ONTARIO FOREST INDUSTRIES ASSOCIATION
ONTARIO HOME BUILDERS' ASSOCIATION
ONTARIO PUBLIC SCHOOL BOARDS' ASSOCIATION
ONTARIO FEDERATION OF AGRICULTURE
CANADIAN FEDERATION OF STUDENTS, ONTARIO COMPONENT
SERVICE EMPLOYEES INTERNATIONAL UNION
FEDERATION OF WOMEN TEACHERS' ASSOCIATIONS OF ONTARIO
CONTENTS
Thursday 19 February 1998
Pre-budget consultations
Bank of Nova Scotia
Mr Warren Jestin
Ontario Forest Industries Association
Ms Marie Rauter
Mr Dave Steuart
Family Service Ontario
Dr Hugh Drouin
Mr Paul Zarnke
Mr Stephen Goldstein
Ontario Home Builders' Association
Mr Murray Koebel
Mr Wayne Dempsey
Ontario Public School Boards' Association
Ms Lynn Peterson
Ms Liz Sandals
Retail Council of Canada
Mr Peter Woolford
Ontario Federation of Agriculture
Mr Ed Segsworth
Mr Ken Kelly
Ms Sharon Rounds
Mr Ron Bonnett
Canadian Federation of Students, Ontario component
Mr Wayne Poirier
Mr Ashkan Hashemi
Global Ryan's Pet Food Co
Mr Jim Walker
Service Employees International Union
Mr Corey Vermey
Federation of Women Teachers' Associations of Ontario
Ms Maret Sädem-Thompson
STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS
Chair / Président
Mr Garry J. Guzzo (Ottawa-Rideau PC)
Vice-Chair / Vice-Président
Mr Wayne Wettlaufer (Kitchener PC)
Mr Ted Arnott (Wellington PC)
Mr John R. Baird (Nepean PC)
Mr Jim Brown (Scarborough West / -Ouest PC)
Mr Garry J. Guzzo (Ottawa-Rideau PC)
Mr Monte Kwinter (Wilson Heights L)
Mr Gerry Phillips (Scarborough-Agincourt L)
Mr Gilles Pouliot (Lake Nipigon / Lac-Nipigon ND)
Mr E.J. Douglas Rollins (Quinte PC)
Mr Wayne Wettlaufer (Kitchener PC)
Substitutions / Membres remplaçants
Mr Carl DeFaria (Mississauga East / -Est PC)
Mr John L. Parker (York East / -Est PC)
Also taking part / Autres participants et participantes
Mr David Caplan (Oriole L)
Mr Peter Kormos (Welland-Thorold ND)
Mr Tony Martin (Sault Ste Marie ND)
Clerk / Greffière
Ms Tonia Grannum
Staff / Personnel
Mr Ray McLellan and Ms Lorraine Luski,
research officers, Legislative Research Service
The committee met at 0931 in room 151.
PRE-BUDGET CONSULTATIONS
The Chair (Mr Garry J. Guzzo): Can we come to order, please. We do not have a quorum, but the rules state that if we're taking in submissions we can start without a quorum. I propose to do that unless anyone has an objection.
BANK OF NOVA SCOTIA
The Chair: Our first presenter this morning is the Bank of Nova Scotia. Gentlemen, welcome and thank you for coming. We have an hour set aside and we hope you'll field questions when your verbal submission is completed. Please proceed.
Mr Warren Jestin: My name is Warren Jestin and I'm senior vice-president and chief economist with the Bank of Nova Scotia. Aron Gampel is vice-president and deputy chief economist. We brought two submissions today, one our forecast of the international economy, which I think is fairly important in explaining where Ontario's going in an international context, and also more specific writing on the province, which we've entitled Ontario's Economy is Firing an All Cylinders. As you can tell from the title, we're pretty optimistic about where the economy is going, not only for 1998 but also beyond. I'd like briefly to go through our economic forecast and our reasons for optimism.
In our view, Ontario will once again outperform the national average by a considerable margin in 1998, just behind Alberta in the race for provincial leadership for the second year in a row. Personally, I don't think we can catch Alberta, because there are a number of very strong fundamentals there. But being number two is certainly a lot better than the stance we had in the early part of the 1990s, and I think we are a solid number two not only for 1998 but for 1999 as well.
While the January ice storm caused activity to slip coming out of the starting blocks, in our view Ontario production should expand by roughly 3.5% this year. Alongside last year's gain of 5% or so, this marks the strongest economic performance this province has had in a decade.
The current expansion, as I mentioned, has a good chance of lasting into the new millennium because it is built on a very broad foundation. Consumers have moved off the sidelines, business investment is surging, exports are poised to set a new record this year and dramatic fiscal improvements are allowing governments to play a more active role in economic growth. In short, as our title suggests, for the first time this decade the economy is firing on all cylinders.
The long-awaited rebound in consumer spending has been a crucial part of Ontario's economic improvement because such expenditures account for more than half of real activity. Retail sales volumes rose by about 5% in 1997 and should increase by close to 4% this year, underpinned by spending on big-ticket items that had been put off earlier this decade. Motor vehicle sales were at an eight-year high in 1997 and are likely to record another solid gain this year, particularly with the average age of vehicles on the road now over eight years. That's moved up significantly during the 1990s. Furniture and appliance sales also will be supported by the continued upswing in housing activity.
While I'm mentioning a few consumer durables here, the important point is that we have a broadly based spending growth in train in Ontario, and I suspect that is going to continue well into next year.
Consumer confidence, in our view, will be supported by a gradual rise in purchasing power as household disposable income outpaces inflation for the first time this decade. The improvement is being fuelled by a pickup in job creation, rising wages and then the third tranche of provincial income tax relief.
Since the mid-1996 acceleration in economic activity, almost 250,000 jobs have been created in this province, representing roughly one out of two positions added nationally. In contrast to the first part of the decade -- and this is very important -- the net addition to employment over the past year and a half has been overwhelmingly full-time positions. Back in the early 1990s, we were destroying full-time positions and creating part-time employment. Nowadays we're solidly back on track with full-time job creation.
While the pace of hiring is expected to moderate this year, payrolls should show a net gain of nearly 125,000 in 1998. The year is off to a good start. If you look at the statistics for January, despite the ice storm that crippled the eastern part of the province, payrolls rose by a solid 39,000. The momentum of private sector job creation is now strong enough, in our view, to absorb the shocks from heightened competitive pressures associated with cheaper Asian imports, consolidation in the retail sector and further public sector restructuring. What we're saying is that there is still going to be ongoing restructuring and obviously downsizing in some industries, but overall, the pace of hiring for the private sector is strong enough to absorb those and still register a solid gain.
Ontario's housing market also will be underpinned by heightened consumer confidence and excellent affordability. The five-year mortgage rate is now 6.85%, a percentage point lower than the average in the 1960s and only a half percentage point above the average in the 1950s. With housing prices still well off their 1989 peak, the percentage of family income now needed to purchase an average-priced home in Toronto is near the lowest level in two decades. In this environment, both the resale and the new home markets should register solid gains. I don't think the price improvement is going to be huge this year. I would expect that prices would be creeping up in general, but the volumes in the market will remain very strong.
Ontario and Alberta will account for most of this year's increase in Canadian residential construction. We expect housing starts in this province to reach 62,000 in 1998; that's up 15% from a year earlier and nearly 75% above the 46-year low we saw back in 1995. Ontarians will also be spending about $6.5 billion this year renovating their dwellings.
Capital spending will also remain in the fast lane. That's a very important leg of the overall expansion, because big investments in key industries such as transportation equipment, telecommunications, petrochemicals and entertainment are going to be complemented by major infrastructural projects. The strong trend of spending on machinery and equipment evidenced since 1992 is being reinforced by a resurgence in non-residential construction.
Vacancy rates have tightened after a prolonged downturn earlier this decade and space requirements have been substantially altered by shifting technology and market demand. All this points to a multi-year upswing in commercial and industrial construction. It's an important point to make, because typically when a non-residential construction cycle begins to take off, it doesn't last for six months or eight months or even a year; it tends to be two to three years and even longer. As a result, we are quite optimistic about this thing continuing into the new millennium.
The 1 3/4% rise in Canadian short-term borrowing costs since mid-1997, in our view, shouldn't turn this process off, shouldn't dampen investment plans very much. Even with the latest currency-induced rise in late January, our prime lending rate, which is 6 1/2%, is only marginally above the average of the 1960s and is significantly lower than the 10% average rate experienced over the past quarter-century. It is also well below the current US rate, which is 8 1/2%. It's an important point to make. Our rates are very competitive on this side of the border. Moreover, the rise in short-term borrowing costs that we have seen recently has been offset by reduced rates on longer-term mortgages and corporate bonds, which are used to finance capital spending. Essentially there you have a situation that if you're building a new facility, you're not going to be financing it by 90-day money or six-month money; you're going to be borrowing for the longer haul, and those rates have been going down significantly and are at very, very low levels.
Provincial exports should set a new record in 1998, though it's obvious that growth prospects are more subdued than in recent years. The US, the destination of roughly 90% of Ontario's foreign sales, is poised for another solid year of growth, and the drop in our dollar below 70 cents has enhanced competitiveness. However, US activity is moderating from last year's hectic pace and our currency is likely to return above 70 cents, to the 70- to 72-cent range by year end. In fact, this morning, on the basis of some fairly solid trade numbers, the currency has moved above 70 cents in recent hours.
0940
Export trends will be further dampened by the aftershocks from recent Asian turbulence. While Ontario has the lowest exposure of any province to the Asian market, with less than 3% of exports going there compared with 35% in British Columbia, a number of local firms will be hard hit. The Canadian dollar has risen dramatically against the currencies of Korea, Ontario's fourth-largest trading partner, and Indonesia, the Philippines, Malaysia and Thailand. The severe economic setback in these countries also has dampened growth prospects in Japan and other parts of the region.
It's important to put that in context. If you were to see the Canadian dollar at 70 cents today and then a year from now it fell to 18 cents, obviously this would have a massive impact on economic conditions in this country. Obviously this is not our forecast for the Canadian dollar, but that's exactly what happened to the Indonesian rupiah over the last year. There has been a 75% to 80% decline in the Indonesian rupiah against the Canadian dollar. The Korean won has adjusted, along with these other currencies I've mentioned, by 30% to 40%. Inevitably that's going to have a very, very substantial impact on international trends.
Even with a historically low Canada-US exchange rate, competition in the United States will intensify as a result of the recent massive international currency realignments. Profit margins will be squeezed as lower-cost Asian imports reinforce deflationary trends on both sides of the border. Export prices and earnings will also be affected. The fallout is already visible in commodity markets. Our Scotiabank commodity price index, which is weighted according to export contribution, has fallen roughly 10% over the past year.
Looking at specific industries in the province, we believe that despite prospects for slower US motor vehicle sales, Canada's auto industry is on track to assemble a record 2.6 million vehicles this year. This represents 18% of Canadian-US production and two times the share of Canada's sales. Production will be buoyed by a doubling in Japanese-owned assembly capacity and the recent $1-billion retooling by the Big Three for the 1998 model year.
In fact, the auto industry has invested about $13 billion in the 1990s, and as a result, auto sector productivity is now better than in the United States. Local auto parts producers also will benefit from a combination of factors: increased vehicle assemblies, a proliferation of new models and an increase in the NAFTA rule of origin from 50% to 56%.
It's interesting to note that the content of domestically made parts in Canadian- and US-assembled vehicles has climbed to more than $1,700 per vehicle, which is up substantially from what it was a decade ago.
We're also pretty optimistic about the electrical and electronic products industries, things like telecommunications equipment, computer hardware and software. While increased competition from Asian producers may exert downward pressure on semiconductor and PC prices, production gains will be augmented by rising net business formation as well as the construction of new research and development facilities. Demand for telecommunications equipment remains extremely strong in the United States and in Europe. This industry, in our view, has a very bright future.
Switching over to the service side, tourism, which is already a major contributor to economic activity, has become one of the province's leading growth sectors. The number of short-term visits from the United States posted a record last year, alongside the expanded number of casinos in southern Ontario. The province's attractiveness as a favoured locale will get an additional boost from the softness in the Canadian dollar. We are very competitive in terms of being a tourist destination.
Rising US trade volumes will also underpin transportation and storage services and boost wholesale trade, which has been rising at an exponential rate recently. Business services will continue to benefit from ongoing public and private sector restructuring and the rapid pace of technological change. Canada's financial sector, which is obviously centred in Ontario, will benefit from buoyant domestic conditions.
Turning to the fiscal policy outlook, after a prolonged period of fiscal drag, governments also will be playing a more active role in economic growth. Ottawa is poised to move into surplus, and whatever the mix of debt reduction, tax relief and new spending announced in next week's budget, the overall impact on growth will be positive, at least over the near term.
I should explain that briefly. We believe that overall debt repayment is the best long-term strategy for improving fiscal flexibility, and tax cuts provide fairly durable relief as well. Short-term spending initiatives provide a boost in the current year, however. That's why we say all the options will be adding to growth. It's been a long time since the government and the private sector have been pulling in the same direction in order to support growth.
Ontario also should move towards surplus over the next few years, with stronger-than-expected revenue growth broadening the range of fiscal policy options even in this budget this year. The province has already indicated that this year's deficit will decline to $5.2 billion, $1.4 billion lower than last May's budget projection, and in our view the actual outcome may even be better than that, because the economy continues to roll into this year at a very solid rate.
Another year of solid economic growth and low interest rates should allow the government to bring the deficit in substantially below its official forecast of $4.8 billion, well below that figure. Personal income tax revenues will be boosted by strong employment growth that I referred to earlier. Retail sales and land transfer tax revenues will be lifted by gains in consumer spending and increased housing activity. Revenues from corporate income taxes will benefit from productivity-led gains in earnings. These beefed-up revenues will more than compensate for the reduction in personal taxes, an additional reduction in federal transfers and an anticipated, albeit modest, rise in program spending.
With a balanced budget looming on the horizon, Ontario is about to join the federal government and a number of other provinces in the great debate concerning the use of fiscal surpluses. While the Ontario government is committed to substantially reducing taxes, it is essential, in our view, that a large share of upcoming surpluses be channelled into debt reduction. Debt service, which currently absorbs 18 cents out of every tax dollar, about $9 billion annually, is clearly much too high and leaves public finances quite vulnerable to unexpected economic and financial market setbacks.
From a historical perspective, the longest expansion in the post-war period that coincided with low interest rates lasted from 1958 to 1967. Betting that the current seven-year expansion will last more than a decade, thereby allowing us to slowly grow our way out of today's heavy debt burden, stretches the odds well beyond prudent bounds.
The only way to reduce the vulnerability of government finances to unfavourable economic circumstances is to permanently lower debt service costs by paying down debt. As an example, even using relatively optimistic assumptions, $16 billion of the province's $107-billion debt would have to be repaid over the next decade just to cut the provincial debt-to-GDP ratio from its current level of 31% to 17%, which is the average level prevailing through the 1980s. This debt ratio in our view is the minimum policy target that the province should set for the first decade of the new millennium.
Focusing on debt reduction does not ignore Ontario's very large human deficit. While the provincial unemployment rate is still more than two and a half percentage points above the level at the beginning of the decade, there is ample historical evidence to show that this lingering problem cannot be solved by government spending. Similarly, we have learned from painful past experience that ignoring heavy debt burdens to concentrate on short-term fiscal stimulus has very large long-term costs.
In our view, strong underlying private sector fundamentals will create the jobs that put our provincial unemployment rate on a downward trend. The government can contribute to this job creation momentum by promoting an environment conducive to new business initiatives and sustainable growth. Ultimately, freeing up the substantial sums that are now directed to debt service is the key to providing long-term flexibility and support for Ontario's increasingly knowledge-based economy.
In effect, we can afford better health care, better education and the like, but we can't afford to pay for these services alone as long as we're spending $9 billion servicing outstanding debt. That is really the dead-weight drag that in my view we have to get rid of over the next few years. Thank you very much.
The Chair: Thank you, sir. For the record, it was my intention to start with the NDP today, but we'll move to the government caucus.
Mr Gerry Phillips (Scarborough-Agincourt): How much time does each of us have?
The Chair: I'm going to divide it in three in case they show up. If they don't, I'll divide what's left at the end between the two caucuses. Is that satisfactory?
Mr Phillips: That's good.
The Chair: Excellent.
0950
Mr Jim Brown (Scarborough West): Good morning, gentlemen. Banks are always my favourite people to talk to in this room because I was a small business person before I got elected, as I am sure everybody knows.
I have a little bit of a bias towards SMEs, small and medium-sized enterprises, in as much as I believe they create 85% to 90% of all new jobs. I believe that over the past probably 10 years, certainly the past seven or eight years, the banks and their policies have not been amenable to small business, in fact were actually counterproductive. I think a lot of SMEs have been shut down. I guess the prime catalyst was the banks.
The Canadian Federation of Independent Business was in here yesterday, just before the Canadian Bankers Association. They pointed out that in their surveys of small and medium-sized enterprises there is still this resounding chorus of complaints against the banks and against the lack of rapport and the lack of communication: the fact that managers change constantly, so no manager could become aware of the needs of any particular little business, that there's great turnover.
The Canadian federation said also that back in the early 1990s, 30% of their constituency, I guess the ones that hadn't been shut down yet, were complaining about access to capital and competitive rates, particularly pointing the finger at the banks. Even in our improved economy of today, their current figures show that that 30% from the early 1990s is maybe 29% now; in fact that is the number, 29%. There's still this perceived problem, and these are companies that are still in business, not the ones that -- if you ever did an exit survey of the companies that the banks have shut down, I think the numbers would be pretty terrible.
Finally, the Canadian Bankers Association said yesterday that they weren't making very much money. That was stretching it. They also pointed out that the $7.5 billion that the six majors made this year was after tax; they paid corporate tax of $2.8 billion, which, to me, is $10 billion before tax. That is a corporate tax rate of under 30%, which is a pretty low corporate tax rate overall.
With the service charges and the red tape that you put small business through and the SME sector being so important in Ontario and Canada, am I off base here?
Mr Jestin: You've raised such a large number of questions that it would probably take me the rest of the morning to go through them.
Mr Jim Brown: And I'm not finished yet.
Mr Jestin: I certainly can't comment on the surveys or the submission that the CBA has put in, because I wasn't here and I haven't seen them. But I can tell you that at Scotiabank we have paid, over the last three to four years, more in taxes than we have had in net income, and that is something that is a matter of public record.
The recent survey that we have access to indicates that Scotiabank approves roughly 80% of small business loan requests and currently we have more than $7 billion in authorized loans to more than 87,000 small and medium-sized business borrowers. Moreover, that's been a very substantial growth over the last few years, primarily because our management believes that is a key growth area in the economy. If you look at the various products offered by the bank in terms of professional loans and the like, we are trying to develop products that specifically suit businesses in the small and medium-sized business community.
Importantly, if you look at a survey from Statistics Canada that has followed exits, as you referred to, you will find that roughly half of businesses that were in existence back in 1989 are no longer in business. That doesn't mean there are fewer businesses; there's simply a very rapid turnover and a very high failure rate initially among a number of businesses, not necessarily for a lack of financing but simply because businesses unfortunately were not able to develop the market opportunities that appeared to be there when they thought up the idea. There is a huge turnover in the small business sector as a matter of course. Historically that has been the case, and Statistics Canada, as I said, has been tracking that very large turnover.
Within that fairly volatile market, I think the banks are doing a much better job. Certainly Scotiabank is focusing on that. You mentioned turnover in bank managers as being a complaint. We pride ourselves on not having a very high turnover at all among our bank managers. I travel across the country talking to small and medium-sized businesses all the time. I just came back from a tour of southern Ontario. Most of the managers I have seen there have been there for years. Inevitably, there's going to be turnover -- people retire, people go on to other opportunities within the organization -- but this is something that we recognize as an issue and we have tried to move to correct it.
Mr Jim Brown: Scotibank was my bank, and in the course of two years there would probably be three managers. I challenge you on that statement that there isn't turnover, because there is turnover. In terms of knowing my business and knowing my needs, they were just a local branch but they were in an ivory tower.
I'm glad to see that everybody is talking about it. Maybe you talk about it first and something will happen.
Mr Jestin: Something already is happening.
Mr Jim Brown: I hope you are born-again small-business loaners. I hope you will do that. I know my colleagues have a couple of questions.
I'm also concerned about what the current merger may do to our financial markets. I'm concerned that while the banks have been given a charter in Canada, a significant portion of their capital, or their loans, is not necessarily in Canada. There's an incentive not to be in Canada because there are different regulations and you can avoid some of the regulations in Canada. Those are gross overall statements.
There seems to me to be an attempt with the merger, those two banks particularly, to look to the foreign market more. Again, I'm very concerned about small and medium-sized enterprises. I'm concerned that merger will foster more mergers and that what will happen is that more of our Canadian-based lending ability will be done outside Canada and be a negative impact on jobs here in Canada and in Ontario.
We're using capital that we raise here, that you make money on here, and you loan it outside of Ontario. I'm concerned about that and I'm concerned about that reduction in competition. Heavens, there are six now; there are going to five. You guys will probably do something and we'll be down to maybe one bank. That would be terrible. There would be no competition. There's virtually no competition now. I'd like you to maybe comment on that.
Mr Jestin: I can't comment on the Royal and the Bank of Montreal's merger intentions or strategy. Certainly we're not involved in that particular one. Our chairman, Peter Godsoe, is on record indicating that he believes there should be a very full and frank public debate on this issue because there's obviously a lot of stakeholders involved here. In fact, that's what we look forward to through the summer and fall of this year, particularly when the McKay report comes down and we get some discussion.
Now, it's very important for the Ontario government to be looking at this, obviously because the Canadian banking system is centred in this province. At the end of this meeting I would like to table a speech I gave last year which was a summary of a report that we commissioned from the Boston Consulting Group indicating the importance of financial services to the GTA. It covers a lot of issues such as jobs and importance of the institutions to the economy. I encourage a very full debate. It's a very important issue.
In terms of the fact that there seems to be a lot of international lending, you're certainly talking to the right bank in the sense that among the Canadian banks, Scotiabank is the most international. We were founded in 1832. Our business developed through the Caribbean fairly extensively the last century. In fact, we were in Kingston, Jamaica, before we were in Toronto. We were in Chicago and in the various areas in the United States before we were in many parts of Canada. We are an international bank. In fact, that's where we make a majority of our earnings. Canadian shareholders -- and that's the dominant ownership group of the Canadian banks and the Bank of Nova Scotia -- reap huge benefits from that particular business.
Scotiabank stock went up by over 50% last year and over 50% the year before, and that reflects a large part of the businesses that we are doing in investment banking and corporate banking, which are international businesses. In fact a lot of the businesses in the retail side and the commercial side are important and fairly large businesses for Scotiabank, very important businesses, but they are certainly not where the majority of earnings are made.
1000
The Chair: I have to interrupt there. Your time is up. I'll move to the Liberal Party.
Mr Phillips: I appreciate the presentation, and I have a good deal of respect for Mr Jestin's forecasts over the last several years. I'll just start with your forecast on the gross domestic product. The government said when it put out its 1997 economic outlook in December, "To be cautious, Ontario finance projects modest real growth of 3.5%...0.7 percentage points below the current private sector average." In other words, the government is saying, "We're going to be prudently below the private sector forecast."
On February 10, the Minister of Finance indicated to the committee that the private sector forecast had dropped somewhat since December, down from 4.2% to 4%. If the government wants to be prudent in its GDP forecast, what do you think we should be using as a forecast for real growth in 1998?
Mr Jestin: Our forecast is at the low end of Canadian forecasts currently. In other words, we're fairly cautious about the outlook, optimistic about where we're going but among the other banks still fairly cautious, primarily because we believe that the Asian economic turmoil, which is largely in financial markets, will spill back into the export sector and create some pressure on various domestic firms, both in Ontario and across the country. That's why our forecast is around 3.5%. I think you would find that is a fairly prudent level. The tendency of governments, both provincial and federal, has been to discount the average of the private sector forecasts. I think something prudent may be in the order of 3% to 3.5%, if you're doing it on that basis. It allows for significant underperformance of what the consensus expects to happen.
Mr Phillips: I was interested in the tables on page 4 of your presentation and your advice to the committee to try to find a way to get back to some of the targets that were hit in 1989-90 as a goal the Harris government should be aiming towards, sort of saying, "Well, let's see if we can't get back to where we were in 1989-90 in the province." I gather you are saying the unemployment rate was around 6%, 2.5% below where we are now; and the debt to GDP in 1989-90 was down around 15%. It's up to 31% now, I gather. Is that your suggestion to the committee that we set targets that were achieved in 1989-90 on debt to GDP? You have here that debt servicing as a percentage of revenue in those days was around 13%. Now it looks like it's around 30%. You'd suggest we look at some targets that we achieved in 1989-90?
Mr Jestin: The reason we stress this is that in this huge debate we now have on how to reduce the unemployment rate and get various sectors of the economy going again, there is an inevitable desire to provide short-term stimulus through spending on health care and education, obviously areas that have been under extreme pressure, and tax cuts to stimulate various activity.
But in my view the root of the problem currently is the fact that we have now channelled so much money into debt service that essentially we have locked off that particular revenue stream from areas that are needed more, so that as we go to a surplus situation we have to concentrate very seriously on getting those debt levels down. It takes a long time to free up that debt service cost, to reduce that interest payment, but the payback is forever. Once you've paid off the debt, essentially you have freed up that debt service stream in perpetuity. That's why we stress that as being absolutely the most important thing we should be shooting at. It has paid off big time for Alberta, obviously, in terms of its fiscal flexibility right now. In fact, even with an assumption that resource revenues are going to be down $1 billion because of problems on the oil and gas side, that province is looking for a surplus in excess of $1 billion, and may well hit something over $2 billion this year.
Mr Phillips: It may be tough for Harris to set a target that was achieved by the last year of the Peterson government. That may be difficult for him to aim for, but it's a fairly aggressive target.
The employment numbers are interesting to me, your chart on the first page, that real growth in 1997 in Ontario looks like around 4.8%, but employment growth was 1.9%. I'm very curious about that. I see in the government's economic statement here that employment growth for 1997 was 102,000 jobs. I see that this year your forecast is employment growth at the rate of real GDP minus one percentage point, which has historically been the formula that's used.
Should we be at all concerned about real growth at 4.8% and employment growth at under 2%? Is that just a one-year anomaly, or is there any possibility that we're seeing a difference in terms of employment growth to productivity growth?
Mr Jestin: That's a very important question. Part of the discrepancy, by the way, depends upon whether you use averages for the year as opposed to end points. Certainly, if you were to use December-over-December employment growth, the anomaly would be not nearly as great as it appears in this table.
Initially as the economy was expanding, businesses, be they small businesses, medium-sized businesses or large businesses, tried to accommodate the increase in demand without hiring, because they had just been through the wringer in terms of a very prolonged recession. Now, however, with demand picking up, there is a greater ability and a greater desire to expand capacity. In fact, what we're seeing in non-residential construction really reflects that improvement in demand. So I suspect what you will see over the next couple of years is a fairly healthy employment growth profile even as overall economic activity begins to moderate somewhat from that very rapid pace we saw in 1997. So that gap of 1% would be easily seen in the statistics, and we might even see stronger employment growth, in other words, the gap slightly closing, before the next couple of years.
Mr Phillips: One of the huge changes right now in the economy is going to be the property tax changes, which over the next two or three months are going to really impact everybody in Ontario. One of the big changes has been the elimination of something called the business occupancy tax, as you know; the business tax, they call it.
