CANADIAN FEDERATION OF INDEPENDENT BUSINESS
ONTARIO HOSPITAL ASSOCIATION
RETAIL COUNCIL OF CANADA
ONTARIO FEDERATION OF LABOUR
CANADIAN TAXPAYERS FEDERATION
ONTARIO CONFEDERATION OF UNIVERSITY FACULTY ASSOCIATIONS
GREATER TORONTO HOTEL ASSOCIATION
ONTARIO ASSOCIATION OF INTERVAL AND TRANSITION HOUSES
ONTARIO REAL ESTATE ASSOCIATION
AGGREGATE PRODUCERS' ASSOCIATION OF ONTARIO
REGISTERED NURSES ASSOCIATION OF ONTARIO
TORONTO BOARD OF TRADE
COUNCIL OF ONTARIO UNIVERSITIES
ALLIANCE OF MANUFACTURERS AND EXPORTERS CANADA, ONTARIO DIVISION
Wednesday 16 February 2000
Canadian Federation of Independent Business
Ms Judith Andrew
Mr Brien Gray
Ontario Hospital Association
Mr David MacKinnon
Mr Murray MacKenzie
Retail Council of Canada
Mr Peter Woolford
Mr Brian Rudderham
Ontario Federation of Labour
Mr Wayne Samuelson
Mr Ross McClellan
Canadian Taxpayers Federation
Mr Walter Robinson
Ontario Confederation of University Faculty Associations
Dr Deborah Flynn
Greater Toronto Hotel Association
Mr Rod Seiling
Ontario Association of Interval and Transition Houses
Ms Eileen Morrow
Ms Corinne McCordick
Ontario Real Estate Association
Mr Ron Merkley
Mr James Flood
Mr Von Palmer
Aggregate Producers' Association of Ontario
Ms Carol Hochu
Mr Ian Duff
Mr Robert Albrough
Registered Nurses Association of Ontario
Ms Jacqueline Choiniere
Mr Kim Jarvi
Toronto Board of Trade
Ms Terri Lohnes
Ms Louise Verity
Council of Ontario Universities
Dr Ian Clark
Mr Robert Prichard
Alliance of Manufacturers and Exporters Canada, Ontario division
Mr Ian Howcroft
Ms Joanne McGovern
Mr John Allinotte
STANDING COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS
Chair / Président
Mr Marcel Beaubien (Lambton-Kent-Middlesex PC)
Vice-Chair / Vice-Président
Mr Doug Galt (Northumberland PC)
Mr Ted Arnott (Waterloo-Wellington PC)
Mr Marcel Beaubien (Lambton-Kent-Middlesex PC)
Mr David Christopherson (Hamilton West / -Ouest ND)
Mr Doug Galt (Northumberland PC)
Mr Monte Kwinter (York Centre / -Centre L)
Mrs Tina R. Molinari (Thornhill PC)
Mr Gerry Phillips (Scarborough-Agincourt L)
Also taking part / Autres participants et participantes
Mrs Sandra Pupatello (Windsor West / -Ouest L)
Clerk / Greffière / Greffier
Ms Susan Sourial
Mr Tom Prins
Staff / Personnel
Ms Elaine Campbell, research officer,
Mr David Rampersad, research officer,
Research and Information Services
The committee met at 1002 in room 151.
The Chair (Mr Marcel Beaubien): If I can get your attention, we'll bring this committee to order. Good morning, everyone.
Before we start with the orders of the day, Mr Phillips requested from the research officers a couple of pieces of information. You have one copy in front of you and the other one will be coming shortly. The one in front of you deals with relative tax levels and a comparison between the American states, Ontario and other provinces. The other piece of information will be coming later on and is an update on the community small business investment funds in Ontario, I think. You'll get that information later on this morning.
CANADIAN FEDERATION OF INDEPENDENT BUSINESS
The Chair: Our first presenter this morning is a representative from the Canadian Federation of Independent Business. On behalf of the committee, welcome. You have 30 minutes for your presentation this morning. Could you please come forward and state your name for the record.
Ms Judith Andrew: Good morning, Mr Chairman and members of the committee. I'm Judith Andrew, vice-president, Ontario, with the Canadian Federation of Independent Business. I'm joined by my colleague Brien Gray, who is CFIB's senior vice-president. Mr Chairman, I trust the kits have been circulated. The main brief that I'm going to be referring to today is entitled Entrepreneurship 2000: A Vision For Ontario. Also in your kits you will find various other pieces of information that may be helpful to the committee in its pre-budget deliberations, including our Ontario Outlook 2000 document; a report on municipal relationships with small business entitled Assessing City Hall; and Wage Watch, which is a report on compensation comparisons as between the public and private sectors with some specific Ontario data pinned to the top of that full report. There's a document dealing with the Ontario government's pre-election commitments to small and medium-sized businesses and a report on attitudes toward small and medium-sized enterprises entitled Small is Big.
Catherine Swift, our president and CEO, appeared early in the committee's deliberations and talked briefly about the high business expectations we have from our small and medium-sized business members in Ontario, over 40,000 of them. The majority, almost 95%, of our owner-managers foresee improved or stable conditions for their own businesses.
But amid this good news effervescing in the short term are some disquieting signs that Canadians, Ontarians in general and independent business owners in particular are worried about their long-term futures. I guess the key policy question for all of us in this new century is, how do policy-makers extend this solid growth into the medium and long term while defeating the root causes of any underlying malaise?
CFIB believes that a focus on entrepreneurship is crucial, not only as a base for a healthy economy but as a foundation for a healthy society. CFIB's pre-budget recommendations to the Ontario government are focused on the elements necessary to capitalize on this entrepreneurial society while readying our economy to weather economic downturns. On behalf of our 40,000 small and medium-sized business members in Ontario, we appreciate this opportunity today.
I'd like to say a few words on building an entrepreneurial society. We believe that is crucial, not only as a base for a healthy economy but also as a foundation for a healthy democratic society. The mainstay of most communities is not the large corporations but the smaller enterprises that are closely integrated into the community in many ways.
Fortunately, Canadians and Ontarians are really quite entrepreneurial. There's some interesting data contained in the brief about the kind of renewal that happens in our sector. We believe that renewal in small business and the phenomenal growth in self-employment that we've seen would hardly be possible without the very high job satisfaction ratings found among small-firm employees, as well as among self-employed people. The chart is there for your perusal.
Our October 1999 poll, Small is Big, which looked at Canadians' attitudes about small business, once again placed farmers and small business at the top of Canadians' most respected list. Paying the ultimate compliment to small business in terms of career choice, nearly half of Ontarians indicate a willingness to consider starting businesses, and most would approve if their son or daughter or a close relative took the entrepreneurship plunge.
We believe that apart from business entrepreneurship, entrepreneurial values are very inclusive. In fact, these attributes and values can permeate every sector of society where contribution and success are rewarded and self-reliance is encouraged as a value.
There are a number of areas where the Ontario government can help position small business entrepreneurs for growth in the province. The key area is to deal with the number one problem. For eight out of 10 Ontario small businesses, that is total tax burden.
CFIB members acknowledge with appreciation provincial tax relief to date, including employer health tax, personal income tax, corporate income tax and capital tax, and we urge the Ontario government to adhere to its pre-election commitment to continue reducing taxes for families and small businesses in order to create jobs, strengthen the Ontario economy and keep our growth rolling.
We trust the government will also move quickly to fulfil its pre-election promise to publicly identify provincial fees and charges paid by businesses in Ontario and review existing fees to determine whether they exceed the cost and the value of the service provided.
When we look at taxes, we also look at tomorrow's taxes, and that leads us right into the spending and debt arena. CFIB members welcome the Ontario government's taxpayer protection and balanced budget legislation and they acknowledge the greater progress made to date by the province in controlling spending as compared to the federal and municipal levels of government.
We issue a caution, however, that the Ontario government, through its new agency, the Ontario SuperBuild Corp, adhere to the proposed directions of investing in genuine infrastructure that truly does support growth, competitiveness and the entrepreneurial culture.
I draw your attention very briefly to another report we did entitled Wage Watch, which is in your kit and which canvasses the public sector compensation advantages over the private sector. Our recommendations in this area are basically to develop a statistical database so that this kind of information can be made available on a more timely basis. Secondly, there need to be policies to bring public sector compensation into line with the rest of the economy, including the pension and employer pension contribution area.
In mid-1999 we asked our members, through two different surveys, if they were in charge, what proportion of future surpluses should be allocated to the following areas. That included paying down debt, cutting taxes and spending on priority programs, the charges on page 6 of your material.
CFIB members placed the heaviest emphasis in their responses at both levels of government on debt reduction. However, small business would allocate more of the federal surplus to cutting taxes than they would Ontario's surplus, which is expected after the budget is balanced. CFIB on this basis urges the government to announce its promised debt reduction plan which, after balancing the budget on schedule, is to set out a plan to pay down debt every year afterwards, including timetables to meet target debt-to-GDP ratios.
Turning now to the worst tax culprit, which is the profit-insensitive tax, I think it's well understood. I know Minister Eves in his remarks talked about profit-insensitive taxes punishing small businesses, and that of course is because they have fewer profits and typically greater labour intensity than their large-firm counterparts. There are a number of profit-insensitive taxes here: employment insurance, CPP, EHT and so on down the line.
We appreciate the support the Ontario government has lent to our efforts federally and we call on the government to continue pressing the federal government to substantially reduce the EI surplus through payroll tax decreases, linking this to any increases in CPP premiums so that the total load does not continue rising.
On the employer health tax, as we've repeatedly indicated, the first $400,000 exemption on EHT was highly appreciated by our members. Without question, this relief measure was more than repaid in substantial growth in tax revenues.
One policy challenge facing Ontario is that we're graduating relatively few small entrepreneurs to the medium-sized category. We certainly think that some of the reluctance to grow may be linked to the various tax and regulatory thresholds currently in place. When we look to the west, our nearest neighbour, Manitoba, has an initial exemption threshold of $1 million in their payroll tax. CFIB therefore encourages the Ontario government to consider increasing the EHT exemption to $600,000, which would make it consistent with the paperwork threshold for EHT, and subsequently to match the Manitoba exemption level in the longer term.
Property tax stands out as a profit-insensitive tax which is a severe problem here in Ontario. A lasting solution to this tax problem is needed. It's certainly a very huge issue, and the uncertainty about what the future holds post cap, coupled with the sheer weight of this tax, is a major impediment to business growth and economic development.
Our report card on municipal governments in Ontario, which was based on an in-person survey of over 16,000 businesses, found municipal governments receiving disappointingly low ratings. This is a repeat of a study we did two years ago. Each of the factors considered-property tax levels, value for money, control of municipal wages, regulations, bylaws and overall awareness of small firms-were not felt by our members to be issues that the municipal government dealt with in a satisfactory manner.
Property taxes in Ontario remain very high relative to the rest of the world, as you can see from the chart on page 8. We're the property tax capital of the world here in Ontario, and the business sector is the most ill-treated under this system.
The property tax rates for business as compared to residential show an enormous business-residential gap, which we don't believe is justified on any economic basis, but certainly on a political basis it serves to cushion voter residence in the short term from the full cost of the local services they enjoy. Ultimately, it dilutes local government accountability to voter-residents, resulting in higher-than-necessary spending.
The disproportionate load on small business entrepreneurs locally dampens the economic growth in the community, suppresses the creation of jobs and hurts residents' children who are, of course, seeking their first job experience with the small firms locally.
There is some information on the top of page 10 about how the first round of province-wide reassessment actually worked out in terms of perceived value by our members. Clearly, there are some bumps to be worked out in the next round of reassessment.
Turning to our members' direction on what to do when the caps expire, we asked our members this question. Clearly, figure 9 shows the most favoured responses include removing more social services costs from the property tax, setting out a multi-year plan to reduce business education taxes and narrowing the business-residential property tax gap. Probably a mix of a variety of these options will be what ultimately works in the long term.
We've set out a series of property tax principles of fairness that we hope will guide the next round of property tax reform, fully understanding that because the distortions developed over some years, it will take some time to rebalance the system. However, there has to be some evidence of progress in the right direction that's solidly evident to small firms.
We recommend, in connection with property tax, that the Ontario government implement a permanent property tax solution for small firms, including a target and timetable for narrowing unfair business-residential gaps and including relief on the onerous business education portion once the caps expire.
I'd like to say a couple of things about personal income tax reductions, which we support as a balanced approach for fiscal restraint and bringing stimulus to the economy. The made-for-Ontario tax system is something that CFIB has long been critical of. We've surveyed our members on this issue many a time. The most recent was 1998, and that particular mandate vote was attached on the issue: "Should provincial personal income taxes be collected as a percentage of taxable income rather than as a percentage of federal tax?" Sixty percent of our members were opposed in that last vote.
Our concerns with tax on income are the tax grab potential, compliance problems with varying systems across the country and the distortions between provinces. Notwithstanding our concerns about the fact that this tax collection arrangement was done very quietly and without consultation, it does in a sense offer a new and interesting opportunity to address the most serious issue facing small firms, and that is undercapitalization.
On corporate income tax, of course we hope and recommend that the government will carry forward on its announced plan to reduce the small business corporate income tax rate until it reaches 4.75%. As well, we believe that this is another threshold area which is preventing growth to the medium size and we would urge the small business deduction threshold be increased. Alternatively, raise the upper bound for the clawback from its current $500,000 level to $1 million to allow the benefit to extend somewhat longer and take account of the growth.
The last area I wanted to address is the barriers to entrepreneurship in business. We have been working forward on the tax administration fairness issues and we trust and hope that the Ontario government will continue implementing its 1999 budget announcements, plus further tax fairness administrative issues that are required. Catherine Swift spoke about PST-GST harmonization, and again that's a barrier that would need to be addressed. We've set out some principles for future sales tax reform in that area. Also on sales tax, we recommend that the government update the compensation for PST collection by small retailers, as well as consider the effect of a cut in the rate as a stimulus measure.
On regulation and paper burden, this commission has done much, but much remains to be done. In this regard we support enlarging its scope to include such ministries as municipal affairs; finance, tax revenue division, for the administrative side; environment; and transportation. We urge the Ontario government to address the specific reforms in the commission's final report. As well, we support the launch of a working group to tackle paper burden and forms with the relevant ministry.
There's also a recommendation, given the concern over high fuel prices, to offer relief on gasoline and diesel fuel taxes at this time.
Financing growth is a serious issue, as I mentioned. A surprising 40% of our members indicate availability of financing to be a serious concern for them. This is double what it used to be in the late 1980s at a similar point in the business cycle. Our banking sector is dominated by the Big Five. Competition is narrowing, not broadening. There's no effective second tier. The Canada Trust-TD bank fusion means the loss of the last potential platform upon which to build a viable alternative structure.
Equity availability is a problem for most small firms. The most effective way of supporting the equity position of small business is through the tax system and not through artificially concocted programs that assist a few.
There are several recommendations here in the financing area which we commend to your attention. The summary of recommendations follows, beginning on page 18 of the report. Brien and I would be delighted to attempt to answer the committee's questions.
The Chair: Thank you very much. Continuing in the same rotation we had yesterday, I'll start with the government side, Mr Galt. We have approximately three minutes per caucus.
Mr Doug Galt (Northumberland): Thank you for an excellent presentation. Good to have you with us.
I want to go to your research on Wage Watch and chat about that for a few moments. I gather that's provincial employees and doesn't include our transfer partners such as boards of education and their salaries. Do you have that information?
Ms Andrew: We have it all different ways, so if you were interested in that, we could get it.
Mr Galt: I'd be very interested in it. Mainly the reason I am is that we've been on the road I forget how many days now, and we've heard from umpteen teachers' unions, somewhere between 15 and 20; I haven't added it up. They want to be able to charge property tax for educational purposes again direct to school boards. What I found absolutely intriguing is that we haven't had a single school board come before this committee to look for money, as most organizations come to this committee hoping there will be money in the next budget. Similarly, we haven't had a trustee organization come before us, which I think is rather ironic, because they are the ones who need the money to pay the salaries. We're hearing from the teachers that they haven't had an increase in X number of years. At the same time I heard from a futurist on the weekend that real dollars in purchasing power etc from 1989 to 1998 went down something like $3,000. I would think maybe our teachers' unions should be quite thrilled that they are holding their own with what's happened, particularly in the early 1990s.
So you do have this information?
Ms Andrew: There is a problem with the data, and our main recommendation in this area is to get up-to-date data. Of course, what we're trying to do here is compare for matched occupation, public and private sector, so we will see what we can find in the teaching arena.
Mr Galt: Really appreciate that. The other question I have relates to gasoline. Some of the consultation with the task force has suggested that we should be cutting fuel taxes. If that was cut, how many jobs would be created for each cent that we would bring it down? Do you have any feeling on how many jobs might be created?
Ms Andrew: It would be very hard to hazard that kind of a guess. We made a separate presentation to the gas prices task force earlier this week, and included as part of that presentation were a number of comments and concerns that have been flowing in to us from all across the province, and we can certainly tell you that the problems with gas and diesel prices are rippling right across the economy. Independent operator-truckers and so forth are in many cases out of business, parking their trucks, even bigger companies-it's been felt in the agriculture area-in terms of all kinds of problems. It's more what could be saved as opposed to how many would be created.
The Chair: The official opposition.
Mr Gerry Phillips (Scarborough-Agincourt): Thank you. It was a very complete presentation and there's little time to ask questions.
To start with your members' views on the allocation of "the fiscal dividend," whatever it's called, they're suggesting that roughly 45% go to debt reduction, roughly 30% to program enhancement, and roughly 25% to tax cuts. The government, on the other hand, has announced what it's going to do over the next four years. They've announced about 55% will go to tax cuts, 35% to 40% to program enhancements and 5% to debt reduction. Your advice to the committee is that the 5% to debt reduction and the 55% to tax cuts is inappropriate?
Ms Andrews: Clearly from these data at both levels of government our members see debt reduction as a number one priority. That came up in a slightly differently worded question last year as well. Our members see debt as tomorrow's taxes. It's got to be paid sometime, so at times total tax burden and deficits and debts typically run neck and neck as issues. Reducing taxes and reducing debts are not dissimilar in our members' view.
Mr Phillips: On hindsight, do you think it was appropriate to add $22 billion to the debt of the province since Harris became Premier? Was that a good idea?
Ms Andrews: We did some surveying, particularly around the income tax cuts issue and the EHT cut issue and our members did see the tax reduction stimulus as positive. They believed a balanced approach was to deal with the spending side, stimulate the economy, and bring the deficit down and eliminate it on target. But they are concerned now that the debts be addressed and not forgotten, because we do need to set ourselves up for the next downturn and be able to weather it properly.
Mr Phillips: It's actually $30 billion when you include Hydro in it, but it's $22 billion when you don't include Hydro. It's quite amazing. The government, I think, has indicated that they've added $22 billion and over the next five years they'll reduce it by $2 billion, which seems inconsistent with your members' advice here.
The second question is on harmonizing the PST and GST. My recollection is that about $500 million of provincial sales tax goes on exports. First, is that consistent with your research, and second, does your proposal to harmonize it assume that no PST goes on exported product?
Mr Brien Gray: Mr Phillips, I can't give you an answer on the $500 million right now, but I'd be glad to take a look at what our numbers show us. With regard to the way the input tax credit works, quite clearly one of the reasons for a blended system is that you would have input tax credit, and that would be good for business generally. From the perspective of our members, the simplicity of one system as opposed to two quite separate systems stacked on each other, we haven't been going out surveying about this very much, but we constantly hear from our members that it's ludicrous. It doesn't make any sense from their perspective that they're having to work under two regimes. The costs and the administrative compliance costs involved with that are nuts.
With regard to the input tax credit on exports, that's not something we have surveyed our members on yet, but it's something we probably should do.
Mr David Christopherson (Hamilton West): Judith, good to see you again. Thank you for the presentation.
Just to pick up on a question that Mr Galt raised on behalf of the government, it's interesting that when he talks about the teachers' presentations, he wants to talk about the one or two lines that some of them happened to mention in terms of teachers' wages. The vast majority, 99% of each report, did not deal with that issue at all; they dealt with all the problems that are happening, the crisis that is affecting our children.
For example, I would draw to Mr Galt's attention and to the presenters, there's a report presentation in front of us from OSSTF district 8 and, if you'll notice, nowhere in there do they talk about wages. They're talking about the funding formula, they're talking about the impact on children and the fact that there are no longer any librarians, psychometrists, psychologists, educational assistants or English-as-a-second-language teachers. All those things have been cut. When you talk about education, let's be sure we talk about what the teachers spend 99% of their time talking about, which is the absolutely horrific damage that your government has done to education through your funding cuts. Let's keep things in perspective.
When we talk about public sector wages, once again, government likes to think that they've got a good punching bag with teachers, but when you go after public sector workers, you're also talking about firefighters, police officers, nurses, the folks who are out right now plowing our highways. I don't hear him saying that those people-and this is his subtext-are all paid too much. The fact is that you just want to make sure everybody's wages are at the bottom so you and your buddies can make as much money as possible, and everybody else be damned.
I wanted to ask a question about the capping, because your focus is, of course, small business. In Hamilton, the nightmare of the government's legislation to change assessment required six more pieces of legislation to fix all the mistakes that were pointed out to them in the first place. You know the damage that was caused out there.
In Hamilton, you may be familiar-and I've asked others in other communities; it's the same elsewhere-the one side benefit to that whole exercise for small business in Hamilton was that in the downtown and Westdale area, assessments that had gone sky-high and made them very uncompetitive were finally going to be adjusted and they'd be back in the game. With the capping, it left them still uncompetitive and, in fact, we've lost as much business since then as we did before.
You mention that this needs to be addressed. I think we all agree with that. Specifically, though, what do you think the government ought to do in terms of what some refer to as an exit strategy? Exactly what do you think the government ought to do to correct this situation if we all agree that businesses in areas like downtown Hamilton are being adversely affected by the previous capping?
Ms Andrew: Obviously if you're a business facing a 300% or 400% increase, the cap was a welcome piece of legislation. For those for whom taxes were going to go down but for the capping, it was very unwelcome. We think that it's a greater sin to overtax than to undertax and therefore there needs to be a way to bring down taxes for people who are overpaying, possibly through better spending control at the municipal level, narrowing the business-residential gap so that you do get accountability for local spending to the voter-residents and a variety of other things as included in figure 9, such as the education portion relief in that area as well.
On the education portion alone, the average across Ontario is about 3.5%. The residential education portion is extremely low. It went from 0.46% and it's going down by 20%, worsening the gap. The government, even on the piece of the pie that it controls, is not dealing with the gaps in the right direction. We're very concerned about that.
The capping legislation for businesses facing increasing taxes was needed, but it has been very detrimental for those whose taxes should be going down.
The Chair: On behalf of the committee, thank you very much for your presentation.
Mr Galt: On a point of order: Mr Phillips consistently, when he's drawing in the debt increase, includes Ontario Hydro debt, which is very unfair. If you want to include that, I can demonstrate that there's actually been a reduction of $10 billion in Ontario's debt. If you want to include-
The Chair: Let's have a bit of order.
The Chair: Mr Galt, Mr Phillips, please. If you don't stop, I'm going to call a recess, so make up your minds.
ONTARIO HOSPITAL ASSOCIATION
The Chair: Our next presenters are from the Ontario Hospital Association. On behalf of the committee, welcome. You have 30 minutes for your presentation. Could you please step forward and state your names for the record.
Hopefully we will have a little more decorum in the room.
Mr David MacKinnon: My name is David MacKinnon, president of the Ontario Hospital Association. With me is Murray MacKenzie, chair of the Ontario Hospital Association board.
Mr Murray MacKenzie: Thank you for the opportunity to be here today. As indicated, I am chair of the Ontario Hospital Association board and president and chief executive officer of North York General Hospital. I would like to make some brief comments before turning the microphone over to David.
As both an OHA board member and a community health care provider, I am encouraged by the recent comments made by Premier Harris and Health Minister Elizabeth Witmer, recognizing the imminent and urgent need to address the issue of sustainability of our health care system and the tough decisions that will have to be made about how much we as Canadians are willing to spend on our publicly funded system.
The greatest strategic threat confronting us in all sectors of the health care system in the short and intermediate term is the shortage of nurses. This is directly related to funding levels and sustainability. Workload, job insecurity and international and interprovincial competition are all critical components of this equation.
We are on the cusp of a great demographic shift. Ontarians are living longer and their health care demands are growing. This dynamic is challenging health care providers and the government to rethink how we view our health care system, and truly how best to organize it to ensure sustainability for future generations. This is a terrific, monumental challenge.
Much work is being done in this area, from the primary care pilot projects currently underway across the province to the establishment of the Ontario Medical Research Council, which will support research in Ontario's own hospitals and universities. These initiatives and many others will form the basis of modernization of our health care system, and there is much more that we can do.
Over the next few weeks, the OHA will be releasing two ground-breaking studies. The first will contain recommendations for building a sound and reliable capital funding system for hospitals and creating an environment conducive to private sector investment. The second report will look at alternative pathways for the evolution of hospitals and their potential partnerships in the community. We believe that through partnership and innovation we can, and will, ensure that our universal health care system is increasingly accessible, accountable, affordable and of very high quality.
Now I'll turn the microphone over to David.
Mr MacKinnon: Thank you very much, Murray. Good morning, and thank you for the opportunity to be here.
I'd like to focus my remarks on the key issue of sustainability that Murray has mentioned. We believe that in general the universal health care system that has been a part of the life of the province for so many years is at risk. It's at risk of being overwhelmed or being left behind by technology and other developments. We believe this for a number of reasons. First, the pressures on the front-line staff, as Murray mentioned, particularly on nurses but also on physicians and many other categories of staff, are immense, and in many cases they are working beyond what can reasonably be expected on a sustained basis to provide the services consumers require.
The second reason for our concern is that new technology is reshaping society. Given our current level of investment in technology in the hospital system, we cannot really hope to keep pace with these changes.
The third fundamental reason for our concern is the comment Mr MacKenzie made that our population is growing and aging, and the demand on the health care system as it is currently constituted is outstripping both our physical ability to meet it and our financial ability to fund it. All of this has fundamental implications for health care and for society as a whole.
According to a recent study commissioned by the Ontario Hospital Association, hospital funding would need to be increased by 18% in real terms over the next five years, and significantly greater amounts over the next 20, to accommodate Ontario's aging. Of course, this is a problem we have along with every other advanced, developed country in the western world. But this very difficult picture-and I find it hard to underestimate how difficult it is and will come back to that point-may not be as bleak as it might appear in terms of looking to the future.
The Internet, advances such as robotic surgery, the mapping of the entire human genetic structure and advanced telecommunications are all fundamentally transforming health care, making it an international business for the first time in human history-and I'd like to think about the implications of that-and creating massive new opportunities for us to compete if we can serve our own consumer base well and build on that to compete around the world in the new international structure of health care. As that happens, as a well-organized, single-payer system with substantial resources of knowledge and skills, we believe we have a capacity to compete that is exceptional and we're not without hope that we can contribute more broadly to the economic base of the province if we do.
Of course, there is a risk. As health care becomes much more international, we must adapt. If Ontario's hospitals particularly, but also the rest of the health care system, fail to make that transition properly in terms of quality patient care, high quality of life and all those other issues, we think the future competitiveness of the province could be significantly impaired.
The stakes are very high in the transition that's about to transform health care in much of the world. But we do believe, given our fundamental strengths, that if we play our hand with imagination and with courage, our system could be valued as much as a source of future economic growth as it is valued for the vital consumer service we provide.
Investing in hospitals and the technology that supports their work would be a very important step in making that transition as smoothly as possible. I'd like to talk for a moment about why technology looms so large, because it is a fundamental underpinning to everything that is happening in health care.
How many times have each of us sat in front of a physician or nurse and recited our medical history? We all do that. Currently, in the vast majority of hospitals and physicians' offices across the province, once that initial consultation takes place, records have to be transferred manually between caregivers or additional medical history and diagnostic tests have to be retaken at a significant cost to the system. The cost of transferring and the cost of redoing tests is high.
Internet technology can change a lot of that. It can provide real-time access to records, MRI results, diagnosis and consultation. It can do that for people without their ever having to leave home.
Not long ago at a seminar in the United States I watched a demonstration. A lady used to have to leave her home, spend two or three hours on a bus and go into a crowded hospital emergency room. She spent a couple of hours doing all that and then had to reverse the process. One day the staff of the hospital showed up with a little Internet-based computer and self-diagnostic equipment, and the intrusion on her day constituted spending 15 minutes going down to her basement and coming back up. All the records and the testing involved were done by this little self-diagnostic machine, and the next thing that happened was a PowerPoint graph came off in her physician's office at the hospital. Amazing things are possible.
But at the heart of all those, our ability to make them happen, of course, is funding. We still continue to experience funding challenges of the most serious order. A particularly serious one relates to capital. Our most recent financial review of Ontario's hospitals, conducted by our change foundation and the Canadian Imperial Bank of Commerce, reports that the rate at which hospitals have been investing in capital assets has declined precipitously over the last three years, particularly with respect to medical equipment and information technology. In 1996-97, hospitals invested approximately $1 billion in these areas. In 1998-99, that figure had fallen to just $230 million, a sudden, serious fall-off. Given that technological environment and the real possibilities before us, you can see why we are particularly concerned at the moment about our expenditure patterns.
To reach acceptable investment levels, the provincial government would probably have to spend an average of $960 million in each of the next four fiscal years to equip us for the technological world we are about to enter. This of course is in stark contrast to the 10-year average contribution by government to health capital of about $160 million. In an era of balanced budgets and very difficult financial demands, we really need to think about how to access roughly six times the annual capital spending in order to be competitive in the new international world of health care than we are currently able to access.
We know there is a wide variety of possibilities before us, that it can't all simply be the taxpayer, although clearly that's where most hospital funding comes from. We have been working with a hospital capital funding working group, drawn from the private sector, on how hospitals can address funding shortfalls through a variety of means, including new public-private partnerships and perhaps methods of pooling to access funds, a whole variety of means by which we can bring an additional element of private sector revenue into this.
In light of our interest in this area, we are very encouraged by the creation of the $20-billion SuperBuild Growth Fund and particularly encouraged by the people who have been appointed to its board. We hope that organization will provide hospitals and other public sector institutions with significant access to funding.
I would also like to talk briefly about research. The people of Ontario should be encouraged by the fact that some of our teaching and research hospitals, despite all our challenges, continue to emerge as world leaders in the areas of research and development and technology. Take, for example, the world's first robotic heart bypass surgery, performed at London's Health Sciences Centre last September, and the recently announced development of a synthetic human cornea at Ottawa's Eye Institute-just an amazing transformation. These are but a few examples of the many and varied advances that have been made from research done in our own hospitals.
To us, as we look at the combination of where we are in terms of funding and the potential and the economic development importance of our industry, there is really no choice: We have to find ways to make additional investments, and we need to do it now. If we choose to do otherwise, we'll see Ontario fall behind the world and we will erode some of this country's most important assets. The scientific capabilities of teaching in large community hospitals constitutes one of the principal assets Ontario has to secure its economic future, and if we erode them, it's not just the consumer service that gets eroded; it's a serious blow at our economic competitiveness in the years to come.
What we are saying really is that we see health care and hospitals as one of the most important investment choices for our society and not just as a cost to be borne. We also think the same logic, from what we can see, is applicable to universities and community colleges as well.
There are several other things we need to do, of course, beyond addressing the fundamental capital and operating financial issues that have been developing in the hospital system for many years. First, we believe we need to reorganize our delivery of care. We need to change the delivery of retail medicine by supporting primary care reform initiatives, including enlarging physician group practices. Enlarged physician group practices, more physicians working together more effectively, is probably the single most important thing that has to happen to improve the overall functionality of the health care system. If we do that, then those physicians will be able to employ modern technology, nurse practitioners and other health care professionals more easily.
Secondly, we also need to move quickly, in light of my earlier comments, on issues such as telephone triage, teletriage, the Internet and expanded communications services.
Thirdly, we also need to become, as most health care sectors need to, more accountable and more transparent with the public as to how we're spending tax dollars. I believe the hospitals in Ontario pioneered, with our hospital report card project of the last two years, in making everything that we do much more transparent and in giving consumers the information they need for their own decision-making, and we intend to continue to do that. We intend to be fundamentally accountable to consumers in steadily improved methods in the years to come.
We'd like to recommend this morning three specific things, in addition to the general observations I've made, for the 2000 budget.
We'd like to recommend that the government ensure hospitals have sufficient operating funding to maintain access to patient care services, including emergency room services. As part of that, we would like to see hospital operating funding put on a more secure funding basis by providing a three-year rolling funding commitment that allows some predictability in the system. At the moment, a lack of predictability in funding is a very serious problem for us, as well as the overall problems I mentioned earlier.
Second, we would like to see government amend capital funding policies to provide upfront funding for hospital investment in new information and medical technology. Again, from my earlier comments, you can see why we believe that's so vital.
We would also like to accelerate hospital-based health research. We welcome the many ideas the government has, some of which are being implemented, to assist with hospital-based and health care research so that we can continue to create high-value-added jobs for the future.
I'd also like to note, as I come to the conclusion of these remarks, that we really do agree with the position taken by our provincial government and other provincial and territorial leaders that federal transfer payments to the provinces must be significantly enhanced. The federal contribution, we believe, has fallen off too rapidly in the past few years.
