Legislative Assembly of Ontario

PRE-BUDGET CONSULTATIONS

ASSOCIATION OF CANADIAN DISTILLERS

COUNCIL OF ONTARIO CONSTRUCTION ASSOCIATIONS

COUNCIL OF ONTARIO UNIVERSITIES

ONTARIO CHAMBER OF COMMERCE

AUTOMOTIVE PARTS MANUFACTURERS' ASSOCIATION

ONTARIO CONFEDERATION OF UNIVERSITY FACULTY ASSOCIATIONS

ONTARIO GOOD ROADS ASSOCIATION

ONTARIO ASSOCIATION OF NON-PROFIT HOMES AND SERVICES FOR SENIORS

ONTARIO NURSES' ASSOCIATION

CANADIAN ENVIRONMENT INDUSTRY ASSOCIATION, ONTARIO CHAPTER

CONTENTS

Wednesday 8 February 1995

Pre-budget consultations

Association of Canadian Distillers

Ron Veilleux, president

Richard Fitzgerald, chair

Paul Clinton, member

Harold Ferguson, member

Council of Ontario Construction Associations

Paul Douglas, first vice-chair

Frank Bisson, chair, tax and economic development committee

Council of Ontario Universities

Dr Peter George, president

Ontario Chamber of Commerce

Ted McCollum, president

Automotive Parts Manufacturers' Association

Elizabeth Mills, director, policy development

Ontario Confederation of University Faculty Associations

Dr Emily Carasco, president

Ontario Good Roads Association

Len Rach, president

Ontario Association of Non-Profit Homes and Services for Seniors

Kevin Mercer, president

Michael Klejman, executive director

Ontario Nurses' Association

Jane Cornelius, president

Lesley Bell, chief executive officer

Canadian Environment Industry Association, Ontario chapter

Lynn Johannson, vice-chair

Gary Gallon, president

Dusanka Filipovic, board member

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)

Abel, Donald (Wentworth North/-Nord ND)

*Caplan, Elinor (Oriole L)

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

*Haslam, Karen (Perth ND)

*Jamison, Norm (Norfolk ND)

*Johnson, David (Don Mills PC)

*Kwinter, Monte (Wilson Heights L)

*Lessard, Wayne (Windsor-Walkerville ND)

*Phillips, Gerry (Scarborough-Agincourt L)

*Sutherland, Kimble (Oxford ND)

*In attendance / présents

Substitutions present/ Membres remplaçants présents:

Hope, Randy R. (Chatham-Kent ND) for Mr Wiseman

Malkowski, Gary (York East/-Est ND) for Mr Abel

Also taking part / Autres participants et participantes:

McGuinty, Dalton (Ottawa South/-Sud L)

Clerk / Greffière: Mellor, Lynn

Staff / Personnel:

Campbell, Elaine, research officer, Legislative Research Service

McLellan, Ray, research officer, Legislative Research Service

The committee met at 1003 in room 151.

PRE-BUDGET CONSULTATIONS

ASSOCIATION OF CANADIAN DISTILLERS

The Chair (Mr Paul R. Johnson): Our first presentation this morning is by the Association of Canadian Distillers. If you gentlemen would introduce yourselves for the purposes of the committee members and for Hansard, I'll remind you that you have 30 minutes within which to make your presentation and field questions from the committee members. Please proceed.

Mr Ron Veilleux: I'm Ron Veilleux, president of the Association of Canadian Distillers. Mr Paul Clinton is president and chief executive officer of Gilbey Canada; Richard Fitzgerald is president and chief executive officer of United Distillers and also the chairman of the board of the association; Harold Ferguson is general manager of Canadian Mist in Collingwood. Thank you for the invitation to come back and address your committee.

The problem facing our industry is unique. There are solutions to that problem and today I want to concentrate on the solutions. I will not take you through the brief in front of you, but refer to the key pages dealing with the solution. The pages are numbered at the bottom in the middle of the page.

Our industry in Ontario and in Canada is on the endangered species list. We would accept this situation if the market were not there; we would accept this situation if we were not competitive on the world market. But there is a market and we are competitive on the world market. The proof? If you go to page 18 of your presentation, the LCBO still sells on a yearly basis over $1 billion worth of our products. However, an increasing number of Ontarians prefer to purchase their products outside the LCBO store network. They prefer the black market.

Proof that we are competitive? If you look on the next page, page 19, our industry exports over $650 million of finished goods every year and $370 million of this $650 million comes from this province, so we are competitive, and the Canadian dollar at the present level makes our industry even more competitive. We are an industry on the endangered species list because Ontarians are simply refusing to pay the 83% tax imposed on our products. This leads to a growing underground economy, and every day in the press there is evidence to that effect.

I would like to leave with you two pieces. The first one, and I've given copies to the clerk, is the front-page story of the Ottawa Citizen for January 26, 1995. This story clearly demonstrates the problem we're facing in this province and in this country on a daily basis. The second is one that you probably have seen. Its title is "Renegade Nation," and it's an excerpt from Men's Journal of December 1994-January 1995. I would urge you to read this story if you have not read it already. It clearly demonstrates what is occurring in our country today.

Both stories are appalling but true, and they are repeated almost every day somewhere in this province, somewhere in this country. This is what is killing our industry and this is why we are on the endangered species list.

The solution? I'd like to point to page 5 of your presentation. Last year, you will recall, I recommended a four-pronged approach: improve enforcement profile, increase penalties, educate the public about the potential health hazards of smuggling or contraband alcohol and remove the incentive to smuggle by reducing taxes.

The province of Ontario has done a lot to improve enforcement and to apply stricter penalties. There is a tremendous amount of cooperation between the province and the federal forces. Little has been done to warn the public about the potential negative health effects of smuggled goods, and this must change. We need your help to warn Ontarians of the sad effects of smuggled goods.

Nothing has been done to deal with the tax issue. I will now propose a solution to the tax problem. This solution -- and I would like to underline here -- if applied, will have no impact whatsoever on the federal or provincial government revenue. It is a revenue-neutral solution.

To do so, I would like you to turn to page 32 of your presentation. I would like to point out before I explain this table that the problem we have been facing over the last two years is the following: We approached the federal government to do something about the inequitable taxes imposed on spirits, wine and beer. The feds are telling us every day, "It's not our problem; it's a provincial problem." We come and see the province and other provinces -- this is not unique to Ontario; all provinces are the same -- and we are being told: "It's not our problem. Go and see the feds." While the ball goes back and forth between the feds and the provinces, our industry is losing jobs, it's closing plants and it's on the endangered species list. Nothing is being done. We believe this is irresponsible; it's not acceptable.

Let's go back to page 32, to the federal excise duty. This table demonstrates the excise duty imposed on beverage alcohol today. As you can see, spirits are imposed at $11.07 per litre of absolute alcohol, wine is imposed at $4.27 per litre of absolute alcohol and beer is imposed at $5.60 per litre of absolute alcohol.

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What have we done? We've added all of these federal taxes and we lumped them together to determine how much the federal government is getting from beverage alcohol. Then we've divided that amount of dollars by the litres of absolute alcohol sold in this country, and the result is the line which says a uniform excise rate of $6.45 per litre of absolute alcohol.

If the government of Canada tomorrow or today would apply this tax equally, all beverage alcohol products would be taxed on an equal basis and the federal government would be revenue-neutral. This is what we've been proposing federally and we hope, by the time I get you to the end of this presentation, that you as a committee will support us to get that level playing field at the federal level.

I would like now to turn to page 36 to show the effects of this level playing field of this federal excise duty. Page 36 is titled "Ontario Retail Price Structure for Spirits: Current and Proposed." On the left side you have the current pricing structure for Ontario and you can see under the manufacturer's price there's this federal excise duty of $3.32 per 750 millilitre or per 26-ouncer. This is the tax today. This is equivalent to the $11.07 per litre of absolute alcohol.

Now, if we go to proposal A, where you can see that the $3.32 is lowered to $1.94, this is the amount of federal tax which would be imposed on a bottle if the federal forces decided tomorrow to level the playing field on the excise duty, remember, with revenue neutral.

What's interesting here is that by lowering that federal tax, if you go down the line to the next black block, on the consumer price, the consumer price in Ontario would be lowered to $15.49. Why is it so? It is so because all of these lines are taxes on taxes on taxes. There's a percentage of a tax over a percentage of a tax over a percentage of a tax. This cascading effect gives these results.

So without any action whatsoever by Ontario, only a level playing field at the federal level, the price would go down to $15.49. I'd like to remind you that the smuggled goods equivalent to this price is $13. On the black market you can buy a bottle at $13. By levelling the playing field at the federal level, your price would go down to $15.49.

I'd like to point out the two lines below the $15.49. You can see that the federal share would go down from $4.46 to $2.85, but we've demonstrated that the impact would be zero, revenue-neutral federally. Provincially, your provincial share would go from $11.54 to $9.24, but look at the note which is attached to the $9.24 below. It says, "To remain revenue-neutral 53%...of the black market" -- in Ontario -- "must be recovered." We strongly believe that this is an achievable target. Half of the black market coming back to the legal market: We believe it can be achieved.

Why? It can be achieved because people, first of all, in Ontario prefer to be legal. They prefer to buy something that has been produced under strict control, meeting norms, standards. People prefer to come back into the legal system because it does contribute to roads, hospitals, schools in Ontario. The black market does not.

This is important, but in order to achieve this, I think we will also need some help from the LCBO. The LCBO would have to launch some marketing exercise to tell Ontarians that they should come back into the legal system. At the same time, if the Ministry of Health could come out and say it is irresponsible, totally dangerous and you're playing Russian roulette with your health if you are drinking illegal goods, that would certainly force, or help, a lot of Ontarians back into the legal system.

We need your help, ladies and gentlemen, Mr Chairman, to convince the federal government to level the playing field so that all beverage alcohol products are taxed equally at the federal level, giving revenue-neutral results and helping Ontario to remain revenue-neutral, but most importantly, to save the 3,800 jobs still available in this industry, with the $800 million attached to these jobs -- this is grain, this is bottles, this is labels, this is marketing and so on -- and the $360 million in export goods that are going out of this province year after year. That's what will be saved. So we need your help.

I have put a poster here and it says, "Here's to the deficit." Why this poster? The focus federally is uniquely on the deficit. While this goes on, no one is interested in dealing with our problem, even if there are compelling reasons to do so. We can toast the deficit; we can all agree that the deficit must be managed, and we agree that it must be managed, but even in the context of managing the deficit we cannot totally forget industries such as ours that are on the endangered species list. We need your help to convince the feds to act and act quickly.

Mr Monte Kwinter (Wilson Heights): Thank you very much. I'm very sympathetic to your problem. As you know, I'm a former Minister of Consumer and Commercial Relations and I have always had difficulty with the concept that alcohol is alcohol is alcohol and whether it's beer or wine or spirits, it's the same alcohol.

I think there's a problem that your industry hasn't addressed properly and maybe the LCBO hasn't addressed properly, and that is that there's a perception by the general public that somehow or other spirits are more alcohol-content prone than beer or wine. I think that is a problem. I also think there's no question that with the high tax -- and we have a perfect example with the cigarette industry. As a matter of fact, just today I'm sure most members, if they've seen their mail, received correspondence from the tobacco manufacturers' association talking about the difference in its results as a result of lowering the tax and eliminating the smuggling on cigarettes. So as I say, I'm very sympathetic and I think that's something we should look at.

But I wanted to ask you something else and that is the change in drinking patterns. Notwithstanding the tax issue, and I understand the tax issue is a problem, but I know that at the time I had responsibility for the industry, sort of the white goods were going up and the dark goods were going down. What has happened with that? Is that continuing? Is there a change in consumer preferences for alcoholic beverages, and how is that affecting your industry?

Mr Veilleux: I will partially answer the question and ask my colleagues to continue. There has been a significant change; you are right. Our surveys -- and these gentlemen all do surveys around the world and in Canada in particular -- indicate that consumers do consume about 20% less alcohol than they did a decade ago. So the volumes have gone down significantly, and we accept that that is due to health concerns, people's lifestyle changes, aging population, and it's all true. But the legal sales in the same period of time have done down 46% in Ontario, so this is why we have the significant problem.

Mr Richard Fitzgerald: Yes, Mr Kwinter, in reference to your comment on white spirits versus brown spirits, generally speaking, the brown spirits category rate of decline has been greater than the white spirits, such as gins, vodkas and so on. But I think the greater message in all of it is on page 20 of the presentation that we distributed to everyone, which basically shows the interaction between spirits, beer and wine, and your earlier comment on the message that alcohol is alcohol is alcohol.

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I think one of the things that we're trying to underline today and reinforce and again ask for your help on is the treatment of the alcohol within beer, wine and spirits equally. Regardless of whether they're brewed, vinified or distilled, they're all alcohol and basically our proposal to your earlier comment is that the various makers of laws across the land should treat beverage alcohol in all regards in the same fashion. If that were taken as such, that chart and the significant decline in spirits you see on page 20 would in fact be not anywhere as significant as it is and the lines would be more in line with what you see for beer and wine at the top of the chart.

Mr Kwinter: If I could just refer to that chart, just to go back to my earlier comment, how much of that decline, compared to beer and wine, is due to the tax and how much is due to the change in consumer preference?

Mr Veilleux: We believe, Mr Kwinter, that 20% is attributable to lifestyle, people being concerned about health and so on. The legal sales have gone down 46%, so this is an index. If you look at 100, the curve in 1994 goes down to minus 46, so it should go down to about 50-something.

I would say about 20% of that decline is lifestyle and the balance, 26% up to maybe sometimes 28%, is really the black market and this is why in Ontario the LCBO seems to indicate that about a third of the sales are really illegal; in Quebec, it's half.

Mr Gerry Phillips (Scarborough-Agincourt): One of the things I worry about with your industry is just that you are an enormous exporter of world products. You're one of the industries that has brand names that are world brand names and I gather that the number we should look at for exports is on page 19. Is this the way I should look at this thing, that 80% of the exports are spirits? What does that mean to Ontario in terms of both jobs and of revenue? Has the industry done any estimate of the value of those exports to Ontario?

Mr Veilleux: Mr Phillips, I will answer that then I'll ask Mr Ferguson also to add to this response. I do not have the precise numbers, but I think last year for the first time the export numbers became larger than the domestic numbers. I think last year, 51% or 52% of the material produced in Ontario was exported while 48% was consumed locally. It's the first time in our history that this is the case and I think this year is going to be about the same, maybe a bit larger.

So therefore, it would be, I guess, fair to assume that half the jobs in Ontario are totally linked to exports. Half the grain and the corn and the material that we buy locally would be totally linked to that business.

Mr Harold Ferguson: I'd just like to echo Ron's comments. The export business certainly is important to the industry generally; to Canadian Mist Distillers, it is fundamental. We exist in Collingwood to export. The issue that Ron brings up with regard to adding value and what you've alluded to, Mr Phillips, is we're adding value to agricultural products, to creating high-paying manufacturing jobs, and given the fact that most tax streams or many tax streams are payroll-based, obviously it means a lot from the tax stream point of view or revenue from the government.

Mr David Johnson (Don Mills): Your industry must be the most visible example that I can think of of what happens when taxes become unreasonable. Just looking down on the sheets, on page 36 we see federal taxes, provincial taxes, environmental taxes, GST and PST. I don't see municipal taxes in there. Are municipal taxes included in the manufacturer's price or are they rolled?

Mr Veilleux: Yes.

Mr David Johnson: So in actual fact does that 83% include municipal taxes?

Mr Veilleux: Yes, it does. But I'd like to point out that some years ago, the municipal taxes on our products were unfair and that has been corrected.

Mr Paul Clinton: Depending on the location of the facility, the property taxes can be extremely punitive as well in the general Ontario area, so that's also coming to be a great concern to manufacturers such as ourselves.

Mr David Johnson: But 83% of the end price is consumed in taxes and the property taxes are included in the 83% as well.

Mr Veilleux: That's right.

Mr David Johnson: Certainly what happens, in general, is that when taxes go up the black market becomes a factor, jobs are lost. Over 4,000 jobs have been lost in your industry; 3,800 remain and are at peril. It's no secret that when prices are jacked up artificially because of taxes, people look for alternative means to obtain that product at a lower cost, and that's precisely what's happening here.

Governments, I guess, have felt that there are other reasons for adding a certain level of taxation, perhaps health reasons or whatever, but it's certainly no secret that when taxes become unreasonable, no matter what the market, people go underground. That's happening right across our whole economy and probably more so -- certainly in cigarettes it has happened to a huge degree, and it's happening here.

From time to time I would purchase your product, but I'm not -- I don't know how to phrase this exactly -- an overly regular consumer, let's say.

Mr Ferguson: It's all relative.

Mr David Johnson: What would be the price of an illegal bottle? What are you competing against? What can they sell it for on the illegal market?

Mr Veilleux: I will, if I may, at the same time correct something that I have said and I think misled you. The municipal taxes are not included in the 83%.

Mr David Johnson: They're not.

Mr Veilleux: I'm sorry. The municipal taxes are in the manufacturer's price.

Mr David Johnson: So in actual fact they're well over 83%; perhaps in fact 90% would be taxes in one form or another.

Mr Veilleux: You're right. I'm sorry.

Mr Clinton: In our case alone, referring back to my comment, it would be approximately an extra $1 per case with the municipal taxes.

Mr David Johnson: I'm not surprised. Sorry to interrupt.

Mr Veilleux: I'm sorry about that. Secondly, I would like to say thank you; I think moderation has a better taste and we also sell moderation. We hope that everyone would apply the same principle, because if everyone did, we would not face the problems of excessive taxation. The abusers, according to Health and Welfare Canada, are less than 3%, but 3% of 10 million people in this province is a lot of people. We are working and we hopefully can work with the Ministry of Health, but the Ministry of Health has refused to work with us. We can work with Health ministries in all provinces except Ontario, and I would hope that at some point we can do something together.

Going back to the last question about what is the price of an illegal bottle, if we take this average bottle that we have priced on page 23, the same bottle on the black market would sell for about $13. It will vary from province to province or area to area. The reason for this is that a lot of the smugglers are removing half the content of the bottle and replacing it with something else; therefore they may be selling you a bottle that has not 40% alcohol per volume, it may have only 20%; the rest could be tea, it could be anything else. This is the type of situation, so average $13.

Mr Wayne Lessard (Windsor-Walkerville): I want to thank you very much for your presentation. I'm very sympathetic to the concerns of your industry, being from Windsor-Walkerville, the manufacturing location of one of those world-known brands, Canadian Club, that is exported all over the world. The future viability of that distillery is important to our community.

I'm glad that you acknowledged the increased efforts that the Ontario government has made to deal with smuggling and deal with the sale of illegal alcohol in the province. I think it's important that everybody knows there are a lot of people who have lost their licences in the last year for selling liquor illegally here in the province. I wonder if your industry is working with the Liquor Licence Board inspectors and what level of cooperation you're finding in identifying illegal vendors and assisting in investigations.

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Mr Veilleux: We are working with the various police forces at the federal and provincial levels and we are trying to promote some programs which would, again, enhance this type of cooperation. We've done several things; there are too many for me to list.

Certainly, at the federal level, which also relates to provincial, every time we export goods the documentation is readily given to the police forces so they can follow shipments. We cooperate with the police forces if we have some indicator that some shipments are not going where they should go. This is being done.

We are certainly in constant contact with forces in the United States. The Bureau of Alcohol, Tobacco and Firearms, BATF, has been working with us. As a matter of fact, I have somewhere a copy of a circular that the Washington BATF issued yesterday, asking its own producers to be very careful about where their goods are going because they believe that a lot is coming into Canada. So even in Washington there's a lot of activity to help in this area.

Mr Lessard: Part of the reason that I ask follows up on the article that you've provided for us about activity at the Akwesasne Reserve, because one thing that has changed since the last time you were here is the decrease in cigarette taxes and a shift in the smuggling business away from tobacco to alcohol. It seems as though the problems in dealing with smuggling activities there are very difficult, and I don't know whether you have any suggestions to deal with this. It's blatant illegal activity and I don't know how much enforcement you can apply to put a dent in that business.

Mr Veilleux: Mr Lessard, I don't have an answer to this one. What I would like to suggest, however, is that there are two sides to the story: people who are selling and people who are buying. If Ontarians and Quebeckers and Canadians in general would stop purchasing these goods, we would not have the problems with the reserves. Certainly, it's not acceptable, but how do you solve this matter?

We've raised it with every provincial government, we've raised it with the federal government many times, but it's a difficult issue. I think we all realize that. It's not an acceptable issue; it's difficult. At some point, someone will have to address it because the legal industries will disappear.

I would like to point out here that in my contacts with many police forces, it was tobacco, now it is alcohol, and it's also chicken, it's also everything that is controlled by a board of some kind in this country. There's no limit.

The Chair: At this point, I'd like to thank the Association of Canadian Distillers for making a presentation before the committee this morning.

COUNCIL OF ONTARIO CONSTRUCTION ASSOCIATIONS

The Chair: The next presentation this morning is by the Council of Ontario Construction Associations. Please come forward. Make yourselves comfortable.

Mr Paul Douglas: Thank you for the invitation to make a presentation. My name is Paul Douglas and I'm here today because the budget process in Ontario has enormous influence on the viability of my company, PCL Constructors, and my industry. With me is Frank Bisson, the chairman of COCA's tax and economic development committee.

Construction is a very vital part of the province's economy, and I believe this is not understood by many, both publicly and in the political world. Even during a recession, 10% of all employment in the province is provided by the construction industry. That represents almost five times the automotive industry and it's the second-largest industry in the province. It generated in 1993, which we have the last figures for, over $15 billion in revenues and paid very high levels of taxation, workers' compensation assessments and other contributions to the public good.

The Council of Ontario Construction Associations represents approximately 10,000 construction companies in Ontario. Some are large corporations like mine, but most of them are small operations with fewer than 10 employees, many less than five. Our industry is not only large but very unique. In the industrial world, where employment is fairly regular, the construction industry is very cyclical. Particularly in the union sector, employees change employers project after project. These are just a couple of the very unique aspects. That has an impact on many facets and that has been recognized in workers' compensation legislation, health and safety legislation, employment equity legislation and a host of other acts which make special provisions for our industry. What is missing is the attention to construction's specific economic needs. That is the principal reason why we're here today.

COCA has made presentations either to the Ministry of Finance or to this committee for many years, but it is clear that our suggestions have gone unheeded. Ladies and gentlemen, the fact of the matter is that the construction industry is not healthy; it's in miserable shape. To give you some solid numbers, you should know that from 1989 to 1994 the total number of workers available in the industry dropped from 371,000 to 331,000, a 40,000 decrease. Those are the available workers. As of last December, over 40,000 workers, some of the best in the world, had either left the industry or left the province in search of other work. Even with this reduced workforce, there were still 64,000 workers unemployed at December 31, 1994, most of them in Toronto.

Innumerable construction companies have closed their doors and highly skilled tradespeople have left. But as I said, no one has listened to date. We have outlined our difficulties year after year and we have made positive suggestions for the Ministry of Finance to help our industry. We are firmly committed to the elimination of the provincial deficit, but we also firmly believe in the boost to the economy that results from the multiplier effect of capital expenditure in construction.

In the recession of the early 1980s the Ontario government increased its capital spending by 48% and the effects on construction were not nearly so severe as they have been over the last five years. Every year we have asked that capital spending be increased, but every year government spending has not met its own projections.

We have also suggested, quite rightly, that the government reduce current spending to offset higher capital expenditures. Instead of listening to us, though, the government has erroneously made countercyclical current expenditures instead of countercyclical capital expenditures. This is purely bad economics.

Directly involved in the vital sectors of the economy, contractors are not isolated from political affairs. We get concerned about such things as the long-term health care bill where the vast majority of professionals and volunteers from the VON, Red Cross and other honourable agencies spoke against the bill, yet it was rammed through the House under closure. We are also intrigued to realize that a New Democratic government has utilized closure more times than practically anywhere in the free world.

