Mr Ted Arnott (Waterloo-Wellington PC)
Mr Marcel Beaubien (Lambton-Kent-Middlesex PC)
Mr David Christopherson (Hamilton West / -Ouest ND)
Mr Doug Galt (Northumberland PC)
Mr Monte Kwinter (York Centre / -Centre L)
Mrs Tina R. Molinari (Thornhill PC)
Mr Gerry Phillips (Scarborough-Agincourt L)
Mr David Young (Willowdale PC)
Substitutions / Membres remplaçants
Mr Joseph Cordiano (York South-Weston / York-Sud-Weston L)
Mr John O'Toole (Durham PC)
Clerk / Greffière
Ms Susan Sourial
Staff / Personnel
Mr David Rampersad and Ms Elaine Campbell,
research officers,
Research and Information Services
The committee met at 1004 in committee room
1.
PRE-BUDGET CONSULTATIONS
The Chair (Mr Marcel
Beaubien): Good morning. It is after 10 o'clock and
we're only cutting the presenters' time, so I'd like to bring the
meeting to order.
ONTARIO ALTERNATIVE BUDGET WORKING GROUP
The Chair:
Our first presentation this morning is from the United
Steelworkers. Could you please state your name for the record. On
behalf of the committee, welcome. You have an hour for your
presentation this morning.
Mr Hugh
Mackenzie: My names is Hugh Mackenzie. I'm actually not
appearing on behalf of the United Steelworkers; I'm appearing as
the co-chair of the Ontario Alternative Budget Working Group. I'm
not speaking for the Steelworkers in this regard. I think I get
here as a result of having been on somebody's list as an expert
presenter, not representing the unions-just to clarify that.
You've got a lengthy piece of
paper in front of you. I'm not going to read through the whole
thing. It provides some additional background to what I'm going
to say this morning. I do have a couple of slides that I'm going
to put up too, but all the information that's on the slides is on
the piece of paper in front of you, so I don't have another set
of pieces of paper to give you.
My main point this morning is
that Ontario's fiscal situation could be described as heading
into a very tightly constrained box as we move into fiscal year
2001-02. Essentially what I'm saying is that, unlike perhaps in
other years, Ontario is facing a squeeze in its fiscal options.
I'm going to go through each of them in a bit more detail as we
get into the presentation, but I just want to summarize them to
begin with.
The first is that the
government is facing enormous pressures on the expenditure side.
The quick and dirty way of describing it is that many of the
chickens from the previous five or six years of significant
expenditure restraints are coming home to roost, whether it's in
the education sector, in capital spending on infrastructure or
the fact there is now incredible pressure in the housing sector
because of the cancellation of non-profit housing programs and
the failure of the private rental market to provide any low-cost
housing-a whole series of fiscal pressures on the expenditure
side.
On the tax side, we actually
have quite a significant legacy of tax cuts that have not yet had
their full impact on the budget. I'll go into more detail on
those, but they basically fall into three categories. There are
cuts that were initially implemented in the year 2000 budget that
only had a partial year impact in 2000-01 and will have their
full year impact in 2001-02. Secondly, there are tax cuts for
which there is already a firm schedule set out; for example, the
small business tax cut. Then there is another set of tax cuts for
which the commitments are quite definite but the timing is a
little more vague. Those are, for example, the reduction of
education taxes on property, phased in over a number of years;
the reduction in corporate income taxes; the reduction in the
small business tax rate; and a couple of other smaller ones.
The third side of the box the
government finds itself in-I guess that's the best way to
describe it-is that over the last several years the government
has lived from quarter to quarter and from year to year in
producing these nice, smooth-looking downward trends in their
deficit numbers, on a fairly significant degree of manipulation
of the government's finances and the accounts. The Provincial
Auditor put the government on notice last fall that he wasn't
going to tolerate it any more. So I think the government's
ability to tailor its accounts to its fiscal situation is
becoming much more limited, thanks to the Provincial Auditor's
view.
But the most important
squeeze is the squeeze on the rate of growth in the economy, and
that will form the core of the presentation I'm going to
make.
Let's talk in a bit more
detail about the nature of the fiscal box the government finds
itself in. First of all, in the area of unmet needs, we've had
capital spending drop from $3.6 billion in 1995-96 to $2.2
billion in 2000-01-and these are nominal dollars. It's dropped as
a share of GDP from 1.2% in 1993-94 and 1.1% in 1995-96 to 0.5%
of GDP now. You don't have to look too far to find people raising
concerns about the impact that's having on the quality of
Ontario's infrastructure, whether you're talking to the
Association of Municipalities of Ontario, which is raising
significant concerns about the impact of capital spending
restraints on the roads, or the concerns that Walkerton raised
about the quality of Ontario's sewer and water infrastructure,
and the list goes on.
In the elementary and
secondary area, we're seeing a very tumultuous period in
collective bargaining in the public sector. That's a direct result of the
constraints on spending, which the government attempts to hide,
but in fact the government's own numbers speak for themselves.
The average real per student spending has dropped by $744 from
1997, which was the last year before the new funding formula came
in, to the 2000-01 level.
1010
In post-secondary education
we have this interestingly stark contrast between what the
government says about Ontario when it's talking to potential
foreign investors and what it's actually doing in its investment
in post-secondary education. We rank last in Canada in our per
capita spending on college and university education, and again
you can see the impact. So that's another stress on the
expenditure side.
On the health care side, we
have this great mystery that there's more and more money going
into the system, according to the government's accounts, yet it
doesn't seem to be having much impact when you hit the street,
whether it's concerns about long-term care, concerns about
emergency rooms, lineups for specialized treatment, whatever.
In social assistance, the
21.6% cut the province brought in in 1995-96 has been taken up,
thanks to inflation, to effectively a 30% reduction in living
standard for people on social assistance. This is a fact that has
emerged and grown during a period of unprecedented boom in
Ontario. We're on the verge of a significant economic slowdown,
with our supports for the least fortunate in our society at an
incredibly weak level.
I mentioned housing in my
introduction.
There's been a great deal
said about the impact of budget cuts on Ontario's environmental
regulation. In fact, some of these cuts are having to be reversed
in the wake of Walkerton.
On the tax cuts side, roughly
$5.2 billion in tax cuts were announced in the 2000-01 budget. Of
their impact, $2.4 billion was not fully felt in 2000-01 and will
be felt fully in 2001-02. That obviously affects one's
projections of revenue.
The 2000-01 budget had a
proposal to reduce capital gains inclusion to two-thirds from
three-quarters. The federal government brought it down to 50% and
Ontario has followed. That's a $770-million item that wasn't
counted in the 2000-01 budget projections and that will be
affecting the budget in 2001-02.
The promised cuts still to
come: we're still living with the legacy of the 20% cut that was
promised pre-election in 1999. It's anybody's guess as to what
percentage of that cut the government thinks it has already
implemented. A lot of it depends on whether you count the impact
of introducing indexing as a tax cut towards that 20%. If you
count that, it's about two-thirds done; if you don't count that,
it's about half done. In the projections I've done, I've made the
more generous assumption that it's two-thirds done. In other
words, I've credited the benefits of indexing the tax parameters
to the government's tax cut program, leaving only about a third
left.
We have significant embedded
promises for corporate tax reductions on all rates of tax: the
general corporate tax, the manufacturing and processing and
primary industry rate, and the small business rate. Only the
small business rate is locked in to a specific schedule. The rest
of them just have a target date and an unspecified schedule.
There are the announcements
that were made in 1998 and 1999 respectively on reductions in the
commercial, industrial and residential property taxes that the
province levies for education. Those numbers are still to be
implemented on a schedule as yet to be determined, but clearly
the government has said all along that it intends to do it during
this term.
Just one footnote to this:
because the province doesn't actually admit formally that it's
collecting property taxes for education on residential,
commercial and industrial property, the impact of that cut
actually shows up on the expenditure side, because as the
province maintains its grant levels at the same level and reduces
the amount of money that's raised from the commercial, industrial
and residential sector from property taxes at its dictate, the
amount it has to put into the system in grants to maintain the
same level of funding for school boards goes up. That's the way
that plays itself out.
I'm not going to go into
great detail on the impact of the auditor's view of the
government's accounting. That's probably a story for another day.
I read it in the fall and then I re-read it when I was preparing
for this, and I was actually stunned when reading it at the
intemperate language for an auditor that is used in the auditor's
view of the government's accounts. When an auditor uses phrases
like, "This practice distorts the government's financial
reporting," and concludes with a statement like, "If such
multi-year items are in future recorded as expenditures in one
year on a substance-over-form basis, I will have to reassess
whether to then include a reservation in my auditor's report on
the government's financial statements." That's pretty strong
language for an auditor. That's equivalent to a tirade for an
auditor. I think it speaks to the difficulties the government
will experience if it tries to play with the estimates and play
with its budget projections in order to minimize the impact of
the other pressures on the government's balance sheet.
I come to the main thing I
want to talk about today, which is the economic situation facing
the province. When the budget was announced in May, I think the
government was projecting 3.1% as a growth forecast for 2001-at
least that was the consensus forecast it was reporting. By
November, Mr Eves had increased his projection for 2001 to 3.7%.
I understand that, under some pressure, the committee managed to
tease out of the minister an estimate of 2.8% as the government's
current projection for 2001.
I'm not going to play
competing forecasts here. My own view is that that's still
excessively optimistic. I have a great deal of trouble imagining
how you can have two consecutive quarters of real growth less
than 1.5% in the United
States and not have that have a much more significant impact on
the rate of growth here than the government is acknowledging.
I've seen other estimates that are in the range of 2% or 2.2% for
2001. I happen to think it will probably be lower than that,
given the severity of the slowdown which, there is widespread
evidence, is taking hold in the United States. But even the
relatively modest slowdown that the minister is admitting to now,
as you'll see when we get into the projections-when you marry
that with the tax cut promises that are still in the mill coming
to fruition, it has a significant negative impact on the
government's financial situation.
1020
I've taken these various
pressures into account and looked at what the impact will be on
Ontario's financial situation in various scenarios. Let me just
say right at the outset that I have not taken into account any
upward pressure on expenditures resulting either from the
expenditure pressures that I talked about or the natural push
upward of expenditures that happens as the economy slows down. So
on the expenditure side, I've actually understated the likely
impact of an economic slowdown on the government's financial
situation.
I've looked at three
different scenarios for economic growth. One is a base case that
takes what the minister said a little over a week ago as gospel.
He indicated a 2.8% growth rate forecast for 2001. We understand
that the corresponding inflation assumption that's being used in
finance to that number is 2.6%, so I used that. Looking
forward-they won't look forward very far-I've used for this one
the assumption that people have been using for a while of about
3%, which is consistent with the very slight slowdown that those
who are whistling in the dark about the economic situation in the
United States are going with at the moment.
I've then got what I call a
"soft-landing" scenario. I put that in quotes in the paper
because, while it's a term that describes a slowdown that doesn't
result in a recession and has in effect become a kind of a term
of art in the economic forecasting business, I don't like using
it because every percentage point that the rate of growth of the
economy drops is thousands of people out of work. For them, it's
not a soft landing at all. But let me just go with the
terminology.
Then on the fiscal side, I've
got two different scenarios outlined. In one of them, I assume
that the government recognizes the severity of the financial
situation that it faces and suspends further implementation of
its tax cuts. What that means is that those tax cuts that have
already taken effect will continue, but the ones where no firm
date has been announced yet for the cut will not be implemented,
will be suspended until the fiscal situation improves.
In the other scenario, I
assume that the tax cuts that have already been announced are
implemented on an assumed schedule that has them done by the end
of the government's term. There's no scenario built in here for
any further tax cuts beyond the ones that have already been
announced or promised.
In the so-called soft-landing
scenario, I assume that real growth drops to 1% for two years and
stays below the long-term projection for another year. So it's
quite a severe slowdown but it's not a technical recession.
I've also got a scenario in
here that assumes a recession that is equivalent in severity to
the recession that hit Ontario in 1991-1993, just to see what
would happen if we got really whacked. I don't believe that's
going to happen, because I think some of the additional factors
that contributed to the severity of that recession don't exist,
principally the fact that we were digesting an unrealistically
high price for the Canadian dollar at the time and we were also
going through a period of significant adjustment to the
structural changes resulting from free trade. I don't see that
happening, but it's in here as a kind of "What if?"
I'm going to get up and sit
down quickly so I don't screw up the mikes. I've got two charts.
They are in your document, but I want to put them up so I can
point at them.
The six scenarios I looked at
are all outlined here. On the revenue side, you can see that the
most optimistic forecast has revenue increasing from about $64
billion in 2000-01 to about $68 billion in 2002-03. That's
assuming no tax cuts and that the relatively rosy economic
forecast the government is using publicly persists.
The second line down: the
difference between the dotted red line and the pink line
represents the cost, at those growth rates, of the completion of
the second-term tax cuts that have already been promised. You can
see the kind of hit revenue takes when you proceed.
The next line down, the
dotted blue line, is what happens if you suspend the tax cuts but
the growth scenario is closer to the soft-landing scenario I've
described. As you can see, you get a similar kind of revenue hit:
about a $2-billion hit in revenue by 2002-03 results from that
growth assumption.
The two bottom lines, the
solid red line and the dotted green line, are the projection of
what happens to government revenues if we get into a real,
capital-r recession equivalent to the one that hit Ontario in
1991-93. As you can see, there is really a quite substantial hit
to revenue at that point, particularly relative to the relatively
rosy forecast. If you combine proceeding with the tax cuts and a
real recession scenario, you end up with an actual reduction in
revenue of about $5 billion over a two-year period.
I think that's an
illustration of the extent of Ontario's exposure fiscally to
variations in growth projections.
The easier number to deal
with when you're looking at these numbers is to look at what
happens to the deficit. I'm going to put that up now and then
talk about it.
What the numbers tell us is
that the only scenario that keeps Ontario out of deficit, going
on for the next two years, is the one in which the minister's
very optimistic forecast of economic growth turns out to be
correct and the government does not proceed with the tax cuts
that have been promised but not yet implemented. That's the
only scenario that
produces a balanced budget or better in each of the next two
years.
If the government proceeds
with the tax cuts, even with the optimistic economic forecast of
the minister, the pressures on the revenue side are such that the
budget will drop into a deficit of about $1 billion next year,
and that deficit will persist for the year after that as well.
That gives you roughly the same result as the no-tax-cut and
soft-landing scenario.
The others are relatively
self-explanatory. As we go through it, obviously the worse the
economic growth situation is, the more substantial the hit on the
government's revenue and the more substantial the hit on the
bottom line, and the impact of proceeding with the tax cuts
relative to not proceeding with the tax cuts is correspondingly
the same between each of the two scenarios. The only thing I
would add to that particular summary is to say that in the worst
of these scenarios-a 1991-level recession and a decision to
proceed with the tax cuts-we're into a scenario with a deficit
that is very close to the deficit the government had in the first
year it was in power, in 1995-96.
1030
So the province's finances
are very heavily exposed, and there's no great mystery as to why
that's the case. The government decided when it was elected that
it was going to spend the fiscal dividend before it arrived. As a
result, in spending the fiscal dividend before it arrived, the
government also systematically eliminated it. Each time some
fiscal flexibility emerged in the budget, the government took
steps to eliminate it by accelerating the tax cuts, bringing in
more tax cuts and undermining the revenue base of the province,
to the point where last year we reached the peak of a boom with
essentially no fiscal flexibility-very, very little fiscal
flexibility-and we're paying the price for that now.
What conclusions do I derive
from this? The principal conclusion is that it would be
irresponsible, given this current fiscal situation, for the
government to proceed with any further tax cuts. The government
should at the very least suspend its program of tax cuts. If it
doesn't do that, then in every scenario it produces a budget
deficit, and the way this government views the world, that means
it will produce a round of expenditure cuts in a system that's
already significantly stressed. If we go beyond that point and
get into a situation where Ontario is chasing George W. Bush down
to the bottom, we are causing even more damage to Ontario's
public services.
I think it's important to
recognize something that's often left out of the equation except,
as I said, sometimes when certain governments advertise the
benefits of the province elsewhere. It's important to understand
the significance of the public sector's contribution to the
foundation of economic growth. I'm talking about relatively
mundane things like good-quality roads, highways that have the
capacity to carry the traffic that's required, an infrastructure
that will support growth in residential areas, that will provide
clean water-you can go down the list.
Secondly, there's a category
of public expenditures that everybody acknowledges contributes
significantly to Canada's economic advantage relative to the
United States, most notably the medicare system, which, for
example, my colleagues in the auto industry say is worth
somewhere in the neighbourhood of $6 an hour as a difference in
cost to the automakers.
The third category-again,
each one a little more difficult to nail down, but of significant
importance-is that for the long run there are significant limits
to the extent to which we can disinvest in public education
without damaging what the economists call human capital, which
everybody says is absolutely vital to the long-term economic
future of the province.
So I think we're at a bit of
a crossroads in budgetary terms. As I said, it would be
fabulously irresponsible for the government to proceed with these
further tax cuts in this economic and fiscal environment. We all
hope the minister's rosy forecast for economic growth for Ontario
is accurate. Frankly, I don't see any cause out there for that
optimism. Our economy is so heavily tied into the economy of the
United States that it is inconceivable that we could roll along
merrily at about 75% of the growth rate we've enjoyed long-term
in Canada, while in the United States their growth rate is one
third, in real terms, what their growth rate was. It's just
inconceivable that this could happen.
I've noticed that people have
gotten a little quieter in going on and on about the robustness
of the high-tech sector as a defence for Ontario, relative to the
slowdown in the American economy, since Nortel's announcement. I
think what we're learning is that both on the investment side and
on the economic side, fundamentally there isn't anything
particularly special about the high-tech sector. It's not immune
from economic cycles. It will go down when the economy goes down.
In some respects, the high-tech sector may actually be more
vulnerable to economic swings, because when things really get bad
in a corporate culture, those kinds of expenditures may be
considered to be the ones that are easiest to dispense with. I
didn't agree with those taking the comfort last week; I don't
think this week anybody can take any comfort from the high-tech
sector. I think we've had demonstrated to us that it's as
vulnerable to swings in the economy as any other sector is.
I'm sorry to be so gloomy,
but I think there's a very significant choice in front of the
government right now. As I said, I know it's very hard to talk to
people who have the tax-cut religion about slowing down, but I
think we have to keep our eye on the bigger picture here about
the role that public services can play in the economy and the
role they play in the lives of the people of this province.
The Chair:
Thank you very much. We have approximately six minutes per
caucus. I'll start with the official opposition.
Mr Monte Kwinter
(York Centre): Thank you very much for your
presentation. Just one comment: your first slide I don't have in
my package.
Mr Mackenzie: No, you don't. If
you'd like, I'll copy that for you.
Mr Kwinter:
No, that's fine. I just thought maybe it was an oversight.
In your presentation, I
didn't see any reference to debt reduction. Do you have any
comments on that?
Mr
Mackenzie: No. Debt reduction is a matter of priorities.
In my view, it's the lowest priority. When you get the level of
public services repaired, then you can think about debt
reduction. In the long term, as everybody says, economic growth
takes care of the extent of the problem that's created by debt.
But I certainly wouldn't make any assumptions about retiring debt
at this point. We're heading into what everybody acknowledges is
at least a slight slowdown, perhaps a significant slowdown. In
the modelling I did of the government's financial situation, I
didn't make any assumptions about earmarked funds for debt
reduction. I just don't think that's the priority at this
point.
Mr Kwinter:
We've had groups that have appeared before us who feel it's the
absolute number one priority.
The other thing I wanted to
talk about was, in your modelling, you use inflation as far as
growth and program spending, which means that all of those groups
that have appeared before us and feel they're severely
underfunded, whether it be in health care, education, social
services, housing, help for the poor-if you just stick with
inflation, there's no increase for them at all; it's just the
status quo. They stay where they are, other than inflationary
adjustments.
1040
Mr
Mackenzie: Yes, I'm making the assumption that on the
expenditure side the government is not going to suddenly see the
light. I'm not presenting here what I want to happen, what I
would like to see happen; I'm making expenditure projections that
I think are a realistic guess as to what the government might
actually do, what the government might actually be planning. Much
as I might like them to, I'm not seeing any evidence that the
government is planning, for example, to make any significant
inroads to address the impact of their cuts to education funding,
for example. I'm not seeing any evidence to date, anyway, that
the government has any intention of doing anything on the housing
front. I wish that were not true, but the purpose of this
exercise is not to say what kind of world I would like to see;
really, it's to take the world as I think the government probably
sees it on the expenditure side and ask, "What are the
implications within the government's own framework of these
various scenarios?"
Mr Kwinter:
Effectively, your projections are very small-c conservative
projections.
Mr
Mackenzie: Absolutely. I maybe said it too quietly, but
at the beginning I said that on the expenditure side I had made
two, in my view, conservative assumptions; one was that even
though I think the squeeze that's facing the government on the
unmet-needs side is quite significant, I've assumed that they
don't respond to that. I've also assumed that there's no built-in
stabilizer effect on the expenditure side, as of course there
would be, particularly with social assistance.
The Chair:
Mr Cordiano, I'll give you a minute.
Mr Joseph Cordiano
(York South-Weston): In a minute, your mention of a lack
of capital spending I think is quite appropriate, because looking
at the fiscal plans of the government over the last number of
years, you rightly point out that there has been a significant
drop in capital spending. I'd like your opinion. Is this drop in
unplanned capital spending for some very basic needs-and you've
pointed this out, but I think it's important to emphasize that if
we are going through a period of slowdown in the economy, this
would be the most appropriate area in which to increase
expenditures for capital spending. Would you agree with that? I
think that would be the greatest spinoff that public dollars
could make in terms of economic growth in a slowdown.
Mr
Mackenzie: I would agree with that, and I note with
interest that we seem to have the governor of the Bank of Canada
on our side as well. In Mr Dodge's speech to the Canadian Club a
couple of days ago, he drew attention to the fact that the
government sector had contracted from 1992 to 1998. Part of the
reason for his optimism was his view that the government side of
the ledger was going to start to grow again, and he specifically
mentioned the capital spending deficit. Because we don't have an
accounting system in the public sector that measures assets and
their depreciation, we don't really know; we can only look at
what we've been doing in previous years. But if we ever get to an
accounting system that values assets and measures depreciation,
my instinct would be that it would show for most of the 1990s
we've been consuming assets.
Mr David
Christopherson (Hamilton West): Thank you, Hugh, for
your presentation. I just want to pick up on the issue of the
amount of pressure that we've seen the government members face
while we've been across the province in terms of making debt
reduction the number one priority. If one assumes that they're
going to continue to play to the crowd that they have so far, it
means they're still going to have to go through with their tax
cuts, as you point out is the likely scenario, but it also says
to me that if they want to appease those pressures, they're going
to have to do something beyond what they're already planning to
do with debt, assuming that they're going to do something, even
if they just give it a throwaway.
Other than the one scenario
where you show positive deficit results and we're into a surplus,
all the other scenarios are negative. I'd like to get on the
record what the impact is, in your opinion, of the economic drag
added if the government chooses to go ahead with tax cuts, go
ahead with debt reduction and the only way they can do it with
falling revenue, even under the soft-landing scenario, is to cut
expenditures even further. What kind of world does that start
putting us into when you look at the drag on the economy?
Mr
Mackenzie: Basically, it puts the government in the
position of chasing the economy downwards, because when you cut spending and cut
taxes at the same time, the negative impact of the spending cut
on Ontario is about five times the positive impact of the
corresponding tax cut. The overall multiplier effects on the
spending side are much better, much higher, between two and a
half and three times the multiplier effects on the tax side. Then
on top of that you have to take into account the fact that the
leakage out of the Ontario economy of the benefit from a tax cut
is significantly greater than the leakage out of the Ontario
economy of the cost of a public spending cut. So if we got into a
scenario where tax cuts are proceeding and expenditure is being
cut, chasing the rate of growth down in order to keep the budget
balanced, the government will be in the perverse position of
reinforcing the negative trends in the economy. The government's
actions will be driving the economy further into debt, will be
driving economic growth lower. It would sort of be Keynesianism
upside down.
Mr
Christopherson: Would it be your expectation that most
economists in the financial sector would be advising the
government not to do that and to just go ahead and run a modest-I
realize we're stepping one out here, but what kind of advice do
you think they may be getting in this scenario vis-à-vis the
debt if they went to those in the financial world and said, "This
is what we're thinking of doing. What are your thoughts on
it"?
Mr
Mackenzie: I actually see kind of confused comments
coming out of the financial community. Most of the commentators
I've seen do their best to genuflect in the direction of tax
cuts. They also raise concerns about public service quality. So
you get in the same speech comments about the disastrous impact
on the economy of congestion on Ontario's highways at the same
time as they say that we ought to be chasing the United States
income tax rates down at the same rate as George W. is driving
them down. So there's a bit of a schizophrenia there. At the same
time, when you sit around with a bunch of bankers, they will all
tell you that debt reduction should be the number one
priority.
Part of the problem is that
the nature of the advice that's appropriate is very different if
you're talking to the federal government than if you're talking
to the provincial government, because even with the massive tax
cuts that they campaigned on in the recent election, they made
very conservative assumptions about economic growth in those
forecasts and, unlike the Ontario government, the federal
government didn't spend the fiscal dividend before it
arrived.
So you'll get bankers saying
to the federal government that debt reduction should be the
number one priority, but they're doing that in the context of
what they view as conservative projections about revenue growth
and the likelihood that unacknowledged surpluses will emerge.
They're really positioning themselves in the debate that will be
ongoing in the federal context about what the size of the surplus
actually is. In the Ontario context, you can't take the same
logic and the same set of priorities and project them into this
context, because we have a revenue base that has been
significantly undermined and a fiscal strategy that has been
designed to extinguish fiscal flexibility whenever it has
emerged.
1050
Mr
Christopherson: I have a quick question on jobs, if I
can, Mr Chair.
The Chair:
Go ahead.
Mr
Christopherson: Thank you, Chair.
The impact that you expect
on the part of the economy that you're most familiar with-that
would be steel-and just overall how many-again, let's take all of
this and turn it into some people issues. At the end of the day,
under various scenarios, do you have a sense of just how many
jobs we're talking about losing and how many of them are likely
to remain out of our economy as opposed to bouncing back say two,
three, four years out?
Mr
Mackenzie: The loss in jobs will be significant. We're
talking about in the tens of thousands of lost jobs throughout
the economy. Our union represents a lot of people who work in the
auto parts sector. I was just speaking with one of our reps in
southwestern Ontario yesterday, who was telling me that there are
already layoffs rippling through the parts sector in southwestern
Ontario, well beyond the initial stone that hit the water, if you
want, and that's before anything real had happened at Chrysler,
for example. That's before anything real had happened at the CAMI
plant. We're seeing just slight slowdowns in rates of production.
These two-week temporary layoffs are backing up the pipeline and
producing layoffs in input plants.
Steel is kind of a
different story, because it's being whacked from every
conceivable direction. Steel is being whacked by the auto sector,
it's being whacked by the decline in the American economy more
generally, and both in Canada and in the United States the
industry is being whacked big time by dumped imports, which our
current trade regulations don't seem to be able to deal with
effectively.
Mr John O'Toole
(Durham): Thank you very much, Hugh. It's good to see
you and the story from the dark side kind of thing. It's
interesting. You've sort of capsulized us as being the tax-cut
religion. Quite honestly, it's a tax-cut discipline, technically.
The same scenarios were talked about in 1995-96 with a very
assertive policy of tax reductions. We had a very simplistic
expression, if you're an economist, that tax cuts equal jobs.
You'd have to judge that as a successful model of discipline, I
would think, the outcome of over 800,000 new jobs, directly
related to the more you increase the disposable income, the more
you increase the consumption, a fairly simplistic model as you
presented it.
You talked just briefly
here about the threats in the steel industry internationally,
really, and I would agree with you. So I'm going to move toward
the whole model of global competition. We can't, certainly as a
province-I guess the federal government has more say
internationally certainly with respect to trade and trade issues
and our competitiveness. But much of the discussion we've heard
about is having the infrastructure to be competitive. Part of that is the capital tax
side, the personal income tax side, and clearly in your agenda
you don't get it. You really don't buy into it, and yet wouldn't
you say your industry internationally has to be competitive?
That's the first requirement. If it costs more, then you aren't
going to sell more. It's just that simple. That may be too
simplistic, as I'm not as eminently qualified as you are.
The first thing I'd like
you to respond to is, do you need to be competitive in whole
jurisdictional areas: R&D investments, capital costs, capital
depreciation, capital tax generally? Aren't they part of what
your employees really need to create jobs? That's not to say you
have to embrace our so-called religion, but you need to address
that.
I just want to refute your
general assumptions on the economic, the macro view. You really
did sort of misrepresent David Dodge. I'm looking at the Globe
and Mail this morning-hopefully you've read it-and he says,
"Despite the sharp drop-off in the demand for cars and
communications ... `in the rest of the economy, incomes are high,
employment is high and demand is strong.'" You've got to tell the
whole story.
I'm just going to follow up
on that, because this sort of legitimizes my own view. Dodge said
here about the range of economic forecasts-I might agree with him
more than you, so I might have dismissed your assumptions already
since I read this earlier this morning. It says the assumptions
are about 3% this year and a range of about 3% to 4% was forecast
last fall. "Despite the near-term uncertainties, the bank remains
positive about Canada's economic prospects for the year, given
productivity increases"-that's the real growth in GDP,
productivity-"and rising disposable incomes aided by tax cuts
that are working to sustain" growth in domestic demand.
If you had listened to
Flaherty's comments on the first day of the hearings, you'd
recognize that the important contribution of domestic demand
again comes back to disposable income. The high-tech sector is
one of the sectors in Canada that I think is surpassing the 10%
of the auto sector. The knowledge-based, infrastructure-based
economy is something you haven't quite got your mind around. In
my view, you're looking at the wrong part of the economy. The
traditional economic strengths are weakening, so I just don't
embrace many of your premises. Perhaps you can respond. Do we
need to be competitive? Do tax cuts have any outcome, despite
what David Dodge has just said this morning in the paper?
Mr
Mackenzie: Let me respond to a couple of the things that
you said. First of all, yes, we have to be competitive, but the
definition of being competitive is much broader than doing an
item-by-item tick-off and saying, "This is higher than this, so
we've got to get it down; this is higher than that, so we've got
to get it down." There is a great number of things that
contribute to the competitive position of this province.
In the sector you seem most
concerned about, perhaps the most important investment we make is
in public education, which investment this government has cut
back on. So, quite seriously, I'm having a little bit of trouble
taking very seriously people who have been cutting back on our
investment in human capital, in training, in post-secondary
education, in elementary and secondary education, in child care
and all those things that contribute to the development of our
human capital. I have a little trouble listening to people wax on
about the benefits of the knowledge economy and the strength that
Ontario brings to that, when the drivers of that particular part
of our economic future are being undermined.
Let me say, secondly, that
I think nothing epitomizes the tax-cut religion better-nothing
illustrates it better-than the wilful, deliberate ignoring of the
unbelievably powerful impact that the growth of the American
economy has had and the growth of Ontario's exports to America
has had on our economic performance in the last five years. Just
to give you an example from a couple of examples that I cite in
the paper that I didn't talk about: something in the order of for
every dollar that our GDP has gone up since 1995, exports to the
United States have gone up by 80 cents. So this is significant
growth in exports. That, if you talk to a macroeconomist, is
what's known as an economic driver. That's something that's
external to the economy that is driving the performance of the
economy.
Just another set of
numbers: in 1995, roughly 36% of Ontario's GDP was exported to
the United States. In five years, that has increased to 46%. So
not only were we tied to a rapidly growing American economy in
the late 1990s but we are tightening those ties and increasing
our exposure, which is having a double impact on the economy.
With that as the
background, I just think it's whistling in the dark for people to
say, "Well, we've got the fundamentals right; we've got tax rates
down and we've got this." It's like we're walking down the street
and the goblins are lurking in the alleyways as we walk past and
we're just whistling away, saying, "Gee, we're just happy and
we're just going to ignore the goblins." The goblins are there.
The goblins are growing at 1% this quarter, according to most
American forecasters. I think you're dreaming in technicolour if
you think that's not going to have an impact.
The Chair:
On behalf of the committee, thank you for your presentation this
morning.
1100
CANADIAN MANUFACTURERS AND EXPORTERS
The Chair:
Our next presentation is from the Canadian Manufacturers and
Exporters. I would ask the presenters to come forward and state
your names for the record, please. On behalf of the committee,
welcome.
Mr Ian
Howcroft: Good morning, Chair, and members of the
committee. My name is Ian Howcroft, vice-president of the
Canadian Manufacturers and Exporters, which was formerly known as
the Alliance of Manufacturers and Exporters Canada. We changed our
name last fall. With me is Glen Pye, director of taxation for
Nortel. Glen is the chair of the Ontario division taxation
committee. Also presenting this morning is Joanne McGovern. She
is CME's director of taxation.
We are going to divide up
our presentation this morning, with me providing some opening
comments or introductory remarks. Joanne will follow up with some
highlights of our recommendations and Glen will provide some
further information on the recommendations and give some reasons
as to why we feel they're necessary. After the formal
presentation, we'd be pleased to entertain any questions the
committee may have.
It's important to note that
the manufacturing sector continues to drive the economy in
Ontario and in Canada. Ten years or so ago, many had written off
the manufacturing sector, but to paraphrase Mark Twain, the
rumours of its demise were much exaggerated. One thing is
certain: manufacturing has changed dramatically and it will
continue to change. Over 1 million individuals are directly
employed in this sector and almost 2 million others are dependent
on the manufacturing sector for their jobs.
CME is the representative
and the voice of manufacturers and exporters in Canada. Our
members produce 75% of Canada's manufactured output and they are
responsible for approximately 90% of our exports. Our members
come from all sectors of manufacturing and all areas of the
province and country. We represent the very large to the very
small, but the majority of our members in pure numbers would be
considered SMEs.
