Assemblée législative de l'Ontario

PRE-BUDGET CONSULTATIONS
ONTARIO CONFEDERATION OF UNIVERSITY FACULTY ASSOCIATIONS

COUNCIL OF ONTARIO UNIVERSITIES

CONFERENCE BOARD OF CANADA

AFTERNOON SITTING

INFOMETRICA LTD

ONTARIO COUNCIL OF REGENTS FOR COLLEGES OF APPLIED ARTS AND TECHNOLOGY

ASSOCIATION OF COLLEGES OF APPLIED ARTS AND TECHNOLOGY

ONTARIO PUBLIC SCHOOL TEACHERS' FEDERATION

ONTARIO SECONDARY SCHOOL TEACHERS' FEDERATION

YORK REGION BOARD OF EDUCATION

CONTENTS

Tuesday 29 January 1991

Pre-budget consultations

Ontario Confederation of University Faculty Associations

Ontario Public School Boards' Association

Council of Ontario Universities

Conference Board of Canada

Afternoon sitting

Infometrica Ltd

Ontario Council of Regents for Colleges of Applied Arts and Technology

Association of Colleges of Applied Arts and Technology

Ontario Public School Teachers' Federation

Ontario Secondary School Teachers' Federation

York Region Board of Education

Adjournment

STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS

Chair: Wiseman, Jim (Durham West NDP)

Vice-Chair: Hansen. Ron (Lincoln NDP)

Christopherson, David (Hamilton Centre NDP)

Jamison, Norm (Norfolk NDP)

Kwinter, Monte (Wilson Heights L)

Phillips, Gerry (Scarborough-Agincourt L)

Sterling. Norman W. (Carleton PC)

Stockwell, Chris (Etobicoke West PC)

Sullivan, Barbara (Halton Centre L)

Sutherland, Kimble (Oxford NDP)

Ward, Brad (Brantford NDP)

Ward, Margery (Don Mills NDP)

Substitutions:

Curling, Alvin (Scarborough North L) for Mr Kwinter

Fletcher, Derek (Guelph NDP) for Mr B. Ward

MacKinnon, Ellen (Lambton NDP) for Ms M. Ward

Also taking part:

Cousens, W. Donald (Markham PC)

Cunningham, Dianne E. (London North PC)

Turnbull, David (York Mills PC)

White, Drummond (Durham Centre NDP)

Clerk: Decker, Todd

Staff:

Anderson, Anne, Research Officer, Legislative Research Service

Rampersad, David, Research Officer, Legislative Research Service

The committee met at 1004 in committee room 2.

PRE-BUDGET CONSULTATIONS
ONTARIO CONFEDERATION OF UNIVERSITY FACULTY ASSOCIATIONS

The Vice-Chair: Welcome to the committee on finance and economic affairs. With us today is the Ontario Confederation of University Faculty Associations. I believe Mr Graham, the president, will be presenting. Would you identify yourself and your colleague.

Dr Graham: Good morning, Mr Hansen and members of the committee. I am Bill Graham, professor of philosophy at the University of Toronto and president of the Ontario Confederation of University Faculty Associations. To my left is Marion Perrin, who is the executive director of OCUFA, and in the audience today are Heather Webster and Glen Brown from our staff.

We want to thank the standing committee on finance and economic affairs for the opportunity to be part of the deliberations. We have appeared before this committee in the past and in the past it has been our practice to address short-term funding requirements. This year, we would like to adopt a somewhat different approach and tie the short-term requirements into some long-term issues.

If I could start just by making a quote from Walter Light, who is a former CEO of Northern Telecom. Speaking before the Conference Board of Canada, Walter Light said:

"In the 1990s, we've got to put our money where our mouth is in terms of addressing the quality of education from elementary school up. I think it is going to take very careful, very aggressive, very innovative management. Talent, in other words, is our newest form of capital. And what does it mean to treat talent as capital? To me it means educating people."

He went on in this speech to say that the majority of the new job entrants in the 1990s are going to be women and members of minority groups.

OCUFA shares with the present government the profound commitment to the achievement of equity in Ontario. The realization of this goal will necessitate fundamental social changes. We believe that the universities of the province have a distinct role to play in achieving a just and equitable society; but if they are going to fulfil this mandate, they too will have to embrace change, becoming more diverse institutions where those who have traditionally had low rates of participation in higher education are welcomed and encouraged.

The face of Ontario is rapidly changing. We are becoming one of the most racially and ethnically diverse societies on earth. Over the next two decades, members of minority groups will increasingly seek access to our institutions as means of achieving equal opportunity. Women, visible minorities, aboriginal people, the disabled and the poor face a barrage of systemic discrimination. Employment equity legislation, even with mandatory goals and timetables, will do no good if educational equity, that is, making it possible for people from these groups to attend post-secondary institutions, is denied.

Universities remain largely homogeneous cultures in a society which is rapidly becoming more and more heterogeneous. We believe that this situation cannot be allowed to continue, that universities must change in keeping with the changing nature of our society, in order to forestall all kinds of economic and social problems which one can see looming on the horizon in the country just south of our border.

What we would like today to share with you is a comprehensive approach to changing and reforming the province's universities. The importance of education in the future society can hardly be denied. Both socially and economically, it is important to have an educated populace. When we are beginning to be a knowledge-based society, more and more people in our society will require post-secondary education. In fact, it is now estimated that at some time in their lives most people in our province will require some form of post-secondary education. It is on the basis of this that we make our appeal to you and our response to your request to appear here today.

Among the particular problems that we see facing the province with regard to post-secondary education is the upcoming faculty shortage which we spoke to you about last year. By the year 2000, one quarter of the existing faculty members in Ontario universities will be retiring. By the year 2006, another one quarter will have retired. That means that within 15 years we will have to replace one half of the existing faculty in Ontario's universities. That is a considerable problem because we do not have any plans in place at present to make that kind of substitution.

There are not enough people in the pipeline, so to speak, to take those positions. We are not graduating enough PhDs to take those positions and we know that other sectors in the world, such as the United States, are aggressively pursuing the hiring of our best graduates because they also face the same sort of problem in regard to retirement of faculty.

You might have seen the Toronto Star this morning in which John Dirks, the dean of the faculty of medicine at the University of Toronto, wrote a letter in which he refers to an article called "A Basic Sexual Mystery Is Solved," which was reported on 6 January in the Star and describes an amazing breakthrough about the differences in males and females. This scientific breakthrough was made by Dr Huntington Willard of Stanford University.

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What the article did not point out and what John Dirks wants to correct is the fact that Dr Willard was formerly a member of the department of medical genetics at the University of Toronto and moved just recently to Stanford. He moved there because of the lack of commitment by the federal government to basic medical science and because the provincial support for university research was being eroded.

In other words, we are losing some of our best and finest talent already to the United States and, when the situation begins to deteriorate even further towards the end of this decade, we will be losing even more. You may have seen also in the newspapers recently reports of other high-quality faculty members who have been lost to the United States, people I personally know. Tim Colton, for example, was pulled away by Harvard University, and Allison Gopnick to Berkeley. These are high-quality faculty people whom we cannot afford to continue to lose.

If faculty shortages are allowed to occur, as we predicted they will, there may be no choice but for universities to cut back on enrolment, and the worst-case scenario is that one or more universities might be forced to close. This is a rather absurd situation because we know that the enrolment has been growing steadily in Ontario universities. Over the last 10 years undergraduate enrolment has grown by about 25%.

At the same time that universities are facing this upcoming shortage of faculty members, because of budget pressures many universities, including the University of Toronto, McMaster University and Western, are actually cutting back on faculty, and that is the absurd paradox. We are facing a situation where we need to build faculty, and instead we are having to cut back on faculty positions. So the situation is not only severe but it is being worsened by the financial situation that our universities are in.

It is imperative, therefore, that the government act quickly and decisively to meet the impending faculty shortage crisis. OCUFA has called in the past and calls again upon the government to implement a faculty growth program, including the provision of targeted funds to increase the number of tenure-stream positions at Ontario universities.

Such funding, in addition, would provide an excellent opportunity for the universities to implement employment equity programs. OCUFA is a strong proponent of employment equity and favours the introduction of legislation which includes mandatory goals and timetables.

OCUFA believes that our universities must become more welcoming institutions where special efforts are made to ensure not only access but also retention of members of the designated at-risk groups. Such efforts should include the initiation of educational equity programs and the broadening of the curriculum.

We were at a conference recently in the United States where the situation is even worse in regard to equity than it is in Canada and we were told at an interesting panel discussion that the existing curriculum should be described as white, male, European ethnic studies, as a kind of response to the describing of certain other programs as native studies or women's studies or other kinds of ethnic studies. There is no question that the curriculum in our universities will have to change to accommodate the growing diversity of our population. We also need to provide better support services and better physical arrangements for the people of different cultures and ethnic backgrounds.

OCUFA firmly believes that students should not be forced to pay for the recovery of universities through the imposition of higher tuition fees. Tuition fees are the single most significant barrier to disadvantaged groups in our society. In the United States, tuition increases and cutbacks in student aid have resulted in a dramatic decline in the post-secondary participation rates of minority students.

OCUFA recommends that tuition fees be frozen and that the government signal its intention to eventually eliminate these altogether. We appreciate that the removal of fees cannot be accomplished in a short time frame, certainly not in the present economic climate. It depends upon improvements in taxation and federal transfer payments. However, only when this goal is realized, it must be clear, will equal opportunity in higher education be truly available for all of Ontario's citizens.

Support for higher education is especially needed in a time of recession, so that those who are unemployed can improve their education, training and skills. University enrolment in Canada rose 4.1% this year, including larger percentages of both the 18- to 24-year-olds and people over 30, but the disadvantaged are still being shut out. The fact is that a bachelor degree is now, for many employers, what a high school diploma was 15 years ago. So with the onset of a knowledge-based economy, most people will need some form of post-secondary education at some time in their lives. If the barriers to post-secondary education for disadvantaged people are not removed, these people will not be able to compete equally for many jobs and careers which are open only to those with higher education.

The removal of tuition fees would bring Ontario into compliance with the United Nations International Covenant on Economic, Social and Cultural Rights, which was acceded to by Canada in 1976 after consultation with the provinces. This covenant commits Canada and Ontario to making post-secondary education equally accessible to all on the basis of capacity by every appropriate means and in particular by the progressive introduction of free education. It is also in line with the speech from the throne, which talked about making available publicly funded postsecondary education. "Strong publicly funded institutions are crucial to lifelong education," is an excerpt from the speech from the throne, 20 November.

Freezing of tuition fees must also be accompanied by the reform of student assistance programs, including, for example, increasing the current living allowance and improving eligibility requirements. In the longer term. student assistance should be restructured with an emphasis on grants rather than on loans. Students are currently graduating from four-year programs with debt loads in excess of $20,000, and this is a tremendous disincentive, especially to economically disadvantaged students.

OCUFA does not favour the income-contingent student loan repayment plans which have been discussed as possible alternatives to the present method of repayment. While preferable in some ways, they still impose a user fee on public education. Furthermore, they do nothing to remove the burden of debt from low- and middle-income students. Public education should be publicly financed by revenues generated by fair taxation, both progressive personal income taxes and taxes on corporations.

OCUFA calls on the government to move forward with the creation of its Fair Tax Commission promised in the speech from the throne. We believe that the revenue generated by such innovations as a minimum corporate tax and speculation tax promised in the last election would enhance the government's ability to deal fairly with public institutions such as school boards, municipalities, hospitals, colleges and universities.

OCUFA believes that the Ontario government must take an active role also in lobbying the federal government to restore and augment the established programs financing and to increase support for research through the federal granting agencies: the Medical Research Council of Canada, the Natural Science and Engineering Research Council of Canada and the Social Sciences and Humanities Research Council of Canada. We urge the government to challenge federal cutbacks in the courts if necessary and to refuse to participate in any consultations on education which are not open and broadly consultative.

Ontario now provides in real dollars some $1,900 less per student than it did $10 years ago and $800 less per student than the average of the other nine provinces. In fact, in terms of per capita funding for universities, Ontario ranks ninth out of the 10 provinces. So we wrote, together with other organizations, to the Treasurer last November and urged the government to bring Ontario universities over a two-year period to an average level of per student funding for the other nine provinces. This would cost $125 million per-year over two years in current dollars.

Mr Chairman, I would be happy to discuss these proposals and to answer any questions your committee might have.

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Mrs Sullivan: Dr Graham, I am interested in a couple of aspects of your report, one relating to the faculty growth fund. I know that you have been working to a certain extent with the Council of Ontario Universities in terms of developing a consensus on what the requirements are for our post-secondary sector. Their recommendation is that $410 million would be required over four years. Have you factored the faculty growth fund into that or do you have an estimate of the need for a faculty growth fund, in addition to that $100 million a year?

Dr Graham: That $410 million of course was an estimate made principally by the Council of Ontario Universities of what it would take to achieve recovery in the immediate future. We are concerned with not only the immediate future, but the long term. Certainly the $410 million would cover part of the recovery of faculty growth, but there would still be a necessity over the 15-year period, longer than the four-year period, to look at the kinds of shortages we are facing and what it is going to take to replace them.

Unfortunately the longer we wait the more expensive it is going to get. The more competition we get involved with for hiring top-notch faculty members, the more competition we get involved in with other provinces and especially with other countries, the more expensive it will be. Unfortunately in many areas there is quite a market for faculty members and certainly in areas that are of very great interest to the government, such as science and technology. We have seen some of the effects of some of these people being drawn off by other universities already, so in answer to the question, yes, the $410 million would do part of the job immediately, but there is a necessity to look at the long-term problem.

As you mentioned, we are working together with the Council of Ontario Universities to develop a study of the exact demand. We know what the overall parameters are, but what we are doing is looking at each separate discipline and seeing what the demand and supply situation is with regard to each discipline. The results of that study should be available some time in May.

Mrs Sullivan: I was also interested in your views relating to student tuition. Of course we have heard that argument from students in the past, and as well in student presentations before the committee this year. The COU has recommended special student fees to assist in the recovery process. I assume, because of your argumentation, that you disagree with the proposal.

Dr Graham: We do. I think we recognize the problem the COU has with regard to its assessment of funding. However, we do disagree. The position on student fees is a relatively new one for OCUFA. The fact of the matter is that we see the necessity to deal with student fees in a vigorous way as a result of the population in Ontario, the fact that we have a very large population of minority students, of women, many of whom are now single parents who require post-secondary education.

We have a growing demand, we think, by aboriginal peoples, a necessity to take the education of aboriginal peoples seriously. We need to deal with the handicapped members of our society, people for whom this kind of tuition fee increase would simply be impossible. We unfortunately feel that the Council of Ontario Universities' solution would purchase recovery at the expense of many of these disadvantaged groups and so our disagreement with them is profound on that particular issue, although we share a lot of their concerns about the nature of the situation in Ontario universities at the present time.

Mrs Sullivan: That leads us then directly into the question of student assistance programs. One of the things I have not seen in either the student presentations nor in yours is any particular emphasis on people who are returning to the educational institution who may have family obligations and so on, where there are certainly enormous pressures, which I am seeing in my constituency office. and I have not seen that emphasis and I am curious as to why.

Dr Graham: I am sorry if you have not. It is certainly one of our concerns that the people who are now making use of post-secondary education and who will need postsecondary education in the future are not simply the 18- to 24-year-old groups but people who are returning for what has been called lifelong education, for upgrading or for education in specific skills or specific disciplines to meet the new kinds of economic and social necessities.

We are becoming a knowledge-based society and people are going to have to have different kinds of skills, so they will have to return to universities. People with family obligations are going to find it increasingly difficult, especially single parents, and we know there is a growing number of them too, to face the kinds of economic pressures that people are faced with in the current financing situation of students for universities.

We are concerned, however, very greatly with people from other cultures and other ethnic backgrounds, with the poor in our society. It is very easy, from the inside of an institution, to forget that there are people outside. Believe me, it is very easy to look at the universities from the inside and to forget there are people outside who look at the universities and our post-secondary institutions in an entirely different way. We do not see the barriers from the inside. You have to get among those people and ask them and talk to them and you will find that they see something we do not see.

If you have ever been to New York City you may have seen, along some of the walls of New York City, and especially in front of garages and so forth in some of the streets, the sign, "Don't even think of parking here." I think a lot of people who are not now engaged and who do not have a family tradition of being engaged in post-secondary education look at our universities and post-secondary institutions and see a sign painted on them that says, "Don't even think of coming here."

That is largely for financial reasons, but there are also social reasons, cultural reasons, familial reasons, reasons of curriculum. There are reasons of the chilly climate they face when one or two hesitantly put their foot through the door. It is not a particularly welcoming situation for them and we want to see these problems addressed, and as a faculty association we want to play a role in addressing these problems.

Mr Fletcher: Dr Graham, I agree with a lot of the statements that appear in your document. I was just wondering about the number of professors who are going to the United States. Help me along here. I am just wondering about their funding. They receive a lot of corporate funding as opposed to the substantial public funding we receive. That appears to be one of the factors that their education system, especially post-secondary, is one that thrives. I know they can fill a football stadium with 80,000 people and a lot of that money does not just go to the athletic part of school. They are generating more money than what our universities generate. That is one of the factors, is it not?

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Dr Graham: That is certainly true. I am not so sure that we should look so --

Mr Fletcher: I am not saying that either.

Dr Graham: -- adoringly at their football situation, because that has created a lot of other problems that you may have read about, sports programs and what they do to minority students who are brought in under the aegis of becoming part of a sports program, and then if they are not first-quality people they are simply pushed out the back door and suffer.

US funding for the public universities is, however, on average well over 35% higher than the public funding for Ontario universities. That is an average across the continent. While it is true that corporations and private funding have been more generous and that there has been more of a tradition for that in the United States, there is also the case that public funding for the institutions is better.

We favour, of course, public funding. That would include not only fairer personal income tax but also tax on corporations. We believe that certainly our corporations and our businesses are some of the chief beneficiaries of the graduates of our post-secondary institutions and the knowledge that is generated in our post-secondary institutions in terms of research, as well as teaching. We think. based on progressive people such as Walter Light, that our corporations and industries would be quite happy to play a fair role in supporting the kind of graduates and knowledge that will be of help to them.

Mr Fletcher: Just one more question and comment: On page 10, "Funding for Recovery and Change," I agree with your statement that at the beginning and during a recession it is going to be hard to reverse the effects of chronic underfunding, but you are hoping that at least "as a minimum the government will provide sufficient funds to protect the universities against inflation and honour previous government commitments, such as funding for enrolment growth." Do you have a dollar figure as far as how much that is? The "previous government commitments." were these previous government commitments from the previous government or previous government commitments from this government?

Dr Graham: I think the dollar figure we had written to the Treasurer about was $125 million per year over two years. That would bring us up to an average position within Canada, bring us up to the middle position. We are now second to last, ninth out of 10 provinces in terms of funding post-secondary education on a per capita basis. That would bring us up to midpoint. We had hoped that this government could establish as a kind of motto for itself, "Midpoint by midterm of government," and then move from there depending upon the economic situation of the province.

Mr Fletcher: As far as the commitments of previous governments, or previous government commitments are concerned, that is the previous government's, not what the New Democratic government is committed to.

Dr Graham: Yes. The accessibility funding, for example: There was some money dumped into targeted funding for faculty renewal. That established 500 positions over five years. The problem with that was that it was only partial replacement. Even after that situation we are facing these shortages.

We are looking at a major problem in terms of addressing the future complement of the faculty in Ontario. There are 13,000 faculty members. Half of them are going to be gone in 15 years. We are pleading for some kind of program to address that, some kind of strategy to address that. We would be happy to play a role in that strategy. It is one that is going to take a partnership of students, faculty, administrators and government to try to solve that issue. We would be happy to have you.

Mrs Cunningham: Good morning. It is good to see both of you again. You did not take the opportunity to talk about standards in any way. I know that you were focusing more on the financial aspects and certainly the future availability of even the staffing of our universities down the road, but I guess I talk about standards in the sense of flexibility.

One of my great concerns in the last few years has been the increased enrolment in universities without the dollars, the resources, to go with it. I think certainly from my point of view as now presently the critic for the Progressive Conservative Party, I have access and make it my business to travel a lot more and hear from students. They tell us that in many instances they are not as happy about contributing -- I understand that people feel differently 10 years down the road after they have left a university -- down the road as graduates of the universities, because they just feel cheated with regard to the sizes of their classes and the amount of time they have with their professors. I wonder if you would comment on this whole accessibility and enrolment trend that the students are facing.

Dr Graham: I can assure you that faculty members also feel cheated and feel that the question of quality is something that must be addressed. Faculty members also do not like to be faced with hordes of students they cannot get to know and cannot deal with on a personal basis. It is very frustrating. There has been as a result a lot of bad morale among university faculty. They felt teaching should be a noble and an idealistic career. yet when you are faced with the kind of numbers we are faced with, continual cutbacks in funding and a shortage and impossibility to hire people in a field, then obviously the quality is going to suffer and the quality has been suffering.

The way to address that, we believe, is to begin to hire faculty. We are concerned that one of the consequences of not doing that might be the necessity to cut back on enrolment and accessibility. We think the inevitable consequence of cutting back on accessibility would be cutting back on accessibility for the people who are already at risk, people who are from the minorities, from the poor, from the aboriginal people. the very people we have to begin to get into our institutions and give an equal opportunity to.

There is no doubt that it is a very difficult situation. Quality is slipping and even in a time of recession it seems to us that a government should be looking towards the

future and saying, "What can we do now to ensure that when the recession is over people will come out of it with some education and some skills instead of simply with social problems, crises, more hunger and more poverty?"

Mrs Cunningham: You talked about the request you have for some discussion around Vision 2000. I am wondering if you see. as an active part of that discussion, the students of both the colleges and the universities, as well as the universities and colleges, being very much a part of that discussion. I am not just talking about standards when I ask you the question. I think in Ontario we have to look at what we are doing and why we are doing it. I know that is what Vision 2000 is about, but I see it as not being a credible discussion if all the partners are not part of it, even the secondary schools.

Dr Graham: I agree with you entirely. It is certainly our view that we should be looking at education from a holistic point of view. Universities have been too long considered aloof and apart from the system. That is as much a fault of people on the inside as people from the outside. We have to begin to look at universities as part of a large public-institutional higher education system. That includes primary schools and secondary schools and our college system.

We are very much interested in what happens to our colleges. We believe there should be a much closer linkage between colleges and universities and between universities and secondary schools. If we are going to make some changes in terms of increasing the diversity of our universities, it means that we are going to have to bring people through the primary and secondary school systems having some sort of a chance to take advantage of post-secondary education.

That means getting rid of certain programs such as streaming which already tell people from certain backgrounds that they do not belong, that their job is to be part of the people who have the bad jobs, to quote the little document about "good jobs, bad jobs." Certain people are already targeted from primary school as being part of the "bad jobs" category.

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Mrs Cunningham: We should maybe talk about what bad jobs are these days too.

Dr Graham: We want to make sure that people have an equal chance at the good jobs, and that means linking all forms of our education. Yes, we are interested in Vision 2000. We would like to see recommendation 40, which is the implementation committee, get off the ground and we would like to play a role in that discussion.

The Vice-Chair: I would like to thank you, Mr Graham, for your presentation and submission to this committee.

ONTARIO PUBLIC SCHOOL BOARDS' ASSOCIATION

The Vice-Chair: We have the Ontario Public School Boards' Association. Mr Checkeris, would you introduce your colleagues?

Mr Checkeris: Yes, I will. My name is Ernie Checkeris. I am a trustee with the Sudbury Board of Education and president of the Ontario Public School Boards' Association. I have with me Pat Hillhouse, a trustee from the Halton county board; Lorraine Nowina of the Etobicoke board, a trustee, and Nancy Bentley, who is with the Lambton county board.

In addition to that we have Ron Sudds, superintendent of business from Northumberland and Newcastle Board of Education; Penny Moss, our executive director of OPSBA; Bev Allen, the director of legislation and finance for OPSBA, and Cynthia Campbell is somewhere.

We are pleased to be here to present our views to you, as the members of the standing committee. I would like to say that OPSBA represents 94 public boards in Ontario of all sizes. We serve 1.7 billion students and adult learners and we speak for the public education that represents the collective interest of public school trustees across Ontario.

We have brought with us a formal brief -- you have it before you -- Ontario Public School Boards: Meeting the Challenge. In addition, we have given you a group of reports that you can perhaps use for background at your leisure. We do not intend to read our report. We will be discussing it and various trustees will be taking time out to tell you from their point of view parts of the report.

I do not have to remind you that there are in fact two levels of government with the responsibility for delivering and funding education for our citizens. Trustees and boards of education are in fact a government. They do collect taxes inasmuch as the Ontario provincial government does as well, so we are talking on a government-to-government basis.

We are all very well aware of the NDP election promises to raise the provincial share of costs to 60%. We have examined the issue of 60% funding and concluded that what is needed is an action plan to overhaul the existing grant program in total. What is needed is a review of school board governance and political fiscal accountability. We know it is not going to happen in a hurry. It will not happen overnight, but we do hope that in the joint government-to-government process, where we can sit around one table and attempt to resolve these fundamental issues, some action will take place. I would like at this time to ask Pat to kick off the first session.

Ms Hillhouse: As Ernie has said, we are interested in your whole issue and presenting to you, obviously, on the issue of the financing of education. The area I am going to talk about is very much in the long term. Ernie has already referred to the fact that our association, among others, including standing committees or select committees of this House have come to the conclusion that a massive overhaul of the whole system of financing education is indeed necessary in this province. What we need to be looking at and what our association is presenting for your consideration are some basic questions about, what should education be responsible for in today's society? How much should that cost to deliver? Who should be paying for it and how?

In our briefs which we have presented to the government, we have suggested a model for consultation on education finance that focuses on the government-to-government issue, as indeed school boards are elected governments responsible for the delivery of service and responsible for taxation in their area. The best form of consultation that we can see would be between the provincial government, which has a broad area of responsibility and the local school boards, public boards, separate boards and francophone boards, represented by their various associations.

This government has already indicated its intention to set up a fair tax commission to look at a variety of areas dealing with taxation at a variety of levels within this province. Our association is asking you, in your submission to the Treasurer and to the government, to support our request that the Ontario Public School Boards' Association should be part of that fair tax commission in terms of representation on the commission and on its subcommittees.

As I said, we are looking at a process of consultation around the areas of education finance and consultation around the role and responsibilities of boards of education in the province. We see this as an area that requires clarification. Education, over this last number of years, has taken on or has been allocated responsibilities which formerly fell to a number of different agencies and ministries, in terms of community and social services, health, recreation and in fact on into the whole areas of justice, to juvenile detention centres and the implementation of the Young Offenders Implementation Act.

So what we are recommending is that these negotiations, these discussions between the two levels of government should involve not just the Ministry of Education but the other ministries which are concerned, and with services to young children and their families. These are long-term issues that we know will require time to study and time to implement. We also know that you are focusing on some short-term issues. We do not feel that all of the issues that are facing school boards are necessarily long-term. There are some short-term remedies that can be brought to bear and can assist boards of education in the financing of education and on the effect on the local taxpayer significantly in this time, in the recession, when local school boards are also facing taxpayers who have significant difficulties.

I am going to ask Lorraine to talk about some of those short-term issues that we believe your committee could make some important recommendations on.

Mrs Nowina: There are a number of interim legislative and policy changes that OPSBA is requesting for immediate solutions in the upcoming budget. I will be dealing with four areas: the general legislative grant, English as a second language, pay equity and cash flow.

I think it is somewhat ironic, as a trustee from the Metro area, when I am dealing particularly with issues of funding transfers, to note that as a representative of a Metro school board, we receive no moneys from the provincial government for education. We are funded at a zero or a negative grant rate.

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However, the first area I would like to draw your attention to is the 1991 general legislative grant program. While there are two specific recommendations I would like to bring forward, I would also like to remind the committee that OPSBA has asked for an 11% increase in the GLG grant. That 11%, we feel, is necessary to ensure a moderate education mill-rate increase. We need to recognize the local property taxpayers who have fixed incomes, and we feel that 11% is a necessary figure for us.

Specifically, OPSBA would recommend that the government allocate a significant portion of the operating funds for education to the basic per-pupil grant of the general legislative grant program. Essentially, this is needed to rectify the gap between the real cost of education and the recognized or the ceiling expenditures that we receive through the GLG. I think it is important to note that the underlying principle in this request is one of equity. We need to have equity of opportunity and to equalize the funding across the province.

A second recommendation for the GLG is that OPSBA asks that adequate notice and a phase-in of all potential changes to the 1991 GLG program occur so that we do not get any major surprises.

Another area that is covered by the GLG is English-as-a-second-language funding. Currently, the established program financing is that federal-provincial mechanism where costs are shared to deal with every language education need of our immigrant groups. This funding essentially is focused on post-secondary education. The public school boards are playing a significant role in the language instruction for both the adults and the children in our school system. and we must have access to these federal-provincial funds.

As a Metro trustee, I would like to relate this issue particularly to what is happening in Metro. Metro is currently receiving 25% of the total immigrant population that is arriving in Canada. I have a school in my area which for the past five years has had an immigrant population of between 75% and 80%. At the beginning of the last school year, out of that 400 school population, there were perhaps 25 Somalian refugee children. By Christmas, that figure was over 100 kids. So 25% last year, and the enrolment is changing all the time, but those Somalian refugees represent between 30% and 40% of the total school population.

The majority of those students are in the primary grades, so you have kindergarten classes, grade 1 classes, where out of 20 kids, 10 or 11 of them are Somalian refugees. You are dealing with a population that is not only suffering from the ravages of war, but young children who are tribal, nomadic, a desert people that come from an oral tradition where not only do they not know how to read and write, their parents are not familiar with the written word in their own language. It is a critical issue and it needs to be addressed. Certainly in terms of Metro, no matter what the funding has been, we receive nothing to deal with these extraordinary expenditures.

Another issue that I would like to raise is pay equity. OPSBA is very pleased to hear that the government is recognizing pay equity affecting some public sector employees more than others. I do not know whether there has been recognition that there are extraordinary costs for school boards, that some school boards are affected certainly by pay equity arrangements more than others, but should the elementary teachers achieve their current objectives, there will be significant impact across the province. We are asking that the extraordinary pay equity costs of school boards be funded from this fund, as opposed to the general legislative grant offered by the Ministry of Education.

The final area I would like to talk about is cash flow, and there are two areas of cash flow. One is from province to school board -- and I will try my best since I have never really had experience with that kind of cash flow. Specifically, we are asking for changes in the way the money flows to us. We would like 25% in the first three months and elimination of the 7% holdback. It should be noted, I think, that as far back as 1985 with the Macdonald commission, it was recognized that school boards need to have the funds transferred from the province on a monthly basis as expenditures are incurred with, particular emphasis on the first three months. Provinces can borrow money at better rates and there is a net reduction in public expenditures.

What we are really looking to do is to help our local property taxpayers, and I am sure that is the direction that this committee and this government also would like to follow.

The second area of cash flow issues is from municipalities to the school boards. I am not sure of how many are former trustees here or how many are former councillors, but OPSBA would ask that property taxes be transferred to school boards as they are collected. We are responsible for levying the taxes, we are accountable to our taxpayers. We should have access to those dollars to spend them as efficiently and as effectively as we can.

Now I would like to turn it over to Nancy Bentley.

Mrs Bentley: Thank you. I want to just speak briefly to another aspect of property taxes and then to concentrate on several issues with respect to the capital funding of school boards.

Payments in lieu of taxes, both at the provincial and the federal levels, are an issue of considerable concern to public school boards throughout the province. The properties of the federal government and the provincial government do not pay property taxes on the same basis as do other properties, but pay instead payments in lieu of to the municipality. Some of these payments in lieu are shared with the school sector and others are not. Basically, at both the federal and the provincial levels, the only payments in lieu of that we receive are those that are connected with residences or tenant-occupied properties.

For example, at the federal level, we do receive the payments in lieu for defence properties and residential properties owned by the federal government. At the provincial level, we have a similar situation. For example, under section 160 of the Municipal Act, the province is paid $75 per bed or student in institutions such as correctional institutions, schools and hospitals. These are not shared with school boards, and yet the school boards are providing services to all these properties.

Another example at the provincial level is property owned by Ontario Housing Corp. For those tenants, we do receive those payments in lieu of. The Macdonald commission identified this inequity of the property tax policy and recommended that the government of Ontario require that all payments in lieu of taxes be shared equitably among school boards and municipalities.

In 1982, a very long time ago, the sum of school boards' lost revenue through not receiving their fair share of all payments in lieu of was estimated then at $120 million. So it could represent a considerable revenue for school boards, and we feel there is a good reason to rethink these existing policies because payments in lieu of really are a replacement for property taxes. The school boards and municipalities are funded on the basis of property taxes. So OPSBA recommends that all payments in lieu of taxes, federal and provincial, be shared equitably between school boards and municipalities on the basis of their respective mill rates.