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As you can understand, we have very little faith in the process, but we proceed with it in the hope that someone will listen in an election year.

The graphs and charts accompanying the presentation will give you a picture of an industry that has been savaged by the recession.

What we said last year is unfortunately true this year as well: Recovery for construction is a very long, slow, painful process. The graphs also demonstrate that the budgetary policies of the government have not alleviated the effects of the recession for construction. In fact, the budgetary policies of the government, particularly the choice to increase current spending and subsequently to maintain expenditures at high levels, have actually harmed our industry.

We don't know why the Minister of Finance chose not to engage in traditional countercyclical capital spending on construction, but between 1991 and 1994 Ontario actually cut capital spending by almost 10% at a cost of over 25,000 jobs.

We have recognized that the government has supported expansion of the Toronto convention centre, subway extensions etc, and let me state very clearly that COCA has publicly recognized the government's actions in this regard and has thanked the ministers for supporting those initiatives.

But we must insist that the rosy picture painted by the government be put in perspective. In 1990 construction employment was 324,000. At the end of 1994 it was 266,000. Construction today has 58,000 fewer jobs than it did in 1990, and the unemployment rate for our industry in 1994 was 19.4%.

To put in bluntly, there hasn't been a single new job created in construction over five years. Some of those jobs that were lost have been replaced, but unemployment remains virtually double the provincial average for other industries.

What is particularly puzzling to us is the fact that despite overwhelming evidence that construction is both very large and very different, there is no single division, department or agency in government that champions our industry. No singular attention is given to us as it is to agriculture, mining, tourism and other important but smaller industries. Looking at our presentations to this committee or to the Minister of Finance over the last five years, it is obvious that no one inside government has championed our case for countercyclical capital spending. Imagine the uproar that would ensue if officials of the Ministry of Agriculture failed to propose stabilization or other payments to farmers during a downturn.

Every year for the past five years we have requested the government to keep its capital spending at least up to historical levels and to increase those levels if possible. But every year for the past five the government has failed to spend its budgetary projection. The actual shortfall in capital spending has probably helped keep the government's deficit down lower than what it might have been, but it has not helped thousands of unemployed workers get jobs.

The government has done some strategic capital investing, of course, but since one in five construction workers is still unemployed, the conclusion is unavoidable that it has not done enough. What we have suggested is that capital spending be curtailed in a variety of areas covered by the budget and that some of the savings be invested in construction. The multiplier effect of spending on construction is extremely high. One million dollars not only generates 25 person-years of full-time work but it also stimulates the provision of other goods and services.

If we could give you but one solid example of a win-win situation, it would be the province's sewer and water services, where annual savings of hundreds of millions of dollars could be realized. To talk about this proposal, I would turn to my friend and colleague Frank Bisson, who has many years of experience with Ontario's best construction companies.

Mr Frank Bisson: As Paul has noted, countercyclical spending by the government is only one side of the question. The other possibility is private investment. So as I've done for some years now, I'd like to repeat a positive suggestion to increase capital spending without increasing either the provincial deficit or the provincial debt. The subject, of course, is public-private sector partnerships.

What we are suggesting is that the government -- indeed all levels of government -- seek out and facilitate appropriate capital projects, and I underline "appropriate," that can be accomplished through partnership uses. By appropriate projects, we mean those that would be self-financing; in other words, truly off the government's books. My example here is water and waste water treatment plants. It's just one example, but I think it's a good one.

One of the leading members of COCA, the Ontario Sewer and Watermain Construction Association, has been attempting for years to impress on governments the absolute necessity of upgrading Ontario's seriously deteriorating water infrastructure. COCA naturally supports the sewer and watermain contractors in this quest, and we both lobbied strenuously for the creation of the capital corporations, specifically OCWA, the Ontario Clean Water Agency.

Unfortunately, however, we have seen very little movement towards public-private partnerships in sewer and watermain development. We think it's a natural. We are hoping, of course, that the recent report of the Provincial Auditor, which pointed out the serious state of water infrastructure in Ontario, will spur governments to action.

As I said at the outset, this area of activity would be an absolute natural for partnerships. Not only could treatment plants be built by private enterprise at no cost to the provincial government; movement towards full-cost recovery, in other words, raising the rates paid by consumers gradually to reflect true costs, would allow the provincial government to eliminate the current subsidization of local plants. By our estimation, a gradual movement towards full-cost recovery by local authorities would eventually save the general revenue fund between $200 million and $450 million per year. Big savings.

In addition, since these would be self-financing, user-pay projects, they would be completely off the government's books and would not increase deficit or debt. Everyone is aware of Highway 407, but the user-pay concept is the only part of public-private partnerships that has been put in place. Private funding of the project is missing, and the costs of the highway are on the books of the provincial government, according to the Provincial Auditor.

By contrast, British Columbia appears to be jumping into the lead in terms of public-private partnerships. Finance Minister Elizabeth Cull has recently stated that BC is considering privately owned hospitals, schools, toll bridges, roads and other projects. The minister is quoted in the Financial Post as saying, "I think you could look at the private sector building [a hospital] and then renting [it] to a hospital board."

Also in British Columbia there is the example of a road being built to a ski resort by private financiers which will be paid for by a $2 surcharge on ski-lift tickets. The possibilities for creativity are endless, and we implore the government to look at private-public partnerships as a way to help reduce the approximately 20% unemployment levels we still suffer.

Last year the Council of Ontario Construction Associations called on the government to cut its operating expenses and increase its use of private sector financing to facilitate a capital budget for 1994-95 of $4.7 billion. This did not happen.

The details of our recommendation suggested that ministry capital budgets remain at current levels and that the capital budgets of the capital corporations be increased by $400 million -- using appropriate capital projects was the thought we had in mind, off the book -- through partnerships with the private sector.

By our estimation, such action would have created 29,000 desperately needed jobs in Ontario, 16,000 of them in the construction sector. The goals we suggested would have reduced unemployment in construction by a whopping 23%. But as you saw earlier, our suggestions went unheeded and unemployment in the construction industry, year over year, dropped only 2%. Construction in fact continues to lag behind all other industries by significant margins.

There are, of course, some large public projects under way in 1995, such as the subway extensions, the convention centre expansion and Highway 407. There are also some large private contracts, such as the Ottawa Palladium being undertaken by Paul's company. But the impact of these projects must be kept in perspective. The industry overall is still in serious decline.

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We invite members of the committee, especially those from the government caucus, to look at the roster of COCA member associations appended to this brief report. Every major sector is included and within each sector are Ontario's leading companies like Paul's -- PCL Constructors Eastern Inc -- which was not only listed in the Financial Post compilation of Canada's top 500 companies but was also listed among the 50 best corporations to work for in Canada. It's number 89 on the Financial Post listing.

We have member companies that are doing hundreds of millions of dollars worth of construction in Michigan, Georgia, Alaska, all the way over in Dubai, Palestine, Hong Kong and China. Many of our companies are sought out for joint ventures all across the world. In other words, the expertise of COCA members is honoured and sought virtually everywhere -- everywhere except by the government of Ontario.

Last year we recommended that the government of Ontario take advantage of the knowledge and experience of COCA's experts and create a permanent panel of public and private sector leaders to make recommendations to the government regarding capital expenditures. Such a group could advise on the role that private-public partnerships might play in assisting the government to meet its long-term capital requirements and also its shorter-term plans for job creation in small and medium-sized businesses all across Ontario. This has not happened.

I am happy to say that we do have a small step in the right direction regarding consultation and that is the creation of the Construction Industry Advisory Council of Ontario. I have the honour to be chairman of CIACO, the council, and we have recently held high-level meetings with senior civil servants concerning CIACO's action plan for the industry. But capital spending is not part of CIACO's current mandate.

What we require, to be blunt, is a champion, a political champion, in the corridors of decision-making. As the second-largest industry in Ontario behind retail, our leaders should be involved on a regular and continuing basis with the Ministry of Finance and Management Board Secretariat with regard to capital planning and the economic needs of our giant industry.

Another matter of great concern to contractors is the image of Ontario as a place to invest. What do potential investors think about moving to the most pro-union jurisdiction in North America where a new company can be unionized with only one employee signing a union card and where employees can't be fired no matter how bad their performance during a union sign-up campaign? How much Bill 40 has retarded Ontario's recovery is something that should be studied seriously.

What our industry needs is an aggressive campaign to lure businesses to Ontario along the line of Frank McKenna's campaign in New Brunswick, but this is hard to accomplish when the image of Ontario is anti-management. A further message we have for this committee has to do with the unfelt effects of Bill 40. Because of the recession, very few unions have dared to undertake job action but if, as and when there is a recovery, the inflationary effects of Bill 40 will be very serious indeed.

Back in 1992 it was claimed by the government that banning the use of replacement workers would reduce picket line violence. The reality, of course, is that removing the employer's only economic weapon virtually guarantees that the only choice for employers will be between giving in to whatever economic demands are raised by the union and going out of business.

The reason we raise this topic is that there are all kinds of rhetoric on both sides of the issue but there is no study of the economic impact of Bill 40 available to this committee or the Minister of Finance. Such a study should be undertaken immediately by this committee.

Finally, we want to leave time for questions so I'll just mention briefly the detrimental effect that our industry would suffer if corporate taxes are raised yet again. It is our view that the government has the same problem as the Workers' Compensation Board and that problem is one of expenditures, not revenue.

I'll close by inviting questions from the committee members, but I'll also remind you that one of the most important things you could recommend is that the construction industry be invited in as a full partner in decision-making regarding capital spending.

Mr Gary Carr (Oakville South): Thank you very much for your presentation, and I agree with a lot of the thrust in terms of the private sector being more involved. As you probably know, yesterday we heard from the private sector. They're involved in roadbuilding and are saying the same thing, that there needs to be more private sector involvement. In fact, we believe there needs to be in day care and nursing as well.

But I wanted to see, on page 4, if you could be a little bit more specific in terms of how the funding would work. You talked a little bit about "the Ontario Sewer and Watermain Construction Association has been attempting...to impress on governments" some of their solutions. I wanted to see if you could be a little more specific. How would it work in terms of raising the revenue to the private sector to be able to fund these projects? Could you be a little more specific?

Mr Bisson: I hope we're answering you properly here. What we see is that you need what we call appropriate projects that would be truly off the government books. Without being an expert in this, I have talked to some people about that, and what you want to do is you want to make sure that it's not considered to be a capital lease in accounting terms.

In order to do that, it first of all has to have a separate revenue source from the government -- in other words, anything that the public would pay for would have a separate revenue source -- and it also has to be not financed by the government. I think that includes government guarantees. So that has an additional cost to it, to go to the private sector -- government can borrow cheaper because it's bigger -- but we think that it's appropriate. It's off the government's books, it doesn't increase the debt and it doesn't increase the deficit. That's what we're recommending here. Is that the answer you wanted?

Mr Carr: Yes. I guess we could get more details of how it would actually transfer the funds through the public now, but that's fine.

A very quick question on Bill 40, because we don't have much time, and I'm interested more in some of the employees right now: As you know, when that came in, we had already committed to getting rid of Bill 40 and the provisions our party has as well as introducing secret ballots for certification, ratification and strike votes. But I wanted to see the average workers out there, what they are saying, because you obviously deal with them on a daily basis. What are they saying about the impacts of Bill 40? Do they realize that it has cost jobs long-term here? What is the average worker saying about Bill 40?

Mr Douglas: The feedback lately from the employees has not been very strong one way or the other. I think when Bill 40 was coming in and basically getting rammed through, the employees knew that wasn't what was great for the industry. I don't think they have seen any great benefits from that but they have seen that our industry is suffering and is continuing to suffer. So they haven't seen great gains and they are seeing great losses. I think it's easy to see that they'll be very supportive of the repealing of Bill 40 en masse.

Mr Carr: Thank you and good luck.

Mr Kimble Sutherland (Oxford): I must tell you I take very strong exception to many of the things that you've put forward in your presentation. You talk about needing an aggressive champion for the construction industry and you talk about Frank McKenna and how he's using funds to attract businesses for call centres there. I think it's important to note that this province has increased the number of jobs in call centres by more than the entire New Brunswick industry in that area, and it is the Premier who is the aggressive champion who's trying to get the other two subway lines built, who's been leading the charge to try and do that. You claim that Bill 40 has in fact a negative impact. We've had the fastest job growth in 1994 since 1988.

You further claim that we haven't reduced the operating expenditures and that we didn't do anything in terms of capital expenditures. In our first budget the anti-recession fund, $700 million, was construction, was extra funds put in. Our government has maintained capital levels to a degree that I would like to see whether any other province has maintained them in the very difficult economic period we have gone through.

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I don't expect you not to be frustrated. Your industry has been extremely hard hit. Some of those are circumstances beyond our control. We can't account for the fact that the private sector, particularly here in Metro Toronto, greatly overbuilt in the commercial sector in the boom in the late 1980s and that's fallen under.

I understand your frustration. We would like to get those people back to work. But I must tell you, some of the rhetoric and stuff in this presentation that just simply does not hold up, in my view, I take very strong exception to that, because this government has made capital a major commitment, despite a lot of pressures, I will tell you, that say, "You should be cutting all government spending, not just operating but capital spending as well."

Mr Bisson: I've been here for the last few years now. I'm not sure how many years, but I know that at least three years ago we began giving the message that we would like to see capital spending through public-private sector partnerships begin, try to get it off book, supported the government and asked that we be given some opportunity to work with the government to try to establish these in a proper manner so that they would be appropriately off the books and so on. This has not happened. We've given up, so we're starting to criticize at this point.

I think that beyond that, if you go back to when your government was first elected, there was a big increase in the deficit. It was all on the current spending side. If you will look at the capital side, you will find that you are something in the area of 10% below commitments on the average in the last three years, below capital spending commitments.

So what happens is quite correctly said. What we said is that you went countercyclical, but your countercyclical spending was on the current spending side, not on the capital side. On the other hand, in the 1982 recession, there was a 50% -- 48%, to be exact -- increase in capital spending by the government of the day.

Mr Sutherland: Okay, but let's also remember the apples and oranges, because in terms of what occurred before then, you didn't have the same degree of overbuilding in the commercial sector that unfortunately has occurred here and has had a dramatic impact on your industry.

I guess all I'm trying to say is --

Mr Bisson: All we've asked was to give some help. For the last few years --

Mr Sutherland: Yes, and that's fine, those proposals. But what I'm saying is, there are all kinds of other things in here that I take very strong exception to, because I don't think they hold up in the facts.

The Chair: We have to go on. Mr Phillips.

Mr Phillips: Well, I appreciate the advice of the industry, and every presentation. Some party may disagree with something, but I appreciate your recommendations and I'd just say a few things.

One is, we've been very supportive of the capital corporations and we voted in favour of that bill, just because we thought the component of it that looked at creative new ways of building infrastructure was right. I'm a Liberal and we're very prepared and anxious to pursue legitimate creative new ways of building infrastructure. So we're with you on that and I appreciate your presentation with some of the specifics.

We're also very supportive of finding a way to avoid the kind of countercyclical spending and I'd appreciate detailed advice from the industry, because I think what has happened in the past is that in good economic times, when the construction industry is booming, probably the public sector should continue to book the expenditure but not to make the expenditure. But the challenge is to book the expenditure, because what we're going to find now, in my opinion, as we come out of the recession, is that we'll continue to have financial problems. So I'd appreciate the industry's advice on that, because I think probably had that been in place five, six years ago, a bank may have been built up on the construction side. As I say, I'm anxious for specifics on that, anxious for specific recommendations from the industry on other creative new ways of funding infrastructure. You've talked today about some things being done in other jurisdictions.

Just in case I don't get my last question in, I too was very disappointed in the 407. When the request for proposal went out, we were totally supportive of it because it was a total package, including the financing. That was going to be the litmus test for me: "All right, they raise the money privately."

The reason we got back from the government of why it didn't proceed with that was because the government said it could borrow money cheaper than the private sector. That's a given. They knew that going into the proposal. That's always the case. So if that was going to be the criterion, they should never have issued the proposal on that basis.

The reason it's so important to us is that both the reasons you've raised -- we now have the debt on the public books. Secondly, in my opinion, the consortiums, had they raised the funds, would have had a better international product to sell. I see today the consortium is doing some work in the Philippines. I think they would have had a much better product to sell if they'd had the -- that's my question.

The Chair: We have to conclude, because we're going to go on to the next presenters.

Mr Phillips: Well, you'll have to do it privately, or just send the committee private sector partnership recommendations and also, I guess, any suggestions on how we do the financing to avoid these countercyclical problems.

The Chair: Regrettably, our time has expired.

COUNCIL OF ONTARIO UNIVERSITIES

The Chair: The next presentation this morning is by the Council of Ontario Universities. If you could identify yourselves for the purposes of the committee members and Hansard, I'd appreciate it.

Dr Peter George: I'm Peter George, president of the council. To my left is Patricia Adams, who is the executive director of external relations for the council. To my right is Jim McAllister, who is senior policy analyst at the council.

We, as always, are pleased to appear before the committee as part of your pre-budget consultations and especially glad to be here this year because the 1995 budget and certainly the 1995 federal budget are going to be extremely important for higher education in this province and, of course, in the country as a whole.

Universities are among the great success stories of the past two or three decades. When Canadians think of their success stories, they usually think of the health care system and medicare, but they can point with equal pride to the universities of the 10 provinces of the country and in particular to the universities of the province of Ontario, which are held in high esteem internationally as one of the finest university systems in the world.

These success stories really arise from what has been a very significant partnership over the past several decades between the federal government, the provincial government and the universities in this province. In my brief, there are a number of specific indications or measures of this success. For example, across Canada there are more than 1.5 million university and college students enrolled at present, and as a percentage of university graduates of the total population, Canada has the highest participation rate, by this measure, in the world.

I have presented to you before data on unemployment rates, average incomes and so forth of university graduates. They are far less likely to be unemployed and far more likely to enjoy higher-than-average incomes than those who have never participated in post-secondary education in Ontario and the country. If you look at the evidence on employment generation during the recent recession, it is university graduates who have taken the new jobs created in the province and country and persons who have not participated in higher education who have borne the brunt of the recession's loss of employment.

In addition, university graduates are what I would call good citizens from the fiscal perspective of the provincial and federal governments. They are less likely to collect social assistance or unemployment insurance benefits and more likely to pay higher taxes. In fact, we have estimates that show that they contribute more to provincial, federal and local government revenues than they use in terms of government grants. A benefit-cost ratio greater than one for levels of government is immediately apparent.

We submit that it's very important to think of our universities as investment expenditures by the various levels of government rather than consumption expenditures. Our contribution to human resource development, our contribution to research development and the spinoffs to industry are vital for the economic success of Ontario in the globally competitive economy.

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We point out in this brief some observations about levels of funding. We would be remiss if we did not do this. The real value of operating grants to our universities is less than it was in the mid-1980s. When enrolment growth is taken into account, whether one views this strictly as productivity increase or not, the amount of provincial funding for each student is now 25% less than it was in the late 1970s. By comparison, expenditure per student in the elementary and secondary systems is far higher than it was in the 1970s. Those comparisons continue to worsen, to the disadvantage of your university system.

We also include in the brief some observations on our sector under the social contract. The Price Waterhouse study that was done almost a year ago indicated that the universities did bear a significant employment adjustment under the social contract, mainly in the form of contract employees who were not renewed. For the most part, salaries and wages have been frozen, grid-scale movement and merit pay frozen, although there are a couple of instances where some modest merit pay has been substituted for reduced across-the-board allocations.

But our major concern is what this long period has done to the competitive position of Ontario universities vis-à-vis other jurisdictions within Canada and certainly to jurisdictions in the United States. Enclosed in this brief for your information is a recent set of data on recommendations for allocations to higher education in the United States to public institutions. The average in the States is for increases of approximately 9% for higher educational sectors by state. Most of the major public systems comparable to Ontario's -- California, Michigan, Minnesota, Pennsylvania, New York -- have very large increases indeed and they're already starting from a base where their expenditures per student are roughly 30% to 50% higher than they are for Ontario universities. That competitive environment is worsening drastically and we are seeing the impacts on our competitive position daily.

We have a number of frustrations, to be frank.

The formula funding review under way by the Ontario Council on University Affairs has come at a time when we felt it was disruptive and created additional anxiety, given the overall fiscal stress facing the institutions.

We certainly have concerns about the way in which Ontario Training and Adjustment Board, OTAB, resources are being deployed and believe that some of those resources ought to be designated for skilling and reskilling of people at the higher end of the skill spectrum.

We believe that the royal commission is bang on when it talks about striving to achieve a genuine four-year preparation in the secondary schools for post-secondary education and the possible reallocation then of a very significant pool of resources to other educational objectives.

We are tremendously concerned about the federal budget proposals and the possible federal cutbacks to university research grants and infrastructure and, generally speaking, to post-secondary educational transfers.

Finally, we do have some observations about the role of the provincial government in support of university research and how that might be improved.

I think there are a number of specific recommendations that I would draw to your attention, in closing.

First, we believe that it is very important to view the university system as a high-priority sector in this province, high priority as an investment in infrastructure, for human resource development and research development for technology transfer, and that the university sector be assured that the level of operating grants announced for 1995-96 be maintained whatever the repercussions of the federal budget and, second, that those operating grants be restored to their historical high of just over $2 billion as soon as possible. I think an explicit recognition by this committee of the priority to be attached to higher education would be most welcomed by the universities of Ontario.

We continue to believe that some further increases in tuition fees are necessary. Our discussion paper of a year and a half ago brought that issue very much to the public's attention. The government has reacted positively with 10% increases for 1994-95 and 1995-96. We believe that further increases in order to provide us with a stable funding base will be necessary, and those increases would of course be used to maintain and enhance the quality of academic programs and access.

We are about to submit to the minister for his approval a proposal to permit fees for advanced training courses to essentially be deregulated so that we can negotiate with our training clients on a cost-recovery basis to offer those programs.

We believe certainly that income-contingent repayment is the way to go for repayment of student loans and encourage the Ontario government to continue working closely with the federal government to implement a suitable ICR program.

Finally, we believe the Ontario government should continue and enhance its efforts to encourage university research and technology transfer.

We say this knowing that the economic climate for Ontario is improving, that the rates of economic growth have turned around, are positive, are strong, and that the employment record is improving as well. We believe this committee is in a position, as it has done in the past, to acknowledge explicitly the crucial role of our universities in economic and social renewal in this province and our vital contribution to the economic viability of the province and its citizens in the globally competitive economy that faces us.

Mr Gary Malkowski (York East): Thank you for your presentation. As you know, our government has committed to keep the services and maintain the services at the universities. Talking about tuition fees and student loans and capital projects, we've promised to maintain these, and at the same time we're facing discrimination by the federal government and we have faced that during the last recession.

I wonder if you can comment on what the impact will be of a reduction in federal transfer payments and what would be your recommendations on creative ways to raise revenue, such as partnerships in the community or other types of partnerships. What would be some creative ways we can get revenue?

Dr George: We have been most appreciative of initiatives like the joint infrastructure funding project which have benefited our institutions. Our concerns about the repercussions of the federal budget proposals have been addressed to the HRD and to all levels of cabinet in Ottawa. Copies of that brief have been circulated to all MPPs within Ontario.

Essentially, we are very concerned that if the total EPF cash were removed abruptly, this would place us in a position where if those cuts were all passed on to the institutions, we would be faced with a very significant revenue loss. The possibility that the federal government held out that this could be offset by very significant immediate tuition increases is not an appealing alternative to us. We're very concerned that the proposed doubling of fees would occur too quickly to too high a level and might have serious repercussions on accessibility. Our own proposals for tuition increase have been much more moderate and I think are seen to be much more moderate now in comparison with those stories coming out of Ottawa.

So our proposal to HRD has been that instead of cutting those cash transfers out immediately, they be mitigated, that some savings be taken, a fair share of savings, out of post-secondary education, but that the rest of those funds be put into support of income-contingent loan repayment plans for student assistance, into research infrastructure in support of university research, and into, thirdly, continuing transfers at a lower level to provide for interprovincial equity of access, all important national objectives and important to Ontario too.

