PRE-BUDGET CONSULTATIONS
NATIONAL CITIZENS' COALITION

CUPE ONTARIO

DAILY BREAD FOOD BANK

CANADIAN CHEMICAL PRODUCERS' ASSOCIATION

CANADIAN FEDERATION OF INDEPENDENT BUSINESS

CANADIAN ADVANCED TECHNOLOGY ASSOCIATION

CITIZENS FOR PUBLIC JUSTICE

ONTARIO TEACHERS' FEDERATION

ONTARIO REAL ESTATE ASSOCIATION

INTERFAITH SOCIAL ASSISTANCE REFORM COALITION

CANADIAN BANKERS ASSOCIATION

ASSOCIATION OF MUNICIPALITIES OF ONTARIO

CONTENTS

Wednesday 18 February 1998

Pre-budget consultations

National Citizens' Coalition

Mr Colin Brown

Mr Gerry Nicholls

CUPE Ontario

Mr Sid Ryan

Daily Bread Food Bank

Ms Beth Brown

Ms Sue Cox

Canadian Chemical Producers' Association

Mr Norm Huebel

Mr Mike Hyde

Mr Dave Podruzny

Mr Steve Moran

Canadian Federation of Independent Business

Ms Judith Andrew

Canadian Advanced Technology Association

Mrs Shirley-Ann George

Citizens for Public Justice

Mr Gerald Vandezande

Mr Rick Tobias

Ontario Teachers' Federation

Ms Susan Langley

Ms Ruth Baumann

Ontario Real Estate Association

Mr Robert Storring

Mr Hugh Foy

Mr Jim Flood

Interfaith Social Assistance Reform Coalition

Rev David Pfrimmer

Ms Gabrielle Mandel

Rev Susan Eagle

Sister Doryne Kirby

Canadian Bankers Association

Mr Michael Green

Mr David Barrett

Mr Tim O'Neill

Mr John Leckie

Association of Municipalities of Ontario

Mr Michael Power

Mr Roger Anderson

STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS

Chair / Président

Mr Garry J. Guzzo (Ottawa-Rideau PC)

Vice-Chair / Vice-Président

Mr Wayne Wettlaufer (Kitchener PC)

Mr Ted Arnott (Wellington PC)

Mr John R. Baird (Nepean PC)

Mr Jim Brown (Scarborough West / -Ouest PC)

Mr Garry J. Guzzo (Ottawa-Rideau PC)

Mr Monte Kwinter (Wilson Heights L)

Mr Gerry Phillips (Scarborough-Agincourt L)

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

Mr E.J. Douglas Rollins (Quinte PC)

Mr Wayne Wettlaufer (Kitchener PC)

Substitutions / Membres remplaçants

Mr John Hastings (Etobicoke-Rexdale PC)

Also taking part / Autres participants et participantes

Mr Tony Martin (Sault Ste Marie ND)

Mr Richard Patten (Ottawa Centre / -Centre L)

Mr Tony Ruprecht (Parkdale L)

Clerk / Greffière

Ms Tonia Grannum

Staff / Personnel

Mr Ray McLellan and Ms Lorraine Luski,

research officers, Legislative Research Service

The committee met at 0934 in room 151.

PRE-BUDGET CONSULTATIONS
NATIONAL CITIZENS' COALITION

The Chair (Mr Garry Guzzo): Our first presenter this morning is the National Citizens' Coalition. Gentlemen, welcome. Thank you for attending. We have 30 minutes. Please proceed.

Mr Colin Brown: My name is Colin Brown. I'm the president of Ontarians for Responsible Government, which is a project group of the National Citizens' Coalition. I see you have Sid Ryan coming in after us this morning, so you're certainly getting a good variety of political perspectives. I'm sure by lunchtime you'll be totally confused.

Mr John R. Baird (Nepean): Some of us are a bit all the time.

Mr Gilles Pouliot (Lake Nipigon): On a point of order, Mr Chairman: Are we receiving the -- oh, yes, I'm sorry. You did mention Mr Ryan. He comes in afterwards.

Mr Colin Brown: That's right.

Mr Pouliot: So he has the last word.

Mr Colin Brown: He has the last word, but it's before lunch, so I don't know what it's going to do to your stomachs -- but at any rate.

Sitting beside me is Gerry Nicholls, our communications director, whom some of you know.

ORG is a group which consists of 7,000 Ontario taxpayers who believe in free enterprise, individual freedom and that less government is better than more government. We were born the day after the first NDP budget, if you recall, seven years ago. That makes us older than the Common Sense Revolution. We've made a name for ourselves with our attacks on government waste and high taxes, and I suppose that's why we were asked to appear before you this morning.

However, I am not here this morning to talk about bond ratings or debt ratios or tax structures. I am here to talk about matters that do not show up on balance sheets: things like principles and values and the importance of remaining true to your commitments.

I think such issues are relevant to this committee's mandate. After all, government is not merely an accounting exercise of ledgers and budgets. Government is more than that. Government is a special bond between citizens and elected officials, or to put it more simply, we elect politicians to do a job and we expect them to deliver.

If you want to use an analogy, government is a lot like the flight crew of an airliner. We, the voters, give the crew their flight plan and we trust that they will take us to a certain destination. In 1995 voters gave the Mike Harris government a pretty clear direction on where they wanted to go. They wanted lower taxes, they wanted smaller government and they wanted to restore fiscal and financial health to the province. To be sure, at the beginning of its mandate, the government soared along on the proper course. It acted decisively and boldly when it repealed labour laws, slashed taxes and axed government spending, and it showed true leadership when it scrapped the gold-plated MPP pension plan.

The days of wild spending, never-ending tax increases and uncontrollable debt are thankfully over -- we hope. Certainly the government deserves praise for this, and it deserves praise for sticking to its promised tax cut in the face of unrelenting protests from strident special interest groups.

Yet at the same time, we are disappointed and even alarmed with certain signals which seem to indicate the government might be diverting from its flight plan.

The first signal was the unexpected and unscheduled detour into the Toronto megacity debate. It's not yet clearly understood why the government took us there and what it hoped to accomplish. One government is better than six. However, we could also end up replacing six wasteful governments with one big wasteful government. Equally clear is that this megacity controversy caused the government to expend valuable political capital that could have been used to bring us closer to an Ontario with smaller and not bigger government. Imagine, for instance, if the effort poured into merging the city had been directed towards, say, privatizing municipal services. Such a course would have addressed the actual costs of services delivered to taxpayers and how they could be reduced.

A second worrying signal concerning the government's path is the apparent loosening of commitments to reduce government spending. As I noted earlier, at one time this government seemed determined to make spending cutbacks a top priority, and rightly so. Reckless government spending prior to 1995 bestowed upon Ontario a legacy of massive deficits and a crippling debt, and the problem has not gone away. Ontario still faces a deficit of about $5 billion and a provincial debt approaching $108 billion. We are a long way from Alberta yet.

Still, we read in the paper that the finance minister and the Premier see no need for any new spending reductions. This suggests, unfortunately, that rather than continuing reductions in spending the government is hoping that increased revenues from a growing economy will eat up the deficit and shrink the debt.

To some, of course, this is an appealing plan. Why risk unpopular spending cuts when the problem will take care of itself painlessly? Well, unfortunately, experience has shown that you can't take short cuts when it comes to restoring fiscal integrity. The truth is that taxpayers cannot count on politicians for decades of fiscal discipline. Nor can we be sure of solid growth, given our debt and tax levels. What's more, recent signs from the economy -- a falling dollar, rising interest rates and slowing economic growth -- are warning us that things could get worse before they get better. This government should not revert to a simple reliance on low interest rates to solve its problems. Too many governments have done that, only to see increased costs and plunging credit ratings.

In short, there's only one reliable way to reduce the debt and eliminate the deficit, and that's to cut spending. This is a fact that the government understands. It's why, back in 1995 during the provincial election campaign, Premier Mike Harris promised to pass a balanced budget law, a promise we were happy to see he reiterated a few days ago. This is a long-overdue step that Ontario desperately needs to ensure long-term fiscal responsibility.

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After all, the nature of the political system gives politicians incentives to expand the size of government through higher and higher spending. A law forcing the government to balance the budget would force politicians to kick the spending habit. Of course, to be effective a balanced budget law must go hand in hand with a law that would prevent governments from raising taxes without the approval of Ontarians in a referendum. This would ensure that the government would eliminate the deficit by tightening the provincial budget rather than cutting the family budget with taxes. This government, I am glad to say, also promised such a tax limitation.

Can these types of government limitations work? The answer is yes. Take Switzerland, for example. The Swiss require any tax or spending increase to go to the voters for approval if enough citizens demand it. I think it's not a coincidence that Switzerland enjoys one of the lowest marginal income tax rates in Europe. It also has low sales taxes compared with its neighbours.

In the United States, meanwhile, 31 states have constitutionally imposed balanced budget requirements and some 23 states have some form of tax and expenditure limit legislation in place. Studies have found that states with spending and tax limitations succeeded in keeping taxes and government spending down.

Needless to say, if the government enacted such limitations here in Ontario it would represent its greatest and most long-lasting achievement. It would be nothing less than a legacy of fiscal responsibility for future generations of Ontarians.

Another promise the government made back in 1995 concerned privatization. This is one promise the government unfortunately seems to have abandoned. We had high hopes that this government would emulate British Prime Minister Margaret Thatcher and implement an aggressive privatization program. After all, as the Common Sense Revolution booklet so rightly noted, "History has shown that the private sector can use public assets more efficiently and provide better services to the public." Yet here we are in 1998 and the government has done next to nothing when it comes to selling off government agencies and services.

It's a mind-boggling omission when you consider that privatization has shown itself to be the most efficient and popular method of reducing the size and cost of government. Indeed that's why governments everywhere in the world, including socialist governments, are privatizing with fervour. In fact, according to the Reason Foundation, the value of privatizations worldwide in 1996 beat all previous records with a grand total of US$86 billion. The total in 1995 was $73 billion. Experts expect that 1997 will be another record year. One analyst has estimated there were at least $53 billion worth of privatizations in Europe alone last year.

All these privatizations are taking place because privatization works. The World Bank released a study called the Privatization Dividend which looked at the performance of 61 privatized companies in 18 different countries. The report showed that on average privatized companies saw their profitability increase 45%, saw efficiency jump 11%, saw investment increase 44% and saw employment go up 6%. When was the last time you heard numbers like that from Ontario Hydro?

What's more, a recent survey asked 500 US municipal officials about their experiences with privatization. Seventy-four per cent of those who had some experience with it said the experience was somewhat or very successful.

Then there's Britain's new Labour government. This group of socialists has also embraced the concept and has not dared to reverse one major Conservative privatization.

Even Communist China is getting into the act. That last bastion of Marxism is getting set to privatize tens of thousands of state-run industries. As one Chinese official explained, "Everyone knows the most successful companies are privately owned." That about says it all.

But what's happening here in supposedly Conservative Ontario? The man hired to oversee its privatization program quit recently because he had nothing to do. He couldn't even privatize the liquor stores. It's embarrassing.

If the lack of privatization suggests the government is drifting off course, then the appointment of Floyd Laughren means the compasses in the cockpit must be spinning. After all, Pink Floyd is the cabinet minister who spearheaded dozens of tax increases and who doubled the provincial debt. He was in many ways responsible for the Common Sense Revolution.

Why would a Conservative invite a socialist, a former NDP finance minister, to head the Ontario Energy Board? The Laughren appointment is reminiscent of the time former Prime Minister Brian Mulroney named NDPer Stephen Lewis as Canada's ambassador to the United Nations. At the time it was a clear signal that the federal Tories had abandoned any Conservative principles they had. We hope history is not repeating itself, but we must ask, how can you be serious about competition in the marketplace when you put a socialist at the controls of the regulatory body? Will Hydro ever be privatized? Time will tell.

Certainly the government's next budget will be an important landmark which will indicate whether or not this government is still on the right flight plan. We will be looking for signs that the government is going to finally start privatizing, we will be looking for signs that it will renew its determination to cut spending and we will be looking for signs that the government is remaining true to its principles and values.

But let me end with this caution. If the government has changed course, if Ontario is headed somewhere else than what we were led to believe in the Common Sense Revolution, then it had better break out some parachutes because, frankly, it'll face a mighty rough landing when the next election rolls around.

The Chair: Thank you very much, Mr Brown. We have approximately five minutes per caucus for questions, and this being day seven, we should be starting with the Liberal caucus.

Mr Monte Kwinter (Wilson Heights): Thank you, Mr Brown. It's going to be interesting to see what really does happen and what your position is going to be as we come up towards the next election.

One of the things that has been brought to our attention is that the government had projected in its budget that it would reduce spending by 5.8% and in fact it's only going to be 1.9%. What is happening is there seems to be a trend -- we keep hearing about other things that are coming on stream -- where this government will probably be spending more money than any government in recent history, in real numbers. Do you agree with that?

Mr Colin Brown: I've seen the numbers that refer to what you're talking about. I think it refers back to the easy way out if you've got a fairly low prime rate and you have revenues which are coming in. One of the reasons revenues are starting to come in is because you've had a tax cut -- we do support that -- but it makes it very easy to lay off on your attempts to cut spending. I would not be surprised by any of that. I don't have access to the numbers or the books, but what you're saying wouldn't surprise me, Mr Kwinter.

Mr Kwinter: What is your organization's response to the fact that at the end of this mandate the debt will have increased by about $30 billion, all of that attributable to the tax cut because the tax cut is all done on borrowed money? Notwithstanding that the deficit is going to be reduced, it is being reduced at the cost of increasing the debt and we will have probably again at the end of this mandate a $10-billion interest charge to service that debt. How is that going to affect your particular perspective on what should be happening in this province?

Mr Colin Brown: Our perspective is that we believe in free enterprise, we believe in less government, we believe in low taxes. If this government or if any government proceeds along that line, the problems you've talked about will eventually take care of themselves simply because, if you have lower taxes and a strong economy and you eventually hit a position of a balanced budget, things are going to start turning around, but they have not turned around yet.

It drives me crazy sometimes when I hear people running around saying that because the deficit is down $1 billion we now have extra money to spend. We don't. We're nowhere near that point yet. I would encourage the government or anyone to keep their shoulder to the wheel, because we've got a long way to go yet.

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Mr Gerry Nicholls: Let me just question one assumption that you raised, however. The deficit or the debt has nothing to do with the tax cut. If anything, cutting taxes will increase government revenue. We've seen that. We don't have any statistical evidence for here in Ontario because there haven't been a lot of tax cuts lately, but if you look in the United States in the 1920s, the 1960s, the 1980s, whenever there was a tax cut it resulted in an economic boom, which in turn resulted in more government revenue. So I wouldn't blame the deficit or the debt on tax cuts; I would blame it on the fact that the government is not cutting spending fast enough, it's not privatizing, which is something that has to be brought up today. There are various things the government can do to reduce the deficit; there are various things the government can do to reduce spending. You've just got to do it.

Mr Kwinter: One of the other things you mention in your brief is a reference to Hydro and the fact that you feel it should be privatized. We've just heard that they've had the largest loss in corporate history, which is taking their debt to $32 billion. They have other potential for stranded debt because of the restructuring. It seems to me, and I sat on the select committee on Hydro, that if there was privatization -- and you should know that no one is really talking about privatization at the moment; they're talking about competition but not privatization -- if they were to pursue your goal of privatization, somewhere along the line, to make it remotely feasible for anybody to get in there and try to acquire it, the taxpayer would have to assume a huge part of that debt. Otherwise nobody's going to buy into it and assume that debt, because it doesn't make any sense. There was an article in the paper today -- and we've said that all along -- that Hydro is effectively bankrupt. Do you have a response to that?

Mr Colin Brown: If you looked at the examples around the world -- British Energy, in New Zealand other major privatizations -- these large publicly held corporations were not in good financial shape either. Let's face it: Hydro is in a very difficult situation. But I know that several years ago there were very positive cases made for the privatization of Hydro, and Hydro was an asset that some people would want to buy; there would be people out there in the marketplace who would want to buy it. With the latest news it's difficult to say, but it could be prepared for that or certain assets of it could be prepared for it. Obviously, the nuclear issue has always been something which people have suggested might not be part of a sale, might be separated.

Mr Pouliot: Welcome, gentlemen. I constantly read about your philosophy and your contribution, especially when I go on Bay Street. You're to be commended for your imagination.

Where would you stop? Do you have any reservations vis-à-vis your inclination -- and I don't say this negatively in the least -- to privatize? Are there some sacred trusts or some sectors where you would be more hesitant, more careful about privatizing?

Mr Colin Brown: We think there are three big targets in Ontario, and they're not that big: the liquor stores, LCBO, Ontario Hydro and TVOntario. We just don't see why any of these are sacred; we don't see why there's a public perception or a great tradition that says that the taxpayers have to be 100% up to their elbows in these businesses.

Mr Pouliot: Indeed. The Ontario government will sell you one Pickering nuclear plant for $1 and you get one free. The debt is $32 billion. Out of this -- Mr Kwinter, please correct me if I'm wrong -- there is a capacity exceeding $2 billion from the Canada pension plan, a little known fact, fully supported by the province of Ontario, a crown agency when it serves its purpose, an independent body also when it serves its purpose.

It is estimated that if Ontario Hydro, with its dilemma to restore the viability of nuclear plants, were to tap the marketplace independently, given the debt, you would be looking at a 75- to 100-basis-point difference without government backing. Do you feel it's good business for Ontario taxpayers, or should they just go to the private sector and it would come back by way of a major rate increase to the consumer?

Mr Colin Brown: I'm not sure the major rate increases are a guaranteed result of all this. The numbers you have just pointed out illustrate to me all the more reason why we shouldn't be in this business. I don't think it's going to end. If you look at Ontario Hydro's management over the decades, it has been run not like an aggressive business which has to exist with competition; the management has existed like a Star Chamber. It has been very difficult to get information and it has behaved with a lot of great fiscal impropriety.

If you look at Hydro and how it has been run, certain things can be changed by some bits of competition, which are being introduced now in breaking it up, but in the long run I would suggest that the only way to really fix it and solve the problem is to get it off the books.

Mr Pouliot: Hopefully, it would be more successful than the water privatization under the Thatcherite philosophy, the Thatcher regime.

You've mentioned that you commend the government because this is a government that does what it said it would. You've mentioned that it cut off the gold-plated pension plan, so there is no more gold-plated pension plan, in your opinion, right?

Mr Colin Brown: It has been changed substantially, yes.

Mr Pouliot: So that has been a welcome move.

Mr Colin Brown: Yes, very much so.

Mr Pouliot: Government spending: Mr Kwinter has indicated that it is likely that this regime will have spent more in this fiscal year than any previous government in any fiscal year. Government spending -- health, education, social services -- is where the money is being spent by and large, the majority of the dollars. You still have a deficit likely in the neighbourhood of $5.2 billion three years into their mandate. This will be the last jurisdiction in Canada to reconcile the books, if the economy keeps turning around. Where would you cut: health, education or social services?

Mr Nicholls: I don't think it's really our job to tell the government where to cut. That's what we elected them for. They have to make the decisions.

Mr Pouliot: But you're very bold.

Mr Nicholls: I can tell you this: Here's what they should do. First of all, they should look at every government agency, every government service, and say, "Is this something that could be done better in the private sector?" You raised the question before, what would we not privatize? I think there are very few things the public sector can do that the private sector can't do better. Look at everything the government does. If the private sector can do it better or if it's something the government shouldn't be doing in the first place, privatize it, sell it off, contract it out. That's number one. That would be a tremendous saving for government right there.

Number two -- and this is something which our organization has always been opposed to, and I'll raise it right now -- are handouts to special interest groups, subsidies to business, grants. The government does not pick winners and losers in the marketplace; it shouldn't be picking winners and losers with taxpayers' money. That's another area where the government could save money.

Mr Wayne Wettlaufer (Kitchener): Thank you, gentlemen. You highlighted that in the United States, 31 states have constitutionally imposed balanced-budget requirements. The United States federal government, when President Clinton came to power, had a deficit of $367 billion. This year it will be something in the area of $10 billion. I wonder if you could comment on how they have achieved that.

Mr Colin Brown: How the American federal budget deficit has been achieved?

Mr Wettlaufer: Yes.

Mr Nicholls: We're not experts in American public policy. We haven't been following the issue there very closely. We have looked at the areas where the states have introduced balanced-budget amendments, and studies have shown -- there's an organization called Cato Institute which showed that those states which have implemented these kinds of reforms have resulted in lower spending and lower taxes. I'm sure there's a move in the United States to make that federal; in fact, I know there's a move to make that federal. I would suggest that whatever they're doing there, there's still a strong movement towards the kind of suggestions we making about how to make government more accountable, how to make government listen to the people who elect them. I think that's the important thing that we're trying to get across here today.

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Mr Wettlaufer: They had followed many of the same policies that we have followed, and I was hoping you could shed a little more light on it.

The other thing I wanted to talk about is that the members of the other two parties have been talking out of both sides of their mouths in the last few days. They have been in one sense criticizing us for increasing spending, as you have here today, and in another area they have failed to recognize that we have increased spending in the health care and the education fields. Health care, of course, we have increased to $18.5 billion, $17.8 billion in program spending alone, and that is necessary in part due to the restructuring that must go on if the reforms in health care that their own very governments started are necessary.

Education at $14.4 billion: We've heard from numerous organizations in the last few days that if we are going to prepare our young people in the areas that are necessary for future development, ie, high tech, increases in spending in that area are necessary. That's not to say that we can't save money in other areas of education, and they're being looked at, I can assure you.

Do you have any suggestions as to where we might be able to reduce some spending in the education field?

Mr Nicholls: When you're talking about education or health care, I think the assumption is that spending more money is the answer, and I don't think it is the answer. I don't think the problems these areas face are due to government spending; I think they're due to the nature or the structure of the system.

As you're talking about education, we'd like to see a system where there's more accountability, where parents and teachers and students have more of a choice. We were disappointed that the government, when they implemented Bill 160, seemed to be going in the opposite direction. They were concentrating more powers in Queen's Park when what they should do, in our opinion, is give more power to the local areas, give more power to parents, give more power to students, give more power to teachers. I guess what I'm trying to say is give people a choice in education. Inject some market economy and inject some ideas of competition into education and into health care as well.

Mr Wettlaufer: Are you talking about charter schools?

Mr Nicholls: Charter schools is certainly one very exciting idea which they have tried in various parts of the world, in the United States and in Alberta, and it's working very well. I think it could work here as well.

Mr Baird: I want to touch briefly on page 4 of your presentation. You spoke both about balanced-budget legislation and legislation requiring referendums for tax increases. Can you explain why you think that's important in the medium and long term?

Mr Colin Brown: Sure. The fact is that if you don't have some sort of structural limitation, if you do not have some sort of mechanism in place where a successor government would have to undo it at their peril with the voters, it's simply too easy to run up the tab again. Time and circumstances can change, and we alluded earlier on to the experience in Britain. It's very interesting to see how Margaret Thatcher has actually moved the yardstick. She has actually moved the centre dramatically in the political spectrum there. Tony Blair is not a traditional Labour type of leader, just like Bill Clinton, who stood up and said the era of big government is over in his most recent State of the Union address, is not a traditional Democrat.

Mr Baird: You'd admit they're good examples for our friends across the aisle?

Mr Colin Brown: Absolutely. I hope they're listening.

The point is that you have to have some legal or very, very strong mechanism in place that really makes it awfully difficult for future generations of politicians to run up future generations of debt for the taxpayers.

The Chair: I have to interrupt you there. I do thank you for your presentation and for your time this morning, gentlemen.

CUPE ONTARIO

The Chair: The second presenter this morning is the Canadian Union of Public Employees, Mr Ryan. Good morning and welcome. Thank you for coming. Please introduce your associates.

Mr Sid Ryan: Good morning and thank you for the opportunity to make a presentation today. Joining me are Margot Young, a researcher with our CUPE national organization; and Doug Allan, also a researcher, with the Ontario region. Both of them were very helpful in putting together our brief.

I come before this committee today on behalf of CUPE's 180,000 members in Ontario. It is because these members are affected directly by the actions of your government that CUPE Ontario has a pressing interest in the budget.

One need only pick up the papers today in Ontario to be reminded of the unprecedented levels of anxiety out there as a result of the policies and the fiscal agenda of your government, an anxiety which has been created by a government determined to deliver on a promised tax cut at whatever the cost, a government that sees our cherished health care system as expendable, a government whose record in dealing with youth unemployment could fit on the end of a squeegee mop, a government that has used welfare recipients as scapegoats and launched an all-out attack on the province's most vulnerable, a government that has raised tuition fees for colleges and universities to the point where those institutions are now out of reach for most working families.

We represent members who work in the broader public sector. Our members have experienced directly the impact of the spending cuts. They have seen services diminish and people suffer as a result of economic policies that have hurt low- and middle-income people in this province. We strongly disagree with the policy of providing tax cuts that are funded by slashing spending on social services and welfare, health, education and municipal infrastructure. Tax cuts benefit higher-income earners while doing nothing for most people, who rely on these valuable programs that have been decimated by your government.

A worker earning about $33,000 is getting approximately $350 as a tax cut, but someone earning over $250,000 per year takes home $15,000 in the tax cut. Tax cuts clearly benefit the wealthy, the ones who need it the least. This type of spending must end. We envision a budget for Ontario that will benefit all Ontarians. Instead of spending money on tax cuts, we want to invest in health, education and social programs. We want a strong public sector delivering these important services to the people of Ontario.

We're going to focus a lot of our presentation today on the issue of making children a priority. The child poverty rate in Ontario under your government has climbed to an astronomical 19.1% from 11%. That's one statistic we don't hear the finance minister or the Premier crowing about. One of the best investments this government could make is in high-quality, not-for-profit child care; instead, it has cancelled millions of dollars in child care funding and threatened the continued existence of junior kindergarten. No previous government has ever reduced funding for child care.

CUPE supports quality, accessible, not-for-profit and publicly accountable programs. This government has touted unregulated care as the arrangement of choice for the care of children, even though most experts and care providers say this is not the way to help children.

We also call for the restoration of funding for junior kindergarten. Allocating increased funds for child care and junior kindergarten will be a sound investment for children and enable parents to participate in the workforce.

The economic policies of your government, coupled with shifting single parents to workfare, will increase the number of families in crisis, thus increasing the demand on the already underfunded and understaffed welfare system.

Contrary to what Minister Ecker would have Ontarians believe, this government is committed to one thing only in the social services sector: slashing costs. Welfare and program cuts result in increased child abuse and neglect. Our child welfare system is in crisis in Ontario. Coroners' inquests into the deaths of children have called for increased funding to community support programs, regulated not-for-profit child care, public housing, addiction services, public health, visiting nurses and community-based child abuse prevention programs.

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Despite the calls for restoration and increases to funding, the government has done nothing but repeat the same funding announcement to provide $15 million, an amount that will not solve the problems in child welfare in Ontario. You have made this announcement six times in the last year, and we're getting a little bit sick and tired of hearing about this $15 million, which has yet to materialize, by the way.

CUPE is calling for restoration and increased funding to child welfare along with improved workload protection for workers. Child abuse prevention programs must be properly funded as well as community programs for children.

I'm going to deal with workfare and the attack on poor people.

The 1990s will be remembered for how your government tried to achieve prosperity on the backs of low-income people. You have chosen to cut jobless and welfare benefits while safeguarding entitlements for corporations and richer Ontarians. The result has been a widening gap between rich and poor.

The government has embarked on a strategy in welfare reform that will hurt job creation in Ontario. Workfare must be ended. It is a job killer. The government means to introduce workfare to the private sector. This will take even more jobs away from the economy and create increasing downward pressure on all wages. Instead of creating decent jobs, this government is concentrating on putting together a $3-an-hour workforce for private business. This is what employers will have to pay workfare participants. There is no doubt that workfare will lead to higher unemployment. In the global race to the bottom for working people, this government is leading the way.

Studies have shown that employers will not create jobs if they can use workfare participants. In Quebec, employers said the workfare program meant that instead of hiring people, they could use people on welfare. Recent studies of New York City workfare programs show that workfare doesn't work. Apart from creating a class of workers that have an inferior status with no minimum employment standards protection, the workfare program has not led to employment. The city parks department, which utilizes 5,483 workfare participants, has only hired 22 of them on a full-time basis. In contrast, 61% of those who receive on-the-job training get full-time jobs. Clearly, if you invest your money in on-the-job training you'll have a better return.