Another situation exists around telephone and telegraph taxes. The Municipal Act provides for the sharing of telegraph and telephone taxes in the jurisdiction between a municipality and a school board. However, in many areas of the province, such as the north, there is not municipal organization but there is, however, a school board.

Last year, again, an estimate of $2 million a year in local revenue was paid to the Ministry of Revenue and does not benefit the local school boards at all. Those payments go directly to the Ministry of Revenue. So we do recommend that the Provincial Land Tax Act be amended to enable the equitable sharing of taxation from telephone and telegraph with the local school boards in those areas without municipal organization, which would again mean a considerable revenue would flow to school boards, which we believe should rightfully be shared with them.

The capital needs of Ontario school boards have been rapidly escalating over the past five years, as I think most of you recognize. The past provincial government, in recognition of this need, did commit $1.5 billion over a five-year period. That meant that $300 million was made available to school boards since 1989.

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In spite of that financial contribution, there remains a considerable backlog of need for new schools, permanent accommodation to replace portables, and particularly renovation. More than 20% of schools in Ontario are over 50 years old.

A good portion of the capital allocation grant program is going for population growth. As you are well aware, in the growth areas of the province much of the capital allocation is being given to those boards that have growth problems. This has added in great measure to the backlog in renovation capital that is required by other school boards.

We would like to point out that there is a direct relationship to the lack of receiving capital allocation by those boards that particularly need it for renovation or replacement schools, because in many cases the students are being bused across very large areas of counties and municipalities and the cost of that transportation is increasing your regular operating expenditures. The recognition of the capital needs would alleviate some of the operating expenditures.

There is a chart included with your information that just illustrates the needs as they exist. You will notice at the bottom of page 16 -- the site purchase and new pupil places; that is, the need for new schools -- the dollars that were allocated in 1990 were $254 million. The school board requests were in excess of $1.1 billion. I think it is only fair to comment that that really probably does not represent the full extent of the need because school boards have to be very careful in justifying a need and are extremely aware of the budgets and the mill rate that they have to pass on as a result of these expenditures.

Then if you look below that at renovation and replacement, the dollars that were allocated were $42 million and the requests were $330 million. In that area in particular, you may be confident that the needs are much higher, because school boards are not able to pass on any mill rate to the local taxpayer. As you know, last year, most of the mill rates across the province were in the double-digit region, so that represents the very minimum of renovation allowances that are needed. In other words, only 12.8% of the projects requested were funded. That gives you a pretty quick picture of the needs of the system.

OPSBA did appreciate very much the five years of government capital funding that was provided, the $1.5 billion. That will be completed in 1994, and we would very much like to see this government continue that practice. It provides for a much more efficient and effective way of school boards managing their resources and in the end is better for the local taxpayer.

The recommendation then is that OPSBA recognizes the past provincial government's contribution to school capital funding and recommends that this government enhance and continue the commitment to multi-year capital planning beyond 1994.

The $700-million capital job creation fund was certainly a welcome announcement from the government. We feel that it was an extremely good use of the property taxpayers' money because it will create employment in regions of the province that are hard hit by the recession.

We are aware that government announcements will be forthcoming as to the allocation of the $700 million and it is naturally the hope of the education sector and the public school boards that this significant allocation will go to school capital and renovation.

We understand that 1991 is going to be a very difficult year, but we would like to recommend to you the continuation of the job creation fund, as it will continue to provide employment for those hard hit by the recession and it will address the issue of school board capital funding for much-needed capital projects. It will be a win-win situation for both our students and our citizens.

OPSBA urges the provincial government then to allocate more dollars to the job creation infrastructure fund in the upcoming 1991-92 provincial budget for public infrastructure, which would include school capital.

The other aspect of capital funding is the program itself. As you know, the ministry assists school boards in the financing of their capital projects. It includes new schools, site purchases replacement and, as I have said. renovations. At present, the approved cost for a capital project is at the average rate of 60% for new school sites and 75% for other renovations.

We feel that the present capital program is inadequate to meet the needs of communities today. We are not speaking just to the adequacy of the funding to be provided to boards of education, but also to the actual structure of the program itself. There are several areas where the policy issues need to be addressed, we feel, in a comprehensive review of the approach to our capital grant program.

I would just like to draw attention to several of those issues. One key area is the allocation process by which funds are made available to boards and the criteria that are used in granting those allocations.

Prior to the allocation process, boards of education spend considerable time and energy and dollars in making proposals to the government for these capital allocations. After the allocations are received, it is very difficult for boards of education sometimes to determine why their allocations were not received because the criteria are not established in such a way that the boards can readily associate the allocations when they are given with the criteria. There is a need to have that thoroughly reviewed and, I think, for all boards of education to understand how the criteria will be applied and be readily able to observe that after the fact.

There is a continuing need for review of the policy for the ministry's funding criteria of rated capacity and operational capacity, which certainly do not gibe. In terms of the rated capacity for schools, it is impossible for us to load them at that level, and now especially with the last government's initiative of lowering the pupil-teacher ratio in grades 1 and 2, this does not relate to the way school boards are funded for the capacity of the schools.

The permanent rated capacity that is now acknowledged by the ministry capital plan is 90% of 35 students in a classroom. Yet in grades 1 and 2 we only have 20 children, so we are funded at the 90% of 35 students. I doubt if many boards have over 30 in their classrooms or wish to have, and in grades 1 and 2 we are obliged to have 20, so the funding criteria of rated capacity need to be reviewed.

We would like to see more flexibility that would encourage innovation through lease arrangements and shared community facilities. I just speak briefly to that. The green paper on finance in 1988 encouraged "innovative methods" for funding education, yet the ministry guidelines and the Education Act do not provide for such innovation.

We would like to see more flexibility for developer and school board agreement and multi-year planning and financing and leasing agreements. While these have been encouraged in the green paper, the legislation does not permit that kind of flexibility for school boards.

Another area is that joint projects should be encouraged with coterminous boards and with local municipalities and community colleges. This in fact has happened in Perth county, Etobicoke and Elgin county. It would be appreciated if ministry guidelines could be forthcoming with respect to the sharing and joint projects with other school boards and municipal bodies.

To sum up then, OPSBA supports the Ministry of Education's review of the capital grant program but does urge consultation on such key policies as the funding criteria, the allocation process, permitting flexibility and innovation and providing guidelines for that.

Child care capital is another area in which there is some confusion. While it has been indicated that school boards may provide child care or make provisions that it be provided within the school system, the funding capabilities continue to be inequitable. Boards that are building new schools or purchasing new school sites can do and provide space for child care. Boards that are not in a growth position at the present time have no funding and with the rated capacity have no possibility of putting child care in the schools. The whole area of child care capital needs to be examined and clarified for everyone concerned because at the moment there is considerable confusion.

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Our last recommendation is that the Development Charges Act has not so far provided the funding for school boards that we had anticipated, or that the previous government had anticipated, I should say. I had better clarify that one. Because this funding is not forthcoming or we are having great difficulties with it, due again to lack of clarification and procedures or progress in that area, we would like to recommend that the provincial average support rates for capital funding be raised to the 75% provincial average from the present 60%. OPSBA recommends that in the 1991-92 provincial budget the government include an announcement that school capital projects will be funded at a 75% rate of grant.

The Vice-Chair: Since we have gone into 30 minutes just on the presentation, let's see if we can get one question from each person who has his name down. Mr Sutherland is first, and then Mr Fletcher and Mr Phillips.

Mr Sutherland: You said that you would like an 11% increase in the GLGs for this year and you said that that would probably mean a moderate increase in the mill rate for people. I am wondering if you could be a little more specific in terms of what type of real impact that would have for this upcoming year, and looking at the issue in the longer term -- certainly the Minister of Education was here yesterday and talked about the commitment of moving back to the 6040. Before that can occur, I guess you have to get both levels to agree to the 100% level. I am wondering if you could give some indication as to where you think municipal increases would be even when we got to a 60 40.

Mrs Bentley: Yes, I think that we all recognize that if we are talking about relief for the mill rate, then it is not a solution simply to provide more funding for the education sector, because in all probability the municipal sector would then move into some of that space created. I think what we are saying is that the Fair Tax Commission will be looking at the whole area of municipal-provincial programs and finances and that school boards are major players in this picture. Within municipalities, school boards invariably are collecting over 50% of the taxes and, as such, we have to be players and major players in the review of these situations, recognizing that there are not simple solutions in the long term but that there are some things that we can do in the short term.

Mr Sutherland: Could you just comment on the 11% that you were asking in increases in GLG? You said that that would probably mean a moderate increase in the education portion of the municipal bill. I was wondering if you could be a little more specific than just "moderate."

Mrs Bentley: There have been some fairly reliable estimates that school boards' budget costs will increase by approximately an average of 14% this year, so when we say an 11% increase in the transfer payments, we are recognizing that this is a difficult year for all governments but that an 11% increase in the transfer payments would enable school boards to hold that mill rate increase somewhere below what it was last year, when in many municipalities it was certainly well into double-digit increases.

Mr Checkeris: I think it is fair to say that when we talk about 11% across the province, there are municipalities and areas where school boards will get much less than 11% because of their industrial-commercial assessment, etc. Other school boards will require 14%, 15% or 16% to meet that average 11%.

Mrs Nowina: If you take a look at how that 14% or 11% is broken down, we are dealing with such things as the impact of GST, mandatory junior kindergarten and lower class sizes, the health tax and enrolment increases. They are pretty basic things that we are talking about that represent that 14% increase.

Mr Fletcher: I have a question and maybe a comment or two. First, let me say that I have always supported OPSBA, in more ways than one. I was just wondering, does OPSBA believe that lot levies are the solution to the funding situation in Ontario? I will ask Ernie that one if you like.

Mr Checkeris: On the one hand or the other hand -- do not ask me how you want me to fund school boards; I am quite radically different from others -- but lot levies are just another way of transferring the cost to people. It is another tax, as far as I am concerned. The policy committee has a different opinion. We have mixed emotions across the province with respect to lot levies or development charges or whatever you want to call them.

Mr Fletcher: I have one other statement and that is that I agree that we should be working together with OPSBA as far as consultation is concerned. but we had a group in yesterday. the Ontario School Board Reform Network, and I know they were also members of OPSBA, and they tout a different tune than what OPSBA is touting today, this splinter group.

Which group do we listen to? Do we go with the reform network and say, "You are the people we should listen to and you can consult"? I know that some members across from us were very impressed with their presentation. I was not, really. I thought that OPSBA should be here giving us a presentation and you are the group that we should be working with, but if you are acting together, how can we do anything about it?

Ms Hillhouse: I think the president is going to comment.

Mr Checkeris: Trustees, like everybody else, are humans and we do have dissident groups. I suggest to you that that dissident group is dissident within its own school board and I suggest to you that they do not represent those school boards that they are talking from and it is rather important to us that you recognize that. The reformers are part of OPSBA and we have answered their questions. We have had workshops to indicate the governance as we see it, as we believe the Education Act permits us to do it, but that is not going to stop them. It is still a free country and I respect their opportunity to do it.

Mr Phillips: This is a subject of considerable interest to me because. as you probably know, I used to be chairman of the Metropolitan Toronto School Board. I would say that of all the issues that affected me in the election, this was probably the most significant one. Frankly, I think several of our members were defeated on it. I think a lot of property taxpayers are looking for the fulfilment of the commitment that was in An Agenda for People on the 60% funding.

My question really to the group is twofold. We heard from the minister yesterday that included in provincial support are capital expenditures and teachers' pensions. On page 12 of your document, The Sixty Percent Solution, at the bottom you have a table there essentially saying that we should get back to the 1975 split between the province and local. Could you just give us some indication of what pension and capital funds would be in the provincial support in 1989 and in 1985?

Mr Checkeris: Maybe Ron Sudds could answer that one. I do not think I can.

Mr Phillips: The level of pension and capital in that $4,129,000,000 and $1,629.000,000.

Mr Checkeris: As you know, it was a few years ago when they incorporated the superannuation into the education budget and claimed that they were paying more than 40%.

Mr Phillips: I think the minister yesterday said that those numbers are in the provincial support. I am just trying to get some idea of how far we have to go.

Ms Hillhouse: I really do not know, Mr Phillips, but my understanding is that in 1975 probably they were not.

Mr Checkeris: They were not. I know they were not.

Ms Hillhouse: One can play with figures and one can get hung up on 60%, 50%, 70%. Our basic question is, 60% of what? For us to be throwing numbers back and forth between school boards and the provincial government, between municipalities and school boards does not solve anything. I think we go back to the basic questions we have raised: What should education be doing? How much will it cost to deliver those kinds of services?

Mr Phillips: They are not in there?

Mr Sudds: They would not have been included prior to 1988 is my understanding.

Mr Phillips: And they are in the 1989 figures?

Mr Checkeris: They probably are.

Mr Phillips: Pension funds and capital?

Ms Hillhouse: Yes.

Mr Checkeris: I recall the Minister of Education standing up and saying that the boards were receiving more than 40% and indicating that superannuation payments were included. They were not before.

Mr Phillips: Let me just have that confirmed. The reason is that it is the way that either property taxpayers pick it up or provincial sources of revenue pick it up.

Mr Checkeris: That is right.

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Mr Phillips: I think it is important. The other one is the commitment of 20% funding to the Metropolitan Toronto public board, which was major in the campaign. How much revenue is the Metro board expecting as a result of that commitment? I gather right now it is zero. What sort of impact might that have on the property taxpayers?

Mrs Nowina: I think from a Metro perspective, if I may digress a little bit from OPSBA, there is also a question of 20% of what and what that 20% means for Metro. We are very cautious in terms of that particular promise, because if we are going to get 20%, we may have to give and that really becomes an issue of provincial pooling of --

Mr Phillips: Was that the condition of the promise? It was not during the campaign.

Mrs Nowina: No, that is a concern that Metro has in terms of that particular promise.

The Vice-Chair: If you contact her after, maybe we could get all the answers.

Mr Phillips: No, these are fundamental --

The Vice-Chair: Yes, yes.

Mr Phillips: I mean, 20% of Metro costs is $400 million, I think, and that was a commitment made during the campaign. We are going to have to give the Treasurer some advice on how he can carry out his commitments or not. I am just trying to get an idea of what those commitments mean.

Mrs Nowina: I believe on Metro budget -- we have not formulated -- we are talking between $1.5 billion and $2 billion.

Mr Phillips: That is the range you are at right now?

Mrs Nowina: Yes.

Mr Phillips: Are you not into your fiscal year?

Mrs Nowina: We are into our fiscal year, but we have not brought back our target budget.

Mrs Cunningham: It is a pleasure to see all of you before the committee today. Interesting to note that many of the things you are asking for we were asking for in 1973, and some of the recommendations at the back will just take the political courage or the bureaucratic courage to change them, because they are very simple when it comes to some of the recommendations you are making. I mean, I could be very specific; I starred some of them at the back, 7, 8, 9 and 10 for certain just take the political will to get the work done around this building and sometimes not much happens.

I would like to ask a question with regard to process, because I am particularly interested in who will be advising this government, and not only the political arm of the government but the administrative arm of the government. You talk in your first two recommendations about your hope to be part of the Fair Tax Commission, either by way of the commission itself or a subcommittee of the commission. Then I think I read somewhere in this brief that you talk about having a concurrent discussion with regard to funding education.

I think that Mr Fletcher raised a good point. I mean, whom does one listen to any more? But I would hope that the public school boards of Ontario would have a very real voice in these deliberations. So would you take the time to very clearly tell me the process that you want. I do not understand the concurrent deliberations and the purpose of them.

Ms Hillhouse: Yes, I would be happy to answer that. What we are talking about here are basically two parallel groups: the Fair Tax Commission, which will be examining all areas of taxation and responsibility, accountability within the province, and at the same time school boards and the provincial government -- school boards through the various trustee organizations, the provincial government and an interministerial group looking at the basic questions of policy; again I say, what should school boards be accountable for providing? -- and then feeding back and forth that information into the Fair Tax Commission. Because it seems to us that the issues that have to be decided around what kind of education, what kinds of systems, what kinds of programs are we supposed to be delivering, go well beyond issues of taxation, go into issues of equity. go into issues of relevance to today's world, go into issues of society's needs to date. We must have those questions being answered at the same time.

Mr Checkeris: I think, if I may as well, we have offered from the very beginning with the new government in place the opportunity for them to take advantage of the practitioners we have in the field. We have a lot of topnotch people in the field who are both in the educational area as well as in the school finance area and their experience is very valuable. We have offered that partnership to the government. We would like very much to say to our people that government has co-operated, it has listened to us.

We know you have to make up your own minds: that is okay. We do not want consultation by letter saying, in effect, "We've been informed that the trustees have been told," and then we hear about it as a first reading of a bill. We want to be actively involved. We have the potential; we have a large staff that is ready for your service.

There have been a lot of unanswered questions here. I am prepared to offer you those people's facilities now. Phone them, use us, call trustees and we will be able to meet with you at any time. We want to make this a fair thing because, after all, our function is to educate children and as somebody said, "That is the future." It is the only future we have, regardless of how we look at it. If we do not do a good job, we are failing them.

Mrs Cunningham: A quick supplementary: Have you had discussions with regard to this process with the minister and have you had any indication that she is going to respond positively to your request?

Mr Checkeris: In my many years as a school trustee, it is the first time that I have ever been able to sit with the Minister of Education and the Treasurer of Ontario and their staffs and be heard by them. I have never had that opportunity before. It was an excellent discussion and I suggest to you it augurs well as long as we continue with that process.

Mrs Cunningham: So you have great hopes.

Mr Checkeris: I have great hopes.

Mrs Sullivan: As the next group is coming before us, since we are expecting the Treasurer to be with us on Thursday, I wonder if we could make a second request to Treasury officials to provide the information that was asked of them when the hearings began last week.

The Vice-Chair: Okay.

COUNCIL OF ONTARIO UNIVERSITIES

The Vice-Chair: The next group we have here is the Council of Ontario Universities. Welcome to the standing committee on finance and economic affairs. Mr Prichard, would you introduce yourself and your colleagues.

Mr Prichard: My name is Robert Prichard. I am the president of the University of Toronto, but I appear here on behalf of the Council of Ontario Universities and not just on behalf of my own institution.

The Council of Ontario Universities is a voluntary organization representing the 16 universities of Ontario. Its council is made up of the executive head of each university, that is, the president of each, and one academic colleague from each institution, that is, one member of the professoriate from each university. So the council has 16 presidents and 16 professors on it.

Joining me today in the presentation, on my immediate left is Professor Ann Kittler, who is a professor in the school of business management at Ryerson. She is a specialist in computer auditing and computer information systems. On my far left is Grant Clarke, who is the deputy to the executive director of the Council of Ontario Universities. He is appearing in the absence of Dr Monahan, who would normally be here. On my right is Edward DesRosiers, who is the director of research for the council.

You may well ask why I would appear on behalf of the council. I am not the chair, I am not the vice-chair. Indeed, I am the rookie member of the council. I appear because the chair is unfortunately overseas and the vice-chair is in Guelph today and they asked if I would come and speak for them, but I do so, I openly acknowledge, as a rookie, not having appeared before you or watched others do it in advance and I seek your indulgence.

The brief we put before you is entitled A Recovery Plan for Ontario's Universities, and each of you has a copy of it. I do not intend to go through it line by line. I would be delighted to take any questions on it, but I thought what I could probably do most usefully is speak to it rather than try to take you through the pages of the brief.

The origins of this brief and of this plan lie in what I would describe as the current situation of Ontario universities, which I believe is both a situation of crisis for Ontario's universities and a developing tragedy for the province and for the country. Those are strong words, but I mean them.

I believe that the current situation facing Ontario's universities is the worst in the contemporary history of Ontario universities, that in the past 20 years there has never been a situation of such serious harm being done to the Ontario university system and that the Ontario university system, relative both to other provinces of Canada and, equally important, internationally, is falling and falling fast.

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The tragedy in this is, I believe, in doing what we are doing to Ontario's universities, is that we are shortchanging the people of Ontario, particularly the young people of Ontario. We are shortchanging them badly. We are doing harm to the universities, harm that it will take a long time to undo unless we move rapidly to arrest the decline.

You may well ask, why do I say Ontario's situation is particularly bad? I actually think the situation in Ontario, again to use a strong word, is now approaching a situation of almost scandal in terms of the support for higher education in Ontario relative to other Canadian provinces. Ontario, the most prosperous province in the country, at present gives support to its universities, in per capita terms for students, that ranks ninth out of 10 Canadian provinces.

That strikes me as extraordinarily shortsighted, as an approach for Ontario, as the industrial capital of the country, as the economic engine of the country, to shortchange the higher end of education in Ontario to an extent that the underfunding has reached the point where Ontario would have fallen to ninth out of 10 Canadian provinces.

The comparison, if you look beyond Canada, is even worse. Not only is Ontario in this situation relative to the other provinces of Canada, but the position of Ontario, which of course is in competition with leading jurisdictions south of the border, in that competition is even worse. To take an institution like my own, a public institution offering a full range of degrees including doctoral degrees, the funding for the University of Toronto is now 40% less than -- and listen to the reference point -- public state universities offering doctoral programs. So compared to the average across the United States of public universities -- not Harvard and Yale and Princeton and Chicago and Stanford, not the private universities -- offering doctoral programs, such as Michigan, Berkeley, Ohio and Penn State, Ontario's universities, like mine, are now 40% less funded per student than those universities.

No matter how imaginative we are, no matter how creative we are, no matter how hard our faculty and staff work, it is simply not possible to compete successfully with those kinds of conditions against us.

What harm has been done? I think the harm that has been done is devastating to Ontario's universities in terms of the quality of the educational experience offered our students. Again let me speak of my own institution. We have just developed a five-year plan to deal with what are now the largest deficits in the university's history. That plan involves taking out 150 professors from the professoriat. Removing 150 professors involves cancelling Italian and German on one campus, Spanish and native studies on another. It involves cutting program after program after program across the university as we shrink the professoriat by 150 members, at a time when we are, of course, at all-time historic enrolment levels.

The demand for university in Ontario has grown and grown not just among young people, but across people of all ages, full-time and part-time, undergraduate and graduate, at the same time we are ripping out of the faculty of our university 150 people. That in my view is extraordinarily shortsighted and is doing real, serious harm to the quality of the educational experience of our students.

There is another concern, and I think -- I do not intend to be provocative in citing it -- it actually worries me a lot in terms of the fairness of what is happening. There are two dimensions to this. The first is who gets hurt most in terms of what gets hurt most at the university when this happens. What gets hurt most are initiatives to try to get better -- our initiatives, for example, with employment equity for faculty. If we cannot hire, if all we are doing is letting people go, we cannot change the gender balance and a racial and cultural balance in our faculty. We can have the most elegant of employment equity programs, but if we are not making appointments we cannot change the makeup of our faculty.

Similarly, if we want, as we do want, to strengthen our work in the area of aboriginal peoples within the university, we simply cannot do that if, instead of taking new initiatives, all we are doing is ripping out programs. The most threatened are the most vulnerable. It is the newest and the most vulnerable ideas that get hurt first as we pull back.

The second problem I have referred to publicly before is, who is it who can avoid the effects of this underfunding? It is those who can vote with their feet. It is those who can afford to leave. The people who can afford to leave the province to get higher education are the ones least hurt. The ones who do not have the option of leaving are the ones most hurt. So I cite a school with which I am familiar, a private school in Toronto where over the last 23 years we have gone from less than 3% of the student body leaving Canada for higher education to now a figure well over 20% and heading for 30% of the graduating class leaving Canada for higher education. They are doing that because the guidance counsellors and the parents and the students have lost confidence in the quality of education available in Ontario and in Canada, and they are leaving because they have an income and wealth that allows them to leave.

But that is not an option available to most of the people you represent. It is not an option available to the great majority of people in Canada to leave to go to the United States and pay $100,000 or more for an education. That is just not an option available, but those are the people who are avoiding the effects of underfunding and overcrowding. The rest of our students do not have that exit option, and that to me is a particular unfairness, that only the most wealthy in our community are able to avoid the effects of the current policy of gross underfunding.

Having said all that, I do not think there is really any debate, that is, I do not believe that any of your three parties disagree with the proposition that the past 20 years have led to a situation of very serious underfunding in Ontario's universities. I have met with leaders of each of your parties. Each of them has said that that is his or her position. The current minister has said in the House that it is his position. There is no ambiguity, I do not believe, on the proposition I put before you. The only questions, I believe, are questions about how to turn it around.

The issue is, how do we repair the situation -- not further document the situation, which I say I believe is a source of widespread agreement as to the devastation that is happening, but rather in a difficult fiscal time, in a difficult recessionary time, how do we, with maintaining our commitment to public universities, turn the situation around? That is what the plan for recovery is directed to. This plan for recovery included in our brief has been unanimously adopted by the Council of Ontario Universities, that is, it is supported by the full council and is put forward to the minister, to this committee, to the people of Ontario as a plan to reverse the current decline and give us a much brighter future for Ontario's universities and the quality of education offered within them.

The goals of the plan are threefold, three goals only: quality of education, access to higher education and equity in higher education. Those are the three goals: quality, access and equity.

The nature of the plan is a multi-year, four-year plan to move Ontario's universities back on to a path which will allow them to be competitive with the best institutions in Canada and in due course compete more successfully with the best institutions beyond Canada's borders. It involves a base increase in the budgets for Ontario universities in total, in aggregate, of $410 million spread over four years. So it is just over $100 million a year for each of four years to move Ontario's universities first to the national average of university support and then modestly beyond the national average by the end of the four-year period.

How is it to be financed? This is the most difficult part for all of us in the university system, and in saying this, it is the most difficult not just for university presidents but it is the most difficult for students, for staff, for faculty: How, in a difficult time that we all face in the province, should this be financed?

It is our judgement at the council that, while the best way to finance it would be to increase the base allocations in the MCU budget for $410 million, in the circumstances we find ourselves in in the province, we are prepared to support accomplishing this through a combination of increased budgetary support for MCU and increased contributions by students. We say that with no particular pleasure, no particular enthusiasm, the latter part of that recipe for calling on the students to carry a heavier burden, but it is our judgement on balance that the quality of education of our students is so critical and that the circumstances of the province are so tough that it is the only option realistically available to the government at the current time.

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Having said that, I should hasten to add that the structure of our proposal of increased tuition fees and increased government grants is designed so as to not only protect current levels of access in the universities through improved financial aid for students, full-time and part-time, but more than that to increase the penetration of universities into those communities historically underrepresented. That is why we call for an equity penetration program to reach out into those communities like the black community, like the lower-income communities of Ontario, which are historically badly underrepresented in Ontario universities, to reach out affirmatively with the high schools to bring those people into universities.

It is our judgement that despite the increase in tuition that we recommend, we would end up with a system of much higher quality, of at least as good accessibility and of greater equity in terms of the representation of students within the student body of the Ontario universities.

Just let me close by indicating the reaction we have had to our plan since we released it about two months ago. There is, I believe, unanimity among the Ministry of Colleges and Universities, the Ontario Council on University Affairs, the government's advisory on this subject, the confederation of faculty associations, the federation of students, the staff associations, the alumni associations, the board chairs. Everybody, I believe, agrees about the need, about the amount of the need and about the urgency of the need. I believe there is complete common ground in that respect and I believe that common ground is also shared by both the opposition parties.

The only point of serious difference that has arisen is the question of how to finance it, and that is a difficult question. That is, it is a difficult question to deal with the fairness. Is it an improvement in fairness, as I believe it is, to ask the students in the current circumstances to share a heavier burden? That is a point on which there are legitimate differences of view, but that is the only point of difference in all our discussions with the government and with others as to the wisdom of this plan.

What the minister has done is he has convened a special advisory group representing all the constituencies I referred to. We are working hard. We are looking for alternatives. We are trying to find solutions. We are trying to find ways that, as a matter of urgency, no later than the budget which comes down this spring, put in place a multiyear plan for the recovery of Ontario's universities.

Let me just close by saying that I believe the stakes are large on this. I think we have gone too long. I think we have let the situation go too long, to a situation where it should be a source of embarrassment to Ontario to find itself one from the last in Canada and way below our competitors in the United States, at a time when we have committed ourselves to open North American and international competition, at a time when the quality of mind and the quality of education and the quality of infrastructure will be so important for Ontario, not just in terms of the economic welfare of the province but also in terms of the cultural and social welfare of the province.

Fortunately, and this is unlike some of the other problems you are confronting as you have these submissions, the amounts of money involved in this case are relatively small; that is, $410 million. Fortunately it would make a lot of difference and is not very much money relative to the magnitude of the other issues you face. Indeed under our proposal only two thirds of that comes from public funds. For a relatively modest investment, a large and important increase in access equity and quality can be achieved.

I am very grateful for the chance to have put that plan before you. With the chair's permission, perhaps I could invite my colleague Professor Kittler to speak for a couple of minutes, reflecting the perspective of a member of the professoriate, who are of course among those who are carrying the burden of the current situation.

The Vice-Chair: I might remind you that you have about 10 minutes.

Mr Prichard: Perhaps she could speak for two and then perhaps we could take a few of your questions.

The Vice-Chair: Fine.

Dr Kittler: I would like to speak, with your permission, on those three points: equity, quality and access. I would like to start off with equity. What I mean by equity is the students who come, their mix and distribution, as well as equity in terms of faculty and staff who will be there when the students come in to provide role models for these students. I would agree with everything Professor Prichard said concerning -- we are trying to get particularly at the historically underrepresented groups.

Research very solidly indicates that the decision to go to higher education is made much earlier than grade 12 or grade 13 -- way back early in high school, if not before that -- and that one of the most significant factors influencing this decision is the attitude or knowledge of parents. That is why we have earmarked $25 million, starting off at year one, that we will ourselves go back into the high schools and talk to the students. We hope that we can set up programs where we could convince them what they have to gain by a higher education.

In terms of the equity in terms of hiring, more than a year ago we at Ryerson made a decision that of the next 72 faculty retirements, more than 52 of those replacements would be women and another significant number would be from minority groups where possible. We got an award for this policy. The irony of it is that this policy is not being implemented simply because nobody is being hired. When faculty retire they are not being replaced. When faculty leave for other reasons they are not being replaced by any full-time faculty. Therefore, we have some short-term temporary positions. Therefore, this really disfranchises the new people we would like to hire, whom we cannot hire.

On one other issue regarding equity, we have several disabled students with varying kinds of disabilities. It is expensive to deal with these students. We are working very hard on this issue. But we have difficulty trying to get these students through to enable them to finish university because of the services they need.

I could give you a specific example about a student we have who is blind. He has a voice synthesizer and we are using a special program called Chem-CAD that the students need to use to work competently in chemical engineering. This student cannot use it because his voice synthesizer takes up too much memory within his own computer, and within any computer we can provide him, and we do not have the opportunity to do the research to provide a similar package for him that would not take up this kind of resource that we can provide him. So he has to do something else. That is just one simple example.

One last point, since I know we are tight for time, is in terms of quality. I have been teaching for more than 20 years. I have seen the quality go down and down, but for the last two years it has been an order of magnitude worse. I teach in some classrooms that were not designed for classrooms. They have posts in the middle that literally obstruct the teaching process. The students cannot see the board. I am a very good teacher. I work very hard at it and it really bothers me.

I have students who have no desks to sit at, no chairs. They are afraid to go to the washroom in case they come back and the seat is gone. In some classes it is that bad. I am only a certain person. The number of students I must deal with has way increased. No matter how much time I give to it, the time I spend with students individually has way decreased. The type of research the students can be involved with, and we are working hard at that at Ryerson, is being seriously hurt, as it is at other universities. Teachers are giving multiple-choice exams where it should be, in some cases, essay-type exams for the appropriate course. But the time to do the marking and other things has been significantly reduced.

I honestly believe my students really are getting less quality than before and we are working hard at it.

Mr Prichard: That completes our submission.

Mrs Sullivan: I have heard both Dr Prichard and the other presenter, Mrs Kittler, present before, and as usual you speak with great passion. I want to get right to the nitty-gritty of your proposal. As I understand it, what COU has put forward is that the ministry continue with its $2-billion commitment to the university sector, that $70 million a year be committed for each of four years from the ministry, plus an additional, in round terms, $35 million a year which would come from students, for a period of four years.

I look, however, later into your proposal and I see a discussion of a trust fund and a suggestion that the funds would become part of the ongoing funding base of each institution. Basically, are you not asking in the beginning for an additional $100 million added to base each year?

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Mr Prichard: The proposal is that we in effect ramp up at $100 million a year over the four-year period. The cumulative effect would be that at the end of the four-year period we would be $410 million higher than we are today in real terms. Over the course of those four years of recovery, the funds, both the tuition-fee funds and the government funds, all go into a trust fund to be spent for these three purposes alone -- equity penetration, accessibility maintenance and then quality -- to be spent only by approval, the funds only to be spent with approval of a committee including students at the OCUA on it, and at the end of that period of recovery, then that new base would go into the general base of the university.