The net effect of that is -- I don't mean to single out the banks, because you're with the bank. The business occupancy tax on banks was 75% of the realty tax. In other words, the banks paid realty tax plus 75%. Small business paid realty tax plus 30% -- I'm generalizing here. The government has now moved to a plan where that's all equalized and the banks will find that instead of paying 75%, they're going to pay an average of about 42%. So their taxes will drop from the equivalent of 175% to 142%, about a 17% drop in property taxes. Small business is going to see theirs increase from the equivalent of 130% to 141% or 142%, a 10% increase. It's going to be quite a fundamental shift.
It seems almost counterintuitive that property tax reform would, if you will, have a very dramatic impact. I use the example of a bank tower. Some $25 million is what they're paying, on average, for property taxes right now. It's going to drop by $3 million to $5 million, and that has to be picked up by small business.
Have the banks expressed any view on that? Because that is going to impact on small business fairly dramatically. Have you, as an economist, looked at the impact of the property tax change on small business?
1010
Mr Jestin: The changes that have been occurring in the Ontario economy have been so widespread that it's almost impossible to do a detailed economic analysis on impacts. There are simply too many things happening in health, education, property taxes and the like to really sort everything out.
I must say personally that I would be astonished three years from now if banks were paying a whole lot less tax than they are today, given the current political environment. We have argued for a look at the tax system that is one that promotes efficiency, but certainly we have not been asking for tax breaks, nor do we quite honestly expect them in the next little while.
You do point out something that's very important, though. We have so many things occurring right now that forecasts for Ontario have a little more in the way of noise this year than they have had in quite some time because we don't know the end impact of it all. My gut feeling, my belief is, though, that the private sector now has such strong underlying momentum that we will be able to push through these changes in various sectors of the economy and still have a very credible growth performance this year. I wish I could answer you in terms of the overall change in taxes but, quite honestly, trying to figure it out is virtually impossible.
Mr Phillips: It's very obvious, it's straight arithmetic: The government has decided to get rid of the business occupancy tax. There's a fairly clear article in the paper today on the difference, small business picking it up. They use an example of a bank branch tax decrease. As I say, it's just at a time when small business is feeling a little bit under threat, or a lot under threat, that this comes along, and for small business in my community it is literally, just like that, a 10% increase.
I want to talk a little bit about gambling revenues.
The Chair: I'm afraid your 12 minutes is up. Mr Martin, we were to start with the NDP caucus this morning. Rightfully or wrongfully, I made the decision that we would divide the time and start the other way and then divide the balance of the time equally. So that would leave you with about five minutes, sir.
Mr Tony Martin (Sault Ste Marie): That's fine. So you'll have another few minutes, Gerry, to follow up on that. Otherwise I would have allowed you to --
Mr Phillips: I appreciate that.
Mr Martin: It seems to me that any economic system should work for all of the people who live within the jurisdiction it affects. I didn't hear your presentation this morning -- I apologize for being late -- but the heading on your presentation, Ontario's Economy is Firing on All Cylinders, would present a picture that everybody is doing better now, that it's firing on all cylinders because of what's happened over the last two to two and a half years. I don't know if you've been watching the proceedings at all. We've had people before us here representing various groupings, various voices in the community, who are telling us a very different story, that in fact there is a lot of stress in the system, particularly at the edges.
Some people's perspective on what's happening in Ontario is that there's a lot of fraying going on, particularly at the edges. Poverty is up. Even in the small business community there's a lot of anxiety around the changes. At one point anyway -- I haven't looked at it in the last month or two -- there were record bankruptcies in the small business sector.
Certainly if you read the quarterly and annual reports of the larger corporations, they're doing well. Why isn't it translating down? Why are there so many people out there in my community really anxious right now, to put it mildly, about a system that's firing on all cylinders? Why is that?
Mr Jestin: That's a very important point. If you look through the paper that we presented, we're looking at the key sectors of the economy. But as you rightly point out, there are many areas of stress.
If you were to take youth unemployment in Ontario, for example, it remains extremely high, and if you adjust if for the number of people who have essentially dropped out of the labour force because they were discouraged or have gone back to school and the like, the rate is above 25% in this province. That is an extremely difficult one.
Also, cutbacks in public support for many areas have caused the social safety net to become somewhat frayed. At Scotiabank, while I am the chief economist, I also am responsible for public and corporate affairs and as a result get involved in a lot of sponsorship-donation issues. Very clearly, the banks and other large corporations are expanding very substantially the amount of support, but there's no way the private sector, at least a few organizations, can step into the breach and totally solve some of those problems. For example, last year we gave approximately $14 million in sponsorships and donations. A few years ago, a couple of years before that, it was only around $6 million to $7 million. There has been a dramatic improvement there.
I think a lot of the problem has to do with, first, a downsizing of a social safety net that unfortunately we found we were unable to support. The clear sign of that was the very rapid rise in debt that we had through the 1990s.
The second thing is simply the pace of change. If you look at the bankruptcy numbers, there's a clear debate as to why business bankruptcies have risen as rapidly as they have. In fact, they've peaked and they're coming down, but they're still at very high levels, and consumer bankruptcies are continuing to go up. A lot of that has to do with the fact that with the pace of change we have right now, you have both winners and losers created in many industries. There's a lot of good news out there, but there are still casualties because of the rapid shifts that are going on. In the case of consumer bankruptcies, of course, student bankruptcies have risen to a very high level, which has created a real challenge for the government in terms of its student loan policies and the like.
So while I wanted to indicate to the committee that we are optimistic that a broad thrust of the economy is very positive, we certainly do not ignore the many areas in the economy that have been marginalized or are still in fairly substantial problem.
The best assurance that we can afford to help these groups over the long haul, though, is to nurture a very strong private sector and to reduce government debt, because if we could free up some of the $9 billion in interest payments that we are using right now for health, education and welfare, we would certainly be able to perform a much broader service for the community than we can now. We have essentially had debt and debt service crowd out the money we need for other areas.
The Chair: We'll move to the government caucus.
Mr E.J. Douglas Rollins (Quinte): Thanks for your presentation. I know we've all got a lot of different things, and I was glad to hear my colleague mention the amalgamation of two of the bigger banks. I think that will certainly have more effects in rural Ontario than maybe it will in downtown metro areas, because in rural Ontario when you've only got two or three banks and the Bank of Montreal is on one corner and the Royal is on the other, that means there is going to be one corner vacant. That bothers me as a member from rural Ontario.
The rate of paydown of the debt: I realize as a businessperson and everybody that we'd like to get our mortgage paid off. What kind of percentage do you see as a recommendation you could give to us as a government on how to pay that debt down, what kind of a portion of the surplus or whatever?
Mr Jestin: The big debate, the front-of-mind issue right now, is a federal rather than provincial issue, because obviously the federal budget is at balance now and moving fairly aggressively into surplus. We submitted a paper to the federal government about a year ago trying to indicate a very similar type of formula to what we have here, where you essentially set out a fairly aggressive schedule of paying down dollar debt.
Now, let's be realistic here. There are certain years where you're going to have a fairly strong economy and other years where the economy is going to underperform, so there has to be a lot of flexibility in this.
What we're trying to do here is to indicate that, among the solutions, we don't focus entirely on spending and tax issues, that we don't forget that the debt level has become so large that it is essentially crowding out a lot of options the government would like to have. We suggested in this paper that getting $16 billion paid down would get us back to the average level of debt service that existed back in the 1980s, as a general target.
But to try and say, "Okay, we're going to do this in 1999, this in the year 2000," and the like -- I think most people would agree that the job the provincial government has done will probably get the budget balanced a year before the official targets, so this is really a very clear and present issue, that we shouldn't so much focus on, say, $5 billion this year and $3 billion the following year but set an end target and try to overachieve it. If you look at what has happened in Alberta, the political capital that has been generated by a fair commitment to this is absolutely enormous. I think that is a political lesson that is well worth learning.
1020
Mr Rollins: There's one other thing I would like to ask about, and I think we've got an example of that particularly with your service charges. As a businessperson, I look at my statement at the end of the month and I turn green. Yes, I've got an overdraft; yes, I've got cheques going through; yes, I've got service charges. You just nickel-and-dime us to death. At the end of the year, the dollars that we pay as small business people in Ontario who contribute to you people are astronomical. They're unreal.
A good warning to you people: Bell Telephone did the same thing, and Bell has had to restructure and take another look at another person coming in and getting service charges under control.
I'd like to warn you from a business point of view that you people are out of control as far as your service charges are concerned. Yes, they're only 50 cents and yes, they're only 20 cents, but the darned things at the end of the month are too much. If you people don't want to look after it, we've got other banks on the horizon at the present time coming in with a flat monthly charge that is quite lower than most of your people and who are saying, "Fine, we're not going to charge you when you push your card into that machine," that it's not costing me 50 cents or a dollar.
It's a little warning. I know my colleague has a question to ask, but I just wanted that on the record.
The Chair: Mr Arnott, you have a minute and a half.
Mr Ted Arnott (Wellington): I just have a minute and a half and I had a lot I wanted to say. Will we get another chance in a further rotation? Probably not.
The Chair: No, we will not.
Mr Arnott: All right. Well, I want to thank you very much for your interest in coming here to talk to us today. Your headline says it all: Ontario's Economy is Firing on All Cylinders. As my colleague Mr Martin said, there are still some people in Ontario who are not yet benefiting from the growing economy, but we're not done yet and we're hopeful that the strong performance of the economy will continue in the months ahead, supported by the policies of the government. That's our objective, obviously, and we're working towards it.
I was very pleased that you talked about the need for debt reduction. I brought forward a resolution in the Legislature last October calling upon the government to commit itself to a debt reduction or debt retirement plan over a 25-year period. I was pleased to receive support for that resolution from all sides of the House. The Ministry of Finance officials still have a way to go and we're working on them, but a considerable number of people have come forward through this process to support debt retirement. Obviously with the situation today, where we're spending $9 billion a year on interest, the fastest-growing government program, spending more on debt interest than on hospitals, for example, there's a crying need for an emphasis, once the budget is balanced, on debt retirement. Thank you very much for your recommendation in that regard.
I'm hopeful that Mr Phillips gets another chance to talk about some of the issues he's been bringing forward, the property tax on business for education. That's an issue he has brought forward. I think most of us here know that the Treasurer has acknowledged the inequity and is prepared to address it over time. The rates have been frozen, which is probably more than the Liberals and New Democrats did when they were in power. Certainly if the bus is to be turned around, it has to first stop, so that's what we're trying to do.
I'm hopeful Mr Phillips will also raise a couple of the things that came out during their years in power: the employer health tax, which was a payroll tax, a direct tax on jobs, which affected small business; and also the commercial concentration tax, I recall, which was a direct tax on business in Toronto. Those are also issues that came up during their time in office.
The Chair: I'm sorry. You don't get an opportunity to comment when we eat up the time with the question. We go back to the Liberal caucus.
Mr Phillips: I'll go back to the question just to indicate once again that I appreciate your advice to try to get the debt back to where it was in 1989-90 and the unemployment rate down to what it was in 1989-90, and the debt servicing costs and all those things.
I want to talk a little bit about gambling revenue and the impact it will have on the economy, because you've indicated in your report that the tax cut, in your opinion, was helpful.
The government, in its financial report dated December 31, said they are increasing the budget of the Trillium Foundation by $1 million so they can set up an agency which will distribute video-lottery-based funds of up to $100 million to charitable and not-for-profit organizations. So $100 million goes to charity, but that's as a result of getting $1 billion in revenue from the hardworking taxpayers of Ontario in the form of video lottery terminal revenues. They're going to give 10% to charity, but the government is going to keep 90% of it.
They also indicate an expenditure of $1 million to the Ministry of Consumer and Commercial Relations to set up a video lottery special communications unit, because they're going to need it; they're going to have to have this unit to try and persuade Ontario why it's a good idea to take $1 billion in revenue in video lottery terminals.
This essentially vacuums up any tax cut. The next, to use your language, tranche of the tax cut will be vacuumed up by the video lottery terminals taking $1 billion of revenue. Is that something we should, from an economic view, concern ourselves with? If the tax cut was helpful, would taking $1 billion out of people's pockets for video lottery terminals be unhelpful in the economy?
Mr Jestin: As a mere economist, I tread very carefully on the whole gambling issue, because it's much more a political issue than an economic one. The one difference between a tax and what's happening in the casinos and video lotteries obviously is that there is a form of choice involved in one, and as far as I know there is no choice on the other. So it's a very difficult one to actually argue.
I was down in Windsor giving a presentation last week and talking to a number of people there in the business community. They were, of course, hugely supportive of the local casino because of the 3,000 or more jobs that have been created down there. As a local issue it's a contentious one. It generates strong emotion on both sides. It's also something that is very complex, because on the one hand it is drawing revenues off; on the other hand, it is creating a certain amount of economic activity.
Mr Phillips: The difference in the Windsor one, I might add, is that 85% of that revenue is from the US. On video lottery terminals, I think the estimate is that virtually all of it will come from Ontarians. That's the one that I'm particularly, whether taking $1 billion, if you will -- I know it's voluntary, but it's still $1 billion less of "disposable income" that would have been going to purchase presumably some of the goods and services that you feel are fuelling the economy and paying the retail sales tax on.
Has your organization, the bank, looked at the impact of $1 billion of video lottery terminal revenue?
Mr Jestin: No, we have not, in terms of the economic implications of it for the economy. In terms of a standard economic model, it would be positive in the sense of job creation and positive because it would be counted as consumption.
Mr Phillips: I'm sorry?
Mr Jestin: It would be positive through job creation and positive in terms of how it would impact consumption, because the actual spending of the money would be considered consumption in a statistical sense. But obviously it's a far more complex issue than simply that. I understand exactly what you're saying, because you can't spend money twice. If you spend it in the video lotteries, you're not going to be spending it on other things.
Mr Phillips: The government told us they are expecting even this year, the coming year -- although I must say, Mr Chair, they promised they would give us this information and they still haven't. That was a week and a half ago.
The Chair: They're digging up what revenue we're losing now from the existing machines. Ask him what happens to the money that we don't even --
Mr Phillips: I'm not here to debate you. I'm just saying, Mr Chair, your job is to make sure we get the information. I'm just saying they promised us a week ago they would send the information, and we still don't have it.
The Chair: It's noted; you're correct. It was inquired into again yesterday. I'm looking after your interests, but I'm no more powerful in that department than are you, sir.
Mr Phillips: Point made.
The Chair: Your time is up. We do thank you, Mr Jestin and Mr Gampel, for your attendance and your submissions.
Mr Phillips: Mr Chair, while we have a moment here, I might also say that we are expecting similar information on the teachers' pension that has also not yet arrived.
The Chair: I inquired about both, as a matter of fact. I might tell you that I have verbal communication from Hydro with regard to the request, indicating that Mr Farlinger is in Ottawa today appearing before the Atomic Energy Control Board and cannot be here, but he will provide us with written documentation in response to your request.
1030
ONTARIO FOREST INDUSTRIES ASSOCIATION
The Chair: The next presentation is from the Ontario Forest Industries Association. Good morning and welcome. Thank you very much for coming. We have 30 minutes.
Ms Marie Rauter: Good morning and thank you very much for having us. I have with me today Dave Steuart, who is chairman of my board. I am Marie Rauter of the Ontario Forest Industries Association. Mr Steuart is also president of the pulp group of Avenor Inc.
I would like to thank you for the opportunity today to address you about the Ontario budget, the Ontario economy and the role of the Ontario forest industry.
The Ontario Forest Industries Association represents primary manufacturing companies that operate sawmills, pulp and paper mills, and lumber, veneer and particleboard mills in more than 35 locations throughout the province. We have some very large companies such as Avenor and Abitibi-Consolidated. We also have some very small family-owned operations. In fact, one of our family-owned operations just celebrated 150 years in business; they're going into their sixth generation as a family-owned enterprise.
We would like to take this opportunity to convey to you the economic contribution of the forest industry to the province and the potential for this contribution to increase in the future.
You have one handout now. We're hoping that two more will come. The one you have is the Price Waterhouse study we did last year. That will be up to the end of 1996 in terms of the financial contribution of the industry. The two studies that I'm hoping will be here before 11 o'clock are two local economic studies, one in the northwestern part of the province, the other in the central part of the province, and the kind of contribution the industry makes in those regional areas.
We support the government's commitment to making Ontario the best place to invest in North America, and our industry is poised to contribute to the economic health of our province as much as any other. If government makes Ontario a more competitive jurisdiction for our sector, the industry can increase its positive contribution to help in the economic recovery of this province. When the industry is profitable, government shares in these profits, not only through increased taxation from both industry and employees, but also through our graduated stumpage system. Those tax dollars contribute to the health, the education and the social programs that are part of the fabric of Ontario.
The forest industry consists of a lengthy value added chain that begins with the harvesting of wood from Ontario's forests and it continues through to the production of lumber and wood pulp, and ends in a wide array of high value added wood and paper products. Every stage in the higher value added processing chain is represented in this province. Indeed the value of a cubic metre of wood escalates rapidly as it passes through the several stages of processing along this chain.
Many of the products produced here, from lumber to fine quality papers and wood products, are exported and contribute significantly to Ontario's economy. In 1996 the forest products sector contributed $3.9 billion to Ontario's international merchandise balance of trade. We are second only to the automotive industry. If you take a look at the figure that's attached, you'll see the large contribution this industry makes in comparison to many of the other sectors.
In 1994 the forest industry sector employed about 63,000 workers in Ontario, but this represents direct employment only. Since the forest industry is the economic base for many northern communities in Ontario, and forest industry jobs are close to the highest paying, the industry generates a high level of indirect and induced employment. This employment has been conservatively estimated as an additional 120,000 workers. The distribution of employment by sector in Ontario mirrors the value added chain.
While the industry is critical to the sustainability of many northern communities, more than half the direct employment in the industry is actually located throughout central and southern Ontario, where a great deal of the higher value added forest industry processing actually takes place. I think this is a real misconception of this industry. A lot of people think it's a northern Ontario industry only. It is also a southern Ontario industry, not only with respect to the direct employment but also the indirect employment.
For example, last summer we conducted a survey just of my members and we found that my members alone purchased in Ontario $2.4 billion worth of products and services. Almost half of that was in central and southern Ontario. In terms of many of the small businesses that sometimes aren't related to the forest industry, many of those are very closely connected to the forest industry, be it the corner garage where some of our material is serviced or be it some of the southern Ontario places where we might purchase a variety of services and products.
Not only do those jobs support many communities and thousands of families throughout Ontario, but we make a substantial and a rising contribution to Ontario's fiscal position. The industry's financial contribution through crown charges related to the harvest of timber has risen by more than 350% during the 1990s, and despite a very difficult decade, where only the 1995 earnings and return on capital reached acceptable levels, the industry has continued to make substantial payments to all levels of government in the form of income and payroll taxes, crown charges for the harvest of timber, and other forms of revenue. You might remember in 1995, when we made substantial profits, that people were saying, "How come you're making so much money and what are you doing with it?" If you take a look at that graph and look at how much money costs us, really the return on the investment and the return on capital has not been very good for this industry, and we're into some very difficult times again. One of the things we really need is some good public policy to continue and to make us a competitive industry for the future.
With that, I'd like to talk a little bit about advanced industries today, and we do consider the Ontario forest industry as an advanced industry. We compete in a global context, and from this global perspective we do face a bright future. The demand for forest industry products will be sustained in the next millennium. You often hear that with computers you're not going to need a whole lot of forest products, but the demand continues to increase. It's increasing not only in North America but we see tremendous potential in the Eastern Bloc countries and also in Asia. But to succeed we need to have good public policy. This will encourage our international competitiveness and our capacity to expand with increased capital investment.
With that, I'd like to turn it over to Dave.
Mr Dave Steuart: Good morning, Mr Chairman and gentlemen. As chairman of the OFIA and as an industry executive, I can confirm there is a need for good public policy. A lot of people don't know -- you people know -- that 90% of our forests on which the industry is dependent are owned by the crown, and therefore the public is our landlord. This is contrary to our main competitor, the United States, where 90% of the forests are privately owned. So good public policy is a key ingredient for the continuing success and future contribution of our industry in this province.
The effects of poor public policy are currently being felt in British Columbia's forest industry. Stumpage fees, already the highest in the country, increasing by more than 250% in that jurisdiction since 1992, and the imposition of an extraordinarily process-driven, costly forest management code are two major contributors to the closing of pulp mills and sawmills, the layoff of thousands of employees and major restructuring of the remaining industry. In addition, although BC has 34% of Canada's pulp and paper capacity, it has attracted only 22% of recent planned capital spending.
1040
If there is good policy, there is incentive for more capital expenditures, increased productivity and improved efficiencies, resulting in a more competitive edge over other jurisdictions.
Recent positive changes that we have seen in Ontario include the streamlining of environmental regulations without adversely impacting environmental protection; that is, no longer testing for elements in the effluent that are not used in the process, harmonization between the federal and provincial environment ministries, one-stop shopping within the Workplace Safety and Insurance Board and the restructuring of Ontario Hydro.
As our industry becomes more complex and the markets we serve become more competitive, it is important for government to keep in close contact with our sector to understand the changes it is undergoing. This will enable development of sound public policy that is appropriately geared to the unfolding changes.
In the past, several factors that adversely affected our competitiveness included increases in crown charges and high and rising prices for electricity. Hopefully, crown charges have stabilized and the thrust towards competition for hydro will bring costs into line there.
However, a process we are watching closely with great concern is Lands for Life, a land use planning process. If substantial areas are set aside for single or restricted uses and not available for sustainable forest management practices, some communities and some companies will suffer hardships. How much will not be known until decisions are made on specific uses for specific lands. The impact will not only be felt in the north but, as Ms Rauter noted, throughout the province, as shown by some of the figures in southern and central Ontario.
We are actively contributing to the process and have engaged a number of consultants, including ecologists and economists, to help provide options that will ensure good forest stewardship of the lands while protecting jobs and communities. We believe there are win-win scenarios and hope these are the ones that will prevail.
Also impacting small northern communities, communities like Thunder Bay, Dryden, Marathon, Red Rock, Kapuskasing and maybe some communities that some members represent, is the Who Does What restructuring of provincial-municipal responsibilities. As a result of restructuring, many northern communities could find themselves in need of revenues to support greater service responsibilities. This is of particular concern in communities that have a single major employer, the forest industry. This could lead to additional municipal user charges or reduced services, both of which are of concern to our members.
A third issue we are following is potential Ministry of the Environment cost-recovery proposals, as enabled by Bill 57. We are in support of cost-recovery proposals that are clear improvements from a broad social and economic perspective and where any negative economic implications are carefully and deliberately managed. But cost recovery as a goal in and of itself may be arbitrary cost recovery and could result in negative socioeconomic impact, effectively working against the government's goal of renewed economic prosperity for the province of Ontario.
Therefore, what can government do? Where should policy be directed, in our view? First, continue the streamlining process to reduce red tape. Continue reviewing regulations to ensure that they are relevant in today's world and meet their objectives in the most effective, efficient way possible. Maintain a market-based stumpage system where in the good times industry shares in the profits with government and in the poor times government shares the pain with industry.
Work with industry to understand its changing world. Understand the marketplace we work in. Understand the competition we face. Finally, consider government policy in concert with a taxation system that encourages sustainable economic development that will in turn pay the taxes to support our socioeconomic and health net. Thank you very much.
Ms Rauter: That completes our verbal presentation. I recognize that in terms of some of the recommendations, they may not be as focused in terms of the budget as some of the other presentations you've had. But it's when you're allocating dollars to the various ministries and the programs the various ministries have, that's where the ripple effect comes back in terms of our being able to operate as an industry.
The Chair: Thank you very much. We have approximately four minutes per caucus. We'll begin with the government caucus.
Mr Rollins: Thanks for your presentation. I am fortunate enough to have probably one of the largest pulp and paper mills in my riding in Trenton, at Domtar. They're certainly a huge contributor to not only the workforce, but I think they do something else that many of us who haven't been through that plant don't realize. The recycling of paper they put through that plant basically since the conception of that plant -- they recycle a horrendous amount of paper. Sometimes as high as 60% of their output is in recyclable paper, depending on the logs coming in or the type of wood.
We had the Minister of the Environment down this year when they opened up one of their inner loops, as they call them, for recycling water to make sure that nothing gets back into the Trent and into the Bay of Quinte for the system to be polluted in any direction. It certainly was a big improvement on their operations down there over what they have done in the past.
One of the things that many of my constituents have expressed concern about is one of the byproducts, Dombind, as they call it, the road liquor they spread on the roads. A large number of townships throughout eastern Ontario buy that or get it free from them. Do you have any comment on the cooperation we've had, through the Ministry of the Environment, to make sure that product stays -- they claim it doesn't harm. There is a product that unfortunately comes out of poplar wood; it's not manmade but just grows in there, and there is a byproduct. I forget the name of it; phenol, I think.
Ms Rauter: There is a byproduct. It's because the mill at Trenton has done such a good job at reducing water and such that it's much more concentrated now than it was before. But in terms of volume, there is probably a reduced volume from what was there in the past.
Another name for liquor is also sludge. The industry has worked very closely with the Ministry of the Environment in making sure that the sludge is environmentally friendly if you're going to put it, not only on roads, but it also goes as a conditioner on soil. Most of that is organic material, the little finds that come out of wood.
We've done a lot of work working with farmers throughout the province. Domtar has done a lot, not only in Trenton but in the Cornwall area. It's a very good conditioner for soil, and that has been done for many years now. We've worked very closely with the Ministry of the Environment and feel comfortable with it. We are developing guidelines to try to make the public also comfortable with what is produced.
Mr Rollins: One of the other things they've done down there too, they've had some recycling of some soil they've had problems with, that has been contaminated over the years on properties adjacent to them. They are putting it into greenhouses and growing corn in it. The corn recycles the energy out of it and the end product is that the soil is purified. It's taken back. It's a little bit slower process, but they have some greenhouses down there with this contaminated soil and after they grow the corn under certain conditions in it, it purifies it.
There is a lot of experimental outreach from your people as far as wood product producers are concerned, and we appreciate it very much.
Ms Rauter: I am pleased to hear that from you because if I have one criticism of my own industry it's that they don't advertise the good-news stories and there are a lot of good-news stories out there. Those are the kinds of things that we somehow have to get out to the public, because there are many, many of them.
1050
Mr Phillips: Thank you for being here. I was recently at the mill in Kenora, and two things struck me. One I guess I knew, but you've pointed it out here, and that is the trade balance. I was just looking at today's numbers, actually; the trade balance came out this morning. Among other things, they say "demand for newsprint has been on the rise, the strengthened economy boosting newspaper circulation. Rising demand should place upward pressure on newspaper costs," so you should be happy with that.
Actually, three things struck me. The second thing was that for many of our communities in Ontario this is essentially the cornerstone of their economy. It's not like other communities, where you may have four or five industries or 10 industries.
The third one was that at least the mill in Kenora was mentioning that they believe they have an unending supply of raw material, of pulp. That impressed me, because I've always kind of been worried that as we harvest the forest we'll get far enough away from the mill to make it uneconomical to bring it in. Is that the case with your industry, that most of our mills now have for the foreseeable future an adequate and competitive supply of --
Ms Rauter: It depends, and it depends very much -- and this is one of our concerns -- on the Lands for Life process. In the early 1980s, when the forest management agreements came into play, that was when the ministry started renewing the forest operations it had, as well as the backlog that existed at that time from government. Those plantations are coming along, some of them doing quite well and some of them needing a little help.
What we're finding is that if we practise sustainable forest management, we think yes, we have a sustainable supply and we think we can satisfy the needs of all users who want to come into the forest. One of the exercises we're having through these round table town hall discussions is that there are a lot of people who want single use of the forest and they want to withdraw large hectarage, acreage, of forest. They call it a blob program, and what they're looking at is withdrawing it from forestry, mining and hydro-electric power and using it for other uses. If that comes to be, it puts this industry in jeopardy.
