STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS
PRE-BUDGET CONSULTATIONS ONTARIO PUBLIC SCHOOL TEACHERS' FEDERATION
COUNCIL OF ONTARIO CONSTRUCTION ASSOCIATIONS
ONTARIO ENGLISH CATHOLIC TEACHERS' ASSOCIATION
ONTARIO SEPARATE SCHOOL TRUSTEES' ASSOCIATION
ONTARIO FEDERATION OF AGRICULTURE
CONTENTS
Tuesday 1 February 1994
Pre-budget consultations
Ontario Public School Teachers' Federation
Reg Ferland, first vice-president
David Lennox, general secretary
Vivian McCaffrey, legislative researcher
Council of Ontario Construction Associations
Frank Bisson, chairman, taxation and economic development committee
Bill Empey, member, taxation and economic development committee
Canadian Bankers Association
Michael Green, director, Ontario region
Judith Bussey, member, taxation committee
Steve McNair, vice-chairman, Ontario committee
Barbara Amsden, director, financial affairs
Ontario English Catholic Teachers' Association
Claire Ross, president
Ontario Separate School Trustees' Association
Mary Hendriks, president
Joseph Kraemer, chair, finance committee
Patrick Daly, member, finance committee
Ontario College System
Richard Johnston, chair, council of regents, Colleges of Applied Arts and Technology of Ontario
Wayne Phillips, president, Ontario Community College Student Parliamentary Association
Doreen Deluzio, chair, council of governors, Colleges of Applied Arts and Technology of Ontario
Dean Barner, chair, community college academic staff division, Ontario Public Service Employees Union
Jay Jackson, chair, community college support staff division, Ontario Public Service Employees Union
Gary Polonsky, chair, council of presidents, Colleges of Applied Arts and Technology of Ontario
Ontario Federation of Agriculture
Roger George, president
Cecil Bradley, director, research and policy
Ontario Mining Association
Patrick Reid, president
Peter McBride, manager, communications and energy concerns
Ministry of Finance
Jay Kaufman, deputy minister
John Madden, assistant deputy minister, office of the treasury
Pat Deutscher, director, macroeconomics analysis and policy branch
Peter Warrian, chair, Public Sector Labour Market and Productivity Commission
STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS
*Chair / Président: Johnson, Paul R. (Prince Edward-Lennox-South Hastings/
Prince Edward-Lennox-Hastings-Sud ND)
*Vice-Chair / Vice-Président: Wiseman, Jim (Durham West/-Ouest ND)
*Caplan, Elinor (Oriole L)
*Carr, Gary (Oakville South/-Sud PC)
Cousens, W. Donald (Markham PC)
Haslam, Karen (Perth ND)
*Jamison, Norm (Norfolk ND)
Kwinter, Monte (Wilson Heights L)
*Lessard, Wayne (Windsor-Walkerville ND)
*Mathyssen, Irene (Middlesex ND)
*Phillips, Gerry (Scarborough-Agincourt L)
*Sutherland, Kimble (Oxford ND)
*In attendance / présents
Substitutions present/ Membres remplaçants présents:
Crozier, Bruce (Essex South/-Sud L) for Mr Kwinter
Haeck, Christel (St Catharines-Brock ND) for Mrs Haslam
McLean, Allan K. (Simcoe East/-Est PC) for Mr Cousens
Sterling, Norman W. (Carleton PC) for Mr Cousens
Also taking part / Autres participants et participantes:
Stockwell, Chris (Etobicoke West/-Ouest PC)
Clerk pro tem / Greffière par intérim: Bryce, Donna
Staff / Personnel: Campbell, Elaine, research officer, Legislative Research Service
STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS
TUESDAY 1 FEBRUARY 1994
The committee met at 1005 in the St Clair/Thames/Erie Rooms, Macdonald Block, Toronto.
PRE-BUDGET CONSULTATIONS ONTARIO PUBLIC SCHOOL TEACHERS' FEDERATION
The Chair (Mr Paul R. Johnson): The first presentation this morning is by the Ontario Public School Teachers' Federation. Please identify yourselves for the purposes of Hansard and for the committee members.
Mr Reg Ferland: Thank you. To my right is Vivian McCaffrey, our legislative observer at OPSTF, and to my left is David Lennox, our general secretary at OPSTF. I'm Reg Ferland, the first vice-president of the Ontario Public School Teachers' Federation.
We, as OPSTF, represent 32,000 members ranging from statutory members teaching full-time in the elementary schools under the public system, representing occasional teachers and educational support personnel also in elementary schools under the public system.
We thank you for the opportunity of exchanging comments and thoughts with you this morning. We believe that these hearings are the appropriate vehicle to express our concerns on behalf of our members.
I am under the impression that you have copies of our brief and I would like to more particularly this morning talk about the recommendations that you will find attached at the back of the document on page 14.
OPSTF has identified three long-term issues for education finance reform: restructuring the tax system so that the major share of education costs is paid from provincial revenues rather than from property tax; ensuring that the ceilings for per-pupil expenditures more accurately reflect the real cost of providing basic services for elementary school students and secondary school students; and providing greater investments in our elementary education system.
These issues, as you are very much aware, are being currently addressed by the Fair Tax Commission, the review of education finance by the Ministry of Education and Training and the Royal Commission on Learning. We do not anticipate that the 1994 budget will deal with any of these issues in a substantive way.
Regarding budget options, OPSTF recognizes the pressure on the provincial revenues and the limited options for setting the upcoming provincial budget. You have three options, in our opinion: raising taxes, cutting expenditures and increasing the deficit. Further cuts to social services spending would result in long-term problems in the quality and level of service in education in Ontario.
Hence our first recommendation: That the 1994 provincial budget avoid cuts to public services and limit tax changes to closing loopholes and making the personal income tax scheme more progressive.
Regarding the educational sector, investment in elementary and secondary education is a long-term one. A highly educated and trained workforce is essential for economic recovery and long-term ability to compete on a global level.
High education levels result in lower expenditures on health services, unemployment and social services as well as reduced costs for correctional services. High education levels are also linked to higher salary levels and greater rates of individual tax contributions.
Public opinion polls strongly support increased spending on education. School boards recently have had their transfer payments cut and have had to absorb further cuts under the expenditure control program as well as the social contract.
Initial program cuts at the elementary level include delaying the implementation of JK, reducing FSL or ESL grants, French immersion, music, art, design and tech, family studies and summer school programs.
Therefore our second recommendation: That the provincial government not further reduce transfer payments to its local transfer partners.
Regarding capital funding, school boards require increased capital funding to accommodate enrolment growth, especially at the elementary level, the expanded JK program and the demand for school-based child care.
Ontario has the highest percentage of schools built before 1950. That's exceeded only by Quebec in the number of schools that were built in the period of 1950 to 1960. Boards require significant funding for renovations to bring schools up to health and safety standards, and to meet modern standards of energy efficiency.
The report commissioned by the Ontario Association of School Business Officials concludes that Ontario schools could reduce their energy costs by $59 million annually and incur comparable further savings throughout subsequent operational savings.
Hence our third recommendation: That the capital allocation to school boards be increased to more accurately reflect the demand for new pupil spaces and the need for building upgrading.
On the issue of adult education, OPSTF has concerns that school boards are not being treated as full training partners within the structure of the Ontario Training and Adjustment Board.
OPSTF believes that the move under the expenditure control plan to cut funding by about 40% to adult literacy programs was shortsighted. It affects those who without that assistance will remain on the unemployment roster and welfare rolls of this province.
Therefore our fourth recommendation: That school boards be recognized as full partners within the Ontario Training and Adjustment Board. Also including our fifth recommendation: That the provincial funding for adult literacy programs be restored to previous levels.
On the issue of child care, OPSTF supports the provincial government's plan to reform the funding of child care and we are anxiously awaiting its announcement on this initiative.
OPSTF believes that the government should deal with the current shortage of subsidized child care spaces by easing the access criteria to the child care subsidies under the Jobs Ontario program.
There will never be a comprehensive child care system without a national child care program. A recent national poll indicated that 63% of Ontarians support a national child care program.
Therefore our sixth recommendation: That the criteria for subsidized child care spaces under the Jobs Ontario fund be eased to reduce the waiting list for general subsidized spaces.
Our seventh recommendation on that issue: That the government take the lead in promoting the establishment of a national child care program.
On the issue of social contract, the social contract represents an unprecedented intrusion into the free collective bargaining process. It is creating inequities between sectors and within bargaining units. Ministry of Labour data indicate that public sector employees are shouldering an unfair burden of provincial expenditure controls.
In the education sector, younger teachers will be more adversely affected than their older colleagues because they are denied grid placements.
Some school boards are taking the social contract as a signal to strip collective agreements. Contract stripping doesn't just affect teachers; it affects the students they teach through class size, pupil-teacher ratio and preparation time, and also affects the broader community at large.
Therefore our eight and ninth recommendations deal with the social contract: That the Social Contract Act be amended to provide for the reinstatement of increments to salary grids; and that, for the term of the Social Contract Act, the School Boards and Teachers Collective Negotiations Act be amended to allow for the extension of existing collective agreements and for the suspension of the ability of school boards to amend the collective agreement 60 days following the release of a fact-finder's report.
On the issue of Fair Tax Commission proposals, OPSTF is not currently in a position to fully respond to the recommendations. We do want to take the opportunity to express our opposition to the recommendations, particularly the one dealing with the removal of property tax as a source of funding for elementary and secondary education.
We do support paying the major portion of total per-pupil expenditure from provincial revenues rather than property tax, but no support from property tax would place the role of school boards in jeopardy. School boards perform a valuable role in responding to local needs and in providing accountability for tax expenditures.
Hence our tenth and eleventh recommendations: That the government not eliminate property tax as a source of support for elementary and secondary education; and that education finance be reformed so that the major share of elementary and secondary school per-pupil expenditures is paid from general provincial revenues rather than from property taxes.
This concludes the OPSTF formal presentation. We would be glad to entertain questions at this time.
Mr Gerry Phillips (Scarborough-Agincourt): I appreciate the presentation. I guess a fundamental recommendation is that the funding from the province for this fiscal year -- that's our basic role here -- should remain the same. Is that your recommendation?
Mr Ferland: Yes.
Mr Phillips: I gather then the expectation is that the property tax portion remains the same, so that you're calling for essentially holding the line or for a freeze in the spending for next year, for 1994-95. Is that a fair assessment?
Mr Ferland: It is.
Mr Phillips: Okay. That's useful.
Mr Ferland: My colleague would like to elaborate on that particular answer.
Mr David Lennox: The answer our first vice-president has given you is absolutely correct. The shock waves that are going through the school systems right now through the expenditure control and through the social contract have anxiety levels higher than I've ever seen them. I think if they have one more surprise from this government, it's going to be one surprise too many.
Mr Phillips: The recommendation on the Ontario Training and Adjustment Board is interesting. I have major reservations about the way that has been established in that I think it kind of gets right in the road of continuous learning and of what I think we were all working towards, which was a seamless system where lifelong learning goes on. We've set up a body that, in my opinion, does not have the public input that I would have hoped.
So far I have heard very little out of the Ontario Training and Adjustment Board. I would think they'll have some good announcements shortly. How close is your organization to that and how well is it functioning so far, in your view?
Mr Lennox: If I may speak to that issue, we're not close enough to the issue. Education has one representative here provincially. With regard to the definition of LTABs, the local training and adjustment boards that are now in their formation stage, we're not going to have as much say on those boards as education should, be it from school board administration, school board trustees or teachers. What we're concerned about is that the role that education should and must play to make that successful in a seamless, lifelong learning experience will have a fairly significant breach in it.
They're still sorting out whether or not there are going to be 22 or 25 local training and adjustment boards in the province of Ontario, and while we don't wish to see 50 or 100 of them, some of the geographic areas certainly give cause for concern. When you consider them from down in the Ottawa-Carleton area up to the top of Renfrew and then coming this way, you get into some fairly significant areas where you can lose an awful lot of money that is aimed at a good cause. But if it's not done through some organized fashion in a local area, for example, the Renfrew county board or the Renfrew Roman Catholic board, then you're going to see that money not used effectively.
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Mr Phillips: I was interested in your comments on capital, because the province has completely changed the way it provides for school capital, as you probably know, to what they call "loan-based financing," which means the school boards go and borrow the money shown on their books as debt, but the province has 100% of the obligation to repay it.
It's a way, in my opinion, of moving, in school boards' cases, $330 million on to the school boards' books, but anybody would look at it and say that really is provincial debt because the province owes 100% of the principal and interest. It's a transparent game that I think most of the financial markets see through, but it allows people to keep spending without having to report it. Do you have any comments on the loan-based financing, or is it completely irrelevant to you people?
Mr Lennox: I like your last comment. I think it's irrelevant to us. We sit there and we know that we have to have capital for both new structures and, more important right now, for the renovation stage.
Creative bookkeeping, we understood it when it came out, it was a matter of shuffling. It'll come back to haunt the Ontario government in future years. The problem is, the further you get into it, whenever some government decides it wants to put it back in its rightful place, it's going to be a terrible burden to try to move back.
Mr Phillips: I have the same concern, frankly, on the pensions. Maybe the group is already aware that the government has 100% of the responsibility for the unfunded liability in the teachers' pension, as everyone acknowledges, but they're taking a three-and-a-half-year holiday from making any payments against that.
In my opinion, that will run that unfunded liability up from $7.2 billion, probably going up $500 million a year. Then when that three-and-a-half-year holiday is over, there's a brand-new expenditure of $500 million a year that suddenly clicks back in. Does the teachers' group have any concerns about the way that's being reported and managed?
Mr Lennox: We have concerns. The government had two options with that money. One was to reduce the unfunded liability over the 40-year period. The alternative was the way they chose to do it. Yes, we have some concerns. We recognize that the Minister of Finance saw it as being an immediate need, so it was a short-term solution to it.
I think I'm going to have to wait until I see the next actuarial study of the pension fund to ascertain how much of a problem it's going to be. I've heard about four different variations on it right now and I don't know which one of those variations I'm prepared to accept.
Mr Norman W. Sterling (Carleton): I see there's no recommendation in here on how we can cut back in terms of costs. In the area I represent, Ottawa-Carleton, we have recently had a commission by Brian Bourns, who initially, in his interim report, recommended the amalgamation of some of the school boards. There's a lot of talk now about the restructuring of school boards, and we have a commission going across our province to talk about it. Have you got any ideas about restructuring or governance questions?
Mr Ferland: Yes. I believe we alluded to that particular concept at the beginning of our presentation, that we have three bodies currently examining the restructuring of education; in some aspect also perhaps the refinancing of education.
We did not make any comments about these particular items that are presently being examined, such as the restructuring or amalgamation of school boards and that whole concept. We do have opinions, we have concerns about the restructuring process and the amalgamation process. We are not opposed to the concept of restructuring and amalgamation.
We met as recently as last Saturday with the Minister of Education and Training, talking about that very issue, and we do want to continue to be part of the input process and the consultative process that is going to happen. We've not addressed any of that in this present tense, because we know that any financing this year will be stopgap until such recommendations are brought forward and dealt with.
Mr Sterling: What do you think of Ralph Klein's idea of going to province-wide bargaining for teachers?
Mr Ferland: We are not for province-wide bargaining. To get into that particular debate at this point in time would be a very lengthy one. It has deep-rooted historical perspectives from the collective bargaining aspect of it.
Mr Gary Carr (Oakville South): I have a quick question.
Mr Lennox: Mr Carr, may I just intrude on that?
Mr Carr: Sure.
Mr Lennox: You've got some really fundamental problems with Mr Klein's approach to this. It's the same thing as his cutting back his 160 school boards out there. There are a significant number of those school boards that are absolutely empty boards. They don't have 160 boards out there. What they've got is all the designations, but some have closed up years and years ago.
With regard to the province-wide collective bargaining, no, we don't support it. We see a connection between the employer and the employee at the school board level and we also see that you've got a fundamental problem with provincial bargaining, that is, who has the resources to pay?
As long as you've got the majority of the resources coming from property tax, then you've got a problem turning province-wide bargaining into any realistic solution. The social contract just bears that out. That was, in effect, an attempt at province-wide bargaining -- no, not bargaining; province-wide contract stripping would be more appropriate. But that's your first attempt at it.
Mr Carr: My question relates to your first recommendation. As you know, the most recent poll I saw, which I think was in the Toronto Star -- I don't know if we have a representative from the Star here -- said that 62% of the people want public service cuts and the percentage, I think, if memory serves me right, was only about 10% wanting tax increases.
The problem you've got there is, when you talk about progressive taxes, unfortunately politicians of all political stripes seem to hit the middle class. The people who can afford it, the rich, seem to be able to move their money. How come you can be so out of touch in your first recommendation when the people of this province are not saying what you're saying, "Increase taxes and don't have more provincial service cuts"? What I've been hearing and what the poll in the Toronto Star as recently as two weeks ago was saying is, how can you be so out of touch with the public in the province of Ontario?
Mr Ferland: I'll ask Vivian to respond to that.
Ms Vivian McCaffrey: We actually make reference in our brief to public support for spending on education and we relied on work that's been done by Doug Hart and D.W. Livingstone at OISE who do the annual OISE polls. They've done a survey of the literature on polls and an extensive survey of polls. Their article came out in the fall of 1993, so just a few weeks ago.
It depends, of course, on the questions you ask, but yes, people do say they want to see cutbacks in government spending. But when they pursue that question, the cuts they want are not public services but in things like -- they mention subsidies to crown corporations, social benefits for the wealthy, defence spending; it's not cuts to education services, social services and that kind of thing.
I don't think you can lump the concept of cutting expenditures and extending that position to cutting social services. I think there are also very good public opinion data to argue against that.
Mrs Irene Mathyssen (Middlesex): On page 9 you talked about support for a national child care system. I think that's very important. Unfortunately, under the free trade agreement and NAFTA, that's no longer possible because of the amount of money that would have to be paid out to the private sector for that to happen. Despite the fact that Mr Chrétien signed that, do you think that we in Ontario should challenge NAFTA?
Mr Ferland: Our resident expert on child care is Vivian, so I'll ask her to respond to that as well please.
Ms McCaffrey: I understand there are concerns about the implication of NAFTA not just on child care but on the delivery of public services in general, but I don't think the experts in the child care field have actually accepted that it's a dead issue. We're talking about a non-profit system across the country. That's what a national program would entail.
The main obstacle as I understand it isn't NAFTA, but agreement of the other provinces. That's why we think Ontario, which has the best record on child care -- the current government has made some significant improvements in the delivery of child care.
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We think it's incumbent on the Ontario government to really push at the federal level and that any problems with NAFTA will have to be dealt with down the line, but NAFTA's an agreement that can be changed like other things. If it looks like NAFTA's a problem, then that would have to be dealt with. But we're a long way down the line to putting a national child care program in place before we have to deal with the kinds of issues that I think NAFTA would present.
Mrs Mathyssen: I hope you're right. My next question, on page 11, the concern over the 60-day rule: I understand that and yet I wonder, has this ever happened in Ontario where a board has unilaterally altered a collective agreement after 60 days? It would seem that it would be more likely that you'd have a ruling of jeopardy before that period, but has there been a time?
Mr Ferland: If I may make an attempt to answer that. I'm not sure that your last word, "jeopardy" --
Mrs Mathyssen: When the Education Relations Commission goes in and sends people back --
Mr Ferland: That's after some type of a sanction. The 60-day rule that we are making reference to here is one that is a time prior to a full sanction exercise by a school board and its employees. It's a time when the fact-finder's report has been made public, and 60 days after that point the school board unilaterally can go into a collective agreement and make contract strips, if you will.
We had two specific examples of that this fall with East Parry Sound and Windsor and both of them did result in strikes, full sanctions, withdrawal of services due exclusively to the 60-day rule that the board availed itself of. It is a very strong concern of ours that should that particular regulation, if you will, not be closed or the door to that particular regulation not be at least monitored very strongly with direction and perhaps full closure, then we're going to experience more of it throughout this province, the educational system of Ontario.
Mrs Mathyssen: My last question: OSSTF came in and recommended the time was now for confederated school boards. I wondered if you could comment on that.
Mr Ferland: Our affiliate ally through OTF, OSSTF certainly has taken that position. We at OPSTF have not at this point in time taken a position on confederated school boards. We have not fully studied it and I'm not prepared at this point in time to make any comments on it.
Mr Kimble Sutherland (Oxford): I'll say to you, as I've said to other groups, if we don't have any shock to our revenues, then hopefully there won't be any shock to the revenues of transfer partners. But I notice in your written presentation you ask for financial stability and of course, as you also noted, the government hasn't had financial stability in its revenues and that makes it very difficult.
The challenge that I'm grappling with in terms of education systems in general, you've certainly made a strong case for keeping local school boards and the local autonomy. My sense out there in the education system is that in certain areas certain school boards do things very well.
I think in my area my local school board has done a good job in identifying its language components and is recognized as doing a good job. Another school board may do something else better. I guess it's just in terms of how we balance off local autonomy with the increasing demand for accountability and in provincial accountability; in other words, a greater degree of consistency from board to board.
Some sense would say that calls for a greater provincial role to ensure that you get that provincial consistency. How do we overcome that challenge of maintaining some local autonomy but getting a higher degree of provincial consistency across the province in what students are learning?
Mr Lennox: I'm not so sure that we want all that consistency. What we want to do is gather the data that reflect efficiency and good fiscal practice and that identify best practice so that other boards can use that best practice if it is fitting for that board.
I'll give you an example because, unfortunately, I sit at the sectoral task force on education and the situation there is we've now had several presentations of best practices throughout the province. One of the things we're finding out is that in a particular school board where they've taken, for example, transportation and they've taken the separate board and the public board and integrated their transportation, there were certain sections where it was costing them more money when they integrated them than when they didn't.
So the aspect is not to blindly go ahead with consistency, but to simply use all of our knowledge and past practice and best practices so that we can do things better, and we can do things a lot better. Just now, from warehousing to procurement to banking to transportation, just in those singular topics we can do a lot better.
Mr Sutherland: I was talking more the curriculum.
The Chair: I'm afraid we're going to have to stop now. I thank the Ontario Public School Teachers' Federation for its presentation.
COUNCIL OF ONTARIO CONSTRUCTION ASSOCIATIONS
Mr Frank Bisson: I'm Frank Bisson. I'm the chairman of our taxation and economic development committee. On my right, I have David Frame, the executive vice-president of COCA. On my left, I have Bill Empey, who is a partner in the ARA Consulting firm and has helped us prepare some of our paper today.
We had hoped to be able to show some overheads, but we have copies of the overheads that relate in among our papers so we won't be doing that.
