ONTARIO COUNCIL OF REGENTS FOR COLLEGES OF APPLIED ARTS AND TECHNOLOGY
MINISTRY OF TREASURY AND ECONOMICS
CONTENTS
Thursday 5 December 1991
Pre-budget consultations
Ontario Public School Boards' Association; Ontario Separate School Trustees' Association
Ontario Council of Regents for Colleges of Applied Arts and Technology
Ministry of Treasury and Economics
Organization
STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS
Chair: Akande, Zanana L. (St Andrew St Patrick NDP)
Vice-Chair: Sutherland, Kimble (Oxford NDP)
Christopherson, David (Hamilton Centre NDP)
Jamison, Norm (Norfolk NDP)
Kwinter, Monte (Wilson Heights L)
Mahoney, Steven W. (Mississauga West L)
Phillips, Gerry (Scarborough-Agincourt L)
Sterling, Norman W. (Carleton PC)
Stockwell, Chris (Etobicoke West PC)
Ward, Brad (Brantford NDP)
Ward, Margery (Don Mills NDP)
Wiseman, Jim (Durham West NDP)
Also taking part:
Carr, Gary (Oakville South PC)
Sullivan, Barbara (Halton Centre L)
Clerk: Decker, Todd
Staff:
Anderson, Anne, Research Officer, Legislative Research Service
Campbell, Elaine, Research Officer, Legislative Research Service
The committee met at 1012 in committee room 1.
PRE-BUDGET CONSULTATIONS
ONTARIO PUBLIC SCHOOL BOARDS' ASSOCIATION
ONTARIO SEPARATE SCHOOL TRUSTEES' ASSOCIATION
The Chair: Today we have two presentations, from the Ontario Public School Boards' Association and the Ontario Separate School Trustees' Association. I want to welcome both groups here this morning and those who are observing. Thank you very much for coming to our pre-budget consultations.
I understand that the order in which these presentations will be made is the order as it appears on the agenda. The Ontario Public School Boards' Association will present first, and presenting will be Paula Dunning. I ask that when you come to the table you introduce those who will be presenting with you.
Let me explain that we are going to have the presentations follow one immediately after the other. They will be approximately 10 minutes. I ask that you try to have 10 to 15 minutes and then after that we will open up to questions. As I have told each group, you may certainly refer questions to any of the staff or others you have brought from your associations and they may assist or carry out the response.
I want to say to the members that we are expecting this presentation and the questioning will probably be complete around 11 or shortly after, and then we have another walk-on agenda item. So I ask that your questions be concise and direct.
Ms Dunning: I will begin by introducing my co-presenters. Gail Nyberg is a trustee on the East York Board of Education, and Karen Redman is a trustee on the Waterloo County Board of Education. Both of them are vice-presidents of the Ontario Public School Boards' Association and will be following my comments with some comments of their own on specific parts of our brief.
I would like to begin by thanking you on behalf of OPSBA for the opportunity to participate in the 1992 budget process. Like the rest of this province, public school boards see the economy as the overriding issue of the day and we do not envy you the task of striking a balance among many legitimate demands that I know are coming your way as you meet with interest groups from across the province.
Two weeks ago we presented a brief to the Minister of Education, Tony Silipo, in which we stressed the dilemma education finds itself in today, in short, between the proverbial rock and a hard place, between two diminishing sources of revenue.
The brief, 1992 Transfer Payments: A Commitment to Education, has been provided to each of you in the folder and we would like you to consider it as a companion piece to the brief we have prepared for this committee. I will not be touching on every subject in that brief, but it does relate to much of what we will be raising with you here.
It is clear to us that continuing to turn to the local tax base to support the increasing costs of education is no longer an acceptable option. Yet the effective delivery of such a fundamental program as elementary and secondary education must continue to be a priority. Even in times as difficult as these, we are convinced that without a continued, focused investment in education our prospects for a brighter future will be diminished.
We are asking the provincial government to show the leadership needed to help us navigate between the rock and the hard place. That means working together to find ways to maximize limited resources, as well as recognizing the legitimate needs of education for increased revenues.
We recognize and appreciate that fiscal reform is in the air, and we hope that a new financial arrangement for school boards will emerge from the Fair Tax Commission and the education finance review that recognizes the principles of equity and local autonomy. But we would like to suggest today that there are some legislative and policy changes the provincial government could implement now to ease the burden on local taxpayers.
We will address issues related to the growing mandate and associated costs of the education system, to the continuing need for capital funds and the processes for allocating those funds, and to cash-flow and taxation policies that affect school board revenues from both the province and municipalities.
As we look towards our own budget-setting for 1992 we see only three options: increases in revenues from the province to meet increasing expectations on our system, increases in local taxation to meet those same expectations, or a reduction in the expectations themselves. We would like to suggest that a reduction in resources without an accompanying reduction in expectations is a recipe for even greater public dissatisfaction than we are experiencing now.
We would like you to consider some of those expectations. School boards are under considerable scrutiny for what the public sees as runaway costs, but more often than not those costs are the direct result of provincial initiatives. Among recent provincial initiatives which have become an accepted part of doing business for school boards are mandatory special education, second language instruction, heritage language instruction, English as a second language for new Canadians, and computer technology in the classroom -- accepted, but costly.
We know there is more coming: integration of special education students into regular classroom programs, mandatory junior and senior kindergarten programs, and the restructuring initiatives themselves which are being developed without reference to cost implications. We do not argue about the value of any of these initiatives, but the cost of implementation must be factored into the increased costs of doing business and acceptable revenue sources must be found if implementation is to proceed during this period of restraint.
It should be noted that over 80% of local school board budgets are related to salary. In education, major economies can only be realized if reductions can be made in staff salaries or staff complements, with resulting impact on programs. That is why, although we appreciate the symbolic value of freezes on senior administrative salaries, we have asked the government for assistance in the form of effective public service wage guidelines.
Not all mandated programs, of course, are educational. Both the Ministry of Labour and the Ministry of the Environment have introduced programs that have significant financial impacts on school boards. We are watching carefully the legislation that would require school boards to implement waste audits. Again, it is not a program we have a problem with in principle, but it is a program that will have associated costs that will need to be met.
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Let us repeat to you the message we took to the minister: Local school boards cannot assume new responsibilities without adequate support from either the province or the local taxpayers.
This brings me to recommendation 1 in our brief, that the government not impose new programs or regulatory requirements that have the collective effect of adding significantly to local school board budgets. Implementation of new programs and regulations must proceed on a voluntary basis, to reflect local need and the ability to pay.
As an aside, it is our firm belief that by devolving more of the decision-making power to the local level, resources will be spent in a more efficient way to address programs that are identified at the local level.
Public school boards are now implementing pay equity, at a major cost to date, without access to any of the $100 million in special assistance funds from the province, reduced to $50 million as part of the midyear spending adjustment.
Therefore, our second recommendation is that the government develop, in consultation with school boards, criteria for accessing the pay equity fund in this fiscal year, and further, that the $50 million be reallocated back into the 1992-93 budget to address costs arising from the legislation of proportional value/proxy pay equity.
In order to fund education programs equitably, it is essential to know what they cost and what impact those costs will have on both the provincial government and local communities. Too often the absence of this information has resulted in significant underfunding, with unanticipated shortfalls added to local requisitions.
Therefore, our third and fourth recommendations are that financial support be given to the Ministry of Education in recognition of the ongoing development of a comprehensive financial database for education, which is already in progress, to assist the government partners in an accurate assessment of the costs of educational programs, and that all submissions to cabinet and Management Board include a school board financial impact analysis of provincial initiatives that they will be required to implement at the local level.
I am going to ask Karen Redman to address the issues related to the capital grant program.
Ms Redman: OPSBA strongly supports the statement contained in budget paper D, "The Ontario Capital Fund":
"Public sector investment in infrastructure makes an important contribution to economic and community development in Ontario. The money that the government spends on roads, schools, hospitals and other public facilities has a positive impact on the current and future growth of this province....
"Public investment in `human' capital such as spending on education and training that increases the skills and adaptability of the workforce, also makes a contribution to long-term economic and social development."
There exists a backlog of unfunded requests for new schools to meet the needs of growth boards, as well as renovations for all. More than 20% of the schools in this province are over 50 years old. The basis of the pupil-loading formula for specific types of classrooms, with the exception of the change to reflect classroom size for grades 1 and 2, has not been adjusted for years. This funding is not based on actual requirement. The rated-capacity formula has not been adjusted to reflect the ministry's own directives. Hence:
Recommendation 5: OPSBA urges the government to review and update the rated-capacity formula.
Recommendation 6: OPSBA urges the government to increase the capital grant allocation to at least the level necessary to accommodate rated-capacity formula changes directed by Ministry of Education policy.
Recommendation 7 deals with the anti-recession fund. We recommend that it be continued in the year 1992-93, with access to school boards for funding for school capital and renovations.
The role of the Ministry of Education, in its regional offices, should be to establish criteria and funding parameters and then allow local school boards to make the most cost-efficient use of public dollars. The grant capital program must be revised to achieve administrative efficiencies and cost savings, provide a clear and acceptable provincial allocation process and provide for flexibility and local innovation.
Recommendation 8: OPSBA recommends that the Ministry of Education and treasury board, in consultation with the school trustee associations and school board officials, review the administrative and regulatory requirements of the capital grant program to facilitate local flexibility and administrative cost savings.
In 1991, approximately 67% of the capital allocation went to separate school boards, with only 32% going to public school boards. This policy appears to discount the fact that the public education system serves three times as many pupils. Public school boards are also truly public, with the mandate of providing education to every student. Well-defined and well-balanced criteria that include not only assessment wealth and enrolment growth but also school board mandate and other factors are needed.
Recommendation 9: OPSBA recommends that the Ministry of Education develop, through consultation, allocation criteria and that these be publicized. As well, the Ministry of Education, through its regional offices, should provide a yearly public report which sets out the criteria and rationale for capital funding allocations.
Ms Nyberg: In 1985 the Macdonald commission pointed out that school boards pay out significant sums in interest payments to finance their operations while waiting for money from the province. The commission stated, "We think that the province should transfer funds to school boards each month as expenditures are incurred, particularly during the first three months of the calendar year." This problem still exists.
Municipalities issue interim tax bills early in their fiscal year. Most of the property tax dollars have been collected by midyear. The municipality has the advantage of keeping the funds and the interest earned. Interest paid is always more than interest earned and school boards are faced with interim borrowing. This seems to be a poor financial policy. The ultimate loser is the residential taxpayer.
To this end, OPSBA has two recommendations. OPSBA recommends that the general legislative grant regulations and the payment schedule be amended as follows: 25% paid out by March 1 and elimination of the 7% holdback, with the total allocation paid out in the school board fiscal year. OPSBA recommends that the Education Act and the Municipal Act be amended in the spring 1992 session of the Legislature to revise the payment schedule to ensure a more realistic transfer of education property tax to school boards.
Payments in lieu of taxes are viewed as a replacement for property taxation and for this reason should be shared in a more equitable way among all local programs and services funded from the property tax base. An obvious example of the government's policy to decentralize, deinstitutionalize and provide access to services to all citizens is special education, a high-cost program. School boards should have access to payments in lieu as part of their local revenue to assist in meeting these costs.
OPSBA recommends that the Municipal Act and the Education Act be amended in the spring 1992 session of the Legislature to provide for the equitable sharing of provincial payments in lieu between school boards and municipalities. Further, OPSBA requests that the provincial government pursue with the federal government similar amendments to the federal grants-in-lieu legislation.
Telephone and telegraph taxes: Section 161 of the Municipal Act provides for sharing between area municipalities and local school boards. There are situations in northern Ontario where there may not be a municipality but there is a school board. In 1990, it was estimated that there was approximately $2 million in revenue lost to these small northern boards. OPSBA recommends that the Provincial Land Tax Act be amended to enable an equitable sharing of taxation from telephone and telegraph taxes in areas without municipal organization but with local school boards.
Ms Dunning: In conclusion, while this committee's mandate is to examine the short-term question of the cost of providing adequate resources to education, over the long term the question must be the potential costs of failing to do so. Ontario's public school boards are committed to working with the government and other partners in education to become part of the solution to the problems we face.
We look forward to full participation in the search for long-term solutions to education funding, but we appreciate as well this opportunity to share some of the legislative, regulatory and administrative changes we believe could improve both government efficiency and political accountability during this period of fiscal distress.
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The Chair: We will move immediately to the presentation from the Ontario Separate School Trustees' Association and then will resume questioning for both groups.
Ms Moseley-Williams: We appreciate this opportunity to come and talk to your committee with some of our thoughts on the financing and the budget process in Ontario. I am Betty Moseley-Williams, president of the Ontario Separate School Trustees' Association. Jim Sherlock is a trustee from Halton and is the past president of our association.
We appreciate the opportunity to assist the standing committee on finance and economic affairs in its deliberations on the upcoming provincial budget and the financing priorities of the province. Public expenditures on education are a significant part of the provincial budget.
We recognize that this is a time of fiscal restraint. For separate school boards, fiscal restraint has always been a necessity. We agree with many of the recommendations that have been brought forward by the Ontario Public School Boards' Association. We have some significant differences, as you will see.
In part I of our brief we discuss certain basic principles we believe must be respected in the budgeting process for education. In part II we describe how the education funding model creates two classes of school boards: the haves and the have-nots. In some respects, it is an engine of inequity that sometimes operates to make the poor boards poorer. In part III we address certain specific concerns about the model and how it can be improved on a short-term basis, mindful as we are of the fact that the standing committee's mandate deals only with next year's budget.
In part I of our brief we outline the basic principles of education and the funding model. The most basic principle is the right to education itself. In Ontario the goal of the system of education is equality of educational opportunity. Because some parts of the province are richer and others are poorer and because some boards are richer and others are poorer, equality of educational opportunity can happen only where some equalization of wealth occurs. The province has always recognized this problem, as you will see from the quote on the title page of our brief:
"The provincial government accepts the principle that it has the responsibility of providing additional financial help where needed and in amounts inversely proportional to local assessment wealth per classroom, or assessment per class unit, to all school boards without sufficient local financial resources to provide the type of education program desired by their communities."
In OSSTA's submission, the basic principle of equality of opportunity must be understood and applied in the context of the system of education in Ontario, which has two branches and two linguistic groups, each with its own mandate. Equality of educational opportunity has three aspects: equity in financial resources, equity in facilities and equity in programming. The latter two are intimately related, since certain programs need specific facilities and cannot be provided in their absence. OSSTA submits that equity in financial resources, programming and facilities must be considered on a per-pupil basis.
We refer to the principle of parental choice at page 3 of our brief. Four choices in public education are offered in Ontario. Children can be educated in English or French, in schools operated by public or separate school boards. Parents make their choice depending on their right to do so, a choice in which children participate increasingly as they grow older. OSSTA submits that parental choice should not be influenced by unfairness in the financing system.
Our conclusion respecting the principles of education is set out on page 4. Only when the education funding model in Ontario provides every school board with equal per-pupil revenue, regardless of revenue source, adjusted only for local circumstances and high-cost programs, will these principles be realized in practice.
Our basic message to you today is the following: Inequities in educational opportunity exist in Ontario at the present time; the provincial budgeting process should assist in improving the situation where possible, and austerity in the form of lean provincial grants must be very carefully administered.
Mr Sherlock: I think you will find that because of the complexities of the grant system, our brief is a very technical one, and I certainly do not recommend it as light reading. However, I would like to highlight a few things and indicate that in the second part of our brief we set out some examples of the inequities in the financing of education.
