ONTARIO ASSOCIATION OF CHILDREN'S AID SOCIETIES
ONTARIO PHARMACISTS' ASSOCIATION
ONTARIO RESTAURANT ASSOCIATION
UNITED VOICES FOR FAIR TREATMENT IN CHILD CARE
COALITION OF ONTARIO HOMESHARING PROGRAMS
CONTENTS
Tuesday 23 February 1993
Pre-budget consultations
Ontario Association of Children's Aid Societies
Mary A. McConville, executive director
Ontario Pharmacists' Association
Garry Cruickshank, president
Gary Sands, manager, government and public affairs
John Connor, president-elect
Ontario Restaurant Association
Paul Oliver, vice-president
R.E. Boone, member
United Voices for Fair Treatment in Child Care
Tracy Buckingham, chair
Jackie Cousins, past chair and president, York region chapter
Coalition of Ontario Homesharing Programs
Moira Bacon, executive director, Sharing
Norman Monkley
Christine Chung, executive director, Scarborough Housing Help Centre
Edna Beange, board chair, Sharing
Susan Bacque, coordinator, information and advisory services, housing department, City of Toronto
Ontario Arts Council
Gwenlyn Setterfield, acting executive director
Jennifer Beadle, executive office supervisor
Eleanor Goldhar, director, communications and research
Daryl Novak, director, administration and council secretary
Jean-Paul Gagnon, touring officer
Local Employment and Trading System
Sat Khalsa, administrator
Robert T. Atkins
STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS
*Chair / Président: Hansen, Ron (Lincoln ND)
*Acting Chair / Président suppléant: Dadamo, George (Windsor-Sandwich ND)
Vice-Chair / Vice-Président: Sutherland, Kimble (Oxford ND)
Caplan, Elinor (Oriole L)
*Carr, Gary (Oakville South/-Sud PC)
Christopherson, David (Hamilton Centre ND)
Jamison, Norm (Norfolk ND)
*Kwinter, Monte (Wilson Heights L)
*Phillips, Gerry (Scarborough-Agincourt L)
Sterling, Norman W. (Carleton PC)
Ward, Brad (Brantford ND)
*Wiseman, Jim (Durham West/-Ouest ND) *In attendance / présents
Substitutions present / Membres remplaçants présents:
Arnott, Ted (Wellington PC) for Mr Sterling
Conway, Sean G. (Renfrew North/-Nord L) for Mrs Caplan
Cooper, Mike (Kitchener-Wilmot ND) for Ms Ward
Dadamo, George (Windsor-Sandwich ND) for Mr Christopherson
Harrington, Margaret H. (Niagara Falls ND) for Mr Jamison
Johnson, Paul R. (Prince Edward-Lennox-South Hastings/Prince Edward-Lennox-Hastings-Sud ND) for Mr Sutherland
MacKinnon, Ellen (Lambton ND) for Mr Ward
Clerk / Greffière: Grannum, Tonia
Staff / Personnel: Campbell, Elaine, research officer, Legislative Research Service
The committee met at 1005 in room 228.
PRE-BUDGET CONSULTATIONS
The Chair (Mr Ron Hansen): Good morning. We're going to resume our hearings on pre-budget consultation in the standing committee on finance and economic affairs. It's Tuesday, February 23.
ONTARIO ASSOCIATION OF CHILDREN'S AID SOCIETIES
The Chair: The first group to come forward is the Ontario Association of Children's Aid Societies. Would you come forward, please? We have until 10:30 for your presentation, if you can at the end of your presentation leave some time for questions of the committee to ask.
Ms Mary A. McConville: I'll do that. As you can see, I'm not a group. My name's Mary McConville. I'm the executive director of the Ontario Association of Children's Aid Societies. I had intended to be accompanied this morning by Mr Ron Edwards, who is the past president of the provincial board, and also Mr Mel Gill, who is the executive director of the Ottawa-Carleton society, but the weather has kept both of them away.
You will find in your packages -- they're being distributed -- a copy of my remarks, a copy of a press release which went out upon the occasion of a conference of all of the local directors of child welfare in December, and also some fact sheets which, in fact, were sent to all MPPs in the province in the fall. Some of you may be familiar with the contents. I also have with me, and it's also in your packages, the remarks of Mr Mel Gill which I will not read to you this morning but I would like to make a couple of comments about before I finish.
The Ontario Association of Children's Aid Societies appreciates the opportunity to appear before the standing committee once again. Children's aids continue to experience tremendous service and financial pressures due to the increasing casualties of the recession and the economic restraint policies of government.
There has been considerable discussion in the provincial Legislature this fall about the difficulties of children's aid societies and I think by now most members are aware of the problems in a general way and perhaps aware that the funding formula for our services is completely ineffective and irrational, which is one of the historical roots of the problem.
You should also be aware at this present time that despite what was stated in the House there are no negotiations occurring between this association and the Ministry of Community and Social Services for the stated purpose of arriving at a new funding formula for children's aid societies.
When we appeared before you last February, we were reeling from Mr Laughren's announcement of a 1% economic adjustment to the major transfer payment sectors and weeks later were shocked to find that the specialized children's services which serve children at risk would receive only a 0.5% increase. We have yet to receive an adequate explanation for this disparity and question as to why vulnerable children in this province bear an even greater burden as the government struggles with some very tough decisions.
Much effort is being put into the development of a policy framework for specialized children's services in the province at the moment, and service providers such as ourselves and consumers welcome these developments, but the progress is agonizingly slow. The thrust of the policy exercise with respect to specialized services for children, like child welfare, is to better integrate and coordinate service delivery. Although this is necessary, it will not address the real problem that we face today and indeed have faced for some time. Casualties increase during tremendous economic stress and this is not the time to reduce resources to children at risk. The cost to society will only be greater down the road. Ontario's families continue to experience increasing financial uncertainty, family breakdown and family violence. Children suffer the most in these circumstances.
The government's long-term agenda for children, as expressed through the Premier's health council and the interministerial secretariat for children and youth, holds real promise for the future through prevention strategies which will reduce dependency on safety-net services. But the fruits of such labour will be very long coming indeed.
The children of the province meanwhile must have first call on the resources of government. We have a collective duty to protect and support especially those in most need. This has not been a good year for the vulnerable children of the province, and I would like to describe to you briefly what has happened to the services to protect children at risk since we spoke with you last: firstly, the 0.5% increase to base budgets, which has fueled children's aid societies' staff reductions which now stand at 175 lost positions; a 0.5% increase to base budgets has also required children's aids to reduce preventive, treatment and protective services by $13.4 million.
1010
The following represent just a few of the rather drastic measures that have had to be taken in order to manage within ministry allocations: The Peterborough society shifted to emergency services only for two weeks in the summer of 1992; the Kingston Children's Aid Society has had to reduce work hours and pay in order to control the budget; the Waterloo society is no longer providing services to teens at intake; the Halton CAS has had to close a play therapy program for high-risk and abused children; and, the London Children's Aid Society has dropped one entire protection team.
We are finding it increasingly difficult to support crown wards through their post-secondary education because of budget constraints, and many of our foster parents, the very backbone of our parental responsibility, have been given no increases to cover the real costs of caring for your children. Despite a significant adjustment to their rates in 1989, we continue to lose ground with respect to bridging the gap between our foster care providers and those who provide private home day care or who service the government's YOA system.
In the past year, since we spoke to you last, there has been no progress in the negotiation of a new funding methodology for the child welfare sector, there has been no progress on disentanglement or moving to 100% provincial funding, and there has been no adequate financial response to the recommendations of legislated child welfare reviews which exist for the purpose of examining the adequacy of the base budgets of societies.
The government has in addition, through a cabinet decision, reduced the amount of funding available for exceptional circumstance reviews -- that's our safety valve -- and capped this financial assistance at $12 million for 1993-94. There are plans to reduce it further to $5 million in 1994-95. The 1992-93 ECR settlements, which are estimated at $17 million, are fiscal dollars only and much of those costs we know will be there next year.
It is essential that the government reflect a high priority for services to children at risk through adequate funding and a rational funding formula that is based on a clear articulation of the legislated mandate, including the regulations and the standards established by the ministry and our service delivery partners. This new funding formula must also consider the definition of core services, workload standards and the real cost of providing services to our clientele. In the absence of such a formula, I don't believe it's an exaggeration to suggest that arbitrary and misinformed decisions will continue to be made about an essential service to the children of this province.
We have been promised for three consecutive years a serious cooperative effort towards solving the funding problem. We are stalled as the ministry engages in crisis management and focuses on integration and restructuring of services. These policy efforts are vital and we actively support them, but they need not forestall progress on resolving the particular problems of this sector.
In summary, we do believe that the vulnerable children of the province require a service system that will prevent abuse and reduce risk; intensify services to children in their homes, not reduce them; and, support well-trained, adequately compensated foster parents in their home communities.
To achieve this, we support the development of the interministerial strategies that are aimed at creating comprehensive services. We should have a special fund and a policy that promotes and supports broad-based prevention efforts in local communities. We also require a legislative committee review of the services to children at risk.
With respect to the particular responsibilities of children's aids, the government must negotiate a new flexible funding formula to support the system, take 100% funding responsibility for the provision of services, and increase funding to CASs by $22 million for 1993. Without these additional funds, further cuts to service will be necessary and we will continue to erode our capacity to protect children.
I'd like to turn, just for a few minute or two and then I'll leave you time for questions, to Mr Gill's remarks on this attachment that says the children aid society of Ottawa-Carleton and the impact of cost constraints. Mr Gill begins his remarks by talking about a death in early January of a six-month-old baby, a baby who was shaken and experienced brain damage. The baby is not dead, excuse me; the baby lies comatose and on life support systems and may well not last. The child also had broken ribs, several fractures and brain haemorrhaging. Mr Gill goes on to say that the society had received a couple of months prior to this incident a complaint about the child having been left alone by its mother. Although there was an investigation, Mr Gill notes that it wasn't the most thorough and in fact they were unable to establish the level of risk. He suggests that in the past this type of complaint would have gotten more attention and more resources from the society.
I feel this is a very risky statement for Mr Gill to make. I think it takes a lot of courage to make it. My comment here is that he is not suggesting that there is a direct causal relationship between the severe trauma to this child and the society's process around investigating. But what he is saying, and it must be said and I know people have difficulty listening to it, is that you cannot squeeze a system of mandatory services like child welfare in the way that it's being squeezed and not expect that this squeeze is going to affect all aspects of the service, including the most essential ones like the investigation that occurs around complaints at the front end of the service.
To use an analogy, perhaps what is happening here is, as societies continue to feel enormous stress in relation to the demands at the door and the resources they've got to work with, that a form of triage is occurring, if you want to use that word, the kind of word that's used in hospital emergency rooms. People are trying to assess risk and clearly have to attend to the greatest risk first because those are the resources you have.
He's suggesting that either cases will not be opened at all or perhaps could be put on a waiting list, that on the face of them do not look to be that serious. Those kinds of human judgements which have to be made when your resources are severely strained are made every day by society personnel in this province. It's a very difficult job. The economic restraint problem affects all aspects of the service, including the front end, once again.
The other problem that he points to, which I think deserves some comment by me, has to do with the third paragraph where he talks about a key method the society has used to try and manage its budget and live within the ministry's allocation once again. This society has eliminated some 65 staff positions, or 10% of its personnel, largely through the elimination of group homes or residences for children. These children have either been moved to what we call the outside paid sector or private operators who in fact often charge far more money for their services, and these services are often out of local communities, or they have been moved into foster care.
He points out here that these moves were not planned moves; they were made for budgetary purposes. Moves of children should not be made for that purpose. They are destabilizing and they are traumatizing and yet this kind of impact, even on the children who are presently in the care of societies, is happening daily across the province and will continue to happen as we work with a totally irrational funding formula that rewards societies for placing children in private operator group homes outside their local communities and penalizes societies for running their own services, including foster care in the local community for those children.
Very simply put, the funding formula discriminates, in our view, against the support for foster care which is a family-like setting for children and rewards the high cost of outside placements.
1020
I'd like to move just to another couple of remarks that he makes. He talks on page 2 about some of the standards that are in place, regulatory standards around investigations and placements of children, for example, and he is pointing out that his society, and I know that it is not the only one, is going to have significant difficulty meeting the standards both with respect to the investigation of abuse and also with respect to the development of plans of care for children.
With regard to the latter, there is a persistently disturbing level of non-compliance around the development of plans of care. The plain fact of the matter is, there isn't enough staff time to go around, to do a good job of developing a plan of care and placing a child properly and supporting a foster home placement or a group home placement such that it doesn't break down.
The last thing I would say with respect to pressures is that children's aid societies have an enormous difficulty absorbing many of the uncontrollable costs they in fact have to absorb without some relief, and when 80% of your budget or more goes to the cost of children in care and salaries for staff, you can see how little room there is to work with if one has a problem with the budget.
I want to give you an example of the kind of uncontrollable costs that are not addressed, again, in the present funding formula. One of them is increases to the workers' compensation system; another one is the increases of UI and CPP. Another interesting one, which I would like to share with you because I think it says something about the system, has to do with long-term disability costs. Our long-term disability costs in child welfare this year have gone up 100% and they've gone up 100% because of a large increase in the number of claims that were for mental and nervous disorders.
Our brokers, whom we work with very hard to try and control some of these costs, consider child welfare a high-risk sector for this kind of coverage, and there's no question that our experience with regard to the coverage for illness and long-term disability is another symptom of the strain which the system is under and especially how it impacts on our staff as well as our children and families.
Thank you for listening. I'll end my comments there and I'll be glad to take some questions.
The Chair: Mr Phillips.
Mr Gerry Phillips (Scarborough-Agincourt): Thank you for your presentation. Just so I get an idea of what we're talking about here financially, how much money is provided by the province totally to children's aid societies?
Ms McConville: There's not a simple answer to the question. There are two parts to it. There is something called an approved base which stood in 1992 at $377.4 million. That's approved spending, if you will. The actual spending for 1992 was in the range of $397 million, somewhere between $396 million and $397 million. So you can see the gap between the approved spending and the actual costs of providing a service. That $396 million, by the way, would have been $13.6 million higher had children's aid societies not cut $13.6 million worth of programming out of their budgets.
Mr Phillips: How is that difference between the approved base and the actual expenditures funded?
Ms McConville: Four million dollars of it is an unfunded deficit that's sitting out there. It's borrowed money, there is no relief for it. The ECR spending for 1992 alone -- and I'm talking about our fiscal year, which is January to December, not the ministry's -- stands at about $13.6 million to $14 million. So exceptional circumstance reviews take care of a piece of it. Then there was one-time-only revenue received of about $2 million from the ministry in 1992 as well. The exceptional circumstance review money was largely fiscal only for 1992, so we fully anticipate that those costs incurred will be there again and there will be more.
Mr Phillips: Your increased funding was 0.5%; have I got that right?
Ms McConville: Yes. That was the economic adjustment.
Mr Phillips: And that was for calendar 1992, was it?
Ms McConville: Yes.
Mr Phillips: What instructions have you gotten so far on calendar 1993?
Ms McConville: None. We do not know what we're getting. We were promised by the minister that we would hopefully hear in January that she would be meeting with us; this was Marion Boyd.
Mr Phillips: Right.
Ms McConville: And prior to decisions being made, obviously with changes and so on. There was no meeting, but in addition, we have no idea what we're getting, which is a whole other aspect of the problem, of course, with respect to planning.
The Chair: I've got to go on to Mr Arnott.
Mr Ted Arnott (Wellington): Thank you very much for your most compelling presentation. The government's in an extremely difficult situation financially. I think the Treasurer said yesterday that 17 ministries have seen a real cut in funding. Community and Social Services is one of the ministries, I assume, that has seen an increase, primarily based on the need for increased income support, individuals and families.
What you've said in your submission, I think, on page 3, the key sentence is, "The children of this province must have first call on the resources of government," I agree with you. It's most difficult to try to impress that upon the entire government, I guess, and the government has the responsibility to determine priorities.
One other thing I wanted to mention to you and ask you about: Our riding office in Wellington county has seen an increase of about 300% in the number of telephone calls it gets and I see that as being an indication of a number of things, certainly the economic situation. You've told us that the demands on children's aid societies have increased as a result of the economic situation in the province. What should we be doing more?
Ms McConville: Firstly, as I said in my presentation, nobody's questioning that the government has a money problem, but within that money problem the government has to set priorities and make, as I acknowledged, very tough decisions. The protection of children has to be your number one priority, and children's services, and we are not seriously working on identifying the need and the legitimate cost of those services. In the absence of that rational approach to the funding requirements, we just play a bit of a smoke and mirrors game.
I think the government has tried, largely through an after-the-fact response, to get some money out there, but there's no question that it's insufficient and that we have to get on with the business of a funding formula.
I also believe that disentanglement is critical to our being able to manage our budget appropriately. It's extremely difficult trying to rectify some of the after-the-fact planning that goes on which makes no sense when in fact we're operating on the calendar year of the municipalities as opposed to the MCSS calendar year. Obviously municipalities are having increasing difficulty addressing a service like this where they have virtually no control from a policy point of view and they have no control over the budget either. They're just asked to hand over their 20%.
The Chair: I've got to carry on. One question is, 1 in 10 families in Ottawa are coming for service, what does the society do to cut down that 1 in 10 and maybe correct the problem rather than putting Band-Aids on? I've got to go on to Ms Harrington over here. It's just a thought.
Ms McConville: Just a thought: They will be doing less if the preventive services are cut, and those are the things that are going in the system.
Ms Margaret H. Harrington (Niagara Falls): I want to agree with you that the disentanglement is a very important issue at this time. I know in Niagara, the regional government always has difficulty with the family and children's services' budget.
1030
I wanted to get to the very heart of it. You're saying that the funding is an irrational system and you talked about discrimination against the foster care. I know we don't have time, but could you elaborate a wee bit on that?
Ms McConville: I'll give you an example of what happens. If a child is placed in what I call an outside paid resource, it's not a group home that's run by your local children's aid society, it's run by a private operator or non-profit operator out there -- these are usually children in treatment programs, children with exceptional needs -- the cost of that placement, regardless of what it is -- and believe me, we have some very costly placements -- is covered by the government, and if the costs exceed our budget, we can go to exceptional circumstance review to have that cost met.
If we place that same child in a foster home and that child requires some additional resourcing in order to keep that child in a foster home -- for example, you want to give the foster parents specialized training and pay them another $20 a day; it's still cheaper than the other alternative -- we can't do it, the costs are not met. If they are over and above your budget, then the costs are not met. So you literally are rewarded, you have a blank cheque for the costs of children in outside paid resources, and we keep the lid on the foster care system in terms of adequately resourcing it.
