CANADIAN FEDERATION OF INDEPENDENT BUSINESS
ASSOCIATION OF DISTRICT HEALTH COUNCILS OF ONTARIO
ONTARIO GOOD ROADS ASSOCIATION
ONTARIO HOME BUILDERS' ASSOCIATION
ONTARIO ASSOCIATION FOR COMMUNITY LIVING
FRIENDS OF ONTARIO UNIVERSITIES
CONTENTS
Tuesday 6 February 1996
Pre-budget consultations
Canadian Federation of Independent Business
Catherine Swift, president
Judith Andrew, director of provincial policy
Ted Mallett, director of research
Ontario Federation of Labour
Gord Wilson, president
Ken Signoretti, executive vice-president
Informetrica Ltd
Michael McCracken, chief executive officer
Ontario Arts Council
Paul Hoffert, chair
Gwenlyn Setterfield, executive director
Association of District Health Councils of Ontario
Susan Brown, chair
Alan Mathany, vice-chair
Ontario Good Roads Association
Denis Merrall, second vice-president
Sheila Richardson, executive director
Toronto Community Ventures
Allan Reeve
Ontario Home Builders' Association
Laverne Brubacher, president
Ronald Sarginson, vice-president
Ontario Association for Community Living
Nancy Stone, president
Barbara Thornber, executive director
Friends of Ontario Universities
Ian Morrison
Pamela Jeffery
Income Maintenance Group
Scott Seiler
Marilyn Ferrel
Harry Beatty
STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS
Chair / Président: Chudleigh, Ted (Halton North / -Nord PC)
Vice-Chair / Vice-Président: Hudak, Tim (Niagara South / -Sud PC)
Arnott, Ted (Wellington PC)
*Brown, Jim (Scarborough West / -Ouest PC)
*Castrilli, Annamarie (Downsview L)
*Chudleigh, Ted (Halton North / -Nord PC)
*Ford, Douglas B. (Etobicoke-Humber PC)
*Hudak, Tim (Niagara South / -Sud PC)
*Kwinter, Monte (Wilson Heights L)
*Lankin, Frances (Beaches-Woodbine ND)
Martiniuk, Gerry (Cambridge PC)
*Phillips, Gerry (Scarborough-Agincourt L)
Sampson, Rob (Mississauga West / -Ouest PC)
*Silipo, Tony (Dovercourt ND)
*Spina, Joseph (Brampton North / -Nord PC)
*Wettlaufer, Wayne (Kitchener PC)
*In attendance / présents
Substitutions present / Membres remplaçants présents:
Bassett, Isabel (St Andrew-St Patrick PC) for Mr Arnott
Carr, Gary (Oakville South / -Sud PC) for Mr Sampson
Marland, Margaret (Mississauga South / -Sud PC) for Mr Martiniuk
Clerk / Greffier: Carrozza, Franco
Staff / Personnel:
Drummond, Alison, research officer, Legislative Research Service
Smith, John, legislative counsel
The committee met at 0931 in committee room 1.
PRE-BUDGET CONSULTATIONS
The Chair (Mr Ted Chudleigh): I see a quorum present and all parties represented. My goodness, we're in good shape this morning. A question, Mrs Marland?
Mrs Margaret Marland (Mississauga South): Mr Chairman, I just wondered if we could have all-party agreement that when we are on a tight schedule, we will allow you to see a quorum even if all parties aren't represented at the scheduled time for deputations during our hearings.
Mr Gerry Phillips (Scarborough-Agincourt): I think we already gave him the ability to do that at the subcommittee meeting.
Mrs Marland: That's fine, but I'm not on the subcommittee, as we found out yesterday.
Mr Phillips: Okay, sorry about that. I think we adopted those minutes, though, at the last meeting.
Mrs Marland: No, we haven't yet.
Mr Phillips: No. Sorry to waste time, but the subcommittee brought its minutes to this economic committee and it was adopted by the economic committee. You weren't on it at the time, I gather, but I think you will find it's all in Hansard.
Mrs Marland: So you don't need me, is that what you're saying?
The Chair: Ms Lankin, did you have a comment?
Ms Frances Lankin (Beaches-Woodbine): I want to inquire whether the clerk received a response from the Deputy Minister of Finance with respect to the question of whether they would be coming forward and providing us with examples of options on the tax cut costing formulation.
The Chair: The clerk indicates that no one has contacted him at this point.
Ms Lankin: Mr Chair, you will recall that that was an outstanding issue and that I had asked the deputy to inform us by the start of hearing time this morning, so I would ask whether or not someone in the clerk's office might be able to make a call.
The Chair: We will pursue that.
Ms Lankin: For the record, I just wanted to indicate from yesterday's Hansard that my question to the minister was, "Would you provide this committee with a range of options of how you could accomplish an average 30% decrease in personal income tax and what the lost revenue projection would be so we can provide you with some feedback on that?" His answer was, "If Finance officials are able to do that, I certainly have no problem with exploring that dialogue with the committee."
CANADIAN FEDERATION OF INDEPENDENT BUSINESS
The Chair: We now have the Canadian Federation of Independent Business: Catherine Swift, president; and Judith Andrew, director of provincial policy.
Mr Ted Mallett: And my name is Ted Mallett. I'm director of research.
The Chair: Please proceed. We have half an hour.
Ms Catherine Swift: Good morning, and thanks for the opportunity to appear before you today. I seem to have something infecting one side of my face, so I apologize for my mutant-like appearance this morning. Anyway, hopefully that won't affect the delivery.
Our brief you have before you. We've optimistically entitled it Getting Back to the Black: The Bottom Line for Small Business and Ontario's Finances. We've really covered an awful lot of issues in the brief. We're going to be touching on some key ones today, but if we do miss some, please don't interpret that as a lack of interest, just a lack of time.
Initially, as you may be aware, the CFIB has about 40,000 small and medium-sized business members in Ontario, and a lot of the information in the release is based on surveys we've conducted of them over the past few months to a year. One of the surveys we did late last year looked at the outlook for the economy and job creation.
We hear an awful lot of talk these days about downsizing in the public sector and so on, which is certainly happening and we think necessarily happening, but it's also worth keeping things in perspective. For example, when we look at the labour force data for 1995, we see that in Ontario private sector job creation was around 154,000 workers, which well outweighed the loss of about 56,000 jobs in the public sector. Throughout this recovery, albeit a very modest one, unfortunately, over the past three years, we've continued to see private sector job creation outstripping any losses in the public sector, and there's no suggestion that should not continue as long as the right policy directions are pursued.
Our most recent survey of our members in Ontario, interestingly enough, found them expecting some job creation, albeit not gangbusters, for 1996. But when we compared our results in each province across Canada, our Ontario members tended to be the most optimistic in the country. That's hopefully a positive sign for our province's economy this year.
Something we survey frequently with our members is what in their view is preventing them from employing more people, turning part-time jobs into full-time jobs and otherwise creating employment. The number one reason that is always cited is of course the state of the economy, not surprisingly. In a recession you're not going to be creating jobs; in good economic times you're going to be. That's something we have some control over but obviously not total control.
However, a lot of the items over which government has virtually total control are also very key impediments to job creation. Things like payroll taxes are cited as number two by our members, and have been for a number of years as governments have increasingly depended on that form of taxation, which is a job-discouraging form of taxation.
Other things that are impediments to job creation are just the whole range of costly administrative measures, from everything that imposes an awful lot of paper burden on firms, which in a small firm the firm owners themselves often do, to other measures that discourage people from hiring people, for example, because it is extremely costly if indeed one has to downsize again and so on. Obviously, a focus on these issues would certainly enhance the potential to create some lasting employment in the province.
Overall our membership is supportive of the government's direction that's been laid out in the two economic statements so far to get our debts and deficits at least on some kind of sustainable track. Paying over $9 billion a year on debt service charges alone is hardly defensible. We would all much rather have that money to spend in a more productive way on social programs or whatever. And of course our members well realize that the deficits are just deferred taxes, if not on ourselves, down the road on subsequent generations. Our members very much favour the government's adherence to the targets it's laid out for itself in that area.
One area that hasn't received the attention we feel it warrants, and this isn't just in Ontario but right across the country at all levels of government, is the whole issue of matching of public sector pensions. On balance, public sector pensions are about twice as rich as those in the private sector, and of course these dollars are matched by taxpayer dollars. Many pension plans in the public sector -- not all of them, but many -- have large unfunded liabilities as well; some are funded, however. When we're talking about trying to find some decent resources to hopefully soften some of the necessary cutbacks in a number of areas of government spending, this is one clear inequity. There is no good reason that the public sector workers should have benefits, notably pension benefits in this instance, twice as rich as those of their private sector counterparts, particularly when the private sector counterparts are subsidizing those pension plans. We'd just like to mention that area as one we're telling all governments they should be looking at for a little better distribution of resources in the future.
Something we'd also like to suggest the government could consider is the whole concept of balanced-budget legislation. You're probably aware that very stringent, but what we feel will be very effective, balanced-budget legislation was passed last year in Manitoba, and this would certainly assure taxpayers of the government's lasting commitment as well as imposing some real rigour. As we know, many governments over the years have had good intentions but they haven't been realized in the ultimate outcome of the numbers.
I'll pass it to Judith now for a little more in-depth analysis of some of the payroll tax issues.
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Ms Judith Andrew: As Catherine mentioned, payroll taxes are one of the worst culprits in terms of their deleterious effect on small business and job creation. The other area, of course, is property tax, which we'll cover in a few minutes.
I wanted to bring to your attention our special concerns with the employer health tax, which we've been concerned about since it was first introduced in the late 1980s. This tax has an especially punitive effect on the smallest and youngest businesses, and we really believe it's important that this regressive burden is lifted so these small firms, who do have the best track record in terms of hiring net new employees, are not impeded from doing so.
We asked our members in a recent survey, "What impact does the employer health tax have on your operations?" The number one thing it does is reduce profitability and it also reduces cash flow. Incidentally, these effects are more pronounced in the north, which is of serious concern in terms of that impinging on the future prospects for those firms.
The EHT of course also increases payroll admin costs, it reduces hiring plans, it lowers salary levels and it hurts the ability to compete. Our survey also turned up -- thankfully, a small number of firms, but almost 6% of responding firms said the EHT actually put them in a loss position. Payroll taxes and EHT-like taxes actually draw down the capital of the firm when they're in a loss position, and this is a major issue.
Accordingly, we are encouraging the government to exempt the first $400,000 of the EHT at the earliest possible date. We see this as an evenhanded measure across all businesses that will begin to deal with the regressive tax on small business. Simultaneously, we believe the self-employed EHT should be eliminated as well.
I'd like to turn to the personal income tax side of things. There's been quite a lot of debate about this. From the bird's-eye view of the small business sector, it shows up on our harmful tax list as a problem for over 42% of our members. Ontarians are overtaxed relative to other jurisdictions. This obviously figures into investment decisions made by business people, it figures into residency decisions taken by young, educated individuals, and therefore is worthy of consideration.
You will recall from the hard facts survey data that Catherine outlined that the number one condition for hiring more employees is increased demand or orders, a response given by 82% of our members. Therefore, it stands to reason that leaving more of Ontarians' hard-earned pay in their own hands will permit increased spending on goods and services and all sorts of positive multiplier effects, one of which is jobs.
We are about to go into the field with a pre-budget survey on tax relief that will probe possible outcomes from implementing the government's pre-election commitment to cut income tax rates by 30% in three years, and we will make these data available as soon as we have them.
Our recommendations in this area, based on the data we have to date, would argue for implementing the PIT rate cut as promised at mid-year 1996, the earliest possible date of course, in order to realize early gains from the boost to the economy.
I'd like to ask Ted to carry on now.
Mr Mallett: Thank you very much, Judith. The property tax section begins on page 8 of our brief. Ontario is the most, and by far the most, heavily taxed jurisdiction in the country with regard to property tax, and Canada as a whole is the most heavily taxed -- again property tax -- jurisdiction in the world. That by itself shouldn't be a problem if the tax were efficient, fair and balanced and so on, but unfortunately it is not -- far from it. It's distorted, it's antiquated and it is tilted seriously against the small business sector. That is a message we've been hearing more and more from our members and it's the subject of some major work we did in the past year.
Through a combination of deliberate policy acts as well as benign neglect, so to speak, on various aspects of the tax system, the playing field has been tilted very seriously against small business, as I mentioned. Provincial policy dictates that mill rates must be 15% higher on business than they are on everybody else. There is a business occupancy tax which is mandatory, which adds another 25% to a 75% premium on business property taxes, and because of old assessments and the use of within-class reassessments, it's had the effect of inflating the business valuation for property tax purposes.
The CFIB's survey that we conducted with 4,700 of our members early in 1995 found that the effective property tax rates on business were more than double those of tax rates on equivalently priced residential properties, and that's the average.
Individual property taxpayers could find their assessments or property loads widely disparate through all kinds of possibilities. Some pay 8% of their annual property value in tax; others pay 1%. That is a huge differential and it leads to widespread confusion about the tax system, distrust about the tax system and general distrust about local government and provincial government policy on this issue as well.
So why shouldn't businesses pay double the tax rate, many ask. The answer is that it stifles job creation, it stifles investment and it kills economic development. It may be convenient to be able to load more taxes on to the business sector from a local political point of view, but in the long term it has serious consequences to the economy. It's not geared to profitability for businesses; in fact, quite the opposite. Large profitable firms can deduct it; small firms, which tend to be less profitable, cannot. If you're not earning a profit, the deductibility is not a benefit.
The notion that businesses can pass these taxes on to their customers through price increases has also been shown to be false, because clearly it is an open economy. Customers can choose whichever products from wherever they want, and if there is a built-in tax premium within prices, then customers will likely move to lower-priced sources.
Finally, it's improper to say that businesses can afford these taxes and everybody else cannot. In fact, our research suggests and shows that small business employers tend to have lower average incomes than employees, on balance, across the country.
The CFIB made these points in our submission to the GTA task force, and we are heartened to see that they identified all the problems we identified in our surveys and that our members identified. Unfortunately, where it fell far short was in where to go from here and what to do with that tax premium that businesses pay, and have paid over the past 20, 30 years.
Our members believe that property taxes should be apportioned by class roughly according to the level of services they consume. That's the only way to ensure that taxes are fairly distributed among businesses and residents. It's the only way to encourage accountability of local governments and it's the best way to ensure that local governments are run in an efficient and equitable manner.
We also recommend the elimination of the business occupancy tax. This tax is taxed only on business occupants. There's no equivalent in the residential rental sector or homeowners and we believe it's arbitrary and it's distortional.
Finally, we believe that variable mill rates, which was an option that was put forward in the Golden task force, is a recipe for disaster. It will ensure that the tax system becomes disparate. There are no guiding principles on it, and local governments would continue to opt for the politically convenient route of ensuring that their costs are borne by the business sector and not by the voters within communities.
Seriously, we believe that the tax system has to be dealt with to ensure the long-term viability of the small business sector in this province.
Ms Swift: As you can see, there is a number of other issues that recommendations are made on: corporate minimum tax, for example, GST-PST, the non-tax fee burden etc, OTAB; but we figure we should leave some time for questions here, so hopefully you can read those. Now we'd be happy to take any questions you might have.
0950
The Chair: Thank you very much. I believe we have about 12 minutes. Could we get a short question and a short answer in? We'll divide into three.
Mr Phillips: So each group has four minutes? Is that what you're saying?
The Chair: Yes.
Mr Phillips: We'll try the short question. One of your first recommendations is to proceed with the elimination of the employer health tax on the first $400,000 of payroll for all businesses. Do you have an estimate of the lost revenue to the province as a result of that?
Ms Andrew: It would be $400 million. That was an estimate I had last year. I assume it hasn't changed.
Mr Phillips: I appreciate that.
Ms Andrew: It's roughly equivalent to the government's proposed fair share health levy.
Mr Phillips: The reason I ask is because the government refuses to give us those numbers. I'd say to the members opposite I really think you need those numbers to make an informed decision. I asked for them in my written request to the government, that it give us an estimate.
Ms Swift: Those numbers have been around for a while, though, Gerry. We've used them for over a year. So that's been around for a while, that $400 million.
Mr Phillips: No, I understand you've used them. I said we've asked the government to give us an up-to-date estimate on the numbers. They refuse. I appreciate you've got an estimate of $400 million. You believe you were told that the fair share health levy raises $400 million. We've never seen that number, by the way. But I appreciate your estimate.
Ms Andrew: That estimate came from the Ministry of Finance, but it's not new. It was an estimate well over a year ago when we were interested in having people look at this recommendation.
Mr Phillips: Good. You've indicated here that in your opinion the provincial personal income tax rate promise was due to kick in mid-1996 at the latest. Was that your understanding of what the Common Sense Revolution said?
Ms Swift: Not necessarily. I think that's our suggestion, because we think the economy could use it sooner rather than later.
Ms Andrew: Exactly.
Ms Swift: So that's our suggestion.
Mr Phillips: I gather you went through the document, though, and it shows here the $2.2-billion revenue loss in 1996-97. I assume that because the employer health tax offset the other thing, the $2.2 billion had to be personal income tax.
Ms Swift: But that would be the full fiscal year that you're talking about. It would click in earlier.
Mr Phillips: You would have thought that it was for a full fiscal year then. Your interpretation of the cut in the personal income tax was that it was for the full fiscal year then?
Ms Swift: Well, like I said, I don't think we had any particular information on that, but our recommendation was, the sooner the better. Given that we're into February now, I think we thought you're not going to change this in the middle of a month some time obviously, so mid-year is probably the soonest date one can feasibly enact it.
Ms Andrew: I think mid-year is the earliest legal date as well.
Mr Monte Kwinter (Wilson Heights): By law, you can only do it on July 1 or January 1.
Ms Swift: That's what I mean. Logically, you don't do it in the midst of some quarter.
Mr Phillips: But the $2.2 billion, in your estimation, was a full year, I gather.
Ms Swift: I think it would be for a full year, yes.
Mr Phillips: Okay, I appreciate that.
Mr Kwinter: In your brief you talk about the benefits of the tax cut. We talked to officials of the Treasury department yesterday, and they all seem to think the same thing, that there's going to be a real kick to the economy. Yet, by your own members, when you surveyed them and you said to them, "When you get this employer health tax -- $400 million -- what are you going to do with it?" by far the largest number, 55.4%, said that they were going to pay down debt. Do you not think that's exactly the same thing that's going to happen to people in the general community as opposed to businesses?
Ms Swift: There will be some element of that, and that isn't a bad thing. When people lighten their debt loads, presumably they free up other resources and what not. The financial community might not be that pleased about it, but I guess that doesn't break our hearts too much. We also saw with the EHT reduction a fair chunk of people -- I think it was about 30% -- were going to either --
Ms Andrew: It's almost 37%.
Ms Swift: -- create jobs or make part-time into full-time or whatever. We thought the cumulative impact of those, on top of our forecasts that were already not terrific but not terrible for Ontario in 1996 among our members, was going to contribute to a boost. I think the logical thing is, of course people are going to pay down debt, but I would rather that than bankruptcy, which leads to further job loss and so on, which we've seen all too much of over the last few years, unfortunately, in this province.
Mr Tony Silipo (Dovercourt): Thank you very much for the presentation. Could I just focus in on a couple of things? You're clearly supporting and advocating that the government proceed with its personal income tax cut. Have you looked at whether, in terms of your members, providing that tax cut, rather than through a cut to income taxes, doing it for example as a cut to sales tax, would be more beneficial?
Ms Swift: We haven't, actually. This came up when we appeared before the public accounts committee last week. I know just from past research I've read, at any given time you might have a different impact hitting one tax versus the other for roughly the same amount of money. I don't know that we have good up-to-date data on that, but if that is a debate, then we can certainly do some surveying on it and so on.
I find it interesting that we're probably having more debate on cutting taxes in this province than we ever had on increasing them, billions and billions of dollars over the last few years, but exactly where it's going to fall in the tax system I think it's tough to say without looking at where the marginal propensities to consume and all that kind of stuff is in the income tax system versus the sales tax. There's no indication that it would necessarily be greater on one or the other in terms of the impact on consumption.
Mr Silipo: It might be interesting to have some of those data.
Ms Swift: I think it might be interesting, yes. Obviously, more money in the economy is good, and exactly how is another issue.
Mr Silipo: If I can pursue another point, because time is limited. You make a point that certainly I would agree with of the high, relative to other jurisdictions, reliance that we put on property taxes in Ontario. One of the points you make is that municipalities should be required to tax property classes in proportion to the level of services that they consume. I just want to pursue that a bit. If we applied that principle to the business side, presumably we ought to also apply it to the residential side. I just put that as a proposition.
I just want to pursue that and see if you would agree that if we were to do that, we would also then have to take a look at the many services that are now being paid through property taxes which are really beyond local services, whether you're talking about the social services or others, and look indeed at a different way to fund those, such as through the provincial level of taxation. Would that be a sensible approach, in your view?
Ms Swift: Possibly, yes. The whole system is such a mess it's obviously in dire need of repair. We think it is an ideal opportunity just to address some of the real inequities of all kinds that are in the system, one of which, that's glaring from our perspective, is this incredibly high differential between business versus residential, based on nothing but political expediency, and the politicians themselves will admit that at the municipal level.
Ms Lankin: Catherine, in reading your presentation I certainly understand the position that you put forward with respect to the overall levels of taxation and looking at property tax and payroll taxes and corporate income taxes and personal income taxes. I understand your arguments.
You also make a very strong pitch, though, about the need for deficit reduction and that deferring to deal with the deficit is just deferred taxes down the road. One of the problems that I'm having with the government's proposal for the personal income tax cut is that we will have to borrow the money to pay for that over the term of office; we will delay getting to a balanced budget.
The government is unable to provide us with information that says in fact it will have a stimulative effect in the economy versus other kinds of tax cuts. I think it would be helpful if your organization could do some work looking at sales tax or property tax or other areas: If the government is insistent on spending this kind of lost revenue on tax cuts, where would we have the most effect in stimulating the economy and creating jobs? My worry is that with the economic drag in terms of cutting government spending, no clear stimulus from the tax cut, at least until three years, and even then it's not clear what it will be, and a delay in dealing with the deficit, we might find ourselves sliding back into a recession. I'm wondering if you have any thoughts about that and if in fact you can commit to trying to do some work on alternative models of tax cuts.
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Ms Swift: Sure. We have no problem with doing the work on it. It would probably be interesting to do in this current economic climate generally, not just for Ontario but for other jurisdictions as well.
Our view for a long time now has been that when governments do attempt to cut back, which is finally happening after us recommending it for 15 years, you need some offsetting stimulative measures. They can take a number of forms. One thing we've recommended and are recommending in here -- indeed Judith sits on the Red-Tape Review Commission. We feel that these days, when governments don't have a ton of money to throw around, one of the most stimulative and yet inexpensive ways for government is to cut back on all that administrative burden. It hits small businesses particularly hard, but it hits everybody, so it would be beneficial across the board. That is a cost for business. Although it's not as quantifiable as a tax, say, or something more cleanly applied, nevertheless it is extremely, extremely costly for businesses.
We've made recommendations along those lines, but of course another key way is to reduce the burden of taxes. I find it so ironic that we're having way more debate about returning some money to taxpayers in this province than we ever had about picking their pockets, as we've done in this province and this country over the past 15, 20 years or so because it just seemed like the right thing to do.
Ms Lankin: Isn't it because of the level of service cuts that are attached with that? That's why the debate.
Ms Swift: That's possible, yet on the other hand we never really saw a whole bunch of service increases for all the tax increases we saw applied. We saw governments getting overgrown and we saw massive debt, which of course has doubled over the past five years in this province. It's clear the historical approach never worked. You're never going to be able to prove the future; you're never going to be able to prove that you'll get X number of jobs out of a tax cut of X billion dollars or whatever. We know the history, though, and we know the history is absolutely going in the wrong direction, so trying the reverse, one would think, would be a positive approach.
Mr Wayne Wettlaufer (Kitchener): Thank you, Catherine and Judith and Tim, for coming today. The presentation was very good.
One of the focuses this government has made is jobs. I note that Monte Kwinter had emphasized the amount of saving that businesses would do, but I also notice that in your 1995 Ontario provincial survey, EHT savings would be applied to hiring additional employees by 36.6% of your members. Doing a quick calculation, that translates into 30,000 jobs approximately if your member firms hired only one employee each as a result of the EHT cut. And that would be in the first year only; if we project that a little bit further, over a three-year period we're talking about 90,000-plus jobs. Do you have any indication whatever from your survey of how many of your member firms would hire more than one employee as a result of this?
Ms Andrew: That particular survey didn't ask that. That survey goes back to August 1995, and we are updating the same question and are about to go into the field with it shortly. It was hard for businesses last summer to predict what they'd do with a tax cut they might receive some time in 1996 and be very specific with regard to how many positions they'd increase. But we do take the 36% as a positive indicator that people would see the payroll tax burden being lightened up, which would allow them to begin to grow. Demand has to go up as well; that's another of the preconditions to growth, but hopefully if we get the economy moving in that direction, there'll be many more positive spins from it.
Mr Douglas B. Ford (Etobicoke-Humber): Ladies and gentlemen, I'm glad to see you here today for your input. Do you think the government is moving too fast on these cuts we're doing, and if we did slow down the cutting, where would we get the revenue to offset those cuts? I'll leave that with Judith.
Ms Andrew: Our view is that cutting at government is long overdue. We have been disturbed by the growth of government over the last decade or more in the province, and we went through good times when government really ballooned. The taxes went up, and we squandered opportunities to actually get our fiscal situation in control here in Ontario. That led us into a recessionary period with also a very high debt, and it's a big problem. I think the time to bite the bullet is now. The new government has a strong mandate to be fiscally responsible. Our members certainly support that. Every indication we're getting from our members is that they're looking upon this positively.
Obviously, there'll be some pain as well, in terms of particularly things that are cut, so it has to be done intelligently with as much compassion as possible, but certainly our members support the direction, and there's no point in waiting.
Ms Swift: If I could just add a couple of things: For one thing too, we do have a growing economy right now, and as we've seen in other countries and to some extent in some places in Canada, if we wait until the next recession comes, and hopefully there won't be one but the likelihood is there will, then the cuts will be even worse and will be even more punitive on the groups that are disadvantaged.
So I think we have a two-year window from an economic standpoint, and I think too when you look at political realities, governments that don't cut and don't do their tough things early on are likely not to do them at all. So I think we feel, unfortunately, moving quickly probably entails making some mistakes, because it's difficult for a new government. I think we saw that happen in Alberta, if we can use that as an example. There's no doubt they made some errors, but overall they were heading in the right direction, and they're now reducing taxes in various areas and they've gotten rid of their deficit, they're start to attack their debt, and they're on an upward climb and they're ahead of schedule.
We've seen some of that in other provinces as well, such as New Brunswick, so I guess we think from the history, it's worth the odd booboo that hopefully can be repaired to move quickly and actually get the proper direction under way than to wait possibly not do it at all, and I don't even think you make fewer mistakes if you wait longer.
The Chair: I'd like to thank the Canadian Federation of Independent Business for coming in and making a presentation.
ONTARIO FEDERATION OF LABOUR
The Chair: Next we have with us the Ontario Federation of Labour. Mr Wilson, I understand, will be presenting. Gentlemen, if you'd like to come forward, would you be so kind as to identify yourselves for Hansard.
Mr Gordon Wilson: My name is Gordon Wilson. I'm the president of the federation. On my right is the executive vice-president of the federation, Ken Signoretti. On my left is Ross McClellan, who's the legislative director of the federation, and on Ross's left is Chris Schenk, who is our research director. We thank you for the opportunity to be here.
The Chair: We have half an hour. You can divide that between presentation and questions.
Mr Wilson: On behalf of our 650,000 members, the OFL is pleased to make this pre-budget submission to the standing committee on finance and economic affairs for the 1996-97 budget of the province of Ontario.
We do so at a time of real crisis, we believe, for the people of Ontario. The government and its Treasurer are embarked upon an approach which we profoundly oppose, and which we know will result in permanent damage to the social fabric of our province.
Moreover, we are convinced that this approach is not only wrong but it is also unnecessary. Therefore, in this submission we want to set out the outline of a completely different approach to solving Ontario's very real problems.