We wanted to deal with the decline in construction activity, which between 1989 and 1993 has had a disastrous impact on Ontario's construction industry. Profits are low, unemployment remains high and bankruptcies continued near record levels, even in 1993.
While there are signs of improvement in the overall economy, industry observers expect the construction industry to continue to struggle in the short term. A recent Ministry of Finance forecast projects a further almost 6% decline for non-residential activity in 1994 before experiencing what you can only term minuscule growth, about 1.2% in 1995.
To assure a timely recovery of the construction industry, the government must meet its commitment to policies aimed at building infrastructure and reducing unemployment. To achieve this goal, COCA proposes that the government add the new commitment of $361 million to the baseline of $3.9 billion in capital spending, as outlined in its 1992-93 budget plan.
The $361 million I mentioned reflects Ontario's contribution in the first year of the recently signed two-year federal-provincial infrastructure agreement -- and I think this next is important. As part of the agreement, COCA supports the federal government's call that contributions represent new money.
Documentation in the agreement states that the program is based on all governments using incremental funds to support infrastructure projects so that new or redirected dollars are used rather than existing or planned capital expenditures. Actually you'll find, if I could quote it directly, on page 3 of the news release that was issued by the federal and provincial governments that this has got to be new dollars.
Outlook for construction, current state: Unemployment rates, as shown in exhibit 1 that we have below, remained high through 1993, averaging 21.5% compared to 10.6% for the total economy. Construction's 1993 rate was only slightly less than its peak level of 22.7% in 1992. So we're at twice the national average.
It doesn't stop there. Levels of total employment continue to shrink. When you look at unemployment, that's only part of the picture. Between 1989 and 1993, construction employment declined by 76,000 persons as measured by unemployment. Over the same period the labour force decreased an additional 35,000 persons; people who left the industry, in other words.
We've got a total at that point of 111,000 reduction in the construction workforce. This decline in the labour force reflects discouraged workers leaving the construction sector for employment in other sectors, resulting in the loss of valuable skills and resources. We've got a little exhibit there showing that.
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A more striking measure of the impact of the decline in construction activity is the loss of man-hours worked. This graph I think is very easy to read. It's quite striking if you look at it. Man-hours go from above four million man-hours to less than two million man-hours.
Our example: Hours worked by ICI carpenters and labourers, that's industrial-commercial-institutional carpenters and labourers, in the greater Toronto area have dropped by 75% between 1989 and 1993, with the 1993 estimates falling far below historic levels ever seen before.
Bankruptcies continue to plague the industry. Year-to-date measures for 1993, January to November, reveal only slight declines compared to the record levels reported in 1992. That was over 700 bankruptcies.
Construction expenditures: The recession has had a devastating impact on the non-residential construction sector. Most segments hit peak levels of activity in 1989 or 1990, before entering into a free fall from 1991 to the present. Following peak levels in 1989, commercial and industrial activity declined by over 40% by 1992.
On the positive side, government projects have offered some stabilizing influence in recent years with institutional work, hospitals and educational institutions etc, and engineering work, roads, bridges and sewers. It's activity above that experienced in the late 1980s.
Our industry outlook: Ministry forecasts indicate a further decline for non-residential construction. We've got another exhibit for that showing very low activity.
The most recent projection taken from the 1993 Ontario Economic Outlook, issued in November 1993 by the Ministry of Finance, reports a 5.9% decline for non-residential construction in 1994 with only minuscule growth in 1995 of 1.2%. Limited growth is expected from the commercial and industrial segments, while infrastructure and institutional projects are expected to be the driving forces of recovery for construction in the short run.
Going on to spending issues: Fiscal planning should reflect the continuing recession in construction. Maximizing capital spending should be a priority. First of all, the uncertainty of a strong economic recovery in 1994-95 means that governments will be faced with tough decisions in the approaching fiscal year. The recently reported weaker-than-forecast recovery reflects a further decline in Ontario's revenues by $1.6 billion in 1994-95, excluding the impact of a possible freeze in federal government transfers.
COCA recommends that revenue shortfalls must be made up by cuts in operating expenditures, not through capital expenditure reductions. COCA also recommends, in view of the economy's weak performance, that the government not increase taxes. Government should also recognize the role of a public-private sector partnership as a means of assisting government to meet its long-term goals of building infrastructure.
Under the recently signed two-year, $2.1 billion infrastructure agreement, the federal and Ontario governments will each spend $722 million on projects that are designed to deliver services to the public, like roads, bridges, sewers, waterworks and public buildings; the remaining $656 million will come from participating municipalities.
COCA recommends that provincial commitments to the new federal-provincial-municipal infrastructure program reflect new capital money and that they not be a reallocation of previously announced provincial infrastructure programs. That's in line with the intent.
Spending by the three crown corporations must remain a priority for the government with increased emphasis on institutional spending, as shown in exhibit 7. Capital spending creates more benefits for Ontario than operating expenditures, as shown by exhibit 8. One billion dollars of expenditures in capital spending would create 13,700 person-years of employment, compared to 10,100 person-years under operating expenditures. We also believe that provincial creditors would more readily fund capital projects compared to borrowing for current operating spending. Infrastructure assets are obviously more creditable than operating expenditures, which once spent are gone for ever.
COCA proposes that the government meet its original target of $3.9 billion in capital expenditures, as outlined in its 1992 and 1993 budgets. Here we refer you to exhibit 9, where we try to look at actual expenditures versus budgeted expenditures and show the shortfall in spending that has occurred consistently since 1989. We want it to meet its original target of $3.9 billion in capital expenditures as outlined in the 1992 and 1993 budgets, plus a 10% increase as a countercyclical measure, and add the new $361-million commitment for the infrastructure program, for an overall capital budget of $4.7 billion.
However, we express concern that actual spending will continue to fall short of announced plans. For example, the $4.3-billion target announced in 1991 was never achieved. The 1992-93 capital expenditures of $3.9 billion were reduced to $3.6 billion. Finally, the 1993-94 projected direct capital expenditure of $3.1 billion was revised to $2.8 billion in the third quarter, according to Ontario Finances accounts on December 31, 1993. Minor revisions only were introduced to the crown corporations, raising them from $800 million to $807 million.
Tax issues: COCA continues to oppose the introduction of a corporate minimum tax, the CMT, as outlined in its 1993 submission to the Fair Tax Commission. COCA would like to draw the government's attention to the fact that the Fair Tax Commission itself also recommended against the CMT.
The proposed structure of the new CMT, based on adjusted book income, would oblige construction businesses to pay tax before profits have been realized as cash. I understand that this is an unfamiliar concept, but it's related to the way the Construction Lien Act operates. There is an unfair mismatching of cash flow with liabilities, and it's caused by the withholding provisions required under the Construction Lien Act. The federal corporate income tax act, and Ontario has accepted that, makes specific allowances for this problem, and it agrees with construction accounting in this area. COCA asks for the same treatment under the CMT.
COCA endorses the use of user fees to help finance public and private infrastructure programs.
Finally, we continue to oppose increased payroll taxes, whether they be WCB, workers' compensation, or the employer health tax. Escalating payroll taxes, as shown here in exhibit 10, are having a crippling effect on thousands of businesses. It doubled in the very recent past.
We finally emphasize that no new taxes be introduced to fund the new federal infrastructure program.
Mr Sterling: I was interested in the federal restructuring program. Basically what I found amusing about it is that we saw pictures of Art Eggleton on the front page of various papers and smiling cabinet ministers shaking hands about this wonderful boon to our Ontario economy. Then I started to look at the figures.
We're going to receive $720 million out of the federal government under this program, but the Ontario taxpayer is going to have to cough up $866 million in taxes to pay back that $720 million, because we pay back 43.3% of all of the federal revenue gained. So my view of a federal infrastructure program is that it's a net loss for Ontario taxpayers and that we'd be much better to go it on our own. Do you agree with that?
Mr Frank Bisson: I've never looked at it that way. That includes interest, is that what you're saying, that $822 million?
Mr Sterling: Just the capital, and we'll have to pay back even more than $866 million.
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Mr Carr: The Ontario taxpayers pay more to the federal government than we receive --
Mr Sterling: You see, we receive 36.1% of the program, we pay back 43.3% of the federal revenues. Therefore, every time we encourage the federal government to get involved in a program, guess who loses? The Ontario taxpayer. I find it amazing that this Premier on several occasions has gone to the federal government and said, "Hey" --
Interjection.
Mr Carr: You don't even know the figures, Irene, so don't you talk. Excuse me.
Mr Sterling: So every time we encourage the federal government to get involved in a program, guess who loses? The Ontario taxpayer. We're much better, in my view, to say, "Okay, if we need an infrastructure program, let's do it, let's tax for it or let's debt-finance it," because it doesn't matter whether the feds are going to do it or we're going to do it; at least we get an even break on this whole thing.
Mr Frank Bisson: Bill, would you like to respond?
Mr Bill Empey: I understand the phenomenon you're describing, but an equally valid reaction would be to simply ask the federal government to give a higher allocation to Ontario. Then Ontario gets what it deserves.
Mr Sterling: Absolutely. We're getting a raw deal from the Liberal federal government. We should be getting $866 million.
Mr Empey: But our point here is that the money Ontario contributes for this to be useful should be new money. Our concern is that what the Ministry of Finance will do, as it has done so often in the past, is say that it's going to take up the federal offer and spend the $700 million on capital. But what it'll wind up doing is a sleight of hand where it essentially transfers what it would otherwise have done in another capital project -- in fact there have already been suggestions that this could happen. Ontario already is not getting the true benefit it needs from the federal program, and that would even add to that. The Ministry of Finance would complicate the problem by spending even less on capital.
Mr Sterling: I just think that us accepting $720 million is a huge loss for Ontario and that other provinces are gaining.
Mr Empey: But I wouldn't describe it as a loss for Ontario. What I would say is that Ontario --
Mr Sterling: It's $144 million.
Mr Empey: Ontario hasn't got its share from the federal government. Ontario deserves more.
Mr Sterling: Absolutely.
Mr Empey: But there's a benefit even out of the $700 million that we're getting. The money's well spent. That's a difference in emphasis.
Mr Sterling: It would be wonderful if in fact there was a bank account there that had the federal contribution of $2 billion and then they were handing it out. Then I couldn't use the argument. But the problem is there isn't any bank account, and guess who's going to have to ante up? You and I. We're going to have to ante up not $720 million; we're going to have to ante up $866 million.
I went over this argument with the Treasurer and he agrees with the rationale behind my figures.
Mr Empey: But again it's the question of the emphasis here.
Mr Sterling: Absolutely. Why didn't the province do this --
Mr Empey: I'm troubled that what your argument leaves is the sense that the capital spending itself is a losing proposition for Ontario, and in fact it's exactly the opposite. The capital spending is probably the wisest way Ontario could spend the money in terms of taking advantage of low costs in construction to put in place sewers and watermains and roads and buildings that the province needs. I don't want to lose sight of that.
Mr Sterling: Okay, I won't go into the infrastructure argument. We might do that another day. You could enter into a debate on that. I just talked to somebody on the phone about it this morning, and they argued that infrastructure programs are not a way to get the economy rolling. I would say I'm not sure that that's right or wrong. I think it would depend upon the construction industry in any given jurisdiction. Ours is suffering so badly in this jurisdiction that in order to keep it alive, we've got to keep some activity going.
Mr Empey: That's the most important point.
Mr Sterling: I agree with that. My point is this: We shouldn't be encouraging the federal government to do any programs. If there is a need to do them, we should be taking the leadership here, doing them on our own and raising the necessary finances for them. We'd get a lot better bang for our bucks than we're getting out of this program.
Mr Sutherland: I know Mr Sterling has concerns that Ontario is only getting 36% but I want to say that's probably a better percentage than we got out of most deals with the previous federal government on just about any program. I think that needs to be noted.
The other fact, that this government was able to stand up to the province of Quebec and now allow Ontario construction firms to go into Quebec, means that we'll probably in the long run be getting more than that 36%, so I think those points need to be mentioned.
You expressed concern that in some cases the full capital amounts weren't expended in certain years, and I think all of us have some concern about that. You didn't highlight what some of the reasons are. Of course, some of those reasons are that for some projects, for whatever reasons, approvals processes don't go forward within the fiscal year; the money doesn't get spent in that fiscal year. I just had a situation where a local municipality decided it didn't want to pursue part of a Jobs Ontario Community Action project so that money, because it's so late in the year coming back in -- so we need to keep that in mind.
I noticed in your supplementary you did compare it to the 1982-83 recession and I think we need to keep in mind the amount of dollars we're talking about. At that point we were talking about going from $1.4 billion to $2.1 billion and we're talking well over $3 billion of capital expenditures.
Mr Frank Bisson: We didn't say it in the speech but we have a background paper. If you go to the background paper, you'll find that construction expenditures actually went up in 1982-83 by something like a third and they have not done that in this one here. They've gone down.
Mr Sutherland: I'll just remind you too, though, in that recession provincial revenues still increased throughout all those years. In this recession provincial revenues have actually declined.
Mr Frank Bisson: Our concern is that every time there is a perceived increase in the deficit, which occurred just last year, we cut capital expenditures, not operating expenditures. The $300-million capital expenditure was the big cut as soon as the deficit went higher last year.
Mr Sutherland: I think you're ignoring the things that we've done on the social contract expenditure control. If you look at the type of reductions we've done on the operating side --
Mr Frank Bisson: That was prior --
Mr Sutherland: I know, but I'm saying if you look at the amount we've done on the operating side, it would be far greater than anything you find under capital.
I'm just trying to say that I think all the information needs to be put out. I think all of us would like to get all the capital expenditure done within the fiscal year, but unfortunately sometimes there are problems beyond our control, and I think beyond everyone's control. They don't allow that money to be spent in that fiscal year.
I wanted to ask you a question about whether you thought the Fair Tax Commission's report in terms of reducing the education portion of the property tax would have any impact on the construction industry in terms of reducing the cost of land development etc and whether that has any impact on increasing construction.
Mr Frank Bisson: We haven't really looked at that. I don't think we can comment intelligently at this point.
Mr Sutherland: Sure. Okay.
Mr Phillips: I appreciate the comment. I personally think your figures are accurate. There's not much doubt that the government has cut about $300 million out of this year's capital and it's lower than it was two years ago. I think that's fact.
My first question is that you're in favour of fees, and I think one of the things the province has committed itself to is to speed up capital projects by what they call selling revenue streams. They will essentially sell off a future source of revenue in order to speed up a capital project. They will sell toll roads that the private sector will build. I think we will see a speedup in capital expenditures, and rather than being paid for taxes it will be paid over time through tolls.
I think that will happen with sewer and water construction, that they will essentially say to the private sector: "That's what the Ontario water corporation is for. You will double the water rates" or something like that, and the owner of that will have the access to that revenue stream. The government has said it is committed to selling revenue streams to speed up capital projects.
I gather you're very much in favour of that and that would be your recommendation.
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Mr Frank Bisson: We are quite aware that the government's cupboard is quite bare and that there is all kinds of private sector money on the sidelines. Essentially, our thought is that this should be countercyclical spending. We don't expect it to continue for the long term, but at this point in time we think a countercyclical approach is the right one.
Mr Phillips: In my opinion, it's a different way of raising money; it's a different way of debt financing as you sell. Is that a fair way of characterizing it?
Mr Frank Bisson: Yes.
Mr Phillips: Should we be showing that as debt if we are going to --
Mr Frank Bisson: You and I have discussed this before; we did in the three crown corporations. I see no problem with the government's current approach, using the three crowns, because I feel this is countercyclical. I don't think this is a 20-year program; I think this is a two- or three-year program to suit a need at a point in time when the economy would not allow these things to occur otherwise. I think it's a logical way to do it. In the long run, I don't think you would want to do that.
Mr Phillips: If I were in your shoes, I would be very strongly in favour of it as well. My concern is that when you sell off a revenue stream, you've sold it off and that's a source of revenue you don't have available for the future. As I say, it's kind of gone, but I gather from your recommendation that --
Mr Frank Bisson: I don't think it would happen otherwise. This is the other problem. If you did not go to the private sector at this point, Highway 407 would not have been built now. There are some real advantages to that. It's the same with the upcoming sewer projects, water projects and so on. There is a good and substantial need for these projects and, if private sector capital is available to do them, we have no reason not to do it that way; I think that makes some sense.
Mr Phillips: Your recommendation on a corporate minimum tax is useful and it would be helpful for us to know a little bit more about the implications of that, because that's a fairly detailed comment.
Infrastructure investment: We hear a lot about that we are into an era of information and technology and we have got to make sure we're making more than just the historical infrastructure investments. Is there any risk that we are still looking in the rear-view mirror of infrastructure investments when the bulk of our capital is going into historical infrastructure investments and not into, as they say, the electronic highway or those sorts of investments?
Mr Frank Bisson: I'll let Bill comment on that.
Mr Empey: My immediate reaction is that there are lots of high-tech infrastructure proposals that have already been taken up and a lot of the infrastructure spending is very much forward-looking in the sense that it's focused on environmental issues, for example, a lot of the sewer and water infrastructure. It's not high-tech in the sense that the structures that are being put in place aren't sophisticated in any engineering sense, but it's forward-looking in the sense that it's structures that deal with new kinds of problems, in particular, environmental problems.
Mr Phillips: If you go by what you read in the paper, you would think that we should have sewers, highway and then whatever you call it -- the buzzword is electronic highway. You would think that in our infrastructure program, we would have a fair chunk of investment in the information era. There is at least that risk that as we look at our capital program, it tends to be more historical than --
Mr Frank Bisson: I think one of the problems our generation has is it has not kept up its infrastructure. If you read any of the people who write on productivity, you cannot have productivity without a proper infrastructure. You can't go and create a new Barrie without there being infrastructure there, whether it be hydro-electric power or roads or sewage treatment plants. Our problem has been for 20 years we have not done anything with it.
Mr Phillips: I'm not disagreeing with you. When I said infrastructure, you said we haven't kept up our infrastructure and then used the historical infrastructure argument. Have you any advice for the Legislature? Should we be broadening our definition of infrastructure?
Mr Frank Bisson: I think there should be a balanced approach. We should be looking at the electronic highways as well as the typical ones. I agree with you there.
The Chair: I thank the Council of Ontario Construction Associations for its presentation.
CANADIAN BANKERS ASSOCIATION
Mr Michael Green: Good morning, ladies and gentlemen. My name's Michael Green. I'm the regional director for Ontario for the Canadian Bankers Association. With us today is Mr Steve McNair, who's the vice-chairman of the Ontario committee, and Mr Phillip Buxton, who is a member of the Ontario committee representing the schedule 2 bank environment in the province. Also accompanying me is Ms Bussey, who will be making a formal presentation on behalf of the CBA. Accompanying her is Ms Barbara Amsden, who's director, financial affairs, for the Canadian Bankers Association, and Ms Nancy Compton, who is with the Canadian Bankers Association in financial affairs. There you have the panel.
Ms Judith Bussey: CBA represents the chartered banks of Canada: seven domestic banks and 53 active foreign banks. Thank you for allowing us the opportunity to meet with you this morning. These discussions allow us the opportunity to shed some light on many misconceptions regarding taxation and budget matters. I'd like to address first a couple of these misconceptions.
The first is the belief that banks pay little tax. The facts do not support this. In fact, the Big Six banks alone last year paid more than $2.4 billion in Canadian income and capital taxes. All told, the Big Six banks paid over $3.6 billion in taxes to all levels of government in Canada last year. This compares to less than $3 billion of worldwide after-tax profits.
In Ontario, $1 of every $8 of corporate income and capital tax revenue comes from the banks, yet only one in every 50 employees in the province works for a bank. In dollar terms, the banks paid more than $700 million to Ontario municipalities last year. That's more than 50% of all such taxes paid across Canada last year, which is a disproportionate share.
Ontario's large share is due in part to the fact that Ontario is more economically active than the other provinces and is able to attract more banking activity to meet the financial requirements of its residents and businesses. It is also due to the fact that in the past the banks have chosen to locate regional head offices and other backroom activities in the province. As a result, about 50% of the banks' staff are located in Ontario compared to the 37% share of the population generally.
The second misconception is the belief that if corporate taxes are increased, the tax burden will somehow fall more lightly on individuals. We believe that if this perception is not challenged and dispelled, in the long run the opposite will actually occur. As noted in the report of the Fair Tax Commission, the corporate tax burden tends to be borne by employees, consumers and investors. In addition, as the tax burden on corporations grows, tax will be an increasingly important factor in decisions to locate operations to friendlier fiscal environments. This will cause the tax and employment base of Ontario to shrink, or at best to grow more slowly.
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But we are not concerned only about our own taxes; we also care about the impact of tax policies on the Ontario economy as a whole. The recent corporate minimum tax paper notes the attractiveness of Ontario with respect to transportation, proximity to markets and so on. However, a recent Peat Marwick survey of 1,100 companies indicated that tax is a leading factor that would help organizations compete in world markets. In this survey, tax ranked ahead of communications, transportation and market proximity. The worst taxes are those that are fixed, that must be paid before a company earns a penny of profit. These are taxes such as capital and payroll taxes. Capital tax is a disincentive to investment, while payroll tax has discouraged job creation.
Canada is close to the highest-taxed jurisdiction among the seven largest industrialized countries. This point was made by the federal Deputy Minister of Finance last year in a statement to the House of Commons committee. The following day, John Crow suggested that higher tax rates could end up being self-defeating for government and "already may have had adverse implications for incentives and investments." As the Ontario Minister of Finance himself has publicly recognized, increases in tax rates do not necessarily result in increased revenues, and tax professionals are concerned that more Canadians may turn to the underground economy to avoid taxes in the wake of recent increases in provincial personal income taxes. It is very difficult to bring back this lost economy.
Yet another tax increase is looming for banks and certain other industries. Ontario has indicated that it is considering expanding workers' compensation to industries that are currently exempt. The banks strongly oppose this for two reasons: First, the banks and certain other companies have comprehensive benefit plans in place providing coverage for injuries and health-related matters inside and outside the workplace; second, for federally regulated companies, there are a number of provisions in federal law that already provide protection and benefits to employees.
We recognize that workers' compensation in Ontario is in crisis. We agree that reform is needed to address the deficiencies in the current system. We also believe that the reform process should be carried out with both labour and business taking some ownership of the system to recommend efficiencies, without expanding coverage to industries that already provide comparable benefits to employees. This is nothing more than a new tax and one we strongly oppose.
With respect to tax issues, then, we hope that the committee will keep in mind the following points:
(1) The total tax burden -- federal, provincial and municipal -- must be considered. In today's global market, business can be conducted across the border and around the world.
(2) The high fixed tax burden, with its emphasis on payroll and capital taxes, including workers' compensation, creates high barriers to entry for new and expanding businesses and discourages investment in the physical and human resources Ontario needs.