Ms Harrington: I would hope that will be addressed.
The Chair: I'm sorry, but time has run out. Mary, I'm sorry to cut you off there. I'd like to thank you for appearing before this committee today. Have a safe trip back home.
Ms McConville: Thank you.
ONTARIO PHARMACISTS' ASSOCIATION
The Chair: The next group we're hearing from is the Ontario Pharmacists' Association. Come forward, please. I'd like to welcome you again this year to the standing committee on finance and economic affairs. I think we have a couple of new faces here, though. I don't recognize everyone who appeared last year. If you wouldn't mind identifying yourselves for the purposes of Hansard, you may begin. We have until 11 o'clock.
Mr Garry Cruickshank: Mr Chairman, members of the standing committee on finance and economic affairs, my name is Garry Cruickshank, president of the Ontario Pharmacists' Association. With me here today are John Connor, president-elect of the OPA, and Gary Sands, our manager of government and public affairs.
The Ontario Pharmacists' Association is a voluntary professional association representing over 4,000 pharmacists across Ontario. In addition to providing services to our members, we strive as an association to enhance the standards of practice in our profession in the interests of pharmacy and the public. We are also mandated by legislation to negotiate the professional fee paid to pharmacists by the Ministry of Health under the Ontario drug benefit program.
On behalf of the OPA council and our members, I would like to thank the committee for once again extending an invitation to our association to appear before you today in your pre-budget deliberations.
Our association was pleased to see that your report last year noted, "The Ontario Pharmacists' Association's presentation was helpful in gaining a better understanding of the issues related to the use and delivery of pharmaceutical drugs." We appreciate that this committee is interested in looking at government programs that account for a significant share of the province's expenditures, which certainly includes the Ontario drug benefit program.
The original concept of the ODB program was to remove financial considerations for those deemed to be eligible recipients. If we continue to accept that premise, and the former Minister of Health, Frances Lankin, has publicly stated that copayments in the ODB program are not appropriate, then our priority now must be to fully utilize the health professions to maximize patient compliance and the rational use of medication.
We bring this recommendation to the attention of the committee because, notwithstanding the review process under way through the drug programs reform secretariat, there is still a great reluctance on the Ministry of Health's part to forge a genuine partnership with our profession in managing the Ontario drug benefit program.
In fact, the government has made repeated pledges to develop a new management system in health care in partnership with health care providers. That new partnership has simply failed to materialize, yet pharmacists are key to the delivery of the ODB program and have the potential for playing a more significant role in developing and managing a more cost-effective drug benefit program.
In speaking about the process of reforming the ODB program on May 1 of last year at our annual conference, Minister Lankin said:
"You have made it very clear that you want access to, and involvement in, this process. Let me acknowledge that until now we have not facilitated this properly. But let me say that I consider it very important and we will be developing the means to work together with you in the drug benefit reform. We are confident that through a cooperative, consultative process, we can reshape our drug benefit program in a manner that is fair, effective and efficient."
We agreed with the minister and we were extremely dismayed to see major changes subsequently made to the ODB program just a few weeks after the minister's speech, with absolutely no consultation with our association, nor the Ontario College of Pharmacists. In fact, there was no opportunity afforded to health care providers, members of the Legislature nor groups most affected by the changes to comment on the efficacy of delisting many of the products as eligible benefits. The Ministry of Health, in a cash-strapped government, then ended up spending approximately $800,000 explaining and communicating these changes to the same groups it had opted to not consult in the first place.
Our desire is to work with the government, other professionals and consumers in looking at ways to control costs, while at the same time striving to preserve and enhance the quality of care. Cost containment exercises in one area can simply transfer costs to another area. Improper utilization can result in other problems, for example, overmedication leading to hospitalization.
Our association would suggest that the most important contribution this committee could make is to recommend to the new Minister of Health the need for a partnership between her ministry and pharmacy that would allow better opportunities for more successful, long-term management of the drug system in Ontario.
Yet the Ministry of Health continues to implement short-term and, in our view, punitive measures such as refusing to discuss non-fee-related issues in our current negotiations; capping drug manufacturers' price increases at 2%, but letting the pharmacists absorb the cost of increases above that level; establishing an advisory council to oversee the drug programs reform secretariat, with an appointee from the OMA, but not allowing the OPA to put forward a representative; freezing the professional fee paid to pharmacists; changing the method of reimbursing pharmacists for the services they provide. All of these steps unfairly single out one group as a target -- pharmacists -- and do not address the complex, systemic issues that we need to face in order to better manage drug programs in the province.
In 1991 Dr Brian Segal acted as a mediator between the Ministry of Health and our association in our fee negotiations. Dr Segal noted in his report:
"There are a number of specific areas raised by both parties during negotiations where collaboration between the OPA and the ministry could have an impact on reducing the long-term costs of the program while ensuring a fair and equitable dispensing fee. Both parties have much to gain from a sustained period of consultation on a variety of pharmacy and ODB issues. Such consultations should occur outside of the fee negotiating process. It is therefore recommended that the ministry and the OPA establish a joint consultative committee (JCC)."
The OPA strongly supported the establishment of this committee. Once again, as I mentioned previously, in our current negotiations the ministry has refused to agree to our proposal to establish a process for ongoing discussions of some of the non-fee-related issues that have significant cost implications, such as utilization. In fact, we recently discovered, to our dismay, that the cash-strapped government we previously alluded to has also just come up with $250,000 for a feasibility study for establishing an institute of drug therapy.
Who did the ministry discuss this idea with? What are its objectives? Who will fund the institute? Who will it report to? Suffice it to say we are disappointed that as the organization representing key players in any potential drug utilization program, we had to file a freedom of information request to find out what this proposal entails. We still have not received a satisfactory explanation for this expenditure and we are continuing to pursue this issue.
This is simply a reflection of the ministry's closed-door approach, as was again further demonstrated by its recent development of pharmacy standards for long-term care, with absolutely no input from our association, nor the college of pharmacists. We are hearing rumours of more impending changes to the ODB program this fall. Possibly, we may see certain drugs being deemed eligible only for certain people, but again, there has been no consultation with our association, which represents the providers, which would end up having to explain these changes to consumers.
The Drug Quality and Therapeutics Committee, DQTC, was also slated for a sunset review prior to the expiration of its mandate at the end of next month, yet the ministry has not consulted with anyone on the future of the DQTC. In fact, we only learned by accident, after the Premier's office wrote to an applicant erroneously stating that the DQTC was being terminated, the status of the DQTC. The Ministry of Health has apparently now sought cabinet approval for a one-year extension of DQTC's mandate. We can only reiterate our hope that the ministry will consult with other stakeholders, including members of this assembly, on the future role of the DQTC.
1040
The ministry must understand that government interest and public interest are not always convergent. It is their responsibility to the public which funds the ODB program to ensure there is more involvement in ministry planning decisions by other groups and providers. This is of even more importance in the context of the ODB program as the cost impact of Bill C-91, which eliminates compulsory licensing and extends patent protection for brand-name pharmaceuticals, will be considerable for both the province and consumers. We must all plan better, manage better and share responsibility together. As Premier Rae has stated: "A monolithic system, in which one insurer has all the political cards, can't work without checks and balances. Professions free to speak out on the quality of care; a partnership in which the planning decisions about the system emerge from a genuine dialogue, and not from the cabinet room alone; above all a sense of fairness and pluralism when it comes to the management of the system: these are all essential if the health care system is to maintain the confidence of everyone working in it, as well as the public it serves."
We hope that this committee could echo the Premier's statement and recommend that a more cooperative approach, in which the Minister of Health seeks partners, not adversaries, is essential to achieving better cost management of the Ontario drug benefit program. Indeed, I would suggest that when political parties do not adhere to the basic principles they publicly espouse, we should not be surprised at the level of public cynicism that exists today about the political process.
Again, let me thank you on behalf of the Ontario Pharmacists' Association for allowing us to come before you today. We would be happy, in the time remaining, to answer any questions you may have.
The Chair: Mr Carr.
Mr Gary Carr (Oakville South): Thank you for the presentation and for being very candid, because this presentation is very condemning of the government in many respects. I want to ask you why you believe the government has acted the way it has. Is it incompetence? Do they not like you? Where are we at? You've outlined them, and again, I appreciate you doing that. Why is the government treating you the way it is, in your estimation?
Mr Gary Sands: I suppose we can only speculate. There does seem to be a systemic resistance to consultation. In fact, those words were Minister Lankin's in our first meeting with the minister when she assumed that portfolio. She said to us that was something she wanted to change and she wanted to be held up against that commitment before she left office. Unfortunately, that commitment to make those changes never did come true and we just don't know what the problem is with wanting to consult with us on a lot of these problems. We just honestly can't answer the question.
Mr Carr: I appreciate that. I guess if we knew that answer, we'd be able to tackle it. I guess the government's the only one that knows that. I wish I had a dime, or even a penny, for every time this government, in the Legislature, said it was consulting. Tony Silipo must have said that every second word was "consult." Unfortunately, it isn't a reality.
I want to get very specific with your presentation. I think it was very good. With respect to the fee structure, I think on one of the pages you mentioned you had some proposals that you would be interested in looking at. What would you like to see the government do with regard to the fee structure? That's on page 3, the last one, "Changing the method of reimbursing pharmacists for the services they provide." What would you like to see happen?
Mr Sands: Actually, in August the government changed the method of reimbursing pharmacists. Notwithstanding the fact that reimbursement was on the negotiating table, they unilaterally changed the method of reimbursing pharmacists for the services they provide on many of the OTC products. What was interesting about that is, we drew to the government's attention that moving to a retail markup method rather than the professional fee was sending a dangerous signal to many of our members in terms of the method of reimbursement.
We also pointed out in a letter to the Premier and the minister -- neither letter was answered -- that it would be interesting to see the government tell pharmacists in August that they were retailers and in January or February, as we expected, it would tell pharmacists on the tobacco issue, "You're health professionals." That was one of the problems we had, that the government, when it suits its own pocketbook, wants to treat pharmacists as retailers, and certainly that's the case in our negotiations, yet on other issues it doesn't want to treat us that way.
There are other things that we put on the table in terms of ways we think pharmacists can be better reimbursed in terms of remuneration for more cognitive services and consultation and those kinds of things, but that is a reference to the change to the retail markup method. We strongly object to a retail markup method for any professional service provided by a health professional.
Mr Carr: The contradictions are amazing. I met with some of the pharmacists in my area to discuss some of the issues, and they talked specifically about that. What is going to happen, in your estimation, to a lot of pharmacists as a result of that change that was made? Do you see a lot of them going out of business, or what do you see, long-term, happening as a result of it?
Mr Cruickshank: Again, I think it would be somewhat speculative. It's really a combination of things which are coming to bear on the pharmacists, and this is one of them. So whether this would be the one thing that might in fact force some pharmacies out of business would be very difficult to assess, but there's no question that it has had and will continue to have impact on the viability.
Mr Carr: But the total picture is that you will see fewer and fewer people surviving, in your estimation, then, with everything that's happened?
Mr Cruickshank: We are impacted on an ongoing basis. It seems that with each passing month, almost, there's something else which is impacting, whether it's the fee being frozen, the capping of the manufacturers whereby the pharmacists were essentially forced to eat the difference between what they were paying and what the ministry was paying, the changes in reimbursement. It seems to be an ongoing process of one thing after another, and as time passes, and certainly if that trend continues, it's going to become exceedingly more difficult for some pharmacies to remain viable.
Mr Arnott: Just to follow from that question; I'm here representing the people of Wellington. I don't know if you want to categorize pharmacists as retailers or health care providers, but they do provide an absolutely essential health care service in many small communities and we're most concerned about maintaining that service. I would ask you, have you seen an increase in the number of pharmacists who have left the business in the last two years? Does your association maintain any statistics on that part of the equation?
Mr John Connor: If I might try and answer that, perhaps, coming from a small-town background myself, I think what we're seeing at this point certainly is a level of frustration. I don't think the point has come when people have decided to leave the profession. The frustrating part is that there doesn't appear to be any hope of perhaps resolving some of the concerns. Pharmacists are extremely responsible people. They recognize that there is a problem with money. All we really want to do is to be part of the solution -- very, very difficult to do. There doesn't appear to be a lot of real, genuine desire to want to make us part of that process and come up with the solutions.
The Chair: We have to go on to Mr Johnson.
1050
Mr Paul R. Johnson (Prince Edward-Lennox-South Hastings): I'd like to pursue what you've just stated as being part of the solution. The Ontario Pharmacists' Association certainly is an important association in the realm of health in the province of Ontario. You service the people who need to buy their prescription drugs most certainly, and these are prescribed by doctors. I think that's very clear.
However, this is a pre-budget consultation. We're concerned about the state of the economy generally. We're concerned about how the province is going to pay for all those things that the province has a history of paying for. Certainly, under the ODB program, I think it's clear that as the province tries to grapple with its expenses, it wants to make sure that everything is done efficiently and effectively. These are things you've heard time and time again, I'm sure.
In this meeting today, in a few short statements, what can you tell me should be done that would improve the province's perspective and improve the finances of the province with regard to drug benefits?
Mr Sands: I think one of the things we almost beg the committee to do, especially, to be quite candid with you, the government members of this committee, is to urge the minister to implement the report of the mediator, which she appointed, or this government appointed, to establish a joint consultative committee. It is absolutely critical to better management of the system and reducing just the costs that you've spoken of to establish an ongoing process for dealing with issues, everything from utilization to prescribing. If that process could be implemented, if the government could be prevailed upon to implement that recommendation, that would be the greatest contribution this committee could make.
Mr Johnson: Do you think those consultations would net the results that both parties were trying to achieve?
Mr Sands: We believe so. It would be almost identical to the process that the government implemented with the OMA. Ours came out of a mediator's report that the government appointed and just chucked the mediator's report out. So I have to come back to that one, because there's no way in 10 minutes we're going to be able to cover everything from utilization to prescribing. But if that process could be set up and implemented, this committee could recommend to the minister to seriously re-examine that mediator's proposal and implement it. It would be a great start.
Mr Johnson: Certainly drugs are a portion of the health costs that are incurred by the province. What could the province do directly to reduce those costs? I know there are many factors, and of course that's maybe too simplistic a question to answer directly. But I know that the patent drug law certainly is going to have implications that are going to be very negative, in my opinion, to the province and to the people who pay taxes, and that's something we don't have any control over. What would your advice be to the province with regard to reducing drug costs, outside of a consultation?
Mr Cruickshank: There are some initiatives under way to establish some drug utilization review programs, and certainly that is probably one of the major things in the future which should have a significant impact, and that's being able to review globally classes of drugs, to be able to look at more costly versus less costly drugs and the benefits of that, to be able to zero in geographically in terms of prescribing habits of physicians. There's just a multitude of things that can be done in reviewing the utilization of medications by the people who are being covered. I think that that would certainly be one of the main things that would come out of it.
I think we need to spend more time looking at the wastage in the system, if there is such wastage. As an example, at the same time the ministry introduced these alternative reimbursement mechanisms to us in the summer, in the same document it listed a concept of a maintenance list of medication. In that they outlined a number of criteria that a drug should meet in order to qualify for that maintenance list. The maintenance list would be eligible for a 100-day supply of medication.
Having said that, there is in place now a law which allows a physician to order up to a 250-day supply of any medication covered under the Ontario drug benefit program. While the maintenance concept appears perhaps to have been a good concept, there was nothing done to look at the fact that currently now there is no control over this prescribing of large quantities. So I think you have to be able to look at those two issues and bring some normalcy to it.
Mr Johnson: And doctors would have direct control over that.
Mr Cruickshank: Yes, they do.
The Chair: I've got to go on to Mr Kwinter.
Mr Monte Kwinter (Wilson Heights): My question is to either one of the Garys; you decide which one wants to answer it. I was fascinated by your appendices, one dealing with Dr MacLeod and the other one dealing with the response from the Premier's office on the proposal to disband the DQTC.
It's always been my impression that the DQTC was the first line of approval to get a drug certified to go into the drug formulary as a substitute. Even though you sort of are critical of the fact that the government initially said it was going to be disbanded, and now it's thinking of maybe extending it for a year without consultation, you don't state your particular position on it. Could you tell me what you feel about the DQTC? Is this something that should be continued, or are you in support of it being phased out?
Mr Sands: No, we're not in favour of it being phased out. I think our point was simply that the possibility of expanding the role of DQTC is something we've always been willing to discuss with the government, and we think it provides a very valuable role. We simply want to ensure that on this issue, because the role of DQTC is so important to the public, there's some consultation, that they actually talk to somebody during this review, including members of the assembly, whatever committee it may be.
Mr Cruickshank: The mandate of that committee certainly needs to be reviewed and, with changing times, does it need to be expanded or its directions changed?
I mentioned earlier drug utilization, and we know that besides Dr MacLeod there is another government committee looking at drug utilization. Should somehow DQTC be brought into that fold, where does it fit in in the concept of drug utilization in determining which drugs are going to be covered and which are not and under which circumstances might a drug be prescribed?
There certainly has to be a body. I think DQTC has functioned reasonably well, but I think its mandate does need to be reviewed. Certainly, as we move into the future, do there need to be changes to its functions that it's performing?
Mr Phillips: I appreciate the presentation. As we know -- I think your brief mentions it -- we all have to face up to the fiscal challenges here and, as I recall, the Ontario drug benefit plan was one area where expenditures were going up fairly quickly.
At the risk that I may only get one question, I might ask a kind of a three-parter here. I am struck by the need for consultation. I am aware that the government has a joint committee with the OMA on dealing with physicians in the province. I'm wondering if you have advice for us in terms of whether an equivalent body or whether an all-inclusive body -- I'm more to all-inclusive than a series of kind of bilateral committees, because I'd always wondered frankly about setting up just the doctors in that committee. I felt there was a risk that it would isolate a part of the health system and may have some short-term benefits. Anyway, your advice on that.
I'm not sure where tobacco sales in pharmacies stand right now. I know that's not even part of your brief, but it seems to me that's part of the business proposition for your members and if that's not allowed I suspect you have to make up the revenue some other ways and just where that stands.
Lastly, the same question I think Mr Johnson asked, and that is if you've any advice for us in terms of areas where we can be looking at reducing expenditures in the drug area.
Mr Sands: In terms of whether it's a separate JCC for pharmacy or all inclusive, we don't have a problem with that. We're more committed to the idea of having a process put in place that we could be a part of on an ongoing basis. I think we'd be happy to discuss participating in that process, whether it be one with the OMA -- in fact, that is one of the areas we think there has to be a mechanism for allowing more dialogue between the doctors and the pharmacists.