Of course, we agree that Ontario's operating deficit is too high, that program spending cannot be sustained by borrowing, and that operating expenditures must be brought into balance with revenues. As I said in our submission on Bill 26 in Kingston, every family in Ontario knows that. That's not a revelation.
But we also believe that the Ontario government is seriously overreacting to the deficit situation and that it has failed to understand the true nature of the problem.
Ontario is not living beyond its means. Ontario is one of the wealthiest societies in the world with a 1994 GPP of $302.5 billion. Our gross provincial product on a per capita basis for 1994 was $27,743, which was higher than all but a very few nations in the remainder of the world.
Proportionately, Canada spends a lower share of our GDP on social programs than most of our economic partners in the G-7, as the following chart would show. We're fourth, behind Japan, Australia, US and New Zealand. We wind up tied with New Zealand at 18.8.
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We can also say as a fact that as of April 1995, Ontario's budgetary spending per capita was $4,874, and that was lower than that of Newfoundland, Prince Edward Island, Quebec, New Brunswick, British Columbia, Saskatchewan and, please hear this, Alberta. But Canada and Ontario do face a crisis; on this we do agree. Where we disagree is on the nature of that crisis and, even more profoundly, on the solution.
First, we should recall the lessons of history. Fifty years ago, Canada emerged victorious from the Second World War with a colossal public debt which stood, in 1946, at 120% of GDP. But within a few short years that debt was retired. There was no magic, no voodoo economics. It was retired by a set of wise public economic policies which promoted a full-employment economy and vigorous economic growth. Fiscal and economic policies were put to service this economic growth, and behind it lay the overwhelming consensus of Canadians that having won the war, we would not lose the peace. We refused to allow the Great Depression of the Dirty Thirties to return. There was a deep determination that never again would the unbridled and unrestrained forces of free market economics be permitted to wreck our economy.
It was the strength of this postwar consensus which created the mixed economy and the welfare state. For the 25 years following the war, with these consensus policies firmly in place, Canada retired its war debt and enjoyed unparalleled prosperity based on monetary and fiscal policies which promoted full employment, steady economic growth and a just sharing of the wealth of the country among all of our people.
That policy based on the postwar consensus has long since been abandoned and the destructive forces of the unbridled free market which created the Great Depression are once again wreaking their havoc. As part of the overall triumph of monetarism, the anti-inflation obsession of the Bank of Canada has led to monetary policies which have created a state of permanent recession. This reality is documented by Ontario's own Ministry of Finance in a technical paper issued in April 1995 entitled The Role for Monetary Policy in Supporting Job Creation and Deficit Reduction. A summary of this paper is attached as appendix 7 with this submission.
By "permanent recession," I refer to the fact that an 8% unemployment rate is now defined as full employment. Canada's real interest rates are kept higher by the Bank of Canada than those of any other G-7 nation, and there is a chart to illustrate that. Whenever economic growth threatens to bring unemployment below 8%, the Bank of Canada has acted swiftly to raise rates, choke off economic recovery and restore the permanent recession.
Since 1988, these policies have been applied with exceptional severity. Let me illustrate. Using again the Ministry of Finance paper referred to earlier, in 1994 Canada experienced strong economic growth, with Ontario's real GPP expanding at a record 5.5%. "This," says the Finance paper, "was the result of a substantial easing of monetary policy in the preceding two years. The three-month treasury bill rate, which was above 8% through most of 1991, dropped to an average of 6 1/2% in 1992 and 4.9% in 1993, and this contributed to strong economic growth in 1994. However, it began to rise sharply in 1994 and it has been above 8% in March and April of 1995. There are already signs of slowing economic growth in early 1995." That's from the Ministry of Finance paper again. The citation is illustrated.
It is now clear that the Bank of Canada once again choked off Ontario's economic recovery in the first half of 1995. Interest rates are now headed again in the right direction, down, and stand today at 5.37%. There's some speculation they will come down even further with an announcement later today. But it remains critical that a stable, long-term, low-interest-rate policy replace the discredited monetarism of the federal government. When this is done, and we believe that a new consensus is emerging that this must be done, then the severe and socially destructive policies of the Common Sense Revolution are totally unnecessary, as we shall show. Economic growth can and will balance Ontario's budget in the 1990s, as it once did after the Second World War.
What follows, what we're setting out in considerable detail, is an alternative economic model to the budgetary strategy of the CSR. For a number of reasons it is not and cannot be a complete alternative budget. For one thing, like the opposition, we lack the resources to construct such a complex document as the provincial budget. For another, the Treasurer has still not provided a public statement of his fiscal assumptions and projections beyond the current fiscal year. To compensate for this, we have used the fifth edition of the Common Sense Revolution as a base for our calculations, supplemented by the Treasurer's November economic statement, as well as the October report of the Dominion Bond Rating Service -- hardly references from the labour movement in the traditional sense.
We hope that this alternative budget will be accepted as a sincere demonstration of our conviction that it is possible and realistic to solve Ontario's fiscal problems through policies which promote growth and at the same time preserve the essential public services which are the bedrock of the high quality of life we have enjoyed in this province. Our alternative budget model is based upon four fundamental premises:
(1) The severe spending cuts of the CSR can and should be replaced by a new fiscal policy which will freeze or flat-line program spending at the level it stood when the Conservative government took office.
(2) Ontario's revenue base should be maintained. The CSR proposal to cut the provincial tax rate by 30% should be abandoned. This will save the Treasurer the total cost of the tax cut, a staggering $20.1 billion over five years, all of which has to be borrowed.
(3) The rigid monetary policy of the past decade must be moderated so that we can escape from the ravages of the permanent recession and a perpetual revenue crisis caused by a low-growth economy. The anti-growth policy of the Bank of Canada can and must be abandoned.
(4) Economic growth can and will retire Ontario's deficit. An approach based upon economic growth would generate dramatically better results than the severe spending cuts of the CSR.
In each of the six budget scenarios we are presenting, we have varied the assumptions found in the CSR document with respect to the level of increased annual economic growth. In scenario 1, we assume a 1% annual additional growth in the GPP; then in scenario 2, a 0.75% annual increase in growth; and in scenario 3, a modest 0.50% increase.
We have taken a very conservative estimate of program cost savings attributable to increased economic growth. The first three scenarios assume a $100-million cost saving per year, and scenarios 4, 5 and 6 assume an annual cost saving of $150 million per year. Finally, we assume a conservative 8% interest cost for public borrowing to calculate the changes in public debt costs over time.
Let me take you through our alternative economic budget scenarios. The detailed calculations are set out in appendices 1 through 6.
First, table 1 compares the spending program of the CSR with our alternative. We would maintain Ontario's spending base at the level the government claims it inherited from its predecessor, at $48.9 billion, when it took office. This included all capital and operating spending and is the primary deficit. It excludes payments against the debt, which are dealt with separately. We would freeze expenditures at $48.9 billion until revenues and expenditures returned to balance.
Table 2 shows the huge increase to Ontario's deficit and debt that the proposed tax cut will create. By abandoning the tax cut, which will benefit the wealthiest Ontarians the most, Ontario will save a total of $20.1 billion over the next five years, every penny of which must be borrowed by this government.
Table 3 shows the two components of additional economic growth. First, by abandoning the CSR, we immediately restore the average 0.40% drag which the CSR spending cuts will take out of the economy in each of the next five years. The second growth factor would result from the economic stimulus created by the Bank of Canada when it sets a long-term low-interest-rate policy. In practical terms, this means allowing the current interest rate trend to continue over the long term, and it is not at all unrealistic; it simply means maintaining the current policy on a long-term basis. We saw the payoff in 1994, the highest growth anywhere in the G-7, of a 5.5% gross provincial product increase in Ontario. Once again, I refer you to the Ministry of Finance technical paper, The Role of Monetary Policy in Supporting Job Creation and Deficit Reduction, for an objective corroboration of this approach.
Table 4 shows the dramatic cumulative effect of a 1.5% annual increase in economic growth, using as our starting point the growth assumption set out in the CSR document itself. Beginning with the added 0.40% growth from ending the drag effect of the CSR spending cuts and adding another 1% of GPP growth due to lower interest rates, the cumulative effect of this level of additional annual growth totals 8.7% by the end of the century. The CSR, you will note, assumes an average 0.40% drag in each of the next five years.
Table 4a translates that cumulative economic growth into revenue growth, using the Ministry of Finance formula that each 1% nominal GDP growth increases own-source revenue by about 1% or about $400 million in additional revenue each year. By the end of the century, Ontario's base revenue under this budget scenario would have increased by an additional $3.5 billion.
Table 5 shows the bottom line for the CSR strategy, a surplus of $40 million in fiscal 2000-01. But recall, if you will, that the CSR budget calls for a tax cut costing $5 billion at maturity and total new borrowing costs of $30.8 billion between now and the 2000-01 fiscal year.
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Table 6 shows the bottom line for our first alternative scenario based upon a reliance on economic growth instead of tax and spending cuts. Scenario 1 assumes 1% additional growth in GPP with 8% public debt interest and $100 million per year in program cost saving. In the final year we have additional revenue of $3.5 billion generated by increased growth combined with the $5 billion in revenue we saved by abandoning the tax cut. For fiscal year 2000-01, this produces a surplus of more than $1.6 billion. Compare this, if you will, to the surplus predicted and generated by the CSR: a puny $40 million, as set out in table 5. And recall our starting point: a freeze on spending at the level it stood when the government took office, surely from the government's point of view a worst-case scenario.
Finally, table 7 shows the huge improvement in Ontario's debt-to-GDP ratio between the two approaches, which is certainly telling. Starting at roughly equal positions at a ratio of 33%, the CSR actually produces a worsened debt-to-GDP ratio of 36.4% in its final year; in other words, there is an increase. Our economic growth model produces a significant reduction in the debt-to-GDP ratio, which would stand at 30.2% by fiscal year 2000-01, significantly lower.
To test our alternative model under a variety of different growth assumptions, we have developed a total of six alternative scenarios, set out in the appendices attached to this submission. Each avoids the terrible pain and suffering of the CSR spending and program cuts, and we will quickly review for you three of them.
Table 8 shows the budget surplus which would be generated from 1% additional economic growth with debt interest costs at 8% and annual program savings from increased growth calculated at $150 million per year. Instead of $100 million as in scenario 1, the end result of this would be a surplus of $2.2 billion, if you refer to appendix 4.
Table 9 shows the bottom line for a lower annual increased economic growth rate of 0.75%, with public borrowing again at 8% and annual program cost savings again at $150 million. The final-year surplus is $1.1 billion, as referenced in appendix 5.
Table 10 shows the effects of a minimal growth increase of 0.5% per year. Assuming again 8% and $150 million in annual program savings, the model still generates a modest $12 million surplus in the year 2000-01. The irony, of course, is that this outcome can be achieved simply by abandoning the CSR spending and tax cuts, thereby eliminating the CSR drag effect, together with an extremely small amount of extra economic growth, as can be illustrated in appendix 6.
In assessing the comparisons between the CSR budget plan and our alternative model, a note of extreme caution is needed. It is that the CSR document has seriously underestimated the true cost of combining a balanced budget with the 30% tax rate cut. This has enormous implications for the CSR bottom line of a $40-million surplus predicted in the year 2000-01, as the DBRS report has pointed out. Without a long-term change in monetary policy, the CSR average growth rates of 4.4% GPP are optimistic. DBRS states on page 7 of its October report -- theirs, not ours -- that the actual deficit under existing conditions will be $2.1 billion and not a $40-million surplus, as the CSR claims to achieve. This further undermines the credibility, we believe, of the Treasurer's budget plan.
With regard to the tax cut, the terrible effects of the Common Sense Revolution spending cuts upon Ontario's social fabric have become clear to most people during the debate -- whatever limited exposure there was -- on Bill 26. It is clearly impossible for the government to honour its election promises to protect health care, classroom teaching, public safety and law enforcement while cutting such huge amounts from the base of the budget.
In this presentation, we have used the cutback figure of $6.8 billion as set out in the CSR document itself, but in its October 1995 report the DBRS again has calculated that the true cost of the plan for a balanced budget, together with a 30% tax rate cut, will be $9.6 billion. As the DBRS says, this amounts to an across-the-board spending reduction of 20% or, if health costs are really protected, as promised, a cut of 32% across all other ministries.
The tax cut itself is hugely regressive. Since it is a 30% reduction in the provincial income tax rate, which is a progressive tax, it will primarily benefit those who earn the most. In fact, our calculation is that fully two thirds of the total value of the CSR tax cut will go to the top 10% income earners or tax filers. On top of that, the rich will get more as individuals. A low-income Ontarian, in the $15,000 to $20,000 income range, will receive a paltry $217 reduction, which equates to only 1.25% of their income. It will be more than eaten up by new user fees and municipal taxes, as have been prescribed and are announced by municipal governments. But a $125,000 earner will receive a tax cut of $5,087, which equates to 4.6% of their income. Even after the new user fees and other municipal taxes, the rich will be the only winners. They will spend their unneeded windfall on foreign vacations and on luxury imports, and the value of job creation will be close to zero.
Let me illustrate our concern in another way. It has been pointed out by the Canadian Centre for Policy Alternatives that a single millionaire will receive a tax cut of $63,745. This will eat up the entire savings the Harris government made by cutting the welfare benefits of 17 single-parent families, mothers with two children. In other words, 51 people were impoverished to pay the 30% tax break for one rich individual.
Our position is very clear. The tax cut should be abandoned so that the essential services ordinary people rely on can be preserved.
A final word on the deficit itself. Public sector deficits and the public debt have not been created by spending beyond our means. They are the byproduct of some 15 years of neo-liberal and monetarist ideology which has inflicted an interest-rate policy that in an earlier age of the development of our society would have been described as usury.
In February 1995 the Dominion Bond Rating Service released a study which attributes 93% of increased federal debt since 1984 -- again the DBRS, not ours -- to compounding high interest rates. The study noted that between 1984 and 1994 the federal debt ballooned from $94 billion to $508 billion, primarily, as they said, due to compounding interest on a relatively modest program expenditure deficiency. DBRS concluded that it is these sustained high interest rates "which are driving the deficit today."
As long as a big spread remains between economic growth and interest rates, it will be literally impossible to retire the public debt. Deficit fighters who ignore this basic reality have as much chance of success as a rat catching its own tail.
In this presentation, we have argued, and I believe demonstrated, that neither the extreme spending cuts nor the huge tax cut of the Common Sense Revolution are necessary. We have used the fiscal plan set out in the CSR document itself to show that an alternative strategy based upon economic growth would generate superior results on the bottom line. To be implemented, this strategy requires a new monetary policy for Canada based on a long-term reduction in the Bank of Canada's interest rates. During the fourth quarter of this current fiscal year, the bank has indeed lowered its rates to more desirable levels, and they currently stand, as we said earlier, at 5.37%. It is now a question of ensuring that the wisdom of the moment is not replaced by the usual folly as soon as the economy begins to take off. It also needs a new fiscal policy for the province of Ontario.
Let us recall that Ontario has not recovered from the catastrophic severity of the 1990-93 recession and there are still fewer people employed in Ontario today than there were in January 1990. What Ontario needs is sustained, vigorous, buoyant economic growth. The very last thing it needs is a repetition of the fiscal and monetary restraints which created the crisis in the first place. We would urge the Treasurer to abandon the tax and spending cuts of the CSR, to adopt this strategy for growth and to join with other Finance ministers across this country to secure a permanent end to the politics of austerity and the economics of the permanent recession.
We're ready to respond to any questions that members of the committee might want to put to us.
The Chair: Thank you very much, Mr Wilson. I'd like to take this opportunity to introduce a group of parliamentarians who have joined us from the country of Thailand. They are here to study our budgetary process. Welcome.
I would ask the committee's cooperation. We have two minutes each for questions, and we'll begin with the opposition.
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Ms Lankin: Will we rotate?
The Chair: Yes. Two minutes.
Mr Phillips: Historically, Mr Chair, I think your job is to like -- the Liberals start it, then --
The Chair: Oh. By all means. Mr Silipo.
Mrs Marland: Right, and we need three minutes.
Mr Silipo: You need three minutes?
Mr Phillips: We'll give you one of ours.
Mr Silipo: Actually, yes, we'll probably agree to give you an extra minute. I'm sure you have some good questions.
I'm sure that our guests from Thailand may find this process interesting. They may actually get a little bit more information from the Treasurer than we've managed to so far in their discussions with the ministry officials.
Thank you very much for the presentation, Mr Wilson, particularly for going beyond what I think would have been certainly a legitimate position for you to take to have just limited yourself to a critique of what the government is doing but for going beyond that and putting together an alternative model, which I think has got a lot of things that would warrant, it seems to me, some careful consideration because you're making the argument that we can address the question of the deficit, we can bring the deficit down, without resorting to the kinds of draconian measures that this government is -- in terms of what the impact of what the tax cut will do and particularly in terms of the cuts that have to be done as a result of getting to that tax cut.
Really the only question, which is more of a comment that I have for you, is that I would say that the government, and particularly the Premier, Mr Harris, is venturing his whole political career on the tax cut, and my reading is that nothing is going to persuade him that he should not do the 30% tax cut, no matter what the economics of it are. I think we saw that revealed somewhat also yesterday in the Minister of Finance refusing to share with us a number of models that they're looking at.
I guess my only question to you is really, as logical as your presentation seems to me to be, what is your sense of how much this government is really going to listen to any alternatives beyond just simply the 30% tax cut?
Mr Wilson: I guess I can only base it on experience. I wrote the Premier on June 8 asking him for a meeting and I still haven't received an acknowledgement.
Mrs Marland: Mr Wilson, you said that you speak for 650,000 members. Can you tell me what percentage of the Ontario workforce that is?
Mr Wilson: I thought you were going to ask for all their names and addresses, Margaret.
Mrs Marland: Don't use up my time.
Mr Wilson: If the total labour movement would be accounted for, the level of unionization in the province is about 36%, 37%.
Mrs Marland: Yes, that's what I thought. I have to ask you, if it's as simple as you feel it is by your presentation this morning, did you make a similar suggestion to the previous government? Did you make a similar proposal to the previous government? The crisis didn't start in June 1995.
Mr Wilson: I think it's a valid question and in this volume of a submission, no, but then again we did not see a government embarking upon the cuts that we now have before us. So if we're to accept criticism, it would be valid for having not done it. I guess it took the scenery developing as it is to spur us to this level.
Mrs Marland: You say on page 14 that you want "a freeze on the spending at the level as it stood when the government took office." I'd like to know how you can defend, speaking on behalf of 650,000 hardworking people in this province, spending $1 million an hour more than this province takes in.
Mr Wilson: Margaret, I'm glad you're not referring to them as special interests, as some of your colleagues do, although you and I share the view that all 650,000 of them and their families are very special. You agree?
Mrs Marland: I just said "hardworking people." And those hardworking people don't spend more than they earn.
Mr Wilson: That's correct and so we have to find a way to get ourselves out of the morass. We tried to refer to some lessons in history I think this government should look at, although I admit that there has been a power shift with regard to the economy and --
Mrs Marland: I'm sorry, Gord. I asked you how could you defend keeping the spending where it is, which is $1 million an hour more than we receive?
Mr Wilson: I'm trying to tell you.
Mr Phillips: Stop picking on Gord.
Mrs Marland: Oh, yeah, right.
Mr Wilson: I guess, Margaret, it depends on your starting point. From the people I represent and work with I want to avoid the experience of the United States, which is very good for some people because now in the United States the top 1% of income earners control 42% of the wealth. In Canada, policies that are similar to the United States which are being implemented in various jurisdictions in this country are driving up that ratio of currently 1% owning 25% of the nation's wealth; it's an upward curve. So if you're in that 1%, it's a good deal. If you're the average person in this province, it's not a good deal at all; you're losing ground.
What we tried to illustrate is that the policies the government currently is embarked on, at the end of the day, when you take into account how high the deficit will be driven up by the borrowing that will be required by this government in order to apply the 30% tax rebate, beneficiaries of which will be mostly --
Mrs Marland: So you're not going to answer my question.
Mr Wilson: Listen to me. You asked me a question; I'm trying to tell you. I always thought you were a pretty open person.
The beneficiaries, of course, those who will most benefit from the 30% tax rebate, will be those in the upper income groups; to the lower people, it means a lot of hardship. It means at the end of the day you'll have a $130-billion debt rather than the $100-billion debt that you currently have.
Mrs Marland: How can you defend spending $1 million an hour more than you're getting?
Mr Wilson: I just said.
Mrs Marland: No, you didn't.
The Chair: You're beginning to infringe on the loyal opposition's time.
Mr Wilson: Margaret, let me ask you a question, then, if I can. Your government has said that its policies under the CSR and the tax cut will result in 780,000 jobs. If that's true, that they can be created here in the province of Ontario, why didn't you make the tax cut 60% so we could have a million and a half people who would be put back to work?
The Chair: We'll take that question under advisement.
Mr Wilson: I'll tell you why: because the response that Margaret would normally give me in private would be that it would be ridiculous. The reality is that the projection of a 30% tax rebate creating 780,000 jobs is equally ridiculous.
Mrs Marland: I wouldn't give you any answers in private that I wouldn't give in public.
Mr Ken Signoretti: Can I just add something to that? I think this is important.
Mrs Marland: Can you defend spending $1 million an hour more than you get?
Mr Signoretti: No, no. First of all, I don't know where this mythical figure of $1 million -- I just don't know. I don't think anybody knows. But the fact of the matter is, when you're talking about reducing the spending, those people with the lower income are the people who really put money back into the economy. Those people who have to live on a day-to-day basis and who live from hand to mouth are going to buy the clothes or buy whatever, and you're taking money away from them.
On the other hand, what you're doing with the tax cut is giving money to wealthy people who will not put money back into the economy but rather invest it in some Third World country or some other place where they're going to get a better return on their dollar. Most of these people have no interest whatsoever in the Ontario economy. That's part of the problem. It's really important to get money into the hands or continue keeping money in the hands of those who are at a lower level.
Mr Kwinter: Gord, I want to compliment you on the work that you've put into your document. It's truly impressive that you've compiled all of this data. I notice that really the basis of a lot of your projections is on monetary policy and a change of monetary policy of the Bank of Canada. My concern is that the interest rates that are there are not done in isolation, we do not act in isolation, and that when you consider that most of the Ontario debt is offshore and that because of our competitiveness and because a good bulk of our industry is for export into the United States primarily, whatever happens in the United States really affects our interest rates. How do you propose that the Bank of Canada establish a monetary policy that will reduce interest rates given the fact that you can't get all of our other trading partners, in particular the G-7, to go along with the same thing?
Mr Wilson: I'm not too sure, Monte, that today you wouldn't get a good reception in France and Germany and Japan for what's developing in their economies. Again, somebody has got to get in this fray somewhere, because my frustration is that if you do not challenge the current monetary policy, there's no way we can get out of the hole. The numbers we have used are not our numbers; they're projections that have evolved from government records and from the private sector.
Our experience of a high-interest-rate period has been exactly that: We continue to accumulate debt, and it doesn't matter how much you cut; you can't get out of the hole. So the way that you've got to deal with that is challenge the problem. What we tried to do is give you a historical reference of how we were able to get out of the problem once before. I admit that there are some significant factors that have changed, but Canada still is one of the safe havens for investment. Canada is still one of the orderly societies in an ever-diminishing number of orderly societies that exist in our world.
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Investment looks at not only return but it also looks at security. At some point what I think Ontario can do is play an extremely important role in leading the charge within this country and pressuring the federal government to broach this subject in a serious way with its partners in the G-7. In Ontario we have an experience -- we tried to illustrate -- of growth equal to a previous period of low interest rates, and then we saw a bubble when interest rates went up and growth got strangled. But if you go back to the last 15 years, that's been exactly the pattern that's evolved.
What we're trying to point out here is that you can't get to digging yourself out of debt by simply cutting expenditures. You get out of debt by holding the line, cutting the fat where it has to be cut, but at the same time focusing on revenues. When you put policies in place that this government is pursuing, the only people who benefit from that process are people who are in the upper-income groups. Those people in the upper-income groups, I would venture to say, are being shortsighted. If they don't project down the road another half-decade or a decade, where does that leave them? If there's a continual erosion of the middle class and its consumer ability in our country, we will move to the political, social and economic instability that is experienced in countries that don't have a broad and secure middle class.
The Chair: Thank you very much, Mr Wilson. Our time has expired. I appreciate your coming in and making your presentation before the committee today.
Mr Wilson: It's nice to be able to talk to a member of the government, Mr Chudleigh. I appreciate that.
INFORMETRICA LTD
The Chair: The next group that we have is Informetrica. Mr McCracken is an expert witness and will have 45 minutes as such. Thank you very much for joining us today, Mr McCracken. Please proceed.
Mr Michael McCracken: Thank you. You've invited me here to ask some questions. I would like to simply make a few opening remarks to provoke some questions and then I'll leave it up to you. This may be your opportunity to get back on schedule.
I'd like to essentially describe to you very quickly the current economic outlook as we see it, comment briefly on the Ontario fiscal moves and, to the extent possible, make a few suggestions for the 1996 Ontario budget that you're considering.
At the present time our best assessment is that the economy is slowing in the US, in Canada, indeed in much of the world. We currently are showing a US growth rate forecast for 1996 of about 2.7%, down from the 3.3% for 1995; our forecast for Canada is about 2.5% growth in 1995, down to 1.8% in 1996, down to 1.6% in 1997. These do include the effects of the unemployment insurance reforms announced in December and the recent Harris economic statement.
The net effect of the Ontario government moves in the December economic statement and the July restraints are expected to lower Canadian real growth by about 0.6%, and I'll go into that in a bit more detail in a moment. In 1996, most of that concentrated in Ontario, but not exclusively. There's more to come in Quebec, and other provincial budgets, and then the next federal budget, the sign of which we expect to be negative for the economic outlook. There does remain a possibility of a tax cut in Ontario some time in the future. I'll come back to that in a moment.
Whether we're in, coming out of or about to enter a recession depends on the definition of a recession used, but it is very clear that we have not been growing rapidly in the last year by any measure. The total employment increase in the last 12 months, through December 1995 was 88,000, of which 80,000 were part-time and 8,000 full-time nationally. There was a decline of almost 80,000 in public administration at all levels of government, implying an offsetting increase of about 167,000 in other sectors. The labour force increased by only 77,000 in the last year. This was about 150,000 lower than normal, reflecting a falling participation rate. In the overall economy through November, on a year-over-year basis, the total change has only been 0.7%, less than 1%, on a year-to-date basis; through November it's 2.2%.
With regard to the Ontario economy, weakness should be increasingly apparent and you'll see it in a number of places: rising unemployment, government revenues under target and an increase in bankruptcies will be some of the indicators. As other regions introduce fiscal restraint, this will also impact Ontario businesses which sell in these other regions. In particular, I'd keep an eye on the next Quebec budget. Of course, these other regions are feeling the effects of Ontario's cutbacks as well.
In the face of weaker growth in Ontario, businesses will cut back, even if they approve of the fiscal moves being made. With slower growth or absolute declines in demand, businesses will postpone expansions, postpone hiring or lay off workers and direct their expansion plans to other markets.
Consumers with weaker incomes will reduce their consumption and try to maintain their savings in light of increased uncertainty and, if possible, move to other jurisdictions where they may be employed or have greater opportunities. I think we've had enough experience over many years of observing the Canadian economy, all of us, to know that these are the underlying fundamentals. You heard the Canadian Federation of Independent Business earlier today talk about the importance of demand for business expansion.
In the forthcoming budget, it is important first, I think, to recognize that the actions that have been taken in 1995 have moved towards significant restraint, reducing spending by some $5 billion in 1996, $7 billion in 1997. Proposed tax changes might be as much as $1.7 billion in 1996, $3 billion in 1997. These are calendar-year estimates.
If in the next Ontario budget, additional cutbacks are implemented, then the fiscal drag will further dampen economic activity in the province. It would seem to make more sense to proceed with some fiscal stimulus, rather than further tightening if the state of the Ontario economy is seen as a provincial responsibility.
I have raised what may seem to you an odd comment, but I would point out to you that if the federal government continues to pursue further restraint, then it is not clear that there is any value in trying to offset their efforts. This was the trap that was set by the federal government that cost Ontario substantially in the last five years. As long as provincial governments absorbed the downloading from the federal government, they continued to reduce transfers to the provinces. As long as provinces tried to maintain employment the Bank of Canada kept monetary policy tight. The net result has been a fiscal improvement federally, but a substantial deterioration of provincial balances.
