Assemblée législative de l'Ontario

PRE-BUDGET CONSULTATIONS
SPARROW LAKE ALLIANCE VOICES FOR CHILDREN

CANADIAN MENTAL HEALTH ASSOCIATION, ONTARIO DIVISION

INFORMETRICA LTD

ONTARIO EDUCATION ALLIANCE

ONTARIO ROAD BUILDERS' ASSOCIATION

COUNCIL OF ONTARIO CONSTRUCTION ASSOCIATIONS

ONTARIO FARM WOMEN'S NETWORK

ONTARIO ASSOCIATION OF CHILDREN'S AID SOCIETIES

ONTARIO PARENT COUNCIL

BRAMPTON BOARD OF TRADE

TORONTO REAL ESTATE BOARD

WINE COUNCIL OF ONTARIO

CONTENTS

Monday 16 February 1998

Pre-budget consultations

Sparrow Lake Alliance; Voices for Children

Dr Paul Steinhauer

Canadian Mental Health Association

Mr John Kelly

Mr Glenn Thompson

Ms Ruth Stoddart

Informetrica Ltd

Mr Mike McCracken

Ontario Education Alliance

Mr George Martel

Ms Jacqueline Latter

Mr Hugh Mackenzie

Ontario Road Builders' Association

Mr Robert Bradford

Council of Ontario Construction Associations

Mr David Surplis

Mr David Frame

Ontario Farm Women's Network

Ms Ineke Booy

Ontario Association of Children's Aid Societies

Ms Mary McConville

Ontario Parent Council

Ms Mary Margaret Laing

Mr Ken Slemko

Brampton Board of Trade

Ms Maria Britto

Mr Stuart Johnston

Toronto Real Estate Board

Mr Bill Palander

Mr Fareed Khan

Mr Von Palmer

Wine Council of Ontario

Ms Linda Franklin

STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS

Chair / Président

Mr Garry J. Guzzo (Ottawa-Rideau PC)

Vice-Chair / Vice-Président

Mr Wayne Wettlaufer (Kitchener PC)

Mr Ted Arnott (Wellington PC)

Mr John R. Baird (Nepean PC)

Mr Jim Brown (Scarborough West / -Ouest PC)

Mr Garry J. Guzzo (Ottawa-Rideau PC)

Mr Monte Kwinter (Wilson Heights L)

Mr Gerry Phillips (Scarborough-Agincourt L)

Mr Gilles Pouliot (Lake Nipigon / Lac-Nipigon ND)

Mr E.J. Douglas Rollins (Quinte PC)

Mr Wayne Wettlaufer (Kitchener PC)

Also taking part / Autres participants et participantes

Ms Marilyn Churley (Riverdale ND)

Clerk / Greffière

Ms Tonia Grannum

Staff / Personnel

Mr Ray McLellan and Ms Lorraine Luski,

research officers, Legislative Research Service

The committee met at 0932 in room 151.

PRE-BUDGET CONSULTATIONS
SPARROW LAKE ALLIANCE VOICES FOR CHILDREN

The Chair (Mr Garry J Guzzo): Our first presenter this morning is Dr Paul Steinhauer, Voices for Children and the Sparrow Lake Alliance. Dr Steinhauer, please come forward. Thank you very much for coming. Welcome. We have 30 minutes for you to use as you see fit. Please proceed.

Dr Paul Steinhauer: Good morning, ladies and gentlemen. You have a rather extensive written brief from me, and I'm not going to insult you by reading it, so what I would like to do is, first of all introduce myself and my organizations a bit and then speak to some of the highlights of it. I'm hoping to leave about 15 minutes open to respond to any questions that you people have.

I'm well into my 36th year as a child psychiatrist in this province, and for most of these years I've been like a person on the bank of a mighty river with drowning bodies of children by the thousands going downstream, and really, along with my colleagues, doing our best to pluck out a few and give them mouth-to-mouth resuscitation. Sometimes we're able to do a great deal; other times we're getting at them too late with too little to offer.

All that time I knew we would never have and never be able to afford enough therapists for all the children in Ontario who are being abused, who are psychiatrically disturbed, who are delinquent, who are failing and dropping out of school, even if our therapies always worked, which we know, to be honest with you, they don't always. So in 1989 I changed the nature of my work. I decided the time had come to stop just treating that small minority who were able to be treated in my office and to try to go upstream and find out what was pushing so many of those kids into that river in the first place and to try to do something about it. Since then, I've cut my direct practice back by about 80%, from 33 hours a week to about seven hours a week, and the time that I've saved I'm using to work in the voluntary sector to keep more kids from getting into that river, through my work with Voices for Children and the Sparrow Lake Alliance.

As I speak to you today, I hope you will bear two things in mind. I sincerely hope that any of you who have children and grandchildren are blessed as I am with children and grandchildren who are healthy, competent, productive members of society, but I hope that, as you listen to me, you will bear in mind what it would be like if your children or grandchildren were among the one in four in Ontario who are neglected and abused and/or failing in school and are psychiatrically disturbed and/or on a one-way road to delinquency.

The second thing I'd like to ask you to think about as you listen to me is, what is this province going to be like in 15 to 20 years from now if one in four of our kids continues to grow up and enter into adult life with significant deficits in mental health, in competence, in literacy and numeracy, delinquent in behaviour and incapable of supporting themselves on a regular basis? What's that going to mean if we continue to mortgage the futures of one in four of our children and youth? What will it mean to the youth themselves, to their families, to the quality of our community life and to our workforce and economic productivity?

That having been said, I'd like to walk you through some of the high points of my brief. On page 2, which is the first page inside the cover, you'll find I've divided it up into four sections. I'll talk briefly about the two organizations I'm representing. Second, I'm going to give you a brief report card on the status of Ontario's and Canada's children. Third, I want to talk with you about what I call the Well Street index, a series of concrete, quantifiable indicators on the status of Ontario's children. Fourth, I'm going to leave you with some discussion and a few recommendations.

The two organizations that I represent, the Sparrow Lake Alliance and Voices for Children, are described on page 2 of my brief. I would just like to say at this point that both of them have Web sites. The Voices for Children Web site actually just last week won a medwatch best-of-the-Web award for one of the best health sites related to children anywhere on the web.

I would also like to draw your attention to the last paragraph on this page. Both of these organizations are non-political in the sense that they're not aligned with any political party; they're not against any political party. We know that each political party and all levels of government have among them members who realize how important it is to get more of our children off to a successful start. Our point is not to assign blame but to suggest solutions. It clearly takes a family to raise a child, but in this age of the globalization of the economy and widespread downsizing, many families need a village and a community standing behind them in times of crisis if they're going to do so in a way that will allow their children to be successful.

If you turn to page 3, I have a report card on the status of Ontario's and Canada's children. The first item deals with the National Longitudinal Survey of Children and Youth, which was a survey the first stage of which was conducted in 1996 and dealt with almost 23,000 children and youth in every province and territory in the country. What it showed us is that 74% of our kids are turning out just fine. But 26% -- and that goes up to 41% if they happen to be growing up in a mother-led single-parent family -- are in trouble. They're in trouble academically and/or emotionally and/or behaviourally and/or socially.

We also know that positive parenting is probably the strongest preventive measure that we have for children who are living in at-risk environments, and there are a number of warning signs that the national longitudinal survey listed. I want you to just bear those in mind when I come around to talk later on about the specific recommendations I have for you.

The Ontario Child Health Study, the mental health survey and the report to the standing committee on social development, which is in Hansard as well as on the Web, are areas where you can get additional information if you want it.

If I move on to page 4, I go into the Well Street index, which is really trying to make the case for why improving the future of Ontario's children is such a good investment for the province. If kids do poorly, if they show decreased mental health, decreased competence and decreased productivity later in their adult life, we as a society are going to pay for that through the erosion of the quality of our community life and through the erosion of the productivity of our workforce. We're in real danger as a society in the future if we continue to waste the productivity of one in four of our kids.

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The work I'm presenting in this section of the brief is the work in progress of four organizations working together. They're listed towards the bottom of page 5: the social reporting project of the Centre for Studies of Children at Risk at McMaster University; the INTEGRA group, who are working specifically in the area of learning disabilities; the public health department of Scarborough; and my own organization, Voices for Children.

We have isolated 12 variables which are concrete, quantifiable indicators. We talk about what they mean, we talk about what the statistics are here in Ontario and we talk about what could be done to improve the situation. In some cases where we don't have specific Ontario statistics, we use Canadian statistics and then we indicate that. But the kinds of indicators of how well or how poorly kids are doing can be shown and measured in the percentage of low-birthweight babies that are born, and especially very low-birthweight babies, who have enormous initial medical costs, estimated between $100,000 and $200,000 in the first couple of years, and they remain prone to chronic illness, to learning problems, to social problems throughout their lives.

Second, the infant mortality rate, the number of babies that die within the first year of life -- and I would just mention very briefly that the ones who die within the first month die usually because of congenital problems and extreme prematurity. However, the ones who die after that point die largely because of social reasons, because of the poor quality of parenting they receive.

Third, the waiting list for subsidized day care: The Vanier Institute of the Family just pointed out that the average Canadian family is now having to work 77 weeks a year just to pay its bills. When it comes to low-income families, they're having to work 83.6 weeks per year just to pay their bills. So the issue isn't just whether one parent should stay home; with figures like that, the issue is that many families have no choice. Statistics Canada has made it clear that if one parent in each family where two parents work were immediately to stay home, we would triple overnight the number of families below the low-income cutoff point.

Fourth, the percentage of children arriving in kindergarten not ready to learn -- and this is the one statistic I'm going to be talking about that isn't readily available at this point. My colleagues at the social reporting project of the Centre for Studies of Children at Risk at McMaster are in the process of making this operational right now. How ready children are to learn, the will and skills that they bring to school as measured by kindergarten teachers, are both the best predictor of how well they're going to do and one of the strongest determinants of how well they're going to do in school.

If we wait until children get to school and if we have an estimated one in three -- and that is not a precise figure. I've heard estimates up to 40%; I think probably one in three is more realistic -- children arriving at school lacking the skills that are needed for successful learning and for behaving appropriately in class, we're greatly increasing both the risk of school failure and dropout and the risk of delinquency, because there is an escalating relationship that the more poorly children do in school, the more likely they are to get involved in aggressive behaviour, which gets them rejected, which gets them in trouble with teachers. The more anti-social their behaviour is, the more likely they are to do poorly in school; and the more poorly they do in school, the more likely their behaviour is to deteriorate.

The fifth index is the mental illness and teenage suicide rates. Almost one in five of our children back in 1989 met the criteria for at least one psychiatric disorder. Two thirds of those kids who had one psychiatric disorder had two or more disorders, and only one in six, even at that time, before the cutbacks that have gone on in children's mental health services, had received any treatment whatsoever over the previous six months.

The next item, and this is one that's increasing, is the rate of teenage births. When a teenager has a baby, that greatly increases the chance of both mother and child remaining chronically dependent. I don't know whether you people have been following the papers, but recently, after a long period of decline, there has been a significant increase in teenage births. Invariably this is a sign of a baby having a baby and a child who is in no way equipped to meet the needs of that child, so that both child and mother are frequently in trouble.

This is particularly important in view of the mass of evidence that has been accumulating over the last 10 to 15 years that shows that the hard wiring of the brain, 90% of which occurs in the first two years after birth, is largely dependent upon the quality of care the child receives and the quality of the child's environment. In other words, it isn't just a matter of nature versus nurture any more. When infants are born, the parts of their brains that are responsible for sustaining life are already wired, but the parts of their brains that are responsible for things like thinking and feeling and behaviour have not yet been connected up. The cells are there but the connections haven't been made.

The evidence is indisputable at this point that within those first two years 90% of that hard wiring occurs. It will continue to be proved as time goes on that what that means very clearly is that we're going to have a lot of babies who are going to be brain-damaged if they are growing up in families that aren't able to provide the positive input, the sort of comforting and nurturing and cognitive stimulation they need, if at the same time they're in families that aren't able to protect them from the chronic conflict and violence that puts them in a state of constant hypervigilance and leaves them prone to excessive anxiety, excessive rage, excessive impulsivity and excessive learning problems for the rest of their lives. The quality of the environment in the first two years is the most important factor, other than genetics, to the quality of children and human beings we're going to have.

Next let's look at the high school dropout rate. The most recent correction I've seen from Statistics Canada suggests it's somewhat over 14%, if you take into account those who have dropped out who have dropped back in and graduate later. But look at the cost to society of high school dropouts. The Conference Board of Canada calculated that the nearly 137,000 Canadian youth who left school instead of graduating with the class of 1987, just in the year 1992, will cost society $1.7 billion due to lost taxes.

We also know that kids who drop out of school are far more likely to be unemployed and are far more likely to remain unemployed longer because their skills just aren't needed. We also know that if you look at the period between 1990 and 1996 and the new jobs being created, there has been a 26% increase in new jobs for people who have a post-secondary school education and there has been a 25% decrease in new jobs created for people who haven't graduated from high school.

As Robert Reich, the Harvard economist, has said, the most critical part, the one element that is unique about a nation is its workforce. How are you going to continue to have the productivity in the workforce if we continue to write off the potential of that significant group of young people?

The unemployment rate for teens and youth in their early 20s is very much related to education level. The number of teens and youth convicted of crimes -- and while there's some artefact here, it's hard to get solid statistics on this one -- is probably the best single measure of anti-social behaviour by teens and youth. The rate of risk-taking behaviours among teens and youth, including drug and alcohol abuse and dangerous sexual behaviours: We know that the earlier kids get hooked on drugs, the more likely they are to progress to more dangerous drugs, to use them more extensively and to spread to become involved in dealing and other criminal activities.

The incidence of confirmed allegations of child abuse: Reports of physical abuse have doubled over the last two years. This is a direct result of deteriorating social conditions, although some of it undoubtedly is due to greater reporting because of the greater prominence the issue has taken because of the recent series of inquests.

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Finally, there's the issue of the child poverty rate. This is a much more complex issue than is often understood. There's no doubt that increased exposure to poverty increases enormously pressure on all family members, particularly on parents, and because of the increased pressure, particularly when you add to that the decreases in subsidized housing and the decreases in support services, it isn't surprising that we're seeing increases in the rate of physical abuse which exceed the rate of increases in the rate of sexual abuse, which is more related to perversion that it is to external tensions. But what we know is that with these extra pressures the rates of child abuse, the rates of parental mental illness and the rates of family conflict and drug abuse are going up. That is the atmosphere in which our young children are being raised.

As far as discussion and recommendations are concerned, it's possible to use reliable, quantifiable figures to monitor how well or how poorly Ontario's children and youth are doing. If the government used such statistics of child wellbeing as they currently use indicators of economic wellbeing to monitor the adjustments of their policy, then outcomes for the future generation of Ontario's children would be significantly better.

Canadians are beginning to get the picture. On the top of page 10, I talk about an Environics poll which shows that people are getting the message that when it comes to the delinquency area, at least, prevention is both more effective and more efficient than just waiting until kids are confirmed delinquents and trying to punish them into being good.

When it comes to the question of recommendations, which begin on page 11, I've got a number of specific recommendations. You will see that these relate back to those figures on page 3 that relate to the warning signs that were given to us by the National Longitudinal Survey of Children and Youth.

There's lots we could do to cut down on the number of low-birthweight and very low-birthweight babies. There is a great deal we could do to remove the systemic barriers that are causing far too many children to be abused in this province. In order to be more effective and more efficient in protecting Ontario children from neglect and abuse, we're going to have to do more than just pay lip-service to a little bit here and a little bit there. This is the worst-served group of children in the province and they're a group of children who are enormously damaged themselves and who have an enormously devastating effect, many of them at times, on the rest of the province.

The committee can make it possible for the Ministry of Community and Social Services to do its job properly with these children. The Ministry of Community and Social Services takes great pride in having brought in a prevention program which is based on a program in Hawaii that cut by 75% the rate of child abuse in high-risk mothers. However, they have so diluted that program in bringing it in, because of the lack of funding they had available to them, that it's going to cut down on the rate of neglect by a half and it's going to cut down on the rate of abuse by a third of the gains that were achieved in the Hawaii program. The thing you people have to ask yourselves is, are you content to reduce neglect half as much as you could and abuse a third as much as you could? It's really going to depend on you people more than on the Minister of Community and Social Services because these days social policy is being made by treasury boards and committees of economics and finance ministers.

Another way to reduce child abuse: There is a sterling panel that has been set up by the Minister of Community and Social Services -- outstanding people. I haven't seen the results of their deliberations, but I know enough of the people on that panel and I trust them enough that if you make it possible for them to put into effect the changes they recommend, there will be fewer abused and badly neglected children in this province.

When it comes to recommendation 4, increasing the number of Ontario children ready to learn in kindergarten, the emphasis is, if we want kids to do better in school we will do more to achieve that goal by getting them ready for school before they arrive at school than we will by our tinkering with the educational system. The educational system needs improvement, but the major factor to either success or failure academically is the skills the children bring to school. I've suggested two ways this could be done: One is through accessible high-quality early childhood care and education, and the second, in recommendation 5, is in the renewal of funding for junior kindergartens across Ontario which have been eliminated in a third of our school districts since the current government took back its support for junior kindergarten.

Recommendation 6 talks about something that could be done in the schools. The experience in Tennessee was that if children in grades 1 to 3 were placed in very small classes and then put back in regular-sized classes, four years later, in grade 7, they were still ahead in all their major subjects. That's a time-limited intervention that can pay off very well.

Recommendation 7 has to do with the way you use your most experienced mental health professionals. The best way to use people like myself, or senior psychologists or senior social workers, is not to have us do one-to-one therapy in an office but to make us available to pass on what we know to day care providers, teachers and social workers who are dealing with kids in the community. That so-called multiplier effect is a far more effective and efficient way of doing things. However, both the Ministry of Health and the Ministry of Community and Social Services have responded to downsizing of their budgets by wanting to increase the amount of direct service and therefore they've cut back on funding for that kind of consultation. Use the most skilled people you have most effectively.

Finally, the downloading of costs to municipalities is widely expected to increase municipal responsibilities more than it will augment the resources. If this happens to lead to further cuts in badly needed social supports and services or to further user fees, particularly in the recreation area -- and already, even before this latest series of cuts, more than 50% of poor families were giving as the reason that their children weren't involved in the supervised recreational programs that can be such a strong protective factor against delinquency the fact that they couldn't afford either the equipment or the entry fee.

There are specific things that can be done. I'm pleading with you people on behalf of the children and youth of this province, as someone who looks to the future of the province, to try to do what is possible to put the ministries that are responsible for delivering services for children in a position where they will be able to do a decent job to get more children off to the start they need.

The Chair: Thank you very much, doctor. I'm afraid we have only a minute or two remaining. Mr Pouliot, I was to start with the NDP caucus. You're going to have to be very brief.

Mr Gilles Pouliot (Lake Nipigon): I will indeed.

Good morning. Doctor, I have humbly sat here for 13 years. An excellent presentation: Yours is perfect and you bring forth the human dimension. It's substantiated, it's tabulated. I could have dispensed with the Well Street index. I'm more familiar with the other indices. I certainly like that we develop your team in terms that you bring forth the human dimension and you dress up what needs to be done -- words of wisdom indeed.

It's up to the government of the day, you're quite right. Sometimes well-meaning people are not oblivious by intent but become so by virtue of their mandate and are not always relevant to the needs of the people who need it the most. It's not the last two years in these instances; it is the first two years in many more to come. I have no other comment except that hopefully the collective will have listened.

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Mr Wayne Wettlaufer (Kitchener): Dr Steinhauer, I'd like to thank you very much for your interest and your dedication in this field. For the last couple of years, contrary to what Mr Pouliot just said, I have dedicated much of my time to the study of mental health and it's amazing how often it comes back to children and their early development.

In my discussions with psychologists, psychiatrists, school principals, judges, police, teachers, and I'm generalizing now, but much of what I have heard relates to parenting. There is some discussion of course on the poverty level, but much of it relates to parenting -- lack of love, lack of discipline, something that we didn't see in our generation. I constantly hear that the generation to which I belong has been a very selfish generation. We have been targeted by the manufacturers from the day we were born. We were given, given, given and we took, took, took and we have never reserved anything for our children.

We also hear, or I've heard from many of these people, that the poverty level that we talk about, the poor people on the street, much of this is in immigrant families who come here with less education and that these immigrant families have been encouraged to come here by the federal government without letting them know what they might face when they get here. I agree that governments perhaps aren't doing enough, we have some responsibilities, but it has nothing to do with the amount of money we spend.

I'd love to talk to you further on this, just you and me, not today, but some time down the road if I have that opportunity.

The Chair: Not at this time, I'm sorry. Your time is up. I'll move to the Liberal Party.

Mr Monte Kwinter (Wilson Heights): Thank you very much, and for members of the committee I want you to know that Paul here is a perfect example of having been directed properly in his youth. I had the distinction of having him as my junior counsellor in camp when he was a teenager, and here he is addressing our committee.

I just want to say that I really find this paper you've prepared hits all of the right points. As you know, we as a caucus have just issued our First Step program, which in many ways mirrors some of the concerns you have. I happen to agree that you really have to put some resources to address some of these problems. I think it's a staggering statistic when you say that the average family has to work 77 weeks a year just to pay the bills, let alone anything else. That means two people working one and a half times: 52 weeks and then 25 weeks.

That's a staggering statistic and you wonder what happens to those people who are at the lower end of the scale, if that's average. That's got to have an impact and that impact has got to be picked up by somebody, and it can't just be a laissez-faire sort of thing, you know, just do your best. Do you have a comment on that?

The Chair: I'm sorry. If you do, you're going to have to save it. We're out of time, doctor. I thank you for your presentation, your written as well as your verbal one. It's well thought out and well presented.

Gentlemen, when I tell you you have a minute, if you want an answer, you can't take 59 seconds for the question.

CANADIAN MENTAL HEALTH ASSOCIATION, ONTARIO DIVISION

The Chair: The second presenter this morning is the Canadian Mental Health Association. Thank you for coming, and welcome. Please introduce your associates.

Mr John Kelly: Mr Chair, members of the committee, my name is John Kelly. As the past president of the Canadian Mental Health Association, Ontario division, I am pleased that you have provided the opportunity for our organization to make a presentation to you concerning the 1998-99 provincial budget.

I would like to introduce to you Glenn Thompson, our executive director, and Ruth Stoddart, the executive officer and senior coordinator of policy development at our provincial office.

The Canadian Mental Health Association, Ontario division, CMHA, is an incorporated, registered, non-profit charitable organization chartered in 1952. Approximately 4,000 volunteers are active in direct, board and committee service in a network of 36 branches located across Ontario. The CMHA, Ontario division, and its branch services and programs are funded through government grants, local United Ways and supplementary fund-raising activities.

Since our founding, the CMHA, Ontario division, has made significant contributions to the development of mental health policy in Ontario. We have consistently advocated for community mental health services which would allow individuals with mental illness to remain in their home communities, close to their families and other natural supports.

In each of our pre-budget submissions over the past several years, the CMHA, Ontario division, has recommended that a central target for the government be the reduction of the provincial deficit. It is our view that major transformational changes are still required in the health care system, especially in that part of the system with which we have the most experience, the mental health system.

We believe it is important that the government and this committee have a conceptual framework within which the potential impacts of the 1998-99 provincial budget may be examined. The New Framework for Support document prepared by the CMHA national office provides that frame of reference. A copy of the community resource base portion of the framework has been attached to our submission as appendix A.

The community resource base contained in the framework document demonstrates the ideal range of resources that should be available to a person with serious mental health problems if they are to live a fulfilling life in the community. The basic socioeconomic conditions of income, housing, work and education make up the foundation of this model. If people with serious mental illness do not have access to these fundamental supports, their ability to benefit from other services available to them is severely diminished.

Use of the framework model will ensure that decisions are made which facilitate the integration and coordination so needed to improve mental health care. The provincial office of the CMHA has recently developed a document called ACCESS: A Framework for a Community Based Mental Health Service System. This document provides a setting for the operationalization of the CMHA national framework through the development of a seamless system of community supports for persons with serious mental illness which emphasizes continuity of care and the achievement of desirable outcomes.

We encourage the government to ensure that the 1998-99 provincial budget includes provisions which provide the authority and impetus for positive change for the mental health system in Ontario.

Now I would like to turn to Glenn Thompson, who will present our views concerning the mental health reform process in Ontario. Ruth Stoddart will then summarize the advocacy activities of our organization in several other areas which are of great importance to persons with mental illness.

Mr Glenn Thompson: Mr Chairman and committee members, thank you for inviting us here today. As you listen to these remarks, I hope you'll see them in a context. Mr Kelly mentioned the ACCESS document. I've brought some copies of that in case committee members want it. It's not a set of financial recommendations, but a framework for community mental health care that we've just developed and it's now in wide circulation and seems to be quite well regarded.

I mention as well that the health field generally, and certainly the mental health field in particular, has had and continues to have tremendous problems of a lack of system coherence. The connection between the legislation that governs it, the policy from that legislation, the information systems or the lack thereof, the governance structures and the programming are all there in bits and pieces but, as Dr Steinhauer was talking about, the brain not getting very well hard-wired in some circumstances in youngsters, the elements of the mental health system certainly haven't got well wired together in this field, and it's a major concern. You should think, I would encourage you to, about any of these fiscal decisions in relation to that need for more coherent structure.

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I'm going to say something about the information about the mental health system that may give you a context for these remarks. You have heard us say before that one in five people in Ontario between the ages of 15 and 64 will suffer from at least one form of serious mental disorder in their lifetime, quite a sobering figure; in fact, one in five people in Ontario will suffer from some form of mental disorder -- not always so serious -- in any year, a major cost on our society if you want to look at this in cost terms and a major drain on our society in every other kind of human terms.

Approximately 118,800 Ontarians suffer from a serious mental illness, which may chronically impair -- and the "chronic" is an important element to consider in this field -- their ability to function in day-to-day life. There is a strong relationship between disadvantaged living situations such as unemployment and mental disorders. Think back to Dr Steinhauer's remarks about the development of children and the relationship in their development to those features. We see it in the mental disorder area. You can see it begin with youngsters and continue on with adults.

About 1.8 million days of productive work or school are lost each month by people with mental disorders. This number is nearly twice the number of days lost by an equal group among the healthy population. The loss in our society, the drain on the productive workforce through mental disorder and in the education system as well is very dramatic.

As can be seen in the above statistics, mental illness is certainly a serious problem. It affects a lot of people and it affects a lot of people who surround those individuals. The following numbers give some indication of the high cost of mental health care in Ontario.

The province was to spend about $18.3 billion on health care in 1997-98, over 35% of the provincial expenditure. In 1997-98, Ontario was to spend $728 million on mental health services, including psychiatric hospitals, general hospital psychiatric units, community mental health programs, homes for special care, but that doesn't include OHIP services provided by psychiatrists like Dr Steinhauer and family physicians. That amount is only about 4% of the provincial health care budget. Think about the numbers I mentioned earlier in terms of the quantum of mental health disturbance in society and then the quantum of the general health budget flowing to this field.

In 1997-98, more than 72% of the mental health budget, excluding OHIP, was to go to institutional care and about 28% to community services, quite a balance in favour of institutional care. These preceding statistics indicate the disparity between the total cost of mental health care and the funding of community mental health care.

As well as that, there are serious gaps in services and extensive waiting lists -- you wouldn't be surprised with that disproportion of funding -- in community mental health services in most parts of Ontario.

Let's think about the mental health reform process. The development of a continuum of community- and institutional-based services with multiple points of access and departure depending upon the need is central to a good mental health system. The Ministry of Health has recognized this need, both for the health system as a whole and in the mental health system in particular, in its 1996 business plan.

Our organization has supported the development of integrated delivery systems across the province with several preconditions needing to be in place: development and evaluation of pilot projects prior to the full implementation of an integrated delivery system to bring that kind of coherence that I mentioned earlier; the availability of information systems; the maintenance of a single-payor health care system and the use of capitation funding for some service providers; investment of financial savings from implementation of integrated delivery systems in health promotion and prevention activities as well as services which emphasize all of the determinants of health. We need to get into the prevention business and not just be at the other end of the system in health care generally, and certainly in mental health we could intervene much earlier.

It's important to note that any continuum of services will require support from providers funded by sources other than the Ministry of Health. For this reason, in a time of fiscal restraint, it will be especially important that all Ontario government ministries work in a cooperative and coordinated fashion to meet this problem need.

To go to the funding area for a few minutes, the overriding concern for the mental health system at present certainly is funding, and that is funding to assist in the beginning -- and we're really just at the beginning -- of the transition from institutional care to community care. That split of 80% institution and 20% community -- we're now five years into the Putting People First mental health plan design, which was to change that proportion to 40% institutional and 60% community services. We've only just begun. We're about four years behind, I would say, in that process. We need to rush to have any opportunity to catch up on that, and transition funding is critical.

Our estimates indicate that approximately $350 million may be required in transition funding to prime the pump to get the system going to allow the downsizing in institutions. None of us wants some of the fiascos that occurred a few years ago where people were sent out into the community and didn't have adequate care there. The Health Services Restructuring Commission has recognized those needs throughout its reports, we're glad to say, and we hope that the Minister of Health in her review of the mental health system just under way at the moment will see and address these particular needs for transition funding, then ongoing funding and a governance structure.

In relation to the 10 provincial psychiatric hospitals, the Health Services Restructuring Commission has recommended that the government close the Lakehead, the Brockville, the St Thomas and the London psychiatric hospitals and that those inpatient services be moved to schedule 1, to general hospitals in the areas where people actually are resident. The hospitals in the past, those 10, were located in all manner of places across the province; their placement bears little relationship to the areas of need and requirement.