We'd also like to recommend-and this may be a controversial issue-that federal policy and transfer payment structures be amended to eliminate all the distortions that discriminate against Ontario and that could undermine the future development of the country. There is at the moment significant evidence that the entire public sector in Ontario, whether it is hospitals, universities, transit systems or community colleges, is facing very significant solvency and debt problems, and that the scale of those problems is related to the massive net transfers from this province to support public institutions and the public infrastructure in other parts of Canada.
I don't want to overstate that, but the numbers involved are huge. The question I think the people of Ontario need to ask is, given the apparent solvency problems in many parts of the public sector in Ontario, how can that be related to the very significant transfer payments that are going to support public infrastructure in other parts of the country? That may be fairly substantially in relation to how we fund our own. Nova Scotia's eight universities comes to mind.
I hope that issue can get some thoughtful attention from the people of Ontario, not just the funding of hospitals, but what we have to do to place this province in a position so that its public sector institutions can move to the future with some confidence and certainty and not just be worried about their cash management and maintaining their standing day to day. If we can get that predictability, if we can get that certainty, I think there are wonderful possibilities before us, but if we can't, the issues look to be very troubling indeed. Thank you very much for your time.
The Chair: Thank you very much. We have two minutes per caucus.
Mr Phillips: There's hardly enough time, but I want to start with a specific. About three years ago, a young lady went to a hospital in my area. She was eight months pregnant. She had a brain hemorrhage and the local hospital knew she was in terrible difficulty. They tried to get her a bed here in Toronto. The CritiCall made 21 phone calls and couldn't find a bed to accommodate her. Finally, the closest bed was in Hamilton. They tried to get an air ambulance. An air ambulance couldn't come. They transported her by land and she passed away. They saved her baby, although they had to get a doctor from another hospital to come.
I spent two years-I did it behind the scenes, not publicly, but with the minister-trying to get an explanation of it. Finally, there was a coroner's inquest last June. I went down to that coroner's inquest, and it made several recommendations. Today in the newspaper I find the story of a man who died under very similar circumstances, almost identical-CritiCall making, I think, 15 calls, they could not get a bed here in Toronto, transported to Hamilton and passed away.
I had assumed that the coroner's inquest would have been enough of a signal to whoever-the Ministry of Health, the Ontario hospitals. The reason I'm raising it today-I realize it's a specific case-is I tried to do all the things that a local member would do. I tried to deal with it. I sent a private letter to the minister. The family wanted to go public. I said "No, let's try and find an explanation." Yet several months later we find another person has passed away under almost identical circumstances.
My question really is this: When you have a coroner's inquest that makes these specific recommendations around things like CritiCall and making sure there are intensive care beds available for something like this, what happens? Does it just fall into a bureaucratic pit, or does something really happen to try and save people's lives?
Mr MacKenzie: Why don't I make a comment or two to give you a perspective about what happens at the local level and then David can talk a little bit about what the Ontario Hospital Association does to try and facilitate lessons learned. I'm not sure that either of us can comment fully about what happens within the Ministry of Health. However, I know in hospitals across the province all coroner's jury recommendations are received by hospitals, insofar as they may relate to some aspect of hospital care or health care, and are widely distributed through the hospital. Through a series of educational sessions, front-line staff are engaged in thinking through, "What can we do in this organization to make sure that it doesn't happen to us, to our patients, clients and residents?"
At the Ontario Hospital Association there's a broader process which the OHA uses to facilitate coordination and co-operation as well as communication, which David will mention, and liaison with the ministry.
Mr MacKinnon: When we get a major coroner's report, and we get many of them-I'll use just one example, the Kyle Martyn issue. You may recall the intensive publicity surrounding this case in a hospital in Mississauga. When the coroner issued the coroner's report, about 40% of the recommendations were directed at the OHA specifically and many others at its members and the OHA. We implemented all of the recommendations within the six-month period given to us and it led to very significant upgrading of triage training across the province, including the rapid implementation of a more advanced triaging system.
We do go through them, Mr Phillips. We have a specific process to do that. When there are system implications, we draw them to the attention of all our members, and we intend to do that more and more intensely.
We also know from our report card issues that once people get into hospitals they are quite well treated, but the clear focus has to be on enhancing access. We're going to expand that system so that we report more on the access issue, so people can actually track it more closely.
Mr Christopherson: Thank you for your presentation, gentlemen. As you know, the front page of the Toronto Star today has a story headlined "Man Died After Five-Hour Search for Hospital Bed." If I can just quote a part:
"`It was more urgent than anybody anywhere-his condition was imminently life-threatening,' says Dr Dan Watkin, the emergency physician on call at Collingwood General Marine Hospital.
"`In 15 years in rural areas, I've never seen a patient of that severity be delayed.'"
The end of the article states the comments from Mildred Lambe, who is the patient's wife:
"But she says it's a bitter irony that her husband may have been let down by a lack of provincial spending.
"`He was always so impressed at the cutbacks. To think that the time of his life when he needed something from the system, it failed him.'"
I would just say parenthetically that I think we're going to see a lot more of this. People in general like the idea of the tax cuts, they think it's wonderful to get government off our backs, but when it's your family member who is affected directly, when you need the bed, when your child needs help with special assistance or supports in the classroom and they are not there because of the funding cuts, suddenly the whole thing takes on a very different perspective.
This is happening all the time. In Hamilton recently, maybe you're familiar with the situation of Barbara Mersereau's mother, who was in Mexico and desperately needed to get back to Ontario. The physicians in Mexico and her own physician agreed she needed to be air-lifted. The insurance company was onside, everybody was onside, and they couldn't find a bed. It was only because her husband happens to be a local psychiatrist and has connections in the medical community-and he admits this-that he was able to, as he says, pull a string and get a bed for Barb Mersereau's mom.
Far too often we're seeing that people aren't getting particularly the emergency service they need. Hamilton Health Sciences Corp is running a deficit. You talk about the debt problem of hospitals. Unfortunately, the media often portray it, reporting the comments of others, that these are hospitals that aren't managing properly. "They've got a deficit, so what's this big problem? They never had it before."
My view of it is that you can always improve efficiencies, but the reality is that the cutbacks mean that you make a choice: You either provide the services and run a deficit or you don't run a deficit and the services aren't there. And when the services aren't there, that's how we get these headlines and that's how people like Barb Mersereau's mom are not able to find a bed.
What do you think the government ought to be doing immediately so that Ontarians can be satisfied that the emergency service they are bloody well entitled to will be there for them?
Mr MacKenzie: I'll make a comment initially. One of the sad realities which we have evolved into is that although adequate, appropriate funding is totally necessary to sustain our health care system at an appropriate level of quality and access-and we give full credit to the government for the additional monies they allocated just before Christmas to the system generally and to help with emergency services-the problem is that nurses, particularly emergency nurses and critical care nurses, are not out there to be hired.
Mr Christopherson: Why aren't the nurses in the hospitals right now? Why haven't they been there all along?
Mr MacKenzie: There was a recent study you may have heard about that the Canadian Nurses' Association just released, and there are lots of other data. Between 1990 and 1998 in this country we've lost about 4,000 nurses net per year to the United States-
Mr Christopherson: Why?
Mr MacKenzie: -and one in three nurses even today leaves the profession within the first five years. Some 10% on top of that go to the States. Why? Workload.
The Chair: Thank you very much. We've run out of-
Mr Christopherson: What I'm getting at is that the irony is that the government cut the transfers-
The Chair: Let's have some order.
Mr Christopherson: -and that's why the nurses were laid off.
The Chair: Mr Christopherson, I will not warn you again this morning.
The Chair: I will recess if you continue on your tirade. I've given you five minutes. I said two minutes; I've given you five minutes. That's more than fair. If you're going to take advantage of somebody else's time, I will recess and everybody else will be penalized on their presentation time. I will not repeat my statement.
Mr Ted Arnott (Waterloo-Wellington): Thank you, gentlemen, for your presentation. I've got a quick comment and then I want to defer to my colleague Mrs Molinari, who has a question.
I want to thank you very much for the constructive suggestions and ideas that you presented today. I know the government will give them all due consideration.
I've heard the opposition comments. Certainly there are problems in health care. We acknowledge that. We're working to solve them. We're hoping to receive further assistance in the upcoming federal budget to fully restore health transfers. I recall the comments that were made by you, Mr MacKinnon, before Christmas, that the government has been very responsive in terms of working with you to solve problems. I think you said we've done more in that respect than any government in recent years. You've given credit to the Minister of Health, and I want to thank you for that, and thank you for your presentation today.
Mrs Tina R. Molinari (Thornhill): Thank you very much for your presentation. It's very comprehensive and it gives us a lot to go into as we move along with the rest of the budget hearings.
On your point about the more secure funding and the three-year budgeting, I certainly agree with the multi-year budgeting and the benefits it can have on any organization, so I certainly concur with that.
I do have one question. As one of the recommendations, you have investment in new information and medical technology. Could you give me an idea of what percentage of the total budget you believe should be invested in that area?
Mr MacKinnon: We drive at it more from a question of how much others are spending and the specific nature of the technological investments we'll have to make. I think the figures in our presentation show that we think we're about one sixth of where we should be, and that is a really serious problem.
I think where it takes us for the future is new partnerships with technology enterprises. It's clear that government funding will have to increase significantly to not only resolve the very important consumer service problems that we're facing but also from an economic development point of view.
In the end, I think it's going to be two things: significantly enhanced government funding and a much broader sense of partnership with the private sector to get a level in hospitals that has to be a large multiple of what it now is. I would say something in the order of four, five or six times the current level would be necessary to be competitive in the years to come.
The Chair: On behalf of the committee, thank you very much for your presentation this morning.
Mr MacKinnon: Thank you very much, Mr Chairman.
The Chair: I'd like to make a quick statement. I know this has been a long three weeks for most of the members and I know that every one of us is getting somewhat tired. We're running 10 minutes late already this morning. We've been very punctual throughout all the hearings across the province. I've had co-operation from all the members, including you, Mr Christopherson, and I certainly appreciate that. I don't mind running late. I've given everybody their fair time.
Mr Christopherson: You've had your say, Chair, and I've listened to it. Get over it.
The Chair: OK. I've given everybody their fair time, more than their fair time, this morning.
RETAIL COUNCIL OF CANADA
The Chair: We'll continue on with a presentation with the representatives from the Retail Council of Canada. On behalf of the committee, gentlemen, welcome. You have 30 minutes for your presentation this morning.Could you please state your name for the record.
Mr Peter Woolford: Good morning, Mr Chairman and members of the committee. My name is Peter Woolford. I'm with the Retail Council of Canada. I'm joined this morning by Brian Rudderham, who is the controller with Wal-Mart Canada and the chair of our taxation committee. We have provided a written submission. I've got a few opening remarks and then we'd be glad to take comments and questions from the committee.
First of all, we do appreciate this opportunity to appear before the committee this morning and provide the views and advice of our members in advance of the 2000-01 budget. As well, on a personal note, I would like to express my thanks to the committee and to the Clerk's office for making it possible for us to be here today. I know that I had given a very short window in which we were all available to appear here, and I do appreciate that opportunity.
A little bit about the Retail Council: We are the voice of retail in Canada, and are a non-profit, member-funded organization whose more than 8,500 members across Canada include national department store chains, national and regional discount chains, mid-size specialty stores and independent merchants. Something that people don't always know is that over 90% of our membership are independent retailers with one or perhaps two stores. Our members account for about two-thirds of Canada's general merchandise retail volume.
I'd like to talk a little about how we see the retail market right now. I know that is helpful to the members of the committee and to the government as we look at the budget for next year. Then we'll run quickly through our budget advice for the government.
Nineteen ninety-nine was a good year for retailers. I'm delighted to be able to say that. It seems I've been coming to this committee almost forever with nothing but bad news about the industry. Our members enjoyed a strong 1999, with growth in sales at around 5.4% in the period from November 1998 to November 1999. That's a national number from Statistics Canada; I believe we'll have the full-year data next week.
Ontario's performance has been even stronger, with sales rising over 8%. In our view, at least part of the reason for this stronger growth in Ontario is the major stimulus provided by the Ontario personal income tax cuts implemented in previous budgets. As the committee knows, we are supportive of those measures. Sales continued strongly through the 1999 holiday season, and again Ontario results were slightly stronger than the national picture.
Looking forward to 2000, our members forecast another year of relatively steady, healthy sales growth, probably in the range of about 4%. However, we will continue to see significant variation in rates of growth among different sub-sectors, different formats and, of course, different individual retailers. In our view, what that reflects is the ongoing battle for market share which is raging inside the retail trade. Retail has always been a very competitive business, and never more so than at the present time.
While productivity in the industry has grown, in fact the benefits have flowed almost exclusively to consumers. Retail profitability has not changed, and while sales have grown we've seen very little or no increase in employment in the industry since 1998. Even at that time, the growth did not make up for the loss of jobs in the first part of the decade.
This should be of concern, because retail is a major employer in our economy, employing about one-eighth of the labour force and acting as a major entry point for people entering the labour force for the first time.
Let me touch on a number of policy issues we'd like to bring to the attention of the committee.
First of all, in the general area of fiscal policy and the broader issue of tax reduction, our first recommendation is to encourage the government to introduce in this year's budget for 2000-01 the proposed income tax reduction initiatives they announced last year. We take this position for two reasons. First, of course, as a business that sells to the final consumer, we are always grateful for more money in the pocket of the consumer. Secondly, we support the government's desire to reduce the role of the public sector.
Our second recommendation is that depending upon the fiscal circumstances of the government, we believe the provincial retail sales tax is another tax that might be a suitable candidate for a reduction in rate. I'd like to expand on that just a little. In our view, a rate drop would provide an immediate, direct and visible reduction in the cost of goods that people buy. Secondly, sales tax is one area where Ontario's rates now are among the higher in Canada, and Canadians have shown a willingness in recent years to bend or break the law in order to avoid taxes that they see as unfair or too high.
I can think of a couple of examples that this committee will be very familiar with from their past history. One would be the phenomenon of cross-border shopping in the late 1980s and early 1990s, and the second would be the widespread smuggling of tobacco in the mid-1990s. The emergence of the Internet as a shopping channel only intensifies the opportunity to do this kind of behaviour and adds competitive pressure to retailers here in Ontario. We will address the whole matter of taxation of Internet sales a little later on in the presentation.
The second issue is that familiar old chestnut, sales tax harmonization. I think I've been talking to the committee about this for 12 years. Our recommendation here is that the Ontario government should pursue harmonization. However, and we want to be very clear on this, it must not require merchants to include the tax in prices. The Retail Council is adamantly opposed to a tax-in, harmonized system with rates that vary by province. Again, I would like to take a little time to expand on that, so people understand how important this is for the retail trade, and in fact for the consumers who shop in our members' stores. Retailers must be allowed to display prices tax-out, to accommodate differing tax rates across the country. I'll talk a little about the direct impact that mandating tax-in pricing would have, and then a little about the broader system effects it has.
The best example of a direct impact that mandated tax-in pricing would cause is the effect on item price marking, where the individual price of the item is actually put on the container or product itself. There is a dramatic cost-saving if price tags are put on merchandise when it is manufactured. At this time the cost is virtually zero or very small. But at the time a product is manufactured, the province of destination is not known. When the iron, the can of soup or whatever personal care product or piece of clothing is manufactured, you don't know what province it's going to be sold in. If you are trying to price at that time, you need a single price to put on the product. If tax-in pricing is mandated, it would force retailers back to the 1960s, back to the practice of previous decades of pricing in the store. Everybody can remember the sales clerks with their pricing guns pricing items. This is a costly, wasteful process that retailers around the world are trying to get rid of.
Let me talk a little about the longer term impact of tax-in pricing, and that is to essentially balkanize the national economy that we've struggled for over 100 years to create in this country. Not only is the national economy destroyed by tax-in pricing, but the entire logistic system which is built around a single, national economy would be eliminated. The additional costs and loss in efficiency would far outweigh any tax saving and would destroy 20 years of technological progress in retailing and in the supply industries.
Let me turn to a brand new issue that is starting to emerge that we feel the government should give some attention to, and that is taxation of sales made over the Internet. The recommendation here is that we believe the logical and best way to ensure fair taxation of Internet sales is to harmonize the provincial sales tax with the goods and services tax. However, if that is not the direction the government intends to move in, we suggest that officials be directed to look for alternative solutions.
Let me talk for just a moment about this. Sales of merchandise to final consumers over the Internet, as everyone knows, have grown at an explosive rate and are forecast to rise rapidly going forward. The Retail Council is the voice of retailers, and that includes pure play electronic retailers, traditional bricks and mortar retailers, and what are now called clicks and mortar retailers-retailers who have both an electronic presence and a traditional store-type presence. Our view is that retailers of whatever type, located in Ontario, need assurance that out-of-province competitors do not gain a competitive advantage simply because they do not have to charge the tax because they do not have a footprint in the province. The government must, of course, maintain a competitive tax regime. But it should also be working with other governments to establish the rules for Internet sales that cross jurisdictional boundaries. That is simply a matter of tax fairness and the proper application of tax. In this area I think our interests line up very directly with the public interest and with the interest of the government, and that is to ensure that every sale carries its fair share of taxation.
The fourth broad area we would like to touch upon very briefly, we are aware, is not one that is the direct responsibility of the committee, and that is environmental fees and levies. We recognize that in this area the responsibility for designing funding for waste diversion has been delegated to the Waste Diversion Organization, and we will be participating in the work of the WDO. But we would like to draw a couple of quick points to the attention of the committee.
The first stems from the fact that however waste diversion is funded in this province, it will be done through something that walks like a tax, smells like a tax, looks like a tax and, by any other name, will be a tax. For that reason we would suggest that officials from the Ministry of Finance be involved in work on financing methods, because this is, in effect, a new tax. Ministry of Finance officials are experts in this area, and we believe it would be desirable to have that expertise at the service of the organization.
Second, we believe governments are experts at administering tax systems. For that reason we recommend that the government administer the new tax to ensure neutrality, equity and efficiency of operation.
The final area is one that the committee has already discussed briefly this morning with other presenters, and that is property taxation. We have just one point to make here, and that is that section 19 of Bill 14, which I believe was passed last fall, should be amended to put in place a more balanced process for reassessing specific properties and classes of property and that this include a proper appeal process. Our concern here is that the current legislation gives the minister very broad power and discretion over the taxation of specific properties and classes of property without any established process for doing that, nor any proper means of appeal.
In conclusion, we are coming off a strong year, 1999, and our members are looking forward to another year of healthy growth in sales. We believe the policies of this government have done a lot to support the environment and played a role in creating domestic conditions that underlie that growth. The challenge for the government now is to pursue policies that will sustain the economy over the medium term and to support the private sector's efforts to improve its competitiveness.
Those are the opening remarks. We'd be glad to respond to any questions.
The Chair: Mr Christopherson, we have five minutes per caucus.
Mr Christopherson: Thank you for your presentation. It's good to see you again. I have to say at the outset that I was a little disappointed that you've given all the credit for the economic activity we now have and the booming economy to the Harris government. There's no reference whatsoever in here to something that virtually every economist who has presented to this committee has talked about and that is the fact that the booming US economy, and therefore the export sales that's generating, is really the main driver of the economy here. When someone is buying something that we've exported in Wisconsin, the personal tax rates here in Ontario have absolutely no impact on that at all. I was disappointed that you didn't at least acknowledge that there are many experts who are recognizing that that's the main driver, not the tax cuts.
Mr Woolford: May I respond to that for a moment, Mr Christopherson?
Mr Christopherson: Sure.
Mr Woolford: First of all, we would never deny that the US has played a role in promoting growth and promoting the health of the Ontario economy; there's no question. What we tend to do as retailers, of course, is look at the domestic economy, what local citizens are buying and what they have in their pockets. In that area, what we saw in the recovery, and then in the first part of the expansionary phase across Canada, was a very unique process whereby domestic demand inside the country lagged, throughout a long part of the cycle, the overall growth of the economy, for exactly the reason you've identified, and that is that the health of the US economy was significantly greater than Canada's and it was exports that were driving the economy. The benefits of that were not flowing to ordinary citizens. The tax take on them was rising at a dramatic rate at all levels, particularly at the federal level, and that left, despite a strong economy, the final consumer in Canada and Ontario with no more money. As retailers, that impacts the business and was of great concern.
One of the things that we do want to give credit to the government for is that they did put some money back in the pockets of consumers and, in our view, that did change the dynamics of the domestic market in Ontario.
Mr Christopherson: I appreciate that, but I also know that there were a lot of small businesses in neighbourhoods in my riding where the 22% cut to the income of the poorest of the poor meant a lot of corner stores were almost going belly up, because of course the less money you have, the more you spend immediately in your community, in your neighbourhoods, and that's exactly where small business-retail business-is, and they were hurt. But I think we both take each other's point.
I would also point out to you, though, that one of the things I think we all ought to be concerned about is the incredibly, in fact historic, low level of savings that StatsCan is now showing us exist. One economist, Mr Hugh Mackenzie from the Steelworkers, pointed out that in the ramp up to the Depression of the 1930s, in the booming 1920s-not that I'm making a direct analogy but eventually this economy that's defying gravity is going to go down-one of the things that they learned was not to let people borrow against the paper value of their stocks. It was called buying on margin and then, of course, when the value of the original stocks went down, the margins were called in, people didn't have the money and ergo bankruptcy started happening all over and we entered the Great Depression.
Now we have historic levels of debt and historic low levels of savings, and what that could mean is that, yes, we don't have the margins that'll get called in and cause the economy to implode, like people's personal finances, but if we see a dramatic downturn or correction in the economy, to use the vernacular, then a lot of people may find that the assets they thought they had in their mutual funds and RRSPs won't exist, they've got no savings and they're loaded up with all this debt. So while you're the immediate beneficiary, and we all are, with a booming economy, of the money being spent, at the end of the day if the bubble bursts we could find that those very same consumers are now into a personal recession and financial depression that could last god knows how long and then you'll be back here in a few years saying, "We're hurting big time because people aren't spending." I think it's something we all ought to be worried about.
Mr Woolford: We raised this before the committee last year, in fact. I seem to recall our remarks focusing on our concern with exactly the points you've just made, that debt levels are at historic highs and still rising, that Canadians were very close to dis-saving, not saving. Again, our sense is that that was coming from the needs of very ordinary folks to make ends meet, to have enough money in their pockets to pay for the daily necessities of life. Again, our concern was that while the economy was growing very healthily, the benefits of that were not flowing to the ordinary citizen. Our members were seeing that in store sales and in the health of the economy.
Mr Galt: Thank you for an excellent presentation and for helping to put things in proper perspective as to what really stimulated the economy in getting it going.
At this point in time, I'd like to extend my personal apologies to you on behalf of the government of Ontario for the terrible economic policies we had from 1985 through to 1995. It was most unfortunate for your industry what happened to it and what happened to the province in general. The loss of jobs: We lost some 50,000 net jobs in this province in the first half of the 1990s, while the rest of Canada gained 350,000 net new jobs. Certainly we're seeing how that turned around.
My question to you relates to retail sales tax, which you're suggesting should be reduced. I asked the previous one on fuel tax. If it was dropped 1%, 2%, how many jobs might that created in the province of Ontario, if we were fortunate to encourage the Minister of Finance to look at that kind of thing you're commenting on?
Mr Woolford: There are two sides to this, and I'll ask Mr Rudderham to address them as well. One is the immediate direct impact on retail. A lot of the goods, in fact all of the goods, that we buy as citizens move to us by some form of transportation which, of course, is carbon-fuel-derived. My understanding is that the cost of that is not a large part of the final cost of the goods. The impact of higher fuel costs on the cost of merchandise is not that great, and I'll ask Brian to confirm that. But the second element then is that what the higher cost of fuel does is drain funds out of the consumer's pocket. If they are spending more for gas, more for home heating, then they have less in their pocket for the other daily necessities. Those are the two impacts we have. I don't think I can give you any sense of the job impacts. What I can tell you is that it will have an effect on consumer spending in the short term. I would imagine that given the ferocity of competition in retail, retailers again are going to be forced to eat this additional cost increase rather than pass it on. But I'd like to, with your indulgence, ask Mr Rudderham to respond as well.
Mr Brian Rudderham: I won't pretend that I'm competent to comment on the number of jobs it would or wouldn't create, but to Peter's point, I think generally speaking anything that puts money back into the consumer's pocket is a positive thing. If you reduce the tax, you're redistributing where that money's going to go. I think a significant portion of it would go into retail, drive retail sales, which would definitely create jobs in Canada, certainly from the perspective of my company. We source about 80% of our goods from Canadian vendors, so in effect you do spread that around quite well.
There is a direct impact of the cost of fuel on our business. Most of the goods in the country that flow through any chain's logistics network do tend to travel by truck. There are taxes and surcharges on that, so there is an impact. But again to Peter's point, anything that goes back there will tend to flow back through to the consumer. Retail is probably one of the most competitive industries in Canada today, and becoming more and more so, and it's very much driven by price competition. I personally believe that a major influence in holding inflation down is the level of competition that's happening. There's just no room for price increases in the supply chain. Certainly if our vendors come with a recommendation for a cost increase to us, our general reaction is, "Just say no."
Mr Galt: Maybe I could sneak in one last question. I believe you said you were with Wal-Mart?
Mr Rudderham: Yes, sir.
Mr Galt: Just questioning what sometimes is in the newspapers, is it true that your company received a grant from Jane Stewart, from the HRDC slush fund?
Mr Woolford: In all fairness, Mr Galt, Brian is here on behalf of the Retail Council this morning. I think we should stick to Retail Council business.
Mr Rudderham: I believe it was reported as a developer also.
Mr Phillips: Thank you for the presentation. I appreciate your comments on the economy. The government put out its quarterly accounts, and I note that from the second quarter of 1995 to the third quarter of 1999, the most recent quarter that is reported, exports are up $80 billion and what's called "personal expenditure on consumer goods and services" is up $20 billion. Not to underestimate the importance of consumer spending, but we now are in an economy that is driven by exports. We've heard presenter after presenter saying that, frankly, that's what's driven the economy. No other place in the world relies on exports as much as Ontario does. We have to be really careful when we assign the key factors. Exports, according to their own numbers, are up $80 billion; domestic spending is up $20 billion. Tax cuts have been interesting and no doubt have helped retail business, but let's recognize the key driver. By the way, the export people tell us that the reason why they're able to compete is the way we fund health care, which is heavily funded by the taxpayer, the provincial government, and the quality of our education system.
You mention harmonizing the PST and GST. My recollection is that somewhere around $500 million of PST, provincial sales tax, goes on product that is exported. If we harmonize it with the GST, I believe that would require taking it off those products. This is an interesting proposal from the retail people, because, theoretically, if one raises the $500 million elsewhere, it helps boost exports perhaps but it is $500 million that has to be somehow or other accounted for. Is that $500 million the number you use, because that's the number I've seen, and is that still consistent with your recommendation to harmonize the PST and GST?
Mr Rudderham: If you recall, when the GST came in, the 12% tax was removed in favour of the GST. The manufacturer's tax that was on exports was removed. That was transferred to the consumption-based GST. Exports have definitely benefited, probably by the figures that you're presenting.
Generally speaking, these measures can be done to be relatively neutral.
There are also tremendous savings to be had by dealing with a single tax base. There's an efficiency on the business side from the point of view that right now we as retailers administer the GST, QST, HST, Ontario's PST, PEI's PST-Manitoba, Saskatchewan, BC. On top of that, we're currently administering 17, and I believe it's soon to be 19, different environmental levies on specific taxes. So from our point of view there's a tremendous efficiency to dealing with one tax regime, and certainly as few tax regimes as we possibly can.
There are also collection efficiencies at the different levels of government. If you're harmonized with the GST, you only have one set of administration. They have an allocation formula that the Maritime provinces have benefited from, and in fact when they harmonized with the GST they actually had a rate reduction for their consumers. I'm not sure what happens to the $500 million, but they got a tax break and a cheaper administration along the way. It seems to be a system that has worked fairly well. It's worked fairly well for the federal government, and I think from a retailer's point of view it makes it easier and less costly to administer this tax on behalf of the government. We're probably the single largest tax collector at virtually every level, certainly the federal and provincial governments, and it's a costly burden to us.
Mr Woolford: If I could add to that just for a moment, where this shakes out is that the goods and services tax is levied on a much broader base than the provincial sales tax. It taxes a lot of services that you cannot efficiently tax with a retail sales type tax. So as the base gets much larger, that will generate a revenue stream which is quite comparable to the retail sales tax. My recollection is that when Ontario and the feds were talking about this, Ontario believed they would lose some revenues and the feds thought they would make some revenues by the switch, if the tax stayed at the same rate.
The other major area where taxes have apparently shifted is taxes on intermediate goods. I believe Ontario receives about a third of its PST revenues, much larger than on exports, for example, on taxes on business imports, which would be much more cleanly flowed through to the consumer. That would be seen as a shift of the tax to the consumer. In fact, what happens is that that is stripped out of the cost base and put on the final price, which means that all the markups through the process are not built in on the tax-included base price. Our expectation is that costs to consumers might come down a little bit and revenues should be more or less neutral.
The Chair: Gentlemen, on behalf of the committee, thank you very much for your presentation this morning.
ONTARIO FEDERATION OF LABOUR
The Chair: Our next presenters this morning are representatives from the Ontario Federation of Labour. On behalf of the committee, welcome. Could you please state your name for the record, and you have 30 minutes.
Mr Wayne Samuelson: Wayne Samuelson. I'm president of the Ontario Federation of Labour.
Mr Ross McClellan: Ross McClellan. I'm director of legislation for the OFL.
Mr Samuelson: Let me begin by thanking you for the opportunity to spend a few minutes talking with you.
We have prepared a presentation which I want to assure you I'm not going to read. It has all the necessary graphs and charts to explain our positions. I think it's safe to say that none of the positions will surprise you. In fact, the points we make about the impact of interest rate policies, tax cuts, service slashing, the need for support for people who are hurting, housing, health care and education are consistent with positions we and others have taken in the past.
I should also tell you that I actually have had some time to watch some of these presentations, so not only does Mr Galt's mother watch, but there are some other people out there who are watching.
I agree that this is an important forum and an important debate. I also want to assure you that I'm going to talk slowly enough that you're going to have time to go through my brief and highlight things and ask really interesting questions. But I have to tell you, I can't believe how far removed many of the issues discussed at this committee are from real people out there.
I'm going to step a little bit out of the box. I want to say off the bat, I understand how this works. I know the government members have their marching orders, that somewhere some gang of unelected people have provided you with your message box-I see you looking, actually, in the back of the room-and it's your role to defend government policy and to say over and over and over whatever they've told you you need to say.
I've actually been around politics a little while and I understand how it works. But I also know it's got to be tough at times. Over the Christmas season, when there was a crisis going on in the emergency wards in Toronto, I can't imagine how you must have felt-because I know I felt bad-knowing that your policies were resulting in a situation where sick people were being driven around this city in the back of an ambulance trying to get into a hospital. I talked to somebody in our building the other day and she was telling me how she spent almost 48 hours in a hallway with her sick mother because they didn't have any beds. That's got to bother you, because it sure as hell bothers me. I don't have the kind of control over how our government spends the money that you do. You've got to wonder about the growing inequality gap in this province and the impact that's having on people who are at the bottom end of the scale.
You've also got your orders to talk about job growth and how great things are, but it must be tough when you know that between 1997 and 1999, less than 7% of jobs that were created were permanent, that around 14% were temporary and that over 20% were term or contract. It's got to bother you, because it sure bothers me, to realize that 41% of all the jobs created in the last decade were self-employed, and a third of those people are living on less than $15,000 a year. I understand it's hard for the government to engage in that kind of debate, because they are in fact giving ground and acknowledging that things aren't as great as they have said.
I want to talk to you a little bit about wages. Again, you're in the position here of actually defending the indefensible. You've got this freeze going on with the minimum wage in this province coming up to five years, and this just blows me away. The same people who give you these orders were probably the people who had the brainwave to put the public salary disclosure on the Web. They've got you in a position of defending a minimum wage that's been frozen for five years on people making $15,000 a year, while any citizen can now click onto the Web and actually track the increases you've given your employees over the last three years, not to mention the $30,000 increase-which is twice the yearly salary of someone on minimum wage-you've given to your political staff. We've got another month to go and up come all the salaries again. You can actually look on there and you can see people who are pretty friendly to your government getting some pretty big wage increases over the last four or five years.
I was in Kingston yesterday. I was driving back down the highway last night and I heard this ad that the Tory party has going. I thought how embarrassing it must be to be a Tory MPP, especially a backbencher who doesn't have a lot of input into these things, when you've got your party running these silly ads to tell people they're getting a tax break, if you can believe that, ads that are primarily subsidized-you understand this-by your donors, a big chunk of whom are very wealthy people and taxpayers, trying to convince all the rest of us that we're getting a break so they can get public support to give them more money in your tax break system. I can't understand it. I'm sure people will figure this out. I'm actually surprised that there aren't more accidents on the highway with these Tory MPPs driving to work trying to hide their faces because they're so embarrassed when these ads come on.
I could go on. Believe me, I could go on and talk to you about the things I hear when I travel the province, the pain of people in the city of Toronto who are trying to access housing.
I remember-and this it sticks in my mind-I was in Thunder Bay some time ago and a woman phoned in to a radio talk show I was on. She talked about how her son used to get help from the special education department in the school and he no longer does. She said to me: "Wayne, this government cut will impact my son for the rest of his life because he doesn't get that help now." So you have an incredible responsibility.