Any move by the provincial government to provide net stimulus should be agreed to by the federal government, with their undertaking not to offload while you are stimulating. If you are unwilling to make such a commitment, or they are unwilling to make such a commitment, then unfortunately you are in a vulnerable position by running a contracyclical fiscal policy.
There seems to me to be a bit of déjà vu in this comment. I think I made it about five years ago and we saw the results of that: our estimates of about a $10-billion worsening of the provincial government balance in Ontario as a result of federal offloading moves.
I've also given you a more detailed statement which I will not go into in great depth, other than just to point out to you our Monthly Economic Review. It's a public document. In there, however, we do provide an estimate of the calendar-year bases Ontario cuts or changes in expenditures, also a first cut at our view of the personal tax. This is our view, not any official view.
Perhaps the interesting chart would be on page 4 in the upper right-hand corner for Canada in total. The cuts that have been announced only, the expenditure cuts, are estimated on a Canada-wide basis to reduce employment by some 60,000 in 1996, 130,000 in 1997 and over 150,000 in 1998-99.
If one includes a tax cut in the magnitude that has been suggested, there is an improvement from that base. The net loss, however, is still on the order of about 90,000 Canadian. In table 5, the employment impacts for the combined spending and tax cuts in Ontario are about 52,000 from 1997 out, about 31,000 in 1996, spending cuts only about 40,000 going up to about 80,000.
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I'll leave the rest of this for you to look at. The main point you should take away is that it's very difficult to see with this kind of fiscal drag where there's anything positive that comes out of this. It's also not clear at all that at the end of the day one will see any magic worked unless one feels that somehow your actions will lead to dramatic changes in interest rates, something which there is no evidence for.
Let me stop and throw it open for questions.
The Chair: Thank you, Mr McCracken. I think we have about 10 minutes each of questions, if that's satisfactory. We could start with the government side.
Mr Joseph Spina (Brampton North): Mr McCracken, you indicated that there are two things. One was you seemed to suggest that the debt load is solely the cause of federal government downloading. Did I understand that correctly?
Mr McCracken: No. I don't know why the federal government has done it. They have done it. They chose to do that. I think they continued to do that because they were not achieving the objectives they had set out in terms of slowing the economy and in order to reach their inflation targets. As long as you stimulated, they were quite prepared to continue. There was no political cost. No one was getting hurt down below you. You were absorbing it in larger deficits, so they continued --
Mr Spina: You mean the province?
Mr McCracken: You the province. They continued to download. I think as long as you act to insulate them from the political backlash of cuts, they will continue to download, and maybe there's a lesson in that for municipal governments as well.
Mr Spina: So by implementing the spending reductions that we have done and are continuing to propose, then we are addressing that deficit situation.
Mr McCracken: Well, you're certainly addressing your deficit situation. You were worse than the federal balance. So the question mark will be, how do they make up that difference? Because keep in mind they also get a bit of the money that you would otherwise have been paying to people or that they would also get in the GST if you cut back on consumption and so on. So there is an effect on the federal treasury, and indeed it's elaborated in this note. There will be shortfall for them to make up as a result of your actions, as there will be in other provinces but yes, you will improve your deficit and your debt position as a result of these moves.
Mr Spina: You also mentioned the word "stimulus" a couple of times. I didn't hear, and if you did have a suggestion I missed it, but what would you propose could be a reasonable stimulus for consumer spending?
Mr McCracken: I think there's any number of choices, keeping in mind that the big question will be the net effect of what you do. Even if you, for example, deliver a tax cut, as you have indicated a desire to do, we have shown in here that it will act as a stimulus compared to today's base case, I mean, the post-December statement. If, however, it is of the magnitude that you're discussing, it will only go partway towards the restoration of the jobs that were lost by the actions taken in July and December of last year.
But certainly tax cuts are reasonable in terms of what kinds of tax cuts. Basically what you want to look at are tax cuts in which you do in fact get what you're after at this juncture, which is an increase in spending activity. These tend to be best served by tax cuts which put money into people's hands who have a high propensity to consume, not save. Those tend to be lower-income people. Or it's taxes which are tied to their actual spending behaviour, so reductions in indirect taxes, or sales taxes, would represent another area that would be more fruitful than -- let's call it personal income taxes at the high end or a personal tax cut that you only earn by increased savings, which would have zero effect, or even a negative effect, on the economy.
Mr Tim Hudak (Niagara South): Thank you, Mr McCracken, for your presentation. I have a couple of basic economic questions, if I could. The question concerns the level of government spending as a percentage of GNP and the relationship that has on productivity in the economy. My understanding is that the larger the proportion the government makes up of the GNP, at least the province of Ontario, the lower productivity is. Does that relationship exist and what does that mean for future generations?
Mr McCracken: Well, we should first distinguish two classes of spending, one of which is part of GDP, that is goods and services that governments use, the resources that they use -- this would include what they spend on health, education, roads etc. The other component that sometimes gets thrown into government expenditure is a share of GDP, or other what we call transfer payments. These are not putting demands on resources of the economy, but rather are transfers from one group to another.
If you look at the shares of government in the Canadian economy as a share of GDP, the resource use has been going down. The spending, for example, on infrastructure by both the federal and the provincial and the local governments has been declining from numbers at the 6% of GDP level back in the 1960s down to about 2% of GDP at present.
To the extent that infrastructure has a link to productivity, and there is some evidence that it does, the impact of government actions in the last 25 years has been to reduce that spending and presumably to reduce productivity growth and, indeed, many people think that is, in fact, what has happened.
In other areas, direct spending might be on, for example, a regulation of the marketplace, on providing health, on providing education. These activities, if done efficiently, presumably contribute to productivity growth in the private sector. It's important to have a healthy person show up to work, it's important to have a well-educated person show up to work. So in that sense it would seem to me a positive effect on the productivity growth in the delivery of those systems.
But governments have been, by and large, getting tighter, if you will, in their management of their goods and services spending. This is not unique to this province, it's not unique to any one level of government. It has been a characteristic that, by and large, government goods and services spending has not been growing as rapidly as, for example, the population or demographic basis underlying it. What we have been spending more on government activities is in servicing debt, in providing social transfers in the provincial level in social assistance, and federally at UI. In those areas though, those are not using up resources, those are reallocating through one group who has to those who don't.
Mr Hudak: Would the net effect of the increase in the government's proportion of GNP, say, over the last 15 years be negative on productivity then?
Mr McCracken: As I say, it's been going down, so if it has an effect I would suspect it is part of the explanation for why productivity has gone down. If we continue to cut it, there's no reason to think that we won't continue to have a negative effect on productivity. If you can't get from A to B because the roads don't work, or if people can't get to work because they're unhealthy, or if people come to work who are uneducated or illiterate, then it's going to have an adverse effect on productivity.
Mr Hudak: With respect to the black market --
Mr McCracken: The so-called "underground economy."
Mr Hudak: Exactly -- the shift in resources from the aboveground economy to the underground economy, does additionally increasing government spending or intervention in the economy increase the share of resources going to the underground market?
Mr McCracken: It may, although there's little evidence of that. There are also many different underground markets, including illegal markets, which we don't measure in the national accounts at present. But Statistics Canada has done a rather extensive examination of the underground economy last year, and concluded that it may be, at the upper end, of a magnitude of something like 2% to 3% of GDP in terms of its total size.
The point, I think, of the exercise is that regardless of what's happening there it's not a sufficient explanation for the deterioration in economic performance we've seen over the last 20-25 years in Canada.
Mr Hudak: If we captured that 2% or 3%, for example, and brought that back to the open economy -- if that was 2% or 3% of the Ontario GDP, for example -- what impact would that have on job creation?
Mr McCracken: Well, roughly you'd pick up 15% of it in revenue, if you were able to bring it in, of that amount, that is of the 2% or 3%. I would think it's likely to be rather small, keeping in mind that you are already getting some of the revenue because people who have illegal incomes still buy goods and services on which the sales tax is applicable, and people who provide services then in the legitimate market will pay tax on that incremental activity. So it's something that we all would say, yes, let's do it, as a matter of fairness and a matter of focus, but it's not going to solve your fiscal problems.
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Ms Isabel Bassett (St Andrew-St Patrick): This is a question really seeking information. In terms of productivity, a lot of people are saying we should be exporting in southeast Asia, the high-tech fields. How do you think that will impact on the productivity that at some levels is a bit stagnant here?
Mr McCracken: To the extent that we can get that market and produce those goods and services here and sell them abroad, that typically is a plus. That creates jobs in this area. The jobs in the high-tech sector, at least some of them, are highly paid. Some are not; some are low-paid assembly jobs. But certainly it is a much better outcome than no employment at all. It also allows Canada to presumably import more than it would otherwise be able to do, and it's often the imports that we should be keeping our eye on, where your benefits come. That's where you obtain access to goods and services at lower prices than you can produce them domestically and that's where, from a consumer's viewpoint in Canada, the benefit would be arising.
So there's nothing, certainly, wrong about exports. There are certainly some very positive things about it in the sense of allowing us to have a scale of activity in Canada in some of our industries that we would not hope to have if we relied solely on the domestic market. It has been a very fruitful area for the last three or four years. Indeed, it's about the only sector of the Canadian economy that's been functioning well, partly reflecting a more robust US, which is our major market of growth, and then also our continued expansion in some areas.
Ms Bassett: So would you see us pushing further in that area?
Mr McCracken: I think it's a fruitful area to continue. You don't want to spend $10 to earn a dollar. One has to still pick targets; one has to realize Canada is a small actor in China, for example. We are, however, a respected country in China and we should take advantage of that by continuing to deliver goods and services and to behave with China as someone who recognized them 15 years before the rest of the world and get that benefit.
Ms Annamarie Castrilli (Downsview): Thank you very much for being here, Mr McCracken. I have two questions.
First, if I could go back on some of the figures you presented in the beginning -- we had to write them down very quickly -- you indicated that the GDP for Canada was 2.5% in 1995 and you foresaw 1.8% in 1996 and 1.6% in 1997. Is that correct?
Mr McCracken: Yes, that's right. That's in real terms, real growth in those three years.
Ms Castrilli: I see that from the economic statement which the minister presented last October, we have figures for Ontario which are as follows: GDP in 1995, in real terms, would be 2.1%; in 1996, 2.3%; and in 1997, 3.1%. In 1997, it's twice as much as for the rest of Canada. Could you comment on whether Ontario could in fact outstrip the rest of the country by that much?
Mr McCracken: Certainly, it has on other occasions. Typically in our forecasts, given that we have a relatively strong export and a machine and equipment investment component to it, we have a tendency, everything else held constant, to have higher growth rates in Ontario than the rest of the country, usually, on average, by about half a per cent. The reason, I would think, that in 1996 the growth rate would be perhaps less vigorous in the finance forecast is that they're reflecting the known impacts of the fiscal drag of their own actions on that number.
The 1997 number, I suspect if you look at their forecast for Canada, is somewhat more optimistic than ours. I think they were, as I recall, in our Canadian forecast looking at around 2.5%-plus in 1997. We are one of the more pessimistic, at the present time, about the 1997 outlook, partly reflecting again the fiscal actions that have been taken not just by Ontario, but are also expected to be taken by Quebec, and our anticipated further restraint in the February 1996 budget federally.
I would say, though, that if everything else remained the same, Ontario should expect to do slightly better than the rest of the country over the next five or 10 years. The big question mark will be the government's own actions and the degree to which it acts, by collapsing its own spending on goods and services or cutting back on transfers to people, as a special damper on the outlook.
Ms Castrilli: The Treasurer's figures, though, indicate that in 1997 we'd be outperforming the rest of the country two to one.
Mr McCracken: Yes, although keep in mind at 3% growth, which sounds good compared to the numbers we're looking at, that still is probably right at the potential growth of the economy, which means essentially it's just enough to keep the unemployment rate from going up in that year. The two previous years are below potential and are likely to witness rising unemployment. So in that sense it is perhaps nice to have, but I would suggest to you it's by no means remarkable. It's much better to go back and look at periods in which Canada grew 4% and Ontario 6% as the periods that we would like to mimic in the future.
Ms Castrilli: So your conclusion is that even if we were to outperform the country to that extent, it would still be just an average performance.
Mr McCracken: Yes, that's right, and keep in mind if we use a half a per cent rule of thumb, in 1997 our forecast for Ontario would be just a little over 2% instead of the 3.1% that Ontario finance has indicated.
Ms Castrilli: Possibly not terribly realistic.
Mr McCracken: We will be tabling some numbers for the provincial outlook shortly and I'll make sure the committee does get a copy of those for their background.
Ms Castrilli: Let me ask one other quick question. Your submission indicates that the province's employment growth will be reduced by about 30,000 in each of 1996 and 1997. This is on page 4, continuing on to the next page. I wonder if you could comment on how realistic the province's plan to increase employment by 725,000 over the next five years is, given those figures.
Mr McCracken: These are just the direct effects of their programs to date. Certainly, it's going to make it more challenging to reach that number if you start off by going in the opposite direction by a substantial amount early on. That spending and tax cut impact on employment is about 50,000 to 60,000 per year, or cumulative over these five years would be about 200,000 down in terms of employment person-years.
Ms Castrilli: It's a formidable challenge.
Mr McCracken: Well, we haven't seen the rest of the program, I guess. We'll evaluate that when we see it.
Mr Phillips: I just want to pursue the employment thing. You go so fast that I can't keep up.
Mr McCracken: Sorry about that.
Mr Phillips: Or at least I go so slow that I can't keep up. That's what it is.
Mr McCracken: You just want to draw it out, I know.
Mr Phillips: I just want to understand what you're saying on the employment front for Ontario over the next two years and then the next five years. You're not predicting that we are going to see fewer jobs in 1996 and 1997 in Ontario.
Mr McCracken: No, not necessarily. This table 5 refers only to the effect at the margin, the difference between the July-December economic statement and one in which in those actions were not taken.
As a consequence of those actions, and if you've put the tax cut back in, you're looking at something like 30,000 lower employment in 1996 in Ontario, 52,000 lower in 1997 and so on. But that doesn't mean that the economy itself may not still create employment, although one should recognize if your growth is, say, in the order of about 2%, with Canada running about 1.5%, you're not going to be creating jobs very rapidly in that kind of an environment. With any kind of a productivity gain, you'd end up with something in the order of half of 1% increase in employment, so you're looking at maybe 50,000 or 60,000 at the outside in that kind of environment.
Mr Phillips: This is quite an important number for us. Unfortunately, you're the only economist we're going to see this week.
Mr McCracken: Fortunately for you, perhaps. Just on a one-hand view and not on another.
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Mr Phillips: Just so I can be clear, the government says that they expect job growth of around 81,000 in 1996, 99,000 in 1997 and then 180,000 a year for the next three years after that. Your number, if I can extrapolate what you've said, for the total job growth in Ontario in 1996 would be what?
Mr McCracken: Probably the best bet is for me just to send you the forecast and lay it out. But just to give you a rough sense of the magnitude, we're looking at about 0.7% growth in employment for the nation in 1997, 1.3% in 1996, so you're looking at about 150,000 jobs nationally; 40% of that would be a rough approximation to the Ontario share, about 60,000.
Mr Phillips: So 60,000 in 1996, and in 1997?
Mr McCracken: Less than that.
Mr Phillips: For the following three years the government's saying 180,000 jobs a year, for 1998, 1999 and 2000. What sort of job growth do we need to see?
Mr McCracken: It depends, but just to give you a rough sizing, if you wanted to have that increased employment as a result of growth without any change in the structure of the economy, then you would need something in the order of another 2% to 3% per year growth in employment. To get that, you would need at least that much more additional economic growth, perhaps more if you had any productivity gains. Now, there are other ways of doing it. One of the interesting areas that may well bear further examination at some point by this committee is the issue of the hours of work that people pursue. Certainly there are ways of creating jobs without increases in output, essentially by job sharing, four-day weeks, extended holidays, sabbaticals, earlier retirement and so and so forth, training programs for people who are currently working. There you can get employment increases, but the problem with those of course is that you're spreading, if you will, the income around; you're not producing additional meat in the pie to be shared across people. For many people that could still be important to do, particularly if they're time-crunched and the choices are being made voluntarily.
Mr Phillips: Now I know why the government wanted you as their witness.
Mr McCracken: I can't believe the government asked for me.
Mr Phillips: He was number one on your list.
Mr McCracken: I thought I was number one on yours, Gerry.
Ms Lankin: I don't know, Mike, but we're the ones who got stuck with you.
Mr McCracken: Maybe that's why I'm the expert. I was on all three lists.
Ms Lankin: Mr McCracken, we really appreciate your input. I want to ask you some questions about your forecast and what the implications might be for the Ontario government. You may know that, unlike previous years, we have not been provided with any data from the Ministry of Finance that takes a look at any medium- to long-term projections on growth, any medium- to long-term projections on revenue streams to the government and expenditure pressures. So we are being asked to give advice without government taking any further action, other than what they've done in July and November, without knowing what their tax cut will cost, what the picture is today and how that looks in the medium and long term. Then we would be in a position to talk about some options.
I want to ask you some questions that might help give us some of that information. You've spoken about your pessimistic projections on economic growth from 1997 out. The Ontario government had, in its November statement, a projection of growth for 1997 of 3.1%, which was at the midrange of the economic forecasts at that time. They fully admit, and said so yesterday, that the forecasts have in fact been revised down and the midrange of independent economic forecasters now is 2.6% -- I'm talking about for Ontario, not for Canada. They have yet to revise their numbers down but will be working on that in light of budget preparations. I am aware that there is a relationship, at least, between economic growth numbers and revenues to government. So I'm interested in knowing whether or not this revision downwards with respect to economic growth in 1997, and I would think beyond, in terms of where the government's numbers are at will have an effect on their revenue stream and what that might be?
Mr McCracken: It will certainly have an effect on their revenue stream, both in real terms from less economic activity, but also, in nominal terms or price terms, we'd probably find there's even less inflation in the system with the slacker economic conditions. At the same time, they have also adjusted on their expenditure side through their actions, and that's presumably where they're trying to get some of their offset to those cuts on the revenue side.
I don't have a separate forecast for the Ontario fiscal position, but looking at the total provincial-local-hospital balances, in spite of the slow growth or maybe even because of the slow growth reflecting increased cuts by government, fiscal positions of the so-called PLH group do improve in our estimation over the next several years as a percentage of GDP. Now, that's in a world in which government expenditure on goods and services continues to decline in growth negatively in 1995, 1996, 1997, reflecting the cuts being made not just in this province but in other provinces in health, education and in the management and administration of government.
In spite of what looks like weak growth, because they are at the centre of it through their fiscal actions, the provincial-local-hospital sector is able to improve its position in spite of that, as are the federal governments who are also contributing to this constraint or restraint by their cutbacks and layoffs of people.
But certainly the revision you would expect to see -- I would be surprised if, in the forecast they present to you, you don't see a significantly lower revenue forecast from the Ontario government even before their tax cut, and then of course the tax cut will do more --
Ms Lankin: Here's the problem, Mike: They won't give us a forecast, unlike in every other year.
Mr McCracken: Presumably they're going to do that in the budget, are they not?
Ms Lankin: In the budget I think we will get it, but without the actions that will be taken in the budget -- and he wants our advice on it -- what would the status quo at this point produce? Then we can give advice on what changes are needed.
We're seeing a situation with slower than expected economic growth -- I'm talking about the government's assumptions now -- which will decrease expected revenues even greater than the July revisions in those assumptions. We're going to see the revenue line grow, but not as quickly as the government had expected, and that will inevitably increase the gap between expenditures, if they are maintained as the July and November statements would suggest -- between expected expenditures and expected revenues, and that means an increase in deficit pressures. In order to pay for the tax cut, we're going to have to see additional expenditure cuts if the government is going to maintain its projected deficit numbers.
My problem with providing advice to the minister right now, not having those numbers, is that this is in a bit of a vacuum. But here is the concern I have, and perhaps you can tell me whether there is any validity to it or not.
If this change in scenario is going to drive even further a requirement for expenditure reductions on the part of the government, that will increase the economic drag effect we will see in the immediate term. The Common Sense Revolution said 0.4% or 0.5%; your estimate is that with the additional measures in November, it's up to 0.6%. We expect more to come in the budget, and if there's an additional requirement, that starts to become a very significant factor.
The minister yesterday said he's not sure of his timing of the tax cut, and even when he brings that in, in year 1 and year 2, there's not likely to be any stimulus effect from that, and he hasn't built in any projections for stimulus effect in year 3 or out.
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I'm worried about an actual decline into a recession, particularly with speculation about the United States in 1997 or 1998. Could you comment on, is there any validity to those concerns? What kind of things should this committee be thinking about to try and advise the minister to counteract that?
Mr McCracken: You've asked me two separate questions, so let me, at least in my mind, separate them.
One is, if the tax cut that has been promised or suggested, 30% of something, is matched by further expenditure cuts in the budget, what's the effect on the economy of that kind of move, that perhaps being predicated on or forced by some targeting on an overall deficit reduction? That would not be what we show in this thing here. You'd have to add the expenditure cuts that go along with that. If you fully funded a tax cut by matching expenditure cuts, depending on how you did it, you could well be back to the same place you were with the expenditure cuts alone in terms of employment loss or even more. If you cut taxes for people who save it and don't create much economic activity from their own actions, and lay off public servants or cut back on welfare payments, which has a direct adverse effect on consumption, you could do worse. You could worsen net, even though your fiscal balance is unchanged.
One would presume that the people at Finance understand that, and if they're going to be trying to create jobs, they'll be trying to do it with a twist towards much, but it'll be a much smaller net number if there are substantial expenditure cuts.
The second question is, if I'm optimistic with an economy with rising unemployment, moving nationally up back towards 10% with growth below potential, what's the story in Ontario if on top of that we're doing further cuts? The answer is, things will get worse here more quickly and indeed will also have national impacts.
The one message you all ought to remind yourselves of on occasion is that you are a significantly large component of the Canadian economy and cuts here have adverse effects not just on Ontario and not just on the direct effect on Canada of Ontario's content, but they also have effects directly on all the other provinces in the country because they sell goods and services to you and that will drag down their activity. So when we collectively look at it together, the total job loss is much larger than the job losses taking place in Ontario.
You may say, "That's their problem," but indeed you should recognize as they cut that they too will have a spillover effect back on to Ontario, and your balance sheet, if you will, or your job situation will be worsened by their activities at the same time.
The Chair: Thank you very much, Mr McCracken, for the detail and your answering of the questions. We appreciate that a great deal.
ONTARIO ARTS COUNCIL
The Chair: The next group is the Ontario Arts Council: Paul Hoffert, chair, and Ms Setterfield, executive director. I believe they have a video to show us.
Mr Paul Hoffert: I have a few opening comments. Our plan is to close with the video, Mr Chairman, if it meets your pleasure.
The Chair: Wonderful. Proceed, please.
Mr Hoffert: In 1963, when the Ontario Arts Council was formed, we were given a clear mandate, and that mandate has not changed; we were given some objectives that were quite clear, and those objectives haven't changed. But I'm here in my introductory remarks to assure you that the answers to the question of how we fulfil our mandate and objectives have changed significantly.
I was thinking on the way down here of the apocryphal story of Albert Einstein, who was teaching a graduate class. When they had their exam, one of the students turned to him and said, "Professor Einstein, I don't want to be rude, but the questions on this exam are exactly the same as the questions on last year's exam" -- something members of this committee probably experience if you've been on the committee for any amount of time. Supposedly, Dr Einstein looked at the student and said, "Ah, yes, the questions are the same, but this year the answers are different."
If there's a bit of a theme we bring, it's that the answers at the Ontario Arts Council are significantly different, that we are reacting to the changes in society and the economy and all the other structures around us in a way that we are certainly becoming much leaner, but we hope just as or more reasonable and not meaner than we were before. I'll just make two brief comments, and then we can move on.
The first one is that in my view, the common wisdom that some people talk to me about, saying, "How can we justify culture when we don't have enough money for education and we don't have enough money for health care?" is absolute folly. Talking about anything like budget/deficit reduction and equating assistance to the cultural industries and the arts in the same breath I'm sure makes no sense to you folks who look at the budget. The numbers are so vastly different that one could cut all assistance to the arts in Ontario and have absolutely no effect on the budget number or the deficit in terms of the number that would appear in a newspaper. It would be out some decimal places.
Given that there has been general consensus that support for the arts and the cultural sector has definite linkage to actual prosperity in Ontario, to job creation -- the number that's generally bandied about is about $11 billion of activity in the sector -- and if you look at what the public's contribution is and look over the years to the linkage of how the public's contribution has risen and how the sector has risen disproportionately high, and if you look at the recession we've been through and the fact that cultural industries are among the only industries that have thrived and are contributing more than ever, I believe there's a very good reason to suggest that a reasonable approach to the finances would not be to try to equate these.
If you took, for example, education, health care or any of the larger ministries, if one wanted to do some simple arithmetic and take less than one tenth of one per cent of the budgets of even a few of those ministries, numbers that in terms of the broad brush we're using nowadays are essentially meaningless, one would more than double the assistance if one moved those tiny percentages over to the cultural sector and the arts.
If one then looked at what the stimulus effect of that would be in terms of job creation, increase to the economic health of Ontario, tourism and the rest of it -- and I don't need to go into those figures; I'm sure you have them -- I think one would make a very good case for vastly increased support to the cultural sector.
Last, I just mention that the trend nowadays, having looked at the last 50 or 60 years of economic activity in North America, is for analysts to understand that new jobs and new wealth are created more and more by small businesses, and not by either governments or large businesses. Having spent most of my life as an independent entrepreneur, as a musician, as a composer, I can assure you that the cultural sector and the artists of Ontario are the prototypical free-enterprise entrepreneurs, each of us, generally speaking, never getting an MBA, generally speaking never taking a business course but having to come through the school of hard knocks, which is that there's still rent to pay at the end of the month, there's still food to be put on the table, and if you don't figure out some way to do it, your family can't survive. As a matter of interest, until I was about 50 years old I didn't have a steady job, ever.
So I put to you that the cultural sector and the Ontario Arts Council are in fact in an excellent position to help the economy of Ontario, that it is an excellent value for the people of Ontario, and I hope that the finance committee would take this into account and make appropriate recommendations to the government. Thank you.
I'd like to pass this on now to the executive director of the Ontario Arts Council, Gwenlyn Setterfield.
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Mrs Gwenlyn Setterfield: Good morning, Mr Chair, members of the committee. I have just a couple of points further to make beyond what our chair has said.
The funding to the Ontario Arts Council now represents less than $2.80 per head, per year in Ontario. It is part of an intricate fabric of support in the arts. For the most part, organizations generate about three quarters of their own income and the rest of it comes from public support of one kind or another. This is an intricate web of funding. When the public support begins to fall away, the private support equally begins to fall away. Sponsors, private donors say: "There isn't any stability here. I'll go and put my money somewhere else."
The Conference Board of Canada has acknowledged that the corporate sector is experiencing a terrific increase, about 10% in any few-month period, of demands on their money. They need to know that there are stable and exciting things happening in the arts if they're going to continue to support the arts, so the one message that we are particularly concerned that this committee carry to the Treasurer of Ontario is the need now for some stable funding for the arts.
The arts council has lost almost 30% of its funding. This is almost twice as much as the average loss to the Ministry of Culture. We feel that we have taken a terrific hit. We have made our contribution to the deficit cutting in Ontario and what our organizations and our artists now need is stability. We need to be able to go to these organizations and say: "This is it. Now you can plan for the next two or three years. You can start to go to your donors, to your private sector. You can make the plans for your seasons that will bring more people into the seats in your communities." But they can't do that with this continuing free fall which they are experiencing on all sides.
Those are the points we would like to make, Mr Chairman. Because we are an arts council, we always bring you a little entertainment in the way of a video. We'd like to show that and then have time for questions.
This represents some of the kinds of things we fund at the arts council.
Video presentation.
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The Chair: Thank you very much. If we could move to questions, we have 15 minutes and we'll take five minutes for each party. Ms Castrilli.