The commitments that will be made on those, the new appointments, the new programs that will be in place, will then be in place in the university. So as we ramp up, the commitment of those funds will take place into agreed-upon areas for quality enhancement beyond equity and accessibility. But yes, at the end of the four-year period, the base of the Ontario university system would be $410 million higher than it is today if one includes tuition-fee revenues as part of the base, which is a slightly different terminology than historically has been the case.

We are suggesting the revenues available to the universities would be $410 million higher than would otherwise be the case.

Mrs Sullivan: But in annual commitment from the government, you would continue to be looking at a similar portion in annual operating transfers?

Mr Prichard: After the four-year period?

Mrs Sullivan: The end of the recovery period.

Mr Prichard: Once we are at the end of the four-year period, our expectation is that the government would return to the basic commitment, which is to take the advice of the OCUA on the amount required the following year to simply maintain current levels of programs in real terms. That is what the OCUA's advice is.

I might say that the $410-million calculation is not our calculation. That is not a number invented by the universities. That is a number simply taken from the OCUA's own advice since 1977, as its advice has not been followed.

Mrs Sullivan: I understand that. The question of capital has been raised by student groups that have been before us and you do not include a discussion of capital in your request. Do you see, once again, new demands in capital over that four-year period of time which you call the recovery period?

Mr Prichard: That is an important question for us and I want to give only a tentative answer because we have only just begun discussions as to how to finance the capital side. One of the difficulties of overcrowding for our students has been a lack of capital. It is our sense that the new government is committed to a program of capital expansion which would include contemplating financing it on a different basis, that at this time, with the need for expansion, we should be considering other instruments for financing it rather than just annual grants, and that we should be considering debt instruments as part of that.

We thought it was premature to put a capital plan forward at this time because it seemed to us that it was in the government's interest to have a discussion which we did not wish to pre-empt by getting out in front with respect to universities when the hospitals and the school boards and others were there. This submission does not address the capital question because we thought it was premature to make such a request at this time.

Mr Sutherland: I want to say I was very impressed by the presentation and it is certainly a very impassioned plea for the plight of the universities. I, too, want to get into the nitty-gritty of this proposal because I have some concerns.

As someone who has put himself through university on OSAP and self-financing, when I look at what you are proposing here, a $550-a-year increase in tuition for four years, that is basically -- I work it out in the first year at least -- a 33% increase in tuition, and on the overall increase you say that the average cost is $7,000 right now, probably over $2,000 extra, so you are looking at almost a 33% increase in the cost of going to university as a whole. That is not taking into account that the other costs outside of tuition are going to increase.

I was very familiar with the Queen's University blueprint proposal that came out last year. At least in that proposal they termed that a set amount of the money should be put aside for student grants. I see nowhere in this proposal where you are saying a certain amount should be put aside. Unless a certain amount is put aside, I do not see how you are going to deal with this question of access, because if you increase at $550 this year, a 33% increase, for someone from a lower socioeconomic scale who has already been planning to go, how is he or she going to adapt to a 33% increase in one year or within two to three years?

Mr Prichard: That is an excellent question. Perhaps I could just address two aspects of it. First, not wishing to avoid the thrust of your question, I believe, as I have heard it, you have misstated our proposal. The proposed increase is $550, but only once. It is an immediate $550 increase; not repeated. It ramps up once by $550 and is not repeated.

Mr Sutherland: I am reading from page 2 where it says "$550 per year."

Mr Prichard: Once it goes up by $550, it stays at that new level, but it does not go up again, so it is a one-time increase.

Mr Sutherland: So basically, this is the Queen's blueprint, except that you are doing it all in one year.

Mr Prichard: We are doing it all in one year instead of spread out over four or five years. But the number is very similar, in this case $550 instead of the $625 proposed at Queen's, so it is a one-time; it is just a correction. As a percentage of the cost of going to university, it is $550 as a percentage of $7,000, so it is about an 8% increase in the cost of going to university, about $3 or $4 a day for a student in class days at university.

On the question of accessibility, the reason we did not put a number is that our position is that the first claim on all the money is to ensure current levels of accessibility. If it costs 20 cents on the dollar, it is 20; if it costs 30 cents, it is 30; if it costs 40 cents. it is 40. We did not want to pre-empt that discussion of the reform of OSAP for both part-time and full-time students and we say the first claim, before a cent goes into quality. is to maintain accessibility.

The reason we did not reserve $20 million or $50 million was that we got estimates from MCU, estimates from OCUA, back-of-the-envelope estimates from other people as to how much was required. Somewhere between 20 and 30 cents on the dollar of the tuition fee increase are the historic estimates. Our view was it should simply be a prior claim before anything is spent on improved quality, so our position is whatever is required is the amount and not some predetermined amount.

That said, I think the shortcoming of this draft of the proposal is that it does not address sufficiently explicitly the shortcomings of OSAP as presently constructed. particularly for part-time students, and our next draft, when it comes out, will much more explicitly address those shortcomings and try to quantify the costs of them. I think the weakness of the document is the explicitness on that. It is not a weakness of intention though. The intention is a complete commitment to maintain the accessibility before money is spent on anything else.

Mr Sutherland: Your university just raised $125 million from a combination of private sector and long-term commitment, I take it, from government.

Mr Prichard: No government funds.

Mr Sutherland: No government funds, all private. Okay, $125 million, that amount of money you raised, is that not going to improve the quality at the university?

Mr Prichard: Absolutely, it will improve the quality. Let me just speak to that. That program announced two and a half years ago was to raise the most money ever raised for any Canadian public institution. hospital or university. It was a five-year program for $100 million. I say this boastfully, because I had nothing to do with it, so you will excuse the immodesty. My colleagues. my predecessor and the volunteers who led that campaign, in half the time, in two and a half years, raised $125 million of private funds.

They did that, though, for capital purposes, which is why, when I had the question earlier from Mrs Sullivan, I held back on that because I think a combination of private support and public support for capital is the appropriate direction to go. But that support is not the support we need for the operating costs of providing a first-class education, for the class size problem we face, for the destruction of the native studies program and the language program and the other programs. That fund-raising is to pay for the costs of the buildings, for the costs of the basic infrastructure within which we have to operate our programs. So it is an enormous contribution, an enormous vote of confidence, in my view, in the importance of quality education, but it is not responsive to the difficulty that we have set before you.

Mrs Cunningham: Professor Prichard, Dr Kittler and others, it is a pleasure to meet you. I have been waiting to do this for some time. As the critic for the Progressive Conservative Party, I have rather made it my business to become as well informed as I can. It was interesting to hear Mr Sutherland's questions, as he was the president of the University of Western Ontario student council and I was his representative, regardless of my party. We had a tremendous debate. It is always nice to see him informed in public. I tried to do it often, but it is coming along very well.

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Mr Prichard: Dr Pedersen speaks highly of him.

Mrs Cunningham: Yes, we are all very careful now, but we do want him speaking for what we all believe in and you are doing a good job today. Having said that, we will continue to have our arguments, but I must say we have agreed from the very beginning on this issue of the tremendous underfunding of universities. If you will forgive me, my questions may seem negative, but they are not. I am very much a supporter, have been for many years and believe in the quality of all education.

But I will tell you what I have heard as I have been doing my digging around with regard to what kind of support, by the way, the government will get from its own administration -- because that is all part of the political process and if we cannot in fact impact upon the bureaucrats from many departments of government and if we cannot get the support of this particular committee with regard to the votes in the House, not only the cabinet, we are going nowhere. Although you have made an impassioned plea today, there are some things I have heard as I try to get myself well educated that do not make me very happy.

One is the same old argument -- and I heard it yesterday from one of your own colleagues who teaches at your own university, as a matter of fact -- that the universities are not underfunded; they are just not well managed. I would like you to speak to that. The other one is that Ontario has to decide what it really wants from colleges, universities and the secondary schools. Who should be doing what? Quite frankly, our great concern is that there are no standards. You can read what I said to your former colleagues earlier today.

So not well managed and no standards, and the third one is the total misunderstanding around how public funds are made. I can tell you, at Western, if we had asked for any money in our private fund-raising for the ongoing operational costs of universities, we would not have got one penny. They are going to pay for what they consider the capital, even for equipment I must say, but there is not one penny for that.

If there is not some match from this government, we will not be getting any more of that down the road because you can have all the buildings you want, but if you have not got the professors and if you have 300 kids in a classroom, which Mr Sutherland very much relates to, people do not even want to contribute to their own universities when they are graduating. Those are from the students.

If you would speak to those -- not underfunded but not well managed, and that we have to decide on standards before we can give the universities any money, which makes me absolutely sick -- if you can in fact speak to those, I think we would very much appreciate it.

Mr Prichard: Thank you. I will try to do so briefly, because the Chairman is looking firmly at me. We greatly appreciate --

Mrs Cunningham: I do not look at the Chairman.

Mr Prichard: He is looking at me, though.

Mrs Cunningham: I know how he looks.

The Vice-Chair: This is very important. We have another group that is coming in for 11:30, not tonight.

Mrs Cunningham: I think it is important for the government to hear what the president is saying here.

Mr Prichard: I will try to do it very briefly, and I am very grateful for the interest you have shown in the problems of the universities at present.

Are we well managed? I am new to management at the university. My own impression would be that there is an exceptional effort being made to live with grossly inadequate resources, that the effort being put out by my colleagues, particularly my administrative colleagues on the staff of the university, is really exceptional.

Can we do better? I do not doubt for a minute that we can do better and that we must do better and we will do better. I think every institution is obliged to do that. Certainly every public institution is obliged to do that to maintain the trust and meet its standards of accountability.

Is there room for improvement? Yes. As I said to my colleagues at the academic board of the university just last week, discussing the taking out of 150 professors from our professoriate -- and I think the weights are about right -- that 5% of it is probably the lack of imagination of our deans and principals and chairs and directors and others charged with the administration of the university, lack of imagination and shortcomings in their effort, and that 95% of our problem at present is simply, by every standard, grossly inadequate resources. I accept the obligation that we must strive constantly to perform and manage as well as can. My own judgement would be that effort is being made and we will continue to make it.

On the question of standards, I do not understand even the claim. My own view is this whole debate is about quality and it is that universities beg for help to allow us to set standards and meet standards that the public and the students reasonably expect us to meet. That is the problem of standards. It is not a problem of aspiration in the university. Professor Kittler speaks to our aspirations of standards for employment equity in the faculty of the university. There is no debate about that. We just cannot meet the standards.

Our problem is a complete incapacity to meet reasonable standards imposed by ourselves, by the public, by our students and standards being imposed on Ontario internationally which we are falling further and further behind. That is the problem of standards in Ontario's universities. We cannot meet our own standards, which themselves are not dreamlike, are just reasonable aspirations for the quality of education we should provide.

On the question of private funds, my own view is that the solution -- and this is not the COU's position yet because we want to have a dialogue with the government, as I indicated -- will lie in matching funds through incentives, working where the private sector and the government work together, through the kinds of programs you are referring to, where we consider the use of debt as well as direct operating grants to do it. In a combination of private and public funds with incentives and with debt, we can probably handle the capital side of the university.

In my view, the number one problem facing Ontario's universities, which is most damaging to the quality, is the operating grant, and that is why that is the sole point of this brief and that is why the Ontario universities are unanimous in putting the brief before you. I am very grateful for your indulgence.

Mr Phillips: I cannot quite understand the numbers yet. I need a little bit of help on that. My understanding is that the grants have been going up by 7%, 8% or 9% a year and that there is the need to increase the grants just to keep where we are.

Mr Prichard: Yes.

Mr Phillips: I would just like to get your feeling on what that is per year. I cannot quite understand the $410 million yet. If you wanted to get to the level right now, not that you think you would like to be at this $410 million, how much incremental grants each year do you need?

I am trying to get some idea of when we know whether we are hitting the target or not. because right now my impression is that whatever grants you have been getting in the last five years, which have been going up at $100 million a year, have done nothing but put you further behind. We are going to have to provide more than $100 million a year just to keep you where you are now, then I do not know whatever the incremental number is, so if you could scope out for us.

The second one has to do with the other part of it, that is, that you are, as I read this, asking the students to pick up relatively a disproportionate share of what they are picking up now. It seems to me that makes it politically more difficult. Did you consider some other alternatives?

I would like to get those two things.

Mr Prichard: In terms of understanding the past, the key thing that has happened in Ontario in the past five years has been a massive increase in enrolment in universities, not just of young people but of all age groups. So in reading the grants and understanding why Ontario would still be ninth out of 10 in Canada, you have to take account of this massive enrolment increase. A vast majority of the funds given to the university in the past five years have been for meeting that increased enrolment as opposed to dealing with the base of the existing enrolment.

Our proposal is that the government in each of the next four years take the advice of the Ontario Council of University Affairs, not our own, and I want to stress that is not the universities' council, that is the government's council, which calculates annually how much is required today to do the same job we did last year. We say the government should accept that advice, of course. That is just a starting point. But if all we did was accept that advice, we would stay where we are in Ontario. We would not recover.

Mr Phillips: I understand that.

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Mr Prichard: So the proposal we put is that the government accept that advice, whatever it is, and in addition, over four years, embark on the recovery. The recovery would cost an increase in base of $70 million from the government and about $30 million from increased student fees in each of the next four years. The cumulative effect is just under $280 million in increased government support above what would otherwise be granted on the advice of the OCUA. That is the number. It would be a $267-million, I believe, or $273-million increase over the four-year period put into the recovery plan, increasing the base over what is required to just stand still.

Mr Phillips: Just to state what I then understand, whatever the advice of that group is, and it will be more than the previous government provided, it will be 10% or something like that.

Mr Prichard: Not necessarily, because the enrolment is now flattening. The government is committed to a flat enrolment. It is the cost of living as interpreted in the university context, in which some things go up fast and some go slower, so they calculate, in effect they index for inflation in the university.

Mr Phillips: So maybe $100 million or something like that.

Mr Prichard: Whatever the number is.

Mr Phillips: Then in today's terms it is $70 million, $73 million?

Mr Prichard: It is $70 million a year.

Mr Phillips: But that is in today's terms. Next year, it would be that plus.

Mr Prichard: In real terms, yes.

Mr Phillips: At the end of the four years, you build into the base today's equivalent of the 110?

Mr Prichard: Of the 280.

Mr DesRosier: Of the 410.

Mr Prichard: No, I am sorry. Let me just give one set of answers. In terms of the government amount, the 280 -- 70, 70, 70, 70 -- goes into the base at the end of the four years, and the student amount -- 30, 30, 30, 30 -- 120 is still available in tuition. You get 120 and 280, which is the 400.

Mr Phillips: So you build that into the annual base?

Mr Prichard: Yes. The student fee continues at the level and that $280 million goes into the base at the end of the four years: 280 and 120 add up to 400.

Mrs Sullivan: But are you asking for it in perpetuity? I guess that is what he means.

Mr Prichard: Yes. It is a new base level so that at the end of that time the average support for students in Ontario would be at and then largely above the national average in support per student, which is in the base across all the other provinces. The comparison we are using is simply what is happening in the other provinces of Canada. If it is taken back out, then we would just drop back to the bottom again.

The Vice-Chair: Thank you.

Mr Prichard: I did not answer the second question.

Mr Phillips: I need some help on that.

Mr Prichard: Could I ask Mr DesRosier to meet with you and provide you with the analysis?

On the second question, we have considered every alternative we know on how to finance this, because there is no debate among all the groups that appear on the need for the money. We do not know of a better proposal than this. If this committee can persuade the Treasurer of a better proposal, we are fully in favour of it.

Our first preference is it be exclusively public funds. The advice we get from the government, from the opposition parties, from the public is, "That is not doable in 1991," and the question always put to me is: "Why won't you help yourselves? Why won't the institutions help themselves by raising tuition?"

What I come to you saying is, the 16 universities of Ontario have said we will, with pleasure, in a sense of with pleasure in getting on with the job and with regret that our students have to pay it, if you give us the opportunity to do it. At present, if we increase tuition by a dollar, our grant goes down by a dollar. If we are given the space to do this, we will do it.

My governing council of the University of Toronto, students, faculty, alumni and government appointees, voted on this on 20 December and they unanimously -- every student, every faculty member, every alumnus, every government appointee -- approved this plan on 20 December to raise tuition by $550 for all constituencies in our university, as evidence of their commitment to doing it.

The Vice-Chair: Thank you.

Mr Prichard: Thank you, Mr Chairman. You were terrific.

CONFERENCE BOARD OF CANADA

The Vice-Chair: Mr Darby, I apologize for our lateness. I think you looked quite interested in the debate there. You might know that we have already talked to the Toronto-Dominion Bank and the Royal Bank, and we look forward to your views on the current state of the economy and your projections for the next one or two years.

Mr Frank: I am Jim Frank and my colleague is Paul Darby. We are pleased to have the opportunity to speak with you today, and on behalf of our president Jim Nininger of the Conference Board of Canada, we always welcome these times before various parliamentary committees.

The conference board, you may know, is a leading forecaster in Canada. We do quarterly forecasts for all of our members and one of the members of the conference board is the Ontario government.

I am going to make some opening comments about the Canadian scene and particularly focus a bit on how we see the policy environment as it will affect the near term, and then Paul will run over the details of the Ontario outlook for you. What we have presented to you in handouts are executive summaries of our latest forecasts. There are lots of numbers in there for your edification, and we can answer any questions you may have.

Before I do that, I want to tell you just a few things about the conference board. We are a private sector, not-for-profit organization. We are funded by business, government, labour unions, associations and so on. Our mission is to be the leading private sector research organization in Canada and our basic goal is to enhance the competitiveness of Canadian organizations in a global economy. That is what we are really about.

In all of our actions, we have a number of guiding principles, and the most important one for our purposes today is to say that we are an objective organization, we are independent and we are non-policy-prescriptive in all of our work. In other words, we try to analyse major economic events and carry out our forecasts in as objective and independent a fashion as is possible.

As a result of this, in our presentation today we are not going to be lobbying for any particular point of view in terms of stimulus or contraction or tax policy or otherwise. What we are going to do is try to give you the best judgement we can on the near-term outlook and hope only that it will be of some value to you as you go ahead in preparing your budget in the next few months.

Just briefly speaking, the conference board, if you like, called the first made-in-Canada recession in quite some time last fall, and as you may know, got a fair bit of publicity on it. We see the recession ending in the second quarter of this year, and that will make four quarters of negative growth. We expect growth of around nine tenths of a per cent last year declining by about three tenths of a per cent this year, with a strong rebound -- well, I should not say "strong," but a more anaemic type of rebound to 3.6% growth next year.

It is a slow recovery and it is a gradual recovery, and Paul will focus on that in the context of Ontario. Unemployment is going to average 9%-9.5% this year and inflation around 6%. We think the US economy is going into recession, has been in recession in the fourth quarter and will come out of it in the second quarter along with Canada.

We think the anti-inflation policy of the government of Canada and the Bank of Canada will remain in place. Even though we see interest rates coming down, our view is that this is not a substantive, if you like, relaxation of monetary policy. It is not fundamentally changed. They are still very worried about inflation, and the wage settlements that have been coming in over the last while, particularly in the public sector, are a centrepiece of that concern.

We are forecasting oil prices to average about US$25 a barrel this year. That is high compared to what it is right now, but I am going to talk to that in a moment.

We see fiscal policy very neutral at the federal level. Our judgement call at this point is that there will be no stimulus in the federal budget nor will there be any spending cuts. It is going to be a steady-as-you-go type of budget essentially. Stimulation at this point would be procyclical, and I do not think they are into that game.

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Second, there is not a lot of money to spend. They have a deficit that is, as you know, hitting $30 billion now: it will probably be $3 billion or $4 billion higher than that this coming year. Additional tax increases, after what has gone on with the GST, I do not think are in the political cards, but that is within the framework that we are forecasting now, that assumption about the federal policy.

Just a word or two about monetary policy. The bank has been worried, as you know, about inflation. The GST has contributed, in the conference board's view, about one and a half percentage points to inflation this year. Add about another half a per cent from oil and you have two percentage points in additional inflation coming this year from just those two events alone.

The fundamental issue is, do wages respond to that and, if you like, catch up or exceed? You are familiar with what has been going on in the public sector. I do not need to mention that.

Our forecast for inflation this year is 5.8%. Next year it drops to 3.8%. The important point here is that we are still explicitly assuming that there will be very little wage response or catch-up, if you like, to offset this increased inflation. Now, there are exceptions, as you all know, to that.

The reason the inflation rate is not higher in 1991 is the extremely weak economy that we have here on our hands now. The oil price increase that just occurred in the fall took about half a per cent off growth in 1991 for Canada. Weaker oil prices will help to support growth, but as I said, we are not expecting a substantive change opposite that $25. If it averaged, say, $20 or $21, you will get a little bit of help on inflation, a little bit of help on growth, but it is not going to rocket us up out of the doldrums.

Interest rates: We are expecting a drop of about another half a per cent or so between now and next year at this time. Our current outlook has interest rates dropping pretty sharply and we are narrowing the spreads between Canadian and US interest rates very explicitly.

Quite frankly, without that kind of cut in interest rates, we would not see the Canadian economy come out of the recession in the second quarter. So we have made a very explicit assumption about reductions in rates and reductions in spreads. So the Canadian dollar moves down gradually over the period and trades around 84 cents by year end. That is compared to about 86 and change now.

Let me talk just briefly about confidence in the economy. We do two surveys at the conference board, one on consumer confidence and one on business confidence. I am going to give you the fourth-quarter results, which were done in November and December and are just being sent out to our members now.

First of all, in terms of consumer confidence, we had a sharp drop in the first part of this year, but the measure of confidence has remained stable for the past three quarters and the index sits at about 75, which is roughly where Ontario is. If you were to go back to the recession of 1982, that confidence measure dropped into the low 50s, so I suppose there are two ways of interpreting it. One is it could go a lot lower, and has historically. We are not seeing that. Second, it is encouraging that it did not fall in the fourth quarter last year after this recession scenario became at least generally accepted within political circles.

Consumers are very nervous. They are very nervous here in Ontario and that is true pretty well across the country, with no exceptions.

Business confidence, on the other hand, is mirroring what is happening with consumers. Businesses are extremely nervous. We had in the past several quarters record low responses to businessmen being asked whether they thought near-term business conditions would improve. We have never seen responses in the affirmative as low as 2% or 4%. Businesses in Canada are very nervous.

The other side, or the good news, is that confidence measure did not drop in the fourth quarter either in any substantive way. So what it looks to us like is that people at least are perceiving that the bottom has been reached. They are not getting a lot more pessimistic than they were in the fall.

All of that means that business investment is going to turn in a very weak performance. We know from our history on this that when confidence drops as it has among businesses, business investment drops, so we do not expect any growth and in fact we expect a decline of about 7% in overall business investment in Canada this year.

Let me just conclude with a couple of comments on the length of this recession and then turn to my colleague, Paul, on Ontario.

When we said that the recession we are in now is a made-in-Canada recession, we made that point because of the interest rate policy that has been pursued for the better part of a year and a half in Canada. We have spreads that tip almost, well, actually for a few weeks, over six percentage points in the spring. If I had come before you and said that we would have interest rate spreads over five percentage points from mid-February to mid-November in this country, you would have said I was crazy, it will not happen. Yet it happened from February through November. The result of that was a killing off of the auto industry, housing starts sharply dropping, and of course the Canadian dollar rising to what we think are unsustainable levels.

Now, when I go back to the main point about interest rate spreads being narrowed, it is because that is how you get stimulus within the economy; you stimulate exports and you retard imports when you narrow the spread because the currency will come down, in our view.

Why will this recession be four quarters and not longer? We get asked that all the time by people in the media and by business audiences and the general public when we are speaking at public events. There are three or four things that are important, and I think they continue to be reasonably valid as explanations. The first is that there was a severe inventory overhang in 1981-82. Inventories were very high at that time. That is not the case now. Businesses have learned to manage inventories much more carefully, and so we do not see that having to be worked off for any great length of time. The second thing in 1982, most Organization for Economic Co-operation and Development countries went into recession about the same time, and they stayed down for a fairly lengthy period.

We expect Japan and Germany to turn in reasonably decent growth this year and next year. Of course, the US will have a fairly modest year, along with ourselves. So most OECD countries went into recession last time; that is not the case now.

There are another couple of issues here that have to do with the downsizing that occurred in 1982. I think you are all familiar with the fact that many companies did not again attain the levels of employment that they had prior to 1981. That simply means they are a lot more efficient. So there was less delay, if you like, in cutting back and balancing the books during this downturn compared to the earlier one. The other point does not affect Ontario so much, but we had back in 1982 the national energy program, which chased a lot of investment out of the west.

In conclusion then, what we are talking about here is a four-quarter recession, milder, less deep than in 1982, which was six quarters and where some quarters actually had declines in growth of over 1%. We are talking now about a decline in 1991 of about 0.3% or, say, half a point in growth, compared to 3.2% in 1982. There is a quantitative and qualitative difference of substantive proportions here. The recovery will occur, we think, starting in the spring, but it will be a gradual and a fairly slow type of recovery.

Paul, can you deal with Ontario, please?

Mr Darby: Thank you, Jim. I guess, as we are all aware at this point, the Ontario economy is clearly deep in recession. The manufacturing sector has been especially hard hit. The housing sector as well has been suffering greatly. I guess if you look at the leading indicators that are currently available to economists, there are actually very few current signs of hope on the horizon. However, we still continue to believe that in fact there will be a fairly solid recovery, in Ontario at least, which should begin to get under way with, I would say, full steam by the third quarter of this year. We should see some positive numbers, weak but positive, in the second quarter and some pretty good growth at about 4% at annual rates, which should start in the summer and head on right through 1992.

This recovery, in addition to some of the factors that Jim has discussed nationally, will be I think particularly triggered in Ontario by the sharp declines in interest rates which are already well under way. It should help to stimulate the housing markets, investment, lower savings rates, stimulate consumption, restore confidence. As well, the recovering United States economy should definitely help Ontario's exports, particularly again with respect to manufacturing, but also with respect to some of the mine products and more primary products like forestry that are produced in Ontario. Hence, I guess we still feel that there is indeed some good reason for hope as we look out into the future.

Given the restrictions on time, I am going to just very briefly touch on some of the key elements of this forecast, and I hope that will leave us some time for questions after.

To begin with the demographics in Ontario, there are some interesting numbers here. They have in fact turned quite sharply against the Ontario economy. If you look back when the economy was, if you like, in boom times, 1986, you had a net inflow from other provinces into this province of 44,000 people, in addition to some fairly solid net international numbers as well. We are now looking at a forecast for 1991 of actually a net outflow of 10,000 people. We heard the expression earlier in terms of voting with your feet. People who live in Ontario now are voting with their feet to the extent they are deciding things look somehow better in British Columbia or Alberta. The situation has, in other words, got bad enough in Ontario that people are deciding to leave.

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However, that is a phenomenon that you see in fact through most recessions as they hit Ontario. In every previous cycle that has always reversed itself, and as the situation improves, in fact, you begin to get a return to net inflow into the province. This helps to give some momentum and, if you like, accelerate the recovery process. As we look towards 1992 we see a net inflow of about 4,000 people into the province, just on a net interprovincial basis.

As well, as I think we are all aware, 1990 was just about a record year in terms of immigration from abroad. We had 192,000 people, thereabouts, come to Canada from other countries, and we are seeing that in fact maintaining itself throughout all the medium term. Ontario will get its good share of those international migrants, and this in itself should also add some solid support to growth in the Ontario economy, particularly as you look out through the medium term, but as well starting in 1992.

The export sector in Ontario has been suffering, particularly with the weakness of growth that we have seen in the US economy. The US economy has been performing very sluggishly through most of 1990, and we are now forecasting it to go into a recession starting in the last quarter of 1990 and on into the first quarter of this year. That, of course, has some pretty solid impacts on the Ontario manufacturing sector and will hurt Ontario's exports; has already done so in fact.

What I find interesting, however, is that if you look at the numbers with respect to the auto sector, and especially with new vehicles, they are not nearly as bad as one might expect from just previous cyclical episodes. The reason why this is the case, in fact, is that we are looking at a transplant phenomenon which has taken place in Ontario. You are all aware, of course, of the new Camry plant at Ingersoll, the Toyota plant was getting up to speed at Cambridge, and they themselves have had an enormous amount of new vehicles in terms of assembly in Ontario. The Ingersoll plant in 1989 produced 660 units; in 1990 it produced 46,606. The Toyota plant, which was still just coming up to speed last year, went from about 21,000 units in 1989 to 61,000 units in 1990. That is a tripling at a time when the US economy was sluggish and going into recession and all the rest of it, so that obviously adds great support to at least the assembly of automobiles in Ontario. Honda had a great year as well, 21% growth. Obviously, the more traditional Big Three did not do nearly as well, and if you include truck assembly, they had a decline of about 5.4% last year.

Clearly, the strategy to bring on some of the, if you like, transplants -- I think that is the term -- has worked in a sense of helping to insulate the Ontario economy from the downturn that we have seen in the demand for autos in the United States overall. I think there are some issues there, however, with respect to parts manufacture. The transplants in general tend not to have so many of their parts manufactured locally, and it is generally accepted there is more value added, more skill, if you like, in manufacturing parts than in simply assembly. I think this is an issue you might want to keep in the back of your minds as you think about moving into the future with continued transplant activity in Ontario.

Even if the auto sector has not been hurt that badly by the weak growth that we have seen in the United States, certainly other sectors of exports have been hurt and will continue to be hurt, I think, through the first half of this coming year. Paper and allied industries will have declines both last year and next; chemicals will be well down this year; machine and equipment exports are well down. Overall, the other sectors of exports in Ontario have been weak enough, I think, to drag down the overall economic performance in the province. But with the recovery in the United States and with some of the slight depreciation in the Canadian dollar that we are looking at, we do see in fact a good year for Ontario's exports, starting in the summer late this year and a very substantial amount of growth next year, so I think the future is in some sense not bleak from that perspective. In many ways I guess it is our opinion the worst is beginning to be behind us.

Just a few words about the manufacturing sector through this cycle. It has been hit very severely in Ontario, I would say probably more severely than we might have expected, looking at the overall depth of the cycle. If I can just give you some numbers with respect to employment, for example, from the second quarter of 1989, which was the last peak in employment in manufacturing in Ontario, through the fourth quarter of 1990, which is the last quarter for which we have data, Ontario lost 112,000 jobs, just looking at the quarterly numbers in manufacturing. That is about an 11 % decline in employment in the manufacturing sector in Ontario. If we look back at the previous recession, 1981 -82, which was, as we all know, a very traumatic experience, we are now looking at that recession being about three times as severe as our current downturn. To date, that is the pattern that has emerged. The decline in employment in manufacturing in Ontario was 13.5%, so the declines that we have gone through in employment and manufacturing in Ontario so far in this cycle are of the same order of magnitude as that last experience we had. Hence, I think it underlines the point that manufacturing in Ontario has certainly taken it very hard.

Other sectors: The service sector definitely has not and has maintained some weak, fairly anaemic growth for much of 1990. It is possible that there may be to some extent a formal structural change going on in the manufacturing sector in Ontario. I am not sure many would argue, but I think there are issues with respect to how many of those jobs might come back once the recovery is under way, how many will be permanently lost because of substitution of capital for labour and what that means for job retraining and issues in the employment market in Ontario as we move through 1992.

The housing sector in 1990 was in fact a terrible year for Ontario. Very high interest rates drove the housing sector down, but I think it is also understood that in Ontario there had been some excess supply of houses already on the market. There had been some speculation house prices had been driven up very high. Affordability was an issue. When the downturn began in that market, I think it was clear it was going to come down very hard. That is indeed what has happened.

In fact, we are looking at further declines through the early part of this year, but we are seeing quite a strong recovery ourselves in housing in Ontario beginning by about the third quarter, through the summer. This is partly because we believe that the low interest rates will clearly trigger a rebirth in activity. We also feel there is some fairly strong underlying fundamental demand, partly because of this continued flow in international migrants who we see coming to Ontario who will need to be housed. This will certainly put some pressure on the market.

Overall, we see business investment in Ontario as lagging the cycle. We do not see any strong activity in this sector until 1992. We have noticed some severe weakness in machinery and equipment investment, which causes us some worry, if you like, because of the feeling that, given the free trade agreement and other issues, at least in Canada there would be a drive towards modernization, always with the worry of global competitiveness -- these are the watchwords -- in the back of the minds of businessmen. The collapse that we have seen in machine equipment investments so far this year from that perspective is worrisome, but we feel that in 1991 there will be some stimulus from the introduction of the GST, which does in fact encourage machine equipment investment particularly. We are looking for some good recovery in Ontario next year, in 1992. We do not believe the underlying imperatives to remain globally competitive are going to disappear.