I just want to say, though, if any of you ever want to stand up to these whiz kids, who meet in some hotel or in some office here, and actually say, "It's wrong that minimum wage workers have had their salaries frozen. It's wrong that people can't get into an emergency ward when they're in an ambulance and they're sick," or if you want to say that it's wrong and you're going to do something about hallway medicine or that kid up in Thunder Bay, or you're going to try and fight for real jobs, I don't think you'll be alone. There are a lot of people out there who believe they elect people to take a stand; they believe they elect people not to mimic the notes that come from the back of the room or from the top floor of the building across the street. They think they elect people not to simply repeat message tracks. I just want to say to you that if any of you ever feel the need to really make a difference, there'll be a lot of support. Please feel free to give me a call. I'll do anything I can to help you, because I actually believe in our democratic system and I actually believe that each of you has to look in the mirror every morning. I know that some day you'll all realize that you're hurting people and it has to stop.
I'll stop there, because I'd like to hear some message tracks but I'd like also like to engage in some conversation.
The Chair: We'll start with the government side. We have approximately six minutes per caucus.
Mr Arnott: Thank you, Mr Samuelson, for coming in today and for your presentation. I look forward to reading it in detail. I haven't had a chance to cover the whole thing because I was listening to your comments. I think you've expressed your point of view very effectively today on behalf of your membership.
I want to focus in on one issue that you raised a couple of times, the issue of the minimum wage. I was privileged to serve in the Legislature from the years 1990 to 1995, when the New Democrats were in power, and I recall that the minimum wage was raised quite substantially during that period of time. I forget the percentage increase, but it was quite substantial. Numerous studies came forward. There were expressions of concern from the Canadian Federation of Independent Business and the retail business council, who were just here, who suggested that the minimum wage increasing as it was, was actually a deterrent to job creation. It was becoming unaffordable for many companies to hire new people. That certainly seemed to be the case, based on the fact that we had a huge unemployment problem and a net job loss of around 10,000 jobs during that period of time.
This isn't a message track, this is reality; this is the truth: There have been around 640,000 new jobs created since 1995, I think partially due to the supportive tax cuts on the part of this provincial government, but more importantly due to the initiative of business people who have seen confidence in the future and have felt that it was possible to hire new people. I think too often the government pats itself on the back for these new jobs that have been created and probably we should be giving credit to the people of Ontario a little more.
It was the position of the government during the 1995 election that we should freeze the minimum wage until competing jurisdictions caught up. We're monitoring that closely. If you have any information which shows minimum wage levels in our competing jurisdictions and the other provinces across the country, as well as some of the states, because as we know we certainly have competition for jobs and investment from jurisdictions in the United States, I'd be very happy to look at that and take that forward to the Minister of Finance.
Mr Samuelson: Let me say, first of all, that I was pleased to actually have an opportunity to hear the previous presentation and hear the representative from Wal-Mart speaking on behalf of the independent retail organizations and companies. It was somewhat interesting.
Let me make a couple of points. I can't believe that you can sit there with a straight face and tell me you're going to freeze the minimum wage until what, Illinois, catches up? I don't know what you're calling it but-
Mr Arnott: I'm not telling you-that was the position of our party in 1995.
Mr Samuelson: I understand the position that was worked out, wherever they work out these positions. What I'm saying to you is that you give the answer with no comment on the impact it has on the people who have been sitting out there working for minimum wage and haven't had an increase since 1995. You just ignore that whole side of the equation. I'm sure that may be of interest to whoever wrote out that first document that you ran on, but I think people out there realize that it's not unreasonable to think that somebody should get some kind of wage increase.
As a matter of fact, I just heard these people say things were going great. I just sat right where Ross is. He said: "Everything is going wonderfully. Great year." I think you should show some leadership here. You've got an opportunity to take this guy at his word, my good friend Peter who was sitting here, and tell the government that they think everything is great and it's time to increase the minimum wage.
I think you would have to go a long way to catch up, because we have had inflation every year since 1995. So actually these workers have had a huge reduction in their wages. I think the argument about what was in the Common Sense Revolution in 1995 about competing jurisdictions may be good spin but it holds no reality to what people are facing every day out there.
Mr Galt: I would like to respond on the minimum wage as well. I come from a rural riding. When we go around on tour and talk to the apple growers in Northumberland county, what is the message I come back with? I come back with two very strong messages. They start pounding the tractor tire and they tell me, "Don't increase the minimum wage because we can't afford to pay any more than that for labour if we're going to compete with our fruit, our vegetables, the various products coming out. The second is, "Whatever you do, don't stop the offshore labour from coming into this province because we so desperately need them."
I was on a farm where there were 96 offshore workers-this was back in the fall when I was there, not yesterday but back in early October-and he would take 50 Ontario workers that day if they would just come and work there. He's going to have to go offshore. That's consistent with the fruit and vegetable people in my area having to go offshore to bring people in to work in those areas. They are just pleading, "Don't increase the minimum wage or we can't survive and we can't compete." That's no tract message, that is direct from the farmers of Ontario in my riding.
Mr Samuelson: Mr Galt, I'm sure you've been around politics a while. Did you really expect that when you go to see an employer he's going to hammer on the tire and say, "Please legislate a raise for my employees"? It should not surprise you, nor does it surprise me, that employers will say, "Don't raise the minimum wage." That's not rocket science.
I agree, you have some responsibility to whoever it is who is banging the tire, but you also have a responsibility to people who are working all around this building, in every community of this province, who have had a wage reduction every single year. These are people at the very bottom of the economic ladder. I think it's important that someone reflect the views of that farmer, but someone also needs to reflect the views of those people whom you've been hurting every single year. You've frozen their salary and forced them to lose money because of inflation. And many of those are not just teenagers, although lots of them are. You're trying to-
The Chair: Thank you very much.
Mr Samuelson: Can I just finish up? I don't want you to yell at me.
The Chair: If you yell, I yell back at you. If you talk nice to me, I'll talk nice back to you.
Mr Samuelson: I think it's important that you remember that many of these people are supporting families on these wages.
Mr Phillips: Thank you for your remarks and your presentation. I want to talk a little bit about exports. Mr Mackenzie, whom I view as knowing as much as anybody in the province about the Ontario economy and the finances of the province-he truly does-was the one who really highlighted the export situation. He went over the Ontario economic accounts and pointed out, and I strongly agree with him, that what's been driving the Ontario economy is exports. If you look back since Mike Harris became Premier, exports are up $80 billion and domestic spending up $20 billion. It is the driving force behind the Ontario economy. In my opinion, we just have to understand that and what the implications are. As you say, it has very little to do with the tax cut and much to do with a variety of things.
I do think that after health care this is the most significant issue for us because it has profound implications for Ontario. I carry this document around with me, and I'm sure you've got it. It highlights some of the reasons why Ontario has been competitive. It points out, "Ontario hourly labour costs range from $4.71 to $13.65, lower than competing jurisdictions in the US." It points out that these are the labour unit costs-you probably can't see it-the United States going up and Ontario staying flat. So one of the reasons we've been successful is because the wage differential has widened.
One of the other two key reasons is the way we fund our health care system. The government itself acknowledges that that is one of the two key reasons to locate in Ontario. We in Canada, we in Ontario, believe that everyone should have access to quality health care so we fund the bulk of it, over 60% of it, from public funds.
The second one is the quality of our workforce. Again, it's the government's own document that points this out: "Ontario's labour force is highly productive and labour costs competitive." It points out a variety of good things about our labour force.
I'm wondering what message the OFL would have for us in terms of the implication of this growing dependence on exports and where that may lead us. Many of the presenters say: "We have to harmonize taxes with the US. We have to have the same income tax, the same sales tax, the same fuel tax, the same property taxes, the same corporate taxes." My own judgement is that if we were to do that, by definition we'd end up with the same way of funding health care as the US, or lower funding. You can't have both. I wonder if the OFL has done much work on this and if you have any advice for the committee on where we're going to be heading on this.
Mr Samuelson: First of all, I think it's a very good question and it speaks to what we're facing in terms of the bigger picture. The government is actually moving towards-and we all know this-a health care and an education system that mirrors the United States. It raises a whole range of issues for us as Canadians and as residents of Ontario about whether we want to see that happen. So rather than do it quickly, it's done by stealth. It's done by privatization. It's done by cutting back on the amount of money that's available to support our health care system.
I'm in complete agreement with you in terms of Hugh Mackenzie and his never-ending work to try and understand and explain the Ontario economic situation. The committee would be well advised to heed what he says. But you'll notice on page 12 that we draw also on Hugh Mackenzie for some of our support. It speaks to the incredible facts around the growth in our economy and how it has become tied to export markets. I think this committee needs to note that. It needs to make sure that while we're tied to these markets we don't find ourselves tying, God knows, our minimum wage to the United States, let alone our health care system. I think Ontario residents and Canadians expect more, and I don't think they're going to stand for it.
What we need to watch is that the government doesn't do it inch by inch and people don't see it coming until it's too late. But I can tell you that my personal experiences with the health care system in the last couple of years are much different than they were 10 years ago when I was forced to spend some time in the system. Clearly, we're heading into trouble.
Mr McClellan: Just on auto and health care: If you took auto out of the Ontario economy, there would be a pretty big hole in the economy. There wouldn't be much left of the Ontario economy if you took the auto sector out. In the auto sector alone, our medicare system gives us a wage advantage of $6 an hour compared to the American auto industry. That's something to think about: $6 an hour is what sustains the most booming sector of our export economy, which is the auto sector. Any weakening of the health sector fundamentally weakens our competitive position and our ability compete in American markets.
Mr Phillips: I was interested that you were using data from the Canadian Institute for Health Information. Interestingly enough, the provincial government uses the same source now, and they provided some response to some questions. I don't know if you've had a chance to look at it, but it shows that provincial spending as a percentage of total health spending is heading down or approaching 60%. Those are the government's own numbers now. Therefore, obviously 40% is coming from elsewhere. So the stealth you talk about, Mr Samuelson, may not be as stealthy as you think. It may be a kind of all-out trot. I do think that, without any question of a doubt, we are heading that way.
Mr McClellan: Eventually that will end up on somebody's bargaining table. Sooner or later that 40% that people now have to pay out of their own pockets instead of its coming out of medicare is going to be on the bargaining table, and it's going to be reflected in the cost of doing business instead of in our medicare system.
Mr Christopherson: Wayne, Ross, it's good to see you again. Thanks for your presentation. As we all note today, Mr Galt is in full flight. Unfortunately, he's going in circles because he's only using his right wing again today.
The fact of the matter is that if you take a look at the track record of this government, if you're very well off, you've done really well by Mike Harris. If you are one of those in poverty, you're in deeper poverty than you've been comparatively in the past. You've had your income cut by 21.6%, and minimum wage, as you point out, Wayne, has been frozen for five years. They're falling behind.
The fact of the matter is that we are now behind the Americans in terms of our minimum wage. Most of us of the boomer generation grew up with an understanding that we were always just a cut ahead in terms of the investment we were prepared to make as a society that would benefit everyone, for the benefits of all as opposed to just a few. Now we see that the American minimum wage is actually ahead of the Ontario minimum wage. Further to that, the President of the United States, who has presided over the biggest economic boom in the history of the United States, not only has increased the minimum wage during this boom, but the other day, in a presidential year, called on Congress to increase it again. I would think that if somebody who wanted his buddy, Vice-President Al Gore, to become the next president, thought this was going to be a serious drag on the economy, the last thing he would want to do is urge Congress to do it.
The reality is that if you listen to Mr Galt's arguments, and his arguments only, the way they used to provide labour in the Deep South before the American Civil War would still prevail. You're correct, Wayne, when you point that you have to take a look at all sides of the equation. If the only thing that mattered was competitiveness, then don't pay anything to anybody. Just make sure you have indentured workers and pay them nothing, just sustenance. The fact of the matter is that we have a civilized society; at least we used to in Ontario.
I want to draw attention to a quote that I raised before you came in, Wayne, and ask your comments on it. I raised the issue of the unfortunate situation on the front page of the Toronto Star today about the gentleman who died while doctors were spending five hours trying to find a hospital bed. At the end of that article, his wife said that it's a bitter irony that her husband may have been let down by a lack of provincial spending: "He was always so impressed at the cutbacks. To think that the time of his life when he needed something from the system, it failed him."
You're out in the real world everyday talking to, not those who are at the very high end of income in our province, but with the working, middle-class people who make this economy go. What do you hear from people in terms of the tax cuts? What are they telling you when you talk to them about whether the tax cuts have been worth the cuts to our education system, our health care system, environmental protection and things like that? What are they telling you out on the streets, in shops, on the floors and in the stores of Ontario?
Mr Samuelson: I think the very fact that the PC party has run ads to tell people about the tax cuts speaks to just how people feel about them. I think people understand that it doesn't matter how much of a tax cut you got; it won't buy you access to an emergency ward if you're sick. You can give someone a $500 tax cut, but if their kid doesn't get the help they need in special education when they're in school, the $500 doesn't mean a lot.
We've got a lot to learn from just talking to people who need help. Nobody talks to me about the tax cut they receive. Most people talk to me about the services they expect, and they know they aren't there. As you said, I travel all around the province, and the issues are the same everywhere I go. The reality is that the people who are at the bottom end of the scale, the 10% at the bottom in after-tax income, in the last decade now represent 14%. There's a huge growth in people who are suffering. There's also a huge growth in those who are doing well.
I've taken a look at the election expenses commission Web site. I've seen pages and pages of corporations and numbered companies that send a lot of money into the Conservative party. Maybe those people believe in this and think it's great, and there's probably some benefit to a lot of them. But the people who don't show up on those donors' lists are my neighbours who want to get into a hospital when they're sick or expect they are going to have services for their children or their community when they're needed.
I think you need to get beyond the sort of message box, the approach that tax cuts are just great, and really look at what it means to people. Because at the end of the day that's what matters. It doesn't really matter what the graphs look like. It doesn't matter whether you get a front page in your local newspaper talking about how great the government is. What matters is the impact it has on people. And you're going to have a hard time convincing me, based on what I've seen over the last couple of years, that you aren't hurting a lot of people. Certainly, the quote in this newspaper story this morning sums it up: At the end of the day, even some people who may think that it's doing them some benefit are at risk themselves.
Mr Christopherson: It seems unfortunate that that's the only way the message is going to get out there. As you say, if you've got $500 in tax cuts it doesn't do you a lot of good if you need a bed in an emergency ward or if you need care for your children or there's an environmental spill or if you find out that the air that your children are breathing is more polluted than ever.
Obviously, not everyone affiliated with the OFL is making minimum wage. I would hope that most of them are making considerably above that, because they benefit from free collective bargaining. What do you sense in terms of people who would consider themselves to be middle class? It's my sense that if we've got a growing pool of people who are in poverty, and that they're in deeper poverty than they've been historically, then it's not millionaires who are broke and are suddenly in poverty; it's people who once considered themselves to be middle class who have now seen their standard of living fall to the point where they are now statistically considered to be in poverty.
Do you have that sense of apprehension and insecurity on the part of people who most would think of as sort of middle class, that they may not, not only be able to improve the quality of life for their families, but they're fearful that it's slipping away? Do you sense that kind of apprehension out there?
Mr Samuelson: Certainly, and I guess the government somewhat naively thinks they can get this short message out about tax cuts and that is going to ease that apprehension. But I have three daughters who are going into the world to try to find work, most of them trying to string enough part-time jobs together after leaving school to find full employment. I think that has to worry a lot of the so-called middle class, the impact of this new economy on their children.
There is a lot more insecurity out there than government numbers might lead you to believe. To simply say that 650,000 jobs have been created, or whatever number you're being told to use today, doesn't make it any more secure. We've had a major restructuring taking place in the Canadian economy, and certainly in Ontario, over the last decade. I think the apprehension comes from their personal experience of not feeling as secure in their jobs as they used to and the fear about their children.
I think a lot of it comes from the deterioration of the services around them, everything from having to pay to put your garbage on the curb, to the fact that there is less because of downloading-the municipalities are in crisis in many areas-to the trip they just took with their elderly mother or father to a hospital. This is creating incredible apprehension. I think there's a general unease just because of what's going on around people, and I don't think this committee should ignore that. I don't think you should get caught up completely in the graphs and charts and people who sit here and talk about how great the tax cut is and not once in their whole half hour do they mention the words "health care."
The Chair: On behalf of the committee, gentlemen, thank you very much. We have run out of time.
The committee recessed from 1213 to 1303.
The Chair: If I can get your attention, we'll bring the committee back to order.
Mr Arnott: Mr Chairman, I just want to draw to the attention of the members of the committee that CAA Ontario, the Canadian Automobile Association, has sent a written brief of four pages. They've outlined very succinctly and directly the concerns of their membership. I just wanted to make sure that all members of the committee had an opportunity to read it.
The Chair: Every committee member has a copy of the letter. It will be filed with the clerk.
CANADIAN TAXPAYERS FEDERATION
The Chair: Our first presenter this afternoon is the representative from the Canadian Taxpayers Federation. I see you're already comfortable. On behalf of the committee, welcome. You have 30 minutes for your presentation. Could you please state your name for the record.
Mr Walter Robinson: Thank you, Mr Chair. My name is Walter Robinson. I'm the federal and Ontario director for the Canadian Taxpayers Federation.
I trust, Mr Chair, that we'll have some of the other members trickle in shortly. I was watching the hearings on TV and you had a busy morning.
I presented my brief in front of you and I will just highlight various key points out of it for about the next 10 minutes, and then be open to your questions.
By way of background, the CTF is a 10-year-old organization. We are non-partisan and not-for-profit. We do not receive any federal or provincial political contributions, nor from governments, nor am I or any members of our board of directors allowed to hold memberships in a political party while we are employed by the Canadian Taxpayers Federation.
We have a threefold mandate: to act as a watchdog on government spending, to advocate on behalf of taxpayers to get involved in the political process and exercise their own democratic rights and responsibilities, and to advocate fiscal and democratic reforms through presentations to legislative committees such as yours this afternoon.
Very clearly, the focus of our pre-budget presentation to you deals with four key areas. The first is the provincial debt. While we have been appreciative and supportive of many of the efforts made by the current government in reducing the tax burden, we believe at this point in time-and it should have been much sooner-we must turn our attention to the provincial debt. In our paper we highlight that the provincial debt is now at about $20,000 per taxpayer, looking at the growth of the provincial debt on page 8. While the debt itself has receded from its torrid growth rate through the early 1990s, it continues to inch upwards.
I have seen the presentations and the debate that Mr Phillips has had with Mr Galt in the committee with respect to the Hydro debt and those sorts of issues, but, at the end of the day, debt is nothing more than deferred taxes. If you want to cut tomorrow's taxes, reduce the debt today. Whether it be federally or provincially, in your case, debt is nothing more than an intergenerational transfer of wealth. It is a tax-evasive manoeuvre, where we benefit today and our children pay tomorrow.
What we have advocated is a legislated schedule of annual debt reduction payments of 5% of gross provincial revenues. It would be in the neighbourhood, to start, of about $3 billion per year. You will note further in our submission that we believe some of this money can come from the province's increasing reliance on user fees and gambling profits, those sorts of areas. We believe that provides a very false sense of security for the province if it continue to rake in those fees: (a) because that money, if it's going to be voluntary taxes such as gambling revenues, should go to debt reduction; and (b) because as long as you continue to have your increased revenue licensing fee take, it gives you cover to not exert the fiscal discipline that we believe is still necessary in terms of restraining program expenditures to the priority areas.
I can tell you, as somebody who has spent a lot of time at the federal level, that the challenges that will be placed on all of you as we move into a post-deficit era in this province are greater than the challenges that were placed upon you in the deficit-reduction era. People's expectations are much higher. They want government to play certain key roles in their lives, specifically in health care and education. It is your challenge to avoid the temptation of having government being all things to all people and to focus on those key areas of public good where people want their tax dollars spent.
The second key area of our presentation is an area of criticism with respect to the provincial government's lack of resolve on alternate service delivery or the privatization agenda. We still continue to ask the question, why is the provincial government in the business of liquor retailing? Why is the provincial government in the business of running French- and English-language broadcast services in a 500-channel universe?
We commend the government caucus for its agencies, boards and commissions review which it undertook early in the mandate, in 1995 and 1996. I believe it was Bob Wood chaired that. That provided a very good cursory overview of looking at what agencies, boards and commissions need to be strengthened and still have a very essential public policy role to play, what could be divested to other providers, whether they be not-for-profit or other levels of government, and then what should be wound down in their entirety. Sadly, that report, which was a very good cursory overview, did not get the detailed follow-up or the legislative attention we believe it deserved. The telling case in that point is that in the first mandate of this government you had a minister responsible for privatization. You now do not have a minister responsible for privatization. In the absence of re-appointing a minister with cross-departmental responsibility to take a look at how you can continually evolve government services, because public services some days serve a function and 10, 15 or 20 years later certain agencies, boards and commissions do not serve a key public policy function, we would hope that you recommend to the Minister of Finance an ongoing, once-per-legislative review of all agencies, boards and commissions to see whether they're still serving public policy interests.
The third area we'd like to focus on in our submission is a federal tax policy issue which has some very severe ramifications at the provincial level. On page 10 of our submission we talk about bracket creep. Many of you are aware that at the federal level the tax brackets are not indexed for inflation. People who simply keep pace with the cost of living in terms of their wage increases, if they're fortunate enough to get those, get themselves pushed onto the tax rolls or have more of their income exposed to higher and higher tax thresholds. This is a federal tax policy, but because the Ontario government calculates its tax payable as a function of federal tax payable, this policy at the federal level, this bracket creep, a stealthy, invisible taxation, affects Ontario taxpayers.
In a report we released earlier this week, on Monday, we highlighted that over the last decade a whopping $90 billion has been paid in extra federal and provincial income taxes by Canadians for the past 14 years due to bracket creep. In Ontario alone, the bracket creep increase in 1999, the cumulative effect of extra taxes that Ontarians are now paying because of this federal tax policy, was $1.2 billion. Over the last 11 years, Ontarians have paid an extra $10.8 billion in provincial income taxes due to the federal tax policy known as bracket creep. I have a copy of that study. I will be more than willing to table it for the benefit of committee members this afternoon and leave it with you. We use numbers derived from Finn Poschmann at the C.D. Howe Institute. It's a very credible study.
What I'd really like to point out with respect to this issue of bracket creep is that it punishes all taxpayers, but most importantly it punishes working poor and lower- to lower-middle-income taxpayers. I am somebody who does not receive any federal tax credits based on my family income, but there are many people, federally and provincially, who do receive various entitlement payments or credits from both levels of government. Here in Ontario, this $1.25 billion that taxpayers have paid in extra taxes in 1999 alone disproportionately affects lower-income taxpayers.
So we have recommended, until Ontario moves toward a tax-on-income system-and we do applaud and support and appreciate that the government is moving in that direction-the government should provide some offsetting measures, either in terms of further income tax reductions or year-end adjustments when taxes are filed. I can tell you that these extra income taxes were approved once at the federal level. The extra provincial income taxes that were paid due to bracket creep never passed the Ontario Legislature. There was never a vote held on paying extra income taxes. If I may say so, as much as we've been supportive of the province's taxpayer protection legislation, this sort of continuous hidden increase violates the spirit and intent of the taxpayer protection law.
The last point I'd like to make with respect to our presentation before you this evening, because I'd much rather listen to your questions, is with respect to gas price volatility, and specifically gas taxes. If I may say so, we believe the current exercise in calling people before the gas-busters committee to talk about and investigate the volatility in gas prices-well, it's like an old saying: A committee is a group of people who take minutes and waste hours. Not this committee but the other committee, we believe, truly is doing that. If the other committee wishes to haul somebody before it to testify and talk about the volatility of gas prices and why they are so high, we believe that committee should call the Premier, the Minister of Finance and the transportation minister to ask why only about 43% of all gas tax revenues the provincial government currently collects are returned to road construction, highway development or public transportation initiatives. Public transportation spending is at an all-time low in this province, yet provincial gas tax collections are at an all-time high, as we clearly highlight on page 13-bad luck for the government, I guess-of our pre-budget submission to you.
Finally, I mentioned in my opening remarks that the government continues to rely on non-traditional revenue sources. We've taken the numbers from the budgets from 1995 to 2000. You can very quickly see that non-traditional revenue sources were stable at between around 10.5% and 10.6% for the last four years. They started to spike up to 13.28% for this fiscal year; these were the estimates from the 1999 budget.
As I mentioned at the outset, in a post-deficit environment the challenge is upon you to meet people's different demands, whether it be for health care spending or environmental initiatives or debt reduction or tax relief-the gauntlet of presentations you've heard in your hearings this month. The pressures will be immense. People have greater expectations in a surplus era. We believe you have to be as vigilant in restraining and controlling program expenditures in the post-deficit era as you were in the deficit era.
We've also advocated that if you're going to provide money for health care, which is an extremely important area, you seek to reallocate within existing budget envelopes first before you jack up the spending envelopes again and again and again.
In health care specifically, the government has made many announcements in terms of returning some of its savings to health services restructuring or whatever the case may be, but there hasn't been that sort of follow-up, and I provide an example to you. The provincial government last year provided the Ottawa Hospital with $6 million in one-time funding to help hire nurses in terms of the nursing shortage that you're facing here in Toronto and communities that you represent, and that your constituents are facing around the province. That $6 million did not go to hire nurses. It went to the bottom line to reduce the hospital's deficit. That was not the intent when the minister made the announcement to stem a very acute nursing shortage.
So if you're going to spend, you need to have expenditure controls. If you're going to put money into those program and priority areas, you need to have outcomes-based measurements. We know that perpetuating the status quo, just spending after spending, is not the answer. We need to ensure that the money that's given to those institutions is tied to outcomes.
In summary, we believe that budget 2000 represents a crossroads for you. What you can do is keep your fiscal vigilance up, restrain and prioritize program spending, because it's now more important than ever, or you can sadly perhaps return to the old days of spiralling deficits and accumulated debt.
I say this with great personal conviction. One of the reasons why I do my job and why I enjoy doing my job is to ensure that when my son, who will turn two next week, is old enough to buy a house and pay taxes and earn a full-time living and raise a family, he has the dignity of ensuring that he can provide the most for his family, knowing that his tax dollars are going fully to fund public services and public goods and knowing that today's 16 cents out of every tax dollar which goes to pay provincial debt obligations will not be a burden or a yoke around his neck or that of his children and his family when he is ready to pay taxes. That's why we've entitled our submission this afternoon "Cut Tomorrow's Taxes by Reducing Debt Today."
There are other things in the submission. I look forward to your questions.
The Chair: Thank you very much. We have five minutes per caucus. We'll start with the official opposition.
Mr Phillips: Thank you for your presentation. I start on the debt, and I wondered where you were-someone else was here five years ago when the government decided to take the debt up by $22 billion to fund the tax cuts and to implement tax cuts worth about $5 billion a year in forgone revenue. Those aren't my estimates; those are the government's estimates. They figure that the amount of money in forgone revenue from the income tax cut was about $5 billion, and you can see it's restrained the growth of personal income tax by the figures you've shown here. I think the federal income tax has gone up by about 35% over that period of time and the provincial one is essentially up a very few percentage points.
The government has also said what they are going to do on debt reduction, and that is over the next four years about a $2-billion reduction in debt: $500 million a year. That's what they've said they are going to do, and I have no doubt that's what their plans are. I think your recommendation is, instead of $500 million a year, $3 billion a year. Where would you rank debt reduction in the debate: debt reduction, tax cuts or program enhancement?
Mr Robinson: A very good question, Mr Phillips. Let me deal with some of the issues you've dealt with and I'll get back to your question.
You talked about the tax cuts. It's an interesting parallel you draw between the growth in federal revenues, which I know very well, and it is about 35% over about seven years in terms of the current government's mandate, and almost the stagnation or let's say about a 10% growth, really, if you look from 1995-96 to 1998-99, about a $1.6-billion increase.
Where was I? I was in private industry five years ago, to answer your question. In terms of growth in provincial income tax revenues-and our organization supported the tax-cutting agenda; there's no doubt about that and I would not hide that-there were great cries that provincial revenues would be depleted, you would lose provincial revenues. In four to five years, the provincial government has now cut income taxes basically by about 35%. Personal tax revenues have not gone down; they have gone up marginally, by about 8% to 10%. That's a function of many things. The tax cuts have had a stimulative effect on the economy. There are also other issues-the auto pact, the growth in the high-tech sector, things that would have happened anyway; of that there is no doubt.
In terms of answering your question as to where debt reduction ranks with tax cuts and program spending, I think unfunded liabilities, which our debt is-and also health care is an unfunded liability, if I can square the circle there-are the most pressing public policy challenges that the federal and provincial governments face. Our debt reduction, as I note, is just deferred taxes, and we believe the $500 million that was outlined by Minister Eves in his recent statement is insufficient. At that rate, you're going to take 200 years to pay down the debt. I talked about my son at the end of my presentation. The grandchildren of my son's grandchildren would still be paying off the provincial debt to pay for the excesses of what we've basically racked up in the last 25 to 30 years, in my lifetime. I think that's fundamentally immoral and is an intergenerational example of tax evasion. So debt is extremely important.
Let me just square the circle there. The other unfunded liability issue is health care. We know, through demographic pressures and technology costs and overutilization when people overconsume a product of perceived free value, it's a simple economic truth that you will overconsume in health care. We know that we have $1.2 trillion as a country in health care expenditures that we have no way of funding. We know we're going to incur them. We're going to get old; we're going to live for 30 and 40 years past retirement. We have no way of covering those, even through our basic taxation system now. I haven't addressed that because health care policy is not my great mandate, but I'd love to come back and speak on that at another time if you ever do a special subcommittee studying it.
The issue is that we would hope the provincial government would take a leadership role in acknowledging the fact that we have a blend of public and private medicine in this country. We always have. Every European nation has a blend of public and private medicine. We need to find out what the public system is going to support for the greatest good, ensuring that those principles of equality of access regardless of income are maintained, and then what else we can do on top of that. You'll notice that I didn't mention the American system.
To answer your question, debt reduction is an unfunded liability. We need to get rid of our debt. Health care is also a future unfunded liability. We need to prioritize program expenditures, which is why we've asked for a further move on privatization in terms of selling off some Ontario crown corporation assets and getting the best value or putting out those tranches of stock capitalization so we can ensure a revenue stream to fund those important program areas.
Mr Christopherson: Thanks for your presentation. I would draw to your attention that early on we heard from a senior economist from the Royal Bank. He suggested that the younger generation-and by that I think he meant even younger than yourself. The boomer generation benefited from the expenditures that created the debt in terms of it building our society; we benefited from that. As boomers, who are in their peak earning powers, are now also getting the benefits of a tax cut, this economist was suggesting that the generation that's coming up-I have a young daughter who is seven, so it would be her generation-may be fair in looking at our generation as pigs at the trough.
I disagree but can appreciate and understand that you might want to make debt reduction the number one priority or that you might want to continue with the Harris philosophy and believe that tax cuts ought to be the number one priority no matter what. But I'd like you to explain to me how you think both should happen at the same time when-and I know that you've been watching because we talked earlier; I know you've been paying attention to these hearings-you will know that we've had some very credible people come forward and talk about the crisis that exists in our health care system, the crisis in our education system, the crisis in our environmental protection. All these things are being eaten away.
It was pointed out in the story on the front page of the Toronto Star by the wife of the man who died that he was a big supporter of the cutbacks, so I would assume he was probably a Harris fan, yet when it comes to the reality of how you go about paying for these tax cuts, there wasn't a bed for him in the hospital system. You like to square the circle. Square that one for me, please.
Mr Robinson: A very good question, Mr Christopherson. Let's be very clear: If we continue in our publicly funded, pay-as-you-go health care system, we will never square the circle. Demand is outstripping our capacity to pay, whether that be for pharmaceutical medicines, hospital beds, much-needed capital improvements, MRIs at $3.5 million a pop or lithotripters for kidney stones which cost about $800,000 a year to run. As long as we continue in this fiction that only the public system is the be-all and end-all in terms of medicine and health care in this country, we will never be able to square the circle. I can't pull a rabbit out of the hat and work miracles in that regard.
If we have a government that is willing to provide performance outcomes, which it has not done so far-and I mentioned that example in terms of the Ottawa Hospital for you-and strings attached to the money that is provided to health care institutions and other providers, then we may be able to start managing a bit of that money.
Moving back to the issue of tax cuts, you will recall that in my presentation I focus on the issue of bracket creep. I'm really alarmed. I've heard some of your allies in terms of organized labour who spoke here this morning, and even your party, who have not addressed this at all, not one iota. It's really surprising on the tax-cutting side because, yes, it's a federal tax policy but the provincial government benefits from it. We've seen in Alberta and New Brunswick and other areas where they're moving to decouple from the system so they don't benefit or punish their constituents and taxpayers because of that policy. Supporting our move on the bracket creep agenda would be the intersection of very good fiscal policy and great social policy in terms of ensuring that the people who most need the money don't have their credits and benefits eroded.
Mr Christopherson: You asked me beforehand, did we address it, and I said no, I don't believe we did anywhere. You mentioned that you thought it was an area we'd be interested in and I said we'd keep an open mind on it. As the finance critic, I will commit to that. We'll take a look at it.