CME has a very active tax
committee which comprises almost 100 individual from our member
companies, and they provide us with policy and technical
expertise. We have identified and prioritized several key areas
in the Ontario tax system that require immediate attention. The
recommendations we have outlined in this submission are necessary
for the province to maintain a healthy economy and improve the
competitive environment for manufacturers and exporters. This is
even more important, given the amount of economic uncertainty
we're currently seeing and experiencing.
In addition to the specific
tax issues we're going to address, we also want to highlight a
couple of other points, one being the skills shortage issue.
Successfully resolving this issue is essential to the success of
our members and to the success of the province. The situation is
going to get worse before it gets better. The magnitude of this
issue will increase as a significant proportion of the workforce
will begin to retire in large numbers over the next few years. In
fact, by 2020, 50% of those currently working will have left the
workforce.
We had a meeting last
evening, and the consistent message from the senior HR executives
was that we have to deal with this issue, we have to come up with
solutions to the skills issue. The average age among these
companies was 47, so they're going to be leaving very soon and in
large numbers at the same time.
It's essential that the
government recognize time-sensitive skills shortages and the
needs of education, health care and infrastructure and develop a
long-term plan for each that is coordinated. These programs must
be prioritized and balanced within a fiscally responsible
economic strategy and a globally competitive tax system.
Furthermore, we must all address the issue of infrastructure. The
government must take a lead role. We are pleased that the
government is dealing with this issue and is looking for
innovative solutions-by that, I will cite SuperBuild-however, a
lot more must be done. I'll cite one example that we are quite
concerned with, and that's the deregulation of the electricity
market here in Ontario. The government has started down the road
to introduce a competitive marketplace, but it must ensure it
continues down this road in a planned way. We have seen what can
happen in other jurisdictions because of a lack of planning.
Ontario can ensure that we escape these experiences by taking the
necessary steps in a planned and confident manner which will
attract investment and create a competitive electricity market in
the province.
Those conclude the
introductory remarks, and with that I'll ask Joanne to talk about
some of our recommendations.
Ms Joanne
McGovern: I'm Joanne McGovern, director of taxation at
Canadian Manufacturers and Exporters. I'd like to start off by
first commending the current government with respect to the
efforts they've taken in the past years in tax reform and making
Ontario a better place to do business and to live. Our members
recognize this, and we support and encourage these measures,
specifically, first of all, the act that was passed in 1999 to
balance all provincial budgets-that is recognized as a very
positive measure-as well as the commitment of the government to
pay down the current provincial debt. In saying that, CME members
do encourage the province to pay down the debt at the same time,
or in conjunction with, targeted tax reform.
I'll go into our four main
recommendations, which have come from our tax committee, what we
recommend for the 2001 budget in terms of the four main areas of
tax reform.
Our first recommendation is
to legislate the 8% corporate tax rate which the government
introduced last year, and at the same time to also legislate the
personal income tax measures and reductions that were also
introduced last year.
Our second recommendation
is to eliminate the capital tax and the corporate minimum tax.
Those are two investment-unfriendly taxes that the CME has been
advocating eliminating for many, many years in many of these
submissions. We strongly recommend that this be the year to
eliminate both of those taxes. Glen will go into a little more
detail as to why we believe this is a good measure to go forward
with.
Third, we believe that
improving the existing capital recovery system would be
advantageous to manufacturers and exporters, and business in
general, in Ontario. Just to make note, there is a system in
place called capital recovery adjustment. It is a good system;
however, we do have some specific recommendations to improve that
system, to make it
better and more advantageous for manufacturers.
Last, and Ian alluded to
this, is the skills shortage issue. We strongly recommend that
governments get together and come up with a long-term strategy to
address not only the skills shortage but retraining and initial
training. That's an area that will directly impact our members as
manufacturers. As Ian also included, 2020 will be the crisis
point.
Those are our main areas of
recommendations. We also have-you can turn to your
submission-five administrative recommendations that I won't go
into in a lot of detail, but they're also included in our
submission, and we believe looking at those administrative issues
will also improve the effectiveness of the general tax system in
Ontario.
I'll now turn it over to
Glen Pye.
Mr Glen
Pye: Good morning. My name is Glen Pye. I'm the chair of
the Canadian Manufacturers and Exporters Ontario division tax
committee. What I'll do is give you some background on our
various recommendations. I'm going to follow the order that you
have in your submission.
Our first recommendation
involves corporate income tax. In last year's budget, Ontario
announced the intention to reduce the corporate income tax
general rate from 15.5% to 8% and the manufacturing rate from
13.5% to 8%. We certainly support this initiative and think it
will provide a lot of benefits to the manufacturing community.
What we are recommending now is that the province actually
legislate the timetable for the reduction of these rates. They do
have a targeted rate of 8% for 2005, but the way business
decisions are made is based on known tax rates, and as long as
there isn't a schedule for these rate reductions, Ontario won't
enjoy the full economic benefits of this planned tax reduction.
By having that certainty out there in a schedule that the
province can live with, I think you'll find that the economic
benefits will be achieved.
Our second recommendation
involves the capital tax. We suggest that Ontario eliminate its
capital tax. Capital tax has been proven internationally, through
various studies by the OECD and others, as a disincentive to
investment. Capital taxes are profit-insensitive and can impose a
substantial burden on companies. Also, they're just not well
understood by the foreign investment community because it's not a
tax that exists in very many jurisdictions around the world. In
fact, Alberta has even legislated to remove their capital tax
this year. So we do suggest that that tax be eliminated.
1110
Our third recommendation is
on capital recovery for business. We're recommending improvements
to the capital cost allowance system to enhance capital
investment and employment. Our recommendation would be for
Ontario to either reintroduce the current cost adjustment, which
provides an uplift in the cost of equipment, to provide enhanced
write-offs similar to what Quebec has-they've extended their
similar policy of 25% uplift through 2005-or alternatively to
provide a two-year write-off for new investment in manufacturing
equipment and machinery. We think that would provide substantial
benefits and investment in Ontario.
Our fourth recommendation
involves the corporate minimum tax. This is something that we
have made recommendations on over the last number of years and
had various discussions with the province. We continue to feel
that based on how little revenue this particular tax raises for
the province, it continues to be a very highly visible
disincentive to investment in the province. Globally, minimum
taxes are not very well received by the business community and
probably create a barrier to foreign investment in Ontario. We
think that really for the administrative complexities and the
minimal revenue that's raised here, it might be a tax that it
would be well to dispense with.
On the personal tax side,
we certainly recognize and commend the government for making
significant progress in addressing the excessive personal income
tax rates. We also appreciate Ontario's efforts in encouraging
the federal government to do so as well. We do recommend that
Ontario legislate the tax reductions that were announced in their
2000 budget, as well as the previously announced full inflation
indexation for tax brackets. We also continue to feel that
Ontario should repeal the Ontario surtax on high-income earners,
formerly known as the fair share health care levy. This would be
similar to the federal government, which has now indicated the
intention to remove its high-income surtax.
Our administrative
recommendations follow in the submission that you have. I'm just
going to go through them briefly. Something that's been a
long-standing recommendation-I think we've appeared many times
talking about it-for business, and manufacturers in particular,
the replacement of Ontario's retail sales tax with a value-added
tax would provide substantial benefits. It would increase the
competitiveness of Ontario exporters when competing in foreign
markets, where their competitors obviously are in value-added tax
jurisdictions. Secondly, it would help Ontario business competing
in the province, where they compete with foreign competitors. A
value-added tax has a lot of economic advantages for business and
would result in additional investment and employment.
In the area of property
taxes, industrial and commercial taxpayers continue to pay a
disproportionate share of the tax burden. This has been
recognized by the province. We feel Ontario should continue to
work toward a simpler and more competitive property tax system.
We recommend that municipalities should be required to reach
provincial fairness ranges within five years and that
municipalities should not restrict warranted tax reductions to
fund caps on tax increases.
On the Ontario R&D
superallowance, in the last federal budget the federal government
subjected Ontario's R&D superallowance to federal corporate
income tax, minimizing the benefit of this program. We've made
our thoughts known to both the Ontario and federal governments, but we'd like to see
the governments co-operate in this area in encouraging R&D,
in that they should not really be imposing additional tax burdens
on each other's incentives. Additionally, we do have an
administrative matter regarding the superallowance, where it
could be simplified and more effective for the province if it
were blended into a single rate on a non-incremental
allowance.
On capital gains and stock
options, we're pleased that Ontario has announced its intention
to parallel the federal government's 50% capital gains inclusion
rate, effective October 17. We're looking forward to legislation
to enact that provision. We're also pleased with the changes in
the tax treatment of stock option gains for R&D employees.
However, we feel that the R&D restriction might be too narrow
and may not provide benefits for a number of small and
medium-sized manufacturers. We'd like the government to review
their criteria here to see if we can't expand this benefit to
companies that might not otherwise be eligible under the current
program.
The one other policy we've
made note of in our submission relates to a deduction
disallowance that Ontario imposes on certain inter-company
management expenses and lease payments. Ontario has modified this
rule in recent years, and we feel it's really outlived its
usefulness and should be eliminated. We're also encouraging
Ontario to continue to work with the federal government to
eliminate the withholding tax on dividends, particularly under
the US-Canada tax treaty, because we feel that will substantially
encourage foreign investment in Ontario.
Our last bullet point deals
with provincial sales tax on software. A number of our members
continue to feel that the application of the 8% sales tax on
purchases of software is a disincentive to the acquisition of new
technology. They recommend that Ontario reintroduce the exemption
that was previously available on purchases of software.
That's it. We're open now
to questions.
The Chair:
Thank you very much. We have approximately three minutes per
caucus, and I'll start with Mr Christopherson.
Mr
Christopherson: Thank you for your presentation. I don't
know how much of Hugh Mackenzie's presentation you heard, but he
was laying out some projections based on different scenarios,
from implementing the tax cuts but with a so-called soft landing,
to increasing the cuts and accelerating payment to debt, and even
getting into a recession scenario and a few in between. But other
than one scenario, it looks like there's a really good chance, if
the government continues the way they are and implements the tax
cuts, that even with a soft landing they're going to be in a
deficit position in terms of the budget.
Do you think they should
cut spending, if necessary, to balance the budget, which would be
necessary if they wanted to go ahead and follow your
recommendation of continuing with the tax cuts they have planned,
let alone any new ones you might have suggested? And if you agree
they should cut spending to do that, then how do we deal with the
corresponding drag Hugh mentioned? I believe he said the
ratio was 5:1 when you're talking drag on the economy. Is all
that worth it at the end of the day, or do you not agree with his
assumptions?
Mr
Howcroft: Unfortunately, I only caught the last couple
of minutes of his presentation, so I really can't comment on what
he had to say. Our view is that we want to ensure the government
maintains a balanced budget and starts paying down the debt. We
feel the recommendations we have made in support of the direction
that has been started will ensure that happens.
We are concerned about the
economy. There is definitely a softening. We're still optimistic
that, overall, the economy will pick up in the latter half of
this year. We will have some growth but not what had been
forecast earlier. If we could project exactly what was going to
happen with the economy, we'd all be a lot richer and a lot
better off. I take some consolation in the fact that economists
have predicted six of the last two recessions, so we'll just have
to wait and see exactly what happens. I think there is a definite
softening, but we feel the government should stay the course,
stay on track and implement the recommendations we have outlined.
We feel that will put it in a healthy position for the
future.
Mr
Christopherson: But projections based on current numbers
suggest that if they follow through with the tax cuts, we're
going to end up in a deficit position on the budget. And if they
want to keep it balanced and keep the tax cuts in place, let
alone accelerating any debt repayment you're recommending they
do-don't even deal with that; just the cuts that are
recommended-that is going to put us in a deficit position, and
the only way they can offset that is to cut spending further,
which, as Mr Mackenzie pointed out, is going to have us chasing
the economy downwards.
Mr
Howcroft: Again, we definitely don't support going into
a deficit position. If that was the case, we'd have to look at
spending and obligations-
Mr
Christopherson: But you wouldn't look at tax cuts to
stay at a balanced budget? You want the tax cuts even if it means
we get into a deficit, even if it means we have to cut spending
further? That's what you prefer?
Mr
Howcroft: Our position is that the tax cuts will help
the economy. They'll help us to attract investment, keep the
investment we have here, keep the confidence of the
business-employer community so that hopefully we won't be in a
position where we're in a deficit.
The Chair:
Thank you very much. We've run out of time.
Mr
Christopherson: The difficulty is that reality doesn't
bear the argument out.
The Chair:
I have to go to Mr Arnott.
1120
Mr Ted Arnott
(Waterloo-Wellington): Thank you for your presentation.
It was thorough and comprehensive, and we certainly appreciate
the advice you brought forward on behalf of your members.
I want to thank you very much for your support of
the need for accelerated effort toward debt retirement and debt
reduction. For a long time I've felt the government needs to
place a higher emphasis on that. I was very pleased that the
government expanded its commitment to retire debt in this term of
office from $2 billion to $5 billion, and you noted that. I think
what we need now is to commit ourselves to a long-term-say,
25-year-debt retirement schedule or plan, if you want to call it
that, to keep our feet to the fire and remind people there is a
huge debt we need to pay down, especially in good years.
You talked about the
capital tax, and you suggested that ought to be repealed. In my
riding, we have people who complain to me about the capital tax
too, especially farm implement dealers and car dealers. Of
course, as you pointed out, it's a tax that's not sensitive to
profit. In other words, companies that are actually losing money
can be assessed considerable capital tax bills.
Do you have any idea what
it would cost the provincial treasury to repeal the capital tax
in its entirety? I don't know what the figure is. I don't know if
you've had a chance to research it. There is likely going to be a
cost, but of course our government believes that if you reduce
taxes you can stimulate the economy and, to some degree, recover
that revenue through greater economic activity. Do you have any
idea of what it would cost the treasury in the short run?
Ms
McGovern: I'm not exactly sure, but I believe it's $1
billion.
Mr Arnott:
So it's a substantial cut.
The other question I want
to ask you is on the whole issue of the favourable tax treatment
for share options-you talked about that. Our last budget allowed
that for certain R&D types of companies, and you've suggested
we expand it to everybody. That would seem to me a reasonable
thing to suggest. I'm just trying to determine in my mind which
companies are currently eligible and which are currently
excluded.
Mr Pye:
The way the current rules are, I think it's companies that are
performing a substantial amount of R&D in terms of their
overall percentages. You find very large companies that may have
a substantial amount of R&D but it's not as significant a
proportion of their activity, and they are not allowed to
qualify. As well, you get small- and medium-sized companies that
may not have the resource dedicated to that particular area.
Obviously, large companies can dedicate specific divisions and
people just to research and development, but it gets blended with
the rest of the operation. So even though they're still doing it,
because of the way they're structured they don't qualify under
the current program. If we can encourage them through this
program as well, I think the province in total would obviously
have more R&D performed here.
The Chair:
Mr Kwinter.
Mr
Kwinter: Over the last several years-I guess over the
last four years certainly-we've enjoyed one of the greatest
increases in our economy. I've been on this committee for 10
years, and the projections on the GDP last year were almost half
of what they actually were, which allowed the government to have
unprecedented revenues that even they didn't expect, and allowed
them to do all sorts of things. It allowed them to come up with a
surplus, it allowed them to make tax cuts, it allowed them to put
some money into debt reduction.
We now have a very definite
softening. I want to read something that should impact on your
industry because, as you say, 90% of the exports we have come out
of the manufacturing sector. "Economist Marc Lévesque of the
Toronto-Dominion Bank said the figures `confirm that we are
getting side-swiped by the United States,' where the
manufacturing sector is already in recession, even if the broader
economy is not."
It indicates to me-and from
everyone we've talked to-that regardless of the level of
softening, we are definitely in a softened condition. Some are
predicting a full-fledged recession; others are saying it's going
to be a soft landing. But no matter what happens, no one is
projecting the economy is going to grow greater than it was last
year. I notice that in the Ontario Economic Accounts, inventories
for the manufacturing sector are the highest they've been since
1995. So all the indicators really show that we're in for a
rougher ride than we've been experiencing in the last four or
five years.
With all that, every one of
the recommendations in your presentation is aimed at reducing
revenues for the government-helping the manufacturing sector,
without question, but everything goes to reduce this tax,
eliminate this tax, change the capital cost allowance, do all of
these things. So all of this is going to reflect on revenues,
plus the fact that virtually on a daily basis the projections of
what the GDP is going to be keep dropping. So that's going to
impact on the revenues, plus there's a $5-billion commitment to
debt reduction over the term of this mandate. There is
legislation now that provides for balanced budgets.
Somewhere along the line
you have to deal with this, and you have to deal with it in such
a way that you respect the legislation, you have to deal with the
commitments that the government has made to debt reduction, plus
all of these other pressures. You mentioned skills development.
We had a presentation by the Association of Colleges of Applied
Arts and Technology saying that unless they get some more money,
they're just not going to be able to deliver these skills.
All of these pressures are
there, and I haven't seen anything in your presentation to say,
"Here's what we think you should do." Everything is really
tax-oriented, basically, the whole presentation. Other than
skills development, it's all tax-reduction-oriented because it'll
make us more competitive. That's a long-winded kind of preamble,
but could you respond to that?
Mr
Howcroft: I'll start. I think I recognize and see what
you're saying and I agree that we are in a softening of the
economy, we are seeing a major slowdown in the United States, and
I think that's why we have put forward our recommendations that
we have to ensure that we're competitive. Things are slowing down
there. We have to ensure that we can keep the business we have
here and continue to attract business, because they're going
through an even tougher
time in the manufacturing sector in the United States. If we were
to start raising taxes or stopping the course, we'd become a less
attractive jurisdiction, and in our view things would start to
deteriorate. We would be in even worse shape if we don't stay the
course and continue to reduce the taxes and make it a more
streamlined system and deal with the other issues that we
have.
I'm glad you did note that
we are very concerned about the skills shortage issue, and it's
not just an issue of money on the skills shortage issue; part of
our recommendation is that we have to deal with that in a more
coordinated effort. If you look at how skills are dealt with in
Canada, you have the federal government with its role; you have
the provincial government with its role. Even within Ontario you
have the Ministry of Training, the Ministry of Education, the
Ministry of Economic Development with its skills initiative;
you've got the Ministry of Energy, Science and Technology dealing
with its own skills initiatives. What we're advocating on that is
to have a more coordinated approach to better deal with the money
we are allocating to skills development.
We're trying to be
productive and responsible in the recommendations we're making,
and we do this to ensure that we have as healthy an economy in
Ontario as we can, recognizing what's happening in the United
States. We are tied, even more so now than we were 10 years ago,
to the American marketplace. That's a reality we have to deal
with. We feel that the recommendations we make take that into
account and will help ensure that Ontario weathers this economic
softening as best it can.
Perhaps Glen or Joanne have
other comments to make on that.
Mr Pye:
Certainly globally we're going through a reduction in tax rates,
and that increases the competitiveness aspect for Ontario. The US
is again looking at tax reductions, and I know every jurisdiction
has to look at its own books of account, and times change. If the
economic conditions warrant it, perhaps we have to revisit some
of these tax reductions. But that's the competitive state
globally, and we feel that to encourage investment-and certainly
investment creates taxes one way or the other, whether it's
through employment or building. Almost all of our
recommendations, you'll see are, to encourage investment in
Ontario. So we think there will be some additional taxes provided
through these cuts. Our recommendations are all based on that and
keeping the global competitiveness that's required to get the
sustaining investment in Ontario.
The Chair:
With that, I would like to thank you on behalf of the committee
for your presentation this morning.
1130
ASSOCIATION OF MUNICIPALITIES OF ONTARIO
The Chair:
Our next presentation is from the Association of Municipalities
of Ontario. I would ask the presenter to please come forward and
state her name for the record. On behalf of the committee,
welcome.
Ms Ann
Mulvale: Thank you, Mr Chair and members of committee.
My name is Ann Mulvale. I am the president of the Association of
Municipalities of Ontario. I'm very grateful, on behalf of the
members I represent, for the opportunity to provide input into
the pre-budget consultations.
I'm sure all of you know of
AMO, but for the record, the Association of Municipalities of
Ontario is a non-profit organization representing the voice of
the municipal order of government in Ontario. AMO represents
almost all of Ontario's 447 municipalities, and our membership
represents over 97% of the province's population. AMO's mandate
is to support and enhance strong and effective municipal
government in Ontario. It promotes the contribution of the
municipal order of government as a vital and essential component
of Ontario's political system.
You have a copy of our
written submission, but in the interests of time I will not
follow it fully. I do want to set the context for our
recommendations.
Having balanced budgets at
both the provincial and federal government is positive. The
impressive competitive performance of Ontario's economy has no
doubt benefited from the disciplined fiscal management of the
provincial government. However, that fiscal plan clearly involved
municipal governments. We believe it is time for that
contribution to be recognized.
Municipalities have managed
over $1.7 billion in transfer payment cuts since 1993 in response
to the social contract, the expenditure control plan, the 1995-96
balanced budget plan and the 1998 local services realignment. We
handled this significant loss of revenue at a time when property
assessment was not growing and, as you know, property taxes are
the major source of our revenue stream. We did this while
generally holding the line on property taxes. However, it has not
been without casualty. Our municipal infrastructure deficit has
grown dramatically.
We understood the fiscal
imperatives that the government faced in 1995. As partners in
government, AMO knew that municipalities would have to be part of
the solution, but we needed the means to manage the loss of the
transfer payments. As an accountable, responsible and experienced
order of government, we asked and continue to ask for the
flexibility to manage the business of municipal governments
without excessive control and prescriptive legislation. Control
and prescriptiveness do not engender creativity and
responsiveness, characteristics needed to govern in the modern
age.
AMO and its members are
dedicated to making Ontario competitive by building strong,
efficient municipalities. We know that competitiveness is a
driving force in the province's economy. However, 2001 is proving
to be a year of great challenge for many of our members. The year
2001 is seeing the convergence of the shifts in property
assessment and taxation policies with the costs of downloading
and the real costs of new mandated programs and standards. It is seeing the
convergence of the costs of amalgamation, particularly the
pursuit of the highest pay levels for employees. It is the
convergence of an economic slowdown.
Our submission will
therefore look at three factors that are posing a significant
challenge to local-level competitiveness and credibility.
(1) The province's policy
to make property taxpayers absorb the cost of open-ended income
redistribution programs;
(2) The maturing costs of
the local services realignment and the continuous trickling of
downloading; and
(3) The combined effect of
these two pressures is significantly impacting the efforts by
municipalities to timely, proactive rehabilitation to our vital
capital infrastructure.
Let me expand on these
three impacts, beginning with income redistribution programs. To
be clear, some of the transfer of services under the local
services realignment made sense, and after a number of false
starts by previous governments, this government has disentangled
some aspects of service delivery. However, a liability remains
with the transfer of a greater share of the cost of income
redistribution programs on to the property tax base, such as
welfare, social housing, child care, public health and ambulance
services.
This decision of the
province signalled a fundamental shift in taxation policy, and
one that is contrary to the accepted taxation principle that
income distribution costs should be borne through pre-tax income
tax revenues rather than after-tax property tax revenues.
As Professor Harry Kitchen
explained in a recent report on taxation released by the C.D.
Howe Institute, "A municipality's taxes should fund the range of
local services enjoyed by its own residents, but not
redistribution of income or benefits that spill over on to
neighbouring communities, commuters or visitors."
Until now, municipalities
have been able to absorb welfare and other social services costs,
as good economic times and the provincial commitment to get
Ontarians back to work resulted in a decrease in overall welfare
caseloads. The program has been effective during the economic
boom, but we have known all along that this situation could
change as economic conditions invariably change.
Now that the economy is
clearly slowing down, our worst fears may be realized. We hope
that welfare costs will not increase by $1 billion as they did in
the last economic downturn. While the government made a
commitment that the local service realignment and community
reinvestment funds would be adjusted if costs went up, this
financial arrangement is at best tenable; it certainly is not
predictable.
Unlike the early 1990s,
this time around we also have responsibility for the management
of the social housing stock. There are many debates about the
state of that stock and whether the $58 million earmarked by the
province for future social housing capital funding will be enough
to manage the exposure. It is clear that this year's rise in
heating bills for these units in itself will put a significant
new pressure on operating budgets, illustrating the exposure
municipalities face.
Then there is the pressure
to find ways to build more affordable and subsidized housing to
help deal with the waiting lists that already total more than
100,000 people. Municipalities cannot afford to be involved in
rent subsidies. Assuming a subsidy level of $10,000 per unit,
which is probably low, it would require $1 billion to meet that
need. This represents an additional 25% of the $4 billion
capital investment municipalities made in 1999. The municipal tax
base is simply not capable of the flexibility to absorb such
surges in expenditures.
The second impact is the
cost of downloading. There is much discussion on whether the 1998
transfer of services was revenue neutral or not. While we can
debate this, and we can put a whole lot of auditors on the trail,
there is one simple fact that cannot be ignored: some municipal
local service realignment costs are higher than what the province
had factored. For example, municipalities must pay provincial
sales tax on equipment and services that the province did not.
These costs have not been included nor have they been waived, but
perhaps this is something that should be considered.
Different labour and
insurance frameworks exist for municipalities, including WSIB,
liability and arbitration, which have resulted in additional
municipal government costs.
The transfer of the
administration of provincial offences has meant that many
municipalities have had to build new court facilities, which also
is not reflected in the LSR, and the POA revenues have been
overstated.
On their own, these things
are not difficult to fix. Fixes would be helpful. What may be
more challenging is getting a handle on the continuous trickling
of downloading through new programs and imposed service
standards. These continue to impact our costs. For example,
municipalities will have to bear the added cost of the new
policing adequacy standards, which establish very costly training
and staffing requirements. The new drinking water regulations
have a significant effect on operating costs. We have yet to be
told that there will not be new costs passed on as a result of
the government's Blueprint initiatives relating to Ontario Works.
We know that standards for the replacement and maintenance of
flood control structures are on the horizon.
While we can debate the
merits of new programs or standards from a public policy
perspective, there is one simple fact: the cost of implementing
them has not been factored into either the LSR or the community
reinvestment fund formula nor accompanied by new revenue streams.
There seems to be a presumption of fiscal capacity.
The provincially approved
process for new initiatives or standards does not appear to
evaluate or appreciate the cumulative impact or capacity of a
municipality to implement any new program or standard. It does
not give any flexibility for how the initiative relates to other
priorities of the communities. When you consider that up to 50% of a municipal operating
budget is directly mandated services and standards, it is
understandable that municipalities feel defenseless.
A final area that has not
been adequately addressed by either the federal or provincial
governments is the need for continuous financing to support the
expansion and regular maintenance and repair of municipal
infrastructure. Both levels of government have, for all intents
and purposes, withdrawn from the capital infrastructure business.
The cost of rehabilitation and replacement of Ontario's roads,
bridges, water and sewage infrastructure over five years has been
estimated at $21 billion.
1140
While Ontario's portion of
the federal infrastructure funding totaling $680 million is
welcomed, we do not feel that Ontario is getting its fair share.
The Ontario economy is responsible for infusing 43% into the
federal revenue stream but only gets back 30% of all federal
expenditures. This is clearly unbalanced. It is not an
overstatement to say that the economic future of Canada is
largely dependent on the quality of infrastructure in Ontario.
The federal government's contribution to infrastructure costs
must reflect that reality, and we will continue to press them on
this. We hope we have your collective support in that regard.
At the same time, it is
important that the provincial government get back into the
infrastructure business. The nature of direct provincial
financial support for infrastructure in Ontario has fundamentally
changed since the creation of SuperBuild. There is no sustained,
dependable, dedicated financing system available. SuperBuild
initiatives are designed to be competitive and establish
selective strategic investments. While this approach has merit
and will facilitate economic growth, it is not going to go as far
as needed. The SuperBuild approach cannot possibly address the
long-term, sustainable financing infrastructure needs of Ontario
municipalities and the people of our province. The submission
sets out a number of examples of the challenges, from transit to
roads to water and sewer. I know others have appeared before you
offering similar examples.
The Premier recently
identified three principles for smart growth in Ontario: a strong
and efficient economy; strong communities and neighbourhoods; and
a clean and healthy environment. If we are to achieve these
principles, we need a sustained and predictable approach to
building and fixing Ontario's infrastructure.
What does the municipal
sector need in this budget? In the face of continued downloading,
mounting municipal costs and signs of an economic slowdown,
municipal financing is at its most vulnerable in decades. The
number of municipalities facing the need for tax increases and
debt financing has grown, and the trend will continue if we do
not deal with these threats to the financial health of our
municipalities.
Improved provincial
competitiveness at the expense of municipal competitiveness is
not a desirable outcome for commercial, industrial and
residential taxpayers of Ontario. It leaves Ontario communities,
and the province as a whole, at a competitive disadvantage to
other provinces and surrounding jurisdictions.
Clearly, continuous debate
over the legitimacy of our respective financial figures relating
to downloading through the local service realignment will not
lead to a satisfactory resolution of this matter. And if I might
make a personal observation, I believe it is a mug's game and
does not serve the people of Ontario.
The time has come for the
province to honour the sentiments expressed in 1998 that income
redistribution programs should more appropriately be funded
through provincial revenues. We were told that when the
province's fiscal house was in order, then it would be the time
to address the risk associated with income redistribution
programs on the property tax base.
We think that time is now.
While the growth projections are lower, provincial sources of
revenues are still growing much faster than municipal property
tax bases, supplemented by user fees. In 1999, our revenues only
increased by 2.3%, while provincially the deficit of $2.4 billion
became a surplus of almost $15 billion in 1999. The surplus this
year is pegged even higher.
Ontario taxpayers expect a
plan. We need a plan. Purposely, we have not brought a detailed
proposal, but rather an offer. Let us work together to build a
plan that continues the financial uploading of some of the social
and community health programs, including education and the farm
tax rebate. We know that any such plan must work within the
provincial fiscal reality, that incremental change will be
needed. Municipal governments can live with evolution, but we
need a plan to see that progress is possible.
This will offer us the
chance to take a fresh look at the actual outcomes of the LS
realignment transfer. Some of it was good and we should not lose
sight of that. We are confident that we can begin to build on the
work to date and arrive at a more sustainable and stable
provincial-municipal financial relationship. While such a plan
may take some time, it will certainly take partnership. This must
be a priority for both orders of government.
In the meantime, the risk
of increases in welfare costs and other social services is
immediate. What can be done in the interim? We ask that the
province commit to an insurance plan-a capping plan of sorts-that
recognizes the employment support approach of Ontario Works. It
must also recognize the related pressures that any economic
slowdown places on social housing and child care.
A clear signal to
municipalities that the province will work with us in designing
such an insurance plan would go a long way to lessening the
immediate municipal anxieties. Together, we are capable of
designing an effective safety net for property taxpayers.
A second component of a
more sustainable financial relationship is to realign sources of
tax revenue with the level of government that is shouldering the
burden of the cost of transferred responsibilities. Programs such
as SuperBuild and federal-provincial infrastructure agreements
come and go. They have particular priorities which are valid and important but lack
the strength and dedication to continue to build a strong and
vibrant Ontario.
If we are to meet the
urgent challenges of quality infrastructure, now is the time for
the province to dedicate a portion of the provincial tax revenue
to ongoing capital infrastructure financing. We ask that you
reconsider redirecting a portion of the almost $3 billion
collected through gas and fuel taxes to municipal infrastructure.
It is an approach that is used in other provinces. It is an
approach that can work in Ontario. Dedicated resources for our
core infrastructure like roads, transit and bridges, unlike
special dedicated programs, will not distort municipal funding
priorities. It will not impinge on public-private sector
partnerships that have a stronger interest in larger,
interregional projects.
The municipal sector, on
behalf of the property taxpayers of Ontario, needs a commitment
from the province that there will be no additional downloading of
costs to municipalities of either a direct or an indirect nature.
Saving targets, if imposed on line ministries, must not result in
new mandatory programs or standards being prescribed for
municipalities.
Should any new provincial
initiatives be imperative for clear public health and safety
reasons, then they should be vetted through a
provincial-municipal committee. This committee should have an
overview of all downloading costs from across the government, and
will be able to best judge the cumulative impact of additional
downloading responsibilities.
In conclusion, I am
confident that with the proper forum we can work together to
reduce financial instability or spiking exposure to municipal
governments and residential property taxpayers. I am confident
that working toward a capital investment process will ensure
Ontario and its municipalities remain competitive. By looking
ahead, we can improve the provincial-municipal relationship. We
share the same constituents. They expect us to work together to
solve today's problems with an eye to the future. AMO and its
membership are ready to move forward on a renewed partnership.
We're hopeful that the provincial government has a similar
focus.
Thank you for this
opportunity to share with you AMO's perspective on what the
municipal sector, on behalf of our mutual constituents, needs in
the next budget.
The Chair:
Thank you very much. We have two minutes per caucus, and I'll
start with the government side.
Mrs Tina R.
Molinari (Thornhill): Thank you very much for your
presentation. Just before I ask my question, to clarify, on your
page 6, where you stated, "In 1999 our revenues only increased by
2.3%, while provincially the deficit of $2.4 billion became a
surplus of almost"-you have here "$15 billion in 1999." That's
inaccurate. According to our Ontario budget 2000, in 1999 it
should be $700 million, if I'm reading this correctly.
1150
Ms
Mulvale: I take the point, if your numbers indicate
differently, but I think the illustration is clear that the
deficit became a surplus and that there are added revenues that
you have that we clearly do not have. So, whereas we can jog back
and forth on the precise numbers, the illustration is that you've
gone from a deficit to a surplus. There's still momentum.
Mrs
Molinari: I understand that. I just thought it was
possibly a typo in your presentation.
Ms
Mulvale: Pat Vanini will take note. If I have misspoken,
we'll go back. We certainly do not want to use numbers in our
presentations, which we make continually across the province,
that are inaccurate.
Mrs
Molinari: My question-
The Chair:
I'll give you one minute.