We're trying to put forward programs whereby all the values of the forest and of the people can be met, but it has to be through integrated sustainable forest management practices. If that is the case, we think the industry can survive and we think all the other uses can be met. If we have these large withdrawals for single uses, then I would say many of those northern communities could be in jeopardy.
Mr Phillips: Is tourism one of the single uses you're talking about?
Ms Rauter: The remote tourist operators would like some of these areas withdrawn because it allows remote tourism. Many of the other resource tourist operators, who depend on access, would have perhaps a different view.
Mr Phillips: Your comments on the Who Does What are important, by the way. I've looked at the list of communities that would have a tax decrease if we moved to a uniform mill rate. There was Toronto and Hamilton and the rest were virtually all communities where your industry is.
The Asian issue: Again this was one of the things I learned in Kenora, that not too many of your exports go to Asia, but there was a concern that it may impact on the price because western competitors whose market may not be as large now would move into your traditional markets. Do you have any advice for us on what impact the Asian situation may have on your industry here in Ontario?
The Chair: You'll have to be very brief, Mr Steuart.
Mr Steuart: You're exactly correct. Although Ontario producers of either lumber or newsprint and/or pulp aren't dependent at all on the Far East -- we ship a little bit of Thunder Bay hardwood to Korea, or we did -- the fact of the matter is that people who are dependent, like British Columbia and like the US south, are having a difficult time in those markets, both from the lumber and the pulp or newsprint point of view, and if they have a difficult time there they try to sell more in the United States or North America. We're experiencing that right now. Even though the fundamentals in North America are pretty good in terms of demand, it's having a dampening effect on pricing, for that exact reason: the Asian issue.
Mr Martin: Thank you for coming this morning and for making a wonderful case for the importance of the forest industry in Ontario, and indeed it is important. In my own community, we have at least three major enterprises that support the economy of our community. I think you raise a couple of issues here this morning, out of so many issues that confront you, that hopefully this government will take into consideration and address.
I remember that one of the first meetings I had when I got elected in 1990 was at St Marys Paper, with Dan Alexander at the time, and he was just beside himself. Ultimately, in the end he lost his business. What was affecting him negatively was the level of the dollar and the interest rates at the time. They were killing him and eventually did. We all of us have to be so very concerned and sensitive around what it is that will make your industry successful and what it is that will take away from it.
The contribution that the forest industry makes to the whole of the province and the economy of the whole of the province I think is irrefutable. You don't often get that sense, when you come down here and talk to people, about the need for us to have in return some consideration of our needs to maintain and sustain the communities that house the people who work in the industry. Certainly the point you make about the contribution we make and, in turn, the consideration we're asking this government to give us re some of the Who Does What exercise that's going on is absolutely critical if we're going to survive and continue to survive and if those who participate in this industry are going to continue to do well.
Are there any other specifics in that you would care to share with us this morning?
Ms Rauter: In terms of the Who Does What, I think at this point there is still the uncertainty. What we've tried to do is flag the potential problems in some of those northern areas. Many of our mills operate as the only major industry. If they have a residential community and you can only raise the residential costs so much and you've got a school that you have to be able to fund and you've got a hospital and such, the concern is that it all falls back on this one large company, and sometimes people feel that the company has deeper pockets so they can take the dollars out of the deeper pockets.
As you talked about St Marys being sold and restructured as an example, one of the things we have to be concerned about is that for these operations it takes large capital expenditures and you need to maintain those large capital expenditures, and if those capital expenditures go elsewhere or have to be spent elsewhere, you lose your competitiveness. We just have to make sure that all of the ducks are lined up properly to encourage the companies to spend to ensure that they stay operational, that they stay competitive, and to make sure that those small communities are accommodated.
Mr Steuart: I think one important point -- I don't know if you got into it with the economist from the bank, but everybody has to realize that we have a 69-and-a-half-cent dollar now and even with that dollar we have a competitive problem. It worries a lot of people in the industry that if the dollar increased in value by 10%, we'd have a huge problem.
Mr Martin: The Lands for Life exercise versus the sustainable forestry act: How is that mixing or not mixing and what is it that we should be or could be doing as opposed to Lands for Life?
Ms Rauter: The environmental assessment hearings and the Crown Forest Sustainability Act told us how to manage a hectare of land. The Lands for Life process is going to tell us whether that hectare of land is going to be multiple use or whether it's going to be a park or whether it's going to be a heritage area. Many of the people, though, in giving presentations for Lands for Life, have had real trouble separating the two and have come back into the forest management question.
The Chair: I have to interrupt you there; I'm sorry. We are out of time. I thank you for your presentation and thank you for your time this morning.
Ms Rauter: Thank you for the opportunity. Should you have any additional questions or anything, you know where to reach us, and please do so.
1100
FAMILY SERVICE ONTARIO
The Chair: Our next presenter is Family Service Ontario, Dr Drouin. Welcome. Thank you for coming.
Dr Hugh Drouin: I'd like to introduce the gentlemen who came with me this morning. Stephen Goldstein is the president of our board. Paul Zarnke is the executive director of the Family Service Association of Metropolitan Toronto, which is our largest family service agency in the province.
We'd like to extend our sincere appreciation for the invitation to present our story before this committee. I'd like to begin by quoting from the finance minister when he presented to the committee last week. He said in his conclusion, "In particular, will I look forward to advice from the committee which will contribute to making Ontario the best place in North America in which to live, work and raise a family."
Raising a family is our business. The family in Ontario is our business; that's what we do. Family Service Ontario is a provincial association representing 48 family service agencies across the province. Family service agencies provide a variety of counselling services, dealing with problems such as couple relationships, teen-parent problems, money management, family violence, divorce mediation and a myriad of other issues. For more information, you can look at appendix A.
What is the cost to government of maintaining these services for the people of Ontario? The overall budget for the 48 agencies combined is approximately $50 million. The government pays roughly half of this amount, for a total of S25 million. To put this in perspective, the average hospital budget in Ontario would be roughly $50 million. For half the cost of one hospital, the government is providing services to 250,000 Ontario residents per year. Furthermore, we believe this investment is even stronger when we consider the preventive nature of the services we render. Without this service, government would pay far more in future costs, because the future costs would have to go to more expensive services such as medical, legal and correctional.
Some of the emerging trends in family needs are as follows. According to 1997 research done by Family Service Canada, an overwhelming majority of clients of family service agencies are now low-income or marginalized. The same has been experienced in the United States. The number of clients in this category has increased significantly in the last 10 years. This is due to a number of reasons: a widening gap between rich and poor in our society, and the reality that middle- and low-income families and those on family assistance cannot afford to pay the high costs of counselling fees in the private sector.
According to the Family Service Canada research entitled The Strength of Canadian Families, the household incomes of family service agency clients are well below the Canadian average for family incomes, the Canadian average being $55,247 in 1995. The average household income of low-income earners is between $20,000 and $29,000. A full third of the respondents indicated that they had received social assistance within the last six months, and strikingly, three quarters of those recipients were women.
Family agencies are currently engaging in a losing battle in attempting to meet the needs of this population group. Government cuts in 1995 took away $3.5 million with the elimination of the purchase-of-counselling program, which provided coverage for counselling for low-income families. These families, growing in numbers, have now no place to access counselling and therapy that would increase their chances of becoming more stable and productive. In all of this, the children are the ones who suffer the most if parents are not in an emotional state to give them adequate emotional support. That is the tragedy of this whole situation: The children are the ones who suffer.
The other group of clients severely affected by the cuts are the male batterers. Although women's programs remain, it is essential that their partners also receive therapy to prevent further recurrence of domestic violence. We know from years of professional experience and practice that the treatment of both the men and the women is crucial in breaking the cycle of violence. In the cuts, treatment services for male batterers were eliminated, and family service agencies lost $2.5 million of funding to serve this population group.
The above services are preventive in nature: They prevent further damage from being done to families; they keep families stronger and stop individuals from ending up in health care, mental health and correctional institutions, which I said earlier cost much more than our service.
Key recommendations:
(1) Family Service Ontario recommends that the $3.5 million in cuts made in 1995 for counselling low-income earners be restored. This is a very small reinvestment that would immediately benefit the lives of over 15,000 people in this province. This renewed investment will prevent much more expensive interventions in the future.
(2) We recommend that the $2.5 million in funding for male batterers be restored to ensure that both men and women receive the treatment they need when domestic violence occurs. Research has shown that the treatment of both men and women is essential to prevent future violence in the family. Peter Jaffe, a leading expert in family violence in Ontario, said recently that 60% of the kids who witness family violence end up with severe emotional difficulties. This is a real issue, and it's a real problem.
In conclusion, our vocation, our calling, whether we are politicians or health care or social service providers, is similar: We all want to make a difference. Together we can make a real difference in the lives of thousands of Ontario families. However, that depends on how much the Ontario government will contribute. Frederick Buechner defined "vocation" in this way: "Vocation is when a deep gladness in your heart meets a real need in the world." Please help us to meet the needs of families. Together we can make a difference in the family life of thousands of Ontarians.
The Chair: Thank you very much, sir. We'll start with the Liberal caucus. We have about six minutes per caucus.
Mr Phillips: I appreciate your presentation. It's timely, with the inquest that's going on right now. It's an amazing coincidence. I coach hockey, and the son of that man involved played on my team last year, having moved from Collingwood at the time. So it's human to me.
One of our challenges here is, if this were education, there are marks you look at, and the students come every day and you see them. If it were a hospital, you'd know how many beds are filled. If it were a municipal service, you'd see it. But this is all out there out of sight, out of at least measurable sight. It's not out of sight, and I don't mean that. Can you help humanize this for us and try to give us some idea of whether the problem is getting worse or better? One of the things we've talked of here in the committee is to try to provide some standards, some goals, some targets to measure ourselves against. Can you help at all in quantifying this for us? I hate to try to turn this into a numbers thing, but is there any way we can do that?
Dr Drouin: Yes, there are ways to do it. I'll let Paul answer part of that question, but we are doing two things at Family Service Ontario. We have an excellent agency accreditation program which an agency has to go through in terms of meeting standards. We also have an outcome evaluation program, which gets at measuring our success with some of these issues. Some of these issues are not easy. But the preliminary data we're receiving now certainly show that when both men and women are treated for family violence, there is progress in the family and many families are saved as a result. There's myriad research about the effectiveness of counselling. That can be quantified and it certainly can be presented. That's a good question.
1110
Mr Paul Zarnke: I think my interpretation of your question is you are looking for some quantitative measures to get some sense of the scope of the problem. I think there are lots of quantitative measures out there for a variety of problems. We know that one in five women is, has been or will be the victim of abuse, in most cases by a partner or someone in her own constellation. We have lots of information about children living in poverty and those numbers are going in the wrong direction. We have numbers about youth unemployment and the impact of all of that. I think the face is there. It's a matter of finding the will to do something about it and not to continue to make moves that exacerbate those problems.
Mr Stephen Goldstein: I'd just like to also mention the qualitative. I know it wasn't in your question, but I think many members here will have seen in their own experience that people they know qualitatively have been affected by these kinds of services. If you go to a United Way progress meeting, you'll hear people talk about the agencies and the work they've done and it saved them from disaster. I think it may be anecdotal but there's certainly a qualitative aspect to it as well.
Mr Phillips: As I said in my opening comments, it's timely and an amazing coincidence that you're here and this major inquest is going on and one of the issues they are trying to deal with is the very issue you're raising here with us.
Your recommendation 3, that Family Service Ontario be supported, you say, as the key agencies. Do you mean as the key agency or as the key agencies?
Dr Drouin: The key agencies in the province, because we really are the main agencies dealing with family. Because we've never been 100% dependent on government for funding, because we also have United Way and we've been entrepreneurial in the sense that we have a lot of EAP contracts with companies to provide counselling, we perhaps haven't had the profile with government in the past that I think we need to address the issues that I mentioned this morning.
Mr Phillips: What would that mean in real terms, being given the mandate? I'm just trying to understand what you would do differently from what you're doing currently and why that's important.
Dr Drouin: I think being invited to come here this morning is certainly a really good beginning, when there are committees such as this or other types of committees and various ministries, that we would be put on the list and be asked for our input. When you consider the 48 agencies across the province, all the expertise that's there with the volunteer board members and the staff, we have quite a wealth of expertise to offer.
Mr Goldstein: We have innovative ways to present programs and we even went cost-cutting and tried to be as innovative as possible. I think there's a wealth of experience among these 48 agencies.
Mr Phillips: What would be the reason why you wouldn't be given that mandate? Have you ever said to the government, "There's a role we could play"? Is there a reason you've been given why you wouldn't be given that mandate?
Dr Drouin: I think it's a number of factors. One, we haven't been 100% dependent on government for funding, so they probably haven't seen a need to give us a stronger voice. The other thing is I think our profile needs to be higher with government so that they know we're out there and also know the kinds of work we do.
Mr Martin: Thank you for coming this morning. It is indeed important that you come and present at this table. You may not know, but I have because I've been here a bit and Mr Phillips may too, that when the banks and the economists come in, the folks across the way perk up and they're very interested and listen real well and even the press show up from time to time for them. But when the people who serve the human dimension come, there's chit-chat and a lack of interest, it seems, and because of that probably at the end of the day a lack of understanding of what you're dealing with out there in the community.
We have economists come in, the C.D. Howe, who tell us, "We don't have any qualitative ways of determining the impact of some of the decisions." This morning we had the Bank of Nova Scotia, I think it was, say to me, "Yes, the policies of this government are going to cause some pain for some folks in the short term but eventually they'll all be better because of what's going on."
I just want to focus on a couple of the policies that you probably have had to deal with very directly and ask you, just how deep are they? The sense you have is, yes, there are some problems but they're not life-threatening, to the system, I guess, because they certainly are to individuals and to families.
One of the policies this government feels it needs to have to improve the economy is to take 22.6% of the income of the lowest and most vulnerable and most marginalized of our citizens away from them. Somehow this is going to contribute to a better economy. Then, not long after that, they take away the services that these people need, which you've outlined here, two of them: $3.5 million in the money that you used to counsel poor people and $2.5 million that you used to deal with the issue of violence in families, where usually there's no income. Money is usually the root of a lot of the violence that happens. Yet this government would lead us to believe that this is good for us, this is good for people, this is good for the economy and eventually we'll all benefit.
I want to know from you just what is the impact. You've talked about having a qualitative or quantitative ability to measure that. What is the impact of taking that much money out of the pockets of those who are already struggling and then taking away the counselling that they need to try and cope with that?
Mr Zarnke: The impact we're seeing in our agency here in Toronto is a growing demand for service, particularly in our woman abuse services and our services for men who are batterers. We're seeing people who are in more difficult, more complex kinds of circumstances and who need greater assistance. So we're having to do more intense work with them to try and help them get their lives back on track.
I think with respect to the woman abuse issue, that is an issue of safety. In fact, you had made the comment about being life-threatening. It is an issue of life and death for many women who are living in circumstances where their life is constantly in danger. So the erosion of any of the supports, either for the women in those circumstances or for the men who are voluntarily at an early stage trying to reach out to get some help to change their behaviour, is ill-founded.
Mr Martin: Maybe I can follow up and ask you the question that I didn't get to ask the bankers this morning because my time was up. Actually, some of it was my own fault. I didn't get here on time because I was doing other things. I really did want to be here for the bankers. I suppose it was a question of how much is enough -- the casualties of this program. They freely admitted that there were casualties, that the system is fraying at the edges at the moment and people are losing out; even in their realm, record-high small business bankruptcies and the impact that has on families and people.
Is there any way of measuring just exactly how much damage is being done with this program? Would you be able to venture a guess as to where it all becomes counterproductive, where enough is enough? I wanted to ask the banks that. When is enough enough in terms of the pain that ordinary citizens have to absorb and endure before a government and a system begins to say we have a problem here that is obviously out of control, that is no longer fraying at the edges but is now beginning to eat away at the core of the system?
Mr Zarnke: It seems to me that it depends on how you define ordinary citizens. I think we've kind of shifted the standard of what we define as ordinary citizens and are concerned about slightly to the right. There are a growing number of people in the community who are having significant reductions in entitlements to access to services. I know in my own agency this access by persons on low income to subsidized counselling was available to people who are on GWA, FBA and on low-wage income and who had to meet a qualifying means test. The province made available to family service agencies about 50-cent dollars and the rest was provided by the United Way. The elimination of that small pot of funding meant that about 1,000 people a year, those people on the lowest of incomes in our community, were no longer able to access counselling services which people who did have means could go out and purchase in the private market.
1120
These are people whose relationships are deteriorating and who are reaching out to try and get help, to try and keep their families together. We all know what happens when families split up. Often you've got two households now both in poverty. They are people who are struggling with issues of relationships, trying to manage their children and the behaviour of their children and cope in terms of relationships at school, again issues of violence within the family, and the list goes on. These services have been greatly diminished in terms of their availability in our communities by the erosion of that one small amount of money.
The Chair: Thank you, sir. I'm sorry I have to interrupt you there and move to the government caucus.
Mr Rollins: Thanks for your presentation. We had some people in the other day and there was a statistic that was astounding to me that they laid on us -- I think it was in with some of their information; I don't know whether they spoke of it or not -- that 36% of people who come from single-parent family backgrounds have problems in school, with the law or with society in general, while only 8% of those people come from two-parent families.
It puts a lot of onus on people who try to direct those to make sure there are two-parent families. I'm not opposed to single-parent families; don't get me wrong. But when we see that kind of a statistic about people who are raised in them, I think that has to put up the lightning rod to say, "How do we make sure that more two-parent families exist?" Because that child who gets out of focus, whether it's at school and he doesn't learn or whether he gets in trouble with the law or whether he never graduates from high school, he doesn't get further advanced education, is a continual drain on our society for the rest of his life. I'm not trying to say that is the only thing that happens, but if that's a fact -- do you people feel that's the kind of ratio it really happens at?
Dr Drouin: I'm not sure exactly of the ratios, but they would be similar, I think. When you're saying yes, keep the family intact, that's certainly our objective, to keep the family intact, because that's the best scenario. No one wants a family to break up. However, when it does happen -- and you're saying 34% of single-parent families have children with problems -- if we can get in there early enough and provide an intervention to these families, we can minimize these problems.
You know and I know a lot of people who have come from single-parent families who haven't done too badly. I was raised by a mother alone. My mother was on mother's allowance. She had good support. There were three kids in the family, and we're all doing fine. We're a little crazy sometimes, but generally we're doing fine.
Mr Rollins: We're all a little crazy at times.
Dr Drouin: But it's because we had help at the right time.
Mr Goldstein: I'd just like to make a point that the more intervention we can do with the family in crisis and the better the family that exists, the better the role model for the offspring of the family, so that at least the next generation has a better chance.
Mr Rollins: That's the concern I had.
Mr Arnott: Thank you very much for your presentation and for the good work you're doing. I've learned a great deal about your organization today and I appreciate the time you've taken to come in.
In your recommendations, you're asking for reinstatement of some of the cuts that have taken place that have affected your organization. I'm looking at the first recommendation, and you say the government cut $3.5 million in 1995. Was that part of the 5% reduction that the government passed?
Dr Drouin: No, it was more than that. It was elimination of the program, cut completely.
Mr Arnott: Have you been able to make up for that reduction through --
Dr Drouin: No, we haven't, so people are knocking on our doors and we have to say we're sorry. That's tough, let me tell you.
Mr Arnott: So it has a negative impact on --
Dr Drouin: Absolutely. The people who can afford to pay can come to our agency if they want to or they can go to private practitioners, and they're fine. But that section of the population that we can't service -- that has really been tough.
Mr Zarnke: I'd also say this was a nice partnership between the voluntary sector, the United Way and the government. The government dollars really were 50-cent dollars. It was a nice working together. We're very sorry to lose that.
The Chair: Just let me take a liberty here and address you, Mr Goldstein. You made a very good point. The bankers were here earlier this morning and yesterday. Everybody, before they came here, has dealt with a bank. Very few people know until they get here and we start to learn -- but let me tell you, as a judge for 11 years on a family court bench and 15 years practising law in a major city doing matrimonial law, if they knew what you people contribute, it would not have happened. That is your problem: Nobody knows.
Thank you very much for your attendance and thank you for your time.
ONTARIO HOME BUILDERS' ASSOCIATION
The Chair: The next presenter this morning is the Ontario Home Builders' Association, Thank you very much for your attendance this morning. Welcome, gentlemen. We have 30 minutes. Please proceed.
Mr Murray Koebel: I'd like to thank you for inviting us here to address the committee. My name is Murray Koebel. I'm the first vice-president of the Ontario Home Builders' Association and I'm a home builder in the Toronto area. Mr Wayne Dempsey is with us here this morning, and our president, Mr Al McLean, is unable to attend today because of an ongoing illness, unfortunately.
For those of you who are not familiar with Ontario Home Builders' Association, we are a volunteer association of companies in the home building industry. We have approximately 3,200 member companies in 34 locals around the province.
You have identified that we have half an hour. Our prepared remarks are relatively brief, so we should have reasonable time for questions.
This morning we would like to cover five topics. I'm going to give you a bit of a report card on two areas. One is how our members rate the government's fiscal management, and the second is the state of the housing industry. Then I will turn things over to Wayne. He will touch briefly on two areas of concern that could affect the performance of the home building industry. These are municipal user fees and licensing and economic disincentives for private investment in rental housing. Finally, Wayne will mention some specific measures we would like to see in the budget.
Let me begin with how our members rate the government. Based on a recent survey of members, in general the industry is very happy with the government's fiscal strategy. Three quarters say they "strongly support" deficit reduction and two thirds "strongly support" spending cuts. In both cases, the balance of members support these actions. Support for income tax cuts is a bit softer. But even here, 88% either support or strongly support this measure. Finally, looking ahead to when the budget is balanced, 61% think the fiscal priority should be debt reduction and one third say tax cuts.
Now I'd like to turn to the state of the housing market. Let me quote from our written submission to the minister, which has been handed out to you.
"It was not hard finding good things to say about the housing market in 1997.
"Total starts in Ontario were up 26% from 1996," to 54,072 starts, "placing them at the highest level since 1992.
"The recovery was spread over most of the larger urban centres in Ontario. Only northern cities and Windsor showed declines.
"Most companies shared in the recovery. Two thirds of OHBA's member companies reported increased sales in 1997.
"A shift in the market towards larger, single-family homes indicated the return of the move-up buyer."
Perhaps the most impressive thing about 1997 is that it was the first time we saw two consecutive years of increasing starts in some time. We expect this trend to continue this year, although at a somewhat slower pace. For 1998 the Ontario Home Builders' Association is predicting 61,000 starts, or an increase of 13%. There are, however, a couple of concerns.
1130
Although 1997 was an exceptional year, it was no different from previous ones in at least one important respect. We still did not build all the housing that is required. Our estimate is that there is now pent-up demand for 125,000 units in Ontario. A lot, but by no means all, of this pent-up demand is for lower-end product, including rental housing. Last year, less than 780 rental units were built in the whole of Ontario. Wayne is going to have more to say about this situation. For the moment, the point I am trying to make is simply that there are grounds for both optimism and concern in the current housing market.
Low interest rates, the land transfer tax rebate, relaxing standards for basement insulation and streamlining the approvals process have all helped improve housing affordability. These have placed us in a better position to deliver the sort of product many families need and can afford. But we are not out of the woods. The economics still do not enable us to meet the needs of a great many families.
As one final word of caution, there are going to be more pressures working in 1998 to increase our costs. Our industry is currently negotiating the collective agreements for unionized trades, especially in the Toronto area. Depending on what happens over the next couple of months, we will probably have more expensive labour, or perhaps no labour at all, in the spring.
We are expecting a new generation of development charge bylaws to be passed under the rewritten Development Charges Act. The new legislation is improved in a lot of important ways but it will not result in lower development charges.
Finally, we are expecting to see more and more municipalities jumping on the bandwagon of increasing existing user fees and creating new ones.
We simply cannot absorb cost increases for labour, development charges or user fees, and as the evidence of pent-up demand suggests, we can't pass them on without forcing more families out of the housing market. In a nutshell, we have a recovery that has taken hold in a lot of the market, but there are still some key areas where we are underperforming. A threat of cost increases is looming on the horizon that could weaken the market in 1998.
I will turn things over to Wayne to talk about some of the trends that are affecting our industry and what we would like to see in the budget.
Mr Wayne Dempsey: Good morning. To begin with, I will stay with the issue of user fees and municipal licensing. Murray mentioned that we expect to see municipalities jumping on the user fee bandwagon. This is not all bad, so let me be clear about what we see as the issue here. The industry supports user fees, but this support has two important qualifications: First, the fee must not exceed the cost of the service, and second, the level of service must be reasonable and it must provide true value. What we have been seeing are instances where fees are increased without justification. We are also seeing fees applied to things that have no true value for the industry or the public.
A clear example of this is municipal business licences. Provincial legislation already tells us what can be built, where it can be built, how it can be built and who can build it. What is gained by having municipalities license the trades that will be working on a project?
The new Municipal Act has been released for public discussion. As part of the consultation, we hope to see the issue of municipal licensing subjected to the Red Tape Commission's regulatory impact and competitiveness test. We submit that licensing fails this test on at least two counts. In the case of user fees, we want to see rigorous cost accounting and no possibility that fees will exceed the cost of providing the service.
Now I will turn to our second area of concern, which is the rental sector. Most of you are probably familiar with the recent history of rental housing in Ontario. If you plotted annual rental starts for the past 25 years on a graph, you would see three patterns. One is a substantial and permanent drop after rent controls were introduced in the mid-1970s. The second is another and proportionately sharper drop after rent controls were tightened in the early 1990S. The third is a marked shift to publicly financed production, beginning in 1989.
There are basically three broad categories of barriers to private investment. These are an imbalance favouring the tenant in regulations governing the management of existing units; a gap between the economic rent needed to receive a reasonable return on investment and the market rent available; and high vacancy rates, which signal low demand.
The government has made substantial progress on the first category of barriers involving the imbalance favouring tenants. It has also devised a detailed agenda to narrow the gap between economic and market rents, but little progress has been made.
Our written submission to the minister describes the measures that were recommended to the government and the changes that have been implemented. The bottom line in that discussion is this: In 1995 the government identified an average gap of $3,000 per unit per year between economic and market rents. If you leave interest rates constant, that gap is still over $2,500. I should add, however, that the jury is still out on some of the measures designed to eliminate this gap.
Municipalities might lower development charges and they might reduce the inequity in property taxes on rental and ownership units. The legislation dealing with both of these issues is as yet untested.
We are recommending that the effect of these changes be closely monitored to determine if they are having the desired results. If they are not working as desired, they should be modified as quickly as possible. As long as this gap persists, private investment will not happen. Quite simply, there are more profitable places to make investments.
We also recommend that the government ensure that no additional costs be imposed on residential construction, and this obviously takes us back to the earlier point about user fees and municipal licensing.
Turning now to the provincial budget, we have two recommendations.
First, the industry strongly supports the government's intention of eliminating the deficit. We have seen a fundamental change in the attitudes of all governments at all levels regarding fiscal management. This change has resulted in lower interest rates, greater housing affordability and a generally improved economic outlook for all Canadians. But the job is not done. We cannot become complacent. All decisions that impact on the budget must respect the need to eliminate the deficit and then begin reducing our public debt.
The second recommendation is made in light of the continuing struggle to ensure an adequate supply of affordable housing in Ontario. For two years, first-time buyers of newly built houses have received a rebate on the land transfer tax. This is obviously a boost for new construction. But just as important, it is a boost for rental supply, since many first-time home buyers vacate units they have been renting.
Our second recommendation, therefore, is that the land transfer tax rebate for first-time buyers of newly built houses be indefinitely extended.
Thank you for your attention. We will try to answer any questions you might have.
1140
The Chair: Thank you, gentlemen. We have approximately five and a half minutes per caucus. We'll start with the NDP caucus.