Two basic factors work together to divide Ontario school boards into two classes: haves and have-nots. One is the unrealistically low grant ceiling. The other is a vast disparity in assessment wealth across the province. Assessment-rich boards have the ability to raise significant sums locally to supplement or even replace provincial grant money while assessment-poor boards have no such opportunity.
Some examples will illustrate the point. Using 1990 estimates, the wealthiest school board in Ontario spent an average of $6,785.50 per pupil. The poorest board in Ontario spent $3,708 per pupil. The difference in expenditures is more than $3,000 per pupil. With such a disparity, can equality of educational opportunity truly be said to exist between these two boards? Even taking local circumstances into account, OSSTA thinks not.
Differences exist even between coterminous school boards, between students living in the same community. For example, the Metropolitan Toronto School Board spent $6,785.50 per pupil while the Metropolitan Separate School Board spent $4,847 per pupil for a difference of $1,938.50 per pupil. As an additional example, the Lake Superior Board of Education spent $4,741 per pupil while its coterminous separate board spent $3,707 for a difference of $1,034 per pupil.
Appendix A in our brief lists more examples. In appendix A, we list the differences in the school boards in the areas represented by some of the members of this committee, and I certainly recommend that you take time to read that.
In part 111 of the brief we talk about specific problems. We say that any additional provincial funding for education should be added to the grant ceiling so that the different wealth levels of school boards are fairly taken into account. At this time of fiscal difficulty, assessment-poor boards are feeling the pinch more because they have less. They need to be protected.
On page 8 of the brief we encourage that an accurate costing of education be undertaken and that realistic grant ceilings be set. On page 9 we offer an idea for major savings. I am sure that all the partners in education are interested in where we can save money. I believe the recommendation we will propose in this area may constitute the largest and most significant difference between our brief and that of the Ontario Public School Boards' Association, which you have just heard. We certainly agree that the largest single component of expenditures on education is teachers' salaries. A move to lower class sizes in some primary grades by the previous government set the agenda for collective bargaining in the province today.
The true costs of lower pupil-teacher ratios must be understood. Based on figures provided by the Education Relations Commission as of June 31, 1991, it would cost over $450 million to reduce the average PTR in the province by one pupil. If you take into account the increments the teachers will receive, their adjustments in September of this year, I think it is fair to suggest that by next year that figure will probably run to about $500 million, or half a billion dollars to lower the PTR by one.
If you go back to 1977 when the Education Relations Commission first started to collect statistics, you will find that the average salary was a little under $18,000 compared to approximately $50,000 now. We feel teachers are entitled to the salary increases they have gained and so we cannot share the public school boards' association's recommendation that you consider wage guidelines. However, between 1977 and 1991 the pupil-teacher ratio, according to the growth statistics from the Education Relations Commission, has dropped by four. You do not have to be a genius to see that a change of four on today's cost is $2 billion.
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I am not certain that the ratepayers or anyone has really received full value in quality of education for $2 billion worth of increase based on a difference of four. We think that if we are serious about saving money in education we have to address this issue. Accordingly, OSSTA recommends that the province mandate a moratorium on the further reduction of PTRs in collective bargaining. There is no concrete evidence that the reduction of PTRs significantly enhances the quality of education.
We are not suggesting any unilateral intervention into existing collective agreements. What we are suggesting is that for many boards where this PTR is spelled out through slippage and other things, the boards are already providing more teachers than are required in their collective agreement. My own board was doing that. When we were put to the wall because of tremendous capital costs that we were having difficulty meeting, we reviewed and have brought our PTR down to its current level in the collective agreement.
We are constantly being put to the wall by our teachers. We have been trying to give them parity of salaries. They want parity of PTR with our coterminous public school board. We cannot begin to afford it, and I suggest to you that across this province, if our teacher partners could be persuaded on a voluntary basis, not through layoffs perhaps but through attrition and other means, I think we could go back to 1977 levels and not affect the quality of education in this province, and the difference is $2 billion.
We also deal with provincially mandated programs and their effects on school boards. In general terms we support the OPSBA's position on provincially mandated programs. We also urge that payments out of the pay equity fund announced in the 1991-92 provincial budget be made as soon as possible to school boards.
We deal with transportation grants on page 10. The new method of calculating transportation grants appears to be favourable to sparsely populated rural boards. However it penalizes significantly urban boards that rely on busing. Separate school boards, because they serve the same territorial jurisdictions as their coterminous public boards for a smaller population, are more heavily dependent on transportation. The explanation of the difficulty is on page 10. OSSTA recommends that the transportation grant be amended to provide a higher basic amount per bus in urban areas.
There probably is room for cost savings in the area of transportation. For example, many school boards now operate joint transportation networks with coterminous boards. OSSTA recommends that a mechanism be introduced to provide some financial incentive for boards to review and reorganize their transportation systems. If a sufficient amount of savings accrues to the benefit of boards, the total cost of transportation could be reduced with attendant savings for the province.
On page 11 of the brief we deal with the pernicious effects of flat grants. Some grants provided to school boards are flat grants in which the province pays a per-pupil amount to the school board recipient. Flat grants are a regressive form of funding since they do not recognize the relative wealth of the recipient. If the total amount of funds spent on flat grants were folded into the basic per-pupil grant, the outcome would be far more equitable.
As the Education Funding Model 1991 notes, the province makes board-specific grants in the amount of $224.8 million. Two of these grants, the compensatory education grant in the amount of $84.9 million and the declining enrolment grant in the amount of $15.1 million, are flat grants which unfairly favour relatively wealthy school boards.
There is no hard evidence to support the utility of these grants at the present time. It is also ironic that there is no offsetting increasing enrolment grant for high-growth separate and public boards in the province. OSSTA recommends that flat grants be terminated as a funding mechanism and that the amounts expended on them be folded into the grant ceiling.
On page 12 we talk about cash flow. We endorse wholeheartedly the recommendation of the Macdonald commission that the province "should transfer funds to boards each month as expenditures are incurred, particularly during the first three months of the calendar year." We note on page 13 that the existing practice of a 7% holdback on grants in the fiscal year ought to be ended.
The same concern about cash flow underlies our comments on the assessment issue on page 14. At the present time, municipalities enjoy windfall interest on amounts collected on behalf of school boards. At the same time, school boards are obliged to borrow money to finance their operations and to pay interest to their lenders. For assessment-poor boards, the additional interest burden makes them poorer.
OSSTA does not believe municipalities ought to be permitted to profit at the expense of school boards. In the longer term, OSSTA recommends that the Education Act be amended to provide for the transfer of funds from municipalities to school boards on or about their collection dates. In the short term, OSSTA recommends that the Ministry of Education and the Ministry of Municipal Affairs co-operate in encouraging municipalities to enter into agreements under subsection 215(3) of the Education Act.
Finally, we deal with capital issues on page 15 and following of the brief. Our recommendations speak for themselves. On page 16 OSSTA recommends:
(1) the average level of support be restored to 75% in those areas of the province where lot levies are not a realistic funding mechanism or where access to lot levy funds has not been obtained, and I believe that is everywhere;
(2) differential local shares be considered for fast-growth boards. Under such a scheme, the ordinary local share would apply to the first school built in a particular year while a decreasing local share would apply to additional buildings built in the same year. For example, if a board were building three schools, the third school might be paid for at a local share of 5%. Such a scheme would ensure that the school board is not left with a crippling debt load. This applies to both public and separate growth areas;
(3) school boards pay no more than their local share of the actual costs of site acquisitions.
We also recommend:
(1) the capital grant plan be amended immediately to reflect the current construction price index and that it be adjusted annually to reflect the annual changes in the construction price index;
(2) furniture and equipment allowances be adjusted upwards immediately, and further that these allowances be reviewed annually and adjusted accordingly;
(3) the ministry's commitment to pay construction costs increase from 90% to 100% of the cost of standard school projects.
The other side of insufficient capital grants by the province is excessive debenture debts for school boards. We set out some technical suggestions for changes that would be helpful in that area on page 17.
You have just heard complaints about the capital allocations process. We reject outright any suggestion that the process has worked unfairly to the advantage of separate school boards. We believe the system works to get money where it is most needed in the province. The reason separate school boards have received more provincial money is explained in the brief on page 18.
Ms Moseley-Williams: It is a good thing we are church readers, because we can do this at a clip. Our conclusions are on page 19. The education funding model does not result in equality of educational opportunity for each student in Ontario. Some of the inequities have been detailed in this brief but relatively few of them can be addressed in the budget. But OSSTA submits that an earnest effort should be made to reduce existing inequities where possible. A number of suggestions have been made in this brief, some of which will require additional provincial funding.
As a general rule, additional provincial funding for education should be added to the grant ceiling and should not take the form of flat grants, which are regressive in their operation. In recessionary times, assessment poor boards have a particular need for provincial assistance.
We appreciate the opportunity of coming to speak to you this morning.
The Chair: I ask that the representatives of each group come to the table and allow the members to ask questions. We will give you a moment to do that.
Mr Carr: I am going to ask a question not as a provincial politician but as the average person would. As you know, with politics over the last little while, the provincial government gives transfer payments and all the transferees, the boards and the municipalities come here and say: "You are not giving us enough money. You are downloading, and it is your fault." Provincial politicians do that with the federal government as well.
As average citizens we are sitting here now, and collectively, federally and provincially, just to pay the interest on those two debts is $80,000 a minute.
Neither of the groups talked about the funding solutions. You talked about how you needed more money. Nobody talked about where the money is going to come from. Have you been before the Fair Tax Commission, or will you be giving any recommendations of where you would like to see it? Again, I am thinking that from your standpoint it is great. You are saying, "We need more money from the province." As the average citizen I am saying I would love to have my property tax reduced, but if it goes to the province all that means is my provincial sales tax will have to go to 20%. Have each of the boards done anything before the Fair Tax Commission in terms of where you would like to see the funding come and what would those recommendations be?
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Ms Dunning: I would be pleased to make some response to that. First, I am sorry if you read our comments as simply saying we want more money. I tried to be careful to make it clear that the alternative -- obviously, we do feel we need to be adequately funded to carry out our responsibility. It would be irresponsible of us as representatives of our boards and of the children who receive education from us not to point out to you the potential costs of a loss of revenue or of an inadequate increase in revenue. I think we made that clear.
On the other hand, I think we tried to point out there were some administrative changes that could be made that would allow us to make better use of the funds available. There are some choices we are prepared to look at that have to do with the delivery of service. It is not possible to come to you and say we can keep doing everything we are doing and more and it is not necessary for us to have the resources. That, I think, is a dilemma we want to stress to you and to everyone we speak to in government. Recognizing we are in a period of fiscal difficulties, we have to be prepared to take a look at what the choices are before us that need to be made. If there are no resources or if resources are severely limited, like everyone else in society we then have to take a look at what that means in terms of what we can realistically be expected to do.
I will turn this over to my colleagues from the Ontario Separate School Trustees' Association in a minute. Yes, the Ontario Public School Boards' Association is preparing responses to the Fair Tax Commission. We are working very hard internally on a document that addresses issues of mandate, funding and governance to try to arrive at some more effective, efficient and rational way to deliver education at a cost the public can afford. We are very concerned about those issues. At the same time we have an ongoing mandate to deliver service. We are trying to strike that balance, as I trust you are.
Ms Moseley-Williams: I would agree. I had hoped some of the things we were talking to were not just saying that we need to have more money without any responsibility. The fact is that I think the budgeting processes in the boards of Ontario in the last year were brutal. They were not done without a sense of very deep responsibility, because programs were cut throughout Ontario. What we tried to do was not to destroy the staffing in our boards. We did a lot of moving around that does not always make for happy campers, but it was done.
One or two of the boards have put forward resolutions that have been accepted to move into the community to talk with the other school boards and with the councils of the municipalities to see what it is we can do together that respects the mandate of everybody and are ways we can save money. Those resolutions are accepted unanimously in the province. People are going forward to try to do something. I do not think anybody should get the impression the boards just sit there and say, "You give us," because that is not the way it is. We have costs on all the boards in the province that were mandated from here, and they cost a lot.
One of the boards in Toronto told me that just the new UIC is going to be in the millions of dollars for that board. Those are real figures we have to find the money for. When we talk about staffing or what it costs us to have a staff level imposed on us, we have to find the money, and we cannot in some cases. You must know that. There are areas of the province where industry is not paying its taxes. They are telling us that at the Fair Tax Commission. All of the northern communities are telling you that none of the industries are paying their taxes. If it seems we are coming here as two groups of school boards saying, "Give us more money," that is not where it is at.
Mr Carr: I appreciate that is not exactly what you were saying. You did mention some areas where there would be savings percentage-wise, though you did not of course give any dollar figures because it is tough to look at; I guess in some circumstances you did. My perception is that the savings we are looking at with some of these things will not be all that great percentage-wise, whether it is 10% or 5%; I do not know, although in this day and age anything would be great. I will send a couple of cards along if there are any suggestions before the Fair Tax Commission. I would be pleased to see them because we are looking at the broader sense.
However, in terms of looking at some of the savings, I appreciate there were some concrete proposals there saying, "This is how you can save some money," and so on. One of the areas that was not touched on -- the big problem I think was alluded to -- is the fact that 80% of the money being spent is in terms of salaries. One of the areas that has been talked about is having year-round schooling. In terms of capital cost savings, there are some people who said that may be it. I certainly have not done any research on it as to whether that would be a savings, whether it could be done and the effect of it. I know right away we would have the teachers against it, and I think I have already said so; as for the parents, I am not sure.
From the trustees' standpoint, do you see any cost savings? Again, it might be a ballpark figure. Percentage-wise, would it be 5% or 10%? Can you give us those figures? Do you think there would be any savings? How do you think we should proceed looking at that, if in fact there could be some savings in that area?
Ms Dunning: Do you want to start on that?
Mr Sherlock: Sure. Mr Carr, my wife is a teacher in Oakville, so I hope you will not share with her the suggestions I am making on some of these things. I think you will find the focus in our brief is not to increase wealth but more to redistribute it.
As far as the school year is concerned, I can tell you that the director of education for the Bruce-Grey County Roman Catholic Separate School Board for years and years has been asking the ministry to look at a revised school year plan. We are based on an agrarian idea that we close the schools in summer so kids can work in the fields, though you do not see many of them out there. The idea of simply scheduling holidays when you do not have to heat the schools would be a tremendous cost saving. There seems to be very little support from parents, teachers or the ministry on that, but I think it is an idea well worth looking at.
Ms Dunning: I think it is consistent with some of the other suggestions we made in our brief. I cannot give you figures -- I am not sure anyone can -- province-wide; 5% or 10%, I do not have any idea.
Mr Carr: Do you think it would be significant?
Ms Dunning: I think what would be significant would be if local communities were empowered to make those decisions based on the savings they were able to predict on the basis of the study of their own situations. I think that is consistent with one of the proposals OPSBA has put forward, which is to look at increased sharing and perhaps even the ultimate establishment of confederated school boards which would allow for a reduction in the duplication of services between public and separate boards. I bring that forward gently.
Mr Sherlock: You have to be kidding, Paula.
Ms Dunning: We have made that proposal. We also believe it is very important for the education community to look very carefully at the extent to which the education mandate is being expanded to include the social services mandate. I know that is being studied carefully and there is a significant cost implication to the education community. I think that whole area of service could be managed in a way that was much more integrated. I know that is on a number of agendas and I hope it moves forward with some fruition on those various agendas
Mr Sutherland: I have two quick questions. First, I would like to know what each of your groups thinks voters told us in the municipal elections. My sense is that the vast majority of incumbent trustees got in and that the alleged tax revolt out there, other than in a few isolated areas, did not take place. I would like to get your impressions.