Mrs
Molinari: Your presentation, representing all of the
municipalities in Ontario, is truly appreciated. We've heard from
various municipalities on an individual basis about some of the
challenges they're facing, and some have been able to make
decisions that have not needed to increase taxes. They've been
more efficient and more able to manage their finances.
My question to you would
be: representing all of the municipalities and having a clear
vision of what's happening in all of Ontario, out of all the
recommendations you've made here, which one would you say would
be the most crucial at this point in time that you would like to
see implemented by this government?
Ms
Mulvale: I believe, first, the interim would be a
capping of the exposure on the welfare issue. That's clearly a
major concern because of the economy. Second, a means to move to
the uploading piece. Premier Harris, when newly elected, spoke to
the first AMO conference making it clear that he agreed with us
that after the deficit was dealt with and your operating budgets
were put into play, there would be an action to relieve the
property tax base, which is paid for in after-income-tax dollars,
of those exposures. We believe the vision that was in your
government at the beginning is the right vision and we need a way
to start proceeding on that. It takes that exposure away and
gives the capacity to the municipalities to get down to their
core businesses. They can still deliver those services, but they
should not be funding those services.
I hear what you said about
municipalities that have been able to hold the line without
increases. We're certainly seeing that the capacity to do that is
virtually exhausted now. We've had a decade of social expenditure
control plans, social contracts. We've worked with the three
provincial governments during my 12-year tenure. There is an end
to what can be achieved. Remember that some municipalities have
growth and others don't. Some municipalities have different
cycles of collective agreements. So it is not totally
constructive to compare municipalities year to year. You might
see the one that didn't have an increase in 1999 have a bigger
increase. You will note that Toronto managed not to have
increases, and the chickens have come home to roost. They may
have delayed capital expenditure, they may have been lacking in
prudence in transferring money from operating to capital, and
then you see a huge spike. Most of us try to have a straight
line-
The Chair: Thank you very much. I
have to go to Mr Kwinter.
Mr
Kwinter: Thank you very much for your presentation. It
would seem to me that with the downloading that has already taken
place plus potential mandated downloading, unless there is
sufficient funding to accompany that downloading, what you really
have is one body telling the other body, "This is what you must
spend your money on, and you're going to have to find the money
somewhere." Is that what you're implying in your
presentation?
Ms
Mulvale: We've made it clear that our observation is
that 50% of the consumption of the budget municipally is by
mandated services. So if those mandated services grow beyond that
50%, what we saw in previous recessions was that it takes away
the discretion. Many local municipalities delayed dealing with
their local road needs because they had discretion. It was not a
discretion they welcomed, but they had an obligation to meet that
mandate.
Just as the federal
government downloaded some of their responsibilities to balance
their deficit on the provincial government, and the provincial
government is being successful in repatriating some of those
health care dollars, we believe now that since the provincial
government has no operating deficit, they should work with us,
take back some of those funding responsibilities and give back
the proper creativity and role to municipal governments to meet
the local needs of the municipal property taxpayer.
Mr
Kwinter: And of course you have the unfortunate position
of being at the bottom end of the tax chain, so the only people
you can download on to are the taxpayers.
Ms
Mulvale: That's true, and remember again-I've said it
twice before, but it bears repeating-municipal property taxes are
paid with after-tax dollars. The C.D. Howe Institute is beginning
to understand, the Ontario chambers of commerce and the
federation of small business all understand that putting exposure
on to the property tax base is inappropriate and
counterproductive to the sustainability of community and the
economy in terms of the municipal contribution.
Mr
Christopherson: An excellent presentation, Your Worship.
It's good to see you again; a neighbour just down the road from
us. I was really glad you put the quote in there from C.D. Howe,
because those of us who have served at the local level certainly
don't need a PhD in economics to understand that leaving the
property tax base vulnerable to increases that are especially out
of whack with what's happening at the provincial government is
just a recipe for disaster.
It's been noted by
presenters, and you've shored it up, that a lot of municipal
governments, because they had to cope with the pressures, have
delayed a lot of spending. As you put it, those chickens are
coming home to roost.
It's interesting that the
Canadian Manufacturers and Exporters came in and they outlined
property tax. Virtually every group that comes in on the macro
scene talks about keeping property taxes under control, yet given
what we have right now, if the government goes through with the
tax cuts they've planned, without even accelerating debt
repayment-and then there's pressure and we hear some of the
members of the government side saying this is their new hobby
horse. It wasn't before, interestingly enough, when they had the
money; it was tax cuts that were the priority. Then they
increased the debt to give the tax cuts. Now the debt suddenly is
the biggest priority of all. Notwithstanding that, though,
they're likely going to be in a deficit position. The only way
they can balance the budget and put in their tax cuts is to cut
spending.
Again, I've sat at the
cabinet table; I know, as soon as you look at the dollars, the
MUSH sector is your biggest sector in terms of transfer payments.
You could be in for further cuts.
I just want to point out,
for those of you who think all of this debate is happening in a
vacuum, that last night in Hamilton there was a 15% increase in
water and sewer rates, not because they wanted to raise taxes,
but because you've decided that you're going to continue to go
around bragging-the government-that you've cut taxes and, "Isn't
it wonderful," and business comes in and sings the praises. But
where the rubber hits the road, things still have to be paid
for.
I want to ask you about the
issue of the tax cuts. If it means the difference between going
into deficit or not, should they put those things on hold? Is it
a bigger priority to deal with the pending pressures that are on
all municipalities?
Ms
Mulvale: I'm astute enough to know that there are all
sorts of figures on whether the downloading was revenue-neutral
and there are all sorts of figures on whether a tax cut will or
will not put the government into deficit. I do not have those
numbers.
Clearly, we're here to say
that the municipal level of government is a fundamental part of
the well-being of this province. We're here to say this
government has succeeded in getting a restoration of health care
dollars from the feds. We think the time to look at a new funding
relationship between the province and municipalities is here. I
do not have the background to comment on whether the tax cuts, if
they are implemented, will drive the province into deficit or
not. So I understand the bait, but I am not taking it.
Mr
Christopherson: Oh, no, I didn't mean it that way, Your
Worship. I regret that you took it that way.
The Chair:
On behalf of the committee, thank you very much for your
presentation.
Mr
O'Toole: Mr Chair, if I may, I would like to ask, with
the permission of the committee, a question to be filed or
responded to, though the Chair, by AMO in response to the GTA
position on forming a transportation authority. What is AMO's
position on that? If you want to file that-
The Chair:
I think you should probably file it with the committee, because
we're out of time.
Mr
O'Toole: It's a very important issue.
1200
ELEMENTARY TEACHERS' FEDERATION OF ONTARIO
The Chair:
Our next presentation is from the Elementary Teachers' Federation
of Ontario. I would ask the presenters to come forward and state
their name or names for the record. On behalf of the committee,
welcome. You have 30 minutes for your presentation this
morning.
Ms Phyllis
Benedict: Good morning and thank you, Chair. My name is
Phyllis Benedict. I'm president of the Elementary Teachers'
Federation of Ontario. With me this morning I have my general
secretary, Gene Lewis, and executive staff officer, Barbara
Richter.
The Elementary Teachers'
Federation of Ontario represents 65,000 teachers and education
workers in elementary public schools across our province. Our
members work in 37,000 classrooms in over 2,500 schools and they
teach more than 900,000 children. ETFO is proud to represent the
interests of public elementary students and teachers and to
promote and protect the public education system.
Last year we came before
this committee and we addressed the funding needs of elementary
students and teachers. We were pleased to see that the resulting
budget recognized some of our issues with funding enhancements to
primary class size, special education and literacy. Buoyed by the
government's recognition of this need for enhanced funding to
elementary education, and particularly to the early learner, we
come before this committee again this year with an investment
strategy designed to ensure the success of our mutual goals.
ETFO and this government
have had differences of opinion. Nevertheless, we do have a major
goal in common: the current and future success of the students in
our care in Ontario's education system. How we measure the
current success, whether it be through standardized testing or
through subjective and individual criteria, or a combination of
both, will be the subject of continued debate. How we measure
future success provides more ground for commonality. We both want
today's students to become good citizens, to participate in the
democratic society, to contribute to the economic well-being of
the province and to lead lives they consider healthy, rewarding
and fulfilling.
There are many factors that
contribute to the way their lives unfold. The foundation we
provide students in their elementary education, particularly in
their early years, will influence what happens to them in later
life. Through smart investment of our financial, material and
human resources in these critical years, we can do our part to
help our students succeed. Added benefits will be long-term
savings to our province that boost our economy.
Whether our students choose
to become doctors, lawyers, lathe operators, truck drivers,
teachers or even the Treasurer of Ontario, they require basic
tools, skills and attitudes for success. Writing a business plan
for a new company or a doctoral thesis for an advanced academic
degree or even a letter to a friend, or reading an instruction
manual, all require basic literacy. The ability to read and
write, no matter the context or the career path, is essential to
a successful future in today's society. Numeracy skills are
critical to building success in today's society as well, and
these go beyond memorizing multiplication tables or getting
through long division. It means having the ability to figure out
how to work with figures, how to solve problems.
Continued enthusiasm about
learning is a third key to success. Whether it's through formal
education with degrees and diplomas, retraining or upgrading to
improve job skills or learning how to glaze pottery, a love of
learning and a passion and inquisitiveness for exploring the new
and the unknown are essential to lifelong learning, to good
health and to success. Where do our students get these tools:
literacy, numeracy and the passion for education? Who pulls it
all together? Family, friends, the media and their formal
education. Educators impart the love of learning that can grow
and blossom through a lifetime.
How do we make it happen?
There are ways we can ensure that our students gain effective
literacy and numeracy skills and acquire that passion for
learning and develop as caring, responsible citizens. We make it
happen by serious investment in our early learners, in smaller
class sizes and in a system that is rich in human and material
resources. Last year the government began an investment program
and this year we call again on the government to turn that
investment into a long-term commitment.
The research on class size
is clear: investment in small class sizes, particularly in the
early years, results in improved learning for students, improved
test scores in literacy and numeracy and cumulative benefits for
both the student and society. The research is there before
you.
The Tennessee
Student-Teacher Achievement Ratio, the STAR project, showed that
students in small classes in kindergarten through grade 3
performed better in reading and mathematics tests than their
peers in larger classes. When they returned to regular classes in
grade 4, they were six to nine months ahead of students from
larger classes, and by grade 8 they were one year ahead.
The Student Achievement
Guarantee in Education, the SAGE program, conducted in Wisconsin
from 1996 to 1998, found that kindergarten and grade 1 students
in classrooms with a student-teacher ratio of 15 to one achieved
greater increases in test scores in language arts, reading and
mathematics than their counterparts in larger classes. The
advantages were maintained in their second year.
California has had an
initiative to reduce kindergarten to grade 3 classes to a maximum
of 20. However, off to a rocky start, the financial investment is
starting to pay off. Those students who are now in grade 3 are
showing achievement gains in mathematics and reading scores.
Research also shows that
students who start their education in small classes are less
likely to drop out, more likely to graduate on time, take more
challenging courses in
high school and more likely to attend college than their peers in
larger classes. They participate more in school and have fewer
discipline problems. They have more opportunities to work on
problem-solving and take on responsibilities.
Teachers in smaller classes
can cover the curriculum faster and in greater depth and provide
earlier identification and intervention for learning
problems.
Our minority students and
inner-city students gain from smaller class sizes.
Is this an expensive
initiative? Yes, but smaller class sizes, though they cost more
money, have long-term benefits to our students. That is no longer
debatable.
Last year the government
invested $100 million to reduce primary class sizes to an average
of 24. This was a first step in the right direction. We believe
that all elementary class sizes, from junior kindergarten to
grade 8, should be reduced, but, as a minimum, the next step must
be a long-term commitment to reduce primary class sizes and an
action plan to implement that commitment. We want the initiative
to be successful, and that requires long-range planning. We need
the spaces, the teachers and the resources to implement smaller
class size. If this government would invest new monies to achieve
reductions in primary class sizes in each year of its mandate,
Ontario would see the results very soon.
We need specialist
teachers. That is another successful investment strategy in
funding. Our members report that there has been a reduction in
specialist teachers since 1998-99. We have fewer
teacher-librarians, special education teachers,
English-as-a-second-language teachers, music teachers and
physical education teachers. These are not frill teachers; these
are teachers whose specialties contribute significantly to
literacy and numeracy skills, as well as giving our students a
love of learning.
Studies have shown that
student literacy improved in schools with well-equipped and
welcoming libraries staffed by teacher-librarians working in
partnership with classroom teacher colleagues and students.
A Colorado study found a
direct correlation between higher test scores and the quality of
the school library, regardless of the socio-economic status of
the students in the community. The size of the library staff and
the variety and size of the collection were predictors of
achievement as well. It also found that when children have access
to interesting reading material, they do read, even without the
promise of rewards, burger coupons or movie passes. The quality
of the school library was among the predictors of higher reading
achievement scores in the National Assessment of Educational
Progress for fourth-grade reading in 41 states in the United
States. There is a disparity in our province about the access
that our children have to books because our school libraries have
been so drastically reduced.
1210
Based on a school-based
survey by ETFO last year, we saw that there was a 22% cut in
teacher-librarians. The People for Education Tracking Report 2000
saw that only 68% of our public elementary schools reported
having a teacher-librarian and, of that, 18% were full-time.
These statistics must change if we want to make a difference for
the children of Ontario.
With special education
programs, teachers make the difference between lifelong success
and lifelong struggle. We do appreciate the government's
flexibility in seeking ways to improve special education funding.
The enhancement to primary student funding was a good first step
for a longer-term investment. Providing additional human
resources for early identification, intervention and program
development will be effective for student achievement and
cost-effective for investment planning. Although these programs
will pay for themselves in measurable savings in later, more
costly remediation efforts, expensive tutoring and even social
programs, the security they can bring to a child's future is
priceless.
Investment in more teachers
and programs for our ESL, English as a second language, will reap
its rewards for our students and, more important, for our
province. Ontario welcomes a diverse population but our welcome
must be supported by commitments to ensure the success of our
young people. Although the government-enhanced funding in these
programs last year, they did not change the method by which
students qualify.
Teachers and principals
know that many of the students who are enrolling in their schools
from families where English is not spoken as a first language are
at a disadvantage. If we're sincere about our commitment to
literacy, improvements in this area are fundamental to the
success of our youngest students.
Programs for children at
risk: public education is society's equalizer. Regardless of the
socio-economic background of our students, our public education
system must give the appropriate supports and extra assistance
that students at risk need to succeed. In this budget, we call
upon the government to take the next steps: to continue and even
enhance its financial commitment to provide specialist teachers
and programming in the elementary panel.
Smaller class sizes and a
system that is rich in human and material resources are two major
investments in our students' future success, and there is another
investment: in junior and senior kindergarten programs. The
government's own Early Years Study recommended resources for
early learners. The Education Improvement Commission recently
recommended a further $1-billion investment in full-day junior
and senior kindergarten. The government has yet to respond.
ETFO's commitment to the
early learner extends beyond the walls of our own classrooms.
High-quality, licensed child care is a vital component of our
early childhood education. Research points to the importance of
greater integration of children's services and to the benefits of
school-based child care. Another good investment is restored
funding for child care services and spaces in our schools.
We want our education
system to be the best it can be. An important component to the
system is its teachers. We are calling upon the government to
make investments in education that will require more teachers, well
trained, with adequate supports and resources. At the same time,
a teacher shortage looms. One way to attract and maintain
teachers in the profession is through adequate compensation
levels, good working conditions and appropriate supports,
including professional development opportunities.
In conclusion, this
government has stated its commitment to the success of our
students, and we at the Elementary Teachers' Federation of
Ontario share that commitment. One of the government's strategies
to achieve that success is improving the literacy and numeracy
skills of our students. We concur, and we add to that skill set
the need to instill a passion for learning in our students.
The government has also
stated its commitment to the early learner, and we also share
that commitment. The government has begun to demonstrate that
commitment in some more practical initiatives. Much more,
however, is needed to ensure the success of our students.
In our brief we have
outlined an investment strategy for this government, a strategy
that complements the government's commitments and that ensures
literacy and numeracy skills for our students, that enhances the
present and future lives of our students, and this will result in
long-term societal benefits and savings to the Ontario taxpayer.
It's an investment that could reap more benefit for our students
and the economy than a simple tax cut. Where could you find a
better deal? Investment in our elementary students is the most
successful financial strategy in today's market and tomorrow's
economy. It's not just the right thing to do, it's the common
sense thing to do.
I refer you to the seven
recommendations that are found at the end of our
presentation.
The Vice-Chair (Mr
Doug Galt): We have just barely three minutes for each
caucus. We're starting with the official opposition.
Mr
Kwinter: Do you have the figure as to what the
illiteracy rate is in Ontario at present?
Ms
Benedict: No, we don't. Sorry.
Mr
Kwinter: I know that at one time when I was in
government it was an astounding 24%. I was just curious to know
whether that's changed. Do you have any idea as to whether-I
mean, even ballpark?
Ms
Benedict: We could find it out. We don't have it with us
today.
Mr
Kwinter: OK. One of the things we have found-as you
probably know, we've been on the road and we've been listening to
groups. We've heard from elementary teachers, and one of the
major concerns that they've expressed to us-and it isn't
reflected in your presentation-is the average class size. The
government has invested $100 million to reduce primary class
sizes to an average of 24. That works out fine on paper, but the
practicality is that some schools in some rural school boards
have relatively few students and in order to get that average you
can have 28, 30, 32 students in another class. Someone gave what
I thought was a very dramatic example when they said that if you
take 32 five-year-olds and put them in your house for the day,
try to teach them, try to keep them under control and try to have
a meaningful educational experience with them, you'll know what
it's like. Do you have any comment on that?
Ms
Benedict: We also do an internal survey with our members
to see what they are experiencing in their classrooms, and their
comments echo the ones that you have made, where we have seen
that there has been a very small reduction in the primary
classes. They're not back yet to what they were in 1997 and 1998,
at a time when the government accused the teachers' unions of
bargaining class sizes upwards. So we're not even back to what
they were in 1997-98.
Parents have spoken to me
on numerous occasions about walking into their child's classroom
and being surprised to find in excess of 24 or 25
children-indeed, many of them are over 30-and saying, "The
government said." If we had maximum class sizes, not board
averages, then we could see the teachers do the incredible jobs
that they try to do under the circumstances now. Again, who
benefits? The students of Ontario.
The
Vice-Chair: We'll move on to the third party.
Mr
Christopherson: Thank you very much for your
presentation. It certainly is very consistent with what we've
heard in each of the locales. I think you have every reason to
provide an umbrella view that reflects what you've said here.
It's certainly sustainable by what we've heard in other
communities, once we go out there and listen to the teachers on
the ground in the various communities.
I have a comment and then a
question. The comment is, I would strongly recommend you get the
Hansard for the presentation that was made this morning, first
off, by Hugh Mackenzie, who talked about the projected outcomes
of where we're going to be vis-à-vis a possible deficit
position with regard to the budget should the government, under
different scenarios, keep their tax cut plan in place and go
ahead with it or not do that and then they factor in the economic
forecast; whether it's going to be the so-called soft landing or
getting closer to the hard recession.
Anyway, what it all points
to is that other than one scenario, which is that they don't do
the rest of their tax cuts and we get a soft landing, which is
not likely-the soft landing is questionable, given what's
currently happening. They put all their reliance on the tech side
of things-it was fascinating that he made that comment-and then,
of course, the bottom fell out of Nortel and we haven't heard too
much about that "the tech side's going to save us" scenario. And
I doubt very much they're going to back off from their tax cuts,
even though it would be the wisest thing to do. That means
they're going to be into a deficit position and the only way they
can deal with that, whether or not they go after the debt in a
renewed fashion, is to cut spending. You're going to be on the
front line just like municipalities were prior to you when AMO
was in here.
1220
So I would ask you to take
a look at that and get ready, as opposed to trying to argue,
"There's a billion dollars; where can we best put it?" I think
we're back into trying to hold what we've got and we ought to be
very fearful of the future in terms of what the numbers are going
to tell this government and how they'll react ideologically.
My question is on an
entirely different matter, but one that's caused me to do a lot
of thinking about it. I haven't changed my position at all, but
it's something I think we all have to keep an open mind to and
keep thinking about things. I'd like to know the position of ETFO
with regard to the vouchers and the charters notion of schools. I
understand, macro, you're probably opposed to it, as I was and
remain. But it's interesting that the argument we heard yesterday
in London very much talked about those of us who are in my
mindset, if you will, and these are my words, but sort of, "Give
your head a shake. The demographics have changed. You need to
look at it differently than you have in the past. If you want to
see examples where it works and it doesn't fragment the province
or the population, take a look at other provinces," which I'm
going to do to see what the experience has been there.
Your thoughts on that?
Because with such a diverse population and it becoming even
greater and much of the world looking to Canada as to how you
deal with so many cultures and religions and values, how you come
to grips with that, this is a major issue for us to deal with. If
we stay the course, we've got to have good reasons why we should,
or those who are arguing "Give your head a shake and rethink it"
maybe should prevail in the absence of those kinds of responses.
Just your thoughts on that, because it's a really crucial
issue.
The
Vice-Chair: Thank you, Mr Christopherson. We'll move on
to the government side. You used three and a half minutes.
Mr
Christopherson: Thanks for cutting me some slack. You
should take a lesson from your Chair, Vice-Chair.
The
Vice-Chair: I could have cut you off at three minutes,
but I gave you the extra time.
Mr
Christopherson: The Chair earlier gave the Tories an
extra minute and that was fine, because he used a little
flexibility. We do fine until you get in the chair.
Mrs
Molinari: Do I have the floor, Mr Chair?
The
Vice-Chair: Yes, you do.
Mrs
Molinari: Thank you very much for your presentation. I
certainly appreciate the tone in which you've presented. You've
highlighted a number of common goals just in your beginning
statement, recognizing the fact that we do have a major goal and
it is a common goal, and that is to do what's best for the
students in the province of Ontario. Although some of what we've
heard in the past-it's nice to know that it's a recognition that
that is in fact the common goal. We have a difference of opinion
on ways to achieve that, but I appreciate the fact that you
recognize that.
I have a question, but
first some comments on the presentation that you've made. You
talked about smaller class sizes and the benefits of smaller
class sizes for the students. For the first time ever, this
government has actually set maximum average class sizes for both
elementary and secondary. In the past, there wasn't a cap and so,
as was stated, it was negotiated as to what those class sizes
would be. I was just reading in some of the clippings a newspaper
article today about one board that cut 400 jobs for an 8% pay
raise. I'm not saying that has a direct correlation to that, but
certainly 400 fewer jobs in a school board means the class size
would increase much more. At least, that's one possibility. But
because there is a set average class size, obviously, it can't go
beyond that.
You also talked about
special education and some of the challenges and issues around
that and also mentioned some of the initiatives this government
has taken to move toward the improvement of that. Special
education is ever-evolving. It's the special children that we
serve, that you serve as teachers. There aren't two that are
identical and alike, so the special education funding formula
needs to be reviewed consistently and constantly. The minister is
always seeking input from those who are in the field as to how
better to improve the way we serve our most vulnerable
students.
You also talked about
specialist teachers and the importance of that. I firmly agree
with the benefits of having specialist teachers in the classroom
in the schools to assist students in the areas of specialty. My
question to you is, how would you feel about specialists within
the schools not necessarily being teachers: artists who could
come and teach the arts but are not necessarily teachers with a
teaching degree, technicians for computer studies who could be in
a school and offer that type of service while not necessarily
being teachers? Could you give me your views on whether your
organization would accept such a different individual as a
professional in the school to assist students in those specialist
areas?
The
Vice-Chair: On behalf of the committee, thank you very
much for your presentation. She similarly used three and a half
minutes. My apologies, but time has run out; the full half-hour
is up. We appreciate your coming before us.
Ms
Benedict: Thank you. I would respond in writing to your
questions if you'd like to receive the answers.
Mr
Kwinter: On a point of order, Mr Chair: Could we have
legislative research find out what the literacy rate is in
Ontario, the number of illiterates?
TORONTO BOARD OF TRADE
The
Vice-Chair: Our next delegation is from the Toronto
Board of Trade. Welcome, and thank you very much for coming
forward to present to us. You have a total of a half-hour for
your presentation, and what's left over after your presentation
will be divided equally among the three parties for questions
and/or statements.
Ms Kerrie MacPherson: Thank you
very much, Mr Chair. My name is Kerrie MacPherson. I'm the chair
of the Toronto Board of Trade. With me today are Elyse Allan,
president and CEO of the board, and Helen Burstyn, the chair of
our finance and economic affairs committee, which did all the
hard work preparing our submission to you today.
Thank you for the
opportunity to present our priorities for the 2001 Ontario
budget. We are pleased to be here today representing Toronto's
business community. The Toronto Board of Trade represents all
sizes of businesses, with members across all sectors of the
economy.
Our presentation today will
provide the committee with an overview of what we believe are the
most pressing priorities for Ontario for the next fiscal year. We
believe the Board of Trade offers this government a strong
framework for action in an area that is growing in importance to
all levels of government.
In short, Ontario must
acknowledge the importance of urban centres to provincial
prosperity through strategic reinvestment. This is a platform in
which our board of directors strongly believes; it is a platform
supported by our members.
The Toronto region,
Ontario's largest urban centre, accounted for almost half the
province's GDP and employment in 2000. Some 57% of Ontario's net
job gain took place in the GTA. Our region is a leading centre
for industry clustering, particularly in sectors vital to the new
economy such as IT, telecommunications, new media, biotechnology
and pharmaceuticals. Quite simply, our cities drive economic
growth in Ontario.
The Toronto Board of Trade
believes that Toronto, Canada's only city capable of being a
world-class competitor and growth driver, is in a state of
decline. The Ontario government must take a leadership role in
stemming this slide. Our government must take action to make
cities and city regions more competitive. Merely holding the line
is not enough, as we are slipping behind as our competitors move
ahead.
At a time when economic
growth is slowing and when some of our leading employers are
announcing significant layoffs, the province must take the
necessary steps to shore up the economy for our future. The
Toronto Board of Trade believes Ontario's best driver for strong
economic growth is a competitive Toronto.
1230
Our 2001 Ontario pre-budget
submission outlines three key areas for action:
First, cities such as
Toronto must be given the governance tools they need to meet the
unique challenges of a large urban centre;
Second, investment in
infrastructure must be made to make our cities internationally
competitive;
Third, and most important,
Ontario must continue to provide a competitive fiscal environment
in which to live, work and build wealth.
Essentially, our message is
twofold: we are urging the province to invest in our cities
directly, indirectly and through partnerships, and we are calling
for greater flexibility for municipalities to give them better
management tools.
I'll now hand over to Elyse
Allan, who will provide you with the highlights of some of our
recommendations.
Ms Elyse
Allan: In the past few months, we have seen a rising
level of tension in the working relationship between the city of
Toronto and the province that has been counterproductive for
Toronto. The service realignment issue raised a bigger question
than who pays for what; it goes to the heart of an issue that has
dogged provincial-municipal relations for decades. It's the issue
of how municipalities, particularly large municipalities, can
manage or raise resources effectively when they are tied to the
apron strings of the province.
When we look around the
world at some of Toronto's major competitors, there is a striking
difference. Other international cities have financing tools
available to them that provide increased planning capabilities to
grow strategically. Given that Ontario's cities are creatures of
the province, Toronto does not have access to similar
vehicles.
This is exactly what has
encouraged the charter city debate. While enacting charter status
for Toronto is an extreme action, we do feel that the arguments
resting at the base of the debate carry some merit. Toronto is
not comparable to other municipalities in Ontario. In fact, it is
not comparable to most cities in North America. It is larger in
population and GDP than six other provinces, but it can't form
business corporations, it can't use secured debt, it can't sell a
business unit without having successor rights apply-something the
province in fact can do-and it is also limited in its ability to
raise revenue, relying almost entirely on property taxes. Raising
property taxes cannot be the solution for solving Toronto's
revenue challenges. Quite simply, the city needs other tools that
the province can provide.
We realize that asking the
province for greater municipal flexibility at a time when our
city is facing a $305-million budget shortfall might not sound
prudent. But the board believes it is just this situation that
highlights the need for cities to learn how to deal more
effectively with urban challenges. To do so, they need better
tools.
To provide a measure of
assurance to the province and to taxpayers, the board supports
the creation of a municipal auditor general function. This would
also provide cities with additional strategic advice, review the
soundness of municipal budgets and programs, and provide annual
reports. As you are aware, Mayor Lastman announced a task force
to review such a concept for Toronto last week, and we believe
the province should support the concept as well.
On the second issue, that
of infrastructure, infrastructure on all levels continues to be a
significant challenge for our urban centres. When businesses are
deciding to locate or expand in a city, they consider many
things: the quality of the labour force, access to professional
services, the range of cultural activities, infrastructure and
the quality of the health and education systems.
Last fall, the board surveyed its members on a
range of public policy issues, including these location decision
factors. We found that our members considered access to roads and
public transit the top decision-making criterion. Sixty-seven per
cent of respondents described it as very important.
Some of you are MPPs from
the Toronto area, and so are quite familiar with the increasing
congestion levels on our highways, expressways and downtown
roads. For others, let me give you a taste. In 70 minutes by car,
you can be in Milton or Oshawa. By 2011, driving for that long
won't even get you out of the city itself. Gridlock is estimated
to cost $2 billion per year in productivity loss in the GTA.
That's also a $2-billion loss for Ontario. With an additional 2.6
million people expected to populate the GTA over the next 30
years, this is only going to get worse unless the provincial
government, in partnership with other levels of government and
the private sector, invests in roads and public transit.
Toronto needs a clear
financial commitment to the TTC and GO. Strategic investment in
transit in particular is vital to limiting urban sprawl,
congestion and environmental damage. The Toronto Board of Trade
urges the government to invest in public transit to the benefit
of all Ontarians and to combat urban sprawl.
Even more important is the
need for greater planning coordination of transportation in the
GTA. The board of trade strongly supports the Greater Toronto
Services Board but believes the GTSB requires increased
legislative authority and financial support from the province in
order to conduct its business effectively and efficiently.
Another infrastructure
aspect that is directly correlated to the liveability of cities
is access to affordable housing. The board recognizes the
measures taken to date by the province. However, the measures
have been targeted largely at emergency shelters or hostel
allowances, with little action on increasing the stock of
affordable housing. Lack of affordable housing in our urban areas
is a significant contributor to the rising level of homelessness.
It must be a pivotal part of any provincial strategy on
homelessness. The increasing number of homeless people is a
condemnation, not only of our cities but also of our nation,
still the only country in the OECD without a national housing
policy. When downtown city sidewalks and doorways become
makeshift shelters for individuals and families who have nowhere
else to live, we all suffer a loss of dignity, civility and
decency, key characteristics of Toronto which have distinguished
it from its counterparts in the US.
Vacancy rates are
tightening. For many urban centres, the vacancy rates are between
1% and 4%, with cities such as Toronto and Ottawa below 1%.
Having a rate greater than 3% is considered healthy. Our cities
are falling far short of that mark. Seventy-three per cent of
respondents to our membership survey stated that it was important
to build more affordable housing in Toronto, with a majority
indicating that federal and provincial governments should lead
the way.
The board has taken the
same message to your federal counterparts, as we strongly believe
that all levels of government bear a responsibility for
addressing homelessness. This will shore up not only our economic
competitiveness but also our social competitiveness.
I'll close with what the
board considers the lynchpin recommendations: the need for
competitive fiscal policies to ensure our cities and our province
operate in the best economic climate possible in the global
arena.
Ontario must establish an
aggressive debt reduction schedule. As economic uncertainty
circles around us, it becomes increasingly important to
demonstrate that Ontario is attacking its debt. The faster
Ontario can make substantial payments on its debt, the better
able it will be to manage economic slides. It will also ensure
that the tax reductions and investment actions taken to date are
not jeopardized. We recommend that the government implement a
strategy to get Ontario's debt-servicing costs as a percentage of
revenues down to at least the provincial average within five
years.
The move to fast-track
previously announced tax reduction actions is something the board
continues to vigorously call for. Our members see corporate and
personal taxes as two top competitiveness issues. When asked to
choose which tax change would benefit respondents' businesses the
most, 33% indicated it would be corporate income tax reductions,
followed closely by personal income tax reductions at 29%. Our
members have told us quite convincingly that taxes matter to
their businesses.
I strongly urge this
committee to recommend that the government continue to reduce
taxes for businesses and individuals. Corporate tax reductions
must be implemented and personal taxes must continue to go down.
Tax reductions can stimulate business investment and consumer
confidence, two vital ingredients necessary to manage economic
uncertainties.
The government must
immediately legislate the timeline for implementing the corporate
tax reductions. Actual reductions are much more of an investment
incentive than proposed ones.
Furthermore, Ontario must
move to eliminate capital taxes within five years. Capital taxes
represent a singularly unique competitive burden that Ontario's
international business competitors in cities like New York,
London and Frankfurt do not face.
As a first step, and as a
strong indicator that Ontario is indeed open for business, the
province must move to eliminate the capital tax rate differential
between financial and non-financial corporations in Ontario. This
is a tax that is particularly harmful to Toronto, given its
status as the country's financial services capital.
1240
We must extend our support
to the government for actions taken on business property taxes
through Bill 140. Having worked with the province to achieve
fairer property taxes for the city of Toronto, the resulting
framework met many of our expectations. Of particular importance
was the extension of the caps on property tax increases for business, and
the board urges the government and this committee to continue to
support this crucial element to property tax fairness.
The Toronto Board of Trade
urges this committee to consider and support the recommendations
made in our submission to foster urban competitiveness. Our
cities, especially Toronto, are at a difficult juncture. While
they are not the top-ranked cities in the world, they are
nonetheless strong contenders to be at the top, but only if the
right investments are made, if the right economic and tax
environment is created and if their citizens are engaged in a
fulfilling and stimulating urban environment. I believe the
provincial government can make this happen.