The Health Services Restructuring Commission has recommended a great deal of money flow into the capital funding needs of hospitals, general hospitals and others in the transition process. What is lacking at the moment is transition funding for program transfer, and that's what we're most concerned about.

In the area of governance, the CMHA, Ontario division recommends that services provided by either a mental health agency as we recommend or whatever kind of governance structure is finally chosen be targeted to the seriously mentally ill. However, others with mental illness who seek mental health services through a family physician in an integrated delivery system of course could be referred to the mental health agency for more specialized services when those are required.

The CMHA, Ontario division recommends that linkages between a mental health authority and the eventual integrated delivery systems could be achieved through the use of shared care approaches to health care delivery, allowing consultation between providers and the transfer of clients between the two types of services.

CMHA recommends that prior to implementation of any type of integrated delivery system, the mental health field will need to develop consistent definitions of mental health needs and appropriate service requirements and determine the cost level of each of those. Present distribution and use of mental health funding, of course, must be determined.

We recommend the development of mechanisms to prevent adverse selection occurring, as often happens in the US in their mental health funded systems, where the organizations operating the systems choose not to handle the most seriously mentally ill because they're one of the most costly and often difficult populations to deal with.

We also have concerns about several other components of the mental health reform process. I'm not going to go into those in any detail today but will just mention the whole set of issues around data and research and evaluation, public education, mental health promotion and prevention and consumer-survivor and family initiatives and partnerships.

Think again, if you will, about that lack of coherence between legislation and policy and information systems, governance and programs, as you think about the fiscal need of mental health in the next few years.

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Ms Ruth Stoddart: There are various other areas detailed in our paper that are the responsibility of ministries other than the Ministry of Health. In order to give the committee time for questions, I won't go into any of them in any detail. There are three I'd like to mention briefly, primarily because they've been fairly prominent in the media lately and we think they're very important.

The first of these is housing and support needs for persons with mental illness. We'd like to point out that people with mental illnesses, when they're looking for housing in the community, not only have to compete with other individuals and families to get affordable housing, but they also face other barriers in not only finding the housing but maintaining it. Those include things such as a lack of employment opportunities -- if you're not employed, you often don't have the money to pay the rent -- and also discrimination from landlords and fear from communities.

The CMHA has many branches across the province that provide supports to people living in housing in the community. Our branches are quite concerned about the downloading of housing services from the provincial government to the municipalities. This downloading is to include social housing. We haven't had any clear direction yet from the government, though, as to what's going to happen to the supportive housing part of social housing. Those are the supports that enable people to live out in the community and that are provided to people, whether they're in social housing, non-profit housing or so-called regular housing.

We're very concerned that if funding responsibility for social housing is shifted completely to the municipalities, those municipalities which don't have adequate money to fund such services may see housing not only become substandard but disappear altogether. We've sent a submission to the Ministry of Municipal Affairs and Housing and the Ministry of Health that suggests three possible options for responsibility centres for funding supportive housing. Each of these includes a recommendation that the Ministry of Health, at least for the interim, retain responsibility for funding the supports part of supportive housing for persons with mental illness.

The other part of housing that has recently been in the news concerns people who are homeless and have mental illnesses. The CMHA, Ontario division, has developed a position paper about homelessness, which is available. Certainly we've made recommendations to the government for advocacy work to increase access to housing and supports for persons who are homeless. There's a real need to develop individualized and flexible supports for these people, and staff outreach skills, so that persons who are homeless with mental illness are able to have more access to housing programs.

The second area I'd like to talk about is social assistance reform. As I think this committee is aware, Bill 142 has been progressing through the Legislature and is going to completely change the existing welfare system. Many people with mental health problems rely on the social assistance system as their sole source of income. We've been very concerned, in watching the progress of Bill 142, about parts of the legislation, some of which have been addressed as the legislation has gone through.

The primary, overriding concern we have, though, is that the legislation leaves a large amount of regulation to the regulations, that many things of serious concern to people with disabilities could be determined in the regulations, which, as you know, can be changed without any sort of public hearings or public debate. Our organization has been consulting with the Ministry of Community and Social Services for about two years on social assistance reform, and we hope to continue to do so.

In addition, we'll also be sending some information to that ministry about the recent announcements of last week, which are of huge concern to us, primarily the apparent new requirement that people who are homeless are going to require receipts for any kind of housing they have, and the potential changes to drug benefits.

Last but certainly not least, and the one that's been in the news most lately, I'd like to talk a little bit about forensic services. Many of our branches provide services to forensic clients. Those are people with mental illness who have been in contact with the criminal justice system. The services that the branches provide are virtually all their services to these clients. Many of our branches also participate in the diversion program which was initially developed by the ministries of health and the Attorney General and is now expanded to include community and social services and the Solicitor General.

These branches are quite concerned -- I get telephone calls fairly regularly -- about public perceptions about forensic clients in the community. As hospitals continue to be downsized, as well as other institutions, an increasing number of forensic clients are going to be discharged into the community. As I've said, some recent high-profile coroners' inquests and incidents in Toronto have certainly brought mental health issues to the attention of the general public. This has resulted in public calls to amend the Mental Health Act.

The CMHA, Ontario division, would like to emphasize three points. First of all, we don't believe that any client of a community agency should be forced to accept treatment against their will. Second, we believe there's definitely more public education needed regarding public perceptions about forensic clients. Finally, there's more research needed about issues of violence and prediction of risk.

We've also stated that we don't believe the Mental Health Act should be amended as it presently exists, because if community services were in place and existing legislation such as the Mental Health Act, the Substitute Decisions Act and the Health Care Consent Act were used as they are written and as they were intended to be used, people with mental illness could receive the services they require without any coercion being involved.

Mr Kelly: Thank you once again for the opportunity to make this presentation to you today. Before we leave, we'd like to leave you with four important thoughts.

First, the CMHA, Ontario division, supports the principle of deficit reduction. Second, the government's key goal should be to preserve the protection afforded to the most vulnerable in our society. Third, there should be a single point of accountability within the government for children's mental health services. Fourth, to maintain the overall health budget at $18.3 billion and to retain the mental health envelope, there must be efficiency and economy in spending and the reallocation of funds from institutions to the community.

The Chair: We have approximately one minute per caucus. We'll start with the government caucus.

Mr John R. Baird (Nepean): Thank you very much for your presentation. I appreciate the time you took to put it together. We'll certainly reflect on it.

I just had a quick question. On page 3 of your presentation you mentioned the 60%-40% split between community and institutional care and mentioned that we were about four years behind on reaching that goal -- which is interesting; we've only been in government for two and a half years, so I certainly accept the numbers. Is that, as you see it, an ideal breakdown, 60-40? Is that, in your mind, a good goal that we should pursue? In the presentation you just mentioned it as "the goal," rather than one that you would embrace.

Mr Thompson: It's a goal that developed out of something called the Graham report. That led to Putting People First becoming policy of the previous government.

Yes, we've supported that kind of shift. While one could dicker, I suppose, about the figures, we think the shift from 80-20 to something in the order of 60-40 is the right way to go and quite achievable.

Mr Kwinter: I only have one minute, so I would like to know this: If we have a message to deliver on behalf of your organization to the Treasurer -- and that's really the purpose of these hearings -- what would it be?

Mr Thompson: I think the main message would be that if you don't prime the pump in mental health, you'll continue to spend money on institutional care that won't be as effective as having the person in their own community with what some people like to call wraparound treatment, the full sequence of care available to them in their nearby community.

Mr Pouliot: It's a renewed pleasure to see you folks. Good morning.

My understanding is that Mr Newman, who's an MPP and a parliamentary assistant, is currently undertaking a review of the Mental Health Act. We with the official opposition and the third party are anxiously waiting, for we are not to be consulted.

You did mention regulations. It should worry and does worry your association. Increasingly, the will of the people is being done through regulation, where you have a group of faceless people who gather in a room after hours and determine the fate of the client group, of the people, and those great Satans will stop at absolutely nothing to reconcile the bottom line.

I have with me, and I would appreciate your comment, a commitment from the government to reduce taxes. We've all heard it. It's hard to find on the paycheque if you make an ordinary salary. Those people there benefit more, those people benefit some, and those people here benefit less. What you have is $3 billion in year 3 of the tax cut. This will go up to $5 billion. In other words, the hand that takes will take $5 billion less. Do you feel it will be reflected in your program? You say one out of every four adults from the age of 15 to 64 will be in need, yet those people will be taking close to $6 billion out, so where are the one out of every four from 15 to 64 to get the service?

The Chair: You're going to have to give Mr Pouliot a one-word answer.

Mr Thompson: The shift of funding in the health care system is just essential. Mental health has to have a larger proportion of that funding. There's no doubt about that in our mind. The global amount that's spent on health care is something that all of you will have to debate about, and I'm sure you do at all times consider that.

The Chair: You're right about that, sir, and I'm going to have to interrupt you there. I apologize. Thank you very much for your presentation and for your attendance this morning.

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INFORMETRICA LTD

The Chair: The next presenter this morning is Mr McCracken from Informetrica. Welcome. Thank you for coming, sir. You've been allotted one hour.

Mr Mike McCracken: Thank you for inviting me again this year to come. The main purpose I try to serve is to give you some background on where we think the economy is going and then to answer any of the questions you wish to put to us. I've handed out to you a copy of some foils. I'll go very quickly through some of these items just to set the scene. The cartoon is more for your pleasure on other occasions, when you consider some of the tradeoffs you have to make as a group. The old guns and butter is of course just part of the story.

Before I go into the remarks I have there, though, I'd like to share with you some observations from a meeting I had on Thursday and Friday in Washington among a number of US and international economists which it seems to me we should take into account in colouring your decisions over the next while. I'd like to simply highlight some of the growing concerns on the international front that make it more and more likely that we're going to be moving towards a slower-growth environment rather than a more rapid growth. Certainly over the last several years the international environment has been a plus. It's made budgets that were in deficit move to balance, has led to economic growth even though domestic policy has been moving towards restraint in many jurisdictions. But we may no longer get that bonus; it may in fact be going the other way.

Very quickly, on the direct story in Asia, it is now beginning to show up in some of the corporate perceptions, with shipments down from 15% to 20% increases to essentially no increase; prices dropping for chemicals; Asian air carriers not reporting their data because it's perceived to be so bad that they simply don't file the numbers with the international authorities; and concern growing that the problems are not going to be restricted to simply South Asia and Korea but that Japan is also looking much weaker in terms of its stance. There is a budget coming up in the next few weeks, which may help offset that to some extent.

This also shows up in an indirect way with loss of orders for previous items anticipated. Most of the big bulge in aircraft orders in the world is from Asian airlines that were in some sense in trouble prior to this problem emerging, and the question, increasingly, is when they will cancel as opposed to whether they will.

Nor is there a sense that it's totally missing on the domestic US side. US retail is down. In January, the US rail industry had a sharp drop in their activity, back to more normal levels after having a rather strong period. Domestic air travel in the US has also dropped from 4% year over year to 1% year over year. These are all leading indicators of a softening of an economy, moving from a view that the outlook might be of an Asian impact of 0.5% on economies perhaps to double or triple that kind of an effect emerging. Also, of course, the US is having some continuing visible difficulties in the western US with El Niño.

The flip side is that those aren't the only problems either. Anyone who feels that we can skate through the Asian difficulties need only look around to who is next on the list, with central European and Russian banks coming increasingly under the gun. Indonesia, on top of their difficulties that we've just seen from financial markets, is essentially on the other side of El Niño, resulting in substantial drought and a growing sense that in Indonesia there will be food riots and that indeed the government of the day may not make it to their April 1 election. The Middle East difficulties we know, of course, as people try to predict at what hour of the day conflict in Iraq will break out, with concerns being expressed about that action by both Russia and China and some terrorist groups. If you have now decided you still have no reason to worry, there is concern that China will also fall out of stability of currency and stability of economy with devaluations of the renminbi.

I just give that to you as a background because you're going to be trying to advise governments and to consider the moves they make in light of an international situation which is increasingly difficult. We should not forget that while the US is involved in international affairs and international trade, Canada is perhaps better described as being committed to such moves. With some 40% of their trade involved in international markets, with foreign ownership very high and with linkages throughout the world, international capital flow is almost an order of magnitude larger than the US. The difference, by the way, between involved and committed is, if this morning for breakfast you had bacon and eggs, the chicken was involved and the hog was committed to that particular breakfast delivery.

We then turn to the major problems facing Canada. The unemployment rate seems to be stuck nationally around 9%, a little bit less in Ontario. Real per capita incomes are stagnant or declining, and that message has continued now since 1989. We seem to be making no progress on the income distribution side, either before or after tax. Certain groups are falling further behind. You heard about some of those this morning, the difficulties with youth and children, certainly aboriginal, unskilled, those requiring medical help and treatment, mental or otherwise. The fiscal limitations, however, seem to prevent us from doing anything about these items. We also, of course, share continued concerns about our international competitiveness.

The kind of economic performance that's turning out at this point in time, it looks like in 1997 we had inflation below 2%, a full percentage point below US measures. We are currently running at 0.7% on the CPI over the last 12 months, well below the Bank of Canada's lower target. Indeed, if you look at the broad-base gross domestic product deflator in Canada, for the last three quarters it has been declining absolutely. So we'll see in the fourth quarter whether we have deflation on a year-over-year basis; certainly we'll have it for the four quarters. It would strike me that of all the problems we have on the table, inflation is not one of those at this point in time.

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On the real growth side, 1997 did indeed perform better than expected, the best year since 1994 and indeed one of the few years in which economic activity has been sufficient to make some progress on the unemployment rate. Next year, 1998, it looks as if it will slow to about 3%, with some further slowing in subsequent years, part of that attributable to slower US growth and part of that attributable to a continuation of fiscal restraint by most levels of government and a continuation of relatively high interest rates in real terms in Canada.

As I mentioned, we saw the unemployment rate drop down to 8.6% in December and back up to 8.9% in January. We wait to see if that was mainly an ice storm problem, although it looks as if in fact only a small part could be attributed to that. But we'll see in February whether it goes back up over 9% again or comes down below 9%. But the bottom line in terms of the outlook is very little further progress expected. We will experience an unemployment rate, currently about four percentage points higher than the US, continuing at roughly that level, with the youth unemployment rate, currently around 16%, still staying in the double-digit range.

Behind this is a rather worrisome long-term effect on what we call the "participation rate" in the employment ratio. The participation rate is the number of people 15 years of age and over who are looking for work or are working. That number was about 68% back in 1989. It has declined now to under 65%. The prognosis is for essentially no bounce back.

In the US, what happened was a short drop in 1990-91 in their recession and then a quick bounce back. Today in the US, the number is up close to 68% of the population working or looking for work, compared to our roughly 65%, three percentage points more.

A similar story occurs on the employment ratio. Again, we've seen a sharp drop in that and it has not bounced back. That is again counter to the behaviour that has been experienced by our neighbour to the south and also contrary to the bounce back that we had in the 1981-82 recession and back in the slowdown in 1974-75. This problem, if you will, has been described as "the great Canadian slump" by Pierre Fortin, suggesting that the losses already are about 30% of what we had in the 1930s, with little expectation of a major turnaround. What this comes out to mean is that we're operating some 10% below the potential of the economy that we could be producing, meaning we're wasting some $80 billion to $100 billion per year in forgone output. That would buy a lot of improvements in our society, if we could move that unemployment rate back to, say, 4%.

In terms of real wages and productivity, one of the characteristics of the last several years has been very little progress made on real wages. Even though there has been some productivity improvement, real wages are deflated by the consumer price index. This leaves employees feeling worse off, making no progress on their earned wages. At the same time, when you look at what is happening from an employer's perspective, deflating by the prices they receive, you find that there has been very little deterioration in the real wage. So what you have is a sort of disconnect between what the corporate sector, which is paying the wages, has, and those who are receiving them: the consequence of basically indirect taxes and the depreciating dollar.

The result of that translates over into real disposable income being very weak, and indeed real disposable income per household is now running at about 94 on a scale of 100 in 1981, about 6% below the 1981 level, and is down from about 106 in 1989, so a decline of some 10% or 12% from the previous peak.

We think there will be some turnaround starting in 1998 but we've been waiting for that for a number of years. It depends on an economy which is growing fairly well, as we had depicted earlier, but even with the growth we have in our reference forecast, we get back only to the level in 2006 that we had in 1981: essentially a 25-year period with no real increase in income per household.

Nor is the setting of interest rates all that hopeful either. Even though they have come down in nominal terms to something in the order of a 6% range, it has coincided with this potential drop in the rate of inflation such that so-called real interest rates now are still running about 5%, dramatically higher than they were back in the 1970s and the 1960s and the 1950s and the 1940s. As such, we still are in that sort of catch-22 position of having to run large primary surpluses by governments in order to get some semblance of stability in debt ratios. That constraint, unless interest rates come down dramatically -- and of course they've gone up 175 basis points since their low point in the last six months. Without that decline, you're going to find yourself still in the position of trying to figure out how to run a primary surplus -- that is, a surplus on program expenditure less revenues -- in order to more than cover the interest costs and to get some stability in your debt ratios.

Policies continue to move towards restraint at the federal level and in a number of the provinces, but essentially the message is one of continued tightening, a continuation of limited indexing, opportunistic increases in user charges. The deficit phobia continues, with further cuts in expenditures, including continued heat on the transfers to the provinces. Immigration backlash is perhaps also something to be expected on the current policy side.

Some of the nightmares -- I talked to you briefly at the start about a weakening US and a weakening world economy. Certainly, if a major recession hits the US and the world economy, this will make the policy in Canada quite difficult. Inflation rates picking up, with the Bank of Canada raising interest rates further, again would add further damage. Financial institutions closing their doors, either here domestically or abroad, can send shocks through the system. Another referendum in Quebec would do the same sort of thing.

In that kind of environment, I guess the question is, what do you do?

First, let me suggest what you don't do. You don't try to raise interest rates, certainly not permanently. Hopefully the Bank of Canada will be able to back off their more recent jumps if there is some strength returning to the Canadian dollar. You don't argue about whether we should have a potential growth rate of 2.5% or 2.75%, which is the current debate in the US. We're so far away from potential that we should just smile when they debate that. You don't cut taxes where you don't get bang for your buck. Certainly those who have a strong tendency to save it tend not to lead to any job creation or improvement in incomes. If you focus only on running surpluses and reducing the debt, then you are, it strikes me, going to make the situation worse, not better.

Certainly one of the other problems out there is an increasing sense of insecurity as people cut back on social programs and with the removal of the labour market protections that were in place.

Some sensible policies: Certainly adopting a full employment target and trying to aim policy in that direction, stimulus on both the fiscal and monetary side, would make sense. If you're worried about inflation, look at some alternative ways of controlling inflation other than the current incomes policy, which is a very high rate of unemployment.

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It would make sense, before we have to, to begin improving our regulatory oversight on our financial institutions, and work to improve the distribution in incomes. Certainly one area that suggests further investment would be the infrastructure side, including education, health and social capital, as well as the roads, telecommunications and electrical distribution.

I was struck by the presentation earlier that if we thought about people, humans, as capital, we wouldn't be treating them quite the way we are either in terms of children or those with mental health problems. Someone objected to the well care indicator. I suggest to you alternatively to just call it the "dirty dozen" indicators of children. They're all certainly ones which should bring shame if you feel governments are responsible for those activities.

There also are some other innovations that could be looked at. Some of these are federal, some are provincial only, some are provincial plus federal.

We have kept talking about guaranteed annual incomes off and on over the last 20 years. Certainly one way to get started on perhaps understanding how those would work better would be to go ahead and do them in high unemployment areas where you have little worry about the incentive effects of such guaranteed annual incomes but may in fact keep activity continuing in those areas, many of which are rural areas. If, however, you don't want those rural areas to survive or continue, then obviously you don't need to look at that.

Working time changes: There have been task forces both provincially and federally that have looked at the different options for improving and spreading, if you will, the work among a population. A better balance in family is one of the outcomes in that. Many of the levers for improving working time are in provincial hands: standards on working time, vacations and so on. Certainly that's an area that you could take a serious look at.

Some things on the federal side which fit with some payroll tax approaches by provinces as well would be to look at removing the overtime incentive from UI and CPP premiums, for example, by no longer having them limited at the upper end by the income level that people have. The effect is that it essentially removes the incentive to use overtime instead of increased hiring. You could even exempt the first X thousand of income and flip the incentive the other way around so you'd have an incentive to hire rather than to work overtime.

Some things like eliminating the UI premiums for individuals are more federal issues, but certainly since the federal government no longer allows individuals to receive UI benefits if they voluntarily quit, it seems to me they are no longer party to the decision about unemployment and it's not clear why they should be paying those premiums for that.

In an area of provincial authority, if you're under pressure to raise minimum wage or the next time you consider doing it, you may want to consider raising the minimum wage for adults with high school or equivalency education to provide that carrot for the completion of school by students and by those who can get a high school equivalency.

Let me stop at that point and take your questions. Again, as I guess I tell you every year, you don't have an easy job. I appreciate that problem. It strikes me this year that the tide is on its way out rather than coming in, and it is going to make your challenge even more difficult from a viewpoint of trying to maintain an economy growing in this province while at the same time making progress on the budget and worrying about the large numbers of groups that are falling through the cracks.

The Chair: Thank you very much, Mr McCracken. We'll start with the official opposition.

Mr Gerry Phillips (Scarborough-Agincourt): I'm trying to get a feeling for employment and what we should expect in employment growth. Economists have told us that, historically, employment grows at the rate of real GDP minus one percentage point. In 1997, that didn't work out; it looked like growth, here in Ontario at least, was somewhere around 4.4%, and employment growth was somewhere under 2%.

If there is some reason for that, that has some fairly important implications for us, because if employment doesn't grow in line with GDP growth, if there's some other thing happening, such as productivity improvement, we then face quite a different employment problem than we had hoped we would face. Do you have any view on that?

Mr McCracken: My sense is that you will get back to the more normal relationship. In any one year you may find that you'll get a cyclical pickup on productivity. Eventually, though, when people see that they are getting the income, that will translate into jobs.

One of the things we should doublecheck, though, in your case is the degree to which you may have had some increase in part-time, so you could have an offset in hours. The relationship is really between growth in hours, productivity and GDP, and if you had 4.4%, you might find that your hours also went up, which would have cut down the number of people somewhat. That's usually the first response in additional growth, some improvement in hours. I can check that for you and get back to you.

But productivity improvements have been averaging 1% or less, and certainly we should be happy to see a pickup of 1%. It just means, however, that the challenge in terms of making progress on the unemployment rate is even more difficult.

Mr Phillips: I didn't know, the service sector being such a huge part of our economy, whether investments in technology in the service sector are having any equivalent impact to what investment in the manufacturing sector might have had in the past. We're looking now at estimates for growth in Ontario this year, 1998, of 3.5% real GDP, and I think 3.2% the following year. Could you give us a sense of how realistic that is? Is that, as they say, a slam-dunk, is that on the modest side or is that starting to become a bit risky?

Mr McCracken: Anyone who is in the forecasting business knows that you speak confidently about the numbers but don't give them the date, or hedge like crazy.

My sense is that if six months ago or three months ago someone had told me 3.5% and 3.2%, I would have said: "You're being conservative. You're taking a number that you are likely to overachieve." Today we are sitting with a 3% national view, going down to, say, 2.5% next year, and we're worried about whether we should be revising that down as a result of a weaker US economy and some of these difficulties abroad.

It would strike me that today your 3.5% and 3.2% might be best expressed as a hopeful mean of what it might be. If there are any risks to that outlook, I would suggest to you that the risks are downward. So you may find that growth in 1998, rather than being 3.5%, is 3% or 2.5%. I think 2.5% is about the most on the down side, but I should point out that once things begin to deteriorate, things never happen smoothly. Go back and look at history. We have gone from 3% or 4% growth to where all off a sudden we're facing zip.

What happens is that some sectors can move very quickly to cut back on their economic activity. Business investment is one of them. That can go down by 10% or 20% in the same way it goes up by 10% or 20% in some years. If they don't think they are going to need that capacity in the next year or two or three, they will simply stop, and that will show up in spades.

Exports can fall off quite quickly. We are at the end of the chain supplying the US. If the US slows a little, we are often the first group that gets the orders cancelled. So you may again find a slowdown of 1% in the US translating into a 3%, 4% or 5% slowdown in growth of trade. It can be a very quick deterioration in outlook even if governments themselves don't add to the problem by their cutbacks.

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Mr Phillips: The Ontario economy to a very large extent is driven by US auto consumption.

Mr McCracken: Very much so.

Mr Phillips: We've benefited enormously in the last few years from that. That's an interesting observation because of the just-in-time inventory. There used to be a longer lag, I think.

Mr McCracken: That's right.

Mr Phillips: There was a downturn before it impacted on auto production.

You commented earlier on the US economy, which has a huge impact on Ontario. What is your sense of the next 12 to 18 months in the US as it may impact particularly on our auto sector? You might also comment at the same time, in case we run out of time, on the dollar and whether the 69-cent dollar is something we should focus on or simply say that's the way things work and accept it.

Mr McCracken: On the auto side, the sense I have from the US forecasts is expectations of no increase in 1998-99 from the 1997 levels, which means something in the order of about 15.1 million units. However, they are anticipating, with the lower yen and the lower Korean won, increased competition from abroad, so their sense would be that fewer of those cars would be cars made in the US. Indeed, even some of the transplants in the US have stopped shipping their products back to Japan as another way in which that adjustment takes place. So you get a loss of activity in the US or more aggressive attempts to put those into the marketplace in the US. So I would say little growth, if any, in autos. That's autos plus trucks.

To get beyond that depends on how lucky we are with particular models vis-à-vis each other. We have been, of course, extraordinarily lucky historically in picking up the Chrysler van and some of the other models that have sold very well in the US. That luck may not be with us forever, of course. California and some others are beginning to realize that what has been going on is an attempt to get around some of their environmental standards, and so there are moves to apply those also to light trucks.

The dollar being lower, at 69 cents, makes Canada a somewhat more attractive platform for making automobiles and for making anything else. In other words, it helps exporters. In that sense, it's a positive thing for Canada, but it moves money from consumers to business. That's essentially the other transaction that's going on. Your real buying power is less when you have a 69-cent dollar than when you have a 75-cent dollar. Effectively, that money is transferred to exporters and import-competing industries in Canada.

The question is, what do they do with that improvement? Do they put it in the bank in terms of increased profitability, in which case that may be good for them but not necessarily good for the economy overall? If they spend it on new investment or on increased employment, increased sales in which they aggressively go out and try to boost their sales, that could warrant a dollar -- net, we usually get slightly higher job impacts out of a lower dollar.

The caveat is that if that lower dollar is also matched by higher interest rates, what you gain on the one side out of improvements in economic activity from a lower dollar you may find yourself losing on interest rates. One thing we found in our regional work over the years is that Ontario is doubly sensitive to both exchange rates, particularly the Canada-US exchange rate, and interest rates. That's because of the mix of activities you have. You trade a lot and you also produce a lot of the investment goods in Canada and a lot of the durable goods, so any weakness in the economy attributable to higher interest rates redounds to Ontario particularly, as do, of course, any positive effects out of the exchange rate.

So if you can have a 69-cent dollar without a bank raising interest rates, you're probably better off. If what you get is a lower dollar and higher interest rates, what you're going to find is a twist occurring in your economy, with some of the export sectors benefiting and some of your investment goods sectors hurting as a result of it. You may find it's all a wash.

Mr Phillips: Gambling is a huge growth industry. It's clearly the fastest-growing revenue for the provincial government. We were told the other day the government's expecting hundreds of millions of dollars of revenue from video lottery terminals, electronic slot machines. Have you had any opportunity to look at the gambling industry North America-wide and have you any advice for us? I think gambling will become the third-largest source of revenue for the province of Ontario in the next few months.

Mr McCracken: We've done a few things on it over the years, both illicit and legal forms of gambling. One of the fundamental issues you have to ask yourself as a government before you sort of go down is what you're doing with any kind of move on the gambling front. Essentially, gambling, if it's going to make money for the province, is a deal in which people give you a dollar and you give them back 50 cents, or they give you a dollar and you give them back 95 cents repeatedly until there is no dollar left. Essentially it depends on the ignorance of people in terms of what the odds are on the offer you're making to them, whether that be a lottery, a VLT, bingo or anything else.

There are two schools of thought. One would say it's a tax on ignorance. Maybe if we tax it highly enough we'll somehow lose the ignorant in that process. It's kind of like the cigarette tax in that sense, though; we find that ignorance seems to be habitual.

The other thought is that these same people will do this anyway somewhere. So the issue becomes one of, if we're going to have people running numbers, gambling in one form or another, should we in fact participate as the state, with at least some saving grace that we can recycle those funds back into society rather than having them go into the hands of organized crime or elsewhere.

The Chair: Excuse me, sir. On that note I have to interrupt and move to Mr Pouliot. He may wish to pick up on it because his riding -- well, I don't want to get into that.

Mr Pouliot: I thank you kindly, Your Honour.

Mr McCracken, welcome back. Yes, I will indeed. The real gambling, by way of the lack of regulation and protection for the investor, is the Vancouver Stock Exchange, followed closely by the Alberta Stock Exchange, and there are other indices, sir, that will rival the worst lottery system. But there too it's a voluntary contribution.

Mr McCracken: Unfortunately there the state doesn't have a sufficiently high tax to benefit very much.