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In terms of some of the savings issues, Betty, we talked about this when we were at a retirement dinner in my riding a few weeks ago. You indicated there were some programs where the general public thinks it is easier for the two boards to work together and have some savings. You certainly indicated they are doing that in the north on busing. You also indicated there are some things certain boards may not be able to afford to go in on together with larger boards. I was wondering if you could expand upon that and then we could get some comments from the public school board after that.
Ms Moseley-Williams: I bet I was drinking wine when I was talking to you.
In the election -- I can tell you did not go through this election -- the questions that were coming from those tax revolt people -- I hope that sounds really decent -- were very interesting. First, some of them were 11-page questionnaires to do with collective bargaining. You had to wonder with some of those questionnaires where the agenda was. There were some very interesting turnovers in boards. Some of it was on tax revolt and some of it, well, who can figure it out? I do not know how much of an impact they had. In my part of northeastern Ontario we did not get anything like that. Maybe Paula will speak to it more.
On savings, sometimes when you go to put together a program -- I am going to use one we use specifically in Nipissing. It was a good program of sharing. It was a film library. We had to stop it because we could not afford to pay our proportional amount. What it broke down to was that in staying with this larger unit, it was costing us $11 to deliver a film to a school, and it costs us $2. It was a wonderful program, but we could not afford that. We are trying to gather that kind of information so we will have a better fix on it in the province.
The boards that have gone into and are now talking on busing, which we seem to deal with to death, are now sharing buses. I think all of us share buses. In many areas now are they looking to say: "Would one unit do that? In the district of Nipissing, could we have one bus department?" We do not have too many differences in our pupils, but we have a bus person and a half-time secretary. The other department has a staff of 3.5. So if we go together, for our board will it be a bigger saving? In spite of much of the rhetoric that is printed and proposed in some parts of the media, I think the boards in Ontario are trying to find those places where they can save money and provide the same service or better. I hope that answers you.
Ms Dunning: I do not think that is directly related to the question that was asked, so I will quickly say our point is simply that given local autonomy, there should be the ability to make decisions about how far to go in the area of co-operation based on the analysis of the local situation, not based on legislated limits as to how far you can go. We would not propose that anybody be forced into relationships they did not feel were advantageous to their communities. I just want to make that clear.
In response to the question about the election, the tax revolt and the return of incumbents, I am actually going to ask my two vice-presidents to comment on that, because they come from areas in the province where there was more activity than in my own area, which is northern Ontario. I would just say quickly that it is true many incumbents were returned. That may be an indication that the public is aware the issues are more complex than single issues would have anyone believe, but I do not think we can pretend we did not hear a message. I suspect that is what my colleagues are going to say.
Ms Redman: In our area, we had four incumbents go down to defeat and we have eight new trustees out of 20. I really agree with Paula. Luckily and happily, I think the public put the quality of the classroom above fiscal responsibility alone, but there are a lot of organizations out there and it is much more grass roots, coming into a formalized -- I am thinking of the industrial coalition and a few groups that are looking to share a partnership with education. They are saying, "If you don't think you can bring in a zero tax increase, let us help you." I think we are going to be looking to a lot more community interest and a lot more initiative in looking at partnerships with trustees and boards than we have seen previously.
Ms Nyberg: In my area of Metropolitan Toronto, the tax people really never got off the ground, but there was one clear message at the door -- I have heard it from my colleagues -- and that is, they are very concerned about money. Like Karen, they also put the quality of education in the classroom ahead of the money, but they are very concerned about the expanded mandate. They see boards being forced to take over social work, speech therapy, breakfast programs. Although they are very pleased their children are getting the service, they are wondering whether their local tax dollars should be paying for that.
Mr Sherlock: In my area, they were very active and they zeroed in on two interesting subjects: retirement gratuities for teachers, which concern a lot of people in light of the amount of money poured into the superannuation fund, and second, pupil-teacher ratio. It surprised me a little bit because there are a lot of retired teachers in that movement, but they are concerned about the cost of class size.
Mr Phillips: I thank both groups for appearing. I appreciate the work you do for the people of Ontario.
The first thing we are going to face, I understand before the end of December, is the announcement of the grants. I am trying to get some feel from both groups. Just to maintain the status quo, what sorts of cost increases are the boards looking at next year? The reason I ask is that somebody may ask me or one of my colleagues to comment when the grant comes out at whatever it is, 6% or 7%. Will that increase the percentage the province funds, will it hold it the same or will it decrease it?
I saw in the public boards' brief that you have reached wage settlements for 1992 in the 5% to 7% range. If you add both the public and the separate boards' budgets together, what sort of increase are you looking at to maintain the status quo in 1992, and therefore, what grants does the province need to provide to maintain, or ideally build, its share of educational funding?
Ms Dunning: I am not sure I can give technically accurate answers to all your questions, but I can make some references that might help to answer those questions for you.
We took a board, which we will refer to as board X for the moment, and we looked at that board's actual budget -- operating expenses and so on -- and we assumed a 3% transfer payment. If we do that and if that board flatlines its administrative and operating expenses, if that board manages to settle a 0% wage increase for the second portion, on the assumption that the first portion is already in place through August, if there are no enrolment increases and no assessment growth, in that particular board the result would be a 10% mill rate increase. For instance, if 50% of that board's revenue comes from the province and if there is no increase in provincial support, any increase in that budget is passed on double to the taxpayers. So if there is no increase from the province and there is a 5% increase in expenditures, then a 10% increase goes to the taxpayers. That may help to explain what the implication of very low transfer payments will be.
I do not know if I am clear on the question you were asking about salaries.
Mr Phillips: The province will announce its grants in a couple of weeks and it will say, "Grants to the educational system have gone up X." The first question people will ask is, "Does that mean the province's share of funding will have dropped, stayed the same or what?" I am just trying to get a feel from the public boards and the separate boards. You look at 1992 and you say, "We are just going to maintain the status quo, cut as many costs as we can." What will your budgets go up next year, and therefore to maintain the status quo for the provincial funding, what should it be?
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Ms Dunning: I am going to ask our director of legislation, Bev Allen, to answer that question.
Ms Allen: I think the question you are trying to address is the split between provincial and local funding and the --
Mr Phillips: No. It is very simple. On educational spending in the province next year -- add the separate board and the public boards -- give us your best cut at what it will go up next year. Then you can say that therefore, there are only two sources of revenue, the province and property tax. The province gives its grant. Just what will the spending go up next year for the public boards, your best cut?
Ms Allen: I think more would be shifted to the property tax base. I do not think one could pull a figure out of the air, not knowing what the transfer payment increase might be.
Mr Phillips: No, it is not the transfer. It is the total spending.
Ms Allen: It is a global figure.
Mr Phillips: Total spending.
Mr Sherlock: Can I have a little crack at the question? As a former trustee, you will appreciate how difficult the question is. Paula, I think, made a lot of excellent points about the costs we are looking at. We read about hydro costs going up 7% to 8%. You will know that many of us have not concluded our collective bargaining for September of this year, so for the last four months of this year we have a pretty good idea of what our increment costs are; we do not know what the base of adjustments are.
I can tell you that at the inaugural meeting of the Hamilton board last night, the chairman made one of the bravest inaugural speeches I have heard in a while. She suggested that the board hoped to hold its mill rate increase at 6%, and in doing so would be required to cut 300 jobs. The 300 jobs will probably be across the board, teaching and non-teaching.
It is a fair question but a very difficult one. I do not have a number to answer you with, but I can tell you that we have cut ourselves to the bone. We are trying to survive. That is what we are trying to do in the Halton separate board.
Mr Phillips: It is just frustrating for me, only because the province has to make a determination in the next couple of weeks on what money it will give you for 1992, and I am just trying to get some feel for the board's look at its total spending for 1992. I think you have determined six of the 10 months, have you not? You have determined your budgets until the end of June, essentially.
Ms Dunning: Just our collective agreements, not our budgets.
Mrs Sullivan: Could I just come in with a supplementary here?
The Chair: If it follows.
Mrs Sullivan: Yes, it directly follows. Have the boards provided an estimate or a projection of the incremental costs of pressures -- whether it is hydro increases, unemployment insurance increases, pay equity, increases attributable to Workers' Compensation Board changes and so on -- that come out as a figure of projected increased spending? If you have done that, then to ensure the system remains at its current standard in terms of quality of education, in terms of running an efficient shop without having to impair the quality of education that is delivered, what range of provincial government funding will you need, given those pressures, to maintain the status quo?
Ms Redman: This would be from our local board. We have looked at building the budget. Were we to get between 6% and 8% from the province, it would still cause cuts to keep it under a double-figure increase to the mill rate. Maybe that addresses your question. So with 6% to 8%, we would maybe be able to keep it under a double-digit increase.
Mr Phillips: What board is that?
Ms Redman: Waterloo.
Ms Dunning: We have with us two superintendents of education who might be able to give you more detailed answers on some of the individual boards' points of view, if you have the time and would care to hear their comments.
Ron Sudds is the business superintendent of the Northumberland and Newcastle Board of Education, and I could ask him to make a comment.
The Chair: Perhaps we could address our comments directly to the question, and as concisely and as clearly as possible.
Mr Sudds: In reply to Mr Phillips's question, I guess what he was trying to do was get a broad scope of where we go next year in terms of total cost increases if we maintain business. I would suggest that with the pressures of wage settlements that are already there, with class sizes, with the government initiatives that we know are in place, with the UIC changes -- you can go on and on and on -- most boards would tell you they are looking at 10% to 15% budget increases on average. You also have to realize we are probably still experiencing about a 3% growth in enrolment, which is a pressure that boards are experiencing. When you put all that together, you are probably talking, on the downside, of 10% to 15%. Obviously, you can massage that, as boards will have to do, but that is if it is just business as usual. Those are the kinds of pressures boards are facing. I think that is what you are hearing, and depending on what the grants are, boards will have to make very tough decisions.
Mr MacKinlay: I would support that. I would add one other factor that is starting to come into educational funding, which is that the assessment base is actually decreasing and that will impact upon the mill rate in 1992. The decrease is coming through the recession and the vacancy of commercial property being reclassified into residential-type definitions. So 10% to 15% expenditures, I think, will be reasonably common among boards as they face the things Mr Sudds mentioned.
Mr Wiseman: I would like to talk a little bit about debenturing. Under what circumstances do you think debenturing is an acceptable form of financing education costs, and what should debenturing be used for?
Ms Nyberg: I know of no OPSBA position on debenturing, so I could not answer. If you are asking for a personal opinion, only when you have no other choice in the world.
Mr Wiseman: Would you feel that debenturing $26.2 million for a new administration building would be acceptable in the current economic climate?
Ms Dunning: It sounds to me like you are referring to a specific decision by a specific board, and I am not prepared to comment on that.
The Chair: Mr Wiseman, you have had two questions.
Mr Wiseman: Those were pretty short.
The Chair: Yes, I know.
Mr Wiseman: One was supplementary to the other.
The Chair: We will stretch the committee's endurance to a comprehensive longer one, but quickly.
Mr Wiseman: They had three questions.
I guess the reason I asked this is because my constituents are extremely concerned with the fact that in the town of Ajax alone, $72 million worth of new schools is necessary because of the expansion of the subdivisions and the growth of the bedroom community. Yet the board does not feel that it is responsible to build schools, but will go ahead and debenture $26.2 million. The $26.2 million, just to give you a reference, would build a high school or would accommodate the first 12 expansions in new school buildings on their list in the entire Durham Board of Education.
When the question, "Sixty per cent of what?" comes up, my question is, given that they have a policy of not debenturing and have not since 1972, and I think other boards have probably followed suit, how am I to respond to my constituents when they say, "We need the schools," and then the board says, "There's no money to build schools," and yet they are going to debenture $26.2 million? I have a great deal of difficulty with this, because the number two priority on the list happens to be the school my kids go to.
Ms Dunning: Our executive director, Penny Moss, has indicated some familiarity with this situation and a willingness to address it.
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Ms Moss: I concur with the president that we are not here to talk about local situations. I just want to point out that this is one of the matters that may be significantly alleviated if you would take our recommendations about the role of the ministry and capital grant plan to heart. We have lived with a situation in which the ministry, through regional offices and the provincial ministry, in the end actually determines which facilities get constructed. Boards do not have the kind of flexibility your constituents may be asking for. That is in general. It is not dealing with this particular project in brief.
Mr Wiseman: As supplementary to that, though, but the boards do. It is the responsibility of the boards to build pupil places, and then if they decide to build the schools out of locally funded money, then the process for getting schools built is not as cumbersome as it is if the province is forced to come up with all the capital dollars.
Ms Moss: That is right. This meeting is too short to explore all of these issues, but we would certainly encourage more meetings between members and the association so that we can actually look at levels of independence and why boards make the kinds of decisions they do, which you are clearly questioning.
Mr Carr: It was worth waiting. That was a good question, because that is what I was getting at earlier. That is where the public frustration is. On the one hand they say, "We need more capital funding." On the other hand, they say, "This is where it should come from." I think you have to appreciate that what we are trying to do is look at the average person. The public does not understand all the intricacies of the funding. I have been in it for a few years and I still do not understand it all, as you do not. Then when we do understand it, it gets changed anyway. I think Jim Wiseman hit a good point on what the public is saying. Quite frankly, when they are as confused as they are, they blame everybody. They blame the school boards and they blame provincial politicians because they cannot figure out who it is. All they know is that it does not work. The proportion of the blame probably should be 50-50, if the truth were known.
But I want to get back to the salary issue, since it is 80% of the cost for each of your boards. I want to see what you are looking at. I know some of the agreements have been made. What do you see happening in the next go-round? As you know, school teachers are a very powerful lobby, as the Liberal government found out in the last election. They took all other issues and said, "Only on one issue, only on the pensions, we're going to defeat this government." They worked very hard and I think were successful. I think we saw where a special-interest group did set the agenda and beat some candidates, not based on the overall effort of the previous government but on one single issue.
In the recession when people are losing jobs, when in the private sector people are very fearful of their jobs, and when school teachers who have a fair amount of job security, or have in the past, what do you think is going to happen in the next round? Do you see any situations where, in the negotiations with the teachers, you are able to say: "I'm sorry. We've got this problem. We've got federal and provincial governments spending $80,000 a minute to pay the interest. As a result, you have job security. You're going to have to hold the line"? Will that happen and will you be successful? If not, what do you look for in terms of increases? What do you anticipate, both on the salary side of it and then the benefits? If you could break those down, because there are two issues.
The Chair: If you have an answer for that --
Ms Dunning: Yes, right, I will sell my answer to the highest bidder.
Mr Carr: I have some great ideas on housing, day care; nobody listens to me, though.
Ms Dunning: First of all, we tell those things to the bargaining units frequently, often and loudly. Whether or not they are going to be more likely to work this time around than they have worked in the past is anybody's guess. You probably are asking the wrong group. If you want to know whether that is going to be successful, you should ask the teachers what their plans are. I can assure you that boards are not going to be going into this set of negotiations feeling particularly generous. I think our position, which I realize is not precisely the same as that of our colleagues from the separate school association, is that assistance in the form of some kind of wage guidelines would be very much appreciated. In fact, without that kind of assistance we are facing what promises to be a very difficult year at the bargaining table.
