Legislative Assembly of Ontario

SUBCOMMITTEE REPORT

PRE-BUDGET CONSULTATIONS MINISTRY OF FINANCE

DAILY BREAD FOOD BANK

ONTARIO ASSOCIATION OF NON-PROFIT HOMES AND SERVICES FOR SENIORS

CONTENTS

Monday 22 February 1993

Subcommittee report

Pre-budget consultations

Ministry of Finance

Floyd Laughren, minister

Jay Kaufman, deputy minister and secretary of treasury board

Steve Dorey, director, macroeconomic analysis and policy

Daily Bread Food Bank

Sue Cook, assistant executive director

Gerard Kennedy, executive director

Ontario Association of Non-Profit Homes and Services for Seniors

Michael Klejman, executive director

STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS

*Chair / Président: Hansen, Ron (Lincoln ND)

*Acting Chair / Président suppléant: Johnson, Paul R. (Prince Edward-Lennox-South Hastings/Prince Edward-Lennox-Hastings-Sud ND)

Vice-Chair / Vice-Président: Sutherland, Kimble (Oxford ND)

Caplan, Elinor (Oriole L)

*Carr, Gary (Oakville South/-Sud PC)

Christopherson, David (Hamilton Centre ND)

Jamison, Norm (Norfolk ND)

*Kwinter, Monte (Wilson Heights L)

*Phillips, Gerry (Scarborough-Agincourt L)

Sterling, Norman W. (Carleton PC)

Ward, Brad (Brantford ND)

*Wiseman, Jim (Durham West/-Ouest ND)

*In attendance / présents

Substitutions present / Membres remplaçants présents:

Arnott, Ted (Wellington PC) for Mr Sterling

Conway, Sean G. (Renfrew North/-Nord L) for Mrs Caplan

Johnson, Paul R. (Prince Edward-Lennox-South Hastings/Prince Edward-Lennox-Hastings-Sud ND) for Mr Sutherland

MacKinnon, Ellen (Lambton ND) for Mr Ward

Marchese, Rosario (Fort York ND) for Mr Jamison

Waters, Daniel (Muskoka-Georgian Bay ND) for Ms Ward

Clerk / Greffière: Grannum, Tonia

Staff / Personnel: Campbell, Elaine, research officer, Legislative Research Service

The committee met at 1403 in room 151.

SUBCOMMITTEE REPORT

The Chair (Mr Ron Hansen): Before we get started, I'll read into the record:

"The standing committee on finance and economic affairs, report of the subcommittee:

"Your subcommittee met on Monday 15 February, 1993, and recommends the following with respect to report writing and pre-budget consultations for 1993.

"1. That individuals be allotted half an hour for their presentations.

"2. That the Chair be authorized to pay expenses for a witness from Thunder Bay who requested reimbursement for travel and accommodation. That further requests for reimbursement of witnesses' expenses be brought to the attention of the subcommittee.

"3. That ministry staff be invited to appear before the committee on Tuesday 9 March, 1993, if the need arises, to answer questions of the members.

"4. That the researcher will prepare an outline for the report to be considered at the committee meeting Wednesday 10 March, 1993.

"5. That the committee agree to provide the Minister of Finance with a confidential copy of the draft English report as soon following the completion of the report as possible.

"6. That the Chair be authorized to make any minor technical amendments necessary to the report before being sent to the printers."

Is there any discussion on the report? Can someone move that the report be adopted?

Mr Gary Carr (Oakville South): I will.

The Chair: Mr Carr. All in favour? Agreed? Passed.

PRE-BUDGET CONSULTATIONS MINISTRY OF FINANCE

The Chair: We'll resume the pre-budget consultations for the standing committee on finance and economic affairs. I'd like to welcome the Treasurer of Ontario, the Honourable Floyd Laughren. We have one hour for your presentation and your ministry staff. Treasurer, if you don't mind identifying your colleagues with you and any other colleagues who come forward, if they would identify themselves for the purposes of Hansard. Mr Treasurer, you have the floor.

Hon Floyd Laughren (Minister of Finance): Thank you very much. Despite what you might think, I'm glad to be back before the committee. With me at the table today is David Trick who's the assistant deputy minister for the budget secretariat. That doesn't tell you what it is; I think the title speaks for itself. He does a lot of the work heading into the budget and all the ramifications that flow from that. Also at the table is Jay Kaufman, the deputy minister who is secretary of the treasury board and has been since its inception. Eleanor Clitheroe is the deputy minister for treasury and economics, or Ministry of Finance as we now say. There are other people in the room who will he happy to answer questions when I can't.

I am pleased to be here, as I said. I regretted the misunderstanding after the last meeting because I don't think it was intentional on anybody's part, but those kinds of misunderstandings don't serve us and I hope we can avoid those in the future. We are here for two hours this afternoon. It's our understanding, and I believe it's yours, that I'll go through a presentation that lays out some of the economic challenges we face as well as the fiscal challenges for this year and next. With your permission, I'll proceed with that.

The Chair: Okay, Mr Treasurer.

Hon Mr Laughren: The first slide -- I don't know how well everybody's going to be able to see the screen, but the paper you have in front of you is the slides as well; it's what's on the screen and I think everybody has that. Please refer to that if you wish.

The economy, as everyone is telling us and telling you, is recovering. It's a somewhat fragile recovery, although we think it's real, but it's going to be very slow. Revenues consistently are our problem and the revenue gap for next year is even more of a problem than it was the last time I was here. We now see it as up around $5.8 billion higher than we anticipated in our budget a year ago.

There's no question that the federal transfer payments are taking a serious toll on the province. We know we should be entitled this year to about $4.4 billion more than we're getting. If the previous commitments were still being honoured for post-secondary education, for social assistance and for health care, next year it will be a little higher than that; it will be around $4.5 billion that we'll be short.

From our side of the street we've taken steps to rein in the expenditure growth while maintaining the essential services. Some of you will recall that in the budget last year we said we had three priorities: to maintain the essential services of the province; to do some job creation on behalf of the province; and thirdly, to keep the deficit in check. It's been a real struggle to achieve those three things, but we've tried as best we can to do that. It wouldn't be hard to do two of them if we didn't worry about maintaining the essential services of this province, which people tell us is important.

We are investing in infrastructure, as you know, through our capital program, but at the same time we know there are some difficult decisions that are going to have to be made for the budget coming up and, indeed, there are even some risks for the balance of this year on the revenue side.

In the third quarter finances we detailed what the risks were. There could be more, because it's that kind of year. We'll see how it all shakes down at the end, but we're determined to do as much as we can on the expenditure side. The revenue side -- once they start to deteriorate, which they have this year, there's not much you can do about it in year; you can work away on the expenditures. I'll provide more details of that as we go, but there's not a lot you can do on a revenue side unless you somehow raise taxes in year or effect some dramatic asset sales in year. That's not always easy to do. As well, you don't want to simply sell assets in a fire sale way to achieve numbers; there are better ways of doing it.

But we are going to continue to work very hard on the expenditure management side. We've done, I think, an admirable job on the expenditure side. If revenues had stayed up, I think there'd be a lot of comments extended to us that we'd really done a good job on the expenditure side. With the revenues doing what they're doing to us, it sort of blows our attempts on the expenditure side out of the water because of the very serious revenue problems. So we're going to continue to work hard on the expenditure side.

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In terms of the economy itself, this chart shows the real gross domestic product for Ontario and for Canada. The solid line is Ontario and the dotted line is Canada. You can see Ontario dropped faster and further than did the rest of the country with its GDP. I suspect a lot of that's because the manufacturing heartland is in Ontario and that's what got hit the hardest in this recession. As we climb out of it in 1992, 1993 and 1994, we parallel more closely the recovery in the rest of the country.

We know one thing that caused the plummeting as well was probably the speculative excesses that occurred, particularly in real estate in the Toronto area in the late 1980s and the beginning of the 1990s. At the same time, the good news is that the recovery has started. The US economy is improving. Ontario manufacturing shipments and exports are up and we've actually regained about 85,000 jobs since last August. There's no question that the recovery has started but, as I said before, it's tough and the recovery is slow. We believe the recovery is going to be led by the exports, with autos in particular, housing and with a lot of investment in machinery, which improves productivity in the province.

Just to put it in context of major layoffs in the province, if you compare it to the recession of 10 years ago, you'll notice on the chart that it's divided into two sections: One is when a company reduces operations and the other is when it either completely closes or partially closes right down. In 1981-82 you can see the lightly shaded area shows that there was a very substantial reduced operations component of the layoffs, whereas in this recession it's the partial and complete closures. As a matter of fact, the numbers are that, in the last recession 10 years ago, about 25% of all the layoffs were deemed to be permanent. This time it's about 65%, which means that the recovery is going to be slower, of course, because they're not just temporary closures -- that the companies will start up again.

The 70% of the layoffs that have been reported have been in manufacturing and over 70% have been in central Ontario. That's no secret to those of you who represent constituencies in the Metropolitan Toronto area. Men between the ages of 25 and 44 without a high school diploma have been the hardest hit and that's going to continue to be a problem in the foreseeable future. The problem is that the laid-off workers do not have the skills the new economy is going to require, so we have to continue to spend a lot of money and invest a lot in skills training and retraining, because to do otherwise would simply, I think, make the matter worse as we go ahead.

The next slide shows the job creation by occupation in the last 10 years. You can see that leading it is managerial, professional, some clerical and services, but you see some negative too: the primary industries, processing, construction up some, transportation, very, very little materials handling as well -- so actual negative numbers in the processing and primary. We know that nearly half of the employment growth is going to be in the managerial and professional jobs area which reinforces what I was saying about the need to continue to invest in training. There are people who say, "Well, what's the sense of training people when there are no jobs out there?" There are going to be jobs out there and they're going to be in areas that require skills, and either we train those people or they'll be for ever on unemployment.

The Ontario employment and unemployment rate: You'll see that the rate is the solid line going up, starting back in 1990, and how the unemployment rate's gone up. The unemployment rate is on the right-hand side, over 10%, and the actual employment in millions is in the bar graph. You can see how the unemployment rate has gone up so dramatically and is going down so slowly, and that is a problem. Our unemployment for 1992 averaged 10.8% -- that's 572,000 in the province -- and it's going to stay high, we think, between 8% and 10.5% until about 1996. So unemployment is going to remain high.

On the positive side, there has been positive job creation for five straight months, which shows on the bar graph there. So at least it's a sign that it's not just a one-month blip; that's occurred for five straight months.

What's not built into those numbers is the discouraged-worker component or factor, because in a recession people do give up looking for work. As the recession ends and recovery gets under way a lot of people will come back into applying for jobs. Of course, when they apply, then up goes the unemployment rate, so the rate will remain high even though employment itself might be growing because the discouraged workers get back into employment seeking as they no longer feel so discouraged and have some hope that they'll be able to get jobs. But it means that the unemployment rate will remain high and will decline very slowly.

The next chart is an interesting one. It shows the recoveries from recession in Ontario since 1955, almost 40 years. The shaded area shows that the real GDP growth has averaged 5.1% in those recoveries after recessions. For the next three years, 1992 to 1996, it's only going to be 3.6%. The employment growth averaged 3% in previous recoveries. It's only going to average a little more than half of that, 1.7%. Labour productivity averaged 2.1% and it's going to be almost that at 1.9%. But labour productivity, as you would know, doesn't always mean more employment. In the short run it can mean less employment as factories and so forth become more productive. In the long haul, it's important to have that productivity but it doesn't give you a real burst of employment as productivity increases.

Looking at the various sectors for the next four years, this chart shows the average annual per-cent growth in key sectors. You'll see that for non-residential construction there's still a lot of excess capacity that's going to be negative for the next four years and then increasing in the other sectors there, virtually all of those sectors increasing.

But look where the big growth is -- business investment, residential, construction, automotive related, which I mentioned earlier, business and financial services, and so forth will be the growth area. Industrial materials and resources, which affect communities, such as the one where I live, will be fairly low at under 2%, and the public sector is expected to show a little growth, since all governments will be trying very hard to improve efficiency and contain their expenditures. The expenditure growth by government will be marginal in the next four years.

To get specifically into the Ontario outlook, for 1992 in the budget you'll see the left-hand column is what we predicted in the budget. In October, we altered a bit the numbers from the budget. The nominal growth being lower because inflation's lower than we or anybody else predicted this year. CPI inflation, you can see there, instead of being 2%, 1.4% -- and, as a matter of fact, we now think it's about 1.1%, so it's even lower again. The unemployment rate, which is disturbing, is a full point higher than we thought -- or anybody else for that matter -- it would be back in the spring, so that's a problem. That's 1992.

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For 1993, you can see that the numbers look better. Real growth, we believe, will be 3.8%, external forecasts -- that's really the average of other people's forecasts -- slightly less. Nominal growth, which means with inflation still in it, 5.5%. CPI about 2% for next year; others say it will be up around 2.2%. Employment growth 2.1%; others say 1.3%. The unemployment rate we think will be 10.6% and the average of other forecasts a little higher than that, around 11%.

The next slide shows the nominal GDP and revenue growth. You can see how revenues came down very, very dramatically in 1991-92 and then are going up, but at the same time going up and then levelling off. The white bar at the top is sort of a forecasted range of what revenues will be. The revenue growth includes things such as potential tax increases and so forth, so it's not just a status quo number. But even though in the last couple of years there's been some tax increases -- both the last two budgets contained substantial tax increases; they didn't set records for the province, but substantial tax increases -- and even given that, look what's happened to our revenues. You can see that really has been a very serious problem for us.