I want to come back to health care. Here's where I have a bit of a problem. When people say, "We can't afford the public health care system," the impression is left that somehow by taking it out of public hands it won't get paid for, that we don't have to worry about paying for it. It's got to be paid for somewhere. I've got to believe you're a big fan of, "There's no free lunch." So either it's paid for by all of us collectively chipping into the middle, into the pot, if you will, and then providing a health care system that's available so we don't have people like we have on the front page of the Toronto Star where there isn't a bed when they're in a dire emergency-because none of us is going to build hospitals on our personal savings, certainly not anybody I know-or we go the private route and pay it through private insurance, through the premiums.
The fact is, when you look at the comparisons, the American system where there's a lot more privatization-in fact, it's almost totally privatization-is not as efficient as ours. You mentioned the OFL presentation. We heard from Ross McClellan that there is a $6 advantage to us in terms of our competitiveness vis-à-vis our auto workers in Ontario as compared to those in the States because we have universal health care. It's something that we all contribute towards and it's not something that Ford or Chrysler or GM alone has to provide to their workers, as they do down in the United States, in order to meet their contractual obligations.
If the only two choices are private or public, our system, while it's not perfect-far from it-is more efficient than the American private system. I don't understand how it's supposed to be beneficial to the average working middle-class family to go away from the public system and expect that somehow we won't have to pay for this any more because it's not within the public domain.
Mr Robinson: Very good questions again. Let me start with the only area where we're going to agree, on the small point that regardless of whether it's public or private we're going to have to pay for it. Of that there is no doubt.
Let me point out two 100%-less-than-truthful statements you have made. One is that we have a universal system. We do not have a universal system.
Mr Christopherson: Less than truthful, or you disagree with me?
Mr Robinson: They are less than truthful. They are categorically untrue. We do not have a universal system; we have a rationing system. In the pure fiction of the American model, people ration by cost. In Canada, we ration by waiting lines. That's why we have 200,000 people on waiting lists in this country. That's a fact. Ignoring it will not make it disappear.
To deal with your assertion that our system is more efficient, by what measure is our system more efficient? Is it a function that we spend less of our GDP? Well, let's take a look at that. We spend less of our GDP in Canada. We spend 9% of our GDP on health care. In the United States it's about 14%. It's 14% for a couple of reasons. One is that the University of Texas M.D. Anderson Cancer Center spends more on research and development in its cancer clinics than the entire government of Canada and provincial governments combined. There's a fundamental cost there. The reason why they spend more is because they have a slightly older population and demographic pressures have kicked in. The reason why they spend more is they have greater acuity of disease in terms of heart disease, cancer, AIDS, a whole bunch of inner-city, urban problems to deal with which also clog up the health care system.
The other issue to deal with is efficiency. A lot of people will say that because of the high insurance premiums people pay and that we don't have that sort of paper jam in our system, we're more efficient. Well, in terms of looking at HMO providers-there are literally thousands of insurance companies that provide health care insurance in the United States-they have a paper trail. You can ask, "How well are you doing in providing services to your people?" They have a paper trail. They can tell you, "In certain plans it's 48 hours or 72 hours for an MRI." In Canada we do not have that paper trail. Minister Rock at the federal level has embarked on a $143-million initiative, which we support, to measure what we're getting for our combined $83.5 billion that we spend on health care each year. Because right now if you ask anybody around this country, "How long does it take you to wait for an MRI?" in Ontario it's about four months, in BC it's about seven months. We have four provinces, including this one, that send their Workers' Compensation Board patients to the United States of America for care because they can't get it here. Our system is not more efficient; that is fundamentally untrue.
The last thing to measure is in terms of the GDP growth. What we need to measure is the per capita growth in health care expenditures because our economy as a smaller unit has grown considerably more than the larger American economy, which has a greater critical mass and lower unemployment. So when you measure percentage of GDP expenditures, as many people-and I've heard you argue in the past and your colleagues argue that that's why our system is more efficient. There's a numerator and there is a denominator, and the denominator is the GDP. Our GDP growth has been great, so any inefficiencies in our system or cost overruns are massed in that 9% figure. You need to measure per-capita expenditures and we're at 4.4% to 4.5%-
The Chair: Sorry, but I have to move to the government side.
Mrs Molinari: Thank you very much for your presentation. I focus on some of the comments that you've made in your conclusion. My colleagues have some questions, but I'd just like to make a few comments. For elected officials, it's certainly a balancing between what one presenter says and what another presenter says, so I thank you for recognizing the difficulty of our job in doing that. I agree with your comments that choosing the path of political expediency without clear plans is a recipe for fiscal chaos; we agree with that as well. Trying to balance all of the requests and looking to any decisions that we make, our long-term decisions, will benefit all Ontarians throughout the years and not just for the immediate needs. So I thank you again for your presentation. I concur with some of your concluding comments.
Mr Arnott: Mr Robinson, I noticed in your written presentation the fact that you've commended the provincial government "for passing Bill 7, the Taxpayer Protection and Balanced Budget Act, into law on November 23, 1999. This law covers the majority of provincial tax acts and outlaws future deficits ... and binds governments to holding referenda on any future tax increases." Of course, that legislation was passed at third reading in the fall. I just wanted to know if you would care to rank the current provincial government relative to other provincial governments over the last, say, 20 years in terms of their response to the overall agenda that your organization proposes.
Mr Robinson: This government has done better, in our view, than the previous NDP administration, the Liberal administration or the Davis administration, in terms of working through your 20-year time frame, Mr Arnott. I would add, though, that we commend the government although it took this government five years to finally live up to its pledge. After two strikes and many foul balls, Mr Harris finally hit a home run for taxpayers, but it took the prodding of the opposition in the last campaign, using some of our words and criticism of the government, to finally make the government pass that law.
Mr Phillips: Keep us out of this.
Mr Robinson: Mr Phillips, I'm only going by the screaming letters I saw on those Liberal campaign ads in May and June with our "CTF" right underneath.
The issue for us though is that we'd like to see the legislation go further in terms of encompassing tobacco taxes, and I know there's an issue there in terms of joint federal-provincial administration you have in tobacco taxes, and also in alcohol taxes and those sorts of other areas where I note the growth in non-traditional revenues which can lull you into a false sense of security because those non-traditional revenues that are growing are the first to go in times of an economic downturn. Your lottery proceeds, which are a tax on people who are bad at math-although I admit if Super 7 is $18 million on Friday I might buy a ticket-your other gambling revenues and some of the sin taxes in terms of tobacco and alcohol revenues and then also your fines and licences and stuff-some of those are functions of economic activity, and in an economic downturn you won't have that. That's why we pointed that out.
The Chair: We've run out of time. On behalf of the committee, thank you very much for your presentation this afternoon.
Mr Robinson: Thank you, Mr Beaubien. I'll leave the bracket creep study for you and I'm sure I'll engage Mr Christopherson again. Appreciate your time.
ONTARIO CONFEDERATION OF UNIVERSITY FACULTY ASSOCIATIONS
The Chair: Our next presenter this afternoon is the Ontario Confederation of University Faculty Associations. On behalf of the committee, welcome. You have 30 minutes for your presentation this afternoon. If you could please come forward and state your name for the record.
Dr Deborah Flynn: I'm Dr Deborah Flynn, president of the Ontario Confederation of University Faculty Associations.
The Ontario Confederation of University Faculty Associations is very pleased to make this presentation to the standing committee on finance and economic affairs on behalf of over 10,000 university professors and academic librarians. For many years now, OCUFA has approached these hearings as an opportunity to document the corrosive effect of two decades of inadequate funding on the quality of higher education in Ontario. While it continues to be important to reflect on the past, with the advent of a new millennium we feel it has become more important to focus on the future.
The mission of advanced education must not be limited to rapid skills training and to job placement. While important, these objectives must be complemented by the need to teach people to think freely, openly, unprejudicially and to respond creatively to the world's challenges. Post-secondary education must teach people to sort and to evaluate information in this input-laden era. And it must help our society to discern what is good to do among the things that are possible to do. Ours is a knowledge-based economy. Now, more than ever, a reinvigorated university system is vital for ensuring that the potential of society is realized.
In the Ontario Economic Outlook and Fiscal Review tabled in November 1999, the Minister of Finance announced that the government had exceeded its deficit target of $2.1 billion by more than $1 billion for the budget year 1999-2000. The province is on track for a balanced budget in 2000-01 and the minister's own projections conclude that a strong economic growth will continue. But the minister also noted that it is essential to make "the right investments to sustain our economic competitiveness."
OCUFA believes that in this knowledge-based economy the right investment is to recommitment to a world-class university system that can lead Ontario into the 21st century. In our written brief, we have provided committee members with a detailed analysis of our concerns about the future of Ontario universities. We have highlighted our concerns about accessibility, the government's tuition policy, student debt, student assistance, and the emerging enrolment pressures and efficiencies in the physical plant confronting our institutions.
OCUFA's recommendations on each of these issues are outlined in the executive summary provided on the first two pages of our written summary. This afternoon, I would like focus the oral presentation on our two primary concerns: the impending shortage of faculty members throughout the university system and its impact on the quality of post-secondary education in Ontario, and the issue of accountability as seen by this present government.
As members of the committee will know, the single most important factor in both the teaching and the learning process is interaction between students and faculty. It is absolutely essential therefore that as we prepare our students to participate in the knowledge-based economy we can keep the student-faculty ratio low enough to ensure that our graduates will receive the kind of education which will help them compete in the global economy. At present, Ontario is ill-equipped to meet that challenge, making faculty renewal a critical issue.
Three factors in particular are contributing to faculty shortages at our universities. First, Ontario has already lost over 2,000 full-time equivalent faculty members since 1990-91, representing over 15% of the total complement. This loss is directly attributable to government policies. Funding cuts have led universities to offer early retirement packages in order to save costs, while further savings were realized through layoffs, unfilled vacant positions, days of unpaid leave and salary cuts or freezes. Already this has had major implications on the quality of university teaching and research, and the loss of faculty to other jurisdictions.
The second factor contributing to the magnitude of the faculty shortage is the anticipated record rate of retirement by professors over the next 10 years. Currently, one third of the professors in Ontario are between the ages of 55 and 64. These faculty will be lost due to retirement just as student enrolment begins to crest. Universities across North America confront a similar challenge, suggesting that Ontario will be competing against every other jurisdiction to fill a high percentage of its current academic positions as these become vacant over the next 10 years.
A compounding factor affecting the magnitude of the faculty shortage is the drastic increase in projected enrolments. One-for-one replacement hirings will therefore not be enough to deal with the anticipated demand. The need now is not just to stabilize the system, but to prepare universities to meet the challenges ahead.
Already student-faculty ratios at Ontario universities have reached unprecedented levels. Between 1988-89 and 1997-98, the ratio of full-time students to full-time faculty members has risen by over 30%. This represents the highest student-faculty ratio in Canada, exceeding the average of the nine other provinces by more than 20%.
In order to lower this ratio, to offset faculty losses and to meet the new projected demand, 13,000 new faculty members will need to be in place within the next three years. A commitment to faculty renewal at this time is certainly not a luxury, particularly for a government that claims to be serious about maintaining Ontario's edge in the knowledge-based economy.
OCUFA calls for an immediate financial commitment to ensure that universities can begin now to implement a plan for the necessary recruitment and retention of faculty. Not including recruitment costs, but accounting for average salaries, benefits and the cost of staff support, this would require an additional expenditure of $1.4 billion.
When thinking about the role of faculty, the duty of teaching is often at the forefront of our minds. However, constraining the research capacity of universities reduces their ability to attract and retain the very best faculty, which in turn has caused concern about Canada's ability to remain competitive in the international marketplace.
Canada depends on its higher-education sector for almost one quarter of its national research and development effort. Most major technological advances of the second half of the 20th century, including those in the new biotechnological industries, telecommunication and the development of new materials for manufacturing, originated in university research. No other G7 country relies so heavily on its universities for R&D. Since Ontario is home to 40% of the scholarly and research activity in Canada, the innovators that our Canadian economy relies upon are the faculty and student researchers right here in the Ontario universities.
Given this link between Ontario's ability to compete economically and the strength of university research, it is hardly surprising that 94% of Ontario business leaders surveyed by Angus Reid supported increasing funding for university research. What is surprising, however, is that a government for whom the yardstick of its own success is the performance of Ontario's economy has failed to adequately support the research capacity of its universities. It's not as if the government were unaware of the system's shortcomings. After all, it commissioned and received a report recently by Heather Munroe-Blum entitled Growing Ontario's Innovation System: The Strategic Role of University Research, which specifically points out, "The government of Ontario fails to provide the funding required to conduct internationally competitive research." OCUFA encourages the government to heed the advice it sought, instead of continuing to cut operating grants and circumscribing both research and capital allocations.
Instead of supporting research through block operating grants, the Ontario government has moved towards a model premised on public and private sector collaboration. For example, in the May 1997 budget, the Ontario Research and Development Challenge Fund was created. Yet instead of providing broad-based research support, the fund primarily focuses on support for research-intensive universities which conduct applied research in the natural sciences, engineering and the health sciences. Disciplines and universities not geared to the production of applied, commercially viable research have difficulty accessing this fund.
In a climate of limited resources, universities will be tempted to divert support away from less "lucrative" basic research as well as social science and humanities research in order to lever money for the matched fund. Yet, as Munroe-Blum points out, this kind of research policy is extremely short-sighted. Not only does innovation draw on the full range of sciences, humanities and social sciences, but Ontario's current approach puts the province at a competitive disadvantage vis-à-vis its Canadian counterparts. According to Munroe-Blum, Ontario's lack of a coherent research policy has placed the province behind Quebec, Alberta and BC in attracting federal grant awards.
The government's ad hoc approach to fostering innovation is reflected most immediately in its reductions to basic research support. Whereas in comparable US jurisdictions, state research infrastructure funding as a percentage of total cost ranges between 50% and 120%, Ontario's support currently lies at 10%. A decade ago, government support was closer to 20%. A similar comparison emerges when Munroe-Blum examines Ontario and Michigan. While Ontario's spending on research and development represents a mere 1.77% of its economy, Michigan's investment is an impressive 5.12%.
Premier Harris's own words suggest that he understands the critical link between university research and economic competitiveness. In 1997, he noted, "Theoretical research is absolutely crucial to our ability to lead and excel in the race for the new ideas of the next century." In practice, however, his government's actions undermine his stated objective.
To marry the two, OCUFA urges the government to act on the recommendations that have now been made in two government-commissioned reports: the most recent Munroe-Blum report and Framework for a Research Policy for Ontario, authored by David Smith back in 1997.
OCUFA urges the government to adopt and support a comprehensive research policy. Specifically, OCUFA supports the call for a balance in the support for both basic and applied research, recognition of the neglect in support for the social sciences and the humanities, wider recognition of the importance of integrative-interpretive research, as well as recognition of the linkage between research and teaching and the concomitant need to recruit and retain exceptional faculty.
Before turning the floor over to give you an opportunity to ask questions, let me close by reflecting on the government's objective of achieving greater accountability in the university sector.
OCUFA certainly agrees that universities do not exist in a vacuum. They are an integral part of society as a whole, and clearly linked to the performance of both local and national economies.
We are concerned, however, about the government's attempt to measure university relevancy simply in terms of the institutional ability to undertake job training. While it is true that students are often attracted to universities because as graduates they will earn more and are more likely to get jobs than those with less education, the mission of universities is not simply rapid skills training and job placement As a result, the performance indicators currently in vogue with this government tell only part of the story. To properly assess the university's performance, it is not enough to focus simply on graduation rates, graduate employment rates and OSAP loan default rates. To threaten to tie university funding to performance evaluations based on such a limited range of indicators is to completely misunderstand the role of universities in delivering a much larger public good.
Ironically, while the government purports to be pursuing these measures on behalf of Ontario taxpayers, both members of the general public and the province's business leaders understand that other factors are equally important in assessing universities' performance. For example, while Ontarians value the impact of university research on economic development and innovation, they also value research for its contribution to the public good. To rely on quantitative measures only would be to misunderstand the motivation of survey respondents when 94% agreed that increased funding for university research must be a priority. To propose a series of more appropriate performance indicators is clearly beyond the scope of this submission, but OCUFA would encourage the government to create a new academic advisory committee to act as an arms-length agency for providing a system-wide overview of university programs that is based on peer review. Any future measures on program evaluation must have faculty representation to reflect the fact that faculty create and deliver those higher-education programs.
In the meantime, the government should act in the knowledge that Ontario taxpayers do indeed value what universities have to offer. Their only fear is that the past standard of excellence may not be maintained in the future. They are concerned about the fact that Ontario isn't keeping pace with its American counterparts. They know that while state appropriations in comparable US jurisdictions had increased by an average of 32% in the last five years, Ontario's support for higher education has decreased by 8% over that same time period.
Ontarians know that this kind of underfunding won't keep our graduates competitive, and as a result, fully 88% of Ontarians surveyed agreed that increased government funding for universities should be a priority. Our submission has indicated that Ontarians are quite correct. The Minister of Finance has indicated that the province's fiscal framework finally allows for significantly increased spending. All that's left now is for the government to take accountability seriously and to make the investment necessary to satisfy this public demand. Thank you.
The Chair: We have two minutes per caucus.
Mr Christopherson: Thank you for your presentation. We don't have a lot of time. I have two quick questions. One is, we hear from a lot of people on the business side of things who continue to argue that tax cuts are the number one priority and ultimately will benefit everyone, and that that's why every one of us should agree that that's the priority. To put your words to it, what argument would you make that an investment in our post-secondary education system, our university system, is such a high priority that even if the tax cuts have to be delayed, or forgotten, or set aside, it's worth doing.
Second, one of the members of the government side talked earlier-it's in the Hansard and I am paraphrasing-about the fact that one of his daughters was taking arts and humanities courses at university. He spoke of how almost cute that was, that it was nice and important for her, but it really wasn't going to lead anywhere. I think a lot of us were taken aback by that. If you could address those two things, I'd appreciate it.
Dr Flynn: Let me address the second comment that you made first. It's certainly an irritant for me as well when people speak of higher learning in that way. I think it's indicative of perhaps some qualities of the person and their value of knowledge themselves. A university education is not simply to provide a job for someone; it's to educate someone. The present government seems to fail to recognize the difference between training someone and educating someone. What we would hope for the Ontario public is that we have an educated public that's going to move into the 21st century.
With regard to some of the comments that have been made by the Premier, yes, some of those people even study Greek and Latin and still have a significant contribution to society as a whole. We first of all would also like to state that those students who graduate in the humanities and social sciences do indeed become employed. As a matter of fact, the statistics that we have in front of us are that after six months, in the social sciences we have 89.3% employed, and in the humanities, 91.8% of those people are indeed employed. It's not as though those graduating with a general BA are not employable, because they certainly are. What we hear from the business sector is that they want people who are not necessarily trained-most of those individuals are trained on the job-but they want someone who is taught to think critically and who can learn, and that is what universities do.
Mr Galt: Thank you very much for your presentation. I appreciated your concerns.
The area I want to explore is teaching techniques in the future for universities. Back in, I believe, the 1960s there was a bill passed that essentially gave the monopoly to Ontario universities to grant degrees within the province. We're now seeing other universities granting degrees in Ontario via the Internet. That, I understand, is happening at quite a high level, or significant anyway.
I'm wondering about how you're changing and teaching technology more efficiently. I think back to the early 1980s when I did post-graduate training in veterinary pathology. I was absolutely amazed when I could sit in a room with a carousel of Kodachromes and a diagnostic sheet-this is a very hands-on activity; excuse me, in pathology maybe I shouldn't talk about hands-on-and how much you learn from that. Today, I wouldn't have to be in that university; I could do that at home. This is a very expensive course, parallel to medicine and dentistry.
What are we doing to move into this 21st century as universities to make sure that we are as efficient as possible? Because if we aren't, others are going to do it and sell into Ontario, and we're going to be lost. We need to be selling outside, because we do have this kind of knowledge-based culture. I think that was the term you used a little earlier.
Dr Flynn: Knowledge-based economy. I think if you take a look at the high levels of enrolment in the universities over the last 10 years, the universities are anything but inefficient. If you look at the numbers of faculty that have been lost in the province and look, over that same period, at the numbers of students coming into the universities, universities have become more and more efficient.
I think the point you made is a very good one. Hands-on experience is very, very important. What we see many of our programs doing now-and I can give you an example of what happens in psychology at my own university-is that because the lecture halls are so enormously filled with students, we have to create part of the course that is a hands-on experience so that we have fewer numbers of students dealing with a professor to learn some of the things that you've talked about that simply could not be learned in a lecture hall of 200, 300, 400 and 500 students at a time.
We have been creating smaller labs, for example, to accommodate more hands-on experience. That's one of the issues that we're trying to confront. Right now we simply don't have the professors to deal with the numbers of students. We are using all kinds of new technology. We have universities that have live professors and, in other rooms, we have students who are sitting watching that professor on video because we simply don't have a room large enough to accommodate all of the students. So we are using the Internet, we are using high technology, but there are no studies to indicate whether the quality of that education is just as good over the Internet or using these forms of high technology as opposed to the learning experience that one has sitting in a live classroom classroom with a professor. We certainly believe that if we're going to maintain the quality of education, we need to keep the ratio down as low as we can. Right now, we have probably the highest in the country, and that's simply unacceptable to us.
Mr Phillips: Thank you for a very thorough presentation. You've raised many points with too little time to debate them. But two that caught my eye were, first, your comment on challenging ourselves to evaluate things on more than just the material side of things. It reminded me of a comment-I think it was made at this committee-by one of the government members, who said people on social assistance want to make a contribution to society but can't unless they get a job. I don't buy that; I don't agree with that. Many people on social assistance do not have the technical skills for a job or may have other challenges, but can make a meaningful contribution to society without "a job" in a thousand other ways. Similarly, I think you've got your finger on, yes, we should measure how well one is prepared for the workforce, but that will not be the only measure.
I'll ask both my questions because sometimes we don't get a chance to ask two questions.
Dr Flynn: OK, and I'll try to be quick.
Mr Phillips: The second one that you raise is a matter of growing concern, and that is, "In the absence of reasonable tuition fees and adequate student assistance, students from low-income families will be disproportionately unable to further their formal educations." I worry a lot about that. I think one thing that has distinguished Canada is that young people, regardless of their background, aspire to and have been able to pursue post-secondary education.
I wonder if you might comment on both those issues for us a little bit, and any advice you've got for us on them.
Dr Flynn: The lower-income issue is a very interesting issue because it has come up quite recently in the media with regard to the Premier stating that there have been studies and studies and studies done in the area that indicate that rising tuition does not affect lower-income students. In fact, there have not been any studies done in the area. We've requested these studies. What we have found is a very old study done by Stager, an 11-year-old study, and the other two were commentaries that were made by individuals that had no basis in data for these comments.
We're not only concerned with lower-income students being affected by increases in tuition but also with middle-class students being affected as well. We have families in the middle class that are able to hold a mortgage, to support themselves, but simply don't have the funds to put away for a university education, and those students do not get OSAP loans because their parents are making too much income. So we have a great concern with the rising tuitions. That is certainly an area where we would like to see the government have a study commissioned and see what impact increases in tuition have on lower-income students, because these policies are based on absolutely no data whatsoever.
The Chair: On behalf of the committee, thank you very much for your presentation this afternoon.
GREATER TORONTO HOTEL ASSOCIATION
The Chair: Our next presentation is from the Greater Toronto Hotel Association. On behalf of the committee, welcome. Could you please state your name for the record, and you have 30 minutes for your presentation.
Mr Rod Seiling: My name is Rod Seiling. I'm president of the Greater Toronto Hotel Association.
I want to start by thanking the committee for giving us this time today. I think you have a copy of our submission. I put it in bullet form to be a little more brief and hopefully allow some time for questions.
I do want to say that the Greater Toronto Hotel Association and its members support the general policy direction of the government of the day. We certainly believe that lower taxes, whether they be personal, indirect such as employer health, property tax-and I'm going to comment on that later. We deeply appreciate the efforts to date which the Minister of Finance has made to try and reform the property tax system. It was 40 years in getting, shall we say, screwed up, and obviously in one year it's not going to be fixed, but it's certainly a start and we want to give him some credit for having the courage to make that start.
Also, in terms of corporate taxes I would like to point out that right now the corporate taxes on the service industry are 25% higher than other corporate taxes. Given that the service sector is now the engine of the economy in this province, I hope the minister and this government will take a look at the tax on the service industry in the corporate field, because if we want to have those industries thrive and prosper and create more jobs, I think we need a level playing field in that area.
We also want to congratulate the government on removing red tape, again reducing debt, its Taxpayer Protection Act, and progressive legislation and regulations, whether it be on workers' compensation or the Safe Streets Act. I know some people are less than supportive of that piece of legislation, but I can tell you from our personal involvement and the comments that we are receiving from our guests here in Toronto that the once lofty position of "safe and clean" was fast eroding by the fact of the aggressive panhandling and squeegeeing that is taking place here. It's something that we pride ourselves on here and hopefully the new tools will allow the police to help correct that.
I must say that tourism benefits from this type of legislation, and tax-cutting especially, because tourism relies on discretionary income. The more income taxpayers have, the better it is for our businesses because we're able to compete for that discretionary income.
A little bit about the Greater Toronto Hotel Association: We represent about 130 hotels here in the city, with approximately 32,000 rooms and more than 20,000 employees. We've been in place since 1925, and I should add that we're about 40% of the hotel industry in the province, which is approximately the same as the greater Toronto area representing the tourism business.
Tourism is a key to economic growth. It's not a frill. It's the fastest-growing industry in the world. In Toronto alone, it's the second-largest industry, only behind the financial services sector. It's an export. It brings fresh dollars to this city and this province, and it's a crucial source of income for government. For every dollar spent by tourists, 41 cents goes to the three levels of government: 19 cents to the federal government, 14 cents to the provincial government and eight cents to the municipal government.
The competition for the tourism dollar is getting greater and greater. Virtually every jurisdiction and country in the world has realized and recognized that tourism is a great way to grow their economy.
It's also a great way to create jobs, and it's the jobs that we like to call "point of entry." We specialize in giving people their first job, or people who are being retrained and coming back into the workforce, whether they've been laid off or retired. They come back in and learn new job skills. We're the perfect place for them. Not everyone will stay in our industry, but they learn new skills, learn how to work in the new economy, and move on.
In terms of economic impact, you have figures in front of you based on 1998, both for the province and Toronto. You will note that initial tourism spending is over $11 billion province-wide and over $3 billion here in Toronto; in terms of wage income, $7 billion province-wide and a little over $2 billion here in Toronto; in terms of output/sales, $23 billion province-wide and almost $6 billion here in Toronto. In terms of the number of jobs, though, you have 332,000 province-wide. The Ministry of Tourism is now saying there are well over 400,000 jobs in the tourism industry. As of our 1997 survey, there were almost 80,000 jobs here in Toronto.
In terms of taxes, you'll see over $4 billion province-wide and $1.2 billion here in Toronto in total: federal taxes, $1.8 billion province-wide and almost $600 million here; provincial, $1.5 billion and almost half a billion here in Toronto; municipal, $808 million, and $255 million here in Toronto. I should point out that of that $255 million, over $160 million is in property taxes alone, and I'll come to the property tax issue later.
Hotels really are the backbone of the industry. We're not the main reason why someone comes to visit a location, but the accommodation must be there for the system to function well. So the fiscal health of our industry is an accurate barometer of the overall health of the tourism industry.
I'll give you some figures on the economic impact. Here in Toronto we contribute $1.2 billion to the gross domestic product-that's based on the 1997 survey by KPMG-and 22,000 jobs. An interesting stat for you: Over half the room nights sold in 1997 were to visitors from outside the province of Ontario; 2.3 million room nights were sold to visitors from the United States, with an additional 800,000 to those from overseas. So we are the gateway to this province.
Again as I said earlier, total tax revenue generated by Toronto hotels for the three levels of government was over $600 million, and $161 million of that was in property taxes alone.
We do have some concerns for the future. The future success of tourism is in jeopardy. Although we're doing much better, I must say that we're not doing as well as people think we are. We're losing market share. Return on investment for the hotel industry is marginal. Our tourism product is declining and hotel expansion is stagnant. When you compare that to what's happening in other major cities across North America and even in Canada, we're a real anomaly. There is no hotel construction going on here in the city.
In talking about future success, fact number 1, and I want to talk about this, is that we're having a slow recovery from the recession.
Our property tax burden is still too high despite the benefits to date of the current legislation and regulation.
Our return on investment is not competitive.
We need to recover market share here in Toronto. We're losing market share.
We've got inadequate funding for destination marketing.
Finally, our image here in Toronto is at risk.
I want to conclude with a summary and some proposed solutions.
Fact 1: Despite recent improvements, Toronto's hotel industry is still a long way off from doing what it needs to do in terms of performing well economically. In the mid-1990s, our industry was virtually bankrupt. Occupancy rates declined by 24%, from 76% to 53%, between 1988 and 1993. Average room rates-our revenue-declined by 12% during that same period. Even in 1998, hotels had the "Vacancy" sign on for more than 275 nights. Despite the fact that most people believe Toronto is virtually sold out, that's not the case. Recovery has lagged behind other jurisdictions in North America.
I apologize for the next chart. These charts were supposed to be in colour, but again with modern technology the colour printer did not work, so you've got them in black and white. But you can see there that the top line is average daily rates and the second line is our occupancy. You can see where we've come from in 1988 to where we are now. I can tell you that based on 1999 figures, our occupancy has actually dropped off about a half per cent in 1999, although our rate has continued to increase and we're going to see about a 6% or 7% increase in average room rates. You can see at the bottom of that sheet where it shows you the average nights per year that we've had with rooms available. In other words, in 1998 one in every four rooms across the city was empty.
I'm going to move on to average daily rate. Actually, I will take you back to show you occupancy performance and how we compare against other cities, and again I apologize. The top line is New York. That's what we call nirvana. You can see they are well above the 80% occupancy. The next line is Boston. The one below that is Chicago. Vancouver is one that's decreasing, and the reason for that is that they've had rapid expansion and the supply has increased dramatically, but they have been showing some recovery in 1999. You see Toronto there, and below that Montreal, which is fast catching up to us.
The next page shows the average daily rate. Again, the top line is New York, followed by Boston, Vancouver and Chicago, with Toronto and Montreal being almost equal.
The next chart you have in front of you is on bankruptcies. You can see what's happened over the past 10 years on sales versus forced sales. You can see the staggering impact that the forced sales have had on our industry. In fact, back in 1992 they were all forced sales. If you move your way through, it is not until about 1996-97 that there is somewhat of a balancing out where normal business sales start to overtake forced sales. I can tell you in 1999 the market virtually dried up, and if we were to chart this, and we could now, you would have a hard time seeing any sales there, partly because of access to capital, which I'll talk about a little later, and the fact that the price per room to build versus the price to sell is about even, although we're still not seeing any hotel construction starting.
Fact 2: Our property tax burden is still too high. Toronto hotels have the highest tax burden in North America. We are the king when it comes to property tax, for a number of reasons. One is the property tax rate here in the city. The rate of tax is way too high. Again, it's a function of the education tax. The government is doing something. It's moving at it over the eight-year period, which will help bring some equity to it. It's one of competitiveness. It's not just competitiveness within this area, but across North America.
I can give you an example. In the Toronto Airport Marriott, which is situated in the former city of Etobicoke, the tax in that hotel is over $5,000 per room. The Hilton Toronto Airport, which is about 400 or 500 yards up the road, happens to be sitting in Mississauga. The tax per room in that hotel is $1,450 per year. They are virtually the same hotel, cater to the same demographic competitive set. You can see what it means in terms of competition, return on investment, ability to market, all those things.
I want read you a quote from Bill Fatt, who is the chairman and chief executive officer of Canadian Pacific Hotels Corp: "Canadian Pacific Hotels Corp wants to fill a need in Toronto for an additional convention hotel. We have the will. We own the land. We have the resources. The high property tax burden for hotels is stopping the project." It's one of the unique situations where a company actually has the resources-not just the land available and the need, but they have the money to build it-and they can't build.
As I said, high property taxes have been identified as the single greatest objection to new hotel development here. Numerous projects have been considered, and again they all fall off the shelf.
You can see why in the next chart. It's a chart prepared by KPMG this past year. You can see that here in Toronto over 13% of hotel revenues are required just to pay property taxes. You can see the competing jurisdictions, where Montreal is next, all the way down to Los Angeles, where it's about 2.5%. We compete with these people. We'll talk about it in a minute.
Fact 3: Return on investment is not competitive. This is where it really hits home. As we said, there have not been any new hotels built in Toronto in the past decade. In the past it has been less expensive to buy than to build, and return on investment has been inadequate to attract new investors. The average approximate ROI for hotels in the Toronto area has been 8%. Owners can get 12% to 16% in competing markets and, as you all well know, I'm sure, capital today has no loyalty. It is fickle and it's like the lady of the night: It goes where the highest bidder is. With that happening, we are not only not getting the new construction that we desperately require here, but we're not getting the investment we need to keep our hotels competitive. Owners must produce a return, so they do it by cutting services.
I want to read a quote from Stephen Foster, vice-president of operations, Starwood Hotels and Resorts. Their brands includes Sheraton, Westin and Four Points Hotels.
"Hotel owners continue to be reluctant to reinvest in their Toronto properties for upgrades and substantial renovations. The return on investment, even with the recent favourable economic performance, is far from where it needs to be, especially if you compare Toronto to other major North American cities of comparable size. Owners know that they can achieve better returns elsewhere, with less risk than they are currently receiving from their hotels."