Mr Gilles Pouliot (Lake Nipigon): Good morning, gentlemen. I appreciated your presentation and wish to echo that it was a good year in 1997, and the outlook for 1998, although not as prominent, will be positive as well.
In your report card, you've mentioned that you appreciate that this government is going through an exercise of spending cuts. The reality is that this government, this fiscal year, will spend more money than any other government in the history of Ontario in any one fiscal year. They've cut, but they're still spending more. That's what the books say. I'm not the one saying this; the Ministry of Finance says that.
In terms of the development charges -- and that would be welcome news for you; it makes you more competitive -- I'm not imputing motive, but there is a perception that not 100% of the savings will be passed along from the builders to the consumers. I'm seeking assurance that all or the majority of the savings would be passed along to the consumer. What you save should be reflected in the price of housing.
Mr Koebel: Basically, the way we look at it is that a housing project is costed based on what has to go into each dwelling, and there's no reason not to pass on the savings. I think builders are in a very competitive environment, and as far as we're concerned, those savings do get passed on.
Mr Pouliot: That's welcome news, and I thank you.
The cost of labour: You have indicated that you would be hard-pressed to meet any increase in the cost of labour. You are guided by collective agreement, a binding agreement between two parties, employee and employer, through the bargaining process. Do you have any suggestion to the government?
Mr Koebel: Obviously, the two parties to the agreement need to spend their time negotiating it, which is the normal process, and see if they can come to terms. If they can come to terms, then we carry forward.
Our main concern is that wage increases have been minimized over the last term of the collective agreement and increases are anticipated. That's going to impact negatively on the number of people who can afford to purchase homes. That's what the problem is.
Advice to the government is really to carry on with the agenda of continuing to streamline, continuing to monitor unnecessary cost increases and those sorts of things, as we have described in our brief, so we can have the best affordability for the most people.
Mr Pouliot: Thank you kindly. Can you tell me in a broadly summarized form, do you see changes in the demographics, the baby-boomers and so on? What does it do to your industry in terms of adjustment, meeting the new needs or relatively new needs of the marketplace?
Mr Koebel: That's a very complex question, and we struggle with that one within our industry all the time. We obviously are dealing with an aging baby-boom group. Every year we're all getting a little bit older. But then there are a lot of other factors. There is the formation of households, which has to do with lots of things. It has to do with people's relationships with one another and all sorts of things.
The best gauge we can make of the marketplace is simply looking at what is being built, and we have noticed that mainly smaller, lower-end product has been the mainstay for the last several years that our industry has been producing.
Mr Pouliot: Since June 8, 1995, I have gotten a lot older. I readily acknowledge this.
Some 3.8 million units are in the process of being assessed and reassessed. It's anticipated that 600,000 appeals will be launched. Anxiety sometimes leads to fear or certainly to some hesitation. You will be one happy lot when this is all behind us, when people can look to the future with certainty and therefore more confidence. You can't say this, but they have created one heck of a mess. The revolution is going on on many fronts and there is a lot of anxiety. In my neck of the woods, my special part of Ontario, there are a lot of people who would like to know what the taxes will be for 1998, never mind 1999. They still don't know, and they have to survive on interim tax levies. Some of them want to buy a house. They don't know, because the government has messed up. That's their feeling.
The Chair: I'm going to have to interrupt and move on to the next caucus, the government party.
Mr Rollins: You're predicting a modest growth for this year. Do you predict that the growth areas in the province at present, Barrie, Hamilton and those areas, are still going to be the hubs of the growth? I come from Belleville, and I see we had a 40-unit increase in growth; percentagewise, yes, it's high, because we don't build many houses there, or we haven't in the past. Do you see that the outlying areas are going to start to grow faster or do you think it's still going to be the metropolitan areas?
Mr Koebel: The result of our studies seems to be that the large cities are experiencing a large portion of the growth. Having said that, it's fairly broad-based and I think it happens a little bit everywhere, but the numbers get fairly small once you get into some of the rural areas. I think the truth is it really does happen in the larger cities.
Mr Rollins: And you predict it will stay pretty much the same this year coming up?
Mr Koebel: I think that's our projection, yes.
Mr Arnott: Thank you very much for your presentation. You have given the government fairly high marks for its economic policies and we appreciate your support. We're trying to do what we can to encourage your industry in a positive way to go out and create the jobs we need. We're not opposed to your making a profit either, because we tax on it and that money comes back to help us fund our programs.
We have undertaken changes to the Municipal Act, as you have identified in your brief, and what you have said on user fees is something I think the government should be supportive of. How do we ensure that municipalities, in turn, make sure their user fees reflect the true cost of the service and represent value to those who are paying user fees? How do we ensure that happens?
Mr Koebel: I think part of it has to do with monitoring. The province always has the opportunity to write legislation where it wishes, but if you could have the cooperation of the municipalities, I suppose that would be one direction.
The building permit fee in particular is what we're talking about, and the licensing, which is the other item Mr Dempsey mentioned, but the building permit fee to be specific. We have had municipalities in various places in Ontario attempt to have 30% or 35% increases, and we don't really understand the rationale for that to happen in any given year. I don't think much changed from prior years. In fact, when the industry gets busier, they should actually be doing better with the revenues that are generated. We're just concerned that these things don't become profit centres or income revenue generators any more than in an absolutely minimal sort of way to cover the cost of the service. That's the main premise. We view these things as a service, not as revenue generators, and they should be paid for at cost or very near to cost.
Mr Arnott: You have also recommended that the land transfer tax rebate for first-time home buyers be made permanent. That has obviously been of benefit to many young people in Ontario over the last couple of years and obviously been of benefit to your industry.
Mr Koebel: Yes. That's been a good program, and it was very helpful at a time when the industry was going through a very low building period in the last couple of years. We think it should be made permanent because there is still much benefit that comes out of it. I believe the number here is that 15,000 people applied for the rebate last year. Basically, almost by definition, many of the people who buy their first home are very often moving out of a rental accommodation unit. Helping to encourage them helps to free up rental units within the marketplace, which helps the supply of rental for those in the needy sector as well. We think that's been of benefit as well.
1150
Mr Arnott: Do you know what the savings would be to a young couple buying a house through this program? Probably about $1,000?
Mr Koebel: It's $1,200 to $1,300 that we've been able to determine was the average amount. The formula would actually give more to some people, but it's based on their incomes. That's the number, $1,200 to $1,300 per first-time home buyer.
Mr Arnott: Thanks again for your advice.
Mr Phillips: Thank you for the presentation from a huge, important industry. I found this document helpful, the submission to the Minister of Finance. It's got a little more detail in it.
I was mildly interested that on page 29, Conservative support among your members has dropped from 90% down to 89%. It must be a cause of some concern for the Conservatives. But the Liberals still have 9%; I appreciate that. You're shut out, Gilles. We'll keep working on it. I'll look for next year's result and see if we can pick up some support.
I was interested in your comment on page 21 that we shouldn't look for any significant amount of activity in the rental sector. Is that the perception of your industry, that there will not be much rental accommodation built?
Mr Koebel: I venture to say that's correct. In fact, if you would flip to page 10 of that report, it lists a chart of the various savings that were anticipated from the various moves the government initially undertook. Some of those have come into play so far and some have not. There's still a gap that doesn't allow the economics to play in favour of someone building these buildings and actually making a minimal return on investment. The investments are substantial, as I'm sure you're aware.
Basically, that's correct. I think 700 or 800 rental units were built in the entire province last year, and that's really not a good thing. There should be much more rental housing being built. We need to get the economics to the point where that can happen in the private sector.
Mr Phillips: I found the chart on page 4 helpful as well, that in 1988 and 1989 there were around 80,000 units a year being built; it dropped off and I gather will go back up. This is just urban. I guess in total there were 105,000 units or something like that, about 100,000 units?
Mr Koebel: That sounds about right.
Mr Phillips: I found your estimate on page 8 helpful. It's the industry's opinion that the need per year is 70,000 housing units in Ontario to meet population growth, family growth, things like that?
Mr Koebel: Yes.
Mr Phillips: Is it that once we get to 70,000 we've at least met the annual need? I guess you're saying that in your opinion there's a pent-up demand of 125,000. Where are those people right now, would you think? Are they living with parents?
Mr Koebel: We believe there is a variety of situations, but some are definitely doing that. People are doubled up more than they perhaps would like to be.
To return to your point about the 70,000, we're hoping to approach 61,000 this year, which is coming up to that level of demand. But as you indicated, the pent-up is all the many years we've been unable to come up to this kind of number. It's very hard for us to say. There were basement apartment rentals and all sorts of other things in the last years that we were aware of, and it would be better if those people had a different type of accommodation to live in.
Mr Phillips: What is your expectation of how the property tax issue will be handled with the province setting the uniform mill rate on residential education? Is it your expectation that those savings will be passed on to the tenants?
Mr Koebel: I believe it will be. With the rent control regulations coming into play shortly, a bit of a market rent situation may occur, and we think landlords will pass that on. It may take a little bit of implementation time as people either stay in their unit or move, but we're anticipating that it would be passed on.
In particular, the main reason we are in favour of this is to help stimulate the new construction element of new rental accommodation, which is the missing element in the industry, and for product choice in the public.
Mr Phillips: Although right now your industry is saying that won't be enough to really get things going.
Mr Koebel: It's one on a list of things. The property tax imbalance -- to make clear what that is, a lot of rental units were being charged double and triple the property tax rates that were predominant in the ownership market. We view that as an imbalance, so the government's cutting back on those and reassessment of the property taxes from especially the education component will help to lower that number.
It's very hard for us to speak on behalf of every landlord. We're really the new home industry.
Mr Phillips: Aren't they required through legislation to pass it on?
Mr Koebel: I'm not entirely clear on that. I could find out.
The Chair: That concludes the time we have. I thank you for your presentation and your time this morning.
We'll recess now until 1:30.
The committee recessed from 1157 to 1332.
ONTARIO PUBLIC SCHOOL BOARDS' ASSOCIATION
The Chair: The first presenter this afternoon will be the Ontario Public School Boards' Association, Ms Peterson and Ms Sandals. Ladies, welcome. Thank you very much for attending.
Ms Lynn Peterson: My name is Lynn Peterson. I'm the president of the Ontario Public School Boards' Association. Joining me is Liz Sandals, our executive vice-president.
I will speak for approximately 10 minutes and then we would be more than happy to answer any questions you may have. You all have a copy of our submission and I hope you will have the opportunity to read it. In the meantime, I will draw your attention to the table of recommendations listed at the front of the document.
The Ontario Public School Boards' Association represents the interests of more than 1.5 million elementary and secondary students and more than half a million adult learners from all regions of the province. The association's mission is to promote and enhance public education for the benefit of all citizens of this province. The association believes that the role of public education is to provide every individual with equal access to educational opportunities regardless of gender, race, religion, ethnicity, ability and place of residence, in English or in French.
Our association is committed to improving education quality, ensuring equity in access, promoting cost-effective and affordable programs and improving accountability. In order to be successful, the government must ensure that we have sufficient funding to provide well-trained teachers, appropriate resources, clean, safe buildings, and we need local access to meet local needs.
For more than a decade OPSBA has been has submitting recommendations to the province that would allow school boards greater flexibility in providing services in a more cost-effective manner. The association is very concerned that insufficient funding will result in further reductions to classroom programs and reduce support for students. Without sufficient funding, equity in education will not exist.
We therefore recommend that we need a provincial funding model based on accurate and comprehensive costings of programs and services based on the diverse needs of local communities and sensitive to the students' needs in all parts of Ontario. We also need access to the local tax base to provide for local needs and we need to be able to improve school board flexibility and freedom to implement new ways to deliver services and to facilitate local innovation.
Public school boards do their best to minimize the impact on students in the classroom. Rather than eliminate programs, many boards have restructured services. Since 1995, school boards have reduced operating expenditures, primarily in central administration, capital, school busing and adult education. By 1997, only 3.9% of education spending was for governance and board administration.
In December, the Minister of Education and Training announced funding for the January 1 to August 31, 1998, transition period. Although OPSBA's participation in discussions about stub-year funding did result in an increase over and above that originally planned by the government, the association is still concerned that the long-range funding model will not meet the diverse educational needs of the learners in Ontario's public schools.
The focus of recent work continues to be the allocation of reductions from the funding base, using a top-down approach with little or no current expenditure analysis. This approach concerns us, as it will not achieve a desired level of equity among the boards.
A funding model comprised of grants based on provincial averages or medians will not reflect a realistic base cost. In fact, the top-down approach violates the principles of the foundation grant and distorts the achievement of equity.
OPSBA continues to offer its assistance to the government to formulate a brand-new approach to provincial education funding. Modifying the old model will not meet the diverse needs of every student in every community.
OPSBA therefore recommends that the provincial government develop a student-based funding model from the bottom up, using sound empirical data built on a statement of fundamental principles and objectives which define quality education and priorities, and also that the new funding model, adjusted for specific issues such as the impact of enrolment changes, changes in teachers' salaries, savings through changes in governance, reduction in secondary prep time and increases in debt servicing costs be phased in.
To this end, we also recommend the establishment of a special task force and work groups effective until the spring of 1999. The special task force would complete the development of policy statements setting out the principles and objectives defining quality education and priorities. The work groups will develop the empirical data and supporting material which will clearly define the education system envisioned for the future in areas such as special education, learning materials, enhanced technology to meet classroom needs and adequate per pupil facilities.
To ensure compliance with the funding model by the end of the phase-in, a critical path and costing model to take the system from the present to the future must also be developed.
Over the past several years, school boards' efforts to reduce were focused entirely outside the classroom until there was no other place to go. Continued reductions in provincial support for education forced program cuts and reduced support for students. Some boards found it necessary to eliminate junior kindergarten, cancel or restructure adult education and day school programs, and eliminate such things as instrumental music, noon-hour supervision, gifted enrichment programs, alternative education and elementary libraries, grades 7 and 8 technology, reduce extracurricular activities and outdoor education, and downsize special education support services using fewer or other types of personnel.
As well, staff positions such as teachers, teaching assistants, special ed assistants and English-as-a-second-language teachers were dramatically reduced. School board amalgamations have further reduced support and administrative staff. The system is stripped to the bone.
We therefore recommend that there be no further cuts to public education and that consistent with the recommendation of the EIC, any savings realized through the restructuring of school boards be reinvested in the education system.
I'd like to talk to you about junior kindergarten. There is no doubt that high-quality early childhood education is beneficial for all young children, especially for those from disadvantaged backgrounds. School boards must be able to maintain junior kindergarten programs.
We therefore recommend that sufficient funding for junior kindergarten must be included in the funding model.
The Ontario Public School Boards' Association strongly emphasizes that now is the opportunity to be more creative in improving public services for children and youth in our communities. It is time to integrate and coordinate all children's services.
Public school boards have been struggling for years to find effective and efficient ways to integrate education, health and social services for children. The province must take leadership by working with all its partners to develop regulations, policies and practices for an integrated approach to children's services. This is even more critical now that local boards no longer have the ability to supplement children's services in schools through the property tax.
1340
We therefore recommend that the provincial government work with its partners to develop policies and practices which recognize the long-term financial and social benefits of integrating children's educational, health and social services, and that the provincial government provide province-wide technological infrastructures to allow school boards and their communities to find creative and effective ways to coordinate and integrate children's services.
School boards are required by law to provide programs and services for identified exceptional students. The delivery of special education programs and services varies across the province, depending on the type and number of exceptional students. Mental health professionals agree that integrating high-risk children in local schools is the best educational option for the child, and parents expect local schools to be equipped and staffed to deal with each and every child. Public school boards, serving approximately 75% of exceptional students enrolled in Ontario schools, are concerned that the new funding model and school board amalgamations will result in understaffed, underfunded, or even cancelled special education programs and services.
We therefore recommend that both the special education per pupil and intensive support amount of the recommended special education grant be sufficient to reflect actual costs and programming needs; that the funding model must recognize the special needs of all students in treatment facilities or institutions; that programs currently funded under section 27 of the general legislative grants continue to be identified and funded sufficiently; that the special education grants must recognize the additional costs associated with the transportation of special needs children; that the special education classes not be included when boards are calculating their average class size. This will result in a more equitable class size calculation, ensuring that boards with a higher proportion of special education students do not have higher average class sizes.
The province has repeatedly stated that there are no second-class students in Ontario. If the province is committed to such statements, it must not decrease the current level of funding for special education.
There are other issues around the financing of education. One of them certainly is taxation. Bill 160 removes local powers of taxation and provides for the Minister of Finance to establish tax rates. School boards are now expected to make appropriate local fiscal decisions while being constrained by fiscal decisions made at the provincial level. This loss of local control results in an education system that cannot respond to local needs.
Independent legal advice from several sources confirmed that the removal of education from the residential property tax is probably unconstitutional. The association is now proceeding with a legal challenge of Bill 160 to protect the best interests of all students in Ontario and the public education system.
We also need to talk to you about transition costs. We are very concerned about the extraordinary costs associated with the amalgamation of school boards. These issues are laid out in detail in our report on pages 15 and 16. Initially, it was estimated that the transition associated with staffing, working conditions and programs and services may add another $300 million to $500 million to school board expenditures.
We recommend that the transition costs associated with the amalgamation of school boards must be fully funded by the provincial government and that this funding be in addition to revenues provided by the new funding model.
Early retirement incentives: As a result of education restructuring and transition, early retirement opportunities for employees and employers may arise. We therefore recommend that the government fund early retirement incentive plans.
In terms of capital, the Ontario Public School Boards' Association is very concerned that the pupil accommodation grant will be calculated on the basis of current, and insufficient, provincial expenditure for capital rather than the documented need for new pupil places. The class sizes legislated in Bill 160 create a need for more classrooms. The pupil accommodation grant must take into consideration day care space and adult education programs.
In terms of transportation, we suggest that the transportation grant must be separate from the foundation grant and based on a defined level of service. The provincial government must define best practices in transportation policy and then provide sufficient funding to meet the policy requirements. Any further reduction in transportation funding could affect the safety of our students.
Pay equity: With the creation of new district school boards on January 1, 1998, the Pay Equity Act again becomes a very critical issue, especially when the new district school board is one of merging boards. Bill 136 requires amalgamated boards to redo their pay equity plans, generating a higher salary rate for many employees. OPSBA submits that the government needs to consider increased funding for pay equity costs in the forthcoming funding model. Therefore, we recommend the provincial government allot an appropriate amount of money for the anticipated pay equity analysis and increased salary costs in the funding formula or through a transition fund.
As we manage these reforms, we would like to talk to you about appropriate regulations. The Ontario Public School Boards' Association repeats its request for a review of all provincial legislation affecting boards, such as school bus safety, health and safety regulations, fire and building codes, and environmental and employment regulations. The association agrees strongly with the recommendations of the Red Tape Review Commission to "guard against unnecessary regulation."
We therefore recommend that the provincial government act on the recommendations of the Red Tape Review Commission to "create ways to remove or change any inappropriate regulatory measures" impacting on school board operations in order to streamline administration and facilitate cost efficiencies.
In terms of cooperation, school boards have already established cooperatives for purchasing and supplies, human resources, payroll, accounting and transportation. Cooperatives can provide increased savings for cost-sharing opportunities for school boards and other community and service partners. The government must provide the incentive and support for extending cooperatives among school boards and other public sectors.
I would like to close briefly with two final comments. I believe that with our many challenges come many opportunities, and I want to reiterate OPSBA's willingness to assist the government directly in two ways.
The first is in the coordination and integration of children's services. There is no better time to bring everyone together to work jointly in meeting the needs of Ontario's children. Our association will continue to work actively towards this goal in the coming months. We would be more than pleased to work with the government on this initiative. Second, please let me again offer any support or assistance we can provide to the government in the formulation of a funding model. We have many people with expertise who are simply a phone call away and have already pledged their help.
While we recognize the clock is ticking in terms of completing this model, our association believes, and I'm sure the government would agree, that getting it right is better than just getting it out. That concludes my remarks. Thank you for your attention, and we'd be more than happy to answer your questions.
The Chair: Thank you very much. We'll start with the government caucus.
Mr Rollins: Thank you for your presentation. There are a couple of things, going through your brief and listening to it. I thought the cash register was ticking and it was just going to be a need for more and more money put into it. I listened to, and I see some results: The York separate board, in the grade 3 testing, did extremely well as far as Ontario is concerned and had a cost per student of, I believe, $4,200. I believe that was their cost. That relates to a much lower cost as far as per student cost is concerned, with the net result being that they still achieved a very high result. I'll give you a chance to answer that in a second.
The other question: You said that Bill 160 creates a need for more classrooms. Bill 160 said we had the same class size exactly as last year. I think it was within a point of where it has been for the last year or so. That's where the recommendations were. It's where they were, the average last year.
Ms Peterson: Can I start with your first question? In terms of the cost per student and test results, you will find they vary across the province regardless of the amount of money spent per child. You will find that as you look across the province the cost per student changes based on what you find in each of those communities. In some communities you will find that there is more support for the children -- it's not that they don't need the support in other places.
I'll give you a situation. If you notice in our report, in 1991 it was estimated that about $356 million was taken straight from the property tax and being applied to things such a social workers, psychologists, psychometrists etc. Those costs I think you would see in larger centres. It's not that the children in the small and rural or northern communities don't need those services; those services were not available to those children. So I don't think you can take a dollar amount and apply it to test results. It's not valid.
1350
Ms Liz Sandals: If I could add, perhaps tagging on to the end of that question, and then on your second question, I don't think anybody has done an analysis laying out all the per pupil costs against all the test results. You can't just cherry-pick one example of test results and per pupil costs and extend that to the whole province. I think you would also find boards that had higher per pupil costs but also had good results, and you would find some boards with lower per pupil costs which had lower results. I don't think there's been an establishment of a relationship between those two figures.
With respect to your second question, which had to do with class size in Bill 160, in looking at what has actually happened, it would appear that the 1995 class size data were used to establish the class sizes in Bill 160. If you'll recall, the provincial social contract agreement, the end of which was kicking in in 1996, actually required a reduction in the teaching staff of 5% in the province. So the 1996 and 1997 class sizes are often substantially higher than the 1995 class sizes actually were. In many boards, the existing class size in 1997 is higher than the class size required in Bill 160. In order to meet the Bill 160 class sizes, it will spread the kids out over more classrooms; therefore there will be a requirement for more physical space in many boards.
The Chair: I have to interrupt you there and move to the Liberal caucus.
Mr Phillips: The first area of concern for me is the funding model, or whatever they call it. I've always been a bit concerned about whether the bureaucrats here at Queen's Park know what the communities want, whether everything can be run from downtown Toronto for Ontario and whether they can figure out with some formula exactly what London wants and what Kitchener would want and what Parry Sound would want. So I'm concerned when this thing comes out, this sort of bureaucratic formula, whether it will indeed reflect the needs of the local communities or not.
My question is, have the trustees been actively involved in the development of these formulas and can I be somewhat comforted that at least people who have been involved on the front lines have been involved in the formulas when they come out? I gather they are coming out in the next few weeks.
Ms Sandals: In answer to your first comment about whether a formula can meet the need of every child in this province, I don't think so. That's why a sharing of responsibility, cogovernance, would work, because the only way you can deal with the needs of every child in this province is that you've got some elected people locally who can deliver on local community needs.
Secondly, in terms of whether we've been involved in this, the answer is no. We have certainly offered our assistance to the government, both verbally and in writing. We certainly are reiterating our proposal one more time that we have lots of very good people who are more than willing to help. We were certainly involved in the stub year. We offered and offered and were finally there, and I think the result was better than it would have been. We still offer our --
Mr Phillips: That's concerning to me. I represent what used to be a Scarborough riding but it's now moved to Toronto and I now represent a Toronto riding. But there is no question in my mind that one of the reasons this urban environment here has thrived is because of a confidence by people in their local schools. I think that's one of the reasons neighbourhoods have survived and thrived in downtown Toronto, where in other similar-sized urban areas in North America they haven't. I think the key reason has been the schools.
I hate the term "formula," because it's going to dictate the lives of all the children in Ontario, but if these formulas do not reflect the special needs -- I know Toronto so let's say the special needs of Toronto -- and if there are no what I call front-line people involved in the development of them, I am getting more concerned that when it comes out, it may not reflect the true needs of the system. Do the trustees have that similar concern?
Ms Peterson: Certainly we are concerned about what the model will look like. If you look in the body of our presentation, we talk about the fact that we need not to take the old model and rejig it; we, along with everyone else in the province, have asked for years that the funding model be changed, because it didn't work.
We've certainly offered our services. You cannot take the old model and rejig it to work. It needs to be based on actual costing: not median numbers, not averages. The work that we've seen to date would reflect an old model that they're trying to fit for the next century, and it's not going to work.
We once again would like very much to be part of it. We are very concerned that the new model cannot in any way, shape or form deliver appropriately to every child in this province or meet local community needs.
Mr Pouliot: Welcome and thank you for your presentation. It's quote obvious to many that since this government took office they have declared war on public education in the province of Ontario. Some board members like yourselves must feel that they are mere victims of the revolution. They fail to acquiesce or to see the evidence of the common sense.
Bill 160 stipulates that by September 1998 you must have a collective agreement in place, but it also says that you no longer have the authority, the power, to levy. It mentions that class sizes will be regulated by the province.
What is it that you will negotiate? You can no longer negotiate power to levy. You can no longer negotiate curriculum. You can no longer negotiate class sizes. What will you do at the bargaining table come September?
Ms Peterson: Clearly this is a problem for us. Understand that these are two-year agreements that we must have in place. We will be negotiating within whatever envelope the funding model gives us. We don't have that funding model yet. We've got a really interesting situation where we don't have the model, but we need very much for the model to be right.
Mr Pouliot: We're talking about education; we're talking about a major ministry. We're also very much aware that time is of the essence. September comes very early indeed, and to this point you have no idea as to the funding formula?
Ms Peterson: No, we don't.
Mr Pouliot: This strikes me, if I may be so bold, as a degree of incompetence rarely seen. We know that Bill 160 was drafted in haste. We had 126,000 of the most educated people, educators, hitting the street to say, "You've gone too far." That should have been food for thought. So you're going almost week by week, month by month, because you don't know what lies ahead.
What will happen to principals and vice-principals in March or April? That's a month and a half down the line. I go to you as my employer. You have as much clout as Mickey Mouse now. Is my job secure? Am I going back to the classroom? What are you telling me, if I'm a principal or a vice-principal?
Ms Sandals: If I can jump in there, certainly that's a concern. We do often feel we're working in a vacuum with some very tight time lines ticking. There has just been a report on principals and vice-principals submitted to the minister where I believe there are some recommendations around needing to sort out some of the issues you have raised about what's going to happen with those folks. We would certainly hope the minister would act on them soon.
If I can go back to another point you made --
The Chair: It will have to be quick.
Ms Sandals: -- which is around the funding, we do have a requirement in Bill 160 to reach a first agreement which starts September 1 and goes for two years. That means it's absolutely essential that school boards have some sort of idea of what the funding envelope will be not just for the 1998-99 school year, but also for the 1999-2000 school year, in order for us to negotiate that collective agreement.
The Chair: I'll have to interrupt you there. Thank you very much for your presentation and for your time today. It is appreciated.
Ms Peterson: Thanks for the opportunity.
1400
RETAIL COUNCIL OF CANADA
The Chair: The next presentation is from the Retail Council of Canada, Mr Woolford. Sir, welcome, and thank you for coming.
Mr Peter Woolford: First of all, thank you for the opportunity to appear before the committee. As members will know, we've appeared regularly in recent years. It's always a pleasure to come back and see the familiar faces again.
I'd like to start with a bit of an overview of how 1997 shaped up for the retail trade and talk a bit about our expectations for this year, because both of those sets of facts and guesses are very important to the perspective we bring in our pre-budget advice. Then I'd like to talk a little bit about fiscal policy and finish off with some fairly general remarks on property tax issues.