I would comment that in terms of the alternative suggestion made in the other brief that class sizes might be addressed more properly than salaries, my feeling is that we are more likely to get value in class sizes than in salaries. I think we would prefer to see some limit on salaries than to get into the class size issue mandated at this level. I am very concerned about the fact that class size clauses in collective agreements vary greatly from jurisdiction to jurisdiction and that it is an area where boards have the flexibility to negotiate conditions that are appropriate to their own situations.
I do not have too much of a guess about what kinds of requests are going to be coming from the teachers. There have been some signals sent from the government. If they are listening to those signals and if they are prepared to follow the guidelines that have been suggested to them, we may be able to come in at a reasonable set of agreements. If they are not prepared to do that, we may have some pretty tough sledding over the next year.
Ms Moseley-Williams: I do not expect negotiations are going to change one iota. I think the demands will be high and unrealistic. Everybody is negotiating now, so I would suspect that we will spend -- we guessed it the other night -- a minimum of 50 hours a month for the next seven months. That will be just on salaries. We will not see anything realistic about it. We have not had one indication that there is any acceptance within the education community to say that there might be a shortage of dollars in Ontario. We will go in and we will go through the process, but I do not expect it to be a good process.
Mr Carr: My other question is tied in and I know you were interested in maybe adding to that. The situation is, as you know -- or maybe you do not -- that provincial politicians have frozen their salaries, and I think we are frozen at 1989 levels, if I am not mistaken, and have frozen them for the next few years. I am at $53,000 because I am one of the 28 out of 130 who does not get any more. So the provincial government has frozen its salaries. That goes by and not too many people realize that, although certainly my wife has noticed that.
What I gathered from you is that you are saying you would like to see a mandate from the provincial government saying, "You're going to get X amount." I think the provincial government could do that, in light of the fact that it has done that with its own members -- if it then went and said to the teachers, "In fact, what we've done over the next few years is we're going to freeze ours and we're asking you to take 2%."
As you know, when you do that, groups get very upset, as the federal government found out. Although I think there was a broad base of public support for that, because there was a perception that they should be held, the fact is that when you do that they literally march on the hill and burn everybody in effigy. If the provincial government was to say, for example that the teachers will not get an increase of more than 2%, and that inflation now is running probably at 2% to 3% and has been wrestled to the ground, what do you think the reaction would be from both the teachers and the public and yourselves? Would you like to see that happen? What number should we be looking at?
Ms Dunning: I think it is just a question of who is going to be burned in effigy where.
Mr Carr: I know it will not be me.
The Chair: And the recognition afterwards.
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Ms Dunning: We would appreciate any assistance we could get from the government in terms of keeping the lid on wages. We are not interested in a situation in which there is a great deal of anger, antagonism and hostility out there, but we are going to face it from somebody regardless. I think that if there were a way in which the government could either demand or persuade bargaining units that are dealing with the school boards to keep their demands within the kinds of parameters boards themselves are going to be working within, that would be much appreciated. I do not have a specific number to throw out because we do not have a number; we do not know what we are working with.
Mr Sherlock: Just to expand a little bit on the position we made earlier as to why we feel control of class sizes would be much more acceptable and more valuable than any kind of wage controls, I could not agree with you more on what their reaction will be, and I cannot see this provincial government setting down wage guidelines or controls. I would be rather surprised. It is laudatory that they have done it among themselves.
Mrs Sullivan: They have changed their minds before.
Mr Sherlock: That would be interesting. Paula made the point that money is well spent on class sizes. The Ontario Institute for Studies in Education is the research arm funded by this province. A few years ago they studied the class size question and published a report authored by Ryan and Greenfield. They reviewed all the research. All the significant, reputable research on the class size question was reviewed in that study and the conclusion was that there is no effect. After they issued that study they called in all the partners in education to review that study and they issued a second one called Clarifying the Class Size Question.
The representative from the Ontario Secondary School Teachers' Federation, in response to the question, "Should we spend more millions of dollars researching this question?" said no, there is no point because the findings are always the same. Heredity, a child's ability to learn, environment, the incentive to learn, those are the factors that determine educational outcomes.
I am suggesting that to continue to pour money into reducing class sizes is ridiculous. Why I suggested Paula was joking when she talked about confederated boards was for the same reason. I cannot see this government asking the teachers' unions, representing all the boards in the province, to lower their spending to our levels and to increase their class sizes to our levels. It is just not going to happen. It would cost millions of dollars to bring our spending to their levels. The Ministry of Education finance officials do not consider this a serious proposal, and I do not think anybody should. I know it is on a lot of people's political agenda but it is not a serious suggestion.
Mr Kwinter: In my riding the public funding of religious and private schools is a big issue. As a matter of fact, there is a court challenge. I would like to get your reaction. What happens if this challenge is successful? How is it going to impact on your two boards and what fiscal ramifications would evolve from it?
Mr Sherlock: The three commissions that were set up by Premier Davis at the time of funding included what is now known as the Shapiro commission, which examined this question and recommended that those schools be supported. The Ontario Separate School Trustees' Association presented a brief to that commission also recommending support. We feel that parental right is the primary basis for education and that those people have the right to be funded. I think somehow that this province, if the wealth was allocated fairly across the board, could afford to support those systems.
To ask me to give you a number, a dollar figure, I cannot. As you say in question period, with a little more notice we could have had a crack at it but not off the cuff. We have supported, in our submissions, that parents have the right and should have the ability to decide how their children are educated.
Ms Dunning: First of all, the OPSBA is in the process of studying the implications, and we do not have figures to share with you about those implications. Naturally, the implications of further dividing the available funds would have a greater impact on the public system than it would have on the separate system, because the parents in the separate system have already made that choice, and the parents who are asking for the choice are now resident in the public system. What financial fallouts would result would impact more on the public system. I think that is clear.
I also think it is fair to remind you that the public sector has repeated in various forums and has taken various opportunities to comment on our concern with fragmentation and with the messages we send out as a society when we choose to educate our children in fragmented and homogeneous groups. I believe those concerns will form part of our response to the desire for public funding of private schools.
Mrs Sullivan: I have two questions that are not particularly related. We have spent a lot of time talking about the expenditure side of boards' budgets. I want to move to the revenue side. We have seen some indication of where a major part of the revenue base change, in terms of provincial moneys going to boards, will have an effect. Changes in the assessment base will certainly have an effect, and opportunities for income from lot levies will certainly affect certain boards, particularly in growth areas. But one of the things we are seeing is that because of the impact of the recession, some of the projections of a couple of years ago in terms of lot levy revenue are changed.
My community, which I share with Jim Sherlock, is a fairly wealthy community, with a wealthy public board a separate board that is struggling to maintain the same services with equity in the mill rate, a community that is expanding, with concomitant pressures on both boards. Indeed some of the expectations of revenue as a result of the potential of lot levies and so on have now moved away from us, because our communities are not expanding at quite the level we thought they would.
I am wondering what other opportunities you see for revenues coming into the boards, whether from special grants or from corporate involvement in delivery of services, or if we are going to have to stay with similar models in terms of revenue generation as we have in the past. We have talked about the expenditure side a great deal, but where are the pressures on the revenue side as well?
Ms Nyberg: I can attempt to answer part of your question, and that would be the question on the revenue side. Being a trustee in Metro, there has been a number of innovative things done with corporations and sharing of their facilities. I can tell you that many Metro boards -- and other boards, I am sure, but I am more familiar with Metro boards -- are looking into getting companies to help pay for a number of things, and I see that only expanding. North York has had some very interesting things with the possibility of selling some air space.
The business superintendent from Northumberland-Newcastle, with its growth area board, may be able to answer your questions on lot levies.
Ms Moseley-Williams: In our submissions at the Macdonald commission a few years ago, we suggested there be better co-operation or deals with business, or a sharing of this, and the Fair Tax Commission is also going in that direction. I think that is fine. I hear the other trustee talk about Metropolitan Toronto and I think it might work very well there. But there are many parts of this province where you would be sharing with yourself, because you might be the industry.
Mrs Sullivan: But in the short term, in terms of the immediate crunch we are in now, the revenue pressures for the next budgetary year will be significant. That is the question I am asked. If we are looking to the next chunk of transfers, the shrinking revenue base is going to be a factor as well as additional expenditures.
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The Chair: The superintendent from Northumberland-Newcastle, may I have your name please?
Mr Sudds: Ron Sudds. The issue of lot levies is obviously one that is being debated by our board. I think the problem has been two things. One is obviously the recession, but the other thing is that some of the growth we were planning for has occurred and now, under the current definition, no longer applies as a "growth boards." It is not growth any more because the kids are there or the houses are there and the potential is there. They are now no longer covered by lot levies under the definition of "lot levies." What you have now is a greater backlog the boards will have to address in their five-year plan that the gentleman was referring to. They have to make some fairly tough decisions around that, and lot levies will not apply.
I think why boards have slowed down in terms of looking at it is that you are still dealing with the immediate. Certainly we are trying to project our strategic planning. Every board does. But you have the issues that are before you.
As to other revenues, basically the province states that there are two: the municipal or local requisition and the provincial government. I also am part of the Fair Tax Commission. The whole question is being investigated and there needs to be some creative thinking. But there is nothing else provided for right now. There are models they have done in the Unites States, some industry-related. There is no provision for that yet in Ontario. Basically we have two sources of revenue.
Mrs Sullivan: Basically what you are saying is that for the next year there are going to be pressures on the revenue side as well as on the expenditure side, and no opportunity for a positive change on the revenue side.
There is the next question I want to ask. I have a lot of concern about this area. We see some boards in Ontario that are able to provide quite extensive services in, say, speech pathology, social work and special program areas, and other boards that are not able to provide that. With some boards there is duplication of services with other deliverers of those services in the community.
Where do you see the province coming in, in terms of setting standards and funding for programs that we know are needed, say, a breakfast program? We know that if a child goes to school hungry, he is not going to learn as well. Where does the province fit in, in terms of that integration of programs and funding of those programs? Should that be a part of next year's transfers, because more kids are going to school hungry this year than last?
Ms Redman: I would use a slightly different example, child care. I think that one of the keys to this is breaking down interministerial, territorial guidelines so that we can work co-operatively and not duplicate. I think that has to be a message from the top on down.
When I look at child care, the Ministry of Community and Social Services does deliver startup grants. However, at our board, we end up funding from the local educational revenue, $30,000 with each new child care centre we build, because we are told that we will get $268,000. In fact we get $238,000, which means that shortfall has to be made up out of the local taxpayers' pocket. So I guess whether it comes from the provincial pocket or the local ratepayers' pocket, we need to get together. There needs to be better communication and maybe less complication in how we fund that, maybe the licence to co-operate more.
The Chair: Thank you very much. We have gone far over time.
There are a couple of things in the interest of clarification. Concerning your studies of class size, I believe the research states, and I would like your clarification on this, that reduction in class size make no difference unless the methodology is also changed. Am I not correct, or are you quoting from another study, Mr Sherlock?
Mr Sherlock: I was referring to two Ontario Institute for Studies in Education studies, the Class Size Question and Clarifying the Class Size Question. As I recall reading those, the results were very inconclusive. They really zeroed in on the one factor. Obviously class size affects teacher workload and teacher morale, teacher style, and those do become factors in educational or in cognitive outcomes, but are not significant factors.
When I was at OISE, one of the profs told me the most significant research document in the century was a book called Inequality, by Christopher Jencks and others, subtitled A Reassessment of the Effect of Family on Schooling in America. A U.S. federal government educationist named James Coleman collected massive data which reached the same conclusions: Heredity and environment are the factors, and the others are probably not very significant.
The Chair: Would you tell me the direction of compensatory education grants? What are they used for? We have all heard the term. Does anyone on the committee know?
Mr Sherlock: I believe it is a flat dollar-per-pupil grant.
The Chair: You have it, Mr Phillips?
Mr Phillips: I want to hear their answer.
The Chair: Compensatory education grants, their direction. Does anyone know? Because we have been discussing it.
Mr Sherlock: I am sure your ministry officials can give you great detail. It is a replacement of weighting factors on a flat dollar basis. Basically, I think our brief addresses the point that the flat dollar-per-pupil grants are regressive.
The Chair: The reason I ask is that I know flat grants are directed specifically to an area so that they can be used only in that area, so I wanted to know what compensatory education grants were for.
Mr Lauwers: I can tell you what they are, reading from this document put out by the Ministry of Education called the Education Funding Model, 1991. The sum of my knowledge is on this page, so if you ask me any further questions, I am not going to be able to answer them, beyond telling you what flat-line grants do. "Compensatory education grant: Some school boards, because of local conditions, have large numbers of students who are economically or socially disadvantaged, and therefore at risk for academic failure and dropout. Compensatory education programs are aimed at addressing the needs of such students. Financial assistance is provided to these school boards to offset the additional costs of these programs."
The Chair: I thought the committee would require that clarification. I appreciate your coming, and we all appreciate your response to the questions. Thank you so very much.
Ms Dunning: Thank you very much. It has been a pleasure.
Mr Wiseman: We are going to have to go. Do we have time allocation, Madam Chair?
The Chair: We are way over time. I would just like to provide the committee with as much leverage as possible to respond. We had one other walk-on item, and that was the appearance of the Treasurer at this committee.
Mrs Sullivan: Madam Chairman, my understanding is that the committee sits from 10 to 12. It seems to me that we are right on schedule.
The Chair: We are. But we wanted to make sure we could discuss this walk-on item, and that is why I mentioned it at the beginning.
Mrs Sullivan: That is fine, but I think one of the members said we should have time allocation.
Mr Wiseman: Time allocation was not in reference to the time we were concluding, but the amount of time that each party has for asking questions.
Interjection: Was that not even?
The Chair: I thought it was quite even.
Mrs Sullivan: I thought the issues were explored.
Mr Phillips: I think the Chair is doing a good job.
The Chair: I thought it was quite even.
Mrs Sullivan: That is right.
The Chair: If we could focus in on this second item, you had asked that the Treasurer appear before this committee. The Treasurer can appear before the committee between 9 and 10 am on Thursday, December 19. Is there any discussion about that?
Mrs Sullivan: We should have an extra hour for questions.
The Chair: The time we have been given is between 9 and 10. We could explore his extending it for another hour. But can we at least agree that we will accept this time now? Then I will certainly explore the possibility of his remaining.
Ms B. Ward: Or just request that he make his statements and allow time for questions within that hour. I am sure our questions will be sharp and concise.
Mrs Sullivan: I really would urge the Chairman to make a particular request of the Treasurer that he provide additional time to us in that committee. We have had a significant change in projections. We are moving into a period of time where he will be preparing for transfer announcements. I think that a limited question period time will be difficult for the committee. He also wants to speak with us about process. I think it would be useful for you to emphasize that we would like him here for at least two hours.
Mr B. Ward: But if that is not possible, we could mention that he allow time for questions within that hour, as long as we do not get overly ambitious in our preambles.
The Chair: Let me say this to the committee members: I will speak to the Treasurer. I will tell him about your concerns. I will make sure he recognizes that we are wanting him there for a much longer period, in view of the concerns you have expressed, and that failing that, he make his presentation as short as possible so that we can have the rest of the time for questions. Is that agreed upon? That is December 19 between 9 and 10, and possibly extending further. That being settled, I declare the meeting adjourned.
The committee recessed at 1151.
AFTERNOON SITTING
The committee resumed at 1554.