(3) The complexity of the tax system is a further disincentive to business. The introduction of a minimum tax adds to the compliance burden, to expense and to uncertainty of the tax environment in Ontario at a time when the economy is still not strong and the business outlook remains pessimistic.
(4) As the economy continues to recover, expenditures will naturally reduce. This, in turn, will slowly increase tax revenues. Any increases in tax revenues which arise from the improving economy should be used not to fund new expenditures but to reduce the deficit.
Of course, taxes are only one side of the budget equation. On the expenditure side, recent polls suggest that a majority of Canadians now understand and are concerned about Canada's debt and would prefer that the government not undertake new expenditures at the expense of the deficit. Lower-cost means of delivering the services must be considered. One area where we believe costs must be cut is through eliminating trade barriers and eliminating unnecessary or multiple layers of legislation and regulation.
We realize this is a complex area and we are approaching the federal and other provincial governments as well to provide input and support to this process. Ultimately, however, we believe that spending cuts will have to be made. We cannot grow our way out of our debt and deficit problem. As a minimum, any reduction in expenditures arising from the improving economy should not be used to increase expenditures in another area, and all other expenditures should be held flat or reduced.
Unfortunately, federal and provincial debt levels continue to grow. Excluding the debt of various government-sponsored pension and other income-support plans, Canada's general government debt, as a percentage of GDP, ranks second only to Italy's among the G-7 countries. This ratio now stands at 59%, up from 54% barely a year ago, and is much higher than the ratio for that of its free trade partners, the US and Mexico.
The debt of Ontario, its municipalities and public sector bodies now totals $78 billion, or about $7,700 per capita. Adding in the federal debt, the per capita debt for a resident of Ontario is now $25,000, or about $100,000 for a family of four. Capital markets continue to be concerned by Canada's growing debt load and have shown themselves particularly volatile in the face of credit downgradings, political uncertainty, continued deficits and growing debt.
Despite good efforts, we are worse off today than we were a year ago from a debt perspective. We understand that Ontario's decisions have been very difficult. Ontario must nevertheless continue with expenditure reduction efforts, as revenue flexibility has been limited by three budgets of tax increases.
Deficits year after year mean more debt and higher interest payments. Indeed, interest payments are already eating up 32 cents of every federal tax dollar collected and 22 cents of every Ontario tax dollar collected. As well, more and more of this interest is being paid to foreign creditors, rather than staying in Canada to be spent on Canadian goods and services. Continued deficit financing, even if aimed at creating employment, ultimately means more tax dollars spent paying interest on the debt, rather than being invested in productive capacity, new jobs and support for social programs. Because of uncertainty about the future, consumer confidence remains low, despite very low interest rates and low inflation.
In the end, the only cost-effective way we can maintain our standard of living, provide social programs and offer job security to Canadians is to unfetter the private sector and let it create jobs.
I would now like to pass the microphone to Steve McNair, who is the vice-chair of the Ontario committee. This committee undertakes a number of initiatives, including programs to stimulate growth in the small and medium-sized business sector of the economy, the sector which has been called the engine for job creation.
Mr Steve McNair: Small business and attracting business to Ontario: The Ontario committee is involved in helping small business in several ways. In this regard, a number of key educational initiatives have been developed in partnership with the provincial government of Ontario, regional municipalities, chambers of commerce and the province's community colleges. Feedback on results to date indicates that the programs are well received by the small business community. As well, the banks are strong supporters of small business through lending under the Small Businesses Loans Act. Finally, the banks are playing a growing role in attracting business to Ontario.
Following are details of the various initiatives by category.
In 1993, the Ontario committee entered into partnership with the Ministry of Economic Development and Trade and the Ontario Development Corp, in cooperation with Humber and Centennial community colleges, to develop Running Start, a business training program for applicants under the new ventures and youth ventures loan programs. The Ontario committee provided funding to develop the course material and CBA staff assisted in curriculum development. The program is being piloted in Metropolitan Toronto until March 1993, after which it will be rolled out more broadly in Ontario. Participants surveyed between September and December 1993 rate the course excellent.
Bankers are participating with the ministry as speakers for the small business seminar series called Starting a Small Business. Some 1,600 seminars were run between 1987 and January 1994.
A series of small business seminars designed to improve financial management skills were held in Ottawa, Orillia, Kitchener-Waterloo and the region of Halton in 1993. The seminars, sponsored by the Canadian Bankers Association in cooperation with Industry Canada, the Ontario Development Corp, the regional municipalities, chambers of commerce and the boards of trade, focused on key aspects of financial management, preparation of a business plan, the Small Businesses Loans Act, the Ontario Development Corp programs, trade finance and marketing.
A series of small business seminars is currently being delivered in the regions of Peel, Durham and Metropolitan Toronto. The seminars are designed to educate small business entrepreneurs on key aspects of business planning, the Small Businesses Loans Act, Ontario Development Corp programs and services.
In terms of the Small Businesses Loans Act, the SBLA is a federal government program designed to help new and existing small business enterprises -- gross revenue not exceeding $5 million -- obtain term loans from chartered banks and other lenders for financing the purchase and improvement of fixed assets. Originally established in January 1961, the program was significantly revised as of April 1993 and extends until March 31, 1998.
Since the April 1 amendments, all schedule 1 banks have been actively promoting the Small Businesses Loans Act. The number of new SBLA loans has nearly tripled from April to December 1993, compared to the same period in 1992. The dollar volume of loans quadrupled as well in this period.
A number of banks are offering loans at prime, a full 1.75% below the legislated ceiling.
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If you look at the following table, you'll see the comparison. In 1992, the number of loans made was 2,293, and in four months alone of 1993, it escalated to 6,966, so there was literally a tripling in the number of loans, and the volume of loans doubled in that same period.
For your information, we're pleased to provide a copy of The Banking Industry Supports the Small Business Sector, which outlines in more detail the small business lending and other initiatives being undertaken by the industry as a whole throughout Canada. It also lists the additional services to small business that the six major banks provide.
In 1993, the Ontario committee met with Chairman Maurice Strong and other representatives of Ontario Hydro to explore the potential for joint initiatives to provide energy efficiency and economic development. Following changes in the utility's treasury and internal banking operations, formerly associated with its incentive and rebate programs, Ontario Hydro was seeking ways the banking industry could assist it to become more cost-effective. This should help Ontario Hydro attract new businesses to locate in the province by offering ways to save on energy costs.
The chairman of the Ontario committee and a CBA staff member sit on the advisory board of the Ontario Investment Service, being developed by the Ministry of Economic Development and Trade. The project will be a public-private sector partnership designed to provide customized business information to stimulate business investment in the province. The CBA expects to continue its support to this worthwhile government initiative.
The CBA, in partnership with the Canadian Chamber of Commerce, Department of Foreign Affairs, Export Development Corp and Canadian Manufacturers' Association, has developed a trade finance seminar called The World is Our Market. The full-day seminar was successfully piloted in Toronto on January 20. It is designed to assist small and medium-sized businesses improve their export sales or to assist businesses entering the export market. The seminar helps them gain access to innovative bank and government trade finance programs and services, and increases their awareness of government export promotional and support programs and other international trade-related educational activities, such as the Forum for International Trade Training. A second seminar is planned for May 25, 1994, in Toronto.
Bank executives are consulting with Industry Canada on ways to assist the growth and development of knowledge-based industries through access to working capital financing and sources for equity capital. A Canadian Bankers Association staff member sits on the Ontario Investment Promotional Coordinating Committee of Industry Canada, a forum to share information on programs and initiatives designed to attract investment and business development to Ontario.
In conclusion, despite the efforts of our industry, the Ontario government and others to encourage businesses to establish themselves in Ontario, there is a growing number of real or perceived barriers to entry which make Ontario a less than hospitable environment.
A recent survey showed that small business is concerned, first and foremost, with taxes, and only slightly less with government legislation and regulation. Uncertainty about what the future will bring is also a major deterrent to undertaking any significant new investments, even for large corporations, particularly after three years of new taxes and tax increases, after three years of new and more onerous legislative changes, and as the spectre of the introduction of or increase in workers' compensation premiums looms.
We agree that Ontario's financial problems cannot be solved in a year or even in several years. A workable, sustainable solution will require time, constant careful management and commitment. We urge the Minister of Finance to remain firm in his efforts to reduce the deficit and, ultimately, the debt of the province and encourage him to set specific goals to bring down the deficit, both in relation to GDP and in absolute terms.
We believe it is possible to foster growth in the independent business sector at the same time as the deficit is attacked. Indeed, we believe the deficit and the concerns it raises about present and future tax loads is one of the greatest impediments to growth in this sector at this time.
We'd be pleased to answer questions you would have.
Mr Jim Wiseman (Durham West): I'm fairly curious about your presentation, because three and a half years into being the member for Durham West, I would hazard to say that in any group of people I can put together, the banks are the one group of people who are almost universally condemned for what they're doing in the marketplace.
The Toronto-Dominion Bank, as Venture showed last Sunday night, is calling lines of credit and business loans. I've had a number in my own riding where if it hadn't been for the securing of loans by the Ontario Development Corp, companies that had existed for 20 years would have been put under for no really good reason, because that company now is still in existence, and others.
The Bank of Montreal is acting to a couple of companies in my riding in a way that is nothing short of what they would have described as Mafia attitude towards putting these businesses out of business.
Bank profits continue to go up at a rapid rate. Banks will not loan money, will not even consider lending money, if the amount is less than $5,000. When you add it all up, the view of my constituents who come into my office on a regular basis complaining that they can't get money to start businesses and asking where I can help them is entirely different from the view you have presented here today.
The view in my community is that the banks are the greatest impediment to economic recovery and that somebody has to do something about the monopoly control that the banks have and the disregard that the banks are showing for businesses and the needs of small businesses. You can hold all the seminars you want, but the view in my community is that you are really out of touch with what is necessary for small businesses to get started, to survive and to continue.
I guess the question I would have is that if you want to talk about myths, as you state at the beginning of your presentation, then that's the reality. If you would like to comment on that, I would like to hear what you have to say, because my view is that banks are out of control, that they're a monopoly, that you're almost dictatorial in what you do to people, and that you have no sensitivity to the burdens that you're placing on small businesses.
Mr McNair: There are an awful lot of comments to try to respond to, but I will respond in a couple of ways.
The information we tried to provide today would show a number of interactions, for example, with the greater Toronto area mayors. We met with them a year ago. The seminars were an output of that process, because frankly what we found was that in many cases people who were trying to start small businesses did not have an understanding of (a) how to access funds, or (b) perhaps what was required to access funds not just from the major banks but also from other opportunities for financing.
Our experience certainly has been a very favourable response to that seminar. We are running one actually in Durham region, I believe in April, and as well one in the region of Peel in March. The purpose, again, is not just to talk about how you can get financing from banks, but frankly to try to increase the likelihood of the business succeeding.
If you look at the numbers presented in the paper, the increased financing under the SBLA is a significant growth of financing to the small business sector. That was something that was worked in partnership with the federal government as well. The numbers do speak for a significant increase in financing. That is real and that is tangible.
I don't have the stats with me today in terms of the total investment in small business by all the major banks, but the number is very significant, very large. It does vary by organization, but on behalf of the industry, it is a humongous number that is real and is tangible.
There are situations, and I'll be frank, where we end up with anecdotal issues around what the issues are that create difficulties in terms of individuals getting financing from all the major banks. But if you look at the activities all the banks are pursuing -- for example, under the new ways of trying to develop business, you mentioned the information and technology in the last presentation. The banks have acknowledged that one of their challenges is to find ways to support entrepreneurs in those kinds of activities to try to ensure that we can value what the enterprise is worth so that we can provide support where it makes sense. Most of the major banks, if not all the major banks, at this point in time are exploring individual activities because they believe that the industry, the company, to do well, can create a competitive advantage for itself. I can assure you that in all the major banks there's a lot of activity and energy trying to focus on ways to meet those lending opportunities.
I can't respond to comments like "dictatorial." I can assure you that people don't sit in the towers on Bay Street and think, "How can we penalize and abuse small business entrepreneurs in Ontario today?" That certainly is not the approach.
Mr Wiseman: Sure looks like it.
Mr McNair: I can appreciate your comment, but I can assure you that's not the case. What I can assure you is that banks are looking for opportunities. I sat through a presentation with the greater Toronto area mayors, I guess the week before last, and a presentation by the president of the Ontario Development Corp. She stated that the ODC is not in the business of giving grants. I gave the comment as well that the banks are not in the position of giving grants. We are trying to find ways to create viable opportunities, identifying clients who are going to be successful and assisting them in meeting the needs of their business, and at the same time remaining viable ourselves. I think that would be the view of the industry.
Mr Wiseman: But you have a $5,000 limit. You won't even write a loan under $5,000.
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Mr Bruce Crozier (Essex South): Thanks for appearing before us today. I, to some extent, echo the comments across the floor in that it's difficult for small business when they see the huge international losses, and in fact some of our domestic losses, that are written off by banks. To that extent I echo what he says, that the small business person said, "Well, gee, they can lend and lose money to the big guy but they can't to us."
In all fairness, I guess what I would comment is that a lot of small business people, those who want to start a small business, once they get the assistance of the lender in preparing a business plan -- oftentimes I think they go to the lender without any plan. They have an idea, but they don't have a plan, and it's more difficult these days to sell an idea then it is to sell a business plan. If the banks can help and educate in those areas and help them prepare business plans, that certainly goes a long way towards easing that tension between the two.
I note on that page 4 of your submission, under "Expenditures," you mention "eliminating unnecessary or multiple layers of legislation and regulation." We have a jobs task force going in our caucus, and that comes up time and time again, that the current government and/or future governments are going to have to realize that small business, business in general, is just tired of regulation and legislation, and perhaps the less we legislate -- I think too often governments look at their record of legislation passed. I think the new objective, like zero budgeting and zero deficit, should be zero legislation, and perhaps that will assist.
I've let you off easy. I don't think I asked a question in there.
Mr Carr: I'm one of the politicians, who disagrees. I guess there are even Conservatives who feel the same way Mr Crozier and Mr Wiseman did. I look at the banking system and we have the safest banking system in the world. I look at the US where they have pumped literally billions upon billions upon billions with the losses that went on there. Politicians at all levels and all political stripes just can't leave it alone. The one thing that's working is the banking system and they want to get in and screw that up as badly as they have other things.
Notwithstanding, there are some problems. The one thing we know for the seniors of this province who are living off their RRSPs or whatever is that the banking system is safe, and I think that should be the number one priority.
It's interesting when you say people think bankers sit around saying, "What can we do to hurt small businesses?" Small business thinks that governments of all political stripes are sitting around saying, "What can we do to screw up businesses and hurt them?" So there's a communication gap between both sides, and I think you see where it's happening and what we can do to bridge that.
But I want to get into the bigger issue that you touched on, the deficit: $25,000 for every man, woman and child in this province is what we're in debt. You mentioned a family of four; I'm married with three kids. The amount I owe is more than my mortgage. When I look at it right now, I think this government thinks it has done a good job with the social contract, and of course we're still at $10 billion. We need strong, determined leadership similar to what is happening in Alberta, balanced budget provisions where you really make the cuts and really do it, because quite frankly, as Mike Harris said: "Christmas is when kids get something and the parents pay for it. Deficits are when parents get something and the kids pay for it."
Would you, as the CBA, be in favour of the tough provisions that Alberta's taking, with the Ontario government taking those in the next budget? You know it won't happen under this government, but would you, as a major group in this province, support the tough measures that are being done in Alberta happening in Ontario?
Ms Bussey: Our position is that expenditure cuts have to be made. I don't think it's our position to necessarily tell you which cuts to be made.
Mr Carr: But you know what happens? Everybody comes in and says that with kid gloves. I know and appreciate you've got to work with governments of all political stripes and you've got to be nice, and Matthew Barrett sits down with the Premier and so on. I guess I'm getting cranky in my old age as I'm sitting around here. These business groups come in -- people remember when I used to be a nice guy here -- and they say, "Well, we're not telling you what to do." Why can't we have some honest debate?
Mr Wiseman: You fooled us for all these years.
Mr Carr: Well, maybe you thought I was cranky when I first showed up. Why can't we have some honest debate where you say yes, that needs to be done. I understand individual banks can't, but as an association, why can't you be a little more aggressive to governments of all political stripes, not just this one, and really tell --
The Chair: One of the problems today, Mr Carr, is that our time has just about expired. I wanted to let you know that.
Mr Carr: Probably because politicians talk too much and you never get a chance to say anything.
The Chair: Maybe the Canadian Bankers Association would want to make a quick comment.
Ms Barbara Amsden: Obviously, we cannot comment on the Alberta expenditure plan. I haven't seen it or reviewed it in detail. But the deficit is a very serious concern of the banking industry. Yes, we can see deficit financing during periods of recession to sort of counterbalance, but I think we've done so much counterbalancing now that we're almost spiralling out of control.
Ms Bussey had mentioned that 35 cents out of every federal tax dollar is going to pay interest. You're seeing people complain they're paying $1 for services and they're only getting 75 cents worth of services because of the difference being paid in Ontario to go for interest, and much of that interest is being paid to foreigners.
It would nice to think that we can continue to offset the recession we're in by more spending, but it has to stop, and I think it has to stop now.
The Chair: I want to thank the Canadian Bankers Association for its presentation.
ONTARIO ENGLISH CATHOLIC TEACHERS' ASSOCIATION
Mr Claire Ross: My name is Claire Ross. I'm president of the Catholic teachers of Ontario. Jim Carey is the general secretary of OECTA. Our first vice-president is Marilies Rettig, and Greg Pollock is one of our staff officers. We're delighted to be here this morning to give you some of our views relative to the budget that you will be preparing.
As the submission indicates, we speak for 34,000 men and women who teach in the Catholic schools of Ontario, beginning in kindergarten, all the way through to OAC. We're part of the Ontario Teachers' Federation of 130,000 teachers.
As we come before you, we certainly are cognizant of the difficulties of the economic climate we're in, and of the sacrifice and the pain and the hurt that is throughout the whole of Ontario. We recognize that some of the factors are certainly beyond the control of this government and indeed any government. I think we understand, as we hope most people in government recognize, that we're involved in what is called a profound period of restructuring and reordering that's affecting not just Ontario, but Canada as a whole.
We would remind the committee that in the past number of years there have been some dramatic forces, primarily financial, that have been at work in our systems and that at the present time we are under the control of the social contract, as well as what is called the expenditure control plan. I don't know that too many citizens are aware of it, but it is the board's social contract relative to its operating expenditures.
As I appear on behalf of the Catholic teachers of the province, I want to emphasize to the committee that what is being reported out in this province is a two-tiered system of education: those who have and those who haven't. If you don't have, it's because of your assessment base, which is directly linked to the property and the commercial assessment base of the province. School boards in Ontario -- and some of them are now becoming the public boards as well -- that are located in northern Ontario -- the rural boards, the Catholic boards -- are becoming part, if you like, of that secondary school system that does not have the resources necessary to provide the kind of education and the educational reordering and restructuring necessary for change to take us into the 21st century.
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It's no understatement to suggest that unless this situation is reversed, there are going to be serious problems throughout the whole of Ontario as the citizenry begins to realize that place of birth and where it is that you choose to live will determine directly the nature and quality of education that will be yours.
The social contract reductions have been particularly difficult for the separate schools. We keep in mind that prior to the social contract there were what we called significant reductions in the transfer payments to boards of education. We live by those payments. They are what sustain and maintain us.
We were forced prior to the social contract to begin to literally cut our systems to the bone, where primarily we're moving to a system which can only be described as that of the 1950s, in which we had a teacher, a principal and very few, if any, other kinds of resources, a system lacking in complexity and sophistication, a system unable to deliver the kind of complexity of program base required because of the changing nature of the world in which we find ourselves.
When the social contract came along, we were forced to downsize from boards of education which were already dramatically reduced and which in terms of the history of the school system had never achieved that kind of platform of resources that accrued to the public system of education.
We find ourselves now in a very desperate situation. As you are aware, one of our boards almost went bankrupt before Christmas, the York Region Roman Catholic Separate School Board, a large board representing thousands and thousands of students and teachers, a board which if such were to happen would represent a very significant problem for the government, and I think would raise very serious questions in the minds of the people of this province.
We would suggest to you that this situation is not necessarily unique. I think it is a sad comment on the province and on the bases of funding in Ontario that we have boards, parents, students and teachers who wonder whether or not the financial viability of their board is going to be such that they're going to be able to stave off bankruptcy. I think we're past the time in pointing the accusatory finger of guilt at trustees and administration, at poor management and so on. I would like to join in my comments with the principle that was articulated by the Fair Tax Commission, in which it said that government in this province should embrace the principle that when a taxpayer pays for a particular service, the quality of that service should not be relative to the circumstances of where it is that you live, that we should pay in the same measure in all parts of the province for the services that are to be provided by the government.
I'm here this morning to tell you that we very strongly endorse this principle of equity. We recognize that the Fair Tax Commission has not defined the specifics as to how that would come about. We recognize that they have proposed moving from the property tax base to an income tax base. We are prepared, as this teachers' organization representing the Catholic teachers of Ontario, to support change.
I think everyone around this table quite frankly recognizes that the present system is not working, and the problem is that if we shortchange our children, be they in public schools or Catholic public schools, we're going to reap the dividends of that kind of negativity in the years to come. It is something that we're just simply not going to make up.
I'm here this morning to strongly make the plea to you that as you put together this budget, you have to consider the two-tiered system of education which has been created in this province. You have to address the question of equity. You have to deal with the matter that some boards now are in far more desperate need than others and that some boards have much while many have none.
We ask you then, as you formulate your plans, particularly with respect to the financial resources that will be reported out by you, that you keep these thoughts in mind, and with sensitivity and hopefully the kind of expertise you can bring to this matter, make at least some adjustments in the interim that will make next year a little less frightful for those of us who are struggling to provide a quality education while at the same time recognizing that our resources are diminishing daily and that at some point in time we are going to find ourselves in the kind of situation that will be very difficult for us to manage.
Having made those preliminary comments, the Catholic teachers' association would be prepared to accept any questions you might wish to direct towards us.
Mr Phillips: You're in support of the Fair Tax Commission, I gather, and fundamentally of the province determining how much money school boards will spend. Essentially, raising that money through provincial sources is something your group is supportive of.
Mr Ross: We're open to that, there is no question. We're open to whatever alternatives can be reasonably brought forward that will begin in fairness to address the awful inequities which characterize the present funding base in this province.
Mr Phillips: There are some who would argue that this would, by necessity, lead to province-wide bargaining. If the province is essentially responsible for raising the money and allocating the money, there would have to be some coordination. Is that something your group would be supportive of?