The next slide shows the revenue outlook for this year and what's happened to it. You'll notice, if you go to the far right-hand column right on the bottom, $1.6 billion -- $1,595 million. You can see that breaks down to where the hits have been on the revenue side. Personal income tax $300 million; retail sales tax $475 million and so forth -- you can all read those numbers as well as I -- all the way down to the bottom of $1.6 billion.

I can tell you that even on the personal income tax side, we thought we were being very conservative in our forecasts for PIT revenue, and we get some advice or some forecasts from the federal government because they, of course, collect the PIT. We reduced their estimate of what our PIT would be by, I think, $1.8 billion -- in that neighbourhood -- from what they thought we were going to get, so we took quite a hit right up front. We said, "No, we think that's overly optimistic," and even then it's not enough. PIT has been a major problem and then, of course, the retail sales tax.

What's interesting about the retail sales tax is we all read those stories, or saw those stories on TV, about the boom in Christmas sales. Well, maybe the boom was in Christmas sales, but it wasn't in sales taxes. Also, of course, it could be goods in particular that weren't high-priced items that would give us the substantial tax revenues, so retail sales tax is off by that amount. That's been our major problem.

We have not included in here either SkyDome or GO Transit. It's conceivable that it could happen, but we think at this point we don't want the sense that we have to do it this year to affect the negotiations for one thing, so we're just taking them off and saying -- there's no reason to believe they both won't happen, by the way. We've signed off on the SkyDome and the purchasing folks are sorting out some arrangements and differences among themselves. It's not us who are the problem here. I really do think it will happen, but I didn't think it was appropriate to push it for this fiscal year. That's the revenue side.

The next is simply putting it in graph form which shows, going back to 1984-85, how revenues were just sailing along, going up, and would warm the heart of any Treasurer of the day, and I'm sure it did. Then you can see how it takes a drop, starting in 1991 and then coming up very slowly after that.

On the next slide it looks at the different revenues. Corporation tax from 1984-85, you can see, goes up and then down very flat. Retail sales tax, same thing, and personal income tax as well, so it's no surprise. It really has been the source of much of our woes.

The total revenues from all our taxes next year would be $2 billion lower than they were in 1990-91, just to put it in perspective, and that's how severe the recession has been. All that push on the revenue side has happened when there's been enormous pressures on the social assistance side, as you all know, and on the money for retraining of displaced workers. Enrolment in our colleges was up last year between 8% and 10%, as I recall, and universities have been up as well, and up again this year. Those areas are very hard to cut back on at a time of recession; that's been our problem.

The next slide shows the revenue outlook that was in the budget for April 1992 -- a year ago -- the November outlook and the current outlook for PIT, RST and so forth, all the way down to the bottom. If you look at the budget for April 1992, the number was $48 billion in revenues. We said in November it's going to be closer to $43.8 billion, and now we're saying no, it's going to be closer to $42.2 billion. The difference between $42.2 billion and $48 billion is $5.8 billion, and I think on one of the first slides I showed you the potential revenue problem for next year would be $5.8 billion and that's basically the breakdown of that $5.8 billion. So you can see why we have a problem.

You notice I said, "we," because I think you do too. I think this is a provincial problem that we have to talk about more openly. Internalizing it isn't going to do anybody any good, so we'll be talking very openly about our revenue problems in the future. There are reasons for each one of those, and later if you want to come back to those, that's fine by me.

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You can see, when we look at these numbers, why it's very difficult to avoid a discussion of federal transfer payments and restraints in federal transfers. Some people say to me: "Stop blaming the federal government. Just get on and solve the problem." That's fine. Part of me agrees with that sentiment, but at the same time, having our transfer payments from the federal government curtailed to the tune of $4.4 billion this year, how can we just say that's okay, business as usual? The federal government basically is transferring its deficit problems to us, one of the three so-called have provinces, even though I don't like that term. That's what they've done. That represents $425 for every person in Ontario and compares with $279 per person, on average, for the other provinces in this country.

I've said before -- and I think it's important to keep saying it -- that until 1990 the federal government paid for 50% of social assistance costs in this province. Now they pay under 30% -- it's around 29% -- at a time when social assistance is going through the roof. It was done unilaterally of course. We in Ontario -- and I would include everybody around this table, to my knowledge -- have never objected to equalization payments from Ontario to the rest of Canada. I've never heard a member of the Legislature of any party object to that. If we want to sit down and talk about equalization payments, let's do it, but this backdoor equalization is not the way to do it, taking programs like this and putting arbitrary caps on them. That simply is not the way you run a railroad.

On post-secondary education and health care, the federal support has fallen from a little over 50% to about 31%. No one should be surprised that we're struggling with a high deficit in this province. The federal government is too; I appreciate that. Nobody's pretending that the federal government doesn't have its own set of problems, but this would be like our saying to the municipalities in this province: "Sorry. You're not getting any more grants. You're on your own. Get it all through property taxes." I'm oversimplifying it, but I can tell you it's not appropriate the way it has been done by the federal government. We'll continue to point that out.

The next slide shows the revenue gap in very stark terms. The April budget showed revenue of $48 billion, November $43.8 billion, the current outlook $42.2 billion. That's the $5.8 billion. If you look at some of the composition of that $4.2-billion decrease, the one from November, you can see the lower economic growth -- it's lower than anybody predicted -- of $800 million. Anticipated revenue measures about $2 billion and other one-time factors about $1.3 billion. The one-time factors are things like the impact of major corporate losses in the province that affect corporate revenues coming into us, some of the personal income tax overpayments for 1991 that had to be paid back, things like this that affect it.

Since then, since November there's been an additional hit, further income tax data of $600 million and the lower revenue forecasts as well. You add all those up and you come to the revenue gap number of $5.8 billion, which is startling, to say the least, and means that we've got a lot of work to do in getting our deficit under control, but we'll continue to work at it.

The next chart shows the estimated average per-point yield. In other words, if you raise taxes a point, how much do you get? Keeping in mind the size of the revenue gap, you can see that this does put it in perspective. For example, if we raised the PIT, which, as of January 1, is 55% of federal tax, we'd get into the coffers of the province $265 million in a full year. If we raised the retail sales tax from 8% to 9%, we'd get $851 million, and so forth all the way down the line. The size of the tax increases that will be necessary when revenues take a plummet the way they have is very substantial. You can see the problem of simply saying, "Oh well, why don't you raise a couple of taxes" -- well, not many people say that even -- "and look after the deficit?" But you can see that the size of the revenue drop dwarfs the money that you get from any one-point increase in tax revenues.

The next slide shows the growth in operating expenditures by the Ontario government. Going back to 1984-85, these are year-over-year increases: 1984-85, 8.2% over the previous year; 1985-86, 9.8%; 1986-87, 12.1%; 1987-88, 9%; 1988-89, 9.9%; 1989-90, 7.2%; 1990-91, 13%; 1991-92, 12%; and 1992-93, the fiscal year we're in now, 4.8%. You can see that almost half of that is the public debt interest.

I know we can't, but if we were to take out social assistance, which is a statutory requirement, and PDI, interest on the public debt, we'd be almost flat-lining our expenditures this year. I think, the last time I checked, about 15 ministries were actually spending less this year than last. We have worked hard on that. Health is the best example. That increased an average of 11% a year during the 1980s and will be down to around 1% this year, the increase in health care. That's despite all the pressures to provide increasingly expensive services in the health care side.

We have reduced the operating expenditures of ministries -- things like travel, supplies, consulting -- by about 18%. I don't have to tell people in this room that cabinet ministers' salaries have been frozen for four years in a row and MPPs' for three years in a row. Senior management in the Ontario public service has been frozen. We are on track to reduce the size of the Ontario public service by 2,500 in two years. As you know, we did some streamlining in the last couple of weeks of government by combining some ministries.

We have worked hard. We've achieved $625 million out of the $950-million reduction target that was established in the budget and we've continued to work hard on that. Ministries are still continuing to try and find savings for the end of this year and for next year as well. We targeted the operating expenditure outlook for next year at $53 billion. We're on track to achieve this number, but it's going to be very tough to go below that level because that level includes anticipated reductions in expenditures in year. Even that number makes assumptions that we will be able to achieve expenditure reductions.

Also, the transfers to our transfer agencies have already been announced for 1993-94, as you will recall, 2% for 1993-94, although it won't be rolled into the base. I think most members understand that the following year it goes back to this year's level. Also, we have continuing obligations for social assistance. Any time there's a recession there's increased pressures on legal aid, and we have commitments on the non-profit housing of course and in other programs as well. The problem of containing our expenditures is an ongoing one.

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We did announce some measures already, in November, that will save $600 million next year and then $1.2 billion the following year because it's annualized. We've slowed down the pace of the pay equity program. We maintain our commitment to pay equity, but we felt we simply had to slow down the pace. We shifted OSAP to a loan-remission-based program. As I mentioned earlier, we froze senior level salaries. We placed a moratorium on the improvements to public service pension benefits and we limited the funding levels to major transfer recipients, which I've already talked about.

Of course, I can't give you a number on the savings from the restructuring, but there will be some of that obviously from the recent changes in the organization of government. We will continue to work on that. Those particular savings from the combining of ministries will be reported. I think we'll have them sorted out and in the budget this year. I'll have to provide you with some more details by then. I certainly couldn't at this point.

We have built into the system now what we call two ways in which we are working on our expenditure management. One is a corporate program review system, which has become a permanent feature of the whole budget cycle, and that's to generate savings and introduce some restructuring to major programs. Jay Kaufman cochairs that committee on corporate program reviews, and some results will be evident in the budget later this year. That's more of a government-wide approach to expenditure reductions.

We also have an internal ministry for all of the ministries called the MYERP, the multi-year expenditure reduction program, which is multi-year. The ministries themselves work away at achieving savings from within each ministry. That's running in parallel with the corporate program reviews, which go on as well.

Last year, with regard to the program reviews, just to give you an indication of an example, the Ontario tax grants for seniors came that route, the revisions to those, as well as legal aid and the Ontario student assistance program, OSAP. That's how those changes came about, through the corporate review program.

The economic renewal infrastructure project -- I know some of you have an interest in this -- is a $6-billion capital investment plan in partnership with both municipalities and the private sector. It, we believe, will create about 60,000 jobs by 1996-97 and over 100,000 in 10 years. The transit projects, which are familiar to many of you, are included in that, and the highway projects as well. By the way, out of that $6 billion we think the provincial government will contribute about $4.8 billion and the transfer partners and private sources the balance, to take it up to $6 billion.

We are determined to work in partnership with the financial community and the private developers and municipalities to achieve that. It's a long-term commitment by the government, and in some cases we're using crown corporations to deliver the investment faster and, in my view, cheaper than would otherwise be the case. It's not a stall. We want to enter design and/or construction in 1993-94. This will be done within our capital budget.

To put your minds at ease, this was detailed or indicated in the budget of April 30, 1992, in which we said that this was what we intended to do. The fiscal plan showed $3.1 billion for capital and $800 million through new financing arrangements such as these. That's what we said in the budget and that's what we are delivering. It's not an attempt to hide or disguise anything. It'll be there for everyone to see and add up, so there's nothing that is untoward.

We're finally catching up and doing what other jurisdictions have been doing for a long, long time.

We've laid out our transit priorities for 10 years -- the provincial highway economic corridor priorities -- and that included, somewhat controversially, a toll road for Highway 407. I think that maybe there is an alternative to that road. It isn't as though people have to drive it. It was the case of if we wanted to get that built and get it built quickly, that's the route we should go.

On water and sewer projects, the Ontario Clean Water Agency will be delivering those and there's a very large number of 120 priorities all across the province. There's the Ontario government relocation program; there's the telecommunications project. I think we've done something exciting at a time when we have all sorts of pressures on the expenditure side. I appreciate that, but I think that to have thrown up our hands and said, "Because we're having these problems we're going to abandon investment in our infrastructure," would have been exactly the wrong thing to do. This is not Herbert Hoover or R.B. Bennett time and we felt we really had to do that. I think you saw -- not exactly the same -- but you saw the pronouncements of President Clinton in the United States, although if you were to compare their commitment on a per-capita basis, I think you'd find we're doing a lot more than they are.

Those are some of the things. I've sort of lost track of where we are on the slides.

Interjection: Slide 24.

Hon Mr Laughren: Okay. I mentioned the sewer and water, the telecommunications, the government relocation. Slide 25 talks about three crown corporations: the Transportation Capital Corp for building transit and provincial highways, the Clean Water Agency for facilities in areas of municipal need on sewer and water projects and the Ontario Realty Corp, which will develop and market surplus land, and finance and manage government accommodation as well. We think this allows us more flexibility in working with the private sector and the municipalities, and it will be faster and a more cost-effective way. We are determined to move; I really think it's the right direction.

The accounting will be done in a corporation-type way and will help match the cost of acquiring capital assets with the benefits they deliver and the financial reporting will be done to the Legislature. We're not attempting to avoid that at all, that would be silly. The spending plans of the corporations will be -- they'll be held accountable to treasury board, which is the way it should be and the borrowing for them will be managed and coordinated by the Ministry of Finance. As I said earlier, other jurisdictions, both here and elsewhere, have utilized this way for some time.