What happens is general managers are forced to reduce services, cut back on improvements, and what they end up doing in order to produce the return that the owner requires is turning an A product into a B product, which lessens our competitive ability even more, so we are in a Catch-22 and a downward spiral.
As a result, no investment means no new growth and the long-term benefits for our city and our province go lacking. We're not getting the job creation that we can, not just out of major construction and ongoing maintenance but also out of our hotel operations. As I referred to earlier, many of those jobs are entry-level positions. However, the anomaly is that Toronto has been recognized as an important potential market for new hotel development, and while we have the need and it's recognized, the conditions are not there for new investment.
If you look at the next chart, it shows you what has happened in our industry in terms of return on investment. As I said earlier, back in 1994 we were virtually bankrupt. Only 11% of the hotels were showing a return of equal to or better than simple bank interest. In other words, they were the only ones making a profit. Some 33% of them were operating at a loss even before debt service, depreciation or income tax; 72% of them were experiencing a loss after debt service but before depreciation and income tax. With 150 rooms or more, that figure jumped to 80%. By the time 1997 rolled around, we were basically back in the black. Luxury hotels were earning a 7% return, full-service hotels an 8.5% return, and economy hotels about 12.9%. When you compare that to what an owner could get simply by investing in GICs-7.25% back in 1994 or 5.3% in 1997-you can see why they're reluctant to invest here in Toronto. If you were an owner who lived in this community and wanted to invest here, you had to shake your head and say, "Why would I go for the risk?"
Going to availability of capital, which still is a huge problem in our industry, Lyle Hall, a partner in KPMG's consulting division within their hospitality side, says: "Debt financing for new hotel development is extremely difficult to find, as the traditional lending sources view the sector as high-risk. The magnitude of operating costs and municipal property taxation in Toronto play a significant role in reinforcing this view."
Fact 4: Toronto is losing market share. We're losing it to the rest of Ontario and to the rest of the world. For the first time in history, total visitation declined in 1997, recovered slightly in 1998, and remains flat. I can tell you, we're seeing from early numbers for 1999, and they will show a decrease.
The decline in market share is due to a number of reasons: chronic underfunding of destination marketing; declining product at major attractions-the majority of those, I should note, are owned by government-and the decline in live theatre. We have no blockbusters, we have no long-running shows. It's hard to market something that's here for four, five or six weeks. We've also lost Livent, which meant that in terms of marketing dollars we've lost $15 million annually in marketing in this city, because that's what Livent spent annually in marketing in Toronto. So not only did we lose their product, we lost their dollars as well.
If we go to the next chart, I'll draw your attention to the US visits. This is a most disturbing number. With the advantage that we have on our currency rate, the exchange rate, that number should be jumping. It's not. I'll go to what is disturbing about that in a minute.
On the next chart you'll see the category in different classes. One of the reasons why the alarm is just sounding now is that the plight of our business has been camouflaged by relatively strong meetings and convention business. That business was booked five to seven years out. That's the cycle. But if you look at our leisure business, it's in the tank. It's down over 14% in 1998 from 1996. Why we're so concerned is that it's a well-accepted fact that to be a successful meetings and convention destination, you need to be a "hot destination" on the leisure side.
Meetings and convention planners are very risk-averse and they only want to take their delegates to where the destination is perceived as hot. So if you lose that shine in the leisure side, your meeting and convention business will soon follow in the same decline, and we are seeing that. I can tell you that while our meeting and convention business for the current year is relatively good, next year is awful. We believe the two are linked. When you look at the booking cycle, the business that we're still enjoying now was booked when we were that hot destination.
If you go to the next chart you'll see how dramatic it is. The visitors from all markets are showing increases except for the leisure, the negative decline. That's what we talked about. So it is real, and we need to fix it immediately, before it becomes catastrophic.
Fact 5: For a number of years we've experienced inadequate funding levels for marketing here in Ontario. Ontario dramatically cut back marketing funding, from $26 million in 1991 to $11 million in 1997. Ontario overnight stays in that period dropped 31% from 1988 levels. Fortunately, in 1998 the Ontario government restored the marketing budget to $30 million for the next three years. That's $30 million annually.
Here in Toronto, the city cut its budget from $7.6 million in 1992 to $4.2 million in 1999. I should add that in the current budget process the city is recommending a 5% increase in that budget. We're not sure whether it will carry or not when it comes to the final budget process, but it looks like there may finally be a stop the continuing budget-cutting process here in Toronto.
Tourism Toronto, our major funding organization, has been trying to fly with one wing. As I referred to earlier, image platforming, which is so needed by both the province and by the city, is lacking because we certainly don't have the money. There isn't any happening right now; it has all been eliminated due to the cutbacks.
From the private sector standpoint, it has increased its funding from $2.8 million in 1992 to $4.3 million in 1999. I should add that the hotels contribute 50% of this, plus an additional $1.5 million in convention subsidies, to help buy down the price of conventions so that we are competitive with our major markets that use their convention centres as loss leaders. In addition, collectively we spend another $150 million marketing this destination.
Compounding this marketing problem, both the federal and provincial government marketing programs are now dollar-for-dollar matching programs. As we have lost dollars, we get a triple whammy, so we are unable to participate in the federal and provincial programs. Other jurisdictions are able to use the money they have, which should be earmarked and is earmarked for Toronto. We not only lose the ability to market, but the money that was available for us is used to market against us.
Competition-wise, Toronto is being outspent by its competitors. We rank 43rd in North America. We're now even outspent by Vancouver and Montreal. Montreal's budget is $6 million greater than ours. If you look at the next slide, you can see an outline of where we are in public and private sector contributions and see where it has levelled out. If you go to the next chart, you'll see where we are in North America. I think you can eliminate the first four, because they are anomalies. I don't think anyone thinks they're going to compete with Las Vegas, Honolulu or Orlando. But when you get down to the next of them, you see Atlanta at $19.9 million and Montreal at $14 million. We're simply not competitive in the marketplace.
I want to add that destination marketing is an investment, not a cost. Tourism advertising delivers incremental dollars to a visitor destination. This not only creates jobs etc, but it creates new activity and new revenues. For example, in New Jersey, the state was going to cut their marketing budget. They hired Longwoods International, a very well regarded research company based here in Toronto, to take a look at what the impact would be. They found that for every dollar expended by the state on marketing, the return was over $150 in incremental expenditures and $19 in state taxes. A similar study found very positive benefits in New Orleans. Conversely, phen Colorado cut their marketing budget, it led to a loss of over $2 billion annually in tourism expenditures for that state.
I talked earlier about our image. For__`_tely, the city has done some things recently and it looks like we will see our image restored. They've tried to clean up the garbage and, with the safe streets legislation, we're expecting a change in the squeegeeing and aggressive panhandling. It's not supposition. A 1998 study conducted by Ryerson University confirmed the comments we were getting from our hotel guests.
I talked earlier about the loss of Livent. I also want to talk briefly about the lacklustre or sporadic programming at government attractions. Mainly due to underfunding, whether it be the zoo, the AGO or the ROM, we're lacking blockbusters. I think it's important to note that because they are government-owned and -operated, the ability for risk and aversion to risk-their management style has to be that they can't afford it, so their ability to take chances to improve programming is somewhat retarded. Of course, the low return on investment of our hotels is also stopping that, because we simply aren't keeping ourselves up to date, especially from a functional standpoint.
In terms of solutions, we've talked about a fair and equitable property tax system for hotels. Right now, the way hotels are assessed really an income tax. The Income Tax Act states that the valuation for property tax purposes is supposed to be on the value of land plus buildings. But we can demonstrate that as our income goes up, our property taxes go up proportionately. We need a revised methodology to get rid of that. We're asking the province to accelerate the business education tax averaging so that we can close the gap between ourselves and the Mississaugas and Peels.
We are also concerned about what's going to happen with property tax stability once the caps are removed. We're in the unique situation right now where we have a lot of hotels that will benefit when the cap comes off. A number of hotels will also get hurt when the cap comes off. No one foresaw the impact of amalgamation that hotels in Scarborough and Etobicoke, where the tax rates were below the average of the new, combined city, were actually going to see an increase in their taxes because of that.
On the destination marketing side, we need to recapture our market share on both the leisure and business sides. We can only do this by improving our ability to market ourselves here in the city. Again, if we market ourselves well in the city, it's going to benefit the province. We are the gateway. The new "du jour" in marketing is what they call "hub and spoke." You get people into your hub and then feed them out to the hinterland across the province. It's the benchmark today of how you market a destination in a wide geographic area.
We need to see an increase for funding Tourism Toronto from the city, but we also need to find a stable funding mechanism not just for Toronto but across the province. So a long-term funding mechanism is required.
The Chair: We have time for a very quick question from each caucus, and I'll start with the government side. You have one minute.
Mr Arnott: Thank you very much for your presentation, Mr Seiling. I thought it was very thorough and very helpful. You have, of course, outlined some proposed solutions and not just come here with problems, and we appreciate that. It must be very difficult for you to articulate what the government ought to do with business property taxes when the 10, 5 and 5 expires. It's a challenge for us.
Mr Seiling: Actually, in Toronto right now we're at 2.5, 2.5 and 2.5.
Mr Arnott: Right. What should we do?
Mr Seiling: I think there are a number of tools. As I said at the beginning, we congratulate the government for having the fortitude to at least start the process of reforming the property tax system, which was so wildly out of whack. Unfortunately the tools are, in effect, maintaining the old system to a certain degree. Depending on what happens after the caps come off-because, as you know, if a municipality has adopted the tool of capping, it is prevented from increasing taxes in that sector-we could actually end up seeing tax increases on sectors that are entitled to a tax decrease simply because the capping stops the system from working. We recognize that there are ways and means to modify some of the serious increases that some of the smaller businesses will incur.
On the same side of the equation, there are businesses, such as hotels, that have been supporting inequitably for quite some time, overpaying their taxes for 40 years. At some time they need to have a return. If they don't, the owners simply aren't going to invest, and we're not see
TJ$T9&::^,áOPA.#^UeY[XZEGere are some tools there. But eventually we have to get to where there is fairness and equity in the system, where people pay their fair share, whether you phase it in, cap it or create some special classes-perhaps one thing the government will have to look at; it provided some ranges of fairness. It's interesting to note that basically every city in the province with the exception of, I think, one is operating outside those ranges of fairness. A large part of it comes back to residents, including you and me, having a tax holiday at the expense of our businesses. At the end of the day, if we don't fix some of that, we're going to lose some of the businesses.
Mr Phillips: Your presentation was somewhat pressing, Mr Seiling. There are two parts to your solution: one is the property thing, which you've just talked about, and the other is finding a way to increase the Toronto area as a destination-a kind of leisure destination, I gather. There hasn't been anything particularly new, in a big way, that I can recall over the last five years in Toronto. We're going to invest a lot of capital, in time, energy and money, in the Olympic bid, and hopefully we'll be successful. My judgment would be that that would be very good for us.
From your perspective, will that be enough, or should all of us be looking at putting some energy into other destination attractions?
Mr Seiling: Certainly the Olympics will be very good for this city, this province and this country. However, first of all we have to win them. We're very concerned that if our sights are trained on the Olympics and we don't get them, what happens? Also, we have this problem now and in the interim. We can't look so far into the future that we forget the present. I can tell you that we're hemorrhaging right now, and it's not just the hotel business; if you look at the tourism sector it's comprised of retail, restaurants, transportation and attractions. If you look, virtually every attraction across the city is down and it's down simply because we're not in the marketplace. It's also down because we clearly identify the need to have some new attractions. Certainly some of that infrastructure would be part and parcel of a successful Olympic bid.
For the leisure traveller the window for buying is about three weeks out, so if you're not top of mind with that traveller when they're looking to go somewhere, you're simply not on the radar screen; they're not coming to see your city. There are so many competing jurisdictions out there because they've all identified tourism as a way to grow business and to create jobs, and to create those jobs at the level that virtually every government has trouble creating, the entry level job; especially to get young people and those who have gone through retraining employed. As I said earlier, we're ideal for that. We spend a huge amount of money training people continually and we know that we always have to because it's the nature of our business. While there are people who make their career in industry and they do very well, we don't expect that everyone who comes into our business is going to stay in our business.
Mr Christopherson: Thank you for your presentation this afternoon. I noted that in your presentation you talked about hoping to see the municipality of Toronto make greater investment in tourism, overall the province to be making investments in tourism, and, as part of that reinvestment in the Toronto Zoo, AGO, ROM, which are important to your industry. Recognizing that, municipalities are tight because of the downloading that the government put upon them in order to pay for their tax cut and that there's no money for these other things because they used that to pay for their tax cut, given a choice, what would you rather see? Would you rather see these investments take place or the 20% tax cut that's currently on the books with this government, if you assume that you can't have it both ways, recognizing that the last 30% tax cut cost us $5 billion to $6 billion, and those are real services that we don't have any more?
Mr Seiling: I'd like to point out first that the cuts in the budgets to tourism in Toronto started long before there was any downloading exercise. But I'm happy to report that the city of Toronto especially has recognized the importance of tourism and has come out in favour of reversing that trend. There's a general recognition, if you listen to the mayor, the chief executive officer of the city and the head of the economic development committee, that tourism is an important industry. It's one of their identified clusters that needs to be nurtured and helped, and so I'm hopeful there. Obviously, though, not all the funding can come through the municipality. We don't have the solution yet but we have to find a stable funding mechanism to grow this industry, because if we do not, we're going to lose out. Other jurisdictions, as I said earlier, are far ahead of us. Money is not the root of all evil at this point in time; it's the root of success.
The Chair: Thank you very much. On behalf of the committee, thank you very much for your presentation this afternoon.
ONTARIO ASSOCIATION OF INTERVAL AND TRANSITION HOUSES
The Chair: Our next presentation is from the Ontario Association of Interval and Transition Houses. Could you please come forward and state your name for the record.
Ms Eileen Morrow: Thank you very much. We're here today representing the Ontario Association of Interval and Transition Houses. My name is Eileen Morrow; I'm the lobby coordinator and staff person at the association. I'd like to introduce Corinne McCordick. Corrine is going to share the presentation with me today. Corinne is a front-line worker at Rosewood Shelter in Midland and a member of the lobby committee of OAITH.
The Chair: On behalf of the committee, welcome. You have 30 minutes.
Ms Morrow: We certainly appreciate the chance to come and speak to the committee about our concerns. We have over the years often come to present before the finance and economic affairs committee. We thank you for this opportunity this year.
Just to give you a little bit of an idea about what OAITH is, the association represents approximately 63 members across the province of Ontario. They are primarily first-stage emergency shelters for abused women and their children who are escaping violence against women. We are the largest shelter association in Canada, and in that regard, approximately one third of women who use shelters in the entire country actually use shelters in the province of Ontario. It's a significant area and a significant sector of services that we'll be speaking about today.
Shelters actually were begun and started by women who were victims of violence, and ever since that time, approximately 1975 in Ontario, abused women and their children have continued to say that shelters for abused women and their children are the most supportive community-based services they use. They continue to have a very high level of support for shelters in addressing their issues. Of course, we're here today before the finance and economic affairs committee and so we're here to talk about finances and the funding of services. For the members of the committee who may not have been around then, I just want to give you a little bit of a brief history.
Shelters actually began in 1975 in the province of Ontario, but it wasn't until the last Conservative government in Ontario that the task force was set up to study the problem in 1982. That was the first time the province of Ontario as a government began to recognize that shelters for abused women, for instance, needed to be established on a permanent basis and that they were essential services for women.
However, by 1986 it was very clear that the system set up with grants and piecemeal funding under the General Welfare Assistance Act could not continue to provide the services that women and children needed and that, in fact, were in serious danger of falling apart financially. The Liberal government implemented a shelter funding review in 1986 and, as a result, developed what's known as the funding formula for shelters in Ontario.
It was an interesting funding formula because it did provide more stability for shelter funding in Ontario, but it had this very interesting aspect to it: Although I haven't done the internal research, I believe we may be unique within the Ministry of Community and Social Services in that shelters for abused women are required within their contract to use 20% of their base core service funding for crisis intervention. That means anything beyond that-and the province has recognized that shelters provide many services beyond basic shelter and counselling for women-needs to be fund-raised as well, but for 100-cent dollars. I certainly can assure you that shelters in the province do extraordinary amounts of fund-raising within the community. Even at that high level of required fund-raising, they are at this point not able to meet the demands that women and children have.
As you know, in 1995, government spending reductions, in order to reduce the deficit, put challenges and restraints on everyone in the province, and that has included first-stage and second-stage shelters for abused women and their children. It's important for me to let you know that historically shelters did not evolve to the point where they had a lot of middle managers and people like that, so there was not a lot of infrastructure to cut from without digging into the direct services for women and children; and that in fact has happened.
As you know, there is no second-stage funding for programs; it was eliminated. This has resulted in a unique problem, where a certain part of the anti-violence envelope in the province has been jettisoned to the municipalities. I think you heard a couple of days ago from the Alliance of Canadian Second Stage Housing and I'm sure they gave you more detail about the struggles. We support their submission and we would really like you to look closely at addressing that issue.
In terms of the first-stage shelters, of course, since 1995 we have been struggling, and at this point we are in a bit of a crisis. We did a report last year calling on the shelters to give us information about the service demands. We found that more women and children than ever are requesting services at women's shelters and service demands have increased significantly between 1995 and 1997-98, from 11% to 30% in various programs within the shelter. Within the first half of 1999 that increase continued, and I'm sure it's even worse now.
We found out that women were staying longer in women's shelters between 1995 and 1997-98 and that rise in stay represented about 18%. Now in the province a stay in shelters can range from three or four weeks to three or four months in communities like Toronto where housing is unavailable and women can't move on.
We also heard from shelters that because of these reduced resources at the same time that there was increased demand, about 60% of the shelters reported a decline in the overall service they were able to give to women and children. As a result, one quarter of the shelters have lost front-line staff and all staff are now having to work harder, fund-raise more and work more overtime. That, of course, has its impact on the women and children within the shelter.
It's important for us to realize that at this point we are facing a crisis within the community-based services for women and children because of the increasing demand. Almost 85% of the shelters in Ontario report that services within the community, as well, are not at the same level they were for women. What this means within first-stage shelters is that it takes longer for us to find the supports and services within the community for each woman, and that contributes to an increased length of stay and a reduction in service for each woman and child.
I'd just like now to let Corinne tell you a little about how we might start to address some of the challenges that are facing women and children and the shelters and services that they're using in Ontario.
Ms Corinne McCordick: We recognize that there have been initiatives taken by the Ontario government to respond to issues of violence against women. However, almost all significant long-term initiatives undertaken by the Ontario government have been focused on the criminal justice system, which sees abuse against women and abused women as victims of crime.
Women's groups have called for criminal justice system reform as an addition to, not an alternative to, community-based programs. A narrow focus which works primarily on one system may address some of the crimes of intimate violence against women, but will not address the experience of intimate violence that often keeps women and children trapped in abusive situations.
The inquest into the death of Arlene May is as yet the most significant initiative undertaken by the government of Ontario. Of the 213 recommendations carefully developed by the jury, 203 were directed towards the Ontario government.
We recognize that while the province has been working on some of the recommendations primarily within the criminal justice system, we have concerns that community-based recommendations have not yet been addressed and feel strongly that these would go a long way to improving services for women and their children. This is especially true of the recommendation for a shelter funding review, as well as those recommending improved independent advocacy services for women and programs for child witnesses of women abuse, which the jury suggested should be located in women's shelters and other women's community services.
Most abused women will not use the criminal justice system to address violence, and even when they do, they still need ongoing, comprehensive support on issues related not only to the crime of violence but to the whole experience of violence and its impact on children. Many women experience abuse for which no criminal charges can be laid.
While we're hopeful that reforms within the criminal justice system will provide positive support for women in time, we know that it takes a long time for changes to large, province-wide systems to become effective practice. Women and children need improved support now.
During Wife Assault Prevention Month, OAITH called on the government of Ontario to take action to support women and children escaping violence. We are asking today that this committee support the recommendations we made at that time, which are listed in the material you've received today; that is, to provide immediate funding for the equivalent of at least one additional women's direct service community support worker and one additional child and youth support counsellor for each women's shelter and each second-stage housing program for abused women and their children in Ontario.
Assuming that approximately 100 shelters and 20 second-stages could receive an estimated $120,000 for the cost of these programs, the total cost would not exceed $15 million. The total initial cost would be less than the $18 million announced for the new crown attorneys and domestic violence courts to support the May-Iles changes to the criminal justice system. This would restore the balance between the criminal justice system and community-based services envisioned by the inquest jury.
We further ask that you support our call for immediate implementation of a review of the funding for women's shelters and second-stage housing programs with a view to increasing funding resources, as recommended by the jury in the inquest into the death of Arlene May.
The Chair: Does that complete your presentation?
Ms Morrow: Yes. We wanted to leave lots of time for questions.
The Chair: We have approximately five minutes per caucus, and I'll start with the official opposition.
Mrs Sandra Pupatello (Windsor West): Thanks for coming today to speak to us. I didn't see your specific request in the proposal sheet.
Ms Morrow: We had distributed a copy of the material that we wrote for Wife Assault Prevention Month. It's called Ten Years from Montreal. I brought 25 copies.
Mrs Pupatello: Those specific proposals are in here?
Ms Morrow: The first couple of pages are an executive summary of the document, so you don't have to read the entire thing unless you really have lots of leisure time, which I'm sure you don't. They actually outline some of the statements we've made today and the request that we made. I think it's on the second page of the executive summary.
Mrs Pupatello: You said specifically that you need an extra youth counsellor at every shelter in Ontario, and the other was the extra full-time staff person-
Ms Morrow: A front-line community worker advocate for women. These are in line with a couple of the recommendations. I have a copy of the inquest recommendations today if you want me to leave it behind for you. There are several recommendations within the inquest jury's list focused on community-based supports for women, because they were very much in support of that.
One of them is that the province of Ontario do a funding review of shelters. I was present every day of the inquest so I know the evidence they heard from the Ontario Women's Directorate and also from shelters. That was one of their recommendations.
They recommended that there be additional supports for child witnesses and that they be placed within shelters in order to provide seamless service to the woman and child rather than being separated out into a different service.
There were several recommendations under what they called "victims' services." One of those was additional advocate support for women within the community. What they were trying to say was that they recognized that women have a lot of challenges and struggles; for instance, to find housing in communities where it's difficult to find housing; in particular with regard to the criminal justice system and family law, which is a particular part of the justice system that women don't get a lot of support within; and within social assistance systems to liaise and work with the community.
Mrs Pupatello: You made some good points in your brief about what the challenges are for women who must leave, and those aren't going to be served by the addition of the workers because it's a function of, is there housing in the community for these women to find? We've had many presenters to this committee talk about the need for 20,000 units a year in Ontario just to meet the current demand. This government is nowhere near that and it doesn't look as though they're going to move anywhere close to that. So that's not going to resolve some of the very basic needs that women have when they must leave.
I wanted to hear your commentary on other ministry cuts that are affecting this area. Some of the people who presented to this committee talked about the booming economy, that things have never been better. We've seen the retail sales talk today about how it's record-breaking etc. They're very pleased with it all. So when the economy is going very well, everyone's happy, everything's going swimmingly. My question is, why is there an 11% increase in the demands for service for your shelters? Why in this booming economy are we having an increase in violence against women? What are the effects in terms of education and what they've cut from programming that would support the kind of education for young people, as well as the cuts to the male batterer program? What effect have you seen that have on the shelters and on women?
Ms Morrow: As I said, almost 85% of the shelters report that because of the reduction in services within the community-they are seeing that-it is having an impact on abused women and their children. Women are returning to abusive partners because they can't find affordable housing or they can't afford market rental housing. Often women, in fact the majority of women, who are on social assistance in the province of Ontario have experienced violence. When they're leaving an abusive situation, at least temporarily, they often find themselves having to access social assistance in order to initially begin an independent life.
What they're finding within the shelters in Ontario is that abused women have returned to or remained with abusive partners because they can't feed their children, they can't find housing that they can afford. Some women report that they are having to use food banks, which is not what abused women should have to be doing. This is just not right. Many women are not eating so that their children will have food. So in some communities where there are not food banks we are now seeing shelters beginning to provide food bank kind of services, food and clothing for women after they've left the shelter.
We didn't want to come here and have a litany of every issue, but it certainly is true. The executive summary of last year's report, which I also submitted to you today, provides some of the background in terms of the increasing difficulties that abused women are facing. As long as that continues it will be more difficult for shelters and we will need more support for women to negotiate those systems.
Mr Christopherson: Thank you for your presentation. Good to see you again.
I know there's never been a time when enough money was dedicated to this, but it did seem as we got through the late 1980s and into the 1990s that we were at least starting to make some strides towards providing the level of service that's required.
I know you don't want to go into the whole litany, but my fear is that in cases like this, if we don't put the issue in context, then you're too easily labelled, especially by government members, as just "special interest," and somehow that means you're not part of society and therefore the issues you raise are somehow less important than the business friends of the government, who of course couldn't possibly be a special interest group.
I'd be interested to hear where you think we're going to be if this isn't addressed in another five or 10 years. Where are we heading? What's it going to mean for the women who are affected, their children, who in effect are still society's children? If you can-and I know you don't like to do this because it moves off the point, but somehow we've got to penetrate the government's psyche where they've got these walls up that we're not getting through on these issues-point out where, as a society, we're going to pay a price, both in terms of the human price and a fiscal price, if we continue down this road unabated, which unfortunately it looks like we may.
Let's get on the record now so that the government can't say they didn't know. Where are we going to be in four or five years hence, 10 years hence, if we continue down this road that the current government's set us on?
Ms Morrow: Already in the province of Ontario 40 women a year are murdered by their intimate partners, and that's the most extreme form of the violence that we're talking about. But many thousands of women and children experience forms of very severe violence up to and until that tragedy happens. Since the inquest recommendations were released, at least 33 women have died, and that inquest was designed to prevent further deaths in the future. The clock is ticking. We know that at least another woman has been murdered since the 33 were killed. That is the human cost.
It's very difficult to exaggerate when you talk about this issue, because simply to minimize sounds like an exaggeration. Make no mistake, lives are at risk and the community life is at risk. Some 30% of women in the province of Ontario experience criminal violence by their partners. That's one third of the women in this province, and all of their children are experiencing the impact of that, if not direct child abuse as well. That has a huge human cost.
We know from research that the cost of violence against women in Canada is already at $4 billion for social services, health, education, prisons, the justice system and so on. If we don't stem this tide, those costs will simply rise. It would be much more fiscally effective for us to seriously address the issues of crisis intervention and to seriously address the prevention issues with the children so that we can hope in the future to prevent further violence.
Just as an example of the shelters and the struggle that they're facing, as you know, according to the law, shelters are required to provide a 1% increase in salaries for pay equity, and we certainly agree. In fact, that's not enough. The shelter workers are very poorly paid and haven't had increases for years in a very stressful and dangerous job. However, there will be no further coverage for those salary increases by the province within the budgets of shelters. That may be possible to cover this year with additional fundraising, but I must tell you, I've already heard from several shelters that next year we will be into talking about cutting services in order to obey that law. We're talking about a situation where, as time goes by, we will be cutting more and more services within the shelters. There are other examples I could give of resources and work that shelters are being asked to take on, some by the province of Ontario itself, that require resources in the future, but there have been no resources dedicated to them. As the years go by, increased demand and reduction of services can only lead to deterioration and disaster for the women, quite frankly.
Mr Galt: Thank you for your presentation. Yesterday I had an opportunity to have a presentation made to me by the Quinte sexual assault centre, looking for funding from the Solicitor General. I guess I was a little appalled, not being all that familiar with the area, with some of the statistics they were giving to me. I look at some of the figures I have in front of me here, like $100 million annually for women's prevention services, some nine ministries involved, $73 million for abused women, 98 emergency shelters. This is all good information for me. I have a little difficulty with how much and where. I hear victims of crime, I hear shelters for women and these centres and so on.
It was interesting, the opposition's comment. They were so concerned about shelters that they refused to build one in Northumberland county in my riding. It was our government that came in and built a shelter for women, and I was very pleased to be part of that and to be there at the sod-turning and at the opening. Similarly, they wouldn't build a hospital in Trenton, which our government is doing, and they wouldn't build a school in Cobourg for the separate school board, which our government has carried out.
The area I'm concerned with, though, is this basic problem of violence in our society, whether it's to children or to women, and to some extent other men. It's just wrong, but it has crept in here and it has almost been accepted, if I dare use that word.
Ms Morrow: Almost? I think it has definitely been accepted.
Mr Galt: How do we get this turned around? Yes, it's one thing to help a woman who is in trouble, and her family and kids, and I agree with that. But how do we prevent this? Does it come in through our media, the films, the videos that we see? What is it we can do as a government, as a society, to redirect this?
Ms Morrow: It's a very complex issue, there's no question about that. Part of it comes to us through our culture, through our movies, through our media, through our education system, through our faith communities, through our history within law. It wasn't that long ago in North America that in fact it was regulated within the law whom you could beat and how. For instance, the expression "rule of thumb" comes from the British common law, which was the basis for our law. You could beat your servants, children and wife with a stick, as long as it was no bigger than the circumference of your thumb. Whenever you use that phrase "rule of thumb," from now on you're going to think of that. It's deep within our history, not just within the media but within our law.
Mr Galt: So it's not new.
Ms Morrow: Absolutely. It's very new to actually think it's wrong and do something about it. We have the happy experience within the year 2000 to know that it's wrong and that violence is unhealthy for all living things.
In terms of solutions, definitely we need to continue our public education. It has been a huge positive force within the community. We need to continue with reform within the systems of family law, criminal law, social assistance, all of those, education within faith communities, and there is a lot of work being done in all those communities.
We also need to be very clear that we need to support and protect children who are witnessing violence and experiencing violence in order to create a different mindset, if I can put it that way.
Mr Galt: I think maybe you've corrected my comment. It hasn't crept in; it has been here all along. I think I see the Chair leaning forward. With reference to our party thinking of you as a special interest group, as the opposition was saying, I disagree with that very much. We see you as a special group doing some very difficult work.
The Chair: With that, Mr Galt, I must bring the discussion to an end. On behalf of the committee, thank you very much for your presentation.
ONTARIO REAL ESTATE ASSOCIATION
The Chair: The next group this afternoon is the Ontario Real Estate Association.
The Vice-Chair (Mr Doug Galt): If you don't mind just stating your names for the record. Welcome. We appreciate your comments. You have 30 minutes. You can present and then whatever is left over will be divided between the three parties for questions or statements.
Mr Ron Merkley: We do appreciate this opportunity to be with you this afternoon. My name is Ron Merkley and I am president-elect of the Ontario Real Estate Association and chair of its government relations committee. With me this afternoon is Jane Doyle, chair of the government relations committee of the Toronto Real Estate Board; Jim Flood, who is the association's director of government relations; and Von Palmer, who is manager of government relations for the Toronto Real Estate Board.
Before I begin my comments, just a reminder about who we are and why we're here. The Ontario Real Estate Association represents approximately 35,000 real estate brokers and salespeople throughout Ontario. We are one of the largest trade organizations in the province, with members in virtually every riding. We work to create a legislative and regulatory environment in which our members can succeed and do so, I might add, with the highest degree of professionalism.
The ability to own and use real estate is one of the economic underpinnings of our democratic society. Real estate forms the basis of most of the personal wealth of Ontario families, and the goal of home ownership is a dream that many still aspire to. It is our job today to convince you to help make that dream a reality for more Ontarians by improving housing affordability in Ontario.
In our written submission you will find substantive comments on our recommendations, but allow me to give you the highlights.
First and foremost, we would like you to consider removing provincial sales tax from mortgage insurance premiums. This tax, originally introduced in 1993 by the NDP government, hits those who can least afford to pay it at a time when they can least afford to pay it. It becomes one of those nasty little surprises when a purchaser goes to close their housing transaction.
Let me explain. First, only individuals who do not have a down payment of 25% or more require mortgage insurance in the first place. In many cases these folks only have 5% down, which compounds the problem. They tend to be young families starting out who have not had the time to save that 25% down payment, or lower-income families who find it difficult to save that amount. They are the people who must have mortgage insurance, and they are the people who pay the tax.
The second problem relates to timing. Provincial sales tax is not like mortgage insurance; you can't roll it into your mortgage and amortize it over the life of the mortgage. This tax must be paid in full on closing and, as I mentioned earlier, it's one of those nasty little surprises that purchasers aren't prepared for.
The elimination of this tax would not cost the government a huge amount of money. In fact, OREA estimates that the total revenue generated by this tax is less than $28 million annually. If the government were to eliminate this tax for mortgage insurance premiums, it would help, by our estimates, over 100,000 Ontario families achieve their goal of home ownership. That is a big return on a relatively small investment.
Our second tax-related initiative, and one that we have talked with this committee about before, relates to the land transfer tax rebate program for first-time buyers of new housing. First of all, let's be clear that we support that initiative and we want the government to continue it. However, we also want the government to expand the program to include first-time buyers of resale housing. We understand that the government may not want to do this from a revenue standpoint, but we believe that simple fairness and tax equity demand similar tax treatment.
OREA's research undertaken some two years ago indicated that, notwithstanding the tax rebate program, 80% of first-time buyers buy resale housing. That's quite a high ratio. Unfortunately, that decision about where they want to live and what form of housing they prefer costs them, on average, $1,350. That's an awful lot of money to penalize an awful lot of people because the government some years ago decided to encourage job creation in the residential construction industry.