Ms Castrilli: Mr Hoffert and Ms Setterfield, thank you for coming in. I think it's a given, and it should be a given in this committee and elsewhere, that the arts contribute greatly to our quality of life, so we'll simply take that as a given.
I'd like to ask you to speak briefly for the record -- you have given us a great deal of material -- on the impact on jobs and economic growth in Ontario of the arts and the Ontario Arts Council and its activities.
Mrs Setterfield: The estimate, the latest figures that we have -- we will have better ones unfortunately in a month from now -- are about 260,000 jobs in the arts and culture sector in Ontario. As you understand, the sector now is a continuum from the not-for-profit sector right through to the commercial end and the artists move back and forth among those forms of work. They may work in the opera company and they may work in Phantom, they may work in a commercial way and then go back to the not-for-profit theatre, for example. So one thing is intimately associated with the other. Indeed, the commercial producers point out that we cannot have a viable commercial sector, film sector, theatre sector and so on without the development and the fundamental base, the platform of the not-for-profit sector, with which the Ontario Arts Council deals primarily.
For example, I could say that 126 performing arts organizations that we deal with in Ontario had revenues last year of over $163 million, and close to $7 of every $10 was generated by those companies themselves. The chair of one of the major arts organizations in this city, a very prominent businessman here, estimates that the leverage is $1 in $8 -- one public dollar, and he generates another $8 out of his company; that's the National Ballet company -- in tourism and other economic benefit to the community.
We fund, I should say, about 1,900 individual artists and close to 1,000 organizations across the province. That represents 360 different communities. So you have a little festival in Hearst; you have three small festivals in Guelph, which they estimate in Guelph brings $1 million into the area during the summer season.
Ms Castrilli: All of this is in partnership with the private sector?
Mrs Setterfield: Absolutely every group we fund is in that partnership.
Mr Hoffert: If I might just add a small, little anecdote -- there are a lot of numbers that deal with the positive effects of the arts and culture -- but we saw the Hamilton Symphony fold its wings, so to speak, just a short while ago. The first thing that starts happening, of course, is that the Ontario Arts Council gets phone calls and we find that the $150,000 a year they were paying in rent to Hamilton Place is now going to have to be absorbed by the taxpayers because they no longer have the Hamilton Symphony; we see that the GST and the PST that are charged on the millions of dollars of tickets that this organization sold will be lost to the public. If one looks at the possible downsides, not just the upsides, I think one can see a really close linkage of the activity of these organizations either way.
Ms Castrilli: I gather from your presentation that the one recommendation you would make is that there be stable funding. That's the crux of your presentation. What does that mean, precisely? Are you saying a freeze? Are you saying multi-year financing?
Mr Hoffert: I think we're saying multi-year financing. If any of you would actually look into the operation of especially the performing arts organizations like an opera company or a ballet or a theatre, you'd realize that they book the actors and plan their productions two or three years in advance. In the case of opera, sometimes you have to book a singer four or five years in advance. So financial commitments are being made greatly in advance of the yearly budgets. This is very, very stressful.
In the current situation we have, where there was a significant cut, for example, the organizations did not have the option in most cases to say, "We will cancel the performances for the rest of the year because we can't afford them," because they still would have had to pay their singers, they still had contractual obligations to others and of course audiences had bought subscription tickets and that money had all gone in. So there is a lot less flexibility than you have in other types of organizations. For this reason it's very important, and I guess the message Gwenlyn was giving you is that stability is very important.
Of course, our view is that funding would hopefully increase. Others would have whatever their view is. But in any case the most important contribution, I believe, to the financial stability of these organizations is knowing what a number would be more than a few months in advance of when they get it, because they can't do corporate fund-raising, they can't plan a production, they can't do any of these things. The National Ballet had its new production of the Nutcracker all ready to go this season. They couldn't cancel it just because we passed through some budget cuts to them.
Ms Lankin: I'm fearful that your message may not be listened to or be well received by some members of the government, and I understand in a sense the struggle they are going through, trying to determine how to achieve the fiscal agenda they have set for themselves.
One of the things that disturbs me is that some of the newly elected members seem to have a sense that no one has done anything in the last few years to try and deal with the fiscal circumstance or that organizations haven't tried to become more efficient or that they haven't absorbed any kind of reduction in spending.
We often hear, if anyone raises concerns about the government agenda, that they're simply defending the status quo. I'll refer to Mr Hudak's comments yesterday, when he said that he hoped that people who came forward before this committee, if they disagreed with any of the directions that the Finance minister was going, would put forward other ideas and solutions for change. But he said, "But again, what I fear is a repeat of what I saw in the Bill 26 hearings, and that is basically a pitched defence of the status quo."
I sat through all of the Bill 26 hearings and I didn't hear that at all. I heard many groups say they recognized the need for change and talk about how they felt that change should be brought about, what they favoured in the government's plans and what they disagreed with. But I fear that you may be viewed as pitching the status quo and I think it's important for you to explain what in fact you have been doing over the last couple of years -- the whole arts community, in fact, and cultural community and cultural funding, the kind of changes in funding levels that you have already absorbed and the fact that there have been attempts to reduce spending in that area and that you've already absorbed a lot of it.
Mrs Setterfield: I think since about the early 1980s most of the organizations that we have funded have been trimming and slimming and reworking their way of dealing with their communities and on hiring their artists. The Toronto Dance Theatre, for example, which is internationally renowned and is at the moment on a tour in California, has severely cut back the number of weeks that they hires their dancers for and is being much more concentrated about when they do their rehearsal and when they do their planning for their season and so on. They are now at the rock bottom. If they cut back any more, they won't have a dance company, because you understand that dancers must dance every day or they aren't going to be dancers any more. This is a company of the quality that can go to New York and self-present and sell out a series, which they do every year.
This has been constant throughout the sector. We have, for example, small theatre groups in Toronto that got together and formed an organization call STAF, the Small Theatre Administration Facility. This is an organization that provides marketing, publicity, business services of all kinds to a collective group of theatre companies so that they're not all paying for those administrative overheads. The Ontario Arts Council helps them out with that sort of thing. The dance community has done the same thing for themselves.
I heard one of the chairs of one of the organizations say, "The arts have been the best and the most outstanding best-in-time deliverers of service in this province." Every night they get the curtain up at 8 o'clock and they do it with decreasing overheads all the time. They are doing smaller plays, they are doing fewer weeks, they are doing less rehearsal and so on. You'll remember a couple of years ago the Toronto Symphony members took a cut in salary. This has been the same in all of the orchestras around Ontario, that the musicians have taken cuts, through less weeks that they've been working. The galleries have been cutting the number of shows that they have, and this is of course having a direct impact on the individual artist.
The Chair: Thank you. That was a long answer.
Ms Lankin: The other thing that I wanted to ask you about is the economic impact of the arts, because I think the government does have to make some difficult choices. They're going to have to come down to looking at what the spinoff benefit back into the economy is. Cultural tourism, the links with telecommunications, all of the work that was done in the culture sector strategy -- can you comment on whether that's moving forward and the sort of payback to the provincial coffers and the provincial economy in terms of jobs?
Mrs Setterfield: I'm not sure that I understand the question.
Ms Lankin: It was too quick; that's why.
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Mr Hoffert: I'll take a quick crack at it. First of all, in terms of technology, the Ontario Arts Council is very fortunate in that we started our technological rebuilding, if you will, before we received the major cuts in the last year. So we have the infrastructure within the OAC of a brand-new computer system that just came on line some few months ago, which was funded out of some previous budgets that we had.
Just for the record, the Ontario Arts Council board has given instructions to the staff to make certain that although we've increased the scope of our activity significantly over the last three or four years -- our funding level for next year will be approximately the same as the funding we received in 1988 -- our administrative costs will be lower, meaning that we will be a smaller organization with fewer internal resources administering more services than we did at that point in time.
Ms Bassett: Thank you very much for your presentation, Mr Hoffert and Ms Setterfield. Certainly our government appreciates the role of the arts in the community and to all our lives. It's enormously important. The question is, as Ms Lankin pointed out, that we were elected on a mandate to cut spending and to reduce the deficit. That is our mandate, so really I couldn't say that there's going to be a lot of money; there is not. The question facing us is not that we don't value the arts -- we do -- but how to get the money.
I'm getting to my question, but I want to say first of all that the Finance minister, Ernie Eves, in his economic statement said that in answer to many requests he's going to allow crown foundation status for the Ontario Arts Council and various artistic organizations, which will loosen up some money that would replace funding that you maybe need.
Lieutenant Governor Hal Jackman, whom we saw on the tape -- you didn't have time to show it, but the reason for those grants that he gave was to honour the six organizations, I believe -- and correct me if I'm wrong -- which increased the balance between the donations from business and decreased their reliance on the public purse.
My question to you is, now that people are getting in and recognizing the fiscal problems, what are you doing or what can we do to help you more, without actually giving you money, that would bring in funding that you need? I mean, imaginative steps down the way. You said into the tape too, Mr Hoffert, that artists can do anything, so maybe you can think of something.
Mr Hoffert: The two issues on the table, which I won't belabour, are stable funding, and certainly crown corporation status for a foundation in the arts would be helpful. We have a lot of creative ideas within the OAC and within our staff and within our board that we are beginning to discuss with the government ministry that are outside the scope of the current structure of the OAC. Just as we are totally restructuring our own organization, we believe that if there's to be real efficiency, it's time to take a good look at the whole picture.
Ms Bassett: Can you think of other steps though that we could be doing, with you maybe or whatever, or through business where we could lend influence, that might stimulate some money?
Mr Hoffert: For example, we're taking steps to do cooperative ventures with the private sector. A good example is the Bravo television network, which is a cultural, arts-oriented network. We're currently involved in trying to do a project with them which would bring $600,000 a year additional funding, which is part of their promise of performance to the CRTC, to make videos for artists and to have the Ontario Arts Council work with them and do it. Of course, we're coming up against corporate culture clashes between the way the arts, the not-for-profit sector has worked and the way the for-profit sector has worked, but we are committed to make it work.
Mrs Setterfield: We had recently written to the Premier to ask him that when there are foreign trips in terms of selling Canadian business to foreign markets, we would hope that in future representatives of the cultural sector would be represented, because our artists are selling abroad, all over the world. We would get a significant boost in those markets if it had the stamp and the help of the Ontario government through the Premier and his ministers when they go abroad. That is an issue, and there's also the support for the new tax reform issues in Ottawa that would be very helpful to our sector.
Mr Jim Brown (Scarborough West): The presentation material is pretty nice and probably cost a few bucks. It ties in with the question on your financial statements. It seems to me you got about $43 million on the 1994 statements, and you take it in here and you give it out there, but the difference is about $6.5 million. What do you for the $6.5 million? Because I could cut those cheques cheaper than you could.
Mr Hoffert: That's a two-parter; I'll take the first part. If we decided at the Ontario Arts Council to administer the flow-through of grants as cheaply as possible, we could do it much more efficiently. In fact, the government could do it yourselves, and some have suggested that the government should. If we just cut cheques, say, to the six largest or five largest organizations in Ontario, without much adjudication, it would be very inexpensive to administer.
What we have been doing more of is really getting out to remote communities, servicing them, making sure that all the people of Ontario get the mandate fulfilled. I must tell you that there is a pricetag on doing that. Last year, we gave out 2,000 grants to organizations across Ontario in 350 communities and about 1,000 grants to individual artists. Each one of those was adjudicated, by a peer group that came to the Ontario Arts Council, and had to go through the process etc. If one looks at relative efficiency, we were, I believe, last year probably twice as efficient as the Canada council -- I don't know if that's saying much -- in terms of number of grants adjudicated and the cost of doing it. But there is a cost involved.
Mrs Setterfield: The other thing that we do besides grants is a great deal of service. We present, for example, two major trade shows, one for the English sector and one for the French sector. They generate over $2 million worth of business for the individual artists and groups in Ontario. We present those trade shows. This brings together the buyers and the sellers, so to speak. We do a tremendous number of professional development workshops for organizations. We do workshops for groups to show them how to do marketing, how to budget and so on. That's where part of that cost goes.
The Chair: Thank you very much to the arts council for appearing before us and expressing your views.
We have a little bit of housekeeping to do, I believe. We tabled the subcommittee minutes of February 1 to today at noon.
Mrs Marland: Mr Chairman, it was my motion yesterday to move the subcommittee report with an amendment and it was my motion to table that until noon today, after which time I could have contacted Mr Rob Sampson, who was the member of the subcommittee who made the agreement on this report. I'm happy to say that I was able to speak personally last night to Mr Sampson. It is true, as Ms Lankin said, that Mr Sampson is perfectly happy with the subcommittee report as it is written and circulated. Therefore, I am withdrawing my motion of the amendment and I will move the subcommittee report as printed and circulated.
The Chair: Shall it carry? Thank you.
Mr Spina: I just want to clarify something on that report, if I may. Is that in order?
The Chair: It's been moved and carried.
Interjections.
Mr Spina: It's not going to change the motion, but I just need some clarification. I understand that under travel the committee is going to Thunder Bay, the Sault, London and Ottawa, and I respect the fact that you're the one making the decision. I was just going to --
The Chair: What decision?
Mr Spina: If I understand it correctly, the Chair has the authority to schedule and make the flight arrangements based on 3(b).
The Chair: Flight or travel.
Mr Spina: So all I'm suggesting is the order. You might consider London first and then to travel across northern Ontario, perhaps ending in Ottawa, as a good, efficient route.
The Chair: We'll consider the airline and the bus schedules before we make that decision.
Mr Phillips: On another matter, earlier today, when the CFIB was in, they indicated there was an estimate on the cost of the elimination of the employer health tax provided by the Ministry of Finance. I wonder if we can get a copy of that. The only reason I raise it is because the promise that was in the minister's remarks yesterday is a different promise than was in the Common Sense Revolution. The estimate that I think the ministry provided was for the elimination of the employer health tax on businesses with payroll of $400,000 or less, and the minister said yesterday the promise was to eliminate the employer health tax on the first $400,000 of payroll. The estimate, I think, that the CFIB had was for the old promise. I wonder if we can request the minister to give us an updated number on what the promise costs?
The Chair: We can make that request.
Mrs Marland: In response to the point that Mr Phillips has raised now, we did hear from Catherine Swift that the figures that they were using this morning were the figures that were given to them by the government a year ago. So if Mr Phillips is looking for newer figures, you're referring to the presentation of CFIB this morning, and in that context they clarified the source of their figures. So if you're asking for new figures, we can't make that commitment to give you new figures.
Mr Phillips: No, no, if I might just clarify it, this morning I think the CFIB said they had the $400-million figure. That was on the earlier commitment of eliminating it on payrolls of $400,000. I'm saying we request the Ministry of Finance to update it to give us the new estimate, because they gave the old estimate on a different set of numbers. So I'm just saying that the committee simply send a letter to the Minister of Finance or to the ministry saying, "Could you give us an updated cost of the commitment that you outlined here yesterday," because it is no longer $400 million, it is some figure above the $400 million.
Mrs Marland: Didn't you ask Ernie Eves, the minister, yesterday for that figure?
Mr Phillips: Yes, but I just assumed that the committee might like to see that number, because the --
Mrs Marland: No, but didn't you ask him yesterday, Gerry, and the minister said that he --
Mr Phillips: I'm not sure I did, no. I was talking about the personal income tax.
Mr Kwinter: I just wanted to make sure everybody understood what the issue was. The commitment under the Common Sense Revolution said that all businesses with a payroll of $400,000 or less would get this tax relief. What has now been said is that all businesses would get tax relief on their first $400,000, which means that there's a much, much larger pool of companies that are going to benefit. We just want to know what that figure is.
Mr Gary Carr (Oakville South): I was going to get a clarification of whether in fact the minister said that and if it's in Hansard or whatever, but there is definitely a difference on that. We may have interpreted wrongly, but we should ask for clarification from the minister, because it is different from what the promise was. But I think you'll find that either he made a mistake or we didn't hear him correctly. But we certainly should have clarification of that.
Mr Phillips: It was in his text. He said, "We will eliminate the first $400,000 of payroll from the employer health tax." I'm quite sure that is the intention of the government, not, "We will eliminate the employer health tax on companies with payrolls of $400,000 or less." It is quite a different promise. All I'm saying is that if we're going to be helpful to CFIB -- that was, I think, their number one recommendation -- it would be helpful for the committee to have some idea of the cost of that.
The Chair: Could we ask the researcher to see if there's some clarification of that statement and get back to the committee?
Mr Phillips: And the cost. That would be great.
Interjection.
Mr Phillips: Oh, I'm not questioning the commitment; I'm just wondering about the cost of it.
Ms Lankin: It's just different than what the CSR said, what he said yesterday.
The Chair: Given the time and the full schedule that we have for this afternoon, I would ask that we reconvene on time, at 1:30. The committee now stands adjourned for lunch.
The committee recessed from 1205 to 1331.
ASSOCIATION OF DISTRICT HEALTH COUNCILS OF ONTARIO
The Chair: We're pleased to welcome the Association of District Health Councils of Ontario; Susan Brown, chair. Perhaps you could identify yourselves for the Hansard record. You have half an hour. You may use that time as you wish. We'd appreciate some questions.
Ms Susan Brown: I'd like to introduce to you Alan Mathany, vice-chair of the Association of District Health Councils, and Gord Gunning, the executive director.
We appreciate the opportunity to come and talk to you about some of our ideas around savings that could be achieved in a health system restructuring. I understand that you have received the paper that we prepared for today. I'm not going to speak to it in total, but what I will do is talk a little bit about the nine recommendations that we are bringing forward in terms of achieving efficiencies in the health care system. Those recommendations that I would speak to start on page 7.
A little bit about district health councils: District health councils have been serving Ontario communities and the Ministry of Health in Ontario for the past 20 years. We now have all six planning districts totally covered, with 33 district health councils throughout Ontario. The most recent one was the Huron-Perth District Health Council, which was enacted, I believe, in 1993.
District health councils have provided a planning perspective on local communities for the past 20 years. At one point, district health councils were totally involved in new dollar allotments or allocation recommendations to communities, but that's a role that's no longer viable in the health care environment.
In the last five years district health councils, as you know, have been participators or the lead facilitators in various communities for hospital or health service restructuring. The Metro Toronto hospital restructuring report was received earlier in this calendar year. Presently one of the other large ones that is being undertaken is in Hamilton-Wentworth, which is actually quite a comprehensive restructuring looking at health care in an integrated way.
That brings me to our first recommendation in terms of achieving cost efficiencies in the health care system. Development of an integrated health delivery system would control costs and improve services, and improve access actually, through the development of locally defined integrated health systems with both horizontally and vertically integrated networks. "Horizontal" means that across the community the variety of services that are necessary for people to access can be accessed. "Vertical," as we define it, is moving through the levels of care: primary -- being the most common -- secondary, tertiary and quaternary care.
In an integrated health delivery system, each system would recommend allocation or reallocation of health care resources for its community. We recommend that the government consider developing a pilot project or a trial project basis in selected communities that have done a lot of preparatory work in integration.
One of the other things that we believe will achieve cost savings is the establishment of a formalized link between local planning and implementation. Over the past six or seven years, district health councils have worked very hard developing new configurations for their community for the delivery of health services. However, without implementation one does not receive any of the cost benefits that they had prescribed.
In doing this, of course, the roles of the ministry, the Health Services Restructuring Commission, district health councils, hospitals and other stakeholders must be clearly articulated before the commission is appointed, to ensure that implementation is based on a local perspective for integrated system care. We were pleased to see one of the amendments to Bill 26 which recommended that the health services commission have regard for plans that had been developed locally by the DHCs.
We also recommend that we need a speedy implementation of these restructuring processes, with a managed and balanced approach to change. Outcomes of hospital restructuring projects that demonstrate clear evidence of both improved service and significant cost savings should be expeditiously implemented to ensure that their communities have continued access to needed services.
Implementation should have a managed and balanced approach to change to avoid emphasis on one aspect of the health service delivery system, ie, hospital savings. Cost savings that are found within the hospital system should have some corresponding reinvestment into the community, which brings us to item 4.
We believe that in providing incentives for achieving efficiencies within the system we'll be able to ensure a managed and a balanced approach to change. The ministry should develop a strategy to provide incentives for achieving cost savings through local restructuring. In some sense, that's already happening. I'm not sure that you could call it incentives in some communities, but communities do have targets which they are able to work towards.
One of the significant recommendations that we are making is that at least 50% of the savings that are achieved through restructuring in a community should be redirected back into health service system delivery in that community. Perhaps a vehicle for doing that would be for the minister to establish something called a healthy community fund -- or a name that might fit it in a better way; it's just one we came up with -- that would be reinjected back into the community for capital investment or program development, to address service gaps and increase efficiency in the years following implementation of a restructured system locally. The ministry should establish policies to encourage innovation for financing capital or operating costs through joint ventures between the public and private sector.
We support the Ministry of Health reorganization to reflect integration as a corporate strategy. We support and would ask for a more timely establishment of planning benchmarks and provision of current accurate data through integrated health information systems. Benchmarks for planning have long been a call of DHCs and there have been a number of positive steps in the recent past. But we support the support to different data collection agencies, health intelligence units, ICES -- the Institute for Clinical Evaluative Sciences -- and other planning and research organizations through established benchmarks for the province through which we can plan for an effective and efficient health service delivery system.
The establishment of a multi-year stabilization fund for planning and timely annual core budget approvals: The ministry should establish a stabilized planning fund to district health councils that provides at least a three-year planning cycle, beginning in the 1996-97 fiscal year. In the recent past, hospitals were given an opportunity to have a planning cycle, which has helped them considerably to get a hold of their budget concerns. It allows for projects and programs of the district health councils to continue through to the end of their mandate rather than to the end of their fiscal year, where things may or may not be completed.
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The development of new models of health care to improve utilization management: New models for health care facilities and physician payment plans developed through local restructuring activities to improve utilization management should receive ministry support as long as they are consistent with policy frameworks and fiscal goals.
One of the hallmarks of district health councils in this province is voluntary participation. District health councils, as you know, are comprised of a voluntary board. District health councils support the Ministry of Health's initiative to establish 43 volunteer-based community care and access centres across Ontario as a means to enhance coordination of long-term-care services. District health councils support the government's initiative to review its agencies, boards and commissions in the overall strategy to achieve cost savings.
We have fleshed out these recommendations in a little more detail throughout the rest of the paper, but perhaps just in summary, before we have an opportunity for questions, the key points that we would hope we've been able to impress upon you in this presentation are the development of an integrated health delivery system, providing incentives for achieving efficiencies, the establishment of planning benchmarks and the establishment of multi-year stabilization funding for district health councils.
We'd be pleased to answer questions, if there are any.
Ms Lankin: Thank you very much. May I say that we also share your pleasure at getting that one small, minor amendment that said the restructuring commission shall have at least regard to district health council reports. Mr Silipo and I spent about 45 minutes attempting to wrest that amendment out of the government. It wasn't what we had originally proposed, it wasn't as strong as that, but we were pleased with that. I don't want to revisit all the Bill 26 issues; there are a lot of things that I'm not pleased about in terms of what happened there.
I think in general the proposals that you put forward with respect to health care restructuring are well thought out. They're ones that are generally supported in the health care community and they're, to me, quite fundamental to ensuring that health care restructuring take place in a framework that ensures that the reinvestment meets community needs and that it's actually community-driven, needs-driven, as opposed to -- and I've gotten in trouble for this analogy before -- some of the higher-tech, louder voices that seem to get money when they ask for it. Some of the community services that are very necessary to ensure a seamless system for delivery of health care services don't get the money and you see gaps in the system.
However, in looking at the budget overall, outside of health, one of the things that I think is important is for the government to actually commit itself to a framework of the determinants of health. This government hasn't done that yet. They haven't taken on that framework or made any commitment to looking at their budgeting process and their priorities in terms of whatever government expenditures are left on the table within that framework of determinants of health. I was wondering if you could talk about that. It might be helpful for committee members to get your insight on what that would mean in terms of areas of government expenditure that are important to place a priority on, even with a shrinking pie, in order to look at development of healthy populations. It's not just the health care system, we know that. Could you comment on that?
Mr Alan Mathany: I think one of the things we would like to see is a greater emphasis placed on the preventative aspect of health. In the last couple of years there have been a number of initiatives -- if you look at the diabetes strategy, for example, certainly an excellent way to approach health care -- because if you do in fact prevent illness, then the longer-term costs are less.
Ms Lankin: I remember that strategy.
Ms Brown: I guess, building on Alan's comments, one of the things that is important is that in being healthier, achieving wellbeing, it transcends sort of all the categories that we put together to fund that kind of existence.
But I just had an image of a documentary I saw some time ago around achieving rural health care initiatives in the southern United States. They were talking about funding a large program around certain kinds of nutritional supplements and they were going to take this out to the elderly in this rural southern community, but there were some things you needed in order to take these supplements. You needed a can opener and you needed running water, and there was something else which I've forgotten, and they found that 80% of the people who would benefit from this nutritional supplement would not be able to utilize it because they didn't have any of the other things.
I guess that just strikes for me that there needs to be a balance in housing, in environment, in transportation. Many people, especially in outlying areas, who may need health services may not be able to access them because they do not have their own transportation and public transportation may or may not reach the area to which they need to go. That maybe is a brief summary of some of the different areas.
Ms Lankin: My understanding certainly of the position the association has traditionally taken is that it accords very strongly with reports from the Premier's Council on determinants of health and that framework. The message I take from that is that as government looks at reducing the pie overall, the decisions within that are quite critical in terms of support for housing, for environmental measures, for better beginnings for kids, a real focus on kids and the health of kids, so a number of those issues. I think it's important that we have an opportunity to provide that advice to the Finance minister as he's looking across his various colleagues' plans. If they act independently, while you might protect the health care budget, the stresses are going to be greater on that because you're treating more illnesses because you haven't put the money into the prevention end up front or looked at the things that actually determine population health status, many of which aren't contained in the health care system. Is that something the association would still agree with and would urge?
Ms Brown: I think so, yes. When you're looking at planning, if you're taking a piece out of the middle, it may be a big piece and it may be a big part of the pie, but if you're taking a piece out of that so that your system's collapsing in a bit and you're not spreading anything out in the sort of fringe areas that could provide support and care, then the whole thing will collapse. In an integrated system, you need to be able to have that continuity of moving through the system, the appropriate care at the appropriate place at the appropriate time, and you should achieve cost savings from that.
Mr Carr: I'm sorry I missed the video presentation but I was reading through it and have been following the work of the DHCs over many years. I'm from the Halton region. You may be familiar with some of the folks there.
My question is on the whole issue of the restructuring and the cutting of the costs. As you know, district health councils have taken a look at some of the restructuring that needed to take place in the hospital fields. The tough part is, when the tough decisions had to be made of closings, people from those communities found it very, very tough to recommend that their local hospital close.
Keeping that in mind, as we restructure, most of the cuts in health care are going to come out of the hospital field, and they're significant. One of the worries of the public is that when we do the cuts, if we take the close to a billion dollars out of the hospital sector, we can't restructure and have the same amount of services.
Being perfectly honest with this, taking that much money out, if we restructure, do you think we are going to have the hospitals, the health care services that we need in this province over the next few years? I'll balance this off Saskatchewan, which closed 30-odd hospitals. Can we take that much money out of the health care system and not see the services suffer? I know you'll answer this anyway, but could you be really honest in your assessment of some of the difficulties the government may have doing this?
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Mr Mathany: I was very involved in our hospital restructuring plan in Hastings-Prince Edward. I think at one point we had 10 busloads of people come to the Legislature to speak to you and also we had 1,500 people show up at one consultation. So I think the DHCs in general have done an excellent job of going to the communities and finding out how things should be restructured.
As for when you actually get to the downsizing or the taking away of beds, for example, I think it's been quoted that there have been enough beds closed to actually close 30-some hospitals, yet not one has been closed.
I certainly think in our area the DHC, and those in other areas across the province, have identified where the savings could be, have worked very hard at trying to reorganize and get people to think in terms of better health care but also realizing that the dollars just aren't there to maintain the system that we had. It is a very difficult thing. In terms of our hospital restructuring, I think we're still recommending that four hospitals remain open and I still think that's true, but where we're going to see savings is how they're going to share in those services, how they're going to look at things like food services and medical supplies etc and share, and there's going to be phenomenal savings.