We urge the government to scrap workfare and to start investing in publicly delivered training and apprenticeship programs and to increase investment in job preparation courses. Ontario's apprenticeship training programs pale when one looks at the investment in training in Europe.

Recent reports show the government is contemplating even further cuts to welfare. The province might cut rates for single, employable clients. In 1995, rates for a single person were $630 per month. After the 21% cut introduced by your government, the rate dropped to $520 per month. The government is now contemplating a rate of less than $460 for this group. This is simply taking food off the table and clothes off the backs of the poor in Ontario. A villain from a Dickens novel would be proud. Yet this money that would have been spent directly in Ontario's communities supporting small businesses, not on luxury items for the wealthy. Welfare rates must be restored to the 1995 rates.

According to the Ontario Coalition Against Poverty, the existing welfare cuts have resulted in skyrocketing evictions in Toronto, and the use of emergency shelters is up 67% over last year. Social housing must be improved if we are to make any headway in reducing poverty. Yet the Ontario Housing Corp plans to sell off units.

People living on the streets of Toronto are about to lose their meagre $4 shelter allowance if they can't provide receipts, leaving them with $6.50 for basic necessities. This mean-spirited action is part of the government's attack on poor people. It will have an insignificant impact on spending.

The gap between rich and poor is increasing in this province. Creating a chasm between rich and poor in this province will create long-term injury for our economy and Ontario society. We must restore spending to welfare and social services. Low-income Ontarians must have stabilizing programs and protections from the fluctuations of the economy.

I'd like to deal briefly now with health.

While the government continues to pretend that overall spending on health is increasing, the fact is that spending has not kept up with inflation. As part of the overall health care sector, spending on hospitals has decreased drastically from 47% of the total in 1994-95 to just 39% in 1996-97. Your government took a huge chunk out of hospital operating budgets in 1996-97 and in 1997-98. The total cut was $800 million, and this government still sticks to the big lie that they are not cutting health care spending.

In addition to cutting spending on hospitals, the government's Health Services Restructuring Commission has wrought havoc across the province, ordering 30 hospitals closed and huge cuts in acute care and psychiatric beds. In so-called sizing the acute hospital system, the commission has relied on a planning tool which sets ridiculously low targets for numbers of beds based on discharging people quicker and sicker.

The targets are also based on sending chronic care patients to yet-to-be-built long-term-care facilities where the funding per head will be reduced from approximately $200 per day to $85 a day. A crisis is looming in long-term care.

The funding for long-term care is inadequate to meet the needs of the existing population. The funding formula does not meet the care needs as they are based on benchmarks that do not reflect the increasing levels of care required. Funding levels need to be enhanced.

Horror stories abound relating to inadequate staffing to meet even basic needs of feeding, changing incontinence pads and helping people out of bed. Introducing patients from chronic care hospitals will exacerbate the existing problems of inadequate funding to provide for the needs of people in long-term care.

Most of the people living in long-term care are seniors. As the population ages, this problem will only get worse. Warehousing seniors in quarters where their basic needs are not met presents another glimpse of the underbelly of the Harris social and economic policy.

The impact of this government's health care policies can be seen all over the front pages of the newspapers. Critically ill people like Fred Gregory are turned away from emergency rooms, paralysed after a long wait for treatment.

An emergency room physician at the Hamilton Health Sciences Corp describes how a typical day starts off with only two beds of the 20 emergency beds accessible to the public because the ER is overflowing with patients who can't get a ward bed. At the same time beds lie vacant in the hospitals because there is no funding to keep them available for patient use.

The hospitals that are slated for closure are operating at maximum capacity. We need them now; we will need them in the future. They also need an ongoing infusion of more operating dollars to reopen badly needed ward beds. Poll after poll has shown that Ontarians will simply not accept any further erosion of the health care system.

In the area of education, the government has already cut more than $1 billion from school board funding and plans to cut another $700 million. The new funding model has not yet been released but funding changes will result in school closures, privatization of services and further deterioration of working conditions. The prime theme of education reform is spending reduction.

Funding for education will come from the province and from property taxes. However, the province will control the property tax rates and set a province-wide expenditure cap on education. School boards will not be allowed to raise funds to meet the unique needs or priorities of their communities. How much flexibility will be provided to the boards has yet to be determined.

The new funding formula must start with an adequate level of moneys. Funding must be provided according to need, not benchmarks. The funding formula must not be formulated to achieve spending reductions. We must ensure adequate and stable funding for our schools.

The infrastructure of education must be kept in the public sector so accountability is maintained. Quality education includes maintaining clean, safe schools, not just what the government refers to as "inside" classroom expenditures. Students require schools with safe, comfortable, appropriate facilities. Keeping these facilities and services in the public sector does this.

Post-secondary education cost continues to climb as a result of Conservative policies. The most recent budget statement allows for increases of up to 20% in tuition costs. University tuition is prohibitive for many working families. Deregulation and fee hikes make university inaccessible. These policies will encourage the introduction of income-contingent loan repayment plans. In fact, your government has raised tuition 45% since you've taken office. Experiences from other countries show that these types of loans make university less accessible to members of disadvantaged groups.

Universities are an investment in our future economic growth and in our quality of life. Government spending on universities is woefully inadequate to ensure that our investment in our future economic growth and productivity is adequate. Funding for universities must also ensure all students have equality of access through a generous grant system. Tuition fees must also be reduced.

Jobs: Cutting the public sector not only erodes valuable public services that are key to economic stability but the cuts also eliminate an important source of decent jobs. The government cuts threaten wage subsidies for child care workers. Home care workers will have their wages threatened as these services are tendered in competitive bidding processes. Women, youth and members of equality-seeking groups will be most vulnerable if the erosion of public sector jobs is allowed to continue.

Public sector jobs provide decent jobs for women. Average earnings for women in the public sector are $29,000 compared to $16,000 in the private sector. Less than one third of women in the public sector earn $20,000 or less per year compared to nearly two thirds of those working in the private sector.

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According to the December 1997 budget statement, 45,000 public sector jobs have disappeared in Ontario in the first nine months of 1997. Public sector jobs declined 8.5% between 1992 and 1996. These job losses were predominantly from the education, health and social services sectors and, by the way, predominantly women lost these jobs. Is it any wonder that your government has real troubles with women in this province? Does this government not realize that every job counts, whether it's in the private or the public sector?

In conclusion, let me say that we believe the economic policies must start to take into account everyone in Ontario. This means people without jobs, youth, women, children, people living with disabilities and elders.

The public sector must receive renewed investment. The public sector creates the infrastructure upon which our economy runs. Investing in health care, education and social programs provides stability for Ontario's economy. Investment in the public sector generates decent-paying, stable jobs.

We urge this government to start allocating funding to health, education and social programs. To do anything less is to abandon our province's proud history of cultivating a caring and compassionate society.

The Chair: We have about four minutes per caucus. We'll start with the New Democratic Party.

Mr Pouliot: Thank you very much for your presentation, Mr Ryan and colleagues. This morning I have the vivid impression that I am indeed among friends, people who share the same philosophy.

Your presentation, unfortunately, when we are experiencing a recovery supposedly -- that's what the financial papers tell us: a recovery which is consequential, a major recovery -- tells us that it's an economy which is based on the philosophy of winner take all, whereby those who can run the fastest are allowed to get away from the field.

Startling statistics: child poverty from 11% to 19% while times are good? This reads like Dickens. One out of every five children in the province of Ontario; for every five, there's one who lives in poverty in rich Ontario. If this regime, the Progressive Conservative government in power in Ontario right now, keeps on with its philosophy of taking money from the middle class, who pay the freight, and the poor and giving it to the rich, who need it less than anyone else, where do you see Ontario going in two, three, four years from now?

Mr Ryan: Let me start off with, you made reference to the Progressive Conservative Party. I think that's an oxymoron. There's nothing progressive about this government.

Mr Pouliot: I agree.

Mr Ryan: In terms of where we're going, what we don't ever hear this government talk about when they cut welfare benefits by 21%, when they try to scapegoat people on welfare as welfare bums sitting at home swilling beer, is that 500,000 children in this province had their benefits cut too by 21.5%. That's why we're seeing a skyrocketing increase in poverty among children. That's why we're seeing evictions skyrocketing in the city of Toronto by 67% more usage of emergency shelters last year.

Clearly we're on the path of destruction of social programs here if this government gets re-elected. It's obviously important for all Ontarians to wake up and get together in a huge coalition to make sure these scoundrels get voted out of office in the next election, because we in this province cannot afford to have four more years of this type of government. It only caters to those at the higher end of the income scale, the business community, and to hell with everybody else.

Mr Baird: Thank you very much for your presentation. I took particular note of your comments with respect to the number of inquests conducted into children's deaths. That's obviously of concern to all of us of all parties. In 1997 I believe there were about eight inquests conducted, of which six involved deaths prior to August 1995. That's of tremendous concern to all of us on a non-partisan level. We obviously want to do a better job. Whatever we're doing, we can do more, and we've got to do a better job on that.

I did want to quickly mention one thing. My colleague the member for Lac-Nipigon talked about the one in five children living in poverty. That was the result of the five years of his government. In 1989 the rate, according to your report, was 11%, and when the NDP left power it was 19.1%. There was no social justice in an $11-billion deficit. There was no social justice in rocketing government spending. In fact, it made this situation demonstrably worse and that's the result.

I guess I just have to wonder. You represent over 180,000 members. Those are the same folks who elected us. In my community the support for work for welfare approaches 90%, right across the province. Those are your members who are supporting that work for welfare. In my constituency 90% of electors in Nepean went to the polls and put an X beside a candidate who supported work for welfare. I just wonder.

It's an honest attempt to try to improve the economy. Our strategies to balance the budget are an honest attempt. The last government, which you helped elect, sir, brought in the social contract, opened collective agreements. That was not the option; our strategy is not the option. Is there an option? Is it realistic to expect any political party to come forward with a policy platform that would satisfy the union leadership in this province? Is that a realistic expectation?

Mr Ryan: There are several topics you get into there. First off, let me talk about the stats of 11% to 19.1%. It was the Social Planning ServicesCouncil of Metropolitan Toronto, an independent group in this province, that laid the blame squarely on your government for the increase from 11% to 19.1%.

Mr Baird: Those are 1995 figures, sir. That's as a result of the NDP government.

Mr Ryan: The 1997 stats that just came out very recently laid the blame on the increase directly and squarely on your government.

Mr Baird: But 20% is the figure you provide for 1995. Those are your numbers, not mine.

Mr Ryan: I can tell you what the facts are. Whatever the typographical error might be in there, I'm telling you that your government is directly responsible for raising child poverty in this province from 11% to 19%. That's an inescapable fact, sir.

Mr Baird: But your numbers, sir, don't suggest that. Your numbers say 11% to 20%.

Mr Ryan: I'm telling you, the typo of 1995 --

The Chair: Please, Mr Baird. We've asked the man a question and we're going to let him answer it.

Mr Ryan: In terms of workfare, you talk about CUPE supporting this. Let me tell you, sir, the reason you have to move your workfare program from the public sector into the private sector is purely because CUPE has fought you every step of the way and has kept you out of every municipality, every school board, every social agency, United Way. Right across the board we have kept your so-called workfare program out of our workplaces.

It is not supported by CUPE members, I can assure you, and it is losing support in most communities. In particular when you start to move it from the public sector into the private sector and people in the private sector begin to feel threatened by your workfare program and their jobs will feel threatened, let me see how much support your workfare program will have.

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

Mr Gerry Phillips (Scarborough-Agincourt): I'm trying to get a handle on the government's priorities and your recommendation. I always carry around with me this chart which shows the tax cut. What it shows is that people making more than a quarter of a million dollars a year, $250,000, are going to get a tax cut that's worth $500 million. That will be, if you will, the lost revenue to the province.

Mr Ted Arnott (Wellington): Does that factor in the health care levy?

Mr Phillips: Actually, it does. The Conservative members don't like to hear this so they're interrupting me, but it includes the Fair Share health care levy. Just so the people at home understand, that's $500 million of a tax break. As I say, people making a quarter of a million dollars may very well need it but it comes at a cost and that is the cost you point out in the hospital sector.

The Ontario Hospital Association was in yesterday sounding some alarm bells for us. They're a very responsible group. They said an accumulation of small problems from fundamentally flawed policies turns into a crisis. They were alerting us to a crisis in our hospital sector. We've found $500 million for people making a quarter of a million dollars a year in the province. That was luckily available in the finances of the province. But it's been at the expense of, as you point out, cutting $800 million from hospitals.

Can you humanize it a little bit for us? When we talk about dollars here, we lose in many respects the human touch. You've talked about child poverty. But unless we really internalize it and know an individual we can visualize suffering from poverty, unfortunately we can just gloss over it. Similarly on cutting hospital spending -- many of your members work in hospitals -- can you help us understand the implications of those hospital cuts in human terms?

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Mr Ryan: We do. We've got about 22,000 hospital workers and approximately 20,000 long-term-care workers, primarily nursing assistants, RPNs and people who work as orderlies, technicians, ambulance drivers, paramedics, so we're on the front lines. We're seeing it all the time. We're currently in the process of conducting a survey of all the ambulance services that we represent in the province, and the feedback that's coming in is quite horrifying. Most hospitals are on what they call bypass, where they're actually closing down the emergency wards and redirecting ambulances, with critically ill patients in some cases, tens of miles if not hundreds of miles away from the rural communities. It isn't just happening in the city of Toronto where it makes the front page of the Toronto Star; it is widespread.

The part that really gets to the paramedics is that they know for a fact that just up the stairs from all of the emergency departments lie corridors of empty beds, shut down because the Tories won't put the funding into the hospitals. We know that they could open some of those hospital beds and alleviate some of the pressures.

From the long-term-care perspective, we know that there are people in the chronic care departments who could be in long-term care, but we don't have the long-term-care facilities. I believe it's 5,000 in the city of Toronto alone waiting to get into long-term-care facilities.

It really is pretty sad. Today most people probably read the Toronto Star. A child died of a flesh-eating disease, and they say he had to wait three hours in the emergency department in the hospital he went to in his part of the province. It is a life-and-death situation that's developing in this province, and what's so sad about it is, it is being created by the Tories. This is a problem of their making. We've had successive governments with problems in the health care system, no question about it; we have never experienced the crisis that we're seeing today in health care.

The Chair: Thank you very much. I must interrupt you there. Our time is up, but I do thank you for your submissions and thank you for attending, sir.

Mr Phillips: Mr Chair, I found the announcement by Hydro yesterday important to our deliberations, and I wonder if there mightn't be either an opportunity here for someone from Hydro -- that would be my preference, just so we understand, because I think $31 billion of the contingent liability is an Ontario government responsibility -- if we might hear from a Hydro official before we complete our deliberations. In the absence of that, I guess, at the very least, a background paper on what they were talking about yesterday.

The Chair: What is the wish of the committee? Do you wish to attempt to have someone from Hydro attend?

Mr Wettlaufer: I think it's the responsibility of a different ministry, Mr Chairman. I believe that the ministry is going to be in touch with Ontario Hydro, and I don't think there is any necessity for us to have a view of that right now.

Mr Phillips: That is crazy.

Mr Baird: I think we could certainly make inquiries. The public portion of our hearings concludes tomorrow, and each party had the opportunity to submit a list of witnesses we wanted to hear from, and we have had a full exchange of ideas. We could certainly inquire as to whether they would be available today or tomorrow, but in the absence of that, a fuller account of their financial situation, as the member for Scarborough-Agincourt has suggested, would certainly be useful, and that would certainly merit support.

Mr Phillips: I'll just go on record as saying I find the Conservative members a bit unusual here. Here we have what could have a much bigger impact on the province's budget than almost anything. We are 100% on the hook, the taxpayers, for the debt, and the most material announcement imaginable, the largest loss in corporate history in Canada, and we won't even hear from anybody. You've got the votes to do that, but I'll make sure the public understand the government won't even hear from anybody on it.

The Chair: Just a minute. There has been no decision made. I don't know whether it's appropriate to have somebody from Hydro or whether it would be appropriate to have somebody from the finance department, but let's be careful how we state -- I admit that I found the statement yesterday somewhat confusing. Obviously, reading the newspapers this morning, others did too. Different papers have different comments on it.

However, at this point in time I do not wish to delay the proceedings. I will deal with it first thing this afternoon if you want to come back and raise the issue. At the very least I think we could have some kind of a written report, but I think it should come from the department of finance.

Mr Phillips: Why don't we just deal with it this morning rather than interrupt a speaker this afternoon?

The Chair: I would start early this afternoon to do it or at the end of this afternoon's hearing and give the parliamentary assistant for the minister an opportunity to report back.

In any event, to keep on schedule, the next presenter this morning will be the Daily Bread Food Bank.

Clerk of the Committee (Ms Tonia Grannum): They're not here yet.

The Chair: I'm advised that these people are not here at this --

Mr Phillips: There we are. We've got time. Perfect.

The Chair: I'm suggesting that we have the parliamentary assistant for the minister report back with regard to an appropriate person to attend, if in fact we have room to attend.

Mr Phillips: Great.

DAILY BREAD FOOD BANK

Ms Beth Brown: Sorry we're late.

The Chair: Thank you for coming, and welcome. Please proceed.

Ms Sue Cox: Thank you very much. We got Bathurst Street bridged today.

I'm Sue Cox. I'm executive director of the Daily Bread Food Bank. With me is Beth Brown, one of our researchers.

First of all, thank you so much for letting us come here. It's a real privilege to be able to let you know what's going on in the food bank world. The documents that you'll receive today from us include not only our brief but a report, which is now quite a few months old, about food bank use across the province of Ontario. Our perspective is not just looking at what's happening in the greater Toronto area, although that's what we know best, but we also like to take a look at the provincial statistics and what's happening out there.

Let me just give you a quick backgrounder. First of all, as you may know, Daily Bread itself is the largest food bank in Canada. The primary area that we serve is the greater Toronto area, and we do that through neighbourhood-based organizations in community centres and churches and similar places right across the GTA. We're moving now about one million pounds of food every month into those programs. In addition, we're quite closely connected with the Canadian Association of Food Banks. Because of the preponderance of the food industry in the greater Toronto area, food donations to national sources actually flow through Daily Bread, so the Canadian association offices are at Daily Bread. We try to keep a finger on what's happening in our local area, in the province of Ontario and right across the nation right now.

We're not here -- and we often have to say this over and over again -- to ask you for help directly for the food banks or to propose that this is a way that you ought to be considering moving in the future, nor are we raising the issue of any particular tax breaks for charities and food banks. What we want to do is put before you the experience of low-income people across the province of Ontario so that this can enter into your deliberations as you move forward in the budget process. We think that too often their experiences have been forgotten or neglected in the enthusiasm around fiscal issues and deficit reduction.

Essentially what we're asking you by telling you these things is that the province of Ontario not pursue any further budget savings on the backs of low-income people, particularly through the social assistance system. That effect has been devastating. We see that devastation in our member agencies and at our own site on a daily basis.

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We'd also like to bust a few myths about the people who use food banks, because we fear that a lot of these decisions that are being made are based on myths -- for instance, myths of the dependency of food bank users or that somehow they have to be shaken out of laziness or some other kind of personal moral failure to move forward. This is not our experience. These are not the people we see. We just see people going through temporary tough times, and we think it would be good fiscal policy in this province to give them the support they need to move out of poverty and to move forward in their lives.

To that end, we've also done a bit of a comparison from 1995, which was prior, of course, to the cuts to welfare, and 1997, the year of our last annual survey. Our research is based on surveying food bank users across the GTA in a random sampling. We have a great deal of information and data about them which we're always happy to share with you if we can help you in your understanding of issues.

Before I turn things over to Beth to tell you a little bit more about some of these details, let me just say that as far as food bank use is concerned, of course we saw very dramatic rises following the welfare cuts. This year we did see a small decline in the need for food banks that reflected some improvements in employment. Unfortunately, they've edged up again towards the end of 1997. But they were down a little bit and I think that reflects the fact that as people get back on their feet, they once again become self-sufficient. They don't need welfare systems, they don't need food banks, their lives improve.

One of our frustrations with some proposed policies, which I won't get into in any detail, or some of the changes being made in welfare now, is they actually stop people from moving forward. They make it more difficult for them to find jobs and more difficult for them to move, as I say, towards self-sufficiency, because I think one of the myths that's out there is that following the welfare cuts people did continue to cope. The implication there is that things were too cushy for them before. But I'm here to tell you that our data show quite clearly that the only reason they were managing and staying healthy is because of their increased need for food banks: increases in frequency, increases in the amount of food they need and increases which, quite frankly, we were not able to meet. We simply couldn't keep up with being at the bottom of the downloading pile.

Secondly, I have to say that it is not just provincial policies that have caused that situation but also many federal policies, particularly the reduction in access to unemployment insurance, which meant that in effect welfare became the program for unemployed people. But sorry, the culpability lies across all levels of government and today we're here to talk to you about provincial policies.

Let me turn you over now to Beth. She's going to tell you a little bit about what we see in the data.

Ms Brown: Thank you very much for letting us appear today. If you compare our 1995 sample to our 1997 sample, the trend we see increasingly in the food bank and also in the general welfare assistance population across the province is more families supporting children having to rely on general welfare assistance. In 1995, about 35% of respondents supported children; in 1997, about 50% support children. If you're looking for the roots of child poverty, declining income is definitely a key in that.

The folks that are supporting kids and are forced to turn to food banks to support those children are increasing, and they're also increasing in the Metro Toronto welfare caseload when you do a comparison. I want to put that out there, that there is an increasing group of children that is coming to food banks, unfortunately, because of declining welfare income.

We also have found, on a positive note, that the myth of welfare dependence has not taken root in Ontario. People are moving in and out of food banks and off the welfare system. When employment picks up, our numbers go down, so there's a real, close tie there. We just want to stress that one.

I guess when we get to the heart of the matter for food banks, and the reason we're interested in talking to you folks, because you're numbers people, is our numbers are showing that there's a frequency-of-use change that has happened in food banks this year that we are very concerned about.

Prior to the welfare cuts in 1995, people came to food banks about once very two months. Now we're seeing them coming about eight times a year. So there has been a real change in the desperation, or at least the depth of poverty people are facing, and we want to challenge the finance committee to come up with some good strategies around fiscal finance and also social policy, because I know a lot of it is set these days in the context of deficit reduction. We just want to put it out there that these folks are probably not able to sustain another hit, if you're looking for more savings in your budget.

If I quickly look at the single person's dilemma, we are looking at people, on average, in 1997 who are living on about $489 a month, so their income is well below the welfare maximum of $520. It's a significant decrease. These folks are the ones I know many people are talking about: Could we reduce rates for the single employable? We're here to point out that the single employable group has been hit hardest by the welfare cuts and has actually become most in need of food bank use.

If you look at their patterns of use, 14% of single food bank users come to the food bank every month, once a month. The average in 1995 was about once every two months, and only 3.5% visited a food bank more than once a month. By 1997, we're seeing a dramatic change. Twelve per cent are coming to the food bank more than once a month and those folks have to really show they are in need because most food banks will only serve people once a month and they are very strict on their own rules, so these folks are living without income.

If you look at the single after-rent income, 10% have no after-rent income in 1997. That means they pay their rooming house fee and they have absolutely nothing left. So food banks have suddenly stepped in to fill a gap that has been left in the social policy field by the government. I am really talking about the single people because I know that's something this government has talked about and considered.

The only fair jurisdictional comparison for us, I think, is Vancouver, British Columbia. On a per annum basis, they pay about the same as a per annum basis in Ontario. I guess if you're looking to compare Ontario to New Brunswick, Newfoundland, Nova Scotia, Quebec, Prince Edward Island, you're really looking at the wrong end of the country. The only comparable housing costs in Canada are Vancouver. If you really want to set rates, I think you should do an actual study and actually figure out what it costs and get the real numbers, as opposed to using artificially inflated averages of welfare rates across the country and then just saying, "We're moving to 10% above the national average."

It's just not a fair rate-setting process and it's also not a good fiscal policy, because it's not based on real numbers. I'd like to encourage, folks, if you were to pick on any group, please don't choose the single employable because they can't really sustain further problems, and we can't sustain them any further from what we are already doing.

I can talk about single parents and children later in the questions, but I just wanted to put it out there that they are pretty vulnerable because they tend to be an easy target for public policy. Michigan cut off their single employable people. I am just hoping that's not where we're moving in Ontario and that's not the way the budget is going to be balanced.

Mr Pouliot: You shouldn't tell them that they're vulnerable.

The Chair: Please don't interrupt.

Ms Brown: Thank you for your time. We'd be happy to answer your questions. I'm sure Sue has some more points.

Ms Cox: Yes, just a couple of things. We do have a couple of recommendations. We apologize for moving into the area of social policy, but I think that fiscal policy so often has guided it that it's appropriate.

But we do have to point out, if we wanted anything, we'd say that really poor financial thinking is involved in workfare, which is costing an awful lot of money, and we strongly believe that it's a policy that's not a cost-effective approach to getting people back to work, but in many instances inhibits getting people back into the workforce.

I'd just like to point out that there are other policies which do this. For instance, the latest releases from Ms Ecker's office indicate that drug cards are going to be withdrawn from people who were working at very low wages, which is hardly an incentive to get back to work if you have high pharmaceutical costs. That kind of thing is social policy indeed, but it's poor fiscal policy because it's not providing the support people need to get back to work.

Anyhow, questions?

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The Chair: Thank you very much. We have almost three minutes per caucus, starting with the government caucus. Gentlemen, I'm going to have to tell you that when you know how much time you have, three minutes, if you take three minutes to ask the question, you're not going to allow them an opportunity to respond. I know that sounds basic, but I have to say it after six days of what we've --

Mr Phillips: You've just taken three minutes to tell us that.

Ms Cox: So it sounds like we get an extra three minutes, right?

Mr Jim Brown (Scarborough West): Being an accountant, I see all these numbers in your report. With accounting, you have dollars and cents, the cheque comes in and you get the cheque, or in marketing and research you do a sample and you have coefficients of reliability. How do you do all these numbers? Where do you get all the --

Ms Brown: The data?

Mr Jim Brown: Everybody who comes in fills out a form or you tick them off or something like that?

Ms Brown: No, actually the process is quite involved. We've been doing it since 1989. We have a research steering committee that involves academics and professional researchers. We also have a PhD researcher on our own staff who sets up the sample to be a representative sample. We look at how the programs draw down food across the city and then we create a sample based on the larger users, so we interview in about 35 programs, a face-to-face, 25-minute interview. We train the surveyors, send them out.

Ms Cox: To 900 people.

Ms Brown: Yes, we end up surveying 900 people, which is quite a good sampling of our population.

Mr Jim Brown: It sounds like a pretty big staff too.

Ms Brown: It's actually very volunteer-driven. What we do is take university students and train them; we train a lot of university students.

Ms Cox: Why don't you come in and we'll show you? We'd love to have you.

Mr Jim Brown: I will. I'll come down.

Metro social services has a program, they've got a van and they've seconded a driver and they take some people on welfare to some of the smaller communities where the vacancy rate may be 20% or 25%, whereas it's less than 1% in Toronto. The cost of housing is a fraction of what it is in Toronto. They get into other communities. What do you think about that program?

Ms Cox: That's something I wouldn't weigh into in a minute because I think a lot of the communities involved in receiving these people are not particularly happy about it. I can see your point. It's much better to be in a place where the rent is cheaper, but it's only as good as the jobs and services available. There isn't a kind of blanket, magic bullet solution there, I think.

Mr Phillips: I appreciate your presentation and the work all the food banks do in the province. It's a tremendous job.

I just want to chat a little bit about workfare because it's quite a divisive issue. As one of the Conservative members said, in his community probably 90% of the people support it. I suspect that's the case across the province. I'm not sure everybody understands it, but it's seen as, "If you want something, you've got to work." You've indicated some considerable concern; it's your number one recommendation.

Can you put it in some kind of human, understandable terms -- I'm not trying to say you don't put it in understandable terms -- so that people who may support workfare can understand why you have problems with workfare?

Ms Cox: It's pretty uppermost in our minds right now because of the huge number of people who are workfare-eligible who are volunteers in the food bank right now. They're approximately a quarter of our volunteer force and put in probably 50% of our volunteer hours. In point of fact, they're effectively not going to be able to volunteer when they're called in to their worker and assigned to workfare.