Mr Pouliot: You did mention the Asian factor. By your tone I take it that we're still in the world of the unknown, for it has not been fully impacting.

Mr McCracken: No. We haven't seen it in our data here at all yet, I would argue. There's lots more to come, deterioration in January and February and more coming down the pipeline, so it will be probably the summer before you have the full sense of the degree of Asian flu you may have contracted in trade.

Mr Pouliot: You've also mentioned, and I see a relationship, your concern, and if not concern, certainly your interest, vis-à-vis interest rates. As the Asian impact develops and is more present in our daily lives, we suspect that some regions of the country, ie, British Columbia, which I trust exceeds 25% to 30% exposure to the Asian market in terms of their exports -- given the fact that we as a country are still to a large extent well represented if not over-represented -- we're resource-based in that sector. If you have less growth, would that not give us a positive outlook on interest rates, ie, that they would not be likely to go up because of the pressure of less growth and Ontario, being manufacturing-based, would perhaps benefit or suffer as much as others who are more resource-based?

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Mr McCracken: There's certainly a hope that we'll have a benign interest rate policy, and indeed up until Friday a week ago I was very pleased to see the Bank of Canada keeping their hands in their pockets. But they just couldn't resist. They took them out and started playing with the bloody dials and gave us 50 basis points more on interest rates. Now, my assessment of what was happening is that we were getting side-swiped, in a sense, by Asian money moving into the US and into Canada, but more rapidly into the US, causing some appreciation of their currency relative to ours.

I think the problem with the Bank of Canada is that they have fixated on this monetary conditions index, which is a combination of the exchange rate and interest rate. So if we find that because of commodity prices dropping they think they're easing up too much with a lower exchange rate, then they seem to be telling us they're going to move to higher interest rates. Unfortunately they're setting a monetary conditions index to try to give us stability in that when our situation requires much easier interest rates.

Mr Pouliot: With respect, if I may follow through by way of supplementary on what you've said about interest rates, the pundits have established a very small differential between short-term and long-term. The spread is very small. Would that not be guidance or an indication, at least speculation, that if you have some turbulence it would be short-term, but yet the call medium and long-term is for stability and more stable, relatively low rates?

Mr McCracken: That's certainly the hope, and one of the fears of course is that you get into a position where short rates are higher than long rates, and when that happens we know that's usually the precursor for a major recession. Keep in mind real interest rates are still very high in Canada. Even though the nominal interest rate, that long rate you're looking at out there, seems low, it's low historically but it's still very high in real terms relative to inflation.

Mr Pouliot: You talked about, simply put, and I hope I got it right, how once you have a car, you have shelter -- those are big-ticket items -- you are not likely to tap the marketplace. What impact do you feel the philosophy -- because it's not a one-time; it seems to stay with us. Savings rates, if not at an all-time low, are very low historically. Personal debt --

Mr McCracken: Very high.

Mr Pouliot: -- is very, very high. You've also spiced the discussion by indicating that you are concerned about the distribution of income. Were you talking about the disparity, that people who can run the fastest get away from the field, and that we can only watch one television, wear one set of clothes and eat one meal at a time? If you look at the savings rates, if you look at the personal debt and if you look at the disparity between the haves and the rest of us, you may conclude that the consumer will not have enough money in pocket to buy goods from the marketplace?

Mr McCracken: Certainly our interpretation of 1997, going into it, was that people who expected the consumer to be extremely strong were going to be disappointed. We saw slow growth or no growth in real income; we saw very high debt ratios, at a record high, and argued the banks would not likely extend further credit to them. What we saw instead was that in fact the banks did extend further credit and people brought down their savings from a drop that had already occurred the year before to a very low level. The consumer in 1997 was quite active, so what's the missing element?

I think there are several different elements. First off, people began to get a little confidence back with the decline in the unemployment rate in 1997. That generally pushes up the consumer confidence index. Also, we had some decline in interest rates, so there was some help there. But the other thing that's been happening is that we should recognize that realized capital gains on equities are not measured as part of the income number we all look at. They're not part of disposable income. They are treated as, if you will, a transitory gain or a gain outside of the system. Some analysis that has been done on the magnitude of those gains in both the US and Canada suggests that they are sufficiently large that they could be part of why you saw a pickup in consumption in the two countries and this apparent decline in the saving rate. Of course, we also know that those capital gains are not being realized uniformly across all of the people in society. They are very much concentrated in the upper end, the upper 5%. Even given the upper 20%, you'll find all of them.

The point is that you might have some improvement in consumption and income occurring, but it will be among the very top. Now, there's nothing wrong with that if you're in the top, and of course if you work for a firm that benefits from that economic activity, there will be increased employment for you down the line, but it does suggest as well, though, the transitory nature of that because in the same way we worry about the high debt ratios, the pundits aren't too quick to call for yet another 30% gain in 1998 on equity markets at this point.

Mr Pouliot: In your presentation, Mr McCracken, you question perhaps the value for money of the tax cut by way of indicating that it does not quite filter through. I think you've mentioned -- I'm trying to remember verbatim -- that some people will not spend, they will just save the money. report is as follows:

Since it has been well established that the tax cut benefits the well-to-do more than the average consumer -- in fact some of my friends, the people I associate with, were hard-pressed to find any difference in their pay envelope -- do you feel that if that money, in lieu of the tax cut, had been put against the deficit -- for instance, if I have my credit card and I'm overexposed, I've spent too much, I would pay my debt before I would throw another party; once my debt is paid I would perhaps celebrate -- the taxpayers of Ontario, in view of the massive debt and in view of the persistence of the present regime to accumulate that debt all with borrowed money -- the money would best be served by paying down the provincial credit card, in lieu of giving the tax cut to people who are not going to spend it because mostly they don't need it?

Mr McCracken: No, I don't. Let's understand a couple of things here. If you give money to people and they can pay down their debts, then they are quite interested in that. They don't, quite frankly, care about the provincial debt because they don't understand that that might be theirs at some future date in terms of higher taxes or cuts in services.

I think the key reason you would choose, however, not to do a tax cut is that you look at the job creation activities and the importance we place in our society on having a job. It strikes me that if you're concerned about increasing employment, then your priority is to direct employment increases, direct spending, where you get roughly 20,000 jobs per billion, instead of tax cuts where you get roughly 10,000 jobs per billion.

Mr Pouliot: That's what I meant, yes.

Mr McCracken: But a debt reduction gives you zero jobs per billion. So you can think of a tax cut as being sort of a half-assed measure, but at least it's in the right direction. I don't know if that helps set up at least some further questions.

The Chair: Thank you, sir. I'll have to interrupt you there and move to the government caucus, Mr Baird first.

Mr Baird: Thank you very much for your presentation. I certainly appreciate it. I have a number of questions arising from your presentation I wanted to ask. At the end you said that if we gave money to people they will pay down their debt, and that relates back to some of the themes in your presentation of high consumer debt levels, that you're concerned that the banks wouldn't lend people more money but that paying down debt would be an outcome of the tax cut and that would have positive economic impact. Could I ask you to comment on that?

Mr McCracken: My comment was that if you were worried about debt reduction it would more likely be a personal debt reduction that people would be concerned about, not necessarily reduction of the national debt.

Clearly, if what people, regardless of their income level, do with an income increase, earned or transferred to them or through a tax cut, is to reduce their debt or to increase their saving, ie, leave it in the bank, then the second-round consequences of that are negligible; they have no effect on jobs. If in the first instance they got that income through a transfer rather than by, say, being directly hired and employed, then all you get out of it is the first round.

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What we have observed over time is that when you give people more income they will do several things with it. They will consume a good part of it, usually about 80% of it in the first instance, and they will save about 20% of it. That 20% they save can be either in the form of an increase in assets or in their chequing account or it can take the form of decreased debt. Either one from a national accounts viewpoint is the same.

The only mechanism by which some people are able to conjure up some big benefits from debt reduction, either of individuals or of governments, is to argue that these lead to interest rate reductions. One would find, I think, some difficulty in proving that claim; ie, if you look at the behaviour of interest rates over the course of the last 20, 30 years, there's little evidence, if any, that debt ratios, whether federal debt, provincial debt, all-government debt, private debt and the changes that have occurred in those, have anything to do specifically with interest rate movements.

Interest rate movements in some sense are independently determined as a choice of policy and in Canada's context as a reaction also to what's happening to international rates. If you take those as independent from that, then the only issue is, whose debt is it in some sense that you want to reduce? Certainly the carrying costs of government debts tend to be substantially less than the carrying costs of individual debts, and in that sense there is a positive reason for paying down personal debt.

Mr Baird: A theme that we've seen developed over the last two or three years: Some people have said that the provincial government of Ontario, regardless of which party is in power, has no impact on job creation, that things like the United States economy, auto consumption, as we heard earlier from my colleague from Scarborough, interest rates, free trade, the value of the Canadian dollar, are 99.9% of the input and the provincial government has nothing to do with the economy, which is sort of interesting because no party ever runs for election to office saying, "By the way, if you elect us for government we will have no effect on job creation." We all want to put forward public policies that will help create an environment where jobs will be created in the private sector; others will be more directly involved per se with that government credit card mentioned by my colleague from Lac-Nipigon.

When you look at the statistics across the country just in the last 30 months in Ontario, we've seen the creation of some 314,000 net new jobs in the private sector in Ontario; 68% of the job creation in the private sector in Canada has taken place in Ontario. What do you think accounts for the economic growth which has been so substantially higher than any of us expected? In 1997 the Ontario government I think had said 3.2%; it was 4.4%. You had said 2.5%; it was 4.4%. So both the government and yourself were way off. What do you suppose is going on in Ontario that just simply isn't taking place in the rest of the country with respect to economic growth and job creation?

Mr McCracken: A good part of this is simply that you are the largest province and you pick up a larger number of jobs from the sheer size. To the extent that a lot of the spending has been in durable goods areas, these durable goods again tend to be concentrated in Ontario, 50% to 60% of the auto sector and many of the other durable sectors here. So I think some of it is more a question of size and distribution of the output than necessarily good management.

There is a good question as to whether governments can determine the output or whether it is all a lottery that we are involved in. My suspicion is that you can do something about it and I think the test is, are people moving into the region to find employment, are firms starting up new businesses, is business investment expanding in the region? On these points certainly the record over the last year or two suggests quite positive things for Ontario. Let's say where private decision are being made, those decisions are being made in a way which says, "We're going to expand here rather than in Quebec" or "We're going to have people move from Atlantic Canada into Ontario." By and large, those are happening. They're not happening as a watershed flow-in, but it certainly is better than the problems in the recession in 1990-91, when there were substantial outflows.

There are certainly some things to look positively to. How much of those are attributable to government activities? I would say some; some federal policies as well, and then some also at the municipal level. The municipalities have a lot to do with particularly locational decisions, about where people will locate a new company, or will an employer in a particular company expand there or decide to branch out elsewhere. I don't want to take governments off the hook, because I also want to continue to hold them responsible in the future for progress. The big challenge, John, is to just keep doing it. Then if you do it really well, at the end of four years they'll thank you.

Mr Ted Arnott (Wellington): Thank you, Mr McCracken, for coming in today. You're an economist with considerable expertise and you've shared with the committee a somewhat different perspective than some of the other forecasts we've heard, so we should obviously review your comments with a great deal of interest.

I have three questions for you. The first one is related to the debt. You indicate in your list of things what not to do in the coming year: The government shouldn't focus on running surpluses and reducing the debt. I'd just like to point out that in the two hours this committee has been sitting this morning, we have probably borrowed another $1 billion. The total outstanding debt for Ontario amounts to about $9,000 for every man, woman and child, and this year we're spending in excess of $9 billion on interest, which is the fastest-growing government program right now, and more than we spend on hospitals, for example. The debt is a serious issue, and I think we should be focusing on how we're going to reduce it in terms of its overall size. I would ask you why you don't think debt reduction is something we should be focusing on in the coming year.

Mr McCracken: Let me take two economies, one in which we have more people working and less debt and one where we have more people working and the same debt. Presumably we would all agree that in that world in which we have more people working and lower debt, that's even better in some sense. The issue becomes one really of, what if we have an economy with, say, 10% unemployment but a lot more progress being made on the debt ratio, in comparison to an economy in which we have, say, 6% unemployment but the debt ratio is not moving down as quickly as we would like to see it? Which would we choose there? That's where you get into the question of values. You get into a question of what matters.

It strikes me that at least for the time being we're in a world where employing people is crucial. Our primary means of distributing income to people is to give them earned income in a job. When significant numbers of people don't have that option or when you take, say, an 8% unemployment rate that translates into about 25% of the people experiencing some bout of unemployment during the year, then it seems to me you've got a problem. Really fixating on that problem, putting more weight on that problem is what I would suggest, rather than worrying about the progress you're making on the debt ratio. It would be a lot easier for you to make that choice if interest rates were lower, because then you would be under less pressure of your debt instability running off on you. That is not something you necessarily have control over, I realize.

Mr Arnott: Job creation is a very high priority of the government, trying to encourage companies to hire people. There's more evidence in the paper today, a Globe and Mail article saying that small businesses are creating a disproportionate number of the new jobs, while big businesses are still in a net sense probably shedding employees. What specific steps would you recommend to the government to encourage more small businesses to hire more people in the coming year?

Mr McCracken: Most small businesses serve the domestic economy when you scratch -- there are some in the export sector, but they're basically dependent on what's happening in retail or in the local area. Anything you can do to improve domestic incomes and buying power will certainly be a plus in that, anything you can do to do direct job creation in specific areas, either directly through firms or directly through increased spending on health, education, all the things you were hearing about here earlier, all those will in some sense fuel a domestic economy that's stronger. That is probably going to be necessary anyway, because I suspect that those who are on the international side are going to find it tough sledding.

The Chair: I'm afraid I have to interrupt and stop there. We've exhausted our hour. It has been most interesting and most informative, and we thank you for your time and your presentation.

Mr McCracken: My pleasure.

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ONTARIO EDUCATION ALLIANCE

The Chair: The final presenter for this morning is the Ontario Education Alliance. Welcome and thank you for your attendance here this morning.

Mr George Martel: It's a great pleasure to be here this morning. I should say first, I'm the co-chair of the Ontario Education Alliance, which is an organization that has over the last couple of years been putting together our teachers, our school board workers, our parents, our students and just plain concerned citizens to see if we can't come together and develop not only short-term policies to deal with the present crisis the Ontario school system is now dealing with, but long-term ones as well. We're trying to put together an organization that will be with us for the long haul.

There are a couple of people I'd like to introduce you to this morning: Jacqueline Latter, who is our provincial organizer, a former chair of the Ontario Parent Council and someone with three children in the Toronto school system; and Hugh Mackenzie, whom you will recognize from another incarnation, who is here, however, as a parent of children in the Toronto schools and as the co-chair of the finance committee of the Ontario Education Alliance.

I want to have Jackie make a few comments, and then Hugh will be presenting our main brief this morning, but I just want to say to you generally that I think I can say without any hesitation that when we look at all of our constituencies, I know they would all want us to encourage you to encourage this government to back off from what appears to be another really very disastrous round of cutbacks to our publicly funded schools and to come up with a funding formula that recognizes the real cost of educating children in Ontario schools.

With that said, here's Jackie.

Ms Jacqueline Latter: My name is Jacqueline Latter and I'm a parent of two children in the Toronto school system. I just want to remind this government once again that education is not a privilege; it's a fundamental right in a democratic society. Our children are not clients, our children are the future citizens of this province, and as such, every single one of the children in this province deserves an equal right and an equal access to opportunities given to them by education.

The tax structure that funds education must be designed in such a way that allows community input at the local level, and our health and social services, which are also fundamental to a democratic society, must be funded not just adequately but appropriately and generously.

I'm not going to say very much more, because I believe Hugh Mackenzie, who has done enormous amounts of work and research on alternative budgets, can give you much more insight into this process than I can. But I would strongly urge you, especially the government members, to listen. There are other ways of doing things. There are better ways of doing things. We hope you will choose to listen and do things better than you have been doing up until now.

Mr Hugh Mackenzie: You'll be glad to know I don't intend to read through the piece of paper that we handed out; instead I'd like to speak to it. What I'd like to do this morning is try to step back a couple of steps from some of the overheated rhetoric about what has happened to, for example, the commercial-industrial tax system in Toronto, and look at education funding from a perspective that's a bit distant from that debate, the hope being that we can persuade the committee to urge the government to start to look at education finance reform as an exercise in education finance reform rather than a fiscal exercise, an exercise in shuffling money around to make things balance and to give government the levers to make things balance.

To start off, I'd like to just spend a few minutes talking about the system that we inherit. The system that we inherit I guess has its origins in the Smith committee report in the late 1960s. The Smith committee was the last major tax reform initiative, public consultation exercise in Ontario prior to the Ontario Fair Tax Commission. They spent a lot of time looking at local government finance and recommended that the provincial government of the day assume responsibility for funding 60% of the cost of public education in the province. At that time Bill Davis was the Minister of Education and then shortly thereafter became the Premier, and the government of the day accepted the recommendation of the Smith committee to move to 60% funding and quite radically transformed the way funding was provided for education in the province.

The 60% funding program existed for about four years, and beginning in 1975 a succession of provincial governments began to look to the education funding formula as a way to generate cost savings in order to deal with fiscal constraints, and that's been a process that frankly has been repeated consistently ever since.

What happened when fiscal constraints started to impinge on the formula? I don't know whether they ever had this conversation, but at least notionally the Ministry of Education had to decide whether they were going to admit that they were funding less than 60% of education costs or come up with some sort of fiddle that allowed them to pretend that they were still funding 60% of education costs when they weren't. They chose to do the latter. They began to create a parallel universe in education finance called "recognized education spending," and they came up with a formula, which they were never successfully able to explain to anybody, that established a number called "recognized education spending" and the province committed itself to fund 60% of that number.

One of the problems with creating a parallel universe is that as time goes on, it separates itself further and further from the real world. That's what happened to the education funding formula in the province, to the point that by the early 1990s the parallel universe was only 60% of the real world and the 60% funding formula actually translated to provincial funding for about 36% of total education costs.

There were a number of consequences of that evolution. One of them was a great deal of pressure upwards on commercial, industrial and residential property taxes, because they move in parallel, in major urban areas. The school boards in those areas, having the misfortune of living in the real world rather than in a parallel universe, had to try to meet local needs. They did so by using their right to access the local property tax base, and that generated some of the pressure on commercial-industrial taxes that was the subject of so much discussion a week and a half ago.

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The other thing it did was drive inequities further into the system. It did that because as the parallel universe shrank relative to the real world in terms of education financing needs and school boards found themselves having to resort to access to local resources, it started to become increasingly a factor in what school boards were able to do to meet local needs. How much money you could raise from the local property tax base was increasingly a factor. You had fiscal capacity constraint issues that started to drive inequities in the system, and not surprisingly, the most extreme of those inequities is between public school boards and separate school boards that occupy the same geographic area.

When I say "not surprisingly," the reason is that as a practical matter a separate school board cannot levy a local mill rate on its supporters that is dramatically higher than the local mill rate on the supporters of the public system, and given that the tax base to which separate school boards have access is smaller, basic arithmetic tells you that the separate school system is going to be even more constrained by the separation of the real world from the parallel universe of the Ministry of Education's funding formula than the public system is.

That's where we sat in 1995. We had a system in which the funding formula was essentially irrelevant to what was going on in most of the school boards in the province and a system that was guaranteed to drive inequities into the system. As parents, we're not denying that there are inequities in the system; in fact, there are representatives of both teachers and parents in the separate school system as part of the Ontario Education Alliance. What we're saying, though, is that it is not either accurate or helpful to start the conversation by saying that the problem with education funding is excessive spending by large public school boards. It's not a helpful way of starting the conversation and it's not accurate. It would be accurate to say that the issues we confront with education funding now have to do with the cumulative impact on both the total volume of spending and its distribution of a progressive process over 25 years of the education funding formula becoming irrelevant to real educational needs and the impact that has had on driving inequities.

That's what we came to in 1995. It seems quite evident to an observer looking at this from the outside that the main driver of the education finance change the government has put in place to date has been the province's fiscal needs. I doubt that I need spend a lot of time citing evidence to that effect. I think the most glaringly obvious example of that is that for a long time through this process it was a matter of principle that residential property taxes shouldn't be required to fund education, and then, all of a sudden, an extra $2.5 billion was needed to make the download work and that was no longer a principle of education finance reform. We have an exercise that is substantially fiscally driven, and I would argue that much of what has happened around the structure of education funding allocation has been driven by the need for the province to make its fiscal equations work properly.

Having started with the fiscal agenda, we're now going through a process of creating an education finance reform agenda tacked on to the back of it. We've got an education finance reform agenda that is driven by a whole series of assumptions which are untested.

First of all, one assumption is that differences in spending per student necessarily reflect inequities. One of the things that mystifies me about the whole process of thinking about reform of education funding allocation is that we have concluded, in a fair amount of detail, that there is a massive inequity in the funding allocation system when we have no standard against which to measure it. One would have thought that if one were going to conclude that there was an inequity in the funding system, one would want to understand exactly what it was well enough so that one could fix it.

The only way I can see to understand in detail how the inequities operate in the education funding system is first to have an allocation model that one thinks works and then compare what the current system is doing with what you think you ought to be doing. That's not what we've done. What we've done is we've concluded that it doesn't work, turned the system upside down and now, a year late, we're maybe, in the next few weeks, going to get an allocation formula. It strikes me that's backwards. The image that occurs to me -- I use the number 100 because that's about how many boards we've got -- is that you've got 100 objects, all of which are different shapes, and you're trying to compare them without a ruler. It strikes me, as I said, that the first job ought to be have been to think about funding allocation. Once you understand what makes sense and what doesn't make sense around funding allocation, then it seems to me it makes sense to start thinking about how you restructure funding, but we've done the opposite.

Another one of the myths, or untested assumptions, that underlies it is that, implicitly, none of the services that are available in some of the large urban boards would be of any value to students who attend boards in smaller areas that have less resources available to them. There's the implicit assumption that the Ministry of Education and Training's assessment of what's needed to provide a quality education is going to be perfect, that the Ministry of Education, sitting over there in the Mowat Block or wherever it is, is going to be able to determine with perfect precision what's required to provide for the education of a 10-year-old in Sarnia or a 16-year-old in Ottawa or, for that matter, a five-year-old in Parry Sound. I just don't think it works that way.

One of the virtues of the system we've had is that there has been that flexibility. Interestingly enough, every study that has been done of education finance reform since it became a cottage industry in Ontario in the late 1970s has concluded that, whatever else you do, you ought to retain a safety valve in the system, you ought to retain some ability for local school boards to vary the amount that's spent, because they're the people who are on the scene, they're the people who can determine whether something is needed that the Ministry of Education won't fund. That's one of the reasons they've all said that.

The other reason they've said that is because they have concluded -- something that perhaps is obvious -- that historically, if you look at the development of the education system in Ontario, the source of innovation has not been the Ministry of Education, the source of innovation has been in local school boards. If you cut off the ability of local school boards to innovate, because you've cut off their ability to vary the amount they spend from the provincial formula, then you're cutting off the ability of the system to respond effectively to change. One might wonder, for example, where we'd be in terms of our ability to serve immigrants whose first language is not English if we had had a straitjacket formula for funding education applying to the boards in the Toronto area since the 1950s.

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There's the assumption built into this that we're spending too much on education in Ontario, certainly that we're spending too much on education in the large urban boards. But there's no evidence to that effect. The only evidence I've seen looks at spending in school boards across North America and finds that Ontario is right down near the bottom. Ontario is not a high-spending jurisdiction and, as I said, there is no evidence that we're spending too much on education in Toronto or Ottawa or Windsor or Hamilton. There is some evidence to suggest that separate school boards and school boards in areas with fewer local fiscal resources do not have enough. But how much? Unless we have a model for funding allocation that helps us understand that, we can't come to any conclusions.

In the interest of leaving some time for some questions, let me just summarize what we think should happen. First of all, we think the government should suspend the implementation of education funding reform. There are just too many things that are not well thought out, there are too many questions that are still to be answered, and we're getting very close to the end of the day.

Second, there are areas of the province where there are obvious and pressing needs. There are school boards, particularly in the separate system, that have been running deficits because they can't meet the needs with the fiscal resources they've got. Those issues ought to be addressed immediately.

We should extend the process for discussion and evaluation of a funding allocation formula. It is a crucial piece of this puzzle. To have us rushing hell-bent for leather towards a deadline of having something in place that will enable school boards to budget for September and we don't even have it yet just strikes us as completely bizarre. If we can go through a rational process of developing a funding allocation model, then we can start to focus in on where the actual spending differs from it and have a discussion about why that's taking place and what needs to be done to address it.

I think we have to come to grips with the question of whether it is possible to simultaneously improve the system, improve equity in the system and cut its funding base. We have a lot of trouble understanding how that's possible. We'd like to see the evidence that suggests that's possible. We have a great deal of trouble with the idea that our children's education is going to be put at risk while we experiment to see whether or not that's the case.

Finally, I'll just repeat what must have been obvious from the earlier comment I made, that at the end of the day one of the things that needs to be a feature of the system is the reintroduction of some kind of safety valve that allows school boards to address problems that emerge in the funding allocation formula. I don't think anybody can create a funding allocation formula that's going to be perfect, that's going to recognize perfectly the needs now and in the future of every school board in the province. That's one of the reasons, as I said, everybody who has looked at these things in the past has said that there ought to be some local funding option in order to provide that safety valve.

The Chair: Thank you very much. We have approximately two minutes per caucus.

Mr Wettlaufer: Thank you for appearing before the committee, although I have to say, Mr Mackenzie, I think much of what you've said is use of smoke and mirrors. There is a lot of talk about funding of education. This year, at $14.4 billion, spending on education in this province is the highest it has been in history.

You talk about the ability of boards to fund. I think the individual boards have demonstrated over the course of the last number of years where their funding priorities have been.

You talk about spending in the classroom. You drew attention to the study that was done and you talked about how Ontario certainly is not the lowest. No, it's not the lowest but it's among the lowest. When you take out the cost of teachers' salaries and benefits in other jurisdictions and in Ontario and you look at the amount of money that is being spent on the children in the classroom, we are among the lowest in North America.

Why is it that during the public hearings we heard from many boards that they only had $3,600 or $3,800 a year per student? Those same boards were putting their textbooks together with elastics and string. Those very same boards were using textbooks from 1976 or 1986. Those very same boards had one computer for a classroom of 35 or 40 students.

I believe every student in the province of Ontario is entitled to the opportunity for an equal education, whether they live in Metropolitan Toronto, Peel, Ottawa, Windsor, London or northern Ontario, and the only way we're going to do it is through a provincial-government-mandated funding formula.

The Chair: Thank you. I have to interrupt you there and move to the Liberal Party.

Mr Kwinter: I'd like to follow up on Mr Wettlaufer's comments from a different perspective. There seems to be a one-size-fits-all mentality, and Mr Wettlaufer just talked about it, saying if you take out teachers' salaries then there is a fairly reasonable allocation of funding vis-à-vis other jurisdictions. The problem is that a teacher requires more money in one location than they do in another location. Realty taxes or services are required more in one location than another location. There's got to be some kind of formula that takes into account the costs involved. Otherwise you have a situation where you can apportion exactly the same resources across the board for every single student but there is a built-in inequity. I don't know the solution, quite frankly, because it's not easy, but I thought maybe you might have a suggestion as to how that could happen.

The Chair: If you have, you're going to have to keep it to yourself because our time is up.

Ms Churley, you have a minute and a half, two minutes.

Ms Marilyn Churley (Riverdale): Thank you for coming today. Let me give the panel an opportunity to respond to the comments made by both other parties. I'd be very interested in hearing your response.

Mr Mackenzie: To Mr Wettlaufer's comment let me just say my point is that we ought to have a funding system that provides excellence for everyone. One does not do that by taking money away from those school boards in those areas of the province that have had the ability to provide the resources that are needed.

To Mr Kwinter's comment let me just say that what you've got your finger on is that equitable funding and equal funding are not the same thing. Because of that and because of the evident problems with the current system, that's the basis for our saying, let's step back, let's do a careful job of debating and discussing and evaluating options for the funding formula before we go ahead and turn the system upside down. That's the concern. The concern is that we're going to screw this up, and the people who are going to pay are my kids and other people's kids, not the people in this room.

The Chair: Thank you very much, sir, for your presentation and for your attendance here today.

That concludes the presentations for this morning. We'll be recessed until 1:30 pm this afternoon.

The committee recessed from 1200 to 1330.

ONTARIO ROAD BUILDERS' ASSOCIATION

The Chair: We'll commence the afternoon proceedings, with the first presenter being the Ontario Road Builders' Association, Mr Bradford. Thank you for your attendance and welcome. We have 30 minutes.

Mr Robert Bradford: Thanks very much, Mr Chairman. I'll probably be considerably less than 30 minutes, unless you've got a whack of questions after I'm done.

It's a pleasure to meet with the standing committee again this year on behalf of my organization, the Ontario Road Builders' Association. I'd like to bring to you today three issues which we believe to be of considerable importance as you go into your budget deliberations.

As a brief introduction, our association has represented the roadbuilding industry since 1927, and our members are the majority of contractors who build and maintain the province's provincial highways and municipal roads. I'd like to add that the Ontario Road Builders' Association remains strongly supportive of the current government's economic objectives and initiatives.

The three issues I would like to bring to your attention today are the province's commitment to investing in its highways and bridges, the growing dilemma at the municipal level, and the need for a longer-term approach to planning the provincial highways program.