On the tobacco thing, the recommendations have gone to the government from OCP. I think many pharmacists would agree it's a controversial issue, no doubt. We'd be happy to discuss with the government some sort of compensatory measures that we could talk about to help pharmacists take tobacco out of the stores.
The problem that I think a lot of people are having is that on the one hand you're telling us to take it out, which I guess is okay from some people's perspective, but then on the other hand that you've got coming down on us -- bang -- it's continually hitting us over the head. That's the problem. Right now the retail component of pharmacy is absolutely essential to those people staying in business and you can't continue to hit them over the head in that area and then turn around say to them, "And by the way, we want you to have tobacco out." That's the economic reality or problem that many of our members are having.
The Chair: Gentlemen, I'd like to thank you for appearing before the committee today. Have a safe trip home.
Mr Cruickshank: Thank you very much.
1100
ONTARIO RESTAURANT ASSOCIATION
The Chair: I'd like to welcome the next group forward, the Ontario Restaurant Association. Come forward gentlemen. Welcome back again this year. Mr Oliver, are you the one who owns the Elephant and Castle?
Mr Paul Oliver: No, I'm not.
The Chair: It's a different gentleman. He used to be the president, I believe, of the Ontario Restaurant Association.
Mr Oliver: Good morning. On behalf of the Ontario Restaurant Association I'd like to say that we are pleased to be here today to discuss the current health of the food service industry and to outline some of the major challenges facing our industry. I'm Paul Oliver, vice-president of the Ontario Restaurant Association, and with me is Bob Boone, senior vice-president of Versa Services Ltd.
The ORA, or Ontario Restaurant Association, is a non-profit industry association which represents the restaurant and food service industry in Ontario. Founded in 1931, it currently represents about 4,500 establishments in all areas of the food service industry, including licensed and non-licensed contract caterers, accommodation establishments, quick service and many other food service establishments. Approximately 80% of the food service industry in Ontario is comprised of small, independent operators.
Unfortunately, many of the operators within our industry are currently struggling to survive. The past several years have been particularly devastating for the food service industry. Over the last three years real, industry-wide sales have declined by approximately 18%. In 1993, real sales are projected to grow by less than 1%. All sectors of the food service industry have been impacted by these negative sales.
Bankruptcies in our industry are at record highs, and unlike some other economic sectors which have witnessed a slight decline in 1992, bankruptcies are continuing to increase in the restaurant sector. Formal bankruptcies in 1992 exceeded 500. This compares to 1989 where we had 167. This only represents, however, about a third of actual closures in the restaurant industry. Most operators simply turn in their keys to the landlord and walk away.
Profit margins on sales, which are typically very thin -- 2% to 5% -- have virtually evaporated, as has financing. Several major chartered banks and lending institutions have stopped all loans to the industry as a matter of corporate policy. Few will even examine new loans and many have cut existing operating lines of credit between 30% and 50% across the board, even for well established restaurants. The restaurant industry has been severely hurt by the current recession and we must work together to improve the health of the industry and ensure that new taxes or regulatory initiatives do not further strangle this price-sensitive industry.
The food and beverage service sector is a major employer throughout Ontario and is represented in every region of Ontario. More than 234,000 residents of Ontario work in the food and beverage sector. Many of the workers in our industry are in demographic groups that face difficulties finding employment elsewhere in the economy. The restaurant industry is very proud of the jobs and employment and training opportunities it provides. In addition to providing direct employment and workplace experience, the restaurant industry is unique in that it provides skills training and workplace experience which assist workers in entering the broader Ontario workforce.
Recent statistics indicate that approximately 30% of all members of the workforce in Ontario received early job training and experience in the foodservice industry. Job experience in the restaurant sector allows individuals, especially young, inexperienced workers, to find first-time employment. This enables them to progress forward to other positions in the broader workforce. Our industry believes that we should be viewed in the broader context as a training ground for all of Ontario's labour force and we should play a more important role in the government's training and industrial strategy.
As you can well imagine, the foodservice operators are very concerned about the next provincial budget and the impact it will have on both their consumers and upon their ability to survive. In the brief which has been provided, we've outlined our views on several potential tax changes as well as suggested a number of cost-free initiatives which could be undertaken by the government to stimulate the economy and help generate desperately needed jobs.
Today, we'd like to touch on two of the major issues of concern to the foodservice industry; namely, maintaining and enhancing consumer confidence and encouraging job creation. The foodservice industry believes it is imperative that the government of Ontario strive to contain and reduce the provincial deficit. We believe current and sustained high deficit levels projected for fiscal 1992 and 1993 are dangerous to Ontario's future and need to be addressed immediately.
The foodservice industry recognizes the difficulties confronting the government of Ontario, especially the impact the federal cap on transfer payments has had on Ontario. However, the high debt level must be reduced, otherwise it will severely restrict Ontario's financial and social policy decisions in the future as well as represent a major barrier to the ability of small business to secure financial lending from a shrinking pool of capital.
The foodservice industry believes that there has been too much emphasis placed on tax increases and more emphasis needs to be placed on expenditure control. The long-term ramifications of high-deficit financing are simply too great for the economic and social future of Ontario.
The government of Ontario, however, deserves credit for undertaking some measures over the last several years which have helped to constrain future deficit growth. Specific constraints, including the implementation of comprehensive reviews by treasury board, major spending constraints within the health care system, the review of the social assistance program and the government's commitment to streamlining ministries and reducing the size of the provincial civil service are positive steps towards reducing the cost of program delivery. These initiatives should be continued and enhanced.
In the area of taxation, the ORA is very concerned about proposals which would increase revenue generated by the retail sales tax. We recognize that a 1% increase in the PST gives the government of Ontario the largest single income boost. However, the psychological impact on consumers, and hence the economic impact, would be devastating on Ontario's economy and particularly on the foodservice industry. Already Ontario restaurant operators must compete with a combined sales tax rate of 15% on food and 17% on beverage alcohol. This is a major burden placed on the foodservice industry, especially when competing with ready-to-serve or prepared meals which are purchased in variety stores or grocery stores tax free. An increase in the PST would have a severe impact on sales and employment within our industry. An increase in the rate of the PST would also discourage tourism, increase cross-border dining and further disadvantage our industry relative to our competitors.
As an industry which is very price-sensitive and highly reliant on consumer confidence, the foodservice industry is very concerned that an increase in the retail sales tax would be a severe and long-term blow to consumer confidence. Only through increased consumer confidence and spending will Ontario fully emerge from this recession. We believe that a sales tax increase would only enhance and lengthen this recession.
As well as damaging consumer confidence, increasing the RST is a highly regressive tax policy initiative. Increasing the rate of taxation on restaurant and prepared foods increases the cost on those members of society who can least afford it. Although restaurant meals might be thought of as a luxury, this is simply not the case today. Due to major social and economic changes that have taken place in the workplace and in the family, prepared meals away from the home are a necessity.
Lower-income households spend a larger percentage of their income on basic necessities, including prepared food, and hence pay a disproportionate share of consumption taxes. Consumption taxes have no link to one's income or ability to pay. Increasing the rate of tax on food consumed away from the home would force low-income households to pay a greater share of their incomes on tax for basic food.
1110
Mr R.E. Boone: In addition to the potential impact of a regressive increase in the retail sales tax rate, the foodservice industry is concerned about the impact of other potential adjustments designed to generate more income from consumption taxes. Currently, a retail sales tax exemption applies to prepared food products under $4. Over the past several years, the true value of the $4 exemption has declined considerably. However, it still plays an important role in mitigating the unfair sales tax burden placed on prepared foods. The $4 exemption on prepared foods is designed to assist low-income consumers who spend a proportionately higher percentage of their income on food consumed away from the home.
The elimination of the $4 exemption would have a severe impact on sales and employment within the foodservice industry and would negatively impact upon sectors of Ontario society including those individuals least capable of paying more taxes, including low-income and fixed-income people, the working, mid-to-low-income earners and, in particular, students. As an example, the industry's experience in Quebec with the elimination of the $3.25 exemption for PST was that consumer spending did not increase and still has not come back. The impact has been lower sales, resulting in lower food purchases and lower employment. The apparent gain in revenue to the Quebec government was offset by lower sales and employment levels; in reality, no real improvement in the economy in Quebec.
An increase in the rate of the provincial sales tax or the elimination of the $4 prepared food exemption would also further enhance the inherent disadvantage the foodservice industry faces in relation to our competitors in the grocery industry, who are exempt from provincial sales tax. This initiative would only further enhance the tax inequities which already exist in both current provincial and federal tax systems.
Increasing the cost of prepared food, which would result from the elimination of the $4 provincial sales tax exemption, would mean higher costs for an important element of food consumed by Ontario residents. The burden of this increase is highly regressive in nature, because it ignores an individual's ability to pay and punishes those individuals who are required to purchase basic prepared foods due to employment, family or school commitments. Although restaurant meals might be thought of as a luxury item, it is no longer the case due to significant social changes which have occurred. Lower-income households spend a larger percentage of their income on food away from home and would be disproportionately impacted by the elimination of the $4 exemption.
Food consumption away from home is no longer a luxury and should not be treated as such. The elimination of the $4 exemption would severely undermine the health of the hospitality industry and cost foodservice jobs and would hurt low-income people such as students, senior citizens, working mothers and any individual on a fixed income. This is a policy which we strongly believe should not be pursued. Instead of reducing the $4 exemption, the government of Ontario should seek increased tax equity and reduce the regressive nature of the provincial sales tax application on food by increasing the exemption on prepared food to $7. This would help restore the value of the exemption which has been diminished by inflation.
The foodservice industry is very concerned about the growing tendency of increasing the tax burden placed on food through either direct consumption taxes or indirect production taxes. The foodservice industry believes all food, because it is a necessity, should be exempt from taxation.
As recommended by the Fair Tax Commission in the report of the Retail Sales Tax/Goods and Services Tax Working Group, a better understanding of food taxation should be sought through an in-depth exploration of both the federal and provincial tax treatment of food. Since the Fair Tax Commission did not have adequate time to initiate this review, the foodservice industry has encouraged the Ontario Minister of Finance and the Minister of Agriculture and Food to initiate a multistakeholder, comprehensive review of food taxation. We encourage this committee to support a review of food taxation.
The increasing level of payroll taxes has taken a serious toll on the foodservice industry. Because the industry is labour-intensive, increases in the level of payroll taxes, especially the employer health tax, have a disproportionate impact on the foodservice industry. A recent analysis by the association members suggests the rate of payroll taxes has increased from 2.7% of total revenues in 1989 to 4.7% in 1992.
Increasing payroll taxes is a direct disincentive to job creation. To encourage job creation and limit the impact of regressive payroll taxes on small business, the Ontario Restaurant Association encourages the government not to increase the overall rate of payroll taxes and to introduce a $500,000 payroll exemption for small business.
The foodservice industry, as a labour-intensive sector which is sensitive to payroll taxes, is also concerned about federal initiatives to limit the deductibility of payroll taxes. In the federal budget of February 1991, the Minister of Finance signalled his intention to ensure that provincial payroll and capital taxes should no longer be deductible for the purposes of determining federal income tax. The budget outlined a mechanism to achieve this objective and proposed that it be phased in over a three-year period commencing in 1992. The proposal was then delayed until the end of 1993.
If this federal proposal is adopted, its impact on the foodservice industry will be severe. Many small as well as large businesses will be harmed significantly. Employers whose operations are dominated by high payroll costs, such as foodservice operators, will bear a disproportionate burden of taxation.
The realities and cumulative impact of both federal and provincial tax initiatives must be considered in the development of Ontario's budget. As employers, it is important that we do not get caught in the middle of a federal-provincial tax fight. Uncertainty created by this type of situation will only reduce the potential for job creation.
Mr Oliver: The foodservice industry in Ontario not only faces significant competition from the domestic market but the restaurant industry in Ontario must compete in the international market. Approximately 21% of tourism expenditures are spent on food and beverages. The cost of food in restaurants is a major determinant in a tourist and convention planner's decision to travel to Ontario or not to travel to Ontario. High taxation has already had the impact of discouraging tourism and convention business in Ontario. Since we do not operate in isolation, it is imperative that the tax burden placed on our competitors in other competing jurisdictions be brought into the formation of the next provincial budget.
Aside from discouraging international tourists from visiting Ontario, the restaurant industry faces a growing problem with cross-border dining. Restaurant operators in border regions have been severely hurt by competition from American establishments. This, in no small measure, has resulted in a staggering $4.5-billion travel deficit for Ontario. This is a major revenue drain on Ontario's economy. Increasing consumption taxes will only enhance this outflow of capital. Business and consumers are already severely burdened with high taxation which is suffocating consumer confidence and limiting Ontario's ability to effectively respond to this recession.
It is imperative that at this time the government of Ontario make the difficult decisions and cut spending. Further tax increases in Ontario cannot be absorbed. Many of the thousands of men and women who make up the foodservice industry are struggling to hang on and cannot withstand the impact of further taxation or a decline in consumer confidence.
On behalf of the ORA, I'd like to thank you for allowing us to appear here today, and we're more than anxious to hear your comments.
The Chair: Ms Harrington.
Ms Harrington: First of all, I represent Niagara Falls and -- very important to our economy -- some of the things you mentioned about the travel deficit, the cross-border shopping, certainly apply. But with the Canadian dollar now lower, it certainly is helping our economy.
I wanted to note some of the things that you mentioned that I agree with: first of all, how important the training is. A major portion of our workforce do start in your industry; I know my family did. Consumer confidence is so important. People have to feel good to be able to go out there and spend, and restaurants are part of that. The fact that the PST is a regressive tax and it does hurt those most not able to pay in some cases, I would agree with you.
1120
What I'm finding in our local economy is that the merchants have to be innovative in order to attract customers, and of course we're also looking at attracting Americans. Has your association done some initiatives to try to lure others and promote new markets and new ways of doing things here in Ontario?
Mr Oliver: One of the things we've looked at is some of the reasons for people cross-border dining. We've done a lot of work in the Windsor-Detroit area in particular. We've identified two major reasons they're going over. One is that they're going over and dining as a sole entertainment activity and that's cost, tax generated in particular. The other reason is that they're going over and dining once a week, but they're going over to get groceries and gasoline or something and they take the family out for dinner at the same time when they're over there.
We've worked with some of our local branches to address and do advertising promotions where they can put all of their money together and do a promotion in the Detroit newspapers and things like that. We've also put out some publications outlining what they might be doing in Detroit that's available then to operators in Niagara Falls or in Kingston, so that there is some exchange of ideas on that.
But from the survey work that we've done, and some of the other convention bureaus, a lot of it is that seeing the tax at the bottom of their bill is a bit of a deterrent both for residents in Ontario -- to encourage them to go across the border -- and to discourage Americans from coming back.
One of the things that our industry in the border regions often relied on during the 1970s was the domestic market, but also drawing a lot of American visitors over to their restaurant establishments. That, for all intents and purposes, is virtually non-existent today. So we're not only addressing now preventing Ontario residents from going over, we're trying to get some of the Americans back. But it's a very difficult sell, especially with the impact of the GST on top of everything they buy.
The Chair: Mr Phillips.
Mr Phillips: I appreciate your brief. Your recommendation to us, I think, is to not look at any increase in taxes and to mainly deal with the deficit through expenditure reductions, if I interpret the brief properly.
Mr Oliver: In part. We did outline in the back of the brief several money-generating initiatives for the government. One is the introduction of video lottery terminals which would generate about $350 million, we estimate, here in Ontario, as well as the extending of hours for hospitality establishments, in particular in border regions, to stem the flow of cross-border consumption across the border for our customers going over. But on the consumption taxes, definitely hold the line, if not reduce them, and that may be an economic stimulant, to reduce it one percentage point, that the government may want to look at.
Mr Phillips: Reduce --
Mr Oliver: The PST as a short-term initiative, but at the very least not increase it.
Mr Phillips: That would mean, I think, a very slow reduction of the deficit, realistically. Any numbers that we've ever looked at, even on very tough spending restraint, it's slow. Would that satisfy your members, if a government said, "Here is a realistic plan that over seven or eight years would get the deficit down substantially but not completely eliminate it"? Would that be something that you could support?
Mr Oliver: It would begin to address some of the problems. One of our concerns -- and it's not just the provincial government here in Ontario but from other provincial governments we've been following and also the federal government -- is they come out with a nice five- or six-year plan and after six months they're not on the plan, they're off. I know it's very difficult to come up with accurate economic spending. But we have a reduction plan supposedly in place here in Ontario that would see the phase-down eventually. It's off its plan; the federal one, as well. I don't know how much confidence the business community or international investors would have to see another plan come forward where they don't see really substantial things taking place or happening.
Mr Phillips: How do you get around that, because all governments can do is say, "Here's what we're going to do"? How do you restore that sense of confidence?
Mr Oliver: One thing you have to do is not look at the budget process with any sacred cows on the spending side and take a look at everything. It might be partial payment on the health care, it might be emergency fees, something to what Quebec has started to do to reduce the immediate cost of the health care.
One of the things that I would like to see personally is that everyone at the end of the year get a bill saying not even that it's taxable, but saying how much they used on health care spending so that they have some recognition that they spent $1,000 or $10,000. People today just don't know that. They think of it as completely free. I'm not saying to tax it back at that time, but at least as an information. With the new health card, we have the capability to do that. I think that people need to know that every time they go to the doctor they're really paying for it as a taxpayer. There needs to be more recognition of cost benefit that they're getting out of the health care system.
The Chair: Mr Arnott.
Mr Arnott: Thank you very much for your presentation; it's very comprehensive. I'm sympathetic to most of the issues you've raised. You've raised a lot of issues that small business generally would be able to come in behind and support.
A year ago, one of the issues you were very concerned about was the regressive changes to our labour laws, Bill 40. Have you been able to monitor in any way the impact Bill 40 has had on your industry?
Mr Oliver: We haven't been able to quantify it; it's very difficult to quantify it. At the time, one of our biggest concerns relative to the labour legislation was the impact on other manufacturers in Ontario that might be leaving or could potentially be leaving. We're trying to track it, but it's very difficult. If a company decides to leave, it's very difficult to say it's because of this or free trade or anything else, but what we are looking at is tracking some of the impact on the contract catering as factories leave and things like that, but it's very difficult and too early at this point to tell.
Mr Arnott: Your suggestion about video lottery terminals and the experience of Nova Scotia, they've had video lottery terminals all over the place in Nova Scotia for a few months and they've since taken them out to just put them in licensed establishments. Are you concerned about children's access to video lottery terminals?