I imagine each corporation would have a chair and a board of directors that would report, in the case of the transportation, to the Ministry of Transportation. The Clean Water Agency would have a similar kind of structure, as would the Ontario Realty Corp. It is our attempt to make them accountable to the Legislature itself and obviously members will appropriately want to be engaged in the debate when the legislation comes forward to establish these. We look forward to that debate because I'm sure members of the opposition and government members will have some positive and helpful comments to make on how these should be structured and run. We look forward to that debate, I hope, this spring.

We're getting to the end, so I guess this is the last one. I've tried to be as direct as possible with members of the committee. We have unquestionably some very difficult choices -- since I consider this as part of the pre-budget process -- some tough choices for the budget that will have to be done later this spring. I'd be very interested in hearing from members on all sides on how we deal with these challenges. Are there realistic limits on the amount of expenditure reduction that we can and should try to achieve in this province?

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Let's face it, government has the wherewithal to massively reduce expenditures, but at what point would you cease to recognize the province of Ontario the way we've traditionally viewed it and the way the people of this province have seen the services they should receive and how they should receive them?

Are there some services that should not be touched or should there be some that receive special attention and should really be cut or eliminated, even? I'd be interested in your views on that. I know the ultimate responsibility is government, but I think we would be very interested in hearing advice from all members on all sides because I think simply throwing up your hands and saying, "Well, it shouldn't be this way" doesn't solve the problem. That's the way it is. It's sure not because we've gone on a spending spree, it's because the revenues have fallen off. I'd be very interested in hearing views.

Tax increases are always difficult and always unpopular, but in times like this, are there some taxes we should at least be considering and some we should not even dare consider? Which, in other words, would be the least offensive to consider as we draft our budget? In other words, would some tax increases be better than some expenditure reductions? Would it be doing more damage to the economy to reduce certain capital expenditures or would it be better to raise taxes? Think about that.

What about the deficit itself? Would letting the deficit go up, given the depth of the recession, be better than increasing taxes or cutting some programs, or would that simply put it off until it's even more difficult to deal with in the next few years? In other words, we would just be postponing the difficult decisions. How would it affect the confidence in our economy if we don't keep that deficit under control?

Those are the tough choices we face. I appreciate the fact that there are tough choices. I really was not hinting that it wasn't our responsibility but I was trying to say earlier that I think we've got to be more open and share with the people of the province the enormity of the problem on the revenue side and what that means in terms of deficits, and that we need to have a free-flowing debate on this with lots of suggestions. The most common suggestion I get is "just reduce expenditures," but people are a little hesitant to say which ones. I would be interested in your comments on that.

The $5.8-billion gap I mentioned on the revenue side assumes no tax increases, no revenue asset sales, things like that, and that is unacceptable.

Mr Jay Kaufman: Just to clarify that -- there were two points the Treasurer made which I just want to clarify. One is that the $5.8-billion gap did include some revenue projections and also, in the chart you looked at in terms of the growth in revenues, you mentioned it included additional revenues from revenue moves, and that didn't. I just want to clarify that.

Hon Mr Laughren: I appreciate that. In conclusion, I was looking at some of the 1992-93 numbers from other jurisdictions -- in other words, what other provinces and the federal government had budgeted for deficit this year. It was cold comfort, I must say, but I was struck by how similar the problems are across this land: the Newfoundland budget, out 10%; PEI, 100%; Nova Scotia, this one we don't have; New Brunswick, 10%; Quebec 21.6% -- this is off on their budget projections of deficit -- ours, 10.2% -- although that could go higher, I hasten to add, if the fiscal stabilization doesn't come in and that's looking very dicey at this point; Manitoba, off about 34%; Saskatchewan, almost 15%, Alberta, 20%; British Columbia, 34%, and the federal government 25%. That's for this year, and next year they're closer to 50% off from what the projections would be.

As I said at the beginning, that's cold comfort. I'm not suggesting for a minute that means we don't have a problem here, we sure do. But at least it's an indication that it's not just Ontario that's got the revenue problem. Every province in this country has it, including the federal government. The federal government's would be a lot higher than even what its numbers are if it hadn't passed a lot of that deficit off to us. You can see that the problem is across the entire country and that's why there's a growing acknowledgement, I think, that the deficit problems in this country are serious and are going to have to be addressed in a very serious way.

Thank you, Mr Chair. I appreciate very much the apparent interest of the committee and I look forward to some exchanges. I won't hesitate to ask people from the ministry to help me out on the questions if the questions get technical.

The Chair: Okay. Thank you for the presentation. Mr Phillips first -- 20 minutes.

Mr Gerry Phillips (Scarborough-Agincourt): Are we going for the full 20 minutes? Is that how you want to go?

The Chair: Do you want to go for the full 20? If you're going for 10, I'll see that you've got 10 left and we can come back to you then.

Mr Phillips: Maybe that would be nice.

Mr Carr: Mr Chairman, why don't we do that, if it's acceptable, just 10, 10 and back round?

The Chair: Okay. I'll mark down how long.

Mr Phillips: I'm anxious to be helpful. I think, Treasurer, or Minister of Finance, I guess, that we seem to spend an inordinate amount of time trying to determine what the real numbers are and, in my opinion, treasury staff or Finance staff have been spending an awful lot of time devising new methods of dealing with the finances. Actually, it's not very helpful; it's not very helpful to the people of Ontario, spending all that time. It's not very helpful for us in opposition to be so cynical about the numbers, because we frankly don't trust the numbers.

Hon Mr Laughren: I hope you'll be specific.

Mr Phillips: For example, I think the delay with the pensions -- there's $570 million you said you would pay. You delayed it from 1992-93. It was a bill due and payable in 1992-93. You delayed it to the next fiscal year and I think you may delay it for a long period of time. That's one example.

I don't believe, personally, that the fiscal stabilization money -- the total money was ever there. I asked you three times to give us the document, as you'll remember, and I've never seen that document.

I have real questions about the establishment of the schedule 4 agencies. I've real questions about moving capital expenditures into the capital corporations. I've real questions about, instead of your funding school capital, having the school boards take on the debt and you guarantee the debt. I've real questions about the sale and leaseback of the GO trains. I've real questions about sale and leaseback of computers. I've real questions about selling the government buildings to a crown agency and then leasing them back in that I think we'll take that into revenue and then have the lease for ever. I've real questions about the numbers I asked for, expenditures on pensions and non-profit housing, that I haven't seen to date.

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But I'm going to make a specific recommendation to help us out of this mess. I've been going through the Saskatchewan report. This is a very recent report, done when the government changed hands. It recommends, frankly, undoing many of the things you're planning to do, almost point by point. I could go through probably 20 different recommendations which are heading 180 degrees from the direction the Ontario government is going to head in. I think there's a solution to this, because it's not particularly productive for me to be constantly badgering the government and the government to be defending it.

I think this independent study was worthwhile. It took only three months to do. It would give the people of Ontario at least an independent look at whether the way you're planning to do all of these accounting moves is reasonable. You asked for specific suggestions; there's one that could be helpful. Maybe you could comment on that.

Hon Mr Laughren: First of all, I'm not sure I understood what your position was. I wasn't sure whether you were saying we shouldn't do the pensions, we shouldn't put off the pensions.

Mr Phillips: I think you have to record that as an expense. I think you've misstated the finances of the province.

Hon Mr Laughren: So you don't think we should have put off the pensions from January 1 to April 1?

Mr Phillips: I think they should have been shown as an expense, as anybody would have shown them, yes.

Hon Mr Laughren: We didn't pay it. It's not an expense if we didn't pay it.

Mr Phillips: Because, again, it says here that you should record expenses in the year they occurred. All you did was delay making the payment, and that is not recording the finances of the province.

Hon Mr Laughren: I guess I don't understand that. It was a $500-million bill for January 1, as I recall. We negotiated it. We said we're not going to pay it on January 1; we're going to pay it in the next fiscal year. So you're saying we should have recorded it in 1992-93 even though we didn't pay it in 1992-93?

Mr Phillips: Yes, of course I'm saying that. That's right, because that is an expense incurred. If you want to get your expenditures down, it's quite easy: Just delay all the payments to the next fiscal year. You can record very low expenditures. But this is the point this report makes, exactly this point, that you cannot simply, with a stroke of the pen, delay $500-million worth of costs that were incurred. That particular one, in my opinion, cost the taxpayers $50,000 every day, for that optical move. That's my opinion.

Hon Mr Laughren: I see absolutely nothing wrong with managing the expenditures of this province in such a way that -- you would do it at a personal level, Mr Phillips, in your own case. You certainly would.

Mr Phillips: There isn't one company in this country that could do that, not one.

Hon Mr Laughren: Of course there is.

Mr Phillips: No, there isn't.

Hon Mr Laughren: Any company can decide to put off an expenditure for three months. Of course they can.

Mr Phillips: No, they can't.

Hon Mr Laughren: I'm interested, though, that you are opposed to the whole question of sale and leaseback. It's a very traditional way of getting a better bang for your buck for the taxpayers of this province. It seems as though you don't want to change anything. You want it to be business as usual for ever and ever in the province of Ontario. I think that is a wise move, I think the taxpayers will gain by that move and I think it would be irresponsible not to do it, quite frankly. The days are gone, Mr Phillips, when you just ride on, spending money, layering program on program, the way it's been done in the past. We've got to do things differently, given the difficulties we're having on the revenue side. I admit that. We have to do things differently. that's one of the things we have to do differently.

Mr Phillips: Would you agree to an independent study which would, I think, clear the air?

Hon Mr Laughren: If the Provincial Auditor says this is inappropriate, then we'll take a look at it, but I have no reason to believe that anything we're doing isn't entirely appropriate and indeed being done in lots of other jurisdictions. If Saskatchewan is doing it in a way that somebody deemed not appropriate, so be it, that's Saskatchewan. But we don't intend to play any kind of funny money games. That would be silly on our part.

Mr Phillips: Is there a reason you wouldn't agree to the independent audit?

Hon Mr Laughren: Just because I don't think there's any necessity for it. We're just starting these up, Mr Phillips. Those have been going on for how many years in Saskatchewan. Maybe it was a time for a look at them. We haven't even started these yet. Give us a chance to get them started, get them under way, and then judge by how they perform and the accountability that's set up to the Legislature. To me, you're prejudging these before we even get them up and moving.

Mr Phillips: That's but one example, as I say, the pensions. I think it was wrong. I'm not even sure you're going to repay the pensions this fiscal year, 1993-94.

Hon Mr Laughren: That's possible. We are negotiating with the teachers now. But it will be in the spirit of negotiation, not arbitrarily, the way some governments do it.

Mr Phillips: But it is a misstatement of the finances of the province.

Hon Mr Laughren: That's nonsense.

Mr Phillips: I'm telling you that you would not get one single company that could ever report --

Hon Mr Laughren: Mr Phillips, I'll take criticism of things we do, but to say that it's a misstatement is total and absolute nonsense. If we negotiate with the teachers to put off the payment of a $500-million bill, paying them interest for three months, what is illegitimate about that, for heaven's sake? Nothing, absolutely nothing.

Mr Phillips: I think this debate is proving why we need the same thing the Saskatchewan government implemented, and that is an independent view on these things. The Provincial Auditor cannot deal with this matter.

Hon Mr Laughren: Of course he can.

Mr Phillips: We tried to get the Provincial Auditor to deal with it and he would not deal with it. We need that independent source, just like the Saskatchewan government.

Hon Mr Laughren: If the province were to engage in any kind of accounting that was not appropriate, the Provincial Auditor would be landing on us with both feet, as he or she should.

Mr Phillips: If I could continue with this, I frankly will keep pushing it. I think you'll keep hearing from me. I said to your staff on Friday that I don't have a problem with the capital corporations; I have a problem with the way you're planning to report them. What I think you're planning to do is to continue to spend probably $800 million this year and record, as I understand, one twentieth of that cost.

Hon Mr Laughren: But they'll be reported back to the Legislature in the public accounts, through our capital accounts, I guess, the capital spending. There's nothing that won't be completely transparent to everybody who wants to examine them.

Mr Phillips: I think the Saskatchewan government would have said they're transparent too and found the need for that.

On the deficit, just so I'm clear on it, you're now saying your best cut on the deficit for 1993-94 is $14.7 billion?

Hon Mr Laughren: No, we had built into our plan for next year a deficit of $8.1 billion total, total budgetary requirements. We're saying that if there's a gap of $5.8 billion, that would take it up to $13.9 billion.

Mr Phillips: What about the $800 million you're spending on capital?

Hon Mr Laughren: The part that's being amortized? Maybe Jay could speak to that.

Mr Phillips: The $800 million you're going to spend on capital, but put that elsewhere.

Mr Kaufman: No, the $800 million you're referring to in the budget was the capital which was to be amortized and reported separately. That type of accounting clearly is different. It's amortized capital and not a direct capital expenditure of the type that's identified in your first set of numbers.

Mr Phillips: So it'll be an $800-million debt, will it?

Hon Mr Laughren: It'd be part of the budgetary requirements.