The biggest problem has been getting them to work together and get together and sit down and say, "We are going to share." I think if we can have some structure in place that allows DHCs to maybe have more teeth or at least get those plans implemented, it will go a long way to saving significant dollars. That's been the problem, getting the plans implemented. We're hopefully going to see this new commission have some authority or power to be able to enact some of those plans, and I think then you'll see the savings.
Mr Carr: My feeling, and I've always said this, is district health councils unfortunately carry the bad news. If there are any cuts, they go out and do it. The last opening was at our hospital, and the previous Premier came out, the politicians of all political stripes are there to cut the ribbons, but when they cut, it's the DHCs.
Ms Lankin: That's not true. I went to Burk's Falls when they closed that hospital.
Mr Carr: Yes, some of them, but on an average basis, unfortunately, you got to do a lot of the tough jobs. The commissioner, the person who shuts the hospital, will be the most hated person. It was my feeling that you had to have somebody like that to do it, that as good as the DHCs were, when push came to shove, they wouldn't make the final decision to say, "We're going to close Women's College," or whatever.
Ms Bassett: Don't say that.
Mr Carr: It's on the list. Sorry. I looked and I just thought, Women's College. You see how difficult it is. As a matter of fact, my wife said, "Yes, I know hospitals have to close, but not Women's College." So she's supportive as well.
Were you in favour of having a commission do this, then, closings?
Ms Brown: I think there needs to be some authority or some lever that says the hospital will close, but I think one of the other things if this is to be successful is that you need strong leadership at the local level. If you have a strong commissioner at the provincial level but no agents at the local level, you will fail. It doesn't matter how good the plan is and it doesn't matter if it's a local plan; you need leaders. The DHCs are good leaders, from my perspective, because generally they're facilitators and brokers and they've been very involved and they're very networked within a community.
I also believe that in the past four or five years, the environment has changed. People have a greater realization that they could do things differently. I think if plans are implemented in a way that's cognizant of all the ancillary concerns that people have, they will be much more successful.
The basic issue I've found in restructuring commissions -- and I led the implementation of the Guelph hospital study and I sit on the Hamilton task force in looking at restructuring -- is that people want care when they want it, but where they get it is not as big a problem. If they don't get it, that's a problem. A lot of the care that we provide now, we could provide in a different place: role function change for some institutions and a buildup of primary care services. In some communities it may be much more appropriate not to have a hospital but to have a community health centre or a primary care centre where people receive 80% of their care and only have to travel for another percentage of care. In communities in urban settings, people don't like to travel for care, but in a great portion of the province that's what they're used to doing and they always have done. So looking at how you can reorganize that in a way that supports the local perspective, you will be successful.
You were talking about $1 billion coming out of the system. I think that's a difficult question to answer off the top of our heads, but if we look at the cost of 8,500 beds coming out over the past four or five years, it's probably reasonably close to that. If you took away the bricks and mortar, you'd save even more. Health care hasn't suffered to the degree that had been predicted, because the delivery system is full of committed and very progressive and innovative individuals at the provincial, regional and local levels. Given opportunities to expand on that, I think it would be very surprising if it didn't work well.
Mr Kwinter: I'd like to follow up on the train of thought that Mr Carr was pursuing. In your recommendations you state that "The Minister of Health and the Health Services Restructuring Commission should closely examine the advice of communities -- for example, the district health council restructuring plans -- before making decisions on what is in the best interests of the communities affected by these decisions."
I have no concerns about the idea of restructuring hospitals and, as everybody says, as long as it's not my ox that's being gored, go ahead and do it. But I do have a concern when the district health council sets itself up as the community, when in fact they're not really the community; they are a body that has responsibility for, in this case, the hospital restructuring.
To give you an example, there are two hospitals in Metro which, since the final report of the district health council has been delivered to the government, have brought out reports that show in certain cases the premise that went into the decision was wrong, the figures were wrong, that criteria that were used to justify the keeping open of one hospital were used to justify the closing of another. I'm not trying to argue the case; I'm trying to say that when you recommend that the communities should be consulted and that it should be in the best interests of the communities, I find that somehow there's a contradiction that in some of those communities they're saying: "This hasn't been done in the best interests of our community. It has been done because of expediency in trying to cut some costs, but that may be a detriment to our community, not in the best interests of our community." Do you have a response to that?
Ms Brown: I think that in particular around some of the concerns in the Metro study, it was an unfortunate lesson in terms of the data that created that difficulty. However, notwithstanding that, I think the DHC processes for hospital or health services restructuring within their community will stand up to scrutiny. The broad involvement at a variety of levels of consumers, whatever that means -- citizens, stakeholders, and care providers and front-line workers -- in developing a plan fosters the best plan for that community. I'm not saying that it's a unanimous consensus in all cases, but that there is a majority who support that particular perspective.
I would suggest that processes that are utilized by DHCs in order to arrive at the results of the studies be examined, because the methodology of how you get there is what makes the difference in the quality of the program, and I think the DHCs have the best methodology and in a sense have the only methodology. I mean, in the past five years DHCs were given this responsibility without -- you should excuse me -- a lot of financial support, absolutely no community development, an environment where in many communities the hospitals didn't speak to the other primary care providers, didn't have a good idea of what the outlying or fringe support services in health care were, and thought the DHC was really just a bothersome meddler.
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In that environment district health councils and district health council staff and volunteers have dedicated millions of hours to making their individual communities better. You couldn't afford to pay for that. No government could afford to pay for that kind of process.
By and large, it has been very successful, and I feel very passionately about this. However, if there are concerns, DHCs processes are always open to review and should be asked for. We believe in what we do. We do not believe we are servants of the government but facilitators within the community to help implement what's best for that community.
The Chair: Thank you very much, Ms Brown. Your time has expired. We appreciate the Association of District Health Councils of Ontario coming in and making this presentation to us.
ONTARIO GOOD ROADS ASSOCIATION
The Chair: If we could now move to the Ontario Good Roads Association, Mr Merrall and Sheila Richardson, executive director.
Mr Phillips: Who's handling the bad roads?
The Chair: It must be the ones in Halton.
Mr Phillips: The old shocks have gone on my car.
The Chair: We have 30 minutes. You can divide that time as you see fit. We would like to have some opportunity to ask questions.
Mr Denis Merrall: We'll try to keep it brief. I think the questions are the fun part of any meeting with new people. I'm Denis Merrall, second vice-president of the association. I guess I'm the third line on the team, but sometimes that third line on the hockey team can hold its own on the ice anyway.
Mr Carr: I thought he sat on the bench there.
Mr Phillips: There is the old goaltender there.
Mr Merrall: Our president and first vice-president are at home attending municipal council meetings. This is a busy time of the year for us municipal people, and it's certainly a challenging year for us.
For those of you who are unfamiliar with our association, let me say that it is a municipal association representing the roads and transportation concerns of over 750 municipalities in Ontario. Our members range from large urban centres to small rural municipalities. Our board of directors is comprised of eight elected representatives and seven municipal staff.
Just to draw a picture, the municipal road network in Ontario comprises over 140,000 kilometres of roads. That makes it more than six times bigger than your provincial highway system.
We are here this afternoon to offer some comments on the upcoming provincial budget. We also want to share our concerns regarding the need for a safe and efficient transportation system that allows people and goods to move, school buses and emergency vehicles to travel and transit systems to operate. In turn, this surface transportation system is the lifeline of our economic viability.
In past years we've come before this committee to plead for a portion of steadily diminishing provincial revenues. This year with the new municipal support grant -- I'll call it MSG later, some kind of seasoning salt, but a little seasoning helps I guess -- and the merging of transfer payments for roads into this transfer payment, the level of funding for roads is a municipal issue.
While we already know the MSG for 1997 will be less than in 1996, it is not our intent to put forward a case for changing the decision. We acknowledge that reduction in funds for transfer partners is necessary to meet the commitments of the Common Sense Revolution, the platform on which the voters of Ontario elected this government last summer. Although OGRA feels that many municipalities have already over the past few years taken steps to reduce expenditures, yes, our costs have been going down over the years, and to spend more wisely, we also acknowledge that even tougher decisions and steps will be required in the light of even further reductions of revenue.
While we are encouraged that the government seems committed to giving municipalities broader autonomy and access to other revenue sources, we are concerned that decisions made by various individual ministries in the immediate future will result in indirect costs to municipalities that will offset the benefits. We would like to address some of these issues with you today.
First I want to stress that municipalities need transfer payment information as early as possible. This will allow us to plan effectively and efficiently for 1997. If reduced funding levels to municipalities are to be used to encourage restructuring, it is particularly important for municipalities to have early and reliable financial information.
We also need the opportunity to discuss with the government and provide input to the determination of the allocation formula for the municipal support grant. With the inclusion of infrastructure in the municipal assets to be funded by the MSG, it is clear that a formula as simple as one based on a per capita rate will not suffice. Infrastructure inventory must play a part in determining the MSG allocations.
Another issue that appears each year in our comments to this committee is that of downloading. It is still occurring under the name of highway transfers. During the disentanglement exercise between municipalities and the province, certain provincial highways were identified by the Ministry of Transportation as candidates for transfer from the province to upper-tier municipalities. When a disentanglement agreement could not be reached, MTO continued to negotiate these highway transfers with upper-tier municipalities. Some negotiations were completed with agreements signed and now in place covering approximately 200 kilometres of highways.
OGRA has been advised that the same highways that were on the list during disentanglement make up most of the highway transfers, with some additions. For each of the next two years, $25 million has been set aside to help with construction needs on these roads. How the money will be allocated has not been announced and we don't know how far this $50 million in total will go to meeting the capital needs on these highways.
OGRA believes that through the transfer of 2,000 kilometres of provincial highways to municipalities the provincial government will realize significant savings. That's almost 10% of your provincial highway system, to give you an idea of the scale. It is our request that the government share these savings with their municipal partners.
MTO will also revoke non-essential connecting link agreements. Some agreements will be retained where links serve more than local traffic, and in those areas only construction funding will be available from MTO. Maintenance and operating costs will be funded as part of the block MSG unconditional grant. We have not yet been advised which agreements will be terminated and which will continue.
We can see from these examples that the nature and size of a municipality's road system can change significantly. This makes it even more important that the municipal support grant to individual municipalities will be sensitive to reflect infrastructure inventory changes.
We know that the MSG will be 17% less in 1997 and that it may decrease further in future years. As municipalities receive less and less funding from the province, municipalities must have access to road user fees that are collected by the province. I would like to mention the long-standing position of OGRA concerning the dedication of a portion of fuel tax for road purposes. I want you to think of roads as nothing other than any other public utility and the gas tax as a user fee.
Now that discussion of Bill 26 has concluded, and in the absence of a provision for the levying of a municipal gas tax, OGRA reiterates this position that the government should share the revenue generated by the user fee. This would ensure access to at least some guaranteed funding for infrastructure.
We also want to express our support for municipalities, like the province, to use tolls as a source of revenue to fund major rehabilitation of roads and bridges.
I want to quickly mention that municipalities require the regulations under Bill 26 to be published as soon as possible. We need the regulations to clarify the scope of municipal authority.
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I also want to briefly address the sometimes hidden or indirect costs that accrue to others as a result of provincial downsizing or privatization. A very significant concern of our small rural members is the absence of the expert knowledge and advice that had been formerly available through the Ministry of Transportation. We believe that access to this assistance must remain available to these small municipalities. It is in the best interests of maintaining a safe and uniform transportation network that such expertise be available.
The MTO bridge office or structural office is currently reviewing its role and mandate. It has traditionally reviewed and approved bridge designs and load limit bylaws for municipal bridges, something similar to your municipal building permit reviews. The structural office is considering changing the approval process to a review and monitoring process. Under the proposal, the structural office will develop policies and procedures for municipal bridges, monitor bridge designs and load limit bylaws and provide technical support to municipalities and consultants.
OGRA supports this proposed monitoring role and the requirement that municipalities submit to the structural office plans for municipal structures. However, we support this practice only so long as there is no fee charged.
It has come to our attention that the Ministry of Transportation has signed an agreement giving trusteeship of the copyright of MTO knowledge products to a publishing house. The agreement covers information previously considered to be in the public domain and includes MTO publications, course content, training videos and software. Much of this information we, as municipalities, have contributed staff time to help develop. Municipal associations such as OGRA and even MTO itself will be required to purchase these products back from the publishing company. While OGRA has no argument with MTO removing itself from this business, such unilateral action should not have occurred without taking into consideration the impacts on the municipal level of government.
I want to take a minute to respond to a comment we hear often these days, that there is a need to give municipalities the tools they require to manage their own affairs, to implement measures to get spending under control and to adjust to new fiscal realities. Many municipalities have in fact been doing just that for some time now. We are already well under way with downsizing, realignment of services and cooperative ventures.
Our association offered, along with MTO, the Municipal Engineers Association and the Association of Ontario Road Superintendents, a program called Cooperation Pays, which assists municipalities wishing to participate in cooperative road management projects with other municipalities. We have also developed processes to assist municipalities in evaluating the performance of their operations, administration policies, budgeting and planning, and workforce training. We are currently focusing on developing information on management issues such as agency amalgamation, restructuring management, right-sizing the workforce and such roads-specific issues as patrol yard rationalization and the optimum size of a road agency.
OGRA is also taking a lead role in looking at standards for municipal roads and structures. Now that the conditional funding formula no longer provides a mechanism for ensuring uniform and safe road system standards, we hope that by identifying and in some cases developing design and geometric standards, service standards, maintenance standards, rehabilitation standards and product standards, municipalities will voluntarily adopt them if they are realistic and affordable.
We believe that if the province keeps its commitment to give municipalities the tools they need, municipalities will attempt to maintain a safe and uniform road network to support the provincial highway system and Ontario's economy and society. But it would appear that many of the tools initially introduced in Bill 26 have been removed or made ineffective by lobbying by those who do not think municipal councils are responsible enough to be given such authority. Municipal councils are an elected level of government and the electorate speaks every three years. I ask that you give municipalities the authority and tools to make responsible decisions.
I wish to take a minute to address another area currently receiving a lot of attention at the Ministry of Municipal Affairs and Housing, and that is in the area of performance measurement, performance indicators and performance standards.
The minister wishes to require municipalities to publish, on an annual basis, performance indicators for municipal services. At the same time, the minister does not wish to significantly change the amount of information collected from municipalities. In the case of roads, it would be counterproductive and at best meaningless to publish a performance indicator such as dollars spent per kilometre. OGRA is currently investigating performance indicators that will allow meaningful comparison.
I would like to conclude by stating that OGRA welcomes the opportunity to participate in your deliberations. We know your task is not an easy one and we hope we have provided some suggestions for your consideration. Thank you.
Mr Ford: Welcome, Denis and Sheila. It's nice to see you here. I've had a bit to do with some of this road construction, and I'd like to ask you a question. Does the OGRA have any fresh, new ideas in a think tank that would save the government dollars? For instance, I see road-paving jobs going on and the spreaders and so on -- they're getting fresh asphalt -- but I see other places, miles and miles away, where they're digging up the roads and remixing. You're probably very familiar with this; I see you've mentioned that. These are relatively new technologies. I wonder if you have a think tank to govern these types of things, that you're going to be able to save the public's money and get more done with it. With the machines regrinding and re-laying, they have fresh asphalt in there, but only to a certain extent, and there are various methods of doing that. In your think tank, do you have enough of these people who do this type of thinking on cost-cutting and different things of this nature?
Mr Merrall: Thank you. You've hit one of my personal causes. One of our association's roles is technology transfer. It's a relatively new role that we've started over the last three years and have really gotten into, pooling both Ministry of Transportation expertise and municipal expertise. You call them think tanks; we call them technology transfer seminars. We've run them on roads and bridges, and we're planning one this spring on winter maintenance.
We're bringing together the contractors, consultants and the road providers, being the provincial staff and the municipal staff, to exchange information on how these things work, the right places to use them and the wrong places to use them, because a lot of great ideas are used in the wrong place and appear to be failures when they're not truly failures.
That is one of the things we have been doing. When you look at the unit costs on roads, the cost to deliver the product, and look back over the last 25 years that I've been involved in roads, you'll find that our unit production costs have been going the same way as the VCRs: Our unit costs have been going down. We do deal with tremendously bigger volumes and heavier axles and our needs are changing somewhat, but truthfully, our production costs have gone down through the use of new technology over the years.
There are other areas we're looking at, and we mentioned restructuring. Roads are a geographical component, and we have a lot of individual road authorities letting separate contracts and a lot more pooling of contracts, a lot more sharing of facilities.
Mr Ford: That's what I'm trying to get at.
Mr Merrall: The Ministry of Transportation has, just over the last two years, got involved with us in the sharing of facilities as well. We need to emphasize that. There still is a lot to be done. If we look at our neighbours, the states adjacent to us, I think you would find there is a lot more pooling and a lot more joint use.
Mr Ford: I've had a little experience stateside, and I thought maybe we could have a little more efficiencies pulled into that area. I see they're doing it. You and your partner there seem to be on the ball, so these are the things I'd like to stress to you.
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Mr Phillips: I appreciate your comment on the use of tolls as a source of revenue. The bill, as I think you know, does permit municipalities to impose a toll. I gather from your comment that you support that and think that's one way some municipalities may be able to raise funds to construct or maintain roads. Is that a fair statement?
Mr Merrall: It is, but it's very specific. With the road grids the way they are, tolls in general won't work. But if you have a specific, very expensive bridge project, there is no way the property tax will support it. Tolls are maybe the only way to pay off the debt on some of these things.
Mr Phillips: I appreciate that. So you're happy with that provision in the bill?
Mr Merrall: Yes. It's not a tool that will be used widely, but I suspect it will be a tool that may be a lifesaver in certain instances.
Mr Phillips: You indicated that you were disappointed that many of the tools that were initially in Bill 26 were taken out. What specifically were you speaking of there?
Mr Merrall: I know it was very controversial. The one tool we were looking at was the ability to raise a municipal gas tax. We're in a situation where we generate revenue for the province. The upper-tier road network, the counties and regions, are a profit centre for the province today. At the same time, we're not having the revenue to continue to deliver the service. I see it somewhat like asking Ontario Hydro to collect the revenues for the gas company and give some back to deliver gas.
Mr Phillips: Was the Good Roads organization initially of the opinion that the bill did permit that? You'd assumed that it did permit a municipal gas tax?
Mr Merrall: That was our assumption from our first reading, yes.
Mr Phillips: Had you had a conversation with ministry officials on that? You made the assumption that that was the intent of the bill.
Mr Merrall: It was our interpretation of reading it.
Ms Sheila Richardson: We did not get a legal interpretation.
Mr Phillips: Does Good Roads meet at all with the government and talk about its proposals?
Mr Merrall: Yes, we meet with staff of MTO, and we're setting up a new relationship with MMAH, hopefully, because MMAH is going to be involved much more in municipal roads in the future.
Mr Phillips: Had you assumed that they'd listened to your concerns, and that was part of Bill 26, I gather, that you thought that, "Aha, finally we get the gas tax"? Is that a fair statement?
Mr Merrall: It is, but at the same time, municipal gas taxes spread out, different ones in every municipality and the collection mode, isn't the most efficient way to do it. Truthfully, the most efficient way to do it is at the provincial level, asking the oil companies to submit --
Mr Phillips: I gather that. I'm saying that your reading of Bill 26 was that it was in there and then through -- I mean, Al Leach decided that --
Mr Merrall: It was certainly controversial.
Mr Phillips: Yes. I feel a little badly that you're blaming other people, because he said it was never in there in the first place. I'm with you, actually. I think it was intended to be in there, it was there, somebody's hand was caught in the cookie jar, and it was taken out. That's my own judgement. As soon as the bill came out, there were so many municipalities saying, "Thank you, we've got it now," that it was no accident, in my opinion. Any other neat tools they took away from you in Bill 26?
Mr Merrall: There were some tools I was looking for and I didn't see. I guess we're waiting for the regulations in Bill 26.
Mr Phillips: What would be an example?
Mr Merrall: There's a certain identified need to restructure how we deliver the road services. We have over 800 road authorities in this province trying to deliver services and a certain degree of duplication. We were hoping for some greater help in sorting out the legalities of restructuring or merging or migrating services. Certainly there's a lot of room in writing the regulations to Bill 26 that can give us the leeway or the guidance to pull things together.
When you try to merge services, when certain municipalities have different debt levels and everything else, requiring unanimity in any government structure -- whether it be the trustees of a church or municipal councils, unanimity is impossible to get in every issue. We would like to see some of those issues dealt with. It would have been nice with the legislation, but I think there's room to salvage with the regulations. Let's go out and make our life easier to restructure; avoid us getting caught up in legal battles. The minute we get caught up in legal battles, we waste a couple of years fighting it out and we lose the momentum to carry forward the good decisions.
Ms Bassett: On a point of order, Mr Chair: Correct me if I'm wrong, because I don't know the system, but I think Mr Phillips gave a leading question. You said, Mr Phillips, through the Chair, "Is there anything else that they took away from you?" implying that something was taken away from Mr Merrall.
The Chair: I don't believe that's a point of order, Ms Bassett.
Ms Bassett: It was just not correct. It's not a point of order?
Mr Phillips: Just to be helpful, when he said, "It would appear that many of the tools initially included in Bill 26 have been removed," I paraphrased that to say "taken away."
Ms Bassett: It's a big difference.
Mr Phillips: I may be dancing on the head of a pin. Rather than "taken away," I will adjust the record to say "have been removed." That may be technically quite different than "taken away," but where I come from out in Scarborough it's a very similar thing when somebody says, "I've taken away your garbage" or "I have removed your garbage." I interpret it as the same, but my apologies to the member if I misread "have been removed." I will say, rather than "taken away," is there anything else that has been removed from you?
The Chair: We will accept your ability to dance.
Mr Phillips: No, no, it's not my ability.
The Chair: Well, you were dancing on the head of a pin a minute ago, Gerry.
Mr Phillips: I'm glad you feel badly that I've been misinterpreted when I said "taken away."
The Chair: Don't infringe on Frances's time, now. She'll be mad at you.
Ms Lankin: Mr Chair, I'm sure you would not allow that to happen.
The Chair: We'll do our best.
Ms Lankin: That was a very important clarification we just got.
Mr Phillips: I feel badly.
Ms Lankin: Gerry feels badly. I feel badly that he feels badly, but I want to go on with some questions. I'm interested in the comments you made about the use of tolls as a source of revenue to fund major rehabilitation projects, roads or bridges. Actually, I take your point that, given the nature of the road grid, this is not a feasible option for minor repairs or for normal road construction, but for major projects it would be.
I don't know if you are aware, however, that the minister -- his parliamentary assistant as well -- when he was asked specifically about this new power given to municipalities to impose tolls on road projects such as this, suggested that he thought that would never be used and he didn't think that was a very likely scenario. In fact, I think the suggestion was, if not explicitly, then implicity, that we were fearmongering to suggest that might even be a possibility in certain areas. It was pointed out to us very clearly that the minister did retain the power to say no and that that might be an occasion in which he would utilize it, because that might be an inappropriate use of these new powers.
Have you had any discussions with the minister? Have you got any clarifications about whether your organization can work with municipalities to utilize that option where it's viable? I recognize that won't be a lot of circumstances. Or is this an area where in fact the minister might, if there's enough heat, move in and say, "No, that's an inappropriate use of the power"?
Mr Merrall: I think we've just blown the toll issue up to bigger than it is. Essentially, we have a situation where people need the road network to get to and from work, commerce needs the road network to move goods and services. What we don't have is a revenue source to handle the big projects any more. When it gets down to a situation where, unless something unusual in funding comes forward, this bridge isn't going to be replaced and people aren't going to get to work or be able to utilize the hospital on the other side of the river and goods aren't going to move, I would suspect, whoever's in government, there's going to have to be some realization that we have to meet the fundamental needs of the residents of these communities. If the government wants to come forward and say, "We don't want tolls, but we'll pick up a share of this cost and make it happen," that's an opportunity.
Ms Lankin: Mr Merrall, I don't think I was actually blowing it out of proportion. I think I took all your cautionary comments, accepted them, and said it would be in extraordinary circumstances. What I was wondering was whether you'd had any assurances from the minister that in those circumstances you could proceed with this, given that the power is there, or whether he would use his unilateral power to say no to you at the end of the day. I'm taking it the discussion hasn't taken place yet.
Mr Merrall: We haven't had that opportunity yet.
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Ms Lankin: Let me move to a broader sort of issue. I think it's very unlikely you're going to get your wish on getting a portion of the provincial gas tax, that road user fee, given the fiscal situation facing the government, given that they're scaling down transfers to the municipalities; that would be a tax expenditure sort of transfer, but it would still be a transfer. So that's unlikely.
Infrastructure spending by the province is being shrunk, in terms of direct roads, but also in terms of special projects, cost-shared projects, whether it be under special programs like the tripartite government program. We can see mounting pressures for infrastructure spending in municipalities for water and sewer and looking at how we pay for that. We can see the roads. What I'm wondering is, if there isn't some stable funding or if there isn't the ability to get part of that user fee through the gas tax, what are you going to do with respect to our roads or what can we predict in terms of the condition of our roads over the next five years, let's say?
Mr Merrall: The model for what we're going to see occurred across the border a number of years ago. We will do the best we can with what we're given, because that's our job. What has happened with the cuts in the municipal support grant is that municipalities have very little room to work with, so most of the cuts have come out of road capital. This road capital is not only the road widenings, but it's your road resurfacing, it's your bridge rehabilitation, it's the things that keep your system glued together and keeps a surface to drive on.
Ms Lankin: Is there not a job and economic spinoff impact of that as well?
Mr Merrall: There is that. We've past that point. I think we're talking survival of communities, we're talking keeping the economy of our province running. The economic spinoffs -- we've cut below that now. I think we're down to the point where we're going to have to start making some very serious analyses about what is the impact on the general economy of our province. It is going to happen. The parallel across the border is that the roads got so bad there became a public hue and cry for dedicated road funding and, lo and behold, dedicated gas taxes took hold in the US. We are going to see the same thing here, what we have in water and sewer.
We have water meters in our homes. You pay for your consumption. Municipalities this year are widely adding sewer surcharges to the water bills to pay for the sewer infrastructure rehabilitation. So we have come up with a user fee, based on consumption, to make water and sewer self-sufficient. We haven't created a simple mechanism for roads yet, to make them self-sufficient and self-supporting. Until we do, we are always going to be in this problem of treating the road gas tax as a tax expenditure, transferring it on, when truthfully you have to feed the cow if you're going to get a little milk out of it.
The Chair: Thank you very much. I appreciate the Goods Road committee coming in and talking to us.
TORONTO COMMUNITY VENTURES
The Chair: Toronto Community Ventures, Mr Allan Reeve. We have 30 minutes. You can divide that any way you wish between your presentation and questions.
Rev Allan Reeve: It's actually Rev Allan Reeve. I'm a United Church minister who works in South Riverdale and the east and downtown communities of Corktown and Regent Park. For something completely different, I'm not going to talk to you about cutbacks to the social service safety net. I'll only add "ditto" to our moderator's letter to the Premier.
I thank you for the opportunity to speak to the committee. I'm here today with my associate John Chang from Toronto Community Ventures. We have been a part of a grass-roots, church-based and church-funded economic development effort in the communities of Riverdale and Corktown for the past seven years, and what I'd like to speak to is your government's investment in community economic development.
My church is a wood shop in Ataratiri, in a city-owned and soon to be a provincially owned vacant building, where there are now 15 businesses housed under one roof, one small roof -- 3,000 square feet. There are over 40 people who work there developing small enterprises, sharing in the access to equipment and the facilities that have been put in place by the community.
This is a long-term investment that has been put in place. The church has invested over half a million dollars over the last year in my time and in a variety of resources, and there's at least another half a million dollars in terms of the sweat equity that the workers in these small businesses have put in of their own time and effort, not only into their own businesses but into the common community organization that we've been able to create there.
The people I'm talking about are the people the headline of the Globe and Mail is talking about, "Jobs Cut Despite Hefty Profits." These are the people who are affected more and more by the job losses in our new economy, this new economy where people are dropping out of full-time jobs.
I refer back to a report put out by the government on the future of work. There's a particular image there that I think was very striking. It showed two triangles representing the modern-day company. One is the old company and one is the company of the future. The old company had one person at the top, three people in the middle and seven headless people on the bottom row. The new company that the report was suggesting was the future of our economy, the future of work, had three people at the top and five people on the next row. The report went on to address this new company and how it was more horizontally managed. What the report did not address is what happened to those seven headless workers in that old company.