What this translates to, just briefly, in terms of employment growth is a decline of employment in Ontario in both 1990 and 1991. We are looking at a solid 1% decline in employment in Ontario this year. We do not feel that employment growth will begin to pick up until, in fact, early 1992 in any substantial way. Employment always tends to lag the cycle. Entrepreneurs tend to want to be sure that this recovery is for real before they take on full-time staff. Hence we do not see full pickup and recovery until next year, but then we are looking at fairly decent, say, roughly 2.5% growth. As a result the unemployment rate stays at fairly high levels throughout 1991 and 1992, at close to 8% in Ontario, and does not really start beginning to come down until 1993.

The overall bottom line, if you like, is that we are looking at real gross domestic product at factor cost to decline in 1990 by about 0.5% and this year by another 0.1% before increasing by a solid 4% in 1992.

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Mr Christopherson: Thank you, gentlemen, for your presentation. It was very informative and very interesting.

Most economists and most people in general accepted the fact that the $2.5-billion deficit for fiscal 1990-91 was an acceptable level, if you will, not necessarily preferable but acceptable, given the situation. There has already been a clear admission by the Treasurer that the deficit is going to be significantly higher than that. No dollar figure has been given publicly.

I would like to ask your opinion on what different dollar figures might mean to the economy as you would see it. For instance, $5 billion or $10 billion or a $15 billion: At what point do you feel certain reactions to seeing a number like that. if that were the case? Second, in terms of the assumptions that have been made, most of them have been made on the American economy: that it is not going to get much worse than it is, that their recession is predictable. Oil prices at this point still do not seem to be expected to be going dramatically one way or another. There is going to be a decrease in the interest rates and some lowering of the Canadian dollar.

I would like to ask you. of those key signs, which of them do you think is the most fragile and could do the most damage if it did not go as expected?

Mr Frank: I am sorry. I heard the oil question. What was the other of the signs that you mentioned?

Mr Christopherson: The interest rates and the Canadian dollar value. The reason I asked that, to put it in context, is that I was meeting with a group of Canadian Manufacturers' Association members in my own community. I asked them, if interest rates dropped but the economy was still perceived to be fairly weak, how would you read that? Would you still go ahead and make moves? Surprisingly, the answer was that this would still give them a fairly good comfort level, that they would still probably go ahead and make a few moves that they are not making right now. So I am curious to see which of the other signs, if you will, might change most dramatically and would alter your opinion.

Mr Frank: All right. Let me come to the last question. I will come back to the deficit.

On the oil issue there are a couple of basic things which you have to keep in mind, regardless of what you read in the papers. The world is awash with oil. There is no shortage of oil in the world. That is a fact. The tide of opinion, if you like, seems to move so quickly with the spot market. If you have the price drop by a few dollars, all of sudden that is the forecast for the next few years. The numbers that we tend to think make sense, in terms of a price that could be maintained over a decent period of time, are somewhere between US$18 and US$22 in today's terms. That is sort of sustainable. When you start to move up to US$30 or to US$40, we would say that this is not going to be sustainable.

What happens to really throw a wrench into the works? You would have to have, probably, a major disaster in the Iraq war right now that would take out a significant amount of Saudi supply. That of course would immediately hit the markets and you would see the spot price jump up. We could then be pushing into the US$30s to US$40s. We did an alternative scenario in the forecast on that because we had so many people asking that question, "What happens if?"

First of all, we said that with a short war -- which is anything, say, under three months -- there is absolutely zippo economic effect that you can measure. Now I do not want to come across as suggesting that there is no impact of this war, that is not the message, but this is in terms of GDP, employment, deficits and all of that.

If you ask about the other scenario and, say, let's suppose this war goes for six to nine months{his is now talking about fighting -- we would assume under that scenario that you have destruction of capacity in Saudi Arabia. Either there are Scuds or sabotage or direct attacks that take out refineries. That makes it difficult to get tankers out of the ports and so on. Then you see oil prices rising. In that scenario we put oil prices up to US$40 and bring them back down to US$30 within this year or within a year after that period. All that does is extend our recession about one quarter. So that is the range that we would say you have to look for.

In terms of interest rates, our sense on that is that the Canadian government has exercised quite deliberately the power of managing the money supply to drive rates as high as it has and to keep the spread as wide as it has. That suggests to us the corollary that there is policy room to reduce the rates. The price that will be paid for that, though -- this is why economists are always teased about having two hands because everything does have a cost and a benefit, two sides to every issue -- is that the currency will come down.

Our best bet for you would be that a currency somewhere around 80 cents is probably sustainable with a normal spread, which would be something like two and a half percentage points, say, between US and Canadian Treasury bill rates on the short end. Now the markets tend to overshoot, going both ways. You get a lot of volatility. If we were to see the currency spread being narrowed sharply, then I think you would see instability in the markets. They had a run with that a year ago in January and I do not think we will see that type of thing happening now. We are going to track down and narrow the spreads fairly gradually.

Now coming to the deficit issue, it is a very hard one to answer because we do not formally forecast deficits for the provinces. We forecast the expenditure side and the output side. We do not get into the fiscal situation in the provinces. Given the kind of outlook that Paul mentioned to you and the decline in growth that we expect to occur on an annual basis this year, you are probably looking at something that could be upwards of $3.5 to $4 billion. That would be something that would not surprise me if it were to occur.

Mr Christopherson: I am sorry. We are now talking about the 1991-92 fiscal year.

Mr Frank: Yes. Now there are a couple of things that of course drive this that I cannot comment on because you people have to make those decisions as government. There are issues of pay-setting in the public sector that are critical drivers. I am on a hospital board in Ottawa and we had to deal with a CUPE settlement that was much higher than we budgeted for. I believe we have just been notified by the ministry that we would be compensated for that. Now that, just in our one little hospital, is $1.5 million a year. to give you some idea of the scope. We have province-wide the Ontario Nurses' Association coming up at the end of March. You know what happened in Manitoba. What do you want to factor in on that one and then how far does that get spread?

Those are cost considerations that come into it, so when you ask yourself what the deficit looks like, you have to ask, "What is the likeliest scenario on that opposite tax increases and so on that you might put through?" But ending it up with all the dust settling, it could be upwards of, say, $4 billion.

Mr Christopherson: I appreciate that. Specifically, I understand that the government is responsible for setting what the deficit will be based on its political decisions and you have said that very clearly and succinctly. I was looking more at what is the impact to analysts if you hit certain figures. For instance, what would $3 billion or $4 billion deficits say to an objective analyst? What would $7 billion? What would $10 billion? I am trying to get a sense of how you, as an independent analyst. would feel about those numbers, not knowing of course at this point where the number will actually be.

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Mr Darby: I guess there are a number of issues here. One would be if the government were to pursue a countercyclical policy and was trying to stimulate the economy while we were in a recession period, which is clearly an option. Generally, then, you get yourself involved in multiplier theory. For every $1 government is spending, that we would put into the economy, how much could we expect to get back out in terms of real economic activity?

For a province like Ontario, that multiplier is probably on the order of somewhere between 1.2 and 1.5. So if you were to put in another $1 of real spending, then you might get $1.20 to $1.50 back out in terms of real GDP. That is the very simple answer.

There are issues with respect to lags. If you start spending the money now, you may find that by the time it has an impact you are -- already we are covering into the last half of 1991 and all you are doing is sort of fuelling the recovery, as opposed to actually doing something about the recession. There is an issue there. Of course, there you have to have some faith in the timing of the recession. I certainly would not want you coming back to me and saying: "Hey, we've been in this for two years now. You told me we were going to get out in the summer." That is an issue. Timing has always been an issue.

Other issues have to do with the fact that there are supply-side constraints. At a certain point you start throwing money at the economy and all you are going to do is drive up prices. We know that we have gone down into a recession. We know that we have some excess capacity that now exists. We know there would be room for some increase in activity which would not put too much pressure on inflation, but at a certain point, putting more money in in general should only serve to increase inflation, and in no way to get more supply, more production out of the economy. There is certainly a constraint there. That is the short answer.

The Vice-Chair: We have Mr Phillips, Mr Jamison, Mr Sterling, Mrs Sullivan and Ms Ward to go yet, so decide on the question and the answer.

Mr Phillips: I really appreciate this. I think the three banks that we have heard from, two here and one we have read about, agree with you, that mid this calendar year we will come out of the thing and I think we all feel better for that. I guess I have two or three questions.

There is no mention of the Quebec situation here. I realize you may be unable to comment on it and that is fine, but to me at least that is going to impact on the economy over the next two to three years, and whether you want to comment on that or not, that is fine.

The second thing is your projection for the Canadian dollar. You have the exchange rate here, but I am not smart enough to translate it back to the Canadian dollar. You predicted the exchange rate. What does that mean to the Canadian dollar?

The third thing is that you have indicated, I think, a significant reduction in manufacturing jobs over the last year or so. I would like your comment in terms of how important that is to our future. I had always had kind of a perception that this was a bit of an engine driving us, and whether the growth towards service jobs is absolutely inevitable and just let it happen or whether that needs to be something we need to be concerned about.

Mr Frank: On the Quebec issue we have made no explicit assumption about the constitutional issue, in this outline. The reason is, quite frankly, that it is an imponderable. That is the honest truth of it and anybody who tells you that he knows what is going to happen there is dreaming in Technicolor, I think, in simple terms.

Mr Phillips: You have factored in the imponderable?

Mr Frank: No, we have not. As I say, we have made no attempt to try to deal with that. What I would say to you is that in economic terms, no matter how it is actually accomplished, if in fact Quebec leaves Canada that is not going to be good news on an economic front. That is all I could tell you, that it is going to be a negative. It will not be a positive. How large a negative is an imponderable. But that is as far as I can go, honestly, in sort of giving you a sense of that.

On the exchange rate, if you just want to jot that down, what is presented in those tables is Canadian dollars per US dollar and basically all you do is invert it. So for 1990 the number would be 85.6 cents, for 1991 it is 84.7 cents and for 1992 it is 83.8 cents. The fourth quarter of 1991 is 84 cents and the fourth quarter in 1992 is 83.7 cents.

That might strike you as a small devaluation, and it is. The reason it is a small devaluation is that this concern about inflation is still very much present in Ottawa circles and I do not think that is going to change. Remember that for a 1% decline in the Canadian dollar opposite the US dollar, we get about a 0.3% increase in the consumer price index within, say, roughly a year. So the dollar comes down 1% and on an 86-cent dollar, 1% of that, you can figure it out, you are going to get 0.3% on the CPI. What they have gained by pumping the dollar up. they will lose as it devalues, so the currency will not fall much more rapidly than what we are saying here.

Mr Darby: With respect to the manufacturing issue, again, certainly there have been very substantial declines in employment. In fact, even if you go back to the previous 1981-82 recession in Ontario. where I talked about the declines we saw at that time, the recovery in employment in Ontario was fairly anaemic. There was only one quarter after the end of the 1982 recession in which employment in Ontario in manufacturing actually got back to the previous peak in 1981. Since about 1987 employment in manufacturing in Ontario has pretty much gone nowhere.

Mr Phillips: In absolute jobs?

Mr Darby: In absolute jobs.

Mr Phillips: Percentage has declined.

Mr Darby: Percentage has declined. It has just pretty much been static. Now that is not to say that output in manufacturing has been static and clearly there has been, I would say, a fairly rapid structural shift here towards capital and away from labour within the context of the manufacturing sector in Canada. That is possibly, I think probably, talking place worldwide. We have seen an enormous amount of machine and equipment investment that went on in Ontario through 1985, 1986. 1987 and 1988, a lot of which will, of course, replace labour.

As to whether that is a good thing or a bad thing, I do not really think I can comment. I think in some sense it is going to depend on a lot of cost issues. I think that is something where perhaps employers in Ontario have not a lot of choice. If they want to remain globally competitive, perhaps that is the imperative, but again there would need to be a lot of case-by-case empirical work done on relative costs within industries to see how important that trend really is.

But I do think there is still an issue here in terms of what you do with the people who are being displaced from the manufacturing sector in terms of employment and turning to other jobs in other sectors of the Ontario economy. I think we can imagine that this process will continue to go on for at least some time after the recovery takes place in 1992, that the return in jobs in manufacturing probably will not equal the losses that we have seen, at least not for a long time. Hence I think there is an issue there perhaps with respect to job retraining or labour force management that could be important.

Mr Sterling: Could I just ask a supplementary in that area before Mr Jamison goes, because it was dealing with manufacturing?

One of the tables that the Royal Bank has supplied us with in terms of graphs showed that in 1985, the end of 1985, the average hourly earnings in manufacturing were around $12 in Canada; in the United States it was around $13.50. Now in Canada we are up to $14.50 and the United States has dropped in real terms to about $12.50, so there is about a $2 spread whereby our manufacturing workers are getting paid more than American.

They said also that 42% of that $2 is attributable to the high dollar that we have, in terms of the high value of our dollar. Given that, is there any hope that we can regain back in the manufacturing sector, as Mr Phillips has asked you? Is that a significant problem?

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Mr Frank: The swings that you get with devaluation on currencies when you translate from one currency to another will make quite a difference. If you are talking about going from, say, 86 cents to 80 cents, that six cents is 8%, so that makes quite a difference.

There is another thing that I should say complicates these numbers and that is that in the United States there has been a bigger move, quite a substantially bigger move, to at-risk compensation. So within the manufacturing sector, the pay of people over the last 8 to 10 years has become more at risk than has been the case in Canada. For example, you will have more profit-sharing, more incentive pay, in their pay structure. So the base of pay is not moving up as rapidly, but you cannot conclude from that that their total compensation has not changed, which is the important point. That is a very substantive research issue. Our compensation research centre has done a little bit of work on that, and I am not really plugged into it well enough, but those differences there would be a lot narrower if you were to account for that one shift in cost.

There is also this whole issue of benefit costs in the total compensation package where we have quite a significant advantage in this country. So again, you have to really look at the total cost of labour to get at this issue well.

Mr Jamison: We have had a number of reports from various people, the manufacturers' association. the banks, and there is a significant thing that is going on, and I do not think you have really latched on to it, concerning this recession, and that is that approximately 50% of the layoffs that we are experiencing in this province in manufacturing at this point in time are in fact permanent layoffs. They are not layoffs related directly to the down cycle. When we talk about a rebound in the second quarter, my question is, where will that rebound take place if in fact 50% of the jobs that we are experiencing layoffs in are permanent? In my mind there is a tremendous amount of restructuring going on in the midsized manufacturing area at this point in time. Basically, I tend to disagree with your feeling about a second-quarter recovery.

I guess the other part of that equation that you have not touched at all on is the trade picture as related to manufacturing, the ability to rebound, free trade, trilateral, Mexico, that kind of thing staring us in the face and what economic impact those situations can have further on our small and midsized manufacturing base. If in fact you are correct -- and I tend to disagree with you; I think the recession is going to run longer and deeper than you are indicating -- at that point in time when we are really coming out of it, what effect could the trade picture have at that point?

Mr Frank: Let me take a stab at a couple of these things and then, Paul, you can help me out here. To be candid with you, we are getting a lot of feedback from people who say we are too optimistic about our outlook, and I am quite prepared to accept that. Your forecast would be that it might be in the third quarter that we will see growth, and I would say to you that is fine.

Now, if you ask what the impact of the FTA is on this and how much of that job loss that we have seen since the beginning of this recession is permanent or not permanent, I know you can look at some of those closures and attribute them to the FTA. I do not think anybody would deny that. Whether it has been a major factor is of course an empirical question and it is almost impossible to analyse or try to get a good grip on. I have read Maude Barlow's book. I look at all that stuff at the back that is there and by implication all those plant closings and so on are due to FTA. It is demonstrably not true.

The other side of the coin is that reasonable people would say there has been an effect from free trade. I have to go back a bit in time here, because when the conference board did its analysis of the free trade agreement, we came up with the smallest economic effect of the three or four major research institutions that looked at this, including the federal government. We said it is not going to have a major effect on employment over a decade; I think we had a couple of hundred thousand more people working. It was very small. The reason was that so much of what we produce is already traded on international markets at international prices without any tariffs. What we did say was that there would be a major adjustment challenge, as we put it, in footwear, clothing and food processing, no question about that; also in autos and parts, as I recall now too.

Again, when you try to quantify that and say how much, big, small, that is where you get into this judgement call. It is very difficult to do. Our view of it at the time, and I still feel this way, is that a lot of the debate now has confused this cyclical short-term crunch on inflation with high interest rates, which drive up the currency too high. They have confused the effects of that with what is happening in the structural side under free trade. So when you compound the free trade agreement and the adjustment going there with a currency moving up gradually to 86 and 87 cents, it is not surprising that manufacturing jobs are lost. Paul did say that we only had one quarter since, what was it, 1982, when manufacturing employment got back to the peak; it was in probably the second or first quarter of 1981. So it was a long process to get back and I would say to you that you have to anticipate that again. It is not going to snap back quickly.

Mr Jamison: My question really was if that had not been weighed into your effect, that I was able to pick up on. Again, I am sceptical of the rebound --

Mr Frank: That is fine.

Mr Jamison: -- when you say it is going to happen. If we have high immigration and we have a high unemployment rate, again, I do not know if that equates to a rebound, in the same manner that you have spelled it out.

Ms M. Ward: I just have two quick questions. One, you talked about the price of oil and the effect that different prices might have. What other economic implications of the war do you see if, say, it extends for some time?

My other question is more a quick informational one. You were talking about the net population outflow of 10,000 in 1991. I may have just missed your complete statement, but is that net of immigration or just from other provinces?

Mr Darby: Just provincial, just net interprovincial.

Mr Frank: It is people moving to Ontario from another province, minus people moving from Ontario to another province.

Ms M. Ward: Not including immigration from outside Canada.

Mr Darby: That is right.

Mr Frank: Your population continues to grow.

Mr Darby: In terms of the impact of a longer war, I think it only becomes significant in terms of government financing when and if they run out of their current stock of munitions. It is at that point that they have to face some serious questions about resupply. They are not in a situation where they have a lot of excess capacity. They have some excess capacity, but not a lot of excess capacity in the munitions industry. I am talking particularly about the United States now. Hence it is not clear that they are going to get much of a price break. In other words. I do not think it is going to be cheap. As well, they are not in a situation where they have a large surplus in their fiscal situation. The US is running a substantial deficit, as we all know. So financing at that point will become difficult in the United States.

I think we are looking at something, we are talking about a war which would be lasting on the order of a year or more before I think that becomes an important issue, but at that time I think, yes, there could be some severe strains on financial markets in North America, there could be real issues about financing the war. Where is the money going to come from? I think we could see some substantial increases in interest rates; there may have to be tax increases; they may have to consider some sorts of price controls at that time. This is not a cheap war. That is a real risk, that they will have some major financing difficulties in the United States if the war goes on long enough that they run out of their current supply of munitions.

If the war does not go on that long, they can spread out, resupply over a number of years. There are no other real international threats, at least currently, on the horizon, particularly with the cold war winding down, so they could take a fair number of years to rebuild their supply of munitions and the strain on their fiscal situation would not be nearly so severe. But if the war does go on long enough, then I think we are looking at some substantial financial problems with respect to financing it.

In Canada, clearly the burden is not as severe because we are not financing as much of the war. I think those issues will still exist to some extent in Canada, but not nearly to the same extent. I think it might be fair to say that if the war went on for a long enough period of time, there are some sectors of the Canadian economy which might benefit. Those would include those supplying munitions to the US government as well as perhaps some of the primary sectors mining and nickel. I think there are, though, major issues with respect to the overall financial situation in the world economy if the war goes on for a long period of time because as I say, there is not a lot of excess capacity and it will put upward pressure on prices. If we remember back to the Vietnam war experience, that upward pressure on prices was, if you like, accommodated and we ended up with the 1981-82 recession at least partly because of that.

If they feel they do not want to accommodate that kind of pressure on supply which would result from a long war, then we are talking about generally higher worldwide interest rates. If the war goes on for a long period of time, I think it is a fairly good guess that interest rates worldwide would rise. That would clearly have some dampening effect on the world economy, including Canada's.

The Acting Chair (Mr Sutherland): Thank you very much for your presentation. It is very important to this committee to get that type of general forecasting information. We are very happy that you were able to come and share so much time. Our apologies for the delay in your presentation.

Our next presenter is here already. This committee was supposed to reconvene at 1:30. I am wondering if, with his permission, we could make that 1:45 to give some time. I would just ask that everyone try to be here promptly at a quarter to two. We will reconvene then.

The committee recessed at 1313.

AFTERNOON SITTING

The committee resumed at 1350 in committee room 2.

INFOMETRICA LTD

The Chair: I think we should begin the afternoon session. I would like to thank Mr McCracken for coming. He has graciously volunteered to make a presentation this afternoon. If you would like to begin.

Mr McCracken: I was most interested in your questions. What I would like to do is very quickly go through a handout there just so you know what is there and get a sense at least of where I am coming from. Then we can throw it open for questions. I know you are already running a bit late and you have a large stack of people seeking funds stacked up behind me. I am not seeking any funds, so we should give them full time.

What I would like to do is give you some sense of how we see the Canadian and Ontario economies evolving in the coming years. In particular. I will speak mainly to the environment that you are going to have to be dealing with in the context of your budget deliberations. Most of the emphasis will be on the national economy. but I am prepared to speak to some of the numbers on the provincial side as well.

Before we start, I think it would be good if we could share a common view about what is good economic performance -- what is the target. if you will, in terms of the rate at which the economy should be expanding.

For the national economy. we have a concept called potential growth or potential of the economy, basically a number in terms of a growth rate that is consistent with the unemployment rate neither rising nor falling. If the economy is expanding at roughly 3% per year at the present time, we would expect to see. with very minor perturbations, an economy with a stable unemployment rate. The potential of the economy is much more arguable. It is, how far can you go in a sense of full employment and a stable unemployment rate? My view is that that is a number for the national economy more in the neighbourhood of 5% rather than the level of 8% that seems to be implicit in the actions of the federal government. Either one of those is, at this point in time, looking for a return to an economic growth rate of, let's say, 3%, which would be sufficient to keep the unemployment rate from rising further.

Why do we worry about that? If you start talking about economic outlooks in which the outlook is for 1% growth or zero, or negative, or even 2%, what you still face is an environment in which that unemployment rate will continue to rise. This notion of potential is essentially determined by two things: one, the growth of the labour force -- in other words, how many new entrants, net, will be coming in -- and two, the productivity growth of the economy that you are looking at.

It appears for Ontario that the potential growth rate is roughly of that same order of magnitude, roughly 3%. If anything, it may be slightly higher. Productivity growth in this province may be slightly higher than the national, and with the substantial increases in net immigration expected over the next few years, labour force growth in this province may be somewhat more rapid than in other regions. That is the target we are looking at, and this number is not fixed and immutable.

Back in the 1960s and early 1970s, potential growth rate for the Canadian economy was about 5%. We had a very much more rapid labour force growth at that particular point in time, and a more rapid productivity growth. In the last half of the 1970s, this number was more on the order of 4% and in the 1980s moved down through 3.5% towards 3%, and when we got out into the period 2000 and 2010, basically the numbers look like they will be on the order of about 2.5% or 2%.

What of course interests you is, what is it now or over the next two, three, four, five years? It is 3%.

Before we get into the forecast, we should make clear, as I am sure all the other forecasters who have come to you, that there is no such thing as a forecast of the economy without a wheelbarrow full of assumptions that come along with it. We make what are called conditional forecasts. At the present time a very key one is the assumption that people are making about the world oil price, and in that particular instance, we are assuming in the forecast that you see here that the world oil price will average roughly US$30 through 1991 and drop to $20 in 1990.

We have other cases. We have cases with lower prices and higher prices, but I have not yet been moved off this forecast which we prepared back in late November nationally, and on a provincial basis we are back still preparing the final parts of it.

All of us know the price today is down below $30, the low 20s, but what we are in a sense suggesting to you is a period in which that price may bounce back before it drops. In 1992 we have the price dropping to $20. I would not, if I were you. get too excited about that. If the number is different from that. I can tell you roughly what it does. so it is not as if we are not aware of the marginal effect of that. But I have been reluctant to jump on the bandwagon and assume $20 for 1991. or even $15 or $12 as some pundits would have you believe.

A second key assumption is that with the fiscal package that has been put in place in the US and the kind of world oil price scenario that we had. the US economy is in a recession from the fourth quarter of 1990, continuing through the second quarter of 1991, with the result that the US economy essentially does not grow at all in 1991; in fact, it slightly declines. In that environment, there is some easing of interest rates in the US. and that again, in 1992, with the cessation of war and a substantially lower price for oil, inflation eases and the real economy in the US expands on the order of three-plus per cent.

In describing the outlook in a very general sense, I would like to build it up in the form of a set of recessions or a set of factors.

Recession A started in April 1990 nationally, the last half of 1989 in Ontario manufacturing. and is in a sense the result of the high real interest rate, high exchange rate and the fiscal cutbacks at the federal level particularly that have been put in place. This particular recession was proceeding and was fairly mild, although occasioned by a rise in the unemployment rate and negative growth in the second and third quarters.

There was a recession B which started shortly after 2 August as a result of a sharply higher oil price. If you take that as being roughly a $10-oil-price shock, what that translated out to in the Canadian context was something very similar to a $6-billion tax increase which consumers and others would pay, plus roughly a $300-billion tax increase worldwide occasioned by a $10 oil price being applied to the 50 million barrels a day of consumption.

Sure enough, that weakened the US economy. Europe and Japan hurt our exports, hurt our trading activity internationally, so the combination of those two gave us recession B. That was on top of the recession that we had already in place.

There was a change of that particular recession as of roughly 17 January into, let's call it, B prime, which is a war, which in the first few hours pushed the oil price up to $40-plus. But the enthusiasm that was exhibited in the sense that this was going to be a quick one led to prices -- I think the lowest they got was about $19, and now running around $21 or $22, which is however just in the first few days, so we ought not to get too excited or make too many guesses about how it will proceed.

The point of that one is it has taken that tax hike off in the world. It has taken it off in Canada, although there is a few months' lag before it comes through. But we have nevertheless created some new uncertainties out there in terms of both the duration and the possibility of other adverse effects downstream.

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There are a few things that have not yet happened but which, in looking at the next few months, we ought to not forget about that could affect the outlook. We have not in this forecast inserted them, but there is the issue of, will GATT fail? And if it does, what would be the fallout from that and will there be an inability to reach a decision or remove to protectionism? As a trading nation, and one particularly with a lot of agricultural exports, that would be bad news. Then we have our own factor of political uncertainty in Canada regarding Quebec and the rest of Canada, which could be both this year and next a device for a shock to the system if the developments there are deemed to be pessimistic.

Okay, so we are sitting here; we have an outlook. I will summarize that quickly for you. The good news we are looking for, if we can see it, would be things like world oil prices declining, interest rates declining, both in nominal and real terms. Good news in some sense would be no increases in taxes or cutbacks in expenditure at the federal level, a recovery on the US side and some pickup following that on the demand for resources and basic industrial goods, all of which would be to Canada's benefit. When might that happen? No one knows, but I just described to you the conditions. I would think at this point that April, May, June of this year are likely to be the earliest, but there is no reason to think it is something automatic that is going to happen at that point in time as long we prolong the continued poor economic performance.

Just with reference to the charts, I have tried to give you through a sense of an arrow what is happening. In 1990 the economy declined or slowed down in growth, averaging only less than 1% in real growth. In 1991 we are anticipating another very substandard year, with negative growth overall, with a weak consumer, business construction falling, housing, government restraint continuing, exports weak with a weak external economy, inventories being snubbed in.

If oil prices went to $20, they would add about 1% growth in 1991 to the numbers you see there. That would be insufficient to overcome -- it would basically turn it into a zero year or a slightly positive year but still one which is a recession by any stretch of the imagination. We do however in this scenario with lower oil prices, with a recovery of the US economy, with declining interest rates, see a fairly sustained recovery in the 1992-95 period, again conditioned on the kinds of assumptions that we are making.

For the province of Ontario I have plotted for you the real growth that we are forecasting year by year, or just for the next five. We would go out to 2010 or 2020, if you wish, but I do not think anyone in this room has that long on the horizon, so I thought just four or five years might be an adequate thing for openers. Essentially, in 1990 the Ontario economy did worse than the national, in our view, whereas the national economy expanded a little less than 1%. Our calculations suggest the Ontario economy declined by about 0.6%. In 1991 we anticipate the economy will decline by about 1.5% in real terms, again somewhat more sharply than the national economy. But in the period 1992-95, the Ontario economy will expand above potential, will expand at a rate greater than the national economy. Those numbers in 1992 are 4.9%, 6.2%, 5.5% and 4% in 1995. That is not unusual, as you can look back to the last recession. I purposefully wanted you to see the 1982 recession in here. Again, Ontario dropped more than the national total, but in almost all of the years since then the Ontario economy has performed at or above that of the national economy.

Now inflation basically in 1990 was slightly down; 4.8% on a year-average basis, compared to 5% the year before. In 1991 we are suggesting this will go up substantially, something in the order of 7%. Again, if we take a lower oil price view, it averages $20 instead of $30, we would knock about one or one and a half percentage points off that, so you would be in the 5.5% to 6% range. But then you would not see as much improvement in inflation in 1992 if that occurred, because we do have the price dropping.

A big story in the next few months will be the GST. It is expected to push up all the measures of inflation. With the economy as slack as it is, there is I think a strong likelihood that it will be just the GST that you see, at least initially. As the year evolves, you should see inflation rates cooling quite substantially, the year-over-year down to 5% by October, inflation less than 4% in both 1992 and post 1993-95 period.

I am just hitting the major aggregates, just to give you a sense. The unemployment rate rose in 1990, averaging 8.1 % a year as a whole but ending the year at 9.3% nationally. In 1991, that continues to rise, consistent with that slow or negative growth. We expect an average for the year of 1991 of 9.7%. That would imply greater than 10% likely in a number of the months. In 1992, the average is still above 9% as the overall economy expands only slightly above potential, and it is basically down to about 7% by 1995.

In the last recession, these next two charts, one shows you what happened in the 1982 recession and another one shows where we are going now in the 1990 recession. You can study those in more detail. The large number by each province is the total increase in the unemployment rate that occurred from when the unemployment rate first started rising to when it stopped rising. In the case of, for example, Canada, in July-August 1981, it was at 6.9%; ended up in December 1982 at 12.8%, for a rise of 5.9%. At the same time, Ontario went from 5.9% in August to about 12.1 % in that same recession, for a rise of 6.2%.

Now, where are things so far in this one? I think that what is interesting, and the other point may be too, is some provinces had already started slipping before the official recession date or the national recession date, and some lagged, the unemployment rate continued to rise, post that period. In this one, the province that stands out like a sore thumb, both figuratively and literally. is Ontario, whose unemployment rate since June 1989 bottomed out at 4.7%, has been rising since that point in time and is now up to 7.8% in December.

Most of the other provinces joined in later, around the April start date of the recession. But there was already, if you will, a regional or a provincial recession or industrial recession that was showing up in rising unemployment rates in Ontario. So it is of a somewhat different pattern from what we have seen before.

If you plot the unemployment rate in 1981-95 in Ontario, again you can see the same pattern that I spoke of a moment ago, of the unemployment rate rising during the 1990-91 period and only slowly coming down post that period. The Ontario numbers here in 1989 are 5.1% in 1990 6.3%; in 1991 8.3%; in 1992 8%; in 1993 7.1%; 6.2% and 5.7% in 1995; again, the unemployment rate in Ontario remaining below the national but nevertheless rising, not unlike it but in the recovery period perhaps dropping slightly more rapidly than the overall national rate.

Interest rates -- again an important element in your prebudget discussions -- where are they going? We saw them rise in 1990, on average. It was a crazy year in many ways, with interest rates rising in the beginning of the year and more recently having come back down. The prime rate ended up at 12.75% at the year end, having peaked at 14.75%. In 1991, we see some further easing of interest rates, even with the goods and services tax and the oil price shock, primarily occasioned by the very weak economy and declining US interest rates. A prime of 11 or less by the end of the year is not unexpected. There are some optimists who think it may be down at I 0 or even lower. In 1992, we see some further easing, particularly if the inflation rate does come out around 4% or less. A prime rate of 10 or less is possible in that environment. Over the 199395 period, we are suggesting some continuing easing in real and nominal rates, some stability returning to the system.

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On any day-to-day or week-to-month basis, we caution you against trying to bet against the Bank of Canada in terms of the movements of interest rates. They are full of surprises.

Another key variable is the federal government balance, how it stacks up, because that may condition again the environment within which you are operating. In 1990, the deficit slipped somewhat from both the plan and the previous year. Basically, the slowing growth and higher interest rates that were in the February budget have caused them to raise their deficit forecast by some $2 billion.

In 1991, we suggest there will be a substantial further slipping of the federal balance with the startup costs of the goods and services tax and a weak economy. The costs of the Gulf war may or may not be significant. We can talk about that, if you want, in your question period. Lower interest rates, if they materialize, will help somewhat. Our estimate is roughly $8 billion higher than their target in the last budget, on a fiscal-year basis $27 billion, $28 billion or roughly $35 billion, compared to the fiscal year 199091 of about $5 billion.