Mr Kaufman: There will be a long-term debt associated with that capital spending and there will be revenue of one sort or another, ultimately, to pay off that debt over the life of the assets. It's not being accounted for in the same way as the capital which is included in your first numbers.

Mr Phillips: I know you're angry with the federal government, but I look at the numbers and it looks to me like the transfers from the federal government this year that's just ending have gone up 25%, $1.6 billion. I was looking at transfers to school boards and what not, at 2%.

Hon Mr Laughren: First of all, that included the fiscal stabilization plan, which is a one-time payment only, right? It inflates the numbers in that year. We got into this one other time. Also, I think it's unfair to look at numbers that way without saying what are the numbers to which we're entitled. That's where the whole thing falls apart, on the obligations of the federal government.

Mr Phillips: In terms of when we should expect the budget, are we on schedule for late April or early May now?

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Hon Mr Laughren: We actually haven't set a date, we really haven't. Pre-budget consultations still have until 13 March. About the middle of March the pre-budget consultations conclude, so we wouldn't want to be taking actions before that consultation period is over, even starting to finalize decisions.

Mr Phillips: On the sale/leaseback things, what will you plan to do with the revenues? To me it's a bit like you have the house paid off, you're living rent-free and now you're going to remortgage the house, take the mortgage money into your income and take on a 20-year mortgage. You get a kind of a double whammy, if you will. You get the revenue that you take in, but you've now taken on a 20- or 30-year cost that wasn't there before. Was that what we should expect on the sale/leaseback of government buildings, computers and the GO trains, the revenue in as part of general revenue and then brand-new costs for --

Hon Mr Laughren: Using GO Transit as an example, we get the money from the refinancing of that and then, over the period of the next 15 years, pay back on a lease basis. But at the end of those 15 years, we have not only received the money from the refinancing; we end up owning the rolling stock again.

Mr Phillips: As I say, I will have a lot of questions around the problems we're going to get ourselves into in the long term by selling off assets, taking them into revenue and then essentially borrowing money and having them as an ongoing expenditure.

Hon Mr Laughren: But I guess it depends on how you view how capital projects should be bought and paid for. I think the traditional view is just that you pay for it all up front and that's it. I think the day is gone when we should be doing that. I just think it's the wrong way to do it.

Mr Phillips: I think we're going to get ourselves in an enormous trap, because, as I looked at your budgets, you said that it costs, every year, about $3.5 billion to $4 billion to refurbish the infrastructure of the province. That's what your budget said. Now you're planning, conceptually, to charge only one twentieth of that cost. It will look good for the short term, but we are creating, in my mind, brand-new debt traps. That's why I strongly urge you to at least consider our recommendation to have somebody independent look at this, or else I think that, rather than getting on to deal with the issues, we're going to be dealing with the symptoms of the problem.

Hon Mr Laughren: We're not exactly breaking new ground with this. I think it's done at the federal level with aircraft. I don't know whether the railroads do it or not, but this is not something that's new. It's an acceptable, standard way of refinancing. If it were something that could be chalked up to creative accounting, I might agree with you. But that's not the case at all. This is quite a traditional way of refinancing.

Mr Phillips: What the commission in Saskatchewan has said is that it is questionable. That's why I think there's merit in an independent look at it, because I think we are spending -- I'll repeat -- spending all of our time with the treasury staff looking at every deal coming up from Bay Street when we should be getting on, in my opinion, dealing with the issues of the province. Whether it be sale/leaseback of computers, sale/leaseback of all the government buildings, we are going to take revenue in and get ourselves a long-term lease or debt that would make it very tough for us to work our way out of.

Hon Mr Laughren: That really is a different way of looking at how you pay for capital expenditures which have long-run benefits for the province. I can't remember how many American states don't do it this way, but it's very few. This is a very acceptable way of doing things, and it's a better way of managing very scarce resources of the province. I wouldn't be doing it otherwise.

Mr Phillips: As I say, the debate will, I guess, continue for some time.

The Chair: You have two minutes left, Mr Phillips.

Mr Phillips: On the revenue forecasts that you have in the budget: Do you continue to use that tax revenues should grow at the rate of 90% of the nominal GDP?

Hon Mr Laughren: I believe that's the standard model of economic forecasting.

Mr Phillips: Because these numbers indicate something a little lower than that. Is there a reason for that?

Hon Mr Laughren: Is Steve here? Steve Dorey will have a run at that one.

Mr Steve Dorey: Hi. I think that rule of thumb is one we've used particularly when we've wanted to go out a fair way and show what's going to happen through the medium term. When we produce a revenue forecast for this year and next, we take a much more detailed look at each of the revenue sources and estimate each of them separately. That's why the ratio is a lot lower. I think the ratio would be something about 75% if you did the arithmetic for next year.

Mr Phillips: That's strange, because in the past I think you've used it for next year's revenues as well. Is there a reason why you take a lower number now?

Mr Dorey: In terms of preparing for the budget, simply applying a ratio, a rule of thumb, to GDP is a pretty crude way to go at it, I think. We just do a more detailed study than that.

Mr Phillips: Okay. On the other revenue, at $4.1 billion, I gather you're assuming you'll continue with sale and rentals.

Hon Mr Laughren: Yes.

Mr Phillips: Is there any indication of how much that is?

Hon Mr Laughren: Sorry; where are you at now, Mr Phillips?

Mr Phillips: I'm actually at slide 15 on the 1993-94 revenue outlook. The other revenue is estimated at $4.1 billion. In 1992-93 you've estimated $4.4 billion.

Mr Kaufman: You're looking at slide 15, the revenue measures?

Mr Phillips: Yes.

Mr Kaufman: That refers to a general target. Obviously any combination of revenue opportunities would be looked at, measures would be looked at, including non-tax revenues, asset sales and also the question of direct tax moves. It's a generalized number which we're using for planning purposes. We'll certainly be looking, and are looking, as you've flagged today in your press release, at a variety of sale/leaseback type of options. Those will be examined by the government over the next period and some decisions will be taken.

Hon Mr Laughren: Did you do a press release again today?

Mr Phillips: No.

The Chair: Mr Phillips, I've got to go on to Mr Carr. Mr Carr, you have the floor.

Mr Carr: I want to thank the Treasurer for coming back again. I know he remembers the days in opposition when it's nice to come back. You're very gracious to come back, particularly with what happened after last time.

I want to talk about jobs in your budget. On page 1 you said that jobs were going to be the number one priority. You mentioned that again today. On page 2 you outlined your game plan for creating jobs. That was how you were going to do it, through Jobs Ontario. Your slide 9 came in today and talked about how at that time you predicted 9.8% unemployment. It's now gone to 10.8%. When you came into office, we had the lowest unemployment rate. Last year four provinces have now passed us, are now lower. In a nutshell, you said this is what we're going to accomplish -- create jobs -- on page 1, on page 2 you said this is how we're going to do it and then slide 9 of your presentation shows very clearly that you didn't make it. Wouldn't a reasonable person in the province of Ontario say, as a result of that, that the budget of 1992 is a failure?

Hon Mr Laughren: I'd say that our expectations of growth in the Ontario economy as of last April 30, when we brought down the budget, were higher than was achieved. I would have to look far and wide to find someone who didn't have the same problem, either other provinces or other forecasters who were predicting growth in the Ontario economy.

Our projections on unemployment and inflation and real growth were pretty well in the middle of the pack when it came to projections for this year. There's no question that we didn't achieve it, as virtually no one else did. You don't have to be a rocket scientist or a hockey player to know that we did not achieve the numbers we had hoped. There's no question about that. The recession has been deeper and longer than anybody predicted. If you go and talk to the federal Minister of Finance, I suspect he'll throw up his hands and say: "That's correct. Nobody achieved what he'd hope to."

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Mr Carr: Thank you, Treasurer. I wasn't interested in your predictions being wrong. I was interested in the fact that the programs you put in place don't seem to be working as a result. I'll just get into that a little bit, trying to be as specific as I can. You said that we'd spend about $6 billion through Jobs Ontario and create about 100,000 jobs. Give or take, probably $60,000 a job is what we're looking at. With regard to the Jobs Ontario Training, we're spending $10,000 to give to the private sector to get people off social assistance. As you know, we've got one in nine or one in ten people.

Why are we spending $60,000 per job if the Jobs Ontario Training will work and get that 1.2 million off social assistance and get them jobs through the private sector? Isn't it a high cost that we're paying to produce jobs with your Jobs Ontario program? I'll just finish up very quickly. Is that an indication that maybe the Jobs Ontario Training isn't working? Why are we spending more if we can get the same bang through another method?

Hon Mr Laughren: I think that's a good question. I'd be careful about the number of people to be trained. The social assistance numbers include children.

Mr Carr: Yes, I know. I appreciate that, but you know what I mean.

Hon Mr Laughren: Yes, I know what you mean. The Jobs Ontario Training, in my view, has been the most difficult and complex program that has been undertaken by government to deal with both training and people on social assistance. To go back to it -- and this isn't meant as an excuse but an explanation -- because the recession's been tougher, the number of employers taking advantage of the very substantial credit that's available to them on the training hasn't been what we'd hoped it would be. However, I believe we will end up spending almost all the allotment for Jobs Ontario Training this year.

Now, you'll keep in mind that the program was designed so that people on social assistance could get into the workforce, get trained, get pre-employment training, get training and hopefully full-time employment down the road flowing from that. Because one of the major obstacles for single parents getting back into the workforce is unavailability of child care, that was built into it as one of the components. If you'll forgive me, I think it's one of the most imaginative, creative, forward-looking programs that's ever been developed, because it puts all those components together and tries to get people on social assistance into the workforce and retrained and provide the child care.

I believe we have an incredible number of commitments from employers -- I don't have all the numbers in my head right now -- that will basically use up the allotment. What's been slower is that they'll say, "We will take these people but first of all we want to be in a position to create that job." That hasn't happened yet because of the recovery being so slow. I think it's a good program. I think it was slower getting off the ground and achieving our numbers. It wasn't because we were trying to save money in the program. We wanted to get the money out the door, get these people trained and get them back into the workforce. If it's slower than I would have liked, and it is, it's because of the slowness of the economic recovery. I still think it's the right principle to be dealing with, because it doesn't just hand out money. It says that we want to tie in training to it.

Mr Carr: Yes, that's the point I was trying to make. I agree with you, by the way, on that, Treasurer, that by doing that we could get more people. That's why I'm saying, if you're going to spend the money, why not do it in a program like that, where it can be a big bang for the buck. We are a little short of time, so I'll get off.

I just did want to make the point that here we are spending more money. If this program is truly working and we need to get people off social assistance, because that's where our revenue is going, our spending is going, then this is a good way of doing it. You said you like the program, and that's the point I wanted to make. We can maybe come back if there's more time. You look like you want to answer, so go ahead if you have some thoughts.

Hon Mr Laughren: I'm sorry. I don't want to cut into your time, because I know you have a lot here, but Jay was telling me that the average cost per trainee was $6,700. Keeping in mind that some of the money is available to employers to train existing employees, you have to be careful about extrapolating the numbers just from the trainees to the total cost of the program. Okay?

Mr Carr: Again, the point that I wanted to make is that if we are spending money, when you look at $60,000 per job, if we can't get jobs that are being created through getting people off social assistance, I would agree 100% with you. But we can argue that. It's just some food for thought.

I did want to get on to the other big question, and that's regarding the T word, which is taxes. I still call them taxes. I don't know if you call them contributions now, like some other politicians, but I call them taxes. You mentioned that last year we had an increase in taxes. During the election campaign you said -- and I'll paraphrase a little bit -- we could have all the spending. We could have $5 billion more with Agenda for People and how we would pay for it is tax corporations and the rich.

Last year's budget put a surtax on people making $53,000 -- a massive surtax, in my opinion -- 14%. That's the average worker at the Ford plant who didn't think he was going to be included in the high corporation. It's very simple. We only get 7% of our revenue from the corporations and they didn't think they were going to be the rich that you were talking about. Slide 12 talked about the revenue. You increased taxes by $1 billion and it still went down, the total revenue, by $1.5 billion or whatever. Doesn't that tell you that by increasing taxes you're not going to necessarily get more revenue? The big question everybody is asking you is, are you going to increase any taxes, and if so, which ones?

Hon Mr Laughren: I would be fibbing to you if I told you that I could even answer that question, because we really have not sat down and looked at which if any taxes we will be increasing or reducing. We actually reduced some taxes last year. You never give us credit for that, Mr Carr. We really haven't looked at that. I know nobody likes taxes, as I said, but you're the first one to point out that higher deficits are future taxes. We do have to keep in mind that there is nothing magical, that there is a balancing act between keeping the deficit in check, maintaining the essential services and being selective about which if any taxes are to be increased. It's a balancing act because you could obviously let any one of them go crazy and that's not in anybody's best interest.

Quite frankly, if I can conclude, there are some taxes where, before we even got to that point in budget planning, I would want to sit down with the people in the ministry and say, "Which one of these would have the most detrimental effect on economic recovery and so forth?" because of, as I said earlier, the rather slow recovery that we're going to experience in the next few years.

Mr Carr: I want to tell you about an experience I had. I went to an open meeting with board of education people. They were taking real heat over the property taxes. I think people realize its education. I'm going to say this in a non-partisan way because Conservatives have reduced the amount of funding from 60% and so have Liberals, so has the NDP, even though in the last election one of these NDPers promised to go back to 60%, so I'll say it in a non-partisan way.