Mr Ross: No. We're not supportive of province-wide bargaining. I think there are all kinds of arguments for and against province-wide bargaining. I think what's important as we go forward is that at some point in time there has to be an end to this piecemeal approach to everything. What has to be put down is a global plan, and in terms of the vision, whatever it is, all of us have to be allowed to input and react in a way in which, hopefully, we will come up collectively with what is best and right for the children of this province.
Mr Phillips: There's a certain logic to your argument. If you carry it to its extreme, that pupils should be treated equally regardless of area, you might suspect that teachers would want the same arrangement. At some stage, as I say, if the province has that responsibility, there's been a view that it would also want to have some say over the expenditure side, obviously; any provincial government. You would want most of that except you would still want local bargaining.
Mr Ross: We're in favour of as much local autonomy as possible. I don't necessarily think we can create the kind of system that Egerton Ryerson at one time created in the province of Ontario, where every student at a particular point, on a particular day, was at the same place in the textbook. That's the logic on the other side and sometimes the logic of that does not necessarily fit so well into reality.
All I'm saying is that this association believes very strongly that there has to be change. We're willing to be partners and participants in that change. Hopefully, that change will be on the basis of the kind of vision where all the stakeholders are able to see what the pieces are and react accordingly so that ultimately the mosaic that is reported out will be the kind of fabric about which all of us can afterwards say that this will serve the students well.
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Mr Phillips: I should know this but I'm not sure I do. In one of your exhibits, the implications of the social contract, at the end of the social contract, right now I gather it is the expectation that scenario 1 is what's happening and what would happen. That's a fair interpretation of that, is it?
Mr Ross: Yes. Certainly, speaking for our association, one of the great injustices of the social contract is that it's going to require our teachers who are entering the profession for the first time, potentially, depending upon the exit strategy that is to be announced by government and which is to be legislated, will pay up to $90,000 each. If the citizenry of this province were ever faced with that kind of a direct tax levy, I think there would be rebellion and insurrection in this land, and yet that is what our young teachers are faced with right now in the loss of their increments and in the potential permanent loss of those increments.
Mr Phillips: One of the conclusions one would reach in the Fair Tax Commission, of which you endorse the recommendations, is that the role of school boards would change fairly substantially. I think the Fair Tax Commission indicates the province would essentially set the budgets for the school boards. I gather you're in favour of that, that the province would establish the budgets for the school boards, and then I gather the role of the school boards would be to spend those budgets in the most efficient way they can.
Mr Ross: One of the things that concerns me as an educator with long years of experience is that there is a bandwagon approach now in the media to say, "Let's get rid of boards and we're going to find something that will substitute and be better."
I would suggest that we have to be very cautious. I really don't have the answer to some of those questions. I don't think that the kinds of funding proposals in which we would have equity, and whether the money is coming from the provincial government or not, necessarily preclude local autonomy, and that there couldn't be a significant degree in terms of the quality and character of schools, as determined by local representatives, being fashioned in terms of the dollars that are being provided. I think there is a great danger now in jumping on the bandwagon, "It's open season on all the boards; let's do away with them because they are the problem," as it were, with education.
Mr Phillips: That wasn't my question. My question was, I gather you're embracing the Fair Tax Commission's report, which essentially says that the province would set the budgets for the school boards. I just want to make sure that I understand your recommendation to us, that this was something your group would be supportive of.
Mr Ross: The province basically sets the budget now in determining the grants and then of course boards are forced to raise above that in terms of local taxation. That's where the great inequities are coming in, because as the provincial share diminishes, the local share has to increase and then we start moving, certainly in the Catholic boards, towards bankruptcy.
There's no question that if there is a transfer and if there are dollars that are going to be coming in greater numbers from the provincial government, there would be possibly considerably more say. But I don't know that it would be really any more or less than it is at the present time, because let's face it, educational program policy in large part is mandated by the Ministry of Education and Training at the present time.
Mr Sterling: MPPs are now working for the same wages as they were paid in 1987-88. My experience with a public school strike about a year ago was that there was no empathy with teachers getting paid one cent more. In fact, many thought they should be satisfied with the status quo.
There doesn't appear to be any more money. There isn't any more money. In fact, we're operating now where we're spending 20% or 25% more than we're collecting. What are we going to do? It doesn't matter whether it's property tax or provincial tax. What are we going to do?
Mr Ross: We've reached the point, haven't we, in many respects?
Mr Sterling: I think so.
Mr Ross: Certainly for those of us in the separate school systems, and I can speak for myself personally, it must be four or five years since we've received any increases in salary, and in point of fact, with the social contract, we've been given the reductions that I think everyone knows.
At some point in time, I suppose, because we're looking at the general tax base problem across the province of Ontario, there has to be a decision in terms of what government is going to fund and pay for. In the last numbers of years, there have been no more dollars coming into our schools and yet the budget deficits keep exploding. I believe there probably is a very significant expenditure problem and that expenditure problem relates to an expanding expenditure base. In other words, we have certain essential services in place and then we keep adding more and more.
Then we try to cut back and suddenly we discover that the essential infrastructure on which we have built our society is beginning to crumble, because we've extended ourselves far beyond anything that the tax base was ever conceived as having to support. I think that's part of our problem. But that's a problem, with all due respect, that has to be put back in terms of your particular table, because only the politicians can make decisions in terms of how wide this general tax base is going to have to be in terms of its support.
Mr Sterling: That may be true in the final analysis, but certainly you don't want us to, as you said before, act in a vacuum in terms of making these decisions.
I'm really troubled by the whole concept, to know the huge number of people who are applying to go to teachers college. It almost is alarming when you're looking at it, in terms of thinking of the motivation behind these individuals. That worries me more than anything else, the fact that perhaps these individuals, or a good number of them, are more concerned with the remuneration that is presently paid to teachers than they are about seriously teaching. I hope I'm wrong, but I suspect that when you have 20 people applying for every one who is accepted, there's something out of whack here in the system.
Mr Ross: There's something out of whack, all right. We've created a world in which there isn't much hope or opportunity for our youth. We really and truly have. When I talk to my son, who graduated from university last year, he doesn't have the kind of world that was open to me. In point of fact, he's very fortunate to have a factory job right now, and he's trying to sustain himself and to get by. That's the kind of world we have created.
You find that there are more and more students staying longer and longer in school because, quite frankly, what else is there for them to do? They live in the expectation of hope that there's going to be a dramatic turnaround. There is some thought that there's going to be a shortage of teachers and that this may be the place where opportunity will find itself in a number of years.
But I do agree with you: We do have some extremely serious problems in this regard. I simply note that when you talk of dollars and money, the system I represent is one which, for the whole of its history and even now, is operating at a per pupil expenditure of about 25% less in comparison with the public boards. We do know how to cut. We do know how to live on the edge. That has been the whole quality and character of our history.
Mr Sterling: Yes, I acknowledge that. I represent the Carleton area, and the Carleton Roman Catholic school board is probably the most efficient in the whole area. On the other hand, the Ottawa Roman Catholic school system is probably not very efficient. So there are differences within your own system as well.
Mr Ross: Yes, there are.
Mr Sutherland: That's one of the points I want to pick up on. If we look at the growing demand for greater accountability in the education system, part of that comes for a greater consistency. Like I stated earlier, some boards do things very well in terms of curriculum. One board may be very good on the mathematics side, another board may be very good on the language side and another board may be very good in another area.
There seems to be some concern, though, in terms of the consistency. I don't think any of us are promoting going back to Egerton Ryerson that everybody should be at the same page in the textbook, but how do we maintain the strong local autonomy that you've suggested should be there and yet develop a better degree or a higher level of consistency in all those areas among all the boards?
Naturally, the question that's been popping into my mind lately, because we could bring in every school board and they'll tell us, "We do this very good, we do that very good," is how do we get that consistency and maintain local autonomy? The trend would seem to say that in order to ensure you get the consistency, then you need more provincial input and maybe a little less local autonomy.
Mr Ross: I'll give you my heresy and I suppose my Walter Mitty day-dreams that I was the Minister of Education and could make some of this come true. Assuming for a moment that there was equity and provincial funding to boards across this province on a proportional basis that treated all students the same, that the role of school boards would have to become, I believe, what the role of boards should primarily be, and that is the curriculum masters, to see that what students are being given is the right program base for life as it will be lived in the 21st century, because if we educate them for grandma's day and grandpa's day, we are taking their future from them because we're living our future now. Going back to the basics or educating kids for the past is not going to be the answer.
The problem in education is that we're for ever changing organizational structures. We're always addressing those kinds of issues, whether it be monetary, whether it be personnel, organizational structures that have absolutely nothing to do with the program base, because the moment you speak to the program base, you embark upon a path which is extremely critical and which can be one of criticism.
Nobody wants to be the kind of speculative futurist who says, "This is where we should be going," and boards are not being measured in terms of the creativity, the innovation, the relevance of the curriculum base, and thus we have problems of systemic irrelevance, absenteeism, dropoutism and violence.
Mr Sutherland: If I could just pursue that a bit further, my sense of some of the basis for local autonomy is to ensure that the curriculum meets local needs. For example, I represent a predominantly rural riding and I think the expectation there is that some reflection of rural life, agricultural life, be in the curriculum and those types of things. Can't that be achieved without the so-called sense of having so much local structure? It seems to me those questions are going to becoming forward.
Mr Ross: I think you have to have a significant local structure. You have to have an informed local structure, and even if you're in a rural area, for example, you would have to understand that we could not have a significant agricultural component, because in the next century only 3% of our people will work in agriculture, and to have a significant component of any school system tied to agriculture would be to educate our students for a reality in a world which is non-existent.
Mr Sutherland: But what people say is that even if you're using examples, like in my riding, math examples, try and tie them into a rural component that way.
Mr Ross: Exactly; I would agree with you totally.
Mr Sutherland: Can't that be done outside of having a significant local structure?
Mr Ross: I don't know. I would be very reluctant to take away some of the kinds of structures that have served us so well on the unfulfilled promise that if we move in this direction, this pig in the poke is better than the one we have walking beside us.
Mr Sutherland: If I can come back, wouldn't some say then that our structures are for the past, that as you were saying we can't have our curriculum for the past, that we need more modern ways?
Mr Ross: This association does support change. We are not going to be here as people who are protectively clinging to what is on the basis that that's the way we like it.
The Chair: I thank the Ontario English Catholic Teachers' Association for its presentation.
The committee recessed from 1204 to 1405.
ONTARIO SEPARATE SCHOOL TRUSTEES' ASSOCIATION
Mrs Mary Hendriks: Good afternoon. My name is Mary Hendriks, and I'm the president of OSSTA. I'm also a trustee with the Lincoln County Roman Catholic Separate School Board. With me this afternoon are Joe Kraemer, a trustee with the London and Middlesex County Roman Catholic Separate School Board and chair of our finance committee and advisory group for OSSTA; Pat Daly, chair of the Hamilton-Wentworth Roman Catholic Separate School Board and also a member of our finance committee; our executive director, Patrick Slack; Peter Lauwers, our counsel; our past-president, Betty Moseley-Williams, trustee from the Nipissing District Roman Catholic Separate School Board; Carol Devine, vice-president with the association and trustee with Metro separate; and Earle McCabe, our deputy executive director. We will share the presentation this afternoon.
The Ontario Separate School Trustees' Association represents 53 Roman Catholic separate school boards in Ontario, which provide Catholic education services to more than 575,000 students. Our presentation will be referring you to highlights in our brief.
I am pleased to be able to tell you that the Ontario Separate School Trustees' Association is generally supportive of the reforms in education finance proposed in the report of the Ontario Fair Tax Commission. The commission understood and took to heart our deep concern about equity.
The situation that assessment-poor school boards find themselves in, particularly separate school boards, is very well described by the commission in the quote which is found on page 2 of our brief: "Those few who know the system well accept as a given that virtually every component of Ontario's system of local government finance is in a state of crisis or near crisis."
When Marion Boyd, as Minister of Education, said, "The education funding model is broken," she spoke the truth. Education finance reform is a matter of utmost urgency. If you walk away from this meeting today with no other impression in your mind, we will have done our job.
In his comments on the system, Professor Brooks, vice-chair of the Fair Tax Commission, said:
"The present Ontario system of school finance is inequitable, irrational, a blatant denial of equal educational opportunity, and an egregious anomaly in a province committed to liberal ideals. Students living in the wealthiest and most advantaged communities have much greater educational resources than students living in the poorest communities. In an economy that is indisputably provincial in character, we continue to treat educational funding as a predominantly local function."
The commission recommended a complete overhaul of the education funding system. We agree. We know that the process is now under way and we call upon the provincial government to proceed immediately with education finance reform.
Mr Joseph Kraemer: On page 4 of our brief we set out the commission's principles that we support. There are two that we want to emphasize:
" -- Since all Ontarians are equally entitled to educational experiences that support lifelong learning, the ability of education systems to provide those experiences should not vary according to the amount of money that can be raised locally.
" -- The distribution of centrally allocated funds for publicly supported education should vary only according to geographical or demographic variations in the costs of meeting needs fairly and equitably."
At the bottom of page 4 and the top of page 5 we set out our understanding of the basic model proposed by the Fair Tax Commission. While we support the model, we have some specific concerns which we discuss in the next few pages.
The commission proposes a limitation on the ability of school boards to raise funds through a local levy. The commission believes that such a limitation is the only way to ensure that future provincial governments do not download. Our experience with downloading leads us to the conclusion that the commission is correct. OSSTA supports the limitation on the ability of school boards to tax, provided that the residential assessment base of school boards is equalized and provided that the system for designating school support is reformed.
The proviso is necessary, because even the ability to tax the residential assessment base creates inequities. The residential assessment base of public boards is richer than that of separate boards. The result would be a consequence that the report criticizes when it talks about revenue-driven inequities among students and taxpayers. In order to ensure equal per-pupil revenues for the same tax effort, OSSTA believes that a system of assessment equalization would be necessary. It could be funded by revenue received from the new assessment system for non-residential property.
The major reason there is a significant gap in the residential assessment per pupil between separate and public boards has to do with the system of designating school support in the province of Ontario. As you know, a person must choose positively to become a supporter of the separate school system or to become a supporter of the francophone section of a board. If neither choice is exercised, the system defaults to the public board and to the English. The result is that public boards end up with a disproportionate share of residential assessment.
Here is a point at which we must express some real disappointment with the Fair Tax Commission's approach. The commission accepts that there will be a gap in the revenue-raising ability between public and separate boards but does not choose to do anything about it. The problem is that the designation system leads to intense competition between public and separate school boards. That competition is one of the reasons cooperation between the two systems has its limitations. All residential ratepayers should be obliged to choose which school board they wish to support, depending on their constitutional entitlement. In those instances where taxpayers refuse or neglect to do so, their assessment should be pooled and divided among the coterminous school boards on the basis of pupil enrolment.
I want to be very clear about this. As we say on page 8 of our brief, OSSTA's support for the Fair Tax Commission's model depends on the creation of a residential assessment equalization plan and reform to the system for designating school support.
OSSTA is also deeply concerned about the constitutional implications of losing the right to tax ratepayers. On page 8 and following, there is a lengthy discussion of the constitutional implications of the changes that the Fair Tax Commission's model would bring about. These are set out in detail on page 10 of the brief. Our basic position on the constitution is set out on page 14 in the paragraph following the title. Because the right to tax is an important protection against less benign provincial governments, OSSTA would oppose its elimination. Instead, we recommend a slightly different approach that has an historical precedent.
Right now, Roman Catholic separate school boards are constitutionally allowed to collect their own taxes, but they don't do so. Instead, they use a municipal collection system because it is cheaper and more efficient. Using a similar approach here, legislation could be enacted giving separate school boards the right to choose between the old model and the new model proposed by the commission. Since the new model would be advantageous to them, without exception they would accept that model and would simply stop using the old model. Constitutional protection would remain.
Mr Patrick Daly: We now turn to other matters raised in our brief.
We deal with the funding and use of capital assets on page 15 of the brief. While we support the idea of multipurpose facilities used by a number of different agencies at the same time, we have two concerns. First, such facilities are normally more expensive than standard loan facilities to develop, but the capital grant plan so far does not recognize that. It is a disincentive to cooperation. Second, the control of the siting of schools is of particular importance to Roman Catholic separate school boards and to French-language education. We need to be able to locate our schools where our students live.
We recognize the need for transitional measures, because the changes proposed by the commission are quite far-reaching and profound. On page 17 of our brief, we set out the basic conditions we think must accompany any transitional provisions: that equity should not be postponed; that transitional measures must be efficient; and that there must be immediate remedy for assessment-poor boards in financial difficulty.
One commissioner proposes the coterminous pooling of commercial and industrial assessment as the alternative to a new provincial tax on non-residential assessment. In the past, OSSTA has favoured coterminous pooling as a step to provincial pooling. We prefer the commission's model, but would be prepared to accept coterminous pooling only as a transitional measure. The base, however, must go beyond commercial and industrial assessment to all non-residential assessment. Since it is students who are receiving education, OSSTA recommends that any coterminously pooled assessment revenue be distributed to school boards on an equal per-pupil basis.
We agree with the commission that the right to tax is not synonymous with the right to govern. We agree as well that the democratic accountability of school boards is and should be based on the educational services they deliver.
We do not agree that elimination of the right to tax means that school boards will not be accountable. In truth, most school boards in Ontario, which are heavily grant-dependent, have little real fiscal autonomy and accountability. Only the rich boards, particularly those in Metropolitan Toronto, have any real degree of autonomy.
We also agree with the commission that a system of school-based management responding directly to a ministry at a central level is not workable in a society that is as geographically spread out and as diverse as Ontario. We insist that regional bodies retain their constitutionally protected identities. There are three reasons for our position, and these are set out clearly on page 21 of the brief.
First, the funding model proposed by the commission does not eliminate competition. So long as competition exists, business functions cannot be merged. Second, since the strategic planning of infrastructure on a regional basis involves the siting of schools, control over the siting of their schools must remain in the hands of minorities. Third, the regional control over educational programs would eliminate curriculum control, which is of course a vital concern to Roman Catholic and francophone minorities.
The commission recommends that the tax-exempt status of charitable organizations, churches and cemeteries be eliminated. We oppose this change. Most Ontarians know the good works that charitable organizations and churches do for the common good. In these difficult times, when money is scarce, it is these charitable organizations and churches that have helped less fortunate Ontarians survive. The addition of a new expense burden must be expected to curtail the number of charitable organizations and churches and therefore to curtail the services they are able to provide. This is not the time to damage the volunteer sector of our society.
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Mrs Hendriks: We repeat our clear warning that education financing reform is a matter of utmost urgency. We call upon the provincial government to proceed imminently. The time has come for action.
We would also like to comment on the budget. As you know, we represent assessment-poor school boards. Everywhere in Ontario the counterpart public board is wealthier in terms of assessment. So far, separate school boards have been forced to accommodate reductions in grant funding through cost cutting, both inside and outside of the classroom. These cuts do affect students.
Further reductions in funding will force us to look for savings in our collective agreements. We know the government and the Ministry of Education and Training have been critical of what has been called contract stripping. None of our boards has engaged in that practice. Indeed, our association has encouraged our boards to be sensitive to the impact of the social contract and today's economic realities on their employees and their families. You must understand, however, that we are cut to the bone and we will have no other place to go if there are further grant reductions.
Some of you might ask, why not just raise taxes? The simple answer is that we are not in a position to raise our taxes above those of our wealthier public school board counterparts. Over 75% of our ratepayers do not have children in our schools. If we raise taxes above the public board rates, some of our ratepayers will switch their taxes to support of the public boards, which has counterproductive effect. This simply increases the fundamental inequity.
In July 1992, when education financing reform was just beginning, we filed a brief. The first principle in that brief was that funding for education should be adequate, stable and predictable. We made a comment which is relevant to the process you are engaged in: The need for stability and predictability in funding is obvious. Planning is not possible without them. School boards do not have the fiscal flexibility to deal with abrupt changes in funding policy and grant rates.
For our boards, funding is not adequate and has not been stable or predictable. Some form of longer-term commitment by the government is essential, not only to proper planning of the operation of school systems but also to such basic things as collective bargaining.
Thank you for hearing us. We hope our comments on behalf of the member boards of the Ontario Separate School Trustees' Association will be helpful to you in your deliberations. We're prepared to try to answer questions you might have.
Mr Phillips: I appreciate the presentation. At the heart of the Fair Tax Commission report, essentially, is that the province would have the responsibility for raising the money and for setting the school boards' budgets and that then the school boards would have the role of spending in the best possible way. I gather from your report that that's a direction your organization is supportive of.
Mrs Hendriks: In general we support the direction of the funding coming from the province. Boards would have the autonomy at the local level to determine how the moneys would be spent, yes.
Mr Phillips: But essentially the province would say, "The budget of the Lincoln county separate school board is $31.5 million," and that would be an acceptable process from the trustee organization's view.
Mrs Hendriks: Provided that there is adequate funding to provide for the mandated programs, that would be acceptable.
Mr Phillips: That would change considerably the role of the school trustees, but I gather your organization is prepared not only to accept that but to embrace it.
Mr Daly: As I said in my comments, I don't think it changes drastically the role of trustees. First and foremost, we should be accountable for the services and programs we provide to students -- that's what school boards are there for -- and we expect to be judged or held accountable for those reasons. Of course we would still be accountable for the efficient use of the resources provided to us. In reality, very little would change except the generation of the revenue.
Mr Phillips: The way the capital now is being handled is that the province has moved to what's called loan-based financing. The province used to provide grants, but now you borrow the money and the province undertakes to repay that over a 20-year period, principal and interest, so the provincial debt's on your books, not on the provincial books. I gather you don't have a problem with that because the province undertakes to repay it, so it's irrelevant to the separate school trustees whatever way it's handled. Is that a fair statement?
Mrs Hendriks: We've not had a problem with that. It's our belief that history has shown that this concept has been used in the past, and used successfully.
Mr Phillips: I guess the teachers' pension is again not an area you involve yourselves in, but do you ever comment on the teacher pension funding? We think the plan for the province is to take a three-and-a-half-year holiday from making any payments against the unfunded liability and then, when that holiday's over, the combination of the teachers' pension and the public service pension comes in at about $800 million a year. Has your organization any views on that or is that something you leave to the province?
Mrs Hendriks: We haven't discussed this issue at all, so at this point we would not have taken a position on it.
Mr Phillips: When the province looks at its funding currently for education, it includes pension payments, but your organization just views that as the responsibility of the province.
Mr Allan K. McLean (Simcoe East): What are the three top recommendations from the report of the Fair Tax Commission that you like?
Mrs Hendriks: They recognize the inequities in existence across the province and attempt to address those inequities. They focus on the issue of non-residential assessment being pooled provincially and distributed on an equal basis per pupil across the province. I think that's it.