The Chair:
Thank you very much. We have five minutes per caucus.
Mr
Christopherson: Thank you for your presentation. First
of all, I want to compliment you and thank you for the support
you've given to the need for an affordable housing policy. It has
always, for some of us, made sense on every front: on the human
front, on the kind of city we want to live in and on the economic
front. Your voice wading in with the kinds of words you've used
today will be helpful. I want to tell you how much it is
appreciated and will help in terms of making that case.
On the other hand, I also
want to tell you how gravely disappointed I am that you've raised
the issue of successor rights. Again, some of us said at the time
the government removed successor rights provincially that this
isn't the end of the road, that eventually it's going to spread
elsewhere and ultimately it's going to spread into the private
sector. If you are successful in making the argument that
municipalities shouldn't be encumbered by keeping their unions if
they privatize any more than the province should, it feeds that.
That's disappointing, because I honestly believe at the end of
the day all that's going to be achieved, if there is massive
privatization at the municipal level, is a reduction in wages. At
the end of the day that's all that will be achieved, because the
only way you can really save significant money when you privatize
is the dollars.
When the union is gone,
many times it's the same employees hired back at $7, $8, $9 an
hour less. So that's a loser for municipalities. Obviously you're
talking about municipalities. It's the middle- and working-class
group of people, who spend their paycheque as they get it to keep
their families going, who keep the local economy going. By
lowering the disposable income of the biggest group in terms of
numbers, all it does, in my opinion, is slow down local
economies, slow down growth and it hurts small business. I stand
to be corrected, but a chamber group, I think it was, in Thunder
Bay even argued that the minimum wage should be increased as a
benefit to small business, making the case that of course the
money is spent in local small businesses in the immediate
neighbourhoods and communities. So I'll leave that. If you wish
to comment, that's fine.
I wanted to pose to you the
issue that Mr Mackenzie raised this morning. I know you didn't
have benefit of that. He's an economist with the Steelworkers. He
came in and pointed out that other than one scenario, where the
government didn't bring in their current planned agenda of tax
cuts and a soft landing, as it's called, other than that one
scenario, we're likely going to see the government in a deficit
budget position. If they want to implement the tax cuts, let
alone any new, ambitious attack on the debt, the only way they
can achieve that and maintain a balanced budget is to cut
spending, and that's going to hit the public sector, the MUSH
sector. It's going to hit municipalities, universities, it's
going to hit all the things that we've been hearing are the
economic drivers of why this is still a great place to do
business. Can you help me with that? How do you see that one?
You're still pushing for those tax cuts. Unless you don't think
it will, but under Mr Mackenzie's scenario they're all going to
push us into a deficit position and we're going to get more cuts
and that'll be a greater drag on the economy. How do you see that
working?
Ms
MacPherson: Mr Christopherson, I'll start and, Elyse
Allan, please feel free. I think essentially the fundamental
premise here is that what we need to focus on in all of these
areas is that we're not simply talking about reducing government
spending. We are talking about creating opportunities for the
private sector to play a better role, a bigger role, particularly
in municipalities as privatization and that sort of thing
occurs.
We believe that by enabling
those things to happen we can end up with ultimately more money
in the economy, coming in more efficiently than it does through
government, so that the impact overall is not a negative one.
Elyse, I don't know if you
want to add some specifics to that.
Ms Allan:
With respect to deficit, I would put it on the record that we
certainly don't support a return to the position of a deficit. We
have applauded the government for getting out of that position
and certainly are looking to them to maintain that.
We do, however, believe
that as it is your job to sort through the priorities, our set of
priorities would focus on how to make Ontario competitive,
because we believe that if we can continue to make Ontario
competitive, as has been I think a fairly focused agenda, that
will pay off for everyone.
We have seen that the
impact of the aggressive tax cuts in Calgary and Alberta among
our members is proving to be very attractive to the businesses.
In terms of looking to want to leave for a more attractive tax
area, that is certainly not healthy for our province or for our
city. That is a fairly common level of conversation at this
point, due to the aggressive moves they've made in taxation, not
only on a corporate agenda but also among individuals
personally.
Mr
Christopherson: Is it still worth doing the tax cuts if
that does push us into a deficit position?
Ms Allan:
I would say that the challenge you have is to ensure that we
don't move into a deficit, but that you absolutely find the
affordability to do the tax cuts.
Mr Christopherson: Then that
means spending cuts probably.
Ms Allan:
If that's what it takes, but I would not move away from your tax
cut. I think it's critical, from what we are hearing in the
business community.
Mr Doug Galt
(Northumberland): Thank you for your thoughtful
presentation and also about Toronto. Once you move outside of
Ontario and start travelling, what do they know about Canada-the
name Toronto, Vancouver comes second, not the name of the
province. Being a provincial legislator, I feel that's rather
unfortunate, but nevertheless, it's reality.
Congratulations on your
page 7, talking about the linchpin-competitive fiscal
policy-something we've been working toward, and also talking
about debt reduction.
I want to ask you a
question similar to what I asked another group that was here.
What do I tell the people in my riding about your request, if I
were to vote for extra money to go to your city, particularly
when I read recently in the press-I don't mean to be sarcastic
here, but this is what my people are seeing-that the mayor and an
entourage had to go to Edmonton to see wet-dry recycling, when we
have it in my riding and we have it in Wellington? They did not
have to go to Edmonton and spend several thousand dollars for
that trip.
They read that there's a
lack of metered water in Toronto. We get preached to about being
environmentally sound in rural and small-town Ontario, when most
of small-town Ontario has metered water. I read that they lost
three quarters of a million dollars last year because they didn't
send out the bills for pet licensing.
You talked about the
gridlock on infrastructure. I can tell you, in 1995 when I drove
into Toronto there was no gridlock because there were far fewer
people working. You talk about affordable housing. In rural and
small-town Ontario, the vacancy rate is up.
What do I tell my people?
The only answer the other group really said to me was, "If you
put money into Toronto, they'll have a nice city to visit." I can
tell you, on concession 2, lot 41, in several of the townships in
my riding, they don't want to ever come to Toronto-not that
they're against Toronto; they just don't like big cities.
There are a few people in
my riding who commute to Toronto to work and they appreciate
having this place to work. What do I tell them if I were to vote
for extra money to go for infrastructure to Toronto?
Ms
MacPherson: I'll begin, and I'll just add I'm from
Timiskaming riding originally, so I understand, "We'd like
Toronto to be there, but not necessarily." My folks wouldn't live
here if you paid them.
But to the point, I think
first and foremost what we have to help people understand is that
this is not just about Toronto; it's about Ontario and Canada
being competitive. Your point is absolutely correct. You travel
around the world and people ask you where you're from. If you say
"Toronto," there's no second question. If you say "Canada," you
sort of start to go down a list.
Toronto truly is the engine
of the economy in this country. We have to, as responsible
politicians and business people, focus on what we need to do to
keep that engine healthy. We're talking about making wise
investment decisions; we're not talking about dumping money into
a black hole.
1250
To your point with respect
to some of the particular issues you raised in the city budget,
I'm sure you are aware that the Toronto board has consistently
urged the city to become more focused on where the money ought to
be spent to control spending at the city level and indeed to find
savings. Some of the things that you've articulated have been
discussed at that level.
In terms of why we have to
do it, it's because this is where it starts. If at the end of the
day we do all kinds of investment in other places and Toronto
withers, it's bad for all of us. It's bad for your riding, it's
bad for my hometown. This is where we have to make the investment
so that we can, in the longer term, benefit more broadly.
Mr Galt:
Excellent response.
Ms Helen
Burstyn: I'd just like to add too that we're not talking
just about Toronto, although Toronto is certainly the largest and
most prominent economic generator for the country. We're talking
about urban centres. We're mindful of the fact that there are
other urban centres in the province and in the country that are
suffering from some of the same inabilities, both to raise
revenue and to keep up with infrastructure needs. So it's more
than just Toronto.
We are also keenly aware of
the fact that urban centres are more than just the cities. There
is a huge spillover effect that goes into the towns and rural
areas around them. Those towns and rural areas benefit from
advances in the competitiveness of cities. So we're anticipating
that there will be some sharing of the benefits of investing in
urban centres.
Mr
Kwinter: It's unfortunate that we didn't get a chance to
see your presentation on Investing in Cities: An Urban
Competitiveness Agenda for Ontario. I think it's far better than
the presentation you made, but time constraints, I'm sure,
dictated that.
There's an old cliché,
"You can't strengthen the weak by weakening the strong." Years
ago I developed a hierarchy of hate for Canada: everybody in
Canada hates Ontario, everybody in Ontario hates Toronto,
everybody in Toronto hates Bay Street and everybody on Bay Street
hates the lawyers.
What you have is a
situation where it's almost tragic that we have this opportunity,
when you consider that we're the only country in the G7 that
doesn't have a tier 1 city and that Toronto is a tier 2
city. It has all of the elements to be a tier 1 city, and the
benefits accrue to everybody, not only in Ontario but in
Canada.
In the limited time I have,
I would like to follow up on a situation you didn't touch on in
your presentation but it's certainly covered in the other
document. Everybody is expecting that Toronto has a really good
shot at the Olympics. That Olympic bid, if it's successful, will
trigger all sorts of other things. I believe the Fung report,
whatever emanation it
appears in, is not going to happen without the Olympics. I was
the chairman of the Toronto Harbour Commission for a number of
years. I've seen so many plans come and go that never, ever
happened. Unless there's a catalyst-and I think it's the Olympics
that would be the catalyst-that will address some of the concerns
you have with the infrastructure, some of the concerns you have
with the waterfront and some of the concerns you have with the
other major infrastructure deficiencies we have, we're not going
to get them in the short term.
I'm just curious to know
what your response is to that. What is the fallback position if
we don't get them? I think if we get the Olympics, lots of things
will happen; if we don't, a lot of things are not going to
happen.
Ms
MacPherson: I'm going to ask Elyse to answer that,
conscious of the time.
Ms Allan:
We share your concerns, first of all, with respect to the
trade-off that some might have of whether waterfront development
happens with the Olympics or without. We certainly believe that
the waterfront development for Toronto is a vital infrastructure
requirement with or without the Olympics and should go ahead. In
fact, our very concern is that there's a perception that they are
bundled.
In terms of the Olympics,
we are certainly strong supporters of moving the Olympic bid
forward and hoping we will prove successful in that Olympic bid
because of the additional infrastructure it will bring and, quite
honestly, the fact that it will get us the attention of the
federal government, which to date has been a challenge for
Toronto in terms of attracting focus on our urban requirements.
So I think, between the waterfront and the Olympics, that does
provide a vehicle for additional investment in Toronto which we
desperately need, particularly in this area of
infrastructure.
I'm not sure if that
completely addresses your question.
Mr
Kwinter: Yes, it does.
It's too bad my colleague
Gerry Phillips isn't here because he loves to wave his chart that
shows the inequity in the tax allocation for businesses in
Toronto and businesses that are just across the street in either
Markham or Vaughan or some of these other municipalities. There
really is an inequity. It is very obvious. As the Toronto Board
of Trade, I'm sure you're confronted with this on a daily basis,
where you're trying to attract industries and they will say, "Why
would I possibly go to Toronto when I can go in the adjoining
community and get all these tax benefits?" How do you address
that? Have you been able to address it?
Ms
MacPherson: The property tax situation in Toronto is
something that we focus a great deal of attention on. You're
absolutely right, it's a critical success factor. To Elyse's
point earlier, it's one of the things that influences decisions
about where to locate a business or whether to stay here, for
example, when your lease has come up. One of the things the
province, in our view, needs to continue to focus on is ensuring
that those inequities are reduced over time, that there are hard
caps and that over time we get to a stage where we are much more
competitive and the business community or the business properties
in Toronto are not bearing such a disproportionate share of the
taxes.
It's particularly keen if
you look in the centre of the city, downtown. We have a situation
where a vast quantity of office space comes up for renewal leases
in the next two to three years. Property taxes have risen so much
that we run the risk that if we don't have very concrete plans in
place to ensure that we can demonstrate that those taxes are
coming down, there will be great incentive for businesses to
actually leave the core and go out.
The Chair:
With that, we've run out of time. On behalf of the committee,
thank you very much for your presentation.
One quick announcement: our
session this afternoon will be in room 151. We'll recess until 2
o'clock.
The committee recessed
from 1257 to 1400.
BMO NESBITT BURNS
The Chair:
I bring the meeting back to order, as it is slightly after 2
o'clock.
Our first presentation is
from Nesbitt Burns. I would ask the presenter to step forward and
state your name for the record, please. On behalf of the
committee, welcome. You have one hour for your presentation this
afternoon.
Mr Doug
Porter: Thank you, Mr Chair. My name is Doug Porter. I'm
with Nesbitt Burns-BMO Nesbitt Burns, actually. We changed our
name officially about a year ago. I welcome the opportunity to
address the committee today. Seeing as the economic environment
has changed so dramatically over the past three months alone, I
thought it would be instructive to actually stick to our knitting
today and basically go over the economic outlook and what we see
in the year ahead, how the slowdown that we've seen develop in
the US will affect Canada and its implications for Ontario.
Just generally, I would
characterize our view on the US and Canada as being a little bit
below consensus, but we're certainly not at the low end of the
spectrum. Fundamentally, we do not believe that a deep recession
will take place in the US economy, but we can't rule out one
quarter of negative growth or indeed even a shallow brief
recession. We readily admit that in the forecasts we are going to
put forward to you today the risks are tilted to the low
side.
Clearly, the biggest risk
for Canada and Ontario in the year ahead is from the US slowdown.
I don't think there is any debate about that. Our own domestic
fundamentals are actually quite fine; not perfect, but certainly
a lot better than, say, what we saw in the early 1980s or the
early 1990s. The governor of the Bank of Canada actually
suggested that very point yesterday in his first speech.
I would like to begin with
a bit of an overview on our US outlook and why we believe that
any downturn should be
relatively mild. I've actually brought along a little handout
that might be helpful if I walked you through it. First of all, I
would like to spend some time on the US. I've prepared a list of
where we think this downturn developed, where and why. It's
instructive because it will also help us understand what the
chances are that we'll pull out of it relatively quickly. Then
I'd like to go into some of the reasons why we don't think we are
headed for an out and out recession.
First of all, let's look at
the backdrop very briefly on what exactly caused this downturn.
There are a number of factors in the States. We listed about nine
of them. First, the US dollar, against all odds and even with a
record trade deficit last year, continued to rise, and this
basically hit the competitiveness of US manufacturing. I don't
think this is the number one factor by any stretch, but the area
of the US economy that is facing the greatest pressure right now
is the manufacturing sector, and part of that is due to the
strength of the US dollar.
The second factor I listed
and probably the single-most important is the fact that the Fed
was tightening monetary policy. Admittedly this was a little bit
less restrictive a cycle than we've seen in the past, but still
they raised rates by almost two full percentage points. It took
time for that to hit the economy, but it certainly did. That
tightening cycle began in the middle of 1999, and the usual rule
of thumb is that it takes about a year for an increase in
interest rates to fully work its way into the economy, and sure
enough the economy began to slow about a year after the Fed first
began raising rates.
Third, on balance, fiscal
policy in the US was still relatively tight last year. Taxes did
rise faster than incomes, and we did see their budget surplus
rise again. Again, I think that was a relatively minor
factor.
The fourth factor was quite
important: the sharp decline in the stock market, including a 40%
decline in the NASDAQ. This worked its way into a weakening of
the economy through many channels: the direct hit to wealth; the
fact that the venture capital market, after providing a lot of
impetus to the growth, really dried up in the fourth quarter; and
finally and probably most importantly was the hit it delivered to
consumer confidence, especially in the fourth quarter of last
year.
A fifth factor was the fact
that credit spreads-in other words, the difference between what a
corporation pays on bonds and what the government pays-widened
quite dramatically throughout last year, and we also saw that in
the commercial paper market. In other words, loans for very
short-term periods of interest really picked up at the end of
last year as investors became much more reluctant to lend to
corporations through the bond market.
We saw a similar episode of
that with banks, which tightened credit standards considerably
throughout 2000, actually to an extent we haven't seen since the
recession of the early 1990s.
Seventh, and probably what
I would say is the third-most important factor, was the rolling
spike in energy prices. First it was oil prices that picked up
through 1999 and peaked in early 2000, then heating oil prices
began to pick up during last summer, then natural gas prices and
then of course electricity prices this year. So Americans have
been hit by one energy shock after another over the past two
years, and eventually this weighed not just on household incomes
but also on confidence.
Then I think what
eventually pushed the economy over the edge, when it had all
these depressing factors operating on it, were the two things
that really hit in November and December. First was the
uncertainty that reigned after the election and the muddled
election result; and finally the fact that the weather was so
miserable in the US in November and December I think to some
extent did exaggerate the weakness of things like retail sales in
December. Certainly it contributed to the whole feeling and view
that the US economy was in serious trouble, and they gave us very
weak numbers for the Christmas selling season.
Combined, these things
brought what had seemed like just an incredible expansion-the
economy was still growing at a 6% annual rate as recently as the
middle of last year-to essentially a complete standstill around
the turn of the year.
Of the indicators that the
economy has indeed ground to a standstill, I think the most
telling is the plummet in consumer confidence we've seen just in
the past three months. Leading indicators as well have fallen
precipitously in the US. Admittedly, some of that is just a
reflection of the decline in the equity market, but some of it
also reflects a real decline in things like orders. We have seen
a real decline in the sale of goods. It isn't just in inventory
correction and it isn't just a financial correction. We actually
have seen a real slowdown in goods sales.
Also, a classic warning of
impending slowdown in the economy is a sharp buildup in
inventories, and we certainly saw that in the second half of last
year. After basically a 10-year period when US industries were
consistently bringing down the ratio of inventories to sales,
they were constantly getting their inventories under better
management, we saw real flattening out in the middle of last year
and then a sharp pickup at the end of the year. That's a classic
warning signal.
Also as evidence that the
economy really has slowed, I think it's most clear in the
manufacturing sector. The National Association of Purchasing
Management is reporting some of the weakest numbers we've seen
since the recession of 1990-91. As well, we've seen orders
actually declining for so-called basic industry, which excludes
the high-tech industry. But even beyond just the basic
industries, we've actually seen a sharp slowdown very recently in
the technology sector. Of course, this area had been leading the
US boom basically throughout the latter half of the 1990s, and
over the second half of 2000 we saw that sector slow quite
dramatically.
Generally, factory
employment and hours worked have fallen quite sharply in the US
in the last couple of months. Again, employers are acting very
quickly in response to the slowdown we're seeing in demand; and
finally, capital spending is also falling.
With that backdrop, I'd like to answer the
question of whether this means the US economy is headed for a
deep recession. Quite frankly, the answer is no. I've listed 13
factors why we think this is not going to turn into an outright
recession in the US. First and foremost, I think most of the
weakness we've seen really has been concentrated in the
manufacturing sector to this point. I can list a number of
sectors that are still looking quite strong, and many of these
apply to Canada and if anything are even more so the case in
Canada.
First and foremost, in
direct response of course to the strength we've seen in energy
prices, energy exploration, in other words drill rigging
activity, is absolutely exploding, and that's even more so the
case in Canada. In a related sense, utility construction is on a
strong upswing, and there are even a number of generating
facilities that are on the books now in California, not
surprisingly.
1410
Office vacancy rates are
very low. That's a direct contrast to what we saw going into the
downturn in the early 1990s, when office vacancy rates had been
extremely high. Again, if anything, that's even more so the case
in Canada, so it's not as if we're headed for a big downturn in
commercial construction.
Also, in complete contrast
to what we saw in the early 1990s and certainly in the early
1980s, home affordability is actually increasing rather than
decreasing. Yes, we have seen home prices rise a bit, but we've
also seen mortgage rates come down quite sharply in the US over
the course of the past year and similarly in Canada. So housing
affordability is still quite good and home sales are still
relatively firm. They are not as high as they were, say, a year
ago, but they're certainly not pointing to an out-and-out
downturn.
There's a similar story in
auto affordability. A lot of the weakness we've seen over the
last couple of months in Canada and the US is a sharp pullback in
auto sales, but a lot of that has been driven by business
purchases of vehicles. Surprisingly, new vehicles purchased by
consumers have actually held in relatively well, and sales were
surprisingly good in January. Admittedly, the anecdotal evidence
from February isn't quite as good, but again I think the rebound
in January shows that a lot of the gloom that we saw in December
was partly weather related and I think it really did exaggerate
the extent of the downturn.
There's a similar story in
tech spending: most of the weakness we're seeing is on the
business side. Consumer spending on technology goods, whether
it's computers or even games or whatnot, is still quite
strong.
There's a similar story for
consumer spending on services, which accounts for over a third of
GDP. This area of spending is still hanging in very well.
Admittedly, some of that is spending on utilities. In other
words, because it was such bad weather in November and December,
consumers had to spend a lot of money on their electricity bills,
and that gets counted in services as consumer spending. But
things such as restaurant meals and when you pay your Internet
service provider, that counts as a service, and growth there is
still looking very good.
Looking ahead, one of the
reasons to think we will avoid a recession in the US is that it
does look as if Congress and the President will work together for
a fairly considerable tax cut. Whether that will actually help
consumer spending this year or not is debatable, but at the very
least I think it will give a bit of a boost to consumer
confidence.
Probably more importantly,
we've certainly seen that the Fed now views avoiding a downturn
as job number one. They've already cut interest rates by a
percentage point. I'll get into it a bit later, but we think they
will cut rates by at least another percentage point. If any of
these other factors aren't in place to support the recovery, we
think the Fed will cut rates even more aggressively than what
we've laid out. Simply put, the Fed does not want a downturn at
all at this point. There is no reason for it. Inflation is not a
major problem, and the weaker the economy looks now, the more
aggressively the Fed will cut rates and the more likely it is
that a rebound will occur in the second half of this year.
Energy prices, which had
been one of the greatest depressants on consumer confidence over
the past couple of years, are already falling. Here you can
certainly look at it as a glass half-full, glass half-empty
scenario. Natural gas prices are down 50% from their highs, but
they are still up by about double from year-ago levels, so it's a
bit of a good news-bad news story there. It's a similar story for
oil prices more generally.
While credit has been
tightened by the banks, it still is relatively available. Even
though bank lending standards have tightened, we have seen bank
loans, even so, still accelerating. Even though they have to pay
more, corporations are going to the bond market a lot, quite
extensively, and they still are able to borrow, even if they are
paying a bit more. Mortgage lending and money-supply growth are
also accelerating, so they certainly are not pointing to a
downturn in the US economy overall.
Also, typically, factory
inventory corrections do not last long. If this really is just an
inventory correction in the manufacturing sector, it could be
quite severe but it could be over within a six-month period, and
that's what we're hopeful is what will play out over the next six
months.
Some people say this isn't
an inventory correction but actually an investment-spending
correction; in other words, we've seen a capital-spending boom in
not just the US but Canada as well over the past five years. But
to some extent that, arguably, is already coming under control. A
lot of these capital-spending goods are actually imported, to the
extent that if there is a cutback in capital spending, it
actually hits imports more than just the US economy. In other
words, it affects places like Germany and Japan as much as it
affects the US.
That's the backdrop and the
main reason why we don't think the US is going into a deep
recession. Again, as I said, we effectively, as a base case,
think that we'll get zero growth in the first quarter and little
better than 1% growth
in the second quarter. We do think we'll see something a little
bit better in the second half of the year, but I think our main
message is that we don't see the US economy going back anything
close to what we've become used to over the past five years. We
think at best we're looking at about a 2.5% to 3% growth trend in
the second half of the year and something similar to that in the
year ahead.
I thought going through
some of these charts might help put a bit of colour behind that
outlook. It is quite interesting to look at the first chart, the
consumer confidence, to see how well it was holding up right
until the fourth quarter; in other words, that long list of
factors I went through before the election and before the
late-year slide in stock prices and that last run-up in energy
prices. You can see consumer confidence was still quite high, but
it has fallen even more than what we saw in the Asian crisis. I
would argue it's unlikely to rebound as rapidly as we saw coming
out of the Asian crisis. A lot of the downturn in the Asian
crisis was a purely financial event. This is much more than a
financial event. We've already seen layoffs hit their highest
level in the last couple of months that we've seen in the past 10
years. That has a meaningful impact, of course, on income and
spending. So it's not going to rebound like it did at the end of
1998 and in early 1999.
The second set of charts
shows that there were plenty of warning signals going up from
other real indicators early in 2000, but they didn't really begin
to become troublesome until late last year or even the turn of
this year. For instance, the leading indicator was falling quite
sharply as early as the middle of last year, but it didn't really
dip below trend until late last year. Similarly,
inventory-to-sales ratios actually bottomed out at the start of
2000. They were starting to back up through the middle of last
year, but they didn't really become troublesome until they
spiralled quite sharply at the end of last year.
The third chart shows just
how deep a downturn this is in the manufacturing sector. This one
line I've labelled "factory survey" is also known as the National
Association of Purchasing Managers report. This survey is really
taken very seriously by the Fed. I think that to some extent,
when it dropped so sharply for the December report, which came
out the first working day of January, that was one of the reasons
the Fed decided to react so aggressively the next day by cutting
rates sharply. Then, when it fell again for January, I think
that's why they followed it up with another half-percentage-point
move at the end of January. So keep an eye on this survey when it
comes out for February. It will be reported the first day of
March. If we don't see much of a recovery, I think that'll give
us a real signal as to the intentions of the Fed looking
ahead.
I think another factor
that's causing the Fed to ease so aggressively is this tightening
in lending standards by the banks. The chart at the bottom of
page 3-4 shows just how tight lending standards in the US have
become and that they are actually as tight as, if not tighter
than, what we saw in the recession of the early 1990s.
Essentially, by cutting interest rates, the Fed is trying to
offset this tightness we're seeing in lending standards.
The next set of charts
shows how the so-called low-tech, or at least the industrial
sector outside of high technology, was sending all sorts of
warning signals throughout the early part of the year 2000. Both
orders and shipments were tailing off. Yet, the high-tech sector
hung in-not just hung in but was doing spectacularly well-right
up until about the middle of 2000. Then you can see that orders,
just in the last couple of months, tipped over quite violently,
and yet shipments are still rolling along at quite strong growth
rates. That's one reason it took so long for the big technology
shares really to react to the weakness, because they were still
growing and shipping out the goods at just an incredible pace.
Actually, they still were up until the fall.
1420
The chart on the bottom
part of that page shows that the purchasing managers' report is
not an infallible signal of recession. It actually has dipped
below the so-called boom-bust line five times in the last 15
years, and only once was that associated with a recession. I
guess the one warning here is that it has weakened to the same
extent that we saw in the downturn in 1990-91. But again I stress
that I really think the manufacturing sector is bearing an
unusual burden of the slowdown in this downturn, partly because
of the strength of the US dollar in this slowdown.
What does all this mean for
Canada? While on balance we do see overall growth in the US of
just a little over 1.5% this year-that is a little bit below
their long-term trend of 2.5%, but it's well below the pace of 4%
we've become used to in the past five years-we see a very similar
pattern for Canada, a little bit stronger than in the US but not
considerably different. As in the US, we essentially see growth
going to about zero in the current quarter, we see growth of only
a little bit better than 1% in the next quarter and, similar to
the US, we see it going back to a pace of about 2.5% to 3% in the
second half of the year. Again I would stress that we do see the
risks as fairly heavily tilted to the low side.
We think that Canada will
outperform the US in the year ahead. Effectively the two
economies have been very similar over the past four years in
terms of overall growth rates. The one exception was 1998, when
we were certainly hit a lot harder than the US by the Asian
crisis and the downturn in commodity prices in that year. But
outside of 1998, you can see that in 1997, 1999 and 2000, Canada
and the US had almost identical growth rates. But by the second
half of last year, Canada was looking a lot stronger than the US.
For instance, in the fourth quarter, it now looks as if the US
only grew by about 1%, whereas Canada probably grew by a little
bit better than 3%. So certainly we had a little better momentum
than the US heading into this year, and to some extent we think
it will carry over a little bit into this year.
I certainly don't want to
give the impression that I think Canada can escape what's going
on in the US. That's
why I've harped so long and hard on the US outlook. I would just
like to draw your attention to the charts on page 9-10. I'm sure
you're familiar with this overall pattern. I think it's quite
clear just how closely tied Canada is to the US cycle, and I
would suggest that since the free trade agreement and NAFTA, if
anything, the tie has become tighter than ever.
Clearly, there have been
some cycles where Canada has deviated for a time from the US, but
certainly the pattern has been almost identical for the past 35
years. You can perhaps make out that in the early 1990s Canada
was pretty consistently a little bit weaker than the US but,
interestingly, we had almost the exact same growth pattern as the
US, just a little bit lower throughout that period. One
significant difference I can point out to you was the mid-1970s.
Canada certainly did avoid the downturn we saw in the US. Some of
that was related to the boom in energy prices. Canada benefited,
while the US didn't. To some extent I would suggest that would
make the case that Canada can do a little bit better than the US
in the year ahead. Unfortunately, that doesn't do a lot for the
Ontario economy. So I think it's very much the case that Ontario
will follow the US pattern overall.
"The Ties that Bind" chart,
the second one, basically just drives home the same point, the
fact that fully one third of Canadian GDP is now accounted for by
exports to the US alone. That's up from about 15% as recently as
15 years ago.
Turning to the next set of
charts on page 11-12, you can see that we had a very similar
situation on the factory side in inventories building in Canada.
As in the US, there were some signs of trouble just beginning to
develop in the first half of 2000, when inventory growth began to
rise a little bit faster than manufacturers were able to ship
their goods out. The two didn't divert significantly until the
second half of last year, but clearly there was a break in the
third quarter of the year, when shipment growth really began to
fade quite rapidly and inventory growth continued to rise.
Very recently there has
been some slowdown in inventories, but the inventory-to-shipment
ratio is still quite a bit higher than it was even a year ago,
and I think there is still some more to be done on that front,
that manufacturers will continue to cut production to bring
inventories back in line with shipments.
I do think this process can
take a fairly brief period of time, but there's no two ways about
it: it is painful while we're going through the process. I think
it will largely be concentrated in the first and second quarters
of this year.
Now, I'll freely admit that
forecasters have been quite slow or quite reluctant to revise
down their forecasts for Canada. In fact, we don't have the
official consensus forecast for forecasters for February, but as
recently as January it was 3.3%. The Economist magazine has a
slightly more up-to-date consensus forecast. They're looking now
at 2.8% growth in Canada. I think that's a little bit more
realistic. We're actually a little bit lower, at 2.3%.
I think one of the reasons
why forecasters have been a little bit reluctant is, let's face
it, we've been burned over the last four years consistently
underestimating the strength of the Canadian economy. If you look
at the past four years, the average underestimation of Canadian
growth has actually been a little bit more than 1%, which is a
bit embarrassing for the forecasting community. The miss was
especially bad coming out of the Asian crisis, when everybody was
doom and gloom at the end of 1998. The average forecaster had
scaled back their forecasts to only 2%, and indeed the economy
sailed right through that period, with incredible growth in 1999
and not too dissimilar a story last year.
So I think to some extent
forecasters have been very, very reluctant to cut their
forecasts. But after a number of years of underestimating growth,
I clearly think the risk in the year ahead is that we will indeed
overestimate growth. The main reason for that is, to some extent,
if you look at the chart on the top of pages 13 and 14, the
slowdown that we're seeing in the technology sector. A lot of the
underestimation of growth in the last few years is because to
some extent we have consistently underestimated the contribution
of investment in high-tech. That's added at least a percentage
point to growth, if not more. I'm taking a very conservative
measure here of the contribution of the tech sector.
Consistently, this has added to growth quite a bit more than
anyone had thought possible in the last couple of years, and
that's definitely the case in Ontario. But given all the warning
signs that are going up from the tech sector, I think it's quite
feasible, if not even likely, that this year we're going to see
that what it's given in the last couple of years it's going to
take away in the year ahead. In other words, real GDP outside of
tech investment actually will hang in there relatively well, but
headline GDP will actually drop well below the trend.
Just turning to some of the
specifics on the outlook, certainly so far most of the slowdown
or any signs of slowdown we've seen in Canada have been in the
auto sector. It's not just the production side; we actually have
also seen a bit of a slowdown in Canadian auto sales. Admittedly,
auto sales are coming off a great level. We saw record vehicle
sales in 2000, but there certainly was a slowdown underway by the
end of last year. Encouragingly, sales actually did pick up a
little bit in January, as in the US, but I'd say the trend
overall is still quite a bit weaker. Certainly, auto production
has tapered off quite dramatically.
Just generally, businesses
are becoming much, much less optimistic. Stats Canada puts out a
quarterly survey of manufacturers that's call the business
conditions index. We convert it into an index, something like the
US purchasing managers index, where a reading above 50 is
consistent with growth; a reading below 50 is a decline. In the
first quarter of this year it fell to 38, which is the worst
rating we've seen since the recession. Admittedly, it's not as
deep as the levels we got in the depths of recession in 1991, but
it is about the same kind of level that we were at right at the
start of the 1990-91 recession.
Admittedly this survey was
taken right as a lot of the worst news was coming out on auto
production and when all the scare headlines were rippling through
at the start of January. But I do take it seriously.
Manufacturers are obviously quite worried about their order
books. As in the US, I think that the biggest risk is to
manufacturing and, by extension, the biggest risk is to the
Ontario economy of the 10 provinces.
Employment overall is
holding up well, but the one area that's really tailed off is
goods-producing employment. That includes things like
manufacturing, construction, agriculture and utilities. That's
where we have seen a very perceptible slowdown over the past
year.
1430
Just to point out that it
isn't a one-sided story by any stretch and that to some extent
the economy is exhibiting a real split personality at the moment,
similar to the US, while manufacturers are warning of very tough
times ahead, we're seeing very decent growth on things like
consumer spending and construction. Building permits hit their
highest level in 10 years last year and they were still
relatively firm at the end of last year. Housing starts, while
they did taper off a bit at the end of last year, bounced right
back in January, and home sales were quite strong as well last
year. There are certainly no signs from the residential real
estate market of severe strains. Outside of the auto sector,
retail sales are still looking relatively firm. As much as we're
seeing weakness in goods-producing employment, service sector
jobs are still ticking along quite well. We've seen over the past
year growth in the service economy employment of nearly 3% and
certainly no early warning signs of a recession at all on that
front.