Mr Oliver: Yes, we are. What we've recommended on video lottery terminals is that they be only available in licensed establishments and that the liquor licence board regulates them. They already have an infrastructure for inspection and control in place; the cost of setting up a separate bureaucracy or agency to oversee video lottery terminals would be cost prohibitive.
To extend it just through licensed establishments, as we've seen in Alberta and other provinces, both controls access but also is a ready-made policing and enforcement mechanism. The cost of rolling out that package would be substantially reduced and the revenue to the province, because it would be a shorter roll-out period, would be able to be realized much sooner.
The Chair: Mr Carr.
Mr Carr: Yes, if there's time left. One of the questions I had regarding the payroll tax that you answered, this committee dealt with a bill in Ontario. Essentially, the government put $250 million into a venture capital program and then said businesses can access it. They said at the time it was for small and medium businesses to be able to have some cash for various needs.
Small business came in and said: "Rather than doing that, let's take the $250 million. Thank you very much for saying you like to help small and medium businesses, but what we should do is take that and reduce the employer health payroll tax by $250 million starting with the lowest until we use up the $250 million." Would you be in favour of that rather than putting basically a pool of money, $250 million, in that will be then accessed by the Algomas and everybody else? Would your association be in favour of reducing and using that $250 million in that manner?
Mr Oliver: I don't know if dedicating it specifically to health levy is the right thing to do, but the idea of setting up a huge superfund for money, our industry has never been able to successfully access government funding to any degree through that. Because we're a small operator, to work through the system is just too costly.
We have made the recommendation that Ontario Development Corp assistance be made available to foodservice and accommodation industries and there has been some work done by the Ministry of Industry, Trade and Technology to do an experimental model for, in particular, a combined foodservice and accommodation establishment in northern Ontario.
It identified a lot of barriers that are there now, and currently our industries are excluded from that. We think as a short-term initiative, the government expanding that would be a direct job saver because we've got a lot of long-term, well-established operations that have just been in a three-year, four-year cycle downwards now that's bottoming out, and to get them over the next year and a half or two years.
The Chair: Gentlemen, your time has expired. I'd like to thank you for your presentation before this committee.
1130
UNITED VOICES FOR FAIR TREATMENT IN CHILD CARE
The Chair: The next group to come forward is United Voices for Fair Treatment in Child Care. I see you made the papers this morning, in the Toronto Sun.
Ms Tracy Buckingham: We haven't seen it yet.
The Chair: You haven't seen it? I'll send it down to you.
We have until 12 o'clock for your presentation. As you can see, if you can leave some time at the end of your presentation to make room so the members of the committee can ask questions on your brief. You may begin, and identify yourselves for the purposes of Hansard also.
Ms Jackie Cousins: Thank you, Mr Chair and members of the committee. My name is Jackie Cousins. I'm the past chair of United Voices and the president of the York region chapter. I'm a parent with two children in the child care system. With me today is Tracy Buckingham. Tracy is the current chair of United Voices and she's a supervisor of a child care program in Milton.
We're a provincially incorporated, non-profit organization formed in 1991. Most of this presentation comments on the recently leaked cabinet document on child care reform. We changed our brief to best suit this latest development.
In the document there is no reference to cost, and we find it incredible that the cabinet is being asked to approve major and irreversible changes on how child care is delivered before seeing one single cost estimate. We will focus our comments primarily on the financial implications of child care reform. Our analysis has found that the cost will be in the billions, and largely unpredictable.
Just to give you a brief background on the system as we know it today, Ontario is regarded as having the best child care system in North America. Most choices are community-service oriented, including municipalities, local churches, employers, non-profit agencies, family-based, privately owned, nursery schools and cooperatives. A total of 122,400 children use the system, of which 70,000 pay the full fee and the rest are subsidized. This is only about 7% to 8% of all Ontario's children ages 0 to 12.
An analysis of recent government expenditures in the last six years shows that expenditures have increased dramatically but the number of children served has not. In fact, since 1988, expenditures in the operating field have nearly tripled, yet there are no more children being served. In 1988 $169 million was spent; $459 million will be spent in 1993.
The number of children approved for subsidy assistance but placed on waiting lists continues to increase and is presently at approximately 15,000. The vacancy rate is high in many centres due to the recession and also as a result of an aggressive tax-dollar-funded expansion of the non-profit sector without proper needs assessments, resulting in some areas in the supply outweighing demand.
In regard to the cabinet document, under the financial reform strategy it indicates that the focus of reform funding should be for the government to reduce the price of care to families by permanently funding more of the actual cost rather than by increasing the provision of fee subsidies. In other words, the emphasis will be placed on subsidizing the service provider instead of on children and their families. It's incredible to see that the government has made a conscious decision to disregard the needs of children on the subsidy waiting lists who need to access child care now. The needy are being neglected while the government focuses on building administration and bureaucracy.
Recommendation 6 wanted cabinet to support in principle the use of a core funding approach. This requires the upfronting of funds to child care programs based on provincially approved standardized budgets. Parents would pay the province a standard fee for service, similar to how OHIP used to be run.
Such a radical approach from the current fee-for-service involves many difficulties, including the enormous costs to create the bureaucracies needed for approving and distributing funds; the emphasis being placed on the provider and not on the child; it lends itself to support inefficient programs; there will be a loss of flexibility of the system to expand or contract as demand dictates; its failure to address the real problem of subsidy waiting lists; the is the likelihood of programs losing their autonomy; and, it lays the foundation for child care workers to be seen as civil servants. Many child care educators from both sectors are fearful that they will lose their ability for creativity and that ultimately the children will suffer.
There will be a possible loss of federal revenue. A base-funded formula may not be eligible for federal cost-sharing provisions under CAP. Certainly, child care funded by the Ministry of Education will not be eligible. This is an important provincial concern. However, we emphasize that taxpayers fund all levels of governments, and the total tax bill is still paid by them.
The government still continues to insist the system be primarily non-profit. The concern here, from a financial point of view, is one of higher costs and inefficiency. A recent review conducted by Metro Toronto compared the total cost of private versus non-profit child care and found the non-profit model was higher.
Also, financial expertise is desperately needed in the non-profit sector. The ministry had recently committed $11 million to help bail out troubled non-profit centres. We wonder why the government continues to pursue this strategy when the model is showing that they are in great difficulty.
Recommendation 7 wants cabinet to approve the use of a standard fee approach for charging parent fees. This would be applied to all parents regardless of income or whether they could afford to pay the full cost of care. The idea is for parent fees to be reduced enough so that more full-fee-paying parents would be attracted to the system.
The document recommends an infusion of $160 million in new funding, which would reduce the average fee by about $25 per week, but this raises many questions. What will be the cost of creating the bureaucracy to handle the processing of applications and fee collections? What will be the cost of revenues lost due to NSF cheques, families moving? How will the intrusive nature of such a system impact on enrolment? How many parents will object to having to complete a form and disclose personal financial information when they are quite prepared to pay the full cost? Will parent fees have to reflect the extra costs from creating the necessary bureaucracy to handle the system?
How will the changing of parent circumstances be handled? Will parents be guaranteed a spot in the centre of their choice? Will this be a first come, first served list; immediate access? What happens if the fee reductions create a significant expansion of the system and how will that be handed? Will there be a fleeing of full-fee parents from the system as they look for alternatives that better meet their needs?
If children of full-fee-paying parents are to be the "preferred" customers of a reformed system as the document states, then will children of poor families be systematically discriminated against if space becomes a problem? What will be the impact on quality of impersonalizing a human-based service and how will that affect parental involvement? What choices will parents have if their program does not meet their needs? Will they be able to choose another?
Recommendation 10 calls for cabinet to commit an additional $160 million in base funding for programs. There are many problems with this as well, including the fact that not one single child from the subsidy waiting list will be helped. It assumes that that number of children served in the system will not increase, even if parent fees are reduced.
In order for the government to recover its investment of $160 million, the system would have to attract an additional 30,000 full-fee-paying parents, but savings per parent become less as the number of children served increases. The government must be anticipating a minimum expansion of 50,000 children, based on the committed 20,000 Jobs Ontario subsidies the 30,000 additional full-fee-paying parents. However, $160 million distributed among 50,000 additional spaces results in a decreased savings per space.
If the government caps parent fees, as has been recommended, then the province would be on the hook for the shortfall. Provincial child care expenditures would become wildly unpredictable and the per child cost of care will increase simply from implementations of other child care reforms. It is unclear whether or not the province intends to absorb all these costs. For example, $160 million spread over 175,000 children would reduce the parent fee to $17 a week, and spread over 200,000 children would translate into a fee reduction of only $15.
1140
The next page simply presents two scenarios based on the cost of care not increasing but the system expanding, and number two, presents a scenario where the costs increase by 15% and the system expands. As you can see, if there was no expansion to the system but the cost of care went up 15%, the government subsidy required would be $297 million. If the system expanded by 50,000 children so that it served 175,000, then the actual subsidy required is $425 million, and this would be additional funding to what we have now.
Recommendation 1 proposes establishing an early childhood authority responsible for the implementation of child care and early education reform. Part of the analysis will be the phased-in implementation of publicly funded, full-day, early education programs for children three to five. Publicly funded, full-day schooling for children basically out of diapers will mean the disappearance of hundreds of thriving nursery schools, preschools and cooperatives. The same will hold true for many non-profit and private child care programs. The choice for parents to send their children to small community-based programs, where parent involvement is encouraged instead of an institutionalized school environment, will be lost. The program still does not help the families on the subsidy waiting lists unless their child is over three and they work between the hours of 9 and 3:30.
Other problems that this offers are the serious problems in the existing school system, including overcrowding. The physical and emotional needs of preschoolers vary considerably from those of older children. The child-teacher ratios under the Day Nurseries Act are much less than those under the Education Act. School programming will certainly emphasize school-like activities rather than the nurturing and emotional aspects that preschoolers need. Parent involvement will be reduced. Year-round, 12-hour days are required for children requiring child care services in addition to a school day. Parent control will be diluted, and the possibility of child care educators losing their jobs if they cannot go back to school to upgrade will be high.
We did a cost analysis of this model. We assumed that the schooling for three- to five-year-olds would take place within the education system and the before-and-after school care required would take place under the Ministry of Community and Social Services, where it is now. There are 425,000 children in Ontario eligible for the program and presently there are about 105,000 four-year-olds in half-day junior kindergarten and 140,000 five-year-olds in half-day senior kindergarten. The bottom line is that the operating costs shifted on to the education system, in addition to what they are now, are just under $3 billion. That translates into an education tax increase of $750 per household.
We thought it would be interesting to calculate the savings to the Ministry of Community and Social Services if you took the three- to five-year-olds out of that service and put them into the education system for the normal school day. We came up with a savings there of $150 million, and that presumes that Community and Social Services did increase its share of costs as it suggests in the reform document by lowering parent fees. Basically, if the object here is to service those children, and there are 94,000 children aged three to five in the child care system, then what we've taken is a $150-million service and translated it into something just under $3 billion.
Recommendation 5 proposes the development of several new layers of provincial bureaucracy to carry out the tasks that are presently being carried out by the municipalities. This recommendation runs contrary to that which has been stated in the 1990 provincial-municipal social services review. The major concern here is cost and the number of new layers of administration required to carry out the tasks. Other cost considerations which the document has not brought forward are the costs for implementing pay equity, employment equity, unionization and mandating levels of service.
We took a brief look at capital expansion and found the government is continuing to indiscriminately fund non-profit expansion. For example, in the Hamilton area in the last year and a half 19 programs closed. However, during the same time the ministry announced $3.6 million for new non-profit programs in the same area. Looking at the reform proposals in the cabinet document, the ministry expects to expand by at least 50,000 spaces. Current cost estimates place the cost of this at just under $1 billion.
In conclusion, the reforms proposed in the cabinet document are costly and heavily mired in bureaucracy. Despite recommendations to infuse significant amounts of new funding into the child care system, the problems of the needy remain basically unaddressed. Subsidy lists will continue and child care will remain unaccessible for thousands of families.
We have a number of recommendations and I'll just quickly emphasize the most important ones: The government should recognize parents as owning the sole responsibility for deciding who should care for their children. The government should support privately operated services, acknowledge their cost savings and the valuable contribution they add to the community. Wage enhancement programs to all child care educators should continue. This is an effective use of resources which improves wages while helping to keep fees affordable. The provision of fee assistance should be directly linked to the child and not the centre. Parents obtaining new subsidy funding should be able to choose from any centre that has a purchase-of-service agreement. All child care responsibilities should remain within the jurisdiction of the Ministry of Community and Social Services. Municipalities should continue in their role as local managers of child care. Centres should continue to receive parental fee revenue and wage enhancement grants from the province. Base funding should not be instituted.
Thank you very much and we'd be pleased to take any questions.
The Chair: Mr Phillips.
Mr Phillips: Thank you very much. I want to seriously commend you for a very detailed, thoughtful and very well researched brief. It's probably as good as we've seen. I appreciate the time that must have gone into it. Just a comment and then a question.
It's like we're in a fairyland here. Yesterday the Treasurer was ere saying we have a fiscal nightmare on our hands and there's no way out of it, and then the same government issues a document like this, its cabinet submission. It's like, are we in a different world? It is crazy. I think your brief has been measured by its response, but is devastating by its facts. What is behind all of this, in your minds?
Ms Cousins: I speak from a parent point of view and I personally think it's an effort for the government to control more of the education of our young children. There's no other reason that I can come up with. It's certainly not to improve the system or to help those who aren't being helped now, so the only answer I can come up with is that they just want to reach down and increase their control over our young children's minds.
Mr Phillips: Monte, did you have a question? If not, in terms of where we stand right now on converting private centres to non-profit, can you update us at all on where that process stands now and what's happening?
Ms Buckingham: At the present time, they've chosen about 10 model schools and they're going through the process of evaluating their businesses and getting back to the owners and determining if they do want to convert, and those schools will be set up as models for other centres that wish to convert. They assumed they would have about a 50% response rate through the province of private centres wanting to convert and they didn't get anywhere near that. People would just rather hold on to their centres than convert at this point in time. There's not money there for them.
1150
The Chair: Mr Kwinter.
Mr Kwinter: I really want to thank you for your presentation. I find it interesting that the government is advocating this particular proposal at this particular time, given the fact that yesterday in Boston the Premier said, and I quote, "The old conflicts, the old rituals of battles between those who argued on behalf of social justice and fairness and those who argued on behalf of economic efficiency and productivity and competitiveness are battles that we can no longer afford," and yet this seems to be exactly that. It is an ideological initiative.
Yesterday, the Treasurer was in here defending his policy of privatizing many sectors of what was previously provided by government, and here we have the government intruding into an area where there doesn't seem to be any reason for it. There doesn't seem to be any reason because it's not addressing any of the problems other than their particular ideological bent.
In your deliberations with the officials at the ministry, have you had any indication from them as to what they think they're going to achieve by doing this?
Ms Cousins: What they indicate this is for is to what they call stabilize the system, and by that they mean help out those programs which are in financial trouble. They feel that at all costs they need to keep the service provider there. Whether or not the demand is there for that program is irrelevant. The fact is the service provider has to be there in order to accept children, which on the outside sounds reasonable, but in reality the demand has gone down and parents are making choices. A very important factor of quality care is choice for parents. There are so many different needs for families that you need a variety of options to satisfy that need.
The Chair: Mr Carr.
Mr Carr: Thank you very much, again. It was a very good presentation. You've had a tough year. The policy that was put together was to drive a lot of the private day care operators out, and we shouldn't be surprised. As a socialist government, they want to do that with auto insurance, they want to do it with many areas. I'm glad to hear they haven't been successful. That's the bad news.
The good news is that they won't be around two years from now. I think everybody agrees with that, and whether the Liberals or the Conservatives get in is just the question.
So two to three years from now, do you see the number of private day care centres staying the same or how many are we going to lose? The reason is, as I believe, that they'd see if they can drive them out in this mandate, that people won't come back in, regardless of what government comes in. Are they going to be able to survive this government and, if so, percentagewise, how many do you think will?
Ms Buckingham: I don't think very many will, especially with the new subsidy problems that they're having The government has cut off all new subsidies to private centres. That will slowly close them. I can't tell you how quickly it will close them; it depends on whether they can maintain the number of children in the centres they have now. As soon as the children start leaving, they won't be able to replace them.
Mr Carr: But in terms of being able to survive, there will be some that will be able to make it past two years?
Ms Buckingham: Some will be able to.
Mr Carr: The second question is with regard to the whole issue of education. A lot of the non-profit centres thought they were away, "Once we got rid of the private, we're all set," and they were gleefully sitting back. Now they're going to be put out of business and the reason is the education system, quite frankly, as this provincial government won't have to spend the money. The education is funded through the property tax at about 60%. I think you're right, they want to control them and they say: "Aha. Guess what? We don't even have to pay for it now, the property tax will."
The way they're selling this is they're saying: "It's not going to be a day care. We're going to educate children." I've seen how governments do that. Quite frankly, putting a little bit of an ad lib in, I've watched the education system and I think not only at the lower grades but all the way up to high school it is a day care centre in many respects. Three- to five-year-olds, how much education can we actually do with them, just from your assessment?
Ms Cousins: I have a three-year-old and a two-and-a-half-hour program of educating, so-called educating, would be more than enough for him right now. They need the emotional, the group interaction, that type of thing. As far as emphasis on educating qualities, a little bit, fine, but not a school environment, no way.
Ms Buckingham: And not a full day.
Mr Carr: I think Ted had a question.
Mr Arnott: Thank you very much for your outstanding presentation. It will help us, those of us who are trying to promote what we see as very commonsense fiscal management practices with respect to the government.
In Wellington county right now we're in a fight over junior kindergarten. Many of us believe that the mandatory aspect of it, that every school board has to offer it by 1994, is economic madness. We can't afford it and we question the need for it.
I'd ask your position on that particular issue. Should junior kindergarten be mandatory across the province of Ontario?
Ms Cousins: No. Based on demand, if the community demands it then that's fine, but if the community does not demand it, if there is a good network of informal arrangements such as cooperatives, neighbours get together, nursery schools, and there is no demand, then there's no way that the education system can afford to pay the cost for something that's not really necessary.
Mr Arnott: This is the issue, and I think Gerry used the word "crazy." In our area in Wellington county we have something like 150 portables, and yet we're going to be going ahead with demanding that schools have the capital expansion that would be required for junior kindergarten. Where is the sense in that?
Ms Cousins: Where do you put them? There isn't any sense.
The Chair: I'm going to have to go on to Ms Harrington.
Ms Harrington: I'd like to, first of all, say to you that our goal as a government is to provide adequate, and that means quality, day care and make it available wherever, throughout this province, not just in selected areas. It's hit and miss.