Mr McLean: That's two. My colleague has a question, but if you think of another one, let me know.
Mr Carr: Mine is along the same lines as Mr Phillips's. I think what the public wants, whether it's in education or health, whether it's division of powers federally and provincially, is clear lines of authority and responsibility.
We've heard from the teachers' union and trustees all saying the province should take more responsibility for funding. I don't think any provincial government, of any political stripe, is going to do that and then allow the trustees to control 80% of the budget through negotiations. Notwithstanding what you said, I believe if they take more of the funding responsibility you essentially are going to put yourselves, in a lot of cases, right out of business. As 80% of the cost is salaries and benefits, I don't want trustees negotiating with teachers if most of the funding comes from the province, and I think no provincial government of any political stripe would.
What is happening in Alberta is that the province has taken over more and more responsibility for funding, but they are also getting rid of school boards. Since this would put a lot of you out of business, I take it you're not in favour of doing what they're doing in Alberta with regard to the education system. I like it. I am in favour of it. I also like province-wide bargaining. That's personal; I'm not even the critic for Education. I'm in favour of what they're doing in a lot of other areas too, as I said this morning, in terms of cuts. I take it you are not, as a group, in favour of what's happening in Alberta, which basically is eliminating a lot of school boards.
Mrs Hendriks: Our brief makes it very clear on pages 18 to 21 what our position is relative to governance. We are not in favour of eliminating school boards and the position of trustee. In terms of the 80% autonomy, or lack thereof, I think it is essential that we look at the existing funding structure. It is clear that for many boards autonomy is not possible. Many of the boards are already grant-dependent to the point of 80%.
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Mr Carr: The public is saying that here you are controlling 80% of the cost and that you're not accountable financially. That's where the average public I think is going to have difficulty with the concept. You're saying, "We want to keep our responsibility, but give the financial responsibility to the province." I just don't think the people of this province want that. Some will disagree and say you should keep all the responsibility as trustees. We can disagree on that. I just think if you start getting unclear lines of authority and responsibility, dividing up the financial end from the operations side, the public does not want that. That's why they're very upset with the federal and the provincial government with overlapped powers. Personally, I think what you're proposing is not what the public wants.
Mr Daly: I'm not sure I would agree with you that that's what the public wants or doesn't want. In the area of negotiations, a number of the assessment-poor boards and smaller boards have successfully negotiated more cost-effective contracts with their teachers and other federations. I don't think one can assume that provincial negotiations would be more efficient than local. Clearly, negotiations with local units enable boards and federations to meet the needs of the local communities much better than any provincial forum ever could.
Mr Carr: That's why the teachers are opposed to it, because they think province-wide bargaining would be tougher. Quite frankly, that's why Alberta's gone to it. As he said in the paper, with a glimmer in his eye, school boards -- granted, there are some tough boards, but on the whole, province-wide bargaining would be tougher. That's why the teachers' union doesn't want it.
Mr Kraemer: The public we hear from when our galleries are packed is parents coming in to ask the board why we reorganized their school midyear and things like that, why we removed various services. We get very few requests about autonomy. It's: "Why are you reducing these services? Why are you taking these programs away from our kids?"
Mrs Mathyssen: I'd like to thank the association for presenting this brief. I'll direct my question to Joe Kraemer. You meet with the local MPPs to discuss situations around education, and we met about a month ago and talked about the problem of inequities. You've mentioned it here with the stats, and we know that in London-Middlesex you educate about 25% of the students with 16% of the dollars.
Those figures are telling, but when I met with you, you had a concrete example: two schools built in London, one by the public board, one by the separate board. Could you describe for the committee the disparity between the children educated in the public and the separate systems in terms of the kinds of things they can expect from support staff, the actual facility, their educational experience and the opportunities -- just in a general way; I don't want to put you on the spot.
Mr Kraemer: It'll be off the top of my head. We compared a London board school and one run by the London-Middlesex Roman Catholic board. The number of students was roughly equal, but the number of teachers they had was 25, compared to ours at about 15 or 16. We went down through the whole list: resource services, library services. We had about half of those special resources all the way down the list.
In terms of programs: technical programs available to their school for the grade 7s and 8s, we don't have. The cost to build, total cost per square foot, for their school was twice as much as ours. That includes, in addition to the capital, all the other items that enter as capital. There was a list of differences, very clear, and I'd be glad to supply you with that list. I'd just add that the number of dollars raised per mill for our board is less than half of what would be raised by the board of education. That's locally raised dollars.
Mrs Mathyssen: The point being that children, no matter what system, deserve equality in education.
Mr Kraemer: They live in the same neighbourhood and have the same friends.
Mrs Elinor Caplan (Oriole): I have a supplementary question if the committee would permit. It's a short one.
The Chair: I'm sorry, but our time has expired.
Mrs Caplan: Could I just ask for unanimous consent to place the question?
Mr Wiseman: Let her ask it. Be quick.
The Chair: If committee members are in agreement, by all means.
Mrs Caplan: You've described well the educational inputs. I'm interested in any of the comparative outcome information you would have about results from the students in those two situations. If you have that and could make it available for the committee, we'd be really interested in test results, scores, anything where the outcome could be evaluated. I'd be interested in how the students in those two environments compare.
The Chair: If you could forward to the clerk any of the information requested by the committee members, it would be appreciated. I want to thank the Ontario Separate School Trustees' Association for making its presentation this afternoon.
Mrs Hendriks: Thank you for the opportunity. We look forward to the outcomes.
ONTARIO COLLEGE SYSTEM
The Chair: The next presentation is by the Ontario Council of Regents for Colleges of Applied Arts and Technology. Some of you are familiar to the committee members, but not everyone, so please identify yourselves for Hansard and the committee members.
Mr Richard Johnston: I'm Richard Johnston, the chair of the Council of Regents, the advisory body to the Minister of Education and Training around matters dealing with the colleges. Today we've come in a very unusual and historic way to present to you: We have all the major stakeholder groups of our system represented here. I'll let them introduce themselves.
Mr Wayne Phillips: My name is Wayne Phillips, president of the Ontario Community College Student Parliamentary Association. I'm a student at Georgian College in Barrie.
Ms Doreen Deluzio: My name is Doreen Deluzio. I'm chair of the Council of Governors of the Ontario colleges and I'm also chair of the board of governors at Sault College in Sault Ste Marie.
Mr Dean Barner: I'm Dean Barner, chair of the faculty division of the Ontario Public Service Employees Union at the colleges.
Mr Jay Jackson: I'm Jay Jackson, chair of the OPSEU support staff workers across the province, representing about 6,500 workers.
Mr Gary Polonsky: I'm Gary Polonsky, chair of the Council of Presidents and president of Durham College.
Mr Johnston: We'd like to take about 15 minutes to make some points. The last two years I've come here, we've made a particular point of not talking about money but talking about vision and where we were trying to go with the system, the reforms that were under way etc. The reason so many of us are today here together, who maybe in a couple of weeks' time on the social contract rebargaining and other things will not be sitting together but across the tables from each other, is that we think we've come to a point in the system where our capacity to reform and our capacity to continue to have as much access as we have had is now in jeopardy, and we wish to present to you to indicate that problem we seem to be facing at this time.
We have not come prepared to talk about the Fair Tax Commission, because we have not tried to produce a consensus position on that. Individuals, if you wish to ask them questions on that, I'm sure would respond according to their own constituencies.
I won't go through the full document -- I'll leave that for you to read -- but I think the bare facts speak for themselves. Since 1989-90, we have had an increase of 35% in the student body in the colleges. The demand is high. The projection I made last year to you about more and more of our society requiring this level of education to be able to participate in our economy is something the electorate and our students are showing with their feet by coming to the colleges for this kind of upgrade of their education. More and more adults are returning to our system from the workforce.
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At the same time, the drop in funding per student has been particularly difficult: It works out to about a 25% drop during that period. Even when you roll in student fee increases during that period -- and the students will tell you they're paying a bigger share now and not sure they're getting the right services -- we end up with 18.5% or 20% less money per student to run the colleges than we had a few years ago.
No matter how you look at it, we have shown great efficiency and great effectiveness in making changes to accommodate that and to try to meet the government's desire for greater access. At the same time, we've taken on probably the most ambitious reform process of any of the levels of education. In the 1991 budget, this government asked us to look at setting standards for the college system. We are well under way now with a standards and accreditation council to establish learning outcomes for generic skills of all our graduates, to look at the general education level of our graduates and to start establishing vocational skill standard levels for all our courses over the next number of years. We also initiated, as you know, the first major system-wide approach to prior learning assessment, a means of trying to assist older workers and others to come back into our system and not have to jump through the kind of hoops they have to in many parts of the education system.
We have at the same time been suffering huge cuts in support from the federal government around the whole training side of what the colleges do outside the post-secondary, and I think Gary Polonsky will speak more to that.
Our point is that we've all been sitting at collaborative tables trying to work our way through these issues for the last couple of years now, and hundreds and hundreds of each of our stakeholder groups are participating together, trying to sort this stuff out. But we are at a stage now where we unanimously come before the committee to say that something has to give: We'll have to slow up on the reforms or we'll have to ease up on the access or we're going to have to start to cut back on quality. It just cannot go any further.
If you look at an even longer-range picture than the tables at the back of the document you have before you show, at the end of the 1970s the relative value of the dollar per student would be $6,200 per student. It's now, as you see, around $3,200. That might be an argument to say we were overfunded in those days, but it's certainly also very important to say that we are incredibly lean at the moment.
Ms Deluzio: The Council of Governors represents approximately 360 governors at 23 operating colleges, soon to be 25 when our other two francophone colleges come on board. I am here on their behalf, together with our college partners, to tell you that we are concerned about the financial challenges facing the colleges.
The governors are volunteers. We have no vested interest in appearing before you. We are community leaders who believe in colleges, for we know at first hand how much colleges benefit the individual, community and provincial wellbeing of Ontario.
Colleges are trying their best to accommodate all the students who need education, training and retraining in this difficult economy. We have accepted a 35% increase in enrolment while at the same time facing a 20% decrease in funding.
My own college, Sault, for example, has been successful in expanding to meet the needs of the severe restructuring at Algoma Steel. One initiative we have undertaken to help laid-off workers is our agreement with the Canadian steel trades education council, through which 350 post-secondary and 130 adult training students furthered their career education at our college. These students are receiving valuable training and all the support services Sault College can provide to promote their success, but financial constraints are jeopardizing the college's mandate to provide accessible quality vocational education to people who need it when they need it. Even with college restructuring -- and the governors took a lead in this, along with our partners -- we don't know how many more students we can serve.
The governors also want you to understand the contribution colleges make to economic development. Again I offer the example of Sault, with the RAPIDS organization now becoming the economic development for the city. We've certainly participated in that. In many communities, particularly in the north, colleges are the engines that drive economic recovery and long-term growth. Northern communities want college programs and services, but these programs and services require your commitment in financing. All colleges want this, and the examples I use could be duplicated in any one of our colleges.
How long can colleges remain accessible, flexible training and education programs for Ontario adults? This is the critical question we are placing before you.
My last point before you hear from our student representative: The people of Ontario agree with the college governors appointed to represent them. A 1993 Ontario Institute for Studies in Education survey shows that Ontario thinks that colleges are doing a good job. Please let us continue to do the job mandated for colleges 27 years ago and so urgent today. The governors hope you will seriously consider the colleges in your funding priorities. Colleges are a critical investment in the future of Ontario. Thank you for listening.
Mr Wayne Phillips: Good afternoon, members of the standing committee on finance and economic affairs. I represent the students of Ontario; there are 120,000 students I represent. Our association acronym reads OCCSPA, so when you hear of OCCSPA, that's us, college students.
We primarily focus on key issues that affect students in Ontario colleges. We've recognized an appreciation, though, for student representation on many of the provincial committees and the processes that affect students. This commitment to students is not system-wide, but it is becoming more common in colleges across the province.
I am here today in support of student participation in the various activities in the college system that are supported by the provincial government. OCCSPA's concern for the quality of education delivered in the Ontario colleges does require monitoring of federal and provincial budgeting activity, as most recent trends have been somewhat dismal for the educational institutions. The financial restraints are prohibiting the colleges from implementing many improvements. Although recent initiatives have begun, such as the College Standards and Accreditation Council, that improve the quality of our education, budget cutbacks seem to challenge these advances.
As of now, students are losing support services on campus, we're borrowing more, we're paying more, and we're wondering if we're receiving more or if we're receiving less. Is it fair to a student if the tuition and ancillary fees skyrocket in a greater proportion than the cost of living, especially after making the commitment to enter post-secondary education?
The colleges should gain recognition as an effective vehicle for economic recovery in our province. After all, the colleges have been an enormous investment by the taxpayers and should be used in training the unemployed. What proportion of the cost of education should a student pay? This question, we believe, will have to wait until a plan of college funding is established and entrenched. The current formula does not allow for consistent calculation of our cost for education.
In the near future, decisions will be made that will affect students in Ontario colleges. We ask that you maintain this government's commitment to the notion of lifelong learning, which will result in a quality education that is accessible and affordable to us.
Mr Barner: I'm Dean Barner, a faculty member at Canadore College in North Bay. I'm speaking today on behalf of almost 9,000 college faculty. I've encouraged our members, members of OPSEU, to work with our managements, with our students, with our boards and with our ministry to enhance access and quality with initiatives such as prior learning assessment and college standards and accreditation.
We have even arisen to the challenges of restructuring in the college system as we desperately seek alternatives to provide more efficient and affordable training and education with fewer dollars. Reluctantly, we have taken part in early retirement and leaving schemes for our members in order to alleviate and avoid more painful layoffs. In fact, in this past year alone our OPSEU dues-paying faculty membership has dropped from 9,500 to 8,900; that's 600 jobs lost in one year. Those remaining behind face an increasing number of students and a greater workload.
What really hurts is to realize that we face diminishing returns, that the real loss is not just our members' permanent jobs but the loss to quality education and training for our students. Instead of rewarding our efforts to increase access and curriculum standards, the province has diminished our transfer payments even more. Those are in direct contradiction.
Sadly, our members are now questioning whether working together works. I still hope so. I hope that our coming here together today has an effect on you and on our future in the CAATs. Thank you.
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Mr Jay Jackson: I'm Jay Jackson, representing support staff workers. For me, these issues of quality and access go back some years. I was fortunate to be one of the two representatives on the group of people who recommended to government how the community colleges should proceed to the year 2000. That was called Vision 2000. From that, clearly access and quality were prime on that recommendation to government.
Today, here in the mid-1990s, as Richard has alluded to, we have over 200 union people speaking on behalf of members across the province on various committees dealing with such issues as restructuring and dealing with how we can move to a more efficient and better community college system. Again access and quality are prime on our list.
In these times of this Ontario economic crisis, the struggle that is going on with our citizens is being responded to by the community college system. More and more learners are coming into our institutions. More and more of our staff are trying to deal with these challenges. It cannot go on for much longer. Access and quality are clearly up for grabs in this question. We feel it's important that if the government wishes to maintain access and quality to learners in this province, an economic commitment must be present in the formula. Thank you.
Mr Polonsky: My name is Gary Polonsky. I'll just take a moment to make four brief points.
The first is that while I am privileged to be part of the shared leadership of my college, and of the college system at the moment, I live very much in the applied world. I spend at least half of my time in the offices of companies and unions and community organizations trying to learn what their needs are so we can respond as quickly and as best we can, so I believe I'm bringing you their perspective this afternoon as well as my own perspective and that of my colleagues.
My second point is that I believe genuinely in my heart that the college system of Ontario represents a huge strategic edge right now for the people of Ontario, for the economy of Ontario. We've always been that through the 1970s and 1980s, but suddenly we're in this new world where knowledge really is driving the economy. Our clients need speed and accountability and quality and to be client-driven and cost-competitive. You know all that. Ontario is almost unique on the planet in having a system which is rooted in the community and at the same time accountable to government so that one can have almost the best of all worlds per the current structure. We are up to this new challenge. Indeed, my point leading into my third point is that we've begun.
I thought I would give you just a handful of examples. Richard in his remarks was focusing on the post-secondary and the full-time daytime diploma part of our programming, which is often deemed the bread and butter. But I'll just leave a number with you for a moment. Durham College has 3,700 post-secondary students by that definition -- I'll come back to that number in a moment -- and indeed we are shifting quickly in being innovative, as are the other colleges, with that client group.
We have many more special-needs students, for example, who are clients of ours. We are engaging industry so that our graduates, during the summer, are now in summer internships. We have high schools coming on to campuses now for joint credit. We are establishing marketing agencies and other kinds of agencies that are adding value to community non-profit organizations in a way that is a win-win for our students and also for those organizations, so we can add value to them at the same time our students are getting meaningful unpaid work and, in the case of the summer internships, paid work.
We're adding new programs in environmental technology and in business, so our students are learning how to speak Japanese and Spanish and what are the customs in Malaysia. We're learning how to do business over there as well as over here of course so that our companies will be able to expand and add to their market share around the world because we're an exporting nation and, God willing, we'll stay that.
We're engaged in projects such as Canada First, where high schools and companies and the colleges are working with students in teams developing space-age materials, space-age products which some day may find their way into the workplace, into the marketplace, and that's very exciting for us. We're partnering with universities to break down the stupid barriers that have been part of Ontario for decades so that people are part of a seamless continuum, as the deputy likes to call it, which facilitates people going from system to system to system, to the workplace, out of the workplace, on both a full- and part-time basis.
As has already been said, we're doing all that in a way that we've increased our student body by a third at the same time that our revenue per student has declined by half, which is a remarkable example of restructuring, especially if one considers the short period of time in which it has taken place.
Just prior to my concluding point, I'd like to come back to that figure of 3,700 full-time daytime students in Durham and make the point that we have over 37,000 students, in our little college, on the other side of our house: the market-driven, contract training, skills training, working with companies, working with unions, people already in the workplace, people in need of labour adjustment services, where the whole emphasis is on speed, flexibility, response time, accountability -- not more so than in the post-secondary sector, but the very fact that the score at Durham is 3,700 to 37,000 helps to give you a feel for how we're responding to these new needs in society.
As one or two of the examples, we're working with local clergy in a number of communities now on the labour adjustment side. The system as a whole has just established Con-nect, which you may have read about recently in the Globe and Mail and the Financial Times. Ontario now has -- this will be my last example -- for the first time in the history of the province, from Kenora to Cornwall, north to the Arctic, a network of economic development offices dedicated to providing consistent multibranch training throughout the province in a client-driven way.
My concluding point is simply that you have the pledge of all of us that if you continue to demonstrate confidence in this system, which is still young but is restructuring before our very eyes, we really can add value to the developing economy as the world is now defining that economy. Thank you for this opportunity.
Mr Carr: Thank you very much, Richard, for a fine presentation and for keeping us informed. Jay, nice to see you again.
I was out to the opening of the Ford plant last Thursday, and when I spoke to the management and the CAW people out there, they said the biggest single factor in getting this world product mandate, 1,000 new jobs, was the skilled workforce. That's what we do better than anybody. In spite of all our problems with governments at all levels, our people are still our greatest asset. Sheridan played a really strong role in the training, and basically we got the jobs because of the cooperation that was done.
In this era when finances are as tough as they are and you're at the breaking point, do you see in the future some of the colleges getting into working with the private sector, and how much revenue do you think can be generated? In this case, they put numerous people through training and so on. Do you see that as a source of revenue? Obviously, in Ford's case the reason we got 1,000 new jobs was because of the skills and training of the people, which is a tribute to the management and the workers. How far can we go? Have we just touched the surface in that area?
Mr Johnston: I think we have just touched the surface, although Gary's already indicated the number of people involved in those kinds of contractual agreements now. This new organization, Con-nect, which includes all the stakeholders at this table, turning the colleges into a proactive economic development network I think has a lot of prospects for attracting dollars. Dean has been involved in a committee working with training for the auto parts sector. If we get more proactive with the 50-odd sectors around the province about how we can do that, I think there are a lot of very positive symbiotic relationships that can be developed.
As well, we probably also need some investment from the government on that side. I'm even thinking about our ability to communicate. What a good place to have a good telecommunications system, the colleges, if you want them to act as a network to support that kind of enterprise. I think there's a good chance of luring in some private enterprise dollars to supplement government dollars for that purpose as well, because it meets all our needs. We see that as very important on this side of what we do.
We continually see a bridge between the training programs we're doing and post-secondary, to get more and more capacity, to get credit for your learning and training applied to your post-secondary diploma. I think that will also be a real value added for the province.
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Mr Sutherland: I think we all realize that the college system has done a tremendous job and continues to do a tremendous job. If anything, there's been a great increase in productivity in the college system. You've called for provision of stable funding to the system. We'd like to do that, if the government could be sure we had stable revenues and stable funds. You understand that situation.
Maybe the college system is trying to do too much. Are some of the things it is doing being provided by other agencies, other institutions? Is there a potential to reduce some of those things that other agencies are providing, and would that provide any savings that could go into the other existing programs?
Mr Johnston: I think there's lots of room for a range of articulations and rationalizations that could reorganize who does what in training, who does what in education in the province. We have a lot of relationships with the individual boards around articulation and we have a lot with other kinds of groups and organizations. I think OTAB will be very useful, potentially, to us in terms of trying to sort out who should do what. We're actively working on that. Every public agency has to these days just to try to survive in the budget crunches we're facing.
I would throw back your first comments to you. Of course we know there's not much money around, and that's one of the reasons we haven't come sort of mewling and whimpering about our state in the past to this committee. But I do think it is important to invest what you've got wisely, and when I look at the crucial role the colleges play in the economy and education and the reinforcements that can be made there, and at the undereducation of our adult population at the moment in terms of the needs of our economy, it just strikes me as a self-evident place where there needs to be an investment of whatever we have.
It would be a real shame if what happens is that our reforms have to fall off, in terms of how quickly we do them, because we don't have the dollars and that therefore our accountability for standards, which will be a means again of reinforcing business' interest in us, can't be followed. And it would be a terrible shame if people had to be turned away from the colleges at a time when they're coming because they really need exactly the kind of education and training combination we can offer.
Knowing you've got a shrinking pie, I'm just saying it's time to pick some losers and winners in a hard-nosed kind of political way. Unfortunately, I'm coming to you saying that we should be one of the winners, but I think there's a logic to it which is inescapable. We as a system are not the squeaky wheels, unlike my life as an MPP where I was primarily squeaky all the time.
Mr Chris Stockwell (Etobicoke West): I was just going to say that.
Mr Johnston: And others are now following in that kind of tradition. We've inquired about it. We've gone about our business, and what we're basically saying now is that our business is in some jeopardy if there isn't some recognition of the kind of role that's being played.