Mr Jim Wiseman (Durham West): You did a good job.

Mr Carr: No, I said with Conservatives it was at 60% and now in Halton, for example, we're down to 27%. Who was worst, whether it was Conservatives, Liberals or NDP who broke the bigger promise? The fact of the matter is that it used to be 60%; it's now 27%. They stood up and were taking a tremendous amount of heat for property tax increases. I was hoping they would stand up and talk about transfers and 60% and blame them. To their credit they didn't do that. What you have done to municipalities, universities, school boards and hospitals in your transfers is a lot similar to what you're saying the federal government is doing. They didn't blame the provincial government and say that if we went back to 60% they wouldn't have to increase taxes, which is true. When will you and the Premier stop blaming other levels of government for the problems in the province of Ontario?

Hon Mr Laughren: When the federal government starts treating Ontario the way Ontario should be treated.

Mr Carr: Like the trustees.

Hon Mr Laughren: When Ontario starts getting its fair share again of the programs to which we are entitled, then we will stop blaming the federal government for at least some of our problems. Mr Carr, when the federal government came out with a proposed national highways initiative, do you know what Ontario's proportion was going to be if we just rolled over and let it do it to us? It was going to be 15%. I'm all for equalization payments, but not, as I said earlier, by the back door. This province pays 40% of the fuel taxes that the federal government collects and here they are going to give us a big bonus at 15% of federal government expenditures on highways all across the country. That simply is not appropriate.

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So very directly, I and the Premier and anybody else, I assume, will stop beating up on the other senior level of government when they start treating Ontario the way Ontario historically has been treated.

Mr Carr: I'm glad to see that some people, like the trustees, aren't taking that same tack.

Hon Mr Laughren: Well, the same thing isn't being done to them.

Mr Carr: I've got one short question and then I --

Hon Mr Laughren: How is it 2%, Mr Carr, at a time when inflation is running around 1% in the province and we are transferring to our transfer partners out there 1% last year plus a 1% transition fund, 2% in the year we're in now, 2% next year? That's surely not treating them the way the federal government is treating us.

Mr Carr: When it used to be 60% versus 27% --

Hon Mr Laughren: Well --

Mr Carr: -- and that's the biggest part of the property tax. Anyway, we'll get off it. The point I'm making is, if you look at the 1985 budget, these pie charts -- 70% of the revenue came from the federal government. Your pie chart here was still at 17% and that's your pie chart. But I just wanted to make the --

Hon Mr Laughren: That's half of your social assistance costs.

Mr Carr: -- point, because the same situation works for school boards.

Last question and then I'll turn it over to Ted. I may have some time to come back and then continue on, but the time is short. I did want to make a couple of points. The point on that is the same thing: I was very pleased the trustees -- it would have been very easy to blame you, they didn't do that.

Hon Mr Laughren: It wouldn't have been easy.

Mr Carr: Last question on social assistance: We've gone from $2 billion to $6.2 billion spent on that. Very clearly you've talked about a revenue that there will never, ever be any opportunity to reduce any taxes as long as we keep spending, whether it's 1 in 9, 1 in 10 or whatever. Your Premier's come out and said he's looked at some of the programs the United States is looking at to get people off social assistance; you've got job training and so on. What are we going to do to get those people off?

We are now looking at spending $6.2 billion. What are you looking at over the next two or three years? Are we going to get that down or is it going to continue to go up? Quite frankly, number one, as a province, if we don't do that we're in trouble because that's where our money will be going; number two, as your Premier has pointed out -- and Bill Clinton and everybody else -- it will be human waste, a tragedy, to have that many people sitting around doing nothing.

What is your plan to get it off and where do you see social assistance spending going?

Hon Mr Laughren: I wish there was an easier answer than the one I'm going to give you, but we are -- and I know people raise their eyebrows when governments talk about restructuring programs and so forth, but there is a major social assistance reform program being worked at now. We're quite serious about it.

Of course, the Minister of Community and Social Services can give you a more articulate answer than I, but we want to make sure -- I think this is where some remarks were misinterpreted a week or so ago -- we have a more, what I would call, proactive labour market policy so that -- and I think the Jobs Ontario Training is not a bad example of that -- people on social assistance are given the opportunity to work. I think historically there's been so many obstacles to that happening that it hasn't happened, and I think child care is just one example of that. Pre-employment training is another example of where it needs to be done and I think training is another area that needs to be changed.

We need to link -- and this is where we have to be careful in the use of our words because they can be easily misinterpreted -- I think there needs to be a closer link between social assistance and the workplace. In other words, more opportunities have to be provided to people on social assistance so they can be encouraged, aided and abetted to get into the workplace to end that cycle of dependence. I think ending dependence is the secret.

To be fair, the former government commissioned a study on social assistance reform and the name of the study, which I thought was most appropriate, was called Transitions. I think that's the way the previous government saw social assistance as well, as transition from being dependent to being in the workplace, and that's the transition -- that's how I read it anyway and I think 1hat's correct.

We very much want to make sure that people who are on -- because I agree with you, that number is scary, over $6 billion on social assistance, and in a very positive way we have to get that number down and get people back to work. It's hard to do when you're in the middle of a severe recession, but I think now is the time to start working towards getting people trained and getting them into the workplace.

The Chair: Okay. Mr Arnott, three minutes left.

Mr Ted Arnott (Wellington): Minister, two questions and both revolve around the debt issue. That concerns me most, I think, about what's happening today with our provincial government.

There was an article in the newspaper, in the Globe and Mail, February 16, "Debt crisis looms," the C.D. Howe Institute study. You were quoted following the release of that information as sharing the concern. What contingency plan is in place if the worst case scenario, as outlined by the C.D. Howe Institute report, is what we're going to be seeing in, say, two years' time?

Hon Mr Laughren: I'd worry that a contingency plan would trigger the crisis. I think the -- I didn't read the C.D. Howe study, I read the press report on what the C.D. Howe said and I wouldn't quarrel with the C.D. Howe that the growing levels of deficits and cumulative debts across the land are a growing problem. You'd have to live in some other world not to realize that as the debt keeps accumulating then more and more of our revenues go to pay for interest on that debt. We're paying now a little over 12 cents on our revenue to service the debt. Once again, this isn't meant as a partisan shot, but the federal government is paying about 32 or 33 cents of every revenue dollar. That gives you very little room or flexibility to provide programs, and about 65% or 70% of our debt is offshore that we borrow now. That is a problem and a real concern.

The only contingency plan, to use your terms, I guess, is to try and get the deficit growth reversed so that the deficits are going down instead of up. Anybody who tells you we can accomplish that in the next two or three years -- we can reverse the trend in deficits, but I'm telling you, it's going to be very, very difficult, given the fragility of the recovery without, as I said earlier, changing the face of Ontario. That's going to be extremely difficult, but I don't quarrel with your premise that the growing deficits and the cumulative debt is a problem.

The Chair: Okay. I have to go on to Mr Johnson.

Mr Paul R. Johnson (Prince Edward-Lennox-South Hastings): First of all, I'd like to thank Mr Laughren for his very open, forthright and complete presentation that he's made before the committee today.

I just want to speak for a minute about taxation. Certainly, we know the revenue projections have not produced the revenues we would have expected and would have liked, and certainly that concerns us. But with regard to taxation, there's another concern, and that is how competitive Ontario is to other jurisdictions. We know people don't care to have their taxes raised, I think you could ask anyone --

Hon Mr Laughren: Don't what?

Mr Johnson: Don't care to have their taxes raised.

Hon Mr Laughren: That's right.

Mr Johnson: We could ask anyone and I'm sure we would all agree that there isn't anyone who likes to see their taxes go up, but there's a benefit relationship. People always say if they know they're getting a good benefit for their tax investment, then they aren't as readily concerned about that increase.

I'm not sure whether you brought this information with you today, but I know on slide 12 it shows some of the shortfalls we were expecting. I was wondering if you had any information you would care to share with the committee today with regard to how Ontario compares with other jurisdictions.

Hon Mr Laughren: I have a couple I didn't actually show but could. One shows the tax revenue as a percentage of gross domestic product compared to other major industrialized countries and the other one is a comparison of corporate income tax rates. Did you want to see one of those two or both?

Mr Johnson: If you could share that information with us, I think it would show that -- I'm under the impression, and some people aren't, I know, but I'm under the impression that Ontario is in pretty good stead when it comes to comparisons with other jurisdictions.

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Hon Mr Laughren: There it is now. This shows the tax revenues as a percentage of gross domestic product in major industrialized countries and you can see the United States is 29.9%. In other words, the revenues they collect in the form of taxes are 29% of their GDP. Japan is 31.3%, the UK is 36.7%, we're 37.1%, Germany is 37.7%. In other words, those first three countries collect a lower percentage of taxes of their GDP than Canada. This isn't broken down by Ontario; it's Canadian. But Germany at 37.7%, Italy at 39% and France at 43.7% are higher, so we're sort of in the middle of those countries. The Organization for Economic Cooperation and Development average of -- what, 22 countries in the OECD? The OECD average is 38.8% -- these are the industrialized countries -- and ours is 37.1%, so we're higher than some countries but lower than others and we're lower than the average of the industrialized countries.

The other chart has to do with comparing corporate income tax rates in the manufacturing sector, because that tends to be one most people concentrate on, I guess. I don't know whether we could get other comparisons or not.

The heavy area is the existing, and the shaded area adds in what President Clinton announced the other night. You can see that Ontario is 35.3%, and we collect our own corporate income tax in the province, not just federal. Illinois, Massachusetts, Michigan, New York, Ohio, Tennessee and Texas are all higher than Ontario.

I hasten to add that these numbers do not include payroll taxes, capital taxes or property taxes that business pays, so you'd have to build all those in. This is simply the corporate income tax rates that compare those jurisdictions.

The one number I can remember -- I guess the health wouldn't be built into this -- but I can remember auto sector persons saying that in the United States, using Canadian dollars, the cost of paying for employees' health care benefits is around $4,200, and in Ontario, it's around $700. So there are some competitive advantages that we don't talk about often enough, I think, because they're real.

Not every employer pays the employees' health tax, I appreciate that, so you can't just build it into a graph, but it's very real and it's a very definite advantage that Ontario has. I don't know how much time I can spend on this, but the last number I saw on health care, we paid about 9% of our GNP on health care -- which is public, medicare. The United States, which is private, pays 12% of their GNP, and even then there are over 30 million Americans with zero health coverage and another 50 million or 60 million with inadequate coverage. So we have some major advantages, too, that we need to talk about more often, in my view.

Mr Johnson: While we're on taxes, I was just wondering: Mr Clinton said he is going to raise some taxes, but one of the things that --

Hon Mr Laughren: Who?

Mr Johnson: Mr Clinton.

Mr Phillips: He doesn't work for you.

Mr Johnson: I think he's the president. With regard to fuel tax, I know that's always been a bone of contention for travellers and business alike. The United States has no policy -- that is, a national tax -- on fuel and Mr Clinton, I know, is toying with this idea. It wouldn't take much, I don't think, of a national fuel tax in the United States to put many of the provinces of Canada, as well as Ontario, in good stead. Do you have an opinion or any further information with regard to that?

Hon Mr Laughren: My understanding of what Mr Clinton's doing is putting a tax on -- what do you call it --

Mr Arnott: British thermal units.

Hon Mr Laughren: -- energy based on British thermal units, which is a measurement of generation of energy, I guess, although I hadn't thought about that since grade 10.

Mr Carr: Oh oh, another tax coming.

Hon Mr Laughren: Yes. I think the equivalent on gasoline, as I recall, would be about seven and a half cents a gallon. If that were true, if it were seven and a half cents all across the board, it still wouldn't bring American gasoline prices up to the level of Ontario or Canadian gasoline prices. Although I think it would have a bearing, for example, on cross-border shopping, I don't kid myself that suddenly people would be flocking from the States to Canada to buy gasoline. It wouldn't be that size of hit, but it was an interesting proposal. There's no truth to the rumour that I said that it gives us that much room to move.

Mr Johnson: You haven't sent him any letters encouraging him to raise it, then?

Hon Mr Laughren: No, but I do think that his economic package is a stimulant package. It's not large -- is it $30 billion? -- in terms of the States. The United States has a population that's 25 times that of Ontario, so if you divide 25 into $30 billion, it wouldn't be a big economic hit in Ontario. But I think it's partly symbolism, an expression of faith in the American economy and to put money into infrastructure. I think that's the right thing to do. I was pleased to hear him say that he was going to do that, because given our trade with them, if the US economy improves, that can only help us. We're rooting for their economy as well.

Mr Wiseman: Just as a supplementary to this question, I found it rather interesting to read that some of the cities in the United States not only have a six per cent personal income tax but also have a six per cent corporate tax. That's on the city level. I don't know when the people do their analysis of competitiveness and comparative competitive situations, but I'm just wondering if that kind of factor is included or if it's done in the assessment.

Hon Mr Laughren: I'm not sure of that. I don't think so. Just as an anecdotal aside, I was in New York about a year and a half ago doing investor relations. I paid my hotel bill. It was a very modest hotel, I might add. The taxes on my bill were something like 23% or 24%, so that what you see isn't always what you get when you see the ads or when you compare accommodation rates in different jurisdictions.