The first subject is one I suspect we've been bringing to the committee since 1927. Unfortunately, for the past two decades at least, our provincial highway system has been deteriorating because we can't seem to find enough money to bring it closer to the standards Ontario enjoyed in the 1960s and early 1970s. If by chance this brief has been passed out and you're reading there "1660s," excuse the typo.

We all know the challenge. The auditor laid it out pretty well in 1995 when he said we need to invest $580 million a year simply to meet our minimalist policy of treading water. We are still falling well short of the required investment level and are moving closer to the major reconstruction costs about which the auditor warned.

In past years, we've gone through the exercise with this committee of bringing out the statistics and reports showing why investment in the provincial highway system is a sound one. We would show you how good jobs are created, public safety is enhanced and user costs are reduced, and we would talk to you about economic growth, the export market's reliance on trucking, and the competitiveness of Ontario businesses.

The statistics are still available and we can provide them to you again, but I won't take your time in going over them again this year because we don't believe this government needs to be further convinced about the relationship between our highway system and Ontario's economic future. Certainly many of you and your colleagues have expressed to us a considerable depth of appreciation for the economic linkages. I think most of us accept now that a good highway system pays social and economic dividends. The only challenge remaining is to make the appropriate investment.

The second issue I'd like to bring to the committee's attention is that of the municipal roads system. Last year we sounded some warning bells in our presentation to the committee. We told you we were worried that the municipal roads system might suffer from the effects of downloading 5,100 kilometres of provincial highways and from changes which moved 100% of the costs for municipal roads to the local property tax base in replacement of a system of dedicated provincial subsidies.

This year we're here to report that some of the concerns we have are already being realized and the future for the municipal roads system is not promising. I notice you have on your agenda later today a delegation from the Association of Municipalities of Ontario. I suspect they will raise this issue as well from their perspective, and I don't suspect it's too different from ours.

In a speech last November, a gentleman named Denis Merrall, who is currently the president of the Ontario Good Roads Association, made it clear how we can expect many municipalities in Ontario to respond to the situation. Essentially, he said that investment in roads will be at the bottom of the priority list behind more politically attractive priorities such as health care, food banks and even community arenas. Where some money is available, it will be spent on local roads, not on the new highways transferred from the province. I am aware that there is a good chunk of money, a onetime payment, that went along with the transfer of roads. I'm here to tell you right now that the municipalities are not going to spend that money on their roads. That's been made very clear to us.

Mr Merrall predicted that municipal roads and bridges which cannot be maintained properly will be closed or posted for load and traffic restrictions. These are not idle threats, because it's already occurring.

The problem of municipalities which cannot fully meet their new responsibilities for the local roads systems is one which eventually must be addressed by the provincial government. If municipal roads are allowed to deteriorate further, it will be a provincial problem, because our roads system is interdependent regardless of jurisdiction.

At the risk of sounding like a broken record, and I know full well the committee's position on the matter, we will again offer what we see as the most reasonable solution. That is dedication of a portion of the provincial fuel tax to the provincial highway system and a portion to assist municipalities with their roads. I remind the committee that road users already contribute over $3.2 billion a year in road taxes, and less than a quarter of that will find its way back into maintaining our roads in the coming year.

The final issue I ask the committee to consider today is the need for a multi-year approach to our roads infrastructure. As it stands, each year the Ministry of Transportation has to wait until the budget comes down in April or May before it can advise our industry about what work will be called that year. Then it's a mad scramble to get tenders called, resources in place and the work completed before the weather ends the construction season in November. This approach is inefficient and has significant costs to both taxpayers and the roadbuilding industry. With advance planning, the industry could make more rational business decisions to respond to the ministry's changing needs. It could put in place its equipment, workforce and materials in a more efficient manner and make things more cost-effective for everyone.

We quite frankly do not understand the reluctance of the government to allow the Ministry of Transportation the flexibility of multi-year capital planning. If it is a matter of not wishing to commit to specific spending levels, then it should be possible for us to say we have a base amount of money every year that we know we're going to spend -- I would suggest $400 million is about the right figure to start out as a base -- and to commit that amount to allow for planning to go forward. Then government could supplement the base each year in the budget announcements.

I attended a meeting last week with the Alberta Minister of Transportation, and I would recommend to you that province's practice of operating under a three-year rolling capital plan. That's for their transportation department. Each year, the third year of the plan is added, depending upon the government's priorities and resources. As well, each year supplements to the planning base are also announced. The system allows their Ministry of Transportation to advise the roadbuilding industry and its suppliers where the program will be concentrated, which in turn allows our industry to make appropriate capital investments and business decisions. It makes a lot of sense to us, and we fail to see where the downside is to such a planning approach.

I would like to thank the committee today. We do appreciate the opportunity of meeting with you again this year, and I look forward to meeting with you again next year to follow up on some of the issues we have raised.

The Chair: We have approximately six minutes per caucus, and I believe I'm going to start with the New Democratic Party.

Mr Pouliot: Mr Bradford, greetings. Ontario Road Builders' Association: It rings a bell indeed.

Mr Bradford: It certainly should, sir.

Mr Pouliot: But you're right, Mr Bradford, and your brief mentions that times were difficult. Times are more prosperous now. The evolution of just-in-time-delivery truck traffic keeps increasing, door-to-door delivery.

You have mentioned the multiplier in your brief. For every dollar spent on capital, there's a multiplier which takes on somewhat extraordinary proportions. You get the money back.

As road builders, and it's not imputing motive, Mr Bradford, your mandate in life is to build.

Mr Bradford: Absolutely.

Mr Pouliot: To build to standards and for profit. There's nothing wrong with that; it's most honourable.

I don't find inside the consortiums, à la 407, your association necessarily. I do find some of them too. I have the expenditure estimates, the reduction in commitment, and I'm trying to marry, to web, to blend this with your proposal with your Alberta recent exposure and experience. Alberta is not as far politically as it is geographically from policies that are designed in the United States of America, preferably the southern states, people who adhere to the same political denomination, if you wish, except that the people opposite are a little more to the right, but it's easier said from me.

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Do you see with the devolution, the downloading you've mentioned, any chance that the municipalities, when they're faced with other problems, will give the highways, the roads, the necessary priority, or do you feel that, not because they wish to do so, but since they will be competing with other downloaded issues, roads in our small towns, access roads all over the province, might not be getting the treatment that they would should the Ministry of Transportation have a hands-on attitude like in the past years? You say that you begin to see a difference. Would you give us some examples?

Mr Bradford: Just for one example, we've recently been advised, and you're probably aware of the situation in Prescott county, where one of the connecting links that was transferred from the province, the county has said, "We can't afford to maintain this road," and they have reduced it to local traffic only. Therefore, vehicles carrying commercial goods now have to bypass that particular highway. That's one example.

You're quite right. I mean, you've picked up on the point I made in my presentation. We're very concerned about municipalities because, as you say, roads now have to compete with all those other perhaps more attractive spending priorities. Public opinion polls will tell you, talk to the man on the street and he'll tell you, certainly he wants good roads, but when it's a difference between his roads and his health care system, he's going to vote for health care. That's why the system that we previously had where the provincial government matched dollars in the municipalities and the money was dedicated to roads took it out of that political sphere and allowed us to do the right thing, and that's maintain our road system.

Mr Pouliot: Mr Bradford, you would know better than most, as well as anyone, approximately 23,000 kilometres of highways in the province, some 3,000 bridges, from time to time those facilities, those links, need minor and major repairs. We know that Ontarians give upwards of $2 billion a year in taxes to Revenue Canada and Revenue Ontario. I mean, they're insatiable. Some people have referred to those people as organized crime. I wouldn't go this far, I wouldn't abuse my privilege or immunity.

Mr Bradford: Nor would I.

Mr Pouliot: But do you feel that, given the fact that a road will last anywhere from 12 to 15 years before major work must be done, the set portion of the money Ontarians give at the pump -- every year we would know, you've mentioned $400 million -- some of that gas money that Ontarians pay so dearly for would go back into the road system, that you wouldn't have to deal with the VAT and the black hole, the discretion of the general fund, which is the privy of the Premier and his cohort the Minister of Finance, that the general public who pay the full freight for that would at least see roadbuilders build and maintain good roads?

Mr Bradford: We certainly see a dedicated fuel tax as a proper response to the funding situation we're in.

Mr Pouliot: I think you illustrate this and --

Mr Bradford: We've proposed that for several years and we continue to propose it although, as I mentioned, it sometimes feels like flogging a dead horse. But it is a good idea.

Mr E.J. Douglas Rollins (Quinte): I think that was an excellent idea brought up by my colleague there, particularly when he was the past Minister of Transportation. I would have thought he would have put that in place when they had the power in the government to do that. I don't know --

Mr Pouliot: On a point of order, Mr Chair: It has no bearing here. We're dealing with the future, Mr Rollins.

Mr Rollins: Oh, I see, the past doesn't count. That's why you sold your Bre-X stock too.

One of the things I think you as an organization certainly can put some -- I know our Minister of Transportation has been asking, and with the Liberals having 102 seats in Ontario, and that represents a large chunk of Canada as far as the representation is concerned, that there should be some pressure put on Ontario to get our fair share back. We certainly are giving more in other grants too than the road tax.

Over the last couple of years I have listened quite closely in the House and heard our Minister of Transportation state how much more asphalting we had done in the last year or so than in the previous three or four years. Is there some sign of improving?

Mr Bradford: I think this government has demonstrated a commitment to attempting to catch up on the infrastructure. Certainly the capital program in the last couple of years has been healthier than it has been in the past. But I think the new Minister of Transportation -- we've spoken with him and he appears very committed to the kinds of things we're talking about -- would admit to you that we still need to come up with the shortfall. The Ministry of Transportation has a stated policy at the moment of attempting to keep the roads from deteriorating any further; that doesn't even speak to improving them or building new roads, and we are not quite meeting that. That said, there certainly have been signs of a commitment from this government to attempt to get us there.

Mr Rollins: What's your feeling on the new road north of Toronto, the 407, with the private enterprise basically into it? What's your feeling towards that? Is that a more expanded way to go? Would you advise that?

Mr Bradford: I certainly think that in the future when we're looking for ways to pay for our roads, we're going to have to turn to more private-public partnerships. I would warn, however, that we seem to be seeing that as some kind of panacea, and private sector involvement will only occur where there is an appropriate revenue stream. I hear governments talking now about: "Let's get the private sector just to maintain our roads. We'll give it to somebody for a few years and he'll maintain it." But where's the revenue stream? The private sector of course responds to profit-making opportunities, so I'd be careful about seeing that as the answer to all of our funding problems. The public sector is still going to have to accept and continue some responsibility for funding roads.

Mr Arnott: Following up on one of those questions that my colleague asked you with regard to tying a certain percentage of the gasoline tax to expenditures on roads, I see from the budget -- this isn't the exact expenditure on roads, but the Ministry of Transportation in the present fiscal year is going to spend about $1.1 billion in capital. In our gasoline tax plan we're expecting to take in almost $2 billion. Those are the rough numbers we're dealing with, I suppose.

Mr Bradford: We won't get down to arguing numbers right now, but add to the gasoline tax also all your licensing fees and all the other taxes that come directly from road users. From your $1.1-billion capital figure, the Ministry of Transportation is also responsible for public transit and other forms of transportation. About $750 million typically will go into roads.

Mr Arnott: So what percentage of the gas tax would you like to see allocated to roads? We've heard this from a number of presentations and they make that general statement. Is there a specific --

Mr Bradford: I think before I throw out a number, because the difference between one cent and two cents is a heck of a lot of money, if you're interested, I'd be glad to get back to you with a number to suggest. I'm not prepared to do that today.

Mr Arnott: You've said you'd like to see the Ministry of Transportation pursue a multi-year approach to roads infrastructure. On our Ministry of Transportation capital plan we have a five-year plan but we --

Mr Bradford: We're not privy to it, though.

Mr Arnott: Okay.

Mr Bradford: And that's the point, that they are afraid to share it with us, quite frankly. They're afraid that if you start putting out things like that, the industry will hold you to a promise or not understand that it's flexible, so without that annual budget announcement they will not provide us with any information about what's coming ahead.

Just to give you one example, I suggested that entailed significant costs. Last year the bulk of the program was not revealed until early June, which is unbelievably late even considering most years. A lot of the asphalting, as Mr Rollins referred to, required a specific type of aggregate. In the middle of July, none of that aggregate was available. Some manufacturers didn't have any; others had to put in extra production to produce it. Anyway, the cost went up tremendously. With a little bit of advanced planning, had we known that program was being rolled out, those aggregates would have been stockpiled.

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The Chair: Mr Bradford, I must interrupt you at this point and turn to the official opposition.

Mr Kwinter: Mr Bradford, would you just explain to me the way the highways are financed? I notice in the proposed budgetary plans there's $1.2 billion effectively earmarked for capital. Is that for new highways, or do they capitalize the repairs?

Mr Bradford: They certainly do capitalize the maintenance part of the program. What we saw last year, and I hope it will be similar this year, was about $500 million into the capital side of the program that is for maintenance and new construction, and there is virtually no new construction going on at the moment or in the foreseeable future. Roughly $250 million more is for the winter and summer maintenance of our roads.

Mr Kwinter: When the auditor says that you have to invest $580 million a year just to stay even, what is the shortfall in that?

Mr Bradford: I would suggest the shortfall is somewhere between $100 million and $150 million at the moment.

Mr Kwinter: What are the repercussions of that? In other words, they also state, and you state in your presentation, that it will require major reconstruction costs unless these levels of financing are provided. What is your time frame?

Mr Bradford: The implications are quite severe, and as I said, we have discussed it with the committee in years past. I'd refer you again to the auditor's report which laid it out quite clearly. A typical pavement has a service life of about 15 years. If you go in and do your proper maintenance and your rehabilitation, in about year 12 it will cost you roughly $80,000 a lane kilometre to do that work. If you don't do it right in there around year 12, if you let it go for two or three more years, rehabilitation is no longer an option; you're into reconstruction at roughly a quarter of a million dollars a lane kilometre. There's a two- or three-year window there where the proper maintenance and rehab has to be done or we've lost it and we're into huge future costs.

Mr Kwinter: I also assume that the $580 million referred to by the auditor referred to the roads that were then under provincial jurisdiction and some of those roads have now been transferred as a result of this downloading to municipal jurisdictions. So there's a good chance that money will not be applied because of the concerns that you've expressed because of other priorities. How is that going to impact on what is happening?

Mr Bradford: I haven't even begun to entertain the possibility that because the province has downloaded 25% of its roads that might affect the capital budget in the same way. We have asked that question and we've been told, "Oh no, there's nothing there." If that were to happen and if that's your question, I guess it would leave us in roughly the same position we are now, not able to reach that break-even point. I suppose, given that 25% of the system has now gone to the municipalities, if we could maintain capital budgets in the neighbourhood that we've been seeing in the last couple of years, we might be getting there.

Mr Kwinter: The major roads like the 407 are provincial roads and will continue to be maintained by the province. Have you done any studies to determine what the impact will be on the transportation grid by, for example, the one you just gave us about a road that is going to be restricted to local traffic only? What is that going to do to the transportation grid and how is that going to be impacted in our ability to move goods and services across this province?

Mr Bradford: I don't have any facts and figures, we haven't studied that directly, but certainly you know the related kind of figures you look at. Apparently up to 15% of the cost of the goods is in trucking, and that rises to about 45% when you're talking about bulk commodities. Just in a general sense, if your trip to your destination is rerouted or is over bad roads or whatever, those are the kinds of costs that you're adding to your trucking costs. In a very simplistic way, that illustrates the kind of economic impact the non-use of roads would bring.

Mr Kwinter: I also imagine it's going to have some impact on plant locations.

Mr Bradford: Absolutely. I tell a little story, and I think I told it to this committee last year. I met with Ivan Grose, a member of Parliament from the east end, about a year ago. He tells the story of a company coming in from Japan. They were looking at locating an auto parts plant in Whitby. They came in at Pearson Airport on a Friday afternoon about 4 o'clock, and by 6 o'clock they hadn't reached Whitby, so they turned around and left. That was it, end of deal. I assume that's a true story. I heard it from one of your federal colleagues.

The Chair: Thank you very much, sir. I appreciate your time and your submission.

COUNCIL OF ONTARIO CONSTRUCTION ASSOCIATIONS

The Chair: Our next presenter is the Council of Ontario Construction Associations. Gentlemen, welcome. Thank you for coming.

Mr David Surplis: Thank you very much. It's great to be back here again. I'm David Surplis and this is David Frame, the two Davids at COCA. I guess if you phone our number and ask for David, you're always going to find somebody there. That's service.

Thank you for inviting us again. I don't know how many years this is, about 15 years I suppose, we've been coming here as the voice of non-residential construction in Ontario. We will remind you, as we always do, that we represent the non-residential sector of construction.

We have a sister organization, as you know, the Ontario Home Builders' Association, who very ably look after their affairs. Last year at this time, we pointed out that the home building industry was starting off on a good boom cycle. It seems to be sustaining. We, on the other hand, have not been doing as well, at least for the last eight years.

As I point out in my notes here, I suppose the best-known symbol of our sector has been the mothballed Bay-Adelaide centre downtown, a building that started with such great promise, then was capped and became a parking lot and a park. That's just to remind you of the distinction between the two sectors.

Actually, to stir your memory a bit -- it was a surprise to me when I looked up the figures for you -- in 1990 our sector here in Ontario contributed $15 billion worth of work to the economy. As Mr Eves pointed out in his statement on December 12, his department was estimating that ICI or non-residential construction in 1997 would be at the level of $5.5 billion. So we're at roughly one third of the capacity we were exhibiting in 1990, just to put that in perspective. As you know, for a variety of reasons, capital expenditures, as Rob Bradford mentioned just before us, were down for many years, billions below the "normal."

Statistics Canada tells us that from 1988 to 1996 our workforce dropped from 350,000 to 265,000, or 85,000 jobs. That kind of statistic seems to miss a lot of people's attention. Everybody was all excited about the loss of jobs in the proposed bank merger or the K mart takeover. The 85,000 jobs lost in the construction sector -- those are actual jobs lost; that's not a reduction in the workforce, which is even greater -- is more than six times the loss of jobs projected for the bank and the K mart takeovers.

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At any rate, things are starting to turn around. As David and I are finding, our members are telling us there are more jobs to bid on and so on. We want to pay our gratitude to the government. The announcements of expenditure on hospital restructuring, schools, courthouses, casinos and so on have all helped a great deal. We're very appreciative of that. But we want you to remember that we have a long way to go.

In particular, echoing Rob Bradford's request, we would like to also suggest that more attention, and of course by that we mean more money, be spent on infrastructure, because it really is an investment. Yes, there is the transitional assistance program, but we respectfully submit that municipalities need more help and more direction.

Sewer and watermain systems, for instance, are vitally important in our economy in Ontario. They're not in great shape, as the Provincial Auditor pointed out. We think the time has come to recognize water as a very important resource that requires careful management, the same as any other natural resource.

The reality is that our water supply systems in Ontario are actually a cost centre for most municipalities, because the fresh water supplies are subsidized to the tune of about $500 per year. As the Ontario Sewer and Watermain Construction Association, one of our leading members, has been saying for years, there is no reason why the principle of full cost recovery should not be implemented with regard to water systems in Ontario, with the provincial government setting benchmarks. We urge you and the finance minister to look into infrastructure as a keen subject of interest, because the reality is it's an investment.

We want to thank the government for reducing a lot of the red tape in our field, some of the impediments to business, for reducing the deficit and some of the tax burden and all those good things. We genuinely mean it: Thank you. In light of the depressed conditions we've had, it's a big boost.

We'd like to take a minute today, however, to point out a very serious problem in the Ontario economy, a problem that begins in the construction industry but one that has serious meaning for the government in investment in Ontario. The problem we refer to is euphemistically called "revenue leakage."

We have quite a name over the years for representing the construction industry's interests with regard to workers' compensation. That has been our bread and butter for years. David is our expert, called on by everybody in the industry, and in fact others as well. So we do a lot of research and so on. In doing some research to deal with the board, David found an interesting fact, and he'll tell you about it later, if you want to ask him about it. In 1996 Statistics Canada reported that there were 267,000 workers actually employed in the construction industry in Ontario. At the same time as StatsCan was reporting that number, WCB reported it had 131,000 workers registered for coverage in the construction industry. That's roughly 48% of the workforce reported for coverage at the WCB.

There are reasons why some of that payroll wasn't reported. For instance, self-employed people aren't required to report. But it's absolutely inconceivable, as we say in here, that over half of Ontario's construction workforce is self-employed. That's plain crazy. The only conclusion we can arrive at is that companies are not reporting as they should. They are evading the cost of WCB -- WSIB now -- knowingly or unknowingly.

There are all kinds of ramifications from this cheating. The average compensation rate for construction is -- get this, those of you who haven't really looked at it -- $8.64 per $100 of payroll; that's what construction average rates are. It ranges anywhere from $4.39 to $18.50 per $100, which is a heck of a long way from the other rates, which average around $2.

Anyway, employers who do not report their wages and their employees to the board have a large, immediate and unfair advantage in bidding against legitimate employers who pay the freight. If you've got a job that's 80% labour, a non-reporting contractor would have a 7% advantage in bidding over a contractor paying $8.65 per $100 of payroll, and of course it goes up depending on what rate group you're in.

Because construction's share of the unfunded liability -- that $10-billion weight that's hanging around everybody's neck at the board -- is so large, roughly a third, or at least that's what they've assessed us, of the whole amount, employers who do pay WSIB carry far more of a load than they should and their rates keep rising as the board presses to eliminate the unfunded liability by the year 2014.

David asked the board a while back for some projections, and admittedly they are projections, but it's projected that the average rate for construction for the next 15 years will be $10.73 per $100 of payroll. That doesn't sound like a competitive situation to us at all.

Because rates are rising at such an alarming rate, more and more contractors are evading the cost and going underground. In 1996, for example, there was a 5% to 6% increase in construction activity in Ontario, yet the WSIB recorded a drop of $32 million in revenue from construction; in other words, about a 10% drop in revenue while activity went up.

These figures do not concern you directly. We know that and you know that. The WSIB is a separate entity and independent. We're happy to tell you we're working on that problem with the WSIB, and also our sister organization, the Ontario Construction Secretariat, is studying the problem with assistance from the Ministry of Economic Development, Trade and Tourism.

The points for your consideration are these: If just under half of the construction workforce in Ontario generates approximately $300 million a year in revenue for the WSIB, it seems reasonable to assume that the board is being cheated to the tune of at least $100 million a year, if not $300 million plus.

What we want you to do is think about that number in relation to income and other taxes in Ontario. There's no reason whatsoever to assume that the 52% of payroll that is not reported to WSIB is adequately reported for income tax purposes. Imagine how much the province is losing on personal income tax. Because tax rates are much higher than WCB premium rates, the missing amount for Ontario could be five times what is lost at the WSIB and that could mean a shortfall in provincial revenue anywhere from $500 million to $1.5 billion a year or more. Then there is the employer health tax that may or may not be reported for those purposes, employment insurance, CPP and a host of other programs that are all short-changed. Besides the revenue leakage, a second point for your consideration is that the cost of construction, of course, gets driven up and that doesn't attract investors.

There are a number of solutions possible to our problem and many of them are being discussed inside our industry right now. One of them is to require reporting of all payments from contractors to subcontractors, compulsory certification or registration of workers, registration of all contractors, including the so-called independent operators, and so on.

The state of Victoria in Australia has done all of those things. It's an interesting study. We've got some literature on it if you are interested in reading it. They've led the way by requiring registration, proof of liability insurance and so on before a building permit is issued. In other words, you have to satisfy all the authorities that you are contributing your fair share. You register to contribute your fair share and then you get a building permit, or you have to give your notice of work, whatever, to the authorities one way or another.

Anyway, our purpose here is to present that problem to you, along with our request for attention to be paid to infrastructure. We're happy to answer any and all questions you have.

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The Chair: Thank you very much, sir. We will start with the government caucus.

Mr Rollins: David and David, I've got two questions I would like your opinion on. With regard to the out-of-province jobs we hear about continually, particularly from some of our members who are very close to the Ottawa area, that come in from out of the province, have they some influence on your construction people? Do you have that concern too?

Mr Surplis: I don't know if it's a concern. We have never as an organization taken a stand against workers and contractors coming from anywhere. In other words, we want to bid on jobs where they are and we have to accept their bidding on ours.

There is an interesting side aspect to it and David will explain it to you. It's about non-payment of WCB when some of them come in here.

Mr David Frame: The accounting we've had from the former Workers' Compensation Board is that as much as 16% of the payroll that's reported to the board for construction is not collected. When we have asked them the reason for that, they've reported to us that the number one reason is contractors coming in from out of province, doing a job and leaving before that is paid. Until Bill 99, they had no way of collecting that. Bill 99, which has just gone into effect in the last six weeks, does give them the power to require payments up front. I don't know if they're going to be doing that or not.

Mr Rollins: We sat here the other day and heard a very passionate presentation by a gentleman from Delta Engineering out of Ottawa. He said the infrastructure money we were wasting was the biggest boondoggle that was ever taken part in. He believed all municipalities could start and earn the right to raise their own capital and everything. He felt it was very misused. I take it you don't support that.

Mr Surplis: I'm sorry, I don't have the benefit of knowing exactly what the gentleman was talking about. If he's talking about municipalities implementing a full cost recovery program so they can run their own capital expenditure programs, that would be fine with us. If that's what he was saying -- I'm not quite sure what he was saying. We sure as heck don't see any boondoggle in upgrading water and wastewater systems or roads or any of those things. We think they're all investments.

Mr Rollins: He was pointing out to us that there seemed to be a large amount of mismanagement in that system. It's only one person's opinion. But I wanted to ask you that.

Mr Baird: Thank you very much for our presentation. We heard from an assistant deputy minister at the Ministry of Finance at the outset of these hearings. I'll just quote:

"On the business side, real spending on plant and equipment was up 6.4% in the third quarter. That's the quarterly rate, and that matches the 30% increase at an annualized rate that you saw on the previous slide. That corresponds to business confidence that remains near record levels."

Can you maybe comment on the confidence level of your industry and whether you think the policies of the provincial government have increased confidence and have made things better than they were in 1995?

Mr Surplis: In a nutshell, yes, they have. Construction is a derived demand. We do almost nothing on our own. We have to have investors. They're the ones with the confidence. They want to build something, expand something, move to Ontario, whatever it is they want to do. We don't do that. We get involved to do that, to fulfil those desires of those investors. For eight years, we haven't seen very much. Normal cycles: Everybody knows about the cycles in construction. We've had a long trough, unfortunately, about eight years long. It's just starting to turn around in the last few months, which must, I agree with you, reflect better confidence on the part of investors who want to build something, add to something and so on. We're quite hopeful of seeing many billions of dollars extra work in the next year or two. All the forecasters suggest that's going to be the case.

Mr Baird: Just from my own view, you can see the return of that endangered species the crane coming around this city and my own community in the Ottawa-Carleton region.

Mr Kwinter: Mr Surplis, I want to pursue this revenue leakage. I don't quite understand. Are we talking about the underground economy?

Mr Surplis: Largely, yes. That's what it's usually called, most of it anyway, but a lot of it actually is, as we're finding out in some of our research, unwitting. I was talking to a contractor one day who truly didn't believe he had employees. He thought he was hiring independent contractors and therefore wasn't paying any deductions for them at all. He gave them a paycheque at the end of the week, but he thought they were independent operators. I think, and I stress the word "think," that by any WCB or WSIB test or Revenue Canada test or anything else, that person would be defined as an employer, responsible for paying all those deductions. He wasn't trying to skip out of anything. He was just chatting away and said that's the way it was and that's the way he did things. I don't know if you'd characterize him as being in the underground economy; it was certainly not knowingly.

Mr Kwinter: The reason I'm asking the question is that in your presentation you say that Statistics Canada reported that there were 267,000 workers actually employed in construction in Ontario. You know that by federal law, every employer must respond to Statistics Canada inquiries. You fill out the forms and you send them in: You have so many full-time employees, so many part-time employees, all of these things. That indicates to me that somebody is filing that information with Statistics Canada saying, "We have these employees." You're saying on the one hand they're telling Statistics Canada that they have these employees, but they're not telling what is the successor to the Workers' Compensation Board, and by extension they're probably not telling the CPP or provincial income tax, federal income tax, all of those things.

I don't understand. I remember that this committee had hearings on the underground economy and people would come in and say, "Notwithstanding that Statistics Canada says there are 267,000 people working, there are probably 500,000, but they're not reported." What I don't understand is why on the one hand you have companies reporting employees and on the other hand it's shown that WCB only has half of those. Can you explain that?

Mr Surplis: Partly, yes. Obviously, there is no cost associated with reporting to Statistics Canada. They don't impose any rates or taxes or levies or anything like that. It doesn't cost you anything to respond to a Stats Canada request.

Mr Frame: We participated in a study that went to the former Workers' Compensation Board a good eight years or so ago, and the study at that time indicated about a 59% participation rate. We were alarmed at that time and a few things were done. The board at that time seemed to throw its hands in the air and say, "We don't know how we're going to get them." The more recent study indicated that the participation rate had shrunk by another 12%, and in that time GST and all sorts of things have come into being.

It's our observation, though, that it's happening just because there's nothing being done, in the case of the Workplace Safety and Insurance Board, to bring people into the system. They don't know you exist unless you report to them or unless a worker has a workplace accident, comes and registers with the board to get compensaion, and somehow they match you up with the employer. But from what we can see, a lot of that matching isn't even happening.