In addition to the tax penalty, the rebate program distorts normal market decisions. For example, there is relatively little new residential housing available in older urban areas, with the result being that first-time buyers must then look to the suburbs. Those who wish to live closer to their work environment or closer to their parents or closer to city services are discouraged from doing so or pay a premium for that privilege.
While we acknowledge that new home construction generates more economic activity than resale housing, it is not a one-way street. Research commissioned by our association indicates that every resale transaction generates an economic spinoff of $17,000: not as big as new housing, but not insubstantial either.
The expansion of the rebate program to include resale housing would raise the total cost of the tax rebate program to approximately $106 million a year from the current level of approximately $22 million per year. However, some of that tax would certainly be recovered in improved sales.
Many of these issues were debated in the Ontario Legislature a few years ago when Mr Dan Newman brought forward a resolution to extend the program to include first-time homebuyers who purchase a resale home. Members of both the Progressive Conservative and Liberal parties spoke in favour of Mr Newman's motion, and the motion was subsequently passed by the assembly.
Of course, our long-term goal is the complete elimination of the land transfer tax. It is a tremendous barrier to home ownership and is not tied to any products or services related to real estate. It is quite simply a tax grab, one we hope to see reduced and eliminated as time goes by and the government's finances improve.
I would now like to comment briefly on a number of issues that have particular relevance for Ontario's larger urban centres. As you know, homelessness has become a significant problem for some of Ontario's less fortunate citizens. For a certain segment of the homeless population, those with mental or physical illnesses, addictions etc, OREA believes government must be prepared to support permanent forms of housing. These individuals have no ability to house themselves and unfortunately may never have the ability to house themselves.
For lower-income individuals, we believe that rent supplement programs can be designed to bring housing within their economic reach. We do not favour a return to the old bricks-and-mortar approach to solving these difficulties, ie, non-profit housing. We believe that a program of targeted rent supplements will help more people at less cost than building non-profit and co-operative housing.
We also believe the private sector should become more involved in helping the homeless through charitable organizations, job training and hiring programs. Across Ontario, individual realtors and member real estate boards are involved in supporting hundreds of charitable activities, the majority of them targeted toward housing-related programs. We are very proud of our members and our boards who give both time and money to support those less fortunate. Our own association, through our charitable foundation, targets over $60,000 a year of charitable donations to housing-related charities across the province. We believe that with the right combination of government support and private sector assistance, no one need be homeless in Ontario.
A second issue we wish to bring to your attention relates to the need for extensive investment in infrastructure if Ontario's economy is to continue to grow in the years ahead. Governments at all levels must begin thinking about how to finance new roads, transit, sewers, schools and health care without undue damage to the public purse. Many of our urban real estate boards have expressed concern that unless these infrastructure issues are addressed, Ontario will lose one of its major competitive economic advantages.
We admit we don't have any easy answers on how to finance these new initiatives. The government's recently announced SuperBuild fund may hold a partial answer, and public-private sector partnerships such as the consortium that built Highway 407 may be the wave of the future. We believe, though, that the government should commit itself to increased funding for infrastructure as the best kind of economic investment it can make.
In closing, we want to congratulate the current government on its economic and fiscal policies. We believe that tax cuts have resulted in improved housing affordability, and we support government initiatives to eliminate deficits and reduce debt. These two initiatives have resulted in the creation of an economic climate that is good for realtors and good for real estate.
We trust that the government will continue its efforts to reduce taxes and promote economic growth. In the final analysis, the best housing initiative any government can undertake is the creation of secure, permanent jobs for its citizens.
Thank you for your attention. We would be pleased to answer any questions you may have on my remarks or on our written submission.
The Vice-Chair: Thank you very much for the presentation-most informative. We start with the NDP, and we have barely five minutes for each caucus, about four and a half to five.
Mr Christopherson: I'll jump right in because I don't have a lot of time. I know of no one who likes to pay the land transfer tax and I'm of an age where my age peer group have bought homes along the way, so there's been a lot of that sort of thing. Every one of them has said that they don't like paying the land transfer tax, but then nobody likes to pay any tax at all. But I have to tell you I've never heard one, not one, say: "Gee, we had a great deal. We had the perfect house. We had the down payment. We had it all lined up, everything was all set, years of saving. But, you know, we had to cancel the deal because we couldn't pay the land transfer tax."
I realize that from where you sit it's an impediment, it's something that you'd like to see removed, and if we could wave a magic wand, I'm sure a lot of homeowners or potential homeowners would like to see it disappear, but I'm not convinced that it has really prevented anyone-certainly not in my personal experience nor in my professional or public life experience-from actually purchasing a home. If they did a list of things that were prohibiting it, I wouldn't argue that it might not be on that list, but I've never experienced that alone being the deal-breaker.
The other thing is, and I'm sure that we'll just, at the end of the few minutes we have, agree to disagree on the issue of affordable housing in bricks and mortar, but if you take a look at the numbers that even CMHC is providing in terms of the number of units that are necessary, if we were to do it all through rent supplements, you'd break the treasury because it's more expensive at the end of the day for the provincial government, and there are studies to show that, than it is to actually provide the bricks and mortar. I know there are complaints and people have differences with it, but nonetheless, at the end of the day for the taxpayer, for the public, for society over a period of 10, 20 years, the life of the building, there's actually a win. It's for the simple reason that when a family moves out the unit is there, available for another Ontarian family to come in and benefit from.
I also compliment you and all your members on the charitable aspects. I think it's very noteworthy. Certainly I'd give it as much praise in my home town of Hamilton as anyone does in their community, and it's not to be trivialized in any way, shape or form. But I have to say to you that when you put that much emphasis on charity-a lot of people who are in circumstances through no design of their own aren't looking for charity; they're looking for their rights as Ontarians, their share of the wealth that we all generate-what came to my mind right away was George Bush with his thousand points of light, that we're going to rely on the altruism of those who have to sprinkle some of the benefits around through charity.
Trying to address the issue of homelessness in that fashion is just going to come up short each and every time. It's not enough. Government has to accept the fact that Ontarians in a province as rich and wealthy as ours have a right to a safe and warm place to live and that collectively we can provide that if the political will is there.
I afford you the chance to respond.
Mr Merkley: Mr Christopherson politely asked three questions, I believe. So, back off to the first one. Yes, you may be right when you say that land transfer tax may not be the major impediment whether a deal goes together or not, but why we're asking that it be extended from new housing-it puts the affordability of new housing out of the reach of most first-time homebuyers. Our long-term goal is to have government eliminate it completely. Do we think that will happen in the next few years? Probably not, but as a long-term goal-we do feel it's an impediment to folks trying to buy a home. At least if the program is extended to resale housing, that's a start.
The second question: I won't belabour the point about our position with respect to non-profit housing, but you did mention something that's very enlightening, that at the end of the day someone owns these properties. We find at the end of the day, which is probably 25 years when the mortgage-if in fact it is paid off, all the repair bills start coming in, for instance, and we find those projects aren't getting paid off. I guess our proposal with respect to rent supplements is targeted rent supplements. Can we give everybody a rent supplement? Probably not. Will we break the bank as you say? Probably. Targeted rent supplements, in our view, work.
Mr Christopherson: What about the balance, though, for those who don't-
The Vice-Chair: We're going to have to move on to the government.
Mr Arnott: Thank you very much for your presentation. We appreciate your ideas and you've come forward with some very good ideas that the government has to consider. My wife and I sold our house in Arthur in the summertime and bought a new house in Fergus in September, so that I could live in my new riding after the boundaries were changed, so we know something about those hidden surprises that you mentioned, although we were very well served by our realtor. He did a great job for us.
I wanted to ask you about the suggestion that you've made to eliminate the retail sales tax on premiums that would be paid for mortgage insurance. You have calculated that it would cost the treasury around $28 million. Can I ask how you came to that figure?
Mr Merkley: Yes, you may. We had a survey done, and it came right from the government itself, on how many people actually have high-ratio mortgages. The figures that we were given since they-
Mr James Flood: The insurable portion.
Mr Merkley: That's the portion that they're paying the tax on.
Mr Flood: Part of the answer relates to information that we obtained from Canada Mortgage and Housing Corp. They estimate approximately 100,000 insured loans in Ontario every year. Truthfully, we just did the math.
Mr Arnott: Because if we assume that it would stimulate additional sales, additional activity, it might not even cost $28 million. Is that correct?
Mr Merkley: You're very, very right. In fact, beyond the fact it might create more sales. What about the appliances these folks might be able to buy instead of paying out money? They don't have a lot of money when they have a low down payment, which they've scrimped and saved or borrowed to get. So they're going to be putting money back into the economy anyway. It may very well be a lot less than that estimate.
Mr Arnott: I'd agree with you it doesn't seem like a huge amount of money, yet it might be a positive incentive that would give more young couples the opportunity to purchase their first homes.
Mr Merkley: Exactly.
Mr Monte Kwinter (York Centre): Thanks for your presentation.
I just want to question the practicality of one of your suggestions. We have heard from house builders, we've heard from mortgage companies, that the construction of rental units is minimal and the simple reason is developers cannot make any money selling to the low end of the market. The only rental units that are being built, and there are very few of them, are for people who for lifestyle reasons don't want to have a condo, don't want to have a house; they want to be able to rent and that's it. They're prepared to pay the price for a level of rental accommodation that makes it economically feasible for the builder and developer to build it. So my question is, if in Toronto you've got a 0.9% vacancy rate, which means there are a lot of people chasing a very, very small number of apartments, how is providing a rent supplement going to work? I don't care what segment of the market, how are you going to satisfy that need?
Mr Flood: The short answer is rent supplements alone aren't going to solve the problem. You're going to need some form of government assistance at the municipal level, you're going to need help at the provincial level, and you're going to need help with things like GST at the federal level. I think from all the submissions you've heard, the people you've mentioned still believe that the route to go is to have the private sector meet that demand, not have governments trying to meet that demand. But you're right, a rent supplement program, especially with vacancy rates like you have in some of Ontario's urban areas, are not going to solve the problem, in and of themselves.
Mr Phillips: I want to pursue that a little bit. In one of the most memorable presentations-I think it was from the Ontario homebuilders-they indicated that to keep up with the rental demand, there should be 20,000 units a year built. My recollection-I don't have their presentation in front of me-is that in the last three years in the province of Ontario there have been 3,000 rental units built, against a theoretical demand I guess of 60,000. And as my colleague just said, probably a majority of those rental units would be built for the upper end of the rental market.
So here we are with advice. The Premier says they'll never build a brick or mortar on this thing. The private sector says "Don't do it." Nothing is happening. We now have a three-year backlog at least. Your brief says, as Monte Kwinter just said, that the vacancy rate is now below 1%, and you say it's going to get worse. Your brief says, "Three principle demand factors will squeeze rental markets further over the next few years."
We need help from professionals like yourself. I know it's fashionable to say that government should not get involved in any bricks or mortar. Certainly that's the Premier's mantra. Aren't we hanging an awful lot of people out to dry here who will inevitably be homeless? I just wonder what advice you've got for us.
Mr Merkley: I think, Mr Phillips, one thing we all have to recognize is that we live in a very diverse province. When you use factors of 1% vacancy rate, that's Metro Toronto. I live in eastern Ontario, and the vacancy rate is 7%. In Ottawa it's about 4%. My colleagues from Toronto can answer those questions, but we're talking about building these apartment units in Metro Toronto only. The vacancy rate is so high in other areas, people are turning their apartment buildings into condominiums.
The Vice-Chair: Thank you very much. Our time has run out, unfortunately, unless one of your other delegates wanted to make a quick comment.
Mr Von Palmer: If I could jump in on that question from a Toronto perspective, there have, for example, been some provincial announcements of PST grants in affordable housing, but that's only $2,000. It doesn't go very far. We have to look at this as a package. The problem is that the feds are the only holdout. For example, the city of Toronto is trying to do certain things like development charges, which is a crucial part. They just brought in the exemption for affordable rental housing. The province is making certain announcements, but the feds have yet to address things like the GST on construction materials similar to the provincial announcement. That's a bigger factor for developers in the business, and things such as income tax provisions. So there are a number of things at the federal level that have to be addressed as well. They're not looking at the whole picture. We've had little announcements back and forth, and that just doesn't seem to do it.
Mr Kwinter: On a point of order.
The Vice-Chair: Thank you very much for your comments. We'll look forward to the federal budget as well. Sorry, Mr Kwinter, we're way over.
Mr Kwinter: On a point of clarification.
The Vice-Chair: Point of clarification, but very quick.
Mr Kwinter: In your brief, you say that the vacancy rate in Ottawa is 0.7%, and you've just said it's 4%. I'm just curious that we have the right number.
Mr Merkley: It's lower than 4%.
Mr Flood: The information that's in the brief is based on a CMHC estimate, and I would take that to be the accurate number.
Mr Kwinter: So it's 0.7% in Ottawa.
The Vice-Chair: Thank you very much for your presentation. It's much appreciated.
AGGREGATE PRODUCERS' ASSOCIATION OF ONTARIO
The Chair: Our next presentation is by Carol Hochu, president of the Aggregate Producers' Association of Ontario. How did I do? You can repeat it and state your name when you come forward. Welcome to the finance committee pre-budget hearings. You have a half-hour for your presentation. Whatever time is left over after your presentation we divvy up between the three caucuses for questions and/or comments.
Ms Carol Hochu: Good afternoon, everyone. My name is Carol Hochu and I am president of the Aggregate Producers' Association of Ontario. I am joined today by Bob Albrough, our association chairman and president of Nelson Aggregate Co; and Ian Duff, the association's vice-chairman, who is also president of J.C. Duff Sand and Gravel Ltd.
We thank you for the opportunity to appear before you today. We would like to use this opportunity to tell you a little bit about our industry, our members, and our contribution to Ontario's economy. Quite literally, we are the foundation upon which Ontario's economy grows and prospers. We are fundamental to this province's infrastructure and continued growth.
Let me begin by giving you some background about our industry.
Aggregate products include sand, gravel and crushed stone. Recycled aggregate consists of concrete, asphalt and brick products that are crushed and reused. Aggregate is used in construction for stability and structure. Whether a highway, house or shopping mail, structures are dependent on a sub-base and base of aggregate. About 90% of the concrete and asphalt used by Ontario's construction industry is composed primarily of aggregate. In addition, aggregate products are used in a variety of manufacturing processes, including steel and iron, insecticides, aluminum, crayons, rubber, plastics, glass, ceramics, floor coverings and fertilizers. Each and every day, Ontarians use and benefit from non-renewable aggregate products. We all live and work in buildings built with aggregate. We travel on roads and highways constructed from aggregate. Even the water we drink is filtered and purified by aggregate.
However, this ongoing consumption of aggregate products means the industry is always challenged to find new sources and deposits to feed future demand. In 1998, the per capita usage of aggregate translated to over 14 tonnes per person in this province. As Ontario's construction and growth figures increase, this amount will increase correspondingly.
To help meet this challenge, we continually work with the ministries of natural resources, environment, and northern development and mines, as well as the planning unit of the Ministry of Municipal Affairs, to identify and appropriately develop aggregate operations. This means striking a balance between the need for a close-to-market supply for such places as the greater Toronto area while respecting the conservation initiatives of the communities that border our operations. We are always looking for innovative ways of meeting the demand for our products while respecting this very important balance.
Now I'd like to take just a couple of minutes to tell you a little bit more about the Aggregate Producers' Association of Ontario, or the APAO for short.
Our mission is threefold: to ensure that our members are the best producers in the aggregate industry; to manage the affairs of the association in an effective way; and, perhaps most importantly, to build partnerships with government and the public to promote the wise management of aggregate resources.
Our association is made up of some 240 member companies, 115 of which are producer members with licensed pits and quarries. The remaining member companies supply equipment and other products, and consulting and other services to the producer members. Our members represent about 75% of the sand, gravel and crushed stone produced in Ontario every year and they support Ontario's $30-billion construction industry.
The aggregate industry employs over 41,000 workers both directly and indirectly in services and transportation. Literally hundreds of thousands of jobs in the construction industry also rely on an adequate supply of quality aggregate products.
In 1998, aggregate production was 146 million tonnes. That represents about a 1.4% increase over 1997, when we produced 144 million tonnes. The production numbers for 1999 are not yet available, but we are expecting production to rise to about 150 million tonnes. If I could just paint a picture for you about what 150 million tonnes means, picture an area bounded by College, that is, the front of the Queen's Park building, west over to Spadina, east over to Yonge and down to the waterfront. If you dug 60 feet into the ground in that whole area bounded by those roads, that represents about 150 million tonnes of aggregate product.
This increase in production is a direct indicator of the strength of Ontario's economic growth and is intricately linked to construction spending. In fact, one of the reasons our industry has been so successful is because of the growth of the construction industry throughout Ontario over the past few years.
We are pleased to hear about this government's creation of the SuperBuild Corp and its plans to inject $20 billion into capital spending over the next five years. We support this clear commitment to strategic and coordinated planning for Ontario's future infrastructure needs. The APAO would be pleased to contribute in any way we can to the process and consultations leading up to the development of those infrastructure investments.
As a proven, successful industry, we would like to see the government adopt a model that favours stimulation of Ontario's domestic economy-local suppliers, contractors and expertise-as these new projects are planned, developed and built. We want to be the foundation of Ontario's future success stories.
We would also like to take this opportunity to commend the government on its Red Tape Commission. As business people whose goal it is to produce a quality product at an affordable price, we support any initiatives that reduce costs to our members. Our industry is different from most, as we have an abundance of small owner-operator companies and only a handful of large multinationals. These smaller members are greatly affected by burdensome and costly paperwork. We encourage the commission to continue working towards the reduction of red tape for good aggregate operators and licence applications.
It should also be noted that as part of our business operations, Ontario's aggregate producers are committed to being environmentally responsible citizens. Aggregate extractive sites undergo a process called "progressive rehabilitation." Rehabilitation begins not after the pit or quarry has been depleted, but rather while extraction is taking place. As work finishes in one part of the site, rehabilitation begins. Progressive rehabilitation means that a site can be returned to its previous use or developed for other uses very quickly after extraction has been completed.
Pits and quarries have been a part of the landscape in Ontario for more than a century. These pits and quarries have been rehabilitated for a wide variety of after-uses. For example, did you know that the Royal Botanical Gardens in Hamilton was once a gravel pit? The Quarries of Hunt Club in Ottawa is another example. We are proud of the fact that most people would be hard-pressed to recognize any of the more than 70 rehabilitated pits and quarries within Metropolitan Toronto alone, because the rehabilitation has been so successful.
We don't just talk about our commitment to the environment, we prove it. We have brought with us today copies of an eight-minute video called The Next Landscape that describes our industry's successful rehabilitation efforts. I know the clerk has distributed these to you, so we hope you will find some time at leisure to review this video.
As part of our ongoing efforts to build on our members' strengths, we have recently become more involved in the management of our industry. Through the Ontario Aggregate Resources Corp, or TOARC, as it is commonly known, we are working with the Ministry of Natural Resources and other industry stakeholders to find innovative ways to continue to provide important services related to the aggregate industry. Established by legislation in 1997, TOARC assumed administrative responsibility for a number of activities, including collection of fees, administration of a trust fund, the management of abandoned aggregate properties program, research and publications and self-compliance. This initiative is, we feel, an indicator of the strength and maturity of our association and of our success in taking on new challenges. We are ready and willing to live up to these challenges, but we see partnership as the key to any sustainable evolution of our industry.
As some of you may know, the existing aggregates program core budget allocation of $1.8 million has been accepted as a reduction to the MNR's budget for fiscal year 2000-01 by Management Board of Cabinet. This is not the first budget cut for the aggregates program either; in 1997 program expenditures were cut by 71%.
Aggregate producers in the province currently send about $2.8 million to the consolidated revenue fund. That funding provides salaries, benefits and operating budgets for 14 aggregate resource officers, six crown land full-time equivalents and seven staff members in the policy office in Peterborough. Collectively, this group is responsible for policy, enforcement and compliance issues, a very important aspect of our business.
Aggregate producers have been asked to make up this $1.8-million financial shortfall, despite the fact that the industry has already taken on increased responsibilities and costs through TOARC. A number of options have been put on the table, including the potential for a 50% increase in the levy paid to the province under the Aggregate Resources Act. We are working closely with the Ministry of Natural Resources to examine all funding mechanisms and options and to ensure that there is a viable future for the aggregates program in Ontario.
Although we want to work with you to develop solutions, let us be clear that the future of our industry and the future of Ontario's economic progress requires that no further erosion to the aggregates program takes place.
In conclusion, on behalf of the APAO, thank you for your time and attention today. We would like to leave you with this message:
Ontario is a growing, thriving and exciting place to be conducting business right now. The growth of the economy leads to a boom in the construction sector, which demands quality products from our members.
Aggregate producers are the foundation upon which Ontario has been built and will continue to grow. We are an integral part of the economic foundation of our strong economy.
Aggregate producers want to continue to provide high-quality products, produced in an environmentally sensitive way, to this province. We look forward to continuing our work with you to achieve mutually beneficial goals of success, growth and sustainability.
Thank you very much and we would be pleased to address any questions you might have.
The Chair: Thank you very much. We have four minutes per caucus and I'll start with the government side.
Mrs Molinari: Thank you very much for your presentation. You made several good points. I'm going to enjoy watching the video you've left for us. I'm pleased to see that you're in the process of working with the various ministries trying to get the points across and to see that what you need in order to fulfil your goals is reflected. I'm also impressed with your comments on the environmental issue and that you're looking very closely at making sure that the environment is one of the considerations throughout.
As a committee such as this, we've been hearing a number of presentations across the province, and it's always a challenge for us to balance all of the needs and requests that come through to the committee. But it's certainly helpful for us to have a good picture of what the individual needs and requirements are in order to fulfil what you need to do your jobs correctly. With that, I thank you for the presentation and for all your comments. I'll leave some time for my colleagues. I know they'll want to speak as well.
Mr Arnott: Thank you for your presentation. I wanted to ask you about the MNR funding cut that you highlighted. It says that the existing budget for the aggregates program is $1.8 million. That entire amount is being cut? Is that what you're telling us?
Mr Hochu: Yes.
Mr Arnott: The government is saying to you, how can you as an industry come up with that money to maintain the programs?
Ms Hochu: That's correct.
Mr Arnott: I understand. A 50% increase in the levy paid to the province under the Aggregate Resources Act is one of the things that's under consideration. How much do you pay at current levels? What does this 50% increase potentially mean?
Ms Hochu: The members pay a levy of six cents per metric tonne of material.
Mr Arnott: Directly to the province?
Ms Hochu: Yes. It is divided; it goes to different things.
Mr Arnott: The municipality gets some of that money.
Ms Hochu: Yes, they do indeed.
Mr Arnott: How does it break down?
Mr Ian Duff: Four cents go to the municipalities, one cent goes to the province, half a cent goes to the regions and half a cent goes into a fund for rehabilitating abandoned pits from years gone by.
Mr Arnott: So with a 50% increase, the additional money would go to the province, I guess.
Ms Hochu: Yes. The proposal is to increase from six to nine cents a tonne and all three additional cents would go to the province.
Mr Arnott: You really didn't go into what impact that might have on your industry and the construction industry in general. I assume that would just drive up the cost of road building.
Mr Robert Albrough: Maybe I could give you an example on that. There's one operation where it could make the difference this year of about $400,000 off their bottom line, one single quarry operation.
Mr Arnott: If they were forced to eat it.
Mr Albrough: Yes.
Mr Arnott: But presumably they'd pass it along to their customers, would they not?
Mr Albrough: It's a very competitive market. It would be nice to say that, but it doesn't always happen.
Mr Kwinter: I'd like to pursue this idea. MNR has eliminated the $1.8 million that they used to provide for these various administrative services. Is that correct? You pay, through fees and everything else, $2.8 million. And there's a trust fund. What is that trust fund? How is that funded and what does it do?
Mr Duff: The trust fund through TOARC is money that the industry raised. It went into the government, into a fund, to ensure that if any aggregate producer went out of business and left an open pit that pit would be rehabilitated. Funds were accumulating without a lot of I guess you'd say action on some of the old pits that had been abandoned. The industry, as part of the latest Aggregate Resources Act, took over the responsibility and took over part of that fund that was available and is now actively rehabilitating-how many have they done?
Mr Albrough: It's 37.
Mr Duff: There are several pits every year in all different municipalities. Some that trust is there and is basically cleaning up some of the landscape that has been left from the 1940s or 1950s, the early years of the industry before there was proper regulation.
Mr Kwinter: But is that also used for, let's say, a current case where an aggregate company goes broke and just abandons the quarry, and that's used to rehabilitate that quarry?
Mr Duff: It's also there for that purpose, although it does not happen-
Mr Kwinter: So are you required to contribute any more to that trust fund, or is there enough in there and it's self-perpetuating and just keeps going?
Mr Duff: As long as interest rates keep the fund alive, that's the intent, yes.
Mr Kwinter: What is it that you're looking for? Are you looking for the government to reinstate that approximately $1.8 million into MNR to look after these administrative costs?
Mr Duff: The simplest thing would be to do that, absolutely, but there are realities that they are trying to face as well. So we're trying to work with the government to find the best possible solution. One is in increasing the fee, which would do that, but then the aggregate producer is faced with how do you pass that on to the customer unless it's set up as some sort of tax or something. What ends up happening is that the public are the ones paying the bill in the long run anyway, so throwing the dollars around is not necessarily accomplishing anything.
What we're trying to do through the APAO is just produce better producers through training, through seminars that we hold. We've been doing this since 1956 and it's been working very well. We have a good group; it's the majority of producers in the province. The topics that we cover with them stress the importance of rehabilitation on pits and quarries, of doing it sooner, of minimizing the impacts on the taxpayers of Ontario by minimizing our haul routes, minimizing the amount of truck traffic out there.
Mr Christopherson: Thank you for your presentation. How many abandoned pits are there, do you think, in the province right now?
Mr Duff: We could get you those figures. I don't know if-
Mr Christopherson: I'm just curious.
Mr Albrough: It was around 5,000 when they did the first inventory. There are other areas of the province that haven't been inventoried yet.
Mr Christopherson: At what rate annually do we find abandoned pits, do you think?
Mr Albrough: At what rate do we-
Mr Christopherson: How many per year?
Ms Hochu: How many do we rehabilitate?
Mr Christopherson: Sorry?
Ms Hochu: Do we find or do we rehabilitate, the abandoned pits?
Mr Christopherson: Those that are abandoned, where nothing is done. I'm just looking to see. You gave me the figure for how many there are. I wonder just how many per year are added to that, roughly.
Mr Albrough: We haven't added any since the first inventory, and that was mainly southern Ontario and the designated areas of the province.
Mr Christopherson: So there aren't any more?
Mr Albrough: There are more in the undesignated areas of the province.
Mr Christopherson: That's what I mean. You mentioned good producers versus bad producers. Can you give us an example of what the difference would be between what you would characterize as a bad producer versus a good one?
Mr Duff: Anyone who breaks the law, I guess, is a bad producer. There are strict rules in our industry. If a person has a licence on a piece of property and digs through that boundary of the licence to someone else's property or into an environmentally sensitive area, that is bad. People who have little respect for their neighbours by not caring about their hours of operation or not getting back to a neighbour who has a question about their operation would be characterized as bad operators.
Mr Christopherson: Just out of curiosity, where exactly does the word "aggregate" come from? Why is that the word used to cover this? You're all laughing. Is there a story there? Do you know, or is it just one of those, "It is."
Mr Duff: It used to be sand and gravel. But sand and gravel were produced 10,000 years ago by the glaciers, and as you use it up, it gets scarce. So nowadays there is more of a need for quarries in Ontario when the gravel that's close to the market is disappearing. The general term "aggregate" has to do with the size of the particles, from small particles up to larger particles, that would make a proper mix for concrete.
Mr Christopherson: I always knew what was being referenced but for the life of me I couldn't figure out where the actual word came from, why this is the word. Anyway, thank you for your presentation.
The Chair: On behalf of the committee, thank you very much for your presentation this afternoon.
Mr Kwinter: Mr Chair, as you know, there is an event taking place right now that has some significance for members of the Liberal caucus. I understand we have an agreement that we will go and will come back.
The Chair: Certainly I'm more than willing to abide by this agreement.
Mr Kwinter: We also have an undertaking that nothing untoward will happen while we're out.
The Chair: We will welcome you back when you come back.
REGISTERED NURSES ASSOCIATION OF ONTARIO
The Chair: Our next presentation this afternoon is the Registered Nurses Association of Ontario. Could you please come forward and state your name for the record, unless you want to follow the two gentlemen for the unveiling.
Ms Jacqueline Choiniere: I was just curious as to what the noise was.
The Chair: They're unveiling a portrait of former Premier Peterson. It's the formal portrait, so it's a big ceremony.
Go ahead, please.
Ms Choiniere: My name is Jacqueline Choiniere. I'm the director of policy at the Registered Nurses Association of Ontario. With me is Kim Jarvi, the economist-health analyst at RNAO.
RNAO, as I think most of you know, is the professional organization for registered nurses in this province. We welcome the opportunity to participate in this consultation and to convey the issues and concerns of Ontario's registered nurses to the committee members.
First of all, we acknowledge the investments made by government in health care and nursing over the past year. But our major theme today is that there is still work to be done. Investment is still required to ensure that our health care system continues to sustain us. Furthermore, Ontario's budgetary situation has improved significantly in the last few years. Prudent investment in the health and wellbeing of all Ontario residents is clearly less fiscally challenging now. There are several reasons:
(1) Growth and growth prospects are good. The province has enjoyed several years of significant growth in real GDP: 4.8% in 1997, 4.2% in 1998, and an estimated 5% in 1999. Private forecasters continue to predict strong real growth in the range of 3% to 4% for the coming fiscal year. Some economists expect that real growth will continue at 3% per year for the next few years as well.
(2) The deficit has fallen steadily since 1995-96 and has consistently been below target levels. The 1999-2000 deficit is projected to fall to $1 billion, with the 2000-01 target of a balanced budget being well within reach.
(3) Federal transfers are up. In the past year, federal transfers for health have risen sharply after having undergone an equally steep decline since 1995-96. Ontario received an increase of about $1 billion in health transfers. Further, the federal government has also committed a substantial, though unspecified, portion of its current surplus on new spending and the federal Minister of Health has tentatively offered new cost-sharing in home care and in primary health care services. This would greatly benefit Ontario residents, given the intention to implement primary health care reform and the recent Health Services Restructuring Commission recommendations.
Thus, our argument is that there is now more room to reinvest in sectors of the economy that have suffered from years of cutbacks and restructuring, including health. RNAO firmly believes there is fiscal room and indeed it is essential to reinvest in the long-term health and wellbeing of our society.
Next we want to deal with some of the reasons why we need to invest at this point.
First is that our health care system remains stressed. In our full submission we note the obvious, that the health care system in spite of recent reinvestment in health care is indeed under stress. Funding cutbacks and radical restructuring are widely seen to be part of the problem. Another problem is that only hospitals and physicians are covered by the Canada Health Act. Consequently, other critical sectors like the community sector are underfunded. Given that the federal Minister of Health has offered to discuss cost-sharing and given that Ontario is already investing in this area, a partnership in this area might be mutually beneficial.
Secondly, the public remains concerned about our health care system. The polls are unanimous in this area. The public is indeed losing confidence in our system. Measured public satisfaction with health care institutions is declining. Unfortunately, the public lays the responsibility for this decline at the feet of the provincial government.
Thirdly, there is unwavering public support for a publicly funded, universally accessible health care system. In spite of this problem of confidence, the public has not abandoned its commitment to a publicly funded health care system. On the contrary, Ontarians demonstrate a strong willingness to support a health care system that is appropriately funded, as witnessed by the overwhelming opposition to funding cuts. A very recent Angus Reid poll reported that 66% of the public was opposed to a two-tiered health care system. The same study even found substantial support-55%-for raising taxes to spend directly on health care.
Our fourth reason is that challenges persist in solving the crisis in nursing. The government has started to seriously address the concerns of nurses and has reinvested. This is a positive step. When a sector is hit as hard as the nursing sector has been, there are inevitable lingering costs. Nurses continue to report difficult work circumstances that limit their ability to perform the care they have been trained to do.
Nurses are waiting for the money that has been reinvested in nursing, in all sectors, to translate into substantial numbers of new, permanent nursing positions. There is no mechanism to ensure that funds earmarked for new nursing positions are being used as intended, and this is extremely problematic. On many occasions, the joint provincial nursing committee has expressed concern about the use of these funds, alerting the government of reported instances of misuse. These include the creation of temporary or casual nursing positions or applying the funds towards accounts other than nursing human resources, such as equipment purchases and deficit reduction.
Our full submission also speaks to the factors that influence a healthy population, only one of which is the health care system. In this area the research is clear: Fiscal and economic policies play critical roles in the health of the citizens of any jurisdiction. This goes beyond the obvious factors such as spending on health care and illness prevention.
Fiscal and economic policies have significant impacts on a series of social and environmental factors that in turn have long been known to be critical to health status. These include absolute and relative poverty, which adversely affects health and causes premature mortality. In Ontario and the rest of Canada, income disparities and poverty have been growing, so there is room for action at all levels of government. The sharp rise in child poverty is the most distressing feature of the upward redistribution of income.
Unemployment: Although fortunately this has decreased, we need to further reduce current levels.