That's my question to your government: What are your plans for the thousands upon thousands of workers who were once employed in the manufacturing sector, who were employed in many ways in jobs that we all agree are not going to come back? So what is it that your government can do to reinvest in the futures of those people?
I believe that community economic development is a strategy that can work for these people. It's a strategy that comes first from the community, that will come first from leadership within a community, and it is up to the government to follow, to respond to the leadership and the resources and the assets the community first invests.
I'd like to spend a few minutes talking about our particular case at Toronto Community Ventures, just to give you a sense of a model and what can happen. With Toronto Community Ventures, there is a vision. It's a long-term vision of co-creating healthy workplaces within a healthy community, workplaces where wealth is generated in ways that are just, sustainable and participatory, a community where wealth is circulated in ways that allow all community members the opportunity to work and live, where we can integrate our economic, social, spiritual, cultural and environmental needs.
We've set up Toronto Community Ventures as a non-profit community development corporation. Its main focus is economic development. We provide facilities and resources to people who want to work in an entrepreneurial way to create community economic initiatives.
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Since 1992, as I spoke of earlier, we have created our first self-sustaining enterprise centre. Our shop down on 158 Eastern is now self-sustaining. The 15 member businesses that work there cover all of the operating costs. There is no government funding currently going into that operation. In the last year, for the first time, we did receive some provincial funding, but even when that was removed this year, that group continued on. In fact, it continues to strive together and to work together. You can't kill that group with a stick, because those people have invested in that shop, invested in their small businesses. They will be there for the long term, whether you are or not.
But there is an opportunity. Our group is now set to open up a second facility across the street in a 20,000-square-foot building, again vacant. It's been there vacant for the last five years, while the Ataratiri deal is worked out, and I know you're all looking forward to adopting that property, but with that property, with the Ataratiri mess, you will be adopting a gem in there. In that further 20,000 square feet there will be another 20 businesses employing over 100 people working in a cooperative manner, accountable to the local community and involving the local community in meaningful ways and meaningful work.
We've identified seven keys to our success, why this has worked, and I'll quickly run over those and also make note of the opportunity for your government to invest.
The first one is the importance of sustained leadership over many years. There are two kinds of leadership that need to happen here. First of all, leadership has to come from within each enterprise, from within each business. There must be business leaders, such as my associate John Chang, who took it upon himself to start a business, but a business that would not only employ himself but would reach out and employ unemployed and disadvantaged workers in the community.
The other kind of leadership is a leadership that can respond to the initiative of someone like John and work from the community side. While the leadership is working from the business out, there needs to be another form of leadership -- call it a facilitator, an animator, a community developer -- who works from the community in. That facilitator works to draw upon the various community sectors. That person, that role, that organization, whoever carries that, needs to be at arm's length from the private sector, needs to be at arm's length from the social service sector, needs to be at arm's length from government staff, but needs to involve all of those sectors into economic development. That's the opportunity.
In our case, the church invested in that kind of leadership and has put me in place, but in communities where perhaps there are not sources of funding initially, that is the kind of leadership that the government can invest in, at least initially, until wealth is generated from within the enterprises that can eventually pay for those kind of development costs.
The second is access to information. These are networks. We draw in business mentors, volunteers. We find we have a wealth of people who are willing to volunteer their time to sit down with our business people. You name it -- marketing, finance, accounting, product development -- whatever the needs are, we can find people who are willing to work with them. So access to those kinds of networks is important.
Also we draw together the people into that common facility. Peer support is often overlooked in economic development strategies, but it is essential. These kinds of networks can happen naturally, but the role of the community developer, especially in urban areas where it's difficult sometimes to make these links initially, is key.
What can also be key is the common facility, is having a place -- in our case it's a shop; in other places, it might be an office building -- some kind of common facility which is a natural meeting place for entrepreneurs, community people to come together to start building relationships and business plans and meeting together. That's the next one -- access to equipment and facilities. Our enterprise centre model is a way for government to invest its capital in ways that can be accessed by people, by many people, over the long term. Government capital investment in equipment and facilities that will house community business development will continue to serve the community on a self-sustaining basis for years to come.
This is an opportunity to invest in the tools and the facilities with an initial investment from the government matched by the private sector and/or community sector. It can be an ongoing asset for the community. This kind of model has been used in the developing nations by the Ford Foundation, by the United Nations very successfully for many years, for decades. It's about time we started to apply that same methodology in our own communities to solve the same issues of poverty and unemployment. Access to facilities and capital where small entrepreneurs cannot afford themselves to purchase the technology: The community can put in place technology that can be accessed by a number of different entrepreneurs, for them to build their business.
Access to credit, number 4, is another key piece in any kind of economic development. Often we're talking about entrepreneurs and/or community groups, co-operatives, that do not have their own collateral and need creative means of accessing credit. Again, the church has led the way. Currently, churches -- the United Church of Canada, the Anglican church, the Catholic church -- have these kinds of revolving loan funds that are available. We need much more, and the government in particular has created a couple of vehicles that I think deserve attention, and because they are also RRSP-eligible, they are much more attractive for community members to invest in the development of their own communities. I'm talking about the labour-sponsored investment funds, which are key to the development of small to medium-sized businesses. We're talking about quarter-million to half-million-dollar kinds of venture capital investments in existing, viable business. Also, these will be key to worker buyouts of viable but downsized industries in our communities.
There are also the community loan funds which were created by the previous government and that I believe deserve attention. These are important vehicles. While they're young and there are bugs to be worked out in these kinds of programs, these are vehicles that will create access to credit for, as I said, entrepreneurs who do not have access to traditional credit sources. They are also a vehicle for people from communities who believe in their communities and who want to invest in the economic development of their communities. These are vehicles which our government can put in place for people to do that.
Access to marketing and markets is number 5. These are major challenges to any small businesses. Government can support the development of self-sustaining marketing infrastructures that create access to larger markets. These are networks, these are infrastructure, marketing expertise that can be provided to community ventures that provide them access to larger retail markets. We have a particular project which offers a model that's called OCM marketing and development. It's setting up a province-wide network to give small, craft-based producers access to larger retail markets. Without that kind of infrastructure in place, craft people and craft producers, small-scale craft industries, are marginalized.
Another opportunity for the government in terms of marketing is government goods and services. The purchases of your government in terms of goods and services is in the millions of dollars. This market is often untapped by local community businesses due to information barriers and also due to financial and/or credit barriers. There are often terms of credit that are in place before a local community group or contractor can bid. With some work, some of those barriers I believe could be removed.
Numbers 6 and 7 are what we call "learning, not training." While classroom training programs serve many, they typically do not serve the needs of marginalized workers or provide hands-on experience to overeducated and underemployed workers. Training programs often will have a high turnover and turn people out, but in our experience what entrepreneurs need is hands-on business experience. They need the time and the opportunity to learn it by doing it. Government training programs do not offer that.
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Instead, what are the ways that the government can encourage on-the-job training? Apprenticeship programs are one. You need the opportunity to create apprenticeships in starting your own small business. The enterprise centre model offers that.
Of all the Jobs Ontario millions of dollars that were spent, the most effective for this particular purpose were $10,000 matching grants that were directed at feasibility studies for business plans. Entrepreneurs would come up with their small business ideas, they would be community businesses and/or cooperatives and they were able to access a $10,000 grant for a feasibility study.
What this in effect did was, these were the dollars that actually went into the hands of the entrepreneurs, where many of the other dollars went into the hands of consultants and community developer organizations like me. These were the dollars that made it through to the actual business entrepreneurs who are able to use that. In essence, it was the first venture capital that your government invested into their ventures. Those small grants enabled these entrepreneurs to get things going.
Our urban sawmill cooperative wanted to set up a sawmill. They used that feasibility study grant to buy a truckload of logs, get the logs, cut them, sell them and that was their feasibility study. It allowed them to understand their business, to make their first venture into it and from there to develop a business plan. Currently, that business employs 12 people. They've borrowed money from other investors. They have two sawmills and just purchased a $50,000 dry kiln. That initial venture capital investment that was accessible and available to small community-based entrepreneurs gives the opportunity to attract further investment and to create jobs.
The final ingredient -- and this is perhaps the most difficult for a provincial government to address -- is the need for time. While your mandate spans four or five years, community economic development requires long-term commitment. A lot of government programs -- we're talking about how many people -- are measured by how many people are put through the program, whereas in business development, economic development, the real question is, how many of those people are in business five years later and/or 10 years later?
In terms of investing in community economic development, the capacity of a community to work together to create ongoing, viable strategies for wealth creation requires long-term investment from partners who believe in the community.
In summary, most people in Ontario now are afraid of what the future will bring. It is a time of great uncertainty. When I go and speak to church people across this city, when I speak to people in the community, we all have the same question: What is the future going to bring in terms of employment? While an immediate fiscal crisis is undoubtedly present and exists, people need to look beyond the short-term pain of the changes that are occurring and understand what their role in the new economy will be. Community leaders are responsible for all people in the community. The question is, what kind of an economy can we create that will utilize all the skills of all our community members?
People who are not working, who perhaps are receiving social assistance and/or pensions I think we typically put on the liability side of the balance sheet. They are considered a cost in our economy. In terms of long-term vision of what our economy must be, we have to take those people off the liability side of the balance sheet and consider them our greatest asset. A government that can look at all people in our community and consider them first our greatest asset is a government that will invest in those people, in all those people, and in strategies that will provide for the long-term, deeply rooted economies: economies rooted in local communities, economies that are rooted in leadership that comes first from community and creates opportunity out of the unique strategies, resources, skills and people in that community.
It's a pioneering spirit. It requires long-term vision. This kind of economics is like farming. You have to clear the land, you have to pull out the old roots and you have to plow the fields before even a seed can be planted. It takes time. It took us seven years, half a million dollars. Five years ago, three years ago, we had almost nothing to show for that investment. Seven years later there is a harvest: 40 people working, a new centre that will employ over 100 people in the next year or two. Even as the vineyard grows it takes pruning, it takes fertilizer, it takes time. It takes a lot of work. Sweat equity.
People here who I know are receiving social welfare benefits want to work. They want the time. They want to put in the time. They have skills. They're looking for the opportunity. They're looking for the access to facilities, technology and credit in order to make their dreams, their vision for their communities come true. That is the way the government can invest in a harvest that will yield a wealth created from the grass roots up.
Thank you very much for your time.
The Chair: Reverend Reeve, you've used up your half-hour presentation time. We thank you very much for coming in and making this presentation to us.
ONTARIO HOME BUILDERS' ASSOCIATION
The Chair: Our next presenters are the Ontario Home Builders' Association: Mr Brubacher and Ron Sarginson. Welcome to the committee. Could I ask you to identify yourselves for Hansard, please. We have half an hour.
Mr Laverne Brubacher: My name's Laverne Brubacher.
Mr Ronald Sarginson: My name is Ronald Sarginson.
Mr Brubacher: Good afternoon. We're pleased to be here. I'm president of the Ontario Home Builders' Association, and I'm also a renovation contractor from St Jacobs, which is just north of Kitchener. Ron Sarginson is the first vice-president of Ontario Home Builders' Association and he's a house designer from Ottawa.
For those of you who may not be familiar with Ontario Home Builders, we are a voluntary association of companies in the home building industry. We have approximately 3,500 member companies in 35 locals across the province.
I understand we have half an hour, and our prepared remarks are relatively brief, so there will be plenty of time for questions.
I'm going to give you a general overview of the housing industry and I also want to comment on the strategy for fiscal management that the government is implementing. Then I will turn things over to Ron to talk about some of the government's recent initiatives that affect our industry, and he will wrap up with some thoughts about the prospects for a recovery in housing.
There's probably not much that needs to be said about the state of the housing market. The numbers speak for themselves. For the record, we built 35,818 housing units in Ontario last year. This is down 23% from 1994. Both 1994 and 1993, you will recall, were weak years. Single, detached housing was the hardest hit, down by nearly a third. Last December we surveyed our members to find out what they think lies behind these numbers. They sum it up in two words: consumer confidence.
Here's what a potential home buyer faces today. He or she probably knows somebody personally, either a friend or relative, who has lost a job. He reads the newspapers -- I'll use "he" for economy -- and he knows his job is not secure. Either technology or a merger could wipe it out tomorrow.
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This lack of job security is compounded by the gradual decline in the purchasing power of his income, and it is further aggravated by his rising indebtedness. In a nutshell, today's consumer makes less, owes more and is less secure than any consumer in recent memory.
That's bad enough, but someone thinking of buying a house has an added concern. Although mortgage rates are very low in absolute terms, they are very high relative to the rate of inflation. With house prices stagnant or falling, the purchase of a new home can no longer be justified as an investment.
Much of the weakness in the housing industry during the 1990s can be traced to four key trends: eroding confidence, reduced buying power, rising real rates and a growing underground. There's one thing under government control that has driven all of these and that is fiscal management.
I would like to quote from a presentation that we made to this committee three years ago: "We are extremely concerned about the size of our provincial deficit...You can't keep deficit-financing one fifth of your operating budget year after year and expect to stay in business...We see additional problems on the horizon if the deficit cannot be brought down to more manageable levels."
As a renovation contractor, I go into my customers' homes and sit down at their kitchen table every day. Builders do a similar thing, meeting with customers who are contemplating a major purchase decision.
This is why we have been and remain concerned about the deficit. We know that taxpayers, who are our customers, are concerned. They are concerned about the rising debt and they are concerned that more and more of their tax dollars are financing government spending that has gone out of control.
This is why the Ontario Home Builders' Association supports the fiscal management strategy in the Common Sense Revolution and it is why we are encouraging the government to fully implement that strategy as quickly as it can.
Hardworking men and women need to see that their efforts are being rewarded. They need to believe the government is spending their tax dollars fairly and responsibly and they need to see a future that is assured by economic realism today.
Now I'm going to turn things over to Ron to talk more specifically about issues that affect our industry.
Mr Sarginson: Good afternoon. As a businessman in our industry, I am saddened by past developments that have hurt construction and frightened by future unknowns that may further erode consumer confidence and purchasing power. But as an association executive who has to step out and look at the bigger picture, I can tell you this government is giving us reason to look on the bright side.
Since June 8, a number of recommendations that we have made over the years are suddenly being acted upon.
The government has put an end to the wasteful spending on non-profit housing that was so badly distorting the housing market.
Genuine streamlining has been introduced into the planning and approvals process and balance has been restored in the policies that guide that process.
An amendment process is planned for the Ontario Building Code that will reduce construction costs and ensure that regulated standards make sense for both the building industry and consumers.
The groundwork is being laid to review the Development Charges Act that will restore this tax base to its original intention of financing hard services.
In addition to all of this, there are two specific areas in which immediate action is needed. One is the harmonization of the GST and PST; the other is deregulation in the rental market.
With respect to harmonization, we urge the government to make a decision one way or the other quickly, and we urge that that decision not increase the tax burden on new housing. Implicit in the changes I have just listed is the recognition that housing is overtaxed and housing is overregulated. This principle must guide any decision on harmonization.
With respect to deregulation of the rental market, the government has made it clear that ways must be found to bring the private sector back into this market. For at least two reasons it is important that this happen quickly. The first and most obvious reason is that there is no other source for badly needed rental stock. The second reason is that the most realistic opportunities for near-term recovery in housing lie on the rental side, and by "near-term" I mean within the next couple of years.
Changes to the approvals process, the building code and development charges will create a market that better serves the needs of the people of Ontario. But obviously these changes will not restore confidence in the overall economy, and this is something that must happen before people return to the ownership market in a big way. Until that happens, the key opportunities for a recovery in the housing market are on the rental side.
The changes I have listed will help bring down the cost of building rental stock, but considerably more needs to be done before the private sector is prepared to invest in this market. Unfortunately, the steps that need to be taken are being misrepresented. This misrepresentation is creating unnecessary fear in tenants and building controversy where it is not warranted.
Anyone who has seen the badly deteriorated condition of many apartment buildings knows that the current system is not protecting tenants, and anyone who has seen the annual start figures for private rental apartments knows the current system is not protecting tenants.
We have recommended a number of measures to encourage more private sector activity in the rental market. They offer the only workable solution to the problems that tenants face, and they offer the best prospects for a rapid recovery in the housing industry.
In conclusion, there are a couple of points that probably bear repeating. As Laverne explained, the housing market is extremely depressed and much of this can be traced to the lack of consumer confidence. The home building industry believes that the government is on the right track, both in terms of fiscal policy and in terms of policies that directly affect the industry, but it will take a while to restore consumer confidence, so over the next couple of years, we expect only a modest improvement on the ownership side of the housing market.
If there is going to be any sudden improvement, it is likely to occur on the rental side, but for this to happen, the government must follow through on its commitment to deregulate that sector.
Thank you for your attention. Both Laverne and I will be happy to try and answer any questions you may have.
Mr Phillips: I appreciate your being here. You indicated that the government commitment to deregulate the rental -- what was that commitment? I'm not as familiar as you are with that.
Mr Brubacher: They've committed to taking rent controls off by the end of this year.
Mr Phillips: Take rent control off by the end of --
Mr Brubacher: Of 1996.
Mr Phillips: Maybe you can send the committee a copy of that. I don't remember that.
Mr Brubacher: We can do that. I think Minister Leach would have that.
Mr Phillips: I'm sure he would. I just don't have it, and I'd appreciate your sending it to us. That was, I gather, to the home builders' group?
Mr Brubacher: Yes. He committed that to us back when we met with him last August, I believe, and that was one of the first commitments he made. We'll get that to you.
Mr Phillips: Thank you very much.
We've been, I think all of us, disappointed in the housing starts, and I think you indicated that 1995 ended up around 35,000?
Mr Brubacher: It was 35,800.
Mr Phillips: Right. What's your judgement on the level that we should be at to sustain the demand, if you will? I've never been able to figure that number out.
Mr Brubacher: A sustainable amount we've determined would be somewhere in 60,000 to 65,000 units in Ontario, and we haven't reached that point since the 1980s. I think in 1994 we had 45,000 and in 1993 about 45,000 as well, and so we slipped back another 10,000 units in 1995. Optimistically, we're hoping for something in the 38,000 to 40,000 units for 1996. I think the Minister of Housing indicated 42,000.
Mr Phillips: Yes.
Mr Brubacher: CMHC is saying 45,000. We hope they're right.
Mr Phillips: Right. The lower interest rates, has that had any impact yet, or is it just simply too early?
Mr Brubacher: I think that lower interest rates are a very positive kind of a thing, but the biggest problem is consumer confidence. If someone doesn't have a job, you can be interest-free and it won't help people buy.
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Mr Phillips: Have you any research that would be helpful to us just in terms of the public's feeling right now about confidence? Has the housing industry done any surveys that would be useful for the committee?
Mr Brubacher: I think that generally the housing sales and housing starts tell the story right there. We can certainly check. I think there have been some studies done on a national basis as well, and we'll check that out for you.
Mr Phillips: I think that would be useful. You indicated that in the short term you think the opportunity may be in rental accommodation and then the longer term -- I gather the home builders' group are also involved in rental-accommodation building.
Mr Brubacher: That's right.
Mr Phillips: You said somewhere in here that anyone who's seen the annual start figures for private rental apartments -- again, we don't need them right now but it may be useful for the committee.
Mr Brubacher: All right. We can get that for you as well.
Mr Phillips: Which I gather would show --
Mr Brubacher: Private rental housing has not been done for the last number of years because the social housing was doing that. We felt the private market could do it much more effectively and much more cost-effectively and that's why it's been cut out, and we support that very much. But the thing now is to get the private sector to have enough confidence to get back in the market again and to be assured that there won't be rent controls slapped on in two or three years. That's something that's very important.
The other thing is the tax structure on apartments is higher than on single-family dwellings as well, and that needs to be reviewed. The whole development process and approvals process needs to be reviewed and the government is committed to doing that and we support that.
Mr Phillips: I'm sorry, you support the shift in property tax --
Mr Brubacher: The review of the whole tax structure on rental accommodation.
Mr Phillips: And a shift of the burden off the rental and on to residential?
Mr Brubacher: Well, shifting the burden so that it's equal with residential. Because it's a much higher rate on apartments than it is on single-family.
Mr Phillips: Yes, I just didn't know from your industry's perspective what you wanted done with that.
Mr Brubacher: We just wanted to make it so that it's cost-effective for a landlord to build an apartment building and charge the standard market rates for rental accommodation. It's not viable at this point, and that's why they're not building.
Mr Phillips: I may know the answer already to this, but just in terms of the cut in personal income tax --
Mr Brubacher: The 30%?
Mr Phillips: Yes. How does your industry feel about that and how quickly do you want it?
Mr Brubacher: We support that. We think that a tax cut will put dollars back into the economy again because people will spend that money. We also support user fees, and likely people will need some of those dollars to support the user fees that may happen in local municipalities for various things that will be happening as well. So I think it all works out fairly well. The money goes back into the economy, taxes are paid, and I think there will be more tax generated from that tax cut than what the tax cut is costing.
Mr Phillips: That's good.
Mr Silipo: Thanks very much for the presentation. I appreciate the chart with your submission listing the total housing starts over the last number of years. Could you give me any sense, looking back over the last couple of years, as to what proportion of that total would have constituted public housing, social housing?
Mr Brubacher: I'm not sure. Peter, do you have that number?
Interjection.
Mr Brubacher: About 10,000 to 15,000 units per year was the social housing part.
Mr Silipo: And that obviously is something that is --
Mr Brubacher: That will affect the total housing starts, yes.
Mr Silipo: It's nothing now, at this point, right?
Mr Brubacher: Exactly. There are still some being built but they're phasing --
Mr Silipo: Basically the ones that were under construction.
Mr Brubacher: That were approved, that's right.
Mr Silipo: You talked a lot in your presentation about consumer confidence. It's certainly something that I agree with you is a key ingredient in your industry. I just want to pursue that a little bit because I'm struck at the difference in how you approach this issue from that of the realtors' association, who came before us not through this committee process but the Bill 26 hearings. They also talked about the importance of consumer confidence, but they were, I guess, a lot more wary than you seem to be around what might happen as a result of some of the government's actions around increased taxation at the municipal level that might offset any gains that people would have from the provincial tax cut. As obviously two groups of people that are very much involved in the housing industry, you in building and them in selling on your behalf, I was just struck by the difference in that approach and I just want to put that to you and see what your reaction to that is.
Mr Brubacher: There probably will be some differences in the way municipalities charge for things that they do. However, I think most municipalities are pretty much under the gun to hold the line on taxes and do their own cutting as well. The other thing is, the user fee thing gives people a choice. They can choose to do things or not, and so it's a personal choice instead of a tax that everyone has to pay. So you pay for what you use.
Mr Silipo: Again, coming to this issue of consumer confidence, clearly, as you said, one of the key parts of that is people having a job and feeling that they're going to have that job tomorrow. One of the things that again I was struck by was, as we look at the government's own figures around what their actions will generate in the way of jobs, I'm not sure that I would feel a lot of comfort and that you should take a lot of comfort from what they're saying. While certainly they said in the election platform that they would create 750,000 jobs, their own figures over the next couple of years indicate that they're not going to be anywhere near those figures. Even when the Minister of Finance was here yesterday and we asked him about what the effect would be of the 30% tax cut, he talked very much about those impacts -- ie, the jobs being created -- not really being felt for at least a couple of years after the tax cuts get implemented.
Does that not concern you in terms of what is going to happen? Because it seems to me that what we're hearing -- and again, we had another private economist here this morning, and what I took also from what he was saying was that there's going to continue to be a fair amount of uncertainty over the next little while, which the government's actions may not necessarily help because of the reductions in jobs as well.
Mr Brubacher: Yes, I agree. I think 1996 is going to be a difficult year for everyone and a lot of lack of confidence, but I think the move is going in the right direction. It gives the business community a lot of confidence and I think that is being felt all the way through as well.
The fact is that we'd like to urge the government to act very quickly on some of the things that are going to unfortunately cut jobs, because if you've got a whole mass of people who aren't sure if they have a job or not, nobody's working effectively. If they make the cuts that need to be cut, then everyone else can get on with life. The fact is that a lot of restructuring will happen and the people who lose their jobs will actually be working in the private sector under contract or whatever and so the job loss of 13,000 or 15,000 that they talk about is probably not going to be nearly as severe as what it sounds like, in my opinion.
Mr Silipo: I hope you're right. I'm not sure that's the case, because I think it's more than just the public servants or the civil servants that we're talking about. We're also talking about the impact of the cuts across the various sectors and what that means in terms of jobs.
Mr Brubacher: I think the other thing is we need to work at wealth creation as well. Businesses have to be profitable and prosperous in order to generate tax dollars to support the programs that the government has in place. If that doesn't happen, then it just won't work.
For example, there's a big issue about the banks making all their money. I have a brother-in-law who works for one of the major banks, and at our Christmas dinner we were giving him a bit of a rough time because his bank had made $1 billion. He said, "Well, the fact is that we paid $1.2 billion in income taxes as well." That's the kind of thing that supports the programs that are in place. So if businesses are profitable, they will grow, they will hire, they will employ, and that's what makes the economy turn around and gives people confidence.
Mr Silipo: Again, I hope you're right, but the figures don't seem to bear out that that investment is happening when people are making big profits; it's just that they're making big profits.
Mr Brubacher: It's starting.
The Chair: Thank you very much. Before we get into a debate on the banks' profits, we'll move along.
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Mrs Marland: I have a couple of questions, and first of all I'd like to thank you for being here today. Certainly, as the former Housing critic for five years, we've had an ongoing relationship.
Can I just be clear about what you understood Minister Leach to have told you in your meeting in August about rent control?
Mr Brubacher: I think what he said at that point was that there would be a review. There is a committee that has been set up to study the whole thing. There would be a tenant protection act put into place which would ensure that tenants are not subject to unfair rent increases, get the health and safety of the apartment buildings in place, try to improve the supply of rental housing stock and give builders confidence to go ahead and build, and the other part was to target the truly needy who need subsidies for rental accommodation. That committee has been working, and Ontario Home Builders' is on that committee and participating, and it's in process right now.
Mrs Marland: And in response to the question from Mr Phillips about decontrol, what is the statement made on the removal of rent control?
Mr Brubacher: The target was the end of 1996.
Mrs Marland: On new construction or all rental accommodation?
Mr Brubacher: I'm not sure. It was on new construction, but I'm not sure about existing.
Mrs Marland: The reason I wanted you to answer that question on the record is that it's a very finite but a very important line, and when we campaigned, we said we would remove rent controls on new construction because it was the only way we were going to increase the rental housing stock, which is of course terribly important to all tenants. But we always said we would protect existing tenants.
By developing a program where we would get confidence back in building new rental housing stock, we also were helping tenants because we were giving them a broader choice of accommodation in terms of location, and everybody wouldn't have to live in deteriorating rental housing stock in terms of conditions, or locations, for that matter.
I just felt in your answer to Mr Phillips it sounded like Mr Leach had said he was removing all rent controls by the end of 1996.
Mr Brubacher: It was on new construction, yes. The BC removed rent controls 10 years ago and rents have increased less in British Columbia than they have in Ontario with rent controls. The market forces will take care of that.
Mrs Marland: Yes, but we don't want to talk about BC because they're thinking of bringing rent controls back.
Just to ask you about the one aspect where you're urging the harmonization of GST and PST, you've said that you urge the government to make a decision one way or the other, and quickly. I hope that you're taking that urging and lobbying to the government which has the control to make that particular decision.
Mr Sarginson: Yes, we are, and we are encouraging it to happen and not to increase taxation on the consumer itself. Taxation throughout the whole housing industry must be reviewed. It contributes close to, I would say, $40,000 to the cost of a house these days, and the more it can be reduced, the more we can encourage people to get the confidence up, the better we'll be. I am encouraged, as I said, by what the government has done to date, and we will work with you, if you desire, in a better, closer relationship to ensure that the economy, the confidence, the building industry gets back on track.
Mrs Marland: But you are working with the federal government.
Mr Sarginson: We are.
Mr Brubacher: We're concerned that any harmonization remains revenue-neutral for the housing industry. We feel we're already being overtaxed, and with a PST on the service side of things and a broader tax base, we could be hit with a double taxation and increase the cost of housing for our consumers.