What does this split
personality mean for monetary policy? How will the Bank of Canada
react to this?
To some extent it is
confused by a couple of factors: the fact that we have a new Bank
of Canada governor, who I think to some extent has to establish
his credentials and I don't think wants to be seen as making
strong steps either toward being overly tight in monetary policy
or being overly loose. I suspect he will follow a very
gradualist, measured policy. As well, the renewed weakness of the
Canadian dollar, some of which admittedly has been driven by the
sudden swoon in Nortel, complicates the Bank of Canada's task. So
I think that while we will continue to see interest rates come
down, the bank will be much more cautious and much more measured
than what we've seen by the Fed. I think they will probably
continue to move in quarter-point increments, but quite frankly,
I don't know. We haven't seen Mr Dodge make an interest rate
decision yet. We have to judge him by his actions and not by
words, but certainly his words suggest that he's still relatively
upbeat on the economy and that he doesn't have any sense of
urgency whatsoever.
So I think we will see
interest rates come down in a very measured fashion. We think
Canadian short-term rates will fall by about another percentage
point, probably coming down by about a quarter per cent in each
one of the next four decisions that the Bank of Canada has. That
means that by the summer we'll see interest rates in Canada down
by about a per cent, more or less matching the decline in US
interest rates that we see in the year ahead.
I'd just like to conclude
by what this might mean for Ontario in the year ahead. I've tried
to weave in as I've gone some of the implications for
Ontario.
Definitely we are the most
closely tied to the US economy of all and we have seen the
manufacturing sector certainly weakening consistently more than
the rest of the country, as you can see from that chart on pages
17-18. I will point out that some of the strength in the rest of
the country is a bit exaggerated because manufacturing shipments
actually include refined petroleum and these numbers are not
inflation-adjusted, so they've been bumped up a little bit by the
run-up in oil prices. But I think the main pattern still holds
there after a number of years, where Ontario industry was
outpacing the rest of Canada. We have seen, which I think is
clearly illustrated by what's going on in the auto sector, a
clear slowing in Ontario manufacturing, more so than in the rest
of the country.
Interestingly, that is not
the case in consumer spending. Consistently over the last four
years we've seen Ontario consumer spending growing faster than
that in the rest of the country. I think some of that is related
to the fact that Ontario has higher population growth and so it's
natural that retail sales are going to grow faster than in the
rest of the country. But you can see that even over the course of
the past year we haven't really seen that same slowdown that's
developing in manufacturing spilling over into consumer spending.
Again, that goes back to the split personality of the
economy.
That stands out even more
so on employment, which I find absolutely fascinating. Ontario
employment has been growing faster than the rest of the country,
and that's even more so the case in the past couple of years.
This is a smooth number, and actually, if anything, if I were to
take the latest number-in other words, January-you'd see even
more of a gap than what's showing there. So certainly to this
point there isn't that slowdown in the broader economy showing up
yet in Ontario. I don't think this happy circumstance is going to
continue for long, and we will certainly see in Ontario
employment gear back quite significantly in the year ahead, but
at least heading into this year it has been remarkably strong. I
suspect that is going to show up in the fiscal numbers for the
fiscal year ending in March, but needless to say, the situation
will change rather sharply in the fiscal year ahead.
On the construction side,
Ontario has looked very much like the rest of Canada. After a
relatively strong year, we did see a bit of a slowdown in permits
by the end of 2000. But overall, it was a relatively good year
for the construction industry and I'd say the outlook for
construction still looks relatively healthy, even though we did
get a bit of a slowdown in permits at the end of the year.
I'd just like to conclude
with one number that came out today, and that was on business
investment intentions for the country as a whole. This was a survey
taken over the turn of the year, from November to January.
Canadian businesses are looking at a real slowdown in business
spending, but they're still looking at a small positive this
year, certainly nothing like we saw last year. Remarkably, the
strongest growth in the country was to come from Ontario, which I
find staggering. We actually are going to see a big pullback in
manufacturing capital spending, but businesses overall in Ontario
are looking to ramp up capital spending, which I do regard as
encouraging.
So even though Ontario is
the most closely tied to the US cycle, we are not calling for an
out-and-out recession. We have scaled back our forecasts for
Ontario growth to 2%, which I understand is a little bit lower
than the finance ministry is looking at and I think it's a little
bit below consensus, but I do think it's realistic. It's
cautious. But again, I would say the risks are probably tilted to
the downside for that number.
In summary, economic
forecasts are fraught with uncertainty at any time, and I would
say that's probably more the case this year than ever. So I would
advise that the province plan with extreme caution in the year
ahead. GDP forecasts for the province have already been cut by
more than a percentage point, and I would freely admit that the
room for error is probably that great even from the revised
forecasts.
There are two aspects of
economic performance to keep in mind at any time: the cyclical
and the structural. I think this is a cyclical slowdown. For a
province, it's extremely expensive to try to fight a cyclical
slowdown with fiscal policy. In other words, we are such an open
economy that I think fiscal policy really cannot do that much to
fight a cyclical slowdown. In a structural situation, certainly
fiscal policy can do wonders or extreme damage. There it is very
important that we get fiscal policy right. But there really isn't
that much that fiscal policy can do to fight a slowdown. In other
words, I don't think Ontario should or could try to cut taxes or
increase spending to avoid this slowdown. I think essentially we
have to try to get fiscal policy as correct as we can, basically
ride out the slowdown and hope that it won't last, just hope that
we have fiscal policy right and that the slowdown won't last
long.
That's it's for my prepared
remarks.
The Chair:
Thank you very much. We have approximately five minutes per
caucus, and I'll start with the government side.
Mr Galt:
Thank you for a most interesting presentation.
It's interesting that
during the week, while we've been on the road, it started out we
were hearing 2.8% GDP growth. The other day it was 1.6%. It's
bouncing all over the place.
I have two questions. One
relates to the US tax cut. It sounds like the Bush administration
is going to come out with one, which may stimulate the US
economy, and we kind of tail along, as indicated. But where does
that put us in a competitive position if they cut their taxes?
Are we then going to have to cut that much more to stay
competitive? We may lose our competitive edge, and how will that
affect us?
Secondly, if you were the
Minister of Finance, after the presentation we heard first thing
this morning about how, depending on whether we stick with our
tax cuts and stick with our other fiscal policies-we may have a
soft landing or a hard landing was the way that economist
described it-what would you recommend specifically, in order of
priority, the Minister of Finance should do to ensure that
Ontario comes out of the recession-or "downturn" might be a
better word; let's call it that-in the best shape?
So two: competitiveness
with the American cut in taxes, and what would you do if you were
the minister to bring Ontario through this downturn the best
way?
1440
Mr Porter:
Well, any potential competitive damage to the Canadian and
Ontario economies from a tax cut in the US will take time. It's
not as if we have to react instantaneously to a tax cut in the
US. First of all, we should see exactly what they do before we
react. To a large extent the response has to come from Ottawa,
first and foremost, but it does drive home the point that we have
to do what we can to make sure our marginal rates do not get far
out of line with the US. That doesn't mean we have to mirror the
rates one for one. Certainly there are a number of differences in
social policy that we have, and there are a number of reasons why
Ontario taxes or provincial taxes generally are higher than those
in the US. We of course have gone years and years with a tax gap.
I would make the case that it has hurt us on a competitive front
but it hasn't destroyed the economy, so it's not as if we have to
react instantaneously. But I think it behooves the government to
try to keep as much in line as we can with the US, without
gutting social programs, obviously.
I made the point last year
that the one concern I had with the overall program of Ontario
tax cuts is that they really didn't do that much to bring down
marginal tax rates. Marginal tax rates in Ontario are not that
different from other provinces. I think that's really where the
focus should be, on making sure that marginal rates, which really
are what matter for work effort and for investment, are brought
down as much as is reasonable.
As to the second part of
the question, in terms of what I would recommend facing this
downturn or this sharp slowdown, again I think it goes back to my
summary in that really there is not that much a province can
realistically do to fight the cyclical downturn. At the very
least, they shouldn't make it worse. In other words, they
shouldn't be out there doing the kinds of things that are going
to crush consumer confidence even more. I don't think spending
cuts are exactly a helpful thing at this point, but I do think
that probably small tax cuts and at least the promise of more tax
relief down the road can be very helpful. In other words, "This
is where we want to get to, and as circumstances allow us, this
is what we will try to deliver. This is what our goal is." I
think that helps confidence both for businesses and consumers.
It gives the impression that this is Ontario's focus and that
we're trying to get the fundamentals right, that yes, we're going
through a tough time now but we are absolutely committed to
providing the best possible environment for business investment
and for the work environment.
The Chair:
We have one minute, Mr O'Toole.
Mr
O'Toole: Quickly, I just want you to comment on how
important the current inventory adjustment issues are, which is a
lot of the manufacturing, and then, more importantly, the
diversification in the domestic economy in Ontario, moving more
from auto to tech and other diversified sectors.
Some of the recent comments
in the Globe and certainly in the Post this morning were about
the importance of the energy sector and the housing sector, which
are both domestic issues technically. We're well positioned in
those areas. If you could comment on those. Our belief, and
Minister Flaherty said in his opening statement and I think you
show that too, is that the domestic economy is stronger perhaps,
showing more ability to be sustainable. How important are taxes
in that part, both the capital tax and the tax on basically
inventories? Are they an important part of the fiscal policy
tools that we have?
Mr Porter:
I'll work in reverse; I'll start with the last question. There's
no question that one of the reasons consumer spending has done
relatively well over the past year-and we think the fundamentals
are good in the year ahead-is that we have seen disposable income
finally coming back to life. Part of that is due to the fact that
wage settlements have started to pick up a little bit. Employment
growth has been strong. Also, there is no question that there has
been a real kick to disposable income from tax cuts, both at the
federal and the provincial level, across the board. I think that
has done a lot, not just for confidence but for actual disposable
income growth.
Actually, we're looking at
disposable income growth after inflation of 4% last year and
about 2.5% this year. Those are some of the best numbers we've
seen in a decade, so I think that is a very important factor
behind why we think consumer spending will hang in there
relatively well and why there is a split personality.
In terms of how
well-diversified the economy has become, I think that's a gradual
process. That takes place over years and years. Slowly but
surely, I think that goes for Canada as a whole. We're becoming a
little bit less resource-intensive, there's no question about it.
But compared to other G7 economies or other industrialized
economies, we are still more reliant on the resource sector than
any others. That hasn't changed and that won't change any time
soon.
Definitely, the tech sector
has risen to be a much more important part of the economy, but it
too is quite cyclical and I think we are seeing that. We are
going to see a real slowdown in the tech sector. I don't think it
is so different from other sectors of the industrial economy or
industrial machinery. It goes through an inventory cycle, it's
dependent on capital spending, and if capital spending slows,
it's going to slow as well. While the structure of the economy is
changing, that doesn't mean we can completely avoid the business
cycle. The business cycle will look different, but we're still
faced with a cycle at the end of the day.
Mr
Cordiano: Thank you for your presentation. One of the
things that strikes me is that you're forecasting a real GDP
growth in Ontario of 2%. I believe the finance minister has
projected a 2.8% growth rate, so yours is considerably more
conservative than the finance minister, who is a Conservative.
It's interesting that there is such a gap, 0.8% of a difference,
in your forecasts, and forecasting being what it is, I think you
should err on the side of being cautious at the present time.
That being said, my concern
has to do with the fact that the province may face a revenue
shortfall, given the real slowdown in the economy. If there is
what amounts to a revenue shortfall, my question to you is, is it
a wise course of action to have tax cuts take place at the
present time at the provincial level? I've heard what you said
about adjusting or fixing the marginal tax rates. You would
probably give priority to that rather than an actual cutting of
taxes across the board.
Do you think it would be
wise for the government of Ontario at the present time to
consider any additional tax cuts, given the fact that we may be
facing a revenue shortfall? As well, there is balanced budget
legislation. They're having to balance the budget by the time
this term is up in about two years.
Mr Porter:
Just starting with the first part, I think it's important to
point out that the outlook for the economy has shifted quite
dramatically in the past three months. To put it frankly, I don't
think a difference of even a percentage point between forecasts
is unreasonable at this point; the outlook is so uncertain. We've
seen the US consensus shift dramatically just in the past three
months, so I don't regard that as a huge gap.
The second part of your
question, going back to my earlier comments, I think it's
probably wise to let up somewhat on the pace of tax cuts at this
point, just to be fiscally prudent. That doesn't mean the whole
process has to be ground to a halt, but I think it is important
to remember that we are also getting, and we will get, a lot of
relief from Ottawa as well. They've already laid out quite a
fairly serious tax-cutting program over the next five years, and
indeed last year's Ontario budget did as well, certainly on the
corporate side and to a lesser extent on the personal side. So I
don't necessarily think it's critical to continue to push that
issue at this point but, as the one member brought up, I think
that realistically we are going to be faced with more competitive
pressure from the cuts in the US. We can't put our heads in the
sand and ignore that that competitive pressure from lower US
taxes, if anything, will be accentuated in the next couple of
years. I think it is important for the government to stress and
to continue to aim to bring down taxes over the medium term, as
much as is affordable within the constraints.
I would be interested to
see the final numbers for the fiscal year that's just about to
end. I suspect that, given the strength we saw in the economy last year,
we might be in a better starting position than has been publicly
put forward, but I'll wait to see the final numbers.
1450
Mr
Cordiano: My concern would be, and I think the
government's concern should be, that we not run a deficit. I
think that would have some negative impact in terms of consumer
confidence and business confidence in general if the province
were to start running deficits again, because that could be a
likely scenario if we continue to have a downturn that exceeds
your expectations or is certainly well below what the minister is
predicting.
Mr Porter:
I think that if we got into a situation where we had an
out-and-out recession, then confidence would already be so
destroyed that the fact that Ontario had slipped into a deficit
really wouldn't do much more damage. That doesn't mean I would
take it lightly that Ontario slipped into deficit, but it really
does depend on how dire the economic circumstances are. If you
had the US economy going into recession, then I think Ontario
would not avoid it. I think even the US government could be
looking at slipping back into deficit if they had an out-and-out
recession. I honestly think it would be forgivable, at least
short-term, if Ontario had, say, a one-year period where they
dipped into a small deficit.
My own view is that
balanced budget legislation really should be over the cycle and
you should not be in a situation where you are forced to cut
spending dramatically in the face of a downturn, or raise taxes,
for that matter, in the face of a downturn, just to keep the
budget balance from slipping into a deficit for a brief period of
time. Again, that doesn't mean I don't take it seriously. I think
that should only be reserved for a deep recession, something more
than just one or two quarters.
Mr
Christopherson: Thank you for your presentation. I
remember last year's discussion.
Just so I understand
clearly: you're suggesting that if the indicators continue to
show that the government would be pushing itself into a deficit
position, they ought to let off the gas on the tax cuts so they
maintain the revenue stream for the short term.
Mr Porter:
The government typically only sets policy once a year or so,
which we'll see in a couple of months. I guess what I'm saying is
that this is probably not the time to make big steps in either
direction, whether it's cutting spending or increasing spending.
By the same token, the direction should still be down for taxes.
I think the long-term goal should still be lower taxes.
What I'm saying is that
cutting taxes or increasing spending at this time would not be a
fiscally cheap way to boost the economy. In other words, Ontario
is such an open economy that a lot of that fiscal stimulus flows
right out of our borders. That's not a fiscally cheap way to do
things.
Mr
Christopherson: I found it interesting that a lot of the
groups that have been coming in over the last couple of weeks
have been saying that reducing the debt, paying off the debt, is
the absolute, number one priority. What strikes me is that many
of them were the same folks who were saying that the tax cuts had
to come first, and since the government implemented their tax
cuts before they balanced the budget, it meant they had to borrow
the money and continue to borrow money to give the tax cut, which
increased the debt. So it's like they wanted to have their cake
and eat it too. They wanted the tax cuts, which have benefits
right up front, and now they want to say that the debt is the
number one priority and therefore you have to keep taking revenue
stream out of social expenditures and into debt.
Would we not have been
better off to follow a plan that had us balance the budget first?
Wouldn't we be stronger right now to withstand this and have a
little more manoeuvring room, had we waited until the budget was
balanced, not made the dramatic cuts that were necessary in
social spending-and we're hearing about the price we're paying
for that, for health care, teachers, infrastructure; AMO was in
here this morning talking about municipalities; my own community
in Hamilton just got hit with a 15% increase for water rates.
Would the government not have put us in a stronger position now,
had they waited to do the tax cuts or any other expenditures with
a fiscal dividend until we actually had it in hand, rather than
doing it before the books were balanced?
Mr Porter:
I think any way you look at it, Ontario faced a very tough
situation a number of years ago. There were a number of competing
needs that had to be faced. In hindsight, the budget deficit
actually did come down a lot more sharply than laid out
initially. But by the same token, Canada had really gotten out of
line with the US, and I do think that was the case in Ontario on
the tax front. If you recall my presentation last year, I think I
tried to make a strong case that you really can show the widening
differential in taxes. I would make the case that that led to the
persistent rise in unemployment that we've seen in the past 15
years. I think there were a number of needs that the government
tried to address, and bringing down taxes was one of the
important things; bringing down the budget deficit was another
important thing. We can probably debate all day the speed with
which both should have been addressed, but I think they were
trying to address both at the same time.
The Chair:
You have one minute left, Mr Christopherson.
Mr
Christopherson: I would think that, given the lack of
flexibility now, somebody should be saying, "Hey, we told you at
the time that wasn't the way to go."
Two things and a short
question: how many jobs, roughly, do you think we're going to see
lost over, say, calendar 2001, and how many of those jobs are
going to come back when the economy rebounds?
Mr Porter:
I think it's important to point out that this base case forecast
I laid out is not a recession. We actually see employment growth
in Ontario this year. Admittedly-and again it goes back to the
split personality-we're probably going to see fairly decent
growth, still, in service employment but declines in
manufacturing employment.
Mr Christopherson: But an
increase in low-paying jobs and a decrease in decent-paying
jobs.
Mr Porter:
Not necessarily. Not all service sector jobs are low-paying.
Management jobs, civil service jobs are not necessarily
low-paying.
Mr
Christopherson: There aren't many civil service jobs and
there's only one management per X number of workers.
The Chair:
With that, I have to bring it to an end. On behalf of the
committee, thank you very much for your presentation this
afternoon.
1500
POLICE ASSOCIATION OF ONTARIO
The
Vice-Chair: Our next delegation is the Police
Association of Ontario, president Bob Baltin, if you'd like to
come forward. On behalf of the standing committee, welcome. We
look forward to your presentation. When you start out, please
state your names for the purpose of the record. You have a total
of a half-hour for your presentation. What's left over will be
divided evenly between the three caucuses.
Mr Bob
Baltin: Good afternoon and thank you, Mr Chair and
members of the committee, for the opportunity to be here this
afternoon. My name is Bob Baltin. I'm the president of the Police
Association of Ontario. I joined the Peel Regional Police Service
as a constable in 1978. I've worked full-time for their
association since 1995. I worked in uniform patrol, criminal
investigations bureaus, intelligence units, morality and vice
units, joint forces operations and the auto theft bureaus.
Appearing with me is Bruce
Miller, the administrator of the Police Association of Ontario.
Bruce was a 22-year veteran with the London Police Service until
he became our administrator last December. He has worked in
uniform patrol, vice, break-and-enter units and major crime
squads. He is a former police medal of bravery recipient.
Together we will try to give you the perspective of front-line
police personnel in Ontario.
The Police Association of
Ontario, the PAO, was founded in 1933. The PAO is the official
voice and representative body for Ontario's front-line police
personnel and provides representation, resource and support for
Ontario's 70 municipal police associations. Our membership is
comprised of approximately 13,000 police and civilian members of
municipal police forces. The Police Association of Ontario
promotes the mutual interests of Ontario's front-line municipal
police personnel in order to uphold the honour of the police
profession and elevate the standards of police services.
We are appearing before you
today to ask that the government remain committed to community
safety. People in Ontario have a right to feel safe in their
homes, on their streets, while at play and in their schools. Safe
communities create trust and comfort and attract investment and
can only lead to a stronger Ontario.
We have applauded some of
the legislative initiatives that the government has enacted in
recent years. The 1,000 new police officers initiative was one of
the most positive steps taken by a government that we have ever
seen. The communities we serve have welcomed this influx of
police personnel. We strongly supported the introduction of the
Sergeant Rick McDonald act to help reduce criminal pursuits and
make criminals accountable. We endorsed Christopher's Law, which
created the mandatory sex registry.
We appreciate the fact that
members of all parties have introduced legislation to help ensure
safe communities and we would like to thank them for their
efforts.
Stats Canada reported that
Ontario had 185 police officers per 100,000 citizens last year.
This compares favourably to the rest of the country, with Quebec
having the highest number, at 188. However, our rates are
considerably less than in other countries. The United States had
247 officers per 100,000 in 1998, and England and Wales recorded
233 per 100,000 last year.
Much has been made of the
fact that crime rates may have been falling. The number of
Criminal Code incidents in Canada increased steadily, from 20 per
officer in 1961 to a peak of 51 in 1991. That rate had declined
to 43 in 1999. However, Stats Canada also reported that a large
proportion of crimes are going unreported because victims of
crime did not feel they were significant enough to report to
police.
A few years ago my own
vehicle was broken into in my driveway, and approximately $700
damage was done and numerous items were stolen. I reported the
theft to the police and discovered while talking with neighbours
that in fact 11 vehicles had been broken into and damaged. These
vehicles also had items stolen from them. I learned that I was
the only one who had made a police report. The others did not
bother because they felt the crime would either go unsolved or
the culprits would be virtually unpunished.
It is noteworthy that
during this alleged downturn of criminal activity, we
commissioned Angus Reid to poll Ontarians in 1996. The following
results were received:
-Three out of five Ontario
residents, 62%, felt there had been an increase in crime in their
community in the past five years.
-The large majority of
Ontarians, 80%, felt that regardless of the deficit situation,
one area that should not be cut back is funding for police
services.
-More than half of property
taxpayers, 54%, said they would be willing to pay an increase to
maintain funding levels for police services.
A soon-to-be-released HRDC
study on policing points out that crime rates have dropped
because of an aging population. However, that same study states
that the aging population will put increased demands on police
personnel. Older Canadians are more frequently the victims of
certain crimes and typically require more intensive personal
attention than younger members of society.
The same study highlights
the fact that crime is becoming more sophisticated, organized and
technically complex. Criminals are using cutting-edge technology
and the police are hard-pressed to keep pace. Criminal organizations do not face the
budgetary restrictions that are faced by police agencies, which
may prohibit or delay the acquisition of equipment or
personnel.
Often, investigations into
these matters are very time- and resource-consuming. We are
playing catch-up to the criminal in many instances. Paperwork and
regulations are increasing the workload of police personnel.
Officers must ensure that all the statutory steps are covered.
The Supreme Court of Canada decision that obligated crown
attorneys to make full disclosure has become a paper nightmare
for investigators.
Electronic surveillance has
become a tool of last resort, as the evidentiary hurdles and
criteria established by the charter and consequential legislation
significantly limit the use of electronic surveillance well below
its legitimate potential.
Search authorizations place
comparable demands on police agencies, as a misplaced comma,
typographical error or inadvertent and inconsequential technical
error can render a search and the resulting evidence
inadmissible.
In the past, police only
had to prepare enough documentation to make the crown's case. Now
they must prepare detailed reports and disclose all information.
Many investigators spend the majority of their time preparing
disclosure instead of investigating crime.
We want to stress that in
spite of this the streets in Ontario remain comparably safe. This
is due to the dedication of our members and due to the fact that
government has recognized the need to give police personnel the
tools they need.
The government gave up
majority control on local police services boards to municipal
councils. This has increased the need and responsibility to
ensure that adequate funding and safeguards are in place to
ensure quality policing. A local municipality cannot be allowed
to make an uninformed decision that may impact on community
safety.
Current funding levels must
be maintained and in fact need to be increased in certain areas
to continue to ensure safe communities. We would like to
highlight certain areas that we feel are deserving of special
attention.
Community policing
partnership funding: In 1998 the province announced the
implementation of the community policing partnership, or CPP.
This extremely positive initiative allowed for 1,000 new officers
to be added to patrol Ontario's streets. Last year the government
announced that it would be establishing a permanent CPP program
and increased the annual budget by $5 million, to $35
million.
It is our understanding
that this additional funding has yet to be accessed. We urge that
it should be targeted to continue the intent of the original
program, adding additional police personnel and resources.
Fighting crime and ensuring
safe communities requires many facets, including tougher
legislation and education. Funding remains a key component and
cannot be ignored. We would urge the government to ensure that
this initiative continues and is not lost.
The Ontario Police College:
The Ontario Police College (OPC) remains among the finest, if not
the finest, police facility in North America. It has a dedicated
and highly talented staff that is combined with quality
leadership. The college received enhanced funding last year and
the current funding levels must be continued.
The Ontario Police College
provides a variety of training programs designed to prepare
police personnel to perform their duties safely and
professionally while meeting the policing needs of the
province.
The primary clients of the
OPC are police and civilian members of all police services in
Ontario, including municipal and regional police services and the
Ontario Provincial Police. Other clients include government
employees from other provincial and municipal enforcement
agencies and occasionally clients from other provinces and
abroad. This fosters an environment for the valuable exchange of
ideas and strategies to combat crime.
The college has 125
full-time and part-time employees, including instructors and
support staff. The 45 permanent instructors are supplemented by
police officers from various police services, usually for
two-year periods. As of last year, there were 44 contract
instructors.
Last year the college
continued to be involved in the training of both recruits and
seasoned police personnel. Approximately 5,000 members were
trained on site while an additional 5,000 members received
training from the college's staff in locations across the
province.
The aging of the police
population has placed increased demands on the college's staff.
At the same time, an increasingly complicated and demanding work
environment has reinforced the need for continuing education.
Police personnel must be
adequately trained to meet today's challenges. The college's
personnel have worked hard to ensure this, and their funding
levels must be protected.
I will now ask Bruce Miller
to continue with the rest of our presentation.
1510
Mr Bruce
Miller: The policing services division is an area that
is badly in need of enhanced funding. The division has an
important audit and advisory capacity. Its mandate includes
monitoring the extent to which ministry-sponsored police
initiatives are introduced and maintained by police services;
assessing police services compliance with the legislation,
policies, operational guidelines and standards the ministry
develops through both internal and external consultative
processes; evaluating relationships between police services and
governing authorities, police associations and agencies, local
crown attorneys, adjacent municipal forces and other community
groups; regularly advising chiefs of police, police services
boards and police associations on policing procedures,
regulations and standards, interpreting the Police Services Act
and other legislation, and internal discipline matters.
The division has seen the
number of advisers fall from a high of 15 in 1995 to the current
five. This comes at a time when the advisers have the added
responsibility of ensuring compliance with the adequacy standards
that came into effect at the start of this year. The standards
were legislated to help ensure quality policing for all
Ontarians. They were enacted as a safeguard against local
municipalities making budgetary decisions that could negatively
impact community safety.
Their workload has also
increased due to restructuring.
Ideally, they are supposed
to be actively involved to ensure that protocols are followed and
that all groups are kept informed and up to date. This sharing of
information reduces the confusion and acrimony that can be
associated with the process.
The policing services
advisors played an important role by being independent. They were
often able to resolve disputes involving associations, chiefs,
senior police management and police services board. They did this
through their educational and conciliation skills. The downsizing
of their ranks coupled with their increased responsibilities has
left them unable to carry out many of their functions. The last
comprehensive audit of a police service was Durham region in
1998.
Far too often disputes
which could have been settled with the aid of an adviser have
ended up needlessly in a public forum. This not only serves to
impact on the morale of the men and women of the service but can
also diminish community confidence in the police service. This
serves neither the community nor the service. We would ask that
their funding and staffing levels be restored to, at the very
least, their previous levels.
Organized crime: The
widespread proliferation of organized crime in Canadian
communities is of significant concern to the Police Association
of Ontario and our members. As professionals who dedicate their
lives to community safety and reduction of crime, our members are
acutely aware of the impact of the thriving multibillion-dollar
industry known as organized crime. Organized crime affects all
Canadians, undermines our economy, reduces our security and
threatens the integrity of our political institutions.
The explosive growth of
technology in our increasingly global society has presented new
opportunities for organized criminals through technological
crime, distribution of child pornography, international
telemarketing fraud and offshore gambling.
The United Nations has
estimated that organized crime has global revenues of $1 trillion
annually. The activity and criminality of organized criminal
gangs has increased in recent years within Canada, at severe risk
to public safety and security. Criminal Intelligence Services
Canada, CISC, has stated, "Virtually every major criminal group
in the world is active in this country."
Our proximity to the United
States of America makes Canada extremely vulnerable. More
importantly, it is our lax immigration policy, open borders, weak
federal laws, archaic justice system, an even weaker federal
corrections system, coupled with under-enforcement that makes us
extremely attractive to the sophisticated criminal.
There are disturbing and
significant trends evolving in organized crime in this country:
increased violence, including bombings, murders and the use of
threats, intimidation and violence against victims, witnesses,
public officials and the media; collaboration-the sophisticated
criminal has recognized that co-operation breeds success, as
evidenced by the recent summit of Hell's Angels and Rock Machine
leaders; globalization of operations; exploiting technology; the
import and export of contraband, including but not limited to
illegal aliens, stolen vehicles, drugs, alcohol and tobacco and
money laundering.
According to CISC director
Richard Phillipe, over a 24-hour period in Canada $6 million
worth of heroin will be imported into this country, 21 to 43
illegal aliens will arrive, $14 million will be obtained through
telefraud and 500 vehicles will be stolen.
Organized crime is far from
victimless. In addition to the traditional forms of violence
associated with the organized criminal, their illegal activities
damage and often destroy the lives of children and vulnerable
persons who fall prey to their illicit trade. The child
prostitute, the drug addict, the addicted gambler and the senior
defrauded of their life savings are all-too-familiar examples.
There is a tremendous economic drain on our economy as businesses
and insurance companies pass on the significant costs of fraud
and theft to consumers. Our members have the desire to combat
this menace, but they need the tools and resources.
Much has been said about
the recent increase in activity of organized criminal motorcycle
gangs. We watched in horror at the carnage that occurred in
Quebec, and we must ensure that the same thing does not happen in
Ontario. This can only be accomplished with adequate tools and
resources.
Recently, a disturbing
trend has developed. Police officers themselves have been
targeted by organized crime. One can only surmise that the goal
of these intimidation tactics is to silence the efforts of these
officers and their co-workers. We cannot and will not allow this
to happen. Police personnel in Ontario will not bow to organized
crime.
We support the Remedies for
Organized Crime and Other Unlawful Activities Act. However,
proper resources and funding must be in place to ensure its
success. Training is a necessary component. The promised
provincial strike force needs to become a reality for the
legislation to be effective. The appropriate tools must be in
place.
The Ontario Crime Control
Commission has done important work in developing strategies to
combat property crime and as of late has been targeting auto
theft. The commission has had a significant role in the sharing
of ideas and strategies. It has helped to educate both the public
and police personnel. We understand that its current mandate is
set to expire in June. It has played an important role and we
would urge that at the very least its mandate be extended.
We have spoken at length
about how combating crime has become increasingly complex and
sophisticated. It is a time- and resource-consuming task. At
times, the dedication and courage of our officers is not
sufficient; specialists are needed. We support the creation of
provincial specialty
task forces to assist in the fight in such areas as organized
crime, Internet child pornography and computer crime.
The so-called ROPE squads
that hunt down prison escapees and parole violators have proven
to be very effective but are badly in need of a cash
infusion.
Drinking and driving
continues to be a major source of tragedy on Ontario's roads, and
funding for RIDE programs and enhanced enforcement must be
continued.
Initiatives that have been
either created or promised need to be continued or carried
through with. In some areas, these initiatives will have to be
expanded.
Policing impacts on all
areas of Ontario, urban and rural. The citizens of Ontario have a
right to feel safe in their homes, to feel safe at work, to feel
safe at school and at play. We believe that our members have the
overwhelming support of Ontarians. We know that we have the
support of the government and members from all parties. We would
like to take this opportunity to thank all members of government
for the law-and-order initiatives that have either been promised
or legislated. We appreciate your commitment to law-and-order
issues. We would urge you to continue to consult with us, as our
members are out there on the front line, in the real world.
Through the dedication of
our police personnel, combined with adequate tools and resources,
we have been able to ensure that our streets are safe. To ensure
that this continues, current and proposed funding must be left in
place. At the same time, new initiatives must be continually
explored to ensure our province's quality of life.
I would like to take this
opportunity to thank the committee for allowing us to address
you, and we would be prepared to answer any questions you may
have.
The
Vice-Chair: Thank you very much for your most
interesting report. We have maybe two minutes per caucus,
max.
1520
Mr
Kwinter: Thank you very much for your presentation. I
think you're absolutely right that Ontarians have a right to
expect to have safety in their streets, safety in their homes,
safety in their schools, safety in their play, and I think by and
large they do. I think that if you ask the average Ontarian, they
would think this is a safe place to live, relatively speaking.
Having said that, there are these areas where there are problems,
and I commend the cop on the street, because he's under
incredible pressure to do his job properly.
I'd just like you in the
time that we have to explain one thing that you say in here. You
say, "The government gave up majority control on local police
services boards to municipal councils. This has increased the
need and responsibility to ensure that adequate funding and
safeguards are in place to ensure quality policing. A local
municipality cannot be allowed to make an uninformed decision
that may impact on community safety."