Interjection.

Hon Mr Laughren: I'm told that no city taxes at all are included in those numbers.

Mr Wiseman: We don't really have the definitive study on competitiveness if we don't take that into consideration.

It was interesting to hear Clinton muse about introducing a sales tax. Given that his situation was $60 billion out of whack from what was being touted in the United States and that he has all these restructuring problems, moving into skills development and infrastructure development and so on, I'm just wondering, when you look at it, how much his options for the future have been narrowed by decisions made in the past in the similar way that ours have been done and whether we've done an assessment, a real assessment or any kind of preliminary assessment, of what this means for Ontario in terms of what he's doing in the United States.

Hon Mr Laughren: We think it's positive. I don't know how you make some comparisons, but we do think it's positive, both on the stimulus side and on the tax increase side, because on the stimulus side the faster and the stronger the recovery in the US, the better for Ontario, because of our trade, and on the tax side the more taxes that he raises, the more competitive we are. Everything he's doing, I think, can only benefit us. Now, to what extent? I don't know how you can precisely measure that. Does that answer your question? If not, I'll get somebody who knows more than I.

Mr Wiseman: I think it's a little early.

Hon Mr Laughren: It better be.

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Mr Wiseman: I just wanted to know in terms of the American market creating more demand for Ontario products and therefore leading to increased employment.

Just to change direction, the deficit is something I'm constantly hearing about from my community. It's interesting that the Progressive Conservative government of Manitoba created a negative 2% transfer to its transfer partners and we continue to hold at 2% this year and then 2% on the base for next year.

Mr Carr: Hold it, it's not 2% on the base.

Mr Wiseman: It's 2% this year and then 2% on the base for this year for next year.

The Chair: Mr Wiseman, the Treasurer will give you the answer; you don't have to listen to the opposition.

Mr Wiseman: That's true.

Mr Carr: You'll get the same answer.

Mr Wiseman: They're too busy apologizing for their federal counterparts. The question I have is about the deficit and how over the years we've seen all these projections in terms of who's going to do what. We see them again. When I started two and a half years ago in the chair that Mr Hansen has now, we were told by everybody that we'd be coming out of this recession in April 1991. We're a little late.

Hon Mr Laughren: A lot late.

Mr Wiseman: A lot late. In terms of putting those into perspective, can you give me some idea of how we've tried to improve the number crunching so that we have a little better and a little more accurate assessment of real growth changes and how we can really get a handle on the deficit? Because these numbers are all over the place and were all over the place before.

Hon Mr Laughren: There are two components here. One is predicting or forecasting the depth of a recession and when it's going to end and also the strength of the recovery. The other, though, is being able to predict things like personal income taxes, retail sales taxes and corporate income taxes. Obviously there's a link between particularly those and the health of the economy as well.

We've been terribly frustrated at the numbers, on the income tax side in particular. I don't believe it's done for reasons that are improper or anything like that. It's just that Ontario put a position to the federal government -- maybe about a year ago; I'm not sure -- about working with the federal government and the provinces to look at forecasting models to see to what extent we could come up with whether there was anything inherently wrong with our forecasting. Were we doing something wrong? Were they doing something wrong? Because everybody is disadvantaged with the inability to forecast more accurately. Nobody has anything to gain by forecasting inaccurately, so everybody works extremely hard trying to get the right numbers, but it's quite volatile.

I'll give you an example. Corporate income taxes, because of the provisions for carrying losses backward and forward, can be very volatile for about seven years. You can carry forward and backward three and four years on each end. You can have a recovery, but because losses can be carried forward under our tax regime, then you don't get a growth in corporate income taxes even though the recovery is under way. On the income tax side, that's been the most volatile for us, extremely hard to forecast.

I mentioned earlier -- and it wasn't meant as a shot -- that the federal government predicted what we could expect our revenues would be. We said, "It's too optimistic," and reduced it by $1.8 billion, which is a lot. Even then we're off the mark. It's really a difficult science. But if you want a more technical explanation --

Mr Wiseman: Dismal science. Isn't that what Malthus said?

Hon Mr Laughren: -- I could ask Steve to come up. If you want a more technical response, I'd be quite happy to have Steve take a run at it. Do you want that?

Mr Wiseman: We have only about three or four minutes left and I do have one more question.

Hon Mr Laughren: Sorry, Steve; I tried.

Mr Wiseman: You're off the hook. There are a number of final papers and a number of draft documents that have been completed by the Fair Tax Commission. They have made a lot of recommendations and suggested a lot of changes. Could you give us some kind of status on where the Fair Tax Commission is, and not exactly what will be in the budget, but do we think the next budget might reflect some of the things that it's recommended?

Hon Mr Laughren: Let me start with the status report. The Fair Tax Commission had, I think, eight working groups that looked at different areas of taxation: property tax, wealth tax, taxation on women and so forth. They have completed all but one of those tax studies. The only one that's still to be reported, and I believe it will be within the month, is the working group on wealth taxation, which always causes the Tories to shiver a bit. But that's the only group that has not yet reported. They'll be reporting within the month. The Fair Tax Commission itself will be coming out with a discussion document which it will take around the province, I think in the next three months, roughly April, May and June, I believe, and will be discussing around the province the total tax regime in the province. It's fine for a working group to study one specialized area of taxation; it's another thing to look at as a whole package. The Fair Tax Commission will be doing that and will be completed, I believe, by early summer. Then it's up to them to conclude their overall report, which comes to me by the end of this calendar year. They have a three-year mandate. They're on target and they're on budget. That's the status of it.

In terms of this year's budget, I have no idea. We haven't approached it that way. We have an understanding with the Fair Tax Commission that it won't be offended if we move in the interim on any tax measures. On the other hand, there are some aspects we really want to look at and some advice they can give us. There is no categorical answer to your question, other than that it's an ongoing process.

The Chair: Mr Treasurer, our time has run out. I'd like to thank you for appearing before this committee again. I understand you spent hundreds of hours preparing some more numbers for the committee. We appreciate your attendance, your staff and the work they've done for this committee.

Hon Mr Laughren: Thank you, Mr Chairman, and I express my appreciation to the staff of the Ministry of Finance because they really have done a lot of work on behalf of the committee. I'd like to express special appreciation to them.

Mr Phillips: The tax material you put up on some of those slides would be useful, I think, for the committee. If you've got any tax numbers from last year -- if you remember, in the Fiscal Outlook you had a useful table of tax comparisons and a whole bunch of things. Those tables that you put up on taxes might be useful for us.

Hon Mr Laughren: Maybe I could have a word with you afterwards. I'm not sure what you're getting at.

The Chair: Okay. Mr Phillips, we're going to have a five-minute recess until staff are able to clear, so we don't have any noise in here for the next presenters. We'll come back in five minutes.

The committee recessed at 1558 and resumed at 1611.

The Chair: We'll resume the hearings on pre-budget consultations by the standing committee on finance and economic affairs.

DAILY BREAD FOOD BANK

The Chair: The next group to come forward is the Daily Bread Food Bank. Would you come forward, please. Welcome again this year to the standing committee of finance and economics. I guess you're familiar with the procedures here. I think this is the third year I've seen you here. If you wouldn't mind identifying yourselves for the purposes of Hansard and for the people of Ontario, you may begin.

Ms Sue Cox: Good afternoon. I'm Sue Cox and I'm the assistant executive director of Daily Bread.

Mr Gerard Kennedy: My name's Gerard Kennedy and I'm executive director.

We have made it a part of our business to come before this committee, at least for the last couple of years, because we feel it is important that the kind of bottom lines you hear from organizations like ours be factored into the recommendations you make to the government and the Treasurer.

We, having established a little bit of continuity, would like to relate to you what things look like from the standpoint of food banks. I don't think any of it'd be particularly surprising. We're now dealing with approximately 162,000 people a month in the greater Toronto area turning to emergency food services. That compares to something under 150,000 at this time last year and less than 100,000 the year before. In effect, in the recession period we've doubled the number of people who are coming to food banks. We see now a majority of employable people being part of the group that is having to depend on charitable food in grocery or meal form.

What's different now that is, I think, remarkable enough to try and have grappled with at the level you're going to form your considerations at is that people are going without food regularly for the first time since we've been in business, in the sense that we know that on a consistent basis the food we're giving them is much, much less than they require. That's because there's been a straight-line dilution of the services we have to offer and a very marked decrease in the quality of government services available to the disadvantaged groups we're seeing.

We came last year remarking on some of the features of how that had happened. It has continued such that, for example, within Metro discretionary benefits for people on social assistance have been reduced by the Metro government as a cost-saving measure and have directly affected both the demands on food banks and the general quality of life of people who are attending food banks.

What we've seen is approximately something in the order of $20 million worth of benefits removed, which is almost the full value of the food we supply. We supply about $25 million worth of food through 220 outlets as the country's largest food bank, and what we've seen is that, in one fell stroke, the amount of transit tickets and first and last month's rent and cribs, layettes and other types of benefits, essential things that people need that were provided through the social assistance system, have been removed.

In August of this year one of our agencies, the Salvation Army, received a letter from Durham social services and in that letter it said: "The provincial government has made cutbacks coming into effect August 1 in connection with the STEP program. We are no longer in a position to be able to offer emergency services. You will receive a tremendous number more people. We hope you can handle it. Good luck." That was from the administrator of government official welfare for the regional municipality of Durham.

We find ourselves in an extremely awkward position vis-à-vis the kind of considerations you have. I think you'll have other groups that will come before you and commiserate how the money is tight, as it undoubtedly is, will understand an emphasis on creating jobs and on learning what the government sector can do under constraints to do that type of thing, and will show generally an understanding of the tremendous realities the government and the political process in general is burdened with.

We, I guess, have to disagree in the sense of the focus, or what we see happening out there. The burden is not being fairly shared. There is a free fall still apparent at the lower end of the spectrum in terms of what people can expect. There has been very little happen by way of a balanced approach to the recession, to which we recommend as a test of that -- what happens to the people who have lost their jobs and have had to turn to official assistance programs?

All levels of government -- and we'll be careful to include the federal government in terms of what's happened -- have made the equivalent of a dine-and-dash in terms of the cost of the recession. We really don't see the kind of programs having any effect and, in fact, we're seeing some of the programs established before, like the STEP program, being taken away from. There's a program that's supposed to make it easier for people on welfare to be working, which we would find consistent with most of the thrusts from most levels of government. But that program has been rendered ineffective since August last year because it was deemed too expensive, in the context that people are no longer able to keep the money they earn until they've been working for three months. We are collecting data on that, but some of our experience is that people are, in effect, not taking jobs because it requires a significant sacrifice from them before they receive the kind of extra benefits in the government design. This was measured and undertaken, we understand, to save something in the order of $200 million in the social welfare system.

Last year we spoke about a social deficit. I mean, there still is an unfunded liability out there. We don't know quite how, and I think we will be trying in more public ways to make the point more adequately, but we have to somehow impress upon you that what we see as average people is not acceptable, that what we see on a day-to-day basis are not the kind of conditions that would say we're doing everything, that we're trying the hardest we can. I don't wish to lay at the feet of this committee or even particularly at the feet of this government that those conditions exist, but it has to rest somewhere. Right now it's resting really uncomfortably with a bunch of church people and people in the volunteer agencies, and the dual problem we have is seeing that, feeling very, very uncomfortable with the little bit of food we can give in response to that and then not having anywhere to take that observation. We basically feel there's been an iron curtain of resistance shut down on the part of all levels of government to do any more.

I think that is problematic, because what is needed right now are programs that do respond to the hardship taking place out there. People have less money now to buy food on welfare than they did in 1975. Those are factual things. There are more people having to pay food money for rent than there have been at any time since those statistics were collected, because of the high cost those families come in with. So it is neither honest nor a point of comfort for the government or for other members to believe that we're doing the best we can. The circumstances have changed, worsened, and the government with its rationale and its constraints and so on has unfortunately not grappled with that, or has not admitted that people on assistance are not being well provided for as they were in the past. That is the simple fact of the matter. It's somewhat incontrovertible. Those are government statistics that would support that.

Our own data show that people have less money left over to buy food for about the third year in a row, and in essence we're disturbed that the basic issue of defining the government's responsibility so community groups like ours can get on with adding to it, has been erased entirely off the government agenda.

There used to be a lot of talk about how much money people got on assistance, and whether that was viable, and whether that was saleable, and whether that was what people would support. I think that in the face of the deficit monster, you know, talk has been scared right out of the room and I think that's very, very unfortunate, because if we had a sign to leave a message with you, it would be -- not intending to be sarcastic -- along the lines of Bill Clinton's sign and it would say "Adequacy, stupid." There really is not enough money for people on assistance. We know it's not popular to say that, but it is true and it is the basic building block under which any other program that would hope to improve people's circumstances would be built on. If there is not a consistent program to stabilize people and if there is not a commitment from the government level to make that threshold investment in people's circumstances that they can pay their rent, buy enough food -- because then those other programs are much less likely to succeed. The risk we would reiterate is that the 13% of the Ontario population on welfare today could, like the 5% of the population on welfare in the recession, find itself resident there because of the lack of timely intervention.