I'm delighted to be here this year with good news. I was one of the people who kept coming here all the way through the early years of the 1990s saying: "No, the recovery is not here yet. No, we're still in trouble." I'm delighted to be able to say that in 1997 the retail trade experienced stronger growth in sales, driven by domestic consumption. That's an important change in conditions in the province. As a result, our members saw growth of sales go up at a fairly reasonable pace, including the important Christmas period.
While the employment statistics are a little contradictory -- you'll see that in our written submission -- our sense is that employment in retailing is growing. It depends on which series you look at what the picture is, but our sense is that employment is growing and should continue to do so this year. Unfortunately, we have not been able to get any Ontario numbers for 1997 yet because of some glitches in the way StatsCan is collecting their data.
With respect to 1998, we expect to see growth continue -- again, a first for this decade, two years of consecutive strong growth -- but it will be less than 1997. We think it probably will come in at a pace slightly less than growth for the overall economy. There are a couple of external reasons for that. One is the problems in Asia, and the other is that some portions of Canada are experiencing an unusual slower pace of growth, most notably British Columbia.
In terms of the internal Ontario economy, the way we approached it this year was to go looking for the places where you might find extra impetus for consumer growth. I'm afraid to say that we could not find them. We looked at personal disposable income, the debt level of households, savings ratios, and the employment projections for 1998. In none of those areas could we see any prospects that would suggest that consumer spending would grow faster than the economy. That led us to our sense that overall spending would grow a little more slowly than the economy itself.
To turn briefly now to our policy prescriptions, our advice to the government is that they should stay the course. We recognize that over the last two and a half years they have had to make some very difficult, very painful and very hard-nosed decisions. We think the results of those are beginning to bear fruit now, and we encourage them to complete that. The sense of our members is that the tax cuts that the government put in place have helped to restore confidence and improve consumer spending, even though some of that was stolen back by the feds. Our members continue to express concern to us about payroll taxes and about the burden of regulation. So again the message is: Stay the course. Carry on.
An interesting observation I would like to make here is the contrast in strategies between the federal government and the Ontario government. The feds decided to keep their taxes high, and as a result have paid their deficit down quite quickly, much faster than anybody had expected. In contrast, this government has decided to give the tax cut early on, and as a result looks at having a deficit that will go on a little further.
If the purpose of all this is to achieve a restructuring of the expenditure patterns of government, it strikes us that the Ontario experience may offer more opportunity for structural change in government than the federal approach. The reason for that is that we're already seeing very substantial pressures emerge at the federal level for new spending. I would suggest that's occurring even before the feds have fully restructured their own operations internally. By creating almost an artificial pressure through the tax cuts, Ontario is being driven into some of the restructuring changes that we believe are necessary.
Finally, as members would know, we support harmonization of taxes. I've been here singing that song many times. We would note to the committee that the federal government has proposed a common collection agency for taxes, and we would urge the government to look at that in a very positive way. We believe that offers significant savings for both government and the private sector.
Finally, I would simply note for your attention that the expense relating to the problem with computers coming up to the year 2000 is a very significant expense being faced by all businesses. I simply raise the question of whether there might be some tax treatment for expenses in that area, given that they fall both on the capital side and the current side.
Let me talk very briefly about property taxes. We have seen and are experiencing massive changes in the property tax regime. Our members are still sorting that out. They're still trying to determine what the impact on them is. Clearly it varies extremely widely across the industry, and I'm sure members are aware of that. You may even hear from different parts of the retail industry themselves expressing their concerns.
Because of that diversity of view, it's hard for an organization like Retail Council to come up with a single position or give you the Rosetta stone that will untangle all of this complex policy. I think all we can do is point out to the government and to this committee the importance of achieving a fair balance on taxation, to ensure the government is aware that these taxes do have an immediate impact on the competitiveness of firms facing each other, sometimes across the street, and to ensure that it's implemented in a way that isn't so sudden that it completely disrupts the competitive balance.
Finally, to touch very briefly on the new levying powers that municipalities were given last year under a series of acts, we have a couple of concerns there, one of which is being worked through, and one I'm not sure has come to the attention of the government.
On the first one, we are concerned that by giving municipalities a new power to tax, municipalities may be tempted to put in place a whole series of hidden levies which may or may not be related to the services they are providing. It becomes in effect a hidden tax that business pays, built into the price, and nobody sees it. It would be a wonderful revenue generator for a municipality that was so inclined.
The second concern deals with the possibility for fragmentation of the tax burden and fragmentation of the tax collection effort as municipalities each put in place a slightly different regime of taxes. You may hear from other industries telling you that this is a problem in the States, for example, where local municipalities have a wide range of taxing powers. You get quite a thicket of conflicting and competing taxes which, while in their actual dollar terms are not very high, do carry a heavy administrative burden with them. That's a concern of our members.
It should be especially a concern when you look at the role small business plays in retail. If you have a small retailer, they will typically grow early on in their process by moving to a new jurisdiction, to a new location. If I've got a couple of stores in a town, very often the best way for me to expand is to move to the next town. If there is a different tax regime in that next town, it puts a barrier to expansion in my way. That's certainly something we should be very alert to.
Those are my opening remarks. I'd be glad to answer any questions or comments.
The Chair: We have approximately six minutes per caucus, and we'll start with the Liberal caucus.
Mr Phillips: Thank you for your presentation. I think over the next six months -- and I know we should have a longer view of things -- the property tax issue is the one that's probably going to be front and centre. My office is getting literally dozens of phone calls, particularly from small business, many small retailers that are now looking at very substantial increases in property taxes because the business occupancy tax has come off. As I've said many times here, the banks are getting quite a big windfall from it, because they were paying the 75% business occupancy tax. They're getting probably a 16% or 17% decrease. The small retailers that are phoning me are getting a 10% or 12% increase.
1410
I might just say that I was looking at the comments by the clerks and treasurers, who warned us about these problems. They said, in commenting on one of the tax bills: "This illustrates better than anything that this government, in its haste, is making legislation by the seat of its pants, without proper thought or planning. Yesterday's bill is amended by today's which will likely be amended by tomorrow's."
No wonder the municipal clerks and treasurers are confused. No wonder they say they are facing an administrative nightmare. No wonder they are asking for a postponement in implementation to let the dust settle and to allow time for the government to decide what it really wants to do and what it doesn't want to do."
What would be helpful I think to the committee, certainly to me -- and you're in a very difficult position because some of your large members are going to get a huge, I don't say windfall, but a huge decrease and some of your small members are going to get a substantial increase in taxes -- can you just give us a sense, without passing a value judgement on it -- you can pass a value judgement on it if you want, but I'm trying to keep you from getting into hot water with your members -- of how this thing is likely to unfold over the next six months? It will be the next six months, I think, when everybody realizes this.
Mr Woolford: Even apart from the small-p political difficulties that we have within our association, it's very hard to know at this point. So much of it will be tied up with what the next steps coming from the provincial government are and how local municipalities deal with this.
I was at a session last week. My understanding now is that municipalities will be, for example, constrained in terms of what multiple of the property tax rate they can charge on commercial properties. That may in fact benefit some of our members in some jurisdictions where the commercial tax is much higher than the property tax. Second, my understanding is that there will be provision for municipalities to in effect supertax certain large commercial structures, which sounds to me as though it's aimed at bank towers. Third, it's my understanding that municipalities are going to be given some powers to phase in some of these elements.
At the provincial level it's very hard to know how this will play out. At the municipal level I don't think municipalities have struck their rates yet themselves, so again the impact on retailers is very hard to determine. Then even within the trade, the treatment of gross leases versus net leases has not been sorted out, although again we understand that legislation may be promised which will somehow enable a landlord to allocate some of these new taxes to gross lease tenants. The whole thing is still very uncertain. I honestly don't know how that will turn out.
Mr Phillips: The provincial government now sets the majority of the property taxes, it's no longer the municipality, so we really should in some respects be focusing -- we shouldn't ignore the municipalities but 60% to 65% will be set here by the province. What the government announced two weeks ago was that they are going to essentially freeze the rates. What it means is that a retailer in Orillia will be paying three times the rate of a retailer in Huntsville -- that's what the government said -- or a retailer in Brockville will pay three times the rate of a retailer in Parry Sound -- identical businesses equally assessed.
It no longer will be the municipalities where the focus might be, it'll be here at Queen's Park, I think, although we in the opposition or even the government members don't get a chance to vote on it; it's just done by the cabinet. But have your members expressed any views on where they may be competing with a store down the road that's going to be paying a third of the rate, let's say, in Huntsville over Orillia?
Mr Woolford: Certainly. We hear it from members most particularly in large urban areas where the lines of demarcation come right in highly populated, very densely settled areas, where a merchant on one side of the street is in one municipality and a merchant on the other side is in another municipality.
The Chair: Sir, I have to interrupt you there and move on to the NDP caucus. I apologize.
Mr Pouliot: Mr Woolford, congratulations on a good year at last.
Mr Woolford: It's a real relief to be here, Mr Pouliot, and to be able to report good news.
Mr Pouliot: My colleague Mr Phillips has mentioned that property tax reforms will likely dominate the scene, certainly among retailers, in the foreseeable future -- well, more short-term future. How impacting is a low Canadian dollar vis-à-vis its US counterpart in terms of the successes of retail?
Mr Woolford: That plays quite an important role. We have covered that in our submission this year. The initial reaction of many people is that, because we source much of our merchandise from the Far East, or a fair portion of it, and many of those countries have experienced significant devaluations, the price of those goods should go down. As we've looked into this with our members, it's become clear that the important relationship is exactly the one you've identified, between the Canadian dollar and the US dollar.
First of all, again a lot of our merchandise is sourced from the United States, either manufactured there or imported in from a wholesaler for the whole North American market. Even in cases where Canadian retailers are importing either directly from the Orient or through a wholesaler here in Canada who sources from the Orient, many of those contracts are denominated in Canadian dollars.
The closest analogy I can give is for resource industries where Canadian rocks and trees and so on are priced in US dollars. When the Canadian dollar falls, our producers don't lower their prices, they get a profit windfall. That is effectively what is happening in that circumstance in reverse in the consumer trade. It probably means that prices will not go anywhere in the short run in Canada. The market is still very hotly competitive. I can't overstate that too much.
Mr Pouliot: I'm only too painfully aware of the fluctuations vis-à-vis commodities in mercantile markets, Mr Woolford.
You mentioned in your all-encompassing opinion and presentation that you would favour harmonizing the GST and the provincial sales tax. Are you in favour of taxing children's clothing?
Mr Woolford: Yes, we are.
Mr Pouliot: You are in favour of taxing, so you would wish to enlarge. Would it simplify matters for retailers if the two were harmonized?
Mr Woolford: I think the first argument we would make is one of fairness, that if we are to have a sales tax it's going to be borne by a range of commodities. There is a good argument to be made to exempt almost anything and there's a good argument to tax almost anything. The fairest tax, in our view, is one which is spread across the widest space.
Mr Pouliot: So the tax on a Mercedes-Benz would go down substantially but children's clothing would be taxed to make up the difference.
Mr Woolford: Or alternatively, the price on a fridge or a stove or other --
Mr Pouliot: A touch of reality. I thank you, Mr Woolford.
You've mentioned about different styles, where the federal government chose to delay the personal income tax decrease, if you wish, and opted to reduce the deficit instead -- it's a tough call -- but that this regime, this government has chosen to do a bit of both. Actually, I just want to set your presentation straight. The truth is they will be spending more money this fiscal year than any government has spent in any previous fiscal year, and the tax cut, since there is a deficit and a huge debt, is entirely subsidized with borrowed money. But it's a school of thought. Some people believe you can do a bit of both; some people say pay your debt first before you throw a party. You don't go on one last binge with the credit card because you've already exceeded the capacity of that credit card. I welcome that.
Mr Woolford: Could I respond to that?
Mr Pouliot: Indeed.
Mr Woolford: That does trouble us. We note that in our submission. It is a tough call. My observation there was simply that it would appear that the federal government already now is coming under intense pressure to develop new programs, to increase spending on current programs, and that pressure seems to be more intense than Ontario is facing, because the fiscal circumstances of the two governments are different because of the strategies they've chosen.
Mr Arnott: Mr Woolford, thank you very much for your presentation. I, like you, recall those days when you used to come into legislative committees in the early 1990s and the state of the retail trade was in dire straits in those days. I don't know how else you'd characterize it. Would you care to remind some of the committee members who may have forgotten what conditions were like in those days, how some of the government policies of the early 1990s contributed to the negative state of the retail trade?
1420
Mr Woolford: It certainly was a very difficult time, there's no question. We were experiencing probably the worst recession since the Great Depression of the 1930s. We were finding a large number of our members were going into bankruptcy. Many others had to go into bankruptcy protection of one form or another. Even those who were not going bankrupt were closing their doors. Employment was falling, sales were falling. It was a very difficult time for the industry.
We were very concerned at the time about the government's expenditure patterns, about a number of their initiatives which appeared to make Ontario a much less attractive place to invest. Even though retailers are in a sense economic hostages, we prosper as the economy as a whole prospers, so that if other segments of the economy are hurt, the retail trade is hurt as well.
It was a very difficult time. We are not out of the woods by any means either. I would simply point to some of the recent mergers and acquisitions. Some of our largest members have been in trouble in recent years. That's a reflection of ongoing structural change in the industry. It reflects excess capacity, it reflects still very tough competition and it reflects a customer who even today is skittish, careful, cautious. Canadians went on a real spending binge last year. Their spending went up by about 5% or 6%. That's not exactly sailors out on a spree. Even today, with the good news that I have -- it is a positive environment -- it's not time to break out the champagne.
Mr Rollins: Thanks for your presentation. If you keep pounding on something long enough, it finally cracks. Maybe that's what has happened. It cracked and on your side.
One of the things you attributed to the federal government was balancing their budget very quickly. I just want to remind you that the $2 billion a year that they deducted from the cheque they send down to Toronto each year, if we had had that, I believe ours would have been balanced now, if you did the mathematics in the time it came down. It would have been at the same point. However, theirs wouldn't have been. That's one of the things I would like to draw to your attention.
Maybe I oversimplify some things at some time, but when I look at something that I want to grow and I have to put some money back into it to make it work better, I think it works very well that way. As a government, we chose to put some of those dollars back into the economy through the tax cut and to make sure that it did get out and give us some more job growth.
Even last month, with the storm in the east, we still had a relatively large growth of new jobs and most of them full-time jobs. We've heard from the opposition continually that they're only McJobs and small Becker-type jobs, but they aren't, they're permanent jobs. That's one of the things that I thought. Thanks for your presentation. I really appreciate it.
Mr Woolford: Could I respond to a couple of those? The phenomenon of offloading is not confined to the feds, of course. This current government has gone through a fair amount of downloading of responsibilities to municipalities. The jury is still out, obviously, on where the financial aspects of that will turn out. Who you believe depends upon where you sit at this point. It's just a caution that I would note, but yes, indeed, the tax cut did have positive effects. Our members believe that it did contribute to growing sales last year.
I'd like to pick up on that McJobs point because we've had that thrown at us a number of times as an industry. What people need to remember is that retailing is often the industry where people get their first job. It is a vital first step in becoming a fully functioning member of the labour force. Many young people, still in school, pick up a job at a local hardware store or grocery store and start to learn some of the basics of working in the work world: how to deal with adults who aren't your teacher or your parent, how to take instruction, promptness, proper dress, professional demeanour, how to serve the customer. Those are all life skills that every one of us needs to learn to survive in today's world and those are taught by those so-called McJobs. In our view, it's a bit of a misnomer. These are valuable, entry-level positions where new Canadians or people returning to the labour force brush up their skills, make themselves more valuable contributors to the labour force.
The Chair: Thank you very much and thank you for your time and your presentation, sir.
ONTARIO FEDERATION OF AGRICULTURE
The Chair: The next presentation this afternoon is from the Ontario Federation of Agriculture. Lady and gentlemen, thank you very much for attending. Welcome. We have 30 minutes for you to use as you see fit.
Mr Ed Segsworth: I'm Ed Segsworth, president of the Ontario Federation of Agriculture. I have with me Mr Ken Kelly, vice-president, and Sharon Rounds, vice-president. Mr Kelly will be making the presentation this afternoon.
Mr Ken Kelly: We'd like to spend about 10, 12 minutes of our time on presenting the high points of our brief to you and we'd like to save as much time as possible for questions.
The Ontario Federation of Agriculture would like to thank the standing committee on finance and economic affairs for allowing us the opportunity to participate in this year's provincial budget planning process.
At this point I'd like to ask if we could enter the entirety of our brief in the record and that would eliminate the need for the reading of all of it and then we could deal with the high points.
The Chair: It will be. Thank you.
Mr Kelly: Thank you. I appreciate that.
We've prepared this brief for your review and in it you'll find an explanation of why agriculture is truly one of Ontario's economic success stories. Certainly the first portion of our brief contains those facts. It explains the importance of public sector support for the agriculture and food industry and the necessity of increasing provincial funding to our public sector partner, the Ontario Ministry of Agriculture, Food and Rural Affairs. Our brief also identifies government initiatives which we deem essential to the continued growth and prosperity of our industry and the Ontario economy. In the interests of making the best use of the committee's time, I'll summarize our recommendations.
The first recommendation is that we provide full compensation to registered farmers for the losses attributed to the ice storm of 1998. The recent ice storm that affected eastern Ontario was the largest natural disaster ever recorded in Canadian history. The long-term effects to agriculture may not be known for many months. Estimates are that the devastation to land, livestock and people for the entire region will cost at least $1 billion.
Second, we would recommend an increase in funding to the Ontario Ministry of Agriculture, Food and Rural Affairs' agricultural programs. OMAFRA spending for the 1996-97 year was approximately $293 million. While this represents a slight increase from the year before, it is still a full 35% below the ministry's 1991-92 budget of $453 million.
Third, we would recommend that we allocate new funds for the Ministry of Agriculture, Food and Rural Affairs to allow the ministry to properly carry out its crucial responsibilities in the area of rural development. Ontario farmers are fully supportive of OMAFRA's efforts in rural development but we do not believe that funding for such activities should come at the expense of agricultural needs. Channelling money away from agriculture to fund rural development programs will merely serve to slow the growth of rural Ontario's core industry.
Fourth, we would like a permanent at-source exemption on all building materials purchased for farm use from the retail sales tax. The temporary RST rebate for farm building materials has facilitated some of the much-needed reinvestment in our farm businesses, created jobs and stimulated rural economic development. Creating a permanent at-source RST exemption for all building materials purchased for farm use would continue to benefit rural Ontario and be particularly well received in the rebuilding efforts in eastern Ontario.
Fifth, replace the current retail sales tax exemption and refund mechanism for eligible farm products with an at-source exemption using the Ontario government's farm business registration number as the qualifying identification for exempting products for farm use from the RST. Most farmers have a registration number and the registration number would be readily identified by retailers. Government could reduce tax leakage because the registration number provides an identifiable means to conduct random tax audits and discourage abuse.
Sixth, we would recommend that we require the farm business registration number as the eligibility criterion for farm licence plates. Use of the farm business registration number as a determiner of eligibility would counter arguments from the commercial trucking industry that farm plates are the subject of widespread abuse. It would also ensure that only eligible farmers are able to purchase these licence plates.
1430
Seventh, through the Ontario Ministry of Agriculture, Food and Rural Affairs and the University of Guelph agreement, increase funding to agrifood research. Explore the feasibility of using matching investments to increase private sector investment in applied agrifood research and fully explore the use of tax credits as an innovative approach to stimulating private investment in capital infrastructure and applied research. Increased funding in agrifood research will pay dividends to the industry as a whole. Specifically, consideration should be given to directing more research dollars to agricultural biotechnology. Studies suggest that the productivity of Canadian farmers grew at an average rate of 1.9%, compared to 0.6% for other Canadian businesses. This farm productivity growth can be attributed to the adoption of new technologies, including biotechnology.
Our eighth recommendation is that we establish a combination grant-loan program that will assist farmers to implement farm improvements that will benefit the environment. There are situations where the only practical means to address an environmental concern is by undertaking a major capital improvement. While such capital improvement will significantly reduce environmental degradation, it often adds absolutely nothing to the profitability of the farm enterprise. Thus, farmers are faced with the dilemma of not being able to cash-flow a farm project that they know probably should be implemented.
We recommend investment in a province-wide groundwater management strategy by supporting the initiatives of the Ontario Farm Environmental Coalition, for example, to provide funding to encourage baseline water well testing in rural Ontario, to enact a long-term financial commitment to evaluate best management practices for nitrogen use efficiency and to increase provincial evaluation and monitoring of Ontario's groundwater supply in order to make rational decisions on groundwater allocations. The farmer-led, multistakeholder water quality working group is an ideal platform that incorporates provincial understanding of the issues and provides the opportunity for local solutions.
We recommend that we provide funding for the Ontario Agricultural Training Institute to enable it to meet client needs into the future. OATI is a unique training institution which is an ideal partner to assist OMAFRA in meeting its business objectives in the rural and agricultural sectors. To be effective, the organization requires funding to ensure that the organization can concentrate on its mandate despite project funding variations.
Our 11th recommendation is to establish a fund to assist with training delivery for farm businesses. There is a particular need for training for new and/or innovative farmers in the areas of information technology, electronic communications, human resource development, financial and risk management, marketing, production technology, quality assurance and environmental management. Just as the introduction of new production technology brought about a revolution in farm productivity during the postwar period, the OFA believes that management skills and technology will play a similar role in the 21st century.
A further recommendation is to assist with the establishment of rural computer training facilities. Farmers require computer training on software programs specific to farm management that often isn't available through local school computer labs. One approach is to provide mobile, community-shared computer training facilities for rural communities and farmers.
We recommend that we continue to fully fund Ontario's safety net programs. While the province allocates $75 million to farm safety nets, this amount is inadequate to meet the needs of the diverse commodity interests of the province.
We recommend that we continue to work with farmers to extend adequate safety net coverage to all commodities that have expressed an interest in enrolling. Farm safety nets offer a more stable and certain business environment for farmers by providing protection against periodic threats from inclement weather and volatile commodity markets. Ontario's safety net programs are generally funded through a 50-50 contribution agreement between the producers and the federal and provincial governments.
Our 15th recommendation is that we would like to reintroduce the Intervenor Funding Project Act to allow for full public participation in select projects before the Environmental Assessment Board, the Ontario Energy Board or the joint board.
We recommend that we release the complete details regarding municipal access to the community reinvestment funds. This funding is to facilitate municipal restructuring as well as offset significant municipal tax losses resulting from property tax reform and the transfer of provincial services to municipalities. Details on eligibility and how municipalities can access these funds remain unavailable. The absence of this information could affect farmers living in rural municipalities whose councils have little recourse but to raise local property taxes.
We recommend that we ensure that adequate resources are available to municipalities to address the capital and maintenance requirements for transportation infrastructure. Farms are critically dependent on the road network for marketing their livestock and produce as well as for the delivery of their purchased inputs. If affordable access to markets or supplies is compromised by a realignment of government responsibilities, the whole sector and all of rural Ontario will suffer.
We recommend that we maintain the provincial predator compensation program and ensure that adequate funds be earmarked to fully compensate farmers for their losses. Predator compensation is a must for Ontario farmers. Public policy in Ontario encourages the growth of wildlife populations. If public policy and programs encourage the growth of these populations, then it follows that the public purse should shoulder its responsibility for compensation for predator loss.
We recommend that we undertake to amend the Livestock, Poultry and Honey Bee Protection Act to include all non-traditional species of livestock; for example, ostrich, emu, deer, elk, wild boar, all raised on Ontario farms. Losses these producers face due to predator attacks cannot continue uncompensated, and we encourage a complete review of this program to ensure the equitable treatment of all producers.
So you see, our list of recommendations contains the tools farmers of Ontario require to go about the business of stimulating the economy in this province, creating jobs. With those comments, we're open for your questions. If we're able to share that around the table here, we'll do that.
The Chair: Thank you very much, Mr Kelly. We have approximately five minutes per caucus. We'll start with the New Democratic Party.
Mr Pouliot: I have two questions; the first one deals with your second recommendation, attested by page 14 of your brief, the subject matter is "Ontario Agrifood Program Expenditures." I did some rough calculations. From 1991-92, you're approximately right, it's a reduction of 35% in terms of the relationship with the provincial government. How is this impacting on the people you represent, Ontario farmers?
Ms Sharon Rounds: Farmers, being the lot they are, don't tend to complain too much about cuts in funding. But we can see that farmers are going into debt more deeply as the years go on without adequate funding on some of these programs. They're taking on more risk and going into probably untested areas at times because of the fact that there isn't research capability around and some dollars aren't being spent that would help them out in making good, solid decisions.
Mr Kelly: Mr Pouliot, to add to my colleague's comments, it's important to point out that this 35% is not in inflation-adjusted dollars; that is in straight nominal dollars, so the difference is greater than 35%. Certainly through the rest of our brief we saw some of the things that haven't been able to evolve with the industry, like the funding for safety nets, like the services and technology transfer that may well be required in the countryside, as well as the issue of research.
1440
Mr Pouliot: We all watched with dismay when the ice storm hit certainly with vengeance, and in my opinion no one was more impacted than the farming community, of course, notwithstanding that many people were impacted, but the damage done to the farming community was certainly unprecedented -- a time of need, a time to share. Are you aware of a timetable? What are the positives? There are good things happening in terms of help from the government, but what would you like to see happen and when?
Mr Segsworth: First, we would like to see agriculture recognized by the farm registration number. The recognition now from the federal government is that you have to make 51% of your income off the farm to be classified as a full-time farmer. Anything below that and you're classified as a part-time farmer. So the cost sharing is quite a bit different in that arrangement. We would like to see the provincial government and the federal government recognize a person registered under the farm registration number as being a full-time farmer.
Mr Pouliot: Are you successful, less successful, more successful than the province of Quebec? And please, I am not, with all the sincerity at my command, comparing one regime to the other.
Mr Segsworth: As of yet, negotiations are still going on. We don't know what the final outcome will be, but we have faith in the government, that they're negotiating with the federal government and that a full compensation package will come forward.
Mr Pouliot: I certainly hope so.
Mr Rollins: Thank you very much for your brief. It's certainly nice to see one laid out with the kinds of recommendations you have in there. I spent yesterday with Bill 146, and I believe you people are familiar with that bill and the support you people have given to it. I think a couple of your recommendations on 146, particularly on item 19, were fairly well dealt with in Bill 146. So when those recommendations in Bill 146 are put in, it will pretty well alleviate number 19's concern.
One of the other things on number 9, with the province-wide groundwater management strategy -- we have a person, not in my riding but in an adjacent riding, Mark Henry, who had just put together a program that I believe was down at ROMA that wanted to log all septic systems, all wells, in Ontario and have it open to scrutiny and be able to know the impact. Is that something similar to what you people are trying to recommend here in number 9?
Mr Segsworth: In Bill 146?
Mr Rollins: No, this is a private --
Mr Segsworth: No, I don't think so. There's a lot of investigation out there now going into non-source-point pollution and we have to look at where that is coming from and it may not be agriculture; it may be other areas that it's coming from.
Mr Rollins: Another thing on the storm, certainly the storm of the century: Whatever can be done still will probably never be enough, but let's hope we can do as close to enough as possible.
Mr Kelly: Mr Chairman, if I might, before we move on to the next question, Bill 146 provides protection from nuisance lawsuits over odour, noise, dust etc. It bears no relation to the need for compensation for predator damage. So this is a specific and separate recommendation.
Mr Rollins: I realize that, but I think in yesterday's hearing it was addressed, in 146. There was a presentation made on that, talking about compensation particularly for that.
Mr Kelly: There may well have been, then.
Mr John R. Baird (Nepean): Thank you very much for your presentation. I certainly appreciate the time you took to present to us and we'll reflect on what we heard.