ONTARIO COUNCIL OF REGENTS FOR COLLEGES OF APPLIED ARTS AND TECHNOLOGY
The Chair: I want to welcome the Ontario Council of Regents for Colleges of Applied Arts and Technology to our pre-budget consultations. I believe you have been given 15 minutes to present. The committee members will then ask you questions.
Mr Johnston: I am Richard Johnston, the chair of the Ontario Council of Regents for Colleges of Applied Arts and Technology. Accompanying me are Peter Milner, a member of the council of governors of all the boards of governors of the system, Keith McIntyre, chair of the council of presidents and president of Mohawk College in Hamilton, and Christopher Trump, a director at the Association of Colleges of Applied Arts and Technology of Ontario, which basically serves the aforementioned organizations of the community college system.
I hope that in the future the community college system, as it gets invited to come before legislative committees, will be understood to be composed of these three prime bodies, together with the employees of the system, who are represented by the Ontario Public Service Employees Union. As the university system is often invited with its various parts into the budget process, we hope we will be as well. We welcome the opportunity of doing it together. We want to emphasize that we enjoy the prospect of being able to speak for the system from our various vantage points within the system.
We are not here to beg for any special consideration within the forthcoming budget or to whine about the difficulties we face. We will try to describe some of the challenges before us from our various vantage points. What we want to do today is to raise with you some serious questions in terms of the role of the government vis-à-vis the college system. Perhaps in your recommendations going forward consideration of some new approaches to how the college system is viewed in the post-secondary mix and the general education mix would be helpful.
Let me just say that we have two prime streams in the college system. One is post-secondary and the other is training. Keith will give you the statistics, and you have been given some tables by the participants. The demand for our services is rising enormously at this point and of course the dollars are not, given the financial constraints with which we are all faced at this point. This is leading us to some major difficulties and requires a very profound review of how the college system is operated and financed. We are undertaking that review early in the new year. We are not sitting back passively as we have to meet potentially low transfers over the next number of years.
I just want to make a few arguments in terms of how the college system should be looked at, then turn it over to the other two gentlemen and perhaps wrap up for a couple of minutes and then go to your questions.
First, think about where we want to place ourselves as an industrial strategy. The Treasurer has said, this government has said, we wish to compete with western Europe, with Japan, with the United States. We do not wish to compete with Third World countries. Our economy is to be a high-tech, value-added approach. I would suggest that looking at the college system in terms of its training capacity and how it should be changed to meet those new challenges is one of the things you as legislators should really be looking at very seriously.
We are the largest single training body. I would argue that we are dealing at a level of general education which in the next decade or so is also going to have to be considered to be the basic education that one requires in our society. If you look back to the 1950s, one could say that grade 8 was the level of education with which one could survive, grade 10 by the mid 1960s, and grade 12 by, let's say, the end of the 1970s.
Right now, I would suggest to you, all the evidence of the restructuring is that the person who has been trained at a community college with a general education and the vocational skills is much better equipped to deal with the restructuring problems we have at the moment than is someone who has never had those skills. We are now being faced with the fact that, according to the Treasurer the other night speaking with us, between 750,000 and one million people may be among the newly displaced within our society because of the restructuring, many of whom have not got the skills we can provide in the college system.
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What I am therefore suggesting to you is that if we are looking at a new matrix, a new level of general education we require, a new capacity to provide an integration between business and training, you should look no further than the community college system for where to invest. We have the best linkages of any public institution with business. We have wonderful advisory committees, over 700 of them working in the system at the moment with all sorts of participation from the community, so that there is a capacity to link into the very fabric of the community and with business in a way that you could not do if you were starting off fresh at this stage.
But there is a real need to re-examine how you fund us. If it is just going to be transfer dollars at post-secondary level, I think we are up against it in terms of how you are going to be able to use us to meet some of the needs of this society. If, for instance, we have a large number of people on social assistance who we really should be retraining to participate in our society and people are going to come off UI much faster than in the past because of changes in federal policy, you need a system which can move those people off straight assistance and into some kind of retraining package.
I would again suggest that you should be looking seriously at the college level. But you cannot do that under our present financing approach. New and innovative ways of looking at social assistance dollars moving into the system of looking at WCB dollars moving into the system, and finding new ways of joining with business to create new dollars are going to have to be found.
The impetus should not necessarily just come from our pleading for it from within our self-interest, but rather from a general policy thrust from the government and from a committee like this, which can, I hope in a fairly non-partisan way, sit back and look at the enormous challenges facing us in this economy and try to focus on how best to approach those things.
So my pitch to you today is essentially not just the budget lines we have at the moment and our particular difficulties -- Keith will tell you about the increases we have been facing in numbers, as well as the difficulties in straight financing -- but in fact to throw on to you the notion that you should be looking conceptually at the framework you would like us to work within. Then we will have the capacity to do it.
We can exist now with no new money, but that will gradually have an negative impact on access. It just has to, that is all there is to it. We will be as creative as we can to make sure that does not happen badly. But if you really want to face the challenge of what is going to be coming forward to us in these next decades, you want to look at very different ways to mandate us as a system than those used in the past.
Let me just turn it over to Peter to talk to you a little bit from the governor's perspective.
Mr Milner: I welcome this opportunity to speak to you on behalf of the council of governors. The council of governors is a constituent part of the Association of Colleges of Applied Arts and Technology of Ontario and it is composed of the chair of the board of every college in the system, plus one regional representative from the northern, western, eastern and central regions of the province. Thus, the council of governors is fully representative of the community college system from the standpoint of boards of governors. Its function is not only to act as a sort of information exchange by means of regular meetings, but also to be, so to speak, the voice of the governors in the system.
I say all this just to emphasize that I am speaking not only for myself and not only for the board of my own college, but for the boards of governors of every college in the system -- boards which, as you probably know, consist of people from every walk of life who serve the colleges as governors on a volunteer basis.
The council of governors meets four times a year and it can meet oftener if required by circumstances. It was recently felt that circumstances did require that the council should hold a special meeting, because the college system finds itself in a unique situation at present, and not a very pleasant situation. Consequently, a sort of extra meeting of the council of governors was held last week. At this meeting each delegate was asked to define what in his or her board's opinion were the most critical issues facing the college at the present time.
I have to report to you that there were 17 colleges represented out of 23. Every one stated the very same major concern. The major concern of all colleges at the present time is how to cope with the increased demand for services caused by the current economic situation. This increased demand, coupled with little or no funding increase, has put a very severe strain on the resources of the college system.
The current economic system, as we all know, means that people are changing jobs or, more often, they are losing jobs. Displaced workers are seeking to be retrained, perhaps for specific skills, hoping to change their career paths or merely to upgrade their general academic skills. Labour adjustment committees -- and I happen to be the chair of a local labour adjustment committee where I come from -- and individuals throughout the province are seeking help from the colleges in this regard.
At the same time, high school graduates are being urged to stay in school and pursue post-secondary education. Besides parental pressure for this kind of thing and other pressures, they are encouraged to stay in school and pursue post-secondary education, perhaps at the colleges, by the fact that there are virtually no immediate jobs available of the kind they used to get by leaving school in grade 11 or whatever.
So the college system resources, which are already strained, are faced with competition now for scarce space and teaching time between the traditional post-secondary students and an older group of displaced workers seeking skills to make them more marketable. College resources are strained because, just to put it in a nutshell, funding is lagging behind enrolment. Lack of funding prevents necessary additions to personnel and to space.
In my own college, at least the college of which I am past chair, post-secondary enrolment has increased 50% since 1988 with no increase in the full-time teaching complement. Between this year and last year, total enrolment is up 16%. Most colleges can tell a similar story and last week, at this meeting I mentioned, 18 of them did. From Windsor to Ottawa and from Peterborough to the Sault, not forgetting the lakeshore and Metropolitan Toronto, all reported this same strain on their resources.
Productivity is often mentioned. "Why don't you increase your productivity?" It is a good question, but most colleges have already made strenuous efforts to increase their productivity. Major shifts have been made: curricula have been changed, faculty has been overloaded and physical facilities have been pushed to the limit. It is an extraordinary challenge to meet the growing access requirements under the present funding limitations.
Many colleges are reluctantly considering a cap on enrolment because they simply cannot handle any more students. This is a real switch, because for the last 25 years colleges have been competing with each other to enrol students, have been designing courses to attract particular groups of students and, as I say, in fact have been competing with each other. But right now, and you can imagine what a painful decision this is, many of them are really thinking about capping it. What would probably happen is that individual colleges would not cap themselves. The system as a whole would get together and rationalize this capping in some way so that it would be properly managed, not just a kind of an ad hoc thing. But it is a real possibility. If it does happen, it will have been made necessary because productivity or increases in productivity can only go so far.
Everyone recognizes that financial resources are limited. I am from the private sector. Until I retired I was a plant manager. I am very well acquainted with asking for money and not getting it. Many governors are also from the private sector and they are all taxpayers of course, so they realize full well the difficulty of allocation of resources, which are pretty scarce at the moment.
The colleges are being asked to perform a role more demanding than their traditional post-secondary role, with some retraining. It is quite different now. The retraining demand is growing more and more every day. The post-secondary enrolment is growing and the colleges are facing real difficulty in providing the kind of access which everyone would like to be able to provide.
All college boards are very much aware of the challenges facing the system and all would like to feel that resources can somehow be made available, perhaps not in the traditional way but somehow, to enable the colleges to meet the challenge. That is what they really want to do. They are confident that, if they are given the resources, they can be part of the solution to the problems which the province and the country are facing today.
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Mr McIntyre: Madam Chair, members of the committee, I am pleased to be here representing the administration of the 23 colleges in Ontario.
If I could ask you to please turn to the first page of the handout prepared for you, there is a pie chart that shows where our colleges derive the revenue streams from. The large piece of the pie is the Ministry of Colleges and Universities and that is the stream that funds the post-secondary activity, the certificate and diploma programs.
I would like to spend just a moment on the next couple of charts. The first shows the trend in the revenue stream and the next shows the number of applicants versus first-year student intakes. We are really unable to grow much more with the current situation, as both Richard Johnston and Peter Milner have indicated.
But look at the increase in applications. You can see the trend. This is growing with the pressures for young people to complete high school to get a better job. Besides coming from high schools, the traditional youth market, so many more adults are seeking to come to college. I think that as a government and as a committee, you have to be concerned about more adults applying and competing with the youth from the high schools, depriving the high school leavers of an opportunity to get in.
That battle was fought up in the Sault just recently at Sault College. Fortunately some new current-year money was provided from the Canadian Skilled Trades Education Congress and the federal funding agencies to enable Sault College to take in diploma students who were adults so that they did not end up depriving high school leavers of admission.
By the way, lest you are worried whether graduates are getting jobs, the answer is yes. Even in this economy we are delighted at the rate of placement. That is because we are colleges of applied arts and technology. We have a work experience component in every program: It is clinical placement, it is field placement, it is co-operative education work terms. It manifests itself in very different ways. So this is not a case of turning out people who are not going to get jobs. Already, as early as now, December, I am hearing feedback about some of the graduate placements coming up this year at my own college.
The final chart shows the trend in college enrolments over the eight years. You can see it has been rising. As colleges, we tried to respond with this piece of our activity, the Ministry of Colleges and Universities part. The Premier met with our group when he was first elected and asked our colleges to do everything possible to respond, and we have. We have demonstrated that. That was done in anticipation of some additional funding. Since, as Peter has indicated, it may not be forthcoming, we look at some considerable challenges.
If you look at the other pieces of the college systems revenue pie in the first chart, note the Ministry of Skills Development portion. That area, where recently Brad Ward was parliamentary assistant, accounts for 11% and is growing. We are delivering programs. That is where we tackle the Ontario skills development offices, the Ontario basic skills, and quite a variety of programs.
The federal programs shown in the pie chart involve apprenticeship. That money moves through Ontario through the Ministry of Skills Development and the Canada-Ontario training agreement. That part is also growing. We are so pleased that the apprenticeship purchases have been increasing dramatically. Compared to four years ago, apprenticeship training in Ontario is up well over 200%.
But now we run into the dilemma that there are not the jobs. Employees cannot be sponsored because the companies are not taking on the apprentices for training. So we may not even be able to spend the money that the apprenticeship pot is indicating, because there are not the indenturing arrangements for the students. We have to find a way to crack that with the apprenticeship review that is going on.
Just look at the other pieces of the pie. Flat-lining or only modestly increasing the MCU grants, a big 55% chunk, forces the colleges and the boards of governors to have to look at these other areas. The tuition fees are set by the minister; we are not free to set tuition fees in our colleges. So tuition fees are a given. There is only a little room left for any entrepreneurial activity to try to create some more revenue to subsidize what it is going to take to keep the students in our colleges or indeed to respond to the applicants' pressure for more admissions.
I would leave the message, Madam Chair, that if your committee is in a position to recommend for budgeting purposes -- a lot of policies, of course, come out of the financing arrangements; the financing steers a lot of what we do -- we would seek maximum flexibility to be as entrepreneurial and as creative as we can in order to work within these other areas to help prop up the requirements which our collective agreements require to be met for our teaching. I would be happy to answer questions from committee members.
Mr Johnston: As a concluding remark, we are already taking major efforts to cut back our costs. We have a settlement with our sports staff of only 3%, which is really leading the way. They have taken that on very responsibly, at some cost to themselves. Our presidents volunteered to take a salary freeze before the initiatives that came recently from the government.
We are going to look at all the serious questions of how we use our space, what we would like to recommend on tuition, recommendations about being flexible. My belief, however, is that in spite of all those things, if we do not have a new way of looking at the role of the colleges and the overall economic plan, we are not going to address the real issues that are out there in this society right at the moment. That is the challenge I would like to throw back to the government. If it sets the direction, we will try to respond.
The Chair: Thank you very much for your presentation. I am going to open up the questioning. Mr Sutherland.
Mr Sutherland: I have one question on your chart showing college system enrolment by year of study. My understanding is that most of the programs at college are two-year programs, the vast majority, not all of them. I was struck by the great drop in the second-year enrolment. Can you account for that? Is that strictly people dropping out of the system? Is that people going part-time? How do you account for it? If it is dropping out, do we have any way of tracking or improving retention rates? It is something I ask the university when I meet with them as well. The dropout rate is a hard thing to track, to get a handle on. I was just wondering if you could elaborate a bit on that.
Mr Johnston: Of course there is a dropout factor, and it varies depending on the course. But there are also a large number of one-year courses and that reflects itself in that scale as well. Then there are a number of people who opt for other kinds of approaches, such as moving to continuing education streams on a part-time basis instead of staying in full-time, depending on their economic circumstances.
The colleges have been very aggressive. They are trying to address the questions of dropout on a programmatic basis. As you probably know, we have two major reviews going on now, one on prior learning assessment, the other on standards. We think both of those things are going to have a major impact in helping us with the retention.
Mr McIntyre: These charts do not show the part-time enrolment. You could multiply by seven the number of full-time students. We have approximately 750,000 part-time enrolled students in the colleges. We have not shown that for you. In fact, it is an anachronism to think of a full-time student. People coming today have so many other commitments, often being the mature older learners. I tell faculty regularly that it is an anachronism to be thinking of learning in our colleges today as a full-time, steady semester-by-semester activity. We have stopouts, we have dropouts, and we have returns. We have programs that can now be delivered in different modes. You can get diploma nursing in our colleges over two and a half years, three years or two years. It varies. You can now get nursing for the first time at the Sault College on a part-time basis.