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In terms of partnerships, we've been working very hard in this area over the past three years, and I've reported to you, I think, on some of these initiatives in their earlier stages. We're about to announce the creation of a COU office of advanced training, and this office is intended to broker the needs of industrial partners seeking training to the university system. Industry tells us they need a single point of access; our office will provide that. It is funded for a three-year pilot project by four sources of support: three of the sectoral training councils, the electrical and electronics industries, the software industry, and the telecommunications industry councils; by HRDC; by MET; and by the universities of Ontario.

There will be close liaison with the new Con-nect office of the Ontario college system, and I would hope that, combined with our consortium development between colleges and universities to deliver advanced training, you will see within the next three years, mark my words, a very significant improvement and enhancement of partnership training in this province at the higher-skills end of the spectrum.

Mr Malkowski: So what we're doing at York University and Seneca College is an example of that kind of partnership.

Dr George: Excellent examples. And McMaster University and Mohawk College have a similar new initiative under way in the applied health sciences. These are tremendous examples, I think, of greater interinstitutional cooperation.

Mr Dalton McGuinty (Ottawa South): Good to see you again, Peter, friends. We've had, obviously, a number of discussions on these issues over the past few years, Peter. It's good to hear you this morning, though, talking about the elimination of grade 13. I just want to get some particulars from you here so I can get the record straight. Does your support of the elimination of grade 13 hinge now upon the transfer of those funds into the university sector?

Dr George: I'm an economist by training, and one of the things I am trained to think of is cost-effectiveness of program delivery, and efficiency. I think there is a misallocation of public resources to secondary education in particular, in the form of the current system.

I have argued in the past that if we move to a system that calls for full disclosure, on high school transcripts, of numbers of attempts at OAC courses, this would in and of itself reduce the numbers of frivolous attempts and save the taxpayer money. I think it would drive the system closer to a four-year goal rather than the current 4.7 years. One has to allow for some friction in the system: We'll never get it down to 4.0; we might well get it to 4.2 or 4.3 and save $200 million or $300 million in the process.

The possibility of going beyond that, to a three-year specialization beyond grade 9, is, I have to admit, attractive to me as well, although I have not generally presented the case strictly in those terms. But when I look at other jurisdictions within Canada and North America, certainly the norm of a four-year high school preparation for post-secondary education is everywhere around us, so there's a logical extension, I think, to Ontario that a four-year high school preparation ought to be our goal. There are a number of ways of achieving that, and I've mentioned the least intrusive first. The most intrusive would be to declare that it is to be a four-year curriculum as the goal.

Mr McGuinty: Parents and students have raised this concern, Peter, and I would like you to respond to it. Are you telling me that we could complete grade 12 in this province, go directly to university, and that there would be no additional university year and corresponding tuition to be paid?

Dr George: I would think that for most students one could incorporate the OACs into the fourth year of the high school curriculum and we could have a genuine norm of a four-year preparation for post-secondary education. I think one has to allow for the possibility that for some students an extra term might be needed, whether it's because they made some inappropriate choices along the way and so have to extend the preparation of OACs. But the key thing, to my mind, is that the curriculum be designed with a view to completing high school within the four years, and then, that friction that carries students beyond the four years is not the normal case, it's the unusual case.

Mr McGuinty: This government will have raised tuition fees by 42% by the end of its term, and you're asking for further increases in tuition fees. Students of course are very concerned about further increases in tuition fees, but when there is some acceptance of that notion there's also a willingness to assert some responsibility for how that money's going to be spent, for instance with something like the creation of a maximum class size.

Universities, historically -- I don't have to tell you this -- have evolved to the point where they consider themselves to be, by and large, autonomous and quite willing to run their own shop on their own. What is the universities' position vis-à-vis students' request that, "Listen, if we're going to pay more, you've got to give us more say in how the money's going to be spent"?

Dr George: What we mustn't lose sight of in all this process is that any additional resources the universities get, whether from tuition or government grants, are put to the goals of accessibility and quality of education. Students, if they are paying more as a private cost for their education, will certainly have greater expectations around the quality and delivery of that education, and I expect that the greater the private contribution, the more demanding a consumer or customer the student will become. I have no problem with that whatsoever. I think our educational system has demonstrated in the past and will continue to demonstrate that it meets the needs of its student clients, and I think the private rates of return to people completing university degrees bear that out fully.

I do think that the question of legislating a maximum class size would carry the shimmer of micromanagement a little too far in the direction of reality. I, as president of an institution, would hesitate to tell any of my departments what their maximum class size is to be, even though I'm very close to the operation, because there's no demonstrable evidence, it seems to me, say in a first-year course, that a class size of 200 is a less effective way to deliver instruction than a class of 100. It depends on the kind of supporting elements there are in the educational process: tutorial groups, access to computer equipment, library access and so forth; it's the total package. So I would certainly object to any kind of intrusion that stipulates maximum class size.

The universities have shown through this period of restraint, lasting for many, many years, that they are exceptionally able to make wise decisions about the allocation of their resources. They don't need help on that issue from government, with all respect. What they do need is help with the resource pool itself. Our two major sources of revenue -- grants and fees -- are closely regulated by this system, and I submit that a little less regulation might also be conducive to greater efficiency in the allocation of resources at the institutional level.

Mr David Johnson: I certainly thank you for your deputation. I'm a little saddened to see that all of the references to funding are for years after I graduated; I'm starting to feel old listening to your statistics.

But I'm thankful that we have an economist who is in such a position because I think the allocation of resources, putting the resources in the proper areas, is so important. My party certainly agrees with you on that. Indeed, I suspect we've listened very closely to you because many of the points you've raised are points we have firmly indicated we're in support of: for example, the reallocation of the costs associated with grade 13; we think that money can be used more efficiently. The income-contingent repayment plan is a plan we're very supportive of. Looking at deregulation, the point you've noted is that the deregulation pertaining to advanced training courses, for example, is something that has to be looked at.

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My question to you is, is there any way to measure the impact of the points you have on the page in terms of meeting your resources and your needs? I'm thinking of grade 13, although there'll certainly be differences of opinion about where those resources should be allocated. Some people feel it should be allocated to three-year-olds, although we don't happen to share that view. The at least partial deregulation; the income-contingent repayment plan; you feel that tuition fees have some room to escalate, perhaps in conjunction with the income-contingent repayment plan: With those kind of plans, is there any way to measure resources that can be freed up, can used more efficiently, how far they'll go to meet the needs you see?

Dr George: That's a very good question.

First, let me say that's one of the very few favourable comments about training as an economist that I've ever heard, and I appreciate that. For most of my economist colleagues, the real world is a special case, and I'm certainly getting a good dose of real-world economics in my current and future jobs.

I think the question of measuring impact is extremely important. We are committed to the publication later in this calendar year of a performance indicators book for Ontario's universities. The extension of that project in the succeeding calendar year, 1996, is to get a better handle on outcomes measures specifically, to provide groups like this committee and members of the public at large with a much better feel for how effectively the universities are expending public resources.

If you were to ask me for specific examples of how we could document, if we got additional resources, where the best bang for the buck would be, I'd say, first of all, that we can certainly look at some of the educational programs. We know that if you look at private returns to investment in, say, dentistry, medicine, some of the professional areas, where tuition levels are very much in the same ballpark as they are for core arts and science programs, private rates of return are very high in some of those professional areas. A substitution, if you like, of tuition for grants would certainly bid away some of the rents that are accruing to individuals who I think are getting a particular bargain in terms of low tuition fees. In that area we could certainly make some demonstration and even argue for some reallocation of resources towards, if you like, the helping professions, like social work, where private rates of return are much lower and for the student it's then a more costly, in net terms, investment.

Second, if you look at the reviews of programs like the provincial centres of excellence program and the URIF program, the university research incentive fund program, which are partnership programs between the private sector, government and the universities, those reviews have been shown to be very positive in terms of the spinoff effects and the enhancement of training for a graduate student to then enter industry.

I would submit that a very useful expenditure of public dollars at the margin would be to add two or three centres of excellence in, say, biotechnology and the life sciences, where we don't currently have one; to fund a universities health research council, with some budget for allocation towards these kinds of technology transfer projects; to expand the URIF program, which again is an industrial partnerships program; and I think generally to support an increase in the envelope for research infrastructure of OCUA, the buffer body.

We are at a sore disadvantage with, for example, Quebec, which puts more money in support of the direct grants received from the federal granting councils, NSERC, MRC and SSHRC, than does Ontario. You can see that Ontario universities' share of those federal grants received annually has been decreasing; Quebec's share has been increasing, because Quebec has in effect been matching the draw of federal funds to its universities from the granting councils. Ontario is losing ground here because it is not acknowledging the importance of research infrastructure and its own complementary role in support of research to help support our appeal to the national granting councils.

There are some good examples.

The Chair: Thank you very much.

Dr George: Thank you. Mr Chair, may I, as a parting comment, say that this will be my last appearance before your committee as president of the Council of Ontario Universities. I want to say that I've very much appreciated, over the past several years, your gracious, good-humoured and really thoughtful consideration and support of our briefs, and I wish you well in your present deliberations.

ONTARIO CHAMBER OF COMMERCE

The Chair: The next presentation is by the Ontario Chamber of Commerce, Ted McCollum, president; Don Eastman, executive councillor. Please make yourself comfortable. Mr McCollum, I presume?

Mr Ted McCollum: Good morning. Yes. Mr Eastman sends his regrets.

Thank you for the opportunity to address you all today. My name is Ted McCollum, and I am the 1995 president of the Ontario Chamber of Commerce.

By way of background, let me say that in Ontario there are some 4,000 vertical business associations credibly representing single-industry and trade groups. But the Ontario chamber represents all businesses in the province, with over 65,000 member companies and their thousands of employees in over 200 chambers of commerce and boards of trade from all regions of the province. The Ontario chamber network is the largest, most diverse and broadly based business organization in Ontario, encompassing all sectors, from major corporations to small family businesses to sole proprietorships.

I believe it's worthy of note that when we speak of "business" in this province, the vast majority of businesses are people like you and me, our neighbour who runs the town pharmacy, the family who runs the convenience store on the corner, the machine shop in the industrial mall, the 20-person factory, the tourist innkeeper.

Our members provide us with a unique perspective on the realities of doing business in Ontario, and it gives us an accurate reading of the real state of business in the economy, our competitive position internationally, and the true barriers to growth.

The recession, at least as far as conventional definition is concerned, is over. Considering its depth, the recovery to date is anaemic and, can we say, jobless. The underlying structural problems which caused Ontario to take on water and list on the way into the recession have not been dealt with, and unless we make major repairs now, our ship will be in considerably worse shape to weather the next economic downturn.

From its inception to the 1984-85 provincial budget, Ontario had taken on $30 billion in debt, and by 1990, $39 billion.

As we all know, in the last five years Ontario has more than doubled its accumulated debt to a record level of probably $124 billion, when you include the unfunded liabilities of the Workers' Compensation Board and the massive $32-billion debt of Ontario Hydro, all of which the taxpayers of the province are responsible for.

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It's an interesting observation at this point that the current year's forecasted deficit approximates the interest payments we have to make on the accumulated deficit. In other words, without the accumulated deficit, the current revenues would just about handle our level of spending. Now, we can't undo the past, but just think where we could be today.

Make no mistake, the phenomenon of spending more than we make in Ontario did not originate with the current government, but they mistakenly believed that swamping the boat as we entered the recession would somehow enable us to climb out faster and easier; a bad plan, and the wrong direction.

So how far is the water now from the gunwales? Can we really withstand the impact of taking on more debt during an economic upturn? If so, how do we withstand the next economic downturn?

Earlier I said the debt level was "probably" $124 billion, because the government has not set in place adequate accounting practices to include all debt in this calculation. We've heard a lot about that recently.

In spite of strong recommendations from the auditor to bring the accounts in line with generally accepted accounting procedures, the accounting does not account for unfunded liabilities and the sale of assets in the traditional manner. At very least, in recognition of the world-class stature of the accounting bodies in Ontario, our government should adopt and must adopt generally accepted accounting practices.

It's difficult to make good decisions without good data. The legislators of this province need accurate and complete accounting of government expenditures and deficits as they face tough choices on tradeoffs which must be made, and the people of Ontario deserve accurate and complete accounting of government spending and deficit balances to make informed decisions on the record of their government. This is a critical time in the province's life, and we must demand full, complete and candid accounting of the province's fiscal affairs from our government.

Last year when I appeared before this committee I reiterated the chamber's view that we in Ontario had hit a tax wall, the point at which tax increases actually have a negative effect on tax revenues. Despite a government forecast for growth in the economy and a forecasted Canadian dollar rising above US$0.73, the Treasurer predicts Ontario will add substantially to the debt through a period of growth over the next four years. Our boat, therefore, is still sinking. We in Ontario are still taking on debt faster than we're bringing in revenues.

The Treasurer's pre-budget documents take great pride in the relatively modest reduction in the rate at which the ship is taking on water. We applaud the Treasurer for his actions and appreciate more than you may realize how painful and difficult it has been for this government to make the decisions required to achieve those reductions. But the bottom line is that the boat is still sinking. The current trend is unsustainable. Either we begin to pump more water out or we'll ultimately sink.

Let me now share some observations with you. Despite the recent upturn in economic activity, we still have far too much unemployment, especially among young people. While public-sector funds are recycled into the economy, the only real net new source of funds is private-sector businesses and their employees. As we have reached the tax wall, higher taxes would drive business out of the province and more people into the underground economy, increase tax avoidance and tax evasion and encourage people to withdraw altogether from the workforce or perhaps not enter it.

Government spending versus revenue imbalance is unsustainable. Lenders are downgrading our provincial bond rating. We continue to borrow heavily abroad. You know, we're the richest province in one of the richest countries in the world, and yet we're sucking capital from the rest of the world to finance a lifestyle that we're not earning. The fundamental imbalance between the size of our public sector and the size of our private sector cannot be sustained and will not be tolerated by our global partners. Dramatic growth in our private sector is mandatory to avoid massive spending cuts.

Businesses today are extremely mobile. Businesses gravitate to jurisdictions which support a competitive environment, jurisdictions with a "welcome" attitude towards business. Likewise, people move and gravitate to jurisdictions which provide opportunity to raise their families in clean, safe and affordable communities where there are jobs.

We do not live on an island here in Ontario. In fact, we live in the open sea of a global economy. We need to be competitive here in Ontario. There is no such thing as a government-generated dollar. There is only one taxpayer. We need taxpayers to want to live and work in Ontario.

We need an attitude in our government that attracts businesses and helps them remain competitive and helps businesses start up and grow here. We need businesses to come to Ontario and grow here. Jobs create futures, jobs build communities and jobs create the tax dollars that support our health care, education and infrastructure services that make Ontario and our communities in Ontario such great places to live -- jobs, by the way, created and sustained by the private sector.

Remember that governments can speak with legislation, regulation and taxes, but businesses and people respond with their feet.

No one knows how to stimulate business better than those in business. The starting point, the most important source of information, is private sector employers, people who have created jobs, who are creating jobs and who want to create jobs.

The perspective of other groups is certainly important -- the academics, the government bureaucrats, organized labour -- but theirs are peripheral viewpoints to what should be the mainstream of your information on job creation and job growth: those in business.

It is essential that you in government today recognize business as your greatest ally in our economic recovery and understand business by being able to put yourself in the shoes of the private sector entrepreneurs, the challenges that they face, the opportunities that they can bring to this great province.

The private sector does not need nor does it want handouts, but rather elimination of barriers across the province and across this country to doing business. It's ironic that, in this day and age when so much has been done to provide barrier-free environments for our physically challenged, we've been building barriers for our job-creating entrepreneurs.

Better design and fewer regulations, less red tape and less bureaucracy, coupled with a pro-business mindset, are what we need for Ontario going forward.

The recent opening of the Canada-Ontario Business Services Centre in Toronto is an excellent beginning. Creating a single point of contact for businesses in the province to get answers on federal and Ontario programs, services and regulations will not only assist business, but assembling all this information in one database in one place will uncover the enormity of it all. I urge the government to act swiftly to undertake the awesome task of review, simplification and reduction of wasteful overlap and duplication of services which slow down and confuse the businesses of this province and add so much unnecessary cost and waste to our government.

We believe there are opportunities for improvements in efficiency and effectiveness that will permit reduced government spending with a reduced level of pain so long as there is a substantial growth in private sector vitality. Therefore, the fundamental challenge facing government is to increase the vitality, the revenue production and the job creation within the private sector.

We do not come here to assess blame, but if we did, perhaps we should first point at ourselves. We've permitted the education of a generation, and the evolution of public opinion, that does not grasp the importance of a healthy private sector to the growth, health and wealth of our Ontario society. We've allowed the concept of entitlement in our society to grow, isolated from an understanding and concern about where the dollars to pay for these entitlements come from.

As a result, we've evolved into a society where too often it's fashionable to take cheap shots at the private sector, as if businesses, faceless and nameless entities, were there for the sport, rather than the real truth, that business today is your neighbour making a living, a return on investment, and providing jobs in our communities. In the face of such an ill-informed public, the current economic mess was largely inevitable.

For more than two decades, those in the private sector focused on short-term adaptation and survival. In our pragmatic and practical way, when confronted with government initiatives damaging to our global competitive position, we focused on making them less damaging and rarely attempted to address the public pressure problem which drove the initiatives in the first place.

Our warnings about deficits went unheeded and now we have a pending disaster.

While the public was aware, for instance, that business did not like Bill 40, there was a limited understanding of why it's making Ontario business uncompetitive and why it's costing jobs in the province.

Today, I believe that as a result of the recent recession and our high unemployment and eroding job security throughout the province, there's a much better and deeper public appreciation of the need for private sector vitality and its inherent job creation.

There still needs, however, to be a better understanding of the expectations of a return on investment and a competitive environment as prerequisites to attracting and encouraging private sector businesses and job growth.

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As they say, you can't get out of the way if you don't see it coming. This last time around we failed. The result wasn't just damaging to the business community but damaging to the entire provincial economy and ultimately damaging to our ability as a province to provide quality public services. The wounds have gone far into the fabric of Ontario and everyone has been harmed.

Each of you is involved in the political structure of this province, I presume because you believe in Ontario and want to make our province a better place to live, to work and to raise families. These objectives simply cannot be met without a healthy private sector growing jobs and making returns on investment. Promises of a revitalized Ontario without a corresponding revitalization of our private sector can't happen. The result will be a disappointed, frustrated and angry electorate.

We both have a common interest. We must include the prerequisite of a healthy private sector in the revitalization of the province and reconcile the gap between the political realities of public opinion and economic reality. We both need to work towards an informed electorate.

As individuals, we all have strong views on the political process, and members of the Ontario Chamber of Commerce have that same divergence of views. The Ontario Chamber of Commerce, as an organization, is apolitical. We are proponents of private sector growth as the only way for Ontario to regain its strong economic position and the only way to grow jobs in this province. This year, in preparing for the upcoming provincial election, we will be promoting the business fundamentals for economic health in all our communities across Ontario to foster a better understanding of these issues among our candidates and our electorate.

I've spent a lot of time not talking about the budget, at least directly. I've spent some time encouraging the government to clean up the accounting and put the numbers before the electorate and the politicians who must make some very difficult decisions. I've spent some time discussing the importance of a government attitude towards the private sector which encourages business to locate in Ontario and to grow here as the only sustainable solution to getting our fiscal house in order and creating jobs.

I've alluded to the need to reduce paperwork and eliminate red tape in government programs. In the last budget, the Treasurer provided for a temporary respite from the EHT levy for new hires. This gesture was well intended and appreciated. However, this is a temporary tax reduction and actually increases paperwork to comply. When business is diverted from productive activities to file reports, it dilutes management attention to basic fundamentals and weakens our competitive position. This budget should focus on reducing paperwork for business and concentrate on making our Ontario businesses competitive in our global markets.

In terms of cost control and reduction, we reiterate our call for comprehensive, independent, value-for-money audits on current and proposed programs.

We continue to recommend:

-- Greater emphasis of making consumers aware of the real costs of health care through semiannual personal health services statements, increasing awareness of the cost and decreasing fraud.

-- Rationalizing ancillary services in education, moving a greater number of dollars from the boardrooms to the classrooms.

-- Social programs based on self-dependency rather than social dependency. Programs should be re-engineered to encourage transition to jobs part-time or lower-paying employment with government support during the transition.

-- Consolidation of government services infrastructure in local areas to reduce overhead expenses and shared infrastructure services.

-- A specific plan to further reduce direct government labour costs, including tighter controls on outside contractors and review of all employee-related expenses.

In conclusion, the Ontario Chamber of Commerce applauds the government's recent initiatives to make Ontario a province in which it is easier to do business. We believe growth in the private sector is absolutely vital to turn around this province. We are committed to taking that message to our local politicians and our friends and neighbours, the voters of the province.

We understand you will shortly be looking to your constituents to confirm another term in office as their representative. Regardless of your political leaning, we encourage you to review the Ontario Chamber of Commerce business agenda and adopt it as the key to turning this province around and growing jobs.

We need to look at this next Ontario budget as an opportunity to show the global business community, the global investment community and the voters of Ontario that the government of Ontario is truly open for business and believes that business growth and job creation are the keys to financial stability for the people of Ontario and for our government, all of which is respectfully submitted.

Mr Phillips: Thank you very much for a thoughtful and kind of a visionary proposal. I'll start with the accounting one for a moment, just because it's an area where our Provincial Auditor, who is the independent source of advice for us and the one that certainly we in the opposition have to rely on, has informed us that the way we're getting the numbers does not reflect "financial reality" is his term, under any accounting rule, and that his advice to us is that we should be looking at something $2 billion to $2.5 billion higher if we want to track the deficit. Has the chamber done any work on looking at the finances of the province, and does the chamber tend to use the Provincial Auditor's numbers as the basis on which you look at the province's finances?

Mr McCollum: We tend to listen to what the auditor has to say. Certainly the auditor is much closer to looking at numbers than anybody outside of the people in the Ministry of Finance, and we have to respect the opinion of the auditor. That's, after all, why I presume our government has decided to hire the auditor.

My other point is that we are one of the highest-regarded jurisdictions in the world in terms of all our services and our abilities and the people who live and work here, and we have very well-thought-of accounting bodies within the province. I think it's incumbent on the government to reflect that degree of professionalism and the competence and completeness in disclosure of accounts. It's always nice to try and think of how we might move some dollars over here if we don't want to talk about them, but in the end I think all governments, regardless of which party is in power, should say: "This is sacred. We are going to do things properly. We are going to have full disclosure." And if our auditor says that we must do something, we can get a second or third opinion, but in the end I think we have to come around to what we might call full disclosure and the use of generally accepted accounting practices.

Mr Phillips: I agree with that.

The chamber is quite concerned about the deficit and getting the deficit under control, I gather from your proposal here.

Mr McCollum: Yes.

Mr Phillips: Do you have a view on where the priority should be in terms of the deficit? I think we're seeing one party that's suggesting that perhaps it could cut taxes by $4 billion or $5 billion. I think the government's assuming we'll kind of grow our way out of the problem. I think that is perhaps a suggestion. And we're in between, as usual. Has the chamber any advice for us?

Mr McCollum: It doesn't seem you've got many positions left.

Mr Phillips: That's right.

Mr McCollum: We've got growth and we've got cutting and in the middle, you know, where the chamber might be.

Mr Phillips: And just in terms of on the tax side, is there any tax area that the chamber feels is particularly onerous on the business community that one could focus on, that you would say is very important?

Mr McCollum: As you might appreciate, with such a broad representation of business across the province, there are all kinds of views. We have people who have voted for all kinds of constituents and all kinds of ideas across the province.

Generally speaking, I would say that when we're talking about business today in 1995 relative to the way we conduct our day-to-day activities and look back to the way we did it in 1985, there's an awfully big difference. There's no business that can stand up and say, "Our customers have told us that they don't care if we give them the services that we gave them last year," or "We don't care if we've got the quality in the products that we had last year." What they're saying is, "Do it for less."