In 1992, with improved economic growth and with lower interest rates, we see some turnaround in the deficit here, lowering by about $2 billion from the level achieved in 1991, and some further improvements as you move out.

The key and most important factor in what happens to the federal government balance will be a restoration of interest rates to more normal levels, real interest rates. We can talk again about that, if you wish, at greater length.

The exchange rate appreciated somewhat in 1990, averaging over 85 cents -- about 85.6, I think, was the final number -- as interest rates remained high relative to US rates. We are expecting some depreciation in 1991. But I must tell you that that is a tenuous forecast. We have been wrong there, I think, as much as we have been right. Again we see some further easing in 1992, 1993, 1995. If this does happen, it helps on the real growth side, it helps our exports. It gives you a bit more inflation, and that is the tradeoff, but it would be consistent with the story of somewhat easing interest rates that I portrayed to you a few moments ago.

Very quickly, what are some of the short-term concerns that we have? Obviously, the recession itself: How long, how bad? Will in fact this interest rate break continue? Everyone is so excited about interest rates or the bank rate being down below 11, the prime rate at 12 or declining. But I would suggest to you that, setting aside the goods and services tax effects for the moment, you are still looking at real interest rates in the Canadian economy in the order of bank prime 8%. In Treasury bills you are looking at something in the order of 6% to 7%, taking a 4% view of inflation.

When we look a little bit outside of the Canadian system, we see a US system in which the financial institutions remain in trouble, real estate projects are still in jeopardy, real estate loans are still problems. So we could get some nasty surprises in that dimension.

The goods and services tax is a reality. We are watching how it does work through the system. But clearly, in the first year in particular, it does hit the consumer; that has not been an issue of dispute. The overall economy was supposed to be roughly neutral. This depended on investment picking up in response to lower investment costs. We will be looking for that to occur.

Then, of course, we will all watch what is happening in the Middle East where things could go, it seems to me, either way, up with oil prices over $40 or down $15 or more. As I say, if those get pushed off the popular list of concerns, we ought not to forget the fallout potential from our constitutional debate or other actions in that area.

Let me try to take a quick whack at some considerations to prompt some questions in this whole area about whether any provincial fiscal action is desirable. I understand this is a pre-budget feeling out or setting up. The old adage in Canada has been primarily that any sort of contracyclical fiscal policy, that is, something trying to do something about a recession and a rise in unemployment, is the purview of the federal government; "purview" not in any constitutional sense, but that the feds are in some sense the right group to do it.

This has been taken on head-on in a recent article by Tom Courchene in the second volume of the C. D. Howe Institute's inflation study called Taking Aim. There is an extended section in there on provincial fiscal policy. Basically the point that he is making there -- I think they all have some legitimacy -- is that would be great if in fact the federal government were willing or capable of taking contra-cyclical fiscal policy, but what if it does not or cannot. In particular, with a high interest rate and a focus on inflation reduction as its overall objective, you run into the situation we are in currently where the federal government, at least up through 2 August, would have taken credit for the recession and the rise in unemployment rate as a deliberate policy to slow the economy down.

Tom Courchene argues that we ought to look again at this old adage and recognize that different parts of the country, particularly in the Canadian context, may be behaving quite differently. There may be relative price shocks that help one area versus another. For example, at the moment or up until 15 January, one would have said Alberta was given a psychological boost at least and certainly something in the order of $3 billion a year at annual rate on the higher oil price flowing into that economy, the private sector, another couple of billion into the Treasury. At the same time, Ontario was getting hit by overvalued exchange rates and by interest rate policy, two variables which Ontario was particularly sensitive to among the provinces. In that kind of an environment, what makes you think a national contra-cyclical policy would be appropriate? Should you not be tuning it in fact to the particular regions?

One of the other factors he raised is that the fiscal multipliers at the national level may be difficult to move around. There may be more opportunities for focusing particular expenditures, ones with higher domestic content, at the provincial level. Of the areas that you might want to stimulate for that purpose, the non-tradeable goods and services are again areas that perhaps are most directly in the bailiwick of the provincial governments. Interest rate policy is something which the feds basically have to keep interest rates in line between Canada and the world, although Tom realizes that the bank has not been quite doing that over the last several years, and he raises the hope that there might be a concerted action with some co-ordination with the federal counterpart.

In other words, if a province could stimulate and the federal government would not offset it at the same time, you might have a basis for a somewhat more tailored or more focused fiscal policy than we have. If you were to do that -- these of course make sense for both the federal side and the provincial side -- in the provincial context the kinds of things you can do are obvious: reducing various taxes, particularly sales tax, speeding up infrastructure spending -- we have already seen some announcements of intent to do that by this government -- fast-track expansion of social housing, starting up of planned hospital and school construction now, adjusting unindexed welfare payments.

In this particular environment we are in currently, that would go some way to offset the shocks from the oil price increases that are already in the system. Then there are other things, basically the criteria, something which is fast acting, reversible and where you can minimize the leakages into imports.

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So let's do it, right? No questions. Well. there are constraints out there and those include what the fiscal position of the province is. Will there be offsetting federal moves? If there are, all you will have managed to do is twist the people in the provincial economy, one way by provincial policy and then the other way by federal policy. There may be constraints in terms of leakages, although again I suspect any leakage to other provinces of increased economic activity might well be welcomed. Then you may be constrained in terms of how many options of speedy things you have to do if you have already exhausted that list.

Let me stop there. I hope I have occasioned at least a couple of questions, and if not, we will get back on schedule real quick.

Mr Sutherland: You have presented all your figures here. I do not claim that my knowledge of economics is that great, but you seem optimistic that we are going to come out of the recession later this year. I look at what you forecast for 1991, 7% inflation, right? You also expect the federal deficit to be going up $8 billion and that leads you to believe, though, that at the same time the interest rates will come down towards 11%. I do not see how a 7% inflation rate and an $8-billion increase in the deficit, based on what the Bank of Canada has been doing, is going to come down. If that does not come down. I cannot see the Canadian dollar coming down significantly, which has an effect on the manufacturing sector which is supposed to drive our economy.

Mr McCracken: Should I explain it?

Mr Sutherland: Yes. Looking at that, it does not seem we are going to recover as quickly as what you said in your brief.

Mr McCracken: Okay. I purposefully chose to sort of put out that 7% number just hoping I would get a response like that. The consumer price index is a useful measure. Every month it is timely but it is a terrible measure of what is really happening out there in terms of inflationary forces in the economy. It includes all the indirect taxes, it includes tuition fees, it includes imported goods, and in the case of the goods and services tax, we know the whole effect of it is to concentrate the tax on the consumer. That is the whole purpose of the exercise. So we know that if we are going to look at any price, it is going to be the CPI that is likely to get the biggest hit from those kinds of things.

It is also important to distinguish between inflation -- and perhaps I should have done so in my comments -- meaning an ongoing process in which prices continue to move out at some phase, and one-time price shocks. Both the oil price and the GST should both be viewed as onetime shocks to the price level. not as inflation. In the case of the GST, while the consumption deflator or CPI will go up roughly 1.2% as a result of the GST alone, at the same time, in 1991, investment prices will be declining by 2%, machine and equipment prices declining by 6%, government investment by 1.8%, even government expenditures, the deflator will be going down slightly. Exports will be declining about three tenths of a point.

If you look at a broad measure of the price behaviour in the Canadian economy, the so-called GDP deflator or the national gross domestic product deflator, the total impact of the GST on that measure is only about one tenth of one per cent and that number for 1991 would be in the order more of 5% or less when the CPI is 7%. Same story if you look at the world oil price. While it might be adding somewhere between I % and 3% to inflation in 1991 if it is at $30, if it reverses to $20 in 1992, you would be taking 1 % to 3% in the other direction.

I think one has to distinguish those two components and I would suggest to you the Bank of Canada in a public statement has said it will. They will not be reacting to the oil price shock or the GST shock. They will be standing on guard for thee against any induced effects from those. But with a slack economy it is not clear that you are going to have large induced effects, so we would suggest that they will be reacting to something in the order of a 4% or 5% inflation environment, maybe even towards 3% and 4%, which is consistent with interest rates coming down.

In fact, if they were perhaps a bit more sensible, the rates would come down even a lot more because the level of real interest rates, that is, nominal interest rates less the rate of inflation, is still extremely high. It has been high for most of this period of expansion as they have tried to experiment with a new way of conducting monetary policies. So think about the 7%, but also do not forget about the 3% in terms of what is coming up.

Mr Sutherland: But do not worry about that deficit increase that you mentioned, because that seems significant in what has been talked about before about keeping the deficit under control so they do not have to put interest rates up.

Mr McCracken: I do not think they will have to put interest rates up because of the deficit. There is a debate in economics in terms of which way the arrows flow. I can tell you with mathematical certainty that higher interest rates raise the deficit, the debt servicing costs. It is much more dubious about the arrow running the other way: Do large deficits in fact cause higher interest rates? That is particularly dubious in an international economy or an open economy like the Canadian economy.

I would suggest to you most of the reason that the deficit will soar in Canada is because we will be growing 3% to 4% below potential growth. In that kind of an environment, you have no expectation other than a rise. Unemployment insurance contributions are fixed in 1991 and 1992 so that they will take the full heat on the unemployment insurance program and the federal deficit in those two years.

There are a lot of things that are working adversely, but again, one ought not panic on it, because if you can restore the economy back to growth to get that turnaround and if you can keep those interest rates moving down, a lot of the heat will come off the public deficit.

I will try to make my other responses a little shorter. I think that is a good question.

Mr Christopherson: First off, I want to thank you for the presentation. I particularly like the format and the simplistic, if you will, way that you have laid out all the key issues.

Mr McCracken: Can we change that to say "simple and clear" as opposed to "simplistic"?

Mr Christopherson: Fair enough. Given Hansard's accuracy, we will make sure we say the right thing.

I really was impressed. Many of the presentations have been as equally good in their calibre, but harder to distinguish the most key things being brought forward. I thoroughly enjoyed this.

I have just a couple of questions, both of which are on the third to last page. You said in your notes that the US financial system is in deep trouble. I think you used the phrase that there could be some nasty surprises. I would be curious to know your opinion on what would happen if there were major bank failures. There are already some. Some are suggesting that the S and I is the tip of the iceberg vis-à-vis the entire financial situation in the states. If the banks start to tumble, how would that affect us and what should we watch for?

The other thing is under the last point on the possibility of $40 per barrel. It was suggested by a previous presenter -- they did not use a $40 figure, mind you. but they suggested that probably what we would see is just, and they qualified the word "just," an extension of the recession for one or two more quarters and that there would not be any real further deepening of the recession or any other impacts. I was rather surprised by that, but I would like your thoughts on whether you think that is "just" an extension that would happen, or are there other things that would happen if that turned out to be the reality.

Mr McCracken: On the US side, you can be schizophrenic. You can get very, very worried. When you look at the number of banks, as opposed to savings and loans, that are on the level 4 list, in trouble, when you see large institutions like the Bank of New England having to become the New Bank of New England, when you see some of the largest banks in the world posting large losses, in the case of First City or Citibank, you can become very concerned.

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In the conduct of monetary policy in the US, we often think -- and even in this country we often say that the first objective is to get inflation down da-da-da, but there is a page I and we ought to realize why the Federal Reserve system is what it is today and the pressures that put in place at the Bank of Canada. Basically, page I says, "You shall not let the financial institution in the system in the country come down around our ears," because we have had that before. We have had that in the US in the 1930s when the banks all had to be closed.

I think what you really want to think through, and put a very low probability on, is system-wide failure. So what then is the next step? The next step is one in which the Federal Reserve and the regulatory institutions take a heavier and heavier hand in the regulation of economic or financial institutions in the US; where there is probably a tendency to lower interest rates, thinking that that will reduce the cost of money to those institutions, allow them perhaps to spread their margins, which is what happened with most of the interest-rate declines in 1990 -- the borrowers did not see the lower rates, but the spreads of the banks were widened to keep them profitable, or to keep them at least above water -- and there will be a focus on getting the economy moving.

Inevitably, when that happens, though. there are some secondary effects. Basically, financial institutions get tighter in terms of their credit-granting. They start getting credit-conscious. You start having other institutions getting in trouble, some non-financial corporations, where the banks throw up their hands and pull the plug or they cannot get the financing and therefore they go into bankruptcy.

I do not think it is going to get completely out of hand, but I would suggest to you that it is going to be a continued pressure. As a result, it makes one less optimistic about the US economy growing, but it probably makes you more optimistic about the kind of interest rate policy it will pursue. In other words, there will be a tendency to err on the downside to lower rates in the US environment. That is a positive item for us; at least it gives us more room in which we could move our interest rates down without any exchange rate consequences.

To the extent that these failures lead to problems on real estate loans, lead to problems of syndicates that the Canadian banks are involved in, it could cause them some problems in terms of larger losses. But again, I do not know of any bank in this country that is so involved in US real estate or so heavily involved in any one particular activity that it is going to have any destabilizing problems. Sure, they are going to lose some money, but it should not affect their decision process here. In fact, it might even remind them that there are some good opportunities here.

On the second point, the easiest way, I find, and it seemed to work pretty well in keeping my thinking sorted out during the first oil price shocks and all the oil price shocks, is to just think of it as a big tax increase. So for every US$10 the world oil price goes up we are consuming basically 50 million barrels a day. That is $500 million a day, so that runs out at about $200 billion a year that you would have for every $10 tax increase. In Canada we consume roughly 600 million barrels a year, so for every $10 that would be another $6-billion tax hike.

Whenever you raise taxes, the immediate question comes up, what do the people who get the money do with it, compared to what happened to the people who paid the tax? If we are paying the tax, we are going to cut back on our expenditures. What happens to the people who get it? If it is going to the Organization of Petroleum Exporting Countries and we are not respending it in Canada, then that is a leakage. We lose that. If it is going to Alberta Treasury and it is simply using it to retire debt and to stock up financial assets, there is no recycling going on. If it goes to the oil companies that are paying off loans and improving their balance sheets but not doing any investment, then there is no recycling in that area. If it is going to the federal government in higher corporate income taxes, and then they are using it to reduce the deficit, there is no recycling.

That is the worst case where you would get $6 billion. If it goes to $40 billion, it is another $6 billion on top of that. And it is not a one-timer; it is continuing as long as that price stays up there. So I do not see how people could argue, "Oh well, it is just another couple quarters of damage," because it is a permanent diversion of income. It is not going to be transitory unless you think the world is one in which oil prices now will stay at $30 or $40, in which case then you begin to see some recycling occurring out there.

You see the oil companies saying: "Let's go put some more holes in the ground. Let's look at secondary and tertiary recovery. Let's dust off some of these megaprojects and go with those." Or you see the Alberta government cutting other taxes out there, buying consumer goods, which has a shadow effect back here. Or you see the federal government saying, "With that source of income, I do not need to take as much out of your pocket over here." So it is recycling in some sense.

In the ultimate sense, if you could somehow ensure yourself that this tax increase would trigger twice as much spending over here, then you could get a positive effect out of it. But the betting at the moment is that any of these jumps in oil price would be viewed as transitory the exception being, for example, that a significant part of the Saudi oilfields were taken out and taken out in a way where people say there is no way that is going to be coming back on stream for a number of years. Then I think you would see people focusing everywhere. Where can I get some oil? You would see Hibernia and you would see tar sands plants. It would be a rather macabre world in which to do that.

Mr Christopherson: What would be the effect on the economy of that say, $6 billion, if that is what went out to OPEC?

Mr McCracken: Well, $6 billion is roughly I % of the economy, so you are basically sucking I % out. That is the easiest way to think about it.

Mr Christopherson: And that would do what, though? In a recessionary time, that would have the effect

Mr McCracken: You have a 1% growth, an unemployment growth 0.5% or more as a result of that. So it is just like, it does not matter who puts the tax on.

Mr Turnbull: Mr McCracken, I would like to throw out your views on this question of debt. The provincial debt, during the last five years of the Liberal government, increased substantially. That was during a period of probably the best growth that Ontario has had in the last 50. It was not just a question of the debt load, it was actual increases in program spending where, as I believe, during that same period the federal government has been able to control program spending within the tax that it is gathering, but it has not been able to wrestle down the debt and therefore the cost of servicing it has increased that debt.

What is your view as to, I mean, if you were to advise all parties here on what we have to do and how urgent it is to start addressing the paydown of the debt. I do not think anybody here would suggest that this is the appropriate year to do it in, but there has to be a certain point in time when you as an economist would say that this is the appropriate direction for the government to go in. What sorts of benchmarks would you use as to when that battle would be appropriate?

Mr McCracken: Let me try to tackle that. First off, can we all assume we are not talking about waste in government expenditure, we are not talking about all of that stuff? We all, as a motherhood or fatherhood virtue, will go for more efficiency in government spending wherever we can get it. Let's put that canard aside, all right?

The issue then comes down first to, what is the social return that you get on the activities you undertake as a provincial government, and how do those compare to the financial cost of borrowing to finance that kind of an increase if you chose to finance at the margin, some of that through debt? That is the basic question.

Now if in fact, as they are all supposed to, your departments and the people coming to you soliciting funds, have done a proper benefit-cost study and have shown that their real rate of return exceeds the 10% real or the 8%, whatever the hurdle rate is in this province, and if you can borrow at 4% or 5% real, then what is the problem? There is none.

I am talking theory here now. The only still residual nagging problem that there may be is if you are in a world, as we unfortunately have been for most of the 1980s, where the absolute level of real interest rates exceeds the real growth of the economy.

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Then the thing you know is that that debt-to-GDP ratio for the province, the ratio of your debt divided by the size of your economy, will continue to rise as long as that real interest rate exceeds the real growth, unless you are prepared to run a substantial so-called operating surplus or primary surplus. That is not theory, that is arithmetic.

The question mark even then is, so what? In other words, what happens with a rising debt-to-GDP ratio? There are conjectures that this could be a problem, although those conjectures have proven so far to be unsubstantiated because debt ratios have been rising for the corporate sector, for the government sectors, not just in Canada but in the US and elsewhere.

Certainly, we have historical periods in which the debt ratio was extremely high; coming out of the Second World War, over 100%, the federal debt-to-GDP ratio, double what it is today. But at that point in time our environment was one in which real interest rates were low, real growth was high and we found that that debt-to-GDP ratio essentially evaporated over time. We outgrew it. So you, it seems to me, have both a microproblem, ie, are our systems for making judgements about what we do on programs and on new capital expenditure such that we are assured we are getting good returns on those decisions relative to our borrowing costs?

Second, what kind of an environment are we going to be living in over the next decade in terms of real interest rates relative to the real growth of the economy? In other words, are they going to be greater than 3% real or not? If they are greater than 3% real, you should recognize that you will face rising debt-to-GDP ratios if you choose to not offset that with some kind of a primary surplus. You may or may not lose sleep over that. Certainly a lot of people lose sleep over it, but they do not do anything about it. We have had rising debt-to-GDP ratios in the US, Canada, Italy and in most other countries of the world. But that is really what it boils down to.

Now, when have I raised this notion federally with people, that the real rates return and what they do should exceed their real borrowing cost and that they are, of course, doing these proper benefit-cost studies, all I get is eyes rolling back into their heads and saying, "Gee, I wish we did have that information."

So if that is the problem, I mean, if you are not confident that the returns that are occurring out of your expenditure are greater than your borrowing cost, then you have a problem. But that is a management problem, it seems to me, about what you choose. You want to make that choice regardless of whether you are debt-financing it or not. I mean, there is no point in your going out and spending money on a program, even if you are running a surplus, if the return on that particular program from the societal viewpoint is lower than what return you would get if you left the funds out there to be used by people and not take it away from them in taxation or in future commitments through the debt.

So I am not trying to be simplistic on you, but it seems to me you can focus on a couple of problems. You may say as a strategy, if you think real interest rates are going to remain high for the decade, that we ought to be leaning towards something where we stabilize that debt growth or do not let it get too high. That might mean that you have to choose a mix where you are running an operating surplus or a primary surplus as you get out there.

Again, I think your comment was quite well taken. You want to choose that time carefully. It is a long-term choice that you are making and certainly, when you are operating as we are now in a recession economy, the last thing you want to do is to convince people that your actions are going to make it worse and longer, because that runs the danger of triggering a loss of consumer and business confidence, which could in fact deliver on a much worse outlook and choke off a lot of private decisions to spend or to invest.

Mrs Sullivan: I want to go back to your final two pages as I frame this question. It seems to us that as we have listened to presenters during this period, and from what we know about this recession, that there are two factors involved in this particular downturn in the economy. One of them is structural change, and the other is the recessionary factors which have been described in great detail. In the manufacturing sector we are probably looking at a sector which will never have a recovery in employment that we would have seen, say, before 1982 when there was a structural change following that. Probably manufacturing is as lean and mean as it will ever be.

I am interested in seeing some of the figures on our business investment growth and seeing that, although there is a decline in that area, there is still substantial business investment and in fact continuing emphasis on research and development. I was interested that you and the Conference Board both talked about, and this is the first time that I have heard it, a severe decline in manufacturing and machinery equipment. In the long run, if we are looking at injections of provincial dollars to jig the economy, to jig a recovery, if you like, I am wondering, given that the predictions of a short-term period for recovery, that we are talking now about another two quarters if in fact the injection of provincial funding is valid and valuable. Second, what sectors, given structural change in certain sectors, would that injection to rejig the economy, to reflate the economy, be most valuable in? In fact, what is the value, if any, of provincial jigging?

Mr McCracken: Let's start with separating out recessions from structural change. Okay. First off we cannot, but the one thing we typically notice is that structural changes happen slowly. In fact, that is why we call them that. I would suggest to you, just to be a bit heretical, that the structural changes, for example the deregulation, the GST and yes, even the free trade agreement have little to do with the recession that the Canadian economy is currently in, or the Ontario economy.

Some sense of that you could get from asking what was the largest possible effect you might have gotten relative to prices or on tariff removal out of the free trade agreement, and compare that to the kinds of movements in the exchange rate that have occurred over the last couple of years, you would see that that is the dominant element more so than the other one. If you recall, on the unemployment rate side, we have the economy moving up to 8.3% with vigorous economic growth in 1992 through 1995, ie, above potential. Nevertheless the unemployment rate still only comes down to about 7% at the end of that period or 6.%-something in the case of Ontario, still below where you were two years ago.

I do not think that somehow you have this little window of a month or two that you can help, and after that it is all roses. You could start now and spend money to get this economy moving and build your capital projects, and they will still be contributing to an improved economic outlook certainly over the next several years. And that is why I talked, when I first started, that this sort of 3% real is needed almost to stand still. Above that, we have to go and get the unemployment rate down. There is lots of room for the economy to move forward.

Where do you spend it? How do you spend it? You might well want to look at some of these structural changes that are occurring out there and ask the question, is there something we can do to make them work better? In other words, globalization is an issue. The free trade agreement is an issue. The GST is an issue -- on and on and on. The answer is, sure, you can, and in particular the area that economists focus on often is infrastructure, for two reasons: First, it is a responsibility of government so you have your hands on that lever; second, infrastructure is something which helps the economy function better. It helps private productivity improve -- not just nice to have, okay?

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Take a simple example in this province, and some of you, I am sure, are closer to this issue than I am. I do not know if anyone here realizes that Ottawa is part of the problem. There are difficulties in moving people and goods and services in and out of this province. I am told that there are increasing backlogs at most bridges, that we may well find people locating elsewhere, like in Buffalo, not because of any great virtues of the city of Buffalo, but simply to be able to provide dependable supply to customers in the US from a warehouse located there. Why is that? We have choke points. The fact is that Ontario is an island when you get right down to it. What do you do about that? You build some bloody bridges. You improve the flow of traffic or you look at ways of otherwise decongesting it.

There is also a temptation to talk about physical infrastructure -- roads, sewage treatment plants -- but we ought to broaden our concept of infrastructure way beyond that, and of course two of the key areas are people, in the form of education and their health, and then research and development, or capital stock that we have in terms of intellectual activity. You have touched on both of those. I think those are key areas, and areas which not only have a benefit in some broad social sense, but also benefits to the individuals, benefits to the private decision process.

If you are asking where I would put my emphasis. It would be there. I must say that I do not share your pessimism about manufacturing. We expect a substantial bounce-back in manufacturing output in 1992, 1993 and 1994, and in fact so strong that in 1994 manufacturing employment will be back over the 1989 level. That is vigorous. But you are quite right that it has been dropping for a while and certainly we get down in 1991 to a level that is --

Mrs Sullivan: But with substantially fewer employers.

Mr McCracken: No, on the employment side I even catch up, but that takes vigorous growth and we have double-digit or 7% or 8% growth for two or three years after the recession.

One other point I would like to get on the record is something which I think confuses decision-making, at the federal level certainly, and it often causes some problems with other provinces. There are two ways you can think of things: One is that if Ontario grows that hurts other areas, or you can recognize the reality that if Ontario grows it is helpful to other provinces.

There was a lot of discussion, as you may recall, over the last four or five years about how we have to slow down Toronto or how we have to slow down Ontario to somehow benefit the rest of the country. That is hogwash. If you slow down Ontario or you slow down Toronto, you slow down the rest of the country and we are, I think, amply going to be demonstrating that again.

Mrs Sullivan: Take this quote and circulate it around the country.

Mr McCracken: But the flip side of that is that if in fact you can speed up Ontario, other regions will benefit as well. Conversely, if other regions stimulate as Quebec at the moment is starting to do in a couple of areas, there will also be a positive shadow effect back into Ontario. Keep that in mind in your activities, that if you can get this economy moving vigorously that will be not just to Ontario's benefit, but to all.

Mr Phillips: This is good news again. I think that when you are in the middle of a storm, you cannot see the end of it, but I think every economic forecaster -- the three banks, yourself, the Conference Board of Canada -- have all predicted a recovery in the mid to the latter part of this calendar year. I think you say that it will come towards the end of this calendar year.

Mr McCracken: I think trying to pick a month -- we cannot even measure it that close. At the provincial level it is hopeless.

Mr Phillips: Right, but we are into that sort of range that we are only months away from --

Mr McCracken: Well, 1992 will be a good year compared to 1991, but 1991 is a terrible year; 1990 was a very bad year. You have had two very bad years where you have given up 4% growth in 1990 and you have given up another 4% growth over potential likely in 1991. That is 8% of a gap that you opened up in two years between where you wanted to be and where you are now, so if you want to get out of that hole you have to grow 3% to 4% a year, plus somewhere pick up that 8% growth -- 2% a year, 3% a year. You can have very, very vigorous growth and still not run into any brick walls out there. The hope is there, but do not let that be an excuse for saying, "Therefore, let's not do anything."

Mr Phillips: No, I understand that.

Mr McCracken: Okay, because that is a conditional forecast, that you do not move in the wrong direction and that we do get a return on business investment, that business investment is not hit terribly bad. that it is helped by the GST, that they take advantage of that break, that we do get a turnaround on the US side, that we do get some sensible monitoring on fiscal policy management, and that will help you.

Mr Phillips: I really did not get my question out and I am not sure I am going to. I will talk quickly. The ballpark answers that come out at the end of the year -- this may be too difficult and if the other members do not want to hear it, fine, just in terms of --

Mr Stockwell: I do not want to hear it.

Mr Phillips: Okay. Your forecasting must take into account the impact of the GST and the free trade agreement. I do not want to get into a whole debate about good or bad, but I would like your opinion of whether for Ontario that is something that is going to be helpful to our economy.

Mr McCracken: No problem. There are published results on this. Let's just make it simple and go 10 years out. Think of it as a structural program. Ten years out both the goods and services tax and the free trade agreement will have been a positive thing for the Ontario economy and for the Canadian economy. It will be particularly a benefit for Ontario in both cases. Why? Because this is where most of the manufacturing is. This is the province in which most of the investment goods are made and so anything which is a positive effect for people's desired levels of investment can redound to this province, and that is the fundamental nature of both the GST and of the FTA. You do not have to believe it, but that is the result of quite a few studies that have been made on both the GST and the FTA by province, and are reproducible as opposed to the conjectured view.

Now run it back and say, "What about the first year. the second year?" By and large in both cases we get positive effects on the FTA, essentially wash effects in the case of the GST in the earlier period. The wash effects in the GST, when you take it down to a provincial basis, are slightly positive for Ontario, slightly negative for some of the other regions, because again the items where the tax is coming off relatively, those things that paid a lot of manufacturers' sales tax, are more dominantly made in Ontario. The other manufactured products which are being taxed for the first time are dominantly being made in some of the other provinces, particularly Quebec and Manitoba.

Mr Phillips: That is with manufacturing job increases.

Mr McCracken: It is a small part of the total. That is the other thing I would like to leave with you, that the whole FTA effects on the province of Ontario over a 10-year period have been more than blown away in the last year or two through the kinds of swings in the economy that have occurred. The total impact on the provincial economy might be a level of income per person or GDP of 3% or 4%. I just mentioned We have opened up a gap of 8% in the case of manufacturing and an even larger gap over what we could have done, so the other thing, as a reminder, is to just keep your perspective, that the way we manage the macroeconomy can be a hell of a lot more important than these effects of some of these structural policies. On the other hand, getting 3% and another 1% or so from the GST are all in a sense positive things to have going for you that will raise the real income levels per capita over the longer haul.

The Vice-Chair: I hope you liked the answer there, Mr Phillips.

Mr Phillips: I am just looking for the truth.

The Vice-Chair: I would like to thank you for appearing before the committee after the invitation we sent out to you and I think you have enlightened us quite a bit with your predictions.

Mr McCracken: My pleasure.

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ONTARIO COUNCIL OF REGENTS FOR COLLEGES OF APPLIED ARTS AND TECHNOLOGY

The Vice-Chair: The Ontario Council of Regents for Colleges of Applied Arts and Technology, Mr Pascal. Sorry for the time delay there, but we have been running behind all day.

Mr Pascal: My congratulations to you for your sustenance in terms of not only the important content, but the climate in the room is a major challenge for you I am sure.

Thank you very much for the opportunity to spend a few moments with you. I am here to talk a little bit about a success story, to talk a little bit about lifelong learning and to talk a little bit about renewal and institutional change in post-secondary education. I wonder if I have your permission not to, at any time during my remarks, ask for money. I wonder if that is appropriate.

Mrs Sullivan: Refreshing.

Mr Pascal: It may be novel.

Mr Phillips: You are going to a new job, though, on Monday, are you not?

Mr Pascal: On Friday, I am told, so I do not know how to spell swan song, but I am very pleased to talk a little bit about the colleges. If it is okay, I would really rather talk more philosophically than financially, because I see that as an important mission.

The first question I would like to ask -- and I wonder procedurally, whether it is okay for me to ask questions of the committee -- with your permission, how many members have been in an Ontario community college for more than an hour?

The Vice-Chair: Studying or just touring?

Mr Pascal: In conclusion, I want to thank the committee for -- perhaps I do not need to continue. A picture and an experience of an hour or more is certainly worth a couple of thousand words.

The colleges over the first 25 years of their history have indeed been a success story, but it has been a success story that is not told as often as it needs to be. The colleges have been so busy responding to requests from so many different clients that they have had very little time to bask or even time to beg. If one wants to find out about the success of the colleges, one needs only to ask the thousands of graduates, both full and part-time. One could simply ask the experienced worker who is taking a robotics retraining course for a more secure future or one could talk to the owners of a mom-and-pop, family-run hotel or motel who need in-service training to remain competitive, or with their children who will take over the business over the next several years with the self-confidence typical of a graduate of one of our tourism and hospitality programs.

The Ontario colleges over their first 25 years have been both efficient and flexible in serving a very diverse group of clients: the chronically unemployed youth lacking successful work experience, single mothers who wish to become tool and die makers or computer-aided design technicians, and young men who wish to pursue a career in nursing.

When the Ministry of Labour wants its occupational health and safety inspectors trained it turns to one of our colleges. When the Ministry of Natural Resources wants the fish in our ponds and lakes to be mercury tested it turns to our natural resource experts in our colleges. When Science North was established, it was our technology experts from a local college who provided the upfront leadership and training to enable that enterprise to get off to a successful start. When the young and experienced with major special needs and a variety of handicaps present themselves, the colleges, all 23, seemed to have responded quite ably.

You all have received a summary of the Vision 2000 document. I did not, through the clerk, send you the complete report, although it is a user-friendly report that is short enough and easy enough to read that I commend the full report to you and would be pleased to provide members with the complete report. But more important than the 40 recommendations that you have noted in that report is the process itself. The process was the most important part of the product. It was an experiment in collaborative policy. When I use the word "collaborative," I am talking about shared power. I am talking about a process of inclusion in terms of involvement of all the stakeholders within the college system, together with our external stakeholders, and a process which included, as members of the committee know, a political inclusion in terms of members of all three parties through one interview process or another.