With respect to two of your recommendations, number one, I agree with you very strongly. There were a lot of farmers in my constituency in our part of the province outside of Ottawa -- and just from talking to farmers particularly in the dairy industry -- who were really hard hit and you really didn't know about it until you talked to someone at 2 in the morning, who was going into day three without a generator. One positive thing, if you could say that, that came out of it, certainly for those people not familiar with rural Ontario, is that they have a much better sense that it's a really high-tech operation and it's not the way it was done 50 years ago or even 20 years ago. That's why I wanted to come to question 7 of your recommendations with respect to biotechnology and agricultural research in that area. What types of suggestions do you make to us in that area -- because that's an area that's of interest to me -- in terms of what we can do to help increase the productivity of the agricultural industry in the province?
Ms Rounds: On biotechnology particularly?
Mr Baird: Sure.
Ms Rounds: Our experience has been that we've been cutting back in the research area, and farmers, as I mentioned before, are going ahead and instituting some of their own research and it's not necessarily in the best environment. We've been very lucky in this province to have had the University of Guelph as a place that has done a good deal of research in the past and that research has been available to Ontario farmers, and I think they've utilized it to a great degree over the years. They're finding themselves severely curtailed in relationship to the competitive aspect of global agriculture, because where Ontario farmers are not having the research dollars spent, other governments are gearing up and putting more and more money into research to increase the competitiveness in the United States and in Europe particularly. So we're competing in a global market with those farmers without the dollars being spent on research so that we can keep up to their technology.
Mr Arnott: Thank you for the presentation. One of your recommendations, and you alluded to it just now, is the need for increased expenditure on research related to agriculture through the University of Guelph. Last year's provincial budget announced an R&D challenge fund in which the government would contribute about $500 million a year in new funding to create this and hopefully lever additional funding from the federal government, from the private sector and also from education institutions. Is this the kind of thing you're suggesting we ought to be promoting?
Ms Rounds: I would say that's definitely the right type of move, yes, and we appreciate the fact that this was set up in last year's budget.
Mr Phillips: Thank you for the presentation from a hugely important sector of Ontario's economy. I want to start on the community reinvestment fund issue, because I think when the government said, "We're going to change the farm tax rebate program," the Ontario Federation of Agriculture applauded that, and that was a good idea. When the other shoe dropped, though, that the gift was announced by Mike Harris but will be given by the local councils, that runs the risk of pitting the farm community against the local municipalities. You may not remember this, but we proposed an amendment when we were dealing with the bill that would ensure that councils were 100% reimbursed for the lost revenue to prevent the possibility of conflict between the farm community and the municipality.
I'm quite worried about this thing now because, in addition to that announcement, the government originally said that the cost was $177 million, and then in its second announcement it said it was only $77 million because the province was going to handle the education portion. I have a strong worry that that's $100 million off the province's books, on to the property taxpayer, not accounted for.
Coming back to my question here for the federation, I know your advice to the committee is to get the community reinvestment fund announced and the criteria announced as quickly as possible. I have a two-part question. One is, have you also kept an eye on the education part of this and how that's going to impact? Second, municipalities are going to have to set their tax rates pretty soon, I think. Have you any indication from the government when it plans to announce the details of the community reinvestment fund?
1450
Mr Segsworth: Mr Chairman, we've been joined by Mr Ron Bonnett, a member of the executive, who is possibly more up on this subject. I'd like Ron, if permissible, to answer that.
The Chair: By all means. Welcome, sir.
Mr Ron Bonnett: Thank you for the question. The government has come forward with some preliminary figures on the community reinvestment fund, based on some calculations that show what they anticipate being spent in certain areas, social assistance being one, ambulance services being another, and you go down the list. There's also an allocation in there to compensate for the loss of the farm tax rebate. One of the things we have to watch now is to see if the actual figures that are coming forward as expenses by municipalities match up with the estimates that were used to calculate the contribution for the community reinvestment fund.
Some of the preliminary indications that we're getting is that there is going to be a shortfall. One of the things the federation is going to be doing is looking at that and following it through and trying to identify where the shortfall is coming. We were given assurances by the government that there would be compensation for those municipalities that were drastically affected by the farm tax rebate. We want to monitor how it actually follows out in the end to see, if there are increases required in taxation, what the reason is for that increase. Is it an increase in social assistance costs? Is it an increase because of having to pay for public health? Is it an increase for some other reason?
Mr Phillips: I think that's wise. My advice is to keep an eye on the education part of it too, because that's $100 million.
In my opinion, your recommendation 7 is a very important one, not that they aren't all important. I hate to live in the past, but when we were in government, as they say, one of the things that I very much supported was trying to establish centres of excellence. That's why we moved the Ministry of Mines to Sudbury and tried to encourage the community college, the university; we planned on moving the Ministry of Tourism to Niagara Falls. We also planned the move of the Ministry of Agriculture to Guelph, to try and get the synergy of the University of Guelph, the ministry, the private sector and the farm community all working together.
I'm not sure I know enough about these specific recommendations to know whether they're the very best, other than to say that I think for all of us it's extremely important that we find ways to get that synergy working quickly. I'm also encouraged by the suggestion on biotechnology. My understanding is that Saskatchewan moved very quickly in this area and got kind of a running start on it, believe it or not. I don't mean to denigrate Saskatchewan. I'd hate to see us lose an opportunity, so I very much like that.
Is there some synergy now taking place in the Guelph area with the private sector there, the federation there? The university, I know, is focusing a lot on it, obviously. Are we starting to see some payoffs on that?
Mr Segsworth: With globalization of our markets, we as an agricultural community are going to have to look at a whole set of new tools to be competitive in that global market. This is one of the tools we have: research biotechnology. The more we can put into that type of thing, it's going to give us what we need to be part of that global market. I can see where biotechnology is going to give us a leg up in a lot of areas that we need.
The Chair: Thank you, sir. We're going to have to end it there. Our time is up. We thank you for your time and for your presentation.
CANADIAN FEDERATION OF STUDENTS, ONTARIO COMPONENT
The Chair: Our next presentation this afternoon is from the Canadian Federation of Students, Ontario component. Gentlemen, welcome. Thank you for coming.
Mr Wayne Poirier: I would like to start by noting that in our brief we mentioned that two things would be appended. I'm just looking at my copy of the brief and they're not appended, so I will forward them to the clerk of the committee.
The Ontario component of the Canadian Federation of Students is pleased to make this presentation before the Ontario finance and economic affairs committee. CFS represents more than 110,000 students at over 20 institutions in Ontario at the undergraduate, graduate and college levels. Our key goal is the achievement of a high-quality, publicly funded post-secondary education system that is accessible to all.
Our vision of the post-secondary education system is one that is of high quality and it rests on its position as a centre of higher learning, not one primarily concerned with the mass production of diplomas, degrees and credentials, nor one centred purely on the notion of providing training for jobs in the private and public sector.
CFS is also committed to universal accessibility to post-secondary education in Ontario. Foremost in this regard is our belief that a prospective student's inability to finance her or his education should never prevent access.
Unfortunately, the post-secondary education system in Ontario is moving away from such a system towards one whose reputation for excellence and accessibility has been progressively compromised. In this presentation we hope to highlight briefly the importance of accessible and high-quality public post-secondary institutions and make some suggestions as to how to improve quality and accessibility.
We'd like to start with the social and economic benefits of post-secondary education. Measured on such terms as the quality of education and research, responsiveness to student and community needs and international recognition, Ontario's colleges and universities have proven invaluable in meeting the social, cultural and economic needs of the province and of the country.
There are many facets to higher education's role in ensuring our social and economic wellbeing. Its enhancement of a nation's global competitiveness, its ability to significantly contribute to the pool of highly skilled workers and cutting-edge research, its development of a well-educated populace and its enrichment of cultural life are only a few of those examples. What is interesting in the present context is the degree to which post-secondary education will play an increasingly larger part in Ontario's social and economic development.
The federation would like to recommend the following:
(1) The government of Ontario should recognize the growing importance of post-secondary education to the social, cultural and economic prosperity of Ontario.
(2) The government of Ontario should cease measuring the quality of post-secondary education by its ability to provide training for the private sector.
As such, the government of Ontario should:
(1) Reaffirm the autonomy of public post-secondary public institutions to develop a curriculum free of government and private sector intervention.
(2) Ensure that curriculum is neither determined by the private sector nor focused solely on job creation.
(3) Cease using default statistics as a way of penalizing programs offered at public post-secondary institutions that are not necessarily geared to the needs of the private sector.
Mr Ashkan Hashemi: I'm going to talk a bit about the current funding situation in Ontario.
By all indications, the role of post-secondary education in enriching the social, cultural and economic life of Ontario is becoming predominantly more important. What is needed now is a strong commitment to ensure that higher education can meet and exceed the expectations placed on it. Of greatest importance is a commitment to sustained and stable public funding which would give universities and colleges the financial ability to surpass the challenges currently put before them.
Unfortunately, in Ontario the reverse has been true. While there's a general acknowledgement of the growing importance of colleges and universities, this government's response has been to slash funding for higher education in an unprecedented way. For the 1996-97 school year alone, Ontario's colleges and universities lost $400 million in funding -- a loss that translates, in constant dollar terms, to approximately a 17% cut. Public funding for post-secondary education is now frozen at least until the year 2000, with no provisions for increases in inflation. As it stands, this government's funding policy will ensure that Ontario's colleges and universities will remain the worst-funded higher education facilities in the country as we enter the next millennium.
1500
The continuing importance of the post-secondary sector in addressing Ontario's social and economic needs is clear. In the current funding climate, however, what is also clear is the growing inability of our universities and colleges to meet these needs. From all reports and indications, our social and economic viability rests largely with the ability of our centres of higher learning to meet the challenges of the future. As such, it makes no social or economic sense for the government to point out society's need for more skilled graduates, a well-educated population, advanced research and so on while continuing to make ever greater cuts to funding for those sectors which provide these services.
In that vein, the federation would like to recommend the following:
(1) The government of Ontario should provide adequate funding for post-secondary education in Ontario. As a minimum requirement, we would suggest that funding for Ontario's colleges and universities should be no less than the national average. Currently, as we've pointed out, Ontario ranks last in providing funding for post-secondary institutions.
(2) The government of Ontario should improve funding for research from where it currently stands.
Funding cuts also have an impact on the tuition fees for students and the accessibility of a system as a whole. Ontario has consistently lacked a coherent tuition fee policy. Instead, tuition fee levels have largely depended on the provincial government's willingness or unwillingness to fund post-secondary education. It is therefore not surprising that students have borne the brunt of the recent cutbacks by way of inordinate tuition fee increases.
Including the announced 10% increase for 1998-99 and 1999-2000, tuition fees will have increased by 158% for university students and 147% for college students in 10 years. The largest increases have occurred most recently. The 20% increase in university tuition fees and 15% increase for college tuition fees for the 1996-97 school year marked the largest single-year increases ever in Ontario. By the end of its mandate, this government will be responsible for a 53% college tuition fee increase and a 60% university fee increase.
These fee increases, combined with declines in earnings and savings, mean that many avenues traditionally open to students for financing their education are now closed. Many families or individuals can no longer fund post-secondary education through their savings, while a bleak employment market makes the prospect of saving enough to go to school a near impossibility. Many people are now looking at the cost of a degree or diploma and deciding that it is not an option for them. Many others, already partway through their program of study, are realizing they can no longer afford to continue.
In either case, the accessibility of Ontario's post-secondary education system is progressively deteriorating. Indeed, applications to Ontario's universities are at their lowest point in 10 years, with approximately 10,000 fewer people applying in 1996 than in 1992.
To make matters worse, the Ontario government, in its 1997 Economic and Fiscal Statement, announced the complete deregulation of fees for graduate and professional programs at universities, for post-diploma programs at colleges, and for other college programs "where job opportunities for graduates are virtually guaranteed and income after graduation is substantial."
The deregulation of entire programs of study within publicly funded institutions is without precedent in North America and will undoubtedly mean massive fee increases in certain programs or at certain schools. Consequently, deregulation will create a two-tiered system, where the only criteria for enrolment in certain schools or programs within schools will hinge on a student's ability to pay.
As it stands, the accessibility of our post-secondary institutions has already been seriously compromised. Any further increases in tuition, especially of the kind associated with deregulation, are bound to have devastating ramifications on the participation rates of lower-income students and on the socioeconomic makeup of the student population. To put it bluntly, we are not far from a system in which ability to pay outweighs all other considerations in determining Ontario's future post-secondary students.
In that vein, the federation would like to recommend the following:
(1) The government of Ontario should implement an immediate tuition fee freeze.
(2) The government of Ontario should be accountable for tuition fees through a clear, coherent tuition fee policy.
(3) The government of Ontario should regulate fee levels at all public post-secondary institutions.
Mr Poirier: This time I'd like to concentrate on student aid and student indebtedness. More and more students in Ontario are using the Ontario student assistance program to fund their studies, and the individual debt carried by these students is rapidly mounting. The number of OSAP recipients has increased from 142,260 in 1991-92 to more than 217,000 in 1995-96, an increase of over 50% in 5 years. Currently, over half of all students in Ontario require student loans to finance their education.
The debt loads accumulated by these students offer an even more distressing picture: In 1991-92 the average yearly loan per student was $4,755; by 1995-96 this number had increased to $6,400 per student. Based on this average loan, and assuming no fee increases in subsequent years, an undergraduate student could be looking at an average debt load of more than $25,000 for a four-year degree.
The reasons for the escalating number of students on OSAP and the crippling debt loads they incur are manifold. Skyrocketing tuition fees have certainly had an impact, as have bleak year-round employment prospects. In addition, the Ontario government cut virtually all forms of grants back in 1993 under the previous government and they have not been restored, nor is there a granting program in place under this government, thereby forcing most students to rely solely on repayable student loans.
Canada is one of only two Organisation for Economic Co-operation and Development countries without a national system of student grants. The combination of these factors on student debt in Ontario should not be underestimated. As it stands, Ontario's post-secondary students are graduating with the highest debt loads in all of North America, even when private schools in the United States are factored into the equation.
Much has been written on the subject of student loans as a means for circumventing the negative impact of high tuition fees on accessibility. However, as recent developments in Ontario have clearly demonstrated, this logic is flawed. Students wishing to pursue a post-secondary degree or diploma have been required to amass greater and student greater debt loads in the form of repayable loans. For many current or prospective students, the prospect of incurring what could amount to lifelong debt is inconceivable. They are simply left with the option of dropping out of post-secondary education or never applying in the first place.
From a larger economic perspective, we would also question the logic of saddling students with immense debt loads at such an early stage in their lives. A generation of massively indebted graduates does not make for a bright economic forecast in Ontario.
Unfortunately, this government's response to the growing need for adequate student assistance, including viable debt reduction strategies, has been the introduction of measures that actually increase student indebtedness and make it more difficult for needy students to access the financial aid they require.
We are also concerned about the present Ontario government's determination to replace OSAP with an income-contingent repayment plan, a plan that its promoters claim provides a more flexible repayment option to the individual student based on her or his income after graduation. ICRPs have been abandoned by other provinces and have been demonstrated to be too costly to both students and governments, as they increase debt loads, lengthen repayment periods, thereby increasing the amount of interest accrued for students, and bear tremendous administrative costs.
While ICRPs allow graduates to repay their loans at a rate geared to their income, they do not reduce the overall amount of debt. In fact, for individuals with low or middle incomes, the amount of debt increases as the interest compounds over the repayment period. At best, ICRPs would continue the cycle of debt for Ontario's students by continuing to mask the real problems; at worst, they will compound the problem by making post-secondary education more expensive and less accessible.
In this vein, the federation would like to recommend the following:
(1) The government of Ontario should provide sufficient funding for student assistance to meet the needs of Ontario's students. Such funding should continue to be separate and distinct from operating grants.
(2) The government of Ontario should scrap income-contingent repayment plans in favour of an enriched OSAP designed to alleviate the debt burden currently facing Ontario's students.
(3) As part of such an undertaking, the government of Ontario must reverse the erosion of the current OSAP system by:
Providing adequate funding for student assistance to meet the needs of students;
Restoring OSAP funding for part-time students who have been cut out of the system;
Restoring child care bursaries for students with dependants so they can continue to attend post-secondary education;
Restoring access to social assistance to students with dependants so that they do not rely on loans to raise their families;
Revamping parental contributions and dependency requirements to reflect current realities that students are facing;
Restoring students' allowable income during the study period to the previous amount of $1,700, which has been chopped down to $600.
(4) An improved OSAP system should include the following:
Grants to help reduce the debt loads carried by students;
Targeted assistance for students with dependants or special needs;
Expanded work-study opportunities for students to earn while they study;
Expanded interest relief strategies and debt reduction measures to aid students who experience difficulties during repayment and as a way to reduce defaults.
(5) The government of Ontario should publicly and aggressively call upon the federal government to implement a national system of grants as an effective tool in reducing student debt loads.
1510
In conclusion, in this brief we have attempted to outline the negative impacts the funding cuts have had for the quality and accessibility of Ontario's colleges and universities.
There are many areas we would have liked to address but were simply unable to based on time and space restrictions. The increasing role that technology is playing in the delivery of higher education, the increasing commercialization of our campus space and the role of the corporate sector in education, the need for open, transparent and democratic governance in our institutions and students' roles within governance are only a few examples.
The main issues facing students today, however, are a direct result of the erosion of government funding to post-secondary education, and this must be our primary concern. We believe that the provincial government must play a more effective role in ensuring that students across Ontario have access to publicly funded, publicly administered post-secondary education. It must also ensure that such a system offers a comprehensive range of programs and services and that does not require the accumulation of massive debt loads for students to attend.
To achieve this, the Ontario government must make a commitment to post-secondary education. Such a commitment would include a reinvestment of public funding to higher education so as to allow Ontario's colleges and universities to meet the growing demands placed upon them and would stop the trend of increasing tuition fees in order to make up for government underfunding and cutbacks.
In addition, the provincial government must reinforce its commitment to an equitable student aid system, one that does not burden students with debt loads that would make for a lifetime of repayments.
That is a summary of our brief. At this time we would be open to taking questions from members of the committee.
The Acting Chair (Mr E.J. Douglas Rollins): We will start with the government side.
Mr Baird: Thank you very much for your presentation. We will certainly reflect on what you've had to say.
I noticed a number of areas and I wanted to get a thought from you with respect to both an income-contingent loan repayment plan and the issue of tuition. Obviously it's a concern. We want to help young people get their first job. I think it's of considerable concern to all of us in all parties, not just here but across the country, and for young people and their parents and other generations alike.
We heard a proposal yesterday from one of the high-technology associations when we discussed the potential of a differentiating tuition policy in an area where there are graduates. Take, for example, someone who graduated from computer engineering and they were going on to an average of $60,000- to $70,000-a-year jobs. If you could charge potentially a higher amount of tuition -- and given the success rates, well over 90% and in some programs 95%, 98% are going on to jobs making more than $40,000 or $50,000 a year in their first year of employment -- they would be better able to repay those loans and you could take that money and increase the number of spots in high-technology programs, thus helping to deal with the youth unemployment problem which is of major concern to us all. How would you folks feel about that?
Mr Poirier: One thing you have to realize is that there are socioeconomic barriers for many students that would prevent them particularly from going into those programs. This is extremely problematic when we see that certain individuals within Ontario will be deterred from going into those programs because of the fear of accumulating massive debt, even with the potential of coming out with an income.
Those students with socioeconomic barriers are the most vulnerable, and ironically, within technology-based programs, are the least able to have that technology, because they can't afford it, by having the computers at home and so forth, and therefore are already disadvantaged. Clearly, differential fees start to have negative impacts on the lowest income within society and that's extremely problematic.
Mr Baird: If we said: "Free tuition, no problem. We'll even give you a 100% grant for your tuition. You only have to pay it back if you make more than $50,000 a year" -- free up front, the whole thing, pay the whole shot, my colleagues in the third party will remember that.
Mr Poirier: Free tuition?
Mr Baird: Free tuition. You don't have to pay it back unless you make $50,000 a year. Free living expenses too. A $10,000-a-year grant and you don't have to pay it back unless you make $50,000 a year.
Mr David Caplan (Oriole): Which party are you in?
Mr Hashemi: There is a serious discussion to be had about tuition fee levels and what they should be and we're more than willing to participate in those discussions. We'd like to view post-secondary education in a broader circle, as a social service that's provided to people, that people have already paid for through their income tax system. So a lot of people have already paid their fees by paying income taxes, which fund postsecondary education.
Mr Baird: I'm the closer to my student days here than any other member of the House and there are very few students who have paid income tax at that stage. But I guess one of the things Queen's University has done with their MBA program is they've said: "Listen, the tuition is extremely high but you don't have to pay it until you earn more than $50,000 a year. If you leave and you don't make $50,000 a year, you never have to pay it back." The money is totally up front.
We're trying to look for some innovative ways to get more money into the post-secondary education system to make a fundamental change for youth unemployment. We can do a whole host of things like we've done on co-op education, on the graduate transition tax credit, on other types of initiatives. But this is one; an income-contingent loan repayment plan; the federal Liberals are on side; the Ontario government is keen to negotiate a --
Mr Poirier: That's actually incorrect.
Mr Baird: Back before Mr Pettigrew was there, Mr Axworthy endorsed the idea.
Mr Poirier: Clearly, the federal Liberals are offside on income-contingent repayment plans. There was an announcement made by the federal Liberals just a few weeks ago by Pierre Pettigrew, the new minister. Clearly, the federal government has heard students and listened to our concerns and is starting to look towards debt reduction measures as opposed to --
Mr Baird: Sounds like a GST promise to me.
The Acting Chair: Thank you very much. If we can move on, please.
Mr Caplan: Very quickly, on Friday the Minister of Education made an announcement about student assistance. I was wondering if you've had a chance to digest that. What are your thoughts about what he announced? Is it going to be a help to students? Is that something that you think it's going to do?
Mr Poirier: Most definitely not. When we talk about the OSAP announcement that was made, one of our concerns is that the government is not providing sufficient funding for the OSAP program. As a result, over the last two years we've seen a tightening up of OSAP requirements so that they could maximize the number of students they get out of the least amount of money. What we found in this current announcement is that parents are going to be expected to contribute more, which doesn't take into effect the realities. The example they use is a $40,000 income with four children; that's before taxes. I think it's really unrealistic to think that family will be able to contribute to their children. As a result, that means the student is going to have a smaller OSAP entitlement and is going to have to try to find that funding from somewhere else.
The simple fact of the matter is that there is not sufficient OSAP available to cover the increasing needs of students. That doesn't even factor in the increases in tuition that will be announced this year. We've already heard from one institution that has made their announcements on tuition. That's Nipissing University, where students pay more than 52% of the costs of their education. They are going to increase fees by 5% and 15% for the faculty of education there.
Mr Caplan: I've been travelling around the province meeting with students and meeting with educators. We've launched the McGuinty Forum on Youth Opportunities. They're telling us that the cost of postsecondary education, university or college -- they're getting sticker shock. They're saying, "Hey, I'm not even going to look at this because it is just way out of control." Would that kind of sentiment surprise you? I've got to tell you it's been universal across this province.
1520
Mr Poirier: That's precisely what we've been seeing. Interestingly enough, the Progressive Conservative Party, in a Blueprint for Learning, which they put forward just prior to their election, announced that their government would look for students to pay 25% of the operating costs of universities. We're already seeing this amount upwards of 30%, and 52% at Nipissing. But that sticker shock you're talking about is most definitely exactly what we're seeing from rising tuition fees, that many students will simply not look to postsecondary education at a time when it's most needed. That is for lower-income students.
Mr Caplan: Another broken promise, really, that was made in the last election regarding student assistance, tuition fees and the operating funds. I'm not surprised that young people are very cynical about this particular government.
Mr Peter Kormos (Welland-Thorold): First let me apologize for Mr Pouliot. He had to leave for a few minutes. His office asked me to come down and fill in. I read the summary and I scanned the body of it.
It's interesting because I just left public accounts, where I spent a day with Veronica Lacey, spending some time, among other things, with the contract she entered into with this government, her performance review contract, the one that says she is expected to pull $667 million out of secondary and elementary. There was some other neat stuff in there too. There was stuff about the goal to deregulate tuition fees here in Ontario, which has already begun. Friday the 13th, Part VI, occurred last week, because raising the threshold from $6,000 to $7,000 was in her performance review. She was told to save $80 million out of OSAP funding, and that saving amounts to exactly $80 million, raising the threshold from $6,000 to $7,000. Then the audacity of saying, "We're going to spend 6% more next year than we did this year," that's only a fraction of the $80 million they pulled out this year.
Mr Baird speaks of letting people go to school and then making them pay tuition if they earn over a certain amount. It sounds like he's an advocate of progressive income taxes, but you wouldn't know it in view of the 30% tax cut.
Let me put this to you, because I find myself and Mr Pouliot in agreement with you about your concerns. I'll tell you this like I've told so many other groups of students. I was born in 1952. I was the child of working-class immigrant parents, the first generation of my family that went to university, because a whole lot of people, generations before us, had paid taxes and worked hard to build public education to ensure that their kids or grandkids got to university, as I was able to.
My detractors will say it didn't do me much good. Let my detractors say what they will, but my fear when I visit Brock University, as I did on January 28, or U of T over here when Mr Bush got his honorary degree -- I wasn't inside, I was outside -- my concern is that the generation of young people in university today who are similarly, as I was, either working-class or even middle-class children or new Canadians, with immigrant parents like mine were, may be the last generation of Ontarians to enjoy what should be a right to post-secondary education.
I think your challenge and all of ours is to talk to people, as you have, about the importance for all of us of investing in education at the elementary, secondary and postsecondary levels, that tax dollars spent on quality public education, from a fiscal point of view -- and you point that out when you talk about the net returns on bucks spent -- make money for our community. It's a difficult challenge because my friend talks about sticker shock and the government members like to talk about the sticker shock of taxes. I understand that, but I'm prepared to pay taxes to ensure that young people get quality postsecondary education. As I say, our job is to make sure people understand that there is a very selfish motive in my doing that. It's not altruism; it's in my best interests to pay taxes to fund postsecondary education. I think that's the word we've got to spread.
I know I didn't ask you a question, I engaged in a little bit of a polemic, but heck, I'm only in here for 45 minutes or so this afternoon. Thank you for the brief and the submission and I encourage you. I know the work you've been doing across the country.
The Acting Chair: The time has elapsed. Thanks very much for your presentation. We've certainly appreciated hearing from you people.
GLOBAL RYAN'S PET FOOD CO
The Acting Chair: The next presenter is Global Ryan's Pet Food Co, Jim Walker. Welcome to the committee.
Mr Jim Walker: When I was invited to address you today, I took a long time to consider the topics I'd like to cover. Overall, I must say I'm pleased with many of the government initiatives over the past few years, especially when it comes to general business practices and the economic growth in Ontario as it affects small and medium businesses. Some specific initiatives that many of my business counterparts are pleased with include the personal income tax cut, the removal of yearly corporate incorporation fees, and enterprise centres which have been set up for small business that have started to take steps towards increasing the access to capital.
Many of the more positive initiatives have, however, fallen short of the intended mark or have been hamstrung by overriding federal programs. For example, the personal income tax cut benefits to individual consumers have been reversed by increases in federal Canadian pension plan contributions. A slight anecdote: Interestingly enough, as you can tell by the title of where I come from, I'm from the pet food industry. The initial cuts that were proposed to provincial income tax equalled approximately the amount it would take for a family to go out and buy themselves a family pet and support that family pet with food and accessories for a year. Unfortunately, with increases in the Canadian pension plan, that's been cut back and fewer people may be buying pets.