Social support and social cohesion are demonstrated to improve population health. The growing income disparity combines with the fraying of the social safety net to greatly reduce the degree of cohesion in our society today. Even the best health care system in the world, if it were combined with an inadequate social safety net, would still compromise the health of a significant portion of the population. Now is the time to invest in all areas that have been hard hit by budget cutbacks and by private sector retrenchment: physical, human and social capital.
Our submission also calls for the need for what we term true economic sustainability, and we have a number of recommendations. Ontario, like other provinces, is at the mercy of outside forces, subject to the vagaries of federal economic policy and of global markets. The feds substantially cut transfers to provinces after 1995-96, which contributed to tremendous fiscal pressures at the provincial level. More importantly, the federal government has at its disposal a very powerful tool, monetary policy, which can help or hurt the provinces.
In the early 1990s, perversely tight monetary policies choked off physical investment through high real interest rates. At the same time, tight money overvalued the Canadian dollar, which devastated the trading sectors of the economy. This saddled the provinces with debts largely not of their own making. Mercifully, this policy has been substantially reversed, to the great benefit of Ontario.
At the same time, expansionary policy in the US is fuelling a boom in Ontario. This happy coincidence of favourable external circumstances is rapidly changing fiscal realities in our province. However, these circumstances could easily change. Conventional economic wisdom is to make hay while the sun shines. Fiscal prudence is always in order.
Economic sustainability arises around a number of issues. Having the right infrastructure is essential to economic prosperity. The market tends to underprovide certain infrastructure-for example, transportation networks, schools, hospitals, water treatment facilities and so on-because the market cannot generate appropriate incentives. Governments traditionally have had to step in to fill the gap, and it is long overdue for provincial governments to start to address the erosion of the infrastructure in a truly serious way.
Now is not a time for tax cuts. Tax cuts as a method of raising demand have a very limited effect. They disproportionately benefit higher income people, who will spend the smallest share of the cut of any group in the economy. An equal rise in government spending would have a much stronger stimulative effect on demand. Furthermore, if these tax cuts are matched by spending cuts, as they have been, the net effect on spending is negative. Thus, we share the expressed sentiment of the public on this issue. We do not want tax cuts if they are purchased by cuts in spending or services, or if they come at the expense of an increased debt.
Even if tax cuts were effective as a provincial demand-management tool, now is not a good time to do them. This is not to say that we should not change the way we collect taxes. It is desirable that taxes be as efficient as possible, and distort correct prices as little as possible. On the other hand, taxes that correct for market imperfections would be desirable. For example, the market overprovides environmental destruction and harmful substances. Green taxes-for example, carbon taxes and increased gasoline taxes, and tobacco taxes could both help to correct underpricing of harmful activities.
We also call for prudent spending. Fiscal responsibility is not only a matter of generating sufficient revenue, but also in spending money in the most effective way possible. The province has belatedly taken some steps forward in this respect with the health care system, and should continue on this path. For example, it has started listening to nurses and has begun to address the serious problem of recruitment and retention of nurses. Nursing is strongly supportive of changing the way that health care is delivered in Ontario. The old, expensive, hospital-centered, cure-focused, fee-for-service model should give way to a more community-based model with doctors and nurses working in collaboration in a system that rewards better health outcomes and illness prevention. The government's Health Services Restructuring Commission has pointed the way towards primary health care reform, as we have already noted. We know that needs will continue to rise in the future as the population ages, so there must be a way to deliver health care and illness prevention in the most efficient way possible.
We caution the government to beware of costly privatization. Fiscal responsibility also entails choosing the most efficient way to fund and deliver health care and other social services. With respect to health care, the economics are very clear. Public funding not only guarantees universal access and controls over quality, but it is also the cheapest way to fund health care. The present government appears to be in accord with most Canadians on this point. Research overwhelmingly also shows that public or not-for-profit provision of health care services is also cheaper and of better quality than for-profit provision. The major nursing organizations in this province have publicly declared their concern about the increasing privatization of health care in Ontario and indeed in Canada. This is of particular concern in the areas of home care and long-term care facilities especially. Nurses' concerns in this regard are both about cost and quality.
In the area of social sustainability, we argue that this area is even more neglected. This includes both the development of human capital and the maintenance of social support structures that maintain a healthy society. Deep cuts to social assistance have definitely pushed many marginalized people even closer to the edge, with unknown consequences for the future. Already, levels of poverty are reported to have risen sharply since 1989. At this point, we cannot assess if the economic turnaround has helped to reverse this trend.
Social sustainability can be addressed on many fronts. A full-employment policy would go a long way in this direction. There still remains the need to deal with those who do not get enough income on their own. There is a patchwork set of programs for this purpose, which has endured cutbacks at a time when the need was greatest. A more coherent set of programs is called for.
Environmental sustainability is also a great challenge. The effects of environmental degradation are often very delayed and hard to identify. Thus they are easy to ignore, particularly since there is very little money to be made in protecting the environment. This is very unfortunate from the point of view of the long-term health of Ontarians. When cutbacks swept through the Ontario government, the Ministry of the Environment was particularly hard hit. Capacity to monitor and analyze has been greatly reduced. It is clear that we cannot rely on industry to police itself, as the incentives to pollute are too strong. Firms that are guided by environmental concerns may be put at a competitive disadvantage against other firms that choose to ignore these concerns. Thus both the public and industry gain by having a level, environmentally responsible playing field for all firms. As Ontario approaches a balanced budget, a reinvestment in environmental protection is long overdue.
Finally, some final RNAO recommendations. We still have much work to do in developing what we call a true accountability framework not just for health but for all ministries. In the health care sector, this entails the collection and processing of data essential to analyzing the performance of the institutions and agencies that make up our system. This means having access to needed information on a timely basis. We urge the government to organize a formal process of consultation by which key stakeholders can help to define the accountability framework that we need so deeply.
RNAO also continues to await the promised patient safety act as one means of increasing access to information, but also of protecting the health care providers who need to report when there are significant problems. RNAO urges the government to finalize the entry-to-practice regulations for those entering the profession as registered nurses, and relatedly, to begin flowing funds to implement the recommendations for collaborative education programs that have been outlined in the report of the nursing education implementation committee.
In conclusion, RNAO appreciates the opportunity to address these critical issues. The spending and taxing decisions made by the province have a significant impact on the health and welfare of Ontarians for good or ill. The government has already taken steps in the right direction in health care. With adequate accountability and collaboration, we will see continued improvements in this area.
Finally, we offer our assistance to the government in dealing with any and all of the issues we have presented today.
The Chair: We have five minutes per caucus. I'll skip the official opposition and come back to them later. Mr Christopherson.
Mr Christopherson: Thank you for your presentation; it is most helpful.
Right now, we have a situation where the hospitals have finally been given the green light by the government to hire nurses. Part of our difficulty is the fact that it was initially the government's cutbacks to hospitals-almost $1 billion-that caused nurses to be laid off in the first place. A big chunk of the money that the government said was an increase in health care spending was money they had set aside for severance for all these nurses. So the government chops the budgets of hospitals, hospitals lay off the nurses, the government sets aside money to pay the severance and calls this increased health care spending, the nurses go and find jobs elsewhere, the government gets into trouble before the election, makes a promise about hiring nurses and now they can't find enough nurses.
Number one, if I've got it wrong, please tell me so, and tell where I'm going wrong.
Secondly, assuming that I'm correct, where are we going to be in the next couple of years vis-à-vis getting enough nurses back into the health care system, particularly in the hospitals, to meet the need?
Ms Choiniere: I'll answer at least one or two parts of that question. What our members tell us, and what we know from other nursing organizations as well, is that if there is an increase in full-time, permanent positions, nurses will essentially come. Relating back to some of the recommendations we have presented here today, this is why we believe an accountability framework, a true accountability framework, is so critical. That would help us in tracking the money that is invested for full-time, permanent nursing positions to ensure that that money is indeed spent in that way.
Mr Kim Jarvi: We don't have the data for 1999 yet, but it doesn't appear from the first indications from the Ontario College of Nurses that the number of actual employed positions has risen significantly over the past year. So that's a bit of a disappointment. It may be that this split is a little more towards full time than it was. The percentage of nurses who have full-time employment is less than 50%, which is certainly a major deterrent to nurses coming into the profession.
It is interesting that when the government made that commitment to nurses, at least on paper, there was a substantial increase in applicants to nursing schools. So another part of the equation would be to make sure of the positions for those students, if they want to come in.
But actual circumstances are going to have to change. Part of the problem, I guess, is making sure the institutions are spending on nurses the money that was in fact allocated to nurses. We are hearing that that's not the case in many cases.
Mr Christopherson: Where might some of it be going? To the other areas that-
Mr Jarvi: Other areas, even paying off deficits. I suppose it's not entirely surprising, given that many hospitals are tight for money.
Mr Christopherson: Nurses have an excellent reputation among Ontarians, and for good reason. I found it striking that on page 6, when you talked about some of the situations nurses are facing on the job, you could almost interchange the word "nurse" with "teacher" in terms of the morale, the pressure and the lack of adequate supports in place to do the job. It's so important that you are using that credibility to come forward and both talk about the issues that affect nurses directly, which of course is your role, but also to talk about how that affects all of us in the provision of health care. I really appreciate your submission today.
If I have time, I'd like to ask you-
The Chair: Quickly, go ahead.
Mr Christopherson: You state that, "However, research overwhelmingly also shows that public or not-for-profit provision of health care services is also cheaper and better quality than for-profit provision." If you check Hansard, you'll find that earlier on, I and a representative of a taxpayer group crossed swords over this very issue. I was making the case that our system is more efficient than the privatized system that exists in the States. You are making the same statement I did. Can you expand on that and, if you know first-hand, what studies were referred to? He was adamant that I was telling an untruth.
Mr Jarvi: Some of the studies are referenced in the endnotes, so you'll have a start there. We can certainly supply you with an endless list of major studies.
Mr Christopherson: I know they're there. I just wanted you to get them on the public record.
Mr Jarvi: The New England Journal of Medicine, the Journal of the American Medical Association, British medical journals-top medical journals; if you get an article in them, you've done very well by yourself academically.
Mr Galt: Thank you for your presentation. Also, thanks to your organization for working with the government as we've come through a very difficult time with health care and some of the challenges, and what HSRC has come through and recommended. I meet with the local nursing association as well, and appreciate those opportunities and those breakfasts. Thanks for recognizing where the cuts really have come from: the federal government and the lobby it is putting forward.
We've been hearing so many things. Just today we heard that if we doubled the amount of money going into health care, we'd still need more. We've heard that there are rations in Ontario and in Canada because of waiting lines, and the US is rationed because of cost.
Last summer I had an experience to go through some hospitals. I was in four, and the nursing care was top drawer in each and every one of them. I have no complaints about the system at all. I don't have people coming to me with complaints, other than the odd phone call that comes to my office and, of course, reading the front page of the Toronto Star. I find that the problem with the health care system really seems to be with the ambulance chasers, which the opposition sometimes likes to do.
I'd like to recite to you as best I can a letter to the editor that was related to an incident in, I think, early January. It was in the community paper in the Belleville-Stirling area. This woman came to Toronto because her mother was very seriously ill with the flu. She called 911-non-emergent. The ambulance came and asked, "Which hospital?" and they suggested Scarborough Grace. They radioed and it was on critical care bypass. They radioed another hospital, critical care bypass. They radioed another. Soon they were outside of her area. She said, "No, I don't want my mother to go that far away." The paramedics said: "How be we help you put her in the car? You drive her to the hospital and they'll accept her." She drove to the hospital expecting an eight- to 10-hour wait in the emergency ward. When she got there, there was not a single soul in that emergency waiting room. She got the wheelchair and brought her mother in, and her mother was seen immediately. Her last sentence was to the effect, "Who is playing games with whom?"
I see the Toronto Star and then I read this letter to the editor. Can you comment on what's going on from your point of view?
Ms Choiniere: Certainly our members are telling us that the problems we are having in our health care system are real. I think what is going on in many emergency rooms is but one symptom. For example, in speaking specifically about the emergency situation, one of our recommendations is that we need a good, comprehensive primary health care system, which I think will mean that people will get the care they need. Quite frankly, what happens now is that individuals who need care, not necessarily emergent care, after five in the afternoon, really don't have much choice but to go to an emergency department. That means we have a situation in which they, and however many other people, are there, which means it's a little congested when a real emergency comes through the door.
We think it is critically important to take a system view of what's happening. I think that means we need to do some upfront investment in order to get our system to where the components of it can be utilized appropriately.
Mr Galt: Something you didn't put in here that I thought you might have has to do with nurse practitioners as one solution for primary care. Do you want to comment on that?
Ms Choiniere: Yes. As you know, we have approximately 400 nurse practitioners in the extended class, who are able to order certain medications and tests and so on-so it's an extended role-who would be exceedingly helpful as we expand this primary health care system. They work in collaboration with physicians, just truly successful partnerships that we have already in certain areas between nurse practitioners and physicians, and we also know that physicians are anxious to work with nurse practitioners as well. So we see it as one key answer for the system.
The Chair: On behalf of the committee, thank you very much for your presentation this afternoon.
TORONTO BOARD OF TRADE
The Chair: Our next presentation is from the Toronto Board of Trade. We're running a couple of minutes ahead of time. Are you ready to go?
Ms Terri Lohnes: Our director of policy just stepped out to make a quick phone call. Would you mind if we tried to track her down?
The Chair: No, go ahead; you've got a couple of minutes.
Ms Lohnes: Thank you.
The Chair: Welcome. If you wouldn't mind stating your name for the record, please, and you have 30 minutes.
Ms Louise Verity: Good afternoon. My name is Louise Verity. I'm the policy director with the Toronto Board of Trade. Regrettably, our president and chief executive officer, Elyse Allan, has come down with the flu, so she send her regrets. I'm the poor replacement.
With me today is Terri Lohnes. Terri is the staff economist with the Toronto Board of Trade and also very much our numbers guru.
It is my pleasure to address the standing committee on finance and economic affairs on what Toronto's businesses believe are the priorities in the 2000 budget. We will be submitting a detailed series of recommendations to the committee shortly, and my comments today reflect the major highlights. Our submission is based on two pillars.
As a non-profit board, we have a process that we go through in order to get to the point where we can make our recommendations public. So we will have a very detailed submission, in the neighbourhood of 17 to 20 pages, and we hope to get it to all committee members by this Friday.
First, in terms of our pillars, the province must fine-tune the provincial economy through debt reduction and corporate tax reform.
Second, the province must strengthen Toronto through property tax reform, infrastructure renewal and initiatives to assist the homeless.
The Toronto board has supported many of the economic reforms initiated by this government. Personal income tax reductions and deficit elimination spur economic activity and result in a stronger, more attractive Ontario for business.
We expect the Minister of Finance to balance the budget in 2000-01. Now we must establish an aggressive debt reduction plan.
Forecasts for the provincial economy are very robust, indicating that the province will soon experience the same pressures as the federal government in dealing with these types of surpluses. Spending should not increase by more than population growth and inflation combined. This still allows for increases in program spending around 3% annually. We believe this is adequate.
The province must first commit a substantial amount of potential budget surpluses to debt reduction, then tax cuts, and then, only once these areas are competitive internationally, program growth.
We believe the government must continue its positive initiatives to reduce the taxes that hard-working Ontarians pay.
Corporate tax reform also must be part of the tax reform agenda and include, first, the elimination of the Ontario corporate minimum tax, a competitive disadvantage for businesses in Ontario; second, the reduction or elimination of taxes on capital, a profit-insensitive tax that deters businesses from growing in Ontario; and finally, the harmonization of the provincial and federal sales tax regimes to reduce business costs and increase transparency for the taxpayer.
The province is well positioned to continue its strong economic performance, but only if it acknowledges and addresses the importance of Toronto to this success. Ontario's economic success requires a strong, vibrant and growing Toronto, which leads to the second pillar of our submission. There are three criticals the government must act on in this area. Business property taxes must be reformed, SuperBuild must have a significant Toronto focus, and homelessness must be addressed.
Last week, the Toronto Board of Trade released Why Grow Elsewhere?, our recommendations on property tax reform. I have brought copies for the committee. Currently, Toronto's commercial and industrial tax rates are six to eight times more than the total residential rate and more than two times those of neighbouring jurisdictions. This is simply uncompetitive. It means that our city is not as strong and competitive as it should and could be. If the property tax disparity is not fixed soon, jobs and businesses will be lost.
The city of Toronto cannot implement all the necessary reforms without assistance from the province. Our report outlines in detail what the province must accomplish.
The province must require all municipalities to cap tax revenue from all property tax classes with a tax ratio greater than the weighted provincial average. To protect our communities, the province must create a separate property class for neighbourhood commercial. These are the smaller businesses, in most cases the street retail, that are critical to the fabric of our communities and that populate our main streets.
With respect to the municipal education tax, the province must accelerate the education tax reduction phase-in by 24 months. The board was really delighted a couple of years ago-it was either in the last budget or, I think, the budget before-when the province announced the education tax relief. We still see this as a major impediment and we hear from our members that the education tax component is still the highest, really, in the province.
The province, with the city, must also look at innovative tax-related financing tools to encourage economic development and investment and how these tools can be applied to Ontario.
The province must also examine the continued applicability of the current value assessment methodology in comparison to the value-in-current-use type of assessment. We suspect the latter would reduce the impact on small business.
Finally, the province must implement a rolling average assessment for longer than three years and consider instead a rolling average of nine or 10 years. Earlier this week we saw the results of this with respect to the potential changes, certainly the cyclical nature of what's occurred in particular in the Toronto real estate market.
I refer you to our paper for a more detailed explanation of the reforms.
Toronto's business community is also very interested in and committed to improving our roads, rails and transit systems. We commend this government's announcement of the SuperBuild program in response to these challenges. SuperBuild's priorities must focus on projects that have the greatest economic return for the province. Projects related to the Toronto area accomplish this objective. The Toronto board offers to work with the province to identify projects that provide a positive economic return and attract private sector partners to the table.
Finally, I will close by talking about homelessness. I want to raise the concern the Toronto board has for the rising incidence of homelessness. There is a provincial role to play that extends beyond the commitments made so far by this government. Access to affordable housing is one of the key elements in reducing the incidence of homelessness in a city like Toronto.
Specifically, we encourage the province to, first, examine the potential for public-private partnerships in providing affordable housing; second, waive the PST on materials used in constructing affordable housing; and third, examine the feasibility of expanding the provincial rent supplement programs to assist families and individuals who are at risk of becoming homeless. These are some of the initiatives with minimal cost that can make a difference for our city's homeless.
We believe the framework presented today is achievable for this government. To that end, we offer our support and assistance in achieving these recommendations. I'd be pleased to answer any questions you may have.
The Chair: Thank you very much. We have approximately six minutes per caucus.
Mr Christopherson: Thank you for your presentation. I noted that on the first page you state, "The province must first commit a substantial amount of potential budget surpluses to debt reduction, then tax cuts, and then, only once these areas are competitive internationally, program growth."
We had a presentation earlier today, in fact the one before yours, from the nurses. You may have heard some of that presentation, speaking to the deficiencies-crises, actually, in some cases-that exist in our health care system right now. We heard just a little earlier today from women making presentations about the cuts to first- and second-stage housing, women who are facing abuse, who are fleeing an abusive situation. Both the shelters where they go as a first stage and then an interim housing accommodation with some supports as the second stage-both those programs have been cut severely to pay for part of the tax cut. We know, through submissions made to this committee, that there are serious problems in child care provision in the province of Ontario-again, cuts in those programs to pay for the 30% tax cut that so many hail as being so wonderful. Education: We've had teachers, psychologists, psychometrists coming in and talking to us about the crisis that exists in our education system in terms of not having enough educational assistants for kids with special needs, not enough support services for children, especially in the inner cities, for instance English-as-a-second-language programs. All of these things have been cut, cut, cut. Protection for our environment-that affects the health of our children, the health of our communities.
Yet with all of that, you're still maintaining on behalf of the board of trade that all of that is secondary and that the number one priority has to be the debt, and then the number two priority is more tax cuts, and then, and only then, start to address some of these other issues. You feel that 3% at the most ought to be what's spent on those areas. I have some trouble understanding how you believe that's going to give us a stronger community and a stronger economic unit-not just social, but economic unit-in the future if we actually followed what you're recommending and ignored all these crises that affect so many people.
Ms Verity: Thank you for your question. In responding to you, I'd have to come at it from a number of different ways.
The first is that obviously, in terms of being government, you will hear a variety of recommendations from a number of different groups, many of them in direct contrast with one another; certainly a number have been put on the table now. Our feeling from a business standpoint is that at this point we have an operating budget in the province of over $50 billion. The challenge is, how can we best allocate those dollars in such a way that those who need the supports and the types of programs get those services the most? That is a tough decision that requires making some tough choices. That's not to say that we have the best mix right now. From the Toronto business community's perspective, our sense is that there is one taxpayer. People are feeling as though taxes are a very serious problem. In order to protect the economy to ensure that people have jobs, to ensure that we have health care, to ensure we have a strong education system, to ensure that we have a strong training system, we have to make sure we have a strong and robust economy that will prepare us for the future so we can deliver these types of programs and services.
Mr Christopherson: Fair enough; I understand that perspective. My difficulty is that all of these cuts and crises are happening at a time when we're in the biggest economic boom that North America has ever seen, led by the American economy. If we can't solve these problems in the good times, how can we possibly-I can't imagine you rolling in here in three or four years, if we're in the ditch economically, saying, "It's time now to spend a whole lot more money in education, health care, environmental protection." If it's not going to happen in the good times and it's not going to happen in the bad times, when is it going to happen? I say this very sincerely.
For a lot of people in Toronto and elsewhere across the province-and I referenced it a number of times today. There's a story on the front page of the Star today about a man for whom doctors spent five hours trying to find a bed in an emergency. They didn't. There may be an inquest as to whether that delay caused his death. His wife is on record as saying, and I'm paraphrasing, that the irony is that her husband supported all these cuts, but he found when he needed the system it wasn't there. Why wasn't it there? Because in order to give the tax cut, which even this gentleman thought was good at the time, it has to be paid for from somewhere. Part of it is coming out of the health care system and part of it is coming out of the education system.
I have trouble understanding why people should believe that a 20% or a 30% tax cut, of which the average middle-class person doesn't get the best benefit-it's the well-off who do-is a good deal when the price is the education system for our kids, child care services for our kids, environmental protection for our kids and the health care system for our kids. How can this possibly be a fair deal? If we don't deal with it now, when are we ever going to deal with it? It's not going to happen during the bad times.
Ms Verity: In terms of responding to that kind of question, if we had the kinds of dollars that we're spending in debt service charges and other ways-we're spending more still on debt service costs. I think it is somewhere in the neighbourhood of $9 billion. That would more than fund the education budget, probably the two education ministries combined. You reach a certain point where the cost of not doing the right things with the economy can result in some consequences that are extremely dire, and more so perhaps than we have today. What you're hearing from us is about protecting the future of our children.
Mr Galt: Thank you for your presentation. I'm not surprised that it was an excellent presentation, coming from you.
I was just listening to the opposition and some of their comments. I don't know how many times he has brought up the front page of the Star. I guess their party's policy is based on the front page of the Star. This happened last July; it wasn't yesterday. The subheading is, "Doctors Disagree Whether Delay Caused His Death." Aortic aneurysms are very dangerous things, just to put it into perspective. We've been ranting and raging about the front page of the Star most of the day and I think we could put it to rest.
Looking at some of the property taxes, I want to ask some questions. We had a presentation earlier from the Greater Toronto Hotel Association. In 1998, property tax as a percentage of hotel revenue per room in Toronto was 13%; in Los Angeles it's 3%. Both councils have to run a city. I have difficulty understanding why there would be that big a percentage difference. Also, he told us that in Toronto it works out to taxes of $5,000 per room and, if my figures are right, in Mississauga, a hotel right next door, it is $1,400 per room. When I was on the Hydro select committee a couple of years ago, we were told about the horrendous difference in rates between Mississauga versus Toronto. Why is Toronto in this much trouble with property tax when Mississauga isn't? Toronto is booming as well. It's the engine of Ontario, as Ontario is the engine of Canada. Why? I don't follow what's happened here.
Ms Verity: The situation in Toronto is somewhat unique. A big part of that had to do with the fact that until the changes were made in the later 1990s, moving to a current value type of system, it was very difficult to assess the differences from one location to another. Now our system is completely transparent, so you can see the differences in a much clearer way. As well, historically Toronto was one of two cities in the province that actually paid full freight for education. This is a result of the historical funding formula. But really what's happened is that over the years the decision has been made that in order to deal with new expenditures, whether it's for programming or maintaining existing programming, that money would come from any type of property class outside of the residential sector.
While our report is very much geared to the commercial and industrial sector, about one third of the benefit of our recommendations would go directly to the multi-residential sector in Toronto. If you look at the number of renters-and, granted, this wouldn't cover everyone-about 53% of all Torontonians actually rent their accommodations, so the benefits would actually go to them as well. But in Toronto it's a very complicated system and it has evolved over a number of years. It's a difficult sell.
Our feeling in talking to our members is that it is a very serious problem that has to be addressed. The reason why we picked this as the time to come forward is that we've got a couple of things happening this year. One is a municipal campaign. Secondly, the 2.4% cap will expire at the end of this year, which means no holds barred; there will be incredible changes if some action isn't taken.
Mr Galt: It will be looked at again.
Just one other area I'd like to go into for a moment and that has to do with harmonization of the retail sales taxes. In theory it sounds good, but every time our Minister of Finance has had a look at it, as I understand, it just means more tax from the public. It goes into different areas because it's the services, whereas our provincial sales tax is more on goods. There doesn't seem to be an easy way to bring them together. In theory, yes, it is good. But to make it work in practice, do you have any suggestions?
Ms Verity: I'll have Terri answer that question.
Ms Lohnes: You're quite right: Harmonization of the two taxes is rather complex given that they tax two different tax bases. One of the recommendations we've made in the past and continue to make around this is that Ontario would be the linchpin in a harmonization right across the country. One of the leverages that the province could have is exploring the application of the GST in a combined system. We believe that the province can in fact have leverage in deciding what a harmonized tax would actually tax, that you wouldn't have to have the PST necessarily moved to the full GST base. We also think there's an opportunity for a rate reduction in a combined PST-GST system which would mitigate some of the base-broadening impact on taxpayers. There are some options that could be looked at in dealing with the harmonized system that would make it perhaps more attractive than it seems on the top.
Mr Phillips: Just a comment on the health issue because the other two parties have commented on it. The reason that it was commented on this morning was-I'll give you a specific example. A young lady in my area went to the local hospital. She was eight months pregnant and got a brain haemorrhage. The hospital made 21 phone calls trying to get her a bed in Toronto and couldn't. She was transported to Hamilton but couldn't get an air ambulance. She got there and she passed away, tragically. This was two and a half years ago. I pushed to have a coroner's inquest. It took me two years to have that-me and others pushing it. They made several recommendations. Then I read today the exact same conditions existed when someone else passed away. That's perhaps something to do with the board of trade but not directly on your presentation.
I wanted to ask a couple of questions. You mentioned the homeless, that it would require a partnership between the private and public sector. I'll ask both questions and you can comment on the public sector involvement.
I carry this around with me. It is a document called Ontario, Canada: The Future's Right Here. It says in this document: "`Downtown core service sector operating costs lower in Ontario: The overall costs of running a financial services business with 100 staff and 20,000 square feet of space in downtown Toronto is 26% to 48% lower than in downtown Atlanta, Dallas, Chicago, Boston, Jersey City, San Francisco, Los Angeles or New York,' according to a June 1998 KPMG business cost comparison." I'm wondering, and I've read the briefs of the Board of Trade, which are always excellent, but why would the government be saying that the costs are that much lower in downtown Toronto, ie, 26% to 48%, when the facts you're presenting would indicate something different.
Ms Verity: First of all, in terms of looking at that report, I've seen it. It has crossed my desk at a point in time. I haven't had a close look at the methodology, so I'd have to do that, and Gerry, I'd be pleased to do that and get back to you. Terri may actually want to comment on that.
What I can tell you is I had a conversation earlier today, and it was with a retailer. This is a group that has stores across the country, stores in the downtown area, and I think I was told that the median price per square foot-and this is a predominantly Canadian business-is something in the neighbourhood of I think $1.83 per square foot, that was the median price. The price in Toronto, and this isn't in the Bloor Street area either, is somewhere in the neighbourhood of $5.83. That was a telling example that just crossed this morning. A business person called up and said: "You know, we've seen your report. We like the message that you're trying to put forward. We understand that it's a difficult one to sell, but, look, we agree and this is what we're hearing." Then we say: "Can we use your name?", and they say: "Oh no, no, that's a tough one."
In terms of the KPMG report-Terri, have you had a look at it?
Ms Lohnes: Yes. That was an interesting study, but when you actually come down to what one of the major cost competitors was for Toronto, it was the dollar and the fact that our dollar was so low, particularly about a year and a half and the two years ago when this study was done. Because you have such a low Canadian dollar when you look at purchasing power with US dollars for Canadian retail space, it becomes very cheap in that respect, but if you're within Canada, you don't have US dollars to buy the space, or to run the space. That was one of the things. When you factor that in, the disparities shrink significantly between some of those other major international jurisdictions. As well, they factor in a lot of other costs which aren't directly paid by businesses in running their retail but in fact come in other ways, through payroll taxes and those sorts of things that don't immediately show up on the bottom line.
Mr Phillips: You recommend the province create a separate property tax class for neighbourhood commercial. Your members believe that would be an important element in dealing with-that seemed to be the group that was most dramatically impacted by the changes. Do you think that would be a significant move by the province?
Ms Verity: We think that actually could be a significant solution to part of the move towards CVA. The point that I would put on the table, though, is that cannot be the only step that the province takes.
I don't have all the numbers in front of me, but just going on memory, what we looked at there was roughly five different codes and classifications, which would pick up many of the street retail and others who were negatively impacted. What we found in 1996 when we first started running these numbers is that about 75% of all businesses would actually have increases under the move to a straight CVA type of model, so this is really seen as a way to protect the types of businesses that are really instrumental to community.
The Chair: It looks as though we've used all our time. On behalf of the committee, thank you very much for presentation this afternoon.
COUNCIL OF ONTARIO UNIVERSITIES
The Chair: Our next presentation this afternoon is from the Council of Ontario Universities. If could you please come forward and state your name for the record.
Dr Ian Clark: It's a pleasure. My name is Ian Clark. I am the president of the Council of Ontario Universities. I will be joined soon by Rob Prichard, the president of the University of Toronto and the past-chair of the Council of Ontario Universities. Professor Prichard is meeting with the minister at the moment, and he'll be here momentarily, but I can begin if you wish.
The Chair: Certainly. On behalf of the committee, welcome. You have 30 minutes for your presentation this afternoon.
Dr Clark: I have distributed our brief. We have two visual aids which my colleagues are mounting. When Professor Prichard comes, I hope he gives an impassioned description of why the Ontario universities have need of further support and assistance from the people and the government of Ontario.
Let me give a little bit of background information before he arrives. I'd ask the members of the committee to turn to page 6 of our brief. Page 6 and the succeeding pages contain no requests for funds or further attention from the government of Ontario. They are intended to describe what the universities themselves are doing to respond to the challenges that face the higher education sector in Ontario. They're meant to try to address the perception that somehow Ontario's universities have been insulated from the pressures to be innovative, efficient and responsive, behind their ivy-covered towers.
Let me just point out some of the things that have been going on in Ontario's universities. First of all, I'm relatively new to the position of president. I've taken the opportunity to look around at other jurisdictions and how they manage the universities. I guess my sense is I haven't seen any jurisdiction in the world where the university sector makes more efficient use of the resources available and is more innovative in the way they're doing that.
In the examples shown on page 6, we have constituted-it has just about completed its work-a task force on learning technologies to make sure that Ontario universities are at the leading edge in the use of new technologies. We have a very impressive collective effort to digitize all the library resources of Ontario's universities and potentially to extend that out to the college sector and the rest of the school sector, which is a tremendous example of collaboration among the various institutions.
Under the "Responsiveness" bullets, the Ontario universities responded very quickly and effectively to the government's access to opportunities program so that there are now 23,000 more new spaces in these high-tech professions, more than the government had originally targeted. Similarly, with respect to teacher education and nursing education, when the government has indicated a need for education in particular areas, the universities have responded promptly and provided the necessary spaces. On college-university collaboration, we had been working hard with the colleges and signed this college-university degree-completion accord.
On the next page, under "Economies and Efficiencies," it goes through a standard list of what members of the Legislature would want to see in their university sector, taking maximum advantage of co-operative purchasing, revenue generation, contracting out in efficient ways to deal with administrative services. When one looks at the overall administrative efficiencies of Ontario universities, they have the lowest expenditures on general administration as a proportion of total expenditures of any of the Canadian jurisdictions.
Finally, on page 10, under "Accountability," Ontario universities provide information publicly on graduate employment rates, degree completion rates, and OSAP default rates. We have commissioned a study, which is nearing completion, by Dr David Smith who is the former principal of Queen's University, to look around the world at quality indicators and measures of quality enhancement that other universities and university systems use to make sure that Ontario universities have access to the best available practices. We are working with the ministry and the minister to address the issues raised in the last report of the Provincial Auditor. I guess the point we would like to make is that Ontario universities are devoting a great deal of attention to making the best possible use of the public resources that they are provided with.