I think that we can agree on the importance of child care, certainly to the development of the child -- and I can see that in my own children at the different types of day care they were in -- and also in the ability of women to be able to work and participate in the economy. I think in the overall, it is an economic issue as well as a child development issue. So I think we can agree on that.
I'd just like to say that when I was working my two children were very young. I was forced into a situation, an emergency type situation, where I had to have my daughter, who was two years old, with a neighbour in a basement where she had children who she cared for, in a smoky atmosphere. I wasn't happy at all. In fact, because child care was not available, I quit my job.
At that time, I took my daughter to a co-op nursery school where the parents participated. It was a great environment and I met lots of the local people around, and very healthy for both the parents and for the children. I think it's so important that parents be part of the system and also that it be adequate, that it be quality and not hit and miss across this province, and that's what we're trying to do. I think Paul has a question.
The Chair: Was that a question?
Ms Harrington: A statement.
The Chair: Okay, thank you. Mr Johnson.
Mr Johnson: Again, with regard to child care, every parent will have a somewhat different opinion as to what they think is the best care for their particular child or their children. From what I gather, from talking to people I know, there's certainly a different view of child care and child care availability and the needs of those children in urban Ontario versus those in rural Ontario.
I come from rural Ontario and I have two children who are now in their teens. However, it doesn't seem that long ago that they were young and my wife chose to stay home and look after them. Even at that time, for a break, we sent them to a day care centre from time to time to give my wife a break. I think that was important for her and it offered the children an opportunity to socialize.
I just wondered, what kind of studies have you done with regard to that very different -- children are children -- perspective about rearing children and the availability of assistance in rural versus urban Ontario. Have you any comments on that?
Ms Cousins: Yes. You're quite right. Half the parents in Ontario choose to stay home with their children, and child care really should incorporate your own child care as well as formal and I think the support has to be there for parents who choose to stay at home or perhaps want a little bit of group activity for their children when they get older. I quite agree with that and I think that's an area that needs to be improved, as a matter of fact.
One of the areas that needs to be improved is dissemination of more information for parents on the importance of age-appropriate activities, that type of thing. I think if the government can stimulate in areas, particularly in rural areas -- they've called it the "hub model" in the past or the "child resource centre" model that they've tried as well -- and try to get the community involved in that aspect, I think that's an excellent way of using resources and would satisfy a real legitimate need.
The Chair: Mr Johnson, the time has run out. I know you had another question, but I'm at the mercy of this committee to keep things on time.
Mr Sean G. Conway (Renfrew North): Can I just ask an information question because this is a fascinating brief. I just would like to know something: Who are you?
Ms Buckingham: Who are you, Jackie?
Mr Conway: This is a very compelling brief, and I've sat here for years. I'd just like to know a little more about you.
Ms Cousins: I guess, since it's an issue that's dear to my heart because it involves my children and the future of our nation, I firmly believe that, this has probably taken about 40 hours since the cabinet document became released. The reason for that and the detail that was required is because of the importance, the impact of such a thing. It's a matter of accumulating. I've got about 20 or 30 reports, probably more than that, and it's going through them all and --
Mr Conway: But the brief is really Tracy and Jackie.
Ms Cousins: It also encompasses the United Voices' mandate, philosophy. There certainly are more than two people involved in the preparation.
Mr Conway: It's excellent. Don't feel at all apologetic. I haven't seen a brief quite as refreshing and quite as pointed in its observations and recommendations as this in a long, long time. I commend you absolutely. Very, very useful.
Ms Cousins: Thank you very much.
The Chair: I'd like to thank you for appearing before the committee. This committee is recessed until 2 o'clock this afternoon.
The committee recessed at 1202.
AFTERNOON SITTING
The committee resumed at 1402.
The Chair: We'll resume the consultations of the pre-budget hearings on finance and economic affairs.
COALITION OF ONTARIO HOMESHARING PROGRAMS
The Chair: The next group to come forward is the Coalition of Ontario Homesharing Programs. Would you come forward, please, and take a seat? I'd like to welcome you to the standing committee on finance and economic affairs. I think you've been here before. Would you mind identifying yourselves for the purposes of Hansard so he knows which mike to turn on when you're talking and to tell the other people who's speaking at that particular time, because at the other end they can't see you. So if you don't mind starting off from the left to the right.
Ms Moira Bacon: I'm Moira Bacon and I'm the executive director of Sharing, which is a sharing agency for seniors in Toronto.
Mr Norman Monkley: My name is Norman Monkley.
The Chair: You can sit back comfortably. He can pick it up.
Ms Christine Chung: My name is Christine Chung. I'm the executive director of the Scarborough Housing Help Centre.
Ms Edna Beange: My name is Edna Beange. I'm the chair of the board of Sharing.
Ms Susan Bacque: I'm Susan Bacque and I work for the city of Toronto in the housing department.
The Chair: Okay, we have until 2:30. In that half-hour, if you can leave some time at the end of your brief for members of the committee to ask questions, okay? You may begin.
Ms Chung: We wish to thank you for the opportunity to meet with you.
I will begin our presentation by introducing the supporters of home sharing in attendance here. We've already done introductions but we also have some people in the audience who represent other home sharing programs. We have come here today to advise you of the ongoing success of the 17 home sharing programs across Ontario. This presentation will enable board members, staff, municipal representatives and clients to highlight the value of this innovative, community-based housing program.
There are three essential points which are critical in understanding the importance of this program across Ontario. They are: home sharing is cost-effective, home sharing offers a broad range of services tailored to meet the needs of a wide variety of clients within each community of service in the province, and home sharing facilitates housing intensification by making better use of housing stock. I'll turn things over to Edna Beange, chair of the board of the Sharing program.
Ms Beange: Thank you. The home sharing programs have been formal organizations in North America for over 20 years. Home sharing has had a national profile in Canada for the past 11 years.
In 1985 the Ontario Ministry of Housing began cofunding programs with municipal governments through cost-sharing arrangements. In the past seven years, this partnership has worked very well. Presently, there are 17 programs. The Ontario model of home sharing is internationally recognized for its effectiveness, cost-efficiency and innovation.
Home sharing programs screen and match individuals who are interested in shared accommodation. They are looking for a safe, affordable housing alternative or looking for help to meet rising costs of maintaining their homes. Intergenerational matches provide support to older people who wish to remain independent in their own home but need the added security of a sharing partner.
Home sharing also assists special needs clients by facilitating housing arrangements in which their unique requirements can be met. These people with special needs would otherwise require extensive government intervention and subsidized housing. Home sharing is a creative community alternative that enables the development of healthy caring communities across the province. In short, home sharing is a means of fostering independence, self-determination and autonomy in the lives of many who have been forced to live in socially and economically restrictive circumstances.
Home share programs also provide access to existing housing for individual residents in a number of ways in addition to actual home sharing. They are often the only avenue in the community for residents to get information about other housing alternatives, to receive help filling out applications and to obtain referrals to appropriate services. Through home sharing, additional units of affordable rental housing are created at very little cost to home owners and to governments. The units are immediately ready for use.
The coalition's 1991 statistics show that 42% of home sharing cases in Ontario involved accommodation that was provided on the market for the first time. Furthermore, close to 80% of all units would not even be on the market if it were not for the home share program. These units are not advertised anywhere else, often because advertising widely in newspapers causes security concerns to single female providers.
The use of this housing stock would disappear without the home sharing program. This is quality stock for the clients whom home sharing programs serve. It is affordable and supportive. In many situations, landlords have become like second families to the clients. In addition, many of the providers are now part of a permanent roster of landlords who have found sharing partners through the programs for several years. In other words, the home sharing programs have developed a new type of permanent accommodation previously not accessible, and the Coalition of Ontario Homesharing Programs, with its 17 community-based programs, can continue to run an effective service.
Therefore, we recommend that the Ministry of Housing continue to fund home sharing programs as part of the permanent core programs offered to the citizens of Ontario. The ministry has expressed the desire to go beyond the bricks-and-mortar provisions to offer more community-based services. Support of the home sharing programs will help in achieving this goal.
Home sharing programs are already well-established in their communities and can provide the expertise and knowledge necessary to establish one-window access to all of the housing options available in each community.
Ms Chung: I'd like to now have Susan Bacque from the city of Toronto talk about the municipal support and community support for this program.
Ms Bacque: As Christine says, I work for the housing department and home share is one of several housing programs that I supervise. I want to share with you some of my thoughts about the local support for this program.
The success of home share is, in my view, due to the diversity of support which each program enjoys locally. The support begins with private individuals such as your constituents. These are the people who use the service. At the city of Toronto we receive 10 to 15 new registrations every week without even advertising the program. When we advertise, this number skyrockets.
1410
People need housing alternatives, and seek the security, confidentiality and support we offer through the home share office. Some programs in the province have a stable base of housing providers who can, on very short notice, shelter a new Canadian, a single mom or a teenager. Home share involves community members in the solution to their community's housing problems.
Home share staff work with staff from grass-roots agencies and other direct service providers to find suitable homes for people at risk. Home share staff keep informed about recent developments in their communities through this working relationship and through local area networks.
In the city of Toronto we work through a subcommittee of council called the alternative housing subcommittee. At the regular meetings of the alternative housing subcommittee we interact with rooming house tenants, non-profit providers, social workers, drop-in staff and indeed a full spectrum of housing helpers. This is how we check the pulse of the city. This is the chance for staff from local hospitals, shelters, drop-ins and schools to meet the home share officer. One of the results is that we consistently make referrals for people who have health, safety and psychiatric concerns, in addition to housing and economic problems.
Every home share program is required to find at least 25% of its budget from a local source, either the municipal government or a locally based agency. In this way the program is integrated with regional, municipal and neighbourhood social service networks. Offices are shared, staff move among the direct service programs, and this produces a comprehensive approach to community services and heightens municipal capabilities in this area.
The final point I want to make is that because this program receives financial support from municipalities across the province, the cost to the Ontario government is a nominal $700,000 a year. Home share found housing for 2,000 people last year. Spending a small amount of money on the provincial home share program each year is smart. Homes and apartments are fully occupied and other costly supports aren't necessary. The provincial funding triggers local monetary commitments in a system of integrated solutions to local housing problems.
Ms Chung: We'll now have a presentation from Mr Norman Monkley. Mr Monkley was matched through the Scarborough home sharing program and he's going to tell you a little bit about his experience and how the program has helped him. This is his first time at Queen's Park, so he might be just a bit nervous. Okay, Norman.
Mr Monkley: I went down to welfare and spoke to the welfare office. They sent me to SHAPES. I was on the street, and SHAPES found me a place on Wildlark Drive with a Mr Edward A. Flowers. I stayed with that man for a year and a half. Then he decided to sell the house and keep his cottage up in Peterborough and go there in the summer months. Then he bought a motor home in Florida to go there in the winter. So he was intending to go to the cottage in the summer and to the motor home in the winter. He was going to keep me there, but he said, "Norm, the only reason I can't keep you is that I want to let the house go." I said, "That's fine, Ted." He said, "You were very good living here." So then I went back to SHAPES and Christine found me another place to live, which is Mrs Sheppard. That's where I'm living right now and Mrs Sheppard, up to now, she's been treating me pretty good.
The Chair: That's good.
Ms Chung: Thank you very much, Norman.
That concludes our presentation on home sharing. We wanted to give you an opportunity to ask questions. So if you have any, we'd be happy to answer them.
The Chair: I'm going to go to Mr Carr first, or Mr Arnott.
Mr Arnott: Thank you very much for your presentation. It's very interesting. How much funding do you get from the provincial government, or is there a simple answer to that question?
Ms Chung: The $700,000 for all of the Ontario home sharing programs, and each program gets $40,000. There's usually a cost-sharing agreement with a local municipality, and the local municipality contributes 25%.
Mr Arnott: All right. There's a list here of the services you provide. You provide information on the Landlord and Tenant Act, offer mediation services between landlords and tenants and refer clients to legal services and so on. How much of your staff time is taken up by that sort of advisory responsibility that you look after as opposed to actually working with people in terms of finding placements for them?
Ms Chung: I think it varies from program to program depending on how many other possible resources there are in terms of housing in the local community. Unfortunately, in a lot of communities the home sharing program is really the only one, so rather than turning away people without any help at all, in going through the process to find if home sharing is really the alternative for them it may be that it isn't, so then the program will look at other alternatives for them in terms of housing, whether it's through non-profits or co-ops or whatever that might be. That's a large part of the work in terms of just trying to help that person in terms of his or her housing needs.
Also, I guess a lot of the mediation and part of the mandate of our programs is also to help people maintain housing. If we match them in a place we also provide services in terms of mediating if there are any difficulties between the seeker and the provider in order to ensure they maintain the housing, so that's a large part of what the mediation activities involve.
Mr Arnott: Do you have many members in the north of the province or are they mainly concentrated in the urban areas?
Ms Chung: I would say we're quite well represented across the province of Ontario. There's a program in Sudbury and a program in North Bay, and we also have throughout the eastern part of Ontario: Ottawa, Peterborough. In southwestern Ontario there's a program in London and Windsor. I would say that the programs vary in terms of urban or rural and each program has designed its own structure to fit the community it has to serve.
Mr Arnott: Thank you.
Mr Carr: Thank you very much for your presentation. I think you said you get $700,000 and you serve about 2,000 people. Was that the correct figure?
Ms Bacque: That was the figure that I used. In our review you can see in one of the graphs at the back I've rounded numbers. There were approximately 1,000 matches last year all across the province, from the 17 agencies. That's an estimate because we didn't get reports from every single agency. So that means effectively 2,000 people were matched; that is to say there was a house and an apartment and someone was living there. When we move someone in we count that as one match. In addition to that the home share officers make suggestions to people about appropriate places to live, for instance, a women's shelter, perhaps temporary places but nevertheless places that are better than simply putting on a blanket on a park bench. So we make referrals to women's residences and other appropriate sources of housing. We call those "placements," and we did about 1,000 placements last year. You'll see it's a little over 1,000 places and a little under 1,000 matches. There we're talking about just one individual.
If you think of it as 2,000 individuals who found a place to live, and you can add into that some of the individuals who had space in their apartment or house but were having trouble affording the mortgage or the rent, and that 2,000 figure doesn't include those people.
Mr Carr: What about when you get involved in matching funds? It's very difficult. What are municipalities saying if you get the funding or any increases? What's going to happen with municipal funding? I guess it will depend upon municipalities, but just in general, are they prepared to match, do they have some funds to help out, or where are we at with some of the matching funds? Does anybody know?
Ms Chung: Actually, the way the program is structured, if you don't get municipal support you can't get the money from the Ministry of Housing. The experience has been actually very supportive. Most of the municipalities are very supportive. None of the programs have lost that municipal money. If we were to lose that, though, there is the danger then that we would lose the money from the Ministry of Housing. Up until now that hasn't been a problem. Actually, it has been almost in reverse; every time we go through --
The Chair: Mr Carr, I've got to go on to Ms Harrington. I bet she's going to say that the pilot project started in Niagara under Doug Rapelje, and I know Margaret supports it but I can't say that. I think she's going to ask questions of how many singles you've set up in the last year compared to 1988. I know all those questions you're going to ask, Margaret, so go right ahead.
1420
Ms Harrington: Thank you very much for your presentation. I do believe we have a good program in Niagara. You probably know Bev Goodman; I think she was here last year. I am with the Ministry of Housing; I'm the parliamentary assistant, and it's certainly something that we are discussing at the moment.
Yesterday I was in Niagara Falls with the Minister of Housing and we were meeting with the access to permanent housing committee, which are housing help centres across the region; we have four locations in four cities. We actually discussed home sharing as part of how they provide housing at the housing help centres.
Two questions: First of all, they said that it was mainly for seniors. What proportion now and maybe in the future do you see would be for younger people? Are you able to fulfil that kind of need? Secondly, they brought out the question of the selection criteria and the process that people have to go through. What was said was that it was quite strenuous, the detail involved. How would you address that in the future?
Ms Chung: On the first point about the focus on seniors, what we have found is that each program locally had developed originally seven years ago in terms of the need in the community, and access being a fairly recent program -- I think there are discussions in every region now between home sharing and access in terms of, the environment has changed; how are we going to meet the needs of the people in the community now that we have these two programs? But our mandate is to serve anybody who was interested in home sharing. So we serve youth, we serve immigrants and refugees, especially in the Metro area because that's a population that has a great need for housing. So there isn't necessarily a specific focus on seniors. Now, the focus in terms of seniors might be in that the providers, a lot of them, are people who have extra space in their home but they may be matched up with a 16-year-old person who's looking for housing or an immigrant who's recently come to the country and may be young. So we don't have any restrictions that way.
The other point in terms of the effectiveness maybe of the programs now, that there is access to permanent housing programs in each community, is something that the coalition would like very much to discuss with the province. I think we have our own recommendations too in terms of how the program could be more effective, but I think we need to know what programs are going to be funded and which ones aren't so we can have that type of discussion in our own local communities about which services should be done by which groups and how those best meet the needs of the community.
Ms Harrington: So you might look at working together.
Ms Chung: Oh, yes, we definitely have done.
Ms Harrington: Good, but the question I asked was about the criteria for placing people.
Ms Chung: The criterion set generally, again, is basically an interest in home sharing. We ascertain whether home sharing is the best alternative for them by interviewing them and by checking some references. Checking the references is basically trying to get at, do they have any medical conditions that we need to know about? Because sharing is a unique type of placement. People have to be compatible and if a provider is going to take somebody in who has certain medical conditions then they need to know about that. So it is a little more involved than a placement. That's actually, I think, in a sense the beauty of the service, that we do do that, and so it's not just placing somebody anywhere. We're trying to find people who are compatible and are going to be able to live together for a long term.
Ms Harrington: In terms of intensification of this kind of thing, I'd like to see it expand --
The Chair: Margaret, I've got to cut you off. And there's one thing you didn't mention: that Doug Rapelje is making a presentation to the social development committee on long-term care on this particular issue, so I just wanted to straighten out the record for you there, Margaret. Mr Phillips.
Mr Phillips: I appreciate the work of the group, and I know we use the SHAPES organization a lot from my office. Just so I understand the finances: Each of the 17 groups' budgets is around $70,000 a year?
Ms Beange: No, $53,000 a year.
Ms Chung: Forty thousand dollars from the Ministry of Housing and then some of the programs seek other funding from other types of programs in addition.
Mr Phillips: Okay, I was going by this sheet at the back here that said $70,000 average budget for 1991.
Ms Beange: Some programs are not attached to other agencies, are not able to be. Sharing is one of those. Sharing serves the seniors of Metro Toronto and it's a standalone program. We haven't been able to find anybody to whom we can attach ourselves. On that basis, we are on this very limited budget which hasn't changed since 1988, so it has been very difficult.