Those are some of the kinds of responses we have made, and you are right, it is very difficult to track. I would say, however, that our retention based on the statistics we have would be higher than most other jurisdictions in Canada, and maybe higher than most in the United States. That is because of the student success strategies that are pursued and the fact that we are so oversubscribed. The applicant ratio indicates high oversubscription, so the people who do get admitted are highly motivated. In health sciences, which is very oversubscribed, and applied arts, overall attrition runs 10% to 15% at most, and that is very, very good.
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The open admission areas where we have the greatest trouble still are general business, because it is not a very highly focused occupation, or general technology, where, until you get in and find your way into civil or mechanical or whatever the case may be, there tends to be a lot of sorting out and career exploration going on.
Mr Carr: I was pleased the other week to spend the morning with all the MPPs and MPs in my area visiting Sheridan College. We had a really good chance to get together with the people there, and they were giving us the statistics on the percentage of jobs. You are right that the colleges are doing just a terrific job getting people into marketable skills.
One of the questions that came up with regard to funding, and I notice you have it on others, is the tremendous market out there now in industry, which years later is finally realizing it has to have skilled people, and the training market for private companies that are doing training, whether it is something as simple as learning Lotus or computer training or some of the more advanced ones. Sheridan told us about some of the aggressive programs they have with, for example, Ford, where Ford needs a training program and will work with the people at Sheridan.
I was wondering, gentlemen, what your thoughts are about going after the business market, where the potential is. I am thinking not just of the large companies, the Fords, who realize it, but of the small to medium businesses that have so many of the people. There is a big market there for training. How are we going to approach the guy who makes widgets and has 10 employees to get some training and, if so, is there any space available? You are talking of people working in the day and going to school at night. How can we incorporate that into offsite training, where you would go in? I see that as one area where we need to be more aggressive. I wonder if you could tell us what we are doing in that area and how far we are along.
Mr Milner: There is one example at Sir Sanford Fleming College in Peterborough, the Fleming Centre for Manufacturing Studies, which is directed at small to medium-sized manufacturers, the widget makers and so on. The stated purpose of this institution is to train everybody from the person on the shop floor to the chief executive officer, employing a series of seminars and specialized courses. The activity of this centre has been a bit limited by the fact that at the moment many companies unfortunately may be shortsighted. But it is a matter of survival for them; they are thinking of survival rather than of training. That is the short view, I know, but it is one that people do have.
This Fleming Centre is in fact actively approaching small to medium-sized manufacturers in a large area, not limited just to the Peterborough area, to do that very thing. I know the board of the college is talking all the time and pressing the administration to design and deliver courses, as you said, on the shop floor, like at 2 o'clock in the morning on the midnight shift, this kind of thing. It is something that we are very conscious of. I said when I was on the board -- I am past chair -- and as a manufacturing man myself, you have to be ready to go where they need you and when they need you, and take the course to them. This is something which is being pursued certainly by Sir Sanford Fleming and I know by other colleges.
Mr Carr: With regard to that, are there any thoughts of how quickly we can move to enlarge the "Other Revenue" segment on your college system revenues pie chart? I do not know, Richard, if you want to attack that. What I see, and we all know it, we have so many pressures on the dollars in order to be able to do it.
The reason I say this is that, as you know, the universities are doing it. I had thought of maybe going back and taking an MBA and, of course, when you do that you see the cost now. They are making money on the adult students because they are the ones who are getting paid. It is an area where there is a tremendous need and businesses will pay a good dollar. Where do you see that "Other Revenue" heading over the next few years? Are we going to see that expanding to be a really large part of the pie or not?
Mr Johnston: I think others, in general terms, will have to expand dramatically. It is a matter of what the context for it is, in my view. I will let Keith respond to the particular flexibilities he would like to see built on, but I think one of the areas I would like to see us really concentrate on in a policy sense is what relationship colleges should have with the Ontario Training and Adjustment Board and how that all gets co-ordinated. One of the things I am very worried about is fracturing the training culture, if I can put it that way. That is where we need a context from government about where it sees the colleges situated to deal with that process.
The direct-purchase stuff is being handled very aggressively in all the colleges. That helps you with the actual plan for that actual plant, if I could put it that way, but it does not help you meet the access issues as they are coming from the generally disfranchised person who has just lost his or her job and has no real hope for the future without major retraining. So I would want to separate out that direct purchase of service thing, which I think we do very well at this point, and the notion of how we should be co-ordinated with the training approach. But I know Keith is very anxious that we be given more flexibility in terms of how we can access other dollars.
Mr McIntyre: The other revenue, if it just grows because of responding to other business opportunities, does not necessarily enhance the side where the shortfalls are, you see. You either have to have additional profit or additional contribution to overhead coming from it. There is a trend now from the federal government side on its purchases, as well as from some of the OTAB and the MSD activity, where they want the colleges to tender bids and compete for the training on a competitive basis.
We are free to respond. We can respond to however much activity is there, and we do. But if the employer wants that person to access the publicly funded, heavily subsidized activity -- by the way, our tuition fees of $800, which are set by the government and the minister, are only about 9% of the cost of providing that education. That is one of the lowest ratios in North America. It is a pretty good bargain when you consider that after two years a graduate can be employed at somewhere from $18,000 through $26,000.
The answer is complicated, because the structures that have grown up have mainly come from this area. In 1966-67 the colleges were set up to address just this area. There was little, if any, of this other activity. The retraining came from the school boards and then there was the apprenticeship program.
The point I have made to Richard and others is that we need increased flexibility. Our collective agreements, for example, are set up by legislation under this side of the House, and I do not have the flexibility to respond quite the way that you would like to see when the training wants 30 hours delivered next Wednesday, starting Wednesday, Thursday, Friday.
We need considerably more flexibility in a variety of areas. If we had more time, we could perhaps outline some of those opportunities. If the students in Windsor, for example, decide they would like to put on a little bit of an add-on to the tuition fee, perhaps they could vote as a student body for $20 a person to enhance their athletics or their library resource centre at St Clair College. What I am saying is I hope that our government will allow that kind of flexibility to happen in Windsor. It will be different in Kingston, it will be different in Peterborough and it will be different in Hamilton, how each is able to respond.
University Hospital up in London is selling prostheses in order to overcome the shortfall. It is marketing this wonderful equipment with robotics technology in order to subsidize its shortfall on its side. I think we have got to do the same kind of thing as colleges in spades. We just have to do that.
Mr Phillips: I have a short time frame, because the grants are going to be announced in the next couple of weeks, and I want to be as helpful to you people as I can. Then there is another debate around OTAB, which I think is going to be fascinating, absolutely fascinating, as they privatize the stuff. Where that all leads will be interesting.
I see your enrolment went up about 10%. My recollection is that grants lag enrolments by two years. My simple math says to maintain the status quo you probably need something a little more than zero. What is the college proposal for what the grants should be in the next couple of weeks? Because all of the other revenue sources I think are down the road, big revenue. How can we be helpful to the colleges in understanding that?
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Mr Johnston: We were looking at the actual costs and what we would actually need to meet the numbers that have been brought in to try to fill the need. You would probably be talking somewhere in the range of 8%, and we all realize that is not to meet our 10% increase. That would be the general kind of range we are talking about. We realize that is not in the works. In fact, we are presuming something zero to 2% and that we will try to work within that at the moment. That is our assumption in terms of what we think will be coming forward at this stage.
Mr Phillips: Really?
Mr Johnston: Yes. We are willing to try to find ways to work within that, especially if we see some light at the end of the tunnel. Our notion is we know there is not 8% there to meet the real need. We know that. However, we know on the other hand that if we keep looking at it in the same way, we are never going to get out of the box we are in. What we really need now are new ways of looking at how the money should flow.
From my perspective, just taking it from what Keith was talking about, we need the flexibility of our money moving from training through to post-secondary and back and forth. If we are going to do prior learning assessment for people coming out of the workforce to get them into post-secondary programs, I would like to see us do it with the training programs in the college, to be able to have people get advanced standing in post-secondary courses once they have finished a training course, and then allow that training dollar to actually move into post-secondary. That would increase your bulge on the post-secondary side in a meaningful kind of way, again accepting the notion that this is the new base of education that a modern worker is going to need.
Mr Phillips: So what are the colleges asking the government for then?
Mr Johnston: We would have wanted our needs met, but we are basically not asking, we are expecting something in the range of 2%, and then we will manage.
Mrs Sullivan: That is below inflation. You mean 2% above inflation, do you not?
Mr Johnston: No, we mean 2% flat.
Mr Phillips: Did you ever think you would say that, Richard?
Mr Johnston: Gerry, there are a number of things I never thought I would do, one of which would be management in a collective bargaining situation.
Mr B. Ward: I noticed in your stats that the number of second-year students increased quite a bit. I am assuming that is because of the recession. If you have no work out there, you have a tendency to stay in school if you can. Do you anticipate this leaping ahead again for next year as well?
Mr McIntyre: Projections indicate that the large intake from last September will carry on over and be a blip coming through into second and third year, and that is one of the requirements for meeting the expenses. Those are cases where you have to have classes, labs, shops and you have to have teachers.
Mr B. Ward: I know Mohawk College offers a wide range of programs and I am assuming that is similar in other colleges as well. How do you review the programs to ensure that they are effective and meeting the needs of the students as well as the communities, so that we do not have a basket-weaving course that is totally unnecessary? How do you review that, or do you?
Mr Johnston: There are a number of factors. I will let Keith join in as well. One of the basic ones is the market. We basically provide courses that we want to get people jobs for and it is an applied learning. If there are no jobs out there, or people do not like our graduates, they will not hire them. I think we have had a great success, so our courses have been relevant on that basis.
There is also a program review process that is undergone both ministry-wide and with the colleges. Now we are in the process of trying to establish standards across the system so we can say an ECE graduate in Mohawk is the same as an ECE graduate at Fleming and anybody who is then looking at them will understand that as they come out in the system. That recommendation will be coming forward to the ministry in June about how to proceed with that approach to things.
We are missing some system-wide checks, if I can put it that way, in terms of our overall standards. But in terms of the relevance of the programs, I think they are really driven by the take up. All the college boards are very sensitive about the response of the business community to their programs and whether or not they are finding success.
There are 700 advisory committees involving business people, labour and community groups across the province operating with the college system, and they tell the college administrations when they think the programs are getting out of whack. It is another very good local accountability check.
Mrs Sullivan: I am interested in your predictions of operating revenue needs and your expectations. I am also interested in what you have to say about changing the funding and financing system. Surely if that is going to occur, it should occur relatively quickly.
I suppose if I were going to compare it to any other system it would be a change in health care from one positioning to another, with a need for an injection of funding to get the thing moving. What kind of level of injection of funding do you see for that transitional period, where you get into a rationalized co-operative approach without being in the kind of awkward purchase service situation you are in now?
Mr Johnston: That is a very hard question to answer at this moment. I am hoping we will be in a position to answer very precisely by about September or October of this coming year as we really start to focus on these issues seriously.
It would, however, be much easier for me to give you an answer by then if I knew what the expectation was from government about what our role is. If our role is to be a primary agent of reintegration of those people who are being displaced in the restructuring, then that has one set of needs for injection. If it is just a refinement of what we are doing and you are going to give us some specific goals of access around certain identified groups, certain unemployment districts or however that was approached, that would have another set of implications for us. If we are going to have more flexibility in how to move between training and post-secondary, it also provides us with another set of expectations.
My own belief or bias at this point is that this, as a set of public institutions well integrated into the community and with the business community, should become a major policy mechanism for the government to meet the restructuring goals that we have. That would speak to a major injection of dollars, but I would hope dollars that are really training based but flexible.
Mrs Sullivan: Can you ballpark it?
Mr Johnston: Again, it depends. If you have numbers that are as high as 500,000 people or so that need that kind of assistance over the next few years on top of what we normally produce, our post-secondary has presently 110,000 people in the system, so you are talking about a quantum leap of investment.
Mr Wiseman: I would like to explore a little bit what is actually happening in the colleges from the point of view of pupil-teacher ratio.
I have met with Durham College and they went through all their funding and what they have been doing in terms of administration. They have distributed the administration load over all the departments so that in effect the administration costs are way down.
I would like to hear a little bit about PTR. They have also said they have increased by two hours a week the amount of teaching time their instructors are putting in and they have expanded the amount of time they are using for preparation. Some of it is coming out of private time, so the amount of time per week is decreased.
Could you give us an overall example of whether that is the exception or the rule and how we as a government could better reward the colleges that are doing it effectively and perhaps not reward the ones that are doing it poorly?
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Mr McIntyre: That is a really tough question. All of the change that has to be implemented in curriculum has to be done by the staff. The new programs you have heard us talk about that we have to be mounting in new areas and new occupations that are coming on stream all the time, all that work is done in the non-teaching time. The actual teaching time -- if you are referring to the pupil-teacher ratio, we have a formula in our college system that helps ensure a quality of instruction. We had a strike in 1984 over that fundamental issue.
Our system has grown and grown without resources matching to the point where class sizes had been pushed to enormous limits, not anything like the way they had been pushed in the universities' case, but that is the difference. We are teaching institutions; we are not research institutions. We have to be accountable for quality teaching and performance on that side.
You could say today the balance between quality, class size, preparation and evaluation has been brought into a reasonable context in the formula. I do not think there is anybody in our system who would deny that is a valid balance. As always, in teaching, as in many professional occupations, a person can do far more than the minimum, and it is done by a lot of people. When you work weekends, you do your preparation at nights and all that sort of thing that is not able to be factored into the formula as hours of delivery.
The hours you are referring to are the classroom presentation hours, and that has been fixed by formula, and yes, because of the way the formula works in terms of size of class, the bigger the classes go, the smaller the hours. It is a simple tradeoff unless there is a structural change in that approach or we could find some other way to deliver the education through telecommunications, video methods or something like that.
The ratios, for example, in nursing are defined by the acts under Health -- 10 to one. We cannot break that. I cannot put 20 nursing students in a ward. First of all, the hospitals would not let us in, and second, the nurse teachers would refuse to take them because of the liabilities. The law requires a maximum of 10. We have a lot of restrictions in the apprenticeship area; that is true. In many areas we have those restrictions, but we do not have pupil-teacher ratios in quite the same sense as you have them in elementary and secondary education.
Mr Wiseman: My supplementary question deals with this as well. With the kind of increase in enrolment that you are talking about, do you have the physical plant available to meet that need?
Mr Johnston: I think that is a very good question. We need to review how we use our physical plant. In many areas it is highly stretched because of the increases we have seen in the last number of years. Approaches of doing things offsite, as have been talked about, are ways around that issue. For instance, moving to a year-long operation is another means we could look at in an organizational structure of trimesters, etc, with all the complexities that would be involved with that.
What you got a hint of from Keith was that we have over 500 programs in the college system doing all sorts of very specific applied learning. Many of them have legislative requirements or apprenticeship-dictated hours and all that kind of thing. It is not easy to have all the flexibilities you would want when you have that kind of very complicated mix.
We would need more physical plant; I think it is true. But on the other hand, when I was at Mohawk one of the difficulties with the college was that there has been a desire on the part of government over the last few years to reduce the amount of rented space we use in the community and to try to consolidate our campuses. It has been going on for a few years now. That in some ways is counterproductive when you want to reach into the community and find ways of being flexible in reaching some of these training needs. I think that needs to be broached again.
I can understand the economic reasons that were pushing it for the last number of years, but at this stage there is lots of rental space available in a lot of plants all over this province at the moment. We have been very well accustomed to using those kind of facilities in the past. That is essentially how the college system got started in the first place. I think we could meet the space needs if we had the mandate.