Mrs Caplan: I'm very supportive of the role the community colleges have played and also the ability of the community colleges to change themselves and be flexible and responsive to not only the changing requirements but also to the community need. I think that's the strength of the community college system, and we've got to be sure that's not lost.
I do agree with you when you say that we have to invest wisely, and I'm very interested in the work you're doing in the area of accountability and standards and linkages and bridging. I think that's outstanding.
A question related to the standards is that you talk about the concern for shrinking quality, and I think we all have to be on guard and very aware of what that means. I'd like to know whether you're doing any kind of outcome evaluation on the basis of your standard of quality and whether that could be made available to the committee so we could understand what you mean when you talk about the standards by which you are evaluating your student result and the outcome of the dollars, so we can then look at both value for money on behalf of the taxpayers and the quality product you are producing for Ontario to give us the competitive economic advantage. I'm wondering what kind of work you've done as far as educational outcome is concerned.
Mr Johnston: We're still very much in the baby-step stages of it. The standards and accreditation council was set up formally last September with equal representation from inside and outside the system. We are now at the point of sending out to the system a paper on guidelines about how to establish learning outcomes and a paper on the level of general education that we think should be expected for our college members.
Yesterday our generic skills council -- I'm the acting director of this group at the moment -- made further steps to identifying the kind of standards we'd want in five major areas: literacy, numeracy, computer skills, interpersonal skills and critical thinking. We're hoping that within the next couple of months we'll actually have that out to the system, too. But it will be not until this next fall that we actually see how well we can implement that. A real progress report on how we're doing at that stage we'd be happy to send you, but the working document, where we are at the moment and what we're considering, I'd be happy to be make available to any member of the committee who would like that.
Mrs Caplan: Just one last supplementary to that: The concern that I have is, how can we talk about decline in quality unless we know where we're at and have something against which to measure that benchmark? I'm becoming more and more convinced that it's not just a question of how much you put into it. Unless you know what you're getting out of it, you won't know whether those tax dollars are being wisely expended and used well, and you can't even answer the question of who should be delivering the service unless you know who can deliver the service best on the basis of results.
Mr Johnston: Let me let Gary respond. But one of the things we're trying to move from is the sort of hours-base or input-base side of it to what are the outcomes and what is the profile of the graduate of our system that we want to be able to say to business and to the community we are providing. We are actually going to be at this stage comparing apples and oranges because we're shifting to that kind of accountability from the old curriculum-style approach.
Mr Polonsky: Just quickly, I have been lucky to be asked to serve in the National Quality Institute. I'm actually the only post-secondary educator in that institute, and have been learning from the likes of the presidents of GM, IBM, Northern Telecom, Xerox and so on as to how systems which have helped them compete magnificently on the global stage could also be applied to my industry. The good news is that the answer is that there are processes, as part of a mindset, which can make a difference.
As Richard said, we're only beginning to measure on a system basis, but a number of individual colleges have begun to do so on an organizational basis. There are performance measures such as job placement, client satisfaction ratings, employer satisfaction, advisory committee reports, operational reviews. We have actually gone a long way in the last three to four years to really become a system which has defined accountability and is prepared to stand and be counted on those measures. As we go forward collectively, I think we'll learn from these examples and maybe even be a beacon in this regard in the medium term.
Mrs Caplan: That's very exciting. Thank you.
The Chair: I'd like to thank the Ontario Council of Regents and the others who are here as well representing colleges of applied arts and technology for making a presentation today.
ONTARIO FEDERATION OF AGRICULTURE
Mr Roger George: My name is Roger George, the president of the Ontario Federation of Agriculture. I have with me today, Bill Weaver, the vice-president of the Ontario Federation of Agriculture, and Cecil Bradley, our director of research and policy.
Mr Chairman, you have before you a fairly lengthy brief from the OFA. We have no intention of going through it in any great detail, but I would ask that it be tabled for the record so that you can peruse it afterwards. Today I intend to take about 10 minutes to hit some of the high spots and leave members ample chance for questions.
I think the key behind our entire presentation is that we, as farmers, want to work with the government to help to build a business environment under which all small businesses, including farmers and including rural people, can be involved in making our economy grow and thrive and creating some new wealth. And along with that new wealth we believe will come jobs, which in turn will broaden the tax base of the province of Ontario.
Over the next couple of weeks we will be having separate meetings with Premier Rae and his cabinet. That's coming up on February 9 and, again, we'll be meeting with the Finance minister specifically over Fair Tax Commission issues on February 16. Those two points will give us an opportunity to maybe get into more details on some of our rural policies as well as some specifics on the Fair Tax Commission. None the less, having said that, the brief before you today, about 50% of it, does deal with Fair Tax Commission issues which we'll get into later.
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We've made in this brief about 19 recommendations, which are summarized at the beginning of the process, and I want to make it clear that our recommendations are spread over many different ministries. We've come to realize in the last three or four years that many of the things that impact upon our industry, upon agriculture, are crossing paths with sister ministries of the Ministry of Agriculture and Food. So I think it's very critical that OFA and other rural organizations continue to have expanded dialogue with ministries such as Natural Resources, Environment, Municipal Affairs, and so on.
If I can quickly hit some of the high spots, if we can move to page 4 of the brief, which deals with agricultural investment performance, the graph, figure 2.2, very clearly shows the reduction in capital expenditure on new plant and equipment in agriculture, and the bottom line with the crosses on it is the increasing expenditure on repairs. Those two lines are almost meeting each other, which is a very ominous sign for our industry; we've pointed this out over the years to government. Clearly there is a need for new capitalization of our existing plant and equipment on the farms, because if we are going to remain competitive we need to modernize our plant and equipment and that extends beyond agriculture, beyond the farm gate, also to the agrifood sector as we face the challenges of new global competition.
We are recommending to the government that it set up a provincial investment tax credit to complement what we hope will be a permanent federal investment tax credit as well.
Moving along to page 6, we talk about the farmers investing in environmental quality and it's very clear from our work we've done already on environmental proactiveness through our farm environmental coalition that many, many farms in our province are going to need to spend significant amounts of money on facilities to ensure that the potential for environmental problems is significantly reduced. The complicating factor for farmers is that many of these investments do not have a return on the bottom line of the balance sheet, while at the same time they do tremendous good for the environment. So we are proposing in this document a combination grant-loan program be established by the province of Ontario to aid farmers in the proactive approach we've already taken to environmental issues.
Chapter 3 on page 8 deals with the tobacco issue. Given the recent events, we feel that the Ontario government has no option other than to re-examine its tobacco taxation policy. If the federal government and other jurisdictions go along with significant reduction in taxation, we feel Ontario has to do that as well. I point out to you once again, and it hardly needs saying, that in Ontario are 1,500 farm families that rely on tobacco, also the start of an industry which accounts for some 50,000 person-years in this province and billions of dollars in the Ontario economy. I'm sure we can have some discussion on this later on, but we are totally supportive of reducing tobacco taxation.
On page 11, on ethanol, we believe very much in value added in our industry. We believe that ethanol is a way to not only add value to our product but also to clear some grains and products off our market. At this point in time, it's a fledgling fuel industry. There have already been some initiatives by the government in funding some feasibility studies and business plans for a couple of cooperatives that are on the drawing board, but we need a long-term commitment from the government of Ontario to ensure that the ethanol component of any ethanol-based gasolines is actually coming from the province of Ontario, meaning jobs in Ontario and value added to our farm product.
On page 13, as an example of where we get into business with other ministries, the issue of rabies is a very serious one for the farm community and the people of Ontario where we have this new strain of raccoon rabies which is rapidly moving its way north from the United States. We believe the government should pay serious heed to this since the farmers of Ontario and rural people ultimately pay a big cost if rabies gets out of control. We recommend that you set aside sufficient funds for the Ministry of Natural Resources to undertake aerial baiting programs in southern Ontario to bring this under control before it becomes an epidemic. Our brief does point out that it costs the health system $600 for an adult to go through a series of treatment if they're exposed to rabies. I think that can be avoided if we take some pre-emptive measures early now.
If we move into chapter 6, which essentially deals with the proposals of the Fair Tax Commission, in a nutshell, on the issue of property tax, the OFA is very supportive, as we always have been, of the need to remove the finance requirements of education from the property tax system. To a degree, the Fair Tax Commission sets off in that direction. Having said that, we believe the existing farm property tax rebate program must remain in place until genuine property tax reform has eliminated the need for this rebate program by removing the inequitous municipal education taxation from our farm land. We are not at all convinced that the Fair Tax Commission's proposal to change the method of assessment is going to work, nor is it anything we are particularly looking forward to at this point in time. We can get into some more details on that.
On retail sales tax, we do agree with the Fair Tax Commission's proposal to replace the retail sales tax with a combined national sales tax. We believe that would lower the cost of our production by expanding the base of tax-exempt inputs to include all farm business purchases. It would lower our cost of production by removing the buried retail sales tax in our inputs from our suppliers, and it would certainly simplify and reduce compliance costs by moving to an integrated provincial-national sales tax.
On the taxation of farm wealth, we are totally opposed to a proposal for a wealth tax on transfer of farm properties. We encourage the provincial government not to follow the recommendations of its Fair Tax Commission in pursuing the elimination of the capital gains component, certainly the $400,000 that's available to small business and farms, particularly at this time when we are going through a major transition and adapting to realities of gas. We again point out that the capital gain that's embedded in some of our farming operations now represents the farmer's only access, in some cases, to a pension plan.
On environmental taxes, on most of the proposals within the Fair Tax Commission, we want to go on record very strongly as objecting to the thrust of the Fair Tax Commission's recommendations in that area. Many of the recommendations have a highly prejudicial impact on farmers and rural Ontario. In many cases -- carbon taxes is one of them -- we don't have access to alternate forms of fuel on our farms and in our rural areas.
There are other areas in there such as crop protection materials, and again we're totally opposed to taxation on those types of products. In many cases, we prefer to pursue with the federal government and the provincial government access to third-generation plant protection materials, which are available in other jurisdictions and have not yet been licensed. In our mind, taxing current plant protection materials without having access to the latest generation again severely impacts upon the competitiveness of our industry.
In a nutshell, that hits the high spots of our presentation. There's a lot of detail in there, and maybe we could spend our time on questions from the members of the committee.
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Mr Norm Jamison (Norfolk): Hi, Roger. Thanks for your presentation. In your brief you mentioned the topic of the day, and that is basically the cigarette tax and the tobacco tax issue. I know that a number of us, Paul Klopp and myself, who are here today attended a meeting with the tobacco board a week ago Friday. One thing we realized is how fast that issue has moved and changed, even over the last year. Where last year we were talking about the export of cigarettes and then a good percentage of that returning, now we're looking at manufacturing plants that are at this point unlicensed and so forth and the potential of tobacco being grown beyond that, outside the marketing board system.
As you well know, that poses a great threat to the economy and the wellbeing of the area that I come from. For people's own knowledge at this point, I think it's important to know why that's important at this point, your position there, and of course how quickly the situation has changed and I expect will change as time goes on, again to the detriment of the community.
Mr George: Very clearly we're dealing with a legal product here, and as long as it's a legal product, the Ontario Federation of Agriculture will continue to support those farm families that grow it.
I think clearly we've got taxation to a point where the public has revolted against it to the point where not only is it undermining the ability of the government to tax, but I think it's also thrown into question a whole bunch of other things under government's authority. There's no question that this tax has to be reduced and there's no question in my mind that we have to keep the tobacco industry in the province of Ontario because of the phenomenal impact it has not just for tax dollars for the government, but also the economic activity in those areas where it's grown, Mr Jamison's area being the key one.
Mrs Mathyssen: I think the OFA has done an excellent job in the past years of bringing the issues to our attention. One thing that I'd like to ask you is about income. I know that the income of a farm family is of tremendous significance. For example, in Middlesex, I think the average income is about $10,000 per family.
I've been reading the farm papers and there seems to be a divergence of opinion in regard to the latest conclusion to the GATT talks and the loss of marketing boards, article XI. I'm wondering if you could comment on that and the effect it will have on producers, the loss of their marketing boards: the milk, the egg, the poultry producers.
Mr George: First of all, we haven't lost any marketing boards. We've lost our ability to have the import quotas at the border, substituting them with a high tariff. To the extent that the federal government is able to make these high tariffs stick for six years, there will be little immediate impact upon those producers.
Having said that, things are changing. Things are changing within the supply-managed industry. Things are changing in the non-supply-management industries. We have to be looking at other markets, we have to be looking at other value added products, and we have to be broadening some of our thinking.
So things are changing anyway, Ms Mathyssen, and I think regardless of a GATT deal or no GATT deal, things will continue to change. I think the GATT is going to speed them up a bit, but there is a real potential to lose business in the processing sector if we're not very careful. I know the Premier is very anxious about that, so it's going to be important that we maintain this competitiveness for our supply and non-supply farm organizations. That's where, I think, the government can come in and play a major role in getting that economic climate because supply management or non-supply farmers by themselves -- none of us is going to survive in this competitive world if we're faced with a playing field that's so severely tilted.
Mrs Mathyssen: But the NAFTA agreement -- the Americans have already indicated that they won't entertain any new tariffs. Is that not a problem in terms of these tariffs that are supposed to protect producers at the border?
Mr Cecil Bradley: I think it's probably presumptuous at the moment where the Canadian and American discussions are going to conclude before April 15, which I believe is the deadline for GATT signatories to accept each other's offers. The US has put a number of issues into play, not the least of which is the durum wheat one, which has very little, if anything, to do with the border protections that might be available for dairy or poultry products.
I think what's going to work out over the next several weeks is a kind of complex negotiation between Canada and the US, which is going to be largely driven by the political pressures in the US. I think the Canadian government has probably got it right when they feel that, with the exception perhaps of yoghurt and ice-cream, they have a very solid position in terms of GATT obligations and that the US may have ranting-and-raving room for their own domestic consumption, but in terms of GATT obligations they really don't have much to stand on.
Mr Crozier: Thank you for your submission, Mr George -- Roger, if I may, since we've met. I want to thank you also for the new smart telephone card I got as part of my OFA membership because I can now phone home, since I'm in Toronto part of the time, at less cost.
I'd like to go back for a minute to tobacco taxation. I really need your help here because, as you know, Health Minister Grier has said that cheap cigarettes will result in needless cancers, heart disease, low birth weight of babies and that's too high a price to pay. We have Quebec going to unilaterally reduce their tax rates by the sound of it and the federal government's saying the same thing, if somebody else doesn't do it. We have Mr Laughren suggesting that he wants us to buy cigarettes, but not smoke them, I guess.
Can you help me look at both sides of the coin? You represent the producers and I understand your position, but there's this moral question as well as the economic question, and that's the one many are faced with today.
Mr George: As long as we're dealing with a legal product, I don't think Mrs Grier's got a leg to stand on with her argument about the health implications of tobacco. Anyway, she should be also arguing the health implications of eating too much sugar and the cost of obesity. What's the cost of candies for the kids on their dental bills here? Is Mr Laughren going to put taxes on candies? We could say the same thing about eggs, for that matter, with cholesterol. Mrs Grier may be worried about cholesterol. Don't give me the one side on the tobacco and the health issue because if it's that bad, then make it illegal.
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Mr Crozier: You are saying there's two sides to it, but you're really not suggesting that we make cigarettes illegal?
Mr George: No, I'm not. I'm just saying that I don't think you can argue both sides.
Mr Crozier: Do you say, though, Roger, there's not a health issue here?
Mr George: I'm not suggesting there isn't a health issue, but I'm saying that we shouldn't be linking these things at all. At this point in time we're dealing with a taxation issue and I don't think we're dealing with a health issue.
There are health consequences of lots of things we do in this life. There are probably health consequences from living in Toronto and breathing the air in Toronto, for all I know. There may be health consequences from living by one of these toxic waste sites and by dumps, that's for sure. Let's start looking at that. If Mrs Grier wants to look at health consequences, look at the consequences of burying two million tonnes of garbage. We'll see the health consequences of that 30 years down the road.
Mr Crozier: Okay. Thank you.
Mr McLean: My first question has to do with farm rebates. The Fair Tax Commission has proposed that the rebate that farmers receive from motor fuels off-road be eliminated. Is there anybody on that committee who's ever been on a farm? They don't know who's paying the cost of growing the food around here. What do you have to say to the Fair Tax Commission? Have you made a report to them with regard to the 100 litres of fuel that you could burn in a day and there's 26-cents-a-litre tax on it? Have you made a presentation to the Fair Tax Commission?
Mr George: We made a presentation to the Fair Tax Commission. They clearly didn't listen to us very well on that particular issue.
Mr McLean: Okay. The other issue is the Fair Tax Commission with regard to the carbon component. If they're concerned about the carbon component, why aren't they supporting the ethanol which gets rid of a lot of that in a lot stronger way? Have you made a presentation to the Fair Tax Commission with regard to the use and promotion of ethanol?
Mr George: Yes, we did. We mentioned ethanol in our presentation to them on that, yes.
Mr McLean: What feedback did you get?
Mr George: I don't recall at the time. Obviously they didn't listen as well as they may have done there because we really need some very positive, long-term action on ethanol from both levels of government to make a commitment so we can put these highly capital-intensive plans up. We're looking at several hundred million dollars of investment in an ethanol plant. I want the farmers to have a stake in these ethanol plants and I don't want to see Imperial Oil running the things or, worse still, the ethanol coming in from south of the border.
Mr McLean: But don't they have to buy corn for the ethanol?
Mr George: Sure, yes.
Mr McLean: And you're scared that it may come in from the States?
Mr George: No, but I want the farmers to get a piece of the action of ownership in the ethanol plant because, at the end of the day, we're going to be selling our corn -- there's no magic to corn going into an ethanol plant as far as price is concerned. It's still going to go in there at $2.70 a bushel.
Mr McLean: There are about 86 service stations in Ontario now. Are the plants big enough or do they need more plants in order to provide the fuel that those stations require?
Mr Cecil Bradley: As I understand it, they could source more in Ontario. Yes, there's Ontario consumption that's been sourced out of province or out of country.
Mr McLean: Is the government showing any lead in regard to the cooperatives and promoting the further expansion of the facilities to make ethanol plants?
Mr George: Mr Buchanan opened the last one in Toronto. I know that much. I think the Ministry of Agriculture and Food is very supportive and I believe, in fairness, the government of Ontario has just announced a $90,000 grant to the proposed Seaway project, but it needs more than that. We need to get these plants up and running. We need to get the venture capital in place, but we need a long-term commitment on taking the taxation off it to make this thing a viable concern because I don't think we've paid enough attention to the environmental benefits of this thing in the long term. It'll be future generations that will reap the benefit of some bold action today.
Mr McLean: Do you think the GST and the PST should be joined as one tax? Would you base the PST on the same broad scope as what the GST is on?
Mr George: I think you'd have to, otherwise you're going to get it far too complicated. They've got to be harmonized and made as simple as possible.
Mr McLean: I may be not so sure you're quite as clear on it as I thought you may be. I'm saying you would base the provincial sales tax on the same scope as what the GST is based on; that is, your telephone bill, your fuel bills. Are you saying now you want provincial sales tax on the same commodities that they have the GST on?
Mr Cecil Bradley: The MTC proposal is that the province move towards the adoption of a multistage sales tax, which is the GST by another name, and at the same time, business, and by that we would take it farm business, be relieved of any tax burden -- that they be put in the same position as people are under the GST where they can effectively rebate themselves -- and that this be run as an integrated, harmonized system which means one rate, one base and the governments divvy it up in the back room.
Mr McLean: But who's going to fill out the forms for the extra?
Mr Cecil Bradley: Farmers are filling out forms now for the GST.
Mr McLean: I know they are. But are they going to have to fill out an extra one?
Mr Cecil Bradley: Not if you've got a harmonized, integrated system. There would be no need for two forms.
Mr McLean: The last question I have and it's short: this employer health tax. Do all farmers pay that? How is that based? Is it based on their gross or on their net?
Mr Cecil Bradley: I believe at $40,000 net income it kicks in.
Mr McLean: I see. Anybody who makes over $40,000 net.
Mr Cecil Bradley: Yes, that's what I understand.
Mr McLean: If they made $20,000 net, they'd pay it based on $20,000?
Mr Cecil Bradley: No, I don't believe so. The tax doesn't begin to bite until the income exceeds $40,000.
The Chair: I thank the Ontario Federation of Agriculture for its presentation.
ONTARIO MINING ASSOCIATION
Mr Patrick Reid: I'm Patrick Reid, president of the Ontario Mining Association. With me is Peter McBride, the manager of communications and manager of energy resources for the Ontario Mining Association.
It's interesting that we should be following one of the other major resource industries in Ontario, the agricultural community, because we have a great deal in common in terms of being resource industries. I recently attended a meeting at Queen's Park within the last two weeks in which we heard from the Ministry of Agriculture and Food about its programs and policies within that industry, and we also heard from the people who are in the industry who said very much the same as the mining industry: that they survive and continue to survive in Ontario by being a high-tech industry.
We provided for you a brief document. On the front page or two we describe the Ontario mining industry in very brief terms. We want to point out that we are a high-tech industry, that our employees are the highest-paid industrial workers in Ontario, and that the mining industry has the most improved safety performance of any sector in the Ontario economy.
However, like many other resource industries in Ontario and Canada, we're under a threat as to our possible survival and our ability to compete and to contribute to the Ontario economy.
The mining industry in Canada came together a year ago and formed the Canadian Mineral Industry Federation, which is an umbrella group whose main objective is to bring to the attention of legislators, regulators and the public at large the importance of mining in Ontario and Canada and to suggest that if all the people involved in the system don't do something about it, we're going to lose this great contributor to the Ontario and Canadian economy.
On pages 2 and 3 you'll see two pages that indicate the state of the mining industry in Canada and suggests a five-point program that industry is prepared to follow and in fact is following, and a five-point program that we recommend for government action.
The request to appear before this committee also included a request to discuss very briefly, as we only can do, the Fair Tax Commission report on Fair Taxation in a Changing World. There are two or three items that are specific to the mining industry mentioned in this report. I'm going to respond to three of them and my colleague Mr McBride, who is an expert on energy matters, particularly hydro, is going to address himself to the carbon tax.
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The Fair Tax Commission: I must say I have not had a chance, nor, dare I say, has probably anyone around this table had a chance, to read this tome in great detail, but if you flip through it, I think the whole tone and gist of it is a little frightening in some respects. The philosophy, the outline in which the recommendations and in fact the research that supposedly led to them are of concern. The whole process of going through this exercise indicated that the tax system wasn't fair, and it probably never was and probably never will be, but it seemed to raise a whole bunch of spectres about some people or some industries or some corporations not paying "their fair share."