Mr Kwinter: That begs the question, if the matching doesn't happen, do they qualify?

Mr Frame: Oh, absolutely. The act is clear on that.

Mr Kwinter: So the worker qualifies regardless of whether or not his employer has been paying the amount, even though he may have been deducting the employee's share.

Mr Frame: That's exactly it.

Mr Surplis: And if you can't find that employer, the costs for looking after that injured worker, who gets all that he or she or should, are borne by the other employers, the ones who are reporting.

Mr Kwinter: Your industry has long lead times; you don't suddenly start building today. What are the prospects? What do you see? Are there projects in the works that look like there are going to be greater employment for the people in your industry?

Mr Surplis: It's just beginning to start. There was a dip when the trade centre got finished, when the expansion of the convention centre got finished and a great part of the 407 got finished, just in the Toronto area. Down went the numbers a bit. The airport is just getting started; the whole rehabilitation, reinvention really, of the Toronto airport is just starting. There is perhaps the Bay-Adelaide centre, a number of other things. The prospects are good, according to senior members in our industry.

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Mr Pouliot: Gentlemen, welcome. I'm looking at your page 5, and like my friend and distinguished colleague Mr Kwinter, I too am quite surprised at what is being revealed. The figures you state are nothing short of startling, to the point where personally -- well, I believe them because you present them; you are the experts in the field and you know of what you are talking. Nevertheless, I'm appalled. I know of a couple of circumstances where you have a single person -- in these two cases, it's single mothers on general assistance, on welfare; they're the less fortunate. I can assure you that the present government exercises a diligence, an iron-fisted diligence like never seen before, so I would assume that the same diligence, the same style of operation, because we're talking about tax dollars, would be spread across the board. That's commonsensical. We see no prejudice if we do it across the board and fairly. But I believe you.

Is it because the "black market" is an invitation to bypass all kinds of rules and regulations, or is it the greed for money? I agree with you that you cannot have a level playing field in the bidding process if you start behind the proverbial eight ball, which is not fair. You start as a loser. In this kind of race, you don't even finish last.

You have gone as far away as Australia, the future republic, to indicate to us that they have a better mousetrap, a better system. Would you be in favour of having a compulsory insurance system -- long-term disability insurance, life insurance -- that carries every worker? I'm not the one saying this. I don't profess that philosophy. However, I must ask you this. Because most employees have some insurance policies, the cost of extra coverage would be between one eighth and one quarter, I heard -- that's quite a range -- of what the cost is right now from WCB. It would be just as easy to monitor the ticket, the compliance, as the WCB system is now. I'm a believer in WCB -- I must repeat this -- although I do of course readily recognize that the system is far from being immaculate, that it needs some fixing big time.

What do you see as the solution where everybody gets a fair playing field without spending undue resources, which no government has, and having Big Brother over your shoulder every step of the day?

Mr Surplis: To give you a very quick answer, because I know you're running out of time, the first thing, and it has to be underlined, is that there isn't one penny of tax money in the WCB or the WSIB. That is all employers' money. That's why we prefaced our remarks by saying it doesn't really impinge on this committee, the WCB, because it's a separate entity. But as to other forms of insurance, David's the expert on that.

Mr Frame: We took a look at that general proposition when the royal commission was beginning to start off, and that was part of their terms of reference, I believe. I guess our major problem with that was that we knew how difficult it was for the then board to administer the act as it was without greatly expanding that reference. We had problems projecting how the board could fairly pay for a much broader system when it already was having significant problems -- you know about the unfunded liability etc -- paying for the system that was there. It's our opinion that the financial problems of the WCB had to be cleaned up before any consideration could be made to expanding it.

The Chair: Thank you very much, gentlemen, for your time and your submission.

ONTARIO FARM WOMEN'S NETWORK

The Chair: Our next presenter will be the Ontario Farm Women's Network, Ineke Booy. Thank you very much for your attendance.

Ms Ineke Booy: Thank you for inviting the Ontario Farm Women's Network to make a presentation to this pre-budget consultation hearing. The Ontario Farm Women's Network is a provincial network of farm women who act together to identify and address issues that are important to farm women, farm families and the family farm. The issues that the Ontario Farm Women's Network feels should be addressed in the upcoming 1998 provincial budget are as follows: green programs and initiatives, health care, education, rural youth job strategy, the community reinvestment fund, volunteers, and rural and farm child care.

Green programs and initiatives: As the government direction is to increase trade and exports, it must recognize and maintain green programs that will ensure our industries are competitive with our trading partners, who are utilizing their green programs to the fullest extent. They are not only maintaining their existing programs but are actively developing new ones.

From the base period of 1986-87, used in the GATT agreement, until 1995-96, the US government has increased funding of green programs from $26 billion to $46 billion, almost doubling the expenditure. Examples of US green programs include the food stamp program and school milk and meal programs.

There are school programs in place in Ontario; for example, Breakfast for Learning. However, they are privately funded. If such programs were to be funded by the Ontario government, they would then qualify as green programs under the World Trade Organization and GATT. This would be a direct investment in our future through our children.

High levels of these support programs in the United States and the European Community make it extremely difficult for Ontario to be competitive. This must change. Agriculture is one of the largest economic sectors in Canada, contributing much to the gross domestic product. If we are to be competitive in the global marketplace, we need to have the same tools, support programs and opportunities as our competitors.

Health care: Health care is of vital importance to the residents of Ontario. Hospital closures and cutbacks in services have proceeded at an alarming pace. Are they all in the best interests of the population, or is cost cutting the bottom line, regardless of the impact on basic health care for the population? Short-term care and home care are becoming a necessity since hospitals are releasing patients very early. We do have a moral responsibility to society.

Have there been any long-term projections done for the health care system? If not, please consider taking a good look at where we will be in five years and 10 years.

Education: The educational process in Ontario appears to be seriously flawed. Students are entering post-secondary institutions with insufficient grammar and language skills. Professors are spending valuable class time, paid for by the students, teaching basic grammar skills. It is unfortunate that this situation has been allowed to develop. The current curriculum must be reviewed, revised and possibly harmonized not only across Ontario, but across Canada. The fundamental skills of reading, writing and math must once again become the basis of our educational programs. To ensure a well-rounded education, music, art, science and Canadian history should be included in compulsory classes.

Children and young adults with learning challenges are not being integrated into regular classrooms as much as they should be. A major stumbling block is the lack of teacher assistance and the tools and equipment which would allow these students to function to the best of their abilities. If our teachers are to continue to challenge these special students to excel and build on their skills and strengths, there must be workable solutions in place where required. Funding should be available to ensure these special children can develop as fully as possible. Every child has the right to an education according to their abilities.

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Rural youth job strategy: The rural youth job strategy, which is in the planning stages, could become an excellent program. Its aim of providing services and creating an environment to make rural life attractive and viable for young persons and young families is laudable.

Community reinvestment fund: Is the community reinvestment fund to be permanent? If it will be gradually diminishing and finally disappearing, as many grants have done, some municipalities, particularly the rural ones, will be facing large future expenditures with little or no urban or industrial tax base to help pay the costs. Is there any allowance in the budget to assist these municipalities in the future?

Volunteers: Volunteers are becoming a vanishing species. Organizations such as the Ontario Farm Women's Network, which rely on volunteers to carry on the business of the group, are experiencing rapid burnout of their executive and members. Too few people are trying to fill too many vacancies left by the withdrawal of provincial funding. Junior Farmers and 4-H teach our farm and rural youth the ethics and pride of working in the agriculture sector. These organizations, among others, should be supported by provincial dollars.

This is becoming a serious situation. What will the future fate of these groups be? Can our society reach its full potential, or will we be slowly but surely regressing to Third World country status? Volunteers give freely of their time and energy. However, the costs of operating an office are often beyond the scope of their finances. Is there any consideration being given in the budget to basic funding for such organizations and groups?

Rural and farm child care: Rural and farm child care is a necessity for the safety of the children on operating farms. Current day care programs are not feasible in many situations, as the operating hours of the centres do not have the flexibility required during peak cropping and harvest seasons. Leaving children with neighbours is usually not an option, as they are likely involved in the same work.

There have been several child care pilot projects during the past few years, which indicated that there is definite need for this type of service in rural areas. We feel the government should seriously consider funding rural child care centres, especially during peak seasons of the year.

These are the issues that the Ontario Farm Women's Network feels should be addressed in the 1998 Ontario budget. Thank you for providing us with this opportunity to express our concerns to you.

The Chair: Thank you very much, Ms Booy. We have approximately seven minutes per caucus, starting with the Liberal caucus.

Mr Kwinter: Ms Booy, I'm not quite clear when you talk about green products or green programs. I know in my mind what green programs are, but when I read your brief, you talk about things like food stamps, school milk and meal programs as being green programs. My interpretation of a green program -- and that's why I'd like you to explain it to me -- is one that is ecologically and environmentally friendly. I'm just trying to make the connection between food stamps, milk, breakfasts, meals in schools and how that relates to making us competitive with green products or green programs. Could you explain that to me?

Ms Booy: I can explain it from my personal standpoint. I am an errand boy -- girl, actually -- here. I'm not on the board. I have not been involved in the development of this brief; I've been asked at the last moment to present it. I myself was surprised as well. Green programs, to me, are the environmental farm plans etc. I would really support those, but I assumed when I read this that there was something I did not know and that these were considered green, that these breakfast programs would be considered green and acceptable under the WTO and the GATT. I have the same concern, actually. I'm sorry I can't answer that. I'll take it back and we'll --

Mr Kwinter: I'd like to know what it is.

Ms Booy: Definitely, if I could add that here, I have recently been in Europe again, and the support that farmers get in general for grain programs is tremendous. It is active support from the side of the government to look at alternatives to our current farming practices that give trouble in the environmental field.

Mr Kwinter: I would assume that when we talk about these green programs as related to farming, we're talking about herbicides, insecticides, things of that kind, all the things that --

Ms Booy: Yes, and alternative practices of farming. That's an area I personally would support very highly, because I know it is very difficult for farmers to look at other options, because there is no support of all, not from the side of the scientists in the universities, especially as this whole industry is very much directed by corporations.

Mr Kwinter: Also, there is a reference to the rural youth job strategy. Can you tell me how that relates to farming communities and what benefits that could provide?

Ms Booy: The relationship there is that it relates very much to quality of life in the countryside. If there are no jobs for even our farm youth -- they cannot all take over the farm or work on the farm -- then it strengthens the community if we can keep our children and keep people in the rural community. It's not only that there have to be jobs in the first place but also that they will be hired and that rural communities and rural businesses are being strengthened to expand.

Mr Kwinter: Can you also tell me about the situation about farm child care? Again, my perception is that if there is one place where you would have an adequate place to look after your children it's on a farm. As I say, that's just my perception.

Ms Booy: If you are in the lucky situation that you have grandparents in the area or aunts or uncles, they can take care of the children, but just as in the urban situation, that's often not the case. People live all over the country.

The problem on the farm is that you cannot do two things. Often the farm environment is a very technical, very industrial environment where there are many dangers, not only from the animals but also from all the running machinery, belts and everything else, so it is not a place for children to be. We have had high child mortality on farms, and it's very difficult to work and to take care of children at the same time. It would be the same as if you had your children here running around. You cannot focus on what you are doing while you have to watch your children, especially not in dangerous situations.

The problem on the farm is that regular day care centres are open from 8 to 5. Sometimes when it's haying time, the hay is dry at 1 o'clock and you have to go till 9 o'clock at night, so there have to be flexible hours, flexible schedules.

Mr Pouliot: Madame, thank you for your presentation. I read your mandate, and I'm quoting: "The Ontario Farm Women's Network is a provincial network of farm women who act together to identify and address issues that are important to farm women, farm families and the family farm."

True to your presentation, you present us with a potpourri, an ensemble of what is right but also what needs to be improved or fixed. You talked about the green programs initiative and then health care. Then you go on to the very real subject matter, education, community reinvestment fund. Then you touch on a group which is disillusioned and tired by way of abuse, those volunteers who we all agree, and we wonder, if they can round out the month, if they can go another mile.

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But if I were to take other presentations with somewhat of the same mandate and I was to say it's society in general, it is not farm, it is not rural, it is not urban, how do you associate -- because I was listening intently when you were presenting. I turned over to the expenditure estimates and I think I made a mistake. I need your help. I looked to agriculture and I was unable to find any money allocated for health, any expenditure allocated for education, etc.

I wonder when you say you represent the Ontario Farm Women's Network. Aside from the rural youth temporary summer jobs, or whatever, placement program, you come to this committee with a presentation which is for all Ontarians, but your reason for being, with respect, what I respect, is that you represent the Ontario Farm Women's Network. When I say I need your help I need to be educated. I don't know the difference between -- when it comes to health, I'm not that sensitive, by way of ignorance -- your organization, its specific and special needs, and that of society as a whole.

Ms Booy: I would like to comment on that. We as farmers are such a small percentage of rural communities that it's impossible to only look at pure farm issues, because we look at the quality of life in our communities. By the way, we also presented the rural child care program, which is very specific, which you didn't mention.

Mr Pouliot: To me, Madame, everyone has an accent and I find yours absolutely, well, interesting and intriguing. Do you know about farms in Europe, for instance, elsewhere? How would you compare their sensitivity and the incentives associated with farming with what you find now in Ontario? You would be able to draw a comparison.

Ms Booy: The country I'm more familiar with is the Netherlands and, since it's a very small country, the distinction between rural and urban is hardly there; it's all very close together. But what I noticed, especially the last time I was in Europe, is the support and the development on the real green programs and initiatives. They have very forward-looking people in the agriculture department, developing programs and having money and people available to educate people on what's happening to the environment and how we can change that.

The Chair: Thank you very much. Mr Arnott is first, I believe.

Mr Arnott: Thank you very much for your presentation. I thought it was excellent. I must tell you that the issues you've raised in your presentation are very consistent with what I hear from farm families in Wellington county. I don't think that would surprise you very much. You have contributed probably literally thousands of hours as a volunteer, haven't you, in community service and farm organizations over the years?

Ms Booy: Probably, yes.

Mr Arnott: I think your contribution has been very significant and I want to compliment you on that.

You mentioned the declining base of volunteers that we have. We still have outstanding volunteers; we just have fewer of them I think. I noticed that even at a 4-H centre I was at in Wellington county about a month or so ago, the numbers of 4-H leaders who are coming forward are just not what they should be. How do we encourage greater numbers of people to volunteer to serve on agricultural-related committees and other organizations that do good work in our communities? What would you suggest we do?

Ms Booy: It depends so very much on the organization. One of the things I have missed over the last years is, for example, 10 years ago we could involve the staff at the agriculture office to type something for us, to photocopy something for us, to serve a supporting role that was very helpful, partly with regard to time but also partly with regard to contact. They knew what we were doing and we knew what they were doing and there was more of an exchange there.

Now it has become so barebones that we have -- we still get to use the meeting room there but that's really it. There's no support from the local agricultural offices, and I really miss that. I think that would be a great help. It makes a lot of difference if you have to type it all out yourself, if you have to do it all yourself than if you have some support there in matters of time.

Mr Arnott: I think your two comments on rural health care and rural child care are very compelling and the committee needs to follow up on those with the Minister of Finance. You probably are aware that the Ministry of Health has a rural health care framework upon which to apply to any hospital restructuring that takes place, and that's something we're working through. But the child care point I think is particularly compelling.

Nothing breaks my heart more than reading about a child who has died in an accident, especially a farm accident, because those could have been easily prevented. Yet, as you say, there are times of the year when conventional day care just isn't sufficient to meet the needs of farm families. I would agree with you that there's work for the government to do in that respect. There have been pilot projects for rural child care that I'm sure you have been aware of. What conclusions would you draw from the pilot projects that have taken place in what needs to be done?

Ms Booy: The pilot project that I'm aware of has been very successful. I also know that there were other possibilities tried out, and that is to have students come to the house and have a network that you could phone up somebody, or students could come from the bus to the farm and babysit the children, which would also be a very flexible way of doing things. Sometimes these things are done on an individual basis, but if such a program is supported, it brings it to people's attention as well.

Because many people have also grown up on a farm they think, "Oh well, I can take care of my child here." But often we have the same way, as some farmers are not very careful with letting others ride on tractors or whatever. We have to make people aware of that. It may not have happened to them yet but it could happen to them tomorrow, so these things would be very helpful.

Mr Wettlaufer: Ms Booy, thank you for being here today. You raised a couple of questions which I would like to address. In the health care area you ask if cost cutting is the bottom line and say that hospital closures and cutbacks in services have proceeded at an alarming pace. Then you go on further to say, "Have there been any long-term projections done for the health care system?"

For 15 years we've had a crisis in health care in this province. It is just coming to the fore now, however. These things do not happen overnight. They come as a result of years of negligence and lack of planning and that is what has happened now. Our government is being blamed for cutbacks when in fact we're spending more on health care now than has ever been spent by any government in Ontario.

The health care system is changing because the demographics are changing in Ontario. We have an aging population. The majority of the population will be over age 50 within another five years. We're going to have more and more seniors who are not going to have anywhere to go. Palliative care and long-term care are going to be the needs of the future within a decade. We are going to need more and more of this care in 15 and 20 years and it must be planned for now. But again, as I said before, that won't happen overnight either. We have to make the plans for it now. We have to make the changes necessary now.

Where we see that there are going to be fewer hospitals needed, we won't have the hospitals. We will have palliative care and long-term care and home care. That is being planned for in the Ministry of Health right now. There are changes taking place. People feel very uncomfortable with it. I feel very uncomfortable with change. It's human nature. But the changes are necessary or we're going to have a health care system whose costs will burgeon right out of control within only a few years.

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The education system: I agree with you that every child has a right to an education according to his or her ability. That is so important. But do you know that the rural boards of education are the ones that have suffered for years and years? We have high-tax areas like Toronto whose industries do business elsewhere in the province but pay no taxes anywhere else in the province. They pay taxes here in Toronto.

Mr Pouliot: Mr Chairman, this is provocative indeed.

Mr Wettlaufer: No, hang on.

The Chair: I'm sure he's getting to a question.

Mr Wettlaufer: We're talking about this large property tax base which is here in Toronto and it is not in the rural areas, whose cost to educate a student is anywhere from $4,000 or $5,000 a year to $5,500 a year or, in the northern areas, $3,600 or $3,800 a year. In the rural areas the students do not have the resources, they do not have the textbooks, they do not have the computers they do here in Toronto. These are things that need to be planned for and that is what our government is trying to do.

The Chair: Thank you very much, Ms Booy, for attending and for your presentation. We appreciate it.

Mr Phillips: On a point of information, Mr Chair: When is Hansard available? Can we get Instant Hansard for these proceedings?

The Chair: I think within 24 hours but it has to be requested.

Mr Phillips: Can I have a copy of Instant Hansard for Friday and today, please? Thank you.

The Chair: Anyone else? Thank you.

ONTARIO ASSOCIATION OF CHILDREN'S AID SOCIETIES

The Chair: We're a little ahead of time here, but the next presenter is the Ontario Association of Children's Aid Societies, Ms McConville and Ms Cresswell. Thank you very much for attending.

Ms Mary McConville: Thank you, Mr Chairman, for the opportunity to speak with you today. I'm Mary McConville and I'm the director of the Association of Children's Aid Societies. Diane Cresswell is not going to be speaking today.

The Association of Children's Aid Societies has appeared before this committee on many an occasion and we've attempted to provide the government with advice about a broad range of issues that are important to children and families and in particular we've tried to provide advice about your child welfare program for the province.

Since we last appeared before this committee there have been some very important changes in child welfare. There has been intense and growing public interest in the Ministry of Community and Social Services and the children's aid societies themselves due to a series of inquests into child fatalities and also because of the release of the Ontario Child Mortality Task Force report.

In spring 1996 the association and the chief coroner's office for the province, with the support of the ministry, convened the Ontario Child Mortality Task Force to review and to analyse information about the issue of child deaths. We tried to collect baseline and accurate data about the number of children who have died over a two-year period who were known to the children's aid society system. We examined the coordination of efforts among organizations that work with children at risk and discussed the prevention of similar deaths in the future. We examined training issues for service providers and also the child welfare sector's ability to assess the risks that children face, especially when they're in their own homes.

In September 1996 a press conference was held with the chief coroner and the association to announce the project, and also to make a couple of other specific announcements, namely, that a survey would be conducted of child welfare deaths and that there would be an expansion of the coroner's committee which reviews child deaths in the province to make it a multi-disciplinary committee. The coroner announced five inquests into the deaths of children who were known to children's aid societies in the province.

The Ontario Child Mortality Task Force released its interim report in March 1997, and a total of six inquests have been completed in the province as of February 1998.

In the spring budget the Treasurer announced the following: "The protection of children is a priority for this government. The government has supported the child mortality task force and welcomed its preliminary report to the public.

"As an initial step, the budget provides $15 million to respond to the task force and to protect vulnerable children.

"We know that more must be done. The government looks forward to the final report of the task force and the recommendations from inquests currently under way. We are prepared to take the necessary steps to ensure that children are protected."

Just for your information, ladies and gentlemen, we have included in your package all of the inquest recommendations which have come from all of the juries to date. They are in the largest package at the back. You also have a copy of the child mortality task force report, in case you didn't have a chance to read it, which contains the specific recommendations out of it.

The impact of the recommendations of the task force and the inquest juries have resulted in a more sensitive public, a public that is more aware of the issue of child deaths and children at risk. We've seen a dramatic increase in the number of referrals to children's aid societies from the professionals who work with children every day, such as physicians and public health nurses and teachers. The whole environment has had a tremendous impact on every aspect of child welfare work, especially the front-line workers who are continuing to struggle with, in many cases, unmanageable caseloads.

Despite these challenges, we are happy to say that many positive steps have been taken to date and we'd like to commend the government for this. In the summer of 1997, the minister, Janet Ecker, announced what she refers to as the child welfare reform agenda. This agenda responds in part, not entirely, to many of the recommendations of the juries who sat on these inquests and also to the child mortality task force report. We've seen the following things happen:

The minister has appointed an outside panel of experts to examine the legislation, something we feel is really critical.

The minister has made it policy that every children's aid society in the province use a standardized risk assessment methodology. People were using different tools up to that point.

We've had a commitment to design a comprehensive information system and an audit of over 3,000 protection files.

She's also announced the development of a new funding framework.

I'd like to talk about the legislation for a minute, because this is a mandatory system. It's governed by legislation and so legislation is absolutely critical in terms of how the system operates with respect to its perceived purpose and its relationship with others. The task force and the inquest juries and your children's aid societies themselves are identifying a number of deficits with the present legislation, and they include the following:

We do not have a specific definition of neglect in the legislation.

The legislation doesn't recognize a prior history of neglect or of parenting deficits as grounds for protecting a child.

We have no reference, as is the case in other jurisdictions, to a child being exposed to repeated domestic violence as grounds for being in need of protection.

We also have a piece of legislation that's completely silent on the issue of sharing of information among all the parties who need to talk to one another when a children's aid society is trying to investigate a case.

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These are but a few of the legislative amendments that we think need to be addressed. We also recognize that if the child welfare legislation is to be substantially altered, there may very well be a change with respect to the number of referrals and the expectations of the public in terms of a response.

The societies themselves some years ago recognized that child protection work was developing a growing expertise in the area of risk assessment. These are tools that have been developed by researchers that assist social workers in making their judgements about the level of risk a child is facing in any given situation. Unfortunately, there was an absence of ministry policy in this area, so what developed was essentially many professionals who were eager to use these tools using different tools. Consequently, there was no standardized approach to a very important piece of the investigative component of child protection work. This is an area that the inquests and the child mortality task force recognized as critical, so we now have a policy in place that requires standardized tools and the ministry has committed funds for training and implementation of these tools across the province.

As of October 1 we're doing blitz training of over 4,000 people from one end of the province to the other to make sure that our staff in Ontario have been trained in the use of the best tools that are available to assess risk. We would like to say, though, that the ongoing implementation and administration of these tools across the system is going to require the dedication of additional resources that we have not yet identified.

Many people have been intrigued by this issue of a comprehensive information system and it has come as a surprise to many people, I think even people in government itself, that the children's aid societies of the province can't talk to one another through technology. Each children's aid society has its own information system, but we have no capacity. We do not have a wide-area network. Consequently, children's aid societies are not able effectively to check with one another whether a case has been serviced in their area. The police, of course, can't do the same, or the coroner's office, or some of the other critical partners that we work with in managing cases.

The introduction of a comprehensive information system that is designed to support the front line and will essentially allow the system to communicate effectively and share information is vital to improving our capacity to protect children and also vital to improved systems management, from both the ministry perspective and an organizational perspective; that is, the societies themselves.

In 1997 the ministry awarded a contract for the design of this system. We're looking forward to the implementation of a fast-track approach to sharing information and a comprehensive system over the next three to four years.

The minister also announced, as part of her reform agenda, that she would conduct an outside review of the ministry's responsibility for its child welfare program, as well as conducting an audit of child protection files. It was the minister's view that both responsibilities, those of the ministry and its transfer payment agencies, needed examining and we heartily agree with that direction.

The children's aid societies are subject to an audit of cases on a routine basis every two years. Unfortunately, we don't have standards in the province that apply to neglect cases; we only have standards that apply to physical abuse cases. Consequently, the audits that have been done routinely over the last few years have essentially neglected a large portion of the child protection caseload. So the minister's efforts in conducting an audit of 3,000 cases was in part to examine how cases of child neglect are being handled, with a view to improving standards.

The child mortality task force found that in over 70% of the deaths of children that occurred in a two-year period, child neglect was one of the primary reasons for service, as opposed to child abuse. I think most people link in their heads the physical abuse of children and deaths of children, as opposed to neglect. It's clear that child maltreatment in its broadest sense is lethal and needs to be attended to from a quality of service perspective.

With regard to the funding of the societies, we've appeared before you on many an occasion over the last several years trying to contend with cuts to services and changes in service demand. In January of this year, the minister announced the allocation of a portion of the $15 million that was announced in the spring budget to the societies. This money is essentially going to replace about 181 front-line workers and about 39 supervisors, hopefully over the next two months, if we can manage to hire that many people that quickly.

The committee needs to know that the system has lost 455 permanent positions over the last three years, and from 1991 to 1994, 300 additional positions were lost. Through something called contingency funding or emergency funding, societies were able to hire contract workers for about 120 staff in 1997. That money has not in fact gone anywhere near replacing the loss of those positions in the system. I just wanted to give you a sense of the impact of the cuts on staffing since 1991, because it has only partially been addressed by the money that was put in place in last May's budget.

In addition to the impact of cuts, your child welfare program has suffered for years and years, since the early 1980s, from a completely irrational approach to funding. The service planning process was meant to be proactive; it is not. We have not had an adequate method of responding to legislated child welfare review hearings for the last several years. The ministry has been relying on this pot of money called the contingency fund, which is essentially a recycled pot of dollars, to try to keep the lid on its child welfare expenditures since 1993. Previous governments have tried to come to grips with the approach to funding of child welfare, but really haven't dealt with a major rethinking of that and have just responded in a very piecemeal fashion.

I'd like to mention foster care for a moment. You've read a good deal about that in the paper of late. In the late 1980s, our foster care system was in serious trouble. We were losing foster parents at a rapid rate. Foster care payments were extremely low. At that time the Ministry of Community and Social Services -- this would be in 1989 -- announced an allocation of $8 million to try to strengthen the children's aid societies' foster care system, because it really is the backbone of child welfare once a decision has to be made to take a child out of his or her home, which is a last resort, of course.

That money was used to provide staff to support foster parents, implement a province-wide training program and also modestly improve the rates they were paid on a per diem basis for the children's care. That problem of foster care resourcing was supposed to be addressed through a second phase of funding that did not occur. What occurred in the 1990s, of course, was an erosion of resources. So much of what we had gained in trying to strengthen our foster care system has been lost over the last three to five years.

Briefly, to turn to our crown wards for a moment, those children for whom the children's aid society is their long-term parent, we have money in our budgets to pay for room and board for children who are 18 and over and who are able to continue on with their post-secondary education. The societies have no funds, though, to pay for the costs of university or college or specific training for these children, and rely on fund-raising and bursaries, and there's simply not enough money to pay for the post-secondary education for many of these youth. We're finding that many of them are having a hard time sustaining their effort in post-secondary education because of their financial struggles and also because they're carrying such a huge emotional burden based on their separation from their families, and many have a terrible history of abuse. We're very concerned about the adequacy of our support to that group of young people as well.

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We'd like to commend the government again for the allocation of $15 million in May and recognizing that this is a beginning step towards addressing these kinds of stresses on your child welfare system. The minister has announced, in addition to the $15 million, the establishment of a funding framework project. We hope this is our opportunity once and for all to put a rational approach to the funding of your child welfare program in place, and I'd like to identify what we think some of the key components of that framework should be.

We need a comprehensive information system. We need to know how the money is being spent and to be able to analyse service trends in order to support a funding framework.

We need to have workload formulae. There's no such thing. Your child welfare workers in the province can carry anything from 50 cases per worker to 20 cases per worker and everything in between. There are no recognized workload guidelines for the child welfare staff.

We also need a mechanism to respond to increased case volume. This is your children's service that can't turn away cases. If a case needs to be investigated, the society can't turn it down or turn it back, so there has to be some kind of method to respond to the reality of caseloads in the system.

We also need to have a rational approach to the funding of prevention and support programs. Regardless of the fact that many children need to come into care and some of those children need to remain permanently in care or move on to adoption, any child welfare system needs the capacity, first and foremost, to strengthen families and to provide direct services to children at risk in their own homes as a first measure before the state becomes more intrusive. We have lost a good deal of ground in terms of our service capacity to try to keep families together.