An example of a program that I feel has missed its mark with regard to small and medium businesses is their access to growth capital. Even though enterprise centres can help, access to bank financing still largely depends on whom you know and often other personal contacts at financial institutions. I was fortunate, not too many years ago, to have had access to the provincially sponsored new ventures loan program. I feel reinstating this program would be very helpful to small business and job creation in Ontario.
Some other areas of concern from my standpoint include actual value assessment and its effect on greater Toronto area retail stores, and commercial taxes specifically; increases in the Workers' Compensation Board rates -- my business category has had a 15% increase alone this year; and retail sales tax late payment penalties, which I feel are rather onerous. I feel penalties should be a percentage of the required payment, not just a flat fee of $1,000. Also, under certain circumstances, special late payment allowances should be made available for PST remittances.
In my experience, we recently purchased a bankrupt business and saved 40 jobs here in Ontario. In the first few months, you can understand, without a lot of access to capital it was a challenge for us to maintain those 40 jobs and also maintain our on-time payments. We were fortunate enough to do so, but it was very difficult from a small businessman's standpoint.
Finally, I'd like to talk about a concern which for the most part falls under federal jurisdiction. However, I feel it needs provincial initiative to ensure that a level playing field exists. I speak of unfair competition and predatory pricing practices employed by many large American superstores. I believe that competition is an excellent way to bring out the best in many of our enterprises in Ontario. I also feel that we should attract and develop business involvement from outside of Canada.
1530
However, when the business attracted predatory pricing practices to eliminate local Canadian competition and force Ontario residents into the unemployment lines, the Ontario government must take some action. The federal competition regulation body has formally acted to maintain level business playing fields only three times since their mandate began. If we cannot rely on the federal government for support, a provincial watchdog needs to be set up and that provincial watchdog needs to be given the teeth to support healthy competition, not unfair predatory business practices.
I thank you for the opportunity today, though brief it was, to present some of the concerns that small and medium Canadian business has, especially with regard to the policies we've seen in the last few years here in Ontario.
The Acting Chair: Thank you very much for your presentation. We'll start with the Liberals.
Mr Phillips: I appreciate your being here and sharing your thoughts with us. To deal with your last issue first, because it does look like these large new types, not new but fairly new, are having a fairly profound impact on retailing, I think it was K mart who suggested that the reason they merged with Zellers was the Wal-Mart situation, if I'm not mistaken, and Home Depot and Price Club Costco are moving in very quickly, expanding very quickly. Are those three examples that you would be thinking of?
Mr Walker: Those would be three examples. Also, in my industry there's an American superstore that just came in called Petsmart, which is another 20,000-square-foot category killer.
Mr Phillips: What specifically do you think you would be recommending should be done?
Mr Walker: From my standpoint, it's very difficult to provide a general overlay of what would suffice in both the Wal-Mart-type concerns of the world, the Home Depot types and how we have trouble here in the Canadian pet food industry. From my standpoint, we are required to deal with, just because of longevity of products, a number of American-made foods and accessories which, although there certainly isn't any hard and fast evidence to this allegation, many of the American superstores seem to be getting into their little warehouse stores at a cost far and away below anything we can even begin to achieve.
I represent a 50-store chain and we purchase pretty much at the best price you're going to find, and yet despite that many of the products in the superstores are sold sometimes 20%, 30% or 40% on regular, everyday prices below what we can even buy the products for. We have to deal with the Canadian distributors, and in some cases they're getting their shipments directly from the United States, although many of the Canadian distributors are paid a distribution fee for that, if you will. That's our biggest problem and I really can't begin today to tell you how to correct that. All I know is that when many of my customers on certain products can go to the superstore and buy it cheaper than I can buy it from the distributor, there's a problem and it's not just in the way I negotiate my deals.
Mr Phillips: I'm interested in that. I always assumed there were anti-dumping laws that would protect against something like that.
Mr Walker: With respect, this is a problem we've experienced now for about a year and a half. When the problem first came up, I went to Bill Saunderson, the Minister of Economic Development at the time, because he was a personal friend and a family friend, and asked what would be best to help us out in this regard. They did point us in the direction of the federal government and we tried and do as much as we could from our standpoint as a retailer. Unfortunately, we were told that unless the complaint could come from a Canadian food manufacturer, we had no standing with them.
Mr Phillips: You suggested that the new ventures program was something that helped get you launched, if I heard you right.
Mr Walker: Yes.
Mr Phillips: Is access to capital for new ventures like you were still a significant problem, and are you suggesting there are labour-sponsored venture capital corporations -- I think the credit unions have been given a lot more leeway in the financial community; the banks are telling us they're very keen on dealing with small business. Is it still, in your experience, a problem for small business -- startup business I guess you're suggesting -- to access capital?
Mr Walker: Yes, fortunately I was able to make use of some of the funds that were available at the time. Part of our business is also a franchise organization, so I deal with a number of people who are coming to our organization on a daily basis looking to start their own business, and franchising can be one of the more successful ways to do it. Many of these people struggle with getting financing, because what it comes down to more -- in a lot of cases in the new ventures loan program I believe $15,000 was available to me. I had to take a number of different daytime courses and I had to propose a solid business plan. But a lot of the people who are coming to us now are having to rely on their own personal retirement savings to either leverage any loan from a bank or use it place of a loan. So yes, it has been a problem and continues to be a problem.
It's very difficult as well, from a small business's standpoint, to make the next step to a medium-sized business. Quite often you'll find that the banks have given some small bit of money, leveraged on some of the savings a person may have, but as they go to improve or increase the business they're in, or grow it, it becomes much more difficult because the loans they've already received have been secured against the existing assets. So yes, it is a problem.
Mr Phillips: A strange world in that in some respects the faster your business is growing, the more difficult it is to finance it; and the slower it is, the easier it is because you don't have the same accounts payable.
Mr Walker: Sometimes, yes.
Mr Phillips: I gather you're in mainly retailing. Do you do any manufacturing of pet foods or are you all retail?
Mr Walker: No, we do some co-packing, but mostly retailing.
Mr Phillips: It was I think quite healthy in 1997, but I guess you're saying to us that within an overall healthy environment you can see some significant winners and losers. If I'm reading you right, I think you're raising the flag about smaller retailers facing some fairly tough competition from the -- you call them category killers, do you?
Mr Walker: Yes, they've been referred to as category killers. Interestingly enough, the more healthy the retail sector appears, of course, the more competition it's going to attract, the more interest there's going to be in starting up new ventures which are similar or bring some other new, innovative ideas to the same business. In our case, there are and have been a number of small chains in Ontario with 10, 20, 30 stores, some as large as 50 or 100 or even 200, and all of them have enjoyed healthy competition back and forth in a lot of different ways and we've had to learn a lot about dealing with the public from a retail standpoint. But you're very accurate that, when it comes to a category killer and with respect to some of the predatory pricing practices I feel they are displaying, that makes it very difficult for a small Ontario-based business, quite frankly in some cases a main-street business, to deal with with the supersized large shopping outlets that appear on the outskirts of the larger towns.
1540
Mr Kormos: I'm sorry I missed some of Mr Phillips's conversation with you. I was interested by your company. Charlie the beagle has been dead for three and a half years now, so it's been that long since I've bought pet food. Charlie was as faithful and likeable a companion as one could ever find, especially around here. I'm not familiar with Global Ryan's Pet Food, but you talked about resurrecting a company that had been bankrupted, with 40 employees, 40 jobs. Flesh that out a little bit.
Mr Walker: Global Pet Foods has been in business for about 22 years. Of course, I didn't start it. But at the same time, another small pet food chain called Ryan's Pet Foods, being about 15 years old, started by a gentleman with the last name of Ryan, went through a number of different ownership scenarios. The last ownership group had some trouble and went bankrupt in 1997. At that point we were able to go in and use some of the techniques we use, which are very different in distribution and retail than they were using, which caused their problems in the first place. We were able to acquire some of the assets of the bankrupt company and keep on the employees and maintain their business, hence the joint Global Ryan's company.
Mr Kormos: Perhaps you were a little facetious but not entirely when you talked about how the provincial tax break was negated by increases in federal deductions. I've got to tell you I'm from down in Niagara region, Welland. We have one of the highest unemployment levels across Niagara region and all of Ontario, well into the double digits. We have really unstable conditions in terms of industry. There have been major layoffs at GM, for instance. The retailers down there -- and again, I'm talking more about the kind of folks you're talking about rather than -- what do you call them? -- the box stores.
Mr Walker: Yes, the big box stores.
Mr Kormos: The Home Depots and the Wal-Marts and those sorts. They're almost like the gas bar phenomenon, because they come on strong and create the illusion of economies for the consumer, but once everybody else is gone, you end up finding that the prices really aren't that competitive other than for the loss leader. That has been my impression. I don't know if that's an observation you make.
Mr Walker: That's very correct in our business too.
Mr Kormos: We bought into that nutty psychology that somehow bigger is better.
Mr Walker: Fortunately, we haven't completely bought into it yet or we wouldn't be here talking to you today. But none the less, yes.
Mr Kormos: I've got to leave time for Mr Pouliot or else he'll be mad at me, and I wouldn't want that to happen.
Mr Pouliot: Thank you, Mr Kormos. Mr Walker, I heard you mention some concern vis-à-vis the Canada pension plan, the CPP. Your client group, it seems, would be the last one. I wrote down here, "Does not apply," because you talked about the CPP, and I see that you're with a pet food company, in fact 50 franchises, is it?
Mr Walker: A combination of franchise and corporation.
Mr Pouliot: A combination. I thank you very kindly. Would you like to focus and help us? How is it that the federal Liberals in this instance -- this is a smaller House, you see, this is a provincial Legislature. We have very little influence over the federal Liberals. For me, it's almost a curse on both their houses, because it's tax and spend, tax and spend, and we see escalating prices. In specifics, what is it you don't like about the CPP? How is it impacting you?
Mr Walker: It appears that many of the gains that would have been made by the provincial tax cut, which, when I referred to the anecdote of actually having enough extra money available to buy another family pet, from the estimates I had seen were somewhere in the vicinity of $1,000-odd for a family per year, have been to a large degree, or appear to be, offset by any increases we're going to have to pay as consumers in the Canada pension plan. I know that certainly is a federal jurisdiction, but it's a comment I was making, that maybe part of the intent of the government's plan to reduce the tax and give the consumer more money to spend missed the mark because it was overshadowed or hamstrung, as I said, by a federal program.
Mr Pouliot: So, less money, fewer pets. I want to go to the tax cut, the incentive to indulge loved ones. If you make $25,000 a year, when all is said and done, the full 30% implemented, you would save about $400 per year in taxes. You're well on your way to Petville. If you make $250,000 a year, which is 10 times 25, well, you don't get 10 times the tax cut, because it's progressive; you get 30 times the tax cut. Your point is well taken, but if there were a redistribution of the same tax cut -- because if you made $250,000 or $25,000, a person can only have so many pets, right? But if more of us had the luxury and the ability and the desire, of course, to have pets, then your business would grow.
One final question. You've touched on economy of scale and you've given us some examples. Is the state of the Canadian dollar a factor in your business?
Mr Walker: It has recently become a bit of a factor. However, at the same time, recognize that all of the different retail competitors we have are also experiencing the same concern. Some of the American-based foods have increased in price because of the Canadian dollar, but if they've increased in price to us, they've increased to everybody.
Mr Jim Brown: It's nice to hear from a smaller and medium-sized enterprise. This morning we had the Bank of Nova Scotia here, and yesterday we had the Canadian Bankers Association here. They were all doing a love-in with small and medium-sized enterprises. They're born-again small business lenders, I guess. Before this reincarnation, I had a small manufacturing company, and I know the trials and tribulations of trying to raise capital for not only startup but expansion. A lot of my friends who had companies expressed the same kind of thing you did.
The federal Liberals control the Bank Act, and there are only six of them basically, so there's very limited supply and very limited competition. You're expressing the same problem with predatory pricing. Again, the Competition Act is the federal Liberals. Do you ever get the feeling that the federal Liberals are big business and the big guys and they don't really care about the little guy who is creating all the jobs? Little business creates probably 85% or 90% of all new jobs. They're the people who also hire youth, who take a chance on people with less experience. Do you ever get that beleaguered? I know I did.
Second, what do we do about access to capital? It is a serious problem, you said, and I agree with you. What do you think we ought to do?
Mr Walker: On your first question, with regard to the federal government, certainly a lot of mention is made all the time about small business and medium-sized business and trying to help them. They have had some programs which have worked well in my business industry. For example, there's a program whereby if you have been let go or laid off or, as they call it, given the golden handshake, they have some allowances for you to collect unemployment at the same time as starting your own business and for the first year to collect unemployment even though you're starting up your own business. That has helped in some cases for us.
My point was more towards the same kind of programs or maybe proposing the same kind of programs at the provincial level. Access to capital sometimes, as you comment, with only six banks being available, can be difficult. At the same time, the new ventures loan program, which I was able to enjoy, worked tremendously well to get me off the ground. It didn't require a lot, was not a huge program where we were asking for $200,000; it had a ceiling of $15,000. I have no way of knowing this -- maybe you can answer the question for me -- was the new ventures loan program put on the shelf because a lot of the small businesses weren't paying it back? Were there a lot of problems with that or was it put away for a reason that I don't know about?
1550
Mr Jim Brown: I don't know. I really don't know the answer to that, but if I can follow up, you and the franchisees, when you go for capital, I guess you approach the bank and that's it? What about credit unions -- is there any play there? -- or labour-sponsored investment funds, the funds that the feds give a humongous tax break to and then the labour-sponsored investment fund plows it into treasury bills and doesn't give it to the companies that it was intended for?
They're sitting on hundreds of millions of dollars. Mr Pouliot is affirming this. Individual investors make a killing on the stocks of these things but the money doesn't get out to small and medium-sized enterprises. They probably have invested 10%, 20% of the total funds that they've taken in, and the taxpayers have really contributed in tax deductibility to these funds and the profitability of these funds.
Did any of your franchisees get any money from or even think of going to labour-sponsored investments funds or the trust companies? You must be advising them, so do you just basically say, "Look, go see the bank," and that's it? I feel that's the only source, frankly.
Mr Walker: I'd like to answer it in two different ways. From the standpoint of a franchisee, when I started off -- and I can only speak to when I started off, because I actually was a franchisee before I got involved in running the entire business -- we had trouble and we weren't able to take advantage of some of the trust companies for commercial loans because they weren't allowed to when we first got into it. I understand there has been some movement in that area, but none the less it wasn't there and it hasn't been there for a long time. For an individual franchisee to approach one of the labour-sponsored funds for $15,000, I'm not sure they'd even talk to him.
Mr Jim Brown: Forget it.
Mr Walker: That is my take on the first part of your question.
The second part, from a medium-sized company's standpoint, we are also involved with a public company. We have some connections with a public company with regard to our ownership structure. Our public company is working on a private placement right now. However, every time they approach one of these labour-sponsored funds, they're able to give their presentation and they work through it, but there seems to be a long delay between their approaching the labour-sponsored fund and getting an answer back. I met one of them, for example, as part of it probably six months ago, and we still haven't heard from them, quite frankly.
Mr Jim Brown: But you know what? They don't really want to give you the money, they really truly don't, because they make more money not giving it to you because they've got better investments with no risk and they would consider you a risk. They don't want to give it to you.
Part of your company is a public company. I was involved in a public company and, I'm telling you, the red tape and the bureaucracy and the legal cost and the amount of stuff you have to go through to get on a public exchange or the over-the-counter market, what a joke. How can a little Canadian business ever become big? It's almost as if the decks are stacked. American companies can come in, easy, but if you're Canadian, you're up against it. What are your experiences? With the public marketplace and the regulatory bodies it's incredible. It just costs a fortune. No small guy can do it.
Mr Walker: I agree. Fortunately, because of my position with regard to the operations of my company, my position is not involved in the regulatory side. But at the same point, the people who are responsible at the public company that we're involved with for this have tremendous amounts of paperwork, tremendous amounts of red tape.
I'll give you a prime example. We became involved with the public company about six months ago. This is a good thing from an employment standpoint, but we went from having an accounting department of one person to now, because of the various filings that have to be done, an accounting department of four.
Mr Jim Brown: You're lucky.
The Acting Chair: Thank you very much for your presentation. We've exhausted the time. We appreciate your presentation today.
SERVICE EMPLOYEES INTERNATIONAL UNION
The Acting Chair: The next presenter we're calling for is the Service Employees International Union, Corey Vermey. You have 30 minutes to use as you see fit.
Mr Corey Vermey: Thank you for this opportunity to speak before the committee. I trust the Chair will politely nudge me as I reach the 15-minute point so that I leave as much time for questions of the committee members as is possible.
The Service Employees International Union, or SEIU, has not annually arrived at the Legislature to make submission to government on the fiscal choices, goals or priorities in the budgeting process. We do feel particularly of late that it may be incumbent upon us to do this on a regular basis, as we feel that the input of our members would hopefully be of benefit to the government.
By way of introduction, given that we haven't had frequent exchanges with this committee, SEIU is the second-largest and a predominantly public sector union in North America. In Ontario we represent some 43,000 members, and again predominantly in the public sector and dominantly females in the health care sector, both the acute care hospital sector and the facility-based long-term-care sector. The numbers respectively are 26,000 in hospital and 17,000 in long-term care.
We certainly have occasion to take a view of the recent changes, reforms, restructuring that has been under way in the health care system in Ontario. The focus of our submission today is in regard to what we trust the budget will reflect, namely, the concerns, particularly from the vantage point of women and of the elderly, in regard to the health care priorities of the current government.
We've had occasion to review the submission by the Ontario Federation of Labour earlier this month and we certainly endorse that submission as an affiliate of that body and leave the broader context of fiscal and economic policy to be addressed by that submission.
Before addressing what we believe to be two overarching themes to guide particularly the current Minister of Health as well as her government in addressing health issues in this province, we should say from the outset that we see no contradiction and no insurmountable difference between advocating the interests of our members, who have historically been the lowest-paid care providers in the health care system, and advocating for the quality of care that patients, residents and clients demand in this province. We see no fundamental contradiction in that respect. We believe that to the extent that the quality of care given residents of this province is funded adequately by government, then the terms and conditions of employment of workers in that sector will at least be comparable with other sectors in both the private sector and public sector.
Nor do we stand in the road of restructuring. We have, particularly through our experiences in the United States in a health care system that is probably the leading drain on national expenditures of a developed country, running at some 11%, if not 12%, of gross domestic product, fed by the intrusion of for-profit health care to the extent that the previous speaker speaks of category killers in the United States -- category killers have entered into the hospital in the acute care sector, such as Columbia HCA, and have wrought considerable devastation, we would submit, in a health insurance system that barely covers three quarters of the nation's population south of the border.
Our membership within SEIU and some 650,000 members in the United States who are employed in health care know well of the broad parameters of restructuring. This has served us well in Canada, not only in this province but in other provinces such as Manitoba and Saskatchewan, in dealing with the broad reconfiguration of the health care system.
As we've noted, we have a number of guiding principles in terms of our participation in restructuring, namely, our participation being predicated on adherence to the Canada Health Act; our participation being predicated upon reinvestment of the savings in the acute care sector into the community, if that is the direction by policy choice; our participation being predicated upon a humane and negotiated human resource plan that deals with the obvious effects upon caregivers and the staffs in acute-care hospitals; our participation again predicated upon the entirety or totality of the health care system being considered, including primary care reform, when engaging in restructuring; and finally, our participation predicated upon repatriation of publicly funded services to the extent that those services have been contracted for to for-profit providers.
1600
We arrived this afternoon to be of particular assistance to the government members of this committee. We understand that they are in search of messages that will appeal to women and seniors and have recently decided that this is a more appropriate communications tack to take. We certainly believe they are properly concerned about particularly the perception of the current government's health policies from the perspective of women and the elderly.
It's clear that women have a particular relationship to the health care system, being the predominant providers. With probably the sole exception of the physician corps within the health system, the providers are predominantly women, four out of five. The health sector is the largest employer of women in the provincial and national economies. The effects of restructuring fall disproportionately, with regard to paid employment, upon women. Equally, the restructuring and placement of burden on informal care providers fall again on women.
Women and particularly the elderly share a community solidarity, particularly in terms of long-term care. The overwhelming majority of the workforce caring for our elderly in facility-based care are women, and increasingly women are caring for our elderly in home-based care. So both as providers and consumers, we wish to address this issue of health care reform.
Before turning to the three principal sectors of reform -- the acute care, long-term-care and home care sectors -- we wish to simply identify to this committee the principal themes or recommendations we place before you and leave the text and justification for the members of the committee to review at your leisure and convenience.
In terms of the acute care sector, of course, there is little doubt that at least the public perception is that this sector of health care is in deep crisis. There have been growing accounts within the press and growing commentary throughout our communities about the devastation of the initial funding cuts to acute care sectors, and then subsequently the activity of the Health Services Restructuring Commission and the word of closure of some 30 hospitals in this province.
What we recommend to this committee for incorporation within the budget is assurance that those hospitals that have survived the commission's restructuring be provided a multi-year timetable and assurance of enhanced funding to cope with the intensity of service that they are required to provide.
Equally, with regard to labour adjustment in this sector, we can only suggest to this committee that the thousands of workers who have received layoff notices or reductions in the hours of work they perform in acute care hospitals, although they have received an apology from the Premier for being compared to hula hoop workers, were only further insulted when the current government withdrew funding from the Health Sector Training and Adjustment Panel, a very important component in any rational and humane redeployment of health care providers flowing with the policy choices to community, if not in fact home care, settings.
At present, it would appear that with the funding cut to HSTAP, at best, if other health care employers so desire, they may contact the registry for eligible employees. In the end, the acute care health care provider is given severance funded 85% by the province and left to the vagaries of the labour market in terms of their next opportunity for employment.
This stands in rather stark contrast to the recent progress with regard to primary care reform, which has yet to be initiated. Certainly the recent negotiations between the province and the Ontario Medical Association do not give cause for celebration to health care workers, who have not seen wage increases and in fact see intensification of their work and growing stress, and in numerous instances have received layoff notices or, if not, a reduction in hours of work, and have a perception that they indeed have borne the brunt of the government's policies with regard to health care restructuring.
The second sector we wish to draw the committee's attention to is the long-term-care sector. Perhaps from the absence of attention by this current government, this sector is not as yet in crisis, but certainly would appear to be headed in that direction.
Various recent reports, including the Health Services Restructuring Commission's interim planning guidelines, as well as surveys by the principal employer associations with long-term care -- the Ontario Nursing Home Association and the Ontario Association of Non-Profit Homes and Services for Seniors -- have all identified not only an existing need but a substantial need within five years in terms of capacity in the system.
We wish to emphasize that although the need for additional capacity in long-term care is now generally acknowledged, what often is not acknowledged is the need for additional funding to the current system in addition to what was previously announced, apart from the 1997 budget, in the June announcement by the then minister, Mr Wilson, of $100 million. Even the employer associations in this sector acknowledge that $100 million of enhancement funding into long-term care was but an initial drop in the bucket to a system that has been greatly underfunded, if not chronically then more recently, with the repeal of the legislative requirement to staff at 2.25 hours of nursing and personal care per resident per day and the withdrawal of red-circling for municipal homes for the aged which staff in excess of that. A very serious quality issue is arising in those facilities as well that must be addressed by enhancement funding prior to the addition of capacity to the system.
The Ministry of Health's own classification system that is the basis for funding long-term-care facilities reveals that the intensity of care has only increased in long-term-care facilities. Since 1992, when residents have been classified based on the level of care, it is the heavier categories of care in which the majority of residents -- both absolute and relative numbers are falling in our long-term-care facilities.
1610
We call upon this committee to urge the Minister of Finance to inject additional funding to maintain the current standards of care prior to expanding capacity, but notwithstanding, to initiate a multi-year plan for the enhancement of capacity up to 30% of existing stock in long-term-care beds.
We call on the government to restore the 2.25 hours per resident per day requirement to ensure that residents in these facilities are adequately cared for.
In particular, we urge the Minister of Finance to direct the Ministry of Health to increase and to also fund for the Ministry of Health an increase in the raw food budget for this sector
Finally, we would urge, in light of those recommendations, ongoing study and evaluation, with the involvement of all the principal stakeholders, to ensure that the funding for long-term-care facilities continues to keep pace with the increased demand for care in this sector, and that any allocation of additional bed capacity that is contemplated be considered in consultation with the major stakeholders and after an opportunity for public consultation on a broad basis as to the proprietary nature of the facilities.
Finally, with respect to the home care sector, our union in particular is of the view that this is the sector within health care that is in the most immediate fear of falling into crisis. We have characterized home care as the black hole of health care reform. Although my astrophysics is not strong, we are concerned that home care, at both the national and provincial levels, is not understood. It's not understood, it's not studied and it has not proven to be cost-effective. Many of the studies reveal it to be rather an enhancement or add-on to institutional care or long-term care rather than a substitute for such care.
There is of course a broad perception that it is a good thing, and we don't dispute that initially, but there is little empirical or evidence-driven study of home care, and what we are most immediately concerned with is that the one attraction of home care is the current significantly lower cost of providing care driven by the substandard wages paid to the care providers. While we appreciate that quality of care may well include discretion as to the location in which a patient or client receives that care, and certainly the home would be a quality environment in most instances, it may not be in all instances. We believe, particularly in light of the current government's policies in terms of the selection of care provider agencies, that a vicious spiral downward is being set in play where existing not-for-profit agencies will be forced into competition again with the big category killers from the United States, Olsten temporary agency, American Home Patient and others, and they will be competing on the basis of the agency most able to depress wages and working conditions for predominantly women working part-time hours, required to travel to a variety of locations, who will not have any regular schedule.
We have already begun to see, not only in this province in the Comcare strike in Kingston but also in Manitoba and in Nova Scotia, labour disputes over the privatization of home care. In this province that would not be a prospect with regard to facility-based care, but given different statutory regimes, not least of which will be with regard to labour relations but equally with regard to pay equity, we fear considerably for the pressures that will be placed on the home care component. As much as it is vaunted as the recipe for successful health care reform, we see that it will fail this province miserably with regard to issues of equity and issues of quality. It is issues of equity and of quality that are of immediate and priority concern for women and the elderly. If this current government is indeed truly seeking not only messages but policies that are of concern and interest to women and the elderly, it needs to very carefully consider home care from the perspectives that are framed by equity and quality.
Our union has fairly recently won a significant victory in a decision by Mr Justice O'Leary in regard to schedule J of Bill 26, and we trust that the current government, in appealing to women in particular but also to the elderly on issues of equity and quality, will appropriately fund the significance and ramifications of the O'Leary decision with regard to the proxy pay equity comparisons in the broader public sector. It has been suggested that the O'Leary decision will affect some 100,000 of the lowest-paid women working in the broader public sector, principally as care providers in the health care and community services sector.
I trust I have left enough time for questions from the committee members.
The Acting Chair: Yes, about two minutes per caucus. We'll start with the NDP.
Mr Pouliot: Thank you for an excellent presentation indeed. You represent some 43,000 public sector workers in the province of Ontario. This government, in my opinion, declared war on education the very first day they took office, but that did not suffice. In the appetite of the revolution, they went to the largest expenditure sector of all, that of health. Your tone cautions the committee, in anticipation of more privatization. You've called them "category killers," people who take over and hire cheaper, often less experienced workers. You're right, the most vulnerable, women and the elderly, could be left holding the bag. You've also mentioned successive cutbacks that make the ability to cope more difficult.
Yet I look at your presentation on page 7 and I see that there is a group of people involved in the delivery: doctors. It says here that the doctors will surpass the target amount by some $85 million in 1997-98. It seems that if you're an educator they'll wrestle you to the ground, if you are a health worker you'll get wrestled to the ground, but if you're a doctor you get wrestled to the ceiling.