How do you propose that we
address that? The city of Toronto, to give you an example,
because we're in Toronto, has responsibility for the police
service. The police service reports to the council. They make
decisions; they make funding decisions. What would you propose to
make sure that they make, in your opinion, the right
decisions?
Mr Miller:
I think, sir, that's already been legislated in the form of the
adequacy standards. They were put in place to ensure that
Ontarians have quality policing right across the province. I
don't like to refer to them as "minimum" standards, because
minimum standards sometimes become the acceptable standards. The
standards are adequate to ensure that the community is properly
policed. The other area, of course, is with the expansion of the
policing services division to provide support and resources for
police services boards.
Mr
Kwinter: So you're happy with it. You just want to make
sure it stays.
Mr Miller:
There are problems in certain communities, but by and large,
Ontario's streets are relatively safe.
Mr
Christopherson: Thank you. It's good to be working with
the PAO again. I'll just comment on a couple of things-we don't
have much time-and any response that you want to give would be
appreciated.
I notice that you make
reference to the fact that the government did follow through with
what it said it would do-unfortunately, in this case-where they
downloaded decision-making responsibility, majority control, on
the police services boards down to the municipalities, thereby
leaving it very vulnerable. Even though there are these adequacy
standards, when you link it with the lack of advisers and the
whole process, if it's still the same as it was when I was there,
or even close, that takes some time and can get quite bogged
down. It seemed to me it was a good check and balance in our
system that the majority appointees to police services boards
were by the province, where ultimate responsibility for policing
services lies. So it's good that you mentioned it. I still think
that was a mistake the government made, and maybe that needs to
be revisited some day.
Again, to mention the fact
that they've lessened the number of advisers from 15 to five, I
know first-hand the role they play and how crucial they can be to
solving big problems and also solving small ones to prevent them
from becoming big ones. I think what you are seeing here is
yourself being a victim of some of the other kind of quiet cuts
the government makes, where they don't get a lot of headlines. In
the Ministry of the Environment, for instance, a lot of the
scientists are gone, a lot of the analysts, things that the
public can't see but that are important to the effective
protection of the environment, in this case, or the effective
provision of policing services.
I would also just mention
you complimented the community policing partnership funding. I
didn't make too huge a deal out of it at the time. It seemed
rather pointless; the election had decided things. But I thought
it's interesting that it's almost the same program that we had
brought in and that the government cancelled and then reannounced
a couple of years later with great fanfare. I see one of my friends from
across the way who remembers those years, who knows very well
that's what happened. It is a good idea no matter who is doing
it. If you can work in partnership with the local municipalities,
where you're both bringing in money for the same objective, I
think that's the best kind of partnership you can have.
Mrs
Molinari: Just quickly and then my colleague also wants
to ask some questions. Just a comment on the organized crime that
you've indicated here. Presently we're holding hearings on Bill
155, the organized crime bill. If you haven't submitted your
views on that, I would suggest that would be a good idea for you
to do. It's certainly a bill that's going to protect Ontario
residents from being victimized by organized crime. So I'd
encourage you to become involved in that.
A quick question about your
comments on the reports to the police on stolen and damaged
property and that you had spoken to about 11 people in your
neighbourhood and none of them had reported it. One of the
reasons you cited here is they didn't bother because they felt it
would either go unresolved or the culprits wouldn't be punished.
That's a rather apathetic approach to crime and I'm concerned
when people have that type of view, that they don't report it.
It's my understanding that in order to claim it on your
insurance, you have to have a police report, so it surprises me
that even with the apathy, that they feel nothing is going to
happen, they wouldn't report it just so they'd have a police
report and be able to claim it through the insurance. Can you
comment on that, please?
Mr Baltin:
I think I can because it was a personal experience dealing with
my neighbours. I was very disheartened as well that they hadn't
contacted the police, because from a policing aspect, if the
police were to do a snapshot of the area for that day, they would
only know of one crime being committed. Had everyone reported it,
they would have known that there in fact had been 11 or 12 or
possibly even more that I didn't learn about.
As to why they didn't
report, you're right: in order to claim on the insurance, they
would have to make a police report. However, what I found was
that for a number of them, depending on the value of the items
that were stolen, if it was going to fall beneath their
comprehensive level-and the level of the comprehensive for theft
has increased over the last few years-again, there was going to
be no financial benefit to them to report it. Essentially, they
just took the loss.
The
Vice-Chair: On behalf of the committee, thank you for
your presentation. We really appreciate your coming forward. Best
of luck in your work.
ASSOCIATION OF ONTARIO HEALTH CENTRES
The
Vice-Chair: Our next delegation is the Association of
Ontario Health Centres, if the representatives would like to come
forward at this time. On behalf of the committee, thank you very
much for taking time to express your interest in the upcoming
budget. You have half an hour to give your presentation, and
what's left over we'll divide between the three caucuses. Please
state your name at the beginning for the record purposes.
Mr Gary
O'Connor: My name is Gary O'Connor and I am the
executive director of the Association of Ontario Health Centres.
I've held this position since 1997. Beside me is Susan Milankov,
who is the vice-president of the Association of Ontario Health
Centres, and she is also on the board of one of the community
health centres in Toronto, the LAMP community health centre.
We are deeply appreciative
of being able to address this important committee of the
Legislature. We are grateful for the time you have allocated to
us and our association. At the risk of being a bit immodest, I
can assure you it will not be time wasted.
I do want to explain more
about the association, but first I want to explain why we're here
today. The Association of Ontario Health Centres has come to
Queen's Park today because we genuinely believe we have a
solution to offer the government that will make significant
improvements to the province's health care system. Given the
amount of money the government has poured back into health care,
we know that this is your number one area of interest. I praise
the government for the continued interest in health care. It's
money well spent.
I think we have an offer
that the government should not, and cannot, refuse. Simply put,
the government should continue to invest in health care, and we
think community health centres are a natural and worthy candidate
for investment. By investing here, the government will improve
the province's health system and begin to deliver in a
significant way on its commitments to expand primary health care
networks province-wide.
Members of our association
have been at the forefront of primary health care reform for the
past 30 years. As a result, we wholeheartedly support the
government's commitment to roll out primary health care reform
province-wide. In last year's budget, the government committed to
having 80% of family physicians working in primary care networks
over the next four years. Again, we applaud both the impulse and
the target.
We think we can assist the
government in accomplishing this important and ambitious
objective. In fact, today we want to leave the committee with a
set of proposals, which have been delivered to each of you, that
move the yardstick on primary health care reform a considerable
distance.
1530
Who are we? Ontario's
health centres are now into their fourth decade of delivering
comprehensive health services to people in their communities. It
was not until 1982 that our association, the Association of
Ontario Health Centres, was officially incorporated. At that
time, the then Minister of Health, the late Larry Grossman, said
that CHCs would no longer be experimental pilot projects, but
would be part of mainstream health services in the province. Minister
Grossman also set targets for growth and expansion of community
health centres across the province. His government's direction
was supported by subsequent governments of all political
stripes.
Today, there are 66 centres
in operation in all parts of the province; 56 are community
health centres, and 10 centres provide services as aboriginal
health access centres. These centres are community-based,
not-for-profit organizations that provide high-quality,
cost-effective primary care services. But our centres do not stop
there. They also focus on health promotion and illness prevention
to improve the overall health outcomes for individuals, families
and the communities they serve.
What we're here talking
about today, what we have to offer, is that the Association of
Ontario Health Centres applauds the direction that the government
has moved toward in managing the health care system. We support
the call for expanded primary health care networks across the
province. We also think we are a legitimate alternative to assist
the government in achieving this worthwhile objective.
We support the idea of
shifting health resources to communities to deliver services
closer to home. Spearheaded by local need and governed by local
boards, health centres are quintessentially creatures of their
communities.
We fully embrace the course
the government and all the governments in fact are starting to
take of putting money back into the health care system. Health
care is our number one priority and a top issue for the majority
of people all across the province. In its 2000-01 business plan,
the Ministry of Health and Long-Term Care described its vision
for Ontario's health system as the following, "An accessible
health system that promotes wellness and improves people's health
at every stage of their lives and as close to their homes as
possible." This vision fits nicely with our approach. In fact, it
could almost be the vision for community health centres. Our
approach stresses comprehensive care close to home with an
emphasis on making people well and caring for them before they
become ill.
Looking further at the
ministry's business plan, it identifies seven strategies to
achieve its vision: (1) anticipate the needs of a growing and
aging population; (2) expand health promotion and illness
prevention activities; (3) plan for enough health professionals
throughout Ontario; (4) enhance the role of community-based
health services; (5) convert 80% of eligible family physicians
from a strict fee-for-service payment scheme; (6) increase
recruitment, retention and nursing leadership; (7) ensure that
rural and northern communities have better access to health
services and specialists.
What the ministry has
identified in its business plan to achieve a better health system
is what community health centres do every day. Seniors report
preferring the health centre model of care because it allows them
to see the most appropriate provider, who then gives them the
service they the need and the time they need.
The health centre model is
structured on a multidisciplinary team concept that places a
significant emphasis upon illness prevention and health
promotion. Our providers are salaried and our budget is capped.
This means the number one goal is to make the individual as
healthy and as well as possible.
Our association has a plan
that would see the hiring of 375 more physicians and 548 more
nurses. This would deliver comprehensive primary health services
to as many as 65 more communities that currently need
enhancements to their local primary care systems.
Community health centres
are just that: they're community centres. They arise out of local
need and are formed and forged by local interests. They're
managed and overseen by local people. When the ministry says its
strategy is to enhance community-based services, it is talking,
or at least should be talking, directly about community health
centres.
The Ministry of Health and
Long-Term Care wants to convert 80% of eligible family physicians
from the fee-for-service payment model. This is a laudable goal.
All of our physicians are salaried. So we agree and we think the
ministry should expand community health centres to support this
strategy.
The ministry wants to
increase recruitment, retention and nursing leadership in our
health service. One way to do this is to expand the number of
community health centres to provide nurses with the opportunity
to work in a team environment, under which they thrive. In
particular, nurse practitioners enjoy the CHC environment because
it is one of the few places where they can practise to their full
scope of training.
One of the key ministry
strategies to improve the health care system is to ensure that
rural and northern communities have better access to health
services. Once again, we agree. Community health centres are all
about delivering health services to people and to communities
that have not had the same access to services as other
communities.
Any way you slice it, what
the ministry says it wants to achieve in its business plan can be
achieved by investing in and expanding community health
centres.
In an effort to assist the
government to expand primary health care reform and plug some of
the gaps in underserviced areas, the Association of Ontario
Health Centres has a set of proposals we would like to share with
the committee. In October we submitted the business case that you
have in front of you, and two weeks ago we submitted phase 1 of
this proposal to the Minister of Health. But, in fairness, there
has been a change at the helm in the ministry, and we realize
it's going to take a little more time for phase 1 to be
reviewed.
We would like to see our
proposal funded in stages over the next three years, although the
committee should understand that the large proposal presented in
October, the process for bringing health centres up to their full
operational capacity, can take as many as three years. So the
full funding maturity of this proposal is more in the
neighbourhood of six years, which means spreading the funding
over six years as opposed to three.
Our proposal calls for
doubling the number of health centres around the province. This
would necessitate adding 65 new health centres in key areas of
the province that have identified a need for better basic primary
health care and wellness services. I don't think anyone disputes
the fact that more and more communities across the province are
finding it difficult to maintain their current level of physician
services.
Another aspect of our
proposal deals with expanding existing health centres so they can
better meet the increasing demands and acuity levels needed to
maintain quality care. We think the expansion process should be
evaluated in year 3 to assess its success and determine whether
additional communities could benefit from expansion.
We think the government
should move immediately to fund phase 1 of our proposal, which
calls for immediate expansion into 13 new communities. In all, 10
new health centres and three new satellite centres would be
created, at a cost of $21.5 million.
We also think it's
necessary for the ministry to inject $15 million into existing
centres so they can better serve their communities and better
meet the government's health care priorities. One third of this
money would be used to address recruitment and retention issues
in CHCs. The committee should know that staff in CHCs have not
had a salary increase now in almost nine years. Many of our
positions are now paid greater than 25% below market norms,
causing tremendous recruitment and retention problems. Some $6.5
million of the $15 million would go toward hiring more health
professionals: 25 more nurse practitioners and 10 more
physicians. The remaining portion of the $15 million will enhance
vital health promotion programs that CHCs deliver.
We think this is money well
spent, because it will help existing health centres meet some of
the most significant cost and program pressures they face.
Keeping our community health centres functional is crucial to
helping to sustain and improve the provincial system, because we
provide service to populations and to areas of the province that,
quite frankly, many providers do not wish to service or are
incapable of servicing.
The communities that we
have identified for immediate expansion include Elliot Lake,
Goulbourne-Kanata, Kapuskasing, North Bay, Nepean-North Innisfil,
Pickering, Scarborough, South Essex, Sudbury East, Tilbury,
Whitewater-Bromley and Zurich. These communities can't wait for
the comprehensive services provided by community health centres.
We also don't think these communities should have to wait for the
ministry to complete its strategic review of community health
centres. This review is not slated to be completed and responded
to until the spring or summer of this year. We think it is too
long to wait to expand a service that is both proven and desired
by communities and population groups around the province.
1540
We are satisfied to wait
for the review in the context of our full expansion proposal to
65 communities, but we do not feel the existing health centres or
the 13 new communities should wait. We also don't think it serves
the government's best interests to make them wait, especially
given the current climate of communities competing against one
another for scarce health professionals to provide for their
basic health services.
I don't think I am going
too far out on a limb to suppose that some of the more
frustrating calls each of the committee members and other MPPs
take from constituents centre around constituents expressing
their dissatisfaction and frustration at not being able to access
better health services. Our plan takes a big step to ending these
phone calls to each of you.
Basically we're saying,
"Let us help you." We might be a little biased, but we think our
proposal can provide a huge assist to the government in managing
the health system and to patients who are trying to gain better
care and better access within the system.
How exactly is this
achieved? Take hospital emergency rooms-and I guess in the
government today you would say, "Please." People go to emergency
rooms not because they necessarily want to but because they have
no other alternative. Either they cannot gain access to their
family doctor or it's after hours and the doctor's clinic is
closed. By funding our proposal, community health centres will be
in a position to provide 24-hour access, seven days a week. This
makes us a natural safety valve and a natural alternative for
hospital emergency room visits, which should improve both the
patient flow in ERs and make sure hospital capacity is maintained
for true emergencies.
We also think our wellness
approach encourages people to take better care of themselves,
which in turn may prevent illness and result in fewer emergency
room visits. We were certainly delighted to see the government
expand the flu immunization program. In fact, CHCs hosted a
number of community vaccination clinics. We think there are other
health promotion initiatives that should be looked at further,
many of which could be delivered by our centres. We believe the
government should build its prevention strategies using existing
prevention agencies such as CHCs and boards of health. There is
no need to create new silos when organizations exist that already
work in collaboration with many community partners.
I firmly believe that the
best emergency room reform strategy has health promotion
initiatives at the forefront. As I have alluded to earlier, we
also think we have a great deal to offer in helping the
government to meet its primary health care reform objectives.
The government is quite
correct in wanting to expand primary health care networks across
the province. However, we think it is wrong to expect one size or
one model to fit all populations.
We think the community
health centre model has an important role to play and should not
simply be shoved aside while the government and the Ontario
Medical Association negotiate networks around the province. We
have a proven, cost-effective, measurable model that treats all
of the individual's primary health care needs. We can also serve
hard-to-reach populations that can potentially drain hospital resources if care is
not provided ahead of time or on time.
When one compares the
Ontario government's own primary health care objectives with the
services currently offered by health centres, it is clear that
health centres are an efficient way to achieve the government's
goals.
On pages 9 and 10 of this
document, you can see how closely aligned primary health care
reform goals and community health centre services are. Some key
points from those pages are as follows:
CHCs are leaders in
coordination of patient care through integrated teams of health
professionals and through the broad basket of services we
offer.
We offer 24-hour access to
care.
CHCs provide ongoing
illness prevention and health promotion education and support to
clients. The philosophy, objectives and approaches inherent in
community-based health delivery-which are a broad understanding
of health and its determinants, an interdisciplinary team
approach and a focus on promotion, prevention and early
intervention-all help to promote preventative care.
Health centres have
established an information evaluation network consistent with the
provincial government's requirements.
Our information networks
provide outcome measures as well as ensuring accountability on
how many primary health care services are being delivered by
health centres.
CHCs already work in
concert with other health organizations-specifically to name a
few, hospitals, community care access centres and public health
units-to secure a continuum of care for our patients.
Forty percent of our
current complement of CHCs are already established in northern,
rural or underserviced communities, communities the government
has identified as having high needs. Over eighty percent of
communities want a CHC to come from these targets as well. If
allowed to expand, we can further cut into the underserviced-area
disparity around the province.
Health providers come to
work at CHCs because of the support they receive through
interdisciplinary teams. Also, CHCs are currently the only
settings in Ontario where nurse practitioners can easily work to
the full scope of their training.
We currently register
patients in our health centres. Our health centres all have
service agreements with the Ministry of Health and Long-Term
Care. We are accountable to a volunteer board of directors. As
well, through Building Healthier Organizations, our quality
assurance and accreditation program, health centres are
consistently striving to improve on effectiveness.
Our centres currently
conduct ongoing assessments and evaluations of the services they
deliver. Patients are generally quite satisfied with the services
they receive.
We have no doubt we fit the
ministry's requirements and objectives for primary health care
reform and we know the ministry has set aside money to implement
these reforms. What we are asking for today is to be considered
as a viable option for primary health care reform expansion. In
other words, help us to help you.
At the risk of again
sounding immodest, we believe we are the best weapon for the
government in fighting the following health battles.
Underserviced areas:
twenty-seven, that is 40%, of our centres are in needy areas and
our phase 1 proposal seeks to eliminate service gaps in 13 key
areas of the province.
Wellness: our philosophy
and approach is all about making people well so they don't need
to rely strictly upon a treatment regime. We know it's a priority
for the government, and we think we are an effective service
strategy to achieve this goal.
Emergency rooms, primary
health care reform, underserviced areas and wellness are four
areas the government knows it needs to get better results in if
it is to make a dent in improving the province's health care
system. In all four of these areas we have a proven and
successful record. So today, we ask the committee to help us
impress upon the ministry the need to back a winner.
In summary, members of the
Association of Ontario Health Centres are in their fourth decade
of providing high-quality, comprehensive primary health services
to high-needs groups and communities. Our centres feature a
multidisciplinary team approach. Our centres provide 24-hour
access to coordinated services. Our centre model is built on a
broad understanding of the determinants of health. All providers
promote illness prevention and health promotion.
Our centres have invested
heavily in information technology and we can measure what it is
we do and what we achieve. Our centres have a high level of
patient satisfaction. Seniors particularly enjoy the CHC
experience. Our centres are community-based and reflect the
health and service needs of their communities.
Our centres are
accountable. We enter into service agreements with the ministry.
We are governed and managed by local people and we submit to
outside review through the BHO accreditation program.
What we hope to accomplish
today is to re-establish our presence and worth in today's health
care system and to state very clearly that the key health
directions the government has identified as priorities are areas
in which we have a proven track record of accomplishment.
We understand the
government has made primary health care reform expansion
commitments with the Ontario Medical Association, but we hope the
government would keep an open mind on other models that can help
the government achieve its objective. We are one such model that
can meet these objectives, but we also meet other objectives,
like wellness and service.
The health care needs in
many communities of this province should not be put on hold and
made to wait while the government and the OMA figure how best to
implement primary health care reform. We have a service model
that works in these communities.
We understand the committee
cannot endorse our 65-centre, comprehensive expansion plan until
more details are known about the government's primary health care
reform expansion plans. Yet we think our phase 1 proposal is
important for the health system today to begin rolling back the gaps in
services that have popped up through several Ontario
communities.
We are proven, we have a
plan, and we hope you will see the merits in our plan. Thank you
very much.
1550
The Chair:
Thank you very much. We have a very tight two minutes per
caucus.
Mr
Christopherson: I'll probably spend most of my time,
then, bragging about the North End community health centre in my
riding in Hamilton, just a fantastic centre. It provides an
excellent service in an area that has some challenges, and it
goes beyond that, if I might, not just in the health provision,
although I will come to that in a moment because it's obviously
most important, but over the years-they're almost like a
schoolyard, a school property. They've become a focal centre for
the community and there are a number of community services that
are provided in the area that tend to be based there either on a
permanent basis or ad hoc. They often hold special events.
Sometimes it's a simple thing, like in the summer they have a
barbecue for all the kids and the families in the
neighbourhood.
They're great because they
can deal with all kinds of different languages. We have a lot of
diversity down in the north end of Hamilton. I can't say enough
about the health service they provide and the asset and the
contribution they make to the immediate community they're in. I'd
give my right arm to have a bunch more to put throughout my
riding.
In that vein, I wonder if
you could tell me what your experience is in terms of attracting
doctors to work in the centres. I know you mentioned the 25% gap,
but almost as a philosophical work approach, do you find a lot of
doctors are open to it, many refuse to even consider it, some are
open-minded? What is the general reaction of the docs, especially
those just graduating who are looking at a lifetime career in the
medical field?
Mr
O'Connor: I'll answer that question in two ways. First
of all, the Ontario College of Family Physicians did a survey
about a year and a half ago and they found in that survey that
50% of primary care practitioners in Ontario would be willing to
work on salary; 98% of primary care practitioners wanted to get
off the fee-for-service system. There is a broad base of
physicians who are willing to look at the kind of model we
service.
By and large we have the
same difficulties recruiting physicians as other parts of the
health care system. But when you compare, for instance, in
Ignace, the Mary Bergland Community Health Centre in an isolated
community in northern Ontario has an easier time recruiting
physicians for its multidisciplinary team than a general practice
trying to sell its practice in the community. By and large, young
physicians don't want to come in and be everything from the
emergency room physician to the psychologist, seven days a week,
24 hours a day. They want to work in a team. They want to have
backups and they want the ability to have a realistic life, which
they can in community health centres.
Mr
Christopherson: Thanks. Keep up the good work.
The Chair:
The government side?
Mr
O'Toole: Out of respect, I think it's important to
compliment your input and working with the Ministry of Health.
I'm not really up to speed except I'm familiar with other
presentations by the health centres.
When Wendy Graham was doing
the primary care reform review, I know this was considered and I
was surprised they didn't move that model forward then. I know
there is discussion and debate with the OMA and the OHA as to who
is the caretaker of the system. It's kind of a power thing,
actually. But I know the government is looking at a model. It's
not really rostering, it's not really capitation, and this sort
of sounds as if it fits.
The question is, what kind
of feedback are you getting from the ministry? Is that resistance
or is it political will? What's missing? If you have a model,
it's accountable as you say, and it works, what's the
problem?
Mr
O'Connor: By the way, the Ontario Hospital Association
endorses our expansion proposal and says it's something that is
critically needed in the province. The Ontario Medical
Association supports community health centres for high-needs,
high-risk populations. It avoids endorsing community health
centres generally. There are concerns within the Ontario Medical
Association about endorsing a model that puts physicians on
salary. But, that said, I've had many conversations with people
in the Ontario Medical Association who support individual
community health centres for individual communities that they
know there are needs in.
Mr
O'Toole: If I could just interrupt there, I want to
clarify-
The Chair:
I'm sorry. We've run out of time, Mr O'Toole.
Mr
O'Toole: -is this more money, additional dollars, or
where does the money come from? The $1 million.
Mr
O'Connor: It could easily come from the OHIP pot.
The Chair:
Thank you very much.
Mr
Kwinter: In theory this system sounds interesting. I
have some concerns. I think that if you can get one established
in a high-need area, fabulous, because they don't have anything
now. If you can get this interdisciplinary team up there, that
would be fabulous. But I have some very serious concerns. Number
one: I sit on the board of a hospital and we can't get anybody to
staff the emergency department at night-and this is Toronto-no
matter what you pay. You just can't get them. You have to close
it down. When you get the association of family physicians doing
surveys saying 54%, or whatever the number is, of our members
would rather have a salary than a fee for service, it doesn't ask
the question, "At what salary?" Sure, they would love to have
that, because if it's fee for service, they've got to go out and
see as many patients as they can. If you give them a salary and
say, "You're going to work from nine to five and we're going to
pay you $250,000 a year," they say, "Great. Where do I sign?"
That's the issue. The issue
is, if there is a doctor shortage now, how do you get these
doctors to buy into this unless you're going to really make it
attractive for them? If you make it attractive enough for them,
you may get them, but I don't know how that's going to work. At
the present time there are incentives by-I'm thinking of
communities in the north and other areas. They offer them houses,
they offer them all kinds of things and they still can't get
them.
So my concern is in the
implementation. I think in theory it's great. We haven't got
enough time, but I understand that you've designated Scarborough
as an area. I don't think Scarborough is an underserviced area,
but I'd love to find out how Scarborough was targeted.
Mr
O'Connor: OK, quickly: the community health centre's
physicians and nurse practitioners provide care 24 hours a day.
That's offered by extended hours, evening and weekend hours,
through clinics and through telephone backup, where someone calls
in and gets referred to a physician or a nurse practitioner. We
have no difficulty doing that. Virtually every community health
centre provides that service.
In Scarborough, the target
is for new immigrants and mental health survivors. There is a
tremendous and growing need in Scarborough for that.
The Chair:
With that I would like to thank you, on behalf of the committee,
for your presentation this afternoon.
1600
CANADIAN FEDERATION OF INDEPENDENT BUSINESS
The Chair:
Our next presentation is from the Canadian Federation of
Independent Business. I would ask the presenters to come forward
and state your names for the record. On behalf of the committee,
welcome.
Ms Judith
Andrew: I'm Judith Andrew, vice-president, Ontario, with
the Canadian Federation of Independent Business. I'm joined by my
colleagues Brien Gray, who is CFIB senior vice-president, and
Melanie Currie, who is our Ontario policy analyst.
You should have an envelope
with our kit before you. I'd like to briefly summarize our brief.
In the course of that, I'll lead you through some of the other
items that are in the kit and leave ample time for questions at
the end.
On behalf of CFIB's 40,000
Ontario small and medium-sized business members, we appreciate
the opportunity to make submissions to the Ontario government in
respect of the forthcoming Ontario budget. As Catherine Swift
summarized in her appearance here before you about a week ago,
it's heartening that the signs from our sector, the small and
medium-sized business sector, are that high expectations continue
to hold for business. Our members are forecasting a strong 5.3%
growth in full-time-equivalent employment. We're able to track
this on a weekly basis through annual personal interviews with
each of our members at their business premise. Through this
grassroots leading indicator, the positive forecasts generally
hold up and things look very good for 2001.
Just to summarize the small
and medium-sized business Ontario priorities for action, which
you'll find on figure 1 of the brief, the perennial number one
issue for business is total tax burden. In this we also include
hidden fees, which are part of the tax burden. The next most
important issue for business is government deficit and debt,
since this represents tomorrow's taxes. The third-ranked item,
employment insurance, while not directly within the Ontario
government purview, is a profit-insensitive tax that's important,
as too is the workers' compensation premium, which ranks high,
and should be matters of provincial interest for their economic
activity.
Regulation and paper burden
is still a highly ranked concern. I know that some of the
committee members around the table have had involvement with the
Red Tape Commission. This 61% ranking in terms of red tape being
a priority for action does justify a more concerted effort on the
part of the Red Tape Commission in terms of tackling regulatory
and paper burden concerns, including in the tax arena.
The cost of local
government is high. It's a proxy for the tax load. I will talk
about property tax in a few minutes.
A shortage of qualified
labour has emerged as a serious barrier to small and medium-sized
business in Ontario. Just today, we've released our new February
2001 research report, entitled Help Wanted: Results of CFIB
Surveys on Shortage of Qualified Labour. You will find that full
report in the left side of your kit. It's a national study. The
breakouts for the province of Ontario are contained on a single
page which shows the growth of the problem to the point now where
business concern over shortage of qualified labour in Ontario has
reached over half of our members, 50.8%.
Within the Ontario data,
the sectoral breakdown is very interesting. The construction
sector has the highest ranking in terms of business concern over
the shortages, followed by manufacturing, transportation and
communications, and so on. Based on these broad-based data from
our members, we estimate that unfilled jobs in the small business
sector in Ontario are roughly one in 20-5.3%-of jobs going
unfilled here in the province.
There are some breakouts on
the back page dealing with the types of occupations that Ontario
small businesses hire, where they're finding the most difficulty
in terms of finding employees with certain levels of education,
and the important skills and qualities they look for in
employees. I think it's also fascinating and very worrisome that
Ontario heads the list in terms of provinces where small
businesses are saying long-term growth is being harmed by this
issue.
The full report contains a
number of recommendations in this area. Our finding is that the
causes are many and the solutions, of course, will be varied as
well. There are quite a lot of solutions that we're proposing,
including everything from looking at the immigration system to
looking at barriers to market entry and mobility and such things
as payroll taxes and better communication with the education system at all levels
by business and, indeed, a more concerted effort by workers to
assume a more active role in job search. Finally, we do argue for
building private technical and vocational schools right into the
education system in a more meaningful manner so that people can
plan that particular educational choice among the others that are
available.
Continuing with some of the
new findings that we have from our members, figure 2 in the
Ontario budget brief shows a rating of the Ontario government by
small and medium-sized business on a range of factors. The
Ontario government received the most positive ratings on things
like setting an environment for growth and controlling government
spending. At the other end of the spectrum there were poorer
ratings associated with things like consultation with the public,
understanding of entrepreneurship and social policy, and even
taxation policy. So on that latter one there's very definitely a
message coming from small business that more needs to be done on
the taxation policy front.
I think the fact that
Ontario got strong ratings in terms of provincial control of
government spending is borne out in the kind of support we see in
our surveys for other provincial spending initiatives. In figure
3 you will see that our members are supporting increased spending
in health care infrastructure, highways, and science and
technology. By contrast, our members prefer to hold the line on
infrastructure spending for education facilities.
Looking at the most harmful
taxes to business, and this is drawn from our Focus on Ontario
surveys for the years 1995, 1999 and 2000, the largest
improvements are evident in the employer health tax and on
Workplace Safety and Insurance Board premiums. Credit is
certainly due on both counts. Certainly the EHT $400,000
threshold was a very important positive measure, appreciated by
business. It's also heartening to see the WSIB premiums going
down, although there are still some pretty big challenges there
with a remaining $6-billion unfunded liability and some pretty
large financial items on the docket for this year.
The greatest deterioration
in this rating of harmful taxes shows with respect to gasoline
and diesel fuel taxes, not surprisingly.
Also, it's interesting and
instructive to see that retail sales tax has increased as a
concern for nearly one third of members, up from about 20%, I
believe. Of course, retail sales tax adds to business input
costs. Administering this separate tax is duplicative and
sometimes difficult, and there is all sorts of jeopardy in
dealing with the tax administration authorities.
Personal income tax is
showing as having diminished concerns. I think that's a sign that
Ontario's PIT relief is starting to be felt. We certainly commend
Ontario's leadership on capital gains treatment. Reducing the
inclusion rate to 50% is a very positive item. Our members have
long opposed a separate personal income tax and would seriously
be concerned and resist any deviation on the income definition
that would result in that outcome.
Our members also appreciate
and support the 2000 Ontario budget measure to increase the
threshold for small business corporate income tax, as well as to
reduce the rates. That's a very positive one. It has yet to show
up in the survey, but I think as it is phased in, the results
will show in the survey.
1610
Of course, I don't think
it's surprising to anyone at this table that the most harmful tax
identified by our members is property tax. About 60% of CFIB
members say that this is a very critical tax for them. They've
certainly been voicing their concerns to the Ontario government
directly through our action faxes, as well as to municipal
governments, and samples of both of those faxes are in your
kit.
Last summer, CFIB
painstakingly gathered property tax data from 25 municipalities,
which we released in an October 2000 study entitled Property Tax
Overdraft. That study is in your kit. We have subsequently
extended that study to cover 70 municipalities, and all of those
municipalities' findings are available on our municipal Web site
at cfib.ca. You will see in your kit a page that shows the
geography plus all of the various communities that can be
accessed in terms of that property tax study data.
I guess what was most
disheartening about the study is that after three years of
property tax reform, we found that little had changed. Commercial
properties are still charged two to three times the taxes that a
same-value residence pays. Industrials pay three to six times the
taxes. It is very positive that Bill 140 took the first modest
step in the right direction on the municipal portion. We
certainly encourage that hard-cap approach, basically protecting
businesses from increases until municipalities reach a certain
fairness threshold that will start to rebalance the system.
On the education portion,
the Ontario government now controls more than half of the
property taxes levied on business, some $3.5 billion. We're
recommending that more relief be delivered on this portion as a
means to recession-proof the most vulnerable players in the
Ontario economy. The 1998 phase-in of $500 million of business
education tax relief was a start in the right direction. We
believe those tax reductions need to be felt in many more
communities, in larger measure, and more quickly. We argue for
reducing Ontario's average 3.3% business education tax rate,
which is in fact eight times the residential rate, down to
something like 2%. This would begin to move Ontario into the
competitive range with other Canadian jurisdictions.
We're also in the midst of
conducting a survey on our members' problems with property
valuation methodology and on their dealings with the Ontario
Property Assessment Corp, the results of which we are planning to
bring to bear on Mr Beaubien's review and as well share, as
always, with the policy-makers. The survey that we have in the
field on that particular issue is on the back side of the
municipal action fax.
I'd like to say a few words
on another topic, the perennial problem of small business access
to capital. The roughly one third of CFIB members complaining
about availability of financing remains stubbornly high. This means that growth has
been significantly constrained for this segment of the economy. A
financing gap exists at the low end of the small business range,
which we believe could be assisted by a straightforward capital
gains incentive. We're not calling for the creation of new
intermediaries with costly staff. We think the government could
extend a low capital gains tax rate-for example, even 0%-to
individuals investing directly and patiently, say for a minimum
of five years, in an eligible Ontario small business.