We also need to look at an equitable approach to funding the societies. On a per child capita basis, you are funding your children's aid program with a spectrum like this: We have got one society that's getting a rate of about $48 per child capita, all the way through to about $400 per child capita, and there's absolutely no rationale for that kind of discrepancy.

Last, we feel that any new funding framework has to have as part of the framework a quality assurance system that's based on standards and outcome measures. The government needs to know what it's getting for its money and whether services are effective, and the child welfare service providers need to adhere to standards that are recognized by experts in the provision of these services.

To close, and before I sit for your questions, I would like to acknowledge the societies of the province, which have worked terribly hard and under extremely difficult conditions over the past 18 months to keep children safe. We believe that a long-term investment and a commitment to strengthening your child welfare program is needed both to restore adequate service capacity and to improve the effectiveness of the system.

I hope my remarks today and the material we have provided you with in the package -- and of course we have much more if you want it -- will help you put this issue in some context, because you are going to have to be making some really tough decisions, as we know, about budget and priorities over the next while. Thank you.

The Chair: The questions will start with the NDP caucus. We have about three minutes per caucus.

Mr Pouliot: Thank you, Madame. You are kind and ethical and generous in your comments. On the one hand, you thank the ministry for the $15 million, and in the same breath you go on to say that 300 service providers were let go, and from 1995 an additional 455. You have used terminology vis-à-vis workloads such as "unmanageable." You can't commend the government there. The way you see the future, unless there is a change of philosophy, I don't sense much hope for an improvement, but one has to remain positive. I can readily acquiesce to style.

The current fate of Ontario children, happy that the minister appoints or provides someone -- I'd like so much to believe that this is not a deliberate, systematic scheme. Logically, to me, it seems you don't cut the funding and then appoint what's wrong with the funding. You appoint something in its transition or to make it different or somewhat better and then you address your funding. But I guess it's a different style.

Now I'll get to the question. We have someone like yourself, with expertise, masters, people working their craft. Dr Paul D. Steinhauer, of considerable renown, this morning talked to us about what's ahead: 26% of our young population, the future of the province, our country, is in difficulty right now. He talked about the reversal in stats, the increase in teenage pregnancy. He talked to us about cutbacks of essential services, cutbacks at the human dimension level. And this is in a time of prosperity. Imagine when the cycle hits. He said to us, "Nothing else matters."

When I blend your presentation with his, I sense an urgency, that it's not too late, good things are being done, but we need a plan of attack, some sincerity and funding to associate the resources with the need. We have to match them. My question is simple, and as always, you shall be positive indeed. What is the morale? Do people sense that they know where they're going? Do they see themselves being better off next year in terms of their ability to cope with the system, and do they look to the future with confidence?

Ms McConville: It's a very mixed picture. I think the front-line workers especially are communicating that they are under tremendous stress and are very worried about their future and their ability to carry out their responsibilities unless their workload is reduced. At the same time, they have some hope and believe that the government is going to follow through with its commitment to properly support its child welfare program.

Mr Arnott: Thank you for your presentation. I must say that the people who work for family and children's services in Guelph and Wellington county do a magnificent job, at times under very difficult conditions, and I hope that message gets back to them and others who work for children's aid societies across the province. We do appreciate the outstanding efforts they put forward.

Earlier today we had a presentation by Dr Paul Steinhauer. I'm sure you've heard that name and are quite familiar with his work.

Ms McConville: Yes, I know him well.

Mr Arnott: He said, "It is far more effective and more efficient to prevent child abuse and neglect and their complications...than it is to have to deal with their consequences." I'm sure you would agree with that supposition.

Ms McConville: Absolutely.

Mr Arnott: What more should we be doing through our children's aid societies to prevent child abuse as opposed to having to react to it all the time?

Ms McConville: The sad thing here is that we were doing it until very recently. Child welfare in Ontario is rather unique, in Canada at least, in that it's a service that's run on a transfer payment basis by community-based agencies with community boards governing them, so we've had the benefit of tremendous community support. I haven't mentioned them here, but we not only have 5,000 foster parents supporting the system; we've got as many volunteers supporting the front-line workers as well. This kind of enriched service capacity and community involvement you don't find in systems where the government runs the service and it's a bureaucratic approach to things.

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But what has shifted in the last few years is that we've spent several years building up prevention programming that was targeted at your more at-risk population as opposed to the primary prevention programming. The children's aid system was building up a capacity to provide supports to families at an earlier stage, in partnership with their communities. These programs have been steadily eroded over the 1990s. What we're finding as a result is an increase in the number of children coming into care and more and more families disintegrating because they didn't get help soon enough.

We really need to design a community-based child welfare system that has a service capacity and that can intervene earlier, but also is fully integrated with a much broader range of support services to families including schools and our public health departments and so on. Just as we need a design on the funding issue, we also need a design on the service capacity and the integrated roles that everybody has to play to support children and families. The last thing we should be doing is narrowing the mandate of your child welfare program to that of policing agents who do nothing but investigate and offer no service. We have those kinds of programs in other jurisdictions, and they're extremely ineffective.

Mr Phillips: We too appreciate the work of the children's aid society and commend you for it. I have a couple of questions. We heard the other day about the need to establish some benchmarks, some measurements so we can have some sense of how well are we doing. I don't mean just in the area of working with children; I mean across the services that government provides.

You've used the phrase "a system in crisis" here. One of the problems is that "crisis" has been overused. I don't mean by you, but by so many people using it that sometimes, even though you say there's a crisis, we -- "we" being governments -- could perhaps ignore it because it's been used so often. Can you help quantify it for us and humanize it a bit so we have a sense of the magnitude of the crisis?

Ms McConville: We have a system that services close to 100,000 families a year and 163,000 children in those families. The system has to bring into its care about 20,000 children a year.

If I could put a face on who those families are, we're talking about families that present with problems of domestic violence; substance abuse, everything from crack cocaine to alcohol; usually families living in poverty and having tremendous struggles financially; families where mental illness is very often a key feature. Your typical child protection family doesn't present one of those problems but often presents all of those problems or some variables on them. These are extremely difficult families to work with. They usually have several children and move about, and they are often families, although not always, that are very resistant to the services that some of your more mainstream services in the community might provide.

It's the job of your children's aid worker to knock at the door of the family that doesn't want to see you or to sit down and talk about intimate things like domestic violence with someone who has the capacity to remove their children. That is the routine in the day of a front-line worker. There isn't a more difficult job you can do. These workers today are working with caseloads in many instances as high as 30, and in the worst-case scenarios between 40 and 50, with nothing between them and disaster striking if they're not on top of the risks those children are facing and if they're not in a position, because they lack the evidence, to remove children from a home.

Children's aid societies cannot do this job on their own. We need a system where your safety net service, the children's aid societies, are resourced properly, but also a system that reflects your recognition that families need a whole range of supports in their local neighbourhoods to adequately raise their children. There are many, many families in our communities that are just not capable of doing this job on their own and they never will be. That's a reality we have to accept as a society.

The Chair: I have to interrupt you there, Ms McConville. I thank you very much for coming and I commend you for the way you stated the case on behalf of the front-line workers. You forgot to mention, though, what percentage of those calls come between 9 and 5 and what percentage come after midnight.

Ms McConville: Actually, they come round the clock.

The Chair: I know they do. Thank you very much.

ONTARIO PARENT COUNCIL

The Chair: The next presenter is the Ontario Parent Council, Ms Laing, chair. Welcome. Please introduce your associates.

Ms Mary Margaret Laing: I certainly will, and thank you for having us. With me are Ken Slemko, the chair of the education policies committee of our council, and Martha Harron. Martha is from Toronto -- Ken is from Ottawa, by the way -- and is the vice-chair of our council.

Once again, thank you for your invitation for the Ontario Parent Council to come before you and present some of our concerns about funding in general.

The Ontario Parent Council is an advisory body to the Ministry of Education and Training. It works to ensure that all parents in Ontario have the opportunity to participate in a meaningful way in their children's education. The OPC advises the Minister of Education and Training on issues from a parent's perspective. Members also serve on ministry committees as volunteers and devote a considerable amount of volunteer time and effort to outreach in their communities.

The members of the OPC, who are appointed by the minister, come from all over the province and from various backgrounds. The three recognized provincial parent associations have seats on our council. I have enclosed a list of members for your perusal, but I think it's enough to note that we come from a very widespread area of the province, every corner of the province -- rural, urban, French, English, Catholic and not -- and a very widespread number of parents are represented on the council.

In its role of advising on key education policy issues, the OPC has made presentations to the legislative committees examining both Bill 104 and Bill 160, two key pieces of legislation affecting the future of Ontario's education system. The OPC supported what it saw as the general intent of Bill 104, to free up additional resources for the classroom through the amalgamation of school boards. It also supported key provisions of Bill 160, including legislating average class sizes and instructional time. The council viewed these as two elements essential to the quality of education in our schools and was concerned about increasing class sizes and the low amount of actual instructional time our students received compared to those in other provinces.

Many elements of education reform in Ontario are only beginning to take shape. Amalgamation of school boards is only in the early stages of implementation. Fundamental change to the funding of those new district school boards is occurring without any clear picture yet as to what impact this might have on individual boards, schools or students. New roles and responsibilities for the government, ministry, school boards, local schools and school councils are evolving. A new elementary curriculum is currently being implemented. A totally revamped secondary school program, with a new curriculum and elimination of the OAC year, is in prospect for the 1999-2000 school year.

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Many parents support these reforms. They are, however, very concerned about the speed of change that is taking place and its effects on their children. Parents need to be sure the government will provide the funding needed to ensure these reforms are properly implemented so they improve the quality of learning in our classrooms.

Like the Education Improvement Commission, the Ontario Parent Council strongly advocated that any savings resulting from Bill 160 should be reinvested to ensure education reform would be a success.

The Ontario Parent Council believes resources must be focused on the classroom, by which we mean on student learning, on improving the quality of instruction, on providing the necessary resources, such as textbooks and support material, which are needed to deliver the curriculum, and on providing a safe and healthy learning environment for our students. With this in mind, the OPC believes there are several principles which should guide the government in its decisions relating to education spending in the upcoming budget.

The government must, at a minimum, maintain spending in the classroom to ensure the new curricula for elementary and secondary schools are properly implemented and the resources needed to deliver those curricula are available. The message is clear: Now is not the time to cut education spending.

The amalgamation of school boards can free up additional dollars for spending in the classroom. The benefits, however, will not be immediately realized because of many one-time and transition costs. The government should not reduce education funding in anticipation that major savings from amalgamation will occur in the next fiscal year. To use an old saying, we ask that the government not count its chickens before the eggs are hatched. The full effects of amalgamation are certainly not out of the shell at this time. Constant attention must be paid to ensuring that district boards set specific and realistic targets for savings from amalgamation. There must be a clear system of accountability and reporting.

The government must continue to search for ways to ensure that more of the education budget is channelled to the classroom.

Teacher training is essential to ensure that all teachers have the knowledge base they need to deliver the curriculum. Training is essential to ensure that teachers have the background and skills needed to deliver a more rigorous curriculum.

It is of great concern to parents to hear that many teachers reported, as part of the recent testing by the Education Quality and Accountability Office, a level of discomfort in teaching elementary school mathematics. It is also interesting to note that it is possible to become an elementary school teacher in Ontario without ever having to take mathematics beyond grade 10.

We need to set high standards for the skills our teachers bring to the classroom and provide the resources needed so existing teachers can upgrade their skills, where necessary, to meet those standards. Attention must be focused on what training most effectively prepares teachers to meet those demands. A culture of continuous learning within the teaching profession is essential to high performance in the classroom.

The government must also provide the money so that junior kindergarten classes can be offered throughout the province in the most effective and cost-efficient manner. The OPC and many parents support the findings of the royal commission on the future of education that early childhood education is essential to ensure our children will be ready to meet the demands of a rigorous elementary education. For this reason, the budget must provide the funding and the government confirm its commitment to provide early childhood education.

The government has recognized that many of its reforms in areas such as municipal affairs and health services will involve significant restructuring costs and has wisely been provisioning for these costs. The government must now, as a priority, allocate a sizeable share of those funds, both in the current and upcoming fiscal years, to meet the significant restructuring costs arising from its reform of the education system, including remedial instruction for those students who need it to meet the expectations of the new curriculum.

In judging the impact of education reform, most parents will focus on how those changes are affecting the quality of learning that takes place in their children's classrooms. While many support the reforms, the jury is still out on whether the reforms will deliver the improvement in quality that all parents wish to see in our schools. Adequate funding is a key element in ensuring that the reforms are successful and that program and learning quality are maintained during the transition.

We would like to leave you, therefore, with two final thoughts when considering the impact of the budget on our classrooms. First, the government must provide a level of funding that will ensure our classrooms have the resources and trained teachers needed so our children can meet the higher standards that will be demanded by the new curricula. Second, the funding must provide a period of stability in which to implement the necessary reforms.

Again, I thank you for providing us with the opportunity to make our views known to you.

The Vice-Chair (Mr Wayne Wettlaufer): Thank you very much. We have about seven minutes per caucus for questions, and we'll begin this round with the government caucus.

Mr Arnott: I thought your presentation was very interesting. Thank you very much for the time you have put into it and for coming before us today.

I wanted to focus on the points you made on teacher training. I agree wholeheartedly that we need to support our teachers, to encourage them to always do better tomorrow than they did today and have a very positive approach to continuous improvement in their teaching techniques and their professional abilities. That's not to be critical of them, because I think we have outstanding teachers, but it's an attitude and a culture; as you call it, a culture of continuous learning. I think that's an excellent way of expressing it.

I find it interesting when you say you can be a teacher in Ontario with having nothing more than a grade 10 math credit. Do you have any idea how many teachers we have in Ontario today who perhaps don't have a higher standard of math in their own educational background than grade 10?

Ms Laing: I wouldn't have those numbers available at our disposal, certainly. The information we have, and this is from talking mostly with the Ontario college, is that a fairly high number, a substantial percentage, more than 50%, of teachers have a very generalized background coming into elementary school. I think it would be fairly safe to say that the information we've given you on mathematics could safely be said for science as well, for many.

Mr Arnott: I agree we should try to encourage a higher standard. I doubt very much that there are that many, but those who do fall into that category should be given the opportunity to upgrade their skills, certainly.

You mentioned junior kindergarten as an issue that you felt very strongly about. It has been the position of the government that that program should be optional so that local school boards, if they wish, can offer it. You're suggesting it should be province-wide.

Ms Laing: That's correct. It has always been the parent council's position on junior kindergarten that it should be a mandated program. That speaks to the notion that it does prepare children for the elementary curriculum, but also to some of the cost savings that can be incurred further down the line on programs for kids to stay in school or return to school. I think the data are quite clear on that.

Mr Baird: Thank you very much for your presentation. There's one thing I'd like to put on the record, because I heard quite a bit during the public policy discussions related to Bill 160 that the Ontario Parent Council is somehow a political wing of the government. Shari Ritter, who's from my constituency, who I recommended, was a concerned parent, no affiliation whatsoever to the party or to the government in any past election campaign. She's just a concerned parent who had been very active not just in our school, but in our community in various labour disputes and how it affected students. So I just wanted to put that on the record, Mr Chair.

I did want to discuss one issue and I wanted to get the Ontario Parent Council's view on this issue. In the establishment of an equitable funding model, one of the issues which has arisen is the amount of money necessary for administration, for those spending as a school board. Just prior to your presentation, we heard from the Ontario Association of Children's Aid Societies, and they had mentioned that an extra $15-million grant given by the government had allowed them to rehire some of the staff who had been downsized under the previous NDP government and under the present government. They used a ratio of 181 case workers together with 39 supervisors. That's about a four and a half to one ratio of supervisor to front-line worker, and that caused some concern upon reflection.

Would you have a problem if in the funding model there was a cap on administration spending, under which there would not be the ability of a board to say, "Listen, our circumstances are very different in X region of the province; we need more supervisors, more administration, a bigger board office, more spending there," that that flexibility would be taken away? If there was a cap on administrative spending, would that be something the Ontario Parent Council would be inclined to support?

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Ms Laing: The council has not discussed that specifically. What we have discussed is making certain there is an established and very transparent mechanism to make certain that the largest percentage of education funding is spent in the classroom. That mechanism does not currently exist. Our feeling is that if we can be certain as taxpayers and parents that money is being spent in the classroom, that by itself will help to ensure that most of the money is spent there and a smaller amount is spent on administration. It's not to say that we don't think administrative spending is an issue. Informally, we've discussed that quite a lot. But for us, the important issue is that most funding goes to the classroom and that we are able to see that most funding goes to the classroom.

Mr Baird: The reason I raise the issue is that you walk into the school board office in my community, the former Carleton Roman Catholic Separate School Board, and you can see just by walking in that they clearly don't waste a lot of money outside of the classroom. It's clearly evident. I just say that because there has been a terrific amount of public discussion which has centred around the fact that they should have the local authority, that if they feel in some area there's a particular reason why they need a big administration, need 50% or 60% more superintendents than in another area, they should have that local flexibility. I think that causes us all a terrific amount of concern, because like you, we want to see the money getting into the classroom where the teachers are, where the children are learning and where the curriculum is in place.

Mr Ken Slemko: One of the things we put in our report here was a real sense that what we need to be looking for in these new boards are targets. Basically, we understood these amalgamations, as we said in our brief, were to free up additional money to go into the classroom. As you're saying, what needs to be done is that there need to be some spending targets for boards that are realistic and that are probably aimed at bringing down the cost of administration in all the boards, and then of course more money will flow, and that there be very clear accountability. That's a bit of the problem, that we sometimes see that reporting and accountability simply aren't there in certain boards to provide parents, yourselves and the public with a good sense of where the money is being spent.

Mr Kwinter: I want to follow up on your recommendation that the budget must provide funding for junior kindergarten. This morning it was quoted extensively, and today Dr Paul Steinhauer, a professor of psychiatry at the University of Toronto, made a presentation to us. One of his recommendations stated, "Readiness to learn in kindergarten is the strongest single determinant of academic success, and one way to increase the school readiness of children at high risk for school failure is through high-quality early child care and education." He then went on to say, "Poor child care, especially when superimposed upon poor parenting, escalates the rate of school failure, behaviour problems and subsequent delinquency."

In your recommendation, you talk about junior kindergarten, but you don't tie it in the way he does to child care. He made the point that when a child is born and for the first couple of years, they hard-wire some of their abilities. Do you have a position on that, or are you just talking about junior kindergarten?

Ms Laing: I did try to allude to that a little bit earlier in my answers to previous questions in saying that the data on this are very clear when it comes to problems later on in a child's educational career. The evidence for early childhood education is quite clear. You're very correct in saying that we have not included it in our brief. I would have to say that if we had had the time and the wherewithal, we certainly would have included it. It's something that we have discussed a lot and that we think is very important to the junior kindergarten discussion.

Mr Phillips: I appreciate the work of the parent council. What would maybe be helpful for us is how you provide advice to the minister and what the minister's response has been to your advice.

I think you have several quite exceptional recommendations in here. Junior kindergarten is one of them. The funding model, which we all expect in the next few weeks, is another one. I think your restructuring fund suggestion is a creative one, because you're right: The government has focused on health restructuring funds, municipal restructuring funds, but it has been strangely silent on education restructuring funds. I particularly like, by the way, your recommendation on human restructuring funds rather than just the normal bricks and mortar sort of thing.

What has been the response of the minister? I know you're there to give advice directly to the minister. Has the minister indicated support for your recommendations?

Ms Laing: Perhaps this is as good a time as any to share with you that our invitation to appear before you came very late in the day on Friday and we have been hard-pressed to get our thoughts before you today. I can say with some certainty that we have not advised the minister specifically on some of the items that we have outlined to you today. He will receive a copy of this brief concurrent with you folks.

I should say too that this is generally how we provide advice to the minister. It's usually in written form. He does attend our meetings from time to time and we're very vocal about putting forward positions such as these with him. I can tell you also that the minister doesn't necessarily -- and I've had experience with several ministers now -- come back and say, "We're for sure going to follow that recommendation." I can tell you, on the other hand, that some of the recommendations we made with regard to Bill 160 specifically, with regard to class size being included in the statute rather than the recommendations, was the way the bill finally ended up. We have had several opportunities like that where we have provided advice and have seen that advice taken, and we're very pleased by that.

Mr Phillips: To paraphrase you, I gather you've sent these recommendations and in your regular meeting with the minister you will review them.

Ms Laing: Absolutely.

Mr Phillips: I have the Minister of Education's financing numbers here.

Ms Laing: Hmm.

Mr Phillips: No, it's a public document. It's nothing secret. They show here that since 1993, enrolment has gone up by about 64,000 students and funding has gone down by about $85 million, spending on elementary and secondary. Pension spending has gone up, but that's mainly as a result of paying off an old unfunded liability from the 1970s that had never been paid off.

How is that being handled in terms of the parent council experience? With a growth in enrolment, a decrease of maybe $80 million over a five-year period and inflation, has there been any impact on the classroom with those numbers, or has there been no impact?

Ms Laing: I think most of what we see out there is anecdotal rather than actually being measured. Part of the recommendations you see from us today with regard to making certain that education funding is flowing to the classroom are a result of what we hear from parents in saying that they're fearful. If money has not actually been taken out of their classroom, they are at least somewhat fearful that in the coming years, weeks, months, when we're trying to introduce new curricula and need new resource materials, it won't be there. That kind of input from parents out there is a direct reason why we've put that kind of recommendation forward. We think that's the most significant consideration when you're talking about where money needs to go.

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Mr Pouliot: Mesdames, gentlemen, thank you very much. I find your presentation, under the circumstances, most refreshing, and I commend you for being of a very positive inclination and nature. I have some difficulties with the language, so I will need your help and attention, please.

Creating a crisis, the need to create a crisis, teachers being overpaid and underworked, now unqualified -- although those people, like us, are not the victims but the beneficiaries of that system. They will say they've done well in spite of the teachers. I think we've done well with the teachers, 126,000 of the most educated group in our province, in the collective hitting the bricks, unprecedented. It's unprecedented that they would have the support of the general populace, because they believe in the classroom, in the foot soldier preparing Ontario for its future. Yet you persevere in face of the many amendments, because those bills were drafted in haste, and when you draft in haste, you make mistakes: the omnibus bill, the veil of secrecy, the funding formula, the anxiety that leads to fear, where rumours take on extraordinary proportions.

My question is as follows: Do you find it passing strange that so far into the fiscal year, in the context of so many changes, we still don't have the funding formula to make the system go and to reconcile and apply all the changes? If I were to ask you -- and you're front row centre, the three of you, representing many others -- where you will be in April in terms of principals and vice-principals, this year, in two months, where you will be in terms of assessment and reassessment that zooms when it hits the municipal tapes and where you will be next September in terms of providing that essential service to our children, would you be able to answer some of those questions at this time, in mid-February? If not, does that cause some anxiety to you, that the government is perhaps going too fast, that by this time you should have the funding formula in your hand?

Ms Laing: You've asked quite a number of questions there. I think we have tried to communicate in our brief to you today that parents are very concerned with the speed of change, very concerned not just with what's going to happen next month with principals and vice-principals but with what's happening with their children in the classroom today, tomorrow, next week. We have made similar presentations about principals and vice-principals and how we think that should go. That is what we can do as a council and as parents, speak to how we think it should go.

We have tried and have worked very hard at following the process of the funding formula and communicating what parents need to the ministry folks who are looking after that. What parents need right now is some reassurance that things are going forward and that we know where we're going to be, as you say, in April, May, June. So, yes, there is some anxiety out there that the funding formula is not yet here, but we continue to be hopeful that it will be here very soon and, more important for us, that it be right, if you will, and that it provide the best classroom education possible for our students. That's the most significant feature for us.

Mr Pouliot: May I have one supplementary? I appreciate it, Chair. Again, this taxpayer, like others, hears rumours that there might be a deal, that the fix is in, if you wish, that a deal is imminent that would allow the superannuation fund -- I believe there's in excess of $50 billion in it, and when you project, it would have the ability to pick up any liability; in other words, the fund is in the black. That would give the opportunity to school boards, technically the employer, to go from a factor 90, the function of age plus years of service, and reduce it to 86 or 85, giving the ability -- this is the fly in the ointment. I'm not imputing motive; I know they have ulterior motives. I know those people. They could hire younger and cheaper --

The Vice-Chair: Mr Pouliot.

Mr Pouliot: Do you feel comfortable with that philosophy?

The Vice-Chair: I believe that really is unparliamentary.

Mr Pouliot: You're only the Chair. You're not supposed to be biased.

The Vice-Chair: I believe that's unparliamentary.

Mr Pouliot: What is unparliamentary?

The Vice-Chair: Questioning the motives of the other members.

Mr Pouliot: Oh well, I will withdraw that if their sensibilities are offended.

But back to the question, with respect, do you feel this would provide an element where more money would be available, since the new teacher would be younger, with less seniority on the grid and therefore cheaper, and it would give the people whose morale has been under a state of siege the opportunity to go and latch on to factor 86 or factor 90? Do you see that as a possibility? Would you welcome that? Because the money is not going to come from any place else.

Mr Slemko: As a parent, it doesn't matter to me whether it's an old teacher or a young teacher; it's the quality of the teacher and the knowledge they have. In our brief we've tried to emphasize that what we really think is important is that any teacher who is teaching has the qualifications to do it and is able to do it. Since we're here to suggest what should be done in this budget, we want to set that as a priority.

Mr Pouliot: So you support qualified teachers. Thank you very much.

The Vice-Chair: I'm sorry, I'm going to have to cut you off at this time. The time has elapsed. Thank you very much for coming today. Thank you for your presentation.

BRAMPTON BOARD OF TRADE

The Vice-Chair: The next presentation is from the Brampton Board of Trade. Good afternoon. You can begin any time.

Ms Maria Britto: I understand you have copies of the submission we have, so I'll just be reading it through and then you can have any questions afterwards.

Good afternoon, ladies and gentlemen. My name is Maria Britto, and I am the president of the Brampton Board of Trade. With me this afternoon is Stuart Johnston, our policy analyst. Unfortunately, the other two members had business commitments they couldn't get out of and at the last minute had to call it off, so we'll do it on our own.

I would like to thank the standing committee on finance and economic affairs for this opportunity to provide to you at first hand our comments and input regarding the upcoming provincial budget.

As background, the Brampton Board of Trade is an organization representing more than 900 corporate members in and around Brampton, which employ a total of more than 60,000 people in the city and across Peel region. We certainly welcome the opportunity to express the economic views of our membership, particularly at this junction in time when both the province of Ontario and the nation as a whole can see the light at the end of the deficit tunnel.

It is important to pause at this time and take stock of the situation to ensure that we continue down the path of financial responsibility. What that means to the members of the Brampton Board of Trade is for governments at all levels to continue with the discipline of holding the line on new spending, balancing the budgets with a firm commitment to reducing the debt and continuing to foster job creation and economic growth by creating a positive business environment through such means as tax reductions and other incentives.

On these points, the Brampton Board of Trade highly commends Premier Mike Harris and his provincial government for staying firm on these most important commitments. Mr Harris has repeatedly demonstrated his government's goals of strengthening Ontario's economy, streamlining government, fostering a positive business climate and reducing red tape. These and other initiatives go a long way to reaffirming Ontario's reputation and very real role of being the foundation of Canada's economy. It is because Ontario has this enormous responsibility that it is vital for the government not to stray from its fundamental vision of strong fiscal management.

The government must stay the course on its fight against the deficit and its commitment to reduce the debt, but it must do more than look after its own house. As Canada's economic patriarch, Mr Harris and his government must redouble efforts to counsel Ottawa to adopt a similar policy with the federal budget. Now is not the time to consider new ways of spending money we don't really have yet. Once the debts of the province and the country are wrestled down to more internationally accepted levels, then, and only then, can we ease the strict nature of our fiscal management policies.

That is not to say that all policies must be geared towards deficit and debt reduction. A prudent path to take is to throw into this mix creative incentives for businesses to grow and add new jobs. This would generate more revenues for provincial coffers and strengthen the economy as a whole. Also, we encourage the government to put some money away for the next inevitable downturn of the economy. Doing so will soften the blow of any future downturn. This philosophy can be told to you by an entry-level economist, but it is important to sometimes reiterate the obvious to reaffirm one's goals.

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The government must also continue in its efforts of job creation and small business assistance through such venues as the small business enterprise centres, of which we are a partner in Brampton. Small business, as we all know, is one of the pillars of the economy. Certainly the vast majority of our membership belongs to this category, and the dozens of new members who are joining each month most definitely follow this trend. Small businesses, by their very definition, do not always have the capital or the luxury of time to solidify their places in the economy. They sometimes need encouragement, and the Brampton Board of Trade is most pleased that this provincial government recognizes and acts on that fact.

But more can and needs to be done. With this in mind, we encourage the provincial government to again address the issue of the federal small business corporate tax deduction. Since 1981, the corporate rate threshold has been set at $200,000. We urge the Ontario government to actively lobby Ottawa to increase this threshold to $400,000. Raising the bar is a tangible way of recognizing the very real and substantial contributions that small businesses give to our economy.

We also encourage the Ontario government to consider a provincial sales tax credit on capital items purchased by new small businesses. Giving new small businesses a break on the provincial sales tax when they purchase their first computer, machinery, supplies or whatever the case may be will go a long way to help those new businesses succeed. A sales tax exemption will do a number of things. It will make it easier for new businesses to purchase their important capital tools. It will also allow the businesses to purchase more of these tools, which will lead to increased demand and therefore production of these same goods. Of course, the provincial government would set a limit on what the sales tax credit will be. Nevertheless, any break in this area would go a long way to help new small businesses to hit the ground running and succeed.