So businesses have totally re-engineered and restructured how they operate. The bureaucracies which existed in business, if you can call them that, are disappearing. They're becoming very flat organizations. They're becoming very customer-oriented. As I mention in here in reference to education, they're moving their dollars from the boardroom to the street. They're trying to use the new technologies, moving ahead quickly, making those kinds of investments, because there are not the margins that there used to be in business, so you can't waste any more; you just have to buckle down and get the job done. People in business are thinking ahead: "Look, I still have to provide the service that I did last week or last year, or 10 years ago," although the services may have changed. "I still have to provide that, but I can't afford to spend the money delivering the service that I did before, so I've got to find an easier way to do it."

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So when we talk about "Where do we go with the deficit?" we're suggesting that we need to do the same sort of soul-searching, and how do we provide the service for less money? How do we do that? It's a huge question. Each industry and each company has spent thousands of hours looking at this, and the reason they've had to is because if they don't, they're out of business.

If you go to the employees of your company and you bring them around the room, which they do today -- these are all empowered businesses we have today; we don't have presidents up here wielding a gavel -- and we say, "Look, folks, here's the way it is; if we don't get our costs down to a competitive level by" -- pick a date -- "June 25, we're out of business; now, are we going to try and get it down or not?" you'll find that all of a sudden some really great ideas come out on how to trim costs.

So we have to be very conscious of driving the deficit down and understand that we all appreciate the services that are provided by the various social agencies within the province, but let's consider that we have to drive that.

Any one piece of legislation?

Mr Phillips: Tax.

Mr McCollum: Taxes. Once again, I think no, I think we're too broadly based an organization. Some people say, "We'd like to cut the surcharge on income tax," and somebody will say, "We'll live with that but we'd like this one removed." I think the whole name of the game, what happens, is that if you shrink the cost burden, some of these other things go away, if you can encourage businesses to grow, provide them the environment which is a friendly environment for them and welcomes them and helps them get through the red tape and just cut through it.

I was saying to somebody the other day, we've got this Ontario Investment Service and we've got this Canada-Ontario Business Services Centre, and these are all great things that help, but what happens if a business decided it actually wanted to come into Ontario? How long would it be from the time they made that decision to the time they went all through the municipalities and argued about water and sewers and whether people like the industry and whether the building should be brown and all this kind of stuff, till they actually got the building up? Maybe it's the next generation. It's tough.

Mr Carr: Thank you very much for your presentation. In particular, some of your comments about how the public needs to be informed were very good. I agree with a lot of things you said, obviously, and we've incorporated a lot of those.

I was thinking, one of the reasons we've come out with our plan a year in advance was similar to what you did sitting down with your employees. We're saying, "This is what we believe in." Essentially it's that to cut spending, cut taxes, will create jobs. It's a very bold plan; it's not tinkering and trimming. We've said to the people of this province, "Here's what we stand for; this is what we'll do." As you may have heard, Mike Harris said the reason is that we not only want to win an election, which we do, but we also want a mandate for change.

What we're doing with the public in this province is similar to what companies have had to do, and we agree we can do more for less. Whether we win or whether the Liberals win or whatever happens will depend on what the public ultimately decides, but we've laid it out there very clearly.

While I appreciate that your membership can't comment on any particular philosophy of the tax cuts, how we differ from, for example, a federal Liberal program in infrastructure -- give the money to the government to spend and provide the infrastructure -- ours are big tax cuts that we'll give to the individuals who will then be able to go out and buy a fridge, stove or whatever. We believe the public having money in their hands is better, and our tax cuts will give the average household of $50,000 some $4,000 over three years.

In terms of what we're going to do -- our program of workers' compensation, Ontario Hydro, the red tape, the employer health payroll tax -- all the things we've called for doing are important, but in an overall theme what we believe is that if we put more money back in the hands of the people of this province and the taxpayers, they will then go out and spend with your members, whether your member is a menswear store or a ladies' shop or whatever.

Speaking in the broad sense, in the province of Ontario now, having looked at our spending and our taxing, do you believe that we have a revenue problem or do you believe that we have a spending problem here in the province?

Mr McCollum: The level of revenue I believe is about maximum, because we've sort of hit a tax wall. If you say, "Do we have a revenue problem?" well, if all of a sudden you could wave a wand and get double the revenue, you wouldn't have a cost problem. But right now, realistically, it's the way any company looks at: "What business is on the table? What's my backlog? Where am I going to get my revenues from? Where is this money going to come from?" And then you say, "Do I have a revenue problem?" No, I've got just about all I'm going to get. So now I've got a cost problem: I've got to get my costs in line with the revenue. If our revenues increase, hopefully we'll decide that we're going to pay down the debt with that. But frankly, I'm not so sure where we're going to get more revenue.

Mr Carr: So it's a spending problem.

Mr McCollum: I think it's probably the cost control side that we need to look at.

Mr Carr: The problem we --

The Chair: Mr Carr, you've actually used up three minutes. I just want everyone to know, because I like to do this from time to time, that when the presenters give lengthy answers, which are important and which we want to hear, sometimes it eats up a lot of time. I just want to move things along, so we're going to go to Mr Sutherland.

Mr Sutherland: Just a quick comment on your accounting comments: We have followed what the auditor has asked in terms of the public accounts going to an accrual basis. In your presentation, though, what you're suggesting is that the WCB and Ontario Hydro debt should be included in that, so when you come up with the probable $124 billion, you're including WCB and Ontario Hydro. I'm not aware of any province that would include those types of debts into the generally accepted debt figure, but I do know when you say from what occurred up to 1984-85 and up to 1990, you're not including in that $39 billion WCB and Ontario Hydro --

Mr McCollum: That's true.

Mr Sutherland: -- where most of those unfunded liabilities and debts did occur before 1990.

My only other comment is regarding your comment about business getting cheap shots. Well, join the politicians, I guess, because we get a lot of them too.

Mr McCollum: I understand, and you're quite right. The real problem is that, as taxpayers in Ontario, whether you put it in this bucket or that bucket or another bucket, and say, "This isn't comparable with Alberta or somebody else" -- good, let's make it all comparable.

Mr Sutherland: Sure, apples and apples.

Mr McCollum: But then let's remember that there are these other little buckets over here, that we should put up our hand and say, "Oh, by the way, there's some over here," because as taxpayers in Ontario, some day we're going to have to pay that. That's really the point.

You're quite right. Some of the numbers may not be comparable, but then some of the numbers are ranges. Because of the way we do our public accounting, we don't follow necessarily a way that a business might do it and it becomes a little difficult for people to figure out exactly: "What are we talking about? How much is it?" And anyway, can you tell me how much $124 billion is?

Mr Norm Jamison (Norfolk): Thank you, Mr McCollum. You're quite right. One of the problems the Treasurer pointed out when he made his submission to the committee here was that we at this point are waiting with bated breath, of course, for the fallout as might happen from the federal budget. Again, we're dealing in partnerships, right down through to the municipality, at the various government levels.

I know it's of pretty good concern to him and I just wanted to indicate that it's a concern, because certainly if -- the traditional word of "offloading" is used. Each level has a problem with the other level at that point, certainly being a partner in a number of areas.

You've mentioned the Ontario Investment Service and how that would help to really define further the amount of red tape that's out there. I believe red tape is a very important issue, an extremely important issue, and to that end I worked on a bill, Bill 187, catchphrased as Clearing the Path. What that bill does, I think combined with the Ontario Investment Service initiative, is that it really provides an umbrella piece of legislation that will finally allow government to take a course in unifying tax numbers and combining forms and reducing the amount of paper burden, also, at the same time, allowing governments to work with each other at various levels, again using a unified tax number.

I think this is beyond taxes, which is a major question, of course, but I believe that's a major concern of small business in this province. How do you see that issue being addressed? I believe it has to be addressed somewhat in a pragmatic fashion.

Mr McCollum: First of all, you say that the province of Ontario is worried about what the feds might do and then down to the municipalities. Well, think how we are, as taxpayers. There's only one taxpayer and we've only got so much money, and we just have these different levels of government. Part of what I see happening, and I congratulate those involved who did it, was this Canada-Ontario Business Services Centre. You are putting everything in one spot, so now people who are assembling the data will be able to say, "Gee, didn't I just see that over here, and didn't I see that over there?"

But think for a moment, when we start talking about how we can streamline things and red tape, how much time governments within our jurisdictions spend arguing with each other over how to spend the same dollar and whose dollar it is.

Particularly, I get from the municipalities what I was saying: if some poor factory decides that, yes, they think this is a pretty good spot and maybe they'd like to move their families here, and then where do they go? I understand that the government of Ontario has some mechanisms to try and smooth the way through, but if you were down in the municipalities and you were trying to put in a factory, what you're reading in the media down there and what the councils are arguing about is that they don't want you: "You're going to put too much strain on our sewer system, sorry. And worse, you might attract more families into the neighbourhood. We wouldn't want that. What would happen with all our services? It would cost us more money. We'd have to put in more roads."

All I'm saying is that the whole idea here is, let's try to create an environment that says, "Hey, come on in; we'll fix the problems; we'll put in the roads if we have to," but that at least we're growing, at least we're doing something and the province is taking off.

Yes, we do worry an awful lot about the taxes at different levels and the amount of time that's spent shuffling and fighting and that sort of thing. It would be nice if we could wish that one away. I think there is a lot of understanding out there now, particularly since the recession. A lot of people are thinking around what really it's going to take to get us moving again, and part of that is working together and not putting up with all the nonsense of infighting and that sort of thing. Sorry for the long answer.

The Chair: Mr McCollum, I'd like to thank you and the Ontario Chamber of Commerce for making a presentation before the committee today.

Mr McCollum: Our pleasure.

The committee recessed from 1213 to 1404.

AUTOMOTIVE PARTS MANUFACTURERS' ASSOCIATION

The Chair: The first presentation this afternoon will be made by the Automotive Parts Manufacturers' Association of Canada, Neil De Koker, president, and Elizabeth Mills, director of policy development.

Ms Elizabeth Mills: I'm pinch-hitting because my president has been struck with strep throat and the flu today.

The Chair: That's most unfortunate. You have obviously made yourself comfortable. I'll remind you that you have 30 minutes within which to make your presentation and field questions from the committee members. Please proceed.

Ms Mills: I'd like to thank you for the opportunity to provide this input to the budget development process. During my remarks I will follow the materials that have been distributed today and I'll be happy to answer your questions following my remarks.

I will describe the size and the importance of the automotive parts industry during my introduction. I will then present four themes that are of strategic importance to my industry when speaking about governments, budgets and change. I will follow with some comments that we hope will guide your deliberations.

The Canadian automotive parts industry is important to the economy of Ontario. It provides over 149,000 manufacturing jobs in Canada and $56 billion in sales, 120,000 vehicle retailing jobs with $40 billion in sales and 260,000 aftermarket sales and service jobs with $12 billion in sales. These automotive sectors combined represent over 520,000 jobs and over $100 billion in sales. Approximately 90% of our automotive parts industry in Canada is located in Ontario.

The Canadian automotive industry is Canada's largest manufacturing industry at 15% of the total. We are Canada's largest exporter, with one third of total exports, where 80% of the automotive industry production is exported, primarily to the United States.

The Canadian automotive industry is competitive, holding 17.5% of the assembly capacity, up 3% since 1981, and 12% of the parts capacity, up 6% since 1981, even though the Canadian market represents only 9% of sales.

Our performance over the past decade has responded to change and we are succeeding. From 1981 we experienced a period of high growth and inflation, passing on price increases to the customer. During this time productivity improvements were negligible. We lost ground to US and Japanese counterparts. During the recession period of 1990 to 1991, we lost 54 companies in Ontario and 20,000 jobs. Productivity improvements were the key to those that survived. Major efforts at cost reduction and productivity improvements have paid off and resulted in a much stronger industry.

Our performance has improved in other areas as well. Major increases in investments and machinery and equipment are taking place to upgrade existing equipment in our facilities and to expand production with new equipment. Yet more investment in new bricks and mortar is taking place outside of Canada.

What has changed in the automotive industry? What are the realities and drivers of profits in this important sector that enable the survivors to be more competitive and assist in recovery? We feel our answers are applicable to government. Our message here is for government to examine its own drivers of success and promote those aspects of its operations that enable government to be more competitive and assist us all in recovery.

Strong profits are needed to finance increased responsibilities of full-service suppliers in our sector. The sources of profits have moved, though, from the sales price increases in 1984 to internal cost reductions and purchased materials economics in 1994. The examination and aggressive pursuit of change in order to survive has been driven within our organization.

We feel government should do the same. Government should be doing more with less, for less -- a familiar phrase. Government's efforts in cost reduction and productivity improvements are essential to the long-term survival of a healthy Ontario.

Efficiency improvements of at least 6% per year are required to stay even, meeting customer demands within our industry. We feel governments should also achieve this goal. The demand for more from your consumers must have an internal response. Continuous improvements and strategic alliances are key to survival. These new types of relationships and standards should drive government's day-to-day operations.

We are rationalized and fully integrated in the North American industry due to the auto pact, the free trade agreement and the NAFTA agreements. The industry is highly capital-intensive and requires major investments to participate: $15 billion has been invested by assemblers in the past decade; $9 billion has been invested by the parts industry in Canada in the past decade.

Our competitive pressures are relentless. Assemblers demand annual price reductions from suppliers to remain competitive with their global competitors. The average supplier reduced their prices by 3% in 1994. At the same time, assemblers are demanding more costly services from their suppliers. Our experiences are not unlike the demands you have faced and will continue to face.

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Major material suppliers, steel and plastics, have increased prices significantly in the past two years. This has placed a major squeeze on parts company profits, especially those that are primarily make-to-print parts suppliers where materials cost is a high percentage of production cost, and over two thirds of the Canadian auto parts industry are such small tier 2 and tier 3 suppliers. Continuous improvements everywhere are vital to survival.

In the face of these pressures, consolidations are continuing which provide economies of scale to be in business. Much more consolidation is expected in the future. Where can government consolidate its services with other levels of government and within government departments is a question we ask.

What does it take to make the Canadian automotive parts industry grow in Ontario? Perception is reality. The perception is that Ontario is no longer a good place to invest. The perception of Ontario as a good place to invest has been eroded in recent years due to a number of factors:

-- The pro-union, anti-investment changes by Bill 40 to the Labour Relations Act.

-- A poor labour-management relations environment, with unions having a disproportionate amount of influence over government-labour-management committees.

-- The largest budget deficits in Ontario history, which almost guarantee that there will be tax increases.

-- Utility rates that were a major advantage 10 years ago but are no longer, although finally stabilized, now put us on par with New York state, which is the most expensive state in the United States for utility rates.

-- Costly social programs including complex pay equity, fast employment equity timetables, workers' compensation costs that have increased dramatically and over $11.5 billion in unfunded liability, and costly health and safety training mandates.

-- A lack of availability of competitive capital.

-- Very high personal tax rates that inhibit a global competitor from importing people from around the world into Ontario.

At the APMA four themes are recurrent messages from our members. We believe strongly in the need to communicate these four themes to you and to gain your commitment to act whenever and wherever possible in their direction. They are harmonization, sustainable government, competitive taxation and competitive regulation.

The federal government, during a recent examination of regulatory burden, has estimated the cost to industry associated with duplicative services and administrative cost of regulatory burdens at over $50 billion in Canada.

Ontario does not need to be the leader in specific areas of either social or economic legislation. The Ontario government should harmonize its approach to those of competing jurisdictions and to the directions of other provinces. More specifically, we wish for you to continue to move towards a harmonized sales tax system and to examine other areas of regulation, in particular environmental and transportation, where Ontario and the other provinces and the federal government still offer disincentives and higher costs to the global and international companies operating in Canada.

We need to prioritize which services and programs are absolutely necessary for government to provide and deliver those in the most efficient manner possible, including aggressive sourcing approaches where both public and private sector groups bid on the basis of cost and quality for the opportunity to deliver a program or service. This will lead or assist to lead in the elimination of the deficit and will reduce the provincial debt.

Once the required level of government service is identified and the plan for reduction in expenditures is in place, we need to put in a tax regime, including personal, small business and corporate taxes, consumption taxes and payroll taxes, which is at a minimum competitive with other jurisdictions and which helps to stimulate economic growth.

For many years, governments have layered on additional regulatory programs, many of which have a direct impact on the competitiveness of business. We need to eliminate unnecessary regulation and streamline the processes for those regulatory objectives which remain valid to ensure that they provide business with the greatest flexibility to comply and the lowest costs that allow business to be competitive with other competing jurisdictions. This must include a process which evaluates those regulations for their competitive impact before they are promulgated.

What should be the focus of the government's action in the budget?

Decrease public debt burdens: Our current level of debt has a negative impact on the health of Canada and on Ontario industry and on the prospects for the future in investment, economic growth and job creation. Industry is extremely concerned about the inevitability of becoming a target for increased taxes.

Make Ontario an attractive place to invest: Our industry is investing elsewhere. The percentage and type of investment made in Canada in machinery and equipment versus bricks and mortar is some evidence of the clear path that has been made away from investing in Ontario in the past four years. Companies have made investments outside of Ontario due to the uncertainty about the business climate in Ontario. Several companies have stated specifically that of the new jobs they have created, because we are in a growth industry, only 20% have been in Ontario and 80% have been outside this province.

Let private growth, not Jobs Ontario, increase prospects for employment. Unemployment will fall only if economic growth continues and there is improvement in the after-tax profit margins. The generation of falsely supported public and private sector jobs is costly and does not enhance the long-term viability of any industry sector.

Understand and limit the impact of the government cost squeeze: Payroll taxes and supplementary labour benefits, as well as regulated prices of utilities, telecommunications and transportation services have all increased. We in industry are doing more for less and with less. Government has to do the same. It can be done. You are in a position to take a first step in this area and to start returning confidence in government leadership and in Ontario.

Establish clear fiscal priorities: Government must create a fiscal and legislative environment that encourages business to innovate, invest and grow in Ontario. Reduce government overhead. Your income is down. You are at your credit limit. A change in operating style is required for you to survive. The drivers of profit within our industry are examples of directions for you to take. The tough decisions that are needed today are long overdue. You must reduce your costs to remain competitive.

The corporate minimum tax: Introduced against the advice of the Fair Tax Commission and of the business community, it sends a wrong message to investors and should be removed.

Recognize Ontario as an organization within a global market: We are a global industry. We compete with companies from all over the world in Ontario. Any costs that make us less competitive as a result of operating in Ontario will result in lost business opportunities and some movement of companies out of Ontario to remain competitive.

No tax increases: Do not consider any kind of tax increase that could exacerbate the recovery of the economy and dampen improving investor spending and consumer spending.

Develop programs with appropriate stakeholders: These programs should increase business, government, academia and labour cooperation where appropriate. Do not set up programs that provide power to stakeholders when nothing is done to facilitate working together towards common goals.

The current partisan shift in the balance of power has become a significant issue for business. Without balance and effective leadership, union-management boards of agencies and commissions operate inefficiently in a vacuum void of common goals and interests. There are many examples.

Remove uncertainty and improve predictability: The continuous uncertainty about tax increases and further demands on companies and individuals is reducing investments in Ontario. What Ontario needs is a stable working and investment environment. This environment, generated by a balance in labour-management views, will re-establish Ontario as a province and global manufacturing location in which to invest. Without a substantial reduction in the aggravation of the current investment climate, Ontario will struggle needlessly on internal issues instead of cooperatively on long-term recovery.

The APMA strongly feels that a balanced budget is vital to our long-term survival. We must be competitive with other jurisdictions where our competitors are located. A positive and competitive business environment includes the following: competitive personal and business taxation levels; a visible and harmonized tax system; an environment that promotes labour-management cooperation, not aggravation; government policies that encourage entrepreneurship and the creation of capital; investment tax credits and accelerated depreciation that promote investment; and social legislation that is reasonable and has been assessed under a rigid cost-benefit analysis.

The APMA supports lower taxes, clear cuts in government spending in a variety of areas, the dismantling of barriers to job creation and the promotion of economic growth, driven by a balanced budget.

The APMA supports giving up grants to business, such as the sectoral partnership fund and the sectoral council training program, to help contribute to a greater deficit reduction. We must all sacrifice for the common good and objectives of sustained economic health.

In order that we remain Canada's leading manufacturing sector and the backbone of Ontario's economy, government policies and programs must support the industry's viability, growth and global competitiveness.

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Mr David Johnson: Thank you very much for those comments. Just looking at one of your closing paragraphs, I don't think it could be said better, in that your organization "supports lower taxes, clear cuts in government spending..., dismantling of barriers to job creation, promotion of economic growth and driven by a balanced budget." In my estimation, that's exactly what is required in the province of Ontario.

We were told yesterday, for example, by the Canadian Tax Foundation, I believe it was, that the personal income tax -- and Ontario would be highest in Canada -- is the highest of the G-7 countries as a proportion of GDP. Property tax, by the way, is the highest in Canada -- and, again, Ontario would fall into that category -- of all the two dozen OECD countries in the world.

There is a good indication of the level of taxation, and that's why we're proposing to reduce the personal income tax by $4 billion. Government spending, which has essentially doubled in the last 10 years here in the province of Ontario, needs to be reduced dramatically, because it's simply not sustainable. We're proposing a $6-billion cut.

I notice that you've indicated that in your business one of your suppliers reduced prices by 3% in 1994, and I was just doing a quick --

Ms Mills: No, that's an average for the industry.

Mr David Johnson: If the province of Ontario was able to reduce its expenditures by 3%, that would be over $1.5 billion a year, about $1.7 billion a year, I guess, which would be in the vicinity of $5 billion over a three-year period. You also have noted efficiency improvements of 6%. Again, if the provincial government could make efficiency improvements of 6%, that would be an even greater reduction.

Ms Mills: It enables that those other cost reductions then become more feasible.

Mr David Johnson: Is that the range your industry feels government should achieve?

Ms Mills: We're giving you the examples from which we base ourselves. We know, for example, that General Motors's price reductions are much higher than 3%. They have received 5% annual price reductions from their suppliers, 15% in the last three years. That's certainly not what we would expect here, but the range is not important at this point. Certainly, 3% to us doesn't seem far beyond, but it does raise the serious kinds of numbers that you have sort of figured in your head.

There is the serious belief that the cost of being in the business of government is much too high and that if industry, in a very painful period of 10 years, has been able to find different methods from within its own organizations to drive its success and survive, then government as an organization, as an operating structure can also learn from those lessons. They were very painful to this industry sector. I think that government should be aware and acknowledge that some of those painful periods might be coming too.

Mr David Johnson: What worries me is, as you've indicated, that the investment is in machinery and equipment over the past period of time, but through your industry the investment in bricks and mortar has been much lower. I'm just wondering what that means for the future if your advice is not heeded, in your estimation, and deficits carry on, spending carries on, taxation remains at an uncompetitive level.

Ms Mills: I think there have been a number of studies where you can have Tennessee, Ohio and Michigan all wind up with Ontario in terms of costs. We have a tremendous workforce here in Ontario. We have some high workers' compensation costs. There may be benefits provided by individual states in terms of attracting business, but when it comes right down to it, the perception of a business making a decision to invest here relies on a subjective assessment of the environment, and the environment is not positive for a business to be here.

Certainly, two corporations I can mention to you, Long Manufacturing and the Woodbridge Group, have placed plants right on the other side of the lake and the river, just near Detroit and on the other side of Lake Ontario, simply because of the fact that they do not wish to place those jobs here, they're too expensive to put here. They're not positive that it's going to be a good place for those jobs to be maintained.

Mr David Johnson: Taxation is part of the problem, but another part of the problem is the regulatory situation in the province of Ontario. You mentioned Bill 40, for example, as one aspect. You've mentioned employment equity, the costly employment equity program and the complex pay equity legislation. How important are they in the scheme of attracting investment into the province of Ontario?