As a result of it, we have some new directions for the colleges which suggest again that the colleges are willing to not just ask for financial support, but simply the moral support required to get on with institutional renewal and institutional change. The colleges in Ontario and my college colleagues, the 15,000 individuals who work within the colleges, the 23 college presidents, the leaders of OPSEU, our provincial union, and so many other stakeholders are prepared to engage in a process of renewal because they all own the recommendations that you can read very easily in the draft summary.

There is a preparedness to do the right thing for the sake of Ontario's citizens in the name of taking lifelong learning, a phrase which shows up in the speeches of educators and others. That phrase has to become a tangible reality for so many Ontarians.

The directions that you have noted I will summarize very simply as the need for quality to be assured through province-wide standards, a major broadening of the curriculum so that our graduates are not only gainfully employed, but that successful employment becomes successful employability over the lifetime of the college system's graduates.

The college system has done a superb job with so many, but for so many the open door has been a revolving door. Our level of attrition is unacceptable. The amount of accessibility that we have enjoyed we think has been superb. The stakeholders in the system with whom we shared the Vision 2000 process tell us that the colleges need to be more accessible, and for those who come in, we have to ensure that they have reasonable opportunities for success, and for so many that has not been the case.

Finally, I notice that you have had discussions today with my colleagues from other parts of the education panel. You have talked to leaders from the school systems. You have talked to my friends and colleagues from the university system. My guess and my hope is that you have heard their interest in ensuring that our educational system becomes a seamless opportunity for lifelong learning. Right now there are so many systemic barriers in the way of having lifelong learning become that tangible reality to which I referred. The Vision 2000 report talks about the need for very strong linkages between the schools and the colleges and some enabling mechanisms to bring that about.

With respect to our post-secondary system, it is surprising to me, after 25 years, the isolationism that both sides of the post-secondary fence have enjoyed, if I can use that rather bizarre expression to describe it. That simply has to be part of the past. We have to ensure that in this province, a province where we talk often of developing our human resources, there are no systemic barriers to achieving full and equal credit for what people have done in learning institutions and in life's experience. The Vision 2000 report talks about methodologies for ensuring that happens.

My guess is, having looked at your schedule today, that you may have heard differences of opinion about topics such as university tuition from groups representing universities. Let me urge upon everyone who studies the issues of tuition and other issues to look at these issues in a holistic and integrated way, that you cannot look at university tuition and questions of accessibility without looking at what happens to college graduates in terms of being labour-market ready, in terms of their ability to go on to university and get full credit for what they have done.

To look at tuition policy in a narrow yes or no fashion, without looking at the colleges in relation to the universities and the enabling effect that colleges can have in terms of accessibility, I think would be a mistake.

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I am sure, through your smiles and response to my supposition, that you may have had differences of opinions from the same sector on issues like that, that there are ways of looking at issues such as tuition in a broader and more integrated fashion. That is one of the beauties of Vision 2000. All the stakeholders are part of it. There are directions in that report about what might happen with the issue of tuition.

In the name of lifelong learning, I would simply want to table at least my personal definition of it, because it is a phrase that is used a lot, as I indicated. I am not sure we ever pause enough to define what it is we mean by these things. For me, it means learning throughout one's life in order to accrue the positive intellectual, emotional, spiritual, financial and physical benefits which arise from an individual's constant quest for personal improvement. A learning society is one in which all of its members have access to the developmental benefits of lifelong learning and can look forward to the collective effects of a future which is more fulfilling, through greater justice, equity, health, safety and comfort.

In closing, I want to read from the letter I have written to my son. My guess is, during your discussions with other stakeholder groups, that you often have people come and read letters to members of their family. Here is another example. Last summer I was asked to give a keynote address at a conference of post-secondary educational leaders in San Francisco. At the time, I had hoped that my son would be able to join me in one of our annual Blue Jay-following quests. We had in mind a coastal trip following my remarks. I was feeling rather blue the evening before my remarks that Jesse was unable to join me as a result of his 11th-hour decision to go to a leadership camp. I was asked to address this conference with respect to issues of leadership and education, so I wrote a letter to Jesse which I decided to make an open letter. It was the keynote that I gave on that occasion. I am waiting for an opportunity to give the one I did not give because I spent quite a bit of time on it. It had some interesting remarks that I will save for another time.

In this letter, I said a few of the following things. I will not burden you with the complete letter.

"Jesse, by the year 2000 you will have just celebrated your 27th birthday. Scary thought. The life decisions that you and your friends and your four billion peers around the world make between now and the turn of the century will determine whether the new millennium marks a new beginning with a chance or the beginning of the end of your dreams and mine. Don't worry. A few of my educator friends will assist, especially those involved with community colleges as we know them in North America.

"And Jesse, I don't know when I have been prouder as a parent than when you and I visited Durham College a few months ago in order for you to check out their sports administration program. It was the first time that I had ever entered a college as a parent. It was a great day for me, and I hope it was for you, but I don't think I told you how moving the experience was for me. Suddenly, our Vision 2000 project on the future of the community college system in Ontario took on a deeper, more personal meaning for me. One of my own kids was going to a community college. It felt great. My commitment to community college education was genuine. Did I have doubts? Not really, but feeling good in the gut was very comforting.

"You know, Jess, going to a community college is more than just entering a system of education. It's more like joining a movement, at least that's the way I would like you to see it. It's a progressive movement designed to act out beliefs about equity and fairness, to promote a lifetime of learning for all, to realize accessibility as an opportunity to succeed in reaching high standards.

"Education generally has an essential role to play in the development of a world which is peaceful, environmentally sound, equitable and economically viable. Education should help balance individual and community needs and foster personal initiative and co-operation within human relationships based on mutual respect.

"Education, in particular community college education, should ensure that people have the opportunity to develop the skills and knowledge they need to adapt to and make constructive contributions to the world in which they live. Education should enhance students' choices and opportunities and promote the development of individual potential. It should also assist learners in developing their commitment to social responsibility and care for the communities in which they live, and respect for cultural integrity and self-determination of those whose language and traditions may be different from their own.

"At the heart of this, Jesse, is the notion that leadership is a very collaborative process. Collaboration means sharing power and it means living the equity message.

"Jess, I know you've often discussed with me what you'll want to do when you grow up. There are exciting possibilities for you because you are blessed with many natural talents. But I am more concerned with what you will be, not just what you will do. Participating in the community college movement as a student should help you on both counts. Because I am a bit older, I have a clearer sense perhaps of what I would like to be if and when I ever grow up, and the community college movement we are soon to share will help in so many ways.

"Jesse, let's be less proud of what we already know and more invigorated by what we have yet to learn, because we want to be leaders. It's great to love humanity, but let's like people, finding value in their diversity of mind, experience and culture, because we're part of a movement.

"Let's learn to deal gracefully and securely with ambiguity and complexity, because we're leaders.

"As healthy, white, privileged men, let's judge our worth not by our ability to protect what we are or what we have but by a behavioural commitment to share power with those who remain unequal partners because of differences which shouldn't count when it comes to opportunities for comfort, dignity, safety, health and equality. And, Jesse, sharing power with unequal partners means giving up some power. You and I will do this because we are trying to be leaders who will lead with ideas, not the power embedded in position or office.

"And to paraphrase JFK (or Ted Sorenson, his speechwriter)" -- Mr Chair, I apologize for the American reference; the setting was San Francisco -- "let's ensure our college movement is informed by committed beliefs in human dignity as a source of purpose, in human liberty as a source of action, in the human heart as a source of compassion, in the human mind as a source of our invention and our ideas."

In closing I want to say simply that Vision 2000 has an agenda. It is an agenda that is owned because of the inclusive nature of the process. The college system is part of an educational panel that needs to be more integrated, more holistic in how it deals with some of the Vision statements arising from my public remarks to Jesse. Everyone who has a stake in our future, including members of your committee, needs to do everything he can and we can to develop a deeper understanding of what colleges have meant to the province of Ontario and, more importantly, what colleges can mean to realizing what I alluded to before; that is, a healthier and more comfortable, more equitable and just future. Thank you very much.

Mr Sutherland: I must say I do congratulate the former Minister of Colleges and Universities for the initiative with Vision 2000. It is a terrific document.

I just want to pick up on the articulation process and get a real sense from you as to how you feel that process is working in terms of transferability of credits from colleges to universities. I was wondering if you could also comment on what the ability is to move from college to college, because I know in the university system it is very poor. I wanted to get a sense of what it is in the college system.

Mr Pascal: Unfortunately, Mr Sutherland. as to the ability to move from institution to institution on the university side and the college side, I will tell you, through some interviews we did in Vision 2000, in some cases it is difficult to move from campus to campus within a large institution and get full credit for what you are doing in the same program. We have to ensure that when people have invested time and energy and financial resources in formal learning experiences, they get full credit for what they have done from institution to institution within the college side of the fence and certainly within the universities.

At present we have about 5% of the applicants to colleges coming from universities and about 2% of our graduates are going on to university from college. Many of the deals that students can get are based on their assertiveness. We should be designing equity based on some principles and procedures rather than whether someone is an assertive consumer or not. The mood of the receiving registrar will determine whether or not chemistry I 0 I at a particular university gets 0.63 credits at the sending institution. and vice versa. The same kind of thing does exists within our college system.

The good news is that in the last couple of years we do now have extant within the system about 72 degree-completion agreements between a college program and a university program, where the graduates of an early childhood education program at college A can go there and go on to university B and receive full credit and take one more year and get a degree, and vice versa. The program goes in both directions.

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But we still have thousands and thousands of students who are not able to mix and match freely around the province. I will tell you one story to illustrate, I think, the intent of your question. A graduate from Fanshawe College in early childhood education -- Fanshawe is in London -- upon graduation wanted to return to her home town of Windsor, where St Clair College has a degree-completion arrangement with early childhood education at the University of Windsor. She asked if she could go immediately to the University of Windsor and avail herself of the same principles, and she was told: "We have a deal with St Clair but not with Fanshawe. You have to start over."

Let me simply say that while there is the beginning of some successful co-operation between our universities and our colleges, we have a long, long way to go until the issue of equitable access and mixing and matching the fine resources in both institutions is a reality.

Mr Fletcher: I was just going to comment on Vision 2000. and it was nice to see that my friend Doug Auld was at the top of the list when it came to some of the contributors. I do believe it is a very good document. It is a good document with a lot of good input. Where is it going? I guess it is along the same lines as what Kimble was asking. Where have we gone?

A lot of the recommendations, in fact all of the recommendations, are that the Ministry of Colleges and Universities "should," the college system "should," the provincial government "should." There is not a "will." There is not a commitment from any part of government or anyone else that they want to do something in there. I know it is just a vision.

Mr Pascal: Obviously we could not use "will," because we were simply -- I should not say "simply." We were about 2,500 stakeholders who got together and got to "yes" with respect to major directions and a vision. But the good news is, because it was inclusive. both politically and in terms of our colleagues in ministries, not just MCU but in the Ministry of Skills Development and members of other government ministries, there is broad ownership, I believe, at this time in terms of the will that is required.

I cannot say the following will happen on some dimensions, because it is my minister. I have a minister,. I report to Dr Allen, and I am very comfortable with the kind of research that he and his ministry have done in terms of what should or should not happen and when these things should happen. But while I am optimistic that you will all see tangible evidence that the will is there, the good news is that there are a lot of recommendations in Vision 2000 that have already given impetus for further dialogue and for action independent of what government decides to do. For example, there are already some very informal discussions at a very high level between college leaders and university leaders to talk about the concept of the institute without walls, the institute without walls being a nonbricks-and-mortar opportunity to ensure that there is going to be that equity. Whether university X or Y decides to look at the future or a rear-view mirror would matter not.

In that context there is an awful lot of very constructive dialogue taking place. Your friend and colleague Doug Auld is among those who are involved in that. Because of the process, I am quite confident that the agenda is owned by all. I am comfortable that the government is very comfortable with the directions, and what remains I think is the manner in which things will be implemented, and the timing. But that is not my job, to make those announcements or to even handicap when they might be made.

Mr Fletcher: One supplementary: I notice the other part, as far as this document is concerned -- I mean, ownership was taken over by the Ministry of Colleges and Universities, but there is never a dollar figure, a numerical figure, put to some of the funding or some of the programs. What does it cost, the long-term costs of what we plan to implement? I know it is difficult to do that in a crystal ball sort of way, but we do have to look at the reality of the money we are working with.

Mr Pascal: That is a very important question and obviously an apt question coming from this committee in particular, and that is why it is easy for me today to cease and desist from asking for money and from encouraging government to set aside X dollars for Vision 2000. There is a very strong tendency, when we are trying to craft public policy around the cornerstone of doing the right thing, to think about the manner in which -- you know, Rome is burning right now, etc, and we wanted to ensure that in spite of the fact that there are colleges right now which are well constrained by resources, we freed ourselves of asking questions about financing division. We wanted to make sure that this document, this process, was clearly set on pointing the system and the government in the proper direction in terms of our colleges and education generally.

With all that said, however, your question remains an important one, and right now there is a process of determining priorities in terms of direction and costs. This is more a function, I think, of the bureaucracy in the Ministry of Colleges and Universities in this instance.

What is important to say, however, is that many of the recommendations do not require large amounts of money. I am glad Mr Fletcher raised the question. Developing a mechanism for ensuring province-wide standards will not cost a lot of money. It will cost a very small amount of money, if anything, in terms of redirecting funds.

The lifelong learning implications of Mr Sutherland's question will not require money. What is required is that educational leaders on both sides of the post-secondary fence begin looking at the future in new ways in terms of a commitment to lifelong learning. So many of the key recommendations do not require infusion of large amounts of money. Some of them do. I do not want to mislead you. some of them do.

Mr Phillips: That may have answered my question on it, which is, we heard this morning quite an impassioned plea from the universities and I do not want the colleges to be shortchanged. It may be from the next group that is coming here that we may hear the financial requirements. You have brought the strategic framework.

Just while I have the floor, I wish you the best of luck in the new job, by the way. It is a fascinating and important job.

Mr Pascal: Thank you for that and. hopefully, the collaboration that I have alluded to will stand us all in good stead in terms of other things ahead, both for me and for you.

Mr Chair, I am not unaware of the fact that I am being followed by Mr Trump, who represents the council of presidents through the Association of Colleges of Applied Arts and Technology. He and I do have each other's phone numbers on our speed dial and, as a result, my guess is he may provide Mr Phillips --

Mr Phillips: Is this a tag team?

Mr Pascal: No, it is not terribly well rehearsed. We are not as good at rehearsing some of these things as our university brothers and sisters are, but my guess is my colleague Mr Trump will probably get closer to, I think, the kind of tangible expectations that members of the committee may have, and you should hear that message, but I thought my role today ought to be a bit vision-directed and philosophical.

I do believe, in answer to the question of Mr Fletcher, that so much of what has to happen will require simply will and vision rather than money. However, Mr Trump may allude to the fact that although 2,500 colleagues and 15,000 others are quite enthusiastic about the directions of Vision 2000, maybe they need to be a little less numb with respect to the current state of affairs to proceed down the path of renewal.

But what is important is that commitment to change is very much there on the college side. I will not allude to whether or not my colleagues on the university side are committed to doing many new things in many new directions. I remain a university professor as well, at least for the next three and a half days, and so I have a tremendous respect for what our universities do for society at large.

My plea is that we learn how to do it together more effectively and that the social and emotional disease that I refer to as hardening of the categories in our province, where there is too much that belongs to person X or person Y or group A or group B, that is something we deal with in new ways, because I cannot think of a major social or economic issue facing the province of Ontario that can be pursued meaningfully without stakeholder groups coming together. In the context of which I speak, of course, I am talking about educational leaders from the schools and universities and of course, last but not least, from Ontario's colleges.

The Chair: Thank you for your presentation.

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ASSOCIATION OF COLLEGES OF APPLIED ARTS AND TECHNOLOGY

The Chair: Our next presentation is by Chris Trump from the Association of Colleges of Applied Arts and Technology. If anybody can tell us where the state of the art is going, it should be you.

Mr Trump: Let us try. I do not think I can get you back on schedule, but I will try.

The Chair: Just as a personal aside, I was present when you announced the experiment in a spaceship, the bread or yeast experiment. What happened to that?

Mr Trump: The bread in space? Sadly, the explosion of the shuttle intervened and the Getaway Special program of NASA is in as dire a strait as some other elements of the program. We have done the right things for the participants, I believe, but having been away from Spar now for a year and a half, I cannot say whether they invited them. as I suggested, to a shuttle launch to at the least partake a little bit in the space program. I believe the Ontario Science Centre had an exhibit of how the oven would have worked, but at least in this century it is not going up.

The Chair: It was a fascinating afternoon to be there when that was announced.

Mr Trump: Yes, it was great fun. I often believe that the space program gives the chance to a lot of people who are not scientists and technicians to participate in something that has bigger meaning.

Anyway, in my new role as executive director of the colleges of applied arts and technology of Ontario, I want to present to you -- I will leave you a two-pager, but I would rather just speak to it -- picking up where Charles left off on Vision 2000.

I was privileged to be part of the steering committee, which did indeed include members from the academic community, secondary, university, colleges, business and industry, president of IBM, labour, Jim Turk, Ontario Federation of Labour. It was an interesting series of sessions through some 18 months. If it is not quite as visionary as we would like, that is what you get when you have committees at work. If you want a visionary, send someone up on a mountain for 40 days and you will get an even more unworkable plan.

Vision 2000 has 40 recommendations. The presidents chose three of them to address: improved access. increased success in programs and academic mobility, which has a great deal to do with standards and accreditation. Three Mondays ago, we had the most interesting session ever in the history of the colleges. Around the table at the association gathered all of the constituent groups: full-time and part-time students, folks from community industrial training committees, the Ontario Public Service Employees Union, faculty, staff, administrators, presidents and governors.

The issue was, what will we tell the minister, Richard Allen, is our intention for the colleges over the next five years in terms of what we want to do? In other words, putting not only meaning and substance to the vision with milestones that are measurable, but also the costs that are associated with it.

I am pleased to report that at the end of that session we had agreement. The students felt that the physical plant at the colleges was abysmal and that a great deal more should be spent on capital improvement. The present administrative staff felt that the principal issue was how badly the administrators were treated by the college administration presidents. Fair game. I hope they tell that to Minister Allen.

But the essentials, improved access, that is, running programs in the evening that are the mirror image of those in the days, recognizing the fact that you have working mothers who need their children cared for while they are in school, all of these are things that can be quantified. There is a backlog at Cambrian College of 200 special needs applicants who cannot be accommodated because there is no room.

Suppose we start with each college and begin to say, "What is your backlog and over the next years how will we open the doors wider?" Once you have said that, then you come to the point of. "Well, it's one thing to admit you, but suppose you flounder, find you are in over your head and quit?" The attrition rate in some technology programs is 40%. We should also establish milestones that improve retention, that is, reduce the attrition rate. This will require improved counselling, remedial instruction, and again that is a long-term objective to improve the role of the colleges.

The final one -- and Charles gave the example of the early childhood education student from Fanshawe who went to Windsor and the University of Windsor said: "We have an articulation program with St Clair. You don't count." I would not necessarily knock the University of Windsor, because the colleges are woefully deficient in the area of standards and accreditation. I was pleased that when Premier Bob Rae spoke to the presidents a week after the election, at which point he said he was no more surprised than they were that he was there, he mentioned standards twice in his 20-minute remarks. I was pleased to hear that.

I was pleased to hear that OPSEU has that as number one on its list. We must have standards, because what in the world is your education worth if it cannot be measured and found to be in congruence at least within the college? We have the example of one major college which shall remain nameless that has five early childhood education programs and there is no interchangeability between them.

We have the example of a Loyalist student who after her first year went to Humber and was told. "Go back to the point of beginning in early childhood education." Fortunately Doug Auld and Squee Gordon talked about it and the case was straightened out, but what kind of a system makes a presidential case out of the efforts of an individual to move from one institution to another, to say nothing of moving from a college to a university or, God forbid, moving to another province?

We are working on that. It is something that requires a great deal of leadership within the colleges, because there are many who just love to carry on the way they are doing, taking refuge in the notion, "We are community colleges." Right, but in Ontario they are first and foremost colleges of applied arts and technology, often programs that should, in terms of outcomes, have individuals. men and women, who are competitive in a global marketplace. So that is the long-range plan, which we hope Monday next to present to Minister Allen in a two-hour session.

For the immediate, I have to tell you our backs are to the wall. I know the universities have told you this too and have documented it in greater degree than we have, because the Council of Ontario Universities has a 26-person staff. We have a four-person staff, but we try. Thanks to some very serious work done by the folks at George Brown College under the aegis of Doug Light, we have determined that next year a 12% increase in the funding base from the Ministry of Colleges and Universities is required to accommodate the 5% enrolment increase. the first in five years, that we endured this fall.

The retention rates which we have experienced now, where people are no longer leaving but staying on, will give us a base increase, we anticipate, next fall of 3% and an anticipated increase of yet another 5%, if not more. This will permit us to offer the level of programs that we have at the moment. Should the increase slip to 10%, we will have to tighten belts, which means that things that we are doing now will have to be truncated.

Should the allotments slip below 10%, then the word is fiscally mandated enrolment caps. We will have to do it on a selective basis, particularly in Metropolitan colleges -- I am talking about Toronto, which is where 60% of the college enrolment is in the province. It will have to be instituted. That is the unvarnished exposition. It is documented. I have the two-pager to leave with you. Should you want the documentation, I will be delighted to bring it. but as I wrote to the Treasurer, I did not want to belabour the point with still more reams of paper. I am sure you have been buried in paper a lot.

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To close on a brighter note, I keep reading all the time of what is wrong with Canada, what is wrong with Ontario. I would like to submit that there are things that do not cost a lot of money, as Charles said, that give great hope for the future.

I am speaking of a movement and Charles spoke of a movement, the community college movement. This one is called Skills Canada. Its genesis was at Georgian College in Barrie, a small town in Ontario. A dynamic dean of technology there, William Leslie, said: "What if we got young people in high schools and in colleges, regardless of their vocational and professional aspirations, and brought them together in clubs? Work hard. play hard, pursue what it is you are interested in, have conferences."

I was at one that they hosted in Bolton. The vice-president of Dofasco was there. The young people introduced him and thanked him; the vice-president of the SkyDome, the same thing. It develops communication skills at the same time. There are now 2.000 enrolled, 100 high schools and 9 colleges. We want to make that all 23 colleges before this year is out. The objective by 1995 is 50,000 youngsters throughout Canada. something that started here in Ontario.

What gives me the greatest hope is that for the first time ever last summer, an Ontario team which represented Canada, there being only Ontarians aboard, of 37 young people went to Tulsa for the North American Skills Olympics in competition with 4,000 Americans. Only one state garnered more medals than Ontario and that was California. We had a bronze, three silvers and two golds. The gold medals were won respectively by a Fanshawe student and a Milton high school student. The Fanshawe student was an apprentice in precision machining, the high school student in the culinary arts.

This to me is one way in which the colleges can make a mark, to put the imprimatur of dignity and the worth of all things that human beings do. If we move in the areas of access, success in programs, standards in accreditation, we will come closer by the turn of the century to having woven that seamless web that Charles spoke about of lifelong learning or long-term training.

Anyway, end of speech. I brought copies of the article. The Financial Post has written a little bit on Skills Canada, and here is our two-pager on our needs. I will be delighted to leave that with you.

Mrs Sullivan: Your presentation was very articulate without a note, and we appreciate too the length of time that it took so that we can all have an opportunity to ask questions of you.

I am interested in your funding base increase request, 12%. I think that would probably add under $1 million to your budget. Is that right?

Mr Trump: It is a bit more than that. The funding is in the order of $750 million, so you are looking at a bit more than $1 million. In fact, $1 million is what, little more than 1%?

Mrs Sullivan: Ten million.

Mr Trump: Of $750 million, you are looking at $75 million just at 10%.

Mrs Sullivan: Good. Thank you. I just do not have those figures.

Mr Trump: It is almost like a Monopoly game when you get to that ethereal reach.

Mrs Sullivan: In that funding base, have you included increased emphasis on the access programs? I have Sheridan College in my riding. There has been great emphasis, for instance, on expanding night and after-work opportunities for people who are moving from one career to another or from one business to another, one kind of work to another, who have other pressures than the 19-year-old student has, whether family pressures or credit crunch pressures. What of your funding base would include increased emphasis on attracting the older student?

Mr Trump: I could not answer that at the moment. In other words, what we are doing literally is coming here at the eleventh and a half hour, inasmuch as the allotments normally are announced in November. What we are really steering towards, after the emergency of 1992, which is a crunch year -- as I said, our backs are to the wall -- is the minister's commitment.

The question was asked, "What in fact are you doing to put Vision 2000 into place?" Well, it cannot be done by just talking about it or getting on a soap box. It needs commitment from on high, saying: "You have made sense. Now begin to position some milestones and we will measure you on how you reach them." At Seneca College, they have a dean assigned to educational effectiveness. Tony Tilly's sole role is to open wider the doors and ensure that those admitted are accommodated in a way that ensures success in the programs. Whether it is at Sioux College or whether it is at Mohawk College, where George Lueddeke is in charge of the program, they are just champing at the bit: "Give us the go-ahead" and "How can we expand?"

But at the moment, their resources are finite and it is really a combination I think of your own efforts, through the minister -- I might add too that 51% of the colleges' activities are non-Ministry of Colleges and Universities. That is more than half at this juncture. So we are also working with Labour and Employment and Immigration. I just learned the other day that Marion Boyd's ministry, Education, gives $100 million to the colleges. So when you get through an aggregate, you have quite a purse to fund the activities of the colleges.

By identifying this area in particular, the access, the success in programs, we believe we have something that can say, "We are moving from point A to point B and beyond."

Mrs Sullivan: You talked about some of the links between the high schools and colleges, and the major question of delivery of some of the technical and technological training has been a question in the past. To a certain extent, it was addressed in the Vision 2000 report. Have the community colleges as a group talked about the question of student assistance programs to ensure that the access is not limited to certain socioeconomic levels?

Mr Trump: I would hate to be facile, but I think it is almost a given. I think the colleges are the institutions that do have their doors open by far wider.

Mrs Sullivan: But in terms, for instance, of the Ontario student assistance plan, the loan and grants programs, do the colleges have a position on where they should go, how those programs should change, what new funding would be required for them?

Mr Trump: If they have, I have not heard about it. It is almost a case of when it does not show up at the association, at the council of presidents, it means it is in reasonably good shape. We had a bit of a kerfuffle last year because they moved the whole operation from Toronto to Thunder Bay, but as we have discovered now, it is working even better after this year of ripples than it was previously.

I would say, just as a given, that our students are accommodated at least as well as university students in terms of where is the wherewithal: a combination of loan programs, part-time work, scheduling to fit the needs of the student.

Mr Sutherland: I was wondering if you could give a brief comment on how colleges are handling the issue of the learning-disabled. I know I had one constituent approach me about his son, who is very capable -- I think he might have been in an apprenticeship or technical program -- who could do the actual work technically and pass it, but had trouble doing the written work because he was learning-disabled. There was really no one there, no counselling or tutorial support to help that person through. He himself can be a very competent individual, doing his specific tasks, but cannot get the certificate to go into the employment area.

Mr Trump: I think that too is an area that we have no statistics on at the moment. I get little anecdotal reports of, "If we could only, then we could help someone like that." I know Fleming College in Peterborough has instituted a program where, within the first week of enrolment, every student has a counselling session. That just psychologically sets the stage to say, "We won't let you sink."

But the ideal in my view, and I look to the States for that, is what Miami-Dade does -- 85,000 students in the college system down there around Miami and every one of them tracked. You cannot hiccup or get the flu without it showing up, and when the water level gets to chin-high, you are in for a counselling session with a remedial teacher assigned to you. A good move on the part of Florida, because if you think it is expensive to invest in that, look at the cost later on when you have a human being who is not employed.

We have much to do and when we say, "Success in programs," it rolls off the tongue easily. Let's get each college to say, "What in fact will you do?", presuming, and I am presuming, that the minister, Mr Allen, will say, "These three areas, go for it," and we will then give the assignment to each college, "Let's see what you can do, learn from those who have already done more than others and put a program into place." It is probably more a promise than it is real at the moment.

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ONTARIO PUBLIC SCHOOL TEACHERS' FEDERATION

The Vice-Chair: Next is the Ontario Public School Teachers' Federation. We have Mr Martin, president. Would you mind introducing your colleague.

Mr Martin: It is a pleasure to be here and appearing before you today. I am Bill Martin, president of the Ontario Public School Teachers' Federation. With me is Gene Lewis, the first vice-president, and there is a possibility that our general secretary, David Lennox, will also be with us this afternoon.

As most of you probably know, OPSTF is one of the five affiliates of the Ontario Teachers' Federation. We have a membership of 23,000 members comprised of statutory and voluntary teachers, occasional teachers and educational support personnel. In the brief we would like to discuss with you this afternoon, there are three major areas that we are looking into: the level of provincial support, the inadequacies of elementary grants and the need to stabilize child care in the province of Ontario.

We understand the realities of a recession. We believe, however, that an investment in elementary education and child care services should be an integral part of the government strategy for dealing with the recession and for the fostering of economic recovery.

The first area I would like to address is the provincial share of educational finance for elementary and secondary schools. Pages 2 to 4 of our brief review the current status of the provincial share of educational costs and outline the reasons why it is important to address the increasing burden of education costs born by the property taxpayers. While the governing party is on record for its commitment to restoring the provincial share to 60% and the Minister of Education has ensured us her ministry is prepared to review the full structure of financing education, these are long-term commitments and The Treasurer must now take interim steps to address the issue.

I would ask you to turn to the graph on page 3 in the brief. It clearly shows that while the actual provincial expenditures have increased each year, the provincial share of educational costs has consistently declined since 1975 when provincial revenues covered 61.3% of the total costs of elementary and secondary education. As you can see from the graph, the provincial funding reached its lowest point --

The Vice-Chair: Could you just hold on for a second. We are just trying to find your brief.

Mr Martin: We are on page 3. The figure of 41% refers to the public and separate school funding. If we take that away and just look at public school funding, at public school boards of education, it is even more alarming, currently being funded at less than 30%. The Treasurer has not announced transfer payments to school boards and in today's Globe and Mail the Minister of Education was quoted as saying that figures would not be released until mid-February. It is impossible for boards, as a result. to speculate to what extent the municipalities will have to once again raise property taxes to pay for educational costs.

The bottom line is this: Per-pupil expenditure ceilings in both the elementary and secondary panels must be increased to better reflect the real costs of education.

On page 4 the submission refers specifically to the elementary situation. Particular attention must be paid to eliminating the inequities in funding between elementary and secondary panels, a position supported by the Ontario New Democratic Party policy paper going to its upcoming convention. I quote from the paper, A New Democratic Party Philosophy of Elementary and Secondary Education. It is on page 4.

"The early years of every child's education are profoundly important and an educational system designed by New Democrats would give both recognition to and adequate funding for this reality. As just one element of providing funding to school boards for primary education, we would eliminate the inequitable differences that currently exist between per-pupil grants for elementary and secondary panels."

That is taken from this document. I do not know if you have it but if you have not, we can get it for you.

Mr Phillips: You should have that.

Mrs Sullivan: Some do. some don't.

Mr Martin: If you turn to page 7, the table provides a history of the gap since 1970. If you look at the information on the graph you can see very quickly that applying slightly higher percentage increases will not address the current problem.

In December a memorandum was sent to the directors of education. In the memorandum the Ministry of Education advised that the 1990 grant ceilings would be increased by $50 for elementary pupils and $25 for the secondary pupils.

The memorandum stated -- see page 8 -- "The purpose of this adjustment is to improve equity in the grants plan and reduce the gap in funding between elementary and secondary levels. The Ministry of Education is committed to high quality education with particular emphasis on the early school years."

This approach to the grants plan is a welcome change in government policy and we would urge the minister to further address the equity issue when the general legislative grants for school boards are determined later this year.

When you look at the gap, back to the figures on page 7, currently existing at $930, that is the difference in funding for education allotted to a child at an elementary level and to the child at a secondary level. We believe the only way that gap will be reduced is by putting additional moneys, significant dollars, at the elementary level in order to bring the funding closer together.

Class size reduction is also supported by the education policy document that will be presented to the NDP convention. It states this on class sizes:

"Smaller class sizes are particularly important in the early childhood years...Smaller class sizes obviously offer the advantage of providing more individual attention and adequate supervision. They also facilitate recognition of learning problems, and make it easier for children with mental or physical disabilities or those with behavioural problems to receive an equal education."

Over the years, we do not believe that elementary funding has reflected the changes in elementary education. I have been at this table for a number of years and each time we were told that we had to go out and negotiate changes in our collective agreements. Well, the elementary teachers are now better qualified. The average years of experience has increased. The teacher-pupil ratio has been lowered and preparation time has been increased throughout the province of Ontario. But even with these increases, the grants have not reflected these changes. The gap continues to grow.