There was an inquiry about seniors' housing. There are three in the province that specifically serve seniors: the one in Ottawa, the one in Hamilton and Sharing in Metro Toronto.
Mr Phillips: In terms of where the issue is, are you finding you have more people who want accommodation or more people who will provide accommodation? Is there a significant mismatch there in any way?
Ms Chung: Again, I think it varies from program to program. Our experience has been that it does vary in terms of -- for example, even immigrant and refugee policy from the federal government will influence how many seekers in Metro Toronto we have looking at one point, but it balances out in terms that usually for each seeker we can give them a choice. So they're not limited to one or two; they get a choice of different possibilities, and for us that's the important thing, that people get to look at maybe six or seven different providers and types of accommodation.
Mr Phillips: I know you must have said this, and the budget right now from the province is $700,000. What's that been tracking over the last few years?
Ms Chung: It's been the same for --
Ms Beange: Since 1988.
Mr Phillips: In absolute dollars, it's been the same, has it?
Ms Chung: Right.
Ms Beange: There's been no change.
Ms Chung: And $40,000 for each program, no matter if they're making more matches or fewer matches or serving a bigger population than another program. It's just a $40,000 allotment, no cost-of-living increases for each program.
Mr Phillips: In terms of matches, you indicated across the province it's around 1,000 individuals who were matched each year, is that right?
Ms Bacque: No, 2,000: providing to the seeker one match. So we have 1,000 people who have moved into somebody else's place, yes.
Mr Phillips: I was struck by the numbers back here that suggested that the average duration was a little less than I had thought it would be, that it looked more temporary for the accommodation. Is that just because people need almost temporary help as they look for a more permanent place; is that what you tend to have more of?
Ms Chung: It could be, but also I think Norman's experience is a good example of how it might be that he initially moves into a place, the landlord decides to sell the house, but he comes back to us again in terms of finding another accommodation.
We have done studies and have found that the most likely reason for somebody moving out of a place is what we call "change in their status," so it isn't that there were problems in the match; it's just that they've gotten another job in another region or the landlord is selling the house. It's not usually because of incompatibility; it's just people's lives change and so they often seek another accommodation within the same program.
Mr Phillips: How have you been dealing with the budget freeze? What are the implications of that?
1430
Ms Bacque: There's less money available to produce helpful guides for people, to produce information about the Landlord and Tenant Act, which has an unusual application in the home share situation. So there's less of that disposable money, and more money is, of course, being spent on staff salaries.
I have an observation about the current situation in the city of Toronto right now which ties in a little bit to the length of a match, in my view. Right now we have many, many more providers, people with space, than people who are looking for space.
Mr Phillips: Really?
Ms Bacque: But the people who are looking for space are quite needy in that they're single moms; they're on welfare; they have head injuries; long-term disabilities; they're coming through a hospital to our program. These people with special circumstances in their lives tend to be a little harder to place, so it's a good thing that we have a lot of options available for these people.
Some of our seekers are also going through a life change of some kind: leaving alcohol behind; leaving an abusive husband behind; leaving part of their lives behind. It's a transition in their lives and they are looking for a stable home environment so that they can work that through. I think that because of some relatively unique needs and because these people are oftentimes using the program at a transition period in their lives, the matches are not quite as long as we might hope, but that, I don't think, takes away from the value of them.
The Chair: Mr Phillips, time has run out. I'd like to thank you for appearing before the committee today.
ONTARIO ARTS COUNCIL
The Chair: The next group to come forward is the Ontario Arts Council. Do all the members have copies of the brief? Is it just the Chair who didn't get a copy? I didn't get a copy.
I'd like to welcome you to the standing committee on finance and economics. You've brought quite a bit with you today and I just hope that for all the members of the committee, you'll direct them to what page you're on or what book you're in. And I guess you're going to start off with a video.
Ms Gwenlyn Setterfield: We will. We would like to just introduce ourselves.
The Chair: Yes, I was just going to get to that, but I know he's trying to get a picture on there, so if you don't mind, from left to right or right to left, introduce yourselves in your position.
Ms Jennifer Beadle: Jennifer Beadle, executive office supervisor.
The Chair: Excuse me. Could somebody just shut the door there for a minute? Wait until the TV goes down there.
Ms Eleanor Goldhar: Eleanor Goldhar, director of communications and research.
Ms Setterfield: Gwenlyn Setterfield, acting executive director.
Mr Daryl Novak: Daryl Novak, director of administration and secretary.
Mr Jean-Paul Gagnon: Jean-Paul Gagnon, touring officer.
The Chair: You may begin.
Ms Setterfield: Mr Chair, we would just like to say a couple of words before we show you the video. We thought we would bring a video this afternoon because we are after all an arts group and we are here to try to give you some information about the arts as a sector which we feel is very important to the economic renewal of Ontario as well as being a social good, if you like.
I would like to first of all bring apologies from the members of our council. We are all staff people here today. We have a membership of 12 on our council appointed by the Lieutenant Governor and we would have liked to have had one of them here today. They do all serve as volunteers on our council. Work, winter travel and winter illness have precluded any of them being here today.
The little film that we've brought is actually an excerpt from a larger film, so the quality of it we apologize for because it was taken from a commercial film. The reason we wanted to bring this film today is to show you some of the kinds of work that the Ontario Arts Council is doing in partnership with the community, and this film represents a scope of things that we have included in our total assistance to the community.
It is based on the story of a little community orchestra down in Cobourg called the Northumberland Symphony, and there you will see the volunteer people, the people who are doing the music just for the love of it. You will also see a young man named Barry Shiffman, who is a young professional getting one of his first opportunities to perform with an orchestra. Since this film was made, Barry Shiffman has actually gone on to a quite distinguished international career as a violinist.
The full-length film was made by Rhombus Media, which is a commercial filmmaker in Ontario. This film was produced with the help of government, with private money, and it did in fact go on to be nominated for an Academy Award. So we see here the full spectrum that the Ontario Arts Council can support: community-based amateur arts, professionals, young people, old people and the commercial sector. So this is culled from Making Overtures.
[Video presentation]
1443
Ms Setterfield: We would like to just let you know that at the Ontario Arts Council, music isn't the only art that we're involved in. We also support theatre, dance, visual arts -- that's crafts, sculpture, painting and design -- as well as an extensive arts and education program, arts in the schools, a special program office for the Franco-Ontarian community, literature, film, photo and video.
Mr Novak is going to say a few words about some of the numbers that you've got in your packages.
Mr Novak: As the province's prime funder of the arts, I thought it would be useful to give you just a capsule of, as Gwen says, some of the numbers.
Our budget in 1990-91, our total operating budget, was slightly in excess of $36 million, and in 1991-92 we were granted a fairly significant increase of approximately $9 million, which brought our budget to just over $45 million. Like many organizations, in this current year we have taken a small cut, which has brought it just under the $45-million level. Of that budget, that roughly $45 million, we devote approximately $38 million to grants and other services to our clients, with the balance of roughly a little under 15% going on salaries and administrative expenses.
Of that $36 million which goes directly to grants, we're looking there at over 6,000 applications per year, and roughly 3,900 to 4,000 grants being given per year. Now, these grants will range anywhere from $500 to a writer for a work-in-progress up to a major operating grant to one of the major institutions such as the Toronto Symphony Orchestra, which will be between $1.5 million and $2 million, and everything in between.
The bulk of OAC's funding, approximately 97%, 98% of it, does come through the Ministry of Culture, Tourism and Recreation as part of our annual allocation. The balance of funding we make up through sources such as interest income and various other special one-time grants or allocations. We do also maintain some separate endowment funds; we have roughly $8 million at this stage. What we do with the endowment fund is use the interest to create other very specific awards, and the endowments traditionally come from individuals who've left us money in their wills.
Just a thought of where this all fits in relation to funding of other things in the province and then funding of the arts in Canada: The Ontario Arts Council was the second-largest agency in the culture portfolio of the then-culture and communications ministry. Spending on culture in Ontario was roughly $33 per capita last year, compared to almost $1,700 on health and $650 on education. Ontario is actually the eighth in per-capita spending on culture, and is about average in Canada on actual dollars spent.
Mr Gagnon: I'd like to continue a little bit and talk about the outreach programs and what happens to that money once it gets to the community. I think you saw an example here of what artists in the community can benefit from with subsidies from the Ontario Arts Council, but there's also the other side, the side that deals directly with the community, with people in their own communities -- small villages, towns, all across Ontario -- who, through outreach programs at the touring office, in the community arts development office and in the arts and education office, receive the benefits of funded artists or funded arts activities.
One example for my office, which is in your package but I just want to point it out: Manitouwadge, Ontario -- I'm sure a lot of you know where that is -- has a population of 4,600, and for the last two or three years they've been talking to our touring consultant in the northwest, saying, "We really want to get some of the attractions that go elsewhere; we'd like to have them here." With a population of 4,600 they managed to sell out a full performance series to their community, and they now, because of the capacity of the hall, have a bit of a waiting list. So it's one example. We do such activities in approximately 350 different communities across Ontario. So I just thought I'd make that emphasis, bring you that, closer to the community.
Ms Goldhar: Besides giving grants, one of the things that the Ontario Arts Council is very dedicated to is helping its clients be more effective and better at what they do, so we have a number of other kinds of services that we provide to them. For example, we will pay for a management consultant to go in and work with an organization to make it more effective. It's really part of skills development. Our clients identify for us a variety of areas where they need assistance in skills development, and we either fund it directly or we put them in touch with people who can provide those services to them. We also provide them with a number of other kinds of services that are information-related services, things such as research, that they can use in their own lobbying and advocacy activities to raise additional funds municipally, or just information that they need for their own purposes to do their job better, whether it's about advocacy or arts management or our services.
1450
So we're an information provider, and we're also a catalyst or a liaison type of organization that helps put ideas and talent and money and opportunity together so that the clients can be as independent and effective as possible within their organizations, within their disciplines, within their communities.
Ms Setterfield: Mr Chair, I think that sums up our presentation. We'd be happy to have any questions.
The Chair: We've got about three minutes for each caucus, and I see Mr Dadamo had his hand up. He's the only one who can sing in our caucus, so I'll give the floor to you there, George.
Mr George Dadamo (Windsor-Sandwich): I'm sorry, I don't have any questions.
The Chair: You don't have a question. Mr Johnson.
Mr Johnson: During these very difficult economic times, those groups that would get funding from the province as well as solicit funds from private individuals and corporations, they're having difficult times. I was just wondering if you could tell me what the sense is in the arts community right now with regard to funding. I know you're here to talk to the government, but I just want to get a sense of what's happening out in the private sector. Are the kinds of dollars coming forward that usually happen?
The reason I raise this is, I was the treasurer for a theatre, and so I became aware of the fact that during recessions we seemed to get less money than we did during the good times, and I was just wondering if that was a barometer of what would happen on a larger scale.
Ms Setterfield: I think it does. It happens across the whole spectrum. Clients are reporting that the corporate sponsorship is down in many cases, or is more difficult to get, and obviously small business sponsorship has been very difficult for some of the small groups.
Interestingly enough, the private individual donations seem to be holding up quite well, which seems to say to us that the people really do care about the arts and they really do want them in their community, individuals. And immense numbers of volunteer hours.
Mr Johnson: Absolutely. Volunteerism is, I think, the backbone of the arts. There's no doubt about that. But a little extra funding certainly doesn't hurt.
Ms Setterfield: It's kind of a domino effect. We've had a great deal of difficulty because the federal government has been withdrawing, as you know, for quite some years. Well before the recession set in they had begun to reduce their support. That's a story I know you're hearing from a lot of sectors, and the arts is no exception.
So people have been looking to the municipal governments; they've been looking to the private sector, but as the recession set in, all of those things began to fall by the wayside, and it's all beginning to sort of unravel for a lot of the organizations. And the artists become the biggest subsidizers then. They work for less and less; they turn back their fees; they do those kinds of things.
Mr Johnson: Well, there's certainly a soft spot in my personal heart for the arts. Thank you very much.
Mr Phillips: I wasn't sure on the numbers that you are recommending to us. You said one year was $36 million, the next year was $45 million, and then $45 million?
Mr Novak: And then we went down by about $500,000 to $44.7.
Mr Phillips: That's the year that's just ending right now.
Mr Novak: That's the year that we're just ending, yes. Right.
Mr Phillips: And what advice do you have for us in terms of next year?
Mr Novak: Do you mean what do we think is going to happen, or what would we like to see happen?
Mr Phillips: I think all of us appreciate that this is not an easy time, but what is your advice for us?
Mr Novak: Ideally we had hoped to at least be able to maintain our base, and possibly at least have restoration of the 1% that we lost in the last year. That's obviously not what we were asking for in our strategic planning documents and the kind of impact that we had hoped would in fact occur when we got our first $9-million increase. But we realize that, as you yourself, Mr Phillips, were saying, things are difficult. At this stage we would be secure if we could maintain our position and not drop.
Mr Phillips: Which is $45 million in absolute dollars -- is that it? -- which is, in real terms, a modest decline in purchasing power.
Mr Novak: In buying power, yes.
Mr Phillips: That's rather refreshing to actually have someone come in here and be prepared to recommend maintaining spending and not increasing it.
Mr Novak: We can effect certain savings internally that we're working on right now. For example, we're renegotiating a lease and most probably moving premises, so that will net us a couple of hundred thousand dollars, and there are areas where we're doing the best we can internally to effect some savings. As we say, it's not going to do what we had hoped to do in our long-range plan, but if we can maintain where we are, we feel that we can still provide a viable service.
Ms Setterfield: I would also like to add, Mr Phillips, that even with this money, even if we could just hold even, it's not just going to be a little club that everybody who was there before are the only people who get serviced, and everybody else is shut out. We're prepared to make some pretty hard decisions so that we can continue to broaden the base. Our council has just been through a planning process, and one of its priorities is to broaden that base of assistance to all kinds of communities that haven't been serviced before.
That may not be in big grants, but it may be in the kinds of service help that Ms Goldhar was speaking about. It may mean looking at some organizations and saying: "We've helped you for a long time. We feel that you're on your feet now, and there's another group that really needs help." The first nations' programs, we have some now that need to be expanded. There are all kinds of new communities I'm sure you've heard from whom we have to be partners with too, so it's not just incremental notching down here. We really are trying to be quite proactive in our planning.
The Chair: I'm going to have to go on to Mr Carr.
Mr Carr: Thank you for the presentation. Of the budget, what per cent would be administration? Just a ballpark figure.
Mr Novak: We spend roughly 11% or $5 million on salaries and wages, which of course is the biggest chunk, and a little under 4% on the other administrative expenses, things like rent, telephones etc.
Mr Carr: So a total of about 15%.
Mr Novak: Yes, a little under.
Mr Carr: Could you give a little bit of an idea what the process would be then, if you're looking at a grant? Say I come to you and would like a grant. What's the process? How long does it take? How does it work? How many people get involved and so on?
Mr Gagnon: We have various types of grants, either advised or juried. A candidate would come to an officer and the officer would examine the request, talk about the request and suggest the best possible way to present it so that the peers, the people that we do get to come in on juries or advisories, are best informed about the activity that is being proposed.
Then similar activities, similar types of grants, are put together as a package and given to these advisers or jurors and examined in context, and decisions or recommendations for funding are made through the peers, through the people from the communities, artists themselves in similar disciplines.
Mr Carr: So the jurists don't get paid then?
Mr Gagnon: They do, yes. They get a stipend.
Mr Carr: Like a per diem or whatever?
Mr Gagnon: A per diem, yes.
Mr Carr: The other question relates to the funding. I think you were right. The first year when this government was in you got a real windfall. I think they were happy to be in and were very pleased to do it. We've heard from the Treasurer yesterday what a terrible financial situation we're in. It'll be $12 billion or $13 billion, whatever. That'll work out to costing us about $15,000 a minute just to pay the interest on the provincial debt. By the time we're done, accumulated debt will go from about $30 billion in 1985 and it's projected to go over $100 billion over the next couple of years. You may have read the report that C.D. Howe says there's a good chance people won't lend us money.
We're hearing from groups that are coming in, people before you, talking about people with housing, children's aid societies that are going to have to scale back. How do you answer the question in these limited times people say that the arts should not be a priority when we quite literally have 1.2 million people on social assistance who didn't get an increase? How do you answer that, because I'm sure you get asked that many times, to the average person who would say that in these tough economic times you should be one of the people who gets cut back?
1500
Ms Setterfield: I appreciate the question and, yes, we do hear it many times, Mr Carr. First of all, we are spending at the Ontario Arts Council $4.57 roughly per person in the province of Ontario. We feel if you swept away that roughly $5 and gave it to these other sectors that are spending $1,600 a person or $800 a person, our $5 is not going to make very much difference one way or the other, in solving the problems of the provincial debt or the other social problems in society.
That's to put it in its most crass terms, but to put it on the other side, this is a viable economic sector in the province. There are 66,000 artists working in this province. It's a growth sector. This is a highly trained, highly disciplined, creative workforce. It is exactly the kind of workforce that we are being told from all corners is going to be very important in the 21st century for the growth of our community.
If we don't have those 66,000 people working, they're going to go on welfare or they're going to work in restaurants, maybe if they can get those jobs, but they've been highly trained and they've been trained by this society. We are training artists here in our universities and our art schools, in our dance schools and so on. These are world-famous institutions, some of them.
We trot out our artists on every occasion when we want to attract attention to our country internationally, and we all know that, in reading these reports, international trade, international presence is going to be very important for this community in the 21st century.
One artist's job costs less than $20,000 to create. We feel that is a terrific investment for the future. Apart from all of that, I have to say that one of the reasons we brought the little film is to say that we still have to have some soul in our lives and in our community, and I think you can see that those people in Cobourg, as she said at the end, "We want it, we need it, we deserve it and we're willing to work hard for it." And they do put a lot into it.
Our arts organizations are not leaving a trail of debt behind them. We have had not one of our clients in this recession who has gone broke and left debt for the public to pay, not one.
The Chair: I'd like to thank you for your presentation before this committee.
Ms Setterfield: We appreciate your attention.
The Chair: Mr Dadamo, will you take over for me as Chair for the last hour here?
LOCAL EMPLOYMENT AND TRADING SYSTEM
The Acting Chair (Mr George Dadamo): Thank you. Mr Khalsa, if you would step forward, sir. Would you identify yourself, please.
Mr Sat Khalsa: My name is Sat Khalsa. I'm the administrator of the Toronto Local Employment and Trading System. I'm here to talk about money.
The Acting Chair: I have to tell you we have 30 minutes. If you'd like to leave some time for questions from the members. Begin any time.