If they did a workfare placement at Daily Bread -- we're actually not going to participate in workfare, but if they did that -- we would only have them for six months. With new people coming in, there would not be an opportunity to provide appropriate training. They would only be able to do 17 hours in the food bank, the rest of their time being involved in job searching. I think we would take away from them a supportive environment which exists for them now which also does offer opportunities to seek work.

The irony of all of that is that if we were to be a workfare site, we would in fact be paid instead of giving the extra money to the person who is volunteering. We would be paid to take them in, yet we would have to incur tremendous costs just in the monitoring and paperwork required by the government. It's very hard to see how it makes any fiscal sense at all. Workfare just doesn't work. People want to work and people will volunteer, given the opportunity to do it, but to force them into that situation is just -- frankly, we also have some philosophical differences, but even from a practical perspective it makes no sense.

Mr Pouliot: Mesdames, bienvenue. I have two questions. By many accounts, the economic situation in Ontario is as good as it's been in recent years -- in fact, many more will attest that it's better than it's been in recent years -- yet your presentation tells us that the number of people for whom you provide that essential service has indeed increased, which would a priori go contrary to an economic recovery.

My second question is, has the makeup of your client group been pretty well the same over the years? Is it predictable? What are the backgrounds of people? Are you able to tell us in your statistics, as we look to the makeup in terms of education, is it male/female? You give us part of a sample, but you don't give us the whole picture.

Ms Brown: Just to speak a little bit about that, we consciously chose not to do a lot of demographics in this group because we really wanted to focus on income and the relationship. Education: As a general statistic, about 30% have done some post-secondary education. I just wanted to let you know that if we didn't look at the whole demographic, there are a lot of myths there that are also --

Mr Pouliot: With high respect, Mademoiselle, not in the context of demographics. She is the one who mentioned demographics. Hansard will take notes and I want to correct.

Ms Brown: When I look at the sample and I look at how it has changed, the overview between 1995 and 1997 shows that there are more families supporting children. I think there used to be a lot more single people using the welfare system but also using the food banks in emergencies, and I think we're seeing a shift. While there has been a wonderful economic recovery happening in this country, there has not been a job creation strategy by any level of government that would engage those people in jobs. There has been a climate created but no actual sustainable job creation by the federal Liberals or the provincial Tories.

Sadly, we see the folks who used to have good jobs. When you look at our sample, we also asked them, "What was your old job?" They'd say things like "teacher's assistant," "nurse's aide," "chef," "theatre worker." They had good jobs and those jobs don't exist any more, whether it's through downsizing of the public sector or whether it's through hospital restructuring where they don't keep their janitorial staff. We see those folks who had good jobs and now don't have good jobs any more and are trying desperately to reconnect. Most of our sample say they're looking for work. If this government wanted to launch a big job creation strategy, we'd be right there behind them.

The Chair: Thank you, ladies, for your presentation and your time this morning.

Ms Cox: Thank you for your patience in waiting for us.

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CANADIAN CHEMICAL PRODUCERS' ASSOCIATION

The Chair: The next presenter this morning is the Canadian Chemical Producers' Association. Gentlemen, welcome and thank you for coming.

Mr Norm Huebel: Good morning and thank you for the opportunity to appear before you. As you said, we represent the Canadian Chemical Producers' Association. My name is Norm Huebel. I'm the Ontario regional director for CCPA. I'll let my colleagues introduce themselves.

Mr Mike Hyde: Mike Hyde, Dow Chemical Canada.

Mr Dave Podruzny: Dave Podruzny, Canadian Chemical Producers' Association.

Mr Steve Moran: I'm Steve Moran, with Nova Corp.

Mr Huebel: Dow and Nova are members of our association.

I'd like to take a couple of minutes just to talk a little bit about the association to give you some perspective as to who we are. We have 72 members manufacturing 90% of Canada's chemicals and plastic resins. That's on a national basis. In the province of Ontario we have something in excess of 50 of those members with facilities in Ontario. Our members' shipments in 1997 were $16 billion and over 55% of those shipments are exported, so certainly we contribute to any type of potential surplus, which I'll come back to later. All of our members, of course, compete globally and invest globally and every one of our members exports.

We are a keystone industry for Ontario and virtually every other sector of Ontario's manufacturing economy uses our outputs as necessary inputs to their products competitively. A good example is the automotive industry where I think something in excess of $3,000 per automobile represents chemical products.

We have an initiative called Responsible Care which is probably one of the most successful exports from Canada. It is an initiative that relates to continuous improvement in environmental health and safety performance. As I say, we've exported that initiative to 42 countries around the world.

Most of our manufacturing has been concentrated in Ontario. Right now about 47% of the manufacturing facilities are in Ontario. The concern is that this has dropped from 55% 10 years ago. We are growing slower here than elsewhere in Canada. We do undertake full competitive assessments of the business and policy environment both federally and regionally and you will see that as part of the package we've distributed to you there is a thing called the competitiveness scorecard. We introduced that to the committee last year and it is a summation of all of the factors that an investor will consider when he looks at investing somewhere. What it does is rank Ontario against the US Gulf coast, outlining advantages, disadvantages versus that jurisdiction, because this is the reference jurisdiction for investment in our industry.

We have also developed analytical tools and computer models which assess Ontario's tax and total competitiveness. So we're not just talking about qualitative analysis here, we're talking about quantitative analysis of the various factors.

Mr Podruzny: Maybe if I could just interject for a second, we have taken those competitiveness models and shared them with the public servants in both the finance and economic development ministries so that they could use the models themselves in their due diligence process. We're not hiding them back here; they're available for anyone to scrutinize.

Mr Huebel: Thank you, David.

What we want to talk to you about today, though, are three major issues that we see as impediments to investment in Ontario and part of the reason that the sector is not growing to the degree we would like it to grow.

To put it in perspective, if you look at chemical sector investments on a North American-wide basis, there's something like $55 billion being invested in North America in the chemical sector. Of that, there's about $4 billion going into Alberta and Ontario is getting less than 1% of the investment. That is the concern.

You heard from a group earlier, which I thought was quite fascinating. They were talking about job creation strategy and high-paying jobs. That's one of the major drivers for us. We want that investment here. We want the plants built in Ontario as opposed to another jurisdiction. That's why we work on what I would call the competitiveness impediments that sit in Ontario.

The other thing is that if you look at Canada as a whole, we have a chemical trade negative balance of $5.8 billion, whereas the US has a $25-billion surplus. We want to do something about that.

To come back to the issues we want to address, if you look at the competitiveness scorecard, there are quite a few factors there, but if you get to the bottom line they don't have the same weighting. Frankly, within the factors that are there, there are a couple of very large ones that stand out. One is feedstock costs and availability and the other is construction labour costs. If those factors are not right, it doesn't matter what you do with all the rest, you won't get the investment.

One of the major problems we have right now is construction labour costs. Ontario is just not cost-competitive. Construction labour costs are higher than jurisdictions, such as Alberta, Texas and Louisiana, which are competing for the major petrochemical investments. We noted this year. We indicated the fact that we were working primarily with the Ministry of Labour to attempt to do something with respect to that non-competitiveness on labour costs.

I guess we've now come to the conclusion after almost two years of work in this area that we have three choices. Number one, if we don't do something there will be no major investment in this province. The second is that we continue to deal with the problem via the modification of the Labour Relations Act. The third thing, and I guess that's why we're presenting to the finance committee and it certainly is not our number one choice, is to change the corporate tax structure sufficiently to overcome the disadvantage and attract more than token new investments. Something such as the introduction of 100% capital cost adjustment would be required if we do not change the competitiveness disadvantage we have in the construction labour costs.

David, I don't know if you'd like to add anything in that area.

Mr Podruzny: Again, we don't come at that nice round number of 100% without going back to the modelling process. We've looked at the 7% or 8% construction cost disadvantage for an Ontario location over a Gulf coast location, which is where we're competing for investment. We've looked at the tax structure there and here and the overall competitiveness of the two jurisdictions. We have a full competitiveness model.

Norm mentioned some of the attachments. There is a sheet in here which compares the corporate tax competitiveness of different jurisdictions in Canada and the United States. Ontario comes out looking pretty good on balance. It has a tax competitiveness which is on a par with the major competing areas. But if you were to look at the full competitiveness, taking into account feedstock costs, construction costs for the capital facility, transportation costs to market and transportation costs for raw materials in, operating costs of the facility, you end up with a disadvantage that is heightened by this construction cost up front. To reduce that 8% or 7%, depending on the kind of project, to a par on the Gulf coast would require introducing about 100% capital cost adjustment write-off on the new equipment investment. That would bring you down 1.3% of the 1.4% in the full competitiveness model. There is a model. As I mentioned before, we've shared that with the finance officials so that they can validate the numbers.

Mr Huebel: There's just one thing I want to add before I lose it. I think the lady from the food bank before us talked about high-quality jobs such as janitor types of things. We're talking about jobs in chemical plants on an average paying $55,000 a year. That's the kind of jobs we're talking about and that's why we feel it's critical we have to do something. That's the kind of jobs we want to attract, not hamburger flippers at McDonald's.

Mr Hyde: I just wanted to give an anecdotal example of where this can come back to really hurt us, this construction labour cost issue. If you look at the labour rates in the Chemical Valley right now, they are about 30% higher than down on the Gulf coast. When you put that all together with the engineering costs, the costs of equipment, wintertime construction costs, what we end up with is a bottom line that is about 8% more expensive than putting a plant on the Gulf coast.

One of the things I really try to do all the time, as Norm has mentioned, and my colleagues in Ontario, is to fight to get the Ontario jurisdiction as competitive as Texas. We have just recently been very fortunate in that we have, competing with our colleagues around the world, won a new plant that we're going to be putting in Sarnia. The cost of this plant is about $100 million and we were able to get labour rates for the construction of that plant that are cost competitive, and that's the major reason that we were able to get the investment.

However, we have another opportunity coming up, and guess where our competing jurisdiction is? It's Texas. The plant is four times as expensive. It's around $400 million. That 8% discrepancy now, the cost of an extra $32 million to put that plant in versus the other smaller plant, is just too great. Our guys are saying in Sarnia: "We're not even going to compete. We are not even going to submit a bid." The reason why we can't use the competitive labour rates is that with the $400 investment you really need the talent of the trades for the major unions. So we have to pay the higher labour rates. It's an anecdotal example of where it really goes back to to haunt us.

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Mr Huebel: Steve, do you have anything you want to add at all?

Mr Moran: I think it's just very, very important to recognize that the single biggest cost in running our chemical operations is feedstock. It represents about 65% of the cost of our manufactured product. We in Ontario can have little control over that because our feedstock in North America is located in the province of Alberta and the US Gulf Coast. When we huddle together with our senior management to review capital programs, we take a look at those cost factors that can be readily controlled. Feedstock is not controllable, so the next-biggest cost factor we have control over is the cost of labour. We operate in an extremely capital-intensive industry. Nova is currently building a $1.2-billion chemical plant in Alberta, which will create 2,500 construction jobs in 1999. That just gives you a little flavour of the relationship of construction costs to other costs.

Mr Huebel: The next issue I want to talk about is electricity costs. The message here is, "Stay the course." We need competition introduced into the electrical system. There is a graph in the package that shows you where the electrical costs in Ontario are versus other jurisdictions in Canada, and you can see they are right at the top. That is a big detriment to some of our members. For some of our members, particularly people that manufacture industrial inorganic chemicals, electricity costs can represent 45% to 50% of their total costs. That's why our message here is, "Stay the course and let's get competition in the system." We need that in a lot of areas to basically attract investment.

The third issue we really want to talk about is regulatory burden and user fees. Obviously regulatory burden can impact on competitiveness, and we are working closely with the Red Tape Commission on a project to identify, quantify and address that impact. One of the things that's happened in the past is that when they put a lot of regulations in place, they look at the impact within that particular ministry or silo. There has been no way in the past of looking at total burden across all ministries, and that's the project we're working on with the Red Tape Commission, to try to identify what that burden is and how it compares with the other jurisdictions.

One of the big things that we are throwing on the table for this committee, and one of the concerns that we have, though, is the whole issue of cost recovery user fees. As budgets have been cut back in the ministries, some of the ministries have decided the way to make up for the lost costs is to impose user fees on particular stakeholders. I think the committee has to be aware of the fact that that simply is another way of increasing taxation.

The concern we have is that there have been no basic principles put out or agreed to by the government to be used by the various ministries if they're looking at user fees, and we feel that is a task that should be undertaken by either the finance department or management board. There should be some types of principles and rules or guidelines that are laid down for the ministry if they intend to get involved with the implementation of user fees.

Mr Podruzny: One of the things we have to stress here is that if there is no option, if there is no other campfire to go to in imposing a user fee, what you have done is inserted a tax. This is a fundamental that we believe has not been put into our tax model, but I think by this time next year we will do that; we will insert the cost of user fees into the model and demonstrate what impact that has on our overall tax competitiveness versus other jurisdictions.

Mr Hyde: Another comment I'd like to make as well is that at present, the Ministry of the Environment is looking at a user fee or a cost recovery process for the movement of hazardous waste in the province of Ontario. Our thought, and we're working closely with them, trying to get them to understand that principles and criteria need to be developed, is that that's the wrong place for this to be built. It needs to built with some non-regulatory body within the government as basic principles and criteria for all ministries to operate under as user fees or cost recovery programs are put in place.

We strongly recommend that the government needs to look at whether it be management board or the Ministry of Finance that leads the development of those principles.

Mr Huebel: The last point I'd like to make before we go to questions is that the competitiveness score card you see here was updated after last year's budget. Again, once the Ontario budget is cast this year, it will be updated and distributed to all the members and it obviously will be looked at very closely by any of the companies that are considering investments.

The Chair: Thank you very much, gentlemen. We have about four minutes per caucus, commencing with the Liberal caucus.

Mr Phillips: I'll say the same thing I said last year. I really appreciate your report card and I've actually used it as an example with other industries just because I find it helpful for us elected people to have some as-objective-as-we-can-get measurements of how Ontario stacks up versus other jurisdictions because we all want to see business expand here and to drive our economy. I find this extremely helpful and I appreciate it. You did raise the same point last year on labour and I think the message for us was that jobs follow investment in your industry like any other industry, but if you don't get the capital investment in the plants, it goes without saying that you don't get the jobs.

Just on the regulatory burden and user fees, we've heard a lot about privatizing government services and letting the private sector take over things, and I think the government has moved on things like your elevator licensing and what not being essentially privatized, and letting the marketplace handle it; you know, that free enterprise should be able to keep the price down. Your suggestion here, I think, is that rather than unfettered free enterprise when they privatize waste disposal, there should be some direction, guidelines or restrictions put on fees. Can you help me a little bit there with the possible conflict between privatizing these things and letting the marketplace handle it, and still fettering the private sector when you do it?

Mr Podruzny: Our principal concern here is where you have a monopoly, where you privatize something but you really only have one place to go to get your service. In that situation if there are no cost disciplines and you are functioning as a cost-plus centre, you end up with some of the inefficiencies that have run through for any other monopoly situation, such as Ontario Hydro. That is our concern. In those situations where you have no alternatives, you need cost disciplines. You need an external discipline to the process of what that fee would actually be.

Mr Hyde: Gerry, just another comment is that one of the principles we are putting together right is alternatives. The service that is being delivered, is there an alternative to it or should there be an alternative to it that could be even more competitive? We need to examine that to determine whether a monopolistic situation needs to remain or you can have competition.

Mr Phillips: I'm really interested in the labour cost issue because I'm not sure it's just your industry that impacts on this. It seems the problem is a bit boxed and doesn't look like it's going anywhere. At least, that's my interpretation of your comments here. Have you any thoughts, apart from your suggestion that an alternative may be to go to an accelerated capital cost depreciation schedule of some sort -- is that, in your opinion, the most likely solution to this or is there a more practical one? I shouldn't say "more practical." I don't mean that as in practical, but less costly.

Mr Huebel: I think the most practical area to handle the construction cost issue is through changes to labour legislation. Potentially, because of opposition from labour groups, it may be more politically difficult. The thing that becomes difficult to understand in some regards is the reluctance to have changes in that area from organized labour, particularly when some of the construction trades have greater than 50% unemployment rates in jurisdictions such as Sarnia.

The Chair: Mr Huebel, I'll have to interrupt you there and move on to the next caucus. Mr Pouliot may wish to follow up on the same question, though.

Mr Pouliot: Yes, I thank you very kindly, Chair. Welcome back, gentlemen. I'm intrigued with your corporate tax competitiveness model, your results summary. You mention on several occasions the cost of doing business through labour, if you wish, the cost of labour, but I take from your presentation that you wish to emphasize the construction labour costs, because in the same tone you pride yourselves, and why not? You make a very positive contribution. Your average worker gets $55,000 per year.

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I could understand hydro being an ongoing cost; I can understand people who work at the plant being an ongoing cost. Why the catalytic importance of the construction costs? After all, you're talking about a one-shot deal. If I'm to draw a comparison with an auto plant, sure they will spend $1 billion at one plant, but they hope the plant will be successful for 10, 12, 15 years and that the cost of doing business per unit will still end up being cheaper than the competition.

Mr Huebel: That's a very easy question to answer. It comes down to return on investment with respect to a facility and it's got to do with a time value of money. If you look at a plant and you build it for 20 years, you're right, there is an operating labour cost advantage in Canada. If they're spread out over 20 or 25 years, the life of the plant, the problem is that construction labour cost is up front. It's today. You spent the $20 million or $200 million or $300 million today and that's got a certain value.

If you've taken the advantage, taken 20 years out and discount $20 million or whatever the number is, bring it back, it's worth maybe $1 million or something. So the problem is that you can't get the return on investment with labour that is spread over 20 years versus something that is up front.

Mr Pouliot: I understand. Thank you. I want to go back briefly to Ontario Hydro. The chemical industry uses electricity, needs electricity, like Alcan Aluminium. Maybe the analogy, the parallel is not filled with validity but it's a very important component. Your chart shows that you're less competitive in terms of electricity rates at present here in Ontario than other jurisdictions. We have the paper today and it says "Ontario Hydro" -- incidentally, if it were not for the backing by the province, this corporation is literally bankrupt -- owes $32 billion, plus $6.3 billion, because successive mandarins didn't do their homework. "No rate increase at present." Are you watching this situation very closely indeed?

Mr Podruzny: I can assure you that the investment community is watching it very closely. It will be more difficult to overcome the impression that's going to leave. What has been suggested in the deregulation process would be to offer other options for sourcing electricity such as developing your own facilities, cogeneration facilities. There are many advantages within a chemical complex to using some of the steam generation and what not and producing power onsite. This also has advantages in reducing greenhouse gas emissions and so on. So there are solutions out there. You're right; we're very concerned with that and with the image that projects for attracting new investments. When the option emerges for other sources of power and competition, we believe there will be an opportunity to give a better picture, a better story.

The Chair: Thank you. We move to the government caucus, Mr Hastings.

Mr John Hastings (Etobicoke-Rexdale): Thank you, gentlemen, for making this fascinating presentation. I'm even more fascinated by your report card and what criteria you apply to some of the disadvantages for Ontario for I guess your industry or all sectors.

Mr Huebel: This is for our industry.

Mr Hastings: Okay, given that it's only your sector, then, would it be fair to assume as a premise that you would never have any investment in Ontario, ever again, given what has been occurring since we got elected in 1995, because it would appear as if you'd have to have probably a decade of surpluses, economic growth of 5%-plus, no inflation, low interest rate environment, no deficits, hardly any red tape, in order to just shift from a disadvantage to making it neutral. Because you are applying very rigorous criteria, I would assume, to say it's a disadvantage to invest in Ontario for your sector right now.

Mr Huebel: I think the point I made earlier is that there are a lot of different points that have been listed on the score card. They're not equally weighted. If we look at it, that's why we've addressed particularly construction labour costs. I guess the fair assumption is that if construction labour costs were competitive, there would be significantly more investment in this province.

Mr Hastings: So you weigh in on the construction labour costs as your fundamental first criterion for any future investment.

Mr Huebel: I think what I said before was, there are two extremely important things. One is the feedstock cost availability and the second is labour cost which is part of your total plant package. The actual mechanical stuff in the plant is competitive but the construction labour costs are not. If those two fundamentals are not right, the rest doesn't matter. That's really what it comes down to.

Mr Podruzny: There are certain advantages to locating in an Ontario-type area. You're close to markets, the transportation costs to the major markets, such as the auto industry, the parts industry and so on are a significant advantage over the US gulf coast. We can get product to the customer at half the transportation cost. So there are some advantages to being here. There are some disadvantages. On the overall balance, there are some upfront, very visible comparatives that make it very difficult for our members to go out and compete with their parent company for location in Ontario versus alternatives.

Mr Hastings: To what extent then is government primarily a refashioner of policy on those two items of feedstock and labour costs before you'd start looking at this jurisdiction as a favourable investment climate?

Mr Hyde: Certainly government can play a very key role in helping to solve the labour cost issue. The reversing of pipeline 9, which has also happened or will become effective, is also going to be very important for us on feedstocks as well, but we have to be aware that we'll always be challenged in Ontario from a feedstock point of view because we're not sitting right on top where the feedstock is coming from. The labour cost issue -- the government can play a key role in helping us solve that problem.

The Chair: Thank you, gentlemen, for your presentation and for your time this morning.

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CANADIAN FEDERATION OF INDEPENDENT BUSINESS

The Chair: The final presentation this morning is from the Canadian Federation of Independent Business, Ms Andrew. Thank you very much for attending.

Ms Judith Andrew: I'm Judith Andrew, executive director of provincial policy with the Canadian Federation of Independent Business, and I'm joined by Brien Gray, who is the CFIB senior vice-president.

I believe you have our kit before you. I just want to quickly draw your attention to the various documents in that kit. The brief we will be presenting today is entitled Performance Enhancing Measures for Smaller Firms. You also have a copy of Catherine Swift's presentation to this committee which was made a week ago, and this is in document form. It wasn't circulated at that time.

On the left-hand side of your package, there are some pieces including our Ontario Small Business Primer, which is a good document, rounding up a lot of the research in the small business area, our 1998 Ontario Outlook, and a couple of research papers dealing with banks and small business credit, as well as bank service charges. There are also three charts which I will refer to as we go through the presentation.

We appreciate the opportunity to appear today on behalf of CFIB's 40,000 Ontario small and medium-sized enterprises. We won't spend a lot of time today talking about the economic overview, as that was done by Catherine Swift last week. I will of course remind the committee that our members achieved their forecasted 3% growth in 1997 and their forecast for this year is a very positive 3.8% employment growth with fully seven in 10 new jobs expected to be full-time.

We have over the years recognized that governments don't in themselves create jobs or cause economic expansions, but there are things governments can do to enhance job creation and small business, and those would include creating conditions that boost customer demand, lowering the total tax take, especially on profit-insensitive taxes, and reducing uncertainty. The Ontario government is to be commended for returning billions of dollars to Ontarians in the form of personal income tax reductions, which we certainly see as a positive move for both consumer and business psychology, not to mention their pocketbooks. Relief on the employers' health tax and downward pressure on other payroll taxes, including the Workplace Safety and Insurance Board premiums and employment insurance premiums, are also most welcome and will reduce the penalties to small business for creating and maintaining jobs in Ontario.

Property tax reform stands out as the one profit-insensitive tax where the outcome for small business is uncertain at best, and probably negative. The federation will be continuing to apply pressure both provincially and municipally until such time as the local tax burden on small firms, including the education portion, is reduced to fair levels which support community economic development. Also, in the context of the municipalities, we would note that we are very concerned about the province's carte blanche approach to the local quasi-taxes, as we call them -- the licences, the fees and the levies -- which will be permitted under the new draft Municipal Act. This is something we are putting a particular focus on.

As the Ontario government heads into the final stretch of its mandate, it's certainly important not to lose sight of the less attractive but nevertheless very important issue areas requiring further attention, such as regulation and paper burden reduction, small business financing, and problems of unfair competition. Relief for smaller firms in the area of corporate income tax as well as improvements to our sales tax regime, including to vendor compensation, are also needed. We would also caution policy-makers to resist the lure of getting back into administering grants to government-selected winners.

Given the prospect of a balanced budget in Ontario around the turn of the century, now is certainly the time to establish a credible plan for dealing with the debt so as to avoid the inevitable pressures when a surplus is imminent to turn on the spending tap and plunge the province back into hot water.

I'd like to make a few more comments in the area of property tax since that one is a very burning issue, not only here in Metro but right across the province. I know that we drew to the committee's attention in our presentation last year that Ontario has the dubious distinction of being the world champion of property taxation. Total property and wealth taxation in the Ontario economy represented 5.3% of GDP in 1993, which was the highest in Canada and well above the levels found in any other developed country. Considering that the business sector is the most ill treated by this profit-insensitive local tax system, CFIB was very concerned that the Ontario government's reforms did not begin to rectify the fact that commercial and industrial property owners across Ontario pay double, on average, the taxes that residents pay, and of course the issue is more acute in Metro Toronto; it's triple the taxes that residents are paying.

When we went into the reform debate, we strongly advocated measures that would ensure the following: a guarantee of no more taxes on the business property base; a specific target and timetable for narrowing the unfair business-residential gap; tough limits on the business education portion of property tax; tight constraints on municipalities using higher mill rates to tax businesses; promotion of local spending cuts by holding local politicians responsible to voters for their program spending; and, finally, several strict penalties applied to municipalities which violate the rules.

Unfortunately, the Ontario government's legislative reforms left most of the key property tax decisions in the hands of municipal governments. Given variable mill rates and no requirement to lessen the business-residential gap, we were concerned that municipalities' lack of accountability for excessive local spending could result in the small business sector being even further overtaxed than it already is. Of course municipalities were publicizing plans to reallocate the former business occupancy tax burden, and then there's a lot of uncertainty and confusion over outcomes from reassessment, the distribution of the business education portion, and various problems with lease terms and so forth. All of this left our members extremely uneasy about their own prospects.

The government's February 5 announcement dealing with the business education portion did not adopt the share-the-misery policy that was being advocated by some municipal politicians and local business groups. We certainly agree that the problem of excessively high business education taxes in some cities cannot be resolved by increasing taxes on businesses in other areas of the province. A uniform rate for business education tax would have meant tax increases in 562 municipalities, with over 95% of them sustaining increases of more than 20%. Commercial properties would have felt the brunt of these tax shifts of over $510 million, and this isn't because they hadn't previously been paying their fair share.

All businesses are overtaxed. The issue is to get the tax burden down for everyone.

The finance minister has stated that the Ontario government should work towards a uniform rate for business education, in line with the recommendation of the business education tax review. In connection with a uniform rate and to help mitigate against some of the huge tax shifts I just mentioned, CFIB argued strongly for a small business threshold below which businesses would pay the same property tax rate as residences. We continue to advocate a small business threshold to help offset the increases of up to 15% due to municipalities recouping from small firms a greater share of the $1.6 billion former business occupancy tax. This would be an especially important protection for overtaxed small businesses in Metro Toronto, Hamilton, Stoney Creek and others.

Ultimately the only check on local spending is the accountability to voters and residents inherent in those residential taxpayers paying their fair share for the services they are enjoying. This requires a narrowing of the unfair business-residential tax gap, likely through a combination of reduced spending and shifting the burden. The calculation of the tax gap must include the business education portion, which accounts for about half of business property tax, especially now that the province is directly responsible for setting approximately one third of the total tax. The suggestion of a dollar matching program under which the province would match municipal business property tax cuts with equivalent business education property tax cuts is supportable for encouraging gap reduction.

The Ontario government's recent announcement set what would appear to be reasonably stringent guidelines on the so-called range of fairness on the municipal portion, resulting in 90% of municipalities being constrained in their capacity to increase the burden on business. This is a positive announcement and it was also accompanied by an indication that the problems surrounding gross leases and BIA levies would be solved by legislation.

At this juncture, CFIB is recommending that the Ontario government implement a small business threshold solution to the problem of the former business occupancy tax burden being shifted from large business to small business in property tax and legislate a permanent cap on the business property tax contribution to education funding. At present we've been told that it will be capped at $3.5 billion, but that's by announcement, not by legislation or anything more formal.