Turning now to the earlier part of the presentation, the two charts that I have beside me show the nature of the challenge that we face. Committee members have probably seen versions of this chart. This shows the dramatic increase in demand for university placements that we anticipate. I know that some of the previous presenters before you have described the impact of that. We're facing a significant increase in the work we have to do, of 20% or 30%.
This side shows the challenges that we face relative to our competitive jurisdictions, whereas Canadian jurisdictions generally have actually reduced their expenditures on higher education over the last four or five years.
Every American state-it's quite remarkable when you look at it, and many of these states have been reducing their personal taxes and so on-has found it, for whatever reason, and it's kind of puzzle, to be good public policy and a good investment to invest massively, increase massively in their higher education systems. This is, as you know, a highly competitive area for professors, for research dollars, and even for our best students. While we face this increase in demand which is much greater than most American jurisdictions face, they have been investing at a rate that is dramatically more than Ontario and most of the other Canadian jurisdictions.
The four parts of our brief then can be found starting on page 2, and we've presented this in terms of a shared challenge that we think that the facts of the enrolment increase indicate some government action.
This is, as many of you will recognize, my colleague Professor Prichard. I've just finished setting the table for you here, Rob. This is getting some of the background, demonstrating how efficient Ontario's universities are, for which I take no credit. As I said I'm relatively recent to the scene. As some of you may know, this will be Professor Prichard's last presentation to this committee on behalf of universities, at least for a long time, and I thought this might be a nice occasion for Professor Prichard to give some personal thoughts.
Mr Robert Prichard: Let me begin by apologizing for being late. I was meeting with the honourable Minister of Training, Colleges and Universities for the past hour, and she kept me five minutes longer than I hoped she would. I hope you'll excuse me for being late.
While breathless, having just run here from there, I'm grateful for the opportunity to represent my colleagues at the Council of Ontario Universities. I am the past chair of council, having served as chair for two years. Professor Davenport, the president of the University of Western Ontario, is not able to be here today. He was here yesterday to meet with Minister Eves and asked me to appear on his behalf today.
As Dr Clark indicated, and I notice it brought a smile to the faces of those of you who have heard me before, this will be my last time. I saw Mr Phillips say, "Thank goodness this is the last time." I think I've appeared here seven times over the past 10 years-
Mr Kwinter: Who's counting?
Mr Prichard: -to try to put to you, and through you to the people of Ontario, as best we can, the case for investment in the future of our young people. I'm here to do it one more time, but I'll confess that I think the stakes for the young people of Ontario are greater today than on any of those previous occasions on which I've had the privilege of appearing.
For me, the moment in time you and your colleagues in government face is comparable to the moment in time immediately following the Second World War, when the troops came home and there was a need for radical expansion of the capacity of our public university system to respond to their needs. Similarly, it's comparable, I believe, to the period in the 1960s and early 1970s, when the children of the troops who had come home came to the university level-I was one of them-and where again there was a need for a major expansion. We had the Davis-Robarts policy of that period, the expansion of the public university system and the introduction of the colleges to meet that need.
This is the third great wave of the post-war period that's now upon Ontario. Just as Ontario responded, I think magnificently, in the post-war period and in the 1960s, we have to do it again if Ontario is to be as prosperous and as good a place to be for a family, as good a place to work, as good a place to live, for the next 25 years as it has been for the last 50. This question that you face now, I believe, there is no question more important than the investments we will make in the intellectual and human capital of our people over the next couple of years to prepare ourselves for this next decade. There is no more important question for the future of Ontario than this.
As Dr Clark has explained, we face a major increase in the number of students who will want to attend our institutions. This happens at a time when every observer from left to right, anywhere around the globe, concedes, acknowledges that it will be the quality of people's minds, the power of the mind-it will be human capital, intellectual capital-which will be determinative of the relative success of jurisdictions in the global economy. This convergence of the importance of intellectual capital with the demand that's coming from all these students-we can see them all. They're all in grade school and high school already. This isn't a prediction based on fantasy. These students are countable. These students can be counted. We know we must meet their needs. We know we must give them a terrific opportunity if we want to give Ontario an opportunity.
All I say to you in the context of all of this is please get it right. For the sake of not just the young people of Ontario who want these places but for the sake of all of us in Ontario, please get this as right as your predecessors did in the 1960s and in the late 1940s when the two previous waves of great change in our system had to be met.
We have put forward a plan. We have worked closely with the government. We have worked closely with Pricewaterhouse Coopers. We have worked closely to develop, we think, an intelligent, workable, measured plan to make sure Ontario gets this right for the next decade.
I'm in a happy position, in terms of my employment. Whether we get it right or wrong will not affect my life in any direct way, because I won't be the president struggling to make it work the way it's been my privilege to for the past 10 years. But if I pull back from being the president to just being the parent that I am, with three children, all of whom will go through this system during this period of expansion, as a parent I ask you to get it right, I ask you to attend to this issue, I ask you to attend to creating the additional places, making the additional investments in research and innovation, the additional investments in our physical plant and in our capacity to renew our physical plants, our investments in faculty renewal, our investments in student financial support. We set this case out. We need the government of Ontario, the people of Ontario, to embrace this cause for the sake of all of us as Ontarians, as parents, as young people and as teachers. All of us have a stake in getting this right.
I have to confess that I'm not confident we will get it right or that we are getting it right yet. There are some very encouraging signs. We've made some real progress in the last two or three years. The Ontario challenge fund is making a real difference. The Ontario Innovation Trust is making a powerful difference. I expect the SuperBuild investments that will be announced in the weeks ahead will make a powerful difference. The access to opportunities program, which doubled computer science and electrical engineering, has made a powerful difference already. The Ontario student opportunity trust fund has made a powerful difference.
We've had a number of very positive developments, but what we need now is to pull that together with a multi-year plan with the adequate operating support to our institutions to allow us to take full advantage of each of these individual initiatives that have been taken and to ensure that we have the opportunity for our young people coming through.
I'm not at all here to complain. I actually come here with gratitude for numerous important steps that have been taken in the right direction and to endorse them and to underline what a difference they have made, but also to say we cannot relax, we cannot back away. Indeed, we have to take even bolder steps, because the pace of change facing us is much greater going forward than it is looking backwards.
Just as Ontario faces this challenge, as our charts will indicate, other jurisdictions have noticed this same challenge. Other jurisdictions have understood and have come to the front of the pack in the race to be competitive in the global economy. You'll see the chart behind me which shows that Ontario has not yet been a leader in this process, that Ontario needs to catch up and accelerate and go by other jurisdictions.
We're here to say please, as a finance committee, advise the Minister of Finance that he must assign the highest possible priority to investing in the future of our young people in our universities and colleges. I hope you will commend to him the specific recommendations we have made in our brief. I hope you will urge him to build on the successes of the last three or four years and get Ontario from a position where we're playing from behind to get Ontario accelerating to a position of leadership not just in Canada but in North America and around the world.
As the province's economy has begun to roar, as we're beginning to experience the fiscal dividends of that tremendous financial success, this is the time to lay the foundations of opportunity for our young people and the future prosperity which we're now enjoying because of the investments that came before.
Mr Chairman, thank you for the opportunity to make that rather personal statement. My colleague Dr Clark will have the last word.
Dr Clark: Just to note the four specific areas that our brief refers to-as I said at the outset, we have presented this as a partnership; we're not coming asking the government to solve all the problems. We have the framework of a plan, as Professor Prichard has noted, and this requires significant action on the part of the universities, and each of the proposals has with it a commitment and an expected result. That is the way we have put forward the framework.
We would be pleased to respond to any questions.
The Chair: We have four minutes per caucus, and I'll start with the government side. Mrs Molinari.
Mrs Molinari: Thank you very much for your presentation. It was certainly very comprehensive. Showing the graphs is a good visual to see exactly where we are and where we need to go in the next few years.
As you have met with the ministry, you're aware of a number of initiatives-and you've highlighted some of them-the government has done for student assistance and to provide for the needs we see coming forward. It's a challenge for any government to balance all the needs within the system with all the requests, within the limited envelope we have to work with. Your expertise-and I know the work you've been doing with the minister and the ministry-is helpful to us as we move forward to make the decisions we need to make that are so necessary.
We had a presentation earlier from another organization, the Ontario Confederation of University Faculty Association. They didn't call it KPI-the key performance indicators-but I think that's what they were referring to. Can you talk a little about how you feel about that inevitability?
Mr Prichard: First, I should say that I commend the brief from OCUFA. I have read all the briefs you have received from the student groups, from the faculty and from ourselves. There are some points of difference on certain policy issues, but fundamentally I think they are all saying the same thing about the need for investment in opportunity to reap dividends for the province.
On the issue of performance indicators, the province's universities have all embraced performance indicators as a way of judging their own contribution, measuring their own success in meeting their missions. The Council of Ontario Universities led an important performance indicators exercise, which has now been taken down into each of the institutions. Most of the universities now publish a significant number of performance indicators about their performance. My institution does, but I say that not to be boastful; it's but representative that we publish annually a significant list of indicators.
In addition the province, in partnership with us, has mandated that we publish certain indicators ourselves every year. The two indicators that we publish are, first, the default rates on OSAP loans and, second, the employment rates of our graduates six months after graduation and two years after graduation. These are both mandated. They're on our Web sites, and each of us publishes them.
If I can just comment on what we see, first, with respect to default rates, the default rates on student loans are dropping quite sharply. They're down by about a third this year. Even though universities have by far the highest tuition, university default rates are the lowest; public colleges, as a group, are second; and private vocational schools have the highest default rates, on average. So it's interesting to see that despite the tuition, because university graduates do so well, they are handling their student loans better than the graduates of the other two places. As I say, the default rates came down by a third this year, and they are quite low at most institutions.
Second, on employment, the results are extraordinary. The results on employment two years after graduation-again, these are posted on all our Web sites-show that medicine, law and dentistry are all 100%. Two years after graduating, 100% employment. Then it drops all the way down to 96% employment in the case of arts and sciences undergraduates in humanities. The band is from about 96% to 100% two years after graduation. They are extraordinarily powerful figures showing the virtues, as a performance indicator, of the significance of the investment that the student and the public make in this experience.
So we embrace the indicators. We are pleased to participate in that program, and most of us have many more indicators that we publish on an annual basis as well.
Mr Phillips: First, I congratulate you on a terrific job at the U of T. It's one of the most difficult organizations to lead, and you've done a great job. It's very complex, and you leave it a much strengthened operation, with a very good financial resource base as well, if I'm not mistaken.
Mr Prichard: Thank you for that. Coming from you, it means a lot to me.
Mr Phillips: The Premier's job is difficult, but being president of the U of T is probably slightly more difficult.
These are very useful statistics, by the way, indicating that over the next five years enrolment will go from around 240,000 to a little above 300,000, which is quite an enormous increase. I gather that the students now are paying 35% of the cost and other sources 65%. What would be your advice to the committee about what we should be looking at for the next five years in terms of who pays what, and how much you think the provincial government needs to be looking at to maintain a quality education system?
Mr Prichard: Thank you for the question. Our position is as follows. First, the expansion of opportunity that is required cannot happen on the backs of students. We do not think it is possible to imagine that any tuition fee policy can solve this problem. This problem is only going to be solved through significant new public investment.
Second, the universities believe it is fair for the students to pay a fair share, recognizing that that is a malleable concept and there is room for debate as to exactly what is a fair share. I know of no university president who believes it would be good public policy to have the provincial investment, going forward, at a level any less than the existing level of investment per student. I think it's the case that every university president believes the investment per student needs to go up over current levels in order to not create enormous pressures on the tuition side.
The universities view it as a case where we must have a fair and adequate public investment and then leave it to the individual university and its students, program by program, as to how much the student might be asked to pay. The term we have used is not very elegant term-it's full average cost funding. It must be done with new investments per student that are at least as substantial as they are at present, while trying to find ways to enrich the quality of the experience through specialized envelopes of intervention. We do not wish to associate ourselves with any view that this expansion can be done on the backs of the students alone.
Mr Phillips: Using that kind of benchmark, that would indicate we should be looking at a 25% increase in provincial support for university and college operating expenses over the next four to five years. I think the enrolment is going up about 25%.
Dr Clark: That's absolutely correct.
Mr Phillips: So is it fair to say that the university presidents feel that would be the base requirement?
Mr Prichard: I think you've added the important word. What we've recommended in our work with the government is that we make a base investment to expand places based on the same per student funding we receive at present for the existing students. That would lead to a figure a bit north of where you are, in terms of the exact number. It depends which year we get to, in terms of growth.
Second, we've tried to identify very specific needs where Ontario needs to strengthen its performance and not stand still. We want to strengthen performance. In particular, we want to bring down class size and increase student contact with individual faculty members and give them more individualized attention. We want to strengthen the research and innovation performance of our institutions. These additional goals require investments on top of that base rather than being accomplishable within the base to which you refer.
Mr Christopherson: Thank you for your presentation. Hopefully you will be more successful than we have been at getting the message through about the importance of getting funding where it needs to be for our post-secondary institutions.
To set a context for the comment I'm going to make, I want to refer to a brief that was presented within the last couple of hours from the Toronto Board of Trade. In their brief they say, "The province must first"-this is their top priority-"commit a substantial amount of potential budget surpluses to debt reduction, then tax cuts, and then only once these areas are competitive internationally, program growth." Earlier, they make the statement that no increase in program spending needs to be above 3% annually. So I leave that contextually. When you presented this, that's pretty terrifying. That ought to tell the message. Most of these jurisdictions are close to our borders, so they are our trading partners. That's who we compete with. It's also the home country of the economic boom that's driving the economic boom that we are enjoying. Not one of these is in deficit. In fact, they're way out in front in terms of the money they are spending. And there's Ontario at minus 8%.
Would you, just in your own words, to help nail down the message, state why it makes not just good social planning sense but economic sense to make these investments, so that those who are coming in and saying, "Spending anywhere is not as important as cutting taxes more or paying off the debt quicker"-because that's their message. They are keeping it very straight, and this government listens to that. We've got to get a message through that economically we can't afford not to be investing in other key areas of our economy, and the university system is one of them. McMaster University is in my new riding of Hamilton West. Help us get that message through. In your own words, please tell the government members why there's an economic argument to this, why it's not just some kind of fluff program where we should only spend someday down the road when we've got enough bucks floating around doing nothing else.
Mr Prichard: I believe it is the case that there is no investment any jurisdiction can make that has a higher rate of return in terms of economic benefit in the economy of the 21st century than investing in human capital. Second, I think it's clearly the case that Ontario's investments in human capital have lagged behind our investments in other aspects of our social and cultural infrastructure, and that we need to repair that situation. Third, I believe it's the case, and there's abundant evidence, that the specific new investments that have been made in Ontario over the last three years have paid dramatic and virtually immediate dividends. We have doubled enrolment in computer science, electrical engineering and computer engineering across the province. That is moving faster than any other jurisdiction I know in North America. Of the 60 jurisdictions, we, I believe, in Ontario have moved the fastest and the farthest because of that investment.
The Ontario challenge fund is at the cutting edge of the kinds of partnerships that can be created between government, universities and the private sector. It's paying immediate and substantial dividends and will continue to do so. The Ontario student opportunity trust fund, an investment where the province's money was doubled literally in the course of the year of endowment for student aid-these initiatives and investments show immediate and powerful dividends. Our problem and the province's challenge is how to deal, not looking backwards but looking forwards, with another 90,000 students about to arrive, each wanting that opportunity, and with our competitor jurisdictions taking advantage of their strengthening financial situation to lay the foundations for their next century of success. Ontario can't look at itself and be complacent. Ontario has to look at the competition.
The Munroe-Blum report that was done looked at the competition, at the government's invitation looked at Michigan and compared. We must move much faster if we're going to keep pace with the state of Michigan, which is right across the border. That's not a criticism of the past. I'm trying to endorse the initiatives that have been made, because they've made a powerful difference. But I'm saying we cannot be complacent. We must make these investments. We must make them now. Whatever the Board of Trade's brief might have said, I believe the case that I'm making to you today is not a case from university presidents; that same case is made to me over and over by leaders in the private sector and leaders in the public sector. Leaders in the public and private sectors around the world are taking this message to their governments. I fear that if we don't embrace this case, we will find ourselves falling behind. Our ambition as a province is to be the best place to work, live and raise a family. An essential element of that capacity will be investments of the kind that are described in our brief.
The Chair: On that positive note, we've run out of time. Gentlemen, on behalf of the committee, thank you very much for your presentation this afternoon.
ALLIANCE OF MANUFACTURERS AND EXPORTERS CANADA, ONTARIO DIVISION
The Chair: Our next presentation this afternoon is from the Alliance of Manufacturers and Exporters Canada. Welcome. Could you please come forward and state your name for the record. You have 30 minutes.
Mr Ian Howcroft: Good afternoon, Mr Chair and members of the committee. First, I'd like to say thank you very much for the opportunity to present this afternoon. We appreciate that. My name is Ian Howcroft, vice-president of the Ontario division of the Alliance of Manufacturers and Exporters Canada. With me are Joanne McGovern, our director of taxation at the alliance, and John Allinotte, director of corporate taxation at Dofasco, one of our member companies. John is also a member of the Ontario division board of directors and chair of the Ontario taxation committee.
The alliance was created almost four years ago with the merger of the Canadian Manufacturers' Association and the Canadian Exporters' Association. We're a voluntary association with thousands of members across the province and across the country. Our membership is composed of companies of all sizes and from all sectors of manufacturing. Over one million individuals are employed directly by manufacturers and exporters, and another two million people's jobs are dependent on the manufacturing sector. It's also important to note that the members of the alliance produce approximately 75% of Ontario's and Canada's manufactured output. Our members are also responsible for approximately 90% of the province's and the country's exports. It may sound trite, but it's true: The manufacturing sector is the engine of the economy.
What we're going to present today in our brief are 13 recommendations that basically fall into three categories. The first are three general ones. Secondly, we have five that are targeted tax reform recommendations. Finally, we have five that are administrative tax recommendations.
I will turn to the experts that I have with me this afternoon, Joanne McGovern and John Allinotte. Joanne will be taking us through the general recommendations.
Ms Joanne McGovern: The general recommendations that the alliance has put forward are, first of all, to commend the government for balancing last year's budget and also for introducing Bill 7, the act to balance the budget. We encourage the government to continue to balance the budget, including the upcoming 2000 budget being introduced this spring.
We also commend the government in paying down the deficit and encourage continued paying down of the deficit and to start to also pay down the debt.
Thirdly, we'd like to make a point that we also support the recommendations in the strategic skills initiative contained in last year's budget and wish to extend our support for more support in this area, including an industrial training tax credit.
I will now pass it on to John Allinotte, who will detail the targeted tax reductions.
Mr John Allinotte: I noticed on the list that we're the last. I used to teach tax in university too, and I used to get a class in the afternoon, so I'll try not to bore you with a lot of detail.
I was interested in the presenter who preceded us, talking about the need to invest in education, in our young people and the capital assets. From our vantage point, the members of the alliance feel that investment is certainly necessary. However, we have to ensure that we have someplace to put these people to work. Right now, we don't. We're seeing an awful lot of our people going. I read an article from Mr Manning this morning that isn't talking about personal income tax rates causing the brain drain; it's the high rate of corporate tax.
So one of our recommendations to you is to take a look, now that we are on the surplus side of the balance sheet, and possibly consider reducing the corporate income tax rate in the province of Ontario, remembering that our competitor is not just south of the border; it is in the world.
The next item on the list of recommendations goes to the capital recovery system. As you all can appreciate, the manufacturers in the province of Ontario spend billions of dollars in hard assets that we lay in the ground, and to pay for them we need cash flow. One of the things that was in the system in prior years was the current cost adjustment, and we would recommend that you consider re-implementing that. That was repealed by the previous Ontario government. Alternatively, going back to the accelerated write-off on manufacturing equipment, this was introduced in 1972 and I can speak for the steel industry that between 1972 and the early 1980s, there was almost $5 billion worth of capital assets put into this province solely because of that initiative.
The other initiative that we strongly suggest you consider is the abolishing of the corporate minimum tax. Again, this was introduced by the previous government. It was more of a nuisance tax than anything else, but it is perceived by possible investors as something they would shy away from, coming into Ontario. We understand that with the high rate of the economy and the high amount of taxes now being paid by corporations, very little is being collected out of the corporate minimum tax, so again we suggest that it be repealed.
The fourth item is the abolishing of the capital tax. Like the minimum tax, we find it to be a nuisance. It's directly targeted to the manufacturing group that is required to invest large amounts of capital into our plants. If an abolishment of it can't be done, one of the recommendations is that we at least consider using the capital tax as an offset to the regular income taxes.
Fifth, we certainly commend the government for the initiatives they have made in the area of reducing personal income taxes. It is certainly something that we encourage you to continue to do. It directly affects the costs of manufacturing to the extent that the take-home pay is higher. Because of a lower withholding tax at source, employees have a bigger spending power.
One of the administrative issues that we would bring forward to you today, one that the alliance has come here on many occasions for, and I've accompanied them on most of them, is to suggest the harmonization of sales tax. We certainly encourage the Ontario government to take the lead in this initiative with the federal government and the other provinces which have not harmonized.
Municipal property taxes under this government: We were certainly encouraged by the introduction of the CVA program. I myself saw that come on board in 1970. That's when the legislation originally was introduced to bring it forward, and each year it was deferred. The current value assessment program is something that we encouraged. However, what happened was not unknown to everyone. There would be a shift in taxation, and it caused a burden on many people. Unfortunately, you had to introduce capping. We would certainly suggest that some of the basic principles-that Ontario go back and review it. We think the system is good, but keep it simple and competitive and predictable.
The super allowance modification is a proposal that is solely from an administrative standpoint. Even the complexities that are involved in calculating it are found by tax administrators such as myself and the people in the treasury department who have to administer it on behalf of the government to be a very difficult allowance to audit, and we find from an administration standpoint it's difficult. We suggest that a single rate allowance be implemented with no incremental so that we don't have to go back two or three years after an adjustment has been made, and we certainly would recommend that you consider it.
Implementation of the stock option credits in the 1999 Ontario budget: The government proposed the development of a framework for a new Ontario tax credit that would substantially reduce or eliminate Ontario personal income tax arising from the exercise or disposition of stock options. We understand that this plan has not been put forward yet. We strongly recommend that you move on that as quickly as possible.
The last item is with regard to the application of provincial sales tax on software. This is, again, more of a nuisance situation than anything else. It adds to the cost-innovation, computerization-the technology is something that the manufacturing community in the province of Ontario desperately needs. By adding sales tax to it, it adds to our bottom cost; it adds to the cost of our product going out the front door. We would again recommend to you that you consider removing the tax on software.
Thank you. If there are any questions, we'd be more than happy to answer them.
Mr Howcroft: I'd just like to add that there's only so much that any group can do in half an hour of time. We have provided some supporting documentation with these recommendations, but I'd also like to extend the offer to any member of the committee. We have two very active standing committees, one dealing with taxation at the national level and one dealing at the Ontario level. We'd like to make the invitation to any member of this committee or any MPP to come out and meet with us. We can discuss these in a more fulsome environment and address all the concerns, again recognizing that there's only so much time and opportunity that exist in a half-hour presentation. I just wanted to make that offer.
The Chair: Good point. Thank you very much. We have five minutes per caucus. I'll start with the official opposition.
Mr Kwinter: Gentlemen, I want to tell you I've been waiting two weeks for you to appear. The reason is quite simple. I was travelling the first day of these hearings and I wasn't here for the Treasurer's remarks to this committee, but I did get a copy of them and I want to quote something that he said. I'd like to get your reaction to it.
This is a direct quote from his speech to this committee: "While exports are critically important to the Ontario economy, some analysts have mistakenly concluded that all of Ontario's economic growth has been due to export growth and thus the tax cuts have not had any effect. However, when net exports-that's exports minus imports-are examined, it becomes clear that external trade has been responsible for only about 20% of Ontario's economic growth over the last four years." Do you have any response to that? Do you agree with it, first of all?
Mr Howcroft: I think I'd like to see the full speech and put it into proper context.
Mr Kwinter: There's nothing before that or anything after that has anything to do with trade.
Mr Howcroft: Our view is that exports are extremely important. We have two economies in Canada. We've seen a lot more growth in the export economy than we have in the domestic economy. Probably most of the numbers that we have deal with Canada, as opposed to just dealing with Ontario, but I think they'd be quite similar. Our view is that exports have been extremely important to the economic revival of Ontario and Canada. Again, without getting into the details of the full speech, I can't offer too much in commentary on that.
Mr Kwinter: OK, can I ask you this question. The implication of that is that an import dollar to the gross domestic product is equal to an export dollar to the gross domestic product. Do you agree with that?
Mr Howcroft: John, do you want to handle that one?
Mr Allinotte: I'm not an economist, but that is not what has happened in the last five to seven years relative to the steel industry. Our exports have gone up, and we contribute our success to our export markets. Comparing export dollars to import dollars as being equal-from a capital investment standpoint, new capital investment in Canada, and I can't speak for just Ontario, has gone down considerably. The US capital investment has to be 30% higher than in Canada. Consequently, to the extent that we don't have new capital investment in Canada, we don't have that growth in our own domestic economy. It's because of the exports.
Mr Kwinter: Also, the other point is that most imports that come into Canada, not all but most of them, are finished goods.
Mr Allinotte: Heavens, yes.
Mr Kwinter: By far. What happens is that those finished goods come in and they get sold. The only value-added you get is whatever the markup is on what you sell. When you have export dollars, those are products that have been manufactured, so you get all the benefits throughout the whole chain, which is really what drives this economy. To suggest that imports are as valuable to the economy as exports is ludicrous. It defies description that a Treasurer of Ontario would make that statement, and I only regret I wasn't here to call him on it. What he what is in fact saying is that when you take the imports and the exports, exports only contribute 20% to the economic activity in Ontario. When you consider that Ontario's exports constitute about 52% of the gross domestic product of this province, it defies belief that anyone would make that statement.
You people are in that business. This is your territory. To suggest that what you do in the manufacturing and export business is just equal to what happens to people who import products that are made in Japan or elsewhere, as I say, defies belief. I just wanted to get your reaction to that.
Mr Howcroft: We just reaffirm that exports are extremely important. That's been the root of our success over the last several years. We're the Alliance of Manufacturers and Exporters, not the alliance of manufacturers, exporters and importers, so I think we'll just leave it at that.
Mr Christopherson: Thank you for your presentation. A special welcome to John out of the steel city.
I'm curious, and I realize you may not have the figure at your fingertips, but what percentage of the total exporting that your part of the economy does do you think goes into the North American auto industry?
Mr Howcroft: I'm sorry, I don't have that figure specifically; 87% of our exports go to the United States, and I'd say the lion's share of that would be related to the auto industry, but I don't have the specific number with me.
Mr Christopherson: Here's the essence of my question. We're in the biggest boom right now that we've seen in the history of North America. It is still defying gravity and will go on, who knows how long? At some point it will drop to some degree, but while it's going well now and things are fine on the corporate side of things-the finance minister trotted out what all finance ministers from every political stripe do when they're making these presentations and showing how wonderful everything is, and the numbers look good.
At the same time-and you've heard some of it today-we are getting a lot of other people rolling in and saying, "But the price of this, in terms of the Harris approach, with the tax cut being done first and foremost over everything else, is leaving us with a real crisis in education and health care." Health care, of course, is a key competitive advantage for us in the auto industry, and by extension, therefore, those that provide parts and supplies into the auto industry and everything else-environmental protection, our social services-all of this is at risk.
When the downturn comes, as it will, and it will affect autos probably fairly quickly-it's usually one of the most sensitive to the overall macroeconomy. When that drops and your work diminishes, as it will for a short while, overall, where is this going to leave us in terms of these key components? I argue they're not just part of our social fabric. They are part of our economic fabric, again, health being the example there is. If we aren't tending to these things now, during the boom times, where are we going to be when we get into the recession? As a society and as an important economic unit in the world-Ontario's economy is a player-where are we going to be with all these crucial foundations that make up our economic and social system, if they are crumbling during the good times and we get into the bad times, and what will that mean for our ability to take advantage of the recovery at the other end of the cycle when indeed that takes place?
Mr Howcroft: I think you're right that eventually this boom will come to an end and we will be dealing with a downturn in the economy, and we'll have to deal with that. It's more prudent now, on the positive side, to get the deficit down, to deal with the debt, so that when the economy does go down we don't start increasing the deficit, increasing the debt, as happened 10 years ago, which put us into a difficult predicament.
What we would like to see is a structured approach, which we've been supportive of over the last four to six years, to deal with the deficit, to deal with the debt, and also to create the wealth that will allow us to have the social programs. Health is extremely important, to me personally and to all residents of Ontario. It's also important to the manufacturing sector. As you pointed out, it is a competitive advantage for companies locating here and keeping their businesses here as opposed to other jurisdictions in North American and the world. We want to see that advantage maintained here.
We also have concerns about the education system. We need a quality education system that produces the workers who are going to be able to help the economy in the future. So we feel that we can do that, but the priority has to be getting the deficit down, which has been taken care of, and now we have to start dealing with the debt. It also doesn't stop us from restructuring the health care to take into account the problems we're experiencing-we recognize there are problems and there have to be some changes made-and also to improve the education system.
We're working with several of the colleges and institutions of higher learning to develop courses and to work on novel and innovative ways to ensure that we have a workforce and that the quality of education continues to improve, recognizing there have been some problems.
I think you've made some good points. I think we would just differ on the way we would deal with them, the solutions that we would proffer or offer up.
Mr Arnott: Just very briefly, because Dr Galt has some questions too, I want to thank you very much for your presentation. You've given us some excellent suggestions, as you always do.
You've encouraged us to recommend to the minister that the corporate minimum tax be abolished, and you've suggested that wouldn't cost very much money. I recall the New Democrats bringing in the corporate minimum tax. To me it's a no-brainer. If it's a disincentive to investment, it's discouraging job-creating investment and it's not really netting any substantial revenue to the provincial government, we should be doing something in that regard.
The capital tax is a different matter. I know we have made some changes to the capital tax, which, as you pointed out correctly, is a profit-insensitive tax, which means companies have to pay whether or not they're making money, and it is a real disincentive to investment. How much would that cost the treasury if we were to abolish the capital tax in the next year? Any idea?
Mr Howcroft: I don't have that number with me. I'm sorry. Joanne, I don't know if you have that.
Ms McGovern: I don't have that figure, but we can do some research.
Mr Arnott: I'm sure the Ministry of Finance people could get that for us too, but certainly that's a consideration. I know there have been some changes to the capital tax in the last year to reduce its impact on quite a number of businesses. I suppose we should be continuing to look at-
Mr Allinotte: Yes, but the nature of the changes were more on the administrative side relative to the quantums of the taxation of it. And you're correct; abolishing any tax will take funds from the treasury initially.
Mr Arnott: In the short term.
Mr Allinotte: One of the things we have to keep in mind is our competitiveness. Taxing capital, taxing the investor you want in your province, is not the way you encourage them. We have a plant in Kentucky where we make steel, the same type of steel that we make in Hamilton. We don't pay any capital tax.
Mr Galt: If I can just make a couple of comments, I think you're number 120 in presentations to this committee, and the last, but certainly a great presentation. I'd like to extend my apologies to you on behalf of the government for the kind of fiscal policy that's been around from 1985 to 1995. I'm sure you'd appreciate that.
What I'd really like to ask you about is the taxes that you're suggesting be cut or reduced, as to how it would relate to jobs. As you've heard from the opposition, we need the money for the various programs, particularly health care. We're not in the business of giving back money, but if the tax was cut, do you have any idea how many jobs would be created? As you said a moment ago, there's that first lull, and that wouldn't be too surprising. You put it very capably. Do you have any feeling on the number of jobs, as you look at items 4, 5, 6, 7 and 8, that would be created if we carried out any one of these, or all of them? Do you have any feeling? Have you had an economist run it through? That's the selling point to the Minister of Finance and to this government.
Mr Howcroft: Again, it's difficult to cover all that in a half-hour presentation, but I will undertake to provide you with a study that we commissioned a couple of years ago that looks at making $100-million reductions in a variety of areas and what the impact would be on investment, on job creation, on several other criteria that were set out. That would give an idea as to where you can get the biggest bang for the tax reduction or investments. It was a study that we had done, again, looking at Canada as a whole, but you can use that for a model in Ontario as well. So I will provide that to the Chair of the committee for distribution. That would cover some of that in a little more detail than we can do in a minute and a half. Not being a tax expert, I'd rather take that than attempt to do it here.
Mr Galt: Anything along those job creation lines, because once the jobs are created, you're going to stimulate revenue, as we found out. We get criticized with the personal income tax about losing $5 billion, according to the opposition; then you see the revenue coming in of another $10 billion. So they only made a mistake of $15 billion. It's just tremendous to see the resurgence in the revenue that's come in, not all because of the tax cuts; we recognize the exports. We also recognize what happened in the early 1990s in job creation and what's happened in the second half of that decade.
Anyway, thank you very much.
The Chair: With that comment, Mr Galt, we've run out of time. On behalf of the committee, thank you very much for your presentation this afternoon.
The research officer will provide us with the draft copy of the report by March 1. The committee will meet March 6 through 9 to discuss the report.
At this point in time, before we adjourn, I'd like to thank the members for your co-operation and your punctuality. This committee is now adjourned.
The committee adjourned at 1757.