Also, should the provincial government agree with this wisdom, we would respectfully request it lobby Ottawa to provide the same sales tax credit on the GST.

We at the Brampton Board of Trade commend the provincial government for its youth training and apprenticeship efforts to date, but strongly urge it to strengthen and augment these programs. Tax break incentives for businesses hiring permanent full-time employees and more financial assistance for training young people must be included in this and future budgets. As well, the Ontario government must strengthen and continue with its research and development incentive programs. R&D is a vital component of increasing the strength of Ontario's businesses on the global market and must not be forgotten or watered down. I'm sure three of our members -- Nortel, Spar Aerospace and Chrysler Canada, not to mention the literally hundreds of others in Brampton and beyond that rely on this research -- would deliver volumes of data supporting the importance of R&D and its direct link to the local and global success that it provides.

Another program that must not be forgotten is the Canada-Ontario infrastructure program. This program, which partners the three levels of government and the private sector, boasts a number of successes throughout Ontario, and certainly Brampton has benefited from it as well. Spending money on strategic investments in this manner is a wise use of public-private funds and creates jobs -- real jobs. We urge the provincial government not to dilute this program.

The provincial government must be congratulated on its efforts to update municipal and education development charges. While the Brampton Board of Trade still considers all development charges regressive taxes that do nothing to encourage new development, we at least must acknowledge the government's efforts in reducing some of the burden in this area.

However, the Brampton Board of Trade is most disappointed that only the industrial sector is privy to an exemption of development charges when applied to the expansion of existing buildings. The Brampton Board of Trade would prefer that a commercial designation be included in this exemption and that the exemption apply to the entire expansion and not just to the expansion of up to 50% of the original gross floor area. Physical expansions of businesses are a sign of growth and economic health, so why should they be penalized through development charges? The goal of the provincial government and any level of government is to foster a healthy business climate, not to erect significant economic hurdles such as development charges.

The Brampton Board of Trade therefore strongly recommends that a sunset clause be adopted for all development charges. Failing that, we recommend that development charges be completely dropped for all expansions and that a commercial designation be included with the current industrial designation.

Speaking of expansions, and to add a strictly local flavour to this presentation, the Brampton Board of Trade respectfully recommends that the provincial government complete the northern portion of Highway 410 so that it links with Highway 10. This is an important transportation link for our businesses and its employees, as I'm sure the Minister of Transportation and Brampton South MPP, Tony Clement, can attest. Completion of this artery is a much-anticipated project that the provincial government must fully commit to as soon as possible.

Further on the topic of transportation issues, the Brampton Board of Trade officially supports the domestic auto companies' efforts to prevent the federal government from reducing or eliminating the most-favoured-nation tariff on non-auto-pact companies. Eliminating the tariff on imported vehicles would have a significant negative impact on Ontario's and indeed Canada's economy and would both directly and indirectly negatively impact our provincial budgets for years to come.

Eliminating the tariff would most likely result in a flood of imports from offshore vehicle manufacturers and a significant reduction in the production of Canadian- and Ontario-made vehicles and parts. Considering that one in seven jobs in this country is directly or indirectly related to the auto industry and that Chrysler, Ford and GM have invested more than $19 billion over the last 10 years, compared to a $3-billion investment from Honda, Toyota and Hyundai, the tariff is a vital and much-needed component of federal policy.

The Brampton Board of Trade certainly supports fairness and operating on a level playing field and would have no problem eliminating such tariffs if there were reciprocal agreements with overseas countries. However, these countries want to eliminate tariffs for their vehicles imported into Canada yet are unwilling to lift their tariffs on auto-pact-manufactured vehicles exported to their countries. Should the tariff be eliminated, our auto industry would be delivered a serious blow, one which we would be hard-pressed to recover from, if ever.

While this matter does not directly affect your budget preparations for this year, one must consider the long-term implications of all policies from all levels of government. Most, if not all, policies have either a direct or indirect budgetary impact. Eliminating the tariff would in all likelihood send Ontario's economy into a tailspin, and that, ladies and gentlemen, must be prevented from happening at all costs.

Therefore, the Brampton Board of Trade urges the Minister of Transportation and the provincial government in the strongest possible terms to firmly lobby Ottawa not to eliminate or reduce the most-favoured-nation tariff on offshore-produced vehicles.

To bring our presentation back full circle and to matters directly related to Ontario's mandate, the efforts to streamline the provincial government and make it more efficient and more accountable must continue. The Brampton Board of Trade recently had the pleasure and honour to host a presentation by Mr Frank Sheehan, chair of the Red Tape Commission, and his associate and our Brampton North representative, Joe Spina. Both gentlemen outlined the government's impressive and, I must admit, daunting task of consolidating, updating, eliminating and augmenting current policies and legislation, with the goal of making things easier, cheaper and more user-friendly. This initiative must be highly commended and the Brampton Board of Trade fully supports all efforts in this regard. Making it easier and hopefully less expensive to conduct business in Ontario is a goal that we all support, and eliminating red tape and its inherent barriers is a great step in the right direction.

But more needs to be done. You're certainly heading in the right direction but you haven't quite reached your destination, and along the way one must keep in mind the importance of retaining the sense of community in municipalities throughout Ontario. What I mean by that is allowing municipalities to retain that vitally important sense of self through well-established principles of taxation with representation, local autonomy over local matters and having a unique local identity.

With the government's exchange of services relating to education and social services, commonly referred to as pooling everywhere outside of Queen's Park, real communities such as Brampton are being inadvertently drawn into the megacity of Toronto. The borders which distinguish communities from one another are slowly being erased, and we see that as a danger to the autonomy of communities. Yes, the borders separating Toronto and the GTA municipalities from one another are largely just lines on a map, economically speaking, but pooling property taxes from across this larger region amounts to a taxation policy without direct representation -- no say for pay, in other words.

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The Brampton Board of Trade, with the public support of the Mississauga Board of Trade and recently the Ontario Chamber of Commerce, believes the funding required for social services, for one, should be derived from the income tax base, not property taxes. Taxation of properties must be left to the local politicians for local matters. The province should not be meddling with property taxes. It has embarked on a slippery slope that, like the temporary measure to pay for our military involvement in 1914 -- income taxes -- it will never get out of.

We applaud the finance minister's decision to freeze the business tax rate for education at current levels, but again the method and manner of financing Ontario's education system is certainly left wanting. We hear the concerns of our fellow businesses in Toronto about how their business taxes are too high in relation to the rest of the province, but asking the surrounding municipalities to pay for Toronto's problems is not the answer. If the costs and service levels in the city were on a par with Peel, Durham or Halton regions, then certainly sharing the burden would make more sense. Toronto is widely recognized as the flower of the province, but to let it grow and have nourishment, you don't water the flower, you water the roots, and we in the GTA are the roots. With that reasoning, we urge the provincial government to stick to the finance minister's decision to freeze business tax rates at current levels.

However, the Brampton Board of Trade urges the government to place a sunset clause on pooling business property taxes for education purposes. Pooling for, say, three years would allow the government and various private sector partners to develop a more fundamentally fair system for all involved, both for Toronto's businesses and those outside the city. A uniform rate, for instance, is fair, but only under the strictest of conditions. The Brampton Board of Trade and its fellow boards and chambers across the GTA have all expressed a desire to work with the government to develop such a system. We urge the provincial government to bring the parties together to work on this issue as soon as possible.

In closing, we must part with a message to the government to pause and reflect as each step is taken. Slow down. Allow Ontario's businesses to absorb the many new, albeit welcome, changes brought about by the government. The effects of the aforementioned pooling of social services, combined with such measures as the business education tax rates, the new property assessment and the removal of the business occupancy tax have wreaked havoc on corporate and municipal budgeting. The government must allow the business community to catch up and absorb these and any future changes before any new fiscal policies are implemented.

As well, the provincial government may want to do a little homework in regard to educating the public on these and other initiatives. Misinformation, putting a vague spin on each subject and only halfheartedly explaining the potential benefits of any new policy will do serious harm to the credibility of the government and will only undermine any good that these changes are attempting to bring about.

I thank you very much for allowing us to present our views.

The Chair: Thank you, Ms Britto. Before moving to questions, I'd like to welcome the member for Brampton South, Tony Clement, the Minister of Transportation. Tony, it's unfortunate you couldn't be here at 1:30 when the Ontario Road Builders' Association was present. You would have enjoyed that as much as Ms Britto's presentation. Welcome, sir.

We'll move to questions. We have approximately 15 minutes, five minutes per caucus. We'll start with the Liberal caucus.

Mr Phillips: Thank you for a very thoughtful brief. It reflects a lot of work and some good policy people on your board who take an interest in this. There are so many areas I'd like to get into, but let's just deal with property tax for a moment. I'm getting an awful lot of calls these days from businesses in my area on the business occupancy tax going --

Ms Britto: Are you in the 416 or 905 area?

Mr Phillips: It impacts everywhere, but I've moved from Scarborough to Toronto.

Mr Kwinter: Without moving.

Mr Phillips: Without moving, yes. It still seems as long a drive as it used to be. I thought that with moving to Toronto I could get down here faster, but it's still the same traffic jam.

These are small businesses that are getting bills from their landlords now that the business occupancy tax is off. They were paying perhaps 30%. They now have to pay substantially more taxes because the business occupancy tax has been added back on to the realty taxes. While banks are getting a big break, because they're dropping their taxes substantially, for small businesses in my area they seem to be going up dramatically. Is the board facing any of those things in Brampton? Are you getting any feedback? I think you mention business occupancy tax in your brief. Have you any recommendations on how we should be trying to deal with it?

Mr Stuart Johnston: From the Brampton perspective, that's one of the questions our membership is trying to deal with right now. The city of Brampton certainly has not issued any tax bills yet. We don't know what the rates are going to be overall. There's vague fear that the small businesses' classification will make their tax rates go up, but we don't have anything definitive on that subject yet. As a board, we are looking at it, but we don't have any policies on that yet because everything is such a question mark. That's one of the reasons Maria was suggesting that everyone slow down right now so we can absorb these impacts and find out how our taxes are going to be affected.

Mr Phillips: That train has left the station. That one is gone.

Mr Johnston: We understand that, but we still don't know how it's going to be impacting on the local level.

Mr Phillips: This is the committee that has dealt with the bill. We're told that municipalities are going to put it on the realty tax. We had a brief the other day from an expert witness who said the banks will see about a 17% decrease in their property tax and small businesses will see about a 10% increase in property tax when you average the business occupancy tax. Banks were paying 75% and small business was paying 30%; it's going to average to around 44% or 45%.

The next question I'd like to get your advice on is your recommendation on not putting social services on property tax -- social housing and social assistance. Premier Harris appointed a group called the Who Does What committee. That's the jargon we use around here. David Crombie headed up the Who Does What and Premier Harris appointed about 14 people to look at what things should be put on property tax, what things should be handled by the province. They unanimously and strongly said, "Don't put social housing and social assistance on property tax." In fact, the language they used was, "We strongly are opposed to this and we unanimously recommend you not do it."

But the government went ahead and did it anyway, and now we're faced with property taxes handling these sensitive services. We all know that particularly in an economic downturn -- and there will be one; I hope it's 10 years from now, but there will be one -- we've loaded the property tax somewhat. Have you any advice for us on how we might work our way out of this problem? You have a fairly strong recommendation here, actually in bold type, that it should be derived from the income tax base, not property taxes. Has the Brampton board looked at how we might work our way out of this problem?

Mr Johnston: One thing we did was take this concern to the Ontario Chamber of Commerce, and last month they agreed on two of our three points, the strongest of those points being that it should be on the income tax base, as we suggested here. The Ontario Chamber of Commerce has now struck a subcommittee to review exactly what you are asking us now. We've more or less, as an association, passed the ball to our parent association at the Ontario Chamber of Commerce. They are dealing with it.

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Mr Pouliot: Monsieur, Madame, welcome. I too would like to acknowledge the presence, from his busy schedule, of the Minister of Transportation and his good friend and colleague as well.

You've made mention of the Minister of Transportation, hoping he would grant you the pleasure of an audience. He's done that. You've also made mention by name of two other main persons, if you wish, in your brief. You're certainly consistent with their philosophy and for that I wish to commend you. Not only are you a good conjurer, but you listen quite well.

I'm not from 905 nor from 416, but I'm aware of their quarrel. I live in 807, which is the most remote, special part of the province. Although we are in times of prosperity, the mining sector and the forestry sector -- we are very much resource-based up north, more so than any other part of the province; it's our reason for being -- are not having a good year. I don't play those things, but people who play the commodities, the mercantile markets, the futures market -- is that the way you say it, Wayne?

Mr Wettlaufer: Why are you asking me? You're the expert.

Mr Pouliot: They will attest that things are not going too well and they too wish to have a break in taxes.

What I'm getting at is as follows: You encourage and commend the government on heading towards a balanced budget, and that's most honourable and worthy of you. We might be the last province, likely, in the Dominion to do so, but it is still in the right direction. Then you go a step further and you tip your hand. You say, "While you're at it, why don't you go to the real problem, that of the debt, for it is sapping our capacity." Before they arrive at that, you say to the government: "I too pay too much tax, yet in order to keep progressive and to encourage, I want to be able to trade; I represent the board of trade. I don't want tariffs eliminated, but I commend you on reducing red tape." Small picture, big picture -- consistency. "I want the 410." Hence the presence of the Minister of Transportation. "I want him to make it happen but I don't want to increase taxes. I don't want the foreign companies to come calling, because Toyota" -- I hope they're not listening to this; Honda, where are you? They're only a certain percentage. You know that the auto pact has served very well here. I would not begin to open that can of worms.

I really appreciate your presentation; it has depth, good insight. If you get 20% of what you propose, will you be happy? You're certainly not going to be able to reconcile in short order -- unless the government people are miracle workers -- all of what you've asked. I want to wish you well.

Incidentally, lobbying the federal government on some subjects is to keep lobbying, because the budget is on the 24th. This government is told that the document -- in fact, I have a copy -- of the federal budget is already printed.

I want to wish you well. I cannot agree philosophically with some of your presentation, but I'm so often wrong. It doesn't mean I'm right.

The Chair: Thank you, Mr Pouliot. I apologize, Ms Britto. I know you'd want to answer all the questions Mr Pouliot put forward, but you don't have time. We'll move now to the government party.

Mr Baird: Thank you very much for your presentation. I appreciate the time you took to come down. I too want to talk about the business tax rate for education, as you mentioned in your brief. I guess the government had a number of options, and others would have fewer options. One is to maintain tax levels the way they are now, which would involve a 0% tax increase everywhere. The other would be to raise taxes for everyone else to equalize it and to raise taxes for people throughout the province to make up the difference. It would mean a significant tax cut for businesses in Toronto and increases for folks like you in Brampton, folks like my constituents in Nepean. One of those options is a tax cut. We know some have said -- they're on record -- that they don't believe in cutting taxes until the budget is balanced, so that wouldn't be an option. That leaves as the most conceivable option to simply raise tax and equalize it around the province. Can you tell me what effect that type of major property tax increase would have on businesses and industries in Brampton?

Ms Britto: As far as the businesses are concerned, ultimately they're not going to take that hit all the time. It's going to be passed down. They're going to have to pass it down to the property tax because they're not going to be hit all the time. We'll never be able to function. I would estimate an increase anywhere from 35% to about 55%, and in some of the smaller municipalities they're probably looking at a 100% increase. In some instances, it could bankrupt municipalities. It's just not feasible.

Mr Baird: So it wouldn't be an option for businesses in Brampton.

Ms Britto: No, not at this point.

Mr Baird: The other thing I wanted to ask you was with respect to the small business corporate income tax deduction, raising it from $200,000 to $400,000. You mentioned that as part of your presentation. How positive an effect do you think that would have, if it were included? I, unlike my colleague from Lac-Nipigon, don't have a copy of the federal budget yet, so I'm not as aware of it as he is. What type of positive effect would that have for small businesses in Brampton? As you know, the government has put a lot of priority on small business, because they're the job creators in the province.

Mr Johnston: Certainly the majority of our membership is small business. Those that aren't quite technically small business are on that threshold, in that grey area. We believe that if we raised the threshold and allowed them to be classified as small business, they would be able to receive some of the benefits and some of the programs geared towards small businesses that they wouldn't otherwise have, for instance, tax credits for financing and that sort of thing. It's more from a philosophical perspective that we're coming from.

Ms Britto: Some 85% of our new members to the board are small businesses right now. That's why the enterprise centre that we've set up is crucial for them. Our opening is on the 23rd, and we invite you to come out.

Mr Baird: The member for Brampton South was in Nepean the other day extolling the virtues of Brampton.

Ms Britto: They are certainly very supportive, and we thank them for that.

We're off and running. We're seeing almost 40 people a day. That encompasses Caledon and Orangeville as well. That is the biggest concern, the startup costs and issues like that.

Mr Baird: Is the business climate in Brampton, the job creation climate, significantly better than it was three years ago? Do you think the policies of the provincial government have had a positive effect on your business climate, on job creation?

Ms Britto: We have a gentleman who works in the city of Brampton, past president of the board, who was instrumental in workfare. We placed a fair number of jobs. The number of businesses into the city has increased, as well as the employment rate, obviously. Last year was probably the best year we had in a decade. We certainly took great pride in that.

Mr Johnston: Our membership is increasing by leaps and bounds now. Three years ago we were at an all-time low, and now we're getting to an all-time high.

Ms Britto: We're averaging 30 to 40 new members a month.

The Chair: I thank you for your presentation, Ms Britto and Mr Johnston. Our time has expired.

TORONTO REAL ESTATE BOARD

The Chair: The next presenter is the Toronto Real Estate Board, Mr Palander, president-elect. Welcome. Thank you very much for attending.

Mr Bill Palander: Mr Chairman and members of the committee, my name is Bill Palander. I'm president-elect of the Toronto Real Estate Board, as well as chairperson of the government relations committee of the Toronto Real Estate Board. With me today are Jane Doyle, both a York and Toronto Real Estate Board member, as well as a member who sits on our government relations committee; Fareed Khan, the board's policy advisor for government and legislative affairs; and Von Palmer, the board's policy analyst in the same area.

I'd like to thank the committee for allowing us the opportunity to appear before you today to express the Toronto Real Estate Board's views as you conduct your pre-budget consultations. Since our time is limited, my remarks will be brief and will address the government's fiscal position, recent provincial policies that impact on property taxes and the land transfer tax rebate program.

I'd like to start by saying that the Toronto Real Estate Board supports the government's goal of deficit reduction. Continued deficit spending and the rising provincial debt are a burden on the economy and remain threats to the economic future of Ontario.

We recognize that the deficit peaked in 1992-93 and that the budget is projected to be balanced by the year 2000-01. We encourage the government to at the very minimum stay on course with this timetable.

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While deficit reduction is important, the provincial government should make all efforts to minimize the impact on municipal budgets. The effect of reduced provincial transfer payments is an increased reliance on municipal property taxes and/or user fees as an alternate source of revenue to fund local programs. This would be contrary to what the government promised in its Common Sense Revolution document.

This brings me to the government's recent announcement that commercial and industrial education property taxes will be frozen. While this is encouraging, we are concerned about the government's rejection of numerous calls by various groups, including the Toronto Real Estate Board, to implement a uniform province-wide industrial and commercial education property tax rate.

TREB was one of the groups that called on and applauded the government for removing education costs from residential property taxes. This was a good move. The next step should have been to address industrial and commercial taxes. The failure to do so will saddle Toronto's businesses with property taxes that would be almost $400 million higher than they would have been with a level playing field, leaving Toronto business property taxes North America's highest. Other provinces which have provincially controlled education taxes all levy such taxes at uniform provincial rates. Even with a uniform rate, Toronto businesses would still be paying 30% of the provincial total despite having only 20% of the provincial employment base and population.

The Toronto Real Estate Board is now urging the province to reconsider a uniform provincial or GTA-wide rate for industrial and commercial education property taxes, since all Ontario businesses, regardless of location, benefit from a well-educated society and should pay equal rates of education across the province.

Uniform rates would also eliminate artificial tax incentives which are currently distorting the operation of the market in influencing business location decisions. Furthermore, a province-wide uniform rate would reduce large business property tax differentials which have contributed to stagnant business assessment growth in Toronto and rapid growth elsewhere outside the city.

While we supported the removal of education costs from the property tax base, we did not expect the province to download responsibility for social costs such as public housing and welfare on to municipalities, especially given that the exercise is not revenue-neutral, as the Premier had promised.

These are income redistribution programs which have historically been the responsibility of the provincial government. Downloading such programs is expected to force municipalities to raise property taxes to finance social costs. Given this choice, the status quo would have been preferable, as costs were more predictable.

The gravity of the impact of some of these changes on municipal budgets is demonstrated by a recent warning from the Dominion Bond Rating Service, which has announced it is placing the domestic currency debt rating of the new city of Toronto "under review with negative implications."

DBRS expressed specific concern regarding property tax reform and the increased volatility in spending because of the provincial downloading of services such as social housing and welfare, all at a time when the new city is faced with substantial costs related to amalgamation. These concerns have to be taken seriously, since a downgrade would scare investors, raise the cost of borrowing for the city and would drive up local taxes.

On the issue of the Ontario economy, we know that it was strong in 1997. GDP growth was 4.4% and economists are optimistic that the Ontario economy will remain strong in 1998. We are counting on the provincial government to continue to cultivate conditions that will maintain business and consumer confidence in the year ahead.

While the Conference Board of Canada has reported that consumer confidence has climbed steadily higher since the end of 1995, it has also recently confirmed that the Asian crisis and the recent rise in short-term interest rates has caused confidence to slip.

One of the most visible ways consumer confidence is measured is the pace of residential real estate activity. The 1996 Ontario budget announced a special one-year provision to the land transfer tax, which was extended an additional year through to 1998. This has been a boost for first-time home buyers and the economic spinoffs to the province have been significant. First-time home buyers have until March 31, 1998, to purchase a newly constructed home to qualify for the land transfer tax rebate. The maximum rebate is $1,725, which is equivalent to the land transfer tax on a $200,000 home.

TREB is calling on the Ontario government to not only extend this highly successful program but to extend the land transfer tax rebate to include resale homes. We fully support MPP Dan Newman in his efforts to convince the government to continue the rebate program and extend it to include resale homes. As you are probably aware, MPP Dan Newman was successful in securing passage of a resolution by the Ontario Legislature calling on the government to include this initiative as part of the 1998-99 budget.

At the same time, I must note that TREB opposes land transfer taxes in principle since they are a cost barrier to home ownership, do not relate to any services provided by the government with respect to real property and are simply a tax to generate revenue. The following should be considered:

The land transfer tax constitutes a significant portion of the closing costs for all first-time buyers. The current rebate program discriminates against first-time buyers of resale homes.

Since the purchase of resale homes also generates significant employment and economic activity, resale homes should also qualify for the land transfer tax rebate under the current provincial program.

According to a study commissioned by the Canadian Real Estate Association and the Ontario Real Estate Association, when individuals purchase homes, they typically purchase new appliances, furnishings and other durable goods, as well as undertake renovations that tailor the home to meet specific personal requirements. Fees are also generated for various professionals, as well as taxes to all levels of government.

The CREA-OREA study estimated that $17,145 is generated by the average housing transaction in Canada. In Ontario, with 142,000 resales during 1997, that would amount to $2.4 billion in economic spinoffs. The total expenditure of $17,145 relates only to the costs of moving from one home to another and does not include any construction expenditures by the sellers of homes in order to prepare their properties for sale, or, in the case of new housing, the construction expenditures involved. According to our study, the 139,000 resales in Ontario in 1996 would have generated almost 27,000 direct and indirect jobs.

Having said this, I think the importance of continuing the land transfer tax rebate program is obvious. Programs such as this and the federal government's programs are all crucial in enabling that potential first-time home buyer to make the move to home ownership.

Let's take a closer look at trends in the greater Toronto housing industry: 1997 was the best year for new home sales this decade, with 27,000 sales, a 31% increase from 1996; 1997 was also the best year for resales this decade, with 58,000 sales, but a more modest 4% increase from 1996. Province-wide the increase was 1.9% for 1997 over 1996.

However, 1998 trends are off to a slow start. Resales for the month of January 1998 were down 26% when compared to January 1997. This is consistent with the numbers from December 1997, when resales were down 27% compared to December 1996.

This is clearly not the time to ease off on incentive programs for first-time home buyers, especially those that cost the government little or no money. First-time buyers remain a crucial part of the housing market. The average price of a home in Toronto is $206,209, with a median price of $182,000, still a significant sum of money.

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To summarize, the Toronto Real Estate Board is urging the Ontario government to:

(1) Continue with its deficit reduction efforts in a responsible way that does not result in additional tax burdens being imposed at the local level through user fees and increased property taxes.

(2) Reconsider a uniform provincial or GTA-wide rate for industrial and commercial education property taxes.

(3) Continue the land transfer tax rebate program for first-time home buyers, set to expire March 31, 1998, and extend it to include resale homes.

Thank you.

The Chair: We have approximately five minutes per caucus for questions, and we'll start with the New Democratic Party.

Mr Pouliot: Thank you and welcome back. In the parlance of El Niño, the eye of the storm is about to descend on Toronto.

What a difference a presentation makes. Your predecessors were involved in sort of a game of table tennis, like ping-pong, but they're from the 905 -- not that they got any pleasure from the misery of others. One has to be kind and generous, but they saw some justification.

Well, 1997 is likely to have been a better year than this year. You have mentioned in your presentation the Asian crisis. Not too many pundits -- I don't recall reading last year at this time that there was going to be an Asian crisis. It hit us. You've experienced -- please correct me -- in the last several months, but a relatively short term, 175 basis points. Our Canadian dollar, although not under a state of siege, is difficult to support; in fact, some people have mentioned that there is some market consideration that it will go up. It's already in the market, if you wish. The bank rates don't reflect that, but certainly the bond market does to a larger extent, because it's its job to speculate. That's why they open the markets.

If you look at the existing interesting rates, although relatively low, they have gone up. We don't know the anxiety over the Asian market. If you throw in the uncertainty and what you anticipate in terms of taxes, because you have heard the Minister of Finance speak -- you know there is a reassessment as never before, that 3.8 million units across the province are being assessed and reassessed. You know the history of Toronto vis-à-vis its relationship with the assessment. Taking those three factors, could you give me an approximate percentage of your business, the people you represent, being impacted? Could it go down in a worst-case scenario by 5% over last year, by 10%? If all hell breaks loose, could it be 12%? How many jobs would it mean and how many millions or billions would it mean to the province?

Mr Palander: I'll let Mr Khan answer in a moment, but personally, as a realtor, I can tell you that certainly the threat of increased taxes for commercial-industrial properties in the new city of Toronto is definitely driving people out of the city. My clients are not looking in the city any more; they're looking outside. As to percentages, maybe Mr Khan has his crystal ball with him. We'll let him answer that.

Mr Fareed Khan: In terms of percentages, as you noted in the presentation, both in December and in January the market was down about 26% from the same time the previous year. Obviously, there are a number of factors involved. Some of it involves the uncertainty about where interest rates are going. We've seen increases in interest rates, and that's going to have an impact on both the commercial and residential markets. Definitely, the changes to the tax structure are going to have an impact.

We've got a number of things happening at the same time, so it's very difficult to isolate which change is impacting the market. We've got the assessment reform happening, we've got the city of Toronto amalgamation and the costs that are going to be involved with that and whatever tax implications that might have. As well, we have the downloading exercise, which is pretty much having an impact province-wide in terms of municipalities being loaded with more costs than they were giving up in terms of the exchange between the province and the municipalities.

We feel that if the trends continue, if interest rates continue to rise, if the Bank of Canada continues to boost rates in order to support the dollar, that definitely will have an impact on the market and we'll continue to see further declines on the residential side, because consumers are very sensitive to interest rates, and also on the commercial side, given all the other changes that are happening as well, because the commercial market also watches where rates are going. If they have to go out and borrow money, they're going to think twice before going and investing money when rates are going up in addition to having to take into account all the other financial changes in terms of taxes and so forth.

Mr Baird: Thank you very much for your presentation. I appreciate the time you took to put it together. I'm not from Toronto; I'm from Ottawa-Carleton in eastern Ontario, so I may not be as well apprised of these issues as my two colleagues in the opposition parties.

I was talking with a group of business people from Toronto the other day and they were explaining their concern about the fact that taxes, while frozen, at least would stop going up -- they've gone up by some 80% over the last 10 or 12 years, and this at least would freeze them. They were appreciative of that but concerned that they would be higher in Toronto than they were in other areas.

One of them said that this is the first time ever Toronto has been forced to pay higher taxes than anywhere else in Ontario, and one of the other fellows interrupted and said: "No, it's not the first time. There was the commercial concentration tax brought in by the Peterson government." I'm not fully aware of why that was brought in. Mr Phillips would know more about that than I. I knew it was taken, but even the NDP wanted to cut that tax. While they were raising all the other taxes, they cut that tax. That's the only other previous experience we've had where taxes disproportionately affected one area, obviously 100% in that case.

What type of effect did the commercial concentration tax have on business, particularly in the commercial area, from your experience in the late 1980s?

Mr Palander: To answer that question quite simply, the commercial concentration tax probably began the ball rolling in terms of decimating Toronto. At that point in time I certainly noticed a clientele that began looking outside of the city, and that move has gone on ever since.