I don't have it here, but if you were to look at the overspending on the drug programs, there's a close tie here. You probably would exceed the amount allocated, the target amount, because those are open-ended programs; they pay piecemeal. So there seems to be some contradiction. Would you care to address it? I see that with the doctors there is no shortage of funding here, and there are, what, 21,000, 22,000, 22,500 licensed physicians in the province, yet the thousands of health care workers have not had an increase. How do you cope with that? We're talking about health here, we're talking about service providers, be it, with respect, a doctor or be it a nurse or be it someone who works in the system.
The Acting Chair: Sir, I'd like to have you address that answer, but Mr Pouliot used up the time. I think that's unfortunate. I will give a part of a minute for the answer, but be quick.
Mr Vermey: Very quickly, I think the answer is the incentive or funding formula or structure in place. For physicians, obviously it's predominantly fee for service. It's essentially piecework, if physicians would not object to being characterized as such. But it is a form of payment that is noted for enhancing utilization, as opposed to dealing in a systemic way with utilization. I think the same can be said for drug benefits, where the costs, as well as for private sector lab testing, tend to be driven by fee for service or incentive-structured.
1620
Mr Baird: Thank you very much for your presentation. Given that we have less than two minutes, maybe I'll just make a comment. Mr Pouliot mentioned your tone. I appreciate that you've been very constructive. There's a lot of information here, and it certainly is incumbent upon us all to reflect on what you've had to say and give it some thought.
I met with your union on a number of occasions on various issues when I was assistant to the Minister of Labour. It was very constructive. Often there will be strong disagreements, but on many issues your union was the first one where I was able to get an appreciation for what the viewpoint was because of the constructive approach they took.
The one thing I took very heavily from what you presented on long-term care was the quality of the existing beds and the need for new beds. In my own community, I visited a long-term-care facility the better part of a year ago. You see one nurse's aide feeding lunch to six seniors with dementia and it's a very disturbing prospect.
The inequities in the system, how a publicly funded long-term-care facility down the road was getting significantly more -- a lot of my colleagues were very concerned about that inequity and we pushed, and there was a $100-million reinvestment. That facility in my riding, for example, got an extra $400,000 a year added to their base budget to deal with that, because the brunt too often was falling on the staff and they were simply not able to cope any longer. The quality of the existing care is certainly of great concern to all of us. We need more long-term-care beds, particularly in my part of the province, but the quality of the existing care is important and that's got to be an area for reinvestment. Just in my community this morning the minister and I announced $81 million in new spending for health care. Long-term care has got to be a priority, and of course home care, as you discussed.
I appreciate your comments and I'll certainly take the time to reflect on them.
Mr Vermey: Just to complement the remarks of the committee member, I think it's appropriate to suggest that the model for home care funding should at best reflect the model currently in place for long-term-care funding; namely, that the funding is driven by the assessed needs of the resident or the client and there is an undertaking that any moneys not expended for the provision of nursing and personal care or raw food are remitted back to the province. There is no take, as it were, for the agency or the facility from the very essential service, which is nursing and personal care. Accommodation is the area in which, if efficiencies are achieved, the operator of that facility may retain the surplus, as it were.
Mr Phillips: The Ontario Hospital Association was in, I think yesterday, with a different message than they had in previous years, in my opinion raising some significant concerns about the direction of health care in the province; a feeling, if I read between the lines, not unlike your caution today on community-based care or home-based care, of an assumption that that's far more cost-effective and can be done less expensively than in other settings. If I read your comments properly, you're warning the committee not to assume that this is a very inexpensive way of providing service, that it may in some cases be better service but it's not necessarily going to be more efficient.
Also you're raising concerns that I guess all of us share, which is that if we ignore that many will need and do need care not in the home but in some institution where they can be provided with ongoing care, if we ignore that and don't provide the investment now, we're going to wake up somewhere down the road with a significant problem on our hands.
The Acting Chair: That's exhausted our time. Thanks for your presentation. It's appreciated very much.
FEDERATION OF WOMEN TEACHERS' ASSOCIATIONS OF ONTARIO
The Acting Chair: I call upon the Federation of Women Teachers' Associations of Ontario.
Ms Maret Sädem-Thompson: Good afternoon. I'm Maret Sädem-Thompson, president of the Federation of Women Teachers' Associations of Ontario. My colleague Florence Keillor is the first vice-president of the FWTAO. Together we represent the 41,000 women who teach in Ontario's elementary public schools.
For 80 years we have advocated for students, for women and for children. We are here to make this presentation to the standing committee on finance and economic affairs for two important reasons. First, it is important to offer our views and expertise on the choices this government should make to benefit all of the people -- all of the people -- of this province. Second, Bill 160 made it clear that the provincial government will control the education budget, so it is appropriate for us to bring our comments to you at this time.
The government plans to take two thirds of a billion dollars out of the education budget. This will not improve education in Ontario. You cannot improve a system by taking money out of it. A better education for Ontario's children requires decisions that guarantee more money for education, more resources, and more of a commitment from everyone.
Many of the initiatives of the last few years in Ontario are more concerned with economy than they are with citizens in our society. As a society, we must value the children for who they are now. Our education system should give all children every opportunity to pursue their education to the best of their abilities.
When choosing between political and financial options, we urge this government to ensure that children have the best conditions in schools, in their families and in their communities. A high-quality education system is much more than a measurement of test results and testing. We know from years of research and experience that quality education requires individual solutions as well as systemic solutions.
In a quality education system, teachers, parents, concerned citizens and politicians like yourselves work together on behalf of our children. Our budget proposal for a truly high-quality education system requires more money for education, for resources and for a commitment from others, everyone in Ontario.
Because a quality education system is not static, we know our students' needs are ever-changing. As our students' needs change, so too must the curriculum. Our quality curriculum development and delivery is not just about preparation for the workforce; more importantly, it is about preparation for quality citizenship. FWTAO believes that curriculum developed by the lowest-tendered bidder is not the way to achieve quality education. Curriculum development by corporations does not reflect the well-rounded expectations of a civic society. Our students and our education system must not be for sale.
Curriculum is the foundation of learning. Learning to read is the cornerstone of that foundation. The earlier the cornerstone is laid, the firmer that foundation. FWTAO believes we must teach reading well, in small classes and with a variety of quality resources. Well-prepared teachers in supportive communities are essential to literacy.
For children and adults to learn, curriculum must go beyond the classroom. Most important, it must be relevant. FWTAO believes the quality educational programming on TVOntario is an invaluable asset to Ontario's children and to their education.
We believe that relevant curriculum is inclusive and representative of our diverse population.
FWTAO believes that relevant curriculum affords all children, and particularly girls, the self-confidence and the skills and opportunities they need to use technology.
The components of a quality education are reduced when class sizes increase. Bill 160 explicitly allows school boards to ask for an exemption to have higher average class sizes. FWTAO supports President Clinton's initiative to reduce class sizes in grades 1 to 3 to a nation-wide average of 18. FWTAO supports this initiative because, unlike the provisions of Bill 160, Clinton's goal is substantiated by research and reflects a significant financial commitment to children and to quality education.
1630
Research shows that lower class size improves achievement overall and influences equity. It affords teachers more time to identify learners' problems. Learning problems identified at an early age are much more likely to be remediated.
Quality education is about innovative teaching strategies. Innovation is much more likely in smaller classes. Reduced class sizes of 18 students in grades 1 to 3 can be achieved in Ontario at a cost of $240 million. This is less than 5% of the tax cut this government allocated for its first term in office. Reducing class size is a small investment for a lifetime opportunity for our students.
Another cornerstone of a firm foundation for quality education is programming for the early years. Research in the Perry Preschool Project has been replicated repeatedly. You are no stranger to the facts on page 12 that show that for every $1 that we spend, we save $7 in costs of dropouts, costs of adult education, costs of crime, costs of welfare. All of those are savings to the government from an investment in our youth. Savings on social costs for adults can be realized by support for early-years education.
Prevention is more effective and less costly than remediation. FWTAO believes this government must put resources into ensuring that our children are born strong and healthy and remain that way. Healthy children are the responsibility of parents, of communities and of society as a whole.
FWTAO believes this government must use common sense and the common good done for all society in Ontario by expanding early childhood education programs. Our economic trading partner is moving forward, European countries are miles ahead, while the government in Ontario cut junior kindergarten funding by $58 million in 1996 with the result, as you can see on page 14, that junior kindergarten classes in 25 school board were cut. Other school boards reduced their JK programs to all day, every other day programs from half day, every day programs for financial savings.
FWTAO recommends that the yet-to-be-announced funding formula include funding for junior kindergarten as a core program everywhere in this province.
Ms Florence Keillor: I want to talk to you first of all about the importance of parent involvement. Parent involvement in a child's education is beneficial to student achievement. Parents can participate at the school board level, at the school level and at the classroom level, and with their own children individually. The education system should make it possible for all parents to participate at all levels.
The government has made it more difficult for parents to participate at the school board level by greatly increasing the geographic size of boards and decreasing the elected representation on boards. Given this, it is incumbent on this government and each school board to ensure the parental voice is not lost.
Parents can and do participate at the school level in a number of ways. The school council is the latest forum for this involvement. Similar committees have been around for many years in the form of parent-teacher or home-and-school associations. FWTAO members welcome this involvement of parents in the schools and are working with parents on the new school councils. However, we feel we must give a note of caution here. School councils are not appropriate forums for personnel matters that are complex, sensitive and governed by collective agreements.
FWTAO members will be challenging themselves to work out ways to welcome and involve more parents directly in the classroom. However, we think it is very important to find ways for all parents to become involved -- those who work outside the home as well as those with flexible time during school hours. Therefore, FWTAO urges the Ontario government to be a positive role model to other employers. Specifically, this means we recommend that the government provide its employees who are parents two days per school year per child for participation in classroom activities without loss of pay or benefits.
The importance of libraries and books: Increased technology in the classroom is acknowledged to be a good thing. We want our students to be computer literate. At the same time, FWTAO would like to remind you, and through you the government, that next to the teacher, the best classroom resource, the best guarantee of success, remains the book. Among the best predictors of success, for example, in a fourth grade reading test in 41 states was the number of books per student in the school library. Research in Colorado found that investments in school libraries resulted in better library collections, which in turn resulted in superior reading achievement scores among elementary schools in that state.
Children read more when they have access to interesting reading material, material that reflects the world as they know it. Even reading magazines and comic books encourages the reading of other materials. We at FWTAO recognize the importance of books and over the last few years have donated 3,494 books respecting diversity to school libraries around the province. In fact, we're awaiting another 1,500 from the publishers to be shipped out now to schools around the province.
There is a clear negative relationship between poverty and the amount of print at home, and a positive one between the amount of print at home and the amount of reading children do. What children cannot get at home, we must provide in the schools. Books are essential to learning, and providing them is not costly, but it will require a commitment by this government to include school libraries in the funding formula. Otherwise, the recent trend that has seen the loss of teacher-librarians and of library resources will continue.
We have some concerns about technology. Network technology is what you invest in after you have some idea of what you want an educational system to do and be -- not before. There is no strong evidence to suggest that using computers will improve a child's learning, yet there is evidence that music, art instruction, and access to books and libraries do. We would strongly caution against allowing other education programs to be cut in order to provide the needed funding for technology. We agree with Henry Jay Becker, who maintains that investments in people are more important than the investments in the technology itself.
Becker goes on to tell us that based on a hypothetical example, he estimates that the cost of implementing a good technology component in a school would be about $1,375 per pupil for the personnel support costs and about $550 per pupil for the equipment/material costs. His estimates of the personnel costs are based on research of "exemplary computer-using teachers." Some of the personnel costs he identified include time for staff development, teacher access, full-time technology coordinators, equity support and reducing class size to 20 per teacher. FWTAO strongly recommends that all costs associated with implementing more computers in classrooms be included in the costing of technology, rather than just the costs of the equipment.
Concerns about fund-raising: The Ontario Public School Teachers' Federation released a study on fund-raising in public elementary schools in September of last year. This study estimates that a total of about $22 million was raised in 1995-96 through fund-raising efforts. Increasingly, money from fund-raising is being used to purchase what most of us consider to be essential items, such as textbooks, and to "maintain an adequate level of program."
Fund-raising is not an option for the core needs of any education system. Almost every school does some fund-raising for some activities. However, there is no equity in the outcomes. A school in North Toronto can raise over $30,000 in a single fund-raising initiative. A school in the inner-city core, a school with complex needs for a student population at high risk, would be lucky to raise $300. That's not equity.
I'd like to continue with the importance of equitable funding. Our education system should ensure equity, not exacerbate inequity. The government's yet-to-be-announced funding formula must be designed in such a way that the diversity of student needs across Ontario is recognized and addressed. Assuming that all students are the same and therefore that all school boards must be funded the same way will result in inequity.
1640
The Minister of Education recently said: "There will be equality in the system, that is my objective. Some [boards] undoubtedly, will get less money."
Our concern is that the minister's insistence on equality will result in those with the greatest needs being further disadvantaged. FWTAO maintains that a fair and equitable funding model for the education system in Ontario must be based on the following principles:
First, the overall level of education funding must be sufficient to provide a high-quality education for all children in Ontario from the age of four.
Operating expenditures per student must be increased on a yearly basis to cover inflation.
Increases in enrolment must be fully funded.
Funding for students with special needs must fully meet the needs and conditions identified.
Funding must provide for fair and reasonable salary increases for teachers and other workers.
All policies and new directions and initiatives that are imposed by the Ministry of Education and Training must be funded adequately, in addition to the regular allocations.
The funding formula must recognize the importance of specialist teachers in elementary schools -- teacher-librarians, guidance counsellors, curriculum leaders, music teachers and physical education teachers.
The funding formula must result in equitable allocation to all school districts, taking into account differences in student population, for example, the 35% poverty rate in Metro, English-as-a-second-language needs, special education needs, as well as differences in school districts such as geography and size.
In conclusion, no single policy or program can ensure the school success of every child, but a combination of approaches can. A survey conducted in Orange county, California, found that the class size reduction initiative in that state has boosted the confidence in the schools.
We know that children learn better if they are confident in themselves. We believe this government should be boosting the confidence in our school system not by forcing amalgamation of school boards or by removing the local ability to fund programs that the community wants or by forcing the teachers in the province to take unprecedented measures to protest the actions, but by seriously trying to improve the education system by reducing class sizes, by providing the money to do so, by providing teachers with more professional development opportunities, not fewer, and by truly committing itself to the children and all citizens of this province. The teachers of this province are committed to the education of all children of this province. Is this government?
The Chair: Thank you very much. We have approximately four minutes per caucus for questions, starting with the government caucus.
Mr Baird: Thank you very much for your presentation. I wanted to ask one question of you at the outset. You spoke about the curriculum and the recent RFP that was put out by the Ministry of Education with respect to inviting teams to come forward. Is this something that has been talked about among your members? Have you talked to your members about that?
Ms Sädem-Thompson: Yes.
Mr Baird: The criteria in the request for proposals are very clear. Every team must have at least 50% secondary school teachers who are currently working in Ontario, and college and university educators also have to be involved with the team. You didn't mention it in your speech here, but did you tell your members that? Would they know that when you discuss this issue? I spoke to three or four teachers in my riding who had called me and written me on this issue. They were just mortified that American companies, evil multinationals, were going to be coming in to do this. They had received some information, but it wasn't mentioned that there had to be a majority of accredited teachers working in Ontario on those curriculum teams. I was just concerned that some people might have been left with a false impression on that.
Ms Sädem-Thompson: You're making the assumption that because there are 50% teachers on the team, if a corporation were the lowest-tendered bidder, the corporation wouldn't be able to recommend or suggest to the writing team to put a certain emphasis on to the curriculum. In Ontario in the past, the curriculum writing teams' work had been done by the boards of education and the teachers in this province working collaboratively with the ministry, not by lowest-tendered bidders and certainly not with the expectation that a corporation that might happen to have the dollars up front to bid would be able to influence that curriculum. That's the concern of the teachers' federation representing the women teachers in this province.
Mr Baird: But if 50% of the people on that team were practising secondary school teachers -- is there a concern about the integrity of those folks? If you had a majority, plus university and college representatives as well, that seems to be a pretty solid safeguard there. Is that something you told your members? Are they aware of that? The members I spoke to weren't; they didn't know.
Ms Sädem-Thompson: They would be aware of that if they were able to access the MerX information on the Q&As that has that information listed.
Mr Baird: Sure, but when reference was made to them, when they were being told about the requests for proposals going out there, were they told at the same time that in these requests for proposals going out there was a built-in requirement that a majority of the people on the team had to be educators, in fact 50% practising educators in Ontario?
Ms Sädem-Thompson: The letter said clearly that the teachers, the university professors, the college professors and a professional writer were requirements as part of the proposal.
Mr Baird: Terrific. I'll just put one fact on the record. As of last week, 256 requests for proposals had been distributed to interested teams. Despite the hysteria, there hadn't been one single American firm, at least as of last week, of the first 256 that had requested the RFPs, so there hasn't been any interest from the Americans on that.
On page 17 of your brief you mentioned the idea about the government providing its employees who are parents two days per school year per child for participation in classroom activities. Is this something you've explored in terms of putting it on the bargaining table as an issue, in terms of your members having that ability on an issue? Have you had any success in terms of school boards -- I'm looking at another public sector body -- where a local fought hard for this and was able to get it?
Ms Keillor: Specifically in the collective agreement we have with our staff at FWTAO, that is a provision for them, that they are able to take leave to go to visit.
Mr Baird: I admire you for that, because many preach but don't follow through. I want to acknowledge that I admire that.
Mr Phillips: I appreciate your presentation and as always the focus on the students and working back from there. The thing I worry about is that we essentially have thrown out the past. It's ironic. Ontario had great economic growth in 1997, led the G-7, we were cleaning up in US trade, our exports burgeoning, Microsoft coming up here and recruiting people to go down and work for them, and as overwhelming evidence that something was going not badly in the education system, I was aware of the Durham school board getting an international award. I was at the presentation, actually. I'm aware the Premier was in Europe extolling the virtues of our education system. None the less, they felt a need to completely throw out the past and frankly to take total control.
None of us will know what the school boards' budgets are until it comes out of some mysterious place. There will be no opportunity for us to vote on it or anything like that. It will just be, "There it is." Every school board in the province will be dictated to.
I always get a kick out of my Conservative friends, who before they got here said: "We're not going to have Toronto bureaucrats telling us how to run things in this province; it should be local input. The bureaucrats don't know what's best for our students." Yet we've gone to a system where it's going to be totally dictated out of the bureaucracy.
The purpose of my question is to get some idea from our teacher groups of whether you've had much input into this funding formula. You're on the front line, you are the ones who deal with the students on an hourly basis and it's your membership that have to make the system work. Has your organization had much input into this funding formula we're going to see in the next two to three weeks, and are you satisfied that it's going to reflect your input?
Ms Sädem-Thompson: Like most situations throughout this past year and last year as well of working with this government, opportunities we have asked for for consultation have not been met. Dates that we've set for meetings with the government have been cancelled. The basic response of the government in most of the scenarios has been, "What part of 'no' don't you understand?"
Is there legitimate consultation? I don't think so. Are we still trying? Yes. Do we believe the government will listen? We will continue to make every effort to make our information available, to make ourselves available, and I believe that's the best we can do.
1650
Mr Pouliot: We, like the members of the government, are products of this system, and I wish to thank you. I don't think as citizens we have done too badly. We have a lot to be thankful for, and in large part it's due to the dedication of the teaching profession in the province of Ontario.
You've suffered a lot. You've been much maligned. It's quite obvious that you have been the target since the day of the last provincial election: the need to create and now the actual state of crisis, nothing short of that; systemically, deliberating maligning people as overpaid, underworked -- recall? The heat never stopped until a work stoppage, the court of last resort, and it still goes on.
I have a question for you. You've talked about curriculum. You have talked about class sizes. You've talked about the ability to fund. Bill 160 stipulates that by September 1 of this year a collective agreement must be in place. You will go and negotiate with what is technically your employer, but the employer will not have the right to levy, will not have the power to set class sizes and will not have the capacity to address curriculum. What will you be able to negotiate at the local level with your technical employer?
Ms Sädem-Thompson: That's a very legitimate question and a question that's putting fear in the hearts of all the teachers. We know from the Royal Commission on Learning that that group looking at in excess of over 3,000 consultation briefs and presentations said the most important thing for teachers is morale. It's very difficult for teachers to continue to have a positive morale and a positive attitude when their ability to negotiate with their school boards has been cut off at the knees.
Our principals and vice-principals likewise, in a recent consultation process initiated by this government, have repeated that they are fearful of their position, with no grievance rights, no rights to recall or redundancy, not knowing what the funding formulas will be for their schools. As the teacher leaders who worked with their professional colleagues to make a difference for Ontario's children and Ontario's future -- we have cut our teacher leaders off at the knees as well by leaving them out on a limb.
I appreciate your question because, yes, there is a sense of frustration, a sense of disappointment and a sense of urgency on behalf of the school boards. I visited 46 school boards in the last year, usually three to four schools a day, and directors and trustees have told me that they are concerned about not having the funding formula. They're concerned about making decisions for children, for teachers and for communities.
Mr Pouliot: By listening and talking to government colleagues, I hear two words more and more often: "charter" and "voucher." What is your impression?
Ms Sädem-Thompson: If the government persists in eroding the funding level for public education in this province, what they will truly be trying to do is make parents think that voucher and charter systems are the only way to go. I am confident, however, that our Education Improvement Commission in its Road Ahead II document said that they do not support charter schools. That's a positive initiative for our schools and a positive initiative for our communities.
The Chair: We're going to have to close on that. Time is up, ladies. Thank you very much for your presentation and thank you for your time.
Members of the committee, we are set to adjourn until March 9. I suggest 10 am, but I'm in your hands.
Mr Pouliot: Civilized, Your Honour.
The Chair: Civilized, yes. We could take the late flight.
I can tell you that I have again inquired of the ministry. Mr Baird is here. We have two parcels of information coming from the ministry. I'm told they're working on them. They were hoping to have one today, maybe both, but I haven't seen them yet. We will distribute them as soon as we get them.
Mr Baird: Could I have a brief word with respect to the draft report? I did mention this to Mr Phillips. Nothing substantial, but I looked over last year's report and just wondered a few things. In some reports in the past they haven't included a list of presenters in the back. I very much like that idea. I think it's a great idea to have the list of people we've heard from both in person and in writing.
The Chair: Any objection?
Mr Phillips: No. It's a good idea.
The Chair: Carried.
Mr Baird: The second issue was the format of the report, and I mentioned this to legislative research at the outset. I like the format, by and large, but there were a few, not many, where -- for example, hospitals were under one section and health care was under another. If there are any areas like that where there's a harmonization, could we, not amalgamate them, but put them --
Ms Lorraine Luski: Break them out?
Mr Baird: Break them out but have them together in the same part of the report. That would, I think, be easier for reading of the report.
Second, the length of the report: One thing I found in looking at various legislative reports, to try to get the greatest utility out of them, is to hope they're read. Last year's report, I noticed, was just a little shy of 30 pages. I was going to suggest, if there was agreement, that we look at 20 pages, but leave it in legislative research's hands whether it has to go a little more than that. A smaller report might have greater utility, not so much for the members of our committee but for other members of the Legislature who will get it and other people in the public policy realm. It would maybe encourage more people to read it.
I did like, in last year's and recent reports, graphs and bullets and bold points. It's a reader-friendly document so that hopefully more people will get to read it. Those were two comments with respect to the drafting.
The Chair: Thank you. Does anyone else have any comments with regard to the drafting?
Mr Phillips: We had this conversation. Organizations spend a lot of time on their briefs, and if we cut it from 30 to 20 pages, fewer of them will have a chance for their views to be reflected in the report. I think it's a balancing act. Maybe when we see the report -- I would personally err more towards 30 pages with more opportunity for the groups' input than 20 pages for brevity.
The Chair: Anybody else have anything?
Ms Luski: Could I say something?
The Chair: Certainly.
Ms Luski: Last year we had 58 submissions. This year we had 85. Maybe 20, 25 pages: Would that be within the --
The Chair: I think it's a goal. Mr Phillips makes a good point as well. People have gone to a lot of trouble, many of them hours and hours of professional time in preparing some of these documents.
I don't share your opinion, Mr Baird. Quite frankly, whether I get past the first page of any of those documents has nothing to do with the thickness. I don't want to tell you what percentage I don't get past the first page of.
Mr Baird: I guess my whole point is for this document to have greater utility, first for our colleagues in the Legislative Assembly and then for others in the public policy field, that the more readable its size and its format in terms of whether there were graphs or bullet points -- to make it a reader-friendly document so it would have some utility, so that other folks do take the time to listen. Maybe you could just take what we've heard and --
The Chair: As far as our colleagues are concerned, if we can't get them to read this document, they mustn't read any.
Mr Phillips: One advantage of being around here for a while is that at least you've got a bit of a memory about what happens around here. I think the people who read it are probably our committee. I think the staff read it. Some of the members will read it. But realistically, none of us reads everything. But I think the people who present all read it.
From a political point of view, from all our political points of view, it's wise that we reflect as much of their information as we can. This is not an earth-shattering decision but politically, for all our sakes I'd rather err on the side of it being five pages longer than we want but that groups that have presented here have important issues reflected in the report.
Mr Jim Brown: I agree completely with Mr Phillips. Leave it up to me. I'll read it all, but maybe some people won't, but leave it up to the people what they are going to read.
The Chair: Anyway, you've heard our feelings. It is a goal only, and I'll leave it to you, Ms Luski.
Mr Baird: I have another related issue, and I'm sure this is the same on every committee that writes reports. The sooner we can get the draft document the better. I appreciate that it's a lot of work, a tremendous amount of work, to put a quality document together. If there's any chance of getting it early, that would be great. I appreciate that it's a long process, but if there is any opportunity to get a copy of the document earlier for the committee members, we'd greatly appreciate it. Having said that, I do appreciate that it's a big task.
The Chair: I think the subcommittee had indicated we'd try to have a draft for March 4th. If we could have it any earlier, certainly.
Mr Baird: Terrific.
Mr Phillips: Just to refresh my memory, I think each of the three caucuses is to have its recommendations for that day, are we? Were there any instructions?
Mr Baird: No.
Mr Phillips: We never gave ourselves any instructions on that?
The Chair: Not that I can recall.
Mr Baird: We did speak in terms of a process that was two days. Maybe this is something where the three parties could speak informally if there is any agreement as to how we could make the best use of that time.
Mr Phillips: My experience, John, is that if the caucuses don't think about our recommendations, it's tough to do it in those two days.
Mr Baird: I'm talking about the process for how we deal with the recommendations in terms of do we go all Liberal, all NDP, all government or do we go around one at a time? I'm just trying to think of a way that would be most collegial and not adversarial. Obviously, there will be some from all parties that all of us will want to support and there will be others where there will obviously be considerable disagreement.
Mr Phillips: Is it the expectation that each of us will bring the recommendations? I can't remember what the subcommittee decided.
The Chair: I don't think we dealt with it.
Mr Baird: That was certainly my expectation, to arrive on that morning and our caucus will have discussed the issues and arrived with a set of draft recommendations to present to the committee.
Mr Phillips: We will too. I'm not sure Mr Pouliot knows that, though. To me it doesn't really matter. We're quite prepared to hand ours out and each of us spend half an hour to go through the background on the rationale.
The Chair: Let's notify Mr Pouliot that's what we intend to do. Do we want to exchange them before the 9th?
Mr Baird: We wouldn't have them. We would obviously want to read the report and then look at what we would recommend from that. There are a lot of ideas we all have now, but --
The Chair: It would be handy to have them even for the weekend before the 9th, Friday the 6th, to go over them. In any event, we'll have them on the 9th if we don't circulate them before.
Mr Baird: Great.
The Chair: Excellent. We are adjourned then until 10 am on March 9.
The committee adjourned at 1704.