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That has got to be the single biggest horror story we could face as an outcome from this recession, that what happened in the last recession could be repeated: welfare rates did not go down after the recession, they went up. They went up because people were remaindered. They were not happy to be on welfare, they were just less employable by the time the dust settled. I think we're seeing a repeat of that right now. We're seeing much more educated, much more employed history types of people who are finding themselves on welfare and in the food bank lineups.

We're very fearful that those people are deteriorating. Our own people who we encounter -- the surveys we are showing are a higher incidence of people showing sickness and other things creeping into it. We can't give you a total quantification of that, except to say that risk is there and if you want to really see it fed back to you, just look at what happened in the last recession. The welfare rates and numbers did not come down. Welfare was not made more attractive or more effective until 1989, so that was not the draw. It was simply that people who no longer were counted as employable ended up somewhere else.

The lack of focus today on adequacy and what that can contribute to an overall strategy of taking care of this recession in human terms -- we wonder if we're in the same room or in the same province, for the lack of attention that's getting today. We really can't commend the government for its focus on things like welfare fraud, we think that's simply a means of avoiding the basic question. We really don't have a lot of regard for the latest talk about putting people to work and so on. If you provide the jobs, we'll provide you with the people.

We can give you thousands of people if you have jobs or training opportunities or, indeed, volunteer opportunities. It is presently illegal to volunteer if you're on welfare or UIC and looking for work, and we still have people who do that. I think the discussion still has to be somehow brought to bear where the government makes an official assessment of where adequacy is. As embarrassing as that could be, it still would at least line up for the community what the challenge i. I think there is a problem developing out there and it's undercutting the confidence in even programs like ours, that somehow this thing is taken care of, that our programs are overly rich, that they are a primary source of our deficit difficulties and all of those things. Rhetoric is in effect undercutting the support the government should be seeking for a properly balanced recovery package and also undercutting, as a byproduct, the support for programs like ours. I think we're going to see more of a boomerang and more of a backlash as this recession continues in terms of people's generosity.

The last point we'd like to leave you with before asking for any questions you may have is that right now, though, our sense of where the public is at is that they're extremely supportive of the people in difficulty, that this is where people are at. We see that expressed. I share with you a survey of 11,000 out of 200,000 people who participated in our last food drive. They filled in surveys at the back of the bags. Some 70% of them said that you guys are responsible for putting us out of business, for solving the problem. They still believe and trust that government is responsible. The next emphasis, of about 20%, is on the people themselves, then on business and then on food banks, in the 6% and 7% categories. So even the giving public, which you think might have a different look on things, doesn't. They don't hold us accountable for solving the problem; they suggest it is a government problem. They believe the hunger problem is extremely serious and they want us to be focused more -- that is, the food banks -- on the causes of hunger. We are going to try and do that. You will hear, if it makes a little bit of noise, that we will be doing that in some significant way, changing our programs from a simple food program to more food information and advocacy programs, things we think are necessary to affirm, unfortunately, on a day-to-day basis, the viability of government programs. We see, as some of the will seems to be missing from the leadership -- at least, that's the impression -- the day-to-day function of government programs has become more and more difficult, more and more adversarial and we're much more likely to get people because of government mistakes and lateness and so on.

We can't underestimate, or at least we recommend to you not to underestimate, what can be accomplished in terms of at least a commitment for some kind of preference, some kind of place being acknowledged for people living in poverty, people struggling through this recession. Obviously, in the contexts of your deliberations, to give that kind of place any meaning has to be backed up by dollars. We come without a lot of specifics besides the focus on adequacy, because we think the many things that could be done are all going to be regressive, in a way, if adequacy isn't part of them. I leave you with that basic consideration and invite any questions you might have.

The Chair: Mr Carr, three minutes.

Mr Carr: Thank you very much for your presentation. I was interested in getting to the bottom of the problem, as you know. A couple years ago -- we just finished talking to the Treasurer about it; I don't know if you were here during that -- we spent about $2 billion on social assistance. This year, it'll go to about $6.2 billion. A couple of weeks ago, on a Friday, I got a call in my constituency office from a lady who works in the region getting out the social assistance cheques. She used to be on social assistance. She tells me that she actually, all things included, made more money when she was on social assistance and wanted to come forward and was complaining to me, as her MPP. She obviously can't come forward because she works at the region and was concerned about her job. What you talked about was a case of some people can't take any jobs because it's illegal and they'll lose the money they're getting. One of the concerns we've got is how we get people back in the workforce. This government has come up with the Jobs Ontario Training, where it basically will put some programs in place to give some employers money so they will train people on social assistance to get them the jobs. What you seem to be saying is we should be spending more money on social assistance. We've done that and the waiting lists keep getting longer and people get more frustrated, ie, this lady who now works for the region.

You talked about STEP. The Jobs Ontario Training program -- are you in favour of that? What can we do to make sure we reduce the number? Quite frankly, we pump more money into it and more people go on social assistance. We need to stop looking at the amount spent in it, because everybody agrees that's what most people want, to get off social assistance. Is there anything else we can be doing? Are things like the Jobs Ontario Training program going to work and, if not, is there anything else you can suggest?

Mr Kennedy: Jobs Ontario Training -- it sounds like a good program, what we've seen of it. Some 70% of the people using food banks say the training program would help them stop using food banks. It doesn't mean it would fix their life, but it would do that. Only 1.5% are currently in a government training program, so there's an obvious gap there and when only one in 50 who wants the program has access to it -- we're now trying to find out the reasons they don't have access to that. Mention was made of benefits. I think we have to take welfare benefits -- and it is a huge expenditure of some $6 billion this year, and now on an unfairly shared basis between the federal government and the province. That really should be taken into the realm of some kind of objective context. In other words, I think the first responsibility of a parliamentarian should be knowing: Are those rates adequate or are they not? We had a federal member of Parliament who quoted the wrong rates for a month in the media and was never challenged. Those are not the accurate rates that Barbara Greene was speaking of. The situations may differ, but I think there was a recommendation in the SARC report that should be important to us now, because I think those kinds of questions end up being both sides of something and they don't contribute very much unless we know the answer.

Mr Carr: You know why that is --

Mr Kennedy: Having the adequacy laid out there so that it's not confusing, so it is clear-cut. But STEP was taken away from this year. For some people in some classes, they indeed would have made less money for the first three months and then it would have kicked in. So they were required to have that job, to keep it for three months, to be in a worse-off position and then to get their deductions under STEP. That was to discourage more people from joining the welfare system.

The Chair: I'll go on to Mr Marchese.

Mr Rosario Marchese (Fort York): Gerard, I'd be interested in your reaction to what seems to be very generally felt out there and how we deal with that. A lot of people believe that many people on welfare simply are there to cheat the system because they don't want to work, and a lot of people believe that what we're building within the welfare system is a dependency from which very few will get out. What people are saying is, "Don't give any more, give less, because it's probably the best way to start getting people back to work."

I know you don't agree with that, but that's the typical kind of reaction. Everybody knows a cheater out there. Everybody you talk to in the constituencies from all parties will say, "I know a case, possibly more, of a couple living together but not living together benefiting from welfare, receiving income as people living apart but they're really together." There are a number of instances of people that people give where they are cheating the system. What is your reaction to that? How do we deal with that perception of the problem?

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Mr Kennedy: I think first of all there has to be an equal counterperception, at least equal, and no one is putting that forward. I think it is the government's job. Can you imagine if you were running the tourism ministry and you said, "We do a really bad job at tourism and we're sorry," or if somebody said, "You're wasting a lot of money on advertising dollars," and they just say, "We don't know how much money is being wasted and we can't find out"?

The typical response, at least from certain municipal governments, when welfare fraud or that kind of thing is brought up in a public context is to say, "Here are some cases we've prosecuted," and to confirm that suspicion on the part of people. They opened up a welfare fraud line in Metro. They got 600 phone calls. Only 100 of those people were on welfare. Only 20 of them were worth investigating. Only 10 of them were actually in a situation where they could proceed. So there were 10 out of 600 for a line picked up to deal with fraud.

I think it is the job for parliamentarians to know what the actual thing is. People sell health care joyfully. They talk about its benefits. People don't do that with social assistance. We don't talk about what it is and what it is there for. Because it's unique in the sense that it gives grants to people, this is the time really to talk, during the recession, and to have some leadership from elected officials to say what those programs are for, because we are going to lose that public support.

The most disturbing thing is to see governments playing right along with that because frankly the anarchy you see out there as this happens -- 13% of the people who use the food banks say they would steal food. That's a small number perhaps, but that's 13,000, that's something like 20,000 thefts of food a month that would be taking place. People said they would protest. People said they would pressure government. People would go hungry. Those are the kinds of social outcomes that are there and that the welfare system is preventing.

It's unfortunate that we have to come and complain, because we see what the alternatives could be. But on that somehow, some kind of program of asserting what that is for and some kind of program where the government is able to say exactly what kind of abuse is taking place as opposed to going along with vague notions that are out there, those I think would be very strategically important at this time.

Mr Monte Kwinter (Wilson Heights): Mr Kennedy, thank you for appearing again. I'm somewhat disturbed by your report in that certainly it seemed to me that the concept of the food bank was that it was to be a temporary measure during tough times. The present government stated that one of its priorities was to eliminate food banks. From your report, I get the impression that instead of its being eliminated, it seems to be getting institutionalized. Statistics Canada has stated that the recession is over and yet your figures seem to be pointing the other way. Do you have any comments on the remarks I've just made?

Mr Kennedy: We're trying to encourage a fresh look at things in the sense that we don't think people should be hungry just because there are less jobs and because welfare is problematic. There's no natural reason to explain why food banks should be there. We would like to encourage the government -- and maybe this committee can made a recommendation -- to reconsider its backing off of its promise to eliminate the need for food banks.

I think we have to have some social goals in this province alongside economic ones. We're disappointed to think that that goal has been put aside so quickly, because we think that a food bank does not mean that someone has to take charitable food; a food bank means that alongside of charitable food people go without, 80% go without food. That's what a food bank means. Accepting a food bank as a condition in this province means accepting hunger. It means that little kids don't get adequately fed. They have white skin -- you can tell them a mile away -- and they're out there in the thousands. That's what that means. That's what we want for people in this government to reassociate themselves with getting rid of: the need for food banks.

We really find ourselves struck when we try to prepare ourselves for committees like this. How do we make that point, that this is not an inevitable thing, that even though we pay more money for people on welfare, we're paying less per person, and if we're going to pay less per person, then per person they're going to have less money for food and there's going to be hunger? We'd like some official body, like the government or committees of government, to quantify that. That somehow has to be available to the average citizen, because we're not getting a positive dialogue around this kind of thing.

We think that if we're back here this time next year and nothing significant has changed, you may see a little white flag up here that says, "Food banks are permanent," because really the alternatives that we're faced with on a day-to-day basis are reaching that point. That's why we're about to announce a one-year program to try to prevent that, but there's only so much we can influence. The government opened up with what we thought was an applicable promise, to eliminate the need for food banks in the course of its term. We don't think it had any right taking that off the table in its first six months and we'd like to encourage all the members of all the parties to get it to put it back on. If we can't do that, what are we going to get accomplished socially in the next three or four years?

The Chair: Okay, Mr Kennedy and Ms Cox, thanks for appearing before this committee today.

Mr Kennedy: Thank you for hearing us.

The Chair: Have a safe trip home with the weather the way it's out there.

ONTARIO ASSOCIATION OF NON-PROFIT HOMES AND SERVICES FOR SENIORS

The Chair: The next group to come forward is the Ontario Association of Non-Profit Homes and Services for Seniors. I'd like to welcome you here before the standing committee of finance and economic. We have until 5 o'clock. If you don't mind identifying yourselves for the purpose of Hansard and for the residents of Ontario, you may begin.

Mr Michael Klejman: Thank you very much, Mr Chairman. My name is Michael Klejman. I am the executive director of the Ontario Association of Non-Profit Homes and Services for Seniors. I bring regrets and apologies from our president, who is ill today. I'll try to stand in both for her and myself.

You have before you copies of our submission. This is our second year to appear before the committee. I recall from last year's appearance that we were a little apologetic, noting that we are not an organization that brings a lot of financial and macroeconomic expertise but that we do look at issues that affect the seniors in Ontario and the non-profit sector that provides services to them.

We are pleased to have this opportunity to appear before you to talk about the direction for the provincial budget in the coming fiscal year. We represent some 250 non-profit organizations, both municipal and voluntary, which provide services to seniors. Our membership includes homes for the aged, seniors' housing, non-profit nursing homes and community service agencies. Altogether, we serve well over 10% of Ontario's seniors.

Our members are funded by provincial grants from the ministries of Community and Social Services, Health and Housing. They also collect fees from seniors using their services, receive grants from municipalities and fund-raise to meet their obligations. It may be of interest to the committee to note that our members received about $350 million from provincial ministries in 1991, at least $62 million from municipalities, $233 million from client fees and another $16 million in charitable donations.

Our members are currently in the midst of trying to cope with significant shifts in care levels, particularly in facilities, while all the funding sources are severely constrained. We are also very apprehensive that the redirection of long-term care will lead to serious deterioration of the quality of care in many of our facilities. While we applaud the government's efforts to introduce a fairer funding system, what we are seeing is a system which will, in reality, transfer the current underfunding from some facilities to others. It'll result in a significant shift of provincial dollars over the next few years from the not-for-profit sector to the for-profit nursing homes.