Mr Khalsa: The problem, to put it succinctly, is that we don't have enough money. That's what we think. From the individual, to the communities, to the business, to the government, we don't have enough money. So even though we have things we have to do, services we have to provide, needs that have to be met, children that have to be taken care of etc, we are feeling squeezed. Meanwhile, on the other hand, if we take a step back, do we have enough food? Yes, we do. Do we have enough technology? More than ever before. Do the people of Ontario have enough brains? Of course. Do we have enough talent? Yes. Are we too lazy? I don't think so. I think the problem is accounting. I'm not going to get into it on the macroeconomic level, because then you'll say I'm crazy, but I want to address it on the microeconomic level.
I suggest that communities without enough money still can make use of the people who are unemployed and the resources that are there to meet the needs that that community has. One of the solutions is what we call a local employment and trading system, or LETS. It's a non-profit community-based barter network that blends entrepreneurial and community spirit. It was invented by Canadian Michael Linton in 1982 in Courtenay, British Columbia, and there are now over 200 communities around the world that are using this system or similar systems. In short, what it does is it enables people to do work even if they don't have a formal job, even if they're short of cash to get things they need. I think that LETS can play a vital role in letting a community solve its own problems.
Let me give you some of the evidence I have for that. In Toronto, despite enormous scepticism and no sponsoring groups, no startup funds, we're here. For two years we've been going. We have 200 members and we've facilitated over $80,000 of non-monetary trading. We don't keep track of the cash that's traded hands, but all the cash that's traded hands was local spending. Much of this trade would not otherwise have happened.
For example, we trade organic produce, sewing, dentistry, day care, word processing, accounting, graphic design, massage and so on and so on. I've personally done $9,000 of trading in exchange for administrative work, writing people's résumés, helping people move, teaching WordPerfect, tutoring university students, preparing people's taxes and word processing; I have rented a juicer and a lamp, gotten my clothes repaired, my car tuned, my bike repaired; I've bought a sofa, received counselling and so on. Usually, these services have been 100% green dollars. Consider this: Although I haven't had a regular, formal job for two years, I get a weekly massage. Many people who get $40,000 a year, maybe some of you, don't think you can afford to get a weekly massage.
In New Zealand, with a population roughly the size of Metro Toronto, four million people, in the last three years alone, they've started 50 systems and they're doing $3 million of trade. The government investment was in the area of $50,000, mostly disbursed as one-time startup funds of $500. There, the community took the ball and ran. In Australia they have 100 systems. The government of Western Australia recently allocated $50,000 to fund a national conference to develop improved computer software, which we're working on here, and to fund dialogue on taxation issues. The government has also produced a 90-page manual describing how to start a LETS.
Closer to home, in the US, Michigan, Missouri and Florida have all passed legislation with all-party support to fund barter credit systems similar to LETS. Missouri allocated $250,000 to 10 groups and set up a kind of state-wide automated teller network. The purpose is not altruistic; it's to ease funding pressures on state-sponsored services for senior citizens, letting seniors help themselves. What they've found is that through these networks, they tap into volunteer effort that isn't accessed through either the paid cash economy or through volunteerism. Up to 40% of the volunteers in these programs are people who have never volunteered for anything in their lives. They find that the volunteer turnover decreases from in the area of 40% to in the area of 5%. Most of the people earning the money in the US don't even spend it, but the simple fact that they're getting paid something makes the work more valuable to them and it educates the people to the potential of the idea.
1510
In Florida they spent $50,000 to start up a barter network in Miami and it now provides 8,000 hours of labour to disadvantaged groups. So for example, a Meals on Wheels program doubled the number of volunteers and quadrupled the amount of food that it could deliver to people without any increase in cash funding. As Ralph Nader states in the introduction to this book on the subject, "Time dollars have been tested, and they work."
To put this in perspective globally, commercial barter networks in Australia, New Zealand, the US and Canada reported transactions totalling almost $6 billion. So while we're talking about a small idea, it has potential. Incidentally, almost all of this barter is taxable. We're not trying to avoid taxes. Economist Hazel Henderson estimates that almost one third of the world's transactions are now bartered.
So what's in it for government? I'm going to quote Milan Dluhy, the director of the Institute of Government at Florida International University. He says: "The potential for using this form of currency is limitless. Communities and groups can now create their own services without having to turn to government or the vote for new taxes. A simple but powerful concept."
Here's what the department of social welfare in New Zealand has written: "The department supports the usefulness of green dollars for the unemployed. Some of the benefits of trading are:
" -- It keeps participants work-ready and therefore more able to enter full-time employment.
" -- It allows individuals to develop a number of skills and abilities they might not otherwise learn.
" -- It affords individuals wanting to test the viability of a business idea an avenue to modify and pilot a good or service before starting a business."
So, for example, if someone is fully convinced they have nothing to offer in the economy, they can join our system and get credit. They can learn a skill, have a résumé written, get a desktop published, get a network of people who are members of the community in good standing, businesses, and they can find work.
So what we're asking for is very humble. We don't want ongoing funding, because we think that this idea can swim on its own, and if the community doesn't want it to swim, well then, it shouldn't. But we'd like the government of Ontario to investigate and endorse the concept: Say that it's above board; say that it's legal; say that it's being done.
We would like funding for a pilot project to see once and for all if the idea can fly. More than that, we want the Ontario government to consider setting up an education and resource centre. The cost of these initiatives would be minimal compared to other kinds of government spending and compared to the expected benefits to the community. Our simple thesis is: When neither the cash economy nor governments can provide the social support structures that people need, governments should simply help communities to help themselves, and LETS is one important way that communities can do that.
That's all I have to say.
The Acting Chair: Okay, Mr Khalsa. Thank you very much. We have about six minutes per caucus, and we'd like to go to the left side and talk -- that's the wrong terminology -- to the Liberals. Any takers?
Mr Kwinter: Yes. Mr Khalsa, the concept that you present is interesting. It's really a reversion back to the beginning of commerce. That's really how the system worked. One person would have a particular aptitude and he would do something for his neighbour. In return for that, the neighbour would give him something that he had that the other person wanted. What you're asking is that we sort of revert back to that.
I have a few concerns. I have no problem with the concept; it's a self-help kind of program. It's not much different than the Daily Bread program in that people in trouble can turn to other people to help them get through some difficult times.
I do have some problems with it as an economic concept. If you take a look at your presentation, you talk about, "The evidence: LETS works because `barter' works," and you talk about, "After two years, we have over 200 members and have facilitated over $80,000 of non-monetary trading." That works out to $200 a year for the 200 participants, and that is better than zero, but I don't see that as solving any particular economic problem for someone, to find that this effort has generated, on average, $200 per year.
I'd like to hear a bit more as to how you feel that -- and as you describe it, it's a local currency, and because it's local, you can't go outside the total availability of the skills and products that are within that local group, so you're limited from that point of view. I'd like to hear how you feel that this is going to really help the economy as opposed to helping specific individuals who are looking for some kind of trade.
Mr Khalsa: You raise a number of points. The first one I should just get out of the way, about Toronto. We didn't start out with 200 people. We started out with a lot less. We've made it up that high. I'd say Toronto is still very much in its beginning phases. Toronto doesn't prove the concept. When you look at figures from other places such as Christchurch, New Zealand, which has about 400 members and has been going just slightly longer than us, they've done $300,000 to $400,000 of trading with about 400 members. In their first year they did $25,000, and then it's just sort of mushroomed.
I also want to address the issue of barter. Barter is, I do something for you; you do something for me. In that sense, it would be primitive to go back to that. But we're not talking about going back to that. In our system, you do something for me and I don't have to do something for you. You get credits which you can then go and spend with any other member of the community.
Now, in terms of how it's going to stimulate a local economy, our system is flexible. It's not 100% barter. In other words, you can go into a store and buy a book and you're paying 90% cash and 10% barter credits, which we call green dollars. So all the cash costs are met by the vendor, but some of the profit is taken in green dollars. This creates an incentive. You see, the higher the percentage of green dollars, the easier it is for people to buy it, because cash is scarce. This creates an incentive for local suppliers to start producing things that can be sold in a local economy. Import replacement is one of the keys to developing a solid industrial base, and it doesn't have to start with really monumental things. Historically, when you look at the economy of Tokyo, they started by building bicycles, and they had to develop various industries that would make the rubber and the tires and the metal and the spokes etc, and it was on that basis that their economy got going.
So we're talking about a very time-honoured idea for stimulating local economy: import replacement. We're not talking about self-sufficiency, but without a greater degree of self-reliance, considering the international situation, I think we're being foolish, because when one industry leaves a one-industry town, there's nothing left. We have to have something more stable than that underneath it all.
Mr Kwinter: If I could just expand on that, there is a well-recognized concept and one that is very, very active in global trade, and it's called countertrade or barter. What happens is you get a company in the Ukraine who's got a product that they want to sell. They don't have any hard currency to buy something that they need, so they put that particular product on the market. The end user may or may not be the customer; they may, as you say, sell it to someone else for something, who then in turn sells that to someone else. That is a very, very viable concept in world trade and it's becoming more and more common because of the shortage of hard currency. But what happens is that ultimately the thing that makes it work is the hard currency, because without somebody eventually getting that hard currency so they can go out and buy what they want, as opposed to what is available, the system breaks down.
In your model, all you can do is the old concept of a willing vendor and a willing purchaser making a deal, but you can only make a deal on those people who are prepared to participate in this kind of LETS arrangement.
1520
Mr Khalsa: Right. But we think that everybody will have an incentive to do so. We're talking about anything that has a local value added can potentially be sold in some or all green dollars. So rather than banking the viability of our idea on the ability of people to go out and buy what they want, the ultimate justification for it is that this will stimulate a community to provide the necessary food, clothing, shelter, education etc, the basic necessities that people need. So really it's the real goods and services of a community that justify the idea, rather than simply money.
The Acting Chair: Mr Kwinter, thank you very much. We need to go on to Mr Carr now.
Mr Carr: Thank you for the presentation. At the end you talk about what you would like, and that's an endorsement. How much money would you be looking for and how would you see it being set up? Have you gone that far, to think that far ahead and what you would like to see to get the job done?
Mr Khalsa: I was thinking about that for sure. It's always problematic because I can really see the point of -- you don't want to give more money than you need to. You don't want to create dependency. You don't want to deliver the message that you need government funding to do it. But at the same time it seems that Canadians, more than Australians and New Zealanders and even more than Americans, need a little coaxing to try the thing on. Most people I talk to say, "It's a great idea," but then they don't do it.
As far as how much money would be needed, it would be more like $50,000 to $100,000 for a pilot project, and most of that would be to ensure that it was conducted in such a way that we'd have the kind of statistically and scientifically valid evidence that we could point to.
Mr Carr: So that would be just funding maybe one person to run it and so on?
Mr Khalsa: Yes. I would tend to think that, in harmony with the concept, what we would want to do is instead of, for instance, renting an office, if there's rent that can be arranged in a government facility or whatever, then you do it that way. Again, you try to decrease cash costs.
Mr Carr: You said you speak with a lot of people who say that it's a good idea, but then they don't do it. What, again, in a nutshell is the reason they don't do it? You mentioned the Canadians, but is there anything else? What are the other reasons?
Mr Khalsa: I think people are busy trying to make ends meet in the regular system, but I also think that a part of the problem is that people don't know that it's already been done before. Everybody's waiting for somebody else to do it and they don't realize that it has been done and that it can work.
I think also, if I can be philosophical about it, that we really do have a situation in Canada where people are waiting for the government to do things. We've really lost the habit of self-reliance.
I just wanted to jump back to an earlier point, though, to say that it's a new idea. It's simple but all the ramifications of it are not immediately obvious. So sometimes it can take a while to get around all the implications that it has.
Mr Carr: Good, thank you very much. Good luck.
The Acting Chair: We'll go to this side now. Mr Wiseman.
Mr Jim Wiseman (Durham West): It's an intriguing idea. I have to take a little bit of exception to the thought that it's not being done in massive scales out there. It's being done. It may not be registered in your credits but it's called the underground economy. If Joe here, an electrician, has a friend who needs the basement done, he'll go and do the wiring, but the guy who's getting the wiring done has already had a favour from Bill, who was able to do drywalling. So he'll do that in exchange for having his wiring done. There's billions of that going on. I'm quite intrigued with this notion that you can tax that, because one of the things that is happening is that because the underground economy is so big and so much tax revenue is being diverted, everybody's taxes are a lot higher. So if there isn't very much cash involved in this, how do they pay taxes? You said they could pay taxes.
Mr Khalsa: Revenue Canada's ruling on taxation is that earnings in kind that are done in your main line of work are taxable, but earnings in kind that aren't in your main line of work aren't. So if I'm a dentist and I charge 20% green dollars for dentistry, I have to pay income tax on the full 100%.
Mr Wiseman: Well, you're supposed to.
Mr Khalsa: Yes. In a store, if I'm selling it for 50% cash, 50% green, I have to pay GST and PST on the full 100%. However, if a dentist goes homes, fixes a neighbour's VCR, gets paid green dollars, it's not taxable.
Mr Wiseman: I'm not talking about that.
Mr Khalsa: Okay. You're talking about the GST and the PST?
Mr Wiseman: I'm talking about an electrician, who makes his job on a daily basis, doing the wiring for his friend's basement, or a plumber doing the plumbing for his friend's basement, in exchange for that friend who is a drywaller drywalling his basement and all of that. That's their line of work; that's what they do, and yet there's a huge, informal exchange program going on out there.
Mr Khalsa: I think I'd be misleading you to say that LETS is going to enable people to catch that sort of thing, stop it from happening. It might even enable it to happen more, but it wouldn't hurt --
Mr Wiseman: That's the problem.
Mr Khalsa: -- the provincial economy in terms of taxation, because cash is changing hands in most of these transactions. The great majority is cash changing hands. So that's cash economic activity that is taxable. I don't think that people will mind paying taxes on cash trading. It's when they pay taxes on green-dollar trading that people tend to have the objections.
Rather, it will stimulate the cash economy. It won't decrease the cash economy, because cash is still needed but it's just that a little cash will go a lot further. For example, if I need to buy a table and I don't have $100 to buy it, I don't buy it; and so the sale isn't made. But if I have $50 and I can do it $50 cash and $50 green, I buy the table. The guy gets some money. I get the table. He takes the $50 and he spends it somewhere else and so it stimulates things. Otherwise everyone just sits on what they have, and we all go down the tubes.
If we can get local businesses involved -- presumably it's harder for them to avoid the taxes and they don't really have any -- the benefit of using green dollars is still enough to compensate for the fact that you still will pay taxes.
Mr Wiseman: Thank you.
The Acting Chair: There's still a few minutes left, sir, if you'd like to field more questions.
Mr Khalsa: Sure.
The Acting Chair: Mr Johnson, you're next.
Mr Johnson: Mr Khalsa, this is most interesting. I'm going to follow along my colleague Mr Wiseman's questioning, because basically what he started off with his questions was what I was going to do. I want to just take it a little further.
In rural Ontario -- and I suspect, well, maybe everywhere in fact, but I'm familiar with rural Ontario and I know this is the kind of relationship that takes place right now -- to encourage the government to get involved in this and to promote the idea, on one hand, and as an avenue to collect more revenue, I think that the people of Ontario who enjoy this experience right now would really be annoyed with a government that put its finger in one more area of their lives that it wasn't involved in, because we get the feeling -- all of us as elected representatives -- that the government has its finger in too many corners of what we're doing. I think that if we were to pursue this, as you suggest, it may actually annoy people more. That's just the feeling I have. Do you have a comment on that?
Mr Khalsa: Other people have said the same sort of thing. I want to clarify: I wasn't saying that this was a way for the government to raise more revenue. I was saying that this is a way in which government can help communities to help themselves by making them aware of the viability of this concept and of its legality.
Mr Johnson: I think it's going on to a large degree and I think, as Mr Wiseman suggested, there are those tradeoffs. I think a lot of bartering takes place. In fact, I know it does in my community -- a lot of bartering.
Mr Khalsa: A lot of barter does take place.
Mr Johnson: It makes the area look a lot more wealthy than probably the types of incomes that the people actually receive, in fact.
Mr Khalsa: I would suggest that the advantage of this system is that it expands the ability of people to get things. Barter is only people you know; it's limited, and it comes and it goes. This is a more systematic accounting that allows people to participate with more ease and it allows the full range of goods and services to get involved. We want to get food, clothing and shelter. We want to get rent in there.
One system I know of in Saskatoon that I actually helped get going because I was finishing my degree there -- they do have all those thing on to the system. In individual cases, people might be able to arrange these barter deals. This makes it easier and it doesn't hurt. It's not like the government is encouraging people to cheat. I think the reverse is true. People come to us and they're concerned that it might be illegal. We always have to assure them: "No, no, this is legal. The government is aware of us. This is not a problem." I don't think the people who are attracted to our system are trying to avoid taxes.
The Acting Chair: Mr Johnson, your time has expired, and I thank you very much. Mr Khalsa, thank you for coming before this committee today.
1530
ROBERT T. ATKINS
The Acting Chair: Our next presenter, I guess, is waiting in the wings outside. His name is Robert Atkins and he's a chartered surveyor from Cavendish Drive in Burlington. He'll be making a grand entrance soon. Mr Atkins, welcome to the finance and economics committee.
Mr Robert T. Atkins: Thank you very much.
The Acting Chair: You have 30 minutes. The process will allow you time to make your presentation, and of course we'd like to ask you some questions too, so if you will leave some time. Thirty minutes will pass very quickly.
Mr Atkins: I'd like to thank you for the opportunity of being before you and making my comments to you. My presentation addresses capital budgets and the dynamic process necessary to control them. My presentation is made in the recognition that, historically, capital sending has not been well controlled and that in the current period of fiscal constraint, better value of public money is desirable.
I've submitted a written brief titled Controlling Capital Costs, and I understand you have all had copies of that. I've also prepared a further handout including some simple graphics to which I'll refer in my talk. There's a one-page résumé, page 5 of the handout, which shows my aims, experience and qualifications, and I believe you've all got copies of that. I understand that questions will be right at the end.
What's the problem? Capital projects regularly cost more than anticipated, often by a significant margin. This applies to publicly and privately funded projects, both large and small, in all sectors and in all regions of the country. I can give some recent dramatic local examples: SkyDome, Darlington nuclear power station, Art Gallery of Ontario. The situation repeats across the province and it repeats across the country: Montreal Olympics; Calgary Saddledome; Museum of Civilization, Hull, Ottawa; National Art Gallery of Canada, Ottawa. I can go on and on. This is just the tip of the iceberg. The list is endless. I'm not privy to detailed accounts of all these projects, but the overruns are reported as being huge, often exceeding 100% and in some cases exceeding 300%.