The additional funding would allow for smaller class sizes. It would enable elementary schools to staff resource libraries. In the late 1970s, we heard of Partners in Action as a resource for activity-based learning. Unfortunately we do not have the resources to put resource teachers in libraries in our schools in Ontario, yet it would allow for more important, specialized teachers in physical education, music, art and other technical studies. It would also provide funding for adequate textbooks and learning materials and would provide guidance personnel, a much-needed resource in our elementary schools.

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If you look directly at the class sizes, on page 9, an emphasis on elementary education should be part of this government's attempt to address the needs of those most disadvantaged by the recession. In a brief presented last month to the House of Commons subcommittee on poverty, the Canadian Teachers' Federation stated:

"We were able to identify health, learning and behaviour related characteristics associated with child poverty, both from the researcher's perspective and from the experience of classroom teachers. A survey of projects in Canada and the US demonstrates, again, that early and sustained interventions with children will provide greater returns in human as well as economic terms."

The recent comprehensive provincial review of children's services, Children First, also points clearly to the need for early identification of children's problems: "We now know a great deal more than we once did about the conditions that imperil healthy child development. We also know that problems that occur in childhood can impair adult life and that the beginnings of many lifelong problems lie in childhood."

Early identification of children's learning and emotional problems is also important in terms of cost-effectiveness. It is a lot less expensive to remedy these problems during the early school years than to wait until the high school years.

The final area I will speak to is the support for child care services. Child care is an important economic and social support to working families. Child care becomes even more important during a recession when families are stressed and when a second income is even more crucial.

Pages 10 to 12 outline some of the key problems facing child care programs and the need for immediate and long-term measures to deal with them.

As a founding member of the Ontario Coalition for Better Child Care, we support the coalition's new funding proposal and its call for additional child care subsidies and program spaces. The proposal for funding is briefly outlined on page 11 of our submission.

To conclude, OPSTF recognizes that the province is in the midst of a recession and that the Treasurer faces some difficult decisions. We would urge the government not to apply too narrowly its mandate to assist those individuals most vulnerable to the effects of an economic downturn. An elementary school system which is sufficiently staffed and supported to provide for early identification and early remedial attention is vital for responding to the needs of our most vulnerable children and for long-term investment of our human resources and future workforce.

Likewise, it would be shortsighted not to move to stabilize and expand existing child care services so as to provide an essential support to working families and quality care for young children.

We leave your committee with four recommendations which are found on page 13:

1. That the Ontario government's strategy for addressing the needs of those citizens most disadvantaged by the current recession include significantly increasing support for elementary education and child care services;

2. That the elementary and secondary per-pupil expenditure ceilings be increased so as to ensure an improvement in the provincial share of education costs;

3. That in fulfilling the government's commitment to improve the provincial share of education costs, the Treasurer provide sufficient funds to the Ministry of Education so as to reduce the differential in per-pupil grants between the elementary and secondary panel and maintain the current class size reduction in grades I and 2;

4. That the Treasurer provide funding to the Ministry of Community and Social Services to create an additional 10,000 child care subsidies and an additional 10,000 child care spaces in the province.

I will take any questions.

Mr Stockwell: Briefly, they are going to give you the same song and dance or dog-and-pony show they have given everybody: "we are in tough times through a recession" and so on and so forth. They are probably not going to tell you that in this party's Agenda for People, which you quoted in here, they admitted in August that we were in a recession. They knew full well we were in a recession, yet they still made these promises.

The question I have which will cut right to the heart of the issues is -- which I find almost disgraceful -- that they would make the comment that they are going to return funding to 60% levels, and you are talking about $7 billion or $8 billion, knowing full well they could not do it. Did you honestly believe that when they said it? Did you believe they were going to do it?

Mr Martin: I believe, in speaking with the Minister of Education, that there will be a move back towards 60%. That is something we have not heard by parties in the Ontario government for a long time. I do not believe that commitment will take place overnight. However, I would hope for and strongly encourage the release of moneys to education in the spring, that the downward trends that have continued since 1975 will be reversed and start moving at least in that direction.

Mr Stockwell: That is a good answer, but it was not an answer to my question. The question was, did you believe it when they said in the Agenda for People that they were going to return the funding levels to 60%? Did you believe in fact they could do that, that they are capable of that?

Mr Martin: I believe this government is capable of moving anywhere it wants if it sets its priorities, and I believe education is the priority that should be set.

Mr Stockwell: Okay, so really you thought that could be done.

Mr Martin: And I would hope that at the end of the five years I will be proved right.

Mr Stockwell: Fine and dandy. For your sake, I hope you are proved right as well. I do not think it will be, but I hope you are proved right.

The next question is, what about the makeup of the 60% and how you see that, the guidelines of exactly how much, where, and is it strictly -- if I look at your figure 2, the underfunding, page 7, you talk about the gap from the 1970s. Is that where you see the increase being made up? Is it the gap that we are talking about?

Mr Martin: I believe the funding has to cover two areas. Obviously the number one area is the overall expenditure on education. The grant ceilings at both secondary and elementary levels are unrealistic. Boards of education are spending millions of dollars above those rates which have been set by the government. That is number one. But also, when we are doing that, we have to address this separation of this double standard that we have in our educational systems on how much we pay for an elementary child to be educated and how much we pay for a secondary child to be educated. Yes, there is going to have to be money to reduce the gap.

Mr Stockwell: So you see it as a two-front attack.

Mr Martin: But also as the gap is being reduced they would not expect that to be at the expense of the needs of our secondary colleagues and the secondary system.

Mr Stockwell: Right, so you are not robbing Peter to pay Paul. It is new money.

Mr Martin: It is new money, and as one goes up ours will hopefully climb a little higher.

Mr Stockwell: Good luck.

Mr Phillips: I think the leadership of the Ontario Teachers' Federation very much agreed with the 60% and is personally on the hook for it, because certainly, as I have said to most education groups, I think that if there was one issue that impacted me it was education.

Certainly the teachers in my area may like me personally, but they sure did not like the fact that we would not fund 60% and they had a commitment from the NDP that it would fund the 60%. I think the teachers' leadership clearly believed it and in fact passed a resolution supporting the NDP and mustered a lot of financial resources behind it, as well as helping organizationally. If there was an issue that the leadership of the educational community got behind, it was the 60%.1 think the NDP was very clear on it.

My question really is, were you as surprised as I was to find that the definition the minister has for the 60% includes teachers' pensions and capital, and that the minister is planning to cap the spending on education provincially to control the 60%? It was quite a shock to me yesterday to hear that, because that was totally contrary to what I think the commitment was. I was wondering if your organization was as surprised to hear those three things. It includes capital, it includes your pensions and there will be a cap on the per-pupil spending determined by the province.

Mr Martin: I will start the answer off and my colleague to my right will conclude. When we say 60%, we are talking about operating expenses of the board. We are not referring to our superannuation and we are not referring to capital expenditures by the boards, so are we surprised that the minister mentioned that in her statement? I guess you could say yes, and we would have to disagree with her statement. If we go back to 1975, when the level was 60%, I believe -- and I will turn to David -- the "operating" was basically operating expenses.

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Mr Phillips: No capital, no pension.

Mr Martin: No capital, no pension. So if we are going to move to 1991, we had better add on what the percentage was with capital and superannuation in 1975 and make sure that we are playing with the same figures in 1991. David might want to add to that.

Mr Lennox: I can add two or three things to it. First of all, back in 1975 there probably was very little capital money available because of the declining enrolment situation. So that will not be a major part of it, but pensions certainly were a major part and they were not included in the 60%.

This concept was perpetuated by a former Treasurer, when he conjured up this idea that the 60% is 60% of what? I think we have to go back and make sure that we have everything on a level playing field. The Minister of Education, through her bureaucrats to this committee, perpetuated what a former Treasurer had stated, and that was that we are going to put in the pension money, we are going to put in the capital money and we are going to target that for 60%.

Mr Phillips: She said she ran on that. That was her campaign platform, that included --

Mrs Sullivan: She said that was her understanding and she answered directly.

Mr Lennox: That may be. and I am not going to challenge that here. The aspect, as far as I am concerned, is that the 60% has become a very symbolic number. Somebody has to ask the honest question: 60% of what? Then you have to go back and ask a more honest question: How much does it cost to educate a child in the province of Ontario? I believe the Fair Tax Commission will not address this. I believe it has such a huge mandate that the education section will not get the profile it deserves and requires.

I believe that until we get the recommendation from the select committee which asks for a task force studying financing of education and asks the fundamental question, how much does it cost to educate an elementary child and a secondary school child and a community college student and a university student, we can play at all sorts of games in this province, but we will never come home to answer that question. The 60% will be symbolic. We will play these games called "60% of what, and what's included in it?" And Mr Stockwell's "Good luck to you."

I think it is incumbent upon the government to set up a task force to study financing of education as immediately as it can, so that we do not get to the fourth year and it says, "Oh, now we are going to set up a task force." I am looking for within the next six months.

Mr Phillips: It is clear in your brief what your definition was. I was in many staff rooms having to debate the issue with other parties' members. So it is very, very clear in my mind, and I think there will be some very interesting debates in staff rooms over the next few months.

Mr Fletcher: I am just going back to what the Minister of Education said yesterday. and perhaps Mr Stockwell was not here when she was saying it. I am not sure if he is here now. I am certain that the 60% figure was there, and I know that during the campaign we did say over a five-year period and that is what you are looking for, over a five-year period. We do understand it is not an overnight thing, as you said in your brief.

Mr Martin: That is correct.

Mr Fletcher: What would you consider to be a first move towards the 60% over a five-year period?

Mr Martin: That is a good point. I think what I mentioned at the outset is that we continually see the line dipping. If this year we even saw it rise, we know we are heading in the right direction. I have heard figures of 10% to 15% in other briefs. I believe it would be a very positive reaction if the gap started to close at the elementary and secondary level, that the one-two funding that was promoted through the previous government was maintained and probably extended and that the overall expenditures, or the ordinary expenditures to a school board, in fact, showed less of a responsibility to the local taxpayer as what currently stands in this province.

Mr Fletcher: I tend to agree.

Mr Sutherland: I want to ask you a rather blunt question because it seems to be popping up among some of the property tax coalitions that exist within this province, and that is the question of teachers' salaries. I think in my board 75% of the cost of the education is teachers' salaries. We got from the Ministry of Education that on average it is 63% of the total cost of education. Many of these property tax coalitions are saying, "If you're going to look at cost, you have to look at where the largest area is," and they are looking at instructional salaries. And in some cases they have called for zero increases in all areas of public sector further increases, or no more than inflation. What do you say to those people when they suggest that the prime area of looking at controlling costs is teachers' salaries?

Mr Martin: I think the first thing I would talk in terms of is the qualifications that the teaching force currently has in the province of Ontario. Elementary and secondary teachers are probably the best trained here in Ontario over anywhere in Canada, the number of people now who have master's degrees in education, early childhood certification, special education certificates, computer knowledge etc. When I look at the number of years it takes for a teacher to become qualified -- three years of university, usually an honours degree after that plus a year at the faculty of education -- it is not something where you just leave high school and become a teacher. There is a lot of growth involved.

As far as I am concerned, when I look at the qualifications, when I look at the number of hours that teachers put into their profession and the job they are doing in Ontario, the actual costs of those salaries are quite within reason. When you compare it to other professions, I think it clearly shows that teachers are not overpaid in Ontario.

Mr Lennox: May I expand on that just for a second? I have talked to several taxpayers with that attitude and I commented to them quite frankly about two things. One is that they are frustrated because of the burden on the local property assessment, which is a regressive tax. They are frustrated on that because of the downloading of the provincial government to the local taxpayer. They are using anybody who comes out of the public purse -- teachers are a good example -- as a scapegoat for their frustration. While you talk about zero-based increase for teachers, I think we are taking the brunt of something we do not deserve.

The second aspect of it is, having been an elementary school teacher and an elementary school principal for a number of years, I found this philosophy between elementary teaching salaries and secondary teaching salaries to be very interesting. With the very high number of elementary teachers with their degrees and with their master's degrees, with the reduction of class size in the elementary schools, which has created the need for more teachers, that was denied for years and years in elementary education, right up until 1980 when To Herald a Child was produced.

I think between 1980 and 1990 we saw a great deal more influence and impact upon the elementary education reduction of class size and this has caused some of it as well. All of that, or the vast majority of that, has been translated on to the local taxpayers' back and it is time we stopped that so we can give them some relief.

Mrs Cunningham: Welcome. It is good to see you again. I thought you did a very good job of quoting the NDP policy, but it was not alone, you know. The policy statements with regard to class size and increased funding were probably part of the mandate of many elections over the years. In chatting with some people who have been involved almost as long as you have, they tell me about the meaningless use of the words 60%, because it is 60% of what?

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I would encourage you to expand upon page 2 of your brief, given the announcement yesterday, and explain exactly what you mean by way of a footnote today, so that we can get it into the Hansard. You say the 60% target for the provincial share has become a symbolic one in the education community. Given that the minister was, I think, throwing a few other things in yesterday which many of us will not complain about -- having the other things thrown in -- as long as people clearly understand what the 60% is, I think quite frankly what we are looking for is for the province to pay 60% of the operating costs eventually, down the road, if it is at all possible. That is my understanding of your position. If it is, I would just like you to verify it, because that is not what we are hearing in the halls of this Legislative Building today.

Mr Martin: It is our position that the government would pay 60% of the operating costs.

Mrs Cunningham: Based, I assume, on the research that you people have done in the operating base funding for 1973.

Mr Lennox: The answer is yes. The second answer is, we would be quite prepared to provide some supplementary information on that and develop some questions that would raise the interest level in the Legislature once it resumes.

Mrs Cunningham: I am assuming you are aware of the trustees' position earlier today when they asked for a concurrent committee to take a look at education financing. I am also assuming that in your presentation this afternoon that is what you want as well. Given that the Fair Tax Commission is looking at expenditures, I think, across the government and the subcommittee will be looking at other ministries -- at the subcommittee, my understanding is that education will be part of it and that we will be looking at other ministries -- you are asking for some concurrent discussions with regard to funding education. to build on. I suppose, what we heard in 1985 with the Macdonald commission, and probably take in some new demands that we all know about. Could you clearly tell me what your idea of that model is?

Mr Martin: I believe the model that we would be most favourable to is recommendation 3 from the select committee on education. which dealt with all partners of education getting together and finding out exactly what that true cost is. I do not have the exact wording, but we are on record in Hansard already a number of times to take that recommendation that was put forth by the select committee and put it into action.

Mrs Sullivan: In her responses to questions yesterday, the minister made it very clear that she would be looking not only at including capital and at including teachers' pensions, but also including the cap, as she was defining what 60% of the funding of education meant. You have indicated that you believe the 60% refers to operating. Your figures in your presentation speak about spending $789.99 per pupil over the grant ceiling. I gather that those are for the public boards. The Ministry of Education figures show a spending of $1.106 for all boards.

Do you see in the 60% operating funding a position where there ought to be a cap, or should all of the funding be subject to the 60% the operating expenses?

Mr Martin: If I can talk first of all in terms of where our figure came from and where the $1,000 came from, we did the grade 5 math question, where we added up the overexpenditures of every board across the province and divided by 70 or 150, whatever the case was, and that is how we got our $700. If you prorated them or weighted them, as they have in the ministry, we would concur with the minister that it would be approximately $1,000-plus. So we are in agreement with that.

The second part of your question dealt with. how fair is this 60% and where does it cap? I believe the cap is determined when we investigate exactly what we should be paying for in education. There are frills to education.

Mrs Sullivan: But your position now is that 60% of operating expenses, whether approved or unapproved, ought to be covered by the province. Is that your position now?

Mr Martin: Approved costs, operating costs.

Mrs Sullivan: Operating costs and approved costs are not the same thing.

Mr Lennox: You are correct.

Mrs Sullivan: You said "operating."

Mr Lennox: Yes. The operating costs -- the first thing that you have to do is start looking at more realistic ceilings, and then you cannot analyse that until you look at what the cost of education is. We know that whatever we have, there will always be boards determined to spend above that amount of money. If you have 60% of the operating costs on a more realistic ceiling, that is a good place to start, but the total costs, you will never end up having all 200 and some boards in the province of Ontario having every cent paid on average of 60%, because of the necessity for special programs in any given area.

So I think the problem, when we hold this discussion on the 60% situation, is that we have to go back to the basics, that the ceilings were unrealistic. So we cannot even identify 60% of approved or operating. We have to turn and say, what are the operating costs of a board? Then we turn and say, okay, what is 60% of that? And we say that is realistic; now what is that on average?

Then what are the programs we want to operate in Ontario? If we want heritage languages, let's put those in the operating costs. If we want this for special education, fine. If we want this for guidance, fine. That is why I said the 60% is symbolic right now, because we have all sorts of the puzzle out there that we have to sit down and analyse and people have been avoiding it now for a decade, focused on several other important things in financing education along the way, the Bill 30 funding and the pooling and so forth, but have not gone back to ask some very fundamental questions on financing education.

I know I have slightly evaded your question. It is because I do not have a good answer, because until we start addressing the realistic ceilings there is not a good answer.

Mrs Sullivan: But what I do hear you saying is 60% of total operating, because the boards will determine the needs of the individual communities.

Mr Lennox: They will, but there will be boards that, no matter what you set that at, will increase their level of costs and the government must be accountable at some decision on the cap. You cannot have open-ended funding, I guess is the answer. You are going to have to have some level of grant ceiling out there. That is an understandable amount on average to educate a pupil in the province of Ontario.

Mr Phillips: I think it is very clear in the breakdown. The ministry figures are 41% -- that is what you said in your document -- and commitments to go to 60%.

Mr Lennox: That is right.

Mr Martin: That is correct.

The Chair: I would like to thank you for your brief this afternoon. Good luck in your deliberations. We cannot wait until February.

ONTARIO SECONDARY SCHOOL TEACHERS' FEDERATION

The Chair: Our next presentation is the Ontario Secondary School Teachers' Federation; Mr French, if you would introduce your companion to the committee.

Mr French: I am Larry French, legislative researcher. With me is Neil Walker, my esteemed colleague, executive assistant for communications. We are the B team. The A team is back at the ranch. It has an important pre-assembly meeting and the president sent his best regards and is sorry he cannot be here to deliver this brief himself.

We will try to keep it brisk. It has been a long day for you guys. I sympathize with what you are going through. I would just like to mention that we do represent 42,000 teachers and workers in education, professional and nonprofessional employees. We will do it a little differently. Neil will read the recommendations of the appropriate sections first from the compendium and then I will speak briefly to each of the recommendations.

Mr Walker: Thank you, Larry. Take a look please on page 4. There is a compendium of recommendations I through 3:

"1. That the Treasurer reiterate in his budget statement the commitment of his government to raise the provincial share of education costs to 60% over five years and to outline the concrete steps he intends to take to implement this commitment.

"2. That the provincial share not be restricted to `approved' costs, that it exclude payments for capital and the teachers' superannuation fund, that it be so defined publicly and that it not be changed unilaterally.

"3. That the transfer payments to school boards be increased by a minimum of 11% for 1991."

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Mr French: Everything flows a little bit from the previous discussion, as you can realize. We, as educators. Like the NDP's Agenda for People, especially the 60% funding. We have talked that over with Mr Phillips.

We mention in appendix A the OTF news release at the time of the leaders' debate, endorsing Bob Rae's position and asking the leaders of the other parties to join up. We call on the Treasurer to do the same, to define the 60% accurately, the way we have just outlined, and to outline the steps he plans on taking towards meeting that commitment.

We think there is a series of steps that the government has got to take to move towards meeting that commitment, even though it does not happen overnight. There has been a lot of support in the community for it. The Macdonald commission has recommended it. I think there is a consensus in the New Democratic Party that it is out of kilter. At one point it recommended 80% funding from the province, 20% local. Certainly from the public school community and the separate school community, we think the 60% barometer, no matter how we define it, is about right. There is community support for it.

We have mentioned the Environics poll during the election campaign or just after, that 75% of those surveyed supported a move to an increased share by the province. It is a problem that is coming to the attention of the taxpayer locally.

On graph figure I on page 7 we show you the impact of the withdrawal of the provincial share. Public local education used to get 13% of the budget share: now it gets about 5.3%. That is a dramatic decrease in funding priority. If you look on page 8 you will see the dramatic decline that my colleagues from OPSTF referred to. This one is public secondary education. It goes from the high-water mark of 59% down to 26% this year. That is the lowest since 1944. In 1944 the province funded at 13% because of difficulties we can all relate to. We have added for your delectation our election time underfunding kit, the media kit we gave out.

Mr Phillips: It looks familiar.

Mr French: It got a lot of attention, as you can well imagine, during the election campaign. One of the things we do point out there is that in comparison with competing jurisdictions like the United States neighbouring states and the other provinces of Canada, our expenditure per pupil, even though it does seem high, is not totally competitive. Other provinces are doing better than us.

We also point out that the effort in Ontario -- and I think this is a key part of the whole discussion -- is the lowest in the country. The per capita effort directed to local education is the lowest in the country, except for British Columbia. There is a little bit of room to muscle in and to beef up the commitment to education, we feel.

As a starting point, we endorse OPSBA's position that the transfer payments issued should go up by 11%, and if the mill rates across the province were 11% last year, we estimate that would immediately keep them at 5% this year.

There are a lot of tax revolts brewing out there. You folks with local connections know that, in the Hamilton area, London area, eastern Ontario. I think your brothers and sisters in local government need a little help. They would certainly appreciate it in this election year, if you could help them.

Mr Walker: Recommendation 4: "That Bills 64 and 65 be amended to mandate the delivery of adequate compensation to public boards for any revenue losses incurred through the imposition of the pooling of commercial and industrial assessment, and that the finance branch of the Ministry of Education be directed to develop and publish a method of calculation of such losses based on the actual revenue transfers from public to separate boards and the concomitant funding shortfall suffered by the former."

Mr French: We are talking of sort of a spillover of separate school funding. During the debate on Bill 64, which some people will remember, the NDP, supported by the Conservatives, wanted an amendment to the bill that would guarantee the compensation to public boards. The government was not keen on that approach. I guess they felt it would tie their hands a little bit too much.

We calculate that it is a significant revenue loss to public boards this year. The estimate that was made in the Ontario Public Education Network study was a $12-million loss. That rises in escalating steps to $116 million annual loss to public boards by the sixth year of implementation. This is too much to ignore, and this is taking into account already the government compensation package.

The new OPEN study will be announced very soon. After one year's experience we are keen to see it. We are sure it will verify the truth of what we outline right here. If there is not enough compensation offered to public boards, local public taxpayers through their local mill rate will be supporting or subsidizing separate education. We do not think this was the intent of Bill 30.

Mr Walker: I am going to quote recommendations S and 6 on page 4: "That special funding assistance be offered public boards struggling with the aftermath of separate school extension to permit them to offer a viable program to those students and parents committed to nondenominational education" and "That an English first-language grant modelled on the French first-language grant be offered to boards having a minority English-language section."

Mr French: The single-school communities where separate school funding has been implemented are having a rough time in some areas of the province, areas that we have brought to your attention. We have talked to the minister about Rayside-Balfour having a very difficult time because of a competing separate school that is drawing away its enrolment base. It basically needs help, a small French-language school that served the community for a long time. It needs more help than the Sudbury board can give it. It needs provincial help. Essex county is erupting. Right now there are stormy meetings down at the board. There is an imminent transfer of a couple of schools in single-school communities that Bill 30 was supposed to protect.

These parents in the public school community, as you can imagine, are in a very difficult situation. We feel that the responsibility for Bill 30 and solving the problems of Bill 30 is not the public board's problem. It is mainly the problem of the provincial Legislature. All three parties did support Bill 30, and we feel it is up to the province to fund it adequately to make sure that the single-school communities are not threatened.

Prescott-Russell is a very special case. It lost all its French-language high schools during an en bloc transfer and was left with a burden of debt that is significant and a capital commitment that has never been delivered upon. We call on the government to recognize those difficulties. It is also almost unique in that it is English-minority language. It has a very small base from English-speaking pupils, and we recognized that in the French first-language grant. We feel this board needs an English first-language grant to help keep it viable.

Mr Walker: Recommendation 7: "That the design of the per pupil ordinary expenditure ceiling elementary and secondary be rigorously linked to the program costs at each panel, that they be raised to realistic levels to reflect these respective costs, and that the grant to adult continuing education be raised to reflect real program costs."

Mr French: This is a very delicate area of the brief Where are my colleagues? I guess they have decided not to be bored with it. The ministry memo B-11 did focus our attention wonderfully, let me tell you. It is the one that OPS referred to, a top-up of grants, $50 elementary, $25 secondary, to close the gap. We have done a lot of listening on the close-the-gap argument. We have been told by a lot of people that it makes sense to fund elementary students the same level as secondary students, that one student is worth as much as another. Quite a few MPPs have told us that.

We felt that we should take a look at that assumption because it does not deserve to go unexamined. We agree every child is worth another, every student is worth another, but some cost more to educate than others. We draw the analogy of the family with children to nourish and to clothe. It costs more to provide the necessities of life to a teenager -- all parents would agree, I think -- rather than to a child who is of elementary age. In the same way, without valuing in any way, it costs more to educate a secondary pupil than it does an elementary. This is what we call the stubborn and irrefragable reality of educational funding.

Mr Stockwell: Irrefragable?

Mr French: Irrefragable, right. We took that from the Vietnam war. The levels at which the per-pupil expenditures are designed recognize this. There is a reason why the secondary ceiling is higher than the elementary; it costs more to educate these pupils.

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As to the local mill rate and the local share, we referred to the tyranny of the local mill rate. None of these boards spend unless they absolutely have to spend, especially if you are over the ceiling level. Former trustees will recognize this, because it is total local dollars, no grant ingredient whatsoever.

On page 15, we have tracked for you the growth in over-the-ceiling expenditure, and it is nearly twice as high at the secondary level. As the grant rises, the over-the-ceiling expenditure at the secondary level rises almost twice as quickly as at the elementary level. If you look at the graph on page 15, you will see that the secondary over-the-ceiling overshadows significantly the elementary over-the-ceiling. That has been a constant pattern. Board expenditure patterns bear that out. They spend what they are forced to spend, and the secondary panel, separate and public both, spend more than elementary.

We do not say that we should keep the elementary grant down and the secondary up. We would like both ceilings to go to realistic levels that are program oriented. We look at the program, we decide how much it is going to cost to educate everybody and we design a realistic ceiling in that respect.

At the same time, we think we should look at adult education. A large part of our population and a large part of our immigrant population are adults. Their grant is only about half what it costs to educate them. It should be realistic, as the government was told a few years ago.

Mr Walker: Recommendation 8: "That a major increase in the allocation to school capital projects be made in both new and repairs and renovations accounts to begin to close the capital needs deficit."

Mr French: We will just steer you very quickly through the deficit. In 1989. the deficit between allocation and requests was $941 million, about $1 billion; this is public and separate. In 1990, it has risen to about $1.5 billion, and unless the government addresses this very quickly, there will be no solution.

Now the good part of the brief.

Mr Walker: Recommendation 9: "That the Treasurer implement as quickly as is feasible the progressive taxation policies included in the Agenda for People."

Mr French: We have referred to the fact that the Ontario effort to education is not as great as that of most other provinces. We support the Agenda for People approach to progressive taxation. We think that is the way to go.

There is a misprint on page 18 in our policy. The last word of our policy about federal and provincial taxation policies should be the word "taxation," not the word "income" -- "an equitable distribution of taxation." A significant difference there. If you could change that, that would be great.

We suggest that these taxes would be supported by the public. I think the NDP garnered support for them during the election campaign. We suggest that the government consider a new tax, a leaving the province tax, that is sort of like a death tax only it is triggered by exodus, so that those companies that have profited from the infrastructure in Ontario return something to Ontario when they leave. It seems that a lot of them are leaving at the moment.

Mr Walker: The final two recommendations: "10. That the Treasurer and the Minister of Education investigate the creation of unified school boards which will ensure continued provision of educational services including those offered on an open-access non-denominational basis by public school boards, and those required by the Constitution of Canada for francophone and Roman Catholic citizens of Ontario.

"11. That the Treasurer offer incentive grants to any boards willing to achieve economies through an integrated or co-operative approach to the delivery of educational services and program."

Mr French: We feel that it is time to consider, in the light of the pressure on all our fiscal resources in the province, that the unified school board would reduce wasteful duplication, as we see it. We mention some of the things that occur. One of the things that is difficult to justify, but it is a fact of life, is the assessment bounty hunting. Both systems now are defending their taxation base with very aggressive taxation search-recruitment programs and assessment defensive mechanisms. It does not make sense. That does not contribute much to what happens in the classroom.

We must say that several public boards have extended a hand to their coterminous boards, but it has not been really picked up. I do not think there is enough encouragement given by the province for them to do so. We suggest to the Treasurer that he facilitate this by making it worth everybody's while. In the short term, it might cost a little investment but in the long term, there would be a lot of payoff.

Transportation: for example, if you structured the grant so that each coterminous board offers an independent transportation system, it might be funded -- it is funded fairly rigidly -- 70%. However, if 75% of their pupils are on a shared system. you could bump that share up to 80% and take some of the local burden off, but the total package, we are convinced, would cost much less. Harry Bowes knows what is happening in York county. The Auditor General pointed out that there is about $1 million in overexpenditure in the separate board transportation budget. There are ways of making enormous savings through this approach.

Finally, we too have a task force on the funding of education and delivery of services and the president has set it up. We refer to it at the bottom of page 20 and we will be ready to collaborate with the government whenever it is ready to receive input from groups like ours. We are eager to participate.

We mentioned that we are taking a very good look at Children First's recommendations. At this point we support co-ordination of services but not the creation of a new superministry, which we think would be costly.

We urge the committee to see educational expenditure as a needed investment in Ontario's future. Thanks again for your attention.

Mr Sutherland: My question is on recommendation 3. When OPSBA was in here earlier today, it recommended the same amount, a minimum of 11 %. When they were here, I asked them what type of impact they felt that would have on property taxes. I did not really get an answer from them that they could give a definite amount. I would like to know, since you have the same figure, how did you come to the 11% figure and what impact do you figure it would have on property taxes in the upcoming year?

Mr French: This would change the chemistry of the transfer and of the local and the provincial share. In the last couple of years, the mill rates across the province -- and this is fairly rough -- rose by about 11 %. If their spending patterns stay the same, in other words, no big, new ingredients that we cannot anticipate, but they were going to do roughly what they were going to do before and the 11% on the basic transfer grant was there, probably they would only need about a 5% to 6% increase. It would make a major --

Mr Sutherland: So basically an inflationary at the property tax level?

Mr French: It would be inflation plus 11 %, a significant help to these local boards. Oh, I see, an inflationary rate for the mill rate.

Mr Sutherland: For the property tax owner.

Mr French: Right. Absolutely.

Mr Sutherland: I would be interested in having you answer some time the other question I asked the public school board, but maybe I will ask you that separately and let someone else in.

Mr Cousens: I want to congratulate the federation on an excellent presentation. I think that you have, as usual, put together an excellent document and I will be going back and looking at it further. I sincerely hope that your time is not wasted. It was not wasted in August when you were making presentations to the different politicians. Everybody was listening to you then.

I just want to know whether or not you had any commitments from the present government, which did not think it was going to be the government then, on what it would do on some of the recommendations when we were all talking about them in such a friendly way back several months ago. Do you have any evidence that they would have been supportive and co-operative? What feelings do you have or proof that we could use in the House or in committee just to remind them of commitments that they made?

Mr French: Election campaigns are very enormously sensitive times and everybody is listening a little harder than they do normally. That is absolutely true.

Mr Cousens: I can tell you, we are always listening.

Mr French: Good.

Mr Stockwell: And they are always promising.

Mr French: Right on. We were very supportive of the NDP commitment to the 60% funding. I am sure it was sincere. We accepted that it was sincere and that a way would be found to make it happen and we did not anticipate that the New Democrat* Party would form the government. We were in the same position as everybody else. However, we welcomed that commitment and we are sure the government is going to take it very seriously.

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Mr Cousens: Did they make any other commitments on your recommendations prior to election?

Mr French: No, actually we had been discussing a lot of curriculum-related matters with the New Democratic Party. Basically, we were happy with its commitment to the 60% funding and that was the major area of our discussion prior to the election, the streaming, destreaming.

Mr Phillips: I am interested very much in the 60%. As you know, Neil, in Scarborough that was a big issue with all of my friends, who really hammered our party pretty heavily on it.

Mr Cousens: So they should have.

Mr Phillips: He drops in for about 10 minutes, yaps, and then leaves.

In the press release that the Ontario Teachers' Federation put out I think it was quite clear, because you mentioned the 41% funding, which is the ministry figure. operating, and the NDP commitment of 60% funding. The minister yesterday said that she campaigned on the basis of the 60% including pensions and capital. That was the first time, because I have debated the detail of that often with OSSTF. The leadership was very much involved I think in this. Was it the understanding of the president and the leadership of OSSTF that was what she was campaigning on, or did you have some assurances that 60% did not include the pensions and the capital?