The Chair: Thank you. I am going to ask Ms Ward to close off the questioning. Do you still have a question?
Ms M. Ward: Yes, just one very quick question about the second chart, the applicants versus entrants. I wonder if you could tell me how much of that is really denied access or whether there is a certain element that is duplicate applications, because the entrants and the applicants are about double for 1991.
Mr Johnston: That is a very useful question because we are just changing our system and Keith can speak to that.
Mr McIntyre: The system will be completely clean in about a year and a half's time when we have a central application system established and parallel with the university application system. We are also going to have our centre in Guelph for our hoped-for connections some day in the future in databases. But we can assure you that the duplicate applications probably are no more than about 5% to 8%. The reason we can say that confidently is because those who do not get into our colleges are now having to enter the private vocational schools. There is a tremendous growth going on there. People are paying $3,500. I have in my own community the Hamilton campus of the St Catharines Business College. I have the Hamilton campus of the Toronto School of Business. They are growing and people are paying that kind of money and they are getting OSAP, so we know that the denied access is havingan effect. Some of them are going even to the United States to get the education. It is clear that the demand is real.
The Chair: Thank you very much. We appreciate your coming and making this presentation to us. I am sure the information will be helpful in our considerations and our reports.
Mr Phillips: Why is there 2% in the budget?
Mr McIntyre: Might I say that it was Richard who said we could stay with 2%.
The Chair: Now it is out.
Mr Johnston: Keith is the big spender.
MINISTRY OF TREASURY AND ECONOMICS
The Chair: The second item on our agenda today is the Ministry of Treasury and Economics. You asked that they return and I know you are anxious to discuss with this group. Will you identify yourself as I call you? Mr Alan Puttee, Mr Tony Salerno, Ms Phyllis Clark and Mr Steve Dorey. Thank you very much. You are going to make a presentation first, are you not?
Ms Clark: We came back to reply to questions, actually. A few questions had been posed the last time on the economics issues. We could deal with those first if you would prefer and then answer questions. Alan Puttee can answer questions on intergovernmental finance. Tony Salerno is prepared to answer questions on fiscal policy. Steve Dorey and I can reply to the economics questions. If you want us to start, we would start on the other questions or we could just entertain questions from the committee.
The Chair: Would you start on the questions that you have here?
Ms Clark: Sure. The first one was on Ontario exports, and the question was, are Ontario trade data available for August, as is the case for Canada, and what do they show?
We do not get merchandise trade data on a month-by-month basis, only on a quarterly basis, and we will not get the third-quarter data until December. What happened in the second quarter of 1991 is that we had Ontario's total real exports rising about 37% at annual rates. Most of that was due to the gain in auto exports. That was following a decline in the first quarter for Ontario of 15.3% on annual rates. We went up in the second quarter to 36.6% of real rates growth. Canada, on the other hand, declined in the first quarter of 1991 at 5.2% and rose 22.2% in the second quarter of 1991. So that was that question.
The next question was with regard to household debt being higher in 1990 and 1991 than it was in 1982. The question here was, "Are Ontario's household debt levels reflecting the severity of the recession?" What we gathered here was the Canadian household debt as a percentage of personal disposable income.
In 1982, consumer and mortgage debt totalled 43% as a percentage of personal disposable income, and it had risen by 1991 to 65.1%. This was primarily mortgage debt however. That was 44.5% and 44.7% in the first two quarters of 1991 as compared to 26.8% in 1982. But you have to remember there was a commensurate increase in the asset value as well. Housing prices are worth a great deal more now than they were in 1982.
We have more data on that. Perhaps I could just leave the sheet with you. I am sure my sitting here reading numbers is not --
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The Chair: How many questions are there?
Ms Clark: One last one. It was on corporate profits and business investment. The question was: What is the current situation for corporate profits and business investments?
Corporate profits have dropped sharply in the 1991 recession. They declined 63.2% over the last two years. This has had a significant impact on business investment, but business investment normally lags behind overall growth in the economy so there is the potential for recovery in that area. However, business spending on plant and equipment in Ontario -- we just have the numbers for Canada -- in the second quarter was down 1.6% and in the third quarter was down 4.2%. We are just working on the Ontario numbers now, given that revision. We can come back and address that if you want when we do get the numbers revised.
Those are the questions you had posed formerly, and we can entertain other questions.
Mr Phillips: I think Hansard would show we asked them to talk about the fiscal stabilization plan today.
Ms Clark: Mr Puttee can answer those questions.
Mr Phillips: Maybe I will just ask questions then. The Treasurer has said it looks fairly certain he will get $585 million from the federal government. Could you outline for us the basis on which that claim is made and let us know what discussions may have taken place with the federal government around the probability of getting that? That is fairly key to our financial picture for the year.
Mr Puttee: The basis on which the claim is made is set out in the fiscal arrangements act. The province has to make a claim, and we are in the process now of preparing that. The key thing about the claim is that it must show a revenue decline due to economic circumstances. What that means is that in preparing the claim we have to adjust tax revenues for changes in tax rate and tax structure that occurred over the years in question. We are working on the preparation of a claim for 1990-91. Therefore, the job we are doing is looking carefully at 1989-90 and 1990-91 and adjusting the revenues in those two years for changes in tax rate and tax structure so we get a clean comparison, so to speak. The estimate you mention that was released by the Treasurer in the November statement was for $585 million for a claim for 1990-91.
Mr Phillips: As I look at the numbers, revenue actually went up in 1990-91 over 1989-90, not down.
Mr Puttee: There have been changes since. One of the key ones was announced when the Treasurer made the announcement.
Mr Phillips: When you subtract the $1.2 billion, which I understand is the impact of the provincial income tax in 1990-91, revenue still goes up. This is where I am having difficulty in the claim.
Mr Puttee: We cannot just look at the budget numbers. For example, budget numbers for income tax -- Tony Salerno can talk more about this -- include amounts for prior year adjustments and so on. In order to make this claim for the year in question, we have to take out all of that and get clean numbers, in the case of income tax, for 1989 and 1990.
I would add one thing. Not all the revenues that are reported in the budget are eligible for stabilization purposes. It is own-source revenues plus some transfers from the federal government, one in particular, the established programs financing cash transfers, minus some smaller miscellaneous revenues that will not be part of the claim. Other transfers to the provincial government from the federal government are not part of the claim. There are some things that have to be subtracted.
Mr Phillips: Do you have the numbers now that show there was in fact a decline that would justify a $585-million claim?
Mr Puttee: No. That is what we are working on in order to make the claim.
Mr Phillips: The Treasury people were in five days before the $2-billion shortfall. I just feel this is such a fundamental part of the fiscal plan for the year.
The Chair: Can we request those figures at some later time? The gentleman has answered that he does not have them here. Is that correct?
Mr Puttee: The point is that the ministry is presently working on preparing the claim. Once the claim is prepared, it will be submitted to the federal government.
Mr Phillips: Could someone in broad terms show me the numbers in the next couple of weeks? I just look at your budget documents and they show a year-over-year increase in 1990-91 over 1989-90. I realize it is not that simple, but I cannot figure this thing out. Could someone in Treasury sit down with me and say: "You don't understand, Mr Phillips. Here are the numbers, and here's why the claim can be made"?
Mr Puttee: We will only be confident in doing that when the claim is ready to be made. I am not sure when it will be, but we are obviously working on this, as it is an important revenue source, as a matter of top priority. That is, I think, probably the first time it would be possible to indicate the areas where the revenue declines have given rise to the claim.
Mr Sutherland: You mentioned in response to the questions that had been asked before about corporate profits that they were down. I thought I was catching up on reading my papers. I thought I saw there was some indication that in the last quarter corporate profits actually went up a wee bit. Was that an accurate report in the papers, and what is the longer-term forecast? Was that a surprise to anyone?
Mr Dorey: Corporate profits were in fact up in both the second and third quarters. They are currently at levels that are extremely low by historical standards, but these are annual numbers we were presenting to you here. The 63.2% decline really reflects the period of the recession, and we are dating the end of the recession from the end of the first quarter of 1991.
Mr Sutherland: Are they somewhat consistent with where projections were as to how corporate profits were going to respond, or are they higher or lower?
Mr Mr Dorey: Because the drops in the fourth quarter of 1990 and the first quarter of 1991 were more severe than I think anybody had expected, the annual number for 1991 will still be substantially below the forecast that was in the budget. Pre-tax corporate profits in the second quarter rose at an annualized rate of 39.4% -- this is for Canada because we do not have the Ontario data as yet -- or about 10% in absolute terms, and rose another 15% annual rate in the third quarter for Canada, which is about 4%. Profits have come back about 14%, but over the past two years they had dropped close to 60%. From that very low base, that is a relatively small recovery.
Mr Carr: I want to carry on where Mr Phillips was with regard to the preparation and the talk of the $585 million. The big concern we have, not to be too sceptical, is the reason it is taking so long is there is concern about its being $585 million. If the numbers are not ready and you have not been able to prepare them, how did you come up with the $585 million when the Treasurer basically said that is what we are looking at? Is it a guesstimate?
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Mr Puttee: That was a preliminary estimate. There have been, we understand, two other claims other provinces have made. It is likely that the claim will be based on data which will then change. We will very likely be making amended claims as further data on the personal income tax particularly comes in, since absolutely final data on that for 1990-91 is not available until 1993 I think. There are not too many changes right at the end. It is a bit of a rolling thing. The estimated claim that was indicated by the Treasurer was $585 million. We will be submitting shortly, as soon as we can. I want to emphasize that as other data which we do not have now become available, particularly on the personal and corporate side, amended claims are likely.
Mr Carr: You are saying "shortly." If we do not get the claim in before, say, the end of the fiscal year, what happens? Would that then be put off into next year, receiving the money from the federal government? How would the timing affect the federal government? In other words, if you do not get it in on time, are we going to be looking at having to, as we have often done, push some of these things into next year? Will the federal government say it would not apply? Do you know what are we looking at that way?
Mr Puttee: Once the claim is made, the federal government obviously has to assess its merit and look at it, and that will take some time. Our expectation is that the claim will be made fairly soon and the federal government will probably be able to respond fairly quickly. I cannot say more than that. That is in their hands.
Mr Carr: With the projections we are looking at, the overall shortfall the Treasurer announced was about $2.1 billion. With some of the concerns we have there, for example, the stabilization fund and some of the other ones adding up, the big fear is that we are going to be sitting here in that period of time saying we have another shortfall. I do not want to be too critical. Obviously you are giving the answers you need to give, saying the figures are not in. As somebody sitting back trying to look at it objectively, everybody is very concerned. I know you said you want to look at the numbers. What is your best guess right now? Are we going to be looking at another shortfall? When the calculation is all said and done, are we going to be looking at another shortfall?
Mr Puttee: Another shortfall from the $585 million?
Mr Carr: Are we going to be behind in our projections and have a shortfall?
Mr Puttee: The estimate we made in November was $585 million, and we are working on the claim. I am not really in a position to say anything else until that claim is made.
Ms Clark: I want to clarify. Do you mean a shortfall in the personal income tax projections we may receive?
Mr Carr: I am talking about the stabilization fund. That is the big fear. In other words, you know what we are all getting at; we think you are not going to hit it. We all hope you do because it is going to be more of a disaster if we do not. The thing is that we are not getting confident answers. I know you are saying we need the numbers and so on and we are going to have to wait and see. I can tell you if I was a betting man what I would be doing now. What happens if we do not get it? What are we looking at?
Ms Clark: I think we will just have to wait to see, as Alan has said, what the numbers are on that.
Mr Carr: But presumably what we are looking at are some more cuts to make it up, or run up the deficit, I would assume. Is that right?
Ms Clark: I think that is a question where we will just have to wait to see what happens when the numbers are in. We did make the best estimate.
Mrs Sullivan: I recall when Treasury officials were here last we talked about the nature of the delay in the actual delivery of personal income tax and corporate income tax income that sometimes leads to what is described politically as a windfall and sometimes leads to what is politically described as a shortfall.
I recall specifically asking when you were here if you had predictions or information. It seems to me that if you did not have it that afternoon, by George, you sure had it the next afternoon, because the announcement from the Treasurer came quickly after.
If you are basing your application for moneys in return from the fiscal stabilization plan for this fiscal year, you will certainly be looking down the line at what are going to be adjusted figures that we will not know until 1992, 1993 or perhaps even 1994, depending on how quickly the feds massage their numbers and see what the actuals really are.
How are you then estimating a clean PIT, since the federal estimates and transfers have been substantially different from the provincials, and how do you have confidence that the $585 million will hold in a very different economic climate today than existed in your comparator year, 1989-90? You are using 1989-90 as a comparator to show the relative decline, are you not?
Mr Puttee: Yes, that is right.
Mrs Sullivan: Given an economic environment which has already meant a budget and two mini-budgets in one fiscal year, how can you be confident that the $585 million is indeed the appropriate claim estimate?
Mr Puttee: We need to make a claim on the basis of, and we will make a claim shortly on the basis of, the best information we have at this time. As I indicated before, as time passes some new information will become available, and if history is a guide, it is likely that the claim we make shortly will be amended somewhat from the provision of new data from the federal government on the PIT side and possibly on the corporate income tax side. But we will obviously make the claim on the basis of the best information we have.
I am not sure I am being responsive to your question.
Mrs Sullivan: What discussions have you had with the feds in relation to the claim?
Mr Puttee: Not too many. They know we will be making a claim. When the claim is made, we will likely be spending a good deal of time with them as they sift through it. We will have more contact with them after the claim is made than we have had heretofore.
The Chair: Thank you very much. We are going to move to Mr Carr. We have no one on this side who has requested to be put on the questioning, so I am just taking them as they come. We will go to Mr Carr and then we will go back to Mr Phillips.
Mr Carr: Just regarding the overall budget figures next year, the concern we have and the fear is -- you all know what we are getting at -- that next year revenue figures are going to be way off and we are going to be looking at a very bad situation. I should not say very bad, but a different situation next year. I know you are waiting for the figures, so you are not going to be able to know some of the information, but do you see the total revenue that was projected for next year changing or do you still feel confident that the numbers are going to be there? I am thinking now in terms of just on the revenue side.
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Mr Salerno: The revenue forecast depends of course on a lot of things. One is the economic forecast, and the economic forecast is still pretty much on course. The economic forecast for next year, I believe, is still on course. It has not changed significantly from what was in the medium-term plan in the budget. There have been obvious adjustments to the base. The base is lower than the base on which we had projected the growth last year, so the aggregate number might accordingly be different but, in terms of a base, the base growth in the revenues, it will not be significantly different from what was projected in the budget.
Mr Carr: What about on the expenditure side? As you know, the problem you folks have in predicting is two of the biggest expenditures are open-ended: social assistance and health costs. Are there any changes anticipated in terms of expenditure? I am thinking in particular of those two areas, but overall, are the numbers -- your best guess right now -- going to be the same on the expenditure side as well?
Mr Salerno: I cannot say in terms of the aggregate numbers, because we are right now in the process of looking at the estimates for the various ministries. As the Treasurer has often indicated, the budget process this year is very different from the past. There are a number of reviews of programs being undertaken -- a number of them centre around those program areas you talked about -- to effect savings in those areas. No decisions have been made in any of those program reviews as yet, so it is premature to say exactly where it will end up. Obviously, the government will decide in terms of where ultimately the revenues will end up and where the expenditures --
Mr Carr: But from an economic side, you can end up with the same number by changing things. Let me put it this way. Do you see a lot of adjustments coming up on both the revenue and expenditure sides? I will put it that way because you can still end up at the end with a budget deficit that was projected by making a lot of adjustments on the revenue side and so on. Do you see a lot of adjustments coming up this year?