Turning to the
recommendations on page 8, summarizing briefly:
The recommendation to
reduce business education property tax to 2% is fair, and an
important caveat on that is to bar municipalities from moving
into the vacated tax room if that's done.
Of course, we continue to
encourage the province to adhere to the positive hard-cap
principle established in Bill 140 and to address the valuation
methodology issues that Mr Beaubien is reviewing.
On employer health tax, the
first $400,000 relief was so positively felt, it certainly
resulted in lots of jobs, we would hazard. We believe it's time
to increase that payroll exemption threshold to the level of
$600,000, which coincidentally is also the same level as the
annual filing threshold, so there would be some symmetry
there.
On capital tax, the relief
that was delivered last year on capital tax is helpful to a
certain degree. We would like to see that tax simplified somewhat
and the whole notch problem dealt with by improving and
reconfiguring the relief by implementing a first $5 million
taxable capital deduction. That means that any corporation with
taxable capital of $5 million or less would be exempt and others
would pay on their taxable capital in excess of that figure.
Simplifying that tax would be an enormous boon, as it's
extraordinarily complex and difficult to understand.
On the fee front, we urge
the government to fulfil its pre-election commitment to publicly
identify provincial fees and charges paid by business, to review
those provincial fees as promised to determine whether they
exceed the cost and the value of the service provided and, I
expect via the Municipal Act, extend those fee-setting principles
to the municipal level of government.
On corporate income tax,
the last item under that category on page 10, we have suggested a
form of tax assistance along the lines of what Catherine Swift
spoke of, perhaps a widely applicable tax credit to encourage
electronic business development.
Under personal income tax
you'll see the recommendation there that I just spoke of on
financing, the capital gains incentive for direct financing.
A couple of smaller ones in
terms of updating, but well overdue updating, would be on the
retail sales tax exemption on restaurant food. Update that $4
amount and update the compensation for retail sales tax
collection to the small retailers who do yeoman's work for
government collecting that tax on its behalf.
Thank you for your
attention. I'd be delighted to try to answer your questions.
The Chair:
Thank you very much. We have approximately two and a half minutes
per caucus, and I'll start with the government side.
Mr Arnott:
Thank you very much for your presentation. We appreciate hearing
from you again and appreciate the specific recommendations that
you've offered this committee.
You've made a good
suggestion on the capital tax changes. This morning we heard from
the Canadian Manufacturers and Exporters. They suggested
scrapping it altogether. We're trying to get a figure as to what
that would cost the treasury in the short run. I think your
suggestion might be a very good first step and I would certainly
highly recommend it to the Minister of Finance.
The other issue I wanted to
engage you in is the employment insurance premiums issue because
we, as the provincial government, feel that we've done as much as
we can to encourage the federal government to revisit this. We
know there continues to be an unacceptably high surplus in the EI
account. I assume you're encouraging your members to follow up
with their local federal members of Parliament. We've got to
continue to work on that issue.
Ms Andrew:
In every way we can, and we appreciate this government's support.
We have a number of recommendations that we're making to the
federal government, things like moving to a 50-50 split on
premiums, reinstating the new hires program, looking at the
implication of people going off on leaves, perhaps there can be
some relief on the replacement person, all sorts of ways to try
to bring that payroll tax down.
Interjection.
Ms Andrew:
Oh, yes. Overpayments on the part of employers, that's another
one.
The Chair:
The official opposition, Mr Cordiano.
Mr
Cordiano: I want to zero in on the property tax question
because I think the discrepancy continues to be quite enormous in
terms of evaluations. As you've pointed out in your brief,
there's a $10,000 discrepancy between a similar business value in
Brockville or in that part of the province compared to something
in Parry Sound.
This is the eighth tax bill
that we've seen brought forward by this government. Maybe you can
help explain why it is that they're not getting it right. What's
the resistance here?
1620
Ms Andrew:
It's an enormously complicated area to tackle, so they do deserve
credit for having tried to reform it. Back in 1995, when we did
our first study, Silent Killer, we documented some of these
horrendous imbalances in the system and urged the government to
fix them. They're not things that are going to be fixed
overnight, so we're kind of happy that Bill 140 is starting to
fix them. But we need a lot more direction to municipalities in
terms of narrowing the business-residential gap.
I was just passing around
some charts. The problems are most acute in Toronto. If you look
at the gaps here, it's just-
Mr Cordiano: You're looking at
the gap between residential and commercial. I'm talking about
similarly valued businesses in two different parts of the
province.
Ms Andrew:
And a big part of that is the history with the business education
portion. That's of course now all under the province's wing.
School boards had bargained various contracts over the years and
had ended up with very differing rates across the province. To
deal with those, we're arguing that they need to basically buy
the 3.3% average rate down toward 2%. Ideally, you'd want to
bring it down so that there weren't those discrepancies. It's a
lot of money.
Mr
Cordiano: Yes. I think the whole objective here is to
level the playing field. Ultimately, if you're going to lower the
revenue, which is what you're suggesting, going from 3.3% to 2%,
that revenue is going to have to be made up somewhere for
education. There are some substantial differences.
Ms Andrew:
Business is paying eight times what residents are paying. So the
taxation is a different calculation from the actual funding
formula for the schools, which is a little more uniform, and the
province makes up the difference.
Mr
Cordiano: I can't imagine, though, any of us trying to
sell an increase on residential property taxes. It's just not
going to fly.
Ms Andrew:
No, we're arguing that on the business education portion, the
province use its financial resources to bring that rate down.
The Chair:
With that we've run out of time, Mr Cordiano. Mr
Christopherson.
Mr
Christopherson: We argued in the last budget that they
should do that. Even if it meant some of the tax cuts would be
lessened or phased in longer, that was a priority. I've mentioned
this to you before. But certainly if you want to see a classic
example, take a look at downtown Hamilton and the problems there
because of the introduction of the change and then capping it.
We're bleeding away in downtown Hamilton. I've also mentioned the
same thing on Concession Street on the mountain and in Westdale
in the west end of my riding. So it's happening everywhere.
You mentioned municipal
taxes. I just wanted to point out-this is today's Hamilton
Spectator-"15% Hike for Water and Sewer," not because these
politicians want to raise taxes any more than anybody else but
because they've-and we had a presentation from the infrastructure
association. Just in terms of the long-term sustainability of the
community, you've got to have the sewer and water lines in place,
as well as for the business end of it.
Anyway, my point is that
you're encouraging tax cuts continue at the same time we're
seeing revenue dropping. We've had a couple of scenarios today
where it's likely we're going to see the government in a
potential deficit position. The only way they can prevent that is
to not implement the tax cuts they've already announced. If they
insist on doing that, then they're either going to run a deficit
or they're going to have to cut expenditures.
You can bet that
municipalities are going to be on the front line, because all the
downloading has put tremendous-I've said from the beginning that
my heart goes out to all municipal councillors, who are
struggling. They've got nobody else to dump on; they're the end
of the road. This is what happens in the real world when you do
that.
Every business group has
come in and mentioned property taxes as a priority. We even had
Mr Porter, who was in here earlier from Nesbitt Burns. I don't
want to put words in his mouth-I say that for the record-but
basically his message was, sort of, back off a bit on the tax
cuts in the short term-he was still committed in the long
term-because of the situation we found ourselves in. It's rapidly
changing in terms of this situation we're in.
All of that is to say that
it would seem that regardless of ideology and philosophy about
tax cuts, the prudent, immediate, short-term approach should be
to back off with the tax cuts, keep your eye on the expenditure
side of things, and if balancing the budget is the priority, then
that's the only way to approach it. Anything different than that
means you've either got to increase revenue or start cutting, and
cutting, I'm suggesting to you, means municipalities are going to
pay the price. To me, it seems you may be arguing against your
own best interests by urging the government to make tax cuts the
absolute priority at a time when doing that means they're going
to be in a deficit position.
Ms Andrew:
We definitely believe the message from the job creators, who are
most harmed by profit-insensitive tax, is that something has to
be done about property tax. That is a recession-proofing
measure.
Mr
Christopherson: Oh, absolutely.
Ms Andrew:
If you don't fix that, then you're going to have more people on
the street and fewer tax dollars rolling in the door.
Mr
Christopherson: I want to be clear. When I'm saying "tax
cuts," I'm talking about the corporate tax cuts and the income
tax cuts, not the cuts you're mentioning. I agree with you that
we've got to keep municipalities strong, financially, or the
budget is not going to work.
Ms Andrew:
I don't disagree that the area of municipal finance needs to be
settled. There have been allegations back and forth about what's
been downloaded. That needs a forensic audit, frankly. There was
an audit in Toronto and it certainly looks as if they weren't
feeling the downloading to the extent that some of the
politicians were claiming. It's not a bad thing that the
residential voter is going to have an opportunity to keep local
politicians accountable for their spending. If politicians can
continue to load an unfair portion on the business sector and the
residential voters aren't paying their fair share, they're going
to naturally want more spending. In the ultimate analysis, that's
going to mean fewer jobs for those residents and for their
children. It's a short-term, long-term thing in terms of
cushioning the residents.
The Chair:
With that, we've run out of time.
Mr
Christopherson: I should say that the pressures are
greater than just the downloading. It's also the issues they have to deal with. They
have the upward pressure on them.
The Chair:
On behalf of the committee, thank you very much for your
presentation this afternoon.
Ms Andrew:
Thank you very much. I tried to circulate some that would be
pertinent to your particular communities, so I hope you found
what you needed there.
The Chair:
I have just been informed that the next presenters are not here
yet, so we'll take a short recess.
The committee recessed
from 1627 to 1629.
ONTARIO ASSOCIATION OF NON-PROFIT HOMES AND
SERVICES FOR SENIORS
The Chair:
Our next presentation is from the Ontario Association of
Non-Profit Homes and Services for Seniors. First of all, on
behalf of the committee, welcome. Could you please state your
names for the record.
Ms Donna
Rubin: Good afternoon, ladies and gentlemen. My name is
Donna Rubin. I'm the chief executive officer of the Ontario
Association of Non-Profit Homes and Services for Seniors,
commonly known as OANHSS. I'm here today with Reg Paul, a member
of our board and our association's treasurer.
Our organization very much
appreciates the opportunity to present our views to the standing
committee as part of the provincial pre-budget consultation
process. We believe the committee can make an important
contribution in raising the awareness of the Legislature, the
Ministry of Finance, the media and the public at large regarding
the critical need for adequate operating funding in the
long-term-care sector.
OANHSS is a voluntary,
province-wide, non-profit association which for over 80 years has
represented non-profit providers of services and housing for
seniors. Our 400 members from across Ontario span the spectrum of
the not-for-profit, long-term-care continuum, including municipal
and charitable homes for the aged, non-profit nursing homes,
seniors' housing projects and community service agencies.
We are committed to
exploring the best ways of providing and delivering much-needed
health services and programs to our clients. Last fall, all MPPs
received a comprehensive package of information from us as part
of our ongoing facility funding awareness campaign. It will be my
intention today to highlight certain aspects of our concerns and
update you on recent developments. We will also be leaving with
you today two key recommendations which we hope you will
seriously consider when formulating your advice to the
Legislature and the government.
Last year in our submission
to this committee we warned, "We must invest in our own future,
and we must do it now." We indicated that our members, as
front-line providers of care, were "increasingly frustrated with
and constrained in their ability to maintain innovative,
responsive quality programming for seniors."
The situation for providers
and those to whom they provide care continues to worsen.
Government funding for the operation of municipal and charitable
homes for the aged and nursing homes is not keeping pace with the
changing requirements of residents who today are being admitted
with far more complex health care needs. As a result, our
facilities are now finding their ability to provide adequate,
appropriate quality care is being compromised. These two factors,
continued underfunding by the provincial government and an older
and sicker resident population with increasingly complex needs,
are causing major stresses in the system. Something has to give,
and it should not be the residents or their families. We are
rapidly approaching the point where our facilities can no longer
cope.
We have estimated that the
Ontario government is now underfunding long-term care by at least
$230 million a year. The number is in fact higher and continues
to grow as more information and analyses become available. That
is the minimum amount of new funding required to meet current
demands. Significantly more will be needed to address future
needs. Currently, Ontario long-term-care facilities receive an
average of about $100 a day for each resident. Of this, about $60
is paid by the province, one of the lowest rates in the country,
with the balance coming from client payments.
Over the past two decades,
the average age of long-term-care residents has increased from 73
to 86. The typical resident today is not only older but also
sicker, often having multiple chronic illnesses and being in need
of more care. As well, about half of all residents suffer from
Alzheimer disease and other dementias.
So what is happening? Faced
with this underfunding situation, long-term-care facilities have
had little choice but to cut back on programs and services. This
means they have had to reduce the level of individual care as
well as the personal support for activities of daily living. For
example, routine bathing may be provided only once a week. The
care provided is still of the highest quality but the level,
quantity and intensity of that care is not what it should be for
the residents of Ontario or their families. Each registered nurse
in many of our facilities now looks after an average of 60
residents in a normal day shift and over 100 in a night shift.
Keep in mind that these staff are now looking after people with
much higher care needs than in the past.
According to Ministry of
Health and Long-Term Care statistics, there are about 14,000
Ontarians currently waiting for placement in long-term-care
facilities. In some communities the wait can be as long as four
years. The Ontario government has announced the creation of an
additional 20,000 beds, but most of these will not be available
for several years. In the meantime, many facilities are having to
turn people away who need long-term care. Even when the
much-needed and much-appreciated 20,000 new beds are added, the
problem of understaffing and inadequate levels of care will
continue to plague the system as long as the province fails to
provide the necessary day-to-day operating funding.
As you're well aware, the province's acute care
hospitals are crowded with elderly patients requiring long-term
care. These individuals cannot be discharged, often because
there's nowhere for them to go, so they remain inappropriately
placed in hospitals at about $400 per day, or four times the cost
of long-term-care facility placements. Long-term-care facilities,
if properly funded, could help alleviate this problem.
It is worth noting that
provincial government spending on long-term care represents only
13.6% of the total Ministry of Health and Long-Term Care budget.
About half of the $3.1-billion long-term-care envelope goes
toward facility funding and the other half to community-based
services. Increases in ministry expenditures in the
long-term-care area have recently been averaging less than 1% a
year. This is clearly inadequate, given the current projected
rising demand for services.
The future: in Ontario, the
85-plus age group is expected to increase fourfold by 2028.
Currently, there are some 100,000 people in Ontario who have
Alzheimer disease. This number is expected to triple over the
next 30 years. According to the Ministry of Health and Long-Term
Care, the number of people with dementia will increase 85% by
2010.
In spite of the good
intentions of this government and previous governments, and some
substantial steps taken to address certain funding concerns,
long-term care in Ontario is in crisis. With an older and sicker
resident population, staff stretched to the limit, long waiting
lists, people being turned away from facilities and lack of
proper funding from the government, is it any wonder that many
long-term-care facilities are at a breaking point?
OANHSS and other provincial
provider associations have been working with government as part
of the current budgetary process to more accurately quantify the
crucial need for increased operating funds for facilities. These
figures are now before cabinet and therefore cannot be released.
It's for this reason that we continue to reference the need in
terms of a minimum of $230 million.
Finally, a longer-range
vision and plan is also needed. Longer-term, the province must
invest significant new money in long-term care to ensure needs
are being met for a growing and aging population. We are
committed to working with the new Minister of Health and
Long-Term Care, the new Minister of Finance and all members of
the government and Legislature to address these very serious
concerns.
In summary, our
recommendations are:
(1) Increase immediately
the government's share of the provincial residential per diem
payments for long-term-care facilities by at least $11, from $60
to $71, thus increasing operating funding for these facilities by
a minimum of $230 million per annum. Again, please note these
numbers are adjusted and higher in the material currently before
government.
(2) Develop a long-range
plan to increase funding for long- term-care facilities so as to
ensure the continued delivery of high-quality, complex care and
to meet the growing need for long-term-care services in Ontario
over the next 25 years.
Thank you very much.
The Chair:
Thank you very much. We have approximately five minutes per
caucus. I'll start with the official opposition.
Mr
Kwinter: I appreciate your submission. I represent a
riding that has the largest concentration of seniors in Ontario.
There isn't a week that goes by I don't have a constituent-their
families, actually, not the constituents-coming in to tell me
about the problems they're having getting some sort of
accommodation for their parents, who are in dire need of
long-term care and just can't get it. They have no way of getting
to it.
1640
I'm curious to know about
the figure you talk about where you say the increase is
"averaging less than 1% a year." Is that capital or
operating?
Ms Rubin:
That would be operating.
Mr
Kwinter: So in effect there is no increase because the
rate of inflation has been much higher than that. You're actually
getting less money each year, even if they give you a 1%
increase.
Mr Reg
Paul: Yes. In fact, it also doesn't properly address the
acuity increase because we know that acuity across the
province-Ontario has one of the lowest percentages of
institutionalized care across Canada and therefore we know people
are staying in the community longer, which is good. When they do
come into our homes, their care needs are higher and the
percentage of care, which is measured presently and which does
not properly assess and measure cognitive impairments, is much
higher than even measured. We are falling behind both from an
inflationary standpoint and from a care standpoint. It's being
adjusted on a base that was terribly inadequate when it first
came in. The amount of funding in 1993 was just under $80 per
resident day on average under the level of care system and we're
up to somewhat just under $100. We're adjusting an inadequate
base, so it makes measurement as a percentage a difficult one to
deal with.
Mr
Kwinter: I also have first-hand knowledge of the problem
you're talking about where there are people in long-term-care
beds in hospitals who should be in long-term-care facilities,
where the savings are fairly dramatic, like a quarter of the
cost, and yet they have no place to go. They're taking up the
space and there's nothing you can do about it. They're just
there. You can't put them out on the street, so you have to keep
them.
Ms Rubin:
It also suggests it's not a quality environment for them to be
in. At least we consider our facilities as homes for people. Then
of course there are the people in the community. If they're
ineligible for long-term care, they need access to 24-hour care.
If they're in the community and they have to wait two to four
years, they're in dire straits. They also are a burden to the
caregivers who need to care for them, and it may be an elderly
spouse of 86 years of
age or older who's caring for the individual as well.
Mr
Kwinter: The 20,000 long-term-care beds that have been
announced, what is your estimate as to when they will physically
be on-line so they can start receiving residents?
Ms Rubin:
They're starting to come on board, but slowly. Of course they're
being monitored to open by the year 2004. The whole industry is
either building or rebuilding, and that will put some instability
in the industry for the next period of time. We have in our
sector approximately 80 facilities that will have to be rebuilt
because they don't meet current design standards, and while
they're going through that process, they're not going to be able
to accommodate even the full number of people they've got
residing in them right now. As you close a facility, you have to
do something with the people who are living there. That means the
industry's going to be in flux.
Mr
Kwinter: Those ones that are being retrofitted, are they
included in the 20,000?
Ms Rubin:
No, they're separate and apart.
Mr
Cordiano: I think it's clear the province is facing a
huge crisis when it comes to long-term care. To be fair to
everyone concerned, it has been a problem that didn't just emerge
yesterday. It has been around for some time, but I think we're
seeing now an acute crisis that is emerging. You note in your
brief that there are 14,000 Ontarians currently waiting for
long-term-care facilities. Obviously you expect that to grow over
the next number of years.
Ms Rubin:
With the new beds coming on stream, we hope that will alleviate
it somewhat, but given the demographics, there will continue, in
our opinion, to be a real need. In fact, unless there are
investments to also increase appropriate housing for seniors,
including supportive housing, facility care is not going to be
enough.
Mr
Christopherson: Thank you for your presentation. I have
to tell you that I've heard it anecdotally, I hadn't seen it in
writing, and it enrages me even more to see it in writing where
you state, "For example, routine bathing may be provided only
once a week." That's pretty disgusting, especially given the fact
the government did have $4 billion, of which the very wealthy got
the lion's share and here we have other people literally living
in conditions you wouldn't imagine are happening here.
You told them last year, a
lot of us told them, "For goodness' sake, don't go with the tax
cuts until you've taken care of a whole lot of infrastructure
stuff, up to and including balancing the budget," and they just
roared straight ahead and did it anyway. What really hurts is
that if you've got the money, you can buy your way out of this
problem. This is a problem faced by the majority of Ontarians but
not all Ontarians. If you've got enough money, you can cut a
cheque that will take care of your mom or dad without any
problem, and you'll get Cadillac services. There's lots of it out
there. You don't need to worry about this, but for the vast
majority of people who need this, they didn't get the benefit
from the tax cut and it's their mom and dad who are getting a
bath once a week. I'd use stronger language if I were elsewhere.
It's so damned infuriating to see this happening.
Let me ask you: if I'm
getting this right, the theory versus the reality, the theory is
that, as much as we can, we want to move people out of the
institutional setting of a hospital, have them in their home and
provide the services from the community. It's cheaper and people
will have better surroundings. Their environment is better, their
home and their family are there, and we bring the services to
them. Even though some say it's a marginal saving at best, it's a
better quality of life, if nothing else, and there is the
argument that it does save money. Only when we get to the point
where they can no longer be sustained by bringing the services to
them from the community into their home do we then move them into
a long-term-care facility-not back to a hospital, because they
don't need that kind of intensive care. Mr Kwinter has already
covered the difference between acute care and chronic care.
If I've got that correct,
one of our problems here is that at this point now-in fact we're
already getting behind in time-if you will, we know that although
there will be more and more people being served and treated in
their homes, ultimately they're likely to end up, for a short
while anyway, in a long-term-care facility. The baby boomers, the
numbers alone, the growth in the population will necessitate more
expenditure at that end of the health care continuum, and yet
now, when we should be making the investment for our long-term
care, we're down to-what?-you said 1%. That's pathetic. One per
cent is not going to do it.
My question to you is, if
we keep ignoring it, does it not mean at some point we're going
to have more and more people spilling out of the system, sitting
at home and not getting the services they need? That's already
happening in some cases. Talk to VON workers and some of the CCAC
case managers and they'll tell you. But it also means it's going
to cost us a lot more as a society down the road if we're
committed to providing that as part of our health care continuum.
Is that not the price we're going to pay? It's no different from
not upgrading the sewers and water. When you don't do it, you end
up with one of these headlines that we've got in Hamilton, "15%
Hike for Sewer and Water." It would have been a lot cheaper if
the senior governments had stepped in and helped municipalities
along the way earlier.
Ms Rubin:
You've got it absolutely right, Mr Christopherson.
Mr
Christopherson: I was afraid of that.
The Chair:
The government side, Ms Molinari.
Mrs
Molinari: Thank you very much for your presentation.
Health care has been under review since this government took
office, and with the Hospital Services Restructuring Commission
that did the study, it was recognized there are a lot of areas
that need to be improved and changed in order to serve the aging
population. We can't
keep doing things the way we were doing them when the population
is changing. We need to change toward the need. That study was
very valuable. Some of the recognition was the fact that there is
a growing aging population. That's why the 20,000 new
long-term-care beds were introduced back in April 1998 and the
need for that has been moved up in order to provide for that
sooner. The target now is 2004, when we hope to have the 20,000
long-term-care beds.
1650
There are a number of areas
the Ministry of Health has recognized and looked into improving.
The 6,438 new long-term-care beds are being developed as a result
of some of the requests for proposals from 1998, and in 1999
there are an additional 6,291 that are being developed in that
area.
You talked as well about
the interim issue, where there are people who are in a facility
in a situation where they need to be moved into long-term-care
beds and they're not available. I don't know whether you're aware
that there was a process undertaken to review what was needed in
this area and, to date, 1,716 interim beds have been approved.
There are another 562 that are in negotiations to accommodate
some of those.
You also indicated the
rebuilding, refurbishing and restructuring of some of those that
definitely need it. The ministry has recognized that those are
also areas that need to be addressed.
Health care, along with
some of the other issues, is evolving. With an aging population,
where people are living longer, it could be said that we have a
good health care system that provides the medication and the care
one needs to live a longer life, but then there are challenges we
need to address, and that's how to properly and adequately care
for them. I'm disappointed to hear from your presentation that in
fact, if that's the case, they are only given a bath once a week.
I think that's rather sad and certainly that's something that
needs to be addressed.
I know the Minister of
Health and the new Minister of Health will value and be in
consultation with organizations like yourselves to come up with
recommendations on ways we can continue to improve those areas.
Some of the things you've indicated here, certainly this is the
appropriate committee for funding. That may be one area where
that can be done, but there are a lot of other efficiencies in
areas that need to be addressed as well. The Minister of Health
and the government are committed to doing whatever we can to
improve health care for the aging population.
I thank you for the
suggestions you've made here. I'm sure the Minister of Health
will look at them and take them into consideration along with the
others.
Ms Rubin:
Thank you.
The Chair:
Any comments?
Ms Rubin:
Yes, I'd like to make one comment. I think that while it is well
intentioned to provide the 20,000 new beds and the rebuilding,
the reality is that the money to do so, particularly in our
sector, has to come out of any surplus or operating efficiency
that could possibly be found out of the operating dollars. So
already when we're in crisis, the need to rebuild and to build
20,000 beds in the not-for-profit sector, and particularly
charitable homes, which have very little additional money, that
alone is going to make it increasingly difficult to provide
quality care.
The Chair:
With that, I'd like to thank you for your presentation this
afternoon on behalf of the committee.
MEDICAL REFORM GROUP
The Chair:
Our next presentation is from the Medical Reform Group. I would
ask the presenter to come forward and state your name for the
record. On behalf of the committee, welcome. You have 30 minutes
for your presentation this afternoon.
Dr Ahmed
Bayoumi: Good afternoon. My name is Ahmed Bayoumi. I'm a
general internist, a physician in Toronto. Thank you for the
opportunity to appear before the committee. I'm going to go
through the document that has been distributed.
The Ministry of Finance has
indicated that Ontario's economy remained strong through the last
quarter of 2000. Against this backdrop, funding for the health
care sector increased in the last fiscal year. Spending must,
however, be measured in terms of per capita funding, adjusted for
inflation and overall economic growth. In relation to economic
growth, and considering inflation, spending in 2001 will still
lag behind what it was in 1995. Furthermore, deep cuts to other
sectors, such as welfare, housing and education, have had
significant deleterious effects on health. In addition, changes
to both the funding and policies of the health care system have
left it vulnerable to privatization.
I'm here on behalf of the
Medical Reform Group, which was formed in 1979. We are a group of
200 practising physicians and medical students. The MRG
represents the views of its members on health and health care
matters through research, public statements and consultation with
other groups who share our aim of maintaining a high-quality,
publicly funded universal health care system. The MRG believes
health is political and social as well as medical in nature, and
that health care is a right.
We have several specific
recommendations for the committee.
The first is to reinvest in
social programs. The MRG has long recognized that the greatest
improvements in health are achieved through spending on social
programs. Good housing, sanitation, education and nutrition are
essential for good health. In Ontario, babies born to parents
living in poor neighbourhoods compared to those born in wealthy
neighbourhoods are twice as likely to die in infancy. At birth,
boys of families with the highest income level can expect to live
5.6 years longer, and girls 1.8 years longer, than those with the
lowest income. Eliminating these differences would have the same
impact on Canadians' life expectancy as eliminating all deaths
from heart disease. Ontario health survey data show that 69% of those with
high incomes report very good or excellent health, compared to
only 43% of poor Ontarians. Four per cent of the wealthy but 19%
of the poor report a long-term activity limitation. Deaths among
homeless persons, unknown before 1995, are now commonplace.
Alleviating the effects of
poverty will improve health. The next Ontario budget should
increase welfare payments, restoring payments to 1995 levels,
immediately restore funding for new social housing in Ontario,
and address the decline in education standards throughout the
province. The MRG unequivocally opposes any new cuts in social
programs or further tax cuts for corporations or the rich.
Our next recommendation is
to bring in integrated and effective primary care. Hospital
restructuring has created more pressure for reinvestment in
primary health care and community support for frail and at-risk
populations. Primary health care reform is long overdue in
Ontario. OMA pilot projects have done nothing but stall necessary
restructuring. Many Ontarians find themselves without a primary
health care provider or with no one to speak to for medical
advice after hours. Telehealth will provide some telephone advice
and triage, but it cannot take the place of an organized,
comprehensive, accessible and appropriate primary health care
system. All Ontarians deserve 24-hour care, seven days a week,
instead of piecemeal care which is fragmented, inappropriate and
wasteful.
With federal dollars
earmarked for both primary health care and information
technology, the 2001 budget should and must build a strong
foundation to support secondary and tertiary health care. We need
a well-funded and well-organized primary health care sector.
Ontario currently has 56 community health centres, which provide
comprehensive primary health care. These centres demonstrate what
we know from the published scientific literature: teams of
doctors, nurses, nurse practitioners, social workers and other
health care providers can make our health care dollars go further
by using non-physicians to deliver appropriate care. Nurse
practitioners, working in collaboration with family physicians,
can help address the fact that many Ontarians cannot find a
doctor. Health centres, group practices and networks can be
funded to provide effective home care services, after-hours care,
urgent and same-day care, obstetrics and palliative care, as
recommended in the 1996 PCCCAR report. By investing in good
primary care, with appropriate incentives to enhance the delivery
of effective preventive and therapeutic services, the province
will save money in treating illness and its complications. The
MRG calls on the government to make that investment now.
Our next recommendation is
to establish universal pharmaceutical insurance. Since the
imposition of user fees for prescription medications covered by
the Ontario drug benefit formulary, our most vulnerable residents
have had to pay more and more out-of-pocket expenses for their
medications. Such expenses totalled $200 million in 1997-98 and
$215 million in 1998-99. This is a significant amount. It
represents approximately one of every six dollars spent on
prescription drugs. Even seemingly small copayments can severely
limit access for the most vulnerable groups in Ontario. Recent
data from Quebec illustrate how user fees for drugs lead to
severe adverse health effects. Additionally, the Trillium drug
program often falls short of providing the requisite level of
assistance.
An alternative to user
fees, incomplete coverage and high deductibles exists. Universal
drug insurance is both just and feasible. Universal drug
insurance is viable and more economically attractive than the
limited public insurance available currently. Universal coverage
allows for risk pooling, eliminating unfairly high deductibles.
Economies of scale allow for potentially large cost savings. In
addition, universal coverage may save money in some situations by
eliminating gaps in coverage, which ultimately result in worse
ill health and unnecessary hospitalizations.
1700
Our next recommendation is
to make home care accessible and accountable. Home care services
in Ontario are in serious trouble. About half of all people who
need home care must purchase services privately or rely on family
and friends. In some areas, such as Metro Toronto, the
availability of home care services is severely limited. The
decrease in access is contemporaneous with a shift in how home
care services are delivered in Ontario. Since April 1999,
community care access centres have acted as brokers for health
care, with private for-profit agencies competing for these
services. The impact of this change in policy has been a decline
in the accessibility and reported quality of home care services
in Ontario. Additionally, details of the contracts between the
community care access centres and the province are not public.
The result is that there is no public accountability left in the
home care system. The next budget should increase the amount of
public funding for home care, but even more importantly, should
restore a universal, publicly funded home care system in
accordance with the Canada Health Act, an act this government has
endorsed.
Our last recommendation is
to keep funding for health care in the public system. Home care
services are the most glaring example to date of how
privatization of the Ontario health care system leads inexorably
to a loss of quality. But privatization is increasing in other
areas as well. During the 1990s, the proportion of funds spent on
health care which were private increased from 27% to 34%. We are
witnessing a determined shift away from the very concept of
social insurance. In real terms, fewer costs are paid through
public insurance and more are paid directly from households. This
is already occurring, for example, with the last government's
institution of user fees, and we are also witnessing the
increasing stratification between those who can afford to pay for
these services and those who cannot. Examples of privatization
are: the private provision of home care services; user fees
for prescription drug
benefits; delisting of prescription drug benefits; and increasing
reliance on private providers for long-term care delivery.
The hospital sector is also
threatened with privatization. The current government's last
election platform, the Blueprint, states, "Hospitals will have
their funding directly tied to how well they live up to their
service obligations ... under the Patient's Bill of Rights."
Hospitals that do not perform well on standardized ratings will
have, to quote again from the Blueprint, "health care efficiency
and service experts ... revamp their systems," a phrase loaded
with the jargon of privatization.
Cost shifting is not cost
saving. The provincial government may be able to claim that they
have saved money because they are asking others to pick up the
tab, but most Ontarians will be worse off, particularly those
with poor health or limited financial resources.
Privatization will lead to
a worse quality of care, a weakened public health care system,
and diminished access to care. The only effective defence against
privatization is a strong, universal, accessible, publicly funded
health care system. The budget should reflect this
commitment.
Recent economic indicators
suggest that the US economy may be experiencing a downturn, and
perhaps heading for a recession. The MRG is concerned that crisis
language serves well the agenda of those eager to dismantle or
weaken social insurance. During the severe economic recession of
the 1980s, governments in Canada used the state of the economy to
justify cuts in social programs. The experience in health care is
instructive in this regard: a large body of literature indicates
that public administration of health care funds is the most
efficient use of these resources. A decision to bolster, not
weaken, publicly funded insurance programs in times of economic
downturn is evidence of both rational decision-making and
visionary political leadership. Thank you.
The
Vice-Chair: Thank you very much for the presentation. We
have about six minutes per caucus. We begin with Mr
Christopherson.
Mr
Christopherson: Thank you for your presentation. You
said an awful lot in a very concise document. You cover so much
ground it's hard to know where to start.
A macro question: what is
your sense of where the young doctors who are graduating now from
med school are at vis-à-vis the kind of reform that you and,
would you say, 199 colleagues support? At this point I don't
think the OMA is onside nearly as much, to put it mildly. Do you
sense a change with young graduates?
Dr
Bayoumi: I think it's not just young graduates, but
doctors in general are eager to see primary care reform brought
in. Surveys of physicians show there is actually considerable
support for changing the way primary care is delivered. It's not
a situation that leaves a lot of primary care physicians
particularly happy-the way they're able to practise health
care-and I think young physicians see that perhaps more acutely
because in training they are exposed to a variety of different
scenarios, many of which are scenarios in which physicians are
not practising what they consider optimal.