We urge the Ontario government to monitor and make public data for each municipality covering the transitional tax ratio and its position within the allowable range of fairness so that there is scrutiny on what's happening, and that the Ontario government use its capacity to set the range of fairness annually to achieve a specific target and timetable for narrowing the unfair business-residential gap, including the education portion, and finally to apply strict penalties to municipalities which violate the rules.

I'd like to also take you to page 11 of our brief and the pie chart which is included as a loose document and also appended to the brief. This has to do with the whole area of debt and deficit reduction and the fiscal approach the provincial government is taking.

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At present there are of course many challenges from many quarters coming on the fiscal plan the Ontario government is currently carrying out, particularly having to do with the appropriate mix of spending, tax relief and attention to the deficit and debt.

Our Focus on Ontario Survey which we conducted mid-year 1997 went to our members and explained some of the background: that the spending stringency had substantially reduced the deficit, that Ontario was ahead of target on its elimination, that the debt had surpassed $100 billion and was expected to go to $118 billion, and that personal income tax rates were in the process of being reduced by some 30%. We received 3,700 responses from independent businesses across Ontario and you see the results in the pie chart before you.

We asked the question, "Which one of the following actions should the Ontario government take to deal with the deficit and accumulated debt?" Over half of the respondents, almost 54%, supported continuing the current plan on spending cuts, tax reduction and deficit reduction. Almost one fifth, or 18.6% actually, would have the government be more aggressive with respect to tougher spending cuts to reduce the deficit more quickly while lowering taxes as promised. Another fifth, 22%, would support the government focusing on privatizing and contracting out, applying the proceeds or the savings to debt and deficit reduction.

As noted above, the stimulated effect of tax cuts is actually supported by smaller firms. A minuscule, only 0.8%, which is actually reasonably large, would have the government raise taxes or fees to permit increased spending and/or faster deficit reduction. Less than 1% of our members believe taxes should be increased, or alternatively that the PIT relief should be cancelled.

There is also some follow-up detail which probably time won't allow me to refer to, dealing with the various portfolios and spending and what our members would have the government do in each of those areas. I commend that to you.

I'd just like to turn now to the recommendations which are summarized on page 13 of the brief.

CFIB urges the government to continue finding ways to reduce the total tax burden, first by reducing its claim on small firms' hard-earned revenue, and second by using its leverage to convince other levels of government to do likewise.

Our members are pleased with the employer health tax relief to date and they're looking forward to the exemption threshold being raised to $400,000 on January 1, 1999. That's also true for the self-employed EHT.

The Workplace Safety and Insurance Board payroll taxes must now also continue on the downward track, even as the board's $8-billion unfunded liability is being reduced.

CFIB also urges the government to review its retail sales tax compensation for small retailers who bear the greatest costs of helping to collect the $10.6-billion sales tax revenue the government is collecting.

On the issue of fees and levies, we support what previous presenters said. We recommend a very detailed review of those be carried out. Excessive increases in certain obvious fees should be rolled back; for example, probate fees. There are a number of principles that we set out here in terms of the application of fees: that they must replace taxes, not be an addition to them; that they must reflect the cost of the actual service being provided and be allocated in an evenhanded manner. These principles, we feel, should also apply beyond the provincial government, for example to municipalities or agencies. Of course, there's an opportunity in the Municipal Act to do that.

We've already covered the property tax and PIT recommendations. On personal income tax, there is some discussion on dealing with the tax collection agreement. If there are any changes in the offing, CFIB recommends that the Ontario government conduct a comprehensive consultation on any proposals for change in that area.

We have several recommendations in the area of corporate income tax to deal with issues for small business, and I'll commend those to you.

Finally, in the area of deficit-debt reduction and government spending, we continue to recommend that the government's pre-election commitment to balance the provincial budget by fiscal year 2000-01 be reinforced with stringent balanced-budget legislation. I saw media reports that that seems to be an accepted one. The Ontario government should follow the example of other jurisdictions and move quickly to set out a tough but attainable plan for paying off the debt, with targets, timetables and penalties for missing them. We believe this should be done now, before many ideas come forward about how the surplus ought to be spent.

Finally, we recommend that the Ontario government adopt a policy whereby public sector employer pension contributions are brought into line with the rest of the economy, by amending legislation to introduce contributory caps equal to private sector norms.

I will conclude at this point, and Brien and I would be pleased to attempt to answer your questions.

The Chair: Thank you very much. We have approximately three and a half minutes per caucus, commencing with the NDP.

Mr Pouliot: Welcome back. Your members must be anxious, and should remain anxious perhaps for the next five or six months. Because of recent legislation -- I am referring here to devolution. Some people will say "downloading," but it's a shifting of responsibilities from the province to the 800-plus municipalities in the province of Ontario.

With that, you have an exercise, assessment and reassessment of some 3.8 million units in the province. It's the largest endeavour of this nature ever undertaken, and the Ministry of Finance says to expect more than 600,000 appeals. This should take place around May, June and July.

Few, if any, of your members will get a tax break when we're talking about the education part of the levy. They're not impacted. They will pay the same amount of money for education. There will be some changes with the BOT, the business occupancy tax. Some, mainly large-square-footage operators, will pay less. It will create a vacuum.

The downloading is not revenue-neutral; it will cost the municipalities money -- another vacuum. The residential homeowner will have a bit of a break. They'll get 50% less. So the municipal councils will have a choice: to hit the homeowners, the residential sector, with a levy to make up the difference -- because the government is not making up the difference; it's going to cost them money -- and/or the business community, especially the small, the commercial assessment levy. What is your reaction? What message do you have for the government? There's still time. They have a majority, and they can use their majority muscle before the budget and with the budget to implement the right legislation for your members.

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Ms Andrew: What you say about small businesses being confused and uncertain and fearful is absolutely true. We are hearing from many of our businesses. They simply don't understand all the pieces of this puzzle, including, as you mentioned, the shift in responsibilities and funding between municipalities and the provincial government and the fact that it may end up with more municipal cost.

All of the pieces of the puzzle, including reallocation of the business occupancy tax; the education portion; the reassessment, and people are just receiving their reassessment notices now for their tax but have no idea what that means in final terms; there are issues around lease terms. The uncertainty in and of itself is very disrupting, and small firms know that they were to date and have been for some years ill treated by the property tax system. They wonder if there's a lot of sleight-of-hand going on here and if the sleight-of-hand is going to mean more picking of their pockets.

Our recommendation for the provincial government is right at the top of page 7 of the brief. We want the municipal portion to be seriously constrained, and as far as we can tell from looking at this, the ranges of fairness are somewhat tighter -- reasonably tight, reasonably stringent, so we hope that is the beginning of a plan to eventually have a timetable for narrowing that business-residential gap. The range of fairness is to include the business education portion, so that's important. Basically, the time has come now for municipalities to make some of the tough decisions, and that is to make the residents pay for the services they're enjoying.

Mr Arnott: Ms Andrew, thank you very much for your presentation today. It's filled with eminently commonsense solutions to what the government sees as continuing obstacles to job creation, so we really appreciate your advice.

You've suggested that we implement a small business threshold solution to the problem of the business occupancy tax changes. Like you, I've had complaints from small business people in Wellington county about this issue. How would you see that working? Are there practical problems to its implementation that might exist?

Ms Andrew: There probably are practical problems, but we would like to work them out because there is this issue of the vast gap between business property tax and residential property tax. For new businesses starting out, either in their garage or their basement, the notion of moving from that very small state to a main-street business premises is of course impacted by the tax. We would argue that below a threshold -- and we would need to see the data and work out precisely at what level that threshold ought to be -- the business properties should be taxed more like they're a residential property, and thus the decision to move from the basement and to grow your business and so forth would be a more neutral one.

At the very least, we believe, as we recommended three years ago going into this, that there should be no more taxes on a business property because they're already paying too much. A threshold would help address that issue.

Mr Arnott: At what level should the threshold be placed? Any ideas?

Ms Andrew: To the government's panel on education we recommended at the level of $400,000. We don't know if that's practical or not; we'd need to see the data. But if you look at some of the tax shifts that would have been involved in terms of just the education, Prince Edward county, for instance, would have seen for commercial properties a 224% increase in taxes and industrial properties up 54%. A threshold would begin to deal with that kind of issue. That also goes for Metro businesses, which are very overtaxed and are having a difficult time. This isn't a new problem for Metro businesses; some have been fleeing Metro, and it's unfortunate. But the answer here is not to share the misery, it's to --

Mr Arnott: Okay. Thank you very much.

Mr Phillips: I appreciate the presentation. Your members indicated that the number one issue for them is property tax and local business tax. Now at least who is responsible is clearer. I think we have to be very clear on this. The province now will set the rates for the majority of property taxes on businesses. It's no longer the school boards and municipalities; the province will now set roughly 60% of the local property taxes. They've actually announced what that rate will be for all the local businesses for the next three years.

Ms Andrew: Which is, "hold the line."

Mr Phillips: Yes. I'll talk about that in a minute. It's not freezing the amount of money they raise, it's freezing the rate, and as assessment goes up the money grows. They've never said they'll freeze the amount of money; they just said, "We'll set a rate and then as assessment grows we're going to have" -- because we're going to reassess every year.

Unfortunately, you can't debate with the government because they don't vote on this thing. They'll never present the tax for a vote. It's not like a municipal government, where at least the business could go and say, "I don't like that." It was announced two weeks ago what it's going to be and that's it. They've done that, and in our opinion it's totally undemocratic. They've set 60% of the tax on all the businesses in Ontario without even a debate. Nobody here ever debated it. Well, Mike Harris did, but it was all done behind closed doors.

There's a problem now, I think, which is that if you're a business in Orillia, you're going to be paying three times the rate a business down the street in Huntsville is paying, set by the province now. If you're a business in Brockville -- and Brockville has had some challenges; I think the Black and Decker plant announced it's going to close; the psychiatric hospital is closing -- you're going to be paying three times the rate of a business over in Parry Sound, identical businesses. That's on 60% of the taxes.

You've suggested that share-the-misery isn't the solution, but for the next three years this is going to be what it is. You've suggested a lower tax on smaller businesses, but that's probably not going to address these inequities. I gather what you're saying is that your members are prepared to live with those inequities so you don't get into the sharing-the-misery issue. Your recommendation to us, I gather, is to try and take a look at some of these things, but that's just the way it's going to have to be over the next three years.

Ms Andrew: No. Our recommendation is not to live with it, certainly in Metro.

Mr Phillips: I didn't mention Metro.

Ms Andrew: Well, wherever. We conducted a nationwide study and found these terrible inequities between business and residential property taxpayers. A big part of the solution is to begin to charge residents, who are the voters, certainly on the municipal portion, to begin to have them pay the freight for the services they're enjoying.

On the education piece -- and you're certainly right; this is putting the worst face on it -- is a new property tax by the province on businesses. This is the reason we are calling for a permanent cap on that contribution to education funding. Education funding is $5.4 billion from the province presently. We're putting a lot of money on education. We're spending the second-highest amount per capita on education in the world, certainly across the provinces and most OECD countries.

Right now we have a situation where we're allocating a lot of that education funding into the teachers' pension fund over an agreement dealing with an actuarial deficit that has now pretty well disappeared, but we are still committed to 22 years, apparently, of paying off an $8.4-billion deficit that is now not there any more. That costs us $460 million a year. It's kind of interesting that $460 million is pretty close to the half-a-billion dollars that it would take to deal with some of the tax shifts if the business education portion was allocated on a uniform basis and to have a threshold.

There are some huge issues here. Businesses in Metro are certainly way overtaxed. Businesses right across the province are overtaxed. The education portion very definitely has to be part of the range of fairness so that we can begin to narrow that business-residential gap.

The Chair: Thank you very much. Our time has elapsed. I thank you very much for your time and your presentation, Ms Andrew.

Mr Baird: I want to follow up on the comments and the issue raised by my colleague from Scarborough earlier with respect to Ontario Hydro. I want to propose a motion to deal with that request now and briefly explain why.

I move that the committee ask the Chair to write the president of Ontario Hydro and request further information and background material relating to yesterday's announcement of the board's decision to write down negative equity of $6.6 billion on its 1997 statement and; that the committee give the president of Ontario Hydro the opportunity to appear before the committee before the end of the public hearings on pre-budget consultations, ending tomorrow, Thursday, February 19, 1998.

Do you want me to make some brief introductory comments?

The Chair: You want me to write and invite the chairman of Hydro to come here some time before 4:30 tomorrow afternoon.

Mr Baird: That's when the hearings are ending, but more important, to get more information for the committee.

I want to just say three things on that. We had a select committee on this issue, which took two or three months and spent more than $400,000 investigating the issue. A committee permanently given the issue of looking into this important issue took three or four months. I know my colleague Mr Kwinter was the Vice-Chair of that committee. Towards this process, each committee had --

The Chair: Just let me interrupt for one moment. Is it the committee's wish to debate this issue at this point in time?

Mr Phillips: I don't have any trouble with the recommendation. I don't think we need to debate it.

The Chair: Are we in agreement?

Mr Baird: It's agreed.

The Chair: Very well. I have no difficulty writing the letter. It will be prepared and faxed today. You've heard the motion. Is everyone in favour? Unanimous. The letter will go out.

We'll recess till 1:30.

The committee recessed from 1203 to 1330.

CANADIAN ADVANCED TECHNOLOGY ASSOCIATION

The Chair: Our first presentation this afternoon is from the Canadian Advanced Technology Association, Ms George, the executive director. Thank you very much for coming. Welcome.

Mrs Shirley-Ann George: Thank you, Mr Chair. Good afternoon. On behalf of the 450 direct and 2,200 affiliate members of the Canadian Advanced Technology Association, CATA, we'd like to thank you for your willingness to listen to the interests of the high-tech community in Ontario. For those of you who are unfamiliar with our organization, our mission is to increase the efficiency and competitive position of our members; encourage innovation and leadership at home and abroad; and to foster a business environment conducive to strategic alliances, partnerships and exports -- the lifeblood of the high-tech community. Our members are heavy investors in R&D and generally derive over 70% of their revenues from exports. Some 55% of our members are in Ontario and include such well-known companies as CAE, Cognos, Cybermation, Gennum, IBM, JetForm, Newbridge, Nortel, OpenText and Systemhouse.

These companies base their world-mandate operations in Canada, while accessing global financing in order to win in the global marketplace. To survive in these conditions, each company must fine-tune every piece of their business. For most of our members, the global marketplace has been tough but successful. For some, as I'm sure you've read in the press, it's been absolutely brutal. Overall, Ontario's companies compete with transnational giants and domestic favourites and are winners on a regular basis. This has led to significant growth.

Stats Canada shows 1994 to 1995 employment growth for this sector to be an amazing 13%. Last year the CATA members' survey showed 175 companies expecting to increase their employment by 10,000 individuals over the next 12 months.

We have watched with interest as this government has attempted to make more changes in a short two-year time frame than many governments would attempt in two to three terms. It is heartening to see that your government understands that Ontario too must compete with countries such as the United States, Ireland, India and Taiwan, and that you too must fine-tune every part of the business of Ontario. Change was sorely needed. Now we watch to see if you will be able to put all the pieces back together again.

CATA's members have been, overall, pleased with many of your initiatives designed to make our businesses more competitive. The most impressive is your move to declare that Ontario is now open for business and your campaign to market Ontario internationally. This new government attitude has brought renewed confidence in maintaining and growing our operations in Ontario. We've also seen a move to the much-needed decrease in personal taxation, which is a real inhibitor to our growth, and also some education initiatives, such as the student opportunity scholarship fund, that will provide downstream competitive advantages for our members.

It should not be surprising that some of your initiatives leave us scratching our heads, and we wait with interest to get further details. One example is, how can you significantly increase the cost of tuition while reducing the amount of student loans? Somewhere or another there's a gap there.

Also, you should note that not all is rosy and that our members have some interesting challenges with your government officials at this time. There appears to be a natural follow-on from budget cutting to aggressive auditors, and that's not just found in the province of Ontario. Both the Worker's Compensation Board -- now the Workplace Safety and Insurance Board -- and your provincial sales tax auditors appear to be going out of their way to move our members, especially software companies, from exempt or low-paying categories to higher-paying categories. In WCB's case, these changes are retroactive up to four years. This is not an incidental aggravation. In one member's case, the bill is over half a million dollars.

We accept that you will need to make changes to your business environment from time to time, but retroactivity tells us that our business environment is unpredictable into the future and into the past. This translates into instability, which I do not believe is the intent of this government. You can support business and job growth in Ontario by stating in the upcoming budget that your government will ensure changes are not made on a retroactive basis unless the government can show malicious intent by the taxpayer. Your leadership in this matter is sorely needed.

Unfortunately, the largest challenge for our members is still the shortage of qualified people in the highly paid professional information technology positions. Using 1995 employment growth rates, we can expect as many as 56,000 new positions to be created for professionals with computing science, computing engineering and electrical engineering degrees in Ontario over the next five years. Unfortunately, again using 1995 graduation rates, we see only 14,000 additional Ontarians with these new skills. This leaves 42,000 direct job opportunities that will go unfilled -- 42,000 highly paid jobs. The result leads to innovations stymied, products not developed, market share uncaptured, revenues unrealized, downstream jobs not created, profits forfeited and, perhaps of equal interest for you, taxes not contributed. Finally, using the standard two to three multiplier, the total number of jobs in jeopardy is 120,000 to 160,000. This is a serious problem for our members and it's a serious problem for this province.

CATA is helping our members through such initiatives as international recruiting with headhunting missions, through our HR Web site designed to help companies and individuals find each other called Technoskill. We are also a partner with an organization called On-Site that helps the unemployed find employment positions in high-tech companies, and we do compensation surveys to help our members ensure that they are in a competitive position. Unfortunately, these efforts are not nearly enough and they don't fill our natural desire to fill these jobs, whenever possible, with residents of Ontario.

On the competitive front, United States universities do not have the funding challenges that Ontario universities have. In fact, even public institutions have a grant rate of over twice that of Ontario. Some of their regions are getting very serious about addressing this problem. The state of Virginia has stated that they are looking to triple not only their university enrolment but also their two-year college programs.

There are many ways for the government to address these problems. Unfortunately, it does not appear that there is enough room in the upcoming budget for the additional approximately $500 million that would be needed to fund Ontario universities at the average Canadian grant rate. And this government surely doesn't need to open another Pandora's box by trying to restructure higher education at this time.

Nortel has a proposal in to the government asking to increase the weighting of university IT students from two to four basic income units. This proposal has a lot of appeal, largely because of its simplicity, but it comes at a greater than $70-million pricetag and would increase as enrolments went up. This is perhaps the best option if you have sufficient funds; $70 million, with your aggressive goals to not have a deficit, seems like a bit of a stretch as well.

CATA's proposal is more modest and has the government and industry working together to cover the costs of the incremental students added to these programs. The cold, hard reality is that if we don't find a solution, these 42,000 and many additional jobs will move to other jurisdictions as the high-tech community loses faith in the ability of Ontario to sustain our growth at home.

It is for this reason that we come to you today with a proposal called Double the Pipeline. The intention is to provide the additional university seats and resulting jobs for 2,300 of Ontario's youth per year by doubling the enrolment in computing science, computing engineering and electrical engineering post-secondary educational and professional institutions.

There are qualified students being turned away today. In 1996 over 7,000 more students applied for these programs than could get into the estimated 2,700 seats. We could have a pilot under way as early as September of this year if the approval was granted quickly. This proposal leverages a $7.5-million government investment in 1998 and $56 million over four years with a greater than $230-million investment by industry. Even with this proposal, it will be four long years before we have a significant increase in the talent pool. For many of our members, that's four or five product life cycles. The problem only gets bigger the longer we wait, and software development in places like India only becomes much, much more attractive. We are willing to start immediately and work with you and the post-secondary education institutions to ensure Ontario's place in the 21st century. We respectfully submit that the time to act is now.

Thank you for your time. I'll be happy to answer any of your questions.

The Chair: Thank you very much. We have approximately six minutes per caucus, and we'll start with the government caucus.

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Mr Wettlaufer: Thank you very much for your presentation. I'm very concerned about the high-tech availability for jobs that are going wanting. I've been doing a lot of reading on that just recently. I noticed with interest on the weekend Nortel's announcement. I have been using the figure of 30,000 jobs that I read somewhere recently, and now you come forward with a new number of 56,000. It is scary indeed that we do not have the people to fill those jobs. Is there any way that we could put this on fast-forward that you know of, ie, people who have graduated from university and are in low-paying, low-skilled jobs who could be retrained quickly?

Mrs George: There's a very natural desire to take the unemployment and underemployment problem and the employment problem and try and fit them together. There is a lot of work already happening in that, but it is only able to fill a certain part of the pipeline. You can take somebody with a BA in arts who can't get a job and teach them to be a Web master in six to nine months; there's nothing you can do to fast-track the high-level positions that a Nortel or Newbridge needs for product developers. You truly do need the education system to work its way through to get the professional skills that are needed. There are lots of programs that are turning arts degrees into LAN managers, and it's very much worth doing, but it doesn't address the high end of the problem.

Mr Wettlaufer: What about the math or science graduate whose areas of specialization are perhaps more closely aligned with the high-tech industry?

Mrs George: There is an initiative under way that you should be aware of that is geared very closely to what you're suggesting. It's called O-Vitesse. It's something that NRC and Mitel have worked on. You take somebody like a civil engineer or a mechanical engineer who's having difficulty getting a job, you give them 12 months' worth of training and you can move them into some level of software development. It's a very good program, highly recognized. Unfortunately, all it needs is a little bit of seed funding at the administration level so that it could be taken across Canada or at least across Ontario. It's by far the best initiative of the kind of fast-tracking you're talking about that I've seen anywhere in Canada.

Mr Wettlaufer: What kind of seed funding?

Mrs George: You just need somebody who will literally make it happen. My guess is that you could do it for possibly as little as $100,000. This one is just a natural fit. It doesn't require millions of dollars. Again it doesn't address the high end of the problem, but you could cycle several hundred people through that kind of initiative over a period of a couple of years.

Mr Baird: You mentioned the report from Nortel. I just got a copy this afternoon. It certainly is worth a read and worth some reflection. The fact that these jobs are going unfilled is not just a tragedy for those folks who don't have those jobs, but the spinoffs in these areas are two to one, three to one, even four to one in some cases, by one federal government estimate, and they do open up other opportunities for others in the economy with perhaps not that specific level of skills. That's got to be a priority for us all.

I want to approach it from another perspective on the training side, since my colleague already raised that issue. It's with respect to the business environment in Ontario. One of the things I'm trying to get a handle on is the tax competitiveness. For every engineer we import from the United States we lose eight, we learned yesterday from ITAC; and one of the biggest factors, they said, was the dollar, but another big factor is the tax competitiveness. How big a disincentive do you think our high taxes are, and do you think the personal income tax reduction has had some effect on retaining those skilled employees here in Ontario?

Mrs George: It definitely has had some effect. Unfortunately, the gap is very, very big. To give you an example, compare a senior software engineer in Ottawa versus a senior software engineer in Austin, Texas, where they have no state tax. Interestingly enough, they'll make approximately the same amount of money, within $5,000, but there will be an $11,000 difference in their take-home pay. That's an approximately $20,000 raise in a day, just by moving to Austin, Texas. That's a huge gap, and not one that we can expect the government to be able to fill quickly. I encourage you to move in that direction as much as possible.

These individuals are extremely mobile. If you've got an engineering degree, you can literally move into the United States with 20 minutes of processing at the border. That's all it takes, and there are tons and tons of jobs down there. American companies are becoming extremely aggressive about recruiting in Canada. They have discovered Canada only over the last 18 months and it is the land of plenty. Just a standard wage in the United States is enough to attract many Canadians down.

Mr Baird: Not that we'd ever get or want our taxes to fall to that level in the short term, and obviously we have health care and other programs which they don't have there, but that still doesn't account for the $20,000.

The Chair: I have to interrupt there and move on. Coming from Ottawa, as Mr Baird and you do, you understand that it's the same rate of percentage increase that a welfare person makes when they move from Quebec to Ontario, come across the border.

Mr Kwinter: I'm really struck by the information about what is happening with this sector in our economy. We've had various groups appear before us. Just before we broke for lunch, we had the chemical industry complaining about the end of the pipeline for their feedstocks, high labour costs, labour legislation. Your industry really is knowledge based, so the individual is the key.

Mrs George: That's right. Our capital assets mainly walk out the door every night.

Mr Kwinter: That is exactly the point I am trying to get to. Just so there's no confusion, we're not concerned about people who build the computing equipment, it's the people who do the software, and that is really the key to what you're talking about as to our competitiveness.

Mrs George: It's not the manufacturing; it's those who build the intellectual property for the company.

Mr Kwinter: As you say, every day they walk out and all your capital goes out with them. It's totally mobile, it can go wherever it wants to go and it's not a big deal.

Mrs George: To give you a sense of perspective, the very, very best software engineers in India cost $18,000 a year. It's a very big competitive threat. It's very easy to move significant portions of your software development offshore.

Mr Kwinter: It looks like it's almost hopeless. Your figures say we're going to graduate 14,000 and the need is 56,000, and even if you double it to get to 28,000 it's still only half of what you're looking for, and this gets compounded. I know you're saying you've doubled the pipeline. That's going to be better than what it is now, but is it going to address the problem?

Mrs George: We know it's not going to be enough, but we're looking for some interim measure that the government of Ontario can help us with to keep our confidence in the province. Two years down the road, hopefully there might be enough money in the system that we can attempt to double again. What we need to do is start making some significant gains. There are some universities that are trying to address the problem, but with their funding constraints they can only increase their enrolment by 15% or 20%. That seems like a very large number, but it's nothing in comparison to the need. It's what we can do to work together to build confidence in the system to have a big win where everybody is a winner, and then we can try and move to the next step after that. That's what our proposal is about.

Mr Kwinter: The key professions you're looking at are computer science, computer engineering and electrical engineering. In order to attract students into those streams, surely you have to start at a very early age to get them on track so they are in fact looking to those kinds of areas.

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Mrs George: That is something that needs to be done as well, but when we did go to the Ontario application centre we were very encouraged and at the same time discouraged to see that there are literally thousands more students applying for the current number of positions than are available. So it would be quite easy to make a very significant increase in the enrolment of these programs without having to go into the high schools to try and widen that pipeline as well. That's a natural next step, but we can get started today without doing that.

Mr Kwinter: Are all of the programs available in Ontario universities filled?

Mrs George: Every one of them is filled; every one of them is turning away people. You need a 96% average to get into computer science at Waterloo; you need a 93% average to get into electrical engineering at U of T. I'd suggest that probably not too many people in this room, if that was the requirement when we went to school, would have made it.

Mr Baird: No comment.

Mrs George: It's just staggering. The cutoff rates are just unbelievable.

Mr Kwinter: It begs the question, then, why aren't they expanding the programs? I guess it's because of fiscal constraints.

Mrs George: That's right. Universities will lose money for every additional computing science student they take. Not a very good business proposition.

Mr Kwinter: That also addresses another problem. The universities, of course, have had some fiscal problems. They are under incredible pressure, so they are looking at delivering programs that are going to give them the highest profitability so they can function. As you say, if there is a program that actually costs them money, there's a disincentive for them to encourage students to go into that.

Mrs George: That's what our initiative tries to do, to ensure that it doesn't cost them money, that they can actually afford to increase the programs. It's very specifically targeted. We understand the reluctance of the government to just pour more money into the top of the funnel and see how it sorts its way out. This way you can get your money right to the heart of the problem.

Mr Kwinter: What is your opinion of the prospects? Do you see any light at the end of the tunnel on this? Do you see any indication that they're somewhat prepared to address this problem?

Mrs George: We'll see come budget time, but we are very hopeful that the government understands this truly is a problem that needs to be addressed, and one that cannot be put aside for another two years.

The Chair: We'll move to the New Democratic caucus.

Mr Pouliot: So the future is today. What an irony. We seem to have some difficulties breaching the 8.6% to 9% range downward, which means positive, in terms of Ontario unemployment. It's a perennial with us; it drags, almost regardless of our economic situation. Yet with your presentation you're telling us that jobs are going begging.

Mrs George: They're not only going begging, they're also leaving every day.

Mr Pouliot: They're also leaving. There is, if not an exodus, certainly an imbalance. People with the qualifications are going elsewhere.

In answering Mr Kwinter's question, you mentioned that it's not so much the people who build the computers, but it's the people who go beyond. You're looking for niche markets, if you wish, or you wish to at least maintain your position.