Mr Salerno: Given that the --
Ms Clark: Let me answer that.
Mr Salerno: Okay.
Ms Clark: Let me just respond to that.
Mr Carr: She takes the tough ones.
Ms Clark: I know, it is like a tag team. I think what you are asking is whether the economic base that we would project revenues and expenditures on is much different than we thought it was six months ago. In a word, no, it is not. We are still forecasting moderate growth with low inflation, and we do not expect to come out of this recession with the same strength we came out with in 1981-82, but we have not changed our minds that much about what is happening with regard to economic growth. As to how economic growth translates into revenue, if the same elasticities apply, that should be the same normal translation we have had before, based on moderate growth and low inflation.
Mr Phillips: Just to confirm the fiscal stabilization fund thing now, just so I am clear, my understanding is that you need approval from the federal government by very early in April to have it in this fiscal year. If you do not have it, then it has to go into the next fiscal year. Is that correct?
Mr Puttee: They have authority for making interim payments, as well as making a whole payment, but obviously the later the claim is being submitted, the less chance that any money would flow in this fiscal year. That is why it is a matter of priority for us to get that claim in quickly.
Mr Phillips: I know you are working as fast as you can on it. Is that a public document once you submit it to Ottawa? Will that be available to the committee to have an idea of --
Mr Puttee: I must say I do not know the answer to that question. I would be reluctant to answer it without checking with our legal advisers. I am just not sure.
Mr Phillips: Could you let us know? I am quite interested.
The Chair: We have had a question and then we had the response.
Mr Phillips: I have quite a few questions, Madam Chair. I do not know whether you want to keep going around.
The Chair: I did want to give some of the others an opportunity to ask. We can get back. We do have another item on the agenda, so I was thinking we would move to Mr Wiseman, then to Mrs Sullivan, and then, if there is time, we could move to you, but you might want to submit your questions. You could think about that in the interim.
Mr Wiseman: I think one of my questions was already answered, but I would just like to make sure I understand it. In the budget projections you have projected how much the economy is going to shrink. How close to being right on were your projections on the shrinkage of the economy? Were you low or high?
Mr Dorey: The recovery began a quarter earlier than we had expected. If you look at the annual numbers, the decline for 1991 looks like it will be somewhat less than the 3.3% that was projected at budget time. The decline in the latter part of 1990 appears to be somewhat larger, so the overall peak-to-trough decline, the total decline in output in the economy was, by our current estimates, 5.4%. I think at budget time we were dealing with an estimate of just over 5%. So it is very similar in terms of peak to trough. The annual numbers will change a little.
Mr Wiseman: If you are that close, then maybe you could account for the decrease in the $670 million. The amount of money we got from the federal government was down but our revenues are also down. How do you explain, if you are that close, that you are that far off in terms of dollars coming in and going out?
Ms Clark: I think it is a question of the relationship, as I said, between what is happening with growth in the economy and how that translates into revenues. For example, you have the first flow-throughs into personal income, and we were also fairly close in our personal income estimates for what we thought would happen during the recession. The next linkage from that is how personal income translates into revenues. The question of the composition of personal income comes in.
There are some aspects of personal income that are not taxable, the employer health tax, for one thing. So there is the proportion of that in personal income. That was introduced, so it was a different factor. Then we also have the factor of maybe there is a change in the composition of income internally. We did not have as many people in high-income-tax brackets, so we did not get the receipts available there. That is the basic translation from income into revenues and that is where we think the difference came in terms of forecast receipts.
Mr Wiseman: Can you tell me what areas of the economy are growing and what areas are shrinking more than you anticipated?
Mr Dorey: Actually I can. At the time of the budget we did not have a full accounting for the impact of GST and other factors in the first quarter on consumption. Consumption for the year looks like it will be somewhat weaker than we had anticipated at budget time. The residential sector is a little stronger. Housing starts have picked up a little more than we had expected. The decline in exports is not quite as severe as we had expected. Auto exports have done fairly well through the summer.
What else has happened? In terms of government spending, given the data we have thus far on the part of government spending that goes into the accounts -- that is, government spending on goods and services at all levels -- that is not quite as high as we had anticipated at budget time, despite the fact that transfers have obviously increased.
That is sort of the compositional effect. Housing has been a little stronger, exports have been a little stronger and the consumer side has been a little weaker than we had expected at budget time.
Mr Wiseman: What about the natural resources area? What is happening there?
Ms Clark: Resource-based industries have generally performed more poorly than things like knowledge-based industries. For example, it been a fairly rough time in the pulp and paper industry, and some mining industries as well.
The Chair: Mrs Sullivan.
Mrs Sullivan: I will let Mr Phillips continue with his line of questioning.
Mr Phillips: Just as an aside, it is surprising, I think, to the committee members that the economy actually is doing better on all fronts, all your major indicators, than you thought at the budget time, at least in 1991: the CPI, unemployment, jobs, gross domestic product. That was not a question.
1720
Mr Dorey: If I can just respond, there are really two issues there. First, the PIT shortfall largely relates to 1990. In fact, there have been some downward revisions for some of the numbers for 1990. We are at the mercy of Statistics Canada on the economic side, and the current estimate produced in October for personal income growth in Ontario in 1990 was 7.5%, exactly the number that was in the budget. That does not seem to be borne out by the income tax numbers, and we are waiting for Statscan to get the tax data and incorporate those into the economic data. There seems to be an inconsistency there that we cannot account for.
The second issue is inflation. Yes, we are doing a little better on the inflation front than we had expected, but that has negative impacts in terms of revenues.
Mr Phillips: You cannot have it all ways.
My question is to try to get an update on what the outlook is right now for 1992-93, which is kind of what we are wrestling with here. The Treasurer has said he anticipates a $1-billion to $2-billion shortfall in revenue from personal income tax, and I believe has moved $600 million of expenditures from this year to next year, a $300 million repayment to the federal government on income tax. If nothing changes, what is the current estimate of your revenue and expenditures and deficit for 1992-93?
Ms Clark: I will just answer the deficit number. Our current expected deficit is $8.9 billion, as reported in the budget. Tony, do you have anything in particular to say about revenues and expenditures?
Mr Salerno: In terms of the expenditures, they will fit the deficit that Ms Clark --
Mr Phillips: There we are.
Mr Salerno: She answered the easy one.
Mr Phillips: That is right. You got the expenditures, $8.9 billion. Give me the revenue. Who has revenue? That will give you expenditures.
The Chair: I must commend this group. You are wonderful. Please continue, Mr Salerno.
Mr Salerno: Seriously, though, you are right. In terms of the revenues, indeed the shortfall, the base this year will have an impact into next year, and the $300 million that has been shifted into next year, repaid back, will reduce the PIT next year.
In terms of the expenditure, that, as I answered before, is just a matter of where we will be in the processes that are going on right now. So that is to be decided. But with the exception of the personal income tax, which has driven the effect into next year, what we are experiencing this year -- not the whole $2.1 billion, but the part that relates to this year -- will affect the base on which the growth for next year is calculated.
One would expect, given that the economic forecast is pretty well on track for next year, that given the normal responsiveness that we assume and given that we are starting from a slightly lower base, the base revenue for next year would normally tend to be lower.
Mr Phillips: I am just trying to get an idea of how much increased taxes we are looking at to get to the revenue numbers you are projecting. I gather it was $1.5 billion before, so if we are short $1 billion to $2 billion, I guess we just add that on.
Mr Salerno: I do not think it is $1 billion to $2 billion. I do not think it is in that range.
Mr Phillips: That is what the Treasurer said in his statement.
Mr Salerno: On the personal income tax, the split was about $740 million this year. That is the PIT reduction. This is partially offset, roughly 25%, in increased EPF. Therefore, the net PIT is, let's say, closer to $500 million or $600 million, the reduction in the base on which we start off. Then of course there is the $300 million that has been deferred to next year.
Mr Phillips: Why would the statement say $1 billion to $2 billion then?
Mr Salerno: I do not recall the $1 billion to $2 billion.
Ms Clark: I thought that the Treasurer said a $2.1-billion reduction which will be offset with federal adjustments. He did not talk about it vis-à-vis the base for next year with regard to the $2 billion. He says the loss is based on information received from the federal Department of Finance, which indicates a total personal income tax decline of about $2.1 billion, and then goes on to talk about the offset of $1.4 billion of federal adjustments related to established programs financing and stabilization, but he does not relate that to the base next year.
Mr B. Ward: You must have read it wrong.
Mr Phillips: I do not think I did. I will find the material. My memory is not all bad.
The Chair: Thank you, Mr Phillips. Mr Carr, I will allow you to pose a question.
Mr Carr: I will be very short, because I had promised the Chair I would be.
Looking at the economy, the only way we can recoup some of this is, as the Treasurer said, with tax increases. Looking at the economy as it is now, do you think the economy can stand any more tax increases anywhere in Ontario?
Ms Clark: I just want to say that we did not say there would be tax increases. We just said --
Mr Carr: The Treasurer did. There could be tax increases. Do you think as an economy we can stand a tax increase in Ontario right now?
Mr Wiseman: That is a pretty broad question.
Mr Carr: Okay, if you want me to be more specific, on the corporate side. Of course, what happens is if you increase the taxes, there is a potential to lower it ultimately, because people will leave because of the corporate tax structure. Looking at the economy today, is there any more room anywhere to increase corporate taxes in Ontario?
Mr B. Ward: That is kind of a political question, is it not?
Mr Carr: No, it is not. I am concerned.
Ms Clark: If you are asking about what I think the impact would be of a corporate income tax on the economy at this point, it is very difficult to answer that without knowing what is the corporate income tax or the corporate tax that you are talking about. I can see your eyes rolling to the back of your head.
Mr Carr: I am just asking in general if you think there is any room, because --
Mr Wiseman: If they are not making any money, you cannot have tax, right?
The Chair: Mr Wiseman, would you please allow the Treasury staff to answer.
Ms Clark: I think that whatever happens, the Treasurer will look at all aspects of any change in either taxes or expenditures to verify the impact on the economy. To the best of his ability and our ability, we will check out what the impacts would be in that kind of thing. I think everybody recognizes that both business and consumer confidence are fragile and sensitive things, and that will be an aspect he will think about when he is thinking about the policy levers he has.
The Chair: I want to express our appreciation for your being here and answering these questions. I hope the additional session will help to bring us to some better recommendations.
Ms Clark: We will get back to you on the one question of the legality of the release of the document.
The Chair: Would you, please.
1730
ORGANIZATION
The Chair: Very quickly, there is some business we have to attend to. A summary of the recommendations from the MUSH sector on the pre-budget consultations has been prepared for you. It will be distributed to you now to make it easier for you to look through those recommendations.
I have some questions about the report that we should very quickly look at while the staff is here. Does the committee wish to table an interim report on these hearings? Do we have any discussion of that, any feelings about it?
Mr Phillips: I would not mind hearing from the Treasurer before we do that.
Mr B. Ward: He is coming next Thursday. I think that would be appropriate as well. I would prefer to wait for the Treasurer on this one as well.
The Chair: He is coming on the 19th. That then speaks to when we are going to table the report. If you wanted to table an interim report by the 19th, it would make that impossible, and that was something you had talked about a couple of weeks ago. If you have changed your mind about that, remember that time was the issue that you felt very strongly about, making sure your recommendations had an opportunity to be considered before any moves were made.
Mr Wiseman: What kind of time do we have available next week on the 12th? Are we hearing presentations, or can we discuss recommendations for an interim report?
The Chair: There is nothing scheduled for the 12th, no presentations, and we thought the interim report and the recommendations could be discussed during that meeting time.
Mr Wiseman: I think this whole exercise would become somewhat meaningless if we did not issue an interim report.
The Chair: By what date? By the 19th?
Mr Phillips: I would love to hear the Treasurer, so it is just where he is at on --
The Chair: Then that changes the date.
Mr Phillips: When is he announcing the transfer payments?
The Chair: He has not given us a specific date. It is before the end of the year.
Mrs Sullivan: December 20.
The Chair: I have been given information here that we can actually table our report after the 19th; it is just that the House will not be in session. Which do you want to do? The 19th becomes the crucial date, but that is the date when the Treasurer is coming. Remember we discussed that?
Mrs Sullivan: It seems to me, Madam Chair, that in tabling our report to the House, it is appropriate that at the same time it be delivered to the Treasurer. But the Treasurer has indicated to us, and the Premier indicated again today, that this is by far the more open and exciting budget process in the history of time.
We have not seen the grey book yet. Last year there was no grey book because they decided it was too expensive to print. We cannot make an interim report with recommendations in it until we have the grey book, so if the Treasurer is going to bring the grey book, if that is the open and exciting new budget process, I will be very interested in it. Frankly, until we have it, we cannot make recommendations, even on an interim basis.
The Chair: Let me say then that the Treasurer is scheduled to come on the 19th, and I have been charged with the responsibility of asking that we extend the time he has allotted to us. That process you have described, Ms Sullivan, is the very topic of his initial presentation, and so it will be the 19th. Realizing that we cannot table a report by the 19th, if it is the wish of the committee to wait until then, let's discuss that.
Mr B. Ward: Recognizing that there are concerns from Barbara and Gerry, next week we do not have anything scheduled. I think we could read this summary of recommendations, prepare an interim report on what we think is appropriate at this time, and then a final report may be modified, depending on what we hear from the Treasurer. I think we should move along with the process so that we do not delay the overall report unduly.
I would suggest that we discuss an interim report with perhaps consensus of recommendations next week. After we hear the Treasurer, if we wish to change those or modify them in any way, that is always possible, because it is just an interim report. It is not the final report.
The Chair: Does this committee wish to have a draft without recommendations for discussion for next Thursday, since we do have that time around which we could at least be discussing those issues on which we agree? Would that be appropriate?
Mr Phillips: Madam Chair, the most effective thing to do is to hear the Treasurer and to give him the benefit of our thinking before announcing the transfer payments. I think that is the best thing to do.
I for one do not have a problem with talking about the interim report next week, listening to the Treasurer on the morning of December 19, and if we can finalize it in the afternoon, great.
Mr Wiseman: I would just like to make a comment in response to Mrs Sullivan. I think there are a number of recommendations that can be made by this committee from what we have heard from the various stakeholders who have made presentations here about transfer payments, how they are allocated and the various configurations of regulations they have to meet in order to do their business. The group we heard prior to the Treasury had some interesting comments about what the roadblocks are in terms of delivering the service in the times we are living in. I think there are a number of recommendations we can discuss that have been brought forward by various stakeholder groups. We could make an interim report to the Treasurer in a number of areas, about regulations, administration, delivery of service. I think an interim report is a very useful document at this time.
Mr Carr: I am going to concur as well. Obviously we all want to hear the Treasurer. His schedule is such that he cannot come until then. I think we should be doing some things in the meantime, and next week would be acceptable to do that. As was rightly pointed out, hopefully we are going to be able to give more information to the Treasurer rather than receive information. If something startling comes from the Treasurer on December 19 which we have not already heard, and I do not think it will, then we can make the appropriate changes, but I think we should be working in the meantime.
The Chair: In order to use that time more fruitfully and effectively, shall we ask that a draft without recommendations be prepared for next week's discussions? Would that be agreeable to all? Can I take that as positive? Then we will move in that direction. Thank you.
The committee adjourned at 1737.