Mrs Marland: You must be excited about the building code amendments that we've been after for a number of years.
Mr Sarginson: Extremely excited.
Mr Wettlaufer: Laverne and Ron, thank you for coming. Being from Kitchener riding, I'm particularly alarmed at the housing start decrease in Kitchener from 1988 to 1995. We're now at 20% of what we were in 1988. We're at 50% of what we were in 1992. And albeit I know that there is going to be a lag in construction from an improvement in the economy, correct me if I'm wrong, Laverne, but I don't believe there was even a rental unit built in metropolitan Kitchener in 1995.
Mr Brubacher: I don't believe so, no.
Mr Wettlaufer: So that means there is a tremendous pent-up demand.
Mr Brubacher: Vacancy rates are dropping all over the province right now, and that shows up as a demand that is there.
Mr Wettlaufer: So it would be reasonable to expect that as the economy improved, it would very much improve your industry.
Mr Brubacher: That's right. We would like to get back into the rental housing market. It just is not viable at this point, with the regulation and so forth that's in place, to get something off the ground. So we're encouraged by the fact that it's being reviewed and there will be less regulation, streamlining the process and reviewing the whole tax structure on rental housing as well.
Mr Wettlaufer: Would we be correct in assuming that there would be a one- or two-year lag in housing construction as a result of an improvement in the economy?
Mr Brubacher: That's probably very likely. We hope it isn't that long, but that's the length of time it will probably take for builders to get enough confidence to proceed.
Mr Wettlaufer: And the consumer also.
Mr Brubacher: Consumers as well. That's true.
Mr Wettlaufer: And that in turn will create thousands of jobs in the construction industry.
Mr Brubacher: If you take a single-family dwelling, there are 2.8 person-years of employment for every house that's built. If you look at the housing starts from 1990 to 1995, where you're dropping by 30,000, that's almost 100,000 jobs that have been lost in the single-family dwelling only, and that goes off to all the supporting industries as well. So it's a major job creator.
Mr Ford: I was just going to have a short question there. Since 1988 to 1995, just a rough calculation, there are about 200,000 houses there, a shortage, and the offshoots of those houses create more jobs. So you said about 2.5 persons?
Mr Brubacher: Yes, 2.8 person-years of employment per house.
Mr Ford: For how many people?
Mr Brubacher: Well, 2.8 person-years of employment for each dwelling.
Mr Ford: Yes, each dwelling. That's a lot of work, 200,000 houses.
Mr Brubacher: Two hundred thousand times 2.8, that's right.
Mr Ford: That's right. I just wanted to check that for my own information. Very good, thank you.
The Chair: We thank Mr Brubacher for coming in and presenting your case to us, and the Ontario Home Builders' Association.
ONTARIO ASSOCIATION FOR COMMUNITY LIVING
The Chair: We move on to the Ontario Association for Community Living, Nancy Stone and Barbara Thornber. Welcome. We have half an hour to spend together.
Mrs Nancy Stone: We welcome the opportunity to come and speak to you. There are some familiar faces around the table, so it's interesting to see people we know.
I'm Nancy Stone. I'm the volunteer president of the Ontario Association for Community Living. This is Barbara Thornber, who is the executive director of the organization.
The Ontario Association for Community Living was formed more than 40 years ago by parents and others who were fighting for the rights of their sons and daughters and friends to attend school. The association's long history of advocacy on behalf of people with developmental disabilities continues to this day.
Although advocacy was also a primary activity at the local level in the early days, it was often coupled with development and provision of various community-based educational, vocational, residential and family support services.
OACL is a federation of 110 local associations with a combined membership of approximately 12,000 people, most of whom are people who have disabilities and their family members and friends, people who have experienced the consequences of disability labelling.
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The economic restructuring which is taking place in Ontario continues to cause a great deal of anxiety for our members and we are pleased to have the opportunity to present our issues directly to this committee.
Throughout last year's election campaign, there were repeated assurances, to us and many others, from the now Premier, Mr Harris, that services for people with disabilities would be protected. The Common Sense Revolution states specifically that, "Aid to seniors and the disabled will not be cut." The government has not kept this promise.
Direct cuts to people with disabilities have included a 2.5% cut to Ministry of Community and Social Services funding as of October 1, 1995, with an additional 2.5% still to come in April 1996. Transit supports have been cut, supports under employment equity legislation are gone, resources available through the Advocacy Commission are being eliminated, user fees are being introduced to the Ontario drug benefit plan, and the list goes on.
In addition to these constraints directly aimed at people with disabilities, other cuts are having an impact as well. The objective of our association is to help individuals find a place in the regular activities of their own communities. Reduction or elimination of government support in such areas as housing, recreation, transportation and so forth means that people with disabilities are excluded from some participation in their community. As services in our communities struggle to deal with economic constraint, often the first thing they cut are the special supports needed by people with disabilities. As a result, people with disabilities are left with only special disability options, segregated housing and recreation, etc. The very notion of including people in the community becomes much more difficult.
A specific example of a government policy having a direct economic impact on people with disabilities can be found in changes under Bill 26 to pay equity legislation. As a result of the elimination of the proxy method under pay equity, MCSS refused to pay transfer payment agencies the 1% adjustments they had made to employees in 1995. Programs made these adjustments at the beginning of the year in accordance with instructions from the government. When the ministry reneged on this funding in December 1995, programs were suddenly faced with a substantial funding shortfall which many can only rectify through a reduction in direct service.
We ask that the government live up to the promise it made and stop cutting supports to persons with disabilities. This includes a commitment to consider the impact that all policy decisions have on the lives of people with disabilities.
OACL believes that the time has come to take decisive action to close the remaining institutions in Ontario. We believe that the government must ensure the closure of all schedule 1 and 2 facilities by the year 2000. As well, it must ensure that all necessary safeguards are in place for people returning to the community.
According to information from MCSS, there are $244.838 million being spent annually to support schedule 1 facilities. From other sources we know that there are fewer than 2,500 individuals in those institutions. That means that there is about $100,000 per person per year being spent to keep people in institutions. This is enough to provide excellent alternative supports in the community and leave additional resources to address the needs of many people who are now on waiting lists within those communities. We cannot afford to artificially prolong the already unnatural lifespan of schedule 1 facilities, nor can the taxpayer, nor can the community, nor the people in those institutions, nor those waiting for service in communities.
The other item is individual funding. Ontario at present has many layers of services and funding for people with disabilities. The province operates its own service through the institutional system, funds are allocated to community agencies through transfer payments, and individuals receive direct funding through special services at home and other arrangements. The government has a great deal of experience and expertise in funding and operating the first two systems, but relatively little experience with direct, individualized funding.
OACL believes that the time has now come to develop that expertise. There are many pressures and opportunities within our current systems. The decision to close all institutions in the province will mean that communities will need to become much better at including people with disabilities. It will also mean that funding which is currently being used to exclude people can be reallocated to include people in their own communities. OACL believes that resources currently being used in institutions should be directed to communities and should be allocated to individuals through a direct funding system.
In conclusion, OACL appreciates very much the opportunity to present our recommendations to you this afternoon. We believe that there is good reason to be positive about the future for persons with disabilities in Ontario if we take the time to plan our steps very carefully. The closure of institutions in Ontario can provide current institutional residents a vastly improved quality of life within their own communities. Further, the redirection of resources to community supports offers the government the opportunity to live up to its promise to maintain service level for people with disabilities.
OACL offers its support to the government to work through these issues and to help design ways of providing individual funding to citizens with disabilities.
Mr Silipo: Let me start with a couple of things. First of all, thank you for being here and for reminding us of an important area that needs to continue to be addressed. I know that certainly in my last life I spent a good chunk of time --
Mrs Stone: Listening to us.
Mr Silipo: Yes, but also I hope doing some of the things that you've been telling us need to be done, particularly in terms of the move from institutional settings to community settings and more individualized funding. In fact, I think I remember one occasion being with Mrs Marland in Mississauga --
Mrs Marland: When you finally handed out a cheque.
Mr Silipo: Absolutely, and I was very happy to, and I hope that work is continuing, because I think it will be important for the government to keep moving in this area. This is for a lot of reasons. It makes sense for the benefit of the individuals, as you point out, but it also is a smarter way to spend the money.
The one thing I hope the government doesn't forget as it continues in this direction is that it does involve some investment of funds initially, because you just can't make the transition overnight. You can't simply close down the institutions and expect that the places are going to be there and the supports are going to be there in the community. It takes some investment in those resources. I'd be happy to hear your sense about what is happening on that front, you know, whether the ministry is continuing that policy which I think has been developed and to varying degrees supported by all three parties over the years.
I'm struck by a couple of particular points that you make in your presentation. The refusal by MCSS to pay the transfer payment agencies the 1% adjustment for pay equity troubles me because the government had -- although I think they were very wrong in eliminating proxy pay equity under Bill 26, they at least had the decency to put an amendment in that said the people would have the right to the 3% that they had -- at least there was a period of enforcement.
I find this action somewhat contradictory to that, because it seems to me now they're saying that the transfer payment agencies have to come up with that money on their own as opposed to continuing to see that there is an obligation on the part of the government for even that limited period of time. Are you getting any sense on that from the ministry that they are, as a result of their amendment, looking at this again, or is this a pretty clear position they have given to your agencies and to others, I'm assuming?
Mrs Barbara Thornber: If I could respond to that, we've certainly made the government aware of it through the MCSS staff and the minister. Our associations are really receiving two different messages at exactly the same time. They have letters from the Pay Equity Commission insisting that they enforce the pay equity, the 1%, and they have letters dated January 15 from MCSS telling them that they will be unable to give them the 1%.
Sorry, I got that wrong. The Pay Equity Commission letter is January 15, and they've been advised by MCSS that they cannot be funded the 1%, so that means they have all of the 1995 year shortfall as well as, of course, most of them have now put this in their base salary budget and in the collective agreements, so they're now in the position of having to honour that.
As you probably know, most of the associations for community living are funded 90% or more by MCSS or other government sources. Many of them have only 1% or 2% of their total budget that they achieve by fund-raising in the community. So this makes it very, very difficult for them, and the only way they can react to such a decision is to cut services to the individuals they support.
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Mr Silipo: I think for those reasons and certainly also because, as I said, the government made an amendment to Bill 26 which indicated, I think, support for at least the rights of workers affected by the cuts to proxy pay equity to be able to enforce at least the 3%, it seems to me to be contradictory that the government wouldn't be prepared to fulfil its obligations as the main funder, as you say, of your agencies. I hope that's something we can pursue.
The other issue that strikes me, beyond the overall cuts and your pointing out to us that that is in fact reneging on the promise the government made to not cut funding for people with disabilities, is also when we look at just the area of social assistance. It's one of the additional inequities that we see there.
On the one hand the government, after the initial mishap, corrected itself and reinstated cuts to people with disabilities. It still allows, as far as I know -- because I don't think they've changed it-cuts even on the social assistance side, where we are talking about, say, a situation -- and I've had constituents coming to my office with exactly this, so it's a real example -- a single mom with a severely disabled child. The child's benefit hasn't been cut, but the mother's benefit has been cut. In a situation like that the mother really has no choice but to spend most of her time with the child, so the family income that goes to support that child clearly has been cut. Have you had a chance to put those issues in front of the government and the minister?
Mrs Stone: The real reality of what it costs to have a disabled person in your family has never been investigated to the degree I think it should have been. There are hidden costs that nobody ever takes into account. My son is now 25 and he lives in an apartment program in St Catharines, but when he was at home and he was 18, to get a babysitter for him -- you can't pay $2.50 an hour for a babysitter for an 18-year-old and you cannot accept a 12-year-old who lives next door. So that very thing, just a small thing, but to give you an example of the kind of costs, you end up paying minimum wage for a babysitter for an evening to go to a movie, so you don't go to movies the way you did.
I think the reality of the cuts to that single mom with a disabled child has ramifications that I can't extend to you. If you have a person who needs a diaper every few hours, they're a dollar each now, so if you're talking five or six diapers a day, that's like somebody who smokes, having that sense. When you account that over a year, it's a lot of money and that's not a luxury, that's a necessity, especially with adults.
There are all kinds of elements there that you really -- I agree with you wholeheartedly and there doesn't seem to have been a lot, other than in individual cases, where there have been some exceptions made, I gather. But those are people who are loud. What about all the people who can't speak English as well or who have difficulty, who don't feel comfortable in situations like this where they have to go and speak and yell and scream about what they need? Those are the people who worry me very much, because they don't fight for what they deserve.
Mrs Marland: I was quite sure that of any deputations that would be here in the next two weeks, I knew we could count on Nancy and Barb. The best way to conduct these committee hearings is to try not to be too partisan and confrontational with our colleagues on the other side of the table. But having said that, as the spokesperson for people with disabilities for the last six or seven years, it just sticks in my craw to hear the former Minister of Community and Social Services criticizing what the present government has done when I know the battles we had with the cutbacks by both the previous two governments in the last 10 years, things like nine months even to get a response to a letter from the former minister's office and the very fact that we had to bring 5,000 people to the front steps of this building in the fall of 1994 in support of my motion.
I agree with you so much, Nancy, when you say that it's those people you have to speak on behalf of, we have to speak on behalf of, who can't speak for themselves, who give you even greater concern and greater heartbreak. For all the years, we've talked about there being too many layers of government and too many ministries involved, the fact that if you move from Hamilton-Wentworth into Peel or Durham, the money didn't flow with the individual who was eligible for that funding as a disabled person. We had all this bureaucratic red tape we couldn't get through. All of this speaks to your last paragraph where you say we have to take the time to plan our steps carefully.
What you're saying is so true. It isn't that the need isn't recognized. I will tell you that our government is committed to prioritizing in terms of human need on behalf of the people for whom you advocate and for whom I have advocated, because the money that is being spent often is lost. When you give some of the examples that you've given, a lot of it's lost along the way before it finally trickles to the recipient who needs it and needs the service. It's not just the individual. The example you give: I know about families and what it is they have to cope with and where money is needed to help them survive on a daily basis. It's not even that it's a lot of money; it's just that it has to be there for these people.
I'm glad that the former minister, the most recent Minister of Community and Social Services, now is in his constituency office advocating on behalf of the people he sees have difficulty, because those were the people we had to bring to Queen's Park to make a major demonstration of a concern that is out there and is very real. I think it's wonderful you're here with constructive suggestions. I want to give you the commitment that our government knows what the priorities have to be, and we would not be party to some of the changes the two previous governments have made.
Mr Silipo: So that's why you're cutting --
The Chair: Ms Bassett.
Ms Bassett: Mr Silipo, I've only got a second. Let me --
Mr Silipo: I'd actually like to extend the time to allow a response to that filibuster.
The Chair: I didn't hear a question, actually. Was there?
Mrs Marland: No. There doesn't have to be.
Mr Silipo: You just wanted to make a speech. You didn't want to hear from them, Margaret.
Mrs Marland: I hear them better than you do.
Mr Silipo: You just contradicted everything that your minister is doing, everything that your government is doing; you completely contradict it.
The Chair: Excuse me, Mr Silipo.
Mr Silipo: I'm sorry, Mr Chair, but when you have a situation like that where a member is completely --
Mrs Marland: On a point of order, Mr Chair: I think Ms Bassett has the floor.
The Chair: Ms Bassett has the floor.
Mr Silipo: Absolutely.
Ms Bassett: I just want to say, as you know, Nancy, I was part of the association. I'm committed, as Margaret is and I'm sure as my colleagues on the other side are. What I want to ask you is, are there any changes you think we can make to make sure the money goes to the people in real need, such as your son would have been and the many people like that who I see and Mr Silipo is seeing, and then some that are lesser, that maybe we could be giving another kind of help to, just because dollars are short? Is there any way you could work with us to come up with divvying up? I just have a feeling that different people need different amounts because there's such a range in the developmentally disabled sector.
Mrs Stone: There's no question that in our minds we feel we're approaching this in a positive way, because it's really important that we understand, as everybody in the province has to, that there are going to be cutbacks and that we're going to be hit by them, even just through a ripple effect, whether we like it or not. We're prepared to look at that. But we also feel there's a great expenditure out there in institutional settings, and they're all over the province. First of all, they're not conducive to the kind of life I would want for my son or your son or anybody's sons or daughters. They're not the way people were meant to live. That's number one.
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They cost an exorbitant amount of money, we know at least $100,000 per person in institutions. We also know that we can do a much better job with a better quality of life in community if those dollars could be committed directly back to community, and I mean all the dollars. I'm not talking about property and capital and all that kind of thing; I'm talking about operating costs. If that $100,000 per person could come back to community, there are many families who could be helped in a way that would support them where the support was really needed. The individualized funding aspect of that means that what we're planning on doing and what we're advocating for is that instead of looking at a person and throwing a whole bunch of dollars at the family, we first examine exactly what those people really need.
Oftentimes, I sat on a waiting list for residential. I really didn't need residential; I needed support and maybe just a little bit of support. You start off needing a little bit to get you going and then as the problem gets larger or the person gets older and you can't handle them as well or whatever, then there may be an increase of what you need for that support. In the beginning, many people under special services at home receive very little amounts of money and yet it does assist them. It enables them to keep their young people at home.
If we could do those two things, close the institutions and look at a different funding mechanism that wouldn't waste dollars, that would put the dollars directly into the hands -- I don't want to see a whole bunch of money spent on administration and a whole bunch of things that tie up money. I want that money to go directly to families that can really do the most and get the most bang for the dollar, because that's what builds a strong community: enabling people to be independent.
I've been very fortunate, because I'm a very strong person, that my family was able to cope a very long time. But for my own son's sake, it was time for him to leave home. He did and the support he's getting is wonderful. But there are cutbacks. Instead of living three to an apartment, there are now four. There are going to be changes and I guess we're all prepared to accept a little bit of that, but I don't want to see Jim suffer for that as well. That's why we come with those two points. I think they're very important because they enable the government to perhaps not save money, but redirect money in a more positive way.
Mrs Thornber: If I could just add, the other piece of what Nancy has said is the very important area of portability. By attaching the money to a person, not to a program, when that person moves to another part of Ontario that money can go with that person so they don't have to go from having the support that it may be determined they need and they go to another area and it's cut back, so portability is also very important.
Ms Castrilli: Ms Stone and Ms Thornber, I want to thank you for coming and for making such a passionate input into our deliberations. I have to tell you at first hand that I share your concern. In my own immediate family there is an instance of disability. I know what it's like to grow up with someone who is disabled and the lifelong care they need.
I don't want this to appear partisan, because it isn't. I want to tell the members opposite that the reality is that there was a promise made by the government and I can point to the exact page in the CSR where it says, "Aid for the disabled will not be cut." The reality is the record speaks for itself: Aid for the disabled has been cut.
I'd like to enlarge a little bit on the points we've been discussing here. I thought your response was very reasoned. You came here with an economic argument that said: "So much money is being invested in the area. Let's use it better. Let's not put it in these institutions. Let's take that $200 million and more and use it more wisely." I wonder if you could enlarge on that. How could it be done? I know you said giving it specifically to individuals. Has your organization done any work in that area that could be of assistance?
Mrs Stone: Yes, for a long time.
Ms Castrilli: Could you share some of that with us?
Mrs Stone: I think it goes back to -- I can't remember which government. The five-year plan was established by MCSS many years ago, where they started to scale down in institutions and OACL has been involved ever since.
Because of our organizations out there in communities -- we have associations in many communities, 110 communities in the province -- the supports are already in place. They just need expansion and some refinement and sort of looking at it again. Yes, we're involved. We work with MCSS continually. The minister has been very genuine and receiving and asked for input and we've been doing that. Yes, we're involved a little bit in the planning and the establishment of something different. We've received assurance that the plan that was in place is continuing, so we're assuming; we'd just like to see it speed up just a titch.
Ms Castrilli: You're confident that you have the government's ear on this?
Mrs Stone: I think so, yes. Certainly at this point in time we have been given assurances that nothing has changed since the change of government.
Ms Castrilli: Your solution is to give it to communities as opposed to the institutions?
Mrs Stone: Yes. I don't think anybody was meant to live in an institution. You have to visit some in the province of Ontario. Huronia is a good example. It's at least 100 years old, I believe, very old. People were not meant to live that way.
Ms Castrilli: Just to be very clear, it's your impression that you have assurances from the government that this is a plan they would follow?
Mrs Stone: Yes. Now, their time line may be very different than what I would like, but they've been certainly given assurances that it's continuing.
Ms Castrilli: What do you think that time line is?
Mrs Stone: We're shooting for the year 2000. I think the plan that's been inherited had a magic number of 2005 or something like that.
Ms Castrilli: A long time for a disabled person.
Mr Kwinter: In your advocacy on behalf of the disabled, have you made representations to the ministry on the impact of things that aren't necessarily associated with the disabled? To give you an example, and just by coincidence, I met with a People First chapter in North York last night, and as I say it was just a coincidence.
Mrs Stone: Good timing.
Mr Kwinter: It happens to be very good timing. For those of you who don't know what People First is, it's a group of disabled people who are literally on their own. They get support, but they can function, albeit at different levels. There were 22 people there last night ranging in age, I would say, from maybe 17 to 60.
One of their concerns, and the reason they asked me to address them last night, was not just what is happening as a result of the Common Sense Revolution but for the last number of years they have found that instead of getting increased support, they're getting decreased support. Even more importantly right now -- these are people who function. They don't function at the level you and I might think we'd like to function at, but they function. As a matter of fact, the president is a school crossing guard and he does his job and is able to do it, and others have other responsibilities.
Their concern is that, for example, when funding is cut to municipalities so that they have to cut back on transit, it inhibits their ability to go out and do their work because that particular route they used to use isn't available to them. It takes them a while to get routinized so that they know what they're doing and suddenly they're lost. They can't figure out quite what the alternative solution is and that impacts on them.
They gave me a whole range of problems they were facing. It has to do with their disability but the repercussions are not part of their disability. In other words, it's something that people don't address. They don't realize that for every action there's a reaction, and you may have a reaction with some group that you didn't even think about. I think that is a problem, and it's certainly a great problem to them.
So I'm fully supportive of your plan to get individual funding so that at least they have some flexibility in what they do. I'm just wondering what your reaction to that was.
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Mrs Stone: We work with People First as closely as humanly possible. We try to act as a support mechanism, organization to organization as well as individual to individual. So we're very aware. We share our concerns very much, and there are very few times that you won't get a document from People First that doesn't have some things in it that reflect some of our concerns and ours will have things that reflect their concerns. But of course it reflects; transportation is a good example of reflecting on all kinds of community people that you just don't envision will happen.
Subsidized housing was another big one. A lot of these people have very low incomes. A crossing guard only gets paid part-time, so his income is probably not great. Therefore, he has to look for the kind of housing he can afford to have, and with a cut to subsidized housing, that reduces the chances of finding something that is affordable.
Everything has an impact on everybody. I think we have to recognize that. If you start to bring in user fees, a lot of those people take medication and that's going to be an effect on their income, and their income is not big. I think we always see ourselves at the bottom of the pot, unfortunately. Persons with developmental disabilities tend to be the ones who are living in a poorer range and it's just that much more difficult.
The Chair: That's a very passionate subject. Thank you very much for coming and sharing it with us.
Mrs Stone: I have no trouble being passionate about this.
The Chair: We really appreciate your attendance.
FRIENDS OF ONTARIO UNIVERSITIES
The Chair: We now have Friends of Ontario Universities, Mr Ian Morrison.
Mr Ian Morrison: My name is Ian Morrison. I'm with Friends of Ontario Universities. I'm also a constituent of Ms Bassett, who I notice is sitting in on the committee today. I'd like to introduce my colleague Pamela Jeffery. I want to thank you for hearing us. Pamela will begin and I'll conclude a brief presentation and we would welcome dialogue.
Ms Pamela Jeffery: Mr Chairman and committee members, I'd like to thank you for the opportunity to be here this afternoon.
Friends of Ontario Universities is a province-wide association of 18,100 individuals with a shared goal of strengthening the position of higher education in Ontario. Our supporters care very deeply about the future of higher education in this province, and they have each demonstrated that concern in a tangible way. They contribute regularly from their own pockets to support a quality system of higher education in this province.
Friends has developed, since 1991, with active support from Ontario's university alumni associations, from 17 universities and from many individuals.
Our mission is to raise the share of mind for higher education at Queen's Park. Friends is working to attain this goal through a sustained, riding-based program of education and communication from constituents to MPPs. On average, Friends has 135 members in each of the province's electoral districts.
Friends sees its role as one of facilitating communication, not just from our members to government but also to university leadership, with the goal of enhancing universities' responsiveness to changing societal needs. However, we are here today to offer advice to your committee which we ask you to consider and pass along to the Minister of Finance in advance of the next provincial budget.
But first some background information.
Over the past 15 years, while enrolment has increased by 50%, Ontario's universities have seen their resources shrink substantially in comparison with other public services and with university funding in other jurisdictions.
Since 1980, under three successive governments, the share of Ontario government spending has fallen from 6% to 4% for Ontario universities.
On a per-client-served basis, the index of grants to Ontario's universities since 1980 falls far below grants to other major societal institutions.
Ontario universities' per-student operating expenditures have been the lowest in any Canadian jurisdiction: 8% below Quebec's and 9% below Alberta's.
Government grants to Ontario's universities are 35% lower than government grants to public universities in the 11 largest American states.
All of these calculations precede the November 1995 economic statement. Now the projected situation is much more serious for our universities' future. In Canadian terms, our university system is funded dead last.
Since universities are the primary developers of intellectual capital in an information economy, this pattern of neglect will place Ontario in a position of growing competitive disadvantage in the future unless corrective action is taken. However, Friends is highly conscious of the difficult fiscal position facing the Ontario government. In the short term, therefore, we recognize that the government has limited capacity to redress the disadvantage we have described.
We also recognize that the government has a mandate from Ontarians to reduce the higher education envelope by $400 million per annum, the cut announced by the Minister of Finance in November. This cut, which was called for in the Common Sense Revolution, is very substantial. It represents a 15% reduction in public support for higher education, a cut of some $1,000 per university student.
Mr Morrison: What we want to put before the committee today is some heartfelt advice on the government's future directions for higher education. As you may know, universities have already tightened their belts over the past decade and they are now stretched to the limit.
Our counsel to the government, through this committee, is not to cut deeper than the $400 million called for in the Common Sense Revolution. We welcome the government's plan to enter into a dialogue with university leaders and the community about the role of higher education in an information economy. We welcome the debate about what society expects from universities. We believe this debate must take place before the government takes any action that could cripple our universities, even if that action were inadvertent, and the essential services these universities would offer to the future leadership of this province.
We believe that our universities can still deliver a quality product and cope with the pain of a huge $400-million cut that the government has announced, provided, and only provided, the government moves right away to partially deregulate tuition.
In an environment where public funds are in very short supply, universities, in our view, should be free to increase other sources of revenue, including fees, in order to sustain their capacity to do their job. Friends supports the idea that university tuition fees should be partially deregulated. We see the November 1995 announcement by the Minister of Finance as a positive first step, but substantial tuition increases are only acceptable if the government moves simultaneously to implement the promised "equal opportunity education fund."
Friends strongly supports reforming student loans to introduce an income-contingent repayment plan system. To be effective, we believe that this plan must be integrated with Canada's income tax system, thereby linking repayment directly with a graduate's capacity to repay. This requires collaboration with the federal government. As student loan reform must accompany any substantial increases to tuition fees, we recommend that federal-provincial negotiations begin immediately to implement this election promise. Of all the government's announced plans for the university sector, this policy initiative is the most complicated to implement. This is an added reason for getting on with the task right away.
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We were therefore highly encouraged by the following statements of the Minister of Finance in the November economic statement, and I'm quoting the minister:
"Ontario will seek the federal government's assistance to develop a student aid plan in which repayments reflect income after graduation.
"The Minister of Education and Training will release a discussion paper in the new year on future goals for Ontario's colleges and universities. The paper will address issues such as student and provincial shares of post-secondary funding, accessibility, and program rationalization and cooperation."
To sum up our position and our advice: While the government can justly claim that the cuts announced in November had been approved by Ontario voters through the election, the government has no mandate, in our view, for any further cuts. Enough is enough. Ontario's universities are making an essential and cost-effective contribution. Let them do their job.