You've traced a program for the government. You say: "At least double or even go beyond, if you're to respond to the marketplace, and put more seats at Waterloo, among others, so people have access, so the curve will not be adjusted upward by virtue of so few seats." We know the way the exercise runs.

What about the shared responsibility of the private sector? You have as much to gain by way of maintaining, by way of increasing your niche markets and beyond. Aside from the recycling, what is it that you would like to enter into in a partnership with any government vis-à-vis education?

Mrs George: Our members are very heavy investors in the education process today, and what we're looking to do is expand that. This proposal has $230 million of industry contribution to a $56-million government contribution, so it's going to cost us more than it's going to cost you. Every one of our members that I can think of has some arrangement, some partnership with Ontario universities today. So we accept that we do have a joint responsibility.

Mr Pouliot: I for one as a hobby just follow the fate of the -- I better find you under NASDAQ or other equity markets. I looked at the fate of Newbridge, and it was pretty difficult with NASDAQ, because past performances don't always grow back, but you have as your price-earning ratio -- and you pay so little in dividends, but that's for another time.

What we have is a government that insists on meeting the needs of the marketplace, but the reality paints an entirely different picture. What you've read in the media, in the papers, is true. They're cutting money; they're taking money out of education. So good, logical people like yourself are saying to the government on the eve of the tabling of a budget: "You need to be better focused. You need to fill the need of the marketplace through education. This is our salvation, all of us. We only get better; there's no downside." I share with you, and I hope they will listen, that you need an infusion of money for the fine point, for high-tech, to meet the needs of the marketplace. Not very complex, is it? You're not asking them to redefine the atom; this is not Greek mythology; this is not nuclear physics in five languages. It's common sense. I understand what you said very much.

Mrs George: We are very fortunate in that to solve this problem we don't need to find a cure for AIDS. We already know how to educate literally world-class, if not the best in the world, computer programmers in this province. We excel at it; we excel at the growth in the marketplace with our telecom equipment and software companies. All we have to do is get our act together and do more of what we already know.

The Chair: Thank you for your time and your presentation. We appreciate it.

CITIZENS FOR PUBLIC JUSTICE

The Chair: The next presentation is the Citizens for Public Justice. Gentlemen, welcome and thank you for your attendance.

Mr Gerald Vandezande: Thank you for the opportunity to appear here. With me is Rick Tobias, the executive director of the Yonge Street Mission, who also appeared with me last year. He will introduce us to some of the realities in terms of the needs of youth and other families living on the streets of Toronto, and then I will follow up with some policy recommendations.

Mr Rick Tobias: Good afternoon. As mentioned, my name is Rick Tobias. For the past 15 years I have worked with the Yonge Street Mission in the core of the city of Toronto. I am currently the mission's executive director.

I want to begin this afternoon by simply expressing my sincere thanks to the committee for providing the opportunity for us to make this presentation to you. Needless to say, I wouldn't be here today if I didn't have some deep concerns about the impact of budgeting decisions on the community we serve. Just for your knowledge, the Yonge Street Mission serves the southeast side of the city of Toronto, arguably the piece of Canada that has the highest population density in the nation. The highest concentration of low-income people in the nation live a walk away from our centres.

For a hundred years, the Yonge Street Mission has had one mandate, and that's to serve the poor and the needy in the core of the city of Toronto. We currently invest several million dollars a year worth of goods and services into the community. The vast majority of the support that we provide is without government assistance.

My reason for appearing before you today is to discuss the recent trends in terms of funding and services and their impact on the poor in our community, their impact on other agencies we work with and on our supporters.

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The impact in terms of cuts in spending for programs serving the poor and continued reduction of welfare benefits continues to take a high toll in our community. People's living conditions continue to deteriorate, and the families we serve continue to be forced into unreasonable choices: Do I feed the children or buy medicine? Do I pay the rent or do I purchase needed clothing? Our sick and infirm are getting less health care and now find themselves panning, doing drugs and prostitution. All those things are increasing in our community, as opposed to decreasing in our community.

I'm especially concerned about the impact of these sorts of choices in living conditions on our children. I don't have to tell you that in spite of a national commitment to reduce child poverty by the year 2000, we have seen a dramatic increase in poverty rates among children. Not so obvious is the increase in the depth of poverty that those children face. If we do not commit ourselves to intervene in the lives of those families and their children, we will pay the financial costs of those decisions for decades to come, not unlike a failure to make the sort of decisions that the last presenter alluded to.

I've recently begun to talk to a number of middle-class people and had them experiment with living off of the province's current welfare budget. I have, to date, been unable to find a single person who could figure out how to make the income that they would have on welfare stretch over a month. In fact, in the past month I met with a group of seminary students and asked them to try to figure out how they would live off a month's welfare income. By the end of it, these seminary students decided they would have to steal, prostitute themselves or cheat the system in order to get from the beginning of the month to the end of the month on that amount of money. Christopher Sarlo, who publishes the most conservative poverty-line or low-income cutoff in Canada, has currently set his low-income cutoffs at higher levels than the current welfare allowances in Toronto.

An indication of the impact of the cuts on our community is an increased demand on mission services. From the moment the cuts to family benefits took effect until today, we have had to deal with a 40% increase in demand on services for our food bank, while absorbing a significant reduction in the amount of food available to the mission through Daily Bread. Weekly allotments from Daily Bread now range at 50% to 70% of what they were two years ago. That means also that the quality of food that we now provide has literally moved to a deplorable state.

The number of street-involved youth making use of our drop-in centre on Yonge Street has increased by almost 50%. It used to be that the vast majority of the youth we served were products of highly dysfunctional or abusive families. Those youth are increasingly being joined by youth whose families' financial situation forced them out of the home. After decades of not providing any substantive amount of food for homeless youth, we now find ourselves compelled to feed 120 to 150 homeless youth in the city of Toronto each day.

As hopelessness increases, so do anger and violence. The Yonge Street Mission's staff are now required to deliver far more service in a far more volatile environment. We do not have a corresponding increase in financial or human resources to meet that need.

Last year I told you that I feared this situation would take its toll on our caregivers. This year I can tell you it has. Staff turnover has increased and, by extension, continuity of care has decreased. This creates, for me, a very alarming downward spiral. Our single most important tool as we work to move people away from dependency to self-sufficiency is the quality of staff relationships with our clients. As those staff relationships deteriorate, the effectiveness of everything else we do rapidly deteriorates and we become far more maintenance-oriented than solution-oriented.

Our historic support community is experiencing donor fatigue and confusion about current realities. They hear from us that poverty is increasing and that our people are hurting more than ever, and they hear from government sources that things are dramatically improving. Business, quite honestly, is investing more in us than ever before, but their interest is primarily in new development and new projects. As a result, many of the private charities and missions in the city are now eating up their reserve funds and going into debt at alarming rates. As a mission, we have been able to hold our own so far, but we have not been able to garner sufficient resources to keep pace with the incredible increase in demand that has been put on our services.

I am convinced that it's time for us to loosen the restraints that we have imposed on the poor, to give back to them some of what we have taken away from them. Otherwise, we face the reality of the potential collapse of a lot of support services. We face the reality of growing hunger. We face the reality of children growing up in this city who, quite bluntly, will be societally dependent until the day they die because we have not taken care of them in their youth.

I want to thank you for the opportunity to share with you, and I would be glad to answer questions after.

Mr Vandezande: Tying in with the remarks Mr Tobias has just made, which is really an update of the report that he submitted to the committee last year, I want to connect with the policy aspect.

While listening to Finance Minister Ernie Eves in this room when he appeared before this committee on February 10, it really struck me that Mr Eves made no mention of the plight of the jobless, the homeless and the poor. The minister spoke repeatedly about deficit and debt reduction, but he did not say a single word about the urgent need for poverty reduction. Mr Eves boasted about the series of income tax reductions, which mostly benefit high-income people.

I should inject here that the government has had to borrow every dollar of the income tax cuts, thus forcing the government to go deeper and deeper into debt each year, for a cumulative total of the income tax cuts of $20.9 billion by the year 2000. That's the amount of money this government has had to borrow in order to finance the tax cuts, which mostly benefit the wealthy.

I want to make that point because Mr Eves boasted about the series of income tax reductions, which mostly benefit high-income people, but he didn't say a word about the pressing problem of homelessness and many people's growing dependence on food banks, as we heard this morning and this afternoon. One could get the impression that there is no hunger, no homelessness, no joblessness, and no poverty in Ontario, but we all know there are huge problems. There are emergencies that must be tackled immediately by our government, in close cooperation with businesses, trade unions, faith communities, community agencies and social organizations.

The finance minister concluded his testimony to this committee by saying, "In particular, I look forward to advice from the committee which will contribute to making Ontario the best place in North America in which to live, work and raise a family."

This objective requires both the eventual elimination of the deficit and the debt and the elimination of joblessness and poverty. These major problems must be tackled together in an integrated way. I draw your attention to the excellent statement made in both the Globe and the Star in full-page ads by David Crombie when he argued for the need for integrated policies. The government's budget premises and policy priorities must be established in the context of our collective obligation to meet the essential needs of vulnerable neighbours. This objective includes, as the minister told the committee, that "the government must balance prudent economic and fiscal management with the need to preserve and enhance priority services if the burden of debt is to be reduced."

However, the process by which the Ontario government is reducing the deficit has caused serious and lasting damage to our province and its people. The government's one-sided emphasis on the fiscal deficit has caused new, dangerous deficits that directly affect our community wellbeing; namely, our economic, educational, environmental, and social wellbeing, including health. The government has failed to act in a humane, integrated way on the basis of the bottom-line principles of human dignity, mutual responsibility, economic equity, social justice, environmental integrity, and fiscal fairness, as outlined in appendix A of our submission.

The commendable goal of deficit reduction has been used to justify arbitrary methods and bad policies. One of the worst of these was the unilateral reductions in Ontario's social assistance rates and community services. Then there was the abolition, with Ontario's consent, of the Canada assistance plan, with its historic commitment to people in need and national standards, and its replacement with a much weaker Canada health and social transfer and drastically reduced transfer payments. These cruel actions by Ontario and Ottawa have undermined the established government practice of promoting public justice for all and protecting the common good of all.

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CPJ shares the conviction that Canadians look to their government to be more than a keeper of good books. Canadians want their government to safeguard a caring society. This task clearly includes ensuring that needy Ontarians, especially children and families in poverty, receive adequate assistance. The discussion we must have is a debate about principles and values, about core commitments and policy priorities that are based on human dignity and equal justice for all people. It is about affirming life, building community and practising solidarity.

We have repeatedly advocated that our federal and provincial governments, as well as our non-government organizations, including the big profiteering banks, must jointly apply the stewardship ethic consistently. This ethic requires that we do not balance our fiscal books today by ignoring problems whose financial costs must be paid in the future. Just as we may not allow a fiscal deficit to be passed on to future generations, we may also not allow economic, educational, environmental, health or social deficits to be passed on to our children and grandchildren.

Chronic unemployment, rising tuition fees, spreading pollution, inadequate health care, increasing poverty among Ontario's children and their parents, the worsening plight of our first nations, as well as the horrifying hunger abroad, are grim reminders that economic inequities and social injustices are the costly consequences of the widespread neglect of humane core values, and this government has some catching up to do as well. These gross distortions in our economic, environmental and social relations demand immediate action. Therefore, we recommend that the Ontario government, in keeping with the request of the finance minister, adopt the elimination of poverty as its provincial policy priority, so that we begin to build on the commitment that must be made so that families in Ontario will be able to build a meaningful future for themselves.

We recommend the following steps, the first one perhaps being the most controversial but the easiest to implement:

(1) Redirect the promised cuts in the Ontario income tax rates to help finance the restoration of social assistance rates, community support services and other social programs that are essential to help eliminate poverty.

(2) Eliminate immediately the income tax now payable by all whose income is below the poverty line and press Ottawa to do likewise.

(3) Press Ottawa to increase substantially the national child benefit so that all of Canada's children and families living in poverty will benefit equally, and of course when the government does that, and there is every indication it will, that Ontario not then use the increased national child benefit to give more tax cuts to high-income people.

(4) Press Ottawa to increase substantially the refundable GST credit payable to all whose income is below the poverty line.

(5) Press Ottawa also to increase substantially the cash floor of the Canada health and social transfer and insist that the CHST include shared substantial standards and effective enforcement mechanisms that apply to all health, income assistance and social services programs.

I discussed these matters with Dianne Cunningham the other day and urged that during the current secret negotiations behind closed doors regarding Canada's future social union, the doors be swung wide open, so that the people of Canada may know what's actually taking place and that Ontario take the lead in establishing appropriate standards.

Furthermore, we recommend that the Ontario government establish an arm's-length, broad-based advisory council representing the full range of views on Ontario's budget premises and policy priorities. Its purpose would be to forge an effective, multisectoral consensus on what the government's core guidelines and budget proposals should be and how they should shape our community building together.

The elimination of poverty must transcend partisan politics. The common good and concern for the wellbeing of tens of thousands of Ontario families -- the families about which Mr Eves expressed concern last week -- in dire need require that politicians of all parties work together to tackle the pressing problem of poverty.

We urge you personally and the committee as a whole to challenge your colleagues from all parties of the Legislature to make the elimination of poverty a new provincial policy priority. Please help to give principled, visionary leadership in seeking a substantial budget commitment which will make a decisive difference for the thousands of children, families and individuals now forced to live in poverty. Most Ontarians will be deeply grateful.

The Chair: We have approximately four minutes per caucus for questions, and we will commence with the Liberal caucus.

Mr Tony Ruprecht (Parkdale): I have so many questions for Mr Vandezande, but I'll just get to one of them to Mr Tobias, who was speaking about the potential collapse of our support services.

Some people, Mr Tobias, will accuse you of being alarmist and of being a scaremonger, but I'll tell you, you haven't gone far enough. I hope you will comment on this. I represent the area, as you know, which is the southern part of Parkdale. There are over 2,700 people who are ex-psychiatric patients and others crammed in an area that is roughly two kilometres by one kilometre wide and long. The support services we are experiencing in that neighbourhood are there, but they're certainly not efficient and they're certainly not sufficient. Those two items go hand in hand.

I'm just wondering. If they are now going to close another -- the minister of course is talking about this -- the exact number of beds in the psychiatric institutions is not yet out, but I think she is talking about a hefty number of psychiatric beds being closed. I can just see that the movement from these psychiatric institutions into the community is going to be done again, for the second time, massively, without sufficient support services. I'd like you to comment, if possible, on how you see that load coming off the psychiatric institutions into the community and not having sufficient support services there. What do you predict is going to happen?

Mr Tobias: I don't want to pretend to be a prophet, but if you stand out in our community and watch the increased numbers of people who are homeless, the increased numbers of people who are making their way to services, it won't take any kind of rocket scientist to understand that those services can't long sustain.

The other thing that's very evident is that as I go through the city, I'm now seeing people spill over into non-traditional communities. When I go up into north Toronto, I'm now encountering people I didn't encounter before. They're going up there because they are in hope there might yet be some untapped service up there, because they're failing to access services downtown because services downtown are all extended to virtually the breaking point.

I have tried to be very careful in my presentation not to talk about other agencies, lest anybody accuse me of misrepresenting anything. What I can tell you is that as an organization downtown, virtually every service we now deliver is extended to the breaking point.

Mr Ruprecht: But there are some areas that are worse off than others. Would you agree with that?

Mr Tobias: Yes, and Parkdale, south Riverdale, Cabbagetown and Regent Park certainly are major areas of concern in the city of Toronto.

Mr Vandezande: It's precisely because of the concern that you express, Mr Ruprecht, that we make recommendation 1, that the tax cuts, which during the next year or year and a half would go mostly to high-income people, be redirected to restore the community support services that have been on the verge of collapse, and that the government face up to the reality of the current social misery in the various situations we just talked about and allocate the money that previously was going to go to wealthy individuals towards those income support and community services.

Mr Tobias: In terms of the most marginalized people, those who are ill, those who are infirm, those who are often defined currently as borderline, ie, we still keep them on the rolls but we say theoretically they should work -- but if you know any of them individually, you go, "Who's going to hire them?" -- those people are getting phenomenal support from downtown agencies. Even things like the new workfare program will eliminate that. People who currently come into our centre now and get good support will disappear from us in six months. They will then go to another agency that has no stakehold in them and they will then go to another agency that has no stakehold in them. We have actually taken a phenomenal step backwards in terms of our capacity to care for the most needy people in our attempt to make sure that "a few abusers" don't slip through the system.

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Mr Tony Martin (Sault Ste Marie): I certainly agree, Mr Tobias, with your analysis there, that we're now into a situation where we're building policy around abusers as opposed to a comprehensive, fuller approach to actually solving some social problems that confront us that we all a vested interest in.

We had before us last week a person from the CD Howe Institute who suggested that we don't have any quality-of-life indicators in place to let us know just what the policies of this government are doing to people out there. Because we don't have those indicators, we really don't know and we can't quantify so that we can put before the government undeniable evidence that this is having the kind of effect you've described here today on the people you support.

One of my questions is, other than what you've described to us here, are there quality-of-life indicators out there that we could count on, depend on, and that might impress the government?

Mr Tobias: Let me jump from that, and instead of answering that, make a suggestion. How about a non-partisan government committee that asks some basic questions like: What are the basic quality-of-life issues Canadians should expect? What is the most basic amount of income required to live in a city like Toronto or Kitchener or Waterloo or whatever? We don't have that research, and where we do it's biased by partisan politics and it's biased by agency need. How about making a commitment to do research so that when we say somebody can live in Toronto on $6,000 or $7,000 a year, we might have something that actually says it's true, or if the number is really $14,000, we then might make a commitment. We need to do that research. No agency in the city has the capacity to do that research. Only government has the resources.

Mr Martin: Underpinning a lot of what this government is doing is the sense that people on welfare actually could be out there getting the jobs they suggest are there for them. You heard the woman before us say there are jobs going begging in the high-tech computer area. How many children of the families you run into every day would be able to hit the qualification of 94% and 97% to actually get into those programs and take advantage of those jobs?

Mr Tobias: Yonge Street Mission historically comes out of the old rescue mission tradition. That means we see people at the very end of the line. Let me tell you that most of the people we work with have a hard time qualifying for jobs as waitresses and waiters. In fact, we run a small coffee and muffin shop literally to teach street youth serving skills. I've watched hands shake over a pot of coffee out of fear of serving a customer. I've watched kids show up for work so foul-smelling that you send them into a shower. They didn't realize at any point in their existence that this was a prerequisite for employment. I don't think we realize how unskilled some of the people we're talking about are in terms of work environment. We're not talking about the same group we were just talking about before, in the last presentation. We're talking about a group of people who, if they're going to become employable, need phenomenal intervention to make that happen.

Mr Martin: Mr Vandezande, could you comment a little further for me on these secret meetings that are going on?

Mr Vandezande: The first ministers have been meeting with respect to the new conditions they think should pertain to what they call the social union. They are supposed to complete their negotiations, and they're all taking place behind closed doors, and conclude their agreement by July 1998, this year. We've written to all the first ministers, including the Premier of this province, and all the intergovernmental ministers and asked that the process be opened up, that public consultations be held, and since this directly affects the way in which we as Canadians live together within one country, that this become part of the overall discussion as to how we preserve a Canada that has Canada-wide standards, Canada-wide guarantees to people in need as Rick talked about, and that deals not be made without consulting major national organizations.

Mr Baird: Thank you very much for your presentation. I took note of your suggestions and they certainly merit consideration. Many of your recommendations, three of the six that you gave, were with respect to the federal government.

Mr Vandezande: No, they don't. They pertain directly to Ontario. The reason I say that, Mr Baird, is that --

Mr Baird: You say to press Ottawa.

Mr Vandezande: Yes. But that's precisely the point I made earlier in response to Mr Martin. When Ontario goes to the federal or first ministers bargaining table, it should think in terms of the national needs of this country. It owes it to Ontario citizens, Canadians, to press Ottawa to assume its federal, national responsibility and make sure that it implements, in cooperation with the provinces, the kinds of national policies that make sense in order to help eliminate poverty.

When in several of the recommendations we ask this government to press Ottawa to do the things that ought to be done, we assume that Ontario would want to take that position and that the finance committee could recommend both to the Treasurer, as he has asked, and to the Minister of Intergovernmental Affairs, Ms Cunningham, as she has asked, a mandate to negotiate the kind of social policies and fiscal policies that will make sure people in Ontario do not live in poverty and do not live in poverty anywhere else.

Mr Baird: We can't even get the federal Liberal government to stop cutting health care, let alone these things.

Mr Vandezande: My position is therefore, Mr Baird, that this government say: "We're going to take a stand. We don't like what Mr Martin is doing and we want to make sure that indeed at these national conferences of first ministers and health ministers and social services ministers we take a Canada-wide approach where we're going to have Canada-wide standards, Canada-wide commitments to the kind of core policies that will begin to eliminate poverty in this country, as promised unanimously by the Parliament a few years ago."

Mr Baird: My only suggestion would be that you may also want to take those to the federal government.

Mr Vandezande: I have appeared before the finance committee. I have met with Mr Martin privately and met with members of the Liberal caucus, and with members of the opposition parties.

Mr Baird: Good for you. Maybe you could ask them to give us back the $2.5 billion in health care they took.

Mr Vandezande: We have pressed for that, but that does not in any way relieve you of your responsibility as a committee to insist that there be appropriate standards in place, and that you respond positively to Mr Eves's request as to which family policies could best be put in place, and no longer condone the destruction of the family that now goes on because of the fiscal deficit reductions you've put in place at the expense of poor people.

Mr Baird: It's a comment more than a question. I guess there are two paths. We learned something incredible from CUPE this morning: that under the previous NDP government child poverty almost doubled in five years, up until 1995 when we took office, that spending more money, borrowing more money, taxing more money, regulating more, led to fewer jobs, less hope, less opportunity.

Mr Vandezande: Precisely.

Mr Baird: I want to comment as well in response to your question. I just looked through Mr Eves's presentation. He spoke extensively about job creation. He spoke extensively about the plight of young people who are searching for employment.

Mr Vandezande: But he did not speak about poverty; he did not speak about homelessness.

Mr Baird: He spoke extensively about the need to grow the economy --

Mr Vandezande: The point, in response to your first --

The Chair: Wait till he asks the question and then --

Mr Vandezande: But he asked it, Mr Chairman.

Mr Baird: No, I didn't. I said I was making a comment.

Mr Vandezande: He asked --

The Chair: Sir, please. Let him finish the question. We have a habit of taking all the time to ask the question and not leaving time for the response, I must admit, and I apologize for that.

Mr Vandezande: Yes, right.

The Chair: Mr Baird has the floor.

Mr Baird: The best social program at all is a job. If we can grow the economy -- 314,000 net new private sector jobs were created in Ontario in the last 30 months. We think that's a good policy and we think that if there's one --

Mr Vandezande: This is not a question, Mr Chairman.

Mr Baird: It's not a question, no.

If there's one single thing we can do if there's someone living in poverty, it's to get them a job, that the old policies followed by my friends opposite killed jobs, put more children in poverty --

The Chair: Sorry, we're out of time, Mr Baird, please.

Mr Tobias: Let me suggest --

The Chair: Excuse me, please, sir. Mr Tobias, Mr Vandezande, thank you very much. We're out of time.

Mr Vandezande: Mr Chairman, I'm going to stay here until I can give an answer to the long position that Mr Baird put forward. I'm going to stay seated.

The Chair: Sir, I'm sorry, your time is up.

Mr Vandezande: But he used up my time.

The Chair: No, sir. The time is for the caucus to ask a question or to make a comment. He did not ask a question; at least he didn't get around to asking it. I do thank you for your time and I thank you for your presentation.

Mr Vandezande: I just want to go on record as protesting the procedure that is being followed. Mr Baird, if he had a question, could have put it. Implicit in his statement was the question do I favour more --

The Chair: Sir, I thank you for your time.

Mr Martin: Mr Chair, on a point of order: I would like to support Mr Vandezande in his contention that in fact it was his time. A half-hour is not a whole lot to make a presentation before this body that's making such very important decisions on behalf of the people of Ontario. I've sat here for about four days now and I've been actually put --

Mr Baird: You have not been here for four days.

Mr Martin: Could I have my --

The Chair: No, I'm sorry. I don't see your point of order. We're moving on and staying on schedule. The only thing I will say with regard to the question is I did extend it to allow you an extra minute and it was not divided evenly because of that, Mr Martin. I hope you appreciate that. Thank you very much.

Mr Vandezande: Mr Chairman, would you allow me to come back later?

The Chair: Sir, tomorrow's the last day and I doubt very much there are slots.

Mr Vandezande: I'm here tomorrow. I will be available.

The Chair: If there's a slot the committee will decide it, by all means. Thank you, sir.

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ONTARIO TEACHERS' FEDERATION

The Chair: The next presentation is from the Ontario Teachers' Federation. Please come forward.

Interjections.

The Chair: Please, children. One fool at a time here. Come on, please. Thank you.

Welcome. Thank you very much for your attendance. Please proceed.

Ms Susan Langley: I would like to take the opportunity to say we're very pleased to make this presentation today. I would like to introduce each of us so that you know who we are. My name is Susan Langley. I am the secretary-treasurer of the Ontario Teachers' Federation. Ruth Baumann is a senior staff member with the Ontario Teachers' Federation, as is David Aylsworth. Both Ruth and David bring years of practical experience, knowledge and history related to education finance. I'm the rookie here but I do bring 30 years of teaching, including 14 years as a principal and a vice-principal so I have hands-on school experience dealing with education funding right at the grass-roots level.

As I said, we're very pleased to present to the standing committee on finance and economic affairs the views of the Ontario Teachers' Federation as part of the Legislature's pre-budget consultation process.

As I know you're aware, the Ontario Teachers' Federation is a statutory corporation. It was created by the Ontario government in 1944 to represent the teachers of Ontario's publicly funded schools. At the present time our membership includes 126,000 elementary and secondary school teachers in the English and French, public and Roman Catholic separate schools of the province. I'd like to point out that the federation has always had a keen interest in the provincial budget, an interest given an even sharper edge this year with the decision of the provincial government to take complete control of the financing of education.

Universal access to elementary and secondary education is regarded as a fundamental characteristic of developed societies. Educational success has a profound impact on the life prospects of the individual, affecting one's career, economic and personal opportunities. There's no doubt, in listening to the former presentation, that we see the effects of not having that opportunity.

It is the significance of quality education as a lever for opportunity that has led directly to a lengthy series of court challenges in the United States regarding the adequacy and equity of state systems for the financing of schools. Mary Fulton, policy analyst with the Education Commission for the States, wrote:

"Over the years, state policymakers have struggled with the question of how much should be spent per student for education, or, 'What does an adequate education cost?' A clear descriptive process does not exist for defining, measuring or funding an 'adequate' or 'core' education. However, recent education reforms and court decisions have intensified the need for a usable model or procedure for determining the cost of a core education. The emergence of high academic standards and a focus on student results are shifting the notion of adequacy from simply providing certain inputs (teacher-student ratio, library books, instruction minutes) to determining what resources are necessary for students to reach their academic potential."

These resources include both financial resources and programs such as special education and remediation. Since 1989, no fewer than 11 states have had their education finance systems ruled unconstitutional by state supreme courts because of fundamental issues of adequacy or equity. Clear solutions to the twin challenges of fairness and adequacy have remained elusive across North America, and certainly in Ontario.

Successive Ontario governments have wrestled with these questions. This government has shown an interest in taking on difficult decisions such as the financing of education, but it remains to be seen whether the result will match the minister's pledge and his five key principles:

"(1) We will fund what it takes to ensure quality.

"(2) We will shift resources to increase spending in the classroom.

"(3) We will maintain current class size with a goal to reducing it in the early years over the longer term.

"(4) We will recognize the unique needs of students by protecting our investment in special education, children at risk, and English as a second language.

"(5) We will meet the demand for new school construction."

The development of a funding model which addresses all of these principles requires at a minimum two key elements: a societal consensus regarding the definition of quality -- and I emphasize "societal" -- and sufficiently accurate data regarding the real costs of program delivery and operation. The Ontario Teachers' Federation asks the question, does Ontario yet have either?

In the Common Sense Revolution, the Progressive Conservatives pledged to guarantee classroom funding, while claiming that savings could be found in other areas of the education budget. Between 1995 and 1997, the provincial government reduced the general legislative grants for recognized operating expenditures by $950 million. Junior kindergarten programs have been cancelled and adult education programs cut as a result; one of the most successful programs, I might add.