Ms Mills: The association and our members don't disagree with what is intended by those regulatory examples. There are good sections of Bill 40, there are some clear goals within the employment equity legislation and within the pay equity legislation that certainly need to be achieved, but realistically the timetables for employment equity are very fast. The health and safety mandates that have been assessed and provided to the industry to become trained are very costly to industry, and those are the kinds of cost-benefit analyses that we want you to be able to recognize when you introduce a regulatory addition to an environment that basically hand-ties our ability to use those dollars to invest more wisely in the creation of additional jobs. No, we're not against those programs; it's just a question of how you implement them and how long you take to provide industry the opportunity to adjust.

Mr Sutherland: Ms Mills, you provided us with some of your members listed on --

Ms Mills: The brochure actually lists all of our members on the back of it.

Mr Sutherland: Okay, members on the back. When I look at the examples in my riding and in my area here that have expanded in the last little while -- Standard Tube, Mastico, Lear Seating in St Thomas, Kelsey-Hayes -- I guess the point I'm trying to make is that a significant number of your members have done expansions in Ontario and hired more employees in the last couple of years, and with the tremendous amount of investment by the auto assemblers, over $5 billion in the last three to four years, it would seem to me that Ontario must be a good place to invest or these people would not have been making these investments in the last few years and continuing to make the recent investments that Toyota is making and other companies are making. So I guess I would ask you to -- based on your presentation versus the record of these companies making significant investments here in the last couple of years.

Ms Mills: Just two comments, really: one is that, yes, Ontario and the Ontario parts industry in Ontario are doing very well. We've recovered 10,000 jobs in recent years. But what I can tell you is that there are companies which only put 20% of their growth here in Ontario; the other 80% is not in this province. For example, Woodbridge Foam has placed 400 jobs in Michigan and Ohio in the last 18 months that are not in Ontario specifically because of the way they feel about the environment. They are shipping their parts from the United States into Whitby because they don't want to be here.

With respect to the assemblers, yes, I'm sure that they're going to invest $5 billion. They've already invested a tremendous amount of money here. They've got a long history, back to 1965, as to why they're going to continue to operate here. I think that Ontario certainly does compete on a cost basis. I've certainly provided that example to you.

It's a question when you come to a company whose employees are looking for expansion, a smaller company. The choice for a small company which is about to experience that kind of growth, once you've gone through all the cost basis, you have to make a subjective decision. Right now the feeling is that you do have a better choice to not locate in Ontario 80% of the time.

Mr Lessard: A number of your conclusions are very general and difficult to disagree with: like competitive tax levels, an environment that encourages labour-management cooperation and things such as that. However, here we need to make some specific recommendations. One of your suggestions is to eliminate unnecessary regulation. So what sort of recommendations could we make about regulations that you think are unnecessary?

Ms Mills: Unnecessary regulations? There's a program right now with the federal government, it's an act that's going to be put forward called the Regulatory Efficiency Act. It's an act that's being driven by the federal government which allows companies to work within a standard of a regulatory act that says, "Let business, within its own operating environment, define its way of meeting the compliance standard; don't prescribe within a regulatory framework the way in which business must comply," because what you do is eliminate not only the possibility of a business complying with an environmental piece of legislation, but you also make it cost-inefficient for them to do so; they're taking dollars out of their companies in order to be in compliance. Take that kind of working framework and apply it to the way you might review some of your own regulations in Ontario.

We've also identified other costs that we would like you to take out, the sectoral partnership training fund. Where we are in cooperation with labour-management on that program, we have achieved success with 25% of our industry; 25% of our industry because they are CAW members. The other 75% of our industry is either non-unionized or doesn't belong to the CAW. They are cautious and hesitant and sometimes outright refuse to participate in a program that relates to the CAW. There are inappropriate stakeholder decisions like that which make the sectoral partnership training fund a program that is not reaching the breadth which it's designed to.

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OTAB: We have some serious concerns about the cost-efficiency of its $1.2-billion mandate and the way it's sector-wide as opposed to industry-specific. If you eliminated that kind of investment and turned it around to training tax credits or more in a balance in that direction, we would be much more able to provide examples of automotive parts companies whose competitors are down the road defining their own methods of training and in training internally because they don't want to take advantage of a generic sector-specific program that's not going to have a competitive advantage to them.

Mr Kwinter: I'd like to follow along on the issue that Mr Sutherland raised. I think this is one of the problems in dealing with the government, in that the Treasurer was here and he held up this list and he said: "Look at this. We've got $5.5 billion of investment coming into Ontario in the automotive sector. That is an indication that we must be doing something right," when in fact, if you take a look at that, you have to understand that the automotive sector has got a huge investment in Ontario and these are relatively small amounts of money and it's add-on investment to protect what they have here and to service a burgeoning car market.

But if you take a look at the greenfield operations -- and this, I think, is a point that you were making, BMW, Mercedes -- not only did they not come to Ontario, they didn't even consider Ontario. They went into the deep south of the United States. I think this is one of the big problems that we have, because the government looks at it and says: "Gee, look what's happening. We must be doing something right and all these gloom-and-doomers don't know what they're talking about, because look at this investment."

Ms Mills: It's the examples that you can't measure which become apparent --

Mr Kwinter: Exactly.

Ms Mills: -- but once you have a conversation with an industry sector, it's the stories that you hear about people who don't invest in Ontario.

Mr Kwinter: That's the point that I'm making. The other point, of course, is that given the size of the automotive industry, a $200-million investment this year doesn't weigh in the consideration, when there's a downturn, of closing down the plant, even though they made the investment of $200 million two years ago or three years ago, and it's the long-term benefits and the long-term employment and the long-term production that we really have to gear to. I know, for example, that most of the small automobile parts makers use tools and dies provided by the assemblers and they can ship those any time they want, and they do, depending on their security of supply. Do you have any comments on that?

Ms Mills: I guess from our perspective that relates to the environment which we have in Ontario. When you have a situation where a company may be in jeopardy in terms of being able to deliver a just-in-time product to a larger assembler, that assembler will not wait for a dispute to end, will not wait for some other resolution mechanism to be put in place. He cannot shut down an assembling program for the sake of a bumper part that's not going to arrive on time. He will pick those tools up out of the plant because he owns those tools, he will either move them out of the country or out of the province or he will move them to another site where he can then produce those parts. If that tool leaves this province, the likelihood of that company being able to compete and get that tool back or that business back is not high. The jobs will not be there.

Mr Kwinter: In conversations I've had with some of the people at the automotive parts association, they talk about Bill 40 and the impact that it has because of this very nature. Do you have any ideas of what changes you would suggest should be made to it?

Mr Randy R. Hope (Chatham-Kent): Scrap it.

Ms Mills: Did somebody say, "Scrap it"?

Mr Hope: That's what you guys would say, so I just thought I'd say it for you.

Mr Kwinter: No, I think she said that she wouldn't scrap it, that there were some good parts to it.

Ms Mills: I didn't say it. There are parts within Bill 40 that we have some serious contentious discussions about. If one were to consider scrapping Bill 40, I think we would probably be in a position to start a large argument that wouldn't be productive for business, government or labour. There are parts of Bill 40 that business does agree with.

For an example of a change, what we would like to see is a secret ballot introduced. We would like for companies where there's a petition provided for certification, if it's 55% for the union and 40% against the union and the 40% need to have their voice appropriately heard, a secret ballot might just be the way to do it. There are provisions within Bill 40 that are a red flag for business and a red flag for labour, and I think the argument that was initiated in 1992 has not been assuaged with time. In fact, it has only continued and exacerbated the problems and belief that business has that Ontario isn't a good place to invest.

ONTARIO CONFEDERATION OF UNIVERSITY FACULTY ASSOCIATIONS

The Chair: The next presentation this afternoon is by the Ontario Confederation of University Faculty Associations. Make yourselves comfortable, please, and identify yourselves for the purposes of the committee members and Hansard.

Dr Emily Carasco: My name is Emily Carasco. I am the president of the Ontario Confederation of University Faculty Associations, otherwise known as OCUFA. We represent over 11,000 academic staff in Ontario's universities. We're pleased to be before you today during your pre-budget consultations. With me is Ms Marion Perrin, the executive director of OCUFA.

There are two projects currently under way that could severely undermine post-secondary education in this province, and it is on those two projects that I'm going to focus my remarks today. We very much want to ensure that this committee is aware of the potential negative consequences of these two projects, the direction that they are proceeding in right now.

The first of these is the Ontario Council on University Affairs review of the way in which Ontario's universities are funded. This review is under way at the request of the Minister of Education and Training. The second potential disaster for us is the discussion paper put forward by the federal Minister of Human Resources Development inaccurately, from our point of view, entitled Improving Social Security in Canada. It is with a sense of irony that we note that the Ontario Minister of Education and Training has publicly declared his opposition to the proposals of the federal minister because of the dire consequences for post-secondary education in Ontario. However, if the Ontario minister accepts the dominant thinking of his own advisory body, OCUA, it may result in similar harm to the universities of this province.

Let me begin with the OCUA review. It was in November 1993 that the Minister of Education and Training asked OCUA, the advisory body to the ministry, to conduct a review of the way in which Ontario's universities are funded. We, OCUFA, the Ontario Confederation of University Faculty Associations, have responded to the discussion papers that were put out by OCUA, the council, and we have attached to our brief today a copy of our brief to OCUA. I'm not going to go into it in too much detail but I do want to express some of the concerns that we have about both OCUA's discussion papers and the potential harm if they proceed with the models that they have suggested in their discussion paper.

The council, OCUA, put out both a discussion paper and a number of research papers. In their discussion paper and the research papers that accompanied it, they paint a picture that does disservice to the ways in which universities have been extraordinarily responsive to public policy in spite of a declining government commitment characterized by steady declines in per-student funding levels.

Council's documents suggest that universities should be instruments of government in order to fulfil public policy objectives. We have pointed out that universities fulfil their unique and critically important role in society precisely because universities are not instruments of government. Council's documents also postulate an artificial separation between teaching, research and community service, thus portraying the nature of academic work quite differently from the way in which it is conceptualized and practised by the faculty of Ontario's universities.

In the last part of council's discussion paper they put forward three possible funding models. It's important to note that in the entire discussion paper there was no analysis of the current funding model that is used and no attempt to point out too the disadvantages and advantages of that model. They went on to propose three possible future funding models: A, B and C.

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Model A calls for a modified version of the existing funding formula, a modified corridor system. To this degree, given that it is a modification of the current system, the essential advantages of the current corridor system would be retained. The critical advantage of this model lies in its predictability of outcomes. The model also provides reasonably equitable allocations across Ontario's universities. Our concern about model A revolves around the lack of precision in the discussion paper of the proposed modification to model A. OCUFA could only support modifications which demonstrate clearly an improved version of the current funding model without sacrificing the essential advantages of the corridor system.

The second model proposed, model B, is also a modification of the existing formula, but this one suggests an enrolment-sensitive system. The discussion paper fails to demonstrate precisely how model B would improve the current corridor system, nor does it adequately address the critical disadvantages of such a model.

Universities require stable, predictable funding to sustain long-term planning. Enrolment-driven funding models make institutions vulnerable to short-term shifts in enrolments at both the undergraduate and graduate levels. Such short-term shifts would undermine rational planning, which in turn undermines quality. Moreover, of course, programs have variable costs. Many expensive programs can be relatively unpopular, as measured by enrolment alone.

The third model proposed by OCUA, the one that gave rise to the greatest concern, model C, is a means of funding universities through the purchase of services which, if chosen by the government of the day as the way to fund this province's universities, would fundamentally alter the very nature of the university itself and would be detrimental to the future of university education in this province.

We have appeared before you in the past, as recently as in your last set of hearings in 1994, and have argued in favour of accountability by Ontario universities to the broader community for all the funds that the universities receive. Those who are in favour of the purchase-of-service model, which is model C, would argue that this improves accountability. That is not necessarily the case. If the government begins purchasing on a short-term basis specific programs and courses, specific research and specific community services, universities will become more directly agents of the government. A purchase-of-service model would, in the guise of making universities accountable, undermine the independence of the professoriate and, most critically, undermine the independence of students and graduates.

I should say that we in no way accept the underlying assumption of model C that one can in fact separate research, teaching and community service in the way it is proposed in model C. The purchase-of-service model would create a two-tiered, perhaps even a three-tiered, university system in Ontario. At the top would be the research-intensive institutions. The rest would have their research capacity sacrificed to their teaching missions. As the province moves to destream the secondary school system, model C would achieve the opposite result in the post-secondary system.

We are greatly concerned about the council's funding model C, because there is a danger that this could be viewed as a solution to funding the universities in the absence of adequate funding; that is, the government, which most probably would be the largest single contractor of university services, would simply not contract for very many, thus thinking that the Ontario university system could get along with less money. We think that such an attempt would be doomed to failure as the university system would be so decimated as to be incapable of providing any services.

Why would the Ontario government contemplate such mammoth cuts to the province's university system? This concern that we have is of course closely connected with the second project currently under way that could jeopardize the future of universities in this province, and that is the federal government's ill-considered and very badly-thought-out threat to eliminate the cash transfer portion of EPF contributions to post-secondary education.

According to the Ontario Minister of Education and Training, if the cash transfer portion of the post-secondary component of EPF is entirely phased out in 1996-97, the reduction in federal transfers to Ontario would be $700 million. If the province passed the full reduction on to the universities, it would be withholding the equivalent of operating grants currently paid to York University, the University of Ottawa and the University of Toronto. If the province passed the full reduction on to the colleges, it would mean withdrawing almost all provincial operating grants from them.

It is unacceptable that the cost of funding our public universities should be shifted to students. Such a shift in funding resources would severely reduce accessibility. This has repercussions throughout the education system. According to the recently released Royal Commission on Learning's report, "Every increase in tuition fees is an incentive for kids from less affluent families to consider dropping out of high school." Such a funding shift, that is, a shift on to students' shoulders, would also further privatize what should be a publicly funded university system.

Both the federal government and the Ontario government have advocated the use of income-contingent loan repayment plans as a way of offsetting increases in tuition fees. We strongly disagree with this approach. An income-sensitive system of repayment would be relatively progressive only if two provisions were ensured: that is, that the absolute size of the debt were to be minimized and that there would be no accrual of interest during either the period of study or of repayment. Ensuring these provisions would entail both a substantial ongoing cost to government in interest subsidies and continued restraint on tuition fee levels. Clearly, neither of these provisions are a part of the federal government's model.

We've been told repeatedly that income-contingent loan repayment plans are a progressive direction to move into. They may in fact be very much the opposite of that. Since it takes people earning less longer to pay off the debt, they will end up paying off greater interest charges and consequently a greater total amount than the people who can pay their loans back sooner. The end result is that the very people who would accrue a greater personal return on their educational investment will end up having their education cost them less than those who find themselves in a less secure financial position.

Since post-secondary education plays a great role in decreasing the gap between those who have and those who have not, going in the direction of income-contingent loan repayment programs would greatly discourage those who come from less affluent backgrounds because they would end up paying their loans over a longer period and thus paying a greater amount.

Universities make large primary economic contributions to the economy by the provision of high-quality, accessible education and advanced training. Universities are also major employers, making a substantial economic contribution to the national, provincial and local economies. Recent studies have provided evidence that there are tremendous returns on university investment. Taking into account the investment one has both in terms of income from those who graduate as well as tax returns, the government gets its investment back in two forms and in impressive amounts.

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We told you at the outset of our remarks that we view both the Ontario government's funding review exercise and the federal government's social security review as potential threats to the future of Ontario's universities. You should note that we are not alone in this assessment. The degree of consensus displayed by the groups that appeared before OCUA during their hearings, groups both from within the university and from the larger community, was remarkable.

Opposition to model C, the services model, and support for the continued autonomy of universities to educate the broadest possible population and engage in research on the frontiers of knowledge mobilized university communities. The threat of government intervention prompted community leaders to evaluate the contributions of universities to their communities, and the results were striking. There was a groundswell of support for universities from leaders of business, labour, local government and local community groups.

It would seem from both of these projects that both the provincial and the federal governments are evading their responsibilities and trying to avoid making decisions that are politically unpalatable. Both the Minister of Education and Training in Ontario and the Minister of Human Resources Development in Ottawa would like you to believe that it is possible to educate most students with less resources and no reduction in quality. This cannot be done.

Regardless of what the federal government decides to do with respect to transfer payments, at both the federal and provincial levels our political leaders have three choices: They can choose to fund the university system properly, they can choose to restrict funding and restrict access to universities or they can choose to fund a lower quality of education for a larger number of students. We believe that neither of the latter two options is palatable to us, to the citizens of Ontario or to the citizens of Canada. It is up to governments to justify their decisions.

We urge the standing committee on finance and economic affairs to be vigilant with us to ensure the preservation of education and scholarship in our universities.

Mr Malkowski: Thank you for your presentation. I appreciate your information. You mention model C, which you called the Ralph Klein model. You might be interested to know that that's in The Common Sense Revolution, the philosophy of the Tory party, if you read that carefully. That's just for your information.

I just want to talk about the federal transfer payments. Can you explain how those will have an impact? Can you expand on that, on what the impact of the reduction of federal transfer payments would mean?

Dr Carasco: To some extent that depends on the reaction of the provincial government to the federal reductions. If those cuts are passed on to us in the same amounts, it would have a very negative impact on the university system as a whole. Depending on how that cut is shared out, it will either lead to cutting of some programs or, in the worst possible scenario, closing a university or two. It all depends on what the provincial government's reaction to that is. If they take on the decreased amount and keep the funding levels the same as they are now, then the universities wouldn't feel the impact of it. But the provincial government may not be in a position to do that.

Mr Malkowski: Do you have any specific recommendations as to what we should do if the transfer payments are cut, how to deal with the economic realities to try to maintain a good standard of education and a good quality of education in the province's universities?

Dr Carasco: I can tell you what I hope you will not do, which is increase tuition immediately to make up for the shortfall in cash, which will lead immediately to restricting accessibility to post-secondary education. We would hope the provincial government would continue to regard funding of our universities as an investment in Ontario's future, as opposed to immediately shifting the burden of the public debt on to the students' shoulders and on to the taxpayers, because of course the students get the money from their parents or other sources, and so again it is the taxpayer taking on that debt.

Mrs Karen Haslam (Perth): I would like to just ask a question. We've had the Council of Ontario Universities come in to us and I find it interesting where they say that they are a long-standing supporter of ICRP as a much more progressive and equitable form of student aid for the post-secondary level. They say that a survey of 366 students taken at the University of Toronto found that 63% of decided students were in favour of that, 76% of students supported the implementation of ICRP.

That's almost in direct contradiction to what you're saying, and I wondered if you could explain, because you're saying, "Use of income-contingent loan repayment plans as a way of offsetting increases in tuition fees, we disagree with that." I see some of your reasons that you've put forward. What I'm interested in is the difference between you and the Council of Ontario Universities.

I'd like to slip a second question in here because I'm not going to get time later --

The Chair: There may not be time to answer it either. However, go right ahead.

Mrs Haslam: It says, "Even if the cash transfer portion of what the federal government labels EPF post-secondary transfers were to be eliminated, we would expect the province of Ontario to live up to its obligation to continue funding the universities of this province." So if there is less money coming from the federal government when everyone in here says cut back and worry about the debt, you are again doing the exact opposite in saying, "If the federal government cuts, we expect you to pick up the slack." I'm wondering how we can do that.

Dr Carasco: I'll try, in light of the Chair's comments, to be very brief. I don't know how ICLRP was presented to the group of students at U of T. I don't know if they were told what the threshold payment level was going to be, what the interest charges were going to be, what the overall debt would be.

If you simply say to students, "Well, this plan means that those who have jobs will pay according to how much they earn," that sounds in theory quite fair. It's only when you begin to look at the actual levels of interest and how long it takes to pay and how much you have to borrow in the first place overall -- the assumption is that tuition rises, so the amount you're going to borrow in the very first place is quite high, much higher than it would be if you borrowed today with current tuition levels.

Unless the students have all of the information in terms of what it would cost them, I'm not sure I would take that study too seriously. I don't know how COU presented it. All we are saying is, theoretically it works. If you don't have all this other information it sounds good, but we've pointed out in our brief exactly what we'd like to know before we could support something like that.

As to the second remark, it's a question of how you regard education. If you see it as we see it, as an investment in the people of this province, in which the province gets four or five times the amount it invests in every dollar in education, then we don't see any contradiction between saying continue to invest in the people of the province.

Mrs Haslam: Versus where else you get it from.

Mr Kwinter: I listened with interest to your presentation. One of things that I think everybody will agree with is that the overriding theme of everybody who has come before this committee has been that we have to do something about the debt and the deficit. I don't think there's anybody who has come forward so far and said, "Forget about the deficit, forget about the debt, let 'er go."

What happens -- and I remember the pre-budget hearings in 1990 when the government was defending its deficit of close to $10 billion at that time and it was preaching Keynesian economics --

The Chair: That would have been 1991, Mr Kwinter.

Mr Kwinter: It was 1991, sorry. They were preaching that you spend in the bad times and you pay it back in the good times.

We are now in a situation that is being perceived as entering the good times. The reality of the situation, if you take a look at the Treasurer's presentation to us, is that the interest rate on the debt is growing faster than the gross domestic product of the province. So if we do nothing, if we maintain the status quo exactly where it is, we get deeper and deeper into debt because the interest rate every year gets greater than the increase in the economy, which means that what we have to do is what everybody is preaching.

We just had the automotive parts association say that we have to do more with less, for less, and everybody has got to deal with that message. Universities are in exactly the same position. I used to be the vice-president of a post-secondary school institution and I had a lot of dealings with OCUFA, and I am saying to you that what has to happen is you can't use the old parameters of saying: "We've got to have more money. We've got to have at least the same amount of money because if we don't all of these things are going to happen." You have to go back and look at how you're doing things and you've got to do it better and cheaper. It isn't a matter of choice; you have no choice.

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I am saying to you that it doesn't matter what government gets elected, they are going to be confronted with that exact same problem: How are we going to get the deficit under control? The only way is that we've got to be able to reduce our annual deficit, and the only way we can do that is by constraint. That doesn't necessarily mean that you have to have a serious meltdown in the institution; it means there has to be a commitment on everybody who is involved to take a look at it and say: "Okay, these are the facts. This is what we have to do and we all have to be part of it. How are we going to do it?" I'd like to get your response to that.

Dr Carasco: I would start out by pointing out that in fact universities have been doing more with less for a while now, pretty much all the time that I've been teaching. The number of students has increased; the amount of resources has decreased. The ratio of faculty to student has increased and each faculty member is teaching many more students.

All of this inevitably is going to impact on quality and that's something you have to keep in mind when we're talking about post-secondary education. If it's just a question of continuing to turn out graduates and we don't care about the quality of education, then we can keep going at the rate we are going. But we are beginning right now to see the negative impact of the last 10 years or so of this increasing doing more with less. So it isn't as if universities have not been doing their share in recent years.

In terms of the debt, of course it's a serious problem, and nobody in the post-secondary sector says that it isn't. But we're asking you to not look at university education, post-secondary education, in isolation from the rest of the economy. If it is important to our economy to have a well-educated, well-trained workforce, then universities have to continue to be able to do the work they have been doing.

They've got to respond to the very rapid changes in our society, which means that some of the things we did in the past are no longer as relevant and we've got to offer new programs and do things in different ways. Technology has brought on its own share of expenses and new ways of doing things in universities. If the university is going to continue to play the important role that it has always played in the economy, then we cannot afford to underfund universities.

The Chair: Thank you.

Mr Kwinter: Do I have another minute?

The Chair: Well, you've actually used more than your four minutes, and everyone has so far, so I'd like to proceed, if I may.

Mr Carr: Thank you very much for your presentation. I'd like to follow up on the same line as Monte as well in this regard.

The Minister of Finance sat in that seat on Monday -- the very seat you're sitting in now as a matter of fact -- and said that when the social contract ends there is no new money going to be coming into the system, notwithstanding what happens with the federal government in cutting transfers and with you having said you want no tuition increases. When the social contract ends -- and he was very honest and has said this before -- the money that was taken out during the social contract is not coming back into the system.