Mr French: I think the Agenda for People mentioned the 60% without going into the specifics. However, our understanding was that everybody understood that it was the 60% that had been defined in 1975, the high-water mark, and that the benchmark had moved down to 41% and that it was going to move back up to 60%. If you define it the way the minister seems to be defining it right now, and we have already communicated with her that we disagree with this definition, then rather than the 41% share right now, it is a 57% share. There is about a 17% or 16% difference in those figures.

Mr Phillips: Never flew when we tried it.

Mr French: Therefore, in terms of 1970, what Dave Lennox was talking about, probably it would have meant that the high-water mark was about 67%, 68% in those days, So we would have to redefine everything in order to track it and to maintain consistency in the tracking. That is why we asked the Treasurer: "Define it, please, and stick with the definition. Then we do not have to worry about what the definition is. We do not have to debate that one. Let's debate the amount."

Mr Phillips: Were he to do so, he would impose a much-needed measure of integrity on our discussion. I think that is an important line.

Mr Fletcher: I just want to say that I liked your presentation. I think your brief was very good and I agree with many of your recommendations, especially the one when it comes to co-operation between the school boards, with different systems, the separate and the public system. I think it is about time that began. I know it is something I believe in and I know there are many others in our caucus who believe in that also, so maybe we will start moving in that direction.

It is funny hearing OSSTF defend some of the practices of the school board, especially when you have negotiated with school boards. But some of the spending habits of the school boards, as you say, they are trying to defend their tax base and they are vigorously promoting their boards' advertising and spending on big budget items such as community relations and things like that. If some of these areas were eliminated from the school boards' bud

gets and they stopped what I call wasteful spending -- because I was a trustee and I did vote against budgets that I thought were excessive that in itself would go a long way towards lessening the impact on the local taxpayer.

Perhaps if it started at that level also, then we as a government could probably move in a little more. I think it has to work in both areas. I think local boards also have to be

accountable. Do you think local school boards should be made accountable by the Ministry of Education?

Mr French: Yes, the select committee looked at that one very strenuously for a year. I think they are relatively accountable right now. The province is the senior level of government and the province can really dictate the terms under which a school board will operate and I think the accountability from the point of view of the province is in how much it gives, and the programs it dictates too, I must admit. But the real tyranny, as we refer to it, is the accountability to the local taxpayer that the board must meet. I do not think any board is irresponsible in this respect. It does what it has to do and tries to be as efficient as it possibly can. I am sure of that.

Mr Fletcher: Thank you for your political answer.

Mr Cousens: A number of your statements were political too.

Mr Fletcher: Yes, but I am paid for it.

Mr Stockwell: Actually, I think more than yourselves are confused with the Minister of Education's comments on interpretation of the 60%. If that was her interpretation, she did not tell her leader, because the Premier certainly did not interpret it that way during the election. I know full well, according to the information Mr Phillips has given, it is the same position that was put forward by the NDP candidate in my riding and the ridings around. The only one who appears to be confused is the Minister of Education, and that is really important because she is the Minister of Education.

The other point that I wanted to address is the 11 % to 5%. It is true that if you get 11%, your school portion of your local tax bill is going to be -- potentially you are looking at a 5% increase in the mill rate. But again, it does not reflect directly that your taxes are only going to go up 5%. You have to include the region and the local councils and so on and so forth. I want to leave the message very clearly that simply 11% does not guarantee a 5% hike, everything else being considered.

Mr Sutherland: Should be the education portion.

Mr Stockwell: Just the education portion.

Mr French: That is what they are referring to.

Mr Stockwell: There are a lot of sections; in Metro it adds up to about half your tax bill.

Mr French: I am sorry, the education portion.

Mrs Cunningham: I will just underline for you to maybe revisit your definition of the provincial share and your concerns about it, as with the former government, and how closely your concerns match what was stated yesterday. I am just drawing that to your attention.

The question I would like to ask you now is a process question. You have I think some interesting solutions and ideas for the government to consider as it takes a look at a tremendous responsibility in the funding of education. To be specific, you talk about progressive taxation policies, which I may or may not disagree with; I have not given it a lot of thought. It is the first time I have seen anything like that in a brief of this type, but that is interesting.

The unified school board: I certainly have had some experience with school boards and have always recommended the sharing of services and cutting down costs to taxpayers. So I think you have some interesting advice.

How do you best see your advice being dealt with in a public forum? I would like you to respond to how you see the Fair Tax Commission working, and the subcommittee, and respond to the recommendations that we have had, both from the public school teachers, elementary, and from the school boards earlier today.

Mr French: Actually, we were very encouraged by the response we got on Bill 12, where amendments that you brought forward were accepted by the government. We thought it was very helpful, a good signal. We are ready to participate in that public process.

I mentioned that we do have a task force at our office which is looking at these things. Our educational finance committee is looking at them. We have one of the best persons in the province, John McEwen, working with us. We are going to define what we think a board should be spending and we are going to attempt to get a definition of what the 60% means in real terms for the province and then what is the local burden, no matter what it might be, and if Toronto decides to do a little better, great. That is beyond the 60% commitment.

We are drafting that material right now. We will be ready to plug it right into the Fair Tax Commission, plus the ministry's interministerial review of educational finance. We consider ourselves to be one of the stakeholders in the process and we will mention to the minister that we think we can helpful in this area.

We are meeting with the minister later in February and we will outline these procedures. We are getting government help to come to speak to us as we define what we are trying to do, our task force on education finance. Yesterday. Colin Maloney spoke to us about Children First. It helped a great deal in focusing where we fit in the services to children and we will be continuing in that sort of global, holistic look at the delivery of education and other services to the children and the youth of our province.

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Mrs Cunningham: To be specific, the other two groups have asked for concurrent discussions around a funding model for education. both elementary and secondary, in Ontario, to begin immediately, given that their observation and concern was that the subcommittee to the Fair Tax Commission would not only include education funding but funding for other ministries' programs as well. It felt that it was too much work, it would take too long, and they were asking for concurrent discussions in another arena for education financing. It is not new. No one has come to grips with it.

You refer to the Macdonald commission. I would not want to tell you how many others I have been involved in over the years. So do you concur with their recommendation and would you be part of those discussions?

Mr French: I think we would. I would have to get clearance from the A-team.

Mrs Cunningham: You are in a worse position than I, and I am elected. I could say on behalf of my colleague Mr Cousens and I right now that we would approve of that.

Mr French: We would be very glad to participate. We are offering our services, you might say. We think there should be a secondary representative on the new, reconstituted Premier's Council on the Economy and Quality of Life. That would helpful since so much of what we are doing is involved with training. We are eager to participate in that process.

Mrs Cunningham: Do not take my last comment seriously. I think you have made a considerable contribution to good policy decisions in Ontario over the years and we thank you for it very much. Again, we see a very positive brief today.

The Chair: Thank you for coming.

YORK REGION BOARD OF EDUCATION

The Chair: Our next presentation is the York Region Board of Education.

Mr Bowes: We did not want to impress you with numbers but we hope to impress you with quality. I am Harry Bowes, chair of the York Region Board of Education, trustee for Whitchurch-Stouffville, which is a suburb of Claremont; Joanna French, vice-chair of the board; Sue Wakeling, chairman of the government relations committee, and we have with us our resident expert who will bring the chair up when we have finished the presentation, Bob Cressman, our director of education.

I would like to say at the outset that this brief has the support of the Growth Boards Coalition. Unfortunately, I delivered these briefs to Mr Decker on Thursday afternoon -- have they got the briefs? -- and we had a meeting of the Growth Boards Coalition on Thursday night. They unanimously supported this and asked me to let you know that. Otherwise, the brief would have been like this with all the names of the boards on it.

The Growth Boards Coalition, of course, consists of eight large boards in the greater Toronto area: the Peel Board of Education, the Dufferin-Peel Roman Catholic Separate School Board, the Halton public and Catholic separate school boards, the Durham public and Catholic separate school boards and the York Region public and Catholic school boards.

These boards represent about 400,000 students, 90,000 of which are in temporary accommodation. I think we are probably one of the few groups that are presenting to you in this session representing so many public and Catholic students together.

We also have the support of some of our local councils which have passed motions supporting us{he city of Vaughan, Whitchurch-Stouffville; you may have seen some of the local papers that have publicized that quite a bit -- supporting us and OPSBA on the 60% solution. Also we have letters here. You remember last Thursday the Halt Increasing Taxes group was here and we have letters from that HIT group supporting us as well.

The Minister of Education, the Honourable Marion Boyd, has told us that she wants solutions, not complaints. In my closing statements, we will have four recommendations that you have in the presentation, plus two more personal solutions of my own that I will present.

It is a great pleasure to be here and represent the fastest-growing school board in Ontario and probably in this nation. Our board has more than a passing interest in the support given by the government of Ontario to the education of our greatest resource, our young people. Our interest in the government's progress to establish its annual budget is heightened by the fact that previous budgets have seen support for education wane, and in the instance of the York Region Board of Education, the support has all but disappeared. We are down now to less than 14% provincial support.

It is our intention to leave you today with only four recommendations -- plus. as I said, two of my own which I will include later -- albeit four of great significance. As support to our proposals, we wish to identify first for you a number of salient facts that have given cause to the circumstances in which we today find ourselves as a corporate entity attempting to provide excellence and educational opportunity and outcome for 63,000 students in 111 schools in the region of York.

Despite the numbers in this presentation being our own, the York region board's, the principles in this presentation are fully supported by the growth boards. I move it over now to Sue Wakeling.

Ms Wakeling: A glance at the provincial scene readily identifies some interesting and discouraging facts about the manner in which the succession of provincial budgets has receded from the strong support experienced by Ontario's school systems in the 1960s and the 1970s.

In 1975 Ontario allocated a little over 15% of the province's budget to support elementary and secondary education in the public and separate school systems, but by 1988 this allocation had decreased to just over 10%. That is almost one third. That was in spite of the announcements that there were going to be additional stresses to us because of the extended funding to Catholic schools. Educators and trustees have been alarmed and discouraged by the continuing decline of provincial dollars that come our way. We cannot keep doing all this with the money going down. The piece of the pie is getting smaller.

The decline in the education share of provincial resources has translated into a horrendous shift of fiscal responsibility at the board level. In 1975 the Minister of Education, through the general legislative grants, provided support to elementary and secondary education at 61%. In 1990 that rate has declined to 40.8%, and we all know who has paid for the extra costs: us, the tenants and the property owners. We paid that.

A major instrument utilized in the general legislative grants to lower the Ministry of Education's support to boards was the adoption of unrealistic grant ceilings on a daily basis. No school system in Ontario can begin to provide equal education opportunities and outcome for the costs outlined in the general legislative grants. They are just not realistic. Expenditures above the grant ceilings are commonly $1,000 per student.

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When you examine the capital asset needs of Ontario's school systems, the picture is equally disturbing. Growth boards are struggling to build new pupil places and portables continue to mount. In York region we have over 1,000 portables. That is the equivalent of 50 temporary schools to accommodate the influx of students to the boards.

The need for renovation and alterations to our older facilities to upgrade the roofing and the heating and the plumbing systems, as well to meet the fire marshal's requirements and program improvements, does not stop and that is not addressed in those costs. We have one school now that will cost us more to renovate and to fix than it would to build from the ground up because it is in such poor shape. That is one school I know of because it is in my area. There are other schools that are equally in the same shape.

A number of years ago, school boards led by York Region Board of Education proposed lot levies for growth projects. The Legislative Assembly after much consultation, agreed and Bill 20 was approved. We still wait. We have not heard what has happened since the new government has taken over with lot levies and that would help us.

Finally, on the provincial scene, it is less than reassuring to be informed by Statistics Canada that Ontario ranked second to last among the 10 provinces with respect to total spending on elementary and secondary education as a percentage of personal income, and the lack of reassurance turns to bewilderment when one considers that we rank first among Canadian provinces in terms of financial ability to support education. We just need to go back for a bigger piece of a pie.

Mrs French: I imagine you are weary after a long day of listening to people asking you for money and coming up with solutions. We can sympathize. We were at a board meeting last night until I o'clock and we all feel a little world-weary ourselves. We will try and be succinct about what we ask. We will try and give you a snapshot of our particular situations of growth boards. The stresses that all school boards experience are exasperated by our growth.

First, we will address grant rates, which is always very exciting. In 1975 our elementary grant rates of ordinary expenditures were 51%. By 1990 they had dropped to 22.5%. In secondary they dropped from 57% to 5%. Capital expenditures showed much the same trend. In 1975 we had 68.2% of our capital expenditures supported. Now it is 28.2% at elementary and at secondary it went from 72% to 28%. In 15 years we have seen a considerable diminishment of support.

In that same 15 years our board has grown exponentially in population. I do not know whether you have included in your presentations the graphs that we had. Perhaps you want to have a quick look at the graph. It is the straight line that goes up in five years from 48,000 to 63,000 new pupil places. That really sums up a lot of our problems.

The grant rates applicable to the recognized ordinary ceilings raise minimal dollars in comparison to the total operating costs when actual expenditures are tallied. Currently the York Region Board of Education expenditure per elementary pupil is $1,059 over ceiling, and per secondary student it is $1,647 in excess. The excess is paid entirely from local tax base.

We showed these graphs to the Growth Boards Coalition. The one that particularly struck a chord was the one called "Revenue Sources" which shows that the level of government support has remained almost exactly the same for five years. In fact it declined somewhat from the 1988 level. However, the cost to the taxpayer and the growth of our budget have been steadily rising. In 1985, 24% of our budget was offset by government grants. That has dropped to 14% and the local taxpayer is now asked to pay nearly 80% of our day-to-day operating costs and capital grants.

We receive almost no grants for secondary schools, as you can see by the 5.9% and for current construction of $100 million worth of new schools. We are building four secondary and eight elementary schools at this time. We are very fortunate, I should say, to be building those. What people do not realize is that despite the fact that we have money granted to us, the majority of the cost is paid by the local taxpayer, approximately 75%. So if you build a high school for $17 million or $18 million, a good percentage of that, about $12 million, comes out of the local taxpayer. You can imagine when you have 12 schools, what an impact that has on your tax situation.

The five-year forecast for new schools for our board totals $185 million with a further $29 million needed for renovations and alterations as referenced. At the current grant rates we have no option but to mortgage the futures of our young residents, thereby increasing the total costs several fold due to interest charges. This was a sore point with the growth coalition. The interest costs are carefully scrutinized by our board because interest paid means less money for classroom benefits. The ministry currently pays us 28% on new projects in instalments spread over three years. In some ways that was an advantage because we knew for three years where we were going to get our allotments. However, it has meant bridge financing for most school boards. As a result we pay approximately $3 million in bridge financing costs. That is 1% on our mill rate. In these days 1% means a lot.

The board is forced to assume costs from provincial and federal mandates. I am sure you have had this hammered home to you with rather monotonous regularity in the last couple of days. These programs are charged to the school system operations, are legislated or regulated upon us, sometimes with some financing but generally with no support.

What is also interesting is that there has been a difference in the way the grants are structured in such a way that this first covering page illustrates to you the decline, not only of the grants, but the fact that the actual general grant has gone from $ 1,064, and then there is a part of the grant that is for special use only and there is no option but to use it for the various mandates, such as English as a second language. textbooks, class sizes, etc. That gives us even less room in which to manoeuvre through the pitfalls of our financing.

I am going to give you a rather depressing list of some of the things that we have to improve in our budget. When you explain this to the taxpayers, they are not really terribly impressed with our rationale. They say we are passing the buck. English as a second language is certainly an element for us. We are receiving a large number of immigrants. There is $2.75 million we have to allot to deal with that and it is growing daily. Even in this time of recession, we have a large number of immigrants coming into the southern part, particularly, of York region.

The day care operations cost us $250,000 and health tax $2.6 million. Pay equity: We were one of the leaders in school boards in pay equity. and as a result I think we have very good labour relations with our various bargaining units. However, it does cost us $3.2 million a year to continue that. Health and safety and asbestos: In fact, last night our board approved a new health and safety officer. Asbestos has been an issue of great interest and alarm in York region. We have a lot of schools that are old. We spent $1.5 million just removing asbestos in the last year. The expectation is that as time goes on and the schools have to be repaired or renovated that cost will continue to rise.

GST is, we think, about $3.2 million, although I have expectations that it may be slightly higher than that. I always find it myself a bit of a shock when I get the final total. As you perhaps know, junior kindergarten is not something we have as yet implemented. Perhaps now that you see our predicament of space and dollars, you will understand why we are baulking at this. For us to implement junior kindergarten, staffing would cost $12 million and the actual accommodation -- which would be portables -- and renovations to our schools would be $19 million. I have real concerns about the actual probability of it happening in some of my schools which have 19, 20 or 25 portables on site. There is no room left for another space and sometimes it just seems like a physical impossibility. Class size reduction has also created a need for portables and that will cost of $3.9 million.

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If you add those all together, you will understand that the recent tax increases could amount to $26.15 million, which translates into 8% on the mill rate. That is not what the taxpayers are asking us for. Most of them are asking us for inflation, 4% or 5%. That creates real difficulty, as you know; you heard Halt Increasing Taxes. They want to hold the line and we are really attempting to do that but it is very difficult.

In like fashion to your consultation process, we are currently receiving briefs from taxpayers. We have a budget committee which now receives briefs from the public. We are most conscientious about our expenditures as evidenced by the Ministry of Education records comparing all school systems. As a large board, we rank second or third lowest in per-pupil cost and yet we have growth problems not experienced by many with which we are compared. In light of that, I guess we are saying we are a really fiscally responsible board. We are not in debt and we try not to be debt, but we do have a growing and demanding school system and we do need some assistance.

Mr Bowes: York Region Board of Education recommends that the 1991 budget for the province of Ontario be established to effect the following in the name of education:

1. Increase the 1991 grants to elementary and secondary education by 11% or $500 million as proposed by the Ontario Public School Boards' Association.

There is no more to be said on that. You have heard that many times over the past week. Another one you have heard a lot about, and we support OSSTF and the many presenters who have stated that they know exactly what the 6% solution is.

2. Initiate a multi-year plan to establish realistic per-pupil expenditure ceilings and to progressively return education funding to a 60% level of provincial support.

3. Initiate a multi-year plan for funding the growth and non-growth capital projects of Ontario's school systems with a 1991 allocation of $500 million.

The next three, we hope, may be some solutions to the problem of revenue and cash flow.

4. Review and reaffirm government support to Bill 20 -- education development charges -- and move immediately to permit school boards to enact bylaws in order to collect levies.

I am sure you might have a lot of questions on that because the director is the foremost expert on educational development charges in Ontario.

These two are personal ones. These came up when I made a presentation to the select committee on educational funding. Because I had a mend who was a pharmacist, these health care costs came up so I am going to have to mention it because I think it is interesting.

Sue Wakeling has mentioned on pages 1 and 2 the decrease for education in the provincial budget from 15.1 per cent in 1975 to 10.4% in 1988. As a pharmacist, I started pharmacy apprenticeship in 1940, and that is over 50 years in the health services field; also a member of a hospital board for 17 years. Also, for a number of years I have had this little blue card which is very good, but I have never had it so good over the past years. Mind you, I have got to get a new one; this is signed by Peterson. I have never had it so good since becoming a senior citizen, retired from pharmacy, and looking back over 50 years in the health services field I have seen the abuses in the health care system.

In 10 years, health care spending has moved up from 27% of provincial revenues to 34%. Meanwhile education has dropped from 15%. There has been a threefold increase in the Ministry of Health expenditures in 10 years. I was heartened by the Honourable Evelyn Gigantes's statement today that they are cracking down on payments for foreign health care, but I was saddened by the fact that she was not considering user fees.

Being in the business that long, in the pharmacy business and having dozens and dozens of physician friends, the user fee in my opinion, while it may be heresy for some of the members of Parliament, is the way to go for this government to save money and increase revenues. The Ministry of Health's budget is the one that is out of control.

On 6 September the taxpayers made their feelings known. Property taxes are out of control. It is time to change the educational source. The sixth recommendation is that funding the educational source has to change away from property tax, whether it is income tax or whatever form. We would be pleased on behalf of the Growth Boards Coalition to be a part of what I understand are going to be two commissions running concurrently, the Fair Tax Commission and the commission on educational tax reform. We would be willing to make presentations to those commissions.

We thank you on behalf of the 20 trustees of the York Region Board of Education for your time and patience and we respectfully request your consideration of our recommendations. I am going to ask Sue to go back and maybe Bob Cressman will come up. I am sure he will be able to answer some questions.

Mr Cousens: On behalf of my community, the region of York, and as a former trustee on this board and chairman of this board, I want to congratulate and thank Chairman Bowes and trustees for taking the time to bring this forward, recommendation 1.

I have always had trouble and continue to have trouble in finding the difference between the high-growth boards and the low-growth boards. What really grieves me as much as anything is, why is there not a bigger membership of the high-growth boards? It is unfortunate that you are not able to have a stronger coalition of boards across the province to agree with what you have got, because what you are talking about is a difference in the design of education within high-growth boards for the children there versus those in non-high-growth boards.

What I see as a problem is that unless the ministry gives a special emphasis to the high-growth boards, and it has not, we are going to continue to have the battles that are going on. It weakens your presentation by virtue of the fact there is not a larger list of names on it.

Mr Bowes: One of the problems, Mr Cousens, is that one of the other high-growth boards is Carleton. They are so far away. They agree with us but it is a long way for Carleton to come. They are probably the only high-growth board in eastern Ontario. They just cannot come down here to York region for a meeting. Simcoe is sympathetic to us, but they are a big, wide, spread-out board and it is difficult for them. This is on top of hundreds and hundreds -- you know how many meetings we have in there, about fourfold since when you were a trustee. Simcoe has trouble.

Diane Williams, Scarborough board, is interested, with the growth in north Scarborough, in what we do and supports us but we can only do so much as individual boards in getting together.

Mr Cousens: Mr Chairman, I do not want to take longer because you have been going longer than I have in this committee, all day. The differences between the high-growth boards and the other boards is something -- I would like to see the differences. I can see the problems you are expressing that affect our area, but also I start seeing other areas having junior kindergartens and I see other areas having other services, so that you are really talking about distinctive differences between the high-growth boards and the non. Maybe that is something we should begin to see, because there is discrimination going on between both systems.

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Mr Bowes: I do not want to take a lot of your time at this time of night, but these are some of the extras on opening a new school: inadequate funding for furniture and equipment, inadequate library and no funding for inventory of supplies to start up. Our growth requires us to buy new textbooks for that growth and that is approximately four times as much as cyclical replacement of current textbooks.

The principal is hired several months in advance of the school opening -- in fact more than several months -- and has to be paid. Caretaking staff are phased in at the school well before the opening. All these are extra costs. Secretarial staff are in place before the opening. Overcrowding in holding schools and two new school openings create a need for extra staff. I do not know how many portables we had at Westminster and the crowding there -- we got flak from the local residents in Vaughan. When the school is being built. we are busing the pupils to the holding schools. There is just a horrendous amount of busing, costing us about $45 million now.

The local share of new schools and portables, as Joanna mentioned, is being added to the requirement for local taxpayers. The major point is that we are having to bear the cost of the opening of new facilities while the grants we receive for the new pupils are required to cover the cost of educating these students in the present facilities. I think the director could go on and on about the problems we have in growth.

Mr Cressman: In short. it is $1 million more than approved grants presently allocate to equipment in secondary schools. We have four going right now.

Mr Cousens: Is that a secondary school?

Mr Cressman: A secondary school.

Mr Sutherland: I have two questions, one short and one just on your comment about English as a second language. That is the board's contribution? Are there not federal funds for that?

Mr Cressman: That is the York board's cost after grant.

Mr Sutherland: Thank you. Then let's get into this issue of lot levies. since Mr Bowes has got into that. Sorry, just before we do that. Mr Bowes, your comment about user fees: The only thing I would suggest is to get a copy of the transcript of when the minister and the deputy minister were here, because they discussed that issue.

Mr Bowes: The Minister of Health? I have read it, and that is why I say I was heartened by it. She is going to try to get some money from the foreign costs, from the people who go to Florida and send their bills back.

Mr Sutherland: T here still seems to be some controversy about the lot levies. There is still a sense among some circles that whether there are lot levies or whatever, that is still a municipal burden. that the property owners are going to have to pay that in the cost of their houses at some point or other. I was wondering if you could comment on the issue as to how you see lot levies as maybe different from regular downloading.

Mr Cressman: Let me recount to you a telephone conversation in June 1989 between me and a taxpayer who had just received his bill wherein we had increased by an average of 16.7% all mill rates in the region. His municipality happened to come in at about 21%, and the man was understandably upset.

When I explained to him where the major costs were in the budget -- they were in growth, new schools, provisional staff, etc -- and about the underfunding, he said, "You mean to tell me that I am paying for the new schools being built along Steeles Avenue and up the Yonge Street corridor?" I said, "Yes, this is a regional school board: therefore the costs are absorbed by the region and the taxes allocated according to assessment." He said: "That's not fair. I am living in a neighbourhood where we have a six-room school that is 38 years of age. My kids went to that school and now my grandchildren go to that school. We paid for that school, and now I am paying for what is happening down there? We don't have a gym and we don't have a library at our school." I said, "Yes, we are working on that." That is the kind of situation we are in.

There are 450,000 people in York region, but you have to remember that during the growth spurt, 300,000 were original residents. Two thirds of them are saying: "Hey, what's going on here? Why am I being soaked for all these new schools that are being built for people coming into York region from outside the region and in many cases from outside the nation?" They get some upset about it.

So there is another side to the coin that says that users should pay something here if they move in. A lot levy of $4,000 or $5,000 attached on a $250,000 home, ladies and gentlemen, is neither here nor there. We all know that. In fact, we know that has no impact whatsoever on the sale of houses because the developers will charge what the marketplace will bear. We know that too.

Mr Sutherland: Do you see that application applying throughout the entire province rather than just in York region?

Mr Cressman: Only in areas where the growth is significant. Don's question about the difference between the boards -- there are boards that are growing in the province by 500 a year and they have total enrolment of 15,000. That means nothing. They have got six schools that are just sitting empty. That is not an issue. Their issue is in renovations and repairs to older schools.

We are talking about growing by 4.000 students a year in some years. Even right now. in a year of recession as deep as it is, we will grow this year by 2,500 students. You know where they will be? They will be living three and four families to a home. We get the revenue and taxation from one residence. but we have three and four families living in that home. as many as eight and 10 children coming out of one house. We have to provide education and new schools, new classrooms and teachers for that.

In areas where the growth is high. the lot levies will be of great assistance to us. In areas where the growth is minimal, I would admit with you that it will not be as important to them as the grants they would get for renovations and alterations. I know because I was a director in that situation in another board.

Mr Phillips: First, I do appreciate the presentation. Some other members earlier said that you are only one group speaking for the trustees, but I like to see a variety of groups before us. I know how tough it is in your area, because it is very difficult to manage growth when parents get very upset. I used to be a trustee in the north of Scarborough. I think over my tenure we built in my area at least 30 schools. I went through all of that. You go through that every day and I appreciate it.

I think the 60% funding commitment, if they move to it, will help you. I will set aside the user fee area. by the way, because I realize it was probably an unexpected recommendation from you.

Mr Bowes: It came out of the select committee. They asked me about how we are going to get money and I brought that up.

Mr Phillips: But on the capital side, this group's recommendation for an incremental $500 million in capital -- the number that I have in my mind is that pre-1985, the capital budget was $70 million or so. In the last four or five years for the province, it has been running at about $300 million.

Mr Cressman: It was $338 million last year.

Mr Phillips: Yes, that commitment, I think, is through 1993 at $300 million. But your recommendation is for an incremental $500 million each year on top of that?

Mr Cressman: No, that is changing the $338 million to $500 million, which is a very simple mathematical calculation. It gives you a 10-year plan, because you have a $5-billion budget ahead of you.

Mr Phillips: So you moved from $300 million to $500 million?

Mr Cressman: Yes, that is the recommendation.

Mr Phillips: Each year for I 0 years?

Mr Cressman: Yes. That gives you a 10-year plan. That is probably longer than people like to see, but at least it is a plan that would see an end in sight.

Mr Phillips: I think another group made a recommendation to us earlier for the capital spending programs, the kind of antirecession stuff. I think the group was saying that maybe part of that could go to the $700 million that has been announced. I understand now; from $300 million to $500 million a year.

Mr Bowes: Yes.

Mrs Sullivan: I am interested in your look at the long-term projections. Halton has also gone through a growth area, but not growing nearly as quickly as York, long-term infrastructure planning where the school boards and the municipalities have come together and looked down the road at what their needs would be in terms of demographic change. This is a comment, not a question really. One of the things that they looked at very seriously was the change in demographics over that same period of time. They were looking at 20 years, and therefore the change in capital need, as much as it could be predicted, over that period of time.

I do not know if you are finding this, but in our area our first heavy need is at the elementary level with secondary schools not requiring proportionately as many pupil spaces in the beginning. But latterly the emphasis is going to be on the secondary level where the costs are significantly higher for pupil spaces in terms of construction. That was factored into their process. Of course, the whole project was done to spring additional funding. They will be back to do the new government about it again. I suggest that you do too.

Mr Cressman: To use this here as an example, we had 2,700 more students this September than the previous September, which was down 1,300 from the year before, when we had a pupil growth of 4,000, and 3,800 the year before that. Of that 2,700, 1,500 were elementary, 1,200 were secondary, so you are right. At the moment there is a greater increase in elementary, but you have to remember that that wave moves on through. Therefore the impact does come in the secondary panel later and the cost in the secondary school today is roughly $20 million. The cost in elementary is $6.5 million to $7 million, not counting land.

Mr Sutherland: Can I just get you to clarify what size of schools you are talking about at $20 million?

Mr Cressman: We build our secondary schools for $14 million and our elementary for $6 million.

Mr Bowes: I might say that on Thursday night we had quite a long discussion on this with the Growth Boards Coalition. I would like to read this paragraph again:

"Interest costs are scrutinized carefully by our board because interest paid means less money for classroom benefits to the students. The ministry currently pays us 25% of new projects in instalments spread over several years. As a result, we annually pay approximately $3 million in bridge financing costs, 1% of the mill rate." They were really concerned and wanted us to use that part about the interest cost that boards have to pay. That ties in with recommendation 3 on the $500 million.

The Chair: One of the groups that came to make a presentation here suggested that one of the costs that could be reduced is if, as the municipalities get 5% of the developed land, school boards would also be allocated a percentage of the land. Do you concur with that? Would you support that?

Mr Cressman: That would certainly decrease our costs. It would not solve the problem, however. At the moment, for the last decade, I have done all the negotiating personally for our board with the big guns, the Marco Muzzos and the Alfredo de Gasperises and so on, and I can tell you that the land prices have escalated considerably. The negotiations become more and more difficult between those gentlemen and me each year and sometimes end up in legal confrontation to solve our problems.

That is fine, but you have to remember that at the present time on an elementary school project of, let's say, $8 million, you are looking at perhaps $1.5 million in land and $6.5 million in building. If and when the economy returns to full bloom and we go back to this business of $500,000 an acre that they would like to see paid, then you are talking --

Mr Sutherland: Is that $500,000 an acre?

Mr Cressman: That is often where they start. They used to start at $750,000 and I beat them down to the point where they now start at $500,000 and I will start at $50,000. You know the old game in negotiations. You play from there.

Mr Bowes: Industrial land there is $1 million an acre.

Mr Cressman: That means I would predict that in a few years your average elementary school will run you $4 million or $5 million for land and perhaps $7 million or $8 million for the building. If that component of land were removed, that would take out a considerable portion, but there is still a very expensive building to go up, particularly in secondary schools, where the percentage is out of whack again, building to property. It would help, but it is not the total answer.

The Chair: On behalf of the committee I would like to thank you for your presentation.

Mr Bowes: Thank you, Mr Wiseman and fellow MPPs. It might help us to get a few more schools. You may even help to get a new school in Uxbridge.

Mr Phillips: You are shooting for the whole works.

The Chair: Before the committee adjourns, there is one item of business.

Mr Christopherson: Thank you, Mr Chairman. I appreciate that. I spoke last night to a group of credit union directors and managers and asked them if their provincial organization had made any presentation to us and they had not. They expressed an interest. I asked them to follow up on it because there may be an opening. We did the same thing for the bankers' association. I understand they did phone this morning and that they are pencilled in but I just wanted to formally, for the record, put a motion forward that indeed they are invited and they constitute part of our agenda.

The Chair: We do have a half-hour slot. Is it the consensus of the committee to include them?

Mr Christopherson: Monday at 10:30, I think, is the time.

The Chair: Is that acceptable? Okay, Monday morning, 10:30.

Mr Christopherson: Thank you, Mr Chair and members of the committee.

The Chair: This committee stands adjourned until 10 o'clock tomorrow morning.

The committee adjourned at 1744.