Second, while the government's promise to work on an income-contingent loan program has merit, this work needs to proceed on a fast track, a fast pace, to bring the program into reality. The long-term affordability and availability of a university education depends on implementation of this promise.
Finally, the government has now met the first of its commitments as stated in the Common Sense Revolution regarding higher education: the $400-million cut. Now is the time to implement the two other key higher-education commitments in order to enable our universities to get on with the job of providing quality higher education for Ontario's future.
That's our brief statement as promised, and we're open for dialogue.
Mr Spina: Thank you for a great presentation. Pamela, it's good to see you again. The last time we were at a local community group of Friends. I'm pleased to hear the tone of your presentation and I think a lot of the things we talked about back then you're starting to see come to fruition.
I wondered if you had a sense of rationalization from some of the universities, that they would be merging, combining programs, paring programs down to reduce a lot of the duplication. I wasn't sure if either you or Ian were in a position to be able to make comments.
Mr Morrison: We'll make comments and we'll find out how we did. As I think Pam mentioned at the outset, when we finally incorporated our organization about two or three years ago, we had a long debate about the goals. One of the goals we made sure we inserted was to provide advice from alumni to universities about how they should adapt themselves to the changing environment. There's no problem speaking out like this. It's just that we're accountable to a lot of people, so we have to be careful.
Mr Spina: We've been there.
Mr Morrison: Clearly, in an environment where universities are facing very substantial cuts, I think you understand that the cuts we referred to -- Pamela mentioned $1,000 per student, just in rough terms, is what was required. The universities thus far have been permitted to raise back, and I'm speaking in broad-brush terms, only a third of that in any freedom to increase fees. They're dealing with cuts that are really substantial, in common with the colleges. So clearly, mergers are going to have to be on the table; I don't think necessarily mergers of institutions but mergers and collapsing of programs.
The management of the university system is going to have to make hard choices, and if the university system is to survive and be more businesslike, entrepreneurial, lean, mean -- all of that jargon, vocabulary -- it's got to have the tools to do it. We believe that we will see a lot of change in that regard as universities make hard choices and we don't see that as all bad. What we really are concerned about is the capacity to maintain the quality of the programs they offer, and the accessibility to students, which brings back the question of the lending of resources to students according to their capacity to repay.
Ms Jeffery: Friends, as we mentioned, operates as a group to represent alumni who care enough about Ontario universities to involve themselves in the process. Because they care enough, we listen to what they tell us, and they tell us they would like to see changes occur in the university system, and we're in the position to be able to communicate with the universities their aspirations and their hopes for the future within the context of wanting to ensure quality education.
Mr Morrison: For any members of the committee who might wonder at this great familiarity with Mr Spina, it just happens that in his constituency we tried an experiment of a constituency meeting. We're going to have one in Frances Lankin's riding in the near future, and we hope she will participate.
Ms Jeffery: You'll be hearing from us.
Ms Bassett: First of all, thanks for your presentation. Since U of T is in my riding, and I was chair of the board at Ryerson, I have some familiarity with getting funds, because even a few years ago we were facing these problems. Business has gone hand-in-hand at the U of T certainly, and Ryerson, to support programs that would have been impossible without the support of business. Do you see universities as a whole moving in that direction more, and are you encouraging it?
Mr Morrison: Thanks for the opportunity. I'd like to answer with an anecdote. A quick answer would be yes. In certain circles one is told that you first think, "Can you say yes or no?" and only if you can't say one or the other do you say any more, but not here.
I'd like to suggest that what I think universities are becoming very skilled at -- and the president of the University of Toronto is perhaps not rivalled in his capacity to make these things happen -- is to turn what used to be called fund-raising, something of a charitable nature, into a real value added business proposition.
I'm aware that the university in your constituency, U of T, was involved with something substantial with Latin America not too long ago. The net result was a lot of money coming to the University of Toronto, but the opportunities, the investments that a lot of Canadian businesses were making were being made in the expectation of some benefit in their export sales to the Americas. That's the kind of win-win situation that universities have to develop in an entrepreneurial age.
Ms Bassett: Are you pushing them to do that? My experience was -- nobody matches Rob Prichard, but beyond that, there are some that have absolutely a negative approach to doing that kind of thing, which in my view you have to do.
Mr Morrison: Maybe what we have is a difference of opinion, but it may be a matter of timing, because I think in 1996 there isn't a university in this province that isn't working very hard in that respect. I don't think they need a lot of pushing, but to the extent they do, their alumni want them to diversify their sources of support, and at the same time, it's increasing the constituency of support for the university and building other partners in society who feel they have a stake in the success of the university.
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Ms Castrilli: Thank you, Mr Morrison, Ms Jeffery. Like Mrs Bassett, I have a university in my riding, York University, and in my former life I was chair of the governing council of the University of Toronto. I'm familiar with the excellent work you do. I always used to ask myself, how can they be so altruistic and give so much of their time and resources to this issue? But it is a very important issue.
Your presentation, as always, is reasoned and based on a good foundation. You speak of the importance of intellectual capital and the role universities play in that, and I would add that the universities and colleges also could be a major focus for economic recovery, and should be. That certainly is something I care very much about.
I wonder if you've had any discussions with the minister as to the priorities he has and the vision he has for universities in the province?
Mr Morrison: Our discussion with the minister would be through a riding coordinator in Halton -- I can't remember the minister's constituency right now.
Ms Castrilli: I can't either.
Mr Morrison: But I do very much remember our riding coordinator, who has been in touch with him. Our tendency is to deal with members of the Legislature not in this way, but through a local contact. Although we haven't had any substantive assurance from John Snobelen on that subject, what I took to be a very positive sign was this announcement of the government's intention to set up this process for dialogue about the future priorities of the universities. We intend to be an active part of that process at the grass roots as well as through our steering committee.
Ms Castrilli: Does it trouble you that the process that has been set up may not achieve the results the university community may want? The analysis is this: that first you have a series of cuts for universities and colleges which will be quite dramatic, then you have a white paper, and then you have consultation. Do you think that is an appropriate process to establish priorities, or have the priorities already been set?
Ms Jeffery: We think that's an important process in so far as consultation is taking place. However, we would like to see the income-contingent student loan program implementation move at a faster pace to allow for the kind of quality education and access we've talked about, and not put that off.
Ms Castrilli: Again there, you have some massive increases in tuition, 10% to 20%, as you know, and there's no serious discussion of what elements any new additional form of support for students will take. It seems to us on this side of the House that they're putting the cart before the horse, that all the cuts are being made and then, subsequent to that, there are some decisions as to what you do in terms of priorities for universities and for students.
Ms Jeffery: The consultative process is one we like to see, but we do share a concern in terms of the first step being undertaken, the cuts that have been announced, without the other two very important steps, the partial deregulation and the implementation of the income-contingent student loan program.
Ms Castrilli: Have you had any discussions with the minister, or through whoever your contact is, with respect to further cuts? I know you're concerned about additional cuts, as are we. Any indication of whether there are going to be any more or whether this is an end? Have they ruled it out?
Mr Morrison: This is like reading tea leaves, but one has to be candid with a legislative committee.
Ms Castrilli: I know you always to be candid.
Mr Morrison: The current reading I have is that the government has heard the message from the university community, has recognized that the university community has not kicked and screamed but instead has said, "We are willing to bear a fair share, notwithstanding what has happened in the past." The government appears to recognize -- I stress "appears" -- the great importance of universities in this province for economic as well as other reasons. The word we have, but it is very much a tea leaf type of word, is that while there are discussions about cuts beyond the Common Sense Revolution benchmark, no decisions have been taken in that regard.
We have detected an awareness on the part of the public service, the advisers to the government, that some of the things Pamela said at the outset, that universities have been trimming their sails for quite some time, have happened. In other words, on a per-client basis the resources allocated to universities have not risen the way they have in other major social partners. We have some hope, but vigilance is where we're at at the moment, because we are aware of the fiscal exigencies and we're aware that unintended actions could happen that could have very grave impact on the future of higher education.
Mr Silipo: Thanks very much for the presentation. I wonder if you can share with us any observations you may have, because obviously what we get so far is anecdotal in terms of what the impact of the $400 million in cuts are or are likely to be. In the Common Sense Revolution the government states its belief that a lot of that money can be found through streamlining of administration and such things as that. But it is my sense that we are also seeing some pretty substantive changes happening and likely to happen that impact directly on the quality of the teaching and the work that goes on in universities. What sense do you have of what is going on?
Ms Jeffery: Our sense is that the effects are quite profound. One example that comes to mind is the overcrowded classrooms and the sense we have that a higher number of students is being taught by a single instructor.
Mr Morrison: And it goes into library acquisitions not being kept up. It's a very, very serious situation. It's true that a reading of the Common Sense Revolution would suggest that somehow there was $400 million of -- what will I call it? -- fat in the higher education system. We know that's not the case, and I suspect the government knows it is not the case. Certainly the university administrations know it is not the case. Notwithstanding all of that, in tough times, on a basis of fairness, every sector should do its piece. We understand that there have to be the cuts. But no one should kid themselves that the cuts, Mr Silipo, will be to some type of unimportant ancillary function that has no bearing on teaching. There is no doubt that the quality of higher education is going to be affected by what is going on.
Mr Silipo: That has certainly been my sense, but I was interested in yours, because at this table at least, your voice is going to carry more weight than mine. Hopefully, people are listening to that.
Mr Morrison: It's not going to hurt just the paper-clip manufacturers.
Mr Silipo: Unless I misunderstood your position, you support further increases in tuition fees, but you also put a caveat on that to say it should only happen, would only be acceptable, if the government also puts in place its promised "equal opportunity education plan." That's the quote you have. Have you done any work and can you share any information with us about where you think that balance can be struck?
Of course, the concern is accessibility to university, and I don't have to tell you that many organizations, whether it's student organizations or others, would argue that the level of tuition fees being charged now is prohibitive in terms of people from lower- and maybe even middle-income backgrounds being able to go to university. At what point do we cross a line so that it isn't any longer possible for people from lower-income backgrounds to reasonably be able to put themselves through university or college?
Ms Jeffery: Our supporters, who are alumni of universities in Ontario, want to ensure that students are able to continue to go on to higher education, but at the same time, they want to ensure that students are going to be able to finance their education in such a way that it's not going to be, as you are saying, "prohibitive." In terms of that sawoff between a partial deregulation environment and the kind of income-contingent student loan program that is implemented, I don't think it's possible at this time for us to say exactly where that would be. Our sense is that we need to have the universities accessible; alumni want to see that. But you've raised a very important question, which is, where is that point?
Mr Morrison: But I am familiar with research which is comparing us with other jurisdictions. If we are going to compare us with other jurisdictions on the global revenue side -- and you said we're dead last at one point -- we have to look at tuition. Ontario's tuition is not the highest in the country at the moment; it is higher than some. Ontario's tuition is lower in many cases than those public universities that you referred to in -- Pam said 11 large US states; it's the 11 states in the American system that are as big as Ontario. So there would appear to be some room. But it is a sliding scale, and it is not something we would advocate; it is just, rather, that the fiscal situation and the government's commitment and mandate suggest that something has to change.
We insist that what changes should not be that only the quality of education will go down, because in the long run everyone suffers in that case. So the income-contingent plan -- it's not an ideal situation, there are problems with it, there are questions of cost -- does provide for us, conceptually, a way that someone who has to mortgage her future will be asked to repay according to the capacity to repay. We would like the government to get on with that in cooperation with the government of Canada.
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Mr Silipo: I agree that work needs to continue.
The Chair: Thank you very much. We appreciate your presentation to the standing committee and we'll take your remarks into consideration.
INCOME MAINTENANCE GROUP
The Chair: The next presentation is by the Income Maintenance Group: Mr Harry Beatty, Mr Scott Seiler and Ms Marilyn Ferrel. Welcome.
Mr Scott Seiler: My name is Scott Seiler and I'm with the Income Maintenance Group. The Income Maintenance Group has been in existence since 1978 and has dealt with disability-related issues around income, employment and, sometimes, health-related issues for that amount of time. We're here to talk to you today about some of the things and initiatives that the government is doing and reiterate in some way some of the things we've said at Bill 26 hearings and other places as well, as well as reiterate some of the things that we've been saying for the entire time the Income Maintenance Group has been in existence.
For instance, one of the things that we have great concern about right now is the whole issue of the drug program's user fees for the Ontario drug benefit plan. We believe this will restrict the ability for people with disabilities to be able to acquire the drugs that they need to keep in control the disabilities they may have or to help them cope and survive in the community. It's very important that people get these medications. We also know that in many jurisdictions that have brought in user fees connected with the drug programs people have made choices, and the choices are, "Do I eat or do I take the drugs?" This is even more crucial for people who are on GWA, the general welfare assistance system, because they have been cut back the 21.6% as well, so they have even less income to be able to spend for the $2 per prescription.
We also know that there are approximately 35,000 people who are on GWA in this province who are waiting for adjudication on to a disability pension, and those people are greatly at risk. Something that may not be being thought of with the user fees is that if you put a user fee and people do not take the medications that they are supposed to take and they end up getting ill, it will cost you 10 or 15 times the kind of cost it would be to provide a prescription to provide the kinds of help that somebody would need in a hospital setting or in a clinical type of a setting, whether that's a hospital for psychiatric disabilities or a general hospital where somebody has to go in for kidney dialysis too early because they don't have enough money to buy the drugs or they have complications because they don't have the money to buy medications that they need.
Also, I think it's very, very important to realize that we are in a time when there are a tremendous number of people with disabilities on social assistance. Part of the reason for that is the economy, and many other different issues are involved there as well. But what we're seeing is a diminishment of the ability for social assistance recipients who have disabilities to be able to go out there and get training and get work. One of the reasons for that is that people with disabilities have no law now, for instance, to help to protect them -- and Marilyn will be talking about that in more depth -- which was the Employment Equity Act.
We also have problems around the division of things like assistive devices for people with disabilities to get work through what they call the VRS, which is vocational rehabilitation services. What they've done is they've taken that program and they've divided it in half. They put one half in the Ministry of Citizenship and left one half in Community and Social Services, where it started. All that's done is double the administration. It has not made more money available for people with disabilities for accommodations.
Also, we have a tremendous issue here with definition of "disability." I want it on the public record here in this committee -- and I've put it on the public record in other committees, other places -- that I believe that we will lose approximately 115,000 to 120,000 people from the disability rolls with what the government is planning on doing with disability definition. They are going to chop that many people out of the system. They almost got away with it once and we stopped them, and they are going to try it again this spring. I want that on the record, because it will mean that most of the people in what we call PUE, which is permanently unemployable, will most likely be off the system. The current estimate is about 115,000 people, approximately.
If that's the case, then we will see people being dumped on to the general welfare system, into the municipal services, and those people will not be able to afford where they're living in many cases and will end up on the street. We've got a tremendous problem with people living on the street today. We've had to call out the armed forces and open the Moss Park Armoury for the first time since the Great Depression. I think that's a sad state of affairs for this province and for this city. I'll be very honest with you: A tremendous number of those people who are out there on that street are people with disabilities. We need to be a little bit more thoughtful in how we decide on these things and look a little bit closer at the effects, because people have died. Three people have died this month and there will be a whole lot more.
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I think some of the cuts around education -- for instance, to the colleges and universities -- are extremely detrimental to getting people with disabilities out into the labour force. If you do that, it's like giving a person something and then taking it back very, very quickly, before they ever get a real benefit out if it. We have only been getting proper services in the community college and university systems for approximately 10 to 12 years now. So the people who have gone through college and university in the last 10 to 12 years are the first people, for the most part -- now, there were some exceptions to the rule there prior to that, but for the most part most people with disabilities have been educated in college and university in the last 10 years. That is in great jeopardy with the MUSH cuts that are being done through Bill 26. If those cuts go through, it will be the access services for people with disabilities and other disadvantaged people that will suffer.
I'm going to turn it over to Marilyn and she's going to be able to talk in some more detail about some of the people who fall through the cracks in the cuts.
Ms Marilyn Ferrel: I'd like to talk on a personal level about what it means to me not to be defined as disabled. I feel that with the cuts I will no longer be defined as disabled, but I won't be defined as employable either. What am I to do? Commit suicide?
The Employment Equity Act gave me hope. It gave me hope that I would have accommodation. It gave me hope that job descriptions and the amount of time I spent on a job could be flexible according to my limitations. It gave me hope that there would be a way for me to be employable. However, the current government has said that only those who fall within the merit principle are permitted to be employed. The merit principle, by definition, says that only the best-qualified for a job can have a job. Therefore, by definition, there are people who are second-best, there are people who get 80% instead of 90% in productivity and those people are no longer considered employable given the fact that, as a Progressive Conservative said in Hansard in a committee of employment equity, the economy is only placing workers by 1% or 2%.
I have worked. Work has cost me my health. I get bronchitis every year trying to work and trying to make myself go at a pace that is beyond what I'm able to do. I have tried hard to increase my speed to the point where I have been almost ready for a nervous breakdown a couple of times. I have lost my husband because the anxiety of trying to work was too much for him, let alone me. So I feel I'm defined as not able to work because I'm not capable of doing the work of two people, which is demanded in this economy, and yet I'm not eligible for social assistance because I have worked to a limited degree.
Most of my jobs were on provincial government grants through the office for disability issues and met more accommodation. I could set my own pace in the workplace and I wasn't forced to work beyond my abilities, whereas even that has been taken away from me. What am I supposed to do? I feel with the favouritism to euthanasia I'm supposed to take my life. I really feel that, because there are no alternatives, no in-betweens. I've applied for UI. I have to wait 18 months to get help to reintegrate in the workplace, to get accommodation, to help me figure out, due to my limitations and abilities, how do I fit, and yet my UIC runs out in August. What do I do for a year and a half?
I know that people will discriminate against me in the workforce. I applied for training through the Toronto Institute of Human Relations. I have a BSW, and I felt, "Well, if I improve my talents and skills, I could maybe do therapy." However, they said to me: "No, we do not want you in the schoolroom. Your speech is difficult to understand. Your speech is slower." So if my speech is slower and so I have limitations on the job, no one would hire me, and yet I have skills that say I am no longer eligible for social assistance.
Mr Harry Beatty: I'll just be brief so as not to take very much time away from questions. I think the concerns expressed by Scott and Marilyn are quite typical of what we are hearing in our office from individuals in the community and family members, case workers and so on, that in terms of what is available, in terms of disability services and programs, things appear to be heading backwards. I think part of it is less money, restraint at all levels, but also a feeling that there is not a consistent approach to disability policy, that decisions are made program by program, but that often people are treated inconsistently.
As Marilyn described, vocational rehabilitation may describe her as unemployable, whereas certainly some disability income programs would look at Marilyn's work history and her education and say: "Well, you're employable. You don't qualify here either."
There needs to be a more coordinated approach. In terms of longer-term planning, the point I guess we've made year after year, Scott, is that we believe that the approach of integrating people with disabilities into the community will work over the long term. If people are given opportunities to work, people like Marilyn, they will succeed or a percentage will succeed and that's the win-win solution, and fewer people will be dependent on income and support programs.
However, it's only in exceptional cases that people are going to succeed with the first try, and it's not the kind of change where you're going to see a big savings at a program if you just look at one year at a time. There has to be a longer-term type of planning process, and it still appears to us, after several years, that a lot of the government planning process is tied to the one-year budget cycle, and perhaps if a longer-term view were taken, that investments in people like Scott and Marilyn and many others would be seen to pay off over the long term.
With that, I'll stop and we can ask for questions.
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Ms Castrilli: Thank you very much, Mr Beatty and Mr Seiler and Ms Ferrel.
Some of us had occasion to hear you on the Bill 26 hearings and were as moved that time with your presentation as we are this time. I think your thoughts were very helpful.
I wonder if I could focus on two aspects today. The first deals with what you refer to as win-win solutions, and your paper makes reference to that a number of times. It talks specifically about some significant opportunities for win-win solutions. I wonder if you could elaborate on that point.
Mr Beatty: Well, basically what we mean is that, again to take Marilyn as an illustration, if someone with Marilyn's disability attempts some education and succeeds in getting a degree and working, there is a real concern that if a functional approach is taken to disability definition and eligibility, that person will be seen as not disabled and the income support that a disabled person should have will not be there. So in a sense, people would be penalized for efforts. I think those of us who have worked in the community have seen this again and again with the person we feel would have the skills to work and perhaps very effectively, but the person is afraid of losing everything. Maybe Scott or Marilyn could follow that up.
Mr Seiler: Actually, the issue of people losing everything is probably more common than any of us would like to know about. In fact, the stories are rampant now about people who have gone out and worked and tried very, very hard in the last 10 years to improve their lives. I can even count myself in this. Frankly, other than having a lot more skills than I did 10 or 15 years ago, I'm about as far employment-wise as I was 10 or 15 years ago. I'm back unemployed.
I have a tremendous potential to be employed, but would anybody hire me under the type of things that Marilyn is talking about, having to be two or three people to be able to do a job and doing the job of more than one person at a time? Is that something that's possible for many people? Many people have tried very hard to do things for themselves.
Ms Ferrel: Perhaps I might just speak to that. I have had about 10 jobs; nine of them I have quit. I have quit because I was just so overwrought at trying to keep up, at trying to push myself beyond a pace. The desktop worked for me, but it took me a long time of trial and error to get there, given my difficulties. So in the current climate, I will be better off not trying in the first place.
Ms Lankin: Given that there's short time, I actually have three questions. What I'd like to do is put the three of them to you and then let you just take the rest of the time to answer them.
First of all, with respect to the number you put on the record of people whom you think will become eligible for social assistance as a result of a change in the definition of disability, could you tell us the kind of people, the kind of disabilities they have, what you think will happen and then -- I've got two more questions I'm going to throw out, okay? -- and what will happen to them then?
Secondly, we've heard the minister make much about the decline in social assistance numbers, of recipients, over the last little while. I've met with some folks who actually lost their housing and have gone off social assistance in order to get into shelters. But I want to know what you're hearing on the street in terms of that decrease in numbers.
Thirdly, lest anyone accuse you of just being defenders of the status quo in terms of the presentation you're bringing forward -- because that's one of the concerns we've heard from government members -- what would you recommend that the government do in this budget round with respect to these issues that you're raising?
Mr Seiler: I think with the very first question, it's crucial for you to understand that those figures come from the people who are what we call PUE, people who are permanently unemployable. These are people who are on the system as a category that is, quite frankly, outside of the disability category in itself. They are a very specialized category within the family benefits system. These people, most of whom have disabilities, but they are not disabled enough under the current definition of disabilities -- which is not very broad in this province either, really, for the purpose of FBA -- those people have been brought into the system because they didn't fit into the definition of disability and so they would not be covered by a disability definition that we have now, so they created this new system. Those are the people who will be there.
We don't know exactly the number but that's approximate, how many people will be out of the system.
Ms Lankin: Then the decrease in rolls now and what your recommendations are to the budget process.
Mr Seiler: The decrease in the rolls for assistance are people who have just decided that living on the street is preferable to living the way they have been on social assistance, in many cases. I'm hearing that from psychiatric survivors and I'm hearing that from many different people. People are ending up on the streets. They're ending up with family, who quite often are not equipped or able to cope either with people. They're ending up in shelters, a lot. We've had some deaths in Toronto, like I said earlier.
Some of the ways that we can deal with this is that people with disabilities need a system where they can be on and off assistance, as needed. What we don't need is more restrictions; we need a relaxed system, a system that will not spend most of its money adjudicating the disability, whether it exists or not. That is where the majority of the money goes. It doesn't go for allowances; it goes for bureaucracy that looks at "Is this person a disabled person?" Let's get rid of that bureaucracy and let people be able to say: "I'm a disabled person. This is my disability. I need some help until I can get a job or get back on my feet." And that's all that people want and need. They don't need to be tested over and over and over again for an established disability.
Ms Ferrel: When people say they are disabled, chances are they are, because being disabled, with the discrimination and the devaluation -- as a person with disability, being devalued and discriminated is no picnic, and if I could get away without it, hallelujah.
Also there needs to be ongoing support for some people in their job, and I strongly recommend supportive work for some people on the job, job coaching. I particularly need a supervisor or a counsellor whom I can go to when I can't keep up or when patience, stress is too much for me. The VRS, as soon as I get a job, they cancel my case and then when I lose that job I can't go back again, and I can't wait 18 months. So for some people they may need ongoing support.
Also, let's not try to put people into jobs. Let's fit the job to the person. If all I can do is stamp envelopes, and I personally can be more than that but some can't, fine. That's something they can do. Pay either social assistance or a wage, it doesn't matter which, but they need an income. I believe each person has the right to use their maximum potential without fear that if they try they may be in a position where they're no longer able to survive, as the three people we've seen this week weren't able to survive.
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Mrs Marland: Marilyn, I agree with a great deal of what you're saying and especially just at the end when you were talking about the necessity to fit employment to the person so that, whoever they are, they can maximize their potential. When our government talks about hiring on the merit principle, there was never any intention that a person with a different ability in terms of a physical or a developmental ability would be measured against someone else outside of that category, because it wouldn't make sense to do that.
Ms Ferrel: For some people it would make sense; for others it doesn't.
Mrs Marland: Right. So when you say that you personally have experienced having a support person, a case worker I think was the term you used, or the counsellor, and then when you lost the job, then you would have to wait 18 months to get back. Obviously you're speaking of experience that you've had under previous governments, so it's not just a new problem.
I think I heard Mr Beatty say that the support will not be there. I think that that's making a statement in the future that simply isn't factual that the support will not be there. There is a commitment to people with disabilities and there is a commitment -- I thought, Scott, when Ms Lankin asked you to give examples of what kind of disabilities were being dropped, she said, "Can you give us some examples of disabilities?" you didn't answer her question. You just said that it --
Mr Seiler: Yes. I can do that. I forgot that part.
Mrs Marland: Yes, okay. You said they were on a system outside the definition of disabled. I think, in fairness to people with disabilities, they need to have a definition that gives them the entitlement.
For example, when you talk about non-profit housing, what we're talking about is yes, the discontinuance of non-profit housing as a program, temporarily has reduced the number of new units being built, but what we're talking about is a program where if indeed you're eligible for help, the help is going to go directly to an individual rather than bricks and mortar in a building and it's going to give that individual an opportunity to live wherever they need to live.
In Marilyn's case, Marilyn, you may like to live closer to work than you could where an existing non-profit building existed. I think that what you will find is not a diminished level of service but greater opportunities in terms of where you can live with a shelter allowance, if you need that kind of help in terms of accommodations.
I feel that all of the things that our government did in its last mandate over 10 years ago towards helping people in the workplace, when you talk about building code stuff and the physical plant accommodation of people in employment, I think, speaks to the recognition that we've always had that people with different abilities have different needs and we're committed to accommodating those needs.
Mr Seiler: I think to answer one of the questions that was asked and a comment there, some of the people with disabilities who will be cut off are people with non-visible disabilities, people who do not need attendant services. It's very clear in the Common Sense Revolution that the entire premise behind the changing of the disability programs around social assistance is to diminish the numbers of people greatly who are eligible for assistance, and that is not helping people with disabilities, I'm afraid. That is going to further hurt them.
Plus, you've made a commitment to this province to diminish the rolls of the general welfare system. I think it's rather interesting that what you're going to do is you're going to cut off hundreds of thousands of people from the rolls of FBA and shove them directly on to the rolls of the GWA program and take the --
Mrs Marland: But do you think the disabled --
Mr Seiler: Just a second -- and take the ability of those people to have a decent way of life, because they cannot work for the most part, away from them. I think that is a disgrace.
Mrs Marland: Scott, do you really think --
The Chair: Ms Marland, given the hour of the day and the --
Mrs Marland: He just answered Frances's question. I just want to ask one final question.
The Chair: Is it very brief?
Mrs Marland: Yes. Do you really want to see people with disabilities stay on the welfare rolls? Do you think that's where they should be? Is that what you're saying?
Mr Seiler: Absolutely not. I would love to be able to see people move off the system, but without a good, comprehensive Employment Equity Act, that will never happen.
The Chair: Thank you very much for your presentation. We appreciate it.
Thank you to the committee for your cooperation today. I look forward to seeing you all at 9:30 promptly tomorrow. We have another full day. The committee stands adjourned.
The committee adjourned at 1706.