Assuming the federal government doesn't do anything, and you've talked about what happens, with no tuition increases -- very clearly your membership has been rolled back or frozen, and now they're going to be asked -- unless there's some other place to find money with no tuition increases, what do you see happening when the social contract ends and what is your membership feeling, knowing the realities of what I just outlined to you, what the potential is when the social contract ends? Can you tell us what's happening and what is your membership feeling?

Dr Carasco: Given the nature of academics, I'm not sure that I can tell you all of the different potential responses to that. Let me start out by saying that we have in fact lost considerable numbers and what we're seeing more and more happening in universities is that work is being farmed out to what we refer to as sessionals, people who just come in to teach individual courses, as opposed to full-time academics, which again has an impact on quality of education, not only because they may not be as well trained as the full-time academics -- which is sometimes the case, but not always -- but also because they're not there, involved in the university on an ongoing basis, there for the students, there to do research etc. So we already have less numbers to deal with the larger numbers of students.

In terms of there not being more money in the system, I think everybody understands that at least for the foreseeable future, that's certainly the direction the province has got to go in. What we're hoping is that we're not going to see less money, which would mean either not being able to offer certain programs or offering a poor-quality education. What we're hoping is that the government will not assume that you can continue to provide good-quality education with less money. If we're going to come right out and say, "Let's put a lid on the number of students so we can continue to offer good-quality education," that would be more honest in terms of dealing with the population of Ontario. Tell them that you cannot continue to offer good-quality education to greater numbers of students. But that's not something any government has shown its willingness to do.

ONTARIO GOOD ROADS ASSOCIATION

The Chair: The next presentation this afternoon is by the Ontario Good Roads Association. I see there are a number of people coming forward, so I invite you all to make yourselves comfortable.

Mr Len Rach: Good afternoon. We're here today representing the Ontario Good Roads Association. My name is Len Rach, director of planning and engineering from Metropolitan Toronto and president of OGRA. With me this afternoon are Gerry Lalonde, councillor for the township of Cumberland and the first vice-president; Morley Daiter, city administrator, North Bay, and second vice-president; Sheila Richardson, OGRA's executive director; and last but not least, Marian Millman, reeve from the township of Yarmouth and an OGRA director.

For those of you who are unfamiliar with OGRA, let me say that it is a municipal organization representing the roads and transportation concerns of over 750 municipalities across Ontario. Our members range from the large urban regions to the small rural municipalities. Our board is comprised of eight elected representatives and seven senior municipal staff, with due recognition to geographical representation across the province.

We are here this afternoon to offer some comments on the upcoming provincial budget. We know that you will hear many eloquent and valid pleas for funding that must be dealt with from static, if not declining, financial resources. We ask only that you keep in mind that a safe and efficient transportation system allows people and goods to move, school buses and emergency vehicles to travel, and transit systems to operate on our road system. In turn, this surface transportation system is the lifeline to our economic viability as a province.

The municipal road system is comprised of almost 137,000 kilometres. In the fiscal year 1992-93, the road system expanded by 481 kilometres, which is below-average growth, because in the previous years we've experienced an average growth of about 578 kilometres per year.

Most of the system growth is taking place in and around large urban areas such as the greater Toronto area due to new residential-industrial subdivision development. Yet, while the road system expands, it continues to be underfunded and the MTO share of the provincial budget for the delivery of transportation services continues consistently to shrink. For example, from the 1955 to 1965 period, transportation comprised between 26% and 33% of the total provincial budget. In 1993, it represented only 4.5% of the provincial budget.

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In 1993, approximately $730 million was transferred to municipalities by the provincial government. An additional $55 million was provided to municipalities in 1993 under the transportation capital program. This program, which concluded at the end of 1993, was a $2-billion, four-year initiative of the government to improve Ontario's transportation system. Municipal roads received a budget total of $200 million over the four-year program, and many of the projects started with the transportation capital funds will require funding to continue through the 1995 period to be completed. Therefore, it is the municipal roads program that will be required to absorb the costs to complete these major projects through its regular budget.

I wish to comment for a moment on the Canada-Ontario infrastructure works program. OGRA is very pleased that the provincial government participated in this program. The contribution of the three partners of approximately $722 million each allowed much-needed infrastructure rehabilitation projects to proceed, in addition to creating almost 25,000 jobs. We were gratified to read in recent reports that roads, bridges, water and sewer projects in Ontario received just over 50% of the allocated funds. We also appreciate the support of the provincial government on the need for municipal flexibility to make amendments to approved programs without the need for formal approval. Municipalities are certainly qualified to reallocate funds among approved projects where there is minor overspending or underspending.

We understand that the Treasurer has announced that 1995-96 transfer payments to municipalities will be maintained at existing levels. We are relieved that these transfer payments will not be reduced, but at the same time we remain disappointed that our expanding transportation system continues to be underfunded. What remains, of course, is to hear from the Minister of Transportation concerning road allocations. Municipalities need that information in January or February each year, and we are requesting that the ministry announcement be made immediately so that municipalities can effectively implement the planned construction before the end of the year.

It seems appropriate at this point to restate an issue of critical importance to municipalities; that is, the need for more predictability not only in funding levels but also in programs. Municipalities have clearly and consistently called for an end to downloading. The Treasurer has eloquently called on the federal government not to cut into transfers to the provinces, "cuts that would have indirect impact on provincial funding for programs and services." We ask that the same consideration be extended to your municipal partners.

Municipalities recognize the need to govern efficiently and manage resources prudently, and we have taken many steps to do so. What we need now is cooperation and agreement from the government of Ontario. Certainty in transfer payments could be significantly increased if a portion of fuel tax revenues was dedicated to road needs. We recognize that dedicated taxes reduce the availability of funds for those sectors that do not have an obvious source of revenue, but we believe that road needs are the legitimate recipient of these funds. In fact, the government has moved towards dedicated funding for provincial roads with the introduction of tolls on Highway 407.

I wish to discuss briefly the link between transportation investment and economic development.

Investment in transportation infrastructure can provide a critical link in achieving high rates of economic growth fundamental to the economic wellbeing of this province and Canada. For example, improved infrastructure can lower transportation costs, which in turn positively affects the competitiveness of Canadian goods. Chosen and planned carefully, transportation investments can generate time savings and reductions in vehicle operating expenses that result in productivity and safety gains beyond the costs of the initial investment. Studies have shown that retail businesses as well as other sectors of industry and commerce incorporate transportation improvements into their distribution systems and planning. Also, the international community views the combination of a highly skilled labour force and a highly efficient transportation system as an attractive climate for investment.

The current state of our municipal bridges is a prime example of our deteriorating infrastructure and our struggle to provide a safe and efficient transportation system. In 1992, the last time we did a detailed five-year inventory, there were 9,197 inventoried municipal structures in Ontario. Of this, 1,854 were identified as below desired load capacity. We would expect that these numbers may very well increase when an updated appraisal is completed.

Overall, the funds that have been made available to rehabilitate and replace these structures are insufficient to stem the further deterioration of our bridge system. In many cases, decisions are being made to defer preventive maintenance until the bridge requires total replacement. Without any regular maintenance program in force, the average life of a structure is considered to be about 50 years. With a reasonable maintenance program, an additional 30 years of life can be added to its overall life cycle before the bridge structure requires major rebuilding.

To give you a few examples, currently Victoria county has 71 county bridges on local roads that are, on average, 46 1/2 years old, and these require some $10 million to rehabilitate or replace, for which no funds were provided in 1994. Elgin county has 60 bridges, with an immediate need of $19 million for rehabilitation and replacement. In Metropolitan Toronto we have 222 bridges and 68 culverts, which were largely built between 1955 and 1969, and they have an estimated replacement value of approximately $1.8 billion. Almost $30 million annually is being spent on these structures for rehabilitation. However, we've completed a life-cycle analysis, and to avoid structurally unsafe conditions in the future, Metropolitan Toronto requires an additional $7 million annually into its capital program to keep the structures in good working order.

It's clear from these examples that greater contributions are required from the province of Ontario to maintain the existing condition of municipal road structures. The rehabilitation of bridges not only generates many jobs very quickly but will also save considerable money, since maintenance is more cost-effective than replacement.

In a matter related to our funding concerns, OGRA has worked with MTO over the past year to develop streamlined administrative procedures as part of a new funding formula. We remain convinced that a new formula is required, one that is more flexible, less complex and which recognizes efficiency and productivity in municipal road management. We will continue to work with MTO and the other stakeholders to accomplish these changes.

I wish to conclude my remarks by stating that OGRA welcomes the opportunity to participate in your deliberations. We know your task is not an easy one, and we hope we have provided some food for thought. We have tried to highlight the major issues facing Ontario's municipal road systems. We have not come with simply a plea for more funds but with a request for the tools to assist in the ongoing economic recovery of this great province. We ask for your assistance, and we hope that our comments will be useful in your deliberations.

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Mr Phillips: Should the province be considering more toll roads? Is that something the Good Roads group feels is a good approach?

Mr Rach: We're certainly supportive of the province's initiative for requiring the user to pay for the use of Highway 407. We feel that's a good direction to go in.

In terms of municipal application, I really don't see any large applications in the municipal sector for toll roads unless you've got an extensive freeway system built into your area.

Mr Phillips: In terms of helping us with a year-to-year-to-year comparison of funding from the province to your Good Roads Association, can you give us a comparison of the funding that's been coming from the province over, let's say, the last two or three years, just so we get some idea of what we're dealing with here in the budget?

Mr Rach: I believe overall the transfer payments from the province to the municipalities have decreased somewhat. I don't have the exact numbers with me. This is in total. I know the transfers for general construction last year were flat-lined from the year before. There were fewer dollars available for special initiatives, such as the major bridges in the province, for municipalities, or the larger major projects that municipalities undertake.

Mr Phillips: Does any of your funding at all come from the transportation capital corporation? Is there any funding from there, or is this all grants from the Ministry of Transportation?

Mr Rach: I believe it's all grants from the Ministry of Transportation.

Mr Phillips: So you don't participate in the transportation corporation at all.

Mrs Elinor Caplan (Oriole): I want to thank you for an excellent presentation. One of the concerns I have is that I don't think there should be any unrealistic expectations of lots more money being available. If anything, I think people at the municipal, provincial and federal level all recognize that this is a time of restraint and that that period of restraint is going to continue for a long time, just given the deficit and debt situations. We're all aware of that. So I would ask if your association has looked at any opportunities for a reallocation of the dollars that are not being used well, in your evaluation of where the province is spending its money, particularly in your own area. It's always easy to look at somebody else's budget; I'm talking about the area of transportation infrastructure. Are there things they're doing which are not a priority, and they should be doing bridges and those kinds of things first?

Mr Rach: From my perspective, I feel that the transfer of funds between the ministry and the municipality should not have any conditions placed on it. For example, some portion of the funding is what we call earmarked funding to specific initiatives, and I feel very strongly that the municipalities are in a better position to judge where those funds should be allocated, whether it should be for a bridge rehabilitation or a road widening. I think it's best left in their view.

Mr David Johnson: Thank you, Len. It's good to see you again, after a few years' absence from Metro, and the people of Good Roads. I had a very short career with the Good Roads Association back -- when was it? -- in 1992, I guess, or 1993; one of those years back in there.

Ms Sheila Richardson: Just before you got elected.

Mr David Johnson: Just before I got elected here. But I know the concern first hand. I was just looking at the fact that you indicated that there was a transfer from the province to the municipalities of $730 million in 1993, and looking at the revenues for the gasoline tax at about $1.9 billion for that year, and for vehicle driver registration fees of about $725 million, that adds up to about $2.6 billion that came into the province of Ontario through those fees. So if you say that you don't feel you're getting your fair share of the -- is that the kind of thing you're referring to?

Mr Rach: Partly. I think our association has come before this committee, as well as other associations in the past, and asked for a portion of the taxes from the gas tax to be earmarked for transportation. We feel it's more consistent and perhaps much more acceptable to the overall public in recognizing that the taxation from the gas will be going back and improving the transportation system of our province.

Mr David Johnson: I recall in my former capacity as mayor that some of the grants were for maintenance, some of the grants were for capital. I think some of the grants were earmarked -- they had to be -- for a certain project. Does that still happen?

Mr Rach: That's still ongoing. Nothing's changed.

Mr David Johnson: I never could understand why that was so. I don't know if it's politicking or whatever it is, but I agree with you that it doesn't make any sense.

In the bridges in Metropolitan Toronto, you've mentioned a number of bridges. Did you include the Gardiner Expressway among those bridges?

Mr Rach: In that inventory, the Gardiner was included as one structure, one bridge.

Mr David Johnson: That must be about the most expensive bridge in the province of Ontario, I guess, is it?

Mr Rach: I hesitate to tell you what it costs us each year to rehabilitate. We have over $10 million in this year's capital works program for replacing the deck in a portion of the Gardiner.

Mr David Johnson: I know in Metropolitan Toronto there was a program of rehabilitation, resurfacing every few years on roads which would prolong the life. Just as you say you can prolong the life of a bridge, you can prolong the life of a road by resurfacing -- what? -- every seven years, I think it was at one point, which would add to the life of a road. Is that kind of technology in place or is it able to be in place with the funding across the province of Ontario?

Mr Rach: The technology in terms of rehabilitation and life-cycle analyses is in place with all the municipal organizations and they're fairly well recognized right across the province. The unfortunate part is that Metropolitan Toronto is like any other municipality, and we all share that in the same boat where we don't have enough funding to undertake the proper rehabilitation of our existing infrastructure. You can take Metro Toronto's situation. We have a backlog of rehabilitation in roads and bridges of over $50 million right now. Over $40 million is required for road reconstruction alone, and basically we don't have the money in our capital program.

Mr David Johnson: What does that say about the safety of bridges?

The Chair: Thank you, Mr Johnson. We have to proceed.

Mr Malkowski: Thank you to the presenters. It was a very good, comprehensive presentation by the Ontario Good Roads Association. I want to congratulate you on coming forward today.

Talking a little bit about our provincial commitment to the continuance and maintenance of a good system of roads in this province, albeit through our infrastructure program, and we're happy to participate in that, I believe we've been one of the leaders, in terms of jurisdictions, working with municipalities and now with the federal government to ensure that we have a good road system. Coming from the borough of East York, I know that they have also received some funds and have done well under that.

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Moving along, I want to talk a little bit about specifically what you said, that you were relieved to hear that the Minister of Finance has announced good news, that he won't reduce, but at the same time you're saying you've a little bit disappointed that you haven't heard yet from the Minister of Transportation in terms of a commitment. I am happy to tell you that in point of fact, part of the process here today and the feedback today on budget consultation is to hear from you and pass on information. My understanding is that the Minister of Transportation will be making a good news announcement, probably at the end of February, and that would probably go a long way to alleviating some of your concerns. We are more than happy to pass on what we've heard today to the Minister of Transportation, but I'm sure the good news announcements are coming.

In terms of the budget itself, I wanted to say that in terms of your comments to the federal Liberal government, it is presently set with its own federal budget. What do you foresee as possible impacts to you if they are to cut, even though we as a province are committed to going ahead with the projects and the commitments that we have? I'm wondering, in your comments, how much damage or impact would happen if we were to be cut back by the federal Liberal government. Can you talk a little bit about that?

Mr Rach: That's certainly a loaded question. If the federal government cuts back on the transfer payments to the provinces, I am relatively certain that the municipalities will probably be next on the list. In the end, it's the taxpayers who will be asked to bear the additional burden. It comes right down to the grass roots of the individual taxpayer in each and every local community.

Mr Malkowski: We join with you in your struggle and your concerns. We want to ensure that we continue to receive good transfer payments and a level of funding for the good programs that we work together on. Thank you for your comments.

Mr Sutherland: I guess this issue may be more appropriately addressed to AMO. Every year I get comments from my local municipal politicians who are concerned about the transfer announcement about the road subsidies because our municipalities operate their financial year on the calendar year, and of course the government and just about every other transfer payment agency operates on a fiscal year of April 1 to March 31. I guess my question is, has your organization given any consideration to moving the fiscal year to April 1 to March 31 to coincide and make it easier for everybody, from our perspective anyway?

Mr Rach: Can I deflect that question for a response to my municipal councillors?

Mr David Johnson: It doesn't help you in roadbuilding anyway.

Mr Sutherland: If you don't want to answer it, that's fine.

Mr Rach: Really it comes down to, the key issue is if we can both work together and develop a system whereby the municipalities can be assured of the transfer payments in January and February so that we can effectively plan a reasonable construction program. You have to appreciate that the construction program in this province isn't very long.

Mr Sutherland: Yes, that's right.

Mr Rach: I think we have two seasons now: construction and winter.

ONTARIO ASSOCIATION OF NON-PROFIT HOMES AND SERVICES FOR SENIORS

The Chair: The next presentation this afternoon is by the Ontario Association of Non-Profit Homes and Services for Seniors. Please identify yourselves for the purposes of Hansard and the committee members.

Mr Kevin Mercer: I am Kevin Mercer, president of OANHSS, and with me today is Michael Klejman, executive director. It is a pleasure to appear before you again this year to speak from the perspective of non-profit providers of services to the rapidly growing elderly population of Ontario.

I point out to you that you have in your package copies of my speaking notes and Michael Klejman's speaking notes, and you also have a copy of our complete submission, so if you wish to follow along, you can.

The Ontario Association of Non-Profit Homes and Services for Seniors celebrated in 1994 its 75th anniversary of representing non-profit organizations serving over 10% of Ontario's elderly population. Our members include charitable corporations and municipalities which provide facility care, housing services and community outreach for seniors.

Nearly 500 members who are in the long-term care field feel strongly that fiscal decisions taken by governments must take into account the short- and long-term effects of their efforts to control the deficit or to stimulate the economy. Much has been said publicly about the projected growth of the elderly population in Ontario in the next 30 years.

The projected increase to over 20% by 2020 has frightened many economists and politicians. That demographic fact alone has triggered much in terms of legislative and fiscal initiatives in Ontario and in other jurisdictions. Much of the restructuring and redirecting of services to seniors is premised on the assumption that the current ways of providing service delivery to seniors when they comprise over 20% of the population would bankrupt the province. It is this belief that has brought about the removal of both the facility-based care and more recently home care from the Ontario health insurance plan. It is also behind the philosophical shift away from the principle of universality of supports, both fiscal and health, for the elderly. We believe that these two premises, and policies based on them, will result in a disastrous situation in the next 20 years.

Not much information exists today about the impact of changing lifestyles and buildup of retirement income among the baby-boomer generation and how it will affect the health and financial status of the elderly in 20 years and the demand for publicly funded health and long-term care.

In the meantime, we are witnessing the gradual dismantling of parts of the long-term care system in Ontario. I should clarify that we agree with the need to rationalize, eliminate duplication and simplify access for those needing long-term care. But we are appalled to see the homes for the aged, that have been the flagship and models for development of care, forced in the past five years to continuing staff cuts and elimination of the critical quality-of-life programs while being forced to sign contractual agreements committing them to meet provincial care standards.

Community organizations that have over decades developed comprehensive programs that support independence of seniors, but are also able to provide intensive care if required, are now facing dismemberment so the multiservice agencies can be created. Overriding all this is the impact of policies and regulations on the ability of non-profit service providers, whose mission is to serve their fellow citizens, not to generate profit. Our members cannot function while caught in the vicelike squeeze between continually reduced or frozen funding while demands for meeting standards, workplace safety, pay equity, arbitration rulings, fixed operating costs and levels of care needed by consumers of service are all increasing.

I would like to set out for you some key principles we want this committee, the Legislature and the government to seriously consider while the budget for the coming year is developed, regardless of which party's responsibility this turns out to be.

We would like to recommend, first of all, as a principle a moratorium on any measures that contribute to increased operating costs without directly improving the quality of services to be imposed. This includes suspension of legislation that has not yet been proclaimed and temporarily disabling of elements of existing legislation.

Secondly, a Premier's council should be set up to review both existing and planned legislation. This council should include representation from provider, employer and consumer representatives and be structured according to the main sectors of the broader public sector. This measure may enable us to move out of the social contract era in an orderly manner.

Thirdly, a sectoral review structure should be set up immediately for the Minister of Health at the deputy minister level to review current policy provisions that have direct impact on cost while no direct quality-of-service benefits. This review would have a specific target of identifying what policies can be changed or eliminated and be translated into direct financial benefit to transfer payment agencies without increasing the level of provincial funding. For example, long-term-care facilities are not permitted to accrue funds to cover labour-related costs. Specifically, it takes up to three years to reach a contractual arrangement, but the Ministry of Health permits accrual for only 30 days.

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Fourthly, the government must open up the dialogue on the issue of devolution and creation of special-purpose bodies. There are many cases of partnership between the province, as a regulator and partial funder, and earlier efforts to rationalize these arrangements that have either failed or seem never-ending. They also lacked openness and inclusiveness.

Finally, a commission be set up to study and recommend a direction with respect to the universality of public services. Specific focus should be on health and address the matter of user fees to ensure fairness, affordability and access to services.

I would now like to ask Michael Klejman, executive director of our association, to highlight the content of our specific submission, which you have.

Mr Michael Klejman: I would like to review with you about four of the key points in our submission, which are also outlined in the document before you.

The first area I would like to address is continuum of care. Much of the provision of services to seniors is based on the concept of continuum of care. This philosophy aims to provide a common environment, continuance of staff and systems to minimize confusion and disorientation. This concept applies to both community and facility programs.

The policy direction and legislative changes in Bills 101 and 173 are creating a system that will be fragmented, with tremendous division between facility programs and community supports. Instead of flexibility and creativity, we are facing a rigid system marked by rules and procedures with little room for innovation.

The second area, in-home care; is it cheaper? There is universal support for a significant expansion of in-home services. An argument has been advanced in the past that the in-home care offered financial as well other benefits. The recently released draft manual for the delivery of in-home services suggests that there will be two levels of in-home services with per diems of $115 and $216 for basic and enhanced services, respectively. By comparison, the Ministry of Health has set the funding average per diem for facilities at $79.61, of which the consumer pays on the average $33. I would just note that most recently, the ministry's preliminary figures for the second half of 1993 show that homes for the aged have been spending on average almost $84 per day per resident. You can see the difference between the subsidized or recognized cost and the actual expenditures incurred by these facilities.

Third area, service priorities, service measures and an outcome-driven approach to funding: A year ago, we brought to the committee's attention the varying funding levels. It may be worth repeating that it costs about $300 a day for a young offender, adult penal institutions' per diems are between $118 and $131, while schedule 1 facilities for people with developmental disabilities have per diems of $241.

We are asking, what are the service priorities and how are they developed and monitored? What service outcome measures are used to determine whether these funds are well used? Has an effort been made to define expected outcomes which then could drive the various systems and directly affect funding provisions and decisions? We believe that such an approach would bring a more equitable process of allocating public funds.

Fourth area, service thresholds: We advance, as a fundamental principle to the success of long-term-care reform, the concept of service thresholds. These thresholds, based on a set of criteria that would consider consumer preference, cost-benefit, quality of life, health and safety and service management, would indicate the most appropriate service option. The setting of these thresholds would permit measurements of program affordability and decisions as to which program or service specifically is most appropriate for each individual in need of assistance.

Finally, support for non-profit services: The ratio between for-profit and not-for-profit facilities continues to tilt in favour of the for-profit sector in Ontario. This is in spite of the avowed preference by successive Ontario governments to prefer the non-profit system for delivery of services to vulnerable populations.

The loss of more than 4,300 beds in the past few years and the total flexibility the legislation gives the province to remove home-for-the-aged beds from the system, which clearly contrasts with the full protection given to nursing home beds from similar actions, are but two examples of the reality. The most glaring is the fact that all nursing home beds are guaranteed funding at a staffing level of 2.25 hours per resident-day regardless of the actual care requirements as determined by the annual resident classification activity that is carried out by the province. Meanwhile, non-red-circled homes for the aged are funded strictly on the basis of the classification outcomes.

I'd like to draw your attention to page 12 of our full submission, which contains recommendations in addition to those stated by Kevin in the opening remarks. These recommendations, which I'd like to read to you now, pertain specifically to health services and long-term care.