It's hard to understand the Fair Tax Commission report in its entirety, because there isn't a great deal of philosophical framework that allows you to put the recommendations that ultimately come out against a framework that makes any sense. It's interesting to me that, having read the comments of the people who served on the commission, it looks like there was an awful lot of money and time perhaps spent on this commission that hasn't and may not lead to a great deal of positive things for the Ontario economy.
In any case, the three issues I want to deal with very quickly: The report recommends a cash flow type of tax for economic rent for the mining resource. We think this is an item that is worth pursuing. We'd like to see how it works out. In fact we'd like to do some economic modelling. We want to put that in the context that in Ontario and Canada generally we have become a less-than-best spot to invest in the world because of the high taxation system we have and because of the increasing number of mandated government costs and their increasing costs of doing business in Ontario and Canada. However, the cash flow concept has been in place in British Columbia and we think this may be something that is worthwhile looking at and we will do so over time. We outline a number of issues that have to be taken into consideration in dealing with this matter.
Two other issues are raised. One in the mining sector is the business relating to mine reclamation funds. It is a legal requirement that mining companies provide reclamation funds to clean up and provide for any work that has to be done once a mine is closed in Ontario. How those funds are treated and how they are provided and how that financial assurance ultimately takes its form is of great concern to the mining industry.
The report does suggest that one of the avenues of financial assurance may be trust funds, that money is put into a trust fund by the mining company to provide for cleanup, that the interest paid on those funds within the trust fund not be taxable and that at the end of the day, when the money has to come out of the fund, it go towards paying the reclamation costs, something akin to an RRSP for retirement, I think a good analogy because a mine has to be retired after it has provided its economic life.
Another item that we are somewhat concerned about and it keeps rearing its head is recommendation 108, the property tax, suggesting that underground mine workings be taxed. We're always a little bewildered what the devil this exactly means. There seems to be some thought that there are underground towns and underground workings in our mines that should be taxed, that if they were on the surface they would be taxed.
The underground workings of mines: Most of the machinery is a crusher that crushes the ore into smaller pieces to allow it to be transported to surface for further milling and refining, there are some maintenance shops for repairing heavy equipment that's underground because it's too expensive and time-consuming to take it to the top, and there are lunch stations and refuse stations. We understand the Ministry of Revenue looked at this matter some years ago and decided that this was a non-issue and we don't quite understand why it has arisen again in the Fair Tax Commission.
I'm going to ask my colleague to comment very briefly on the carbon tax and then I want to make a concluding remark before the questions begin.
Mr Peter McBride: We'd just like to use the carbon tax as an example of a suggestion that's not thought through totally and that certainly would increase costs to business in this province.
In the Fair Tax Commission report it was suggested that a $25-a-tonne carbon tax would be modest and only increase the operating costs of companies from 0.l% to 0.7%.
Because of the energy intensity of mining companies in Ontario, which are, I should add, the most energy-efficient in the world, the actual increase in cost of a $25-a-tonne carbon tax would be about 0.5% to l.5%, which would likely double when the inputs have carbon taxes put on them as well, and transportation is included.
The $25 a tonne may seem modest; the percentages may seem modest. For one of the largest mineral producers in this province that would translate into somewhere between $10 million and $15 million a year added cost, which means selling somewhere between four and five million additional pounds of nickel.
Just something to keep in mind is that when you are a commodity producer you can't pass your costs on to your customers; you take what the world price is. There are no other mineral producers in the world who are facing a carbon tax. This basically would needlessly, I think, add to the operating costs of mining companies.
Also, while I look around this room I do see -- well, Paul Klopp has left but Kimble Sutherland's there -- there are people who have industrial minerals operations in their ridings, but I don't see anybody from northern Ontario. Sometimes in the south we forget one of the incentives of the carbon tax is to get people to switch from higher carbon-content fuels to something deemed preferable, like natural gas. But outside of communities like Sudbury and Timmins, for most mining communities, companies and their employees and the communities they support, natural gas is not available. It's not an option for them. I can assure you in the south you will have people including the Treasurer recognizing that you're penalizing the northern two thirds of the province.
Mr Reid: I'd just like to conclude with two comments. Ontario is not the best spot to invest your money in these days. We have a very fragile investment climate in Ontario. I think this budget has to be very supportive of investment in Ontario because we're not going to pay down our debt and we're not going to be able to provide the social services that we want to provide unless we have investment coming into the province or investment coming within the province that already exists, the funds that are already here.
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I have to tell you that we are in a very fragile and delicate state, that we aren't a place that people are looking at, because they know that the size of our deficits means increased taxes at some point. I have to tell you that another large burden that we have and are carrying, all of us, is the regulatory climate that we face in this province and in Canada generally. Nobody is asking for unrestricted capitalism or anything else. What we're asking for is reasonable regulation based on some kind of reasonable and known criteria.
In terms of the environment, we're looking for scientifically based regulation and legislation that people can understand and say yes, if we don't get to these limits this will have an effect on the natural ecology or on human health. I have to tell you that the regulatory burden between the province of Ontario and the federal government is discouraging investment in this province, in fact is driving investment out of this province, and if we don't change that we'll all be back here next year and the years following, saying the situation is even worse.
On that happy note, I conclude.
Mr Phillips: Thank you to the group. We've had at least two major business groups in saying to us: "Get rid of the tax expenditure stuff. We don't need any more handouts to business." I'm paraphrasing but I think that's fairly accurate. I'm not exactly sure whether or not they've analysed the whole tax expenditure program when they make that statement. I think there's a certain public appeal to that, by the way -- eliminate the tax expenditure, the tax breaks to big business, is the way some of the public like to see it.
What's your feeling on that recommendation and what impact might that have on the mining industry?
Mr Reid: Let me start by saying that people always rail against something they think somebody else is getting that helps them out, but just about everybody gets a subsidy of some kind, it seems. The mining industry is not in favour of direct assistance to individual companies. If there are programs to improve the investment climate that are applicable to everybody, then we would consider those. In most cases we're against them. The mining industry has been probably more consistent than most in saying: Don't give any direct assistance to a mining company. If they can't make it on their own or if it's not economically viable, giving them a tax break or a tax expenditure is not going to keep it going in the long run.
Having said that, there are certain occasions, obviously, when somebody needs some help and assistance and might create jobs. So I'm not sure that it's a blanket thing, but I think generally we would agree that tax expenditures of that kind should be done away with.
Mr Phillips: The reason I raise it is because I think there's a lot of interest in it. I look at the Fair Tax Commission report of the direct Ontario tax subsidies to business activities, the tax expenditures. A fair number of them are in the resource mining industry, at least as they define them: the exploration and development expense, the new mines tax exemption, the $500,000 mining profits tax exemption -- oh, that's no longer applicable, I guess. But I'm just saying that when they talk about tax expenditures, they may not be using the same definition you might use.
Mr Reid: No, I don't think they are. I think the Fair Tax Commission basically started from the view that there's a whole bunch of people, whoever they are, ripping off the system. I don't agree with that. Over the years, the tax system has been built up willy-nilly to attract investment of one kind or another, whether in the mining business or something else, to Ontario, to create jobs. Basic economics don't change. The change came up with the investment function. That still exists and it's still there.
Mr Phillips: I guess my advice is for your organization to keep an eye on this area because I think there was an intense interest without necessarily understanding what's really meant when you say, "Get rid of tax expenditure programs."
Mr Reid: I would agree with you, because what we all have to be careful of is presuming that everyone is monolithic, that all business is business; all industry is industry. Mining is quite different from forestry, from agriculture, from making widgets, to a whole lot of other things. One of the things in mining is that it's a very highly capital-intensive business that takes a lot of money, anywhere from $50 million to $400 million, to open a mine, never mind the millions you spend on finding it.
If you want that kind of investment in your province, there may be things that you're going to have to do that are a little different for mining. To take one template and apply it to all is not going to work. That's one of the problems I have with the Fair Tax Commission. I think it's pretty simplistic. If you want to argue about the Carter commission, I thought that was simplistic. A buck is not a buck; you earn a buck in different ways. It's called "risk." As a businessman, you will have remembered that concept.
Mr McLean: Welcome, Pat; good to see you again. The first question I have is with regard to the tax exemption for underground that the Fair Tax Commission is interested in imposing. What type of a tax would that raise in the average mine in northern Ontario?
Mr Reid: I can't answer that because one of the problems with the Fair Tax Commission is that it doesn't give you any numbers, generally. They have some lovely charts, but they don't really do any financial analysis of how any of this is going to impact on an individual or a company or corporation.
As I said, all that is underground is a rock crusher which bangs the rocks together so that they're in smaller pieces and can go up to the surface. There are some lunch areas that have stuff sprayed on the wall and they have some timber around and they have a washroom and chairs and tables, and they have maintenance areas where they fix the vehicles that work underground.
Mr McLean: Why would they make a recommendation such as this?
Mr Reid: I have no idea.
Mr McLean: Have they visited any mines that you're aware of?
Mr Reid: Not that I know of, no.
Mr McLean: The other question I have is with regard to the corporate tax. How is that going to affect the corporations?
Mr Reid: It's another way of discouraging investment in Ontario. The corporate tax -- I presume you mean the minimum corporate tax -- is just going to discourage investment and job creation in Ontario. I'm not quite sure. It sounds good and it sounds logical until you start looking at it, but unless people make money, they're not going to invest and they're not going to create jobs. If they aren't, they're playing under the rules of the game. It seems to be another way of harassing people and saying, "If you're in business, if you're trying to do something, then you're going to pay for it, one way or the other."
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Mr McLean: Hydro was always one of the major issues with the mining association, the increases that were substantial over the years. Have they been frozen the last year or are they still prohibitive in the business of mining?
Mr Reid: I'll ask my colleague to respond to that, but before he does I want to make this point, that you can't always directly relate A to B, but we basically have come up with a figure of about $65,000, that when the cost to a mining company rises by $65,000 somebody loses his job. We've lost a lot of people as a result of government-mandated costs. My colleague here will tell you what hydro increases have done in the last three years. The fact that we've lost a lot of jobs isn't necessarily all related to increasing hydro costs but certainly there is a correlation between jobs lost and cost of hydro and other government costs.
Mr McBride: The good news for all ratepayers of Ontario Hydro is that there is no increase in 1994, which is obviously welcome to an energy-intensive industry like mining, the industry that was still reeling under what we've all faced, the 30%-plus increase over the previous three years. Ontario Hydro has gone from being very competitive and attractive to, next to Nova Scotia and PEI, the highest-cost producer of electricity in Canada. I think, without looking at what electricity costs beyond our borders -- beyond Ontario the two main mining provinces are Quebec and British Columbia, and Manitoba and Saskatchewan follow beyond that. They all have much cheaper electricity rates for home owners and industry than you can find in Ontario. Our best hope is to try to keep rates at 0% or minimal increase over the next few years. We're working with Ontario Hydro on their rate structure advisory committee to try to give some other options to industry, to hopefully restore our electrical utility to a competitive position.
Mr Sutherland: I just want to make a couple of comments. First of all, the chair of the Fair Tax Commission was before the committee yesterday to answer some questions and very clearly outlined what its mandate was and that the objective of its goals was to be revenue-neutral while trying to find a fair taxation system. She did make some comments on the carbon tax, and you may want to get copies of the Hansard just to hear her comments in terms of what the intent was there. Other than those comments, while I have the quarries in my riding and have some understanding of them, I don't really claim to be an expert on mining issues. I don't have any other questions. I think Mr Wiseman does.
Mr Wiseman: I was reading through your excerpt. I wasn't here for the presentation but I read through it. You make a comment about Central and South America being the new attractive locations for mines. My understanding is that's not coming at no environmental cost, because they don't have in Peru or in Central America some of the laws concerning environmental protection that we have here; their problems are just beginning. I'm interested in this one bullet point here where you say, "Implement a new verifiable environmental management system." How do you propose to do that and how are you going to balance the needs of protecting the environment with creating a sustainable industry in mining?
Mr Reid: I'm glad you asked that question. First of all, I want to make it very clear that mining companies aren't going to South America to avoid their environmental responsibilities. We have an environmental policy statement that says that our Canadian companies, pretty well all of whom are members of the Ontario Mining Association, will apply Canadian standards, where they're reasonable, wherever they go in the world. They're not going down there to take advantage of looser or laxer environmental laws. What we mean by the comment you pointed out is that we will have best management practices to apply to environmental aspects of mining. I think that mining has come a long way in the last number of years in proving itself environmentally responsible and knowledgeable. We've still got some problems, all of which we haven't solved, but we're sure working on them.
One of our major concerns, I have to tell you -- and we have Mr Lessard here, who spoke at the mineral symposium in December -- is what the municipal-industrial strategy for abatement program is going to do. We've been involved in a six-year program with the Ministry of Environment and Energy and we've been sandbagged, we feel, at the end of the process. We spent six years trying to come to a reasonable, sustainable economic approach to mining in Ontario, and after six years, when everybody agreed that this was the way it was, it appears that things are going to be changed arbitrarily by the Ministry of Environment and the people within it.
If you think that's going to attract investment to Ontario in mining, or anywhere else, you're sadly mistaken. Six years of consultation and, willy-nilly, things are changed. That's not sustainable economic --
Mr Wiseman: In reference to that, we know now that the toxicity levels of the Great Lakes is increasing, and not in controllable issues like phosphates but in the chemical balance. My concern, given that both my communities drink the water from Lake Ontario, is that it already has traces of tritium in it from the nuclear power plant -- that is a debate all in itself -- and is also at the other end of a sewage pipe, which is another debate all in itself.
We have to be very careful that we do not allow the levels of toxicity to increase to such a level, with chemicals and bacteria, that it can't sustain itself and that we can't filter it out. Quite frankly, I think we're getting awfully close to that. While this may sound heretical to you, if adding another mine is going to tip the balance against having a sustainable environment, then I may not be in favour of having another mine.
Mr Reid: Mr Wiseman, I can't think of anybody, including the people in the mining industry, who would disagree with what you just said. But I think we have to have reasonable evidence, reasonable data, we have to know what impact everything is having on our environment, and then we make a reasonable decision. But we have to have it done on some kind of scientific, reasonable, rational basis. Nobody would disagree with that. We would not open a mine if it was going to cause those kinds of problems.
But I ask you this question: You mentioned the end of a sewer. There's something called the municipal-industrial strategy for abatement. Industry is being told, "Thou shalt do this; thou shalt do that," sometimes with no scientific proof or any indication that it's having an effect on human health or air, water or whatever.
We're waiting to see what the government of the day is going to do about municipalities and their sewage systems, because the sewage systems in this province are awful. The only reason the government, in my personal view, has not done something about it is because the cost of doing something about municipal sewage and waterworks is in the billions and billions of dollars.
There's a large amount of hypocrisy involved in saying, "You industry, whoever you are, shall do this, but by the way you municipalities, because we've got a tax problem here, don't have to do anything."
Mr Wiseman: I agree with you on the latter part.
Mr Reid: I hope you'll talk to Mr Lessard. I'm sure he'd be interested in your views.
Mr Wiseman: We do. But I just wanted to hear about this environmental management system, because there are some very creative things being created.
I was reading in one of the geographic magazines, and I hope that the kind of environmental degradation that's taking place in the Yukon around the technology for spraying whole mountainsides and having the dirt come down and looking for flake gold and for gold is not going to be the kind of thing that will continue.
Mr Reid: I must confess I don't know anything about that, but I can assure you there's no placer mining in Ontario.
Mr Wiseman: I was reading about the Yukon, and when you go back to looking at what happened at the turn of the century, it still hasn't healed. That's still a scar.
Mr Reid: I know, but we did all kinds of things years ago.
Mr Wiseman: But there's still an argument it's happening in the inside of Brazil, and somewhere in the neighbourhood of thousands of natives are being used as slaves and have been killed.
The Chair: Mr Wiseman, our time has expired.
I thank the Ontario Mining Association for its presentation.
At this point in time, I believe the committee members understand that it won't be until 4:30 that ministry officials will be here. Therefore, we will recess until 4:30.
The committee recessed from 1611 to 1631.
MINISTRY OF FINANCE
The Chair: I would like to make a request of the Ministry of Finance officials. Are all the necessary people here at this point in time?
Mr Phillips: We wouldn't know.
The Chair: The committee members wouldn't know, most certainly. There are still others on their way? Okay.
Anyway, I would ask the ministry officials to please make themselves as comfortable as they can. I want to thank the ministry officials for returning to the committee for some further questioning. As I understand it, most of the questions will be initiated by Mr Phillips.
Mr Phillips: Smoke me out.
Mr Jay Kaufman: I thought we'd dealt with most of them in our other hour and a half with you, Gerry.
Mrs Caplan: But now we'd like the answers.
Mr Kaufman: You expect that from me, do you?
The Chair: Just before we start, for the committee members, we have Steve Dorey, Jay Kaufman and Peter Warrian. I think that Hansard understood my explanation of who our representatives are here, and I think the committee members know that. So I guess we can proceed, and we'll turn it over to you, Mr Phillips.
Mr Phillips: I appreciate the ministry staff being here and being helpful. I did, at their invitation, have a chance to talk with them, and I think all the information I got was submitted to the committee.
As I think the ministry staff know, tomorrow we start trying to write the report, and then we theoretically are supposed to finish it on Thursday. I'm feeling frankly a little bit naked in terms of knowing, other than some preliminary revenue estimates, where we are on some of the other areas. You may not be able to be helpful, but it's going to create a bit of a problem, I think, for us trying to, as a legislative committee, comment on the 1994-95 budget without some of the data I think we could use.
On the expenditure side, I realize that you're just getting into kind of the review and all that sort of stuff, but I'm going to make the assumption that nothing significant has changed with your previous forecast that you had a year ago on the $42.6-billion budget estimate. When I say "significant," you in your report to us on January 19 indicated there are some expenditure -- what do call them? -- pressures, and I don't mean to say $300 million is not significant, but they were not huge spending pressures. So I'm assuming that we're not far out of whack on something for 1994-95 in the $43-billion range for operating expenditures.
Mr Kaufman: There's no question at this juncture the reason we put those numbers in there is that we wanted to signal to you as a committee that we're still experiencing cost pressures. Your first point -- we haven't as yet got all our estimates in, so we're not able to roll it up in the way we did last year, but I don't want to underplay the fact that we've got some tough expenditure decisions to make in order to get our numbers down on that expenditure track that we put into last year's budget.
So $300 million I think is probably a low estimate. Typically, ministries come in with a fairly long list of pressures, as you know. We have a process in place, a corporate process, taking a hard look at our programs and our spending, and we do expect to be making some tough expenditure decisions to try and make those expenditure targets.
Mr Phillips: Right. But on the evidence we've had in the last couple of weeks from, as we say, the transfer payment people, I think they sound to me like they're prepared to live with the estimates that were given to them when this budget was prepared.
Mr Kaufman: I think that you're well aware, as everyone is, that we're waiting on a federal budget. They've got some major decisions to make with respect to transfers to provinces and there's no question that we're going to have to assess our position after having seen the federal budget.
We won't be making, for example, any major transfers decisions, final decisions, until after we've seen the federal budget, because, as you know, there has been a lot of speculation about freezes and cuts and so on. We simply don't have the amount of certainty at this stage to know whether the plan of last year is still on.
Mr Phillips: And what was the plan of last year for federal transfers for 1994-95?
Mr Kaufman: We assume that the current programs, the cap on CAP and the freeze on equalization on a per capita basis, would stay intact for this coming year. Those numbers from last year assume that. The speculation has been, as you know, that there may be a freeze on federal transfers.
Now there are different ways that freeze could impact on Ontario. If it were a freeze on a total budget line, we benefit by having a freeze on a per capita basis because we have population growth. If they froze differently, it would cost us -- I think our estimates potentially are in the order of $100 million. If they froze the CAP, then the number gets a lot higher, quite frankly.
Mr Phillips: Okay, but that's kind of on the revenue side. On the expenditure side, there's nothing other than the pressures here that you've outlined that should be a major cause for concern for the committee in terms of those.
Mr Kaufman: No. I think if you're looking at drugs, you're looking at student assistance, you're looking at legal aid, you're looking at OHIP, I mean, you're looking at the traditional -- the traditional cost drivers, despite the fact that we've brought them down dramatically, remain pressure points for us. We're not seeing, for example, case load declines yet in social assistance; we're still seeing case load increases. That's why we're flagging those as pressures to you.
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Mr Phillips: Okay. In the absence of anything else, I'm leaving with the assumption that the $42.6 billion may drift up but not significantly.
On the public debt interest costs, you had $8 billion in. Is it fair to assume that we are doing better on debtservicing costs than we thought a year ago?
Mr Kaufman: John Madden's here and he can give us that. Our current projections are that we're roughly at those kinds of levels. As you know, and John will get into this in more detail, in order to protect our financial position, we look at long-term borrowing as opposed to short-term borrowing and exposing ourselves to fluctuations. So those numbers are pretty much on the mark as far as our current estimates are concerned.
Mr John Madden: I think it's fair to say that they're pretty well on the mark because we have done a high proportion of our funding in the fixed-rate markets in the long end because we think it's a particularly opportune time to do that. While we might look at short-term costs in terms of reflecting upon how much the provincial PDI would decline because of that, one should not focus on that because we haven't done a great deal there. We've done a little bit more but not a great deal, because about 6% of our debt is floating and most of it's fixed.
There may be some benefit if rates continue to decline, particularly in the long end, more we than we anticipate, but that's not anticipated at the moment in any sort of significant way. It should be around that margin as it stands right now, Gerry.
Mr Phillips: I gather that with the Ontario Financing Authority you'll also be loaning money to municipalities and what not and charging a fee for that, but is the $8-billion public debt interest solely the interest charge against what debt?
Mr Madden: Against the, approximately -- I just don't have the numbers in front of me here -- about $77 billion in external debt at the moment in terms of public debt and also non-public debt from the pension funds and the like. That's how the public debt interest number is projected.
Mr Phillips: Would you charge for any of the funds that are in the Ontario Financing Authority that aren't part of the provincial purpose debt?
Mr Madden: You mean in terms of the funds that are on lend to corporations and the like?
Mr Phillips: Yes.
Mr Madden: Yes, that would be charged, but in terms of next year, that's not a real big significant number at this juncture. That would be included in the estimates.
Mr Phillips: Yes.
Mr Madden: And it would be the average, Gerry. It would be the average over a period of time. It could be that some of those folks just went short, elected to take floating rate money. Don't forget some of that money will be taken out, depending on the corporations, by external revenue sources that are coming to those corporations.
Mr Phillips: I see this year we've taken our cash position up by about $1 billion over what we thought we would be, I gather, in 1993-94.
Mr Madden: Which numbers are you referring to? I'm sorry. I don't have that in front of me.
Mr Phillips: The third-quarter results. I think that's the number.
Mr Madden: I don't have it in front of me.