Mr
Christopherson: So you think it's maybe a misconception
to believe-if you talk to folks in the know about this, there are
a number of people who will say, "It's a lot of the docs who
benefit from the entrenched system and they don't want to change
from it," but we're hearing something very different from you and
a previous presenter.
Dr
Bayoumi: I think if you actually look at the surveys
critically, you will see that some people do in fact not want the
system to change, but there is a very large proportion,
particularly of primary care physicians, who are unhappy with the
lack of progress in primary care reform. Primary care reform
would not be something that would be resisted, I believe, by the
majority of primary care physicians in Ontario.
Mr
Christopherson: That's good to know, because what it
means is that the only foot-dragging is on the part of the
government, which talks a good story but doesn't seem to want to
move on it.
I want to commend you for
linking the whole issue of social services that are provided
directly to the health care system, because they are inseparable.
You make the statement that you've long recognized that the
greatest improvements in health are achieved through spending on
social programs.
For a long time, long
before Walkerton came around, I pointed out that the biggest
single advancement in improving the public health of any
citizenry was not the introduction of new magical drugs, not the
introduction of new surgical procedures and not the introduction
of new technology; it was the provision of clean water. Clean
water being provided to the general public was historically the
single biggest improvement in the health of the general
population, and we sometimes lose track of that. Again I applaud
you for linking that and it will be helpful.
I'll be talking about two
things and then I'll give you a chance to respond to any of what
I've mentioned.
You talk about the need for
universal pharmaceutical insurance, something the NDP has long
believed in, both provincially and federally, and we can afford
it. In fact, it will save money in the long run. But again we're
into, "Those who can afford to don't need this kind of program,"
and unfortunately they are speaking with the loudest voices, at
least in terms of who this government is listening to. Is it your
experience-I hear this anecdotally-that a lot of seniors, because
of lack of discretionary funds and increased user fees, are doing
more and more self-medicating? Because they can't afford the full
complement of their drugs, they're deciding which drugs they can
take today and which ones they can hold off on until tomorrow. Is
that an issue as you see it?
Dr
Bayoumi: I think it's a very real issue, and anecdotally
I hear it as well. We have real, solid research evidence from
Quebec that seniors are not taking their medications as they
should because of the imposition of user fees, which are real
barriers to people treating themselves as they appropriately should, and
with serious health consequences. People are getting sick and
dying.
Mr
Christopherson: You raise the issue also of home care
services. In fact, you state, "Home care services in Ontario are
in serious trouble." From where I sit, anyway, there are a number
of issues. We went through a long strike in Hamilton with VON.
Because of the government's managed competition, what's happening
is that privatization is in home care services in a big way and
it's having a huge downward pressure on wages, which means a lot
of nurses, who are in scarce supply, only stay for as short a
period as they can at $13 or $14 an hour, waiting for a chance to
get into a hospital where they're back into a union setting and
getting decent wages, and who can fault them for that?
1710
There are two things there:
one is the government's overall strategy and plan, which we've
said from the beginning was to lower the value of all labour,
whether it's professional skill trades or manual labour. They
want to depress and lower all of that because it creates the kind
of economic climate where their friends can move in and make a
pile of money, and they've now introduced privatization into this
where there are non-union entities that are competing with
organizations like the VON which are unionized, and those
organizations are having a tough time competing. Those, at least
in the view of Hamilton, are a couple of the key problems. Would
you agree with that?
Dr
Bayoumi: Absolutely. We're seeing in the hospitals that
we're having difficulty arranging home care for people in the
community. It's exactly the opposite of what the overall thrust
has been in the last few years, which is to move care into the
community. We can't move care into the community because there
aren't people to provide that care, and that's a direct
consequence of privatization.
The
Vice-Chair: We will now move on to the government
side.
Mrs
Molinari: Thank you very much for your presentation. You
are a group of 200 practising physicians and medical students who
are part of the Medical Reform Group, right?
Dr
Bayoumi: We are approximately 200 now.
Mrs
Molinari: Are you familiar with the Association of
Ontario Health Centres? They presented to us earlier today and
the topics are relatively the same. Are you familiar with this
organization?
Dr
Bayoumi: Yes.
Mrs
Molinari: Were you here for the presentation?
Dr
Bayoumi: No, I was not.
Mrs
Molinari: One of the things they talked about with
respect to primary care reform, one of the ways they suggest, is
that physicians be on salary as part of a multidisciplinary team.
Expanding health centres would provide salaried positions for 375
more physicians and 50% of family physicians would accept
salaried payments according to a recent Ontario College of Family
Physicians survey. Would you agree with that statement? What are
your views?
Dr
Bayoumi: Yes, we have long advocated the expansion of
community health centres as an effective and cost-effective means
of delivering care.
Mrs
Molinari: You have some really good suggestions on
primary care. On page 3, point 6, "Make Home Care Accessible and
Accountable," in the last statement here you state that it should
be a "publicly funded home care system in accordance with the
Canada Health Act, an act this government has endorsed." Are you
implying that it isn't at this point?
Dr
Bayoumi: I am very seriously concerned that
accessibility, which is one of the five principles of the Canada
Health Act, has been compromised in the home care system.
Mrs
Molinari: How has accessibility been compromised?
Dr
Bayoumi: Because home care services are simply not
available. You can't access something that's not available.
Mrs
Molinari: You also talked about privatization and, from
your presentation, it's not something that you support at all. Am
I reading that correctly?
Dr
Bayoumi: That's correct.
Mrs
Molinari: Would you say, then, that there shouldn't be
any type of service available for those who would choose to
purchase services for whatever care they would require or
need?
Dr
Bayoumi: That's a very broad question in terms of any
services. I think the principle should be that health care should
be publicly funded and health insurance should cover all
necessary services within Ontario.
Mrs
Molinari: If some private organization is offering those
services and people wish to access those services, is it
something your organization would not agree with?
Dr
Bayoumi: That's correct. If those services contravene
the Canada Health Act, we would not agree with that.
Mrs
Molinari: Does your organization have the support of the
OMA?
Dr
Bayoumi: We are an independent organization from the
OMA. They agree with us on some issues and they disagree with us
on others.
The Chair:
Any further questions?
Mr
O'Toole: I would be very interested in following up on
the OMA. The OMA has agreed to participate in primary care
reform. It sounds, from what I heard-I was watching this, as it
is televised; even though I wasn't here physically, I was here
mentally-that you're supporting primary care reform in a definite
sense, and full accessibility to a range of services. My key
question is, the OMA has already signed on to agree with the
seven pilots in Ontario with the expectation that in three years,
with that agreement, they will be-I shouldn't say this-on salary,
which is like this community care thing, the community health
centres. Is that not right? Do you not read that the same way as
I do?
Dr
Bayoumi: I don't know what the OMA thinks. I'm not privy
to their-
Mr O'Toole: Are you not
involved? You're a member, though.
Dr
Bayoumi: All physicians who bill OHIP are members of the
Ontario Medical Association under the Rand formula.
Mr
O'Toole: You're under the Rand formula? Oh, Jeez, I
didn't know that.
Dr
Bayoumi: Yes. That is the agreement that your government
negotiated with the OMA.
Interjection.
The Chair:
One conversation at a time, please.
Dr
Bayoumi: The OMA may or may not support physicians being
on salary. They have not clearly come out and stated that. If you
have information that's more definite than that, I'd be
interested to hear it.
Mr
O'Toole: No, I'm asking you as a practising physician.
It sounds like you're fully agreeable with that, that your
patients come first and that money comes second. That's great
that you think that way.
Dr
Bayoumi: Our main argument, if you read the brief, is
that the pace of primary care reform does not need to be as slow
as it is now.
Mr
O'Toole: I kind of agree with you, I might say.
Mr
Kwinter: Thanks for your presentation. I just want to
tell my colleague Mr O'Toole that when he was up in his office, I
was there with him mentally but not physically. I was thinking
about him.
I want to talk to you about
a couple of things. I want to tell you my experience in a couple
of areas that you've covered. One is the additional fees for
certain drugs. I have a brother-in-law who is a pharmacist in my
riding. He's got a large Shoppers Drug Mart. He's always telling
me stories about how seniors come in and because they're on the
drug benefit plan, they expect that all of their prescriptions
are free. Occasionally their doctor will prescribe an item that
is not on the drug formulary. So when they give the customer this
package, they'll say it's going to be $8 or $12, whatever it is,
and they say, "No, I don't pay for drugs. I'm a senior. Take a
look. I've got it registered. I'm a senior." And they say, "Yes,
you are a senior but this is not covered." They say, "Well, then,
take it out." If they have to pay for it, they don't want it.
That may be the most
important product that they have in their little bag, and yet,
because of that, they have unilaterally decided that if they have
to pay for it, they're not going to do it because they can't
afford to pay for it. He tells me that is not an isolated
incident, it happens regularly. It drives him crazy because he
really feels that people are making decisions that are not
soundly based on medical reasons but for financial and economic
reasons.
I don't know whether you've
found that in your practice or not or whether it inhibits you
from prescribing certain things that may be the best treatment
for that patient but, because of the financial implications, you
don't.
Dr
Bayoumi: I think you raise an excellent point. I do find
that all the time, that I'm constrained in what I can prescribe
and constrained in what my patients can pay for. I think the very
nature of the imposition of user fees leads me to be concerned
that those who endorse those user fees do not appreciate that
what may seem like small amounts to people with good incomes can
be very large amounts to people on fixed incomes and can act as
real deterrents and can really lead to suboptimal health
care.
1720
Mr
Kwinter: I want to tell you about another incident that
I'm literally living with as we speak. I have a community care
access centre in my riding. They had a contract with home care
providers and they've had it ever since the inception of the
program. The contract came to an end and they have negotiated a
new contract with another group. Obviously, it must mean because
the other group is cheaper.
I'm now caught in the
middle. Every day I get e-mail, faxes, telephone calls and
letters from the providers who are saying, "I have been working
for this organization, I've been doing my job and now I'm told I
don't have that job any more," which in itself is a problem. But
on the other side and where I'm caught in the middle, I'm now
getting calls from the patients who are saying, "I've had this
health care provider who was terrific and I've developed this
relationship. They know me, they come in, and they do what they
have to do and it's excellent. Now they tell me they're not going
to be there and I have to worry about someone else that I don't
know. I don't know how they're going to be. What sense does that
make? These people were doing their job, I was happy with them
and now they tell me, because of this contract that has been let
to another group, `We can no longer provide you with the service
that we've been providing.'"
That is a direct result of
privatization, where the bottom line is what determines the
service that's provided, as opposed to a service that is really
geared to outcomes. Do you have any comment on that?
Dr
Bayoumi: I couldn't agree with you more. Cost is
certainly a consideration. The quality of home care services
seems to not even be on the table, and quality includes who is
providing it, continuity of care and all those issues you've
mentioned. You can't run a private health care system and have it
publicly accountable. It's an untenable situation and it creates
a loss in quality for what may or may not be savings in costs,
but we'll never know because there's no accountability built into
the system.
Mr
Kwinter: Do I have time?
The Chair:
Yes, you've got about a minute and a half.
Mr
Kwinter: Earlier today we talked about these health
service centres, and doctors, as opposed to being on fee for
service, would be on a salary. I don't know whether you're
prepared to answer this or not, but I felt that, sure, doctors
would like to be on salary. The question is, what is that salary?
Do you have any ideas of what salary would be attractive to a
doctor to get into a practice where he gets a salary, as opposed
to a fee for service? I don't want to put you on the spot. I just
want to get a ballpark kind of a thing so we know what we're
talking about.
Dr Bayoumi: I think you could
probably look at what the average salary is for family doctors in
Ontario and it would be somewhere around that figure.
Mr
Kwinter: Which is?
Dr
Bayoumi: I don't have the numbers off the top of my
head, but $90,000 to $100,000 would be my guess in terms of their
take-home pay.
Most doctors don't want to
go on salary because it's an easier lifestyle or because it's
more money. They want to go on salary because they think they can
deliver care to their patients better and there's more stability
in the system. Now, essentially you're not paid for seeing
patients under certain circumstances, even though you think that
they need to be seen. That's not an attractive situation. Where
you are not paid for taking care of very sick patients, that
encourages a health care system where you only want to have well
patients, healthy patients who are easy to care for in your
practice. If we're really talking about a health care system
designed to deliver care to those who need it the most, salaries
make an awful lot of sense.
The Chair:
With that, I must bring it to an end. On behalf of the committee,
thank you very much for your presentation this afternoon.
CANADIAN NATIONAL INSTITUTE FOR THE BLIND
The Chair:
Our next presentation is from the Canadian National Institute for
the Blind. I would ask the presenter to come forward and state
your name for the record. On behalf of the committee,
welcome.
Dr Penny
Hartin: My name is Penny Hartin and I'm the executive
director of the Canadian National Institute for the Blind, the
Ontario division. I'd like to thank you very much for the
opportunity to come this afternoon to talk with you about some of
the services that CNIB provides and particularly about some of
the issues which we face in providing specialized rehabilitation
and support services to blind, visually impaired and deaf-blind
persons in the province and to ask you for your consideration of
those needs as you're going through your process, understanding,
of course, that you have a great many priorities that you need to
deal with.
I want to tell you a little
bit about our organization in just two or three minutes. We are a
voluntary, not-for-profit charitable member agency of the United
Way. We've been in business since about 1918 as the primary
organization that provides specialized services to blind,
visually impaired and deaf-blind persons.
The objectives of CNIB are
to improve the condition of blind persons, to prevent blindness,
and to support services relating to sight enhancement, which
basically means to help people make the best possible use of
their vision. To dispel some myths that may be out there, the
CNIB doesn't serve just people who are totally blind. Totally
blind people probably only represent about 10% of the people we
work with. The majority of people who receive our services have
some degree of usable vision and we like to make our programs
available to anyone who feels that the services can help them
maximize their independence.
The services are organized
specific to the people who require them, so we do provide
individualized programs. For people who have low vision, for
example, their vision loss is so different that you can't have a
one-shoe-fits-all type of solution. We really try to
individualize the programs that would be available to
individuals, and we also try to offer programs that are related
to blindness or vision impairment specifically. So we don't
provide housing, for example. For the most part, we don't involve
ourselves in recreation and we don't provide homemaker service or
that kind of thing, because other community resources are
perfectly equipped to provide those services. We would work with
those resources to make sure they then know how to ensure that
their services can be accessed by people who are blind or
visually impaired.
That being said, we focus
what we do on programs that people need because they can't see
very well, or at all. Those services can include library
services; it can be talking books, Braille books, other special
format library programs. They can include counselling and
referral services. That essentially means counselling around
vision loss-what does that mean for the person and his or her
family-and then referral either to other programs that we offer
or within the community. It includes rehabilitation teaching,
which is essentially life skills, home skills services-it could
be cooking, grooming, how to manage within your home. It also
includes teaching Braille, keyboarding and so on; orientation and
mobility, which basically means how you get around safely, in
most cases using a white cane; sight enhancement services-how to
make the best possible use of the low vision that you have;
technical aids services, which can be anything from teaching
someone how to use a self-threading needle so that they can sew
on their own buttons, showing them how to use a special knife
that has a guide on it for cutting in their home, or it can be as
complicated as a computer that talks and produces things in
Braille. Career counselling and employment services are, once
again, those services that people need to help find a career
that's going to meet their needs and to get back into the
workforce.
These
restorative/rehabilitative services, which are funded and
provided directly by government to other disability groups, have
historically been provided to blind, deaf-blind and visually
impaired Ontarians by the CNIB. These services, which enable
blind, deaf-blind and visually impaired citizens to learn
alternative methods of personal care, self-management, household
and daily living skills, alternative Braille or voice access to
information and communications processes, movement and travel
techniques with cane and/or dog guides etc, are the foundation
upon which personal, family, community, school and workplace life
are reconstructed. They are essential if a person grappling with
severe or total vision loss is to be able to become independent
and healthy, with a productive lifestyle.
1730
We also offer some
additional services where we can. We have a very large volunteer
program. Each of our offices probably has 200 volunteers
providing such things as driving support, reading, shopping,
personal support, friendly visiting, and so on. We have well over
100 peer support groups around the province. We do have a small
holiday centre up on Lake Joseph that people enjoy, intervention
services for deaf-blind persons, and we have just begun an early
intervention program for children. We do blindness prevention
programs primarily through an eye van that travels through
northern Ontario providing ophthalmological services to people
who live too far from ophthalmologists. We've just introduced
some First Nations projects, and we also have some scholarships
for young people. Most of those are funded through the Gretzky
family. We're fortunate in that support.
To give you a brief
synopsis, we serve nearly 50,000 blind, visually impaired and
deaf-blind persons across the province through 28 service
centres, about 500 staff and about 6,000 volunteers. We're seeing
about 12% new clients every year. Our total growth is about 7%.
The reason you see such a large growth in new clients is because
75% of our clients are over the age of 60; about 28% are working
age and about 6% are young people, children. We do provide
service through the whole age range. Because vision loss is very
directly linked to the aging process, we have seen our numbers go
up dramatically. They have doubled probably in the last 15 years,
and we are anticipating that they will double again by the year
2015. That's what the medical information is telling us.
The other interesting fact
about the CNIB and the services we provide is that people
generally need services throughout their lifetime. They don't
just come in, get something that helps them and then leave again.
Oftentimes people's vision will change, their circumstances will
change, and they'll need help and support throughout their
lifetime, so they remain clients throughout their life. The
change could be as simple as moving to a new community. Then we'd
have to start over again to teach mobility techniques, go into
their home and do some adaptive things and that sort of
thing.
How we are financed: Our
budget for this year is approximately $33 million. That's funded
64% by donations through the private sector: foundations,
corporations, and a lot of our own fundraising activities that we
take on. We get about 10% that's cogenerated through the United
Ways, and the various levels of government would fund about 26%
of our total funding. Most of that would be through the Ministry
of Health and Long-Term Care. Ten years ago we were receiving
about 16% from United Ways, about 33% from levels of government,
and we were generating about 49% ourselves. It's not that the
government levels or United Way went down. It's just because our
client numbers grew so dramatically, about 70% in that time
period, and we needed to be able to respond to that. We've been
quite successful in doing a lot of activity that's been able to
generate our own fundraising in order to meet those demands.
When I compare our
organization, though, to other organizations serving disability
groups, we are receiving a much lower level of funding. When I
talk with my counterparts at other organizations, some of them
are receiving 75% of their funds from government, others 50%, and
so we do wonder if there is a lower proportion being provided to
serving blind, visually impaired and deaf-blind persons.
We also note some serious
inequities across the province. I'll give you an example. For our
long-term-care funding, we receive about as much money to provide
services to 2,000 people in the Niagara area as we do to serve
12,000 people in Toronto. So there are some big inequities both
around the province and in terms of what goes to support services
for blind and visually impaired people compared to others.
Yes, we have been very
successful over the past 10 years in being able to meet our own
needs, but I would be concerned that if our client numbers are
going to double again by 2015, I don't think we would have the
capacity with our staff and volunteer resources to double our own
efforts again, without putting so much of our time toward fund
development. I always have to balance how much of our staff time
should be spent on fund development. They're really good at
providing services. If we're already raising 64% ourselves, then
I don't think we can increase that percentage a whole lot more
without it having an impact on our service programs.
To look at some of our
priorities, in addition to what we're currently doing and what is
supported through long-term care, there are a couple of other
areas that I wanted to make you aware of and I'll just touch on
those briefly before I have some time for questions.
The first area is around
employment programs. Unemployment, underemployment, job retention
and preservation is still a huge issue for blind and visually
impaired people. You'd be surprised to know that still about 75%
of working-age blind persons continue to be unemployed or
underemployed. The sad thing is that hasn't really changed an
awful lot in the last 20 years. In speaking with my colleagues
from the US, they're experiencing the same kinds of things.
Technology is helping a lot, but there are still a lot of
barriers out there and a lot of barriers around attitudes. I'll
just take one minute to give you an example that I think will
tell you a lot.
I just had a call recently
from a young woman who was a professional secretary, worked for
many years and was very competent. She got a job in a health care
setting in the Ottawa area. She went through all of the processes
that you do to get a job and she was hired; everything was fine.
The first day at work somebody saw her looking-you know, like I
do-kind of close at her paper and called human resources and
said, "We have a blind person here." They called her up to their
office and sent her home that first day, without even finding out
what the vision impairment meant and whether or not she could do
that job. She wasn't
providing direct health care to individuals; it was in an
administrative setting.
Unfortunately those
attitudes are still there. There's a lot of work that we have to
do. There's a lot of work that we have to do with other community
resources so that they can help blind persons find jobs as well.
There are other resources out there and we work closely with
them, but often they don't know what accommodations are needed.
For a blind person, unlike someone who-and I don't like to
oversimplify things, but if you compare finding a job for a blind
person to someone who uses a wheelchair, with mobility
impairments their accommodation difficulties are often resolved.
Their work station is made accessible once they get into their
work site. For a blind person that's not the issue. You can
usually get into the building, get to your work site. The
accommodation problems only begin then, because how do you make
sure that they have access to the information? There are lots of
solutions, but we need to help people find those solutions.
What we are looking to do
is establish about four or five centres across the province,
regionally based, that will provide employment training and
technology training for individuals so that they can have a much
better chance of finding employment. We're estimating at this
point that it will probably cost between half a million and a
million dollars, I would think, to get that kind of thing
established.
We also have concerns
around children's services. Once again, we've felt for many years
that services to blind children can be provided well in the
community. Once they start school that's certainly the case
through the education system. However, before they get to school,
the early intervention and development programs that exist just
don't see enough blind children to gain the expertise. So over
the last few years they and the parents have told us that CNIB
needs to get back involved in that. We received funding from the
Trillium Foundation a year ago to establish two pilot projects.
They're going extremely well, and we want to roll that out across
the province now.
1740
We are putting in a
proposal to Children First and Last, the children's secretariat
program, for a challenge grant and we're hoping with that to be
able to expand the program to 10 sites across the province so
that all blind children who need that specialized service early
on will get it. We estimate that whole program will cost about
$1 million to roll it out across the province and we're
optimistic that we will receive some of the funding through the
new children's secretariat to help with that.
Library and information
services: I'm sure you're all aware that CNIB does have
specialized library services. That doesn't just mean Braille and
talking books, by the way. With the growth of information, we've
tried to keep pace with that as best we can, so we have a large
children's collection. We make sure that they can learn to read
too. We even operate summer reading clubs for children. We just
do it through the mail. We have newspapers by phone now, so
someone can call our number and receive the full text of 14
newspapers from across the country now, whereas before that
wasn't possible. They can also get them on our Web site if they
want. They can access our catalogue of talking and Braille books,
or whatever, through the Internet, and we're setting up other
programs so that they can access magazines and other information
you probably just take for granted that blind people don't
normally have access to. So we're working hard to make all of
that available.
That service, which is
currently costing us in Ontario about $2.5 million dollars and we
project will cost probably $5 million over the next several years
because we have to digitalize the whole service-we can't get
cassettes any more so we have to computerize the whole way that
we offer the service. That service is not funded at all through
government support. You don't need to feel so badly; the rest of
Canada doesn't either. In fact, we're the only G7 country in the
world that does not provide public assistance to specialized
library services for blind, visually impaired and other
print-handicapped people. We are definitely hoping that is
something you would consider as you look at library service
budgets and so on. We know that with the aging population,
seniors are more sophisticated in their desire for information,
and while about 25% of our present clients use the library, we
expect that this number will grow dramatically and that they will
want the other aspects of library service as well so that they be
informed.
OHIP coverage for low
vision: You may not be aware that at present low-vision
assessments are not covered under the OHIP program. That means
that many individuals who could really benefit from the use of
low-vision aids are simply not able to afford the assessments.
The doctors charge about $75 for them. They can see their
optometrist or their ophthalmologist for types of pathology or
eye disease, but the low-vision assessments that determine what
kind of low-vision aids might be helpful for the person to use
are not funded at this point in time. We would ask you to
consider making that service available for persons. The
low-vision assessments can make a huge difference.
Personally, I have low
vision. I probably use about 25 aids around my home for different
kinds of things, but if the assessments weren't available then I
probably wouldn't have the same access to information or to use
the tools that really are available and that can make a huge
difference to people.
There's also a tax on audio
books that we'd like to talk with you about. As you know, print
books are not subject to provincial sales tax but for some reason
audio books are. I guess they were always considered to be
entertainment, but in fact many people do learn using audio
books, and not just people who are CNIB clients. Certainly we do
use the audio books and do purchase them from the stores, but
lots of new Canadians who are learning English find the audio
books very helpful. People who are print-handicapped in other
ways-perhaps they have a perceptual difficulty-clearly use audio
books. Many commuters
now, as you know, also use audio books as they're travelling to
and from work. They very much help to improve literacy and to
improve the learning of our language. So I'd really encourage you
to consider eliminating the provincial sales tax on the audio
books that are available.
The last area that I wanted
to mention was intervention services for deaf-blind persons.
People who are deaf-blind need a very special kind of service
beyond all the rehabilitation kinds of programs that I talked
about earlier, the Braille and the white cane travel and so on.
They need those, but in addition they need special services to
interpret their environment for them. It goes beyond interpreter
services that a deaf person needs. A deaf person needs somebody
to interpret what you say to them and then what you're saying
back to that person you're talking with. For someone who is an
intervener, they don't necessarily use American Sign Language.
They may have to use a print alphabet on the person's hand. They
also not only need to tell you what the person is saying and
interpret that information back and forth; they also need to give
you information about the environment.
We've had interveners
who've actually gone with our clients for surgery and have
intervened for that person throughout surgery, to tell the person
what was happening as well as what the person was saying to them.
That's what the service can mean.
It can also mean, if
someone is going shopping, to explain to somebody that there are
10 different kinds of Tide on the store shelf, because the person
wouldn't necessarily know that. It helps them to determine what
type of Tide would probably meet the person's needs, whether it's
liquid or whatever it might be, because when you can't see or
hear, you not only need to know what somebody is saying to you;
you need to have the environment around you interpreted as well.
That's what interveners do.
The problem right now is
that they're only funded for about three hours a week of
intervention service, and generally that time has to be used for
doctors' appointments or appointments with lawyers or whatever.
The person probably isn't going to get the assistance maybe with
shopping, maybe participating in a recreational activity. It
might even be visiting family or friends, because sometimes the
communication methods are so complex that not everyone in a
person's family or circle of friends may know that.
We recommend that people
really should have about 15 hours a week. That's what most
deaf-blind people feel would be helpful for them.
There are some inequities
within the province as well. There are some individuals who are
in group home settings now. Some of them are receiving up to 24
hours a day of intervention. We don't believe that's really
necessary, but there are a lot of inequities. There's a whole
group of people who are really only getting two or three hours a
week, and it's just not enough for any kind of independence for
them.
Those were the major areas
I wanted to present to you this afternoon. Clearly the needs of
blind, visually impaired and deaf-blind persons will increase
over time, essentially due to the aging population. It's a fact
of life. As we get older, our eyes don't work as well. There is
not a cure for macular degeneration, which is the leading cause
of blindness, nor is one expected on the horizon within any
number of years that we can plan for at this point in time.
1750
CNIB believes in strong
partnerships with the community and with the government to help
us provide the specialized services to blind and visually
impaired people. I haven't presented all the needs today. I've
tried to focus on what I think to be most urgent and what I think
has the potential to make a real difference in enhancing
independence for persons who are blind, visually impaired and
deaf-blind, to increase their independence and their
self-sufficiency.
I also have presented some
issues that will help to respond to some of the inequities that
currently exist within the province, both among disabled groups
themselves and also among some regions of the province. CNIB has
a philosophy of service equity. We firmly believe that services
should be available to people regardless of where they live. We
have service centres and other programs around the province to
help make that happen, but it's a challenge when there are such
inequities within some of the funding pockets. We clearly do have
areas that are much better served than others.
I want to thank you very
much for your interest and for taking the time to listen to me
this afternoon and for considering our requests. Please be
assured that we want to work with you and want to work in
partnership, as we all work together to make life better for
blind, visually impaired and deaf-blind people in Ontario.
Thank you. If you do have
any questions, I'd be happy to respond in any way that I can.
The Chair:
Thank you very much for the presentation. I'll allow two minutes
per caucus. I'll start with the government side.
Mrs
Molinari: Thank you very much for your presentation.
It's quite comprehensive and you have a lot of recommendations.
When you say you haven't highlighted or you haven't told us all
of the issues around the deaf-blind, then obviously there's a lot
more. You have a lot here already.
I don't know if you're
aware of the recent private member's bill that was passed in the
Legislature, Bill 125. David Young, who's the MPP for Willowdale
and is now the Attorney General, introduced a private member's
bill that would declare June deaf-blind awareness month.
Dr Hartin:
Wonderful.
Mrs
Molinari: He has been in contact with the Rotary
Cheshire Home, which is in his riding, so he speaks highly in the
Legislature about that quite often.
Dr Hartin:
They run a good program.
Mrs Molinari: Yes, it's a
wonderful program. The one question that I do have is-I think I
heard you say that Canada is the only G7 country that doesn't
provide talking services for the deaf-blind.
Dr Hartin:
They don't fund the specialized library services for blind,
visually impaired or deaf-blind.
Mrs
Molinari: What would that entail?
Dr Hartin:
It would entail funding the production of alternate-format
materials as well as assisting with the distribution. The public
libraries have a good collection of large-print books. They do a
good job with that, but they have very, very few talking books,
and I don't know of any public libraries that have any
Braille.
The Chair:
Mr Kwinter.
Mr
Kwinter: I'm totally supportive of everything that you
do. The issue about talking books and the sales tax should be
easy to resolve. I raised an issue in the House some time ago
about computer books, that if they didn't have a computer disk in
them, they didn't have to pay sales tax, if they did have the
computer disk, they did, which made no sense, because the book is
useless without the disk, because it teaches you how to use the
computer. We got that resolved.
I think that can be
resolved, so that those people who are visually impaired or blind
can have a card that says, "I am blind, and as a result I am
exempt from paying the sales tax on those books." I think that's
something we should be recommending.
I just want to tell you
very quickly: I've had contact with two blind people, both of
them absolutely outstanding. It just shows that if they get the
support and if they get the ability to reach their maximum
potential, they can.
One of them, whom many of
us know, is David Lepofsky. I used to own a children's summer
camp and David Lepofsky came to me as a little boy, totally
blind. He was able to function in the camp program; he did
everything. He wound up as a lawyer and he's now a major advocate
for the disabled.
Another person whom you may
know of, because I think at one time he was the chairman of your
organization, was Edward Dunlop. Edward Dunlop was a former
member of Parliament, a war hero who was the commander-in-chief
of the Queen's Own Rifles. One of his men dropped a hand grenade.
He went to get it, picked it up. It blew off a couple of his
fingers and blinded him.
He came back to become a
member of Parliament, a cabinet minister. I worked on his
campaigns. He became the founding president of the Toronto Sun.
Just because he was blind, it didn't in any way take away from
his particular abilities.
I applaud David Young for
this blindness and hearing-impaired awareness week, because
there's a stigma. If someone sees someone who is blind, they
immediately think that not only has he lost his sight but he's
lost everything else. I think that's a real problem and it's a
problem that we have to address. There are resources, when I talk
about human resources, people who happen to have an impairment
but they can make a very useful contribution to our society. I
congratulate you for your efforts.
Mr
Christopherson: Thank you very much for your
presentation. Referring to one of your earlier pages where you
compare the percentage of your income that you now have to raise
yourself compared to what the government gives and compared to
before, it's pretty clear that it's going in a direction that's
making your life more and more difficult.
You make note that if you
compare it to other rehab agencies, you're way out of whack. What
about other provinces? Is it the same? Are the trend lines going
the same way in other provinces?
Dr Hartin:
They vary in other provinces. In some provinces the funding
support is closer to 50%. On average across the country it's
around a third, around 30%. BC is terrible. That's the only way
to-it's, I don't know, 10%, 12%. It's astonishingly low, which is
obviously a real problem to raise sufficient funds. So that
brings the average down.
I would say traditionally
we are lower than other disability groups, I suppose because CNIB
has been around for a long time. We have been successful in
raising the funds to support the service programs. The worry we
have, though, with the increasing number of people coming, is,
would we be able to sustain that in the long term and really be
able to respond to people's needs? I would worry that we probably
wouldn't. That will be the case in other provinces that don't
have the level of service that we have here in Ontario either,
because they simply haven't been able to develop the capacity to
raise the money they need. So I really worry about the services
in other parts of the country.
The Chair:
With that, we've run out of time, but on behalf of the committee,
thank you very much for your very interesting and informative
presentation this afternoon.
Dr Hartin:
Thank you very much for your time.
Mr Galt:
Mr Chair, on a point of order: Just for information purposes, I
have the report that I requested the other day, when the OSSTF
made a presentation. I'm just wondering, will this appear in the
official record? There's a significant discrepancy between the
figures they gave us and the figures that are in here. It's
important for the record that it appear. It's more than 50%
greater than they put in their report.
The Chair:
I'm told that it does not appear in Hansard, but it will appear
in the committee minutes.
Mr Galt:
It says here that it's 50% more. Thank you very much.
Mr
O'Toole: I would like to move that it appear in the
report.
The Chair:
No, it does automatically.
Mr
O'Toole: Great.
Mr
Christopherson: On a point of order: I wonder if, out of
courtesy, since it affects one of the presenters, we might have the clerk forward
the results that came from research to OSSTF, I think it was.
Mr Arnott:
It was Earl Manners.
Mr
Christopherson: Just to give them a chance, because they
may want to respond to the response.
The Chair:
I would think that's a fair request.
Mr
O'Toole: They may want to retract.
Mr
Christopherson: No, John, not because they want to
retract.
Interjections.
Mr
Christopherson: At least have the trial before you hang
them, John.
The Chair:
With that, I'll bring the meeting to a conclusion and we'll
adjourn until tomorrow morning at 10 o'clock.