First, we recommend that the 1995-96 budget priorities balance the needs of the client, consumer choice, overall service outcomes, the degree to which particular service packages meet all the client needs, and comparative affordability.

Second, we recommend that the province develop information with respect to service need projections and an accompanying outcomes-based cost analysis of its current initiatives. This analysis should be conducted prior to any further changes in the system.

Third, we recommend that the province review the policy which prevents consideration of assets when determining the ability to pay for services, specifically in long-term-care facilities.

Fourth, we recommend the establishment of a realistic but flexible threshold for the delivery of community services based on fiscal, quality-of-life -- that includes consumer choice, and health and safety considerations -- and service management factors. The threshold would define the point at which a senior's needs would be better served by a different service provider. We further suggest that the absence of such a service delivery threshold will result in increased risk to consumers and reduced cost-effectiveness to the system.

Fifth, we recommend that the province take immediate action to stop any further erosion of the not-for-profit sector.

Finally, we recommend that the distinctions among the various community services covered by Bill 173 be reviewed so that the historical capacity for flexibility, innovation in program delivery and design, and service efficiency not be lost.

Mr Carr: Thank you very much for your presentation. It's nice to see you again. I've sat on this committee for a few years now and it feels like old home week when people come through again. I must be getting old: I'm recognizing people as they come through for the second and third time. But thank you, it was a tremendous presentation.

I want to turn to page 10 of your submission, where you talk about the commitment to volunteers. You say, "Despite verbal commitments to the importance of the voluntary sector, the role of volunteers in the provision of long-term-care services has been virtually ignored by the province during the reform." You go on to talk about how "Bill 101 and Bill 173 fail to recognize the essential role of governance and service volunteers in services offered by municipal and charitable homes for the aged...."

As you know, during this debate -- and I actually read your submission during the Bill 173 debate -- I watched in the House when the government and the minister stood up every day and said: "No, that isn't the case. That isn't what is happening." How come we can have this difference of opinion between the service providers like yourself, who are saying this is what will happen, and the government? You heard it. I think even the Premier stood up in some of the discussions and said, "No, that is not what is going to happen with this bill." Would you like to discuss why? How can the public on the one hand listen to the service providers like yourself saying volunteers are going to die, including the Red Cross and the VON, and how can members of the government stand up and say, "No, that's not the case"? What's happening here?

Mr Mercer: It's our sense that there's a culture within the community sector, within the provision of community services and certainly the members we represent, that there's been a cadre of voluntary support that's been cultivated over the years. Clearly, it's our evaluation and the evaluation of the people we worked with in terms of preparing our brief for Bill 173 that that element was ignored by the government in terms of the drafting of the legislation.

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It's our sense that the structures envisioned by the government will not take into consideration the culture at a community level that has cultivated that sense of voluntary support, that the creation of agencies as envisioned in the legislation nullifies the kind of fostering and development that has been developed by charitable organizations and voluntary organizations in the community. Clearly, they came forward and expressed that as well. There are other jurisdictions where the experience has already been noted. In Quebec, for example, a task force report was developed, evaluating structures that were very much similar to the MSA structure, and noted the negative effect on volunteerism. So it's our belief that it hasn't been given enough priority in the evaluation of Bill 173 and its impact on communities.

Mr Klejman: If I may pick up on another element of it -- and we don't doubt the commitment and belief of anyone in the House who stands up and says that the belief in the importance of volunteers is there -- where we see the difficulty is in our interpretation of what legislation, regulations and then emanating policies do to boards of directors, how they impose straitjackets on them in terms of their ability to manage programs and feel fully accountable to them. They don't feel that their role is to simply march to the orders issued from bureaucrats at Queen's Park and administer programs that have been conceived in an ivory tower. There is a sense of their knowledge of what the community needs, how the community needs those services, and they are trying to respond to those needs in their ways, in their understanding, and that is where the new legislation makes it more and more difficult.

Mr Carr: On page 7, the word that struck me was very powerful. You said, to date, long-term-care reform has had a "devastating" impact on the residents and their families. Could you expand on what you mean by "devastating," and what's happening?

Mr Klejman: Sometimes use of certain words triggers questions or a reaction. I'm not sure if we intended to ring great bells of alarm, but we have noted that there has been a confusion, particularly among facility residents in the last two years. The way in which their fees are determined has changed at least twice. They were notified once about how their fees would be determined, then that was changed.

They are now being told that, for many of them after a lifetime of never declaring any income tax, they have to file an annual return before their income can be determined to establish their rate of contribution. Why? Bureaucracy forces 75-, 85-, 95-year-old seniors to file annual income tax just for the purpose of using that as a mechanism for determining their fee. We don't understand, because it's not necessary. There are other ways of doing it.

Families are confused because many of the families of these residents have seen loss of service. Many of the homes for the aged have been laying off staff for the last four and five years. It may not have been in great numbers, but it's been a gradual, steady reduction of services, as they have been frozen, their funding has been capped and red-circled now for five years.

Mr Carr: Thank you very much. Good luck.

Mr Malkowski: Thank you for your presentation. In terms of your comments regarding long-term care, there seem to be some inconsistencies with what I've heard specifically from constituents in York East, and my constituency has a high population of seniors. We also heard from the seniors' alliance during the committee hearings on Bill 173; they were very clearly in support of the MSA model. Also, the report they had done by Price Waterhouse talked about cost-effectiveness in terms of being able to save millions of dollars and reduce the duplication of services.

I am surprised that you didn't talk about the potential things that could be done in terms of how to save money and still at the same time minimize the impact and maintain the level of services. So I would disagree with the comments when you were talking about what the impact would be to service providers.

I would like to ask you, and actually it's perhaps a bit of a challenge, if you could give some specific recommendations for us to consider in terms of being able to cost-save and yet be creative, because the government has spent over $600 million to look at community-based long-term care. As well, with Jobs Ontario Homes projects, there has been an increase in non-profit housing projects that seniors have received. Perhaps you'd like to comment on those: the government initiatives focusing on community initiatives, and Jobs Ontario Homes.

Mr Mercer: I would simply point out that within our brief there are a number of recommendations that we believe will improve the efficiency of delivery of services. In particular, we'd emphasize that our association and our members have always supported a continuum-of-care philosophy which sees community support being provided, through to housing, through to homes-for-the-aged services. We believe there are significant economies to be achieved in applying that kind of model within our communities.

Unfortunately, we see that with the legislation and the policies that emanate from Bill 101 and also from Bill 173 there is a fragmentation of the long-term-care sector. Clearly there's a recognition of a community sector versus an institutional sector, and homes for the aged have been lumped into the institutional sector. We've always considered ourselves to be part of the community in that regard and part of a continuum of care. We believe that's where the efficiencies can be achieved and that's where consumer choice is also preserved.

In terms of the Price Waterhouse study, it's my recollection that the study was withdrawn, that it was seen as being deficient in its analysis. Certainly that was our evaluation, that it was markedly deficient.

Mr Klejman: If I may add a comment with respect to the Jobs Ontario, Homes Now effort, it is my understanding that the majority of allocations did not go towards seniors. We agree that there are other vulnerable populations that require such support, but there was a distinct policy within the Ministry of Housing to prioritize seniors and seniors' need for housing at the bottom of the ladder.

Mr Sutherland: The long-term-care debate about the volunteers: I looked at my own community and tried to find a similar model, and I would say that if you look at children's aid societies, they have lots of volunteers; the one in mine has I think over 250 volunteers. So if you're looking at a community board covering a larger area than an individual institution, those people are still volunteering.

My one other comment -- food for thought -- is that we've just had a report from the Royal Commission on Learning which talks about ensuring consistency around the province in terms of standards etc. I wonder if there isn't a parallel for delivery of long-term-care services with that.

Mr Klejman: The consistency of standards is critical in any sector where public funds are expended, and we know that funds are limited. We support that concept. The development of standards, though, ought to involve those who use the services, those who provide services and those who pay for services. It was not our experience, in the development of the facility programs manual, that we were there at the time the manual was developed. We have no quarrel with the concept; we want to be a part of the process.

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Mrs Caplan: Nice to see you again. I'm very aware, as you know, of the important contribution that your organization and the facilities you represent play in providing important care as part of long-term care for the people of the province.

I'm concerned and distressed to hear that you weren't a part of consultation for the development of standards. I was a little concerned when I first saw and heard your presentation because I interpreted it to mean that you didn't support the development of standards against which outcomes could be evaluated. I'm pleased to hear that in fact you do support the development of standards and want to be a part of that. I believe that's extremely important and that you should be a part of that. I'm wondering if you had any information from the ministry about why you were left out of the development of those standards.

Mr Klejman: The process was twofold: first, the writing of the manual, and then the time frame for actually looking at and dealing with critical sections. In some cases it was a matter of a two-hour meeting, and we do not consider that an open, consultative process.

Mrs Caplan: My own view is that long-term-care reform is essential, the development of a system. You're aware, and probably very few people watching these proceedings but most of those around the table would know, that what we've had until now really has been patchwork, where there has been no consistency and no way to evaluate whether people were getting the care they really did need at a reasonable price for the care they were getting. I'm pleased to see that one of your guiding principles is that there's support for the kind of outcome review and that there should be the test of quality and affordability in determining the development of a new system.

I heard you say that you don't consider yourselves part of the institutional sector, and yet the services your agencies provide are all inpatient; I know some of them have day centres where people come just for the day. Do you differentiate between the inpatient or those whose homes are in your facilities, the homes for the aged where people actually move in and that becomes their home, and your day hospital activity? Is that where you think the link is? I'm not sure why you wouldn't consider yourself an institution.

Mr Mercer: In terms of the history and the evolution of homes for the aged in Ontario, we started out as predominantly residential care facilities. I think in many respects that has been a benefit to our organization and to our members in that we subscribe to predominantly a social model of care provision. That's pervasive in the attitudes of the staff in the organization and in terms of the evolution and development of the programs.

Mrs Caplan: To be fair, when people decide to go into a home for the aged they feel they're entering an institutional environment. Isn't that true?

Mr Mercer: I would say that we have changed dramatically the physical structure of our facilities and the methods by which we provide care, so no, we have minimized the amount of institutional feel that people truly experience when they come to a home for the aged.

There's no doubt that within the continuum of services a home for the aged is not the first option that people will look for when they require care, and we've always supported that. It's been the mandate of the staff in facilities providing the continuum of services that we help clients find the most appropriate level of service, be that in the community or be that a part of our short-stay programs and a combination of community services. We're very much a part, and have been the pioneers in many respects, of many of the community services that are in place today. Home support in many areas of the province has been pioneered by homes for the aged in those areas and is continuing to be provided by those facilities.

Mrs Caplan: It's been my view that people should have the opportunity to remain in their homes for as long as possible if that was their wish.

Mr Mercer: Our view as well.

Mrs Caplan: I just wanted to make sure we still agreed on that.

Mr Mercer: Because of that, because people are staying at home much longer, what we're seeing is that the average age of admission for the facility-like services is much higher. The average age of admission is 85, whereas 15 years ago it was probably 10 years less than that.

ONTARIO NURSES' ASSOCIATION

The Chair: The next presentation this afternoon is by the Ontario Nurses' Association. If all those representing the association would come forward and make yourselves comfortable, I would ask you to identify yourselves for the purposes of the committee members and Hansard.

Ms Jane Cornelius: Seppo Nousiainen is one of our research officers; Lesley Bell is our chief executive officer, and Noelle Andrews is the director of our external services. My name is Jane Cornelius, and I'm the president of the Ontario Nurses' Association.

As president of the Ontario Nurses' Association, I speak on behalf of over 50,000 unionized staff nurses working in the province's hospitals, nursing homes, homes for the aged, community health units and industry. We welcome this opportunity to present our submission for the 1995 pre-budget consultations.

Last year, 1994, seems to have marked something of a turning point in our economy, if only a modest one. After four years of decline or modest growth, we saw a return to more normal levels, although not to the high levels of the 1980s. If the government forecasts prove correct, we may even have reason for guarded optimism. This provides a distinctly different environment for financial planning than in recent years, one that goes beyond cost-cutting, downsizing or otherwise slashing through budgetary restraints.

The last time we came before this committee, we asked the government to pause and assess its actions before engaging in further potentially destructive cutbacks, particularly in the institutional sector of the health care system. We also asked the government to re-evaluate its priorities and manage further restructuring in a way that would minimize further erosion of the system.

We recommended that this happen within the framework of our 1993 report, Rethinking Health Care. In that document, we emphasized the need to reallocate resources rather than increase funding. We set out the following 10 recommendations:

Make better use of resources so that only the most effective and least expensive treatments are used; shift resources from institutional care to community-based care; develop resources for better self-care; adopt provincial health goals; encourage dialogue between providers and consumers on realistic limits to health care; embrace new and innovative ideas and extend them more rapidly throughout the system; and finally, reorganize and make better use of the skills of registered nurses.

We still hold to all of these principles and goals and in the context offer our comments on the upcoming budget for 1995.

The same pressures that were evident in the institutional care sector last year continue in 1995. Institutional budgets, although held at the previous year's levels in nominal terms, are in fact being reduced in real terms since no allowance has been made for inflation.

Layoffs continue as hospitals restructure their services. However, the real impact on labour incomes has occurred through a reduction of hours worked by nurses. This is now an industry characterized by part-time work -- more than 50% of total employment. We see no end to this trend.

It should be recognized that the growth in part-time employment affects women disproportionately; over 95% of nurses are women. This is not advantageous at a time when women are supposedly making headway in society. Furthermore, the negative effects of part-time employment on aggregate demand cannot help the recovery, least of all those who are trying to re-enter the workforce.

As rationalization and restructuring continues to pick up steam across the province, many communities in Ontario are developing plans to merge hospitals or eliminate them altogether. The recent document Managing Health Care Resources for 1994-95 reports that some 7,900 beds have been closed. Metropolitan Toronto can account for 3,000 of those beds alone and is projecting a further cut in excess of over 2,500 beds.

Further, it was reported that the average length of stay has declined from 8.2 days to 6.5 days, while inpatient acute care has decreased by over 5%. By contrast, outpatient services have increased by 10.4%.

This represents an enormous shift in the way we do things, yet we know of no evaluation to show how patient care has been affected. Yet these changes continue.

We raised this issue in our 1994 presentation to the committee and we are not the only ones to express this concern. The 1994 Provincial Auditor's report notes:

"The ministry does not have a system in place to monitor bed closures to ensure that service levels are maintained as beds are reduced, and that service reductions are not offset by increased waiting periods for treatment."

On the issue of decreased lengths of stay, the Institute for Clinical Evaluative Sciences notes that variations in how services are provided do not tell us whether services are timely or appropriate or whether community needs are being met, nor are outcomes known beyond simple indicators like in-hospital death and readmission rates.

These are crucial issues, and we once again ask the government to undertake and evaluate the impact of these changes.

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With respect to community care, year after year we are told that, as we deinstitutionalize, community services will be in place to substitute for some institutional services. However, while deinstitutionalization continues to take place, there has yet to be a corresponding increase in the community resources.

The Ontario Nurses' Association has recognized for years that community-based services must be in place before the institutional services are cut. Yet, as we told this committee last year, we are moving in the reverse order: deinstitutionalization before we have the community system.

Workers are affected as well by the lack of progress in community health. Government has repeatedly promised there would be plenty of jobs in the community once deinstitutionalization took place. This has not materialized, and the downsizing of hospitals has been far more painful that it needs to be. As we speak, RNs are being laid off in community agencies, which causes us again to ask the question: Has there been any planning in this sector at all?

Furthermore, the work of organizations like the health services training and adjustment panel has been seriously compromised by their inability to find jobs for displaced workers in community settings.

This brings us to the issue of the generic workers. To the best of our knowledge, there are plans to continue bringing in more of these workers as low-cost alternatives to more highly qualified workers in the community settings. The question remains, will these workers be truly able to do the job, and at what cost to patient care?

The government claims that continued growth in times of restraint reflects its commitment to the community-based approach to health care. It then says that in 1994-95 spending will increase by 5.3%. With all due respect, 5.3% of the total community and public health expenditures of $600 million is a drop in a bucket -- $30 million -- when total spending exceeds $17 billion. Not enough is being done and the government knows it.

Furthermore, the multiservice agency program has barely gotten under way, since Bill 173 remains unproclaimed. With MSAs unable to coordinate services, we must wait even longer before real reforms are realized in this area.

With respect to other worthwhile initiatives, such as community health centres, health service organizations and comprehensive health organizations, evaluations on outcomes are still needed.

As the auditor's report notes, the community health branch lacks a computer system capable of collecting data in order to monitor the achievement of CHCs. Says the report, "Before any significant expansion of the CHC program occurs, the ministry should obtain information on the program's current effectiveness."

With respect to HSOs, it is noted, "While program objectives are being established, measurable performance targets have not been set to evaluate the achievement of these objectives on a timely basis."

On the issue of long-term-care reform, this area of the health care system continues to be inadequately funded. Although residents are getting older and increasingly frail, base budgets remain at their 1993 levels. Working conditions in nursing homes are particularly bad.

Recently, ONA conducted a quality-of-worklife study of our membership in nursing homes. This survey examined the relationship between staffing levels and the quality of worklife from the point of view of the nurses in the 171 nursing homes and homes for the aged.

The results were distressing. They indicated that in some homes patients do not always get all their medications and treatments simply because there are not enough nurses. Sometimes even basic needs such as nutrition are not met because of staffing shortages, and it is becoming increasingly difficult to deal with dementia and violent behaviour for the same reason.

It was also found that participation in policymaking is not working, although there are supposed to be mechanisms in place to encourage such participation. Problems are most severe in larger units, where administrations seek to achieve economies of scale. However, nurses are often afraid to express their real concerns for fear of losing their jobs.

Community-based long-term-care reform is also being held up. While the province is not increasing the number of long-term-care beds, neither is it expanding home care services. This leaves families in the impossible situation of having to cope by themselves in very difficult circumstances.

In terms of the province's health insurance, payments have declined as a percentage of total expenditures. However, we have no assurance that the individual consumer is in fact not paying more.

Delisting of services is an ongoing process, and we wonder if individuals are simply not being forced to pay for services that were previously publicly funded. At the same time, we are aware of certain practices that raise the cost to the consumer, such as charges for administrative services and physical examinations demanded by employers and insurers.

It seems to us that more and more services are in fact being privatized in Ontario as a tradeoff, it seems, for restricting access to the public plan. Indeed, private expenditures on health care were reported to be 27.5% of total expenditures in 1990. This is an increase of 8.7% from 1980, according to the Canadian Hospital Association. Costs for drugs increased by an astonishing 267.6%, from $71 per person in 1980 to $261 in 1990. Since 1990, there has been further privatization and it would not be surprising if we were close to 30% in private coverage now.

The issue of the selling off of Blue Cross falls into this category and should be thoroughly investigated. What is particularly troubling about the sale is that investors see it as an opportunity for coverage of services that are either being delisted or may never be listed. Certainly, premiums will rise as we take this not-for-profit agency built by provincial tax dollars and turn it into a for-profit organization. This merely continues the trend towards privatized, for-profit health care. Those who can afford to pay will do so; all others will do without.

This flies in the face of the basic tenets of the Canadian medicare system, affordability and universal access, and once again we are left without any analysis of what really is occurring. The government should be monitoring the situation and making public all information so that informed debate can take place. We must ensure that as we cut back in the public system, the public is not being forced to pay privately for these services.

Ontario Finance Minister Floyd Laughren announced a new initiative for long-term public sector restructuring. On December 5, 1994, he outlined a plan that would require each sector under the social contract to establish a job registry to match laid-off workers with job opportunities in the public sector. Resources from the job security fund created by the social contract could be used to get this initiative under way.

This plan falls far short of ONA's discussions with the ministry staff. ONA has repeatedly proposed that employers be required to hire from the pool of laid-off health care workers in all vacancies. We also proposed that the job security fund be utilized to provide these workers with the necessary education to successfully make the transition from one work setting to another.

Also needed is an employment security agreement, which would provide a broader coverage for health care workers beyond simply requiring employers to register job vacancies. This calls for human resource planning, pension changes to assist with early retirement, mandatory hiring and training and reallocation of dollars.

Finally, we would like to commend the government for its nurse practitioner initiative. The need for this program has been evident for many years, and it is heartening to see that it is now under way and that nurses are being recognized for their many and varied skills.

It is unfortunate, however, to see some members of the medical community wanting to fight against this and being willing to do so by lobbying their patients in their offices. We trust they will be deservedly ignored by both their patients and the government.

We have made a number of recommendations today on health care issues and their relationship to the budgetary process. In particular, we have emphasized the need for comprehensive planning as our system continues to evolve.

We also have urged the government to be cautious in its approach to change. We do not as yet fully understand the implications of moving to a new configuration of service delivery. In particular, we have concerns that if the change is not well planned or happens too quickly, there is a danger that the quality of care will suffer. At the same time, we do not want to place unnecessary burdens on those who currently work in the system and must bear the consequences of the change.

As we told the committee last year, we continue to believe that we have the time and the money to engage in the process of managed change where no individual or group has to bear unreasonable personal costs for change. There are enough resources in the system to take care of all of these problems without the need to further privatize health care services. All we need is the will to ensure that this will happen.

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Mrs Haslam: Thank you. That's a well-written report and I appreciate your presentation today. I have a number of questions and I shall start and they'll tell me when I can stop and when I run out of time.

Do you see that there are definite cost savings in the nurse practitioner program? I have my opinion on that, but in that cost saving, will that cost saving accrue to the ministry? Do you see that happening?

Ms Cornelius: There's no question that the nurse practitioner program costs money up front, but it's certainly our belief the costs in the long run are more substantial and we'll end up with a better health care system.

Mrs Haslam: That's interesting, because my next question goes back to page 4. I hadn't anticipated that type of answer from nurse practitioners because I firmly believe there are cost savings there when they are used in a community in various ways.

You talked about upfront costs and one of them was that you reported the auditor mentioning that they lacked a computer system capable of collecting data in order to monitor the achievements. This again brings us to an upfront cost in a system as large as the health care system, a $17-billion budget.

If we had to find within that budget that has gone through cost reductions in the first couple of years further reductions in second- and third-year budgets and in those reductions we had to come up with mega amounts of money to put this in place, would you rather see us do that in a health care budget, taking money from within the system to put into this type of program?

Ms Cornelius: I think the issue is that many agencies are planning their computers in isolation and there isn't a lot of coordination in the planning for the computers and there's probably a lot of money that could be saved if there was better coordination of the computer purchasing, coordination of what information would be collected through the computerization in that there would be more savings and there would not be large upfront costs.

I'll go back to the nurse practitioner. Yes, there is a cost in terms of education, but when we look at the cost savings and altering some global budgets now and utilizing nurse practitioners, there's a huge cost savings.

Mrs Haslam: I agree. I'm trying to say that there are costs in any program and we have people coming to the budget meetings saying, "We want more in the education system" and everyone saying, "But you can't raise taxes and you have to cut your expenditures," which we've done. Part of the expenditure cuts came from within our largest sector, and that was the health care sector at $17 billion. It was a third of the budget. We've been able to manage the growth down to less than 1% a year, but now, to bring forward some other things that have to have funding, we have to look within that system for the money for those.

The computer system just happened to tweak me because I know how expensive some of those systems are in a ministry, and finding that kind of money within the system without affecting your program or OHIP program or the doctors' program or assistive devices program is becoming more and more difficult. Do you feel it's worth it to do it now, even though you yell and scream about your program being cut, because you feel it's better for the long run?

Ms Lesley Bell: I think you've raised some good points. The point we want to make, though, is that we've said for a long time that there's enough money in the system but it's a question of reallocating it appropriately. We've all recognized that fee-for-service with increased utilization just continues to increase the cost to the system, so we've got to look at that one point.