Mr Phillips: And last year, I think, we took it up over what we actually needed by a couple of billions. Is that a fair statement?
Mr Madden: In terms of cash on the balance sheet?
Mr Phillips: Yes.
Mr Madden: Generally it depends on the timing of the borrowings, when these things are put out, but generally we like to stay one quarter ahead in our funding. I'm just looking here.
Mr Phillips: I told you about this, didn't I?
Mr Madden: An increase of $1 billion; oh, $1.339 billion. Okay. I guess I have to look back and see what the time in the borrowings is. It could be just simply the timing of the borrowing. We borrow at the most opportune time, but we have several billions in the kitty right now prior to budget blackout season to deal with cash outflows that we have during that period.
Mr Phillips: I think you're borrowing really well, from what I understand.
Mr Kaufman: They like us anyway.
Mr Madden: For example, we just borrowed upwards of $4 billion this week at very favourable rates, and that will be used to fund cash outflows during the budget blackout period, which we otherwise can't fund during those periods.
Mr Phillips: I accept that. I'm trying in my own mind to figure out the capital corporations and the public debt interest and what is actually attributable to the budget and then how the interest charges and the capital corporations will be handled. My own instincts are that it will be in the budget a little bit lower than the $8 billion, just because I think we're borrowing better than that and we blah blah blah.
Mr Kaufman: I think that's a reasonable assumption.
Mr Madden: Don't forget that a lot of the debt isn't rolling over. We've got about $1 billion refinancing, so it isn't a huge number. A lot of it's locked in. Just so you get that.
Mr Phillips: I know, John. You'll look good anyway. I know how tough it is.
Mr Madden: Tell these guys, Gerry.
Mr Phillips: I don't mean to steal your thunder.
On the capital expenditure one, my sense is, and check me if I'm wrong here, that you're moving more as a percentage off-book than you had planned. I only base that on the basis of what I see occurring year to date in 1993-94, and I see the loan-based financing. You're moving some stuff into Culture, Tourism and Recreation. Virtually all of the cuts in the capital were in the on-book capital and the rest was all in the off-book capital. My sense is that the capital expenditure of the 2.7 that you'd planned may be a tad lower, but the total capital expenditures I gather are still going to be in the 3.9 range.
Mr Kaufman: No. Total capital spending is likely to be around the 3.6 number.
Mr Phillips: Next year?
Mr Kaufman: Oh, sorry, next year?
Mr Phillips: Yes. All this is 1994-95.
Mr Kaufman: Oh, sorry. I thought you were talking about this year.
Mr Phillips: No. I'm sorry. The $8 billion is 1994-95 on debt servicing.
Mr Kaufman: We have yet to finalize or put to bed our capital program. I would expect to see the total capital program that we ultimately decide on in that ballpark. I think one of the things we are trying to do on capital is, as you've noted publicly, we have been allocating about 3.9 and coming in for two years on the order of 3.6 or thereabouts. One of the factors in that has been simply the fact that we've got prices substantially coming in a lot lower than we'd expected and normal kinds of delays.
One of the things we're trying to do is to get our capital cash flow much tighter in terms of the actual allocations, so we're not ending up with allocating a lot more than we know we're going to spend. That's a hard one to deal with. Whether we're actually at 3.9 or somewhat below that, I expect we'll be a little bit below that before all is said and done in terms of our level of spending, but the total spending will be up in that range I expect.
Mr Phillips: In 1994-95.
Mr Kaufman: Yes.
Mr Phillips: I don't know how you want to run this, Mr Chairman.
The Chair: We're going to be coming up to 20 minutes in about three or four minutes. Mr Carr may have some questions. The government caucus has chosen not to ask any questions, as you know.
Mr Carr: I don't have many. Just a few.
Mr Kaufman: We had expected to be here for about half an hour. We've probably got a few more minutes than that. How long did you want us to be here?
The Chair: Not much longer than that, I don't think. The government gave up its opportunity to ask questions so that you could get out a little earlier.
Mr Kaufman: To my next meeting. Thank you.
Mr Phillips: Normally, the only thing that stops one meeting around here is the start of another.
Ms Christel Haeck (St Catharines-Brock): A good observation.
Mr Phillips: Flipping to the revenue side for a minute, I appreciate that you've given the committee what's called the medium-term revenue outlook. I think we all have this copy and I found it useful. Can you just refresh my memory? I think the Minister of Finance gave us the reasons for the $1.6-billion shortfall, and I'm sure they're in Hansard, but just what were they versus your expectations?
Mr Kaufman: Pat Deutscher is the head of our revenue forecasting group. Why don't you take that one, Pat.
Mr Pat Deutscher: I don't have the specific breakdown in front of me, but a large part of the revenue shortfall flows from the 1992 PIT returns as processed by the federal government. We found out that we had been overpaid by more than we had anticipated at the time we put together this forecast previous to the last budget. That both lowered the base for growth of PIT revenues and meant that in 1994-95 we have to repay more to the federal government than we had thought.
For next year, about 0.8 billion of the 1.6, about half of it, comes from the PIT shortfall. It's about half the annualization of the weaker position in 1992. The other half is additional repayments to the federal government that will have to be made.
Mr Phillips: So $800 million was shortfall in personal income tax, half being the repayment and half being --
Mr Deutscher: That's right. Then we're looking at about $300 million less than we'd anticipated in corporation income tax, roughly $100 million less on the retail sales tax next year. We're looking at roughly $100 million lower on EPF payments based on the downward revision to Ontario's population relative to what we thought it was at the time of the last forecast. Those are the major factors. There's another $300 million that comes largely from the other tax revenues. So it's really largely an extrapolation of the slower-than-expected economic recovery in 1993.
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Mr Phillips: On the federal transfer payments, you still have the same number in there as you had in your estimate last year.
Mr Deutscher: Overall, that's a major factor that plays into that number, but the basic assumption that's built into the forecast is a continuation of the current rules. There's some impact on EPF, on the cash portion of the EPF payments that results from the change on personal income tax, so there may be some differences in the numbers at a minor level, but I would have to really dig in to see what they were. They don't add up to very much difference in this forecast compared to the budget forecast.
Mr Phillips: Because I've now got taxation at 33.2, other revenue for 1994-95, to get to your 44.9.
Mr Deutscher: Can I borrow back my --
Mr Kaufman: Basically, federal transfers are non-tax revenue. Two other clumps make up the difference.
Mr Phillips: Yes, but how are they split?
Mr Kaufman: Just off the top, I think the federal transfers are about -- correct me if I'm wrong here -- $7 billion: 6, 7, 8, something in that order. We'll get that for you. That's the ballpark, as I recall.
Mr Phillips: So I guess I just subtract the 33.2 plus the 7.6, which I think is 40.8, from the 44.9, and I get other revenue of 4.1. Is that a fair way of doing it?
Mr Kaufman: Yes. I would want to get back to you on the specifics. I think, as I say, it's in the $7.5 billion range, our federal transfer, so that math is probably roughly right, but I'd want to get back to you with something more specific than that.
Mr Phillips: Because that looks like about a $900-million drop in other revenue then from this year.
Mr Deutscher: Again, there are a lot of asset sales that are included in this year's projection. There's the GO refinancing, there's the SkyDome, the Suncor sale that's already happened, so those are not factors in the projection for 1994-95.
Mr Phillips: Right. So we had a billion dollars of asset sales this year, and I think you told me in the briefing that you figured maybe $500 million this year, 1994-95.
Mr Kaufman: Yes, in that range.
Mr Phillips: Then I'm just surprised the other revenue dropped so much, because I think we've got the cash machines in there and the casino lotteries that are new -- the photo-radar cash machines. Am I right? Do those things generate --
Mr Kaufman: I haven't seen any cash yet, so I'm still looking for it.
Mr Phillips: They generate $15 million each year?
Mr Carr: Your eyes are lighting up.
Dr Peter Warrian: Four machines were intended to make about $60 million.
Mr Phillips: How much?
Dr Warrian: Four machines were going to make about 60. It wasn't necessarily 15 per machine; it depends on where you stick them.
Mr Phillips: I tend to just average them. There may be one making $50 million. I want that franchise. I appreciate it's four getting 60.
The Chair: Any comments made that aren't made in the mike wouldn't be picked up by Hansard so if someone sitting in that chair would like to repeat that comment, otherwise, it won't be noted or may not be noted accurately.
Did I hear that correctly that four machines produced $60 million?
Mr Phillips: It was a voice from the back of the room. It's not $15 million per machine. It's four machines produce $60 million.
The Chair: I see, and that's better than slot machines.
Mr Phillips: The only reason I raise that is --
Mrs Caplan: Is that what they mean by video lottery terminals?
Mr Kaufman: It's something different. Go to your local bar, you can check it out.
With respect to the casino and the revenue there, I don't have the exact projection, but it's the interim casino. We're not talking about the full board casino. We're expecting that to be pretty much a 12-month revenue gain. The target right now is to have that open in mid-April.
Again, we can get our specific forecast on that number because we do have that. I don't have it with me but we can certainly get that.
Mr Phillips: What I'm trying to do is get some feeling of --
Mr Kaufman: The big drop is, as I said, in things like GO and so on and on the non-tax revenue initiatives that the major ones, which would be the casino coming on, a lot of the other ones are just getting going. For example, you mentioned photo-radar. We're going to do pilots. It's not clear at this point in time how much money we're actually going to raise next year as a result of those pilots, and where we go with it.
It'll take some time before we see the non-tax revenue piece grow as dramatically as people have been forecasting. It's really I think 1995-96 before we see the full impact of the non-tax revenue measures we've announced at this stage.
Mr Phillips: Right. I appreciate that. As I say, it would be useful I think, to me at least, to see how those two things split, the federal revenues and the other revenues, because we put so much focus on other revenue, and I gather you are still looking at things like, say, a leaseback on airplanes and what not, that aren't currently in there.
Mr Kaufman: Yes, and to be quite candid about it, we're also looking very extensively at additional non-tax revenue sources. Our view is that Ontario generally, compared to other jurisdictions, has not utilized the non-tax revenue source as much, and we do anticipate moving ahead with additional non-tax revenue moves.
The Chair: Mr Phillips, I just want to let you know that it's very close to 5 o'clock. I'm sure you're looking at your watch there and are aware of that anyway.
Mr Phillips: I wasn't.
The Chair: Mr Carr indicated that he wanted to maybe pose a question or two.
Mrs Caplan: The question that I have on the revenue side is, in your forecasting, since we know that the economic recovery that's taking place is not resulting in more jobs being created, that's rather slow, the forecasts on personal income tax increases, I would imagine, are therefore lower than increases that you would find from corporate tax or sales tax. I'm just wondering at what rate of growth you are forecasting increases in those revenues as compared to personal income tax.
Mr Deutscher: Are you talking in terms of 1994-95? That's correct. Personal income tax, in terms of our cash flow, does come back a little bit faster than retail sales tax because of this repayment to the federal government, but we're looking at growth of just under 7% for personal income tax. For the retail sales tax, it's about 5.7%, and for corporation taxes, the rebound is 16%. The growth rate of corporation profits that we're forecasting is much higher than that, so the buildup of losses in the past is going to drag down the growth of revenue that results.
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Mrs Caplan: What you're anticipating will be write-off of past losses on the corporate side, but you're still anticipating that the corporate profits overall -- you'll be up about, did you say, 16%?
Mr Deutscher: That's the forecast for next year, that's right. For this year, we're looking at growth of about 7%. Partly these are budget measures that we've put into place: the corporate minimum tax and closing of some loopholes. That builds up and helps shore up the growth next year.
Mrs Caplan: The question I have is why you're forecasting a lower revenue increase in the sales tax rather than the personal income tax, since there doesn't seem to be any evidence overall that the personal income tax is where you'd see growth. I would think it would be sales tax if it was a consumer --
Mr Deutscher: Again, it's partly the budget measures, because we've essentially had a full year of the impact of the PIT measures that were introduced in the last budget. That doesn't play into growth in 1994-95, whereas we'll have a full year of the base-broadening measures that applied to the retail sales tax. You're probably quite right that if we took out the impact of putting the tax on insurance, this would change the way you'd rank those.
Mr Kaufman: The point being that RST would not be growing as rapidly as we have in the forecast because of the base-broadening. The other thing to keep in mind is that when you look at the PIT versus the corporate side, the corporate side is coming from such a low base. It dropped very, very dramatically, as you know, whereas PIT has dropped but nothing like the dimensions of the drop in corporate. When you get a 16% growth on the corporate, it's from a very low base.
Mrs Caplan: The other question I have is, given the large number of people in the province without jobs and the number of people that are not even looking -- if you add the two together, I think it's around 14% as a real unemployment number -- what are you estimating as far as cost of social assistance payments in 1994-95?
Mr Kaufman: At this juncture we're not expecting a firm forecast until probably the end of February, but we're looking probably in the $6.5 billion range. I think that's about right.
Mrs Caplan: You're expecting it to be about the same as it is now. You're not expecting any drop?
Mr Kaufman: No, that's an increase over this year. I think the number this year is about 6.2, 6.3; so it is an increase. That's why we've indicated that the numbers are up. We don't have a full forecast at this juncture, but our expectations are that social assistance costs will go up next year.
Another major factor playing into it has been the changes in UI. We're getting much more rapid takeup because of the restrictions on unemployment insurance, basically downloading from the federal government to us of increased case load. The indicators are that that's the principal driver right now. If you're looking at three or four factors, that would be a very significant factor in pushing the case loads up at this point. We'll be in a better position at the end of February to give you a firmer idea.
Mr Carr: Quite a few reasons: easier ability to get on, allowing 16- and 17-year-olds, eliminating home visits also would be a part of that, just to jump in there.
I have just a couple of quick questions. Elaine did a very good report that we just received this afternoon, outlining what we've heard from various groups on a number of issues.
I take it you've had some discussions with various groups as well. I was wondering if you could just sum up what people are telling you they'd like to see in the next budget. You can talk about whatever, the big one, whether it's taxes or deficits. What're you hearing from the people? What would they like to see?
Mr Kaufman: We haven't formally begun the budget consultation process; it begins next week. The first consultation will go on for a month into mid-March, so we actually haven't been meeting with groups to this point. As the Treasurer indicated, there'll be about eight meetings in Toronto and then four regional meetings, so that's going to be our formal consultation with the Treasurer.
Mr Carr: So at this point you haven't had any discussions with any groups, even internally.
Mr Kaufman: Not the way it characterizes as genuine consultation meetings.
Mr Carr: Okay. One thing I would suggest, and I think the Treasurer was very good as that, is keeping the committee informed of what you are hearing. I don't know how that can be done, but I think last year the Treasurer promised and for whatever reasons -- not his fault -- I think it didn't get done. It may be our fault; we didn't follow up. If there's some way to do that, I think that would be helpful.
Mr Kaufman: As you just mentioned, those meetings will be open to the media, at least our provincial consultations, so the information will be more easily accessed that way. We obviously keep some notes of those meetings and we will see if we can follow up and make sure the committee has copies of what has been said.
Mr Carr: One of the concerns we heard and one of the things that worried me a little bit was when you talked about the non-tax revenues. We heard from business, whether it's WCB, which I know you don't control, and people are looking at the bottom line.
In the last little while, I want to tell you, I spent, as critic for Economic Development and Trade, a lot of time speaking with business. Probably, and I say this not to be partisan because I don't think you people realized it when you did it, the corporate filing fee -- businesses, small ones everywhere from Essex say, even though the money isn't that great, that is the single biggest factor to discouraging them that they've seen over the last little while. They said it isn't the amount; it just showed very clearly, and in that regard it wasn't even the amount coming in; it was a letter that was sent out, which I know was in your ministry.
If I could just caution you, you may talk in terms of non-tax revenue, the people out there are very concerned about that as well because they're looking at the bottom line. I know you can package it up and call it whatever you want and I think in the past it may have worked, but the public has seen through that and they are angry about those increases as well.
We heard from business groups that said that would be great if there was any corresponding decrease in taxes, but I think they know that governments of all political stripes don't do it properly in terms of making -- whether it's user fees in one area, there's never been a reduction. So I would encourage you to take a long, hard look at that. I know how you call it but that non-tax revenue will be as disruptive particularly, as all the economists told us, when consumer confidence is very, very fragile.
I think it's starting to look up, a lot of people are, and we cannot afford to have anything that will damage it. I don't want to go back over the past, but the tax increases last year I think did dramatically. That's gone and done, so if I could give a bit of a warning on that, whatever you call it, any increases in any fees will I think be detrimental.
The next question is my last one, and then you can get off to your meetings. I don't know how you can answer this. The federal transfers are going to be a very interesting question. Are you hearing anything right now? Is it a case of the federal government doesn't know, because I recognize it is just getting in and getting in up to its ears? Of course, they may want to keep some things confidential, but is there anything you can give the committee in terms of what you're hearing in terms of the federal transfers? Where are they at and what are they saying to you privately, if you could share that information with us?
Mr Kaufman: Let me tell you what's public and known now, which is that the federal government, on equalization, has increased equalization payments to equalization receiving provinces. The average increases are across the board about 5%. Mr Martin indicated publicly when he did this that it was not a precedent for transfers. I think we would be wildly optimistic if we expected that there would be any increase, from those kinds of signals, to transfers from the federal government.
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Clearly we have pushed very hard and will be continuing to push extraordinarily hard on the issue of fair treatment for Ontario. This is something which is I think a concern to all Ontarians, and I can tell you that the Finance minister, at the two federal-provincial finance meetings we've had, has made this a very, very strong point in those meetings and also privately to the federal Finance minister. This is something which needs to be corrected. We're hopeful that they will do something. We'll see what happens.
The single public signal that has been given has been the one by the Prime Minister some time ago, which were ruminations on a freeze of transfers, but beyond that we don't have a firm indication of where the federal government is going to come down. I think Mr Martin has said he is going to have what he would term a balanced approach both with revenue-raising through base-broadening. That is essentially the message he has communicated again publicly, and I think he's generally signalled that to us privately.
That's the basic approach they're looking at, and making some tough expenditure reduction decisions. Now, how federal transfers will play in that, I'm not sure. He has indicated that he expects to make a lot of those reductions in his area of the budget, which I suppose is some reason for a bit of optimism.
That's in summary I think pretty much what we've got from them at this stage. I also don't think they've finalized their transfer decisions, by the way.
Mr Carr: I know I speak on behalf of all the members, that all of you will be going into a period where you're going to be working extremely hard, and we do appreciate your taking the time and coming in and sharing it. I know you've got a lot to do but it is very helpful and I know you're going to have your work cut out. I think we all wish you luck. A great deal of the future of this province is in your hands and I know it's in good hands. So we again thank you for taking the time to come here.
Mr Kaufman: Thank you very much.
The Chair: Just before we conclude, because it was at Mr Phillips's insistence that the committee request that you come back, I wanted to know if there was any burning last thought that you might have, Mr Phillips.
Mr Phillips: That's a pretty high standard to set. I'm not sure I have any burning first thought.
I appreciate the work. You've been most helpful. I think the one thing that would be useful for me is just the other revenue numbers, what you had when you had that 1994-95 revenue estimate and what you're currently estimating for other revenue, the tax breakdown just so that the committee can get some sense of where we look like we're heading in 1994-95, but the rest of it is helpful. The rest are detailed questions that I can deal with elsewhere. I appreciate the stuff here.
Mrs Caplan: The one point I would like to make before we leave it, on the non-tax revenue, and I've heard this from a number of small business people particularly in my riding, is that as you move to more of a user-pay for services that you're providing, there is a lot of frustration when they don't feel they are getting any service but that in fact you're adding to the hassle of yet another form to fill out, and on the $50 filing fee the concern was they weren't getting any additional service.
They could understand the one-time annual fee and fill out the one form to update the records. In fact, what I heard from small business in my riding was that they were prepared to accept that on a one-time basis, but to do it annually when there was no change, to be required to pay $50 to fill out a form when everything was exactly the same made them crazy. If this was a hidden tax, it was adding insult to injury when you made them fill out a form that wasn't needed and send in $50 for an unnecessary form. They said as bad as the $50 was, the unnecessary form made them nuts.
I don't know whether you have any response to that or whether you are considering looking at your non-tax revenue and at least being able to say, "Look, we need the revenue, we're looking at user-pay," but you're not adding an unnecessary form to justify the non-tax revenue that you want to collect. I'm sure you've heard that from others.
Mr Kaufman: Yes. Just on that point, Elinor, when we looked at this move, one of the key things that factored into the decision was making sure we had a permanent, continuously up-to-date system. The reason for that is that the actual information base itself has real value as long as it's up to date. I don't know where we're at in this but we certainly were looking at ways of building off that database other products which would have some commercial use in the marketplace where we could actually get some revenues. The minute the integrity of the database starts to decline, then that commercial value evaporates.
The question of whether there's a better way of actually maintaining that is something we certainly can take back to CCR and look at.
Just the one other point I'd make, in terms of our approach to non-tax revenue we have instituted a model which is very much geared towards customer service. Ministries are able to retain about 30% of their non-tax revenues to reinvest into customer service improvements or into the development of new products.
I think it's a point well taken that people do want to see value for their tax dollar and that's been part of the method that we felt was necessary to get the non-tax-revenue, user-pay concept more accepted. I think there have been some improvements in some areas and obviously in others we've got a long way to go.
Ms Haeck: Just as a point of information, since it has been raised at least twice, I have the dubious honour to be the Chair of the standing committee on regulations and private bills. A substantial amount of the business that we conclude relates to the resuscitation of corporations that have allowed their incorporation to lapse. The process that they have to go through to basically regenerate themselves costs them somewhere in the neighbourhood of $2,000, not $50, and their range of tax benefits as well as liabilities that exist around the incorporation.
When a corporation allows the whole process to lapse and one of them is that MCCR sends out forms to them, not just around this filling in, trying to chase them down, but other things once they no longer exist, the owners basically, there's a range of tax obligations and other concerns which obviously MCCR can do a whole lot better job of explaining. But I think for the most part some small business people have not understood that there is a range of other problems that they face by not paying the $50 and being easily found uncontactable.
Because they weren't regularly sending in their forms, lots of times those records were totally inaccurate and the shareholders or whoever were totally unfindable and 10 years down the road somebody all of a sudden finds out when they contact some former bookkeeper, "Oh, guess what. I have this letter for you." Thankfully nobody has raised a serious problem and decided to sue them or some other good thing because they haven't submitted their name in the proper forms. I think that while the point is well raised, and that is a concern out there, there are also some other major liabilities that small business people should know they make themselves liable to.
The Chair: On that note I think we could conclude. I want to thank the representatives here today from the Ministry of Finance for spending this additional time with the committee. It's very much appreciated. Thank you very much.
Mr Kaufman: Thank you. Good luck in your deliberations.
The committee adjourned at 1719.