Mr Khan: It wasn't just outside the city, in that case it was outside the greater Toronto area, because that tax applied across the GTA. I can't recall the square footage and someone can correct me if I'm wrong, but if a commercial property or a business property had more than, I believe, 200,000 square feet in space, starting at that point there was a tax that was levied. It was a discriminatory tax and we lobbied against it and a subsequent government did repeal that tax.

Having had that experience happen, however, we realized, and I hope that governments realized, that discriminating against the economic heartland of the province not only did not do this region any good, but also had repercussions throughout the rest of the province. What we're saying when we look at the commercial-industrial-education tax is that some people say, "Toronto has all this business assessment and this is where the growth and economic activity is, so in this instance it's justifiable that they should be taxed higher."

The reality is that if you tinker to that effect on the down side with the Toronto economy, it's going to have an effect up in Timmins and it's going to have an effect in southwestern Ontario, because this is the concentration of the economic activity of the province. We've got almost 50% of the economic output of the province happening in this area, so it's not just something that affects us; ultimately it's going to affect the rest of the province.

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Mr Baird: I wanted to ask you a question on another issue relating to residential sales. I was reading the Nesbitt Burns provincial handbook, which tracks various outputs in the economy, and it talked about consumer spending and household incomes being boosted by approximately $2 billion, and this will underpin the bullish outlook for consumer spending. One of the big reasons for the personal income tax deduction was that it made home ownership that much closer for people by making it more accessible. Can you tell me what impact the increase in consumer confidence, assisted by the tax cut, has had on residential sales for your members?

Mr Khan: Actually, the main boost in consumer confidence had more to do with the decline in interest rates, because the reality is if you looked at the tax cut in terms of an absolute dollar term on a per paycheque basis, unless you get into the higher income levels it's only a few dollars per paycheque. The reality is that a few dollars every two weeks is not really going to make that much of a difference in terms of if you're looking to buy a house. However, the fact that interest rates decline by a number of percentage points over the last few years, plus you had this pent-up demand that was left over from the recession in the early 1990s, has had more of an impact as well as the decline in house prices.

Mr Phillips: I know the answer before I ask the question, but I want to pursue one of the real estate board's major thrusts. Just to say I represent a Toronto riding as well and it's very difficult to get sympathy from around the province for Toronto issues. It's a reality. I think this is really advice and then a question.

When people in Ontario realize that the province now has 100% responsibility for setting the property taxes on businesses, on about 60% of business property taxes, all the education portion on business is now set by the province, 100% responsibility, and then when they begin to look, here's what the numbers will show: A building worth $500,000 in Brockville will pay roughly $15,000 of property tax and an identical building assessed at exactly the same value in Parry Sound will pay $5,000. When the Brockville business person begins to raise questions with his local MPP of, "Why is it, when this was supposed to be fair across the province, I am paying $15,000 and I know a business identically valued in Parry Sound is paying $5,000?" -- a business in Orillia will pay almost $15,000 and the identical business in Huntsville, just up the road, will pay $5,000; an identical business in Hamilton will pay $18,000 and one in Burlington I think $11,000.

The reason I raise this is it will only be, in my opinion, when MPPs are forced to justify why the province sets the tax rate on businesses -- the province has set up an assessment system that says no matter where your business is you will be assessed fairly, the province now says, "We have 100% control of education so we'll set the school budgets so that no matter," as Mr Wettlaufer says, "where you are you're going to get fair treatment from the province" -- it will be that forcing the MPPs to justify why they've set substantially higher property taxes on one than the other.

I'm very concerned about Toronto business. I think it will be completely transparent now; you know, a business will pay dramatically higher taxes in Toronto. I use the example of a business in Richmond Hill and a business in Toronto identically valued, and I think the business in Richmond Hill will pay half the taxes.

My question is this: Has the Toronto Real Estate Board tried to enlist at least the awareness of other real estate boards across the province that this is not just a Toronto problem but is going to be a problem of inequities right across the province? Have you any discussion with your counterparts in other jurisdictions?

Mr Khan: Actually, I was just meeting this morning with my counterpart at the Hamilton Real Estate Board and they're facing the same situation where you've got properties of similar value located within the core of Hamilton and then those located outside of Hamilton in the larger region of Wentworth. You've got similar properties, and they're paying large differences in property taxes.

Just a note: When this whole exercise started on the property tax reform we were very supportive because we felt that whatever system is used, the same rules should apply. That way you have "transparency," which is a term you used. However, we've been very disappointed with the result that has come out, because what you've got is a system where supposedly the rules are going to be the same, but they're going to be applied inequitably depending on where you are in the province.

We realize it's not just a Toronto problem; there are other urban municipalities in Ontario that face the same problems that Toronto is facing. But in terms of the overall impact, obviously Toronto is going to face the largest impact in dollar terms. Also, given that this is the economic heartland, anything that happens here is going to have an impact economically across the rest of the province.

Mr Phillips: The province, back in December, blew this, in my opinion; completely blew it. They did all the calculations on residential property taxes and said, "We're going to have a uniform mill rate right across the province." It had the same kind of impact as if you had a uniform mill rate on commercial-industrial. Some communities benefited, some were penalized. It had a terrific impact of shifting around. But the province had $600 million worth of funds to fix the problem, so they gave some communities quite a lot of community reinvestment funds because they knew that having a uniform mill rate was going to hurt their taxpayers. They had a chance then to use the limited financial resources of the province to look at the same thing for commercial-industrial, but they didn't. They didn't get around to dealing with this until less than two weeks ago.

Have you had any conversations with the government on why, back in December when they were dealing with the residential tax rate and moving to the uniform rate, they didn't at the same time do the same calculation on commercial-industrial? Because believe me, nobody wants taxes to go up in their community, and that's why they had the community reinvestment funds to cushion that blow.

The Chair: Have you had any discussion, sir? We're out of time.

Mr Von Palmer: What you say makes a lot of sense. Along with a whole bunch of business groups, we're under the impression that when the province addressed residential property tax they were off to a good start. That was a great start. In all the discussions, if you go back, a lot of commissions and task forces out there all recommended a uniform tax rate across the province for industrial-commercial businesses. We thought that residential was a good start, and the next step was to address the industrial-commercial property taxes. So we were surprised, along with other groups, the board of trade as well, when Ernie Eves announced that he would freeze the property tax rates, which was a great move, but that we will not get a uniform tax rate.

I think it's unrealistic to expect that you can simply have a uniform tax rate across the province and have the 905 and other jurisdictions take a tax hit. We're not saying that, but a move in the right direction would certainly be welcome. You can phase in whatever adjustments have to take place. I mean, Toronto always expects to support the province, and I think that's clear and that will never change. We're not saying move overnight, in two days, but it was a step in the right direction. But the announcement that we heard was that the best we can hope for is we'll balance the budget in 2000-01, and then we can address that problem. Clearly the province recognizes there is a problem, an imbalance, so now is the time to move and take a step in the right direction.

The Chair: I apologize, sir, but I have to interrupt you there. Our time is up. We thank you for your presentation and thank you for your time.

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WINE COUNCIL OF ONTARIO

The Chair: The next presentation is from the Wine Council of Ontario, Ms Franklin. Good afternoon. Welcome.

Ms Linda Franklin: I realize I'm the last presenter at the end of a long day and you've all heard a lot of submissions, so I'll try to be brief and to the point. I apologize to some of you folks who have heard some of our issues not that long ago as we dealt with the assessment question. At any rate, we appreciate this opportunity to come and talk to you folks about issues that are relevant to the 1998 provincial budget development process.

As was mentioned, I'm Linda Franklin. I represent the Wine Council of Ontario, which is the trade association for wineries in the province, with 32 members.

This past year, unlike some sectors, I guess, has been a really good year for our industry. Sales of domestic wines are up 8%, and for the first time since the mid-1980s, sales of domestic wines have surpassed sales of the French, which were always our benchmark, both in terms of volume and dollars, which is a rare feat when you consider that some French wines retail for over $100 and we're lucky to get $20 a bottle at our high end. It has been a good year that way. In Niagara and in southwestern Ontario, those of you who have been to visit the wineries will know that tourism is up, and developments at wineries to support that have vastly increased over the last few years. That in turn is building job creation, so we're now employing hundreds of people more than we were just two or three years ago in the tourism and customer service part of our business in Niagara and southwestern Ontario.

Several new wineries opened their doors in the past year and there will be shovels to be in the ground, we expect, for two new major winery developments in the coming year: a new winery for Andrés Peller Estates in Niagara-on-the-Lake and a winery and culinary institute in Vineland. Today as well, three wineries in Ontario are publicly traded companies, and that's up from one just over a year ago.

Growth in the wine industry is also fuelling new economic activity in agriculture, particularly in Niagara, which has been a particularly hard-hit area of the province in agricultural terms over the past few years. Today, wine grape growers are planting an average of 1,000 acres of grapes a year; that's a cost of about $14,000 for every acre planted, so there's a lot of financial investment going into the peninsula that there wasn't a few years ago. To help finance this, wineries are signing long-term contracts with growers for the first time in many years, so there's some long-term security for wine growers in the province. Banks and the Niagara Credit Union are starting to develop special loan processes that defer payments on loans taken out to plant vineyards until the vineyard comes into production.

Planting activity in the peninsula is expected to grow for several years because the growth in consumer demand for our wines, again for the first time in many years, is outstripping supply significantly. We anticipate that we are several thousand acres short, even at the rate of 1,000 new acres a year, of the wine grapes we need, so it's also good news for nurseries who supply us with the vines that we plant in the ground. Economic growth in Niagara is really being fuelled in many ways by growth in the wine industry.

As well, we take some credit for academic growth in the peninsula, because the growth in our industry over the past couple of years has made it possible for Brock University to open the first dedicated viticulture and oenology institute in the country, something they tried to do twice before and simply couldn't get a critical mass to do. Well, the industry is big enough that they can now. That means that if you want to be a winemaker in Ontario, you won't have to go to Australia or California or Chile or Europe to learn your craft. Over the next few years, you can do it here in Canada, and that hasn't been the case up until now.

Without question, we take credit for a lot of the growth and development in our industry. There's been a lot of hard work over a lot of years, and a lot of changes, as most of you know, in the quality and the way wine is made. We also have benefited from partnerships with a series of governments, Liberal, NDP and Tory, that have recognized that there is some value to investment in our industry, and I think we have rewarded that investment and that faith on the part of government by turning the industry around in the past decade to where it is today.

As well, though, in the past few years the economic stability and growth in the province's economy have helped fuel our industry. There is no question that consumer confidence is on the rise, and with it there is a greater willingness for folks to open their wallets in areas like tourism and entertainment. We see it every day at our winery retail stores, at our winery restaurants. People are buying more wine, they're coming out in greater numbers, they're bringing friends, to an extent that we wouldn't have anticipated a few years ago. We believe that this whole general sense of confidence in the economy is helping fuel that.

A lot of why we believe that is anecdotal, but I think on the other side of the coin there's some pretty significant evidence that when the economy is unstable and in trouble and people lose confidence, it has a direct impact on sales. In our case, this has been true this year in relation to the Asian economy. As a rule, one little liquor store in Niagara-on-the-Lake in an average year sells about $600,000 of our province's icewine; singlehandedly, they're responsible for about a fifth of the amount of icewine we sell as a province, and they do that because they get a tremendous influx of Japanese tourists every year and Japanese tourists tend to cart out our icewine in multiple cases.

This year, the drop in the Asian tourism market produced a significant drop in tourists in the Niagara region, particularly Niagara-on-the-Lake, where there's a fairly large influx of Japanese tourists. The net result for us was a 24% drop in the amount of icewine that that one little store sold in a year. That's a pretty huge impact on the industry and again is almost entirely attributable to that drop in Japanese tourism. It's a small example in overall economic terms but I think an enlightening one, because it again suggests the importance of the consumer confidence and ability to spend money on things like tourism and travel and entertainment.

Looking at specifics from last year's budget, our industry benefited from a number of undertakings. As many of you who were involved in the committee hearings know, we were promised a solution in the last budget to the inequities in the assessment system that caused estate wineries in the province to experience thousand-fold increases in their assessment costs. During the year, new regulations were developed to address this issue. The changes received all-party support during the committee hearing process. We were very pleased with that. It made things run a lot more smoothly.

As a result, we have a solution to that problem that has benefited the industry tremendously. The net result of that solution is that a number of wineries that were putting off planned expansions because of those assessment increases have actually started expanding again. We have a couple of wineries that are expected to about double in size over the next few months as a result of an ability to invest that money against their plant. All of that has been very important to our industry.

Equally important, of course, is our ability to market our products once we get them produced and bottled. But because so many of the wineries, as many of you know, are small, family-based operations, marketing funds are very hard to come by. By all standards, we're a pretty small industry worldwide. We compete in Ontario against European and American imported wines that are heavily subsidized by their home governments in their marketing efforts abroad and receive tremendous support. So we face a pretty uphill battle to reach consumers even in our home market, that we should own.

This year, the Grow Ontario program provided tremendous assistance to us in this area by offering matching funds for programs in the area of marketing and research. The Ontario wine industry, because we're agriculturally based, was able to join in partnership with the grape growing marketing board, and through that partnership secured funds to help market our premium wines, our Vintners Quality Alliance wines. The resulting market share gains that we made with the help of Grow Ontario helped drive increased plantings of the fine wine grapes from which our premium wines are made and which is really fuelling development in the peninsula. We were very pleased to see this initiative and pleased to see the continuation of agricultural incentives through the recent announcement of the rural jobs strategy. We think that program will continue the good work of Grow Ontario.

We have a bit of a vested interest in it because it helped us, but frankly, just looking at the Niagara Peninsula, there's no question that it was a tremendous benefit across the peninsula for folks in agricultural endeavours who had to do some more serious thinking than they ever had in the past about how they take their product from the farm gate through to marketing to the consumer. That's not something the agricultural community, in our experience, is particularly adept at, and this program helped a lot of those folks start to think through some of those ideas and put programs in place to help the marketing end of what they make.

In addition, just recently the announcement of the extension of credit to licensees for the purchase of alcohol benefits not only the Ontario restaurant industry and the industry in general but also our industry by making it easier for folks who buy our wine in volume to manage their cash flow effectively, and in the restaurant industry, where margins are pretty thin, that's a pretty important issue. There's a cost to the Ontario government of providing that benefit, but we think the net result in terms of job creation and economic development is going to be well worth the investment.

All in all, we're pleased with the economic thrust of the government over the past year. We're supportive of a continued focus on deficit reduction, economic stability and job growth, at least as it relates to the domestic wine industry.

I guess the other piece today is, what would we like to see in this year's budget to help us continue our growth and development? Of course, even though we have a lot of good news to report, there are always things we want in addition. Most important, there's this need for a stable economic and business environment to help our industry develop long-range plans. That hasn't always been easy. As those of you who have been involved in the Ontario government for a number of years will know, since the inception of free trade in the late 1980s, frankly it has been a bit of a mug's game to try to determine from one year to the next what the environment is going to be in terms of policy around the Ontario wine industry. Free trade and GATT have driven a lot of difficult decisions at the government level that have impacted on our business. This uncertainty isn't very conducive to growth in our industry, and with tens of millions of dollars being invested in the industry by growers and wineries, it's more critical today than it has ever been that we have a predictable business environment to invest and plan against.

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We are a highly regulated industry, so of course we're not the masters of our destiny entirely in relation to our business environment; it can be dramatically affected by government policy decisions. For that reason, we were concerned with initial ideas about where the government might be going in relation to the LCBO, which of course buys and sells most of our product. We've been really pleased to see that in the past year there seems to be a change in focus away from privatization and towards the retention of the liquor board and a modernization process at the board that is more customer-focused and yet falls short of completely overhauling the system, with all of the disruption that would cause in our sector.

Over the next year we think it's equally important that whatever decisions are considered by the government in relation to the liquor board, they be taken after careful consideration and consultation with affected parties, including the wine industry. At the end of the day, modernization, if it's not carefully considered, can end up with the same dramatic dislocation as privatization but done more subtly so it's harder to comment on. To make change for the sake of change, we think, or without fully understanding the cost of those changes to Ontario producers would probably wipe out the hard-won gains our industry has made over the past decade. So we caution against swift action or ill-considered action in relation to the liquor board.

As well, as changes are considered, it is really important to us that the government bear in mind the ongoing importance of the Ontario winery retail store system to the health of the domestic industry. Although we have done really well in the liquor board over the past few years, in actual fact the most significant gains we have made as an industry in market share have been made through our own winery retail store system and the direct access we have to wine consumers through those stores. Domestic wine stores separate from the LCBO represent the only advantage over imported wines our industry retains in its home market after free trade. There have been a lot of fundamental changes wrought on our industry as a result of free trade.

In contrast, the wine industry in Europe and in other places hasn't followed suit. In Europe they get over $6 billion in subsidies every year. OMAFRA has tracked that and developed a fairly sound analysis. That's in spite of international trade agreements. The US industry is heavily subsidized as well to sell wine into the Ontario market. While Ontario and Canada, as is always the case with Canadians, have been quick to rush to meet our own trade obligations, other countries have not been nearly as diligent. We have on record 70 adjudicated violations of the GATT agreement by the United States that the United States acknowledges they are in violation of and on which their Congress has simply said: "Well, that's really interesting news. Have a nice day." That's very American. We're very Canadian. So we're left with very few advantages in our home market, and every day we face subsidized imports in our marketplace that don't compete with us on a level playing field.

We're really concerned that any changes that are made to enhance the profitability of the LCBO are done bearing in mind the importance of our winery retail store system, the need for that system to maintain a competitive advantage and the fact that frankly that's the only competitive advantage we continue to have in our home market. Given the fact that our governments federally and provincially are not able to fight the kind of fight in defence of our wine industry that Europeans and Americans can -- it's simply a numbers game; the value of the wine industry in Europe far surpasses the value of the industry here -- it's very difficult to train our guns to the same extent against the Europeans as they train on us.

Following that, we have been pretty heartened over the last few months by the Minister of Consumer and Commercial Relations' recent remarks indicating a willingness to work with the federal government to try to address the massive imbalance in wine trade between Ontario and Europe. Right now, the Europeans bring in $300 million in wine to Ontario for sale, and in a good year we have $1 million worth of wine in return sales. So there's a real imbalance there. We're wide open to Europe; they are very closed to us.

We think it's critical that as long as the Ontario wine industry is barred from doing business in Europe, the Ontario government, through the liquor board, not extend new benefits and new marketing advantages to foreign wines. We're not asking to cut back the number of wines we bring in or to disadvantage them in our marketplace, but we are suggesting that no new advantages be put in place.

That's pretty tempting, frankly, because the liquor board can add all sorts of charges to wineries. Those charges are readily payable by folks who are using government-subsidized dollars from offshore. It's not so easy for us to carry some of the freight of those costs. In the last year, the liquor board has increased costs of doing business to the industry by about 84%. Those costs again are more readily absorbed by foreign countries with large marketing budgets than they are by our estate wineries. So again it's an issue that we think the government should pay some attention to when the liquor board comes asking for changes to be made to increase their profitability.

Another priority for our industry is the need to legislate and enforce the rules we have developed for the production of our premium wines, which carry the Vintners Quality Alliance symbol. We know this is a curious thing to be asking of government. We, as an industry, routinely chafe against increased regulation, but now we are coming to you and asking you to increase the regulation on our system, coming and asking a government that has a visible commitment to reducing regulation to produce more.

We think there are some really compelling reasons for doing this. I'm sure many of you know that the industry has developed voluntary standards for the production of fine wines. We had to do this, frankly, to address a lot of quality issues that existed in the industry 10 years ago, when our flagship was Baby Duck. That has changed a lot over the years. It still leaves us with a gap for entry-level drinkers that Baby Duck filled, frankly. But at any rate, there were some real and compelling reasons to establish a quality control system for our wines, and we did that. For a long while, it was enough just to have the standards written down and in place. We knew we had a quality assurance problem, so it wasn't all that difficult to get our folks to play along.

Today, though, we're at a point in time where in order to ensure that the system is credible and enforceable at home, and frankly in trying to get access to the European markets, it has become critical that there is a government stamp of approval on those rules and regulations. It's not enough any more to say, "We're all nice guys and we all play well together, so we'll enforce our own standards."

That has become particularly critical in ice wine. Icewine has become a very big piece of our business, a very profitable piece of our business. As some of you probably know from reading the news reports, this hasn't been a very kind winter for us and we have lost a lot of the icewine crop out there in nice, warm El Niño weather.

We're very concerned that growers who stand to lose a lot of money in this area, and some wineries that do as well, will start harvesting that icewine at temperatures that fall short of our standards, ship it off to the States and let producers in the States ship it right back here and call it icewine even though it's not. We're concerned that some of our own wineries may be in that business this year as well.

The net result of that sort of thing going on is that it will reduce the credibility and the value of what has become a very important product for us, and frankly a very highly priced product. So there are lots of good reasons for us to find a way to protect those standards that assure the public that what they get in the bottle is value and is monitored and conforms to standards that are enforceable.

One of the reasons Europeans claim as well that we don't have access to their market is that they say we lack a government-sanctioned system of rules for winemaking, and they are right. The VQA rules and regulations will go some way to addressing this issue. There's no question there are federal issues at play as well. But the British Columbia government, trying to get a step ahead of things, has taken action and legislated VQA rules and regulations in their own province. We think there would be tremendous value in having the same sort of system legislated in Ontario, where 90% of the wine is grown anyway, and we think we might be able to take those regulations to the bank and persuade the Europeans that on that basis we should have access that we don't have today.

I guess the biggest stumbling block to all of this is that there is going to be a cost involved in legislating and enforcing such a system. Obviously, our industry is quite prepared to help cover these costs. Here's the rub: In every other winemaking country, there is a government partnership with the industry in regulating its activities and paying for those activities. Given the fact that our industry is about one tenth the size of the next-smallest significant wine-producing country in the world, we feel we are going to need that partnership with government, at least in the early going, to make sure our regulatory system is enforceable and affordable, at least early on.

Recognizing that government never likes to hear requests for additional money, we think, like the licensee credit system, we can produce some real benefits in job creation, increased sales and general economic activity through the regulation of our fine wine side that will make it worth the investment in dollars.

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Finally, we think the government's efforts to enhance the marketing research and technological expertise of the agricultural sector in Ontario through a matching funds program should continue. It's been our experience that programs like Grow Ontario and the rural job strategy play an important role in helping the agricultural industry mature and come together to implement new strategies around marketing and value added, and quality assurance, frankly. In the agricultural community today, we are still pretty far behind in quality assurance measures. Some of that needs to be taken on in the next little while.

We think these strategies are critical to long-term growth. We encourage government to continue the support as a way of assisting agriculture to grow and develop the expertise that it needs to compete in the next century, and so we support the continuation of these sorts of programs.

That's my wish list. We appreciate the opportunity to come and offer that wish list up to you as a committee and the opportunity to share our views of the past year.

The Chair: We have about two minutes per caucus, and we'll start with the government.

Mr Wettlaufer: Hello, Linda. Good seeing you again.

Ms Franklin: You too.

Mr Wettlaufer: I'd like to talk briefly about the marketing aspect. I've had comments made to me from various constituents, and I know in the past I certainly had the same problem myself, that late at night -- or not necessarily late at night but at 8 o'clock at night -- company shows up at the door and you don't have any wine, and you go out and the wine stores are closed. I get over that problem now by buying wine by the case. I make sure I have an adequate supply. Mind you, I pay for a case what Gilles Pouliot pays for a bottle, but that's beside the point. Has any thought been given to extending some of the wine store hours?

Ms Franklin: We would love to have that opportunity, frankly. It's out of our hands. Our winery stores, as you may know, are in actual fact agency stores of the liquor board, so all of their activities are governed by the liquor board. For the past little while, when the liquor board wasn't allowed to open late at night, they weren't really happy to have their competition open late at night. We've asked for this a number of times; we've been turned down a number of times. But yes, we would be very happy if there was a mindset that said there should be some extended hours. Particularly in areas where there's high demand, high traffic, it would make some sense, we think.

Mr Phillips: Just a comment and then a question. This is an industry where I think 15 years ago there was a question about its future. There was a feeling that it was at risk. It is one of the real success stories in North America probably of an industry that invested in improving its product and worked hard at it, and now not only is it a huge wine industry but it's a huge tourism industry too, which is a terrific double bonus for us. I think governments of all political stripes are anxious that it continue to grow, and I would just commend the industry.

My question is on the privatization of the liquor outlets, because I think probably 12 to 18 months ago that would have been high on the government's priority list. I'm not sure where it is now. Can you just help us understand the implications to the wine industry of the privatization of the liquor retail outlets?

Ms Franklin: As we first understood it a couple of years ago when we were looking at wholesale privatization of the system as one option on the table, our view was that it was a pretty devastating option for a lot of reasons, one of them being that we now have an industry that is about 45 strong in total, and nine tenths of the players represent 20% of the volume. They're small estate wineries. There are a couple of very large companies, Andrés and Vincor. The rest are very small businesses, family run in most cases.

Today, because of the LCBO, a family operation of three can survive. They send one fellow into the liquor board and they meet with the wine manager. If they have a good case to make why a product should be listed at the liquor board, they're suddenly in 600 outlets right across the province. So your ability to get some reach to consumers is relatively simple. If all of a sudden we were dealing with 600 mom-and-pop liquor stores across Ontario, that would be an impossible task. We would be looking at job creation, because you'd need a sales force for an estate winery, but in Alberta the experience has been that your cost of doing business increases so dramatically that it's virtually impossible to manage if you're a very small operation. So increased cost of doing business is one of our concerns.

The other one is that in Alberta they have resisted up until now putting beer and wine in grocery stores, but we think that eventually is going to collapse because it's discriminatory. In Ontario, the concern about privatization that would eventually allow Loblaws in the door to sell beer and wine is that it removes an entire area of play for some of our wineries. The large wineries would be able to produce wine in the volumes that the grocery stores demand to list their products, so they would probably be okay in their high-volume brands, but all the VQA products, all the premium wines, come nowhere near the kind of volume you would need to play in grocery outlets, so they would lose one important playing field. In exchange, they would probably have a series of fine wine stores, but the numbers of those would be much smaller and the range of product would probably be smaller. As I say, it would make life for the industry much more difficult.

The other piece that we would say is problematic is that you've got high-volume, enormous companies like E&J Gallo that in that sort of environment we expect would put tremendous dollars against owning the marketplace and would probably again reduce our market share fairly significantly.

Mr Pouliot: Madame Linda Franklin, you meet a lot of people by virtue of your profession. The last time -- you might not recall this, but I do, vividly, for it's not too long ago -- was during a late afternoon, not unlike today. I had mentioned then that wine was the purest form of a beverage. I quoted from Louis Pasteur, the scientist, the chemist, that it was the most hygienic beverage. You thought perhaps that I was presenting with tongue in cheek, because what I did ask is for the pleasure of having you pay us the compliment of your visit, your insight, your expertise, and bring samples.

I have two questions. The first one is, where are the samples -- and we're not talking about Baby Ducks or duckettes. Where are the samples for the members, for our staff and the members of the committee?

Ms Franklin: To answer that question, Mr Pouliot, I do remember that vividly from our last meeting.

Mr Baird: They're available for purchase at the gift shop.

Ms Franklin: I think at the time I mentioned to you -- and frankly I'm dismayed and disappointed that there hasn't been more action on the part of the government towards this end -- that if the sanction against donations of wine could be removed from our industry, we would be only too happy to have this conversation in the --

Mr Pouliot: By final supplementary, I take a great deal of pride in listening to your presentation. This is indeed a success story. It's true that people will say we came a long way. We have some international recognition; we're growing in range. The advent of the ice wine has given us a new opening, if you wish.

My friends opposite have mentioned the possibility of looking at the grocery store. I know little, but I'm certainly aware that in the province of Quebec they don't grow much wine. They know about their capacity; that they know very well. So what they do is they import a blend, if you wish, and then they make it available to different outlets: the ma-and-pa store, the dépanneur. It's more flexible. It's available seven days a week. Statistics will attest that people don't consume more -- maybe not less, but it is not a major factor in it.

Would you make a presentation to the government regarding those specifics, with some examples, so that you would get not an advantage, but certainly an opportunity to put the products of the people you represent forward in the best possible light?

Ms Franklin: We would love to look at those sorts of opportunities. I guess the difficulty for us and one of the cautions around changes to the system as it stands is that the Quebec system that you referred to, the dépanneur system, existed before the free trade agreement. So they had a system in place that allowed folks who had a domestic winery -- and by that they meant a factory that brought in blended wine but created jobs in Quebec. If you have a presence in Quebec, you have a right to be in the dépanneur system. If you don't have a winery in Quebec, you're not in the wine store.

If Quebec wanted to introduce that system tomorrow, they wouldn't be allowed to because it would violate free trade. But because it existed prior to free trade, like our winery retail store system, it's frozen in time. It's grandfathered. If you tried to duplicate that in Ontario today, you would run afoul of these same free trade issues and it wouldn't be allowed.

As I say, for us it's very important that the government understand, as it looks towards modernizing, changing, advancing the liquor retailing system, what the long-range and short-range ramifications of those changes are, because nine times out of 10, I've got to tell you, some of the ramifications will mean a disaster for our industry. They may not be readily visible. As I say, it's largely because of all these curious complications that the free trade arrangement has brought to our marketplace.

The Chair: Thank you very much for your presentation and for your time.

Gentlemen, we adjourn at this time until 9:30 tomorrow morning, when we're in committee room 1.

The committee adjourned at 1732.