Parents and teachers alike point to a tangible deterioration in conditions in the classroom: complaints from Thunder Bay to Wingham about cancellation of special education programs, reductions in resource personnel for special ed students, increases in the number of students with special needs integrated in regular classroom with minimal support, a serious lack of current textbooks, overcrowding, and even peeling paint. At the same time, enrolment has grown by 1.5% to 2% per year and inflation has increased by 1.5%. The net effect, then, is that it feels like there's an actual loss of 6% to 7% per year.

Studies of teachers conducted by the Ontario Public School Teachers' Federation indicate that individual elementary school fund-raising has more than doubled in the past 10 years and that public elementary teachers spend, on average, $315 of their own earnings on classroom supplies each year. When schools have to rely on fund-raising for basics, inequities between schools and neighbourhoods increase. Rumours continue to abound, after apparent confirmation from the Premier in October 1997 and reports from government caucus retreat, that the Harris government plans to reduce expenditures for elementary and secondary education by at least $660 million in 1998-99.

We ask, is education spending out of control? In Where Has the Money Gone?, an article by Karen Hawley Miles and Richard Rothstein of the Economic Policy Institute, the authors analyse spending increases in nine typical US school districts during the period 1961-91 and conclude that much of the increase in education expenditure was due to specific program decisions designed to improve the success and quality of education.

Their findings indicate that more than one third of net new expenditures went to support special education programs, including teachers, paraprofessionals and transportation; 8% of net new money was devoted to new attendance, dropout prevention and counselling services; and another 7% was devoted to bilingual and compensatory education programs. Improvements in regular classroom education during the period studied by Miles and Rothstein were attributable to reduced pupil-teacher ratios in elementary grades, the introduction of subject specialists and increased planning time in elementary grades, resource teachers working outside the regular classroom and salary increases due to greater experience and training.

The Ontario debate has focused on whether expenditures for elementary and secondary education have increased too much and, if they have, where the blame should rest. Premier Harris, Finance Minister Eves and education ministers Snobelen and Johnson have been quick to point out that education property taxes increased by 120% between 1985 and 1995. However, what is conveniently omitted from this analysis is that the provincially mandated education mill rate rose by 67.2% during this period and that provincial funds from income tax and consolidated revenue as a proportion of overall education expenditure declined by 8%. By 1996, the decline in the provincial share of overall expenditure since 1985 had reached 14%, leaving school boards to pick up the slack.

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During this same period, the provincial government completed the Roman Catholic secondary school system, introduced technology in classrooms, mandated junior kindergarten programs and smaller class sizes in grades 1 and 2, undertook major curriculum revisions in grades 1 to 9 and required school boards to complete the implementation of special ed programs. Every single one of these government initiatives required real resources at the school and classroom level and were considered important by the governments that introduced them. The increased expenditures, then, were the direct result of provincial government decisions. To challenge the increase in property taxes as irresponsible behaviour by school boards is both unfair and false.

In January 1997, then-Minister John Snobelen announced his education reform package, including the amalgamation of school boards and the overhaul of the education financing system. In May 1997, Minister Snobelen released the education finance discussion paper and announced the appointment of expert panels to provide advice to the government regarding the most effective ways of handling accountability, capital and accommodation, learning opportunities, and special education. At that time, the minister announced that the expert panels would report by the end of August 1997 and that the details of the new funding model would be announced in the fall of 1997.

We are still awaiting the details of the funding model, which must be operational for 1998-99. The reports of the expert panels have not yet been released. Without the details of the model, the ministry cannot determine what allocation each district board will receive for 1998-99, and the district school boards cannot set budgets, make program decisions or determine staffing requirements.

The Ontario education system is under tremendous pressure at the moment, pressure which is only increased by the process of finance reform. The new district school boards are struggling with reorganization and amalgamation, difficult tasks even in times when transitional funding can grease those changes. Schools are implementing mandated school councils, preparing for the implementation of secondary school reforms and implementing the new curriculum for grades 1 to 8. I don't need to say enough that change is stressful and requires a reasonably stable environment to succeed.

The provisions of Bill 160 require that the district school boards negotiate a two-year agreement with their employees to begin no later than September 1, 1998. The legislation further requires that each school board comply with its average class size provisions and its requirements for instructional time. Most existing collective agreements require that notice be given to teachers who may be declared surplus or redundant by March or April of the preceding school year. That's next month. School boards do not yet have any details of the funding model or how much money they will have for their 1998-99 budgets and they find themselves unable to make decisions.

We propose 10 key questions that need answers right now: How much money will each district school board have for its 1998-99 budget? What restrictions will be placed on the allocation of funds at the board level? Will some spending categories have ceilings while others have floors? Will any identified savings from amalgamation be reinvested in the system? Will there be a flexibility factor for unexpected events, such as the ice storm in eastern Ontario or a sudden surge in immigration or refugees? Will there be a phase-in period for any of these changes? How will real differences in need be recognized, such as small school boards, remote boards, boards with high immigration, concentrations of special needs students? How will the funding model be modified over time, and what kind of process and, very important, what participants will determine the adequacy of the model? How will school boards be accountable for their decisions? What will be the process for setting the provincial property tax rate; will there be a debate in the Legislature? How will the provincial government be accountable for its decisions? In addition, what research will be carried out to assess the effects and the adequacy of the funding model?

The public is concerned. The Environics poll conducted in December 1997 showed that since the spring of 1997 education has become the single most important issue facing Ontario after unemployment, displacing health care for the first time in several years. Six in 10 Ontarians disapprove of the way the government is handling education, and seven in 10 believe the government is not listening to its constituents.

The same Environics poll indicated that nine out of 10 Ontarians believe that spending on elementary and secondary education should be maintained or increased, and that only one in 10 believes that spending should be reduced. Three out of four Ontarians believe the annual setting of educational property tax rates should be a matter for debate in the Legislature, rather than the undisputed prerogative of the Minister of Education and Training or cabinet.

In conclusion, the Ontario Teachers' Federation believes the process of finance reform must have integrity. It is not possible to cut expenditures and build a new model from the ground up at the same time and have the model be credible. Without the ability of local school boards to raise some revenue, there is no flexibility in the system to meet local needs or to deal with unanticipated events.

A high-quality elementary and secondary education system is an effective lever for individual success and economic opportunity, and for the success and opportunity of our society as a whole. In a system already under tremendous pressure, as I noted, it is critically important not to destabilize the system further.

The future of Ontario's children and its youth is at stake. It is imperative that changes be made in ways that benefit our students and our society.

The Chair: Thank you very much. We have approximately three minutes per caucus, starting with the NDP.

Mr Pouliot: Welcome. I have two simple questions, straightforward; perhaps a third one by way of supplementary. I wish to focus on page 4 of your excellent presentation: "The provisions of Bill 160 require that the district school boards negotiate a two-year agreement with their employees to begin no later than September 1, 1998." Would you kindly tell me, in view of the latest mandated developments, negotiate what? They don't have the power to levy. They don't have the power to regulate class sizes. They don't have the power to set curriculum. Once you've gone through the process of "Good morning, how are you?" and, "More important, how are you?" what is there to negotiate?

Ms Langley: I think the sentences at the end of that paragraph support and confirm what you're saying. Ruth would like to embellish upon some of our concerns.

Ms Ruth Baumann: It is certainly our understanding what school boards and their employees will be able to negotiate in the next year as they try to amalgamate the agreements of the previously separate school boards will be agreements that reflect the funding envelope they're given by the government and there will be no opportunity to make decisions outside that envelope. Furthermore, they don't know what's in the envelope yet, which makes it even harder to work against a deadline of September 1.

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Mr Pouliot: Regardless of stripe, governments have responsibilities vis-à-vis the common goal, and what more important than that of education? I know your courage is great. You've suffered a lot. We've all been through collectively, you more so because you are front-liners, the need to create a crisis that has become almost proverbial in the annals of a relationship -- overpaid, underworked, you know, minimizing, belittling the contribution that the most educated group in the province, that of 126,000 educators, have made. I am not an educator, I am a citizen who is the recipient of the benefits from education.

Do you find it, in terms of planning, passing strange that a month and a half before the end of one fiscal year, hence the beginning of a new one, six or seven months before the overhaul of a magnitude that has never been seen before, you can come here on the eve of budget presentation, ask 10 questions, all relevant, and get away from here at the end of the day, so near to the deadline, with not one answer? How can you manage the affairs of the state, how can you manage your affairs, if you don't have answers because nobody knows?

Ms Langley: I'm not sure whether that's a rhetorical question or you really want us to give you an answer.

The Chair: It is difficult from time to time. I appreciate that. Do your best.

Ms Langley: I think the bottom line at the end of the day is the students. Aside from what the teachers and the people we represent must live with, I think the uncertainty, the chaos, the crisis is in the eyes and the faces of the students that our teachers meet every single, solitary day. I think we are doing them an exceptionally serious disservice, and a disservice that will be reflected year after year after year.

Mr Pouliot: I thank you very kindly.

On a point of order, Chair: With respect for you and high respect for your tenure, your supplementary -- I mean, humour does not become you -- was not necessary. I apologize. I make the same ambiguous mistakes in more than three languages. Nevertheless, I have been here 13 years and it is my impression that you're not coming back, so the point is not well taken.

The Chair: Well, sir, if you want a question answered, you have to ask a question. If you want to make a statement, it's sometimes better to identify it as such and ask for a comment.

Ms Langley: If I may, I would like to clarify, because when I asked about whether it was rhetorical I was not in any way meaning to be insulting to the person who asked the question. I felt that we all were clearly understanding what kind of response would be given and that it is a serious issue.

The Chair: I thank you. For the government, Mr Wettlaufer.

Mr Wettlaufer: You address, on page 2, "The development of a funding model which addresses all of these principles requires at a minimum two key elements," and the one element is a "societal consensus regarding the definition of quality." I wonder if you could comment on the quality of an education system that stresses learning for learning's sake but yet will leave 42,000 students without a job once they graduate from university, when they could have high-paying jobs in the high-tech industry.

Ms Baumann: I think your question strikes at the heart of what we're getting at about this societal consensus. We believe there are those who believe that education is about getting jobs and there are others who believe that education is about learning in a more generic sense, about learning research skills, about learning all kinds of things and having a basic common knowledge with other Canadians, and that any real --

Mr Wettlaufer: So they can panhandle on Yonge Street?

Ms Baumann: No, not so they can panhandle, and in fact many of them don't. There are many people who have arts degrees and other degrees who are doing very well and some of them in those high-tech jobs. The issue --

Mr Wettlaufer: The arts degrees -- they're not in the high-tech jobs.

Ms Baumann: Indeed, if you look at some of the recent reports from some of the major business groups, they're saying that the people they want to hire are people with degrees in the humanities, who have critical thinking skills, who are adaptable and who are able to do flexible kinds of work and research. I think the societal consensus we're identifying here is the very nature of the debate that you're engaging in with me right now.

Mr Wettlaufer: With respect, we heard --

The Chair: Please let her answer the question.

Ms Baumann: There needs to be a debate about what we want our schools to do and how we wanted to do it for them and how we meet those needs. That's a debate that has not yet been had in an open and public way in this province other than the fairly inconclusive conclusions of the royal commission.

Mr Wettlaufer: With respect, we heard a previous presentation from the Canadian Advanced Technology Association just this afternoon. They told us that a person with an arts or social science degree was not easily trained. That's the one comment.

Another comment different that this is, did you know, prior to or during the teachers' strike last year, of the many similarities between Bill 160 and the previous Municipal Act and the Education Act? I would just like a yes or no, if you knew of the similarities.

Ms Baumann: I think that there are a number of similarities that some of us were aware of. I think that doesn't have anything to do with the pre-budget consultation of the government and the standing committee on finance.

Mr Wettlaufer: It was just a comment. Thank you.

Ms Baumann: Some of us are fairly familiar with legislation.

Mr Richard Patten (Ottawa Centre): Thank you for your presentation. We only have three minutes so I just want to respond quickly to what I gather is the gist of your intent. You're saying, "Listen, don't take any more resources out. We're here in a position of living in limbo because we don't know what the funding formula is at this particular stage," even though it has been promised for more than several months, almost the better part of a year. I can certainly appreciate that.

You talked about some of the cuts that are there already. The Premier had said that the classroom funding for education will be guaranteed. I'd like your reaction to that statement, whether you think classroom funding or the classroom is affected in any particular matter. I'd like to concur and support your thesis. I think your estimate of the costs is conservative, small-c, because if you take into account the growth you allude to, if you take into account the transition costs that have to be absorbed by new school boards, if you take the growth in student bodies etc, you're probably talking in the neighbourhood of $2 billion, $2.3 billion. That's my estimate of what is lost in actual resources to the system. Is there or is there not an impact upon the classroom and the children in the classroom, given that financial position?

Ms Langley: I think I'll start and take you back to the findings that have occurred in the United States, that is, the definition of what is adequate and what do we mean by equitable. What I think we're into is a situation where what has been developed is a very narrow definition of classroom spending, so all of the things that you're talking about simply are ignored in terms of that definition. Therefore, we end up with an extremely inadequate and inequitable system.

Mr Patten: The government's definition seems to be one teacher and a classroom, no acknowledgement of the role of a librarian, a speech pathologist, a counsellor or anybody else in the system. Everybody knows that not all education takes place in that classroom. So it's an outdated, outmoded definition of a description of the costs related to the classroom. It's really what is related to the children's education and now that the fund-raising has to go into basics -- and I know this because I see it happen in schools in my riding -- schools are out fund-raising for basics.

Ms Langley: If I could refer back to a former question or comment about preparedness -- aside from the fact that I have an honours degree in music and I feel my arts degree has managed to serve me well and my daughter graduated from the Ontario College of Art and she's an art director and is highly technologically literate and it has served her well, but that's a personal comment -- I reflect back to the school system and the fact that it's through fund-raising that computers are bought. We must take a look at what supplies are available and what a properly and adequately stocked classroom looks like. I think that has to be part of it as well.

Ms Baumann: Our estimate would be that the loss just in the 1995 to 1997 period of revenue to the school system that should have been there for growth or we would have expected to be there for inflation in other times was in excess of 7% of what we think the real expenditures would have been if they'd been kept constant to 1995 standards. That's without the $950 million extraction.

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

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ONTARIO REAL ESTATE ASSOCIATION

The Chair: The next presenter is the Ontario Real Estate Association. Gentlemen, welcome. Please proceed.

Mr Robert Storring: Good afternoon to you, Mr Chairman, and to other members of the committee. My name is Robert Storring and I am the president of the Ontario Real Estate Association. With me this afternoon are Mr Hugh Foy, chairman of our association's government relations committee, and Mr Jim Flood, director of government relations for OREA.

OREA is a non-profit trade association founded in 1922 that represents the interests of some 40,000 real estate brokers and sales people who live and work in every community in Ontario. We very much appreciate the opportunity to visit with you again this year and to share with you a few thoughts on the economy, the real estate market and some housing-related suggestions.

Last year we told you that the real estate market in Ontario was on a roll. That comment was borne out in 1997, as the statistics in our written submission indicate. Growth in 1997 resulted from a combination of low interest rates, pent-up demand and rising consumer as well as business confidence.

Despite recent increases in short-term mortgage rates, we expect 1998 to be a year of solid, sustained growth for the real estate market. The government's policies of deficit reduction, reduced taxation and streamlined regulations have resulted in lower interest rates, increased spending, strong job growth and increased consumer confidence. Those are the main factors that drive any real estate market and they are all positive at the present time.

We therefore urge that the government stay the course on their deficit reduction initiatives, continue to improve housing affordability by cutting red tape and needless regulation and promote further job growth in the province.

As noted in our written submission, the market for investment, commercial and industrial real estate is also positive for 1998.

I would now like to ask my colleague Hugh Foy to make a few comments with respect to the measures we would like the committee and the Minister of Finance to consider in the upcoming budget.

Mr Hugh Foy: As Robert mentioned, we're generally pleased with the economic development in Ontario, but, like all groups, we do have a few suggestions we believe would make the current situation even better.

First and foremost, we're here to ask that the existing rebate on land transfer tax provided for first-time buyers of new housing be extended to first-time buyers of resale housing as well. As you know, that measure was originally introduced in the Ontario budget in 1996 for a one-year period and was subsequently extended and is now scheduled to expire March 31, 1998.

It is our hope that the government will see fit to continue the program and expand it. There are a number of reasons why we believe that it is in the public interest.

First, the existing rebate program distorts the normal operation of the real estate market by favouring one type of housing over another. This government is on record as favouring a fair, balanced marketplace where consumers are given maximum freedom. The existing rebate program is not consistent with those principles.

Second, the original rationale for favouring new housing over resale housing may no longer be valid. When the program was introduced, the government explained that it was aimed at promoting job growth in the residential construction industry. The growth of new housing starts since that time would suggest the program has helped in achieving that objective. Employment in the residential construction industry is much stronger as a result. In summary, the residential construction industry may no longer need the rebate program to sustain jobs.

Third, the program discriminates against first-time buyers who wish to purchase homes in developed, usually urban, areas of the province. As you know, these areas attract little new home construction because there simply isn't land available to build on. As a result, individuals who may want to live in relatively mature areas are forced to live in the outer communities to take advantage of the rebate program. People should be given the opportunity to live where they want without the government attempting to sway them.

Finally, I want to make the point that the land transfer tax rebate program does provide a significant boost to the housing affordability. Encouraging people to buy homes, whether new or used, is a worthwhile investment by the government. Not only does each real estate transaction generate some $17,000 in spinoff activity; it promotes healthy community, financial security and other socially desirable goals.

Our second request has more to do with the process than it does the policy. During the past year, the government has undertaken a number of steps that could make a significant contribution to the housing affordability. Assessment reform, municipal service delivery restructuring and the development charges are three such initiatives. Unfortunately, it is too early to tell whether these initiatives will have a positive or a negative impact on the individual property owners. It's therefore important for the government to monitor how municipalities implement policies relating to the assessment reform to ensure equity and fairness. In like manner, the government should continue to work with individual municipalities to ensure that the restructuring of service delivery is revenue-neutral.

Last, recent changes in the way in which the development charges and education development charges are to be levied require vigilance by the government to ensure that the goal of housing affordability is enhanced and not frustrated. There are a number of other issues raised in our submission, which you may review at your leisure. That concludes our opening remarks, and we'd be pleased to attempt to answer any questions from the committee at this time.

The Vice-Chair (Mr Wayne Wettlaufer): Thank you very much. We have approximately eight minutes per caucus for questions and we begin with the government.

Mr Baird: Thank you very much for your presentation this afternoon. The overriding goal of the government's economic strategy is to help create a climate for job creation rather than investing directly. I can think of no other industry which is probably more sensitive to consumer confidence than the real estate industry, given the significant amount of economic activity generated by resale homes. This is the first question. Can you tell me how you feel consumer confidence and the boosted household income have affected the industry across the province?

Mr Foy: I think the interest rates alone have started, but I think that people are now getting more secure in what they're doing, and I think that job security is no longer a question with them and they really are starting to look at it. But we need every little initiative we can get to make them come across and buy homes. I know in my area the land transfer tax would have a big bearing on it because of the fact that it's not a lot of money, but it makes them want to buy the home.

Mr Baird: I know one real estate agent in my community said about 10 years ago, "If we could just get interest rates below 12%, we could sell every house we have on the market." Of course, it didn't happen when --

Mr Foy: I agree. I have been in real estate for 20 years, and we always thought that too, that if interest rates dropped 1% or 2%, the market took off. It has very little bearing on the marketplace now. People are more concerned about their overall and where their future is.

Mr Jim Flood: If I can jump in just for a second, I think the climate in the real estate market is probably absolutely as good as it has been in the last 10 years in Ontario, and I think the government can claim some credit for that in terms of the initiatives they have taken -- tax cuts in particular is one area I can think of -- that make housing more affordable to people by giving them more money to spend on housing.

Mr Storring: If I might jump in as well and reiterate that very point, the more money people have in their pockets, the more people who are eligible to buy houses, the more people who qualify to buy houses, and I think the spinoff from that can't be ignored. In our report it does mention $17,000 worth of spinoff business from each real estate transaction. That $17,000, based on next year's estimates of 145,000 transactions in Ontario, manifests itself in $2.5 billion worth of extra business.

Mr Baird: You see that not just among realtors' fees, but among lawyers, and you see it through furniture stores, the fellow down the street who does painting or other home renovations. In my community Rona Warehouse is opening up just next week, 200 new jobs, the largest in Ottawa-Carleton, so a considerable boom in the home renovation business.

In my community the income tax reduction, for an average household, would be $150 to $170 a month, once it's fully realized, adding $150 to $170 per month to a family's pocket. Has your industry done any statistics in terms of the elasticity in the relationship between the price of someone renting and then realizing what is for many still a cornerstone of their dream and their goals in life to own their own home, as to how much the relationship between the rent and a combination of interest rates and consumer confidence and disposal income has in terms of somebody being able to go from renting to buying?

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Mr Flood: We haven't, as an organization. A number of the banks publish what they call affordability indices and publish numbers that yield something like the percentage of renters who earn enough income to be able to afford a house at a certain level within a given community. That type of information is around. Most of it is compiled by the banks.

Mr Baird: Does the Ontario Real Estate Association deal primarily with residential sales or does it also deal with commercial and industrial?

Mr Storring: We cover both but the majority of our members are residential.

Mr Baird: There's been some discussion with respect to the proper education taxes on industry and commercial properties, that we should go to a uniform rate. We could do one of two things: one is an asymmetrical tax cut for Metropolitan Toronto, the new city of Toronto, amounting to some $400 million, or the other would be to simply equalize the rates, bring the rates up in communities right across the province and then bring Toronto down. Do you know what the elasticity is of property taxes for those types of consumers, the industrial and commercial users?

Mr Storring: I'm not sure I can answer the elasticity, but I can say that we do agree with the concept of an equalized system right across the whole province, given the fact that it's very difficult to implement it overnight and arbitrarily introduce it. We understand that fact and we realize it probably will take a number of years to happen, but we do think it should be equalized.

Mr Baird: So if it should happen, but it should be over a period of time and not all at once.

Mr Storring: Exactly.

Mr Patten: Thank you, gentlemen, for your presentation. I was rushing to read through some of your points in your presentation here, which does look interesting. In your recommendation related to the tax rebate program, I thought you were going to recommend eliminating it, so I wonder why you didn't recommend eliminating it rather than expanding it given your vivid description of its having outlived its usefulness and its attempt to address a need that no longer exists.

Mr Flood: I guess the answer to the question is, you're right, we have to be a little bit careful here that we don't put ourselves in the position of throwing the baby out with the bathwater. We think the program, if it was originally designed to spur construction or job creation in the residential construction industry, has served its purpose. On the other hand, it has a second purpose, and that's to make housing more affordable for everybody. That's why we want the program continued and expanded.

Mr Foy: To add to that, I think it's important to understand that, as we said, in Brantford or in smaller communities it's not everybody who can build new homes and things like that. It's a stimulation to get the market going. Toronto maybe has had a strong market, but the January market in Brantford is very slow and very hard to get going. We're hoping that this initiative would maybe just put it over the top and generate some more sales and everybody would have a better spinoff.

Mr Storring: The purpose of putting it the way we did in this submission is if the government is considering extending it, they extend it to everybody.

Mr Patten: On the question my colleague across the way just referred to, you said the municipal restructuring should not result in additional costs being placed on municipal taxpayers. I'd be interested in your comments as you see the struggle of a lot of municipalities. My area is Ottawa-Carleton and both the city of Ottawa and the region are facing tens of millions of dollars of pressures in their budgets as a result of restructuring that hasn't even taken place yet. They either have to drastically cut or they have to charge enormous user fees, which is another form of taxation, or they have to increase property tax, or they have to increase business tax or realty tax, or whatever, somehow, if they want to maintain it, or some combination thereof. I'm wondering about your statement that this should not. How does that square with your observations around the province, with numerous municipalities raising the flag and the cry that they will indeed be facing those kinds of pressures?

Mr Flood: The problem in a nutshell is, who's got the numbers and what numbers are right? We don't have any independent research capability that allows us to evaluate whether, as an example, Mel Lastman's numbers are right or Mr Eves's numbers are right. Frankly, we work on the simple assumption that the government has said repeatedly that at the end of the day the numbers are going to be revenue-neutral. So far I don't think there are any municipalities in the province that have actually physically suffered a financial loss as a result of restructuring. I think there are a lot of people who say it might happen or it could happen or it's going to happen unless something changes, but in our judgement all of that is hypothetical at the moment. It is true, as I think our submission points out, that nobody is really going to know what the effect of the entire restructuring process is going to be probably for another 12 or 18 months. Until we can see some independent numbers that we can trust, we're working on the theory that the government is going to be as good as its word.

Mr Patten: Maybe in the aggregate, but specific municipalities will be facing different situations. I think most municipalities felt that all municipalities would be supported through transition phases if there was a differential, number one; second, that there would be a revenue-neutral arrangement. If there isn't, then what's happening and where does the money go in the aggregate?

I submit to you that there will be -- and I was pleased to see the provincial government acknowledge Mr Lastman's figures by coming out with the $200-million loan, tax-free I believe, plus a grant of about $50 million. I hope they proportionally do the same in my particular neck of the woods where the need is as great proportionally. I think that would substantiate that indeed there is some acknowledgement by the province, and I would say, if in fact there are these discrepancies, it will have an impact on your industry, because people will say, "Not again," if property taxes are going to go up. That would discourage people, it seems to me, from wanting to buy or to move from buying to renting or to downgrade their home or whatever it may be. I suggest to you that there are enough data now from the CAOs and from the financial people at municipalities that if you're not fair on it there's enough information out there to confirm that indeed they will be facing this whole experience.

Mr Flood: I don't think we disagree with the point that you made with Toronto. If you were the government you might argue that in fact there was a discrepancy in the numbers and that they did something to try and redress that inequity, and if the same thing happens in Ottawa and Nepean we hope they would do the same.

Mr Patten: I know there's this attempt to move towards that if you own a store in downtown Toronto you should pay exactly the same business tax as you pay if you owned a store in Smiths Falls or Perth. I'm not sure I agree with that, because that's only one slice of the pie. Indeed, if you look at salaries, they're a heck of a lot higher in Toronto than they are in Perth, if you look at what's available to people, the access to certain services, all those kinds of other questions. Unless there's some kind of appreciation of differentials regionally, I agree with the principle of equitable, fair business levels, but -- well, I would say personally; I'm not speaking on behalf of my party -- I have some problem with saying, "Well, the little guy in Perth has got to pay the same thing that the store owner or businessman or businessperson in Toronto is paying," because they're in two different environments, two different cost structures in their standard of living and in their expenditures and their opportunities. I don't know whether you agree with that concept.

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Mr Storring: If I might answer it, I think that's the kind of thing that's still unfolding. We do agree with a set rate, that it should be equalized; possibly assessed values themselves will take care of that problem. There is a difference in a value of a downtown building in Toronto and a downtown building in Perth.

Mr Pouliot: Welcome back, gentlemen. I think 1997 was a good year -- well, better than 1996 or 1995 and some preceding years -- and 1998 is shaping up to be -- how do you see it so far?

Mr Foy: I think it's too early to know. I know there was a fair increase last year, but I think it's pockets. Some of the market seems to have started, but as I say, in some areas it's a little slower. I don't know if we know yet where it's going to come out at all. I think it's going to be reasonable, but I can't predict the future.

Mr Pouliot: I appreciated your answer during this debate as to the importance of the impact of interest rates. Of course, there are extremes, there's extremely low and extremely high, but grosso modo, generally speaking, they're not catalytic, they're not make or break. You've just listed some of it. You've mentioned government policies as well. That too is not catalytic; it's a factor. You have taxes, demographics; things do change. In our case, the Canadian population is getting older, you have the influx of immigration. All these have to be factored in. They're all a part of consumer confidence.

There's one thing I've learned over the years, and I need your help to see if you share the same sentiment, and that is that uncertainty does not call for a good marketplace. If people are anxious or hesitant, they are just as likely to withdraw or to stay put for a while. Do you sense, in view of what my colleague and friend Mr Patten has said, because we have many houses that are being reassessed -- if I make, as a consumer, a 25-year commitment on the largest item I'll ever purchase -- a quick fix, meaning revenue-neutral? I'm not imputing motive. I would want to see the other shoe fall before I engage myself in making a commitment. Do you think in some locations it will be more important than in others whether it is revenue-neutral or not?

