise. I do not know that the models make any difference. One of the things we believe very strongly about in the labour proposals, however, is that we do not seem to feel there is room in there for a non-union model, in the preamble, and that is obviously something that we as a company react to.
1710
Mr Carr: I think you are very interesting. I have always been somebody who is very interested in the management style. Reading as much as I can, I think we can learn a lot. I had a lot of questions, but I would like to do this one. You give us hope, because people would say: "Well, IBM is such a big company. You can do that with a small company; you can't with the biggest." You have shown you can do it with one of the biggest companies in the world.
In order the achieve that, and I am thinking now of the Ontario government, with 90,000 employees, we would like to do the same thing, as legislators. How would you suggest we do it? Because what happens in governments is we always have checks and balances. We put the Ontario Municipal Board in because we will not give anybody the authority because they might run wild and make strange decisions. Consequently the decisions go so long, we get waiting lists. Would it be to streamline and decentralize that?
As you know, we have got different levels involved. You have got the federal government and it even makes it more difficult. One of the ways it can be done is to force it from the economic standpoint, to say to a department or ministry, "You're going to reduce by 10%." That does not necessarily get you all the efficiencies that you talked about. As a government, how would you see doing it? Would you start with the financial aspect of it and say, "You are going to reduce by 10%, therefore you are going to have to be more efficient and get rid of the secretaries and so on," or do you start with a program and then phase out the money? Which comes first in your estimation?
Mrs Harley: I will let Barbara comment and then I will just add a couple words.
Ms Caldwell: I ran a small manufacturing company and I do not know that it makes much difference. Before you can do any of that, all those things fall out of the vision of the company, or the government. I think before you can make any of those kinds of moves, you have to know where you are going. That takes leadership whether it is in government or business. Out of that vision comes a strategy and out of a strategy comes the tactics, the way you make it happen, and that might be decentralization. It does not happen easily, because you have to retrain people. It is a very different mindset.
But without the vision it cannot happen at all because otherwise people do not understand why. I would also suggest to you that another way that companies are doing it -- certainly IBM has done, and our small company did it -- is that you have to incent people differently. You have to give them incentive to reduce.
We talked about the fact that we used to measure the level of managers on the number of people who reported to them, but that is not on any more. Now you have got to find ways to plug them in -- "reduction" and "lean and mean" are the buzzwords. That is what is going to give them the brownie points. Once you get them bought into it, then it begins to happen all the way through the organization, or out of the organization, because I think the organization would be much flatter.
Mrs Harley: Just one quick comment. The larger you are, the more difficult it is. In fact, people are always saying we in Canada have such a disadvantage because of our size, that we are so small. I think we could turn that into an advantage. Some of our companies are much smaller than our counterparts and that means you should be able to change things a lot faster. But it has got to start at the top and it has got to involve everyone. It has got to involve the employees, every idea. What are the jurisdictions in government? That is where I would start. In each one of your areas, who does it the best? Go find who does it the best. Learn from business in that area, if there is a comparable organization, and then start putting your vision together.
Ms Caldwell: The other question is: What is the choice? Because it really is basically choice for any of us.
Mr White: When I saw your name on the agenda I was a little nervous. I was thinking, gee, I had a presentation earlier on from a member of your group -- possibly outside of your formation -- and it was one of those "anti-OLRA, but I have not got any alternatives to it" kind of presentation.
The Chair: Could you get to the question, Mr White.
Mr White: I was very impressed with your presentation, with the range of values that you put forth. I found it very exciting. In regard to the OLRA issue and to some of our comments, in the province of Quebec they have a different labour relations climate than we have here, one in which they supposedly have a flexibility and a team approach which we do not have as much here, and which you have evidenced obviously at IBM and elsewhere. I wonder if you have any ideas as to how you would see the kind of values that you have spoken from the outset being actualized in terms of labour relations or in terms of employee relations, where it is a non-organized work setting.
Mrs Harley: Let me try that one. You have to learn from every other jurisdiction, but the bottom line is that whatever you learn you have to apply to your own environment. There are lots of things in Quebec that work well in Quebec about which we should say, "If it's good, let's adopt it." I can speak just for our Toronto plant, for example. We operate a very effective plant in Bromont, Quebec, but our supplier network in the province of Quebec is very different from that in Ontario. The main link with the Bromont plant is across the border in Burlington, Vermont, and there is a lot of traffic back and forth, but not a lot of same reliance on local suppliers.
Over the last six months of being involved in Project Economic Growth, the thing that just astounds me is how we all say the same words and really do not have the same meaning behind the words. As a country and as a province, and just as businesses and other economic partners, we have to get a mechanism to understand the meaning behind the words and try to find some common ground. I think this particular government in Ontario is in a unique position to help us do that. I could not imagine labour and business coming together for Mr Mulroney in today's environment, but I could imagine that the current government in Ontario does have the ability to bring the economic partners to the table.
We have to understand what the needs are for these pieces of legislation. Listening through a lot of the hearings just personally, it sounds to me like we have labour law that is just hung up in bureaucratic, legalized processes that are not helping any of the constituents. If that is the problem, we have to fix that, but we all have to understand that that is the problem. I think it all starts by trying to get people together to find a forum to talk. We are very optimistic that we can bring it about. You need new mechanisms. Old paradigms do not work any more. On this one issue, I think the old paradigm of taking this through the traditional process we do not think is going to very effective.
Mrs Harley: If I can just add to that, I think that what we are hearing and what the other parties are hearing is only what the media says we are saying. It is our feeling that people sitting across the table from one another very quickly find common ground, in whatever venue or whatever the issue is. You cannot do that if you are artificially working at odds. So this is why I think we are so concerned with getting parties together and moving forward on the process. If it needs to be changed, then that is what needs to happen.
Mrs Y. O'Neill: On a point of information, I think we should correct the record, at least for our committee and for Barbara. This is not the first time that pre-budget consultations have taken place. This whole process was begun by the former Treasurer, Mr Nixon, and I think that should be on the record. Interjections
The Chair: I took it as a point that we are trying to open it up more. This is what the last line was.
Mr Johnson: Mr Chair, also on a point of order: It is not the first time that we have had just women make presentations either, just for the committee's information, but I will say that every time just women have made presentations, they have been excellent.
The Chair: I would like to thank you for appearing before this committee. Being last is sometimes being in the best position, because we had an extra 10 or 15 minutes. I appreciate your input into this committee. Mrs Y. O'Neill: Mr Chairman, is this agenda for tomorrow updated?
The Chair: You are asking on this agenda. At 11:20 we have the Council of Ontario Construction Associations and at 2:20 we have the Ontario Restaurant Association. At 10:40, we do not have a group to fill in at that particular time.
Mr Sutherland: Mr Chair, I was wondering just before we go, if we could not get an all-party approval to extend the time for the Ontario Pharmacists Association. I think there are a lot of issues related to health care, budget costs, etc, that if we could get them for a full hour overall to allow more time for questions that would be helpful.
The Chair: Let's see, if at least we had 10 minutes for each party -- let's see how long their thing is, and we could extend it up to an hour.
Mr Sutherland: All right, fair enough. Thank you.
The Chair: This committee is adjourned.
The committee adjourned at 1720.