The purpose of my being here is to present to this committee a suite of concepts, ideas and procedures for consideration which, if applied, will stop future cost overruns. It'll improve value for money. This in turn will assist in deficit reduction and eliminate fiscal waste on capital projects. I understand what those words mean, "eliminate fiscal waste on capital projects." I call the concept total value management.
I want government to get good value. I don't want to see it exploited, as it has been in the past. I want to see it well managed in its capital program and I want to see deficits eliminated -- don't we all -- and taxes reduced. It can be done, and I think it can be done for a minimal cost without impinging on functional space or on quality. Currently, these concepts either are not properly applied or not applied at all.
I'd like to just state at this stage in the proceedings that I don't represent any company or specific interest other than the interest of effective capital control and management. I don't have authority to speak on behalf of any of the professional organizations of which I'm a member, nor do I claim so to speak.
What's the reason for overruns? Overspending can be a result of changing needs leading to expanded project scope where government may still be getting good value for money, but in the vast majority of cases, overspending is not good value and it results from one or more of the following circumstances: lack of effective cost planning concentrating on prevention rather than cure; a lack or misunderstanding of project information; non-adherence to effective commitment, approval and spending conventions; an unclear or inadequate delegation of responsibility and authority.
There's a pervasive belief in senior management, which I've seen time and time again, that it's not possible to control capital cost with any degree of certainty. Consequently, there's a commonly held view that it's not cost-effective to try to control costs, nor is it necessary to allocate specific funding for that purpose. A reliance on the expectation, tinged with hope, that everything will come out right in the end, is a common approach. Experience in the daily press tells you that that simply doesn't work. In some circles, even, a 10% overrun is deemed normal and acceptable -- it's almost institutionalized -- and I think that's terrible.
So what do I see as a solution? I think a commitment to control should be communicated to government staff, consultants and contractors at the earliest possible stage in clear, unequivocal terms, and restated regularly during the project progress. Resources should be allocated specifically to plan and manage costs, and cost management policy should be written or an existing one reviewed.
Policies should be circulated and acted upon, and should be referenced in consultant agreements and contracts. Responsibility and authority to apply the policy should be given to a suitably qualified and experienced staff person or consultant who would report directly to the senior executive responsible for the project. The person should not be under the direction of another authority or discipline or under the direction of an architect or an engineer.
If I can refer to the blue bound item, page 1 is "The shock absorber." In most project teams, there's a knowledge gap. The design disciplines don't know or understand what is required of them by client management, or what accountability disciplines require. Client management and accounting is reactive to the event. It doesn't control, and often doesn't understand, the design and construction process. There's no shock absorber, which leads to a rough and a dangerous ride.
There's a requirement to connect these two essential facets of design and of accounting of a project team firmly but flexibly. The connection between these needs to translate the needs of each for the understanding of the other; a foot in the design and construction and one in management and accounting, a shock absorber between these two disciplines -- I call this person a cost planner or value manager -- a shock absorber to smooth the ride, a conduit for project information and a support for the framework of the whole team.
Cost planning and value management are predicated on the necessity of advising the client owner, the government, at each stage of the project of the real status of the project, of the outlook, if the current plan is maintained, and of available options, with their potential impact, on the project if implemented. Cost planning and value management identify the risks and the status of the reserves which will have to accommodate them.
1540
What action should be taken to enable application of this type of process?
The project must be clearly defined at the earliest possible stage, and I'd reference page 2 of the blue bound document, which I titled "Cone of opportunity." This shows that at the concept stage, the left-hand side of the graph, the world is your oyster. You can buy a Pinto or Rolls Royce. All your options are open. But as the design information and the requirements and scope get defined, it narrows down so that your flexibility potential continually reduces as you pass through the project. Once you get through to design development, you just have to make revisions to documents. As soon as you get into the construction phase, you have to make physical reductions. Things have to be changed, taken down, altered in some way, and the point of this graph is that the decision should be made early so that you make the decisions and you have all your arguments and discussions at the outset, right at the beginning, when the flexibility is still open to you.
If you turn to the next page, 3, "Change management," you'll see that that graph shows the ease of change at the early part of the job, over to the left-hand side. You can see the amount of effort for the result achieved. If change is delayed, the amount of effort required increases and the result diminishes.
Changes should be made at the beginning of the job, before you're committed to drawings, before you're committed to specification, before the job gets into any sort of production.
The scope must be analysed. Any scope that you prepare should be analysed using a realistic work breakdown structure, so you can see what's going on. The scope, the cost and the schedule, both current and forecast, should be objectively reported, starting from inception, from the very beginning of a job, and continuing to the final settlement of all accounts. Informed and timely management and control decisions can then take place in sure knowledge that you see the picture.
I'd refer to page 4, the 10 commandments of value management. This is contingent on, as it says at the top of the sheet, two fundamental requirements: controls are treated as a discipline in their own right, not subservient to other disciplines, and the controls discipline has authority and responsibility.
The commandments are fairly clear:
-- Define the scope clearly and comprehensively, so we know what we're supposed to be doing. Everybody knows what it is we're supposed to be doing.
-- Apply a formal cost planning process so that there is some structure where the costing and the forecasting are analysed and reported.
-- Develop a schedule very early on, so that everybody knows when things are supposed to be happening.
-- Organize a method statement meeting, so that all the parties to any form of capital program are together early on, so that each of them understands what it is they're required to do, whether it's an accountant or a designer or a cost planner or anybody else, for that matter -- an operator.
-- Include incentives in contracts. The incentives at the moment are not to control; they're exactly the opposite. You should have incentives that pressure people into controlling.
-- Have a value management workshop, where the value of the job is investigated in a forum among everybody, so that everybody knows what the important things are and what the unimportant things are and they can be gotten rid of.
-- Impose a formal change control system, so that changes don't just happen by osmosis and just appear and just bubble up; they're controlled and managed, and no change moves forward without appropriate funding.
-- Require timely and detailed reporting so that the people who are taking the decisions know what is going on. Most projects are hijacked from the client, certainly from the government, and they don't have a clue what's going on and the project has its own momentum and away she goes.
-- Manage reserves and expenditures. That sounds a simple thing, but there need to be reserves put there which are controlled. Contingency is seen as a slush fund that people just dip into. Contingency is not a slush fund, and requires just the same authority that the main contract requires.
Timely and effective reaction to the reports and information arising from these commandments will ensure -- and I understand what the word "ensure" means, too -- that the final project cost will not exceed funding.
What will be the result if this is put in place? It will maximize the effectiveness of available funds. It will reduce risk to the client. It prevents or reduces abortive work. It reduces the incidence of delay. It eliminates fiscal waste. It minimizes changes and improves the likelihood of achieving value for money.
This process is not new. It's been used before and it works. If I could make some examples, I was the director of capital budget at Expo '86, the world's fair, responsible for $376 million of expenditure. This process was applied there and worked like a dream and we ended up with not an underrun but not all the reserves were expended. We had 2% of the capital budget left at the end of that, and that was a very difficult project with a very tight time frame.
At Hotel Macdonald in Edmonton, and I know that's not a publicly funded job, CP Hotels, I was responsible for that. That's $30 million. The complex rehabilitation of a heritage structure, that was finished on time and there was a return to the general account of some funding. These principles were applied throughout. There are many other examples. I wasn't engaged on Darlington.
Mr Wiseman: Nobody was.
Mr Atkins: No, exactly.
Who benefits and is there a downside? I think everybody benefits. Certainly the client, the government, would benefit, but the designer and the contractor would benefit also. We saw in the paper just recently the architect, Roderick Robbie, on the stadium who has still not been paid and he's not been paid because the job was not controlled; not that he didn't do a good job or a bad job, that doesn't enter into it, but he still hasn't been paid and that's because that job was not managed effectively.
I think the benefits apply certainly to the client, certainly to the government. I think they apply to the architect in that he is controlled so that he can't get into a situation such as Mr Robbie's, and I can give you histories galore of that. The contractor knows what he's got to build, what he's got to do. Changes are minimized and he can just get on and do it. I don't think that's cloud-cuckoo-land.
Who has the knowhow to implement something like this?
-- The shock absorber needs to be a cost planner and a value manager who has wide experience on large projects, who knows how to plan and manage capital cost and who is dedicated to the control of the project, someone who believes that the prevention of capital cost overruns is in itself desirable. Taxpayers have the right to expect that their money is not wasted.
-- A person who believes that there are effective control processes which have been successfully demonstrated and which have relevance, no matter what type or size of project. Controls can be applied without compromising realistic requirements, plans and designs while still maintaining acceptable standards of quality.
-- Somebody who believes that the prevention of overspending can only be achieved through a clear commitment by the client/owner, by the government, to a fiscal responsibility program, which incorporates objective planning, reporting and management. If a project is not subject to formalized cost management processes, the likelihood of cost overruns are significantly increased.
There are few such people available to carry out this task, but that's a shopping list of skills which you should require a consultant or a staff person to have.
What will be the cost?
Funding necessary to support a viable cost planning and management process will vary. Normally, it's about 1% of the capital cost. On a very large, straightforward job it will be significantly less. On a building that's multiphase, complex, perhaps employing construction management, it could well be up to 3%. It could be more than that. On a megaproject with a high proportion of cost in large bought-out items, I would expect it to be very much lower because you're getting big packages of things. On something like Darlington, I would have expected just the cost management process to have cost around $15 million, something like that.
I hope the committee's found the presentation interesting and to the point. I hope that it creates an environment in which some of the implementation of these ideas and concepts could take place, and if you require any more information or any fleshing out of these ideas, I would be pleased to present it to you at any time.
The Acting Chair: Mr Atkins, thank you very much. I guess we'll try to flush out some more information from you now. You've left us with about three minutes per caucus and we'd like to start with Mr Carr.
1550
Mr Carr: Thank you very much. Your presentation is very thorough and very interesting and I think we need it.
I want to talk about an area where I think we really need it. I don't know if you're familiar -- the auditor did a report on non-profit housing this year, which is absolutely scathing. We'll spend about $5 billion, all told, within operating budgets of $1 billion, and I want to read you what the auditor said. He said, "...the approval of over 70,000 assisted housing units in five years was a significant and costly undertaking." In other words, that means the taxpayers got ripped off.
In it, he says things like "over 25% of the projects" didn't even have budgets and approvals. Supposedly the Ministry of Housing approves them. They had allowable maximum unit prices, and I am reading from the auditor's report, which became the target price rather than a ceiling. So you've got all these and if you read it, page 125 to 136, as a taxpayer you'd be absolutely frustrated. Everything you said happened is happening in non-profit housing, and we're talking billions, not millions of dollars here.
Why is it that these abuses seem to be happening more frequently when the government does it?
Mr Atkins: I'm not so sure that that's true. I think you can make some exceptions. People at the big oil companies and so on control their costs very well and put in processes similar to the one that I've described, but government is seen, and I'm speaking as somebody who's in the industry and I see it on a daily basis, as a soft touch. It's a bottomless pit. They know they're going to get paid, and they do if they carry out a job even half decently. I just think that most contractors, most consultants, see government as a soft touch. I see that happening regularly, and the government does not put in place the sorts of controls that I'm talking about.
This is tough. Handling other people's money is a very high responsibility, and I've been doing it all my life, but you have to be tough. There's no luxury in it of judgement in terms of: "Oh, I think that's a good idea. We'll do that." If it's not authorized, it's not authorized and it doesn't go.
Just one thing on Expo: Initially, one of the architects tried to issue changes without getting authority of the project manager or of the organization, and I sent him the bill.
Mr Carr: Good.
Mr Atkins: And I made him stick it. I picked a little one so that it wouldn't kill him; it was $2,000 for the first one. I did it twice. I didn't have to do it again, but I would have done it and I would have done it whatever it was for. I'd have sent him the bill, because nobody had authorized spending that money. There are a lot of engineers out there who would have had big bills on Darlington.
Mr Carr: In all fairness to the people who work at the Ministry of Housing, politics being what it is, many of the time lines are driven by political considerations. We see that every day when people say we have to get this done because politically we're getting a lot of heat. A lot of times it isn't the actual people working in the ministry; they're even more frustrated than the public is.
But getting back to the Expo situation, you talked about your success with that and you used some of the figures, so they brought you in. Obviously a great deal would go to yourself, but would the success be the people who hired you and would that have been Mr Patterson or was it the government of the day or why did somebody decide to bring you in? I'm not looking for any credit for anybody, but where does the success for that lie? Who was the one who said, "This is what we've got to do"?
Mr Atkins: It was an ideal situation. There was no historic baggage. There was no existing organization. We were creating an organization on a blank sheet of paper. We could write our own policies. I knew the VP of installations. I'd worked with him on Canada's Wonderland just here when I put the cost management process in place and then got fired. But it was really a networking thing and I knew the guy who was there and he knew what I did and said, "Come in and do this." I was in at Square One before the decisions were made at the very earliest stages. I could write my own policy and that's what I did, and I would say that Jimmy Patterson had absolutely no bearing on it whatever.
The Acting Chair: Mr Atkins, there's a question now from Mr Wiseman. Thank you, Mr Carr.
Mr Carr: Good luck.
Mr Wiseman: I'm interested in your source control because there's a hospital being expanded in my riding and it was ongoing for about 15 years of planning and, over a series of governments, ours has finally implemented the expansion.
What's interesting about that was that when they put their tenders out to the private sector and the tendering came back in, it was much lower. All of the bids were much lower, by $2.5 million, than what they were three years ago. The presumption is that they will meet those costs, that what they've bid they will do. I can see you smiling now, so that's a good place. You can tell me why you're smiling at that.
Mr Atkins: I don't place a credibility on tenders. A tender is the highest number that a contractor thinks he can get away with and get the job. It's nothing more or less than that. He uses quantities and measures and looks at the drawings to come up with that number, but it's almost a roll of the dice. On those jobs -- you know what the marketplace is now. The marketplace is ultracompetitive and the construction industry is really hurting. Your bidders will go in at the highest possible figure that they think they can get the job. Then what they'll try and do is recover that, because that doesn't reflect the real cost to them; they are looking to make a profit, of course; that's why they are in business. They will try and recover that situation up to the level that it should have been, that possibly the estimates that you had some years ago, would suggest.
Certainly, the prices that are being bid now are down at 1987-88 levels, there's no question of that, and in some cases even lower than that, but the final cost doesn't relate to the tender at all and we should all know that and all recognize that. There's very little correlation between the two things. I think what you've got to do is look at the budget, look at the risks. The tender is just one piece of information that's coming in.
The first bid that we ever got of Expo, just as an example, came in at half my estimate. People said, "Why is your estimate so wrong?" I said, "No, why have the contractors bid wrong?" That was my reaction straight away. "Why is his bid wrong? We'll accept his bid, but why is it wrong?" In fact, he had left out all of his equipment as it turned out. But we accepted his bid. The argument then came to me that we should reduce all the estimates that we'd put forward, and when I was showing an over on Expo at that time, everybody thought that was a load of nonsense. But that was the situation at that time. I think you've got to be very careful. People used to say at Expo, "We'll get some real numbers in now; we've got some tenders." Tenders aren't real numbers. Tenders are wishful thinking. Don't place too much emphasis on tenders. Place emphasis on somebody who objectively is giving you cost information. That is not a general contractor.
Mr Wiseman: Real quick: Do you know of any courses being taught at any of the universities or anything that teach just what you've outlined?
Mr Atkins: Yes, there some courses in project management at Ryerson. I have, in fact, taught courses at the University of British Columbia to the architects there, a very small course. In fact, that's a requirement now, that they have some cost management. But no, there's not enough, in my view. In fact, I have a proposal into Ryerson at the moment to run a course along these sorts of lines.
Mr Kwinter: Mr Atkins, I'm curious to find out how you would address the situation that happened at the SkyDome. At the time that the tenders were let, everybody in Canada was aware of the debacle of the Olympic Stadium in Montreal and what had happened. There were criminal charges laid from contractors and all sorts of payoffs and things of that kind. So the public conscience or the consciousness was there about not having that happen at the SkyDome, and the successful contractors were compelled to provide bonding to make sure that the project would come in at the price and at the time of the tender document, and there were penalties for non-targeting of those particular things.
The big problem with the SkyDome was that owners kept changing and kept adding as it went along and there was nobody there to say, "You can't do that," because they were the owners. So you suddenly had health clubs and hotels. I know for a fact that some arbitrary decision to have it open up on a particular day, instead of when it would naturally have been finished, cost them over $1 million just in temporary stairs for that SkyWalk. How do you deal with that?
Mr Atkins: If you got a method statement and you've had your team together so that everybody understands and it's written down, the options of adding in a hotel, which in my view was absolutely ridiculous -- that hotel cost $300,000 a room. I don't know of any other hotel in the world that cost $300,000 a room. You rightly described the situation, that the changes kept going on. If I was running that situation and I had any authority, I wouldn't let those changes go on. "If you want to put a hotel, where's the money?" I would look at that hotel and I would have said that it was about $116,000 a room. I'd have wanted that money up front. I'd have wanted to know that that money was approved before you proceed. You can't spend money that you haven't got. Most projects don't do that.
I can speak to some particular projects that I've been brought into late on where the owner has got himself into precisely that sort of position. He's changed and added things without any report, without any note, without any drawdown of reserves, without any statement of the status of the job at that time. And people say, "Good heavens, it's cost us a load more." Of course it's cost a load more because you've done this, this, this and this. What happens is, once a job is out of control, it is out of control and the value in the job just plummets. It falls straight down, because who cares any more? And the answer is that nobody cares any more, unless you're riding shotgun on all those changes, and schedule is one of those too. At Expo, we had May 2 as our opening date, which was cast in stone four years before we opened, and we opened that day and it was finished, more or less.
If the schedule is brought in, there's an impact on cost of the schedule, of course. Things like temporary stairs and hoardings, and if I put my mind to it I could come up with a list as long as your arm, of the costs of accelerating a schedule. I would report that as an overrun straight away. Even though there may be some reserves money still there, that is reserves money that wasn't assigned to put this acceleration in. That was for something else and I'd report an overrun to you. You wouldn't like the report I gave you. I usually get shot at because I try and speak objectively about the status of a job. People don't like to hear that. They certainly don't like to hear it at the beginning; everybody's friends. I don't want to be friends at the beginning; I want to be friends at the end and I want people to come to me again for another job.
The Acting Chair: Mr Atkins, thank you. Have a nice trip back to Burlington.
This finance and economics committee is adjourned for today and we will meet again Wednesday, February 24, 1993, room 228 at 10:00 am.
The committee adjourned at 1603.