Mr Flood: If the question is, "Are property taxes an important element in a home-buying decision?" I think the answer is yes.

Mr Pouliot: When we are talking about property taxes, some of us are just as concerned with the uncertainty, the anxiety, because you have assessment and reassessment. This is uncharted water. We're talking about 3.8 million units, and the Ministry of Finance, gentlemen, is saying we should expect 600,000 appeals. In the meantime, you're riding on an interim tax levy, which is 50%, inclusive of the BOT, the business occupancy tax, and then you condense your year and the tapes come for your general purpose and the school will be set. It's quite uncharted water. I shouldn't say I fear it, because there is a recovery, and we can finally sense it, we can relate to it. But we had better know quickly, don't you feel, where the other shoe will fall: What are my taxes going to be? What about assessment? What about appeals? Is the $200 million Mr Patten mentioned a quick fix? What about two years down the line? What about government commitments? Will Toronto, for instance, be left holding the bag?

Mr Storring: If I might jump in there, I think all of the points you mention certainly are of some concern, but I think as we say through our report a number of times, the growing consumer confidence -- in my personal opinion; this is not the opinion of the board -- will outweigh that. There are certainly some uncertainties with assessment and everything else, but I think consumer confidence is growing at a faster rate, and I think it will outweigh those uncertainties.

Mr Pouliot: Especially in Ontario?

Mr Storring: Yes.

Mr Pouliot: I share your sentiment, and we keep our fingers crossed. I agree with you, because the Asian factor will not impact Ontario, should not. We're a manufacturing base more than a resource base in Ontario, and some pressures in other parts of the country, ironically, could benefit us by keeping the lid on some interest rates.

If you had to choose two or three items -- and it's a difficult question -- vis-à-vis your industry, job creation as well, what would you tell the government? If you could only focus on one or two items, and Mr Eves was right there and said, "You have a choice of two or three and I will do it," what would you tell Mr Eves? That's the job of this committee: to report back, through the Chair, to the Minister of Finance for the province, and he should, in his wisdom, take all recommendations into consideration, weigh each with and against the others and come back with equilibrium in his search for balance on the eve of the budget. What would you tell him?

Mr Flood: It doesn't relate specifically to real estate, but if we were to pick simply one issue, I think we would probably ask the Minister of Finance to concentrate on job creation. That's probably the single biggest determinant that affects the housing market.

The Vice-Chair: Gentlemen, thank you for your presentation.

INTERFAITH SOCIAL ASSISTANCE REFORM COALITION

The Vice-Chair: The next delegation is from the Interfaith Social Assistance Reform Coalition. Hello, Reverend Pfrimmer.

Rev David Pfrimmer: How are you? Nice to see you again. We appreciate the opportunity to be here with you today. I thought I would introduce the delegation for your benefit so you know who is representing the Interfaith Social Assistance Reform Coalition today. Reverend Susan Eagle is from London, Ontario; Ms Gabrielle Mandel is with the Canadian Council for Reform Judaism; and Sister Doryne Kirby is with the Canadian Religious Conference in Ontario.

The Interfaith Social Assistance Reform Coalition is a coalition of religious communities across the province. We've appeared here before. We've sought to address the continuing reality of hunger, homelessness and poverty in this province.

Ms Gabrielle Mandel: To begin with, I'd like to talk about Ontario's commitment to the poor. During 1997, the Interfaith Social Assistance Reform Coalition held hearings across Ontario to look at the impact of many of the changes that were being made to welfare and social assistance. These hearings were held in over 14 centres right across the province from June to November of last year.

I'd like to share with you one of the stories from some grade 4 and 5 students in a northern Ontario town. This story was retold at one of the hearings, and it goes as follows:

Poverty is...

Wishing you could go to McDonald's

Getting a basket from the Santa Fund

Feeling ashamed when my dad can't get a job

Not buying books at the book fair

Not getting to go to birthday parties

Hearing my mom and dad fight over money

Not ever getting a pet because it costs too much

Wishing you had a nice house

Not being able to go camping

Not getting a hot dog on hot dog day

Not getting pizza on pizza day

Not going to Canada's Wonderland

Not being able to have your friends sleep over

Pretending that you forgot your lunch

Being afraid to tell your mom that you need gym shoes

Not having breakfast sometimes

Not being able to play hockey

Sometimes really hard because my mom gets scared and she cries

Hiding your feet so the teacher won't get cross when you don't have boots

Not being able to go to Cubs or play soccer

Not being able to take swimming lessons

Not being able to take the electives at school (downhill skiing)

Not being able to afford a holiday

Not having pretty barrettes for your hair

Not having your own private backyard

Being teased for the way you are dressed

Not getting to go on school trips.

Sadly, this is not just their story but the story of over half a million children in Ontario. The situation today is worse than it was in 1989, when Canada pledged itself to the elimination of child poverty by the year 2000. The number of millionaires has tripled while the number of children in poverty has doubled between 1989 and 1995. That's a national statistic, but in our written submission it says that Ontario has had a 58% increase in the number of poor children. That's the national statistic, and I believe the statistic for Ontario is actually a 99% increase in the number of poor children.

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This statistic was taken before the October 1995 cutbacks to social welfare. Is not the economy for the wellbeing of all people in our society? Do we not have a special responsibility to those in need? Are not governments charged to safeguard particularly those most at risk? What are the priorities for how we determine our provincial budget?

ISARC recommends that this committee should propose an all-party resolution that would agree to make the elimination of hunger, homelessness and poverty, as well as the furthering of social wellbeing, the priority of the budget of Ontario.

Rev Susan Eagle: The religious community is deeply concerned about the worsening situation for many of our families. Our front-line workers and volunteers see this crisis in faces of people who are our neighbours. We hear agonizing reports from food banks, from community organizations, from schools and family service organizations. We heard in testimony at the ISARC hearings, time and time again, of how difficult it was for low-income people just to make it through the day or through the week. The tremendous stress that this places on family and community relationships is punishing, but more importantly, the widespread sense of insecurity and vulnerability is truly alarming. For example, at our hearings we heard several times of people who were on the brink of suicide or who had experienced attempted suicides within families because of that tremendous sense of crisis. ISARC believes, along with other groups, that this is primarily due to the drastic cutbacks to benefit levels, to availability of affordable housing and to the reduction and elimination of many services in many of our communities in Ontario.

Families are poor because employment is not available to adults within the family, and it's not sufficiently available to meet family needs. Employment is an issue because profits are increasing while jobs are not increasing. November 1997 was the first time that quality jobs -- full-time, permanent, with decent salaries and benefits -- increased in Canada, more full-time jobs and a decrease in part-time jobs that month. So one of our concerns is not just job creation but quality jobs. Many jobs are low-wage jobs; in fact, many government policies, like for-profit competition for home care service agencies, are decreasing the wages to nurses and home care aides.

I serve on the council in the city of London, and we had a proposal the other night about transferring ambulance service, and already people are in the door offering to do it for less by hiring people who would be paid a lot less, so we're seeing many of those kinds of proposals. Creating jobs with adequate compensation is vitally important. Nevertheless, we believe that planning for job creation should be accompanied by income security measures that provide an adequate basis for families whose principal providers are either unemployed or underemployed. It is our belief that you can have neither a secure country nor a secure community, with large numbers of people desperate in the face of the economic insecurity of poverty.

In the face of what is a looming crisis, we do not see proposals or programs that will foster a greater sense of social security among low-income people; in fact, it's our belief that low-income people have taken the hit again and again in the last couple of years. We would encourage members of this committee to consider some of the proposals brought forward by the alternative provincial budget process. Religious leaders have met with the Premier and will be meeting with the leaders of the other political parties. We are asking for the proposals they are prepared to put forward to address these fundamental needs in our province. More of the same failed policies are not an answer for those who face this crisis day by day.

As an immediate measure, therefore, we are again calling for a moratorium on the tax cuts. We have called for a moratorium on the tax cuts ever since they were proposed and we continue to do that. We are also calling on this committee for adequate benefit rates based on a market basket approach to assessing income needs, or at a minimum, the reinstatement of the 21.6% cut that recipients who were on social assistance took two years ago. I might add that the 21.6% cut is still in effect. There has been no increase since it happened two years ago, and there has been the opportunity for at least two rental increases since people had that cut, so in fact it's more than 21.6% now.

Rev Pfrimmer: Canada has prided itself in its positive image as a global citizen within the family of nations. As a nation, we have voluntarily signed numerous international agreements such as the UN International Covenant on Economic, Social and Cultural Rights, the Convention on the Rights of the Child, as well as many of the various action plans from the recent series of UN summit meetings.

While signed by the federal government, it is the responsibility of the provinces to ensure many of the aspects of their implementation within their area of jurisdiction. Canada will be reviewed in 1998 for its compliance under the International Covenant on Economic, Social and Cultural Rights. Sadly, while Canada may pride itself in being a world-class economy, we may fall short of being world-class in honouring our obligations under these agreements.

ISARC has suggested this is an area which needs a proactive role from Ontario. All levels of government also need to be mutually accountable to the process of addressing human need. We are not so optimistic about human nature as to leave to any one level of government the sole responsibility for effective social programs. The federal government has been equally quick to avoid its responsibilities to the poor, as well as in the areas of education and Canada's health care system. The development of standards is vitally necessary, not merely from a contractual point of view but in terms of the federal covenant that binds Canadians as a national community.

Therefore, ISARC recommends that this committee recommend that the provincial government, in its negotiations with the federal government, ensure that there are substantial standards with effective mechanisms for compliance by all levels of government, that apply to Canada's social programs and ensure a fair share of the necessary financial resources for the people of Ontario and a commitment by all levels of government to honour our obligations to those in need.

Sister Doryne Kirby: Members of the religious community remain deeply concerned about the continuing subtle and not-so-subtle vilification of the poor in Ontario. The continuing suggestion that people are poor because they are lazy, don't want to work, want something for nothing, and the lack of defence of those already suffering is nothing else but a double victimization of the poor. They suffer the ravages of being poor and hungry and they suffer the indignation of public scorn and contempt.

Many of the religious leaders who heard the presentations at the Neighbour-to-Neighbour hearings reported their shock at the level of worry and sheer fear that many low-income people feel today. Many were terrified that word of their situation might make their situation worse, and many were afraid the government might take their children because they could not provide for them on the miserly benefits they were being provided.

It was also clear that a dangerous atmosphere was afflicting the delivery of these services. Many religious leaders reported that it was clear that programs for the poor and marginalized are being managed in a manner which can at best be described as cold, calculating and arbitrary. We know that the poor did not choose to be poor. Sadly, elected leaders can set the trend. For some in public office, "welfare" is a vulgar and offensive word used almost with a sense of derision and condemnation. During the Neighbour-to-Neighbour hearings, we too were reminded of the ways in which members of the religious community can harbour similar attitudes and misconceptions. We need more leaders to speak in defence of the poor and the marginalized. Punitive public policies like Ontario Works and the lack of a public advocate can only lead to further social exclusion. Such exclusion can only serve to rupture the social fabric of our communities. To dispel the myths about poverty and to dissipate the public maleficent attitudes, it is important that we help people understand the causes of poverty and that we demonstrate our effectiveness in addressing them.

ISARC recommends that this committee call for the establishment of a social forecast concurrent with their fiscal forecasts to be tabled in the Legislature and an independent social audit undertaken regularly to evaluate the performance of public policies.

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Rev Pfrimmer: In conclusion, ISARC believes that in the face of fundamental challenges, leaders need to make fundamental choices about priorities. There will always be those who say, "Give me more, I want a tax break at all costs," but usually this is done at a cost to others. There are sadly those who want more because they feel they are entitled to more of our economic wealth than they need and more than they can ever hope to spend.

I am reminded, however, of a retired woman in her 70s, a generous woman, who supports through her charitable contributions many worthwhile causes, who said: "I don't want this tax cut. I couldn't sit down once to eat without thinking that the food that blessed my table meant someone else might not eat."

May it be that you and we all will listen to that small voice of conscience within us. It is our prayer for you that God will grant you wisdom to know what is right to do and the courage to do it.

The Vice-Chair: Thank you. We have about four minutes per caucus for questions and we will begin with the Liberal caucus.

Mr Patten: Thank you very much for your presentation this afternoon. There's certainly nothing I can disgree with in here, and would support it. The recommendation related to a social audit I think is a good one. Of course, there would be interesting debate on the indices to be used. Do you have a specific model in mind?

Rev Pfrimmer: I think more needs to be discussed about that, but I was just at the UN commission on social development last week where there was an extensive discussion. In fact, one of the non-governmental organizations just put out this report. Canada is cited in here around its performance on poverty issues. There is a whole series of indices that are used in this arrangement. There are many groups within the UN system and also internationally that are looking at the role of social impact statements in advance of policies, social forecasts tabled in Legislatures and then subsequently a social audit. Some of that work still needs to be done, but I think if there was a commitment to do it, one could develop an effective model by which one would table what we expect to be the consequences of our public decisions. That certainly has found a lot of favour within the UN system and among a number of countries. I think there are models to look at that would be very helpful in this regard.

Mr Patten: I think so too. If you have some specific ones, you might want to share that. It would certainly be interesting, and your views on that.

We had heard at 2 o'clock from Citizens for Public Justice. Mr Vandezande is with us still and I see his name related to your presentation, so I gather you work together.

One of the recommendations there that seems consistent with yours is that the remaining tax cut, which undoubtedly favours those with the highest possible income -- in other words, it's not a progressive tax. If it were, then there might be some justification. If it were front-end-loaded to the lowest possible income and narrowed with nothing, perhaps, to people who earn over $200,000 or $250,000 or what have you, then maybe there could be some explanation. Is that your contention as well? The recommendation from that group was to take that balance of the tax cut at this time and to look at social safety nets that we have, and for those who are in abject poverty, to supplement what is available at this stage.

Rev Eagle: Certainly. I think we have to really look -- the folks at the bottom are getting further and further down. For example, last week this government announced it was going to require that homeless people lose their $120 shelter subsidy unless they could provide receipts. One has images of people walking around with a filing system in their pocket as they try to keep track of receipts while they're homeless.

I asked our commissioner of welfare in London if I could know how many homeless people in London would be affected by that. The answer I got this week was zero. Nobody is affected because nobody is getting the shelter subsidy now because of the definition of homelessness that this government produced two years ago.

You're not homeless if you're a transient person. People who are temporarily without a dwelling place aren't considered homeless. You're not considered homeless if you're sleeping in your car. You're not considered homeless if you're staying with different friends or relatives while you locate an address. You're not considered homeless if you're residing in a trailer, a tent or any other kind of seasonal vehicle.

When you've removed all the people who were disqualified by this new definition of homelessness, suddenly you found that there were no homeless people any more. But we know that those people are just being pushed further and further down, literally into the gutter. So to redirect money into those areas is really important. How far do they have to go before we start to see and hear them?

Mr Martin: Thank you very much for your comment and thank you for the work you continue to do around the province today in the face of a growing tide that opposes the kind of argument you present and your position and stories you tell.

We had your Neighbour-to-Neighbour exercise in Sault Ste Marie, which is the community I come from. It took place in the soup kitchen and it was aired on the cable channel. The response we all got from that was exhilarating. The stories that were told touched people in a place that caused them to understand more fully the pain that some of these folks are feeling and why. I think it's wonderful.

You make a pitch for a return of the 21.6% that was taken from the poor and a backing away by the government on the tax break. Bishop Henry in Thunder Bay put it a little bit differently. He made a pitch for the money that was stolen from the poor to be given back to them. He actually set up a fund that people could put their tax break into so that he could give it back to them in the ways that were available to them.

Whenever we raise that here in this place and in the Legislature, the members of the government always retort with the comment that it's not their money. The 21.6% that was taken away from the poorest and the most marginalized, the most vulnerable in our community, is not their money.

Rev Eagle: You're asking a deeply theological question here, so maybe David will answer it.

Rev Pfrimmer: Let me just say I think it is important. We also supported the People Before Profits campaign and there were a number of groups across the province that redirected their tax return, the money they received, to other social causes and to organizations that helped low-income people.

But I think you're right. When people say it's not their money, let us be clear. I'm speaking as a Christian person, a religious person. I think it's shared among the major faith groups in this province that all we have, the wealth we have, is not solely our own possession. Roman Catholic social teaching, for example, has a wonderful phrase that says that every possession we have has upon it a social mortgage, that it has to be used in the service of our neighbour. So what we get back in terms of possessions, in terms of tax cuts and things like that is not merely our own private possession to do with as we will.

The second thing I would like to say is that taxes are the way we fulfil our obligations to one another. The idea that taxes are somehow bad and therefore we have to cut taxes I think is one that needs to be countered by saying that we get a lot of good things from taxes and that they are a way we fulfil our responsibilities to one another.

The third point on this is that it is often said we are overtaxed in this country. If you compare what happens among OECD countries -- let's take a comparison between the US and Canada. If you look at what we receive in terms of services and if you add in what in the United States you pay in supplementary costs for education and health care, the tax levels in this country are probably lower than in the comparable jurisdictions in the United States. I think this whole issue about taxes is really -- I might say that to believe it is an act of faith and I think one that may be misleading to people and dubious at best.

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The Vice-Chair: Thank you. We will move to the government caucus. No questions.

I want to thank you for your time. The committee thanks you for your report, your input and it will be considered.

Rev Eagle: Could I make one further comment in response to this one? The government, in announcing its cuts last week, referred to the issue of accountability. We note the same documents were released two years ago in a press release that talked about savings of money, and now it's accountability.

The issue of accountability is one that rests with us, not with the people on the street or the people who are dying the death of 1,000 cuts. The question is going to come back in terms of our accountability to the most vulnerable in our community. I'd really like to turn that back to the government in terms of the question of accountability for us as to how we are going to care for those folks who are falling further and further behind.

The Vice-Chair: Thank you, Ms Eagle. Thank you very much for your presentation.

Mr Martin: On a point of privilege, Mr Chairman: I would like to put on the record that I find it passing strange that the government would not have even one question for those who come before us today.

The Vice-Chair: That's not a point of privilege, Mr Martin. Your time is used up. That's political posturing. It's not a point of privilege.

Mr Martin: Not even one question.

Interjection.

The Vice-Chair: Your time has expired.

Mr Phillips: Hansard will show that.

Interjection.

The Vice-Chair: I'm sorry, I have to call it. I am the Chair and the time has expired. We move to the next delegation now.

CANADIAN BANKERS ASSOCIATION

The Vice-Chair: The next delegation is the Canadian Bankers Association. Please come to the table and introduce yourselves for the record.

Mr Michael Green: My name is Michael Green. I am the Ontario director for the Canadian Bankers Association. We are delighted to be here today to attend the pre-budget consultation.

I would like to introduce the members who will appearing for the CBA. Mr David Barrett is senior vice-president with the CIBC and chairman of the Ontario committee. Mr Tim O'Neill is senior vice-president and chief economist of the Bank of Montreal. Mr John Leckie is senior vice-president of the Toronto-Dominion Bank and a member of the CBA independent business committee.

Mr Chairman, in preparing for today's briefing we were told that we would have 15 minutes to provide you with the briefing and then leave it open for questions, and that we will be delighted to do.

The Vice-Chair: That would be fine, thank you.

Mr Green: I would like to invite Mr Barrett to start now.

Mr David Barrett: Thank you for allowing us the opportunity to be with you today.

The banking industry in our minds is a core business in Ontario and a major job creator. The 53 chartered banks and their subsidiaries employed 221,000 Canadians as of July 31. Of this total, 110,000 are employed in Ontario. The greater Toronto area alone accounts for approximately 31% of all bank employees, employing 69,300.

New areas of business such as telephone banking, personal computer banking, investment advisory services, trust and insurance services are among the areas creating new job opportunities in the banking industry. The banking industry is a key contributor to Ontario's economic strength and is strongly committed to job creation and sustainable economic growth among its small and medium-sized business sector. We have a very strong record of lending to the small and medium-sized business sector and, as my buddy John Leckie will allude to very shortly, we've made available $25.4 billion to more than 275,000 business borrowing customers in Ontario alone.

The Ontario committee, which I currently chair, is made up of senior bank executives with general management responsibilities for their organizations in Ontario. Each of the members is responsible for a sizeable number of business branches in the province. The Ontario committee members believe that education and training are important components to assisting small and medium-sized businesses gain access to capital.

I will take a moment to highlight two major initiatives we have undertaken in partnership with the provincial and federal governments, the chambers of commerce and other key stakeholders. In partnership with the Ministry of Economic Development, Trade and Tourism, the banking industry has participated in the government's seminar series Starting a Small Business. Approximately 2,000 seminars have been held in the last 10 years. We have successfully delivered a series of small business seminars entitled Partners in Your Success, designed to assist entrepreneurs improve their business financial planning skills, gain insight into federal and provincial support programs and services, and become export ready through sharing real life entrepreneurial experiences.

Exhibitor trade shows have been a major feature of each event, offering a valuable networking opportunity for entrepreneurs. Seminars have been delivered in Huntsville, Ottawa, Kingston, Toronto, London, Hamilton, Bradford, North York and North Bay. Some 2,500 entrepreneurs and business students have benefited from this experience. We have put in your package to take away with you today a more comprehensive list of initiatives that we have been involved with.

I would now like to turn it over to my colleague Tim O'Neill to provide an industry view on taxation.

Mr Tim O'Neill: Thank you for the opportunity to do that. Let me first begin by reiterating a point that many of us in the industry have made, and that is to commend the government on its success in reducing the deficit. To that end, we've helped over the last three fiscal years in contributing about $3.3 billion in taxes at the provincial and municipal levels in Ontario. In the past year, in 1997, approximately $1.4 billion in taxes were paid into the coffers in Ontario. That represents an increase of about a third over the 1996 levels.

Banks, as I am sure you are aware, are the most heavily taxed industry in Canada. In 1997 the Big Six banks paid almost $6 billion in taxes and levies to all levels of government in Canada. We pay them in a variety of ways and we pay the taxes not only that are typically applicable to corporations, but also taxes that are specifically targeted at the larger deposit-taking institutions. That's quite unlike our international competitors and quite unlike other sectors of the economy. I will return to that point in a moment.

We pay at the top federal rate of 28%. That's higher than manufacturers. It's higher than our competitors, the credit unions. We also pay provincial taxes at the highest rate. It's about 15.5% in Ontario.

If you do this in the context of the profits the banks make, which is the subject of some interest on occasion, from 1991 to 1997 the Big Six banks' profits in Canada increased by about 63%. In the same period taxes and levies increased by 75%. Taxes in Ontario rose by 98% over that same time period.

There are a number of potential consequences of that. In particular, let me point to the budget which harmonized the capital tax base with the federal large corporations tax base. That cost the Big Six banks alone over $66 million in additional tax costs.

I want to make a couple of key points about this. I made reference to our competitors internationally and to other Canadian corporations. The tax system does place Canadian banks at a competitive disadvantage with respect to other industries in Canada, and to non-Canadian competitors as well. Higher capital tax rates than non-bank providers, for example, are a key issue, and as a result of that, banks tend to earn a lower return on total capital.

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The capital tax in particular is, in our view, an inappropriate form of tax because those taxes are levied regardless of ability to pay. They penalize the very base which supports the generation of growth and income taxes. In effect, by taxing capital, you're taxing away the foundation upon which income taxes are going to be generated. They are, I think it's fair to argue, a disincentive to financial institutions that would be interested in investing more and creating more high-skilled, world-class jobs here and in other parts of Canada. That applies not only to domestic institutions, which I think are the typical focus of this kind of discussion, but also to foreign institutions that might be considering expanding their own base in Canada.

At the end of the day, and I think this is something that perhaps is not properly understood by many people, when you think of corporations as entities with a personality, whatever you may think that personality is, if you treat them as if they're persons, what you end up doing is forgetting that ultimately it is real people who pay those taxes. They're going to pay those taxes as employees, as customers, as suppliers or as shareholders. At the end of the day, taxes don't end up stopping at the doors of individual businesses. They end up at the doors of the people who work for, who supply or who are shareholders in those businesses. That's true in any firm, but if you are excessively taxing one particular industry, then obviously that is going to get passed on somewhere in Canada. The Ontario Fair Tax Commission noted that ultimately taxes on institutions are paid by people, something we should never forget.

Mr John Leckie: I'm John Leckie. I'm responsible for small business at the TD bank and represent the committee at our Canadian Bankers Association. Today I won't throw a lot of facts at you. I have two areas I'd like to quickly cover. One is about access to capital, and the second one is about how we're making it easier for small business to deal with the banks.

In the first area, we're pleased to report that the CEOs met with the Premier I think on September 6 and discussed the linkage between small business and the surtax Tim was talking about. I think a good consultative process has arisen out of that. We've met with Michael Gourley's people, the finance department's Steve Orsini, to be specific, along with the Canadian Federation of Independent Business. You're probably familiar with that association.

As a result we've developed a survey that went out by a company called Thompson Lightstone, along with a couple of Carleton professors who have had input into it. It's probably the first time we've ever asked the Canadian small business person, in this case residing in Ontario, about the demand for capital, and asked the question in the context of capital being both equity and debt, not just the debt component, which is usually what we end up talking about in the media or in these kinds of forums. But there is a relationship between debt and equity and we're trying to determine what the demand for access to capital is in that context and figure out what the gaps in the marketplace are for access to capital.

That survey will be released in March. I've seen a draft of it. I'd love to tell you a little bit more about it. It's going to be very revealing and helpful information, from what I've seen so far, and I'd really encourage politicians such as yourselves to have a darn good look at this and hopefully invite us back, and certainly Thompson Lightstone, the survey people, to walk you through this. I think it'll help all of us and most particularly the small business people who are trying to access capital. That's the first point I wanted to make.

The second point: I really think there's tremendous change going on in how banks provide credit product to small business. This arises both as a result of technological changes, the ability of portfolio management to come about for small business -- I hate to raise the word because it conjures up images of high interest rates and they're not necessarily connected -- portfolio management in the sense that we can tie analysis of the business more directly to credit bureaus and the payment behaviour of the small business and its owner. By doing that, the predictability of how that business is doing and whether or not it's paying its bills is a very good predictor of the health and survival probability of that business.

What that does for the small business person as well as the bank is that it obviates the need to get involved in a whole lot of rigorous analysis, it saves time in the interview process, it is more fair, it is colour-blind, if you will, and in the end I think it unquestionably, as we've entered into this process, provides faster, fairer answers. I think you're going to see new products developing. You've seen Visa products launched by the some of the banks. In our own case, we have a $50,000 small business Visa product with no fees to apply for the product and no monthly fees attached to it for ongoing provision of the product. I think you're going to see a lot of rapid change and improvement in this area. As I said, I'm responsible for small business at TD. We are not making these changes for altruistic reasons, I can tell you. We're doing it because it makes sense.

Small business, and I've worked in New York, Chicago, covered the corporate Fortune 500 all the way up and down the ladder, in my opinion is probably the last area where you truly can have a relationship with the business client, because they need us, the bank, and we need them. They are valuable and profitable clients when you add up their business requirements for the bank, tied with their personal business, and along with the business needs of their employees, who are also a market I'm seeking out. So you add it all up and it's a good, profitable business and we intend to grow it.

The Vice-Chair: Thank you. We have about four and a half minutes per caucus. We will start with the NDP.

Mr Pouliot: Welcome, gentlemen. The Canadian banking system is historically based on very strong fundamentals indeed. Your mandate, by way of your charter and statutes, sees you as a manager and facilitator of capital. With the human dimension, with stability in growth as its ultimate, there is the perception, and I personally throw us a challenge, that in its evolution over the years, as the world becomes smaller indeed, as opportunities lie elsewhere just as much as they do in Canada, where we're less than 3% of capitalization through our markets, with the emergence of mergers and takeovers, keeping in mind that competition at the marketplace is the essence of our system -- hence the perception by some and the worry of many that competition is losing its effervescence, or a "concern" that your role, while you adhere to your mandate, is becoming more one of world investment, with an eye to the consumer and the small business entrepreneur. I would like your competition blend to mandate integrate in the world community, participate more.

If I was to read your charter, your mandate of 10, 20, 30, 40 years ago, would I be able to recognize the same delivery as I am now?