But one of the other things is that we're spending, as you've pointed out, $17 billion already, yet we have very few outcome studies. We don't know if the moneys we're spending on health care are effectively helping the health of Ontarians. For a lot of these outcomes to be monitored, you have to invest some moneys upfront in computer systems and tracking mechanisms to determine whether your moneys are being utilized appropriately.

Mrs Caplan: I was sitting listening and smiling as you were answering, Lesley. I agree with not all but just about everything you said, and I think at one time I said it. So it was interesting to listen.

Certainly there's a need for greater coordination. One of the things in your brief that I'd like you to spend a couple of minutes on -- I'll tell you, I'm also very concerned about the delisting of services and the shift to private, because we know that when you consider health expenditure as a percentage of gross domestic product or per capita expenditure, Canada and Ontario are the most expensive national health system in the world, second only to the United States. When you consider that, it doesn't matter who pays: A dollar is a dollar is a dollar, and in fact you're not helping your economic competitiveness and the health status of your population by shifting to someone else's budget. The privatization and the Americanization of our system is a great threat to our achievement of medicare. I wanted to make that point.

But you know of my concern that nurses have a say in the changes that are taking place in the -- call it what you want -- restructuring of the health system, or health reform, which is what I prefer. I'm concerned that you've made the point of saying that nurses are afraid to express their real concerns for fear of losing their jobs. I'm wondering, how much of that is real, is it happening, and what do you think can be done about it to encourage the participation of nurses in not only voicing concerns but also helping to plan those changes that are taking place in the workplace to make sure that people get the care they need, the most effective and high-quality care? Can nurses speak out and are they speaking out when they see things being done that shouldn't be done?

Ms Cornelius: There's no question more nurses are participating in the system now and on committees, but part of the problem is, number one, are they decision-making committees or are they just consultation for the purpose of saying consultation occurred?

The second part is that in terms of the restructuring going on in the system, jobs are tighter and people are afraid to speak out. We do have situations where people are voicing the concerns internally to us because they don't have the confidence or feel secure in voicing them at the employer level. There's no question that it's real and that people have been disciplined for speaking out and speaking against their employer, and we have grievances and arbitrations in the system fighting those same issues.

Mrs Caplan: Are there forums being provided so that nurses -- and I'm not talking about the normal kind of grievance. I understand that those take place all the time. What I'm interested in is whether nurses are feeling they are more a part of decision-making in how changes are being made, whether it's in the hospital system or in the community system, particularly as you're seeing the redeployment, and jobs are changing even within the system. Are nurses a part of that?

Ms Cornelius: It's only legislated in terms of the regulations under the Public Hospitals Act as it relates to hospitals. Our community members and our members in the homes don't necessarily have that same luxury of participation on committees. There's no question that some employers do, but not, by far, all.

Ms Bell: But if I could give an example of even where nurses are on the committees, we have them having to sign oaths of confidentiality when they walk in, being muzzled. What we looked for during the social contract negotiations was some kind of whistleblowing protection when we're able to raise specific institutional problems, and that wasn't forthcoming. We have nurses, obviously because of the job market, very reluctant to speak out while we recognize that there are huge wastes institutionally.

We're getting more involvement at the district health council level, and I think that's very important, to have front-line workers there when you're planning for the health needs that cross boundaries from institutions to the community and so forth.

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Mr David Johnson: Thank you very much for your deputation. Having been associated with the Toronto East General Hospital for a few years and being quite familiar with True Davidson Acres home for the aged, I can identify with many of the problems that you have indicated in the report. I must say that institutions are having to go through considerable change and adjustment. It's been difficult, and they're doing quite a good job.

But the basic problem -- it's an analogy that just occurred to me, so it's probably not a very good one -- is that it's almost as if you bought a puppy and allowed the puppy to go to bed with you when it was small, and that was fine, but the puppy turned out to be a St Bernard, and as the years went by it essentially is crowding you out of the bed. That's what's happening in the province of Ontario with interest payments. The interest payments in the budget are crowding everything else out. They're crowding health care, they're crowding education, they're crowding all sorts of services.

Our approach, what we're suggesting should happen, is essentially what I think you're saying. We're saying, "Protect the dollars for health." I think I heard you say we have enough money, $17 billion, in health, and that should be protected. Seal the envelope, but let's look at how we spend the money, and let's see if we can do it more efficiently.

I was interested that you indicated we really should have outcome studies. I wondered if you could expand on that, where you would start or what sort of outcome studies you would propose that should be undertaken.

Ms Bell: I think the Institute for Clinical Evaluative Sciences is looking at some of the medical practices. We all need to recognize that the physicians are still the drivers of the system, physicians' prescribing habits, their treatment habits. For a lot of them, in my experience as a registered nurse, the latest drug on the market is the one we use, regardless of the fact that we know the good old standard one that costs four cents per pill is as effective. Those are the kind of outcome studies we're talking about.

But that's strictly dealing with the medical model. Our concern with health is that if you don't start looking at some of the social determinants of health, you're going to continue to spend more money on the last two weeks of life or the first two weeks of life without recognizing that you have no money for the middle, and you're going to end up with less than a productive outcome at the end.

The outcome studies that we're looking at in nursing are going to revolve around the nurse practitioner project and also a province-wide project in trying to determine the outcomes that nursing intervention has. We intuitively know that nurses taking people and toileting them will eventually save money in bladder infections and those kinds of things, but we need hard research data. That's something that we as a profession are taking on, but I think it needs a broader application in outcomes as it relates to the health of Ontarians.

There are all kinds of research people who can give you specific ideas they have, and I think we're starting on them, but for the most part they've been limited to medicine. When you consider that they're still the heaviest driver of the system, it makes sense to start there, but don't limit it to that.

Mr David Johnson: One other point that you made, just as we come to a close, is that you had suggested we should encourage dialogue between providers and consumers on realistic limits to health care, which is an interesting concept. I wonder if you could elaborate a bit on that, what sort of limits we're talking about.

Ms Cornelius: Well, they're the hard choices: When do we say no? When do we not dialyse? When do we not do some oncology procedures? What kind of services in terms of comfort? They're big questions not only for the government but also the taxpayers.

CANADIAN ENVIRONMENT INDUSTRY ASSOCIATION, ONTARIO CHAPTER

The Chair: The next presentation this afternoon is by the Canadian Environment Industry Association, Ontario chapter. Please make yourselves comfortable and identify yourselves for the committee members and Hansard.

Ms Lynn Johannson: Good afternoon. First of all I'd like to thank you for the opportunity to speak here today. I'm Lynn Johannson, president of a company called E2 Management Corp. We specialize in assisting corporations in Ontario and other countries on how to be more competitive using environmental management systems. With me are the president of the association, Mr Gary Gallon, and Ms Dusanka Filipovic, who is the founder and deputy chair of Halozone Recycling Inc. Dusanka is also the inventor of the technology her business supports.

We'd like to thank you again for this opportunity. We recognize we are in a time constraint situation, as everybody else is these days. The purpose of our appearance here today is to speak, on behalf of the environment industry in Ontario, to matters that relate to the budget that affect our industry sector and that will also lead to improvement in the provincial economy.

The environment industry itself has grown dramatically over the last 10 years. It is now among the five largest industries in the country. Our sector employs approximately 92,000 people, generates average revenues of about $11 billion a year and our historic growth rate is about 6% to 8% per annum. Over 40% of the environment industry is located in Ontario, where we employ approximately 36,000 people.

CEIA Ontario is a private sector association dedicated to helping its environmental company members strengthen their business activities not only domestically but internationally. In doing so, we hope to make our customers more competitive and also improve the environment. We are firms of the "new economy." We work towards achieving sustainable development. We assist our customers in becoming more competitive, essentially making them leaner, keener and greener.

Specifically about CEIA Ontario, we are a relatively new business association. We were created in 1991 with a handful of businesses. We have grown rapidly in the last four years to approximately 200 member companies, representing also crown corporations and other associations. We are essentially an umbrella organization. In doing so, we also represent the interests of some 2,200 environmental companies in Ontario.

Our industry is very diverse. We represent technologies, products and services. CEIA Ontario represents companies working in the fields of environmental technologies, total quality and environmental management, pollution control, waste management, pollution prevention, environmental law, environmental assessment and auditing, environmental measurements, energy and water use efficiency, environmental law and soil and sediment remediation. We also have laboratories, air and water pollution control equipment suppliers, environmental auditors, energy services, site remediation, environmental R&D, consulting engineering, financing and environmental assessment companies. We have other environmental industry associations. We also have representation from the municipality of Metropolitan Toronto and major crown corporations, such as Ontario Hydro and the Ontario Clean Water Agency. Other associations include the Independent Power Producers' Society of Ontario, the Canadian Polystyrene Recycling Association and the Canadian Wind Energy Association.

Our association works with both Canadian companies and international companies together to leverage our resources on projects and to export our joint expertise. Our association holds workshops and seminars to help educate not only our members in the rapidly changing technologies and science skills that are coming forward, but we also provide these services to other members wishing to have a similar educational background.

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We host business delegations coming in from foreign countries. In the last few months, actually, we've done Mexico and China. We've worked with federal and provincial governments in setting up environmental business trade delegations to other countries and other areas such as Europe, Asia and Latin America.

We are a repository of information on the capability of Ontario companies and new commercialized environmental technologies. We host monthly breakfasts so that people can share in a networking opportunity of new and emerging technologies and business opportunities. We also have government representation coming there to share in a more informal atmosphere.

We also produce a monthly fax intelligence newsletter where we bring business opportunities from around the world to Ontario companies.

There are also nine other provincial associations in parallel to ours. We work closely with the Ontario Ministry of Environment and Energy and the Ministry of Economic Development and Trade to promote our sector. We participated on the Green Industry Ministerial Advisory Committee, also known as GIMAC, during the formation of the green industry strategy announced by the government on November 15 of last year.

We have cosponsored the annual Environment and Energy Conference of Ontario in November, which hosts more than 700 participants in one of Canada's oldest long-standing conferences. We have worked with the MOEE to send trade delegations to the World Bank.

CEIA also works closely with the Ontario Centre for Environmental Technology Advancement based in the Toronto Economic Development Corp, or TEDCO, offices in the port of Ontario. OCETA there has a professional staff of seven and is helping Ontario companies commercialize and advance their environmental technologies.

In helping Ontario companies and Canadian companies become more competitive, we see that out of 14 recommendations we've put forward today, there are three primary ones we would like you to pay special attention to. One is the timely implementation of the green industry strategy, which was worked on with the government. The second one is to reduce tax-assisted competition to make a level and fair playing field, and the third is to maintain and enhance funds for environmental research and development.

What I would like to do now is turn the discussion over to the association president, Mr Gary Gallon, because Gary can elucidate these points more clearly than I.

Mr Gary Gallon: Thank you very much, Lynn. One of the reasons we're here today, as a private sector group, is to first of all indicate quite clearly that we are keen to see government reduce its expenditures and live within its means. We, as the private sector, then also want to be able to help do that with you and for you. In that regard, we'd like to give you some examples today of what we propose in attempting to do this.

We, as an industry sector, are going to be generating jobs, revenue and tax income for you. We're going to be doing this by way of moving out to export our technologies that have been developed here over the last 25 years as a result of stringent regulations that have been developed ever since 1971 with the Environmental Protection Act.

Of the 14 recommendations you can read in our submission to you, I'd like to deal with just a couple of them, just to give you some examples. The first one is tax-assisted competition. There's a problem here when government agencies want to go out and pay their way. They end up paying their way by competing with us and they do it by saying: "Here, we'll take some government money and we'll lower our bids because we're tax-assisted. Our labs are paid for, our sewage treatment plants are paid for. Now we can go out and bid against the private sector," which has to pay its own way. So they are using taxpayers' money to go out and underbid the exact same private sector that is generating wealth, generating new employment and, most of all, generating tax revenue for you.

What our companies have been finding then is that we are dying. We either have to leave the province -- Clayton Environmental has already left; there are a number of other companies that need to go elsewhere to generate revenues -- or we are reducing our salaried and employed staff in order to try to compete against crown corporations, crown agencies, which themselves are already spending taxpayers' money to undercut us.

This is happening to us in the field of energy, laboratory services and the field of sewage treatment. So we're looking forward to certain crown agencies such as the Ontario Clean Water Agency, often called OCWA, to become more private sector, in fact possibly become sold into the private sector, in order to become more efficient and more capable of developing an export market capacity, and at the same time to be private sector oriented on their own two economic feet and basically out of the trough of the government and contributing to where government needs revenues to pay for real expenditures to help the common good.

Another area is decision-making. Quick decision-making is dollars. The quicker government can make decisions on demonstration projects for new technologies, the sooner it can make a determination of which way it's going to go on, for example, the soft drink issue. Is it going to go refillable containers? If it does, we have a whole green industry ready to put in bottle washing and collection systems. But they've been waiting there with their several hundreds of millions of dollars to come in. Is it going to go recycling and blue box? In that case we have a ton of recyclers out there ready to move quite rapidly with an expanded blue box system on recycling. But if the decision isn't made, then we sit for years with money set aside in the back lines not ready to be spent. So I think you could generate good economic activity for a better Ontario by proper decision-making processes.

The other one is to approve demonstration projects more rapidly. What do we have downtown but Ataratiri and other brownfield sites that have toxic contamination within the soils. The cleanup, as I understand it, for Ataratiri, for example, has increased from $16 million -- an estimate -- to over $100 million. What we've proposed is that there are a number of new, economically efficient technologies that can be applied, and they should be demonstrated there onsite so that they can be used to decompose PCBs, break down dioxins and help the community actually develop what now is a blighted area, a hole in the core of a strong Metro Toronto, and an area that should be redeveloped for our own good. We have the technologies to do it but cannot get the rapid approvals to do it.

We have been working with the Ontario Ministry of Environment and Energy. We're getting some good progress there and we hope we are able to get into a situation where we can have demonstration projects that work over a six- to 12-month period prove themselves. If they're good, then they get long-term approval to go out and help clean up sites in Hamilton, Sudbury, North Bay, the military sites.

Finally, just to give you some examples of what we might do in the near term, the G-7 is going to occur in Halifax this year, and so we're going to have the major nations and the major prime ministers and first ministers in Hamilton to discuss the new economy of the world order. Before that, we propose to host a meeting of the G-7 environment ministers in Hamilton. That proposal has been put on the table by the federal government. There's an opportunity here to showcase Ontario's technologies. If we've got the minister's ear from Denmark and from Mexico, from France, England, Germany, we can showcase. So let's work with the federal government, the municipality of Hamilton-Wentworth, and start to sell our technologies and processes.

Finally, there's a proposal for a framework convention climate change secretariat to be based here in Toronto. Let's get it. We're bidding against Bonn. We're bidding against Japan. They want it. They're putting money on the table. We found that the other international secretariat on the Montreal convention for CFC reduction based in Montreal has led to a number of contracts, over 100, with our companies in developing countries and in Europe to help them reduce their CFC emissions and their ozone-depleting substances and begin recycling and putting in new and different products. We can now do the same thing if we have the climate convention secretariat here in Ontario.

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Ms Dusanka Filipovic: I represent a company by the name of Halozone Recycling Inc, which is an Ontario-based company, one of those small-sized companies, so far only three years old. I'm a co-inventor of the technology known as the blue bottle technology, which was specifically designed to come up with a solution to an environmental problem of global concern, being the ozone protection and ozone depletion. The technology is 100% Canadian technology with worldwide patent protection and it eliminates emissions of ozone-depleting compounds as well as global-warming compounds down to zero. Not only does it eliminate emissions, but it also reclaims, recovers, recycles these compounds for reuse. So theoretically, the marketplace is basically global, it is not just Ontario and in fact it is not just Canada.

I'd like to emphasize the importance of the government assistance that we had certainly received over the last perhaps six years in developing the technology and the assistance with the financial and technical support provided by the Ontario government as well as the federal government of Canada. However, some kind of milestones and roadblocks that we have been experiencing now that the technology is developed and recognized, as such, I'd like to share with you.

For one reason, I'd like to propose that legislation -- as opposed to what a lot of people think, legislation and proper regulations specifically with the technology in place to meet the regulations are extremely positive and they are really enforcing innovation in new technologies. They are basically creating new jobs. For our company alone, we were only two people three years ago; we now have 40 people and we already have affiliations not just in Canada but also in Europe and the Philippines.

However, in order for someone to be successful internationally, we first have to be successful in our own backyard domestically. So for that reason, local regulation is important, and not only regulation but also enforcement. The regulation of CFC emissions -- that calls for no venting on CFCs, HCFCs and HFCs, which in fact are CFC substitutes, but also not so good for the environment; they may be ozone friendly but not environmentally friendly -- came in place April 1994. When you ask me now how many buildings in Ontario are really complying with that regulation, I can just count them perhaps on one hand. So what we are finding out, that really without the proper enforcement of that regulation, regulation is really almost meaningless, which is a real shame considering the amount of time, money and effort that had been spent in coming up with a regulation that is very meaningful. I'd like to suggest that really financing of these enforcement issues is very positive and again they do create jobs. They also focus on the kind of environmental technologies that are performance oriented rather than equipment oriented.

Another point is in order to go internationally, we really need to have some demonstration projects on an international site. So financing and programs that are in place to actually sustain that kind of expenditure is very positive and we like to propose that this stays in place.

Also, when we talk export, most of us feel Asia or Europe. However, how about the USA which is our next-door neighbour? Specifically, in the CFC reclamation and recovery business, the business is global but most of our clients and customers in Canada are basically US-based headquarters. So basically we should be able to cover both sides. Our plant in Toronto can handle all the used refrigerant that has been recovered from the refrigeration and air-conditioning equipment right here in Toronto. What we would be able to do is to bring our raw material from the US, let's say from New York or Boston or Montreal, the same way we bring it from any other city within Canada or Ontario. In order to do that, we would need certain exemptions from the importation act in order to sustain that business and be able to bring the material from the US to Toronto to purify, reclaim it for them and bring it back into the US, which actually will enhance our business opportunities and business success dramatically.

I think I ran over my time. I can talk a lot, but I'd like to stop at this point. Thanks very much for your time.

Ms Johannson: I'd just like to close at this point and tell you that I'll provide you with the apologies of our chair, Dr Anton Davies -- he was hoping to be here today but a death in his family precluded that activity -- and leave you with the parting thought that there's a growing recognition that a healthy environment and vibrant, competitive economy are mutually dependent, and we're here to show you that.

Mr Kwinter: I found your presentation very interesting. I'm a great proponent of green industries and I think that we certainly have a story to tell. I agree with you that Canada and Ontario are among probably the top five countries in the world when it comes to environmental development and the development of its industry.

One of my concerns and a concern I had when I was the Minister of Industry, Trade and Technology, which is now Economic Development and Trade, is that sometimes the government would set standards and criteria to be met by a fixed period of time and the technology wasn't there. That created some serious problems. Have you, as an organization, addressed that problem?

Mr Gallon: We sure have. What we found is that often the technology was not there. What we did, then, is to provide time for the technology to be developed. A classic example is Inco on acid-gas rain -- emission controls for a 66% reduction. We gave them three years; they came up with a proposed new technology and then they developed it in-house. Now they're going to be one of our best environmental technology exporters as a result of changing the process by which they smelt nickel. By having made that change, they can now go into eastern Europe and sell that same kind of flash technology, a technology that they didn't have at the time the regulation was written.

So regulation definitely, as Dusanka says, drives the technology. Even with the CFC regulations announced in 1989, the blue bottle technology had not been perfected yet and a number of the other technologies -- I think they just now have a CFC refrigerator developed as a result of being driven by regulation and the need to get CFCs out of our production system. So it can happen and it's an effective way of driving innovation. That's why Canada today, because of its need to clean up the Great Lakes over the last 25 years, has so many technologies to export.

Mr Kwinter: One of the other areas that I have is that when you take a look at automobile emissions, a lot of our legislation is predicated on the California standard. I find that a little disconcerting, because I think we should be establishing our own standards. Do you have any comments on that?

Mr Gallon: The California standard is the most advanced because they're the most polluted within their basin. We have been able, by sideways glances, to take their automobiles that they've been developing for California and other parts of the States and use them in Ontario as cleaner-emission vehicles. That has made us much cleaner than, for example, Mexico City, where our Canadian Embassy officials are only allowed to stay for two years because of the black lung problem, the health problem is so bad. So by incidence, we've been able to benefit by the regulations in California.

To say that we should achieve California standards at the same time they do, probably not; a phased-in approach, definitely yes. It'll be much healthier for our economy. For example, the legumes, beans and the other types of farm-grown products in Sarnia have a 15% reduction in growth production as a result of ground-level ozone created by automobiles and stationary sources. So already, if we take that ozone out of the air by using California-level standards, we're going to increase the productivity of our farmers.

Mr Carr: Thank you very much for your presentation. It was very interesting. In number 5 on page 5 you talk about helping expand the export markets and you went into great detail. I myself, similar to what Monte suggested, realized that this is an industry that has a tremendous amount of potential for us. As you know, the Ontario government had offices around the world that it closed because of the fiscal situation, and its feeling is that through the Canadian embassies and offices we can do that.

I know you suggested working with Ontario Hydro and so on, but do you think Ontario industries can do it through the Canadian offices, or would you like to see the Ontario government have some offices around the world to help with export markets for industries like yourself? Can it be done using the Canadian offices, in your estimation?

Ms Filipovic: If I may answer that, we had some experience with that, actually, before and after the offices had been closed. Yes, Canadian offices can be used, but we definitely would like to see what used to be, in the past, in every country, trade commissioners and people who have that focus mandate to work directly on promoting your technology and identifying potential joint-venture partners for a strategic alliance.

Mr Gallon: Right now we also have excellent assistance from the Ontario Ministry of Environment and Energy as well as the Ministry of Economic Development and Trade. Today they are taking a delegation of 15 of our companies down to Washington to meet with the World Bank, the Inter-American Development Bank and to help our companies begin to reach out and actually sign up on the World Bank registry system so that we can begin to do contract work with them. So even without the trade offices of Ontario located in those areas, we're now getting substantively better assistance where we had not gotten it before, and we think that can be built upon.

Mr Carr: That's good to hear, and good luck to all of you.

Mr Sutherland: We greatly appreciate you coming forward today. I'm glad to see that more North American companies are realizing what companies -- certainly if you look at what Japan did with its auto industry, because of the need for energy efficiency, not having their own sources of oil, what European countries have done in terms of some of their technology, to see that is occurring here.

It was interesting to hear that regulation can be productive for the economy. We often hear that it's the problem in the economy, in creating jobs. I notice you did use the words "appropriate regulation," and what that definition is depends.

I just want two quick questions. Do you have a problem with private financing of new technologies? This seems to be a concern about how we finance ideas, and banks come under some criticism for not having to do that when you don't have your own collateral. Even in these difficult economic times, are businesses still seeing the advantage of doing environmental activities? I mean, if you're looking at cutting costs, it would seem that, "Well, maybe we'll wait on doing our green program because we want to cut costs to meet our bottom-line targets."

Ms Johannson: I'll take the challenge of this one on. When you're looking at private funds, I'm sure anybody who doesn't want to give away their soul to a venture capitalist would love to have capital. This is not a comment specific to Ontarians, but Canadians aren't known for supporting high-risk activities. Too many of our companies actually go to other countries where the higher risk factor is more comfortable and so you do see some of those activities going on.

In terms of the latter part of your question, the environmental issue is starting to come out of being simply regulatory-driven into being more of an innovation-based situation. There are international standards now being set up for environmental management systems. The ISO process is bringing forward a series called the 14,000 series which is parallel to the quality management process.

I think you'll see over the next five years a greater dependency on having companies do voluntary standards because of international market pressures. You simply can't ignore those kinds of things, and managing a company environmentally will mean managing a company more effectively and more efficiently. The market pressure will push that, maybe not so much in the domestic companies which have an internal market base, but anybody who's got an international basis can't ignore that issue for very long or they will not be in business, in my estimation.

The Chair: I'd like to thank the Ontario chapter of the Canadian Environment Industry Association for making its presentation before the committee this afternoon.

This committee stands adjourned until 10 am tomorrow morning.

The committee adjourned at 1703.