In our presentation I'd like to address some broader fiscal matters and then speak about more practical financial matters related to our sector, keeping in mind of course that in all the comments we're looking at primarily how our sector fits into the broader budgetary and economic issues you are looking at right now.

We recognize and applaud the government's efforts to stimulate the economy and to reduce the hardship Ontario's citizens are facing due to job losses. We urge the government to include in its job-creating initiatives capital projects for homes for the aged. There are, in 1993, over 1,00 ward rooms in homes for the aged, thus affecting at least 4,000 residents. We find it unacceptable that people are still forced to live without the basic right to privacy. Keeping in mind that 63% of seniors in homes for the aged are over 80 years of age, we strongly urge the government to include upgrading of those facilities which have ward rooms.

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This province can look at its mix of cultures and ethnic groups with a fair degree of pride, particularly when we consider the conflicts and strife in so many other places in the world. We should not be complacent and must be vigilant to deal with racism and discrimination. There are clear examples of this government's policies which show sensitivity and responsiveness to ethnocultural issues. The commitment of 660 nursing home beds to multicultural non-profit groups is one such clear example. It is unfortunate, however, that now, some two years after the allocation was announced, very few of these beds are anywhere near being opened. The simple fact is that most of these groups are faced with years, if not decades, of fund-raising efforts to come up with the $60,000 to $100,000 per bed they need to build these facilities. The province, meanwhile, takes the credit for supporting multicultural groups while pocketing about $11 million each year these homes are not in operation. The degree of frustration and cynicism among these groups is significant as they struggle to realize their dreams.

We urge this committee to consider one-time grants to these groups, matching the funds they have already raised, to assist them with their long-sought goals. Keep in mind that such grants would establish the province as a partner of these facilities, thus retaining the funds or value of those funds in public hands.

Shifting to another area, we would like to address the relationship between two of the basic functions of the government. Governments are entrusted with the responsibility to protect their citizens. To accomplish this, measures like setting safety, health and environmental standards are often taken. There is a direct relationship between the government's role as the regulator and the policymaker and as the funder. When we look at the government's initiatives in the past several years in the areas of workplace safety, labour relations and employment practices, we must ask who will pay for all these expectations.

We want to be clear that we do not oppose these changes; however, we do want the recognition that these well-intentioned changes have a direct cost impact on our member agencies. We object to the imposition of these new requirements without adequate financial support because in the end it is the seniors who will pay through the lowering of quality of care. The most recent change of this kind is the exclusion of third-party annual medicals from OHIP coverage. You may not be aware of this, but all homes for the aged are obliged by law to require a medical statement from every staff person they employ every year. Under the new regulation, the homes are to absorb these costs within their budgets, which are already stretched to the breaking point.

Moving on to more microeconomic aspects of the provincial budget, we will focus specifically on long-term care issues. Citizens of Ontario were sold on the idea of a radical overhaul of the long-term care system, beginning with long-term care facilities. We were promised a system that would be based on the principle of funding the care and needs of residents in facilities, and not facilities themselves. It is now becoming apparent that the reform of facility funding will essentially be a redistribution exercise. If our prediction that the anticipated $150 million in additional resident revenues will not materialize is correct, then the reform will simply turn into a shift of provincial funds from non-profit homes for the aged to for-profit nursing homes.

It is worth noting that last summer a government-constituted task force developed a budget for a hypothetical 100-bed facility which would meet the expected standards of care. This facility's projected per diem was about $120 per resident. This effort was then terminated by the government and the group was asked to figure out how to allocate a per diem of $90 per day, as this was what was available. As I noted in my earlier remarks, there has to be a correlation between what the government expects as outputs, through its standards for care, and what it is prepared to pay for.

Finally, we wish to draw the committee's attention to the serious inequity in the treatment of residents in homes for the aged. There are nearly 4,000 residents in homes for the aged who, although holding valid extended care certificates which make them eligible for OHIP coverage of their costs, are forced to pay the full costs of their care. This inequity results from the provisions which enable the Ministry of Community and Social Services to designate beds in homes for the aged as either residential or extended care and then permit conversions to extended care at its own discretion. Over the past several years this discretion has been refused, although everyone agrees there is a definite need for it. This situation is reflected in the fact that nearly 60% of all charitable homes for the aged in Ontario are in deficit and are carrying a total deficit of over $16 million, of which the province funds currently only 57% in spite of its long-standing commitment to fund 70%. Thus, some of these groups are literally on the ropes and we have witnessed six charitable homes closing their doors due to financial burden.

We ask the committee to urge a review and lifting of the freeze on bed conversions, particularly since the province already funds about 57% of these costs. This action is even more critical as we see continuing delays in the implementation of the new system.

It is disconcerting to note that the province, while loudly complaining about the impact of federal capping of its transfer payments to Ontario, has employed the very same measures to cap, first, municipal homes in 1989, thus shifting a much greater cost to municipalities, and now this year has capped special grants to charitable homes as well.

In conclusion, I'd like to highlight key points of our brief. We urge the committee to include the retrofitting of homes which still offer ward accommodation as a priority in its effort to stimulate the economy through capital projects.

We urge the committee to strongly recommend that special matching capital grants be provided to multicultural groups which were awarded nursing home beds.

We ask the committee to insist on establishing, as a principle of costing and funding, the compliance with new provincial legislation which affects operations of transfer payment agencies, including municipalities.

We urge the committee to support the principle of fair treatment of residents in homes for the aged by honouring valid extended care certificates and, finally, we ask the committee to recommend suspension of capping provisions imposed on homes for the aged. Thank you very much.

The Acting Chair (Mr Johnson): Thank you, Mr Klejman, for your presentation. We have approximately six minutes per caucus and we're going to start with the government side. Mr Marchese?

Mr Marchese: I want your opinion on our long-term care initiative and how those initiatives fit in with some of the recommendations that you're making, if they contradict each other or if, indeed, in going through this process, some of these questions might be dealt with down the line.

Mr Klejman: One of the issues you raise with respect to bed conversions will, in the long run, be addressed. One of the concerns we have is that the date of implementation keeps on shifting back. We were all working initially towards January 1, 1993, implementation date. Our latest formal indications are some time in the late spring, possibly as late as June. Informally, from bureaucrats, we hear we're looking at the fall. I suspect now we'll probably be as late as January next year. Meanwhile, these homes are piling up deficits.

The reference to $60 million means that some of the homes have been accumulating their own share of deficits now for five or six years, and they're having problems with their banks to even sustain current operations. This is why we're asking for the conversion provision to either be retroactive to January 1, 1993, or at least implemented immediately to take off some of that pressure. There are many charitable homes right here in Metro under this burden.

Mr Marchese: Can I ask again, on the long-term care in terms of one of the concerns you raised about ethnoracial groups, do you have a sense of how the long-term care might benefit those communities that have different linguistic and cultural backgrounds? Would they benefit? Would they not benefit? Do you have any concerns about it?

Mr Klejman: Yes, we do. I could spend a long time talking about some of our concerns. The major concern is with the concept of placement coordinator function that is clearly spelled out in Bill 101, which one of the other committees of the Legislature is currently holding hearings about. That takes away from seniors who are in need of facility care any ability to choose what facility they want to go and live in, which may result in the pressure of basically having to take the first bed available rather than choosing a bed in that setting in an organization that has the proper language, religious or cultural environment the person's looking for, so there's a real concern around that.

The other concern is the issue of tying funding to care levels. There is no reference in the bill whatsoever to tie the levels of care to the kind of funding that will be provided down the road. In essence, we measure levels of care to divvy up the money currently available, but not connecting it to how much it takes to provide the care.

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The Chair: I have to go on to Mr Kwinter.

Mr Kwinter: Mr Klejman, I wish you could just elaborate on one of the points you've made, your contention that if the government doesn't address some of your concerns, it's going to tilt the balance and there's going to be benefits for the for-profit operators.

I have had several representations made to me by the for-profit operators who've come to me saying that, in their opinion, the government policy is going to put them out of business and that there is a definite sort of thrust by the government to get rid of the for-profit operators. How does that square with your particular position?

Mr Klejman: That may be the case in terms of impressions, but the reality of the new system that is about to be introduced is that the for-profit sectors tend to gain $191 million in additional funding. I want to make it clear that we do not oppose the idea of providing additional funding to nursing homes, because the residents in those facilities need it. But what is so disturbing about this transfer of funds isn't the additional funding that's being injected into the system, what we're going to see in the next two to three years is a shift of what money is in the system from the not-for-profit to the for-profit sector. It's a reallocation, primarily, of current dollars, rather than an assessment of how much money is needed and then putting money in from the provincial coffers.

I have no concerns at all -- and I would support an effort to provide more funding to residents in any facility that is currently underfunded. There are many not-for-profit homes that are underfunded, but it's not being done in a way we would expect it to be done.

Mr Kwinter: Thank you.

The Chair: Mr Kwinter, you still have some time.

Mr Kwinter: No, it's okay.

Mr Carr: Thank you very much for your presentation. I want to talk non-profit housing in general. I don't know if you had a chance to take a look at the auditor's report of this year, but pages 125 to 136 are a very scathing condemnation of non-profit housing.

I'll give you just a couple of examples, and this isn't me saying it, it's the auditor saying it. They talk about how need and demand studies were not done, despite a significant decline in land prices. The cost went up; 25% of the projects lack review of the operating budgets and they close by saying -- and again this is in general for non-profit -- multiple waiting list and inconsistent placement criteria and referral practices made it unlikely that those needing affordable houses will be treated consistently, equitably and efficiently.

You may have heard today the Treasurer comment and say that we're in a crisis: revenue is down and costs are going up dramatically. We're in a situation where we might not even be able to get any more credit around the world. Having read the auditor's report on non-profit housing and considering we're spending a tremendous amount of money, the question I have for you is how can you come in here and ask for more money when you take a look -- recognizing that there are some differences when the auditor, not me, not anybody else, is saying we are literally wasting hundreds and hundreds of millions of dollars?

Mr Klejman: Just to clarify, it probably wasn't that clear in our presentation. When I make references to long-term care facilities, I do not include housing.

Mr Carr: I appreciate that.

Mr Klejman: The second comment I have with respect to non-profit housing -- it's been Ministry of Housing policy for the last two years at least, if not longer, that seniors are not a top priority. Therefore, very little of the funding and unit allocation in the past few years has gone to projects which are strictly seniors' geared. The needs that have been identified are in the other sectors of our community.

I can tell you from my own experience that every seniors project that has been able to come on stream has been filled. Many of them are self-funded, many of the seniors projects our members have developed have received no provincial funding because of the Ministry of Housing priority.

So although I cannot speak about the non-profit housing in general, I can tell you that from what I see about seniors' housing: First, the demand is there. Anyone looking at demographics in this province sees it as a very obvious trend. Secondly, I think there is another advantage to looking at seniors as a target population for housing. We're releasing single-dwelling housing to make it available to families having a hard time acquiring new housing these days. It may also reduce the pressure and facility services if we can provide housing settings for seniors with some onsite services.

Mr Carr: I appreciate that because as I mentioned earlier, I understand that. What I was getting at is the principle of non-profit housing. You talked, for example, of the Halton regional non-profit and they say, "Oh, yes, It's terrible, but we're okay."

What I'm talking about is the principle of government-run where they basically are supposed to have controls in place that are not there. When you take a look at and see where the money is going, the worst part about the whole thing -- and I appreciate you saying that isn't happening with seniors -- is that the money is going to these groups. These consultants pushing these things through are the ones making tremendous amount of money and, to coin a phrase, there is a lot of profit in non-profit housing right now. So I appreciate that.

What I was getting at is, when the government gets involved it says, "Well, of course, we put controls in place." The auditor says there are absolutely no controls in place and the same principle applies for you and I appreciate you saying: "Well, it doesn't happen with us. We're efficient and so on."

I want to tackle another bigger issue. Again, you've heard about the financial situation we're in in this province and the Treasurer has asked very specifically again today: If we're going to fund other programs where are we going to get the money? Have you thought, within the revenue of the provincial government, which is now $10 billion, maybe more, in debt -- and that doesn't include Ontario Hydro; that doesn't include the unfunded liability of WCB; we're in a real crisis here -- where are we going to get the money to pay for some of these programs for seniors?

Mr Klejman: Actually, maybe I'll be kicking myself for not making sure it's in our brief, but there is one area we have been advocating the government to reconsider in its approach to long-term care reform and that is the shift in determining resident contribution, client contribution to be limited strictly to income.

We believe there is a potential, and certainly feel comfortable in advocating, that assets of seniors considering coming into facilities be included in calculating their ability to pay for their care. We have many examples, and I'll be glad to provide them to the committee, of some of our members who have determined the asset levels, whether it's property -- property may have been passed on to family members -- that may be available at certain point to be made a claim upon by the province or a facility on behalf of the province to cover some of the costs of care. As the redirection of long-term care currently defines, it excludes consideration of any assets from determining the consumer's ability to pay.

The Chair: Time has run out and I'd like to thank you for appearing before this committee today.

Mr Klejman: Thank you very much.

The Chair: Have a safe trip home. Mr Kwinter, I'd like to pass on to Mr Remo Mancini on giving up this room for this committee today. I hope you pass that on to him. This committee is adjourned until 10 o'clock tomorrow in room 228.

The committee adjourned at 1658.