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Mr Barrett: I'll take the first run at this, Mr Pouliot.

Speaking from our own organization, I think as an industry it still is fundamentally that our core purpose is financial solutions that help people, pure and simple. I think that's at the foundation of everything that we do. I think I can speak for my colleagues, and I'll let Tim and John answer, that basically we're still a people business. We will always be a people business, but we are going to change the way we do things because, believe it or not, the marketplace is demanding it.

There are a lot of people who are being affected by this change through this transitional period. I tell some of my colleagues that they're managing yesterday's bank for some, today's bank for others and tomorrow's bank for others at the same place in the same location -- a huge challenge. We understand the dilemma for some of our clients, but as John said before, they're still very important to us. Tim, do you want to add anything?

Mr O'Neill: I think what's important to note, going back to your question about whether we would recognize the mandate from a historical perspective, and I think it's already been said, what is done and what will be done is exactly what we've always done as financial intermediaries. The way it's done, the way in which services are delivered, the quality of that service, the quality of the people who are delivering that service, that's what's dramatically changing.

I detected in your question a concern about whether we're turning away from the domestic market to the foreign market. Let me assure you that the total credit extended in Canada exceeds the total deposit taken in in Canada. We are servicing Canadian consumers and small businesses. What I think is important to recognize is that many people use the word "globalization" very glibly. In financial services it's inarguably happening, and what we as an industry need to look towards becoming is a company, let's say, like Nortel, where you have two thirds of your employees in Canada but only 6%, 8%, 10% of your sales in Canada. I'm not saying we're going to get in that position. What I'm saying is you can be an exporter and still service the Canadian market and still have a huge number of jobs for Canadians. This is a very huge employer and it's not going to change.

The Vice-Chair: We will move to the government caucus.

Mr Jim Brown: Good afternoon, gentlemen. You're probably my favourite group of witnesses. I used to have a small business. I have been out of it for three years but the scars are still there.

Mr Pouliot: Keep your jacket on.

Mr Jim Brown: I try to keep my jacket on. I didn't bring any money today because they were coming.

I notice that in one of your books there you've got that bank profits are not excessive. I would quarrel with that. But I look at the chart on page 5. I'm wondering if the rate of income taxes -- you're complaining about taxes. If I draw a line across, it looks like you're paying in corporate tax about $2.6 billion. If you add that on to your after-tax profit of $7.5 billion, $10 billion in total before tax, your corporate rate of taxation would be about 30%, which to me is not excessive taxation, especially making $7.5 billion this year. I'm just trying to put that in the perspective of the small and medium-sized enterprises.

Again, like last time your guys were here, you've said that you've had a rebirth, you're focusing on lending money to small and medium-sized enterprises, which I would debate with you. CFIB, if you met them a couple of weeks ago, has a report, Credit Where Credit is Due, and in the surveys of their members in the late 1980s there was a credit problem; in 1994, 1993, 1992 there was a credit problem. About 30% of those companies that were still in business, the ones you hadn't closed, had a credit problem. It's only 29% now, so according to the Canadian Federation of Independent Business there's not that much of a change in terms of access to credit.

One of the other problems they point out is the fact that they don't have contact with managers because managers keep turning over, especially in Ontario and in Toronto. That's a problem that remains unaddressed.

Access to capital remains unaddressed, the turnover in the relationship remains unaddressed, and then CFIB -- and I'm amazed that you said you met with them a couple of weeks ago or a month ago. I would be meeting with them quite regularly. They've got another research bulletin, The Price Is Not Right, in which they're talking about all the nickel-and-diming that the banks do I guess to every customer but particularly to small and medium-sized enterprises.

I have a problem. Do you talk to SMEs, do you know the SME market, and in spite of all of that which you said, do you really care about the SME market, the small and medium-sized enterprises?

The Vice-Chair: Mr Brown, I know that they would like to answer that question; however, you've used up all the time. I think there were hundreds of thousands of shareholders who were cringing. But we'll move to the Liberals right now.

Mr Phillips: I may just follow up on some of the same line. I think what is on a lot of people's minds is what looks like one merger coming and then the possibility of other mergers coming and what that will mean for both individuals but also businesses.

My colleague did indicate that the Canadian Federation of Independent Business has done a couple of surveys that indicate some concern around this. They ranked the value for money on service charges in Ontario and small business ranked credit unions first, the Hong Kong Bank of Canada second, and then others. So they ranked the smaller institutions better than the larger institutions. I'm wondering how you respond to the concerns by the business community about being bigger, when it looks like in this survey they felt that smaller was giving them better value for money on things like service charges. How does the banking industry respond to what I think is a fair level of concern out there about fewer and bigger?

Mr Barrett: John wants to take a run at it first and if he leaves us time I'll try it.

Mr Leckie: I'll try and be quick. First of all, not all the banks agree on the last question you made, that bigger is better. Better is better, in our view. There's a debate over that and I think it's healthy we get that out on the table and the Canadian public sees how the various banks position themselves on that subject.

Insofar as the CFIB study is concerned, on service charges, the TD Bank froze its service charges in 1991. We have not increased service charges. I think what's really going on there is people are transacting more. They may be paying more but they're not paying more per service charge. We disclosed in our annual report the amount of service charges collected by the bank, by TD at least, and it's roughly 5%, I believe, for the industry in total. It's 4.4% of total revenues. It is not a growth area.

What is going on, though, is because of electronic banking and the ability, in the case of small business entrepreneurs, of moving money around on their PCs from an account that's paying them interest to one that isn't, they're moving it back and forth and they're transacting like crazy, and they're getting charged per transaction. They're optimizing the investment of their money, but I have debated that subject on television with Brien Gray, who wrote the thing you're referring to. You can get a tape of that if you wish. I don't know who won; it may have been a draw, actually. I think there's a lot more information that has to be fleshed out on that subject. You can't just take it on a superficial level.

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Mr Phillips: That's useful. A bank was in here recently, and they made the statement that the interest charged by banks for small business was lower than it was in the US --

Mr Leckie: Yes, it's about half.

Mr Phillips: -- and then sent us the information, which I found helpful, because that's not the popular perception.

Mr Leckie: It sure isn't.

Mr Phillips: So if you have something on the service charges, I would find it and the committee might find it useful.

Mr Barrett: If I could just add to that in the sense that just slightly more than 50% of our clients do not pay service charges, but those who do, I will agree with you personally that we have not done a good job in proving to them that we're giving them value. I do not think in most cases the service charges are the problem; it's the value piece. We as an industry are going to work on that. You've probably heard of our campaign to improve our image. Part of the thing is for all of us to get in front of our client and let them know what they're paying and why they're paying for it, so the value piece is a big issue with us, as well as yourself.

Mr Phillips: You indicated in your brief considerable concern about the tax that has been in the last two budgets. It was designed to encourage the banks to make available capital for small business. I think most of us would support the objective of making access to capital better for small business, but you've expressed considerable concern in your written brief, not orally, today. What is wrong with a tax that encourages you to loan to small business, that you then can essentially, if you perform, earn it back?

Mr Leckie: The labour-sponsored venture funds get tax relief to do what we're being asked to do and they don't get the money out. They've only got about 30% or 40% of it out, and they're at the high end of the market, where it's a lot easier to put out equity or quasi-equity instruments. We're down here, where it's very difficult to make those judgement calls because there's very little information. Financials don't mean a whole lot, frankly. Under $5 million in sales, financials don't mean very much. Not only are we not getting incentive to do it, we're being taxed, so it's completely backwards.

Mr Barrett: Another issue to this thing too is, for us to be able to recover the money is such a bureaucratic nightmare that the banks quite frankly are not even attempting to recover it. First of all, it's not having the desired effect, and then the incentive for us to get the money back, as good as it sounds in theory, is very difficult to work because the paperwork behind it isn't worth the effort.

Mr Green: I'd like to add just one comment too. The whole incentive to lend to small business, it's the banks' largest portfolio and small business is one of the major components of that. As John had said earlier on, there's $25 billion worth of credit available for small business, so there is adequate capital out there. The problem is, is it debt or is it equity? This is what we are trying to determine through other means, through the research analysis, what the actual needs are. Certainly if it's equity, then people like the Business Angels and the labour-sponsored funds certainly have sufficient funds to do that, but the banking side is providing debt.

The Vice-Chair: We appreciate your input; we appreciate your time. Thank you very much.

ASSOCIATION OF MUNICIPALITIES OF ONTARIO

The Vice-Chair: The next delegation is from the Association of Municipalities of Ontario, represented by Michael Power and Roger Anderson. Please approach the table.

Mr Michael Power: My name is Michael Power. I'm the mayor of the town of Geraldton in the great northwest, in the riding of Lake Nipigon. I'm the president of the Association of Municipalities of Ontario. With me I have today my colleague the first vice-president of AMO, Roger Anderson, who's also the chair of the region of Durham. As the government prepares for its 1998 Ontario budget, we trust that the comments we present today will assist the government in its deliberations.

We believe there are many tools and supports that the province can provide to municipalities that will assist us as we attempt to cope with previous and current provincial budget reductions, along with the additional costs and associated expanded roles and responsibilities that are part of the transfer of provincial programs to municipalities and to the property tax base.

Obviously, the government's significant transfer of services through the 1997 Who Does What announcements, coupled with the ever-changing financial information and revenue-expenditure impacts for 1998, are at the forefront of serious municipal concerns. There is considerable responsible apprehension among Ontario municipalities as they plan for 1998, 1999 and beyond. Many questions remain unanswered. There are grey areas that require accurate financial information from the province before any reasoned municipal budgets can be set. There are painful local decisions that must be made as municipalities struggle with service cuts versus program elimination versus negative impacts on the property taxpayers of this province.

For Ontario's municipalities, 1997 has been a roller-coaster ride, a year charged with expectation, disappointment and uncertainty: the expectation of getting the tools we needed to get the job done; disappointment as we watched an amended Bill 136 pass without the promised supports municipalities were told they would get, which municipalities expected they would receive; and always uncertainty -- uncertainty about the scope and depth of regulations that affect how services are delivered.

Throughout 1997 municipalities continued to work with the province, providing advice and solid alternatives, offering workable solutions to complex problems and presenting options that made sense from the municipal perspective. Unfortunately, the government did not always take this advice. Generally, that cooperative spirit remains among the municipalities of Ontario, although that spirit has been dampened by numerous legislative setbacks and poorly advised policy announcements. It is a relationship that has been strained by less than clear, straightforward communications from the province.

The government's December 12 announcement of a new funding arrangement for the transfer of services still presents significant impacts and has left critical policy issues unresolved late in the implementation phase, issues such as the allocation of service costs in a two-tier government and how tax policy and reassessment will shape municipal revenues.

As we all know, in exchange for 50% of the residential education tax, municipalities take on the funding responsibility for about $2.4 billion in additional services. The thing to keep in mind is that we, as municipalities, do not get to manage many of these particular programs; however, we started paying for them last month. The provincial government is looking for municipalities to find, in the government's words, "reasonable efficiency savings."

For most municipalities, the government has set a rate of 1.7% of a provincially derived expenditure figure. What leaps out to us immediately is that for most municipalities, we have management control over less than half of these provincially derived expenditure figures. We can and should only be expected to find efficiencies in the costs we control. The situation that we find ourselves in is that the 1.7% target is significantly understated. This is a major cause for concern when we try to understand the real impacts of the December 12 service funding announcement and how to respond to these impacts.

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The provincial government has indicated that municipalities will have access to approximately $1.3 billion in offsetting funds starting this year. This amount includes the community reinvestment fund of $570 million, plus additional short-term money. Another serious problem begins to develop when we put the province's savings targets together with the duration of the funding assistance. Municipalities are being told to find $565 million starting this year, and that we should expect to maintain that expenditure reduction for the years to come.

When we add to that the elimination of the short-term component of the provincial funding for Who Does What, we find that municipalities in the year 2001 will be expected to absorb more than $1.3 billion in additional reduced revenues. This is the revenue gap the province expects us to manage; at least that's the gap based on the latest figures.

Before Who Does What and its impacts, municipalities had already managed a reduction in provincial transfer dollars in the amount of $1.1 billion from 1993 to 1997, $807 million in the last two years alone. We have managed these pressures by reducing our levels of service to our communities. In some cases, we have had to see services and some programs totally eliminated in order to manage.

As well, municipalities have changed their operational and administrative systems. They've reduced the number of staff, they've reduced the size of councils. Services are now shared, user fees are at a threshold, and to cope, some municipalities have deferred capital expenditures. Generally municipal governments have held the line on property taxes over the last five years and, as a last resort, some modest increases have occurred, and in addition some decreases have occurred.

The big question is that, given the amount of cutting, how much is left to cut in the part of the municipal budget that we have control over? Municipalities fear that we won't have money to provide essential services without property tax increases.

At our recent special meeting of the members, municipal representative after municipal representative rose to speak of their anger, their concern and their confusion over the fiscal situation in which Who Does What has put them, both in the short term and the long term. But despite the vented frustrations, there remains an understanding that solutions are at the table and we must remain at the table to find solutions to our common problems. We must set aside the political agendas and differences and agree upon directions that will best serve each and every property taxpayer in Ontario. Taxpayers expect no less of us; they deserve no less of us.

We know that 1998 is bringing enormous challenges to municipalities as we come to terms with the fundamental changes in the way Ontario's communities are governed and the way that public services are delivered and financed. We also know that many municipalities have reached their absolute limits and cannot absorb any additional financial burdens. The property taxpayer is not the solution to any further proposed provincial cuts. In fact, the transfer of responsibilities and financial costs announced in 1997 alone will only add to property taxes in many municipalities.

These municipal concerns should not surprise anybody in this room. The messages today from AMO and from its membership are quite simple: Municipalities cannot take any more cuts; municipalities cannot absorb any more additional costs; and municipalities need the tools and the support from the province to effectively and efficiently deliver the massive shift in service and funding responsibilities. We ask that the province keep these messages at the forefront of its 1998 budget deliberations and decisions.

We also ask that the government remember the stated goals and objectives of Ontario municipalities for provincial-municipal reform. These goals and objectives have been part of each and every representation we have made to this government. Some of you may have heard these expectations before, but we believe they bear repeating:

Municipalities expect clear and direct accountability. Responsibility and authority for municipally funded services must be through elected municipal governments and not mandated, special purpose bodies.

Municipalities expect pay for say. Municipal funders must have decision-making authority over the services and programs including control over costs, how the funds are spent and levels of service.

Municipalities expect clearly defined provincial and municipal responsibilities. The separation of services and responsibilities between the provincial and municipal levels of government will reduce duplication and facilitate innovative and cost-effective approaches to service delivery. In so doing, the public and property taxpayers will clearly know who is responsible and, therefore, who is accountable.

Municipalities expect maximum local flexibility. The government must ensure that province-wide standards allow for maximum local flexibility to plan and manage services according to local needs and circumstances. Prescriptive legislation and regulations will undermine the goal of flexibility.

Municipalities expect opportunities to find efficiencies. Municipalities require opportunities to find better and more affordable ways of managing services at less cost.

Municipalities expect predictable, sustainable costs and revenues. Costs of service and program transfers must be matched with the appropriate revenue sources and be sustainable over the long term.

These are not monopolistic, territorial goals and objectives. They are inclusive, reasoned and altruistic. They speak to the need for municipalities to have manageable control of the programs and services which they are responsible for delivering and for which they are expected to pay. They address the legitimate concerns of a legitimate level of government.

These are the goals and objectives that the voters of this province want their municipal representatives to pursue. How these goals and objectives have or have not been met will be explained to every property taxpayer in Ontario as councils set their municipal budgets and their municipal property taxes.

The province has stated that the well is dry, that there is no more provincial money, that municipalities will have to find $565 million in savings on programs that have already been pared to the bone. Municipalities are very familiar with empty wells. They have been managing with less and less over the years and are facing a dollar drought within their own communities. Many municipalities are placed in the unenviable position of having to go to the property taxpayer to make up the differences.

As much as we would like to ask for more direct financial assistance, we know the reality of this happening is slim at best. We know that what is within the realm of possibility is legislation, regulations and actions that support better government at less cost, not legislation and regulations that have a cost for the province.

Today, municipalities want to go on record as saying we are willing to sit down with the provincial government as partners, we are ready to find ways and means of making the job of cost-effective municipal governance a real possibility and we are able to offer and receive alternative solutions to our mutual, complex financial and regulatory problems. This is a willingness that has always been an integral part of AMO's work, and we believe that the development of an equal partnership between the province and municipalities is an achievable goal.

I would like to touch on several areas where we believe municipalities can make, and have made, a real difference in the bottom-line cost-effectiveness of municipal governments. These examples demonstrate municipal ingenuity and creativity. They are also examples of some key non-monetary steps that we feel will go a long way to assisting municipalities.

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First of all, there are many simple, short-term measures which will immediately assist municipalities to achieve savings and improve service delivery.

AMO believes that the province must continue the work it has started to eliminate the powers of special purpose bodies that have the authority to make decisions that have significant financial impacts on municipalities. Municipal councils, not special purpose bodies, must have the authority and accountability for how a municipal government spends taxpayers' dollars.

In the area of public health, as an example, the government is adding a new layer of compliance in conjunction with municipal funding by allowing for the appointment of assessors. The assessors will be permitted to assess compliance matters and "the quality of management and administration." Municipalities correctly question why the current compliance process is not sufficient and are concerned that this is an indication of the province's mistrust of municipalities with regard to public health.

In order to find the cost savings set out by the province, municipalities must be permitted to migrate public health services towards shared boards or towards single municipal government structures. In addition, municipalities should be permitted to employ the services of a part-time or shared professional medical officer of health, as circumstances deem appropriate. Providing flexible approaches to managing public health does not mean municipalities do not support public health programs. On the contrary, it means local solutions can better meet local needs.

We also believe that municipal restructuring has provided the opportunity to re-evaluate how programs and services can be delivered at a more affordable price to the taxpayer. The flexibility that has accompanied restructuring has, in many cases, benefited municipalities.

For example, in the restructured municipality of Chatham-Kent, in an effort to achieve cost efficiencies and quality customer service in the delivery of public utilities, the newly restructured municipality incorporated the functions and governance of the hydro-electric power and water commission into the municipal operations. Given that almost half of all the costs of municipal services pertain to water and electricity, there were obvious advantages in combining the work and responsibilities of the public utilities commission with those of the new municipality. This integration is estimated to save property taxpayers in Chatham-Kent $2.8 million per year. I am sure you will agree that this is a significant savings in costs.

While this example is a product of municipal restructuring, the ability to achieve these kinds of efficiencies should not only be available to restructured municipalities. They should be available to all municipalities where such an opportunity exists. The province must introduce legislation which gives municipalities the flexibility to merge operations such as public utilities commissions.

In order to avoid property tax increases as a result of the Who Does What transfer, the government says municipalities must reduce the costs of delivering municipal programs by meeting its preset targets. It stands to reason that if these savings targets are as achievable for the programs municipalities are paying for as the finance minister says they are, then the province also needs to realize similar savings in the programs it administers and then bills to municipalities for, such as public health, ambulance services, social assistance and social housing. This is fair and in the best interests of the property taxpayer, who is now footing the bill.

Municipalities do understand the government's fiscal agenda. We understand that the whole issue of whether the province's Who Does What agenda of transferring services and funding responsibilities to municipalities is in fact fiscally neutral seems to rest on the municipality's ability to achieve these savings targets.

That is why municipalities have called upon the government to give municipalities the tools they need to do the job the province is asking of municipal governments. If we are expected to fund and deliver certain services, we must be allowed to do so without provincial intrusion. It's the pay-for-say principle: If the government is getting out of the business and is no longer going to pay for certain services, it therefore should have no say in the municipal management and administration of that service. In instances where regulation is absolutely needed, it must clearly focus on the core provincial interest. Such regulations must be minimal and flexible, allowing municipal politicians to find ways to deliver that service more efficiently and effectively, while protecting the provincial interest.

It is critical that the government must have significant input from municipalities in the development of any regulation that directly affect us and property taxpayers. We firmly believe that it is in the best interests of both levels of government to develop flexible, inclusive regulations and legislation that will give us the widest possible range of options, options to meet the differing needs of municipalities in every region of Ontario.

There have been some successes in efforts to find that flexible common ground in legislation and regulations that have been to the benefit of municipalities without jeopardizing provincial interests. The fire services area is one example of where we have made significant strides. Bill 84, the Fire Protection and Prevention Act, gives municipalities greater control over fire services and the ability to set fire standards that reflect local circumstances and priorities. The Solicitor General is to be applauded for taking and acting on the municipal input and advice in preparing flexible guidelines that offer assistance to municipalities to fulfil their responsibilities in a way that meets local needs.

There are a number of regulations currently being prepared. Some regulations are already in place and others have been dragging on for a while. Regardless of the stage of preparation, the province must make a commitment to include municipalities in their development and, perhaps more important, to seriously take that municipal advice. AMO's test for the viability of these regulations is that they clearly speak to the provincial interest, that they be flexible and adaptable to local circumstances and that they do not require a higher level of standard than when the related programs were delivered by the province.

The province has made progress in eliminating some prescriptive legislation and is to be applauded in these efforts. However, there are still provisions in remaining legislation that are overly prescriptive, inefficient and end up costing municipalities unnecessary tax dollars.

For example, under the building code legislation, there are requirements for several different inspectors to be involved in building inspections. While it would make financial sense to minimize the number of inspections while maximizing their effectiveness, current legislation prevents municipalities from doing this. Further, there are restrictions on municipal operations that are not placed on the provincial government, for example, on how information can be stored.

While on their own such things as amendments to building inspection requirements and greater flexibility on how municipalities store their information do not seem significant, cumulatively these types of amendments will help municipalities achieve efficiencies.

Perhaps the single most important provincial attempt at reducing red tape and simplifying rules under which municipalities operate is to enact a new Municipal Act. With the release last week of the draft act, our anticipation is that the proposed changes will finally give municipalities the level of flexibility they need to get on with the business of local government and to recognize municipalities as a self-reliant level of government.

We applaud the Minister of Municipal Affairs and Housing for his commitment to providing sufficient time for municipal input before the new Municipal Act goes to the Legislature. While AMO will be commenting on this at a later date, we would like to reiterate that it is a shared provincial-municipal interest that Municipal Act reform be a success. I know that by working together we can make this happen.

One program that demonstrates the positive outcomes of when governments work together is the Canada-Ontario infrastructure works program. It provides matching dollars from both the federal and provincial governments. With the upcoming completion of its second phase, there have been suggestions that the program may be extended for another year. Should the federal government indicate an interest, we strongly urge that the province seriously consider participating once again.

Municipalities must have the ability to recover their costs for providing services. Therefore, it is essential that the province establish a flexible and non-prescriptive approach to user fees and licensing. AMO believes that user fees are, and will continue to be, an appropriate alternative revenue source, because they are based on usage of services and in some cases are linked to consumer choice. User fees, however, are not the substantial answer to any revenue shortfalls. User fees have their limits and can potentially impede full access to some services by all taxpayers.

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As you know, the province is no longer subsidizing the costs of recycling. The net cost to municipalities in 1996 for recycling was about $43 million. Municipalities need a level of certainty about the costs and the means to address these financial costs. We are pleased that the Minister of Environment is in the process of reviewing funding options generated through a multi-stakeholder consultation process.

AMO continues to argue that income redistributive programs such as education, social assistance and farm tax rebate should not be funded from the property tax base. The changes to funding of welfare, child care and social housing constitute a serious financial liability for municipalities and property taxpayers. The financial risks associated with these important provincial programs should not be borne by property taxpayers.

The government has stated that it shares our goal to move these income redistribution programs completely from the property tax base. We are asking the government to make a commitment to municipalities to work on a time frame and economic indicators for achieving this goal.

While our shared goal is to remove income redistribution programs from the property tax base, in the interim the government needs to take the following actions. The actions that we suggest the government needs to take in terms of social assistance and GWA are laid out.

There have been positive moves on the part of the province, moves that are the result of provincial-municipal cooperation and actions that have aided municipalities. For example, 50% of residential education taxes have been removed from property taxes, we have retained the scope and breadth of development charges, we gained control over police services budgets and governance structures and we secured greater flexibility for municipalities in providing fire services.

As a government, you listened to the concerns of rural and northern municipalities over funding to them. You listened, you heard and you were willing to agree on a solution through the community reinvestment fund. You need to take that forward to listen to other sectors in the province and also find solutions for them. Obviously, municipalities and the province have many common and shared objectives. Key among them is that we work together to improve the economic outlook for Ontario and for Ontario's taxpayers. AMO and the government will work together cooperatively to ensure that happens.

We ask the province to work with us to ensure that actions taken by the government have no negative impact on property taxpayers. We believe strongly that by working together we can achieve the transfer of programs, services and responsibilities in a way that will provide the people of Ontario with better government at lower cost. Together we can further the course of sustainable and commonsense reform. We do not believe it is necessary to compromise the principles of good government to get there.

We thank you for allowing us an opportunity to share our views with you today.

The Chair: Thank you, Mayor Power. We are almost out of time. We have less than a minute per caucus. I'd like to proceed. We'll start with the government.

Mr Wettlaufer: Mr Power, I thank you for your presentation. It was relatively positive. I have to say that I come from an area, and as a result my views are biased, that has 440,000 people. We have seven municipalities. We introduced market value assessment in our area in the 1980s and that represented a significant windfall to the municipal council, the municipal government. True to form, they spent it.

The city of Cambridge decided they wanted a new city hall, and not to be outdone, the township of Wilmot decided they wanted a new city hall. The city of Kitchener, not to be outdone, built a new city hall. The city of Waterloo had to have its city hall. The region of Waterloo decided they wanted to build a regional headquarters, but because we had a population in various cities who were upset that one city might be selected over another, they decided to build two buildings, one in one city and one in the other.

There's tremendous waste in infrastructure. We see daily that a road is constructed and two days later the bloody thing's torn up because they forgot to put the sewers in.

The Chair: Thank you, sir. I'm going to have to interrupt and go to the Liberal Party.

Mr Phillips: I come from an area where my experience with the municipal politicians is that they're quite responsible on spending. I think they've been the level of government that probably dealt first with the fiscal realities of the country and the other levels of government have eventually followed them. I don't have experience in Waterloo that the member has, so I'm supportive of what the municipal councils are doing.

My question is on property tax. You don't mention it in here, but the clerks and treasurers, when they were before us on the property tax bill, indicated some fairly considerable concern about the implementation of it. They felt there was a risk that it wasn't coming together very well and could be fairly chaotic in the implementation. I know it's kind of early in the year but it's all beginning to hit now. Is AMO of the opinion that it's all working its way out and we shouldn't even worry about that, or are any of the concerns that the clerks and treasurers expressed to us beginning to pop up?

Mr Power: One of the things, as you know, Mr Phillips, is at this point in time all municipalities are putting out there interim tax bills which are based on 50% of last year's taxes and that's a fairly straightforward thing. I think what the clerks and treasurers may have been bringing forward is what we brought forward at AMO, our concern about reassessment and receiving the tax rolls in time and getting the new assessment in place in time. That is unfolding. They're being delivered across the province at this very moment as we speak, and we'll just have to see how that unfolds in the fullness of time. But in the interim, the interim tax bills, as far as we know, are progressing.

Mr Pouliot: Thank you, Michael; for the past 30 years always a renewed pleasure. Following what my colleague and friend Mr Phillips has said, the municipalities that you represent are already into their fiscal year. You will survive on interim tax levy but only for a while. You don't know the full impact of the devolution of the new responsibilities, the changes, and on top of that it's expected that 600,000 appeals will take place on the assessment and reassessment, with a condensed year. That must make you and the people you represent very nervous indeed.

Mr Roger Anderson: It concerns us greatly. Not only is it the assessment appeals, it's some of the information we're getting from the recently released assessment numbers. But it's not only those numbers that concern us, it's the numbers that continually change from the province. The numbers we got on December 12 created some concern, but we do know that the government is diligently working on more accurate numbers. We don't have those numbers, and until we get those numbers, you put that with assessment and you put all the other issues and compile them altogether, the impact is significant. It's those concerns that we'd just like straight answers on with real numbers so that we can deal with them all equally fair or equally unfair.

The Chair: That uses the time allotted. We thank you for your time and for your presentation.

Members of the committee, we'll adjourn now until 9:30 tomorrow morning.

The